What happened
It was a rough day for Amplitude (AMPL 1.02%) investors. Shares of the cloud software company focused on digital optimization plunged after the newly public stock posted solid results for the fourth quarter but offered weaker-than-expected revenue guidance for 2022.
Coming into the report with a pricey valuation and in just its second quarterly report as a public company, the stock got chopped in half as a result. As of 11:05 a.m. ET today, shares were down 52.1%.
Image source: Amplitude.
So what
Amplitude, which helps companies analyze their data to make better product decisions, reported strong fourth-quarter numbers across the board.
Revenue rose 64% in the fourth quarter to $49.4 million, topping analyst estimates at $47 million and the company's own guidance of $46 million to $47 million. It also showed a 78% increase in remaining performance obligations (RPO) to $170.1 million, indicating its backlog remains strong. RPO for the next year was also encouraging, up 60% to $137.3 million.
Total customer count increased by 54% to 1,597, and its net retention rate reached 123%, an improvement from 119% in the quarter a year ago, meaning existing customers increased their spending by 23%.
The company nearly doubled spending on sales and marketing to lean into the growth opportunity in front of it, and as a result its free cash flow loss expanded from $3.8 million to $12.2 million. It also posted an adjusted loss per share of $0.05, but that beat the analyst consensus at an $0.08 per-share loss.
CEO Spenser Skates said, "2021 was a breakthrough year for Amplitude. Digital products are becoming the central driver for how businesses operate, go to market and generate revenue." He added, "We believe we are in the very early stages of a large market opportunity, and we're excited to help companies realize the business outcomes of digital optimization."
Now what
What killed the stock today was the company's guidance. For the first quarter, it expects revenue of $50 million to $51 million, or 52.5% growth at the midpoint, which was slightly below estimates at $51.3 million. For the full year, the company called for $226 million to $234 million in revenue, or 35% to 40% growth, which also missed the Wall Street consensus at $235.9 million.
While a sell-off in the stock seems justified considering the weaker-than-expected guidance, a 50% plunge looks excessive. There's nothing in the report that would signal a fundamental problem with the business, and full-year guidance could easily move higher over the course of the year. If the company ends up beating its own forecast, today's sell-off will have clearly been a buying opportunity.
