And so I’m really looking forward to that.
Yaoxian Chew : Next question, Brent Bracelin from Piper, followed by Jackson Ader from KeyBanc.
Brent Bracelin: Thank you. Good afternoon. Maybe I’ll start with you, Criss, here. We’ve seen RPO backlog growth decline for a couple of years now. But this quarter reversed a little bit. Looks like CRPO growth is not high, but back to growth after being negative last quarter. What drove the improvement in backlog this quarter? Were there some anomalies that aided you this quarter? Or do you think maybe that one metric is starting to kind of reverse here? Thanks.
Criss Harms : So I’ll remind you, I don’t spend a lot of time looking at the RPO. I do focus on the ARR and would encourage everyone to continue to focus on the ARR. But I will speak to the dynamic that you just raised. If you recall, prior comments that I’ve made is that our renewal base is more heavily weighted towards Q1 and Q2 than it is in Q3 and Q4. It’s very reasonable for me to expect the RPO and aggregate to increase as we enter Q1 and Q2. And I would expect it to have a little bit of downward pull into Q3 and Q4. Now, I expect that historical renewal base to somewhat shift as we mature and get a larger footprint into the enterprise space, reflective of their more Q3 and predominantly Q4 buying patterns. But that’s what we’re seeing today.
Brent Bracelin: Helpful color. And then maybe Spencer, for you, we’re trying to think through potential levers that could accelerate the business. You clearly have some new products that you can control, new product-led growth initiatives that are in your control. One of the debates out there in the software land is, when does AI start to show up at the application layer? And so my question here is on AI, but not a product AI question, more of an industry driver question. We’re hearing a lot of these application companies do experimentation with AI features. But you absolutely quite different as you think about layering in a large language model. Are you seeing any of your customers that are now starting to lean in on AI start to either show increasing volume commitments? As they do experimentation, do you think ultimately Amplitude could benefit as more and more of these application companies, B2B applications companies start to layer in large language models or not?
Spenser Skates : And Brent, just to make sure I understand what you’re saying, I mean, there’s a few different ways. First, it’s like if they have more end usage from their customers because hey, we created a chatbot, there’s a lot more engagement that’s sending us more data. Is that what you’re talking about? Are you talking about Amplitude itself having AI capabilities that drive a bunch of the value out of the platform?
Brent Bracelin: Yes, I’m talking about end users and any sort of like acceleration you might see based on more application companies layering in these AI features.
Spenser Skates : Yes, for sure. I think so what we’ve seen with every wave of technology disruption is that that’s been an accelerant to the amount of data that gets tracked for your end users and the need for something like an Amplitude. So when we first founded that wave was mobile, and then the whole rise of SaaS kind of coincided with some of our largest customers today are SaaS companies. We saw that with crypto. And now we’re starting to see that with AI and all the workflows on that. I’d say B2B companies that have a strong help or chat, like a support component that’s that uses chat with agents. We’ve seen some upticks from that. And then it kind of goes back to if you look at AI native companies, they desperately need us.
And so that’s why we’ve seen mid journey character, a whole bunch of others adopt Amplitude. And so absolutely, that’s a growth lever for us, the more people spend time on in the digital world, the better that is for us, because that means that’s where your customers are. And you want to optimize that journey. So now that all said, I want to be really clear, it’s early for a lot of these companies, I think I’ve probably seen like three or four companies on the B2B side that have a real AI offering. I mean, a lot of people just brand their stuff with AI, but the percentage of value driven through that workflow is minimal. So it’s early days for it.
Brent Bracelin: That’s consistent what we’ve seen. Thank you so much.
Yaoxian Chew : Next question, Jackson Ader from KeyBanc followed by Nick Altmann from Scotia Bank.
Michael Vidovic: Hey, guys, this is Michael Vidovic on for Jackson, but thanks for taking my questions here. So on renewals, they’ve been a large part of your story as of late. So I guess could you just speak to the different factors at play that you’re looking at? But I guess we’ll drive customer renewals to kind of better or worse than you expect to the next year here.
Spenser Skates : Yes, so on the renewal side, I mean, we’ve obviously talked a lot about the customers who bought in 2021 in the early part of 2022 that are resetting their contracts. I was just part of one renewal where the customer size went from $2.5 million to $1.9 million because they had overbought in 2022 and we’re looking to reset that. Now that customer expects to grow with us here on out and that’s like a one-time pandemic reset where people had over projected the 2021 growth rates forward without realizing that they were going to reset to normal levels. And so that’s the biggest driver behind the elevated churn levels that we’re seeing in both Q1 and Q2 of this year. The early indicators are that once that happens, a customer is much more likely to renew flat on the subsequent renewal or even grow.
And then I think the other thing that we see is from customer cohorts in 2023 and beyond while it’s early, obviously, we’re only one quarter into those renewals, they are significantly stronger and more like our kind of 2019 cohorts and before which had much higher gross and net dollar retention.
Michael Vidovic: Great, and then just to make sure I understand, you didn’t see any change in upsell, down sell, or churn dynamics this quarter compared to 4Q, right?
Spenser Skates : It was elevated. So we call that it was elevated because we have a significant number of customers who are renewing Q1 or Q2 on the large customer side.
Criss Harms : Yes, I think it’s worth adding that since last May, we’ve been calling out an expectation for an elevated level of churn across Q2 of last year, Q3, Q4, continuing into Q1 of this year and continuing into Q2 with the two drivers being the multiyear contracts getting optimized for the dynamics that Spencer just hit upon and then the VC startups, right, cutting our solution just to survive. What we’ve tried to profile is that we will be in a structurally different place as we enter into Q3 of this year, where we will have worked our way through most of those multiyear resets. That we’ll be in a structurally different place and an expectation of a notably reduced churn from the levels that we’ve been experiencing for those prior four quarters and then the fifth quarter including this upcoming Q2 as we enter into Q3 and Q4.
What I’ll add is we haven’t changed our assumptions in terms of the VC kind of startups of them exiting out of our ARR base. That I think consistent with what you’ve been hearing from some of our peers is that we don’t know where that endpoint is going to be and so therefore, we have not built up any improvement in terms of that part of our churn that’s for the lower end of the market into our revenue guide for the year and our outlook for the top line. Those are, I think, are the two dynamics to embrace.
Yaoxian Chew : Next question, Nick Altamann from Scotia, followed by Taylor McGinnis from UBS.
John Gomez : Hi. This is John Gomez on for Nick Altmann. Thanks for taking my question. Can you talk about the factors that have pressured NRR and whether there are any drivers to NRR that is improving or holding up better than others? Thanks.
Criss Harms : So there are two factors. The first one, by far, is the role that churn is playing in bringing down our GDR and, obviously, than the impact it has on NRR. And with the more macro conditions of budgets having getting tighter, our expand motion has not been operating at the same level as it was when we were up north of 120% on NRR. A combination of those two factors has clearly brought us down. So what we’ve tried to signal to you is where we feel that trough is going to be and a sense about where that trough was — the level. I think we quoted in the prepared remarks kind of the mid-90s. Inclusive in that, look, we will be in a fundamentally different place, as we’ve talked about in Q3. And then the other point to highlight is we did talk about the new ARR that we brought in this quarter and that it was about two-thirds driven by expand.
It gives you a sense of the magnitude of the churn that we’re working through as part of this reset of the optimization because we did continue to trick down on NRR. All of those we continue to convey. We see troughing in the very near term and having us positioned for a much cleaner level of reacceleration. Now, the degree of that reacceleration is something we’ll convey later in the year. And in an Investor Day, we talk about our long-term model. And then we’ll talk through the drivers about how we would see that growth rate developing over the coming years.
John Gomez : Got it. And I think you mentioned the pipe, you saw the pipeline is improving. Can you talk about what exactly you’re seeing there?
Criss Harms : I’ll let Spencer speak about pipeline.
Spenser Skates : We put a lot of work into pipeline. It’s still early days on that. And so particularly on the enterprise side, there’s been a change in named account focus where we’ve had the number of accounts we’re focusing on and focusing on accounts with very high potential value. And so that’s been a change across the sales and marketing team. And so we’ve been kind of through one quarter of operationalizing that already seeing improvement in our just kind of aggregate quantity of pipeline. But again, that’s a that’s a very early in — that’s just an early indicator. And so proof will be as we go through this year.
Yaoxian Chew : Next question is Taylor McGinnis with UBS, followed by Rob Oliver from Baird.
Taylor McGinnis: Yes, hey, Spencer and Criss, thanks so much for taking the time this evening. So, Criss, you mentioned this a little bit earlier, but I just want to double click on it. So you made two comments. So one is that you feel like you’re getting close to getting through the peak COVID renewals, but also that you’re seeing VC backed companies still cutting. So how do we think about those two dynamics as we move throughout the year? So are we getting to the point where a churn can start to normalize after 2Q, or will this be hampered by some of the smaller companies cutting? And I guess what I’m just trying to get at is are you seeing those smaller company optimizations get worse? Are they staying more of the same like an additional headwind? Just how do we think about that in terms of our recovery?
Criss Harms : Yes, no, understood. Let me start here, right. Beginning Q2 of 2023, these four quarters that have just completed with Q1, we’ve really had our arms around churn, like our ability to understand our customers, where we are, and the likely resets that were going to happen while they were large. And that obviously is hard for us. The real positive side is we’ve got our arms around it, and we’re modeling it correctly. As I look into Q2, Q3, and Q4 of the rest of the year, I expect us to continue to repeat that pattern. I think we have our arms around it, and we’re building our expectations for the role of that churn into our top line. What I wanted to convey as it pertains to the optimization is we are expecting that to decrease considerably from the levels that we’ve been, which will culminate in Q2, down into Q3.
But what we have not done has changed our outlook for improvements in that VC-backed side of churn that’s built into our renewable base, that we’ve not modeled any improvements in the full year revenue guide that we’ve provided kind of reflects the trend lines that we’ve seen and are again pretty good view about what those expectations are Q2, Q3 and Q4 and their associated impact upon our top line.
Taylor McGinnis: Perfect and then on Spencer maybe one for you. I’d love to understand, you mentioned like seeing green shoots right. I’d love to understand that dynamic a little bit more so as you look at some of the like newer lands that you guys have had more recently or if you look at some of these post optimization renewals and you talked about those being flat to up like have you seen any like inflections in those either in size or number of products that people are incorporating that’s giving you guys comfort that once you get beyond this period of tougher renewals that you could see healthy growth on the back of that.
