We expect Amp to become our biggest and fastest growing revenue driver in the next 6-24 months. As Cody sunsets and the Search platform continues as a growing, but niche offering, we will transition to a hybrid model of seat-based and consumption-based monetization. This transition requires a shift in our topline reporting framework. Our ARR composition is now as follows:

For Amp ARR, we selected the ARR calculation (28-day trailing average spend * 365) as we believe it ties more closely to the economic reality of consumption than our traditional ACV (also referred to as booking) metric. We chose a monthly timeframe that captures high growth velocity while also smoothing out unusual fluctuations on a weekly basis like public holiday or viral moment, etc. Additionally, we chose 28 over 30 days due to its divisibility by 7 days in a week and thus, there are 4 of each business day in a month.

Discussion of ACV and ARR

As described above, the definition of Company ARR now reflects consumption for all Amp offerings. It is important to understand that all our quotas/commissions/etc are based on ACV (see table below). In other words, this proposed change to Company ARR will not impact existing GTM compensation plans, but It will remove the 1:1 correlation of compensation metrics to ARR.

Our ACV framework for Enterprise sales is as follows:

While still tied to consumption via Amp Enterprise Premium, ACV directly reflects spend commitments. For all legacy product offerings, ACV is consistent with how ARR has been historically calculated. For Enterprise Premium Amp, ACV is equal to the direct dollar value of a prepaid Enterprise Premium Amp credits commitment. Here are examples of how ACV will be recognized with Amp.

Example (Customer initial purchase & later expansion): A customer purchases:

• 100 Search seats at $500 each = $50,000 & $25,000 of Enterprise Premium Amp credits
  • Total ACV = $75,000
• 6 months into the contract, the customer purchases an additional $15,000 of Enterprise Premium Amp credits
  • Total ACV (post-expansion) = $90,000

In this example, ARR attributable to Amp will be recognized based on the customer’s actual consumption. However, ACV and thus, GTM compensation is based on the full $75,000 ACV at the time of booking plus the additional $15,000 ACV at the time of expansion.

At the account level, ARR and ACV will likely differ at any point in time. See below for examples:

Example (ACV is greater than ARR): A customer signs an OF with $5k Amp Enterprise Premium commitment on June 1. Upon the moment of a closed-won opportunity in SFDC, we would recognize $5k ACV. In the first days or weeks post-signature, actual usage (the new basis of ARR) may be low or non-existent. Until the 28-day trailing consumption *365 catches up with the ACV, there will be a lag between ARR & ACV.  Compensation would be based on the $5k ACV.

Example (ACV is less than ARR): A customer signs an OF with $200k Amp Enterprise Premium on June 1. One month after the opportunity is closed-won, the customer uses $50k of credits. ARR would reflect the higher consumption rate (i.e. $50k * 12 = $600k), while ACV ("bookings") would only grow as they actually purchase more packages in future months. Compensation would be based on the $200k ACV.

Gross ACV vs Net ACV

We will define “Gross ACV” consistently with our old definition of ACV (also referred to as “new bookings only”).

“Net ACV” will be defined as Gross ACV less churn. Churn, in this case, follows our existing framework of “n+1” contract end date recognition (see section below on ACV churn recognition timing). In other words, churn will not be recognized in this calculation based on trailing consumption patterns, but rather on contractual commitment term dates. It is also important to note that GRR calculations for GTM compensation will be based on “ACV” in the new framework and not on consumption.

ARR & ACV Definitions Summarized