New Relic Announces Fourth Quarter and Full Fiscal Year 2019 Results

Fourth quarter revenue increased 34% year-over-year to $132.1 million

Quarterly GAAP operating loss of $(15.4) million; Non-GAAP operating
income of $3.8 million

New Relic introduces New Relic One, empowering teams to accelerate
innovation and deliver more perfect software faster

SAN FRANCISCO–(BUSINESS WIRE)–New Relic, Inc. (NYSE: NEWR), the industry’s largest and most
comprehensive cloud-based instrumentation platform built to help
customers create more perfect software, today announced financial
results for the fourth quarter and full fiscal year 2019 ended March 31,
2019.

“FY19 was a very productive year for New Relic. Our focus on the high
end of the market drove expansion within our enterprise customer base
and contributed to top and bottom line results that exceeded our
guidance ranges,” said Lew Cirne, CEO and founder of New Relic. “We are
kicking off FY20 with the launch of New
Relic One
, the industry’s first entity-centric observability
platform, designed to help our customers with complex environments find,
visualize and understand everything they need to create more perfect
software. New Relic One is also our platform for delivering brand new
innovations to market — and we expect to end the year with at least
nine paid products.”

Fourth Quarter Fiscal Year 2019 Financial Highlights*:

  • Revenue of $132.1 million, compared to $98.4 million for the fourth
    quarter of fiscal 2018.
  • GAAP loss from operations was $(15.4) million, compared to $(7.5)
    million for the fourth quarter of fiscal 2018.
  • Non-GAAP income from operations was $3.8 million, compared to $4.8
    million for the fourth quarter of fiscal 2018.
  • GAAP net loss attributable to New Relic per share, basic and diluted,
    was $(0.30), compared to $(0.13) per basic share for the fourth
    quarter of fiscal 2018.
  • Non-GAAP net income attributable to New Relic per diluted share was
    $0.13, compared to $0.09 per diluted share for the fourth quarter of
    fiscal 2018.
  • Cash, cash equivalents and short-term investments were $744.7 million
    at the end of the fourth quarter of fiscal 2019, compared with $722.3
    million at the end of the third quarter of fiscal 2019.

Fiscal 2019 Financial Highlights*:

  • Revenue of $479.2 million, up 35% compared with fiscal 2018.
  • GAAP loss from operations was $(33.1) million, compared with $(46.8)
    million for fiscal 2018.
  • Non-GAAP income (loss) from operations was $30.0 million, compared
    with $(1.5) million for fiscal 2018.
  • GAAP net loss attributable to New Relic per share, basic and diluted
    was $(0.72), compared with $(0.83) per basic share for fiscal 2018.
  • Non-GAAP net income attributable to New Relic per diluted share was
    $0.66, compared with net income per diluted share of breakeven for
    fiscal 2018.

*New Relic adopted Accounting Standards Codification (ASC) 606 “Revenue
from Contracts with Customers” (ASC 606) using the modified
retrospective method on April 1, 2018. Unless otherwise stated, the
financial metrics for reporting periods during fiscal year 2019 provided
in this release are presented in compliance with ASC 606, which replaced
ASC 605, “Revenue Recognition” (ASC 605). The financial metrics for
reporting periods prior to fiscal year 2019 are presented as previously
disclosed in conformity with ASC 605. A reconciliation between our
performance with respect to certain financial metrics under ASC 606 to
ASC 605 has been included in the appendix to this release.

Fourth Quarter & Recent Business Highlights:

  • $100K+ Paid Business Accounts as of March 31, 2019 of 858, compared to
    703 as of March 31, 2018.
  • 61% of ARR from Enterprise Paid Business Accounts as of March 31,
    2019, compared to 54% as of March 31, 2018.
  • Dollar-Based Net Expansion Rate for the fourth quarter of fiscal 2019
    of 131%, compared to 141% as of the fourth quarter of fiscal 2018.
  • Recognized as a Leader
    in Gartner’s Magic Quadrant for Application Performance Monitoring for
    the seventh consecutive time.
  • Hosted first-ever FutureStack Tokyo
    event.
  • Advanced AIOps strategy with acquisition of SignifAI,
    Inc
    .
  • Named one of the 2019
    Best Workplaces in Technology
    by Great Place to Work® and FORTUNE.

Outlook:

New Relic has not reconciled its expectations as to non-GAAP income from
operations or non-GAAP net income per diluted share to their most
directly comparable GAAP measures as a result of uncertainty regarding,
and the potential variability of, reconciling items such as stock-based
compensation, lawsuit litigation expenses and employer payroll taxes on
equity incentive plans. Accordingly, reconciliation is not available
without unreasonable effort, although it is important to note that these
factors could be material to New Relic’s results computed in accordance
with GAAP.

  • First Quarter Fiscal 2020 Outlook:

    • Revenue between $138.0 million and $140.0 million, representing
      year-over-year growth of between 28% and 29%, respectively.
    • Non-GAAP income from operations of between $0.5 million and $1.5
      million.
    • Non-GAAP net income attributable to New Relic per diluted share of
      between $0.07 and $0.08.
  • Full Year Fiscal 2020 Outlook:

    • Revenue between $600.0 million and $607.0 million, representing
      year-over-year growth of between 25% and 27%.
    • Non-GAAP income from operations of between $20.0 million and $25.0
      million.
    • Non-GAAP net income attributable to New Relic per diluted share of
      between $0.54 and $0.62.

Conference Call Details:

  • What: New Relic financial results for the fourth quarter and
    full fiscal 2019 and outlook for the first quarter and the full year
    of fiscal 2020
  • When: May 14, 2019 at 2:00 P.M. Pacific Time (5:00 P.M. Eastern
    Time)
  • Dial in: To access the call in the U.S., please dial (833)
    241-7256, and for international callers, please dial (647) 689-4220.
    Callers may provide confirmation number 7775818 to access the call
    more quickly, and are encouraged to dial into the call 10 to 15
    minutes prior to the start to prevent any delay in joining.
  • Webcast: http://ir.newrelic.com
    (live and replay)
  • Replay: Following the completion of the call through 11:59 PM
    Eastern Time on May 21, 2019, a telephone replay will be available by
    dialing (800) 585-8367 from the United States or (416) 621-4642
    internationally with conference ID 7775818.

About New Relic

New Relic is the industry’s largest and most comprehensive cloud-based
instrumentation platform built to help customers create more perfect
software. The world’s best software and DevOps teams rely on New Relic
to move faster, make better decisions and create best-in-class digital
experiences. If you run software, you need to run New Relic. Learn why
more than 50% of the Fortune 100 trust New Relic to make the world’s
software run at newrelic.com.

Forward-Looking Statements

This press release and the earnings call referencing this press release
contain “forward-looking” statements, as that term is defined under the
federal securities laws, including but not limited to statements
regarding New Relic’s future financial performance, including its
outlook on financial results for the first quarter and the full year of
fiscal 2020, such as revenue, non-GAAP income from operations, non-GAAP
net income attributable to New Relic per diluted share, cash from
operations, free cash flow, gross margins, operating margins, deferred
revenue, capital expenditures, capitalized software, anticipated
headcount, including hiring plans for the full year of fiscal 2020,
fiscal 2020 capital expenditures, and market trends and opportunity,
including the market opportunity for the New Relic Platform, New Relic’s
anticipated enterprise momentum and ability to create value and reach
revenue milestones by increasing go-to-market capacity and accelerating
its innovation cadence, the number, timing, and benefits of anticipated
paid products and product introductions, the value proposition of New
Relic’s products and features to customers, benefits from and
investments in New Relic One, New Relic’s ability to attain its
instrumentation goals, and the overall pace of hiring activity and
seasonality. These forward-looking statements are based on New Relic’s
current assumptions, expectations and beliefs and are subject to
substantial risks, uncertainties, assumptions and changes in
circumstances that may cause New Relic’s actual results, performance or
achievements to differ materially from those expressed or implied in any
forward-looking statement.

The risks and uncertainties referred to above include, but are not
limited to, New Relic’s ability to generate sufficient revenue to
achieve and sustain profitability, particularly in light of its
significant ongoing expenses; New Relic’s short operating history in an
evolving industry; New Relic’s ability to manage its significant recent
growth; the development of the overall market for SaaS business
software; the dependence of New Relic’s business on its customers
purchasing additional subscriptions and products from it and renewing
their subscriptions; New Relic’s ability to develop enhancements to its
products, increase adoption and usage of its products and introduce new
products that achieve market acceptance; the dependence on customers
expanding their use of New Relic’s products beyond the current
predominant use cases; New Relic’s ability to determine optimal prices
for its products; New Relic’s ability to expand its marketing and sales
capabilities and increase sales of its solutions to large enterprises
while mitigating the risks associated with serving such customers;
privacy concerns, including changes in privacy laws and regulations,
which could result in additional cost and liability to New Relic or
inhibit sales; New Relic’s ability to effectively compete in the
intensely competitive market for application performance monitoring
solutions and respond effectively to rapidly changing technology,
evolving industry standards and changing customer needs, requirements or
preferences; fluctuation of New Relic’s quarterly results; New Relic’s
dependence on lead generation strategies to drive sales and revenue;
interruptions or performance problems associated with New Relic’s
technology and infrastructure; New Relic’s dependence on SaaS
technologies and related services from third parties; defects or
disruptions in New Relic’s products; the expense and complexity of New
Relic’s ongoing and planned investments in data center hosting
facilities; risks associated with international operations; New Relic’s
ability to protect its intellectual property rights; risks related to
the acquisition and integration of businesses or technologies; certain
risks associated with incurring indebtedness, including risks related to
servicing New Relic’s convertible senior notes and related capped call
transactions; and other “Risk Factors” set forth in New Relic’s most
recent filings with the Securities and Exchange Commission (the “SEC”).

Further information on these and other factors that could affect New
Relic’s financial results and the forward-looking statements in this
press release and in the earnings call referencing this press release is
included in the filings New Relic makes with the SEC from time to time,
particularly under the captions “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations,” including our Annual Report on Form 10-K and subsequent
Quarterly Reports on Form 10-Q and subsequent filings. Copies of these
documents may be obtained by visiting New Relic’s Investor Relations
website at http://ir.newrelic.com
or the SEC’s website at www.sec.gov.

All information provided in this press release and in the earnings call
is as of the date hereof and New Relic assumes no obligation and does
not intend to update these forward-looking statements, except as
required by law.

Non-GAAP Financial Measures

New Relic discloses the following non-GAAP financial measures in this
release and the earnings call referencing this press release: non-GAAP
income (loss) from operations, non-GAAP gross profit, non-GAAP gross
margin, non-GAAP operating expenses (sales and marketing, research and
development, general and administrative), non-GAAP operating margin,
non-GAAP net income (loss) attributable to New Relic per diluted share,
non-GAAP net income (loss) attributable to New Relic per basic share and
free cash flow. New Relic uses each of these non-GAAP financial measures
internally to understand and compare operating results across accounting
periods, for internal budgeting and forecasting purposes, for short- and
long-term operating plans, and to evaluate New Relic’s financial
performance. In addition, New Relic’s bonus plan for eligible employees
and executives is based in part on non-GAAP income (loss) from
operations. New Relic believes these non-GAAP financial measures are
useful to investors, as a supplement to GAAP measures, in evaluating its
operational performance, as further discussed below. New Relic’s
non-GAAP financial measures may not provide information that is directly
comparable to that provided by other companies in its industry, as other
companies in its industry may calculate non-GAAP financial results
differently, particularly related to non-recurring and unusual items. In
addition, there are limitations in using non-GAAP financial measures
because the non-GAAP financial measures are not prepared in accordance
with GAAP and may be different from non-GAAP financial measures used by
other companies and exclude expenses that may have a material impact on
New Relic’s reported financial results.

Non-GAAP financial measures should not be considered in isolation from,
or as a substitute for, financial information prepared in accordance
with GAAP. A reconciliation of the historical non-GAAP financial
measures to their most directly comparable GAAP measures has been
provided in the financial statement tables included below in this press
release.

New Relic defines non-GAAP gross profit, non-GAAP operating expenses
(sales and marketing, research and development, general and
administrative), non-GAAP gross margin, non-GAAP operating margin,
non-GAAP income (loss) from operations, and non-GAAP net income (loss)
attributable to New Relic as the respective GAAP balances, adjusted for,
as applicable: (1) stock-based compensation expense, (2) amortization of
stock-based compensation capitalized in software development costs, (3)
the amortization of purchased intangibles, (4) the transaction costs
related to acquisition, (5) lawsuit litigation expense, (6) employer
payroll tax expense on equity incentive plans, and (7) amortization of
debt discount and issuance costs. Non-GAAP net income (loss) per basic
and diluted share is calculated as non-GAAP net income (loss)
attributable to New Relic divided by weighted-average shares used to
compute net income (loss) attributable to New Relic per share, basic and
diluted, with the number of weighted-average shares decreased to reflect
the anti-dilutive impact of the capped call transactions entered into in
connection with the 0.50% Convertible Senior Notes due 2023 issued in
May 2018. New Relic defines free cash flow as GAAP cash from operations,
minus capital expenditures and minus capitalized software. Investors are
encouraged to review the reconciliation of these historical non-GAAP
financial measures to their most directly comparable GAAP financial
measures.

Management believes these non-GAAP financial measures are useful to
investors and others in assessing New Relic’s operating performance due
to the following factors:

Stock-based compensation and amortization of stock-based compensation
capitalized in software development costs.
New Relic utilizes
share-based compensation to attract and retain employees. It is
principally aimed at aligning their interests with those of its
stockholders and at long-term retention, rather than to address
operational performance for any particular period. As a result,
share-based compensation expenses vary for reasons that are generally
unrelated to financial and operational performance in any particular
period.

Amortization of purchased intangibles and transaction costs related
to acquisition.
New Relic views amortization of purchased intangible
assets as items arising from pre-acquisition activities determined at
the time of an acquisition. While these intangible assets are evaluated
for impairment regularly, amortization of the cost of purchased
intangibles is an expense that is not typically affected by operations
during any particular period. Similarly, New Relic views acquisition
related expenses as events that are not necessarily reflective of
operational performance during a period.

Lawsuit litigation expense. New Relic may from time to time incur
charges or benefits that are outside of the ordinary course of New
Relic’s business related to litigation. New Relic believes it is useful
to exclude such charges or benefits because it does not consider such
amounts to be part of the ongoing operation of New Relic’s business and
because of the singular nature of the claims underlying the matter.

Employer payroll tax expense on equity incentive plans. New Relic
excludes employer payroll tax expense on equity incentive plans as these
expenses are tied to the exercise or vesting of underlying equity awards
and the price of New Relic’s common stock at the time of vesting or
exercise. As a result, these taxes may vary in any particular period
independent of the financial and operating performance of New Relic’s
business.

Amortization of debt discount and issuance costs. In May 2018,
New Relic issued approximately $500 million of convertible senior notes
due in 2023, which bear interest at an annual fixed rate of 0.50%. The
effective interest rate of the convertible senior notes was
approximately 5.74%. This is a result of the debt discount recorded for
the conversion feature that is required to be separately accounted for
as equity, and debt issuance costs, which reduce the carrying value of
the convertible debt instrument. The debt discount is amortized as
interest expense together with the issuance costs of the debt. The
expense for the amortization of debt discount and debt issuance costs is
a non-cash item, and we believe the exclusion of this interest expense
will provide for a more useful comparison of our operational performance
in different periods.

Anti-dilutive impact of capped call transactions. In connection
with the issuance of its convertible senior notes due in 2023, New Relic
entered into capped call transactions to offset potential dilution from
the embedded conversion feature in the notes. Although New Relic cannot
reflect the anti-dilutive impact of the capped call transactions under
GAAP, New Relic does reflect the anti-dilutive impact of the capped call
transactions in non-GAAP net income (loss) attributable to New Relic per
share, basic and diluted, to provide investors with useful information
in evaluating the financial performance of the company on a per share
basis.

Additionally, New Relic’s management believes that the non-GAAP
financial measure free cash flow is meaningful to investors because
management reviews cash flows generated from operations after taking
into consideration capital expenditures and the capitalization of
software development costs due to the fact that these expenditures are
considered to be a necessary component of ongoing operations.

Operating Metrics

New Relic defines the number of paid business accounts at the end of any
particular period as the number of accounts at the end of the period as
identified by a unique account identifier for which New Relic has
recognized revenue on the last day of the period indicated. A single
organization or customer may have multiple paid business accounts for
separate divisions, segments, or subsidiaries. New Relic defines an
enterprise paid business account as a paid business account that New
Relic measures to have over 1,000 employees.

New Relic’s monthly recurring revenue represents the revenue that New
Relic would contractually expect to receive from those customers over
the following month, without any increase or reduction in any of their
subscriptions. Similarly, annual recurring revenue represents the
revenue that New Relic would contractually expect to receive from those
customers over the following 12-month period, without any increase or
reduction in any of their subscriptions.

New Relic’s dollar-based net expansion rate compares its recurring
subscription revenue from customers from one period to the next. It is
increased when customers increase their use of New Relic’s products, use
additional products, or upgrade to a higher subscription tier. New
Relic’s dollar-based net expansion rate is reduced when customers
decrease their use of New Relic’s products, use fewer products, or
downgrade to a lower subscription tier.

New Relic is a registered trademark of New Relic, Inc.

All product and company names herein may be trademarks of their
registered owners.

                 
Consolidated Statements of Operations

(In thousands, except per share data; unaudited)

    Three Months Ended March 31, Year Ended March 31,
2019 2018 2019 2018
Revenue $ 132,097 $ 98,448 $ 479,225 $ 355,058
Cost of revenue 21,696 16,383 77,399 62,725
Gross profit 110,401 $ 82,065 401,826 $ 292,333
Operating expenses:
Research and development 32,112 19,646 104,859 74,332
Sales and marketing 71,975 55,006 257,066 207,021
General and administrative 21,714 14,945 73,007 57,788
Total operating expenses 125,801 89,597 434,932 339,141
Loss from operations (15,400) (7,532) (33,106) (46,808)
Other income (expense):
Interest income 4,077 687 13,103 2,190
Interest expense (5,747) (22) (19,679) (86)
Other income (expense), net (92) 226 (1,377) 343
Loss before income taxes (17,162) (6,641) (41,059) (44,361)
Income tax provision 257 325 697 959
Net loss $ (17,419) $ (6,966) $ (41,756) $ (45,320)
Net loss attributable to redeemable non-controlling interest 580 863
Net loss attributable to New Relic $ (16,839) $ (6,966) $ (40,893) $ (45,320)
Net loss attributable to New Relic per share, basic and diluted $ (0.30) $ (0.13) $ (0.72) $ (0.83)
Weighted-average shares used to compute net loss per share, basic
and diluted
56,917 55,669 56,884 54,814
 
           
Consolidated Balance Sheets

(In thousands, except par value; unaudited)

  March 31, March 31,
  2019 2018
Assets
Current assets:
Cash and cash equivalents $ 234,356 $ 132,479
Short-term investments 510,372 115,441
Accounts receivable, net of allowance for doubtful accounts of
$2,457 and $1,728, respectively
120,605 99,488
Prepaid expenses and other current assets 21,838 15,591
Deferred contract acquisition costs   27,161
Total current assets 914,332 362,999
Property and equipment, net 80,742 53,899
Restricted cash 8,805 8,202
Goodwill 41,512 11,828
Intangible assets, net 13,855 1,312
Deferred contract acquisition costs, non-current 26,218
Other assets, non-current   4,763 5,086
Total assets   $ 1,090,227 $ 443,326
Liabilities, redeemable non-controlling interest, and
stockholders’ equity
Current liabilities:
Accounts payable $ 10,249 $ 2,985
Accrued compensation and benefits 23,537 17,414
Other current liabilities 14,572 8,619
Deferred revenue   267,000 189,633
Total current liabilities 315,358 218,651
Convertible senior notes, net 405,937
Deferred rent, non-current 11,025 8,147
Deferred revenue, non-current 4,597 649
Other liabilities, non-current   947 775
Total liabilities 737,864 228,222
Redeemable non-controlling interest 2,733
Stockholders’ equity:
Common stock, $0.001 par value 58 56
Treasury stock – at cost (260 shares) (263) (263)
Additional paid-in capital 654,759 521,119
Accumulated other comprehensive income (loss) 645 (324)
Accumulated deficit   (305,569) (305,484)
Total stockholders’ equity   349,630 215,104
Total liabilities, redeemable non-controlling interest, and
stockholders’ equity
  $ 1,090,227 $ 443,326
 

Contacts

Investor Contact
Tony Righetti
New Relic, Inc.
503-336-9280
IR@newrelic.com

Media
Contact

Andrew Schmitt
New Relic, Inc.
415-869-7109
pr@newrelic.com

Read full story here

New Relic Announces Fourth Quarter and Full Fiscal Year 2019 Results

Fourth quarter revenue increased 34% year-over-year to $132.1 million

Quarterly GAAP operating loss of $(15.4) million; Non-GAAP operating
income of $3.8 million

New Relic introduces New Relic One, empowering teams to accelerate
innovation and deliver more perfect software faster

SAN FRANCISCO–(BUSINESS WIRE)–New Relic, Inc. (NYSE: NEWR), the industry’s largest and most
comprehensive cloud-based instrumentation platform built to help
customers create more perfect software, today announced financial
results for the fourth quarter and full fiscal year 2019 ended March 31,
2019.

“FY19 was a very productive year for New Relic. Our focus on the high
end of the market drove expansion within our enterprise customer base
and contributed to top and bottom line results that exceeded our
guidance ranges,” said Lew Cirne, CEO and founder of New Relic. “We are
kicking off FY20 with the launch of New
Relic One
, the industry’s first entity-centric observability
platform, designed to help our customers with complex environments find,
visualize and understand everything they need to create more perfect
software. New Relic One is also our platform for delivering brand new
innovations to market — and we expect to end the year with at least
nine paid products.”

Fourth Quarter Fiscal Year 2019 Financial Highlights*:

  • Revenue of $132.1 million, compared to $98.4 million for the fourth
    quarter of fiscal 2018.
  • GAAP loss from operations was $(15.4) million, compared to $(7.5)
    million for the fourth quarter of fiscal 2018.
  • Non-GAAP income from operations was $3.8 million, compared to $4.8
    million for the fourth quarter of fiscal 2018.
  • GAAP net loss attributable to New Relic per share, basic and diluted,
    was $(0.30), compared to $(0.13) per basic share for the fourth
    quarter of fiscal 2018.
  • Non-GAAP net income attributable to New Relic per diluted share was
    $0.13, compared to $0.09 per diluted share for the fourth quarter of
    fiscal 2018.
  • Cash, cash equivalents and short-term investments were $744.7 million
    at the end of the fourth quarter of fiscal 2019, compared with $722.3
    million at the end of the third quarter of fiscal 2019.

Fiscal 2019 Financial Highlights*:

  • Revenue of $479.2 million, up 35% compared with fiscal 2018.
  • GAAP loss from operations was $(33.1) million, compared with $(46.8)
    million for fiscal 2018.
  • Non-GAAP income (loss) from operations was $30.0 million, compared
    with $(1.5) million for fiscal 2018.
  • GAAP net loss attributable to New Relic per share, basic and diluted
    was $(0.72), compared with $(0.83) per basic share for fiscal 2018.
  • Non-GAAP net income attributable to New Relic per diluted share was
    $0.66, compared with net income per diluted share of breakeven for
    fiscal 2018.

*New Relic adopted Accounting Standards Codification (ASC) 606 “Revenue
from Contracts with Customers” (ASC 606) using the modified
retrospective method on April 1, 2018. Unless otherwise stated, the
financial metrics for reporting periods during fiscal year 2019 provided
in this release are presented in compliance with ASC 606, which replaced
ASC 605, “Revenue Recognition” (ASC 605). The financial metrics for
reporting periods prior to fiscal year 2019 are presented as previously
disclosed in conformity with ASC 605. A reconciliation between our
performance with respect to certain financial metrics under ASC 606 to
ASC 605 has been included in the appendix to this release.

Fourth Quarter & Recent Business Highlights:

  • $100K+ Paid Business Accounts as of March 31, 2019 of 858, compared to
    703 as of March 31, 2018.
  • 61% of ARR from Enterprise Paid Business Accounts as of March 31,
    2019, compared to 54% as of March 31, 2018.
  • Dollar-Based Net Expansion Rate for the fourth quarter of fiscal 2019
    of 131%, compared to 141% as of the fourth quarter of fiscal 2018.
  • Recognized as a Leader
    in Gartner’s Magic Quadrant for Application Performance Monitoring for
    the seventh consecutive time.
  • Hosted first-ever FutureStack Tokyo
    event.
  • Advanced AIOps strategy with acquisition of SignifAI,
    Inc
    .
  • Named one of the 2019
    Best Workplaces in Technology
    by Great Place to Work® and FORTUNE.

Outlook:

New Relic has not reconciled its expectations as to non-GAAP income from
operations or non-GAAP net income per diluted share to their most
directly comparable GAAP measures as a result of uncertainty regarding,
and the potential variability of, reconciling items such as stock-based
compensation, lawsuit litigation expenses and employer payroll taxes on
equity incentive plans. Accordingly, reconciliation is not available
without unreasonable effort, although it is important to note that these
factors could be material to New Relic’s results computed in accordance
with GAAP.

  • First Quarter Fiscal 2020 Outlook:

    • Revenue between $138.0 million and $140.0 million, representing
      year-over-year growth of between 28% and 29%, respectively.
    • Non-GAAP income from operations of between $0.5 million and $1.5
      million.
    • Non-GAAP net income attributable to New Relic per diluted share of
      between $0.07 and $0.08.
  • Full Year Fiscal 2020 Outlook:

    • Revenue between $600.0 million and $607.0 million, representing
      year-over-year growth of between 25% and 27%.
    • Non-GAAP income from operations of between $20.0 million and $25.0
      million.
    • Non-GAAP net income attributable to New Relic per diluted share of
      between $0.54 and $0.62.

Conference Call Details:

  • What: New Relic financial results for the fourth quarter and
    full fiscal 2019 and outlook for the first quarter and the full year
    of fiscal 2020
  • When: May 14, 2019 at 2:00 P.M. Pacific Time (5:00 P.M. Eastern
    Time)
  • Dial in: To access the call in the U.S., please dial (833)
    241-7256, and for international callers, please dial (647) 689-4220.
    Callers may provide confirmation number 7775818 to access the call
    more quickly, and are encouraged to dial into the call 10 to 15
    minutes prior to the start to prevent any delay in joining.
  • Webcast: http://ir.newrelic.com
    (live and replay)
  • Replay: Following the completion of the call through 11:59 PM
    Eastern Time on May 21, 2019, a telephone replay will be available by
    dialing (800) 585-8367 from the United States or (416) 621-4642
    internationally with conference ID 7775818.

About New Relic

New Relic is the industry’s largest and most comprehensive cloud-based
instrumentation platform built to help customers create more perfect
software. The world’s best software and DevOps teams rely on New Relic
to move faster, make better decisions and create best-in-class digital
experiences. If you run software, you need to run New Relic. Learn why
more than 50% of the Fortune 100 trust New Relic to make the world’s
software run at newrelic.com.

Forward-Looking Statements

This press release and the earnings call referencing this press release
contain “forward-looking” statements, as that term is defined under the
federal securities laws, including but not limited to statements
regarding New Relic’s future financial performance, including its
outlook on financial results for the first quarter and the full year of
fiscal 2020, such as revenue, non-GAAP income from operations, non-GAAP
net income attributable to New Relic per diluted share, cash from
operations, free cash flow, gross margins, operating margins, deferred
revenue, capital expenditures, capitalized software, anticipated
headcount, including hiring plans for the full year of fiscal 2020,
fiscal 2020 capital expenditures, and market trends and opportunity,
including the market opportunity for the New Relic Platform, New Relic’s
anticipated enterprise momentum and ability to create value and reach
revenue milestones by increasing go-to-market capacity and accelerating
its innovation cadence, the number, timing, and benefits of anticipated
paid products and product introductions, the value proposition of New
Relic’s products and features to customers, benefits from and
investments in New Relic One, New Relic’s ability to attain its
instrumentation goals, and the overall pace of hiring activity and
seasonality. These forward-looking statements are based on New Relic’s
current assumptions, expectations and beliefs and are subject to
substantial risks, uncertainties, assumptions and changes in
circumstances that may cause New Relic’s actual results, performance or
achievements to differ materially from those expressed or implied in any
forward-looking statement.

The risks and uncertainties referred to above include, but are not
limited to, New Relic’s ability to generate sufficient revenue to
achieve and sustain profitability, particularly in light of its
significant ongoing expenses; New Relic’s short operating history in an
evolving industry; New Relic’s ability to manage its significant recent
growth; the development of the overall market for SaaS business
software; the dependence of New Relic’s business on its customers
purchasing additional subscriptions and products from it and renewing
their subscriptions; New Relic’s ability to develop enhancements to its
products, increase adoption and usage of its products and introduce new
products that achieve market acceptance; the dependence on customers
expanding their use of New Relic’s products beyond the current
predominant use cases; New Relic’s ability to determine optimal prices
for its products; New Relic’s ability to expand its marketing and sales
capabilities and increase sales of its solutions to large enterprises
while mitigating the risks associated with serving such customers;
privacy concerns, including changes in privacy laws and regulations,
which could result in additional cost and liability to New Relic or
inhibit sales; New Relic’s ability to effectively compete in the
intensely competitive market for application performance monitoring
solutions and respond effectively to rapidly changing technology,
evolving industry standards and changing customer needs, requirements or
preferences; fluctuation of New Relic’s quarterly results; New Relic’s
dependence on lead generation strategies to drive sales and revenue;
interruptions or performance problems associated with New Relic’s
technology and infrastructure; New Relic’s dependence on SaaS
technologies and related services from third parties; defects or
disruptions in New Relic’s products; the expense and complexity of New
Relic’s ongoing and planned investments in data center hosting
facilities; risks associated with international operations; New Relic’s
ability to protect its intellectual property rights; risks related to
the acquisition and integration of businesses or technologies; certain
risks associated with incurring indebtedness, including risks related to
servicing New Relic’s convertible senior notes and related capped call
transactions; and other “Risk Factors” set forth in New Relic’s most
recent filings with the Securities and Exchange Commission (the “SEC”).

Further information on these and other factors that could affect New
Relic’s financial results and the forward-looking statements in this
press release and in the earnings call referencing this press release is
included in the filings New Relic makes with the SEC from time to time,
particularly under the captions “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations,” including our Annual Report on Form 10-K and subsequent
Quarterly Reports on Form 10-Q and subsequent filings. Copies of these
documents may be obtained by visiting New Relic’s Investor Relations
website at http://ir.newrelic.com
or the SEC’s website at www.sec.gov.

All information provided in this press release and in the earnings call
is as of the date hereof and New Relic assumes no obligation and does
not intend to update these forward-looking statements, except as
required by law.

Non-GAAP Financial Measures

New Relic discloses the following non-GAAP financial measures in this
release and the earnings call referencing this press release: non-GAAP
income (loss) from operations, non-GAAP gross profit, non-GAAP gross
margin, non-GAAP operating expenses (sales and marketing, research and
development, general and administrative), non-GAAP operating margin,
non-GAAP net income (loss) attributable to New Relic per diluted share,
non-GAAP net income (loss) attributable to New Relic per basic share and
free cash flow. New Relic uses each of these non-GAAP financial measures
internally to understand and compare operating results across accounting
periods, for internal budgeting and forecasting purposes, for short- and
long-term operating plans, and to evaluate New Relic’s financial
performance. In addition, New Relic’s bonus plan for eligible employees
and executives is based in part on non-GAAP income (loss) from
operations. New Relic believes these non-GAAP financial measures are
useful to investors, as a supplement to GAAP measures, in evaluating its
operational performance, as further discussed below. New Relic’s
non-GAAP financial measures may not provide information that is directly
comparable to that provided by other companies in its industry, as other
companies in its industry may calculate non-GAAP financial results
differently, particularly related to non-recurring and unusual items. In
addition, there are limitations in using non-GAAP financial measures
because the non-GAAP financial measures are not prepared in accordance
with GAAP and may be different from non-GAAP financial measures used by
other companies and exclude expenses that may have a material impact on
New Relic’s reported financial results.

Non-GAAP financial measures should not be considered in isolation from,
or as a substitute for, financial information prepared in accordance
with GAAP. A reconciliation of the historical non-GAAP financial
measures to their most directly comparable GAAP measures has been
provided in the financial statement tables included below in this press
release.

New Relic defines non-GAAP gross profit, non-GAAP operating expenses
(sales and marketing, research and development, general and
administrative), non-GAAP gross margin, non-GAAP operating margin,
non-GAAP income (loss) from operations, and non-GAAP net income (loss)
attributable to New Relic as the respective GAAP balances, adjusted for,
as applicable: (1) stock-based compensation expense, (2) amortization of
stock-based compensation capitalized in software development costs, (3)
the amortization of purchased intangibles, (4) the transaction costs
related to acquisition, (5) lawsuit litigation expense, (6) employer
payroll tax expense on equity incentive plans, and (7) amortization of
debt discount and issuance costs. Non-GAAP net income (loss) per basic
and diluted share is calculated as non-GAAP net income (loss)
attributable to New Relic divided by weighted-average shares used to
compute net income (loss) attributable to New Relic per share, basic and
diluted, with the number of weighted-average shares decreased to reflect
the anti-dilutive impact of the capped call transactions entered into in
connection with the 0.50% Convertible Senior Notes due 2023 issued in
May 2018. New Relic defines free cash flow as GAAP cash from operations,
minus capital expenditures and minus capitalized software. Investors are
encouraged to review the reconciliation of these historical non-GAAP
financial measures to their most directly comparable GAAP financial
measures.

Management believes these non-GAAP financial measures are useful to
investors and others in assessing New Relic’s operating performance due
to the following factors:

Stock-based compensation and amortization of stock-based compensation
capitalized in software development costs.
New Relic utilizes
share-based compensation to attract and retain employees. It is
principally aimed at aligning their interests with those of its
stockholders and at long-term retention, rather than to address
operational performance for any particular period. As a result,
share-based compensation expenses vary for reasons that are generally
unrelated to financial and operational performance in any particular
period.

Amortization of purchased intangibles and transaction costs related
to acquisition.
New Relic views amortization of purchased intangible
assets as items arising from pre-acquisition activities determined at
the time of an acquisition. While these intangible assets are evaluated
for impairment regularly, amortization of the cost of purchased
intangibles is an expense that is not typically affected by operations
during any particular period. Similarly, New Relic views acquisition
related expenses as events that are not necessarily reflective of
operational performance during a period.

Lawsuit litigation expense. New Relic may from time to time incur
charges or benefits that are outside of the ordinary course of New
Relic’s business related to litigation. New Relic believes it is useful
to exclude such charges or benefits because it does not consider such
amounts to be part of the ongoing operation of New Relic’s business and
because of the singular nature of the claims underlying the matter.

Employer payroll tax expense on equity incentive plans. New Relic
excludes employer payroll tax expense on equity incentive plans as these
expenses are tied to the exercise or vesting of underlying equity awards
and the price of New Relic’s common stock at the time of vesting or
exercise. As a result, these taxes may vary in any particular period
independent of the financial and operating performance of New Relic’s
business.

Amortization of debt discount and issuance costs. In May 2018,
New Relic issued approximately $500 million of convertible senior notes
due in 2023, which bear interest at an annual fixed rate of 0.50%. The
effective interest rate of the convertible senior notes was
approximately 5.74%. This is a result of the debt discount recorded for
the conversion feature that is required to be separately accounted for
as equity, and debt issuance costs, which reduce the carrying value of
the convertible debt instrument. The debt discount is amortized as
interest expense together with the issuance costs of the debt. The
expense for the amortization of debt discount and debt issuance costs is
a non-cash item, and we believe the exclusion of this interest expense
will provide for a more useful comparison of our operational performance
in different periods.

Anti-dilutive impact of capped call transactions. In connection
with the issuance of its convertible senior notes due in 2023, New Relic
entered into capped call transactions to offset potential dilution from
the embedded conversion feature in the notes. Although New Relic cannot
reflect the anti-dilutive impact of the capped call transactions under
GAAP, New Relic does reflect the anti-dilutive impact of the capped call
transactions in non-GAAP net income (loss) attributable to New Relic per
share, basic and diluted, to provide investors with useful information
in evaluating the financial performance of the company on a per share
basis.

Additionally, New Relic’s management believes that the non-GAAP
financial measure free cash flow is meaningful to investors because
management reviews cash flows generated from operations after taking
into consideration capital expenditures and the capitalization of
software development costs due to the fact that these expenditures are
considered to be a necessary component of ongoing operations.

Operating Metrics

New Relic defines the number of paid business accounts at the end of any
particular period as the number of accounts at the end of the period as
identified by a unique account identifier for which New Relic has
recognized revenue on the last day of the period indicated. A single
organization or customer may have multiple paid business accounts for
separate divisions, segments, or subsidiaries. New Relic defines an
enterprise paid business account as a paid business account that New
Relic measures to have over 1,000 employees.

New Relic’s monthly recurring revenue represents the revenue that New
Relic would contractually expect to receive from those customers over
the following month, without any increase or reduction in any of their
subscriptions. Similarly, annual recurring revenue represents the
revenue that New Relic would contractually expect to receive from those
customers over the following 12-month period, without any increase or
reduction in any of their subscriptions.

New Relic’s dollar-based net expansion rate compares its recurring
subscription revenue from customers from one period to the next. It is
increased when customers increase their use of New Relic’s products, use
additional products, or upgrade to a higher subscription tier. New
Relic’s dollar-based net expansion rate is reduced when customers
decrease their use of New Relic’s products, use fewer products, or
downgrade to a lower subscription tier.

New Relic is a registered trademark of New Relic, Inc.

All product and company names herein may be trademarks of their
registered owners.

                 
Consolidated Statements of Operations

(In thousands, except per share data; unaudited)

    Three Months Ended March 31, Year Ended March 31,
2019 2018 2019 2018
Revenue $ 132,097 $ 98,448 $ 479,225 $ 355,058
Cost of revenue 21,696 16,383 77,399 62,725
Gross profit 110,401 $ 82,065 401,826 $ 292,333
Operating expenses:
Research and development 32,112 19,646 104,859 74,332
Sales and marketing 71,975 55,006 257,066 207,021
General and administrative 21,714 14,945 73,007 57,788
Total operating expenses 125,801 89,597 434,932 339,141
Loss from operations (15,400) (7,532) (33,106) (46,808)
Other income (expense):
Interest income 4,077 687 13,103 2,190
Interest expense (5,747) (22) (19,679) (86)
Other income (expense), net (92) 226 (1,377) 343
Loss before income taxes (17,162) (6,641) (41,059) (44,361)
Income tax provision 257 325 697 959
Net loss $ (17,419) $ (6,966) $ (41,756) $ (45,320)
Net loss attributable to redeemable non-controlling interest 580 863
Net loss attributable to New Relic $ (16,839) $ (6,966) $ (40,893) $ (45,320)
Net loss attributable to New Relic per share, basic and diluted $ (0.30) $ (0.13) $ (0.72) $ (0.83)
Weighted-average shares used to compute net loss per share, basic
and diluted
56,917 55,669 56,884 54,814
 
           
Consolidated Balance Sheets

(In thousands, except par value; unaudited)

  March 31, March 31,
  2019 2018
Assets
Current assets:
Cash and cash equivalents $ 234,356 $ 132,479
Short-term investments 510,372 115,441
Accounts receivable, net of allowance for doubtful accounts of
$2,457 and $1,728, respectively
120,605 99,488
Prepaid expenses and other current assets 21,838 15,591
Deferred contract acquisition costs   27,161
Total current assets 914,332 362,999
Property and equipment, net 80,742 53,899
Restricted cash 8,805 8,202
Goodwill 41,512 11,828
Intangible assets, net 13,855 1,312
Deferred contract acquisition costs, non-current 26,218
Other assets, non-current   4,763 5,086
Total assets   $ 1,090,227 $ 443,326
Liabilities, redeemable non-controlling interest, and
stockholders’ equity
Current liabilities:
Accounts payable $ 10,249 $ 2,985
Accrued compensation and benefits 23,537 17,414
Other current liabilities 14,572 8,619
Deferred revenue   267,000 189,633
Total current liabilities 315,358 218,651
Convertible senior notes, net 405,937
Deferred rent, non-current 11,025 8,147
Deferred revenue, non-current 4,597 649
Other liabilities, non-current   947 775
Total liabilities 737,864 228,222
Redeemable non-controlling interest 2,733
Stockholders’ equity:
Common stock, $0.001 par value 58 56
Treasury stock – at cost (260 shares) (263) (263)
Additional paid-in capital 654,759 521,119
Accumulated other comprehensive income (loss) 645 (324)
Accumulated deficit   (305,569) (305,484)
Total stockholders’ equity   349,630 215,104
Total liabilities, redeemable non-controlling interest, and
stockholders’ equity
  $ 1,090,227 $ 443,326
 

Contacts

Investor Contact
Tony Righetti
New Relic, Inc.
503-336-9280
IR@newrelic.com

Media
Contact

Andrew Schmitt
New Relic, Inc.
415-869-7109
pr@newrelic.com

Read full story here

New Relic Announces Fourth Quarter and Full Fiscal Year 2019 Results

Fourth quarter revenue increased 34% year-over-year to $132.1 million

Quarterly GAAP operating loss of $(15.4) million; Non-GAAP operating
income of $3.8 million

New Relic introduces New Relic One, empowering teams to accelerate
innovation and deliver more perfect software faster

SAN FRANCISCO–(BUSINESS WIRE)–New Relic, Inc. (NYSE: NEWR), the industry’s largest and most
comprehensive cloud-based instrumentation platform built to help
customers create more perfect software, today announced financial
results for the fourth quarter and full fiscal year 2019 ended March 31,
2019.

“FY19 was a very productive year for New Relic. Our focus on the high
end of the market drove expansion within our enterprise customer base
and contributed to top and bottom line results that exceeded our
guidance ranges,” said Lew Cirne, CEO and founder of New Relic. “We are
kicking off FY20 with the launch of New
Relic One
, the industry’s first entity-centric observability
platform, designed to help our customers with complex environments find,
visualize and understand everything they need to create more perfect
software. New Relic One is also our platform for delivering brand new
innovations to market — and we expect to end the year with at least
nine paid products.”

Fourth Quarter Fiscal Year 2019 Financial Highlights*:

  • Revenue of $132.1 million, compared to $98.4 million for the fourth
    quarter of fiscal 2018.
  • GAAP loss from operations was $(15.4) million, compared to $(7.5)
    million for the fourth quarter of fiscal 2018.
  • Non-GAAP income from operations was $3.8 million, compared to $4.8
    million for the fourth quarter of fiscal 2018.
  • GAAP net loss attributable to New Relic per share, basic and diluted,
    was $(0.30), compared to $(0.13) per basic share for the fourth
    quarter of fiscal 2018.
  • Non-GAAP net income attributable to New Relic per diluted share was
    $0.13, compared to $0.09 per diluted share for the fourth quarter of
    fiscal 2018.
  • Cash, cash equivalents and short-term investments were $744.7 million
    at the end of the fourth quarter of fiscal 2019, compared with $722.3
    million at the end of the third quarter of fiscal 2019.

Fiscal 2019 Financial Highlights*:

  • Revenue of $479.2 million, up 35% compared with fiscal 2018.
  • GAAP loss from operations was $(33.1) million, compared with $(46.8)
    million for fiscal 2018.
  • Non-GAAP income (loss) from operations was $30.0 million, compared
    with $(1.5) million for fiscal 2018.
  • GAAP net loss attributable to New Relic per share, basic and diluted
    was $(0.72), compared with $(0.83) per basic share for fiscal 2018.
  • Non-GAAP net income attributable to New Relic per diluted share was
    $0.66, compared with net income per diluted share of breakeven for
    fiscal 2018.

*New Relic adopted Accounting Standards Codification (ASC) 606 “Revenue
from Contracts with Customers” (ASC 606) using the modified
retrospective method on April 1, 2018. Unless otherwise stated, the
financial metrics for reporting periods during fiscal year 2019 provided
in this release are presented in compliance with ASC 606, which replaced
ASC 605, “Revenue Recognition” (ASC 605). The financial metrics for
reporting periods prior to fiscal year 2019 are presented as previously
disclosed in conformity with ASC 605. A reconciliation between our
performance with respect to certain financial metrics under ASC 606 to
ASC 605 has been included in the appendix to this release.

Fourth Quarter & Recent Business Highlights:

  • $100K+ Paid Business Accounts as of March 31, 2019 of 858, compared to
    703 as of March 31, 2018.
  • 61% of ARR from Enterprise Paid Business Accounts as of March 31,
    2019, compared to 54% as of March 31, 2018.
  • Dollar-Based Net Expansion Rate for the fourth quarter of fiscal 2019
    of 131%, compared to 141% as of the fourth quarter of fiscal 2018.
  • Recognized as a Leader
    in Gartner’s Magic Quadrant for Application Performance Monitoring for
    the seventh consecutive time.
  • Hosted first-ever FutureStack Tokyo
    event.
  • Advanced AIOps strategy with acquisition of SignifAI,
    Inc
    .
  • Named one of the 2019
    Best Workplaces in Technology
    by Great Place to Work® and FORTUNE.

Outlook:

New Relic has not reconciled its expectations as to non-GAAP income from
operations or non-GAAP net income per diluted share to their most
directly comparable GAAP measures as a result of uncertainty regarding,
and the potential variability of, reconciling items such as stock-based
compensation, lawsuit litigation expenses and employer payroll taxes on
equity incentive plans. Accordingly, reconciliation is not available
without unreasonable effort, although it is important to note that these
factors could be material to New Relic’s results computed in accordance
with GAAP.

  • First Quarter Fiscal 2020 Outlook:

    • Revenue between $138.0 million and $140.0 million, representing
      year-over-year growth of between 28% and 29%, respectively.
    • Non-GAAP income from operations of between $0.5 million and $1.5
      million.
    • Non-GAAP net income attributable to New Relic per diluted share of
      between $0.07 and $0.08.
  • Full Year Fiscal 2020 Outlook:

    • Revenue between $600.0 million and $607.0 million, representing
      year-over-year growth of between 25% and 27%.
    • Non-GAAP income from operations of between $20.0 million and $25.0
      million.
    • Non-GAAP net income attributable to New Relic per diluted share of
      between $0.54 and $0.62.

Conference Call Details:

  • What: New Relic financial results for the fourth quarter and
    full fiscal 2019 and outlook for the first quarter and the full year
    of fiscal 2020
  • When: May 14, 2019 at 2:00 P.M. Pacific Time (5:00 P.M. Eastern
    Time)
  • Dial in: To access the call in the U.S., please dial (833)
    241-7256, and for international callers, please dial (647) 689-4220.
    Callers may provide confirmation number 7775818 to access the call
    more quickly, and are encouraged to dial into the call 10 to 15
    minutes prior to the start to prevent any delay in joining.
  • Webcast: http://ir.newrelic.com
    (live and replay)
  • Replay: Following the completion of the call through 11:59 PM
    Eastern Time on May 21, 2019, a telephone replay will be available by
    dialing (800) 585-8367 from the United States or (416) 621-4642
    internationally with conference ID 7775818.

About New Relic

New Relic is the industry’s largest and most comprehensive cloud-based
instrumentation platform built to help customers create more perfect
software. The world’s best software and DevOps teams rely on New Relic
to move faster, make better decisions and create best-in-class digital
experiences. If you run software, you need to run New Relic. Learn why
more than 50% of the Fortune 100 trust New Relic to make the world’s
software run at newrelic.com.

Forward-Looking Statements

This press release and the earnings call referencing this press release
contain “forward-looking” statements, as that term is defined under the
federal securities laws, including but not limited to statements
regarding New Relic’s future financial performance, including its
outlook on financial results for the first quarter and the full year of
fiscal 2020, such as revenue, non-GAAP income from operations, non-GAAP
net income attributable to New Relic per diluted share, cash from
operations, free cash flow, gross margins, operating margins, deferred
revenue, capital expenditures, capitalized software, anticipated
headcount, including hiring plans for the full year of fiscal 2020,
fiscal 2020 capital expenditures, and market trends and opportunity,
including the market opportunity for the New Relic Platform, New Relic’s
anticipated enterprise momentum and ability to create value and reach
revenue milestones by increasing go-to-market capacity and accelerating
its innovation cadence, the number, timing, and benefits of anticipated
paid products and product introductions, the value proposition of New
Relic’s products and features to customers, benefits from and
investments in New Relic One, New Relic’s ability to attain its
instrumentation goals, and the overall pace of hiring activity and
seasonality. These forward-looking statements are based on New Relic’s
current assumptions, expectations and beliefs and are subject to
substantial risks, uncertainties, assumptions and changes in
circumstances that may cause New Relic’s actual results, performance or
achievements to differ materially from those expressed or implied in any
forward-looking statement.

The risks and uncertainties referred to above include, but are not
limited to, New Relic’s ability to generate sufficient revenue to
achieve and sustain profitability, particularly in light of its
significant ongoing expenses; New Relic’s short operating history in an
evolving industry; New Relic’s ability to manage its significant recent
growth; the development of the overall market for SaaS business
software; the dependence of New Relic’s business on its customers
purchasing additional subscriptions and products from it and renewing
their subscriptions; New Relic’s ability to develop enhancements to its
products, increase adoption and usage of its products and introduce new
products that achieve market acceptance; the dependence on customers
expanding their use of New Relic’s products beyond the current
predominant use cases; New Relic’s ability to determine optimal prices
for its products; New Relic’s ability to expand its marketing and sales
capabilities and increase sales of its solutions to large enterprises
while mitigating the risks associated with serving such customers;
privacy concerns, including changes in privacy laws and regulations,
which could result in additional cost and liability to New Relic or
inhibit sales; New Relic’s ability to effectively compete in the
intensely competitive market for application performance monitoring
solutions and respond effectively to rapidly changing technology,
evolving industry standards and changing customer needs, requirements or
preferences; fluctuation of New Relic’s quarterly results; New Relic’s
dependence on lead generation strategies to drive sales and revenue;
interruptions or performance problems associated with New Relic’s
technology and infrastructure; New Relic’s dependence on SaaS
technologies and related services from third parties; defects or
disruptions in New Relic’s products; the expense and complexity of New
Relic’s ongoing and planned investments in data center hosting
facilities; risks associated with international operations; New Relic’s
ability to protect its intellectual property rights; risks related to
the acquisition and integration of businesses or technologies; certain
risks associated with incurring indebtedness, including risks related to
servicing New Relic’s convertible senior notes and related capped call
transactions; and other “Risk Factors” set forth in New Relic’s most
recent filings with the Securities and Exchange Commission (the “SEC”).

Further information on these and other factors that could affect New
Relic’s financial results and the forward-looking statements in this
press release and in the earnings call referencing this press release is
included in the filings New Relic makes with the SEC from time to time,
particularly under the captions “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations,” including our Annual Report on Form 10-K and subsequent
Quarterly Reports on Form 10-Q and subsequent filings. Copies of these
documents may be obtained by visiting New Relic’s Investor Relations
website at http://ir.newrelic.com
or the SEC’s website at www.sec.gov.

All information provided in this press release and in the earnings call
is as of the date hereof and New Relic assumes no obligation and does
not intend to update these forward-looking statements, except as
required by law.

Non-GAAP Financial Measures

New Relic discloses the following non-GAAP financial measures in this
release and the earnings call referencing this press release: non-GAAP
income (loss) from operations, non-GAAP gross profit, non-GAAP gross
margin, non-GAAP operating expenses (sales and marketing, research and
development, general and administrative), non-GAAP operating margin,
non-GAAP net income (loss) attributable to New Relic per diluted share,
non-GAAP net income (loss) attributable to New Relic per basic share and
free cash flow. New Relic uses each of these non-GAAP financial measures
internally to understand and compare operating results across accounting
periods, for internal budgeting and forecasting purposes, for short- and
long-term operating plans, and to evaluate New Relic’s financial
performance. In addition, New Relic’s bonus plan for eligible employees
and executives is based in part on non-GAAP income (loss) from
operations. New Relic believes these non-GAAP financial measures are
useful to investors, as a supplement to GAAP measures, in evaluating its
operational performance, as further discussed below. New Relic’s
non-GAAP financial measures may not provide information that is directly
comparable to that provided by other companies in its industry, as other
companies in its industry may calculate non-GAAP financial results
differently, particularly related to non-recurring and unusual items. In
addition, there are limitations in using non-GAAP financial measures
because the non-GAAP financial measures are not prepared in accordance
with GAAP and may be different from non-GAAP financial measures used by
other companies and exclude expenses that may have a material impact on
New Relic’s reported financial results.

Non-GAAP financial measures should not be considered in isolation from,
or as a substitute for, financial information prepared in accordance
with GAAP. A reconciliation of the historical non-GAAP financial
measures to their most directly comparable GAAP measures has been
provided in the financial statement tables included below in this press
release.

New Relic defines non-GAAP gross profit, non-GAAP operating expenses
(sales and marketing, research and development, general and
administrative), non-GAAP gross margin, non-GAAP operating margin,
non-GAAP income (loss) from operations, and non-GAAP net income (loss)
attributable to New Relic as the respective GAAP balances, adjusted for,
as applicable: (1) stock-based compensation expense, (2) amortization of
stock-based compensation capitalized in software development costs, (3)
the amortization of purchased intangibles, (4) the transaction costs
related to acquisition, (5) lawsuit litigation expense, (6) employer
payroll tax expense on equity incentive plans, and (7) amortization of
debt discount and issuance costs. Non-GAAP net income (loss) per basic
and diluted share is calculated as non-GAAP net income (loss)
attributable to New Relic divided by weighted-average shares used to
compute net income (loss) attributable to New Relic per share, basic and
diluted, with the number of weighted-average shares decreased to reflect
the anti-dilutive impact of the capped call transactions entered into in
connection with the 0.50% Convertible Senior Notes due 2023 issued in
May 2018. New Relic defines free cash flow as GAAP cash from operations,
minus capital expenditures and minus capitalized software. Investors are
encouraged to review the reconciliation of these historical non-GAAP
financial measures to their most directly comparable GAAP financial
measures.

Management believes these non-GAAP financial measures are useful to
investors and others in assessing New Relic’s operating performance due
to the following factors:

Stock-based compensation and amortization of stock-based compensation
capitalized in software development costs.
New Relic utilizes
share-based compensation to attract and retain employees. It is
principally aimed at aligning their interests with those of its
stockholders and at long-term retention, rather than to address
operational performance for any particular period. As a result,
share-based compensation expenses vary for reasons that are generally
unrelated to financial and operational performance in any particular
period.

Amortization of purchased intangibles and transaction costs related
to acquisition.
New Relic views amortization of purchased intangible
assets as items arising from pre-acquisition activities determined at
the time of an acquisition. While these intangible assets are evaluated
for impairment regularly, amortization of the cost of purchased
intangibles is an expense that is not typically affected by operations
during any particular period. Similarly, New Relic views acquisition
related expenses as events that are not necessarily reflective of
operational performance during a period.

Lawsuit litigation expense. New Relic may from time to time incur
charges or benefits that are outside of the ordinary course of New
Relic’s business related to litigation. New Relic believes it is useful
to exclude such charges or benefits because it does not consider such
amounts to be part of the ongoing operation of New Relic’s business and
because of the singular nature of the claims underlying the matter.

Employer payroll tax expense on equity incentive plans. New Relic
excludes employer payroll tax expense on equity incentive plans as these
expenses are tied to the exercise or vesting of underlying equity awards
and the price of New Relic’s common stock at the time of vesting or
exercise. As a result, these taxes may vary in any particular period
independent of the financial and operating performance of New Relic’s
business.

Amortization of debt discount and issuance costs. In May 2018,
New Relic issued approximately $500 million of convertible senior notes
due in 2023, which bear interest at an annual fixed rate of 0.50%. The
effective interest rate of the convertible senior notes was
approximately 5.74%. This is a result of the debt discount recorded for
the conversion feature that is required to be separately accounted for
as equity, and debt issuance costs, which reduce the carrying value of
the convertible debt instrument. The debt discount is amortized as
interest expense together with the issuance costs of the debt. The
expense for the amortization of debt discount and debt issuance costs is
a non-cash item, and we believe the exclusion of this interest expense
will provide for a more useful comparison of our operational performance
in different periods.

Anti-dilutive impact of capped call transactions. In connection
with the issuance of its convertible senior notes due in 2023, New Relic
entered into capped call transactions to offset potential dilution from
the embedded conversion feature in the notes. Although New Relic cannot
reflect the anti-dilutive impact of the capped call transactions under
GAAP, New Relic does reflect the anti-dilutive impact of the capped call
transactions in non-GAAP net income (loss) attributable to New Relic per
share, basic and diluted, to provide investors with useful information
in evaluating the financial performance of the company on a per share
basis.

Additionally, New Relic’s management believes that the non-GAAP
financial measure free cash flow is meaningful to investors because
management reviews cash flows generated from operations after taking
into consideration capital expenditures and the capitalization of
software development costs due to the fact that these expenditures are
considered to be a necessary component of ongoing operations.

Operating Metrics

New Relic defines the number of paid business accounts at the end of any
particular period as the number of accounts at the end of the period as
identified by a unique account identifier for which New Relic has
recognized revenue on the last day of the period indicated. A single
organization or customer may have multiple paid business accounts for
separate divisions, segments, or subsidiaries. New Relic defines an
enterprise paid business account as a paid business account that New
Relic measures to have over 1,000 employees.

New Relic’s monthly recurring revenue represents the revenue that New
Relic would contractually expect to receive from those customers over
the following month, without any increase or reduction in any of their
subscriptions. Similarly, annual recurring revenue represents the
revenue that New Relic would contractually expect to receive from those
customers over the following 12-month period, without any increase or
reduction in any of their subscriptions.

New Relic’s dollar-based net expansion rate compares its recurring
subscription revenue from customers from one period to the next. It is
increased when customers increase their use of New Relic’s products, use
additional products, or upgrade to a higher subscription tier. New
Relic’s dollar-based net expansion rate is reduced when customers
decrease their use of New Relic’s products, use fewer products, or
downgrade to a lower subscription tier.

New Relic is a registered trademark of New Relic, Inc.

All product and company names herein may be trademarks of their
registered owners.

                 
Consolidated Statements of Operations

(In thousands, except per share data; unaudited)

    Three Months Ended March 31, Year Ended March 31,
2019 2018 2019 2018
Revenue $ 132,097 $ 98,448 $ 479,225 $ 355,058
Cost of revenue 21,696 16,383 77,399 62,725
Gross profit 110,401 $ 82,065 401,826 $ 292,333
Operating expenses:
Research and development 32,112 19,646 104,859 74,332
Sales and marketing 71,975 55,006 257,066 207,021
General and administrative 21,714 14,945 73,007 57,788
Total operating expenses 125,801 89,597 434,932 339,141
Loss from operations (15,400) (7,532) (33,106) (46,808)
Other income (expense):
Interest income 4,077 687 13,103 2,190
Interest expense (5,747) (22) (19,679) (86)
Other income (expense), net (92) 226 (1,377) 343
Loss before income taxes (17,162) (6,641) (41,059) (44,361)
Income tax provision 257 325 697 959
Net loss $ (17,419) $ (6,966) $ (41,756) $ (45,320)
Net loss attributable to redeemable non-controlling interest 580 863
Net loss attributable to New Relic $ (16,839) $ (6,966) $ (40,893) $ (45,320)
Net loss attributable to New Relic per share, basic and diluted $ (0.30) $ (0.13) $ (0.72) $ (0.83)
Weighted-average shares used to compute net loss per share, basic
and diluted
56,917 55,669 56,884 54,814
 
           
Consolidated Balance Sheets

(In thousands, except par value; unaudited)

  March 31, March 31,
  2019 2018
Assets
Current assets:
Cash and cash equivalents $ 234,356 $ 132,479
Short-term investments 510,372 115,441
Accounts receivable, net of allowance for doubtful accounts of
$2,457 and $1,728, respectively
120,605 99,488
Prepaid expenses and other current assets 21,838 15,591
Deferred contract acquisition costs   27,161
Total current assets 914,332 362,999
Property and equipment, net 80,742 53,899
Restricted cash 8,805 8,202
Goodwill 41,512 11,828
Intangible assets, net 13,855 1,312
Deferred contract acquisition costs, non-current 26,218
Other assets, non-current   4,763 5,086
Total assets   $ 1,090,227 $ 443,326
Liabilities, redeemable non-controlling interest, and
stockholders’ equity
Current liabilities:
Accounts payable $ 10,249 $ 2,985
Accrued compensation and benefits 23,537 17,414
Other current liabilities 14,572 8,619
Deferred revenue   267,000 189,633
Total current liabilities 315,358 218,651
Convertible senior notes, net 405,937
Deferred rent, non-current 11,025 8,147
Deferred revenue, non-current 4,597 649
Other liabilities, non-current   947 775
Total liabilities 737,864 228,222
Redeemable non-controlling interest 2,733
Stockholders’ equity:
Common stock, $0.001 par value 58 56
Treasury stock – at cost (260 shares) (263) (263)
Additional paid-in capital 654,759 521,119
Accumulated other comprehensive income (loss) 645 (324)
Accumulated deficit   (305,569) (305,484)
Total stockholders’ equity   349,630 215,104
Total liabilities, redeemable non-controlling interest, and
stockholders’ equity
  $ 1,090,227 $ 443,326
 

Contacts

Investor Contact
Tony Righetti
New Relic, Inc.
503-336-9280
IR@newrelic.com

Media
Contact

Andrew Schmitt
New Relic, Inc.
415-869-7109
pr@newrelic.com

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