UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2022~~June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36766

New Relic, Inc.

(Exact name of registrant as specified in its charter)

_________________________________________________


Delaware						26-2017431
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

188 Spear Street, Suite 1000

San Francisco, California 94105

(Address of principal executive offices, including zip code)

(650) 777-7600

(Registrant’s telephone number, including area code)

__________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

NEWR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~January 31,~~July 24, 2023, there were ~~68,883,490~~70,225,487 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

NEW RELIC, INC.

Form 10-Q Quarterly Report

TABLE OF CONTENTS


		Page
Special Note Regarding Forward-Looking Statements		2
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	5

	Condensed Consolidated Balance Sheets as of ~~December 31~~June ~~, 2022~~30, 2023 and March 31, 202223	5

	Condensed Consolidated Statements of Operations for the Three ~~and~~ ~~Nine~~Months Ended D~~ecember 31, 2022~~June 30, 2023 and 20 212	6

	Condensed Consolidated Statements of Comprehensive Loss for the Three ~~and~~ ~~Nine~~ Months Ended D~~ecember 31, 2022~~June 30, 2023 and 20 212	7

	Condensed Consolidated Statements of Stockholders’ Equity for the Three ~~and~~ ~~Nine~~ Months Ended D~~ecember 31, 2022~~June 30, 2023 and 20 212	8

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended D~~ecember 31, 2022~~June 30, 2023 and 20 212	9

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2620

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4134

Item 4.	Controls and Procedures	4234

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4336

Item 1A.	Risk Factors	4336

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6962

Item 3.	Defaults Upon Senior Securities	6962

Item 4.	Mine Safety Disclosures	6962

Item 5.	Other Information	6962

Item 6.	Exhibits	7063

	Signatures	7164

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “New Relic,” “we,” “Company,” “us,” and “our” refer to New Relic, Inc. and its subsidiaries. “New Relic,” the New Relic logo, and other trademarks or service marks of New Relic that may appear in this Quarterly Report on Form 10-Q are the property of the Company. This Quarterly Report on Form 10-Q contains additional trade names, trademarks, and service marks of other companies. The Company does not intend its use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of the Company by, these other companies, and all such third-party trade names, trademarks, and service marks are the property of their respective owners.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “would,” “shall,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our pending acquisition by affiliates of by Francisco Partners Management, L.P. and TPG Capital Management, L.P., including the ~~impact of natural disasters and actual or threatened public health emergencies, such as the COVID-19 pandemic;~~anticipated timing thereof;

•our future financial performance, including our revenue, cost of revenue, gross profit, gross margin, operating expenses, ability to generate positive cash flow, and ability to achieve and maintain GAAP (as defined below) and non-GAAP profitability;

•our key operating metrics;

•use and limitations of non-GAAP financial measures;

•the sufficiency of our cash and cash equivalents to meet our working capital, capital expenditure, and liquidity needs;

•worldwide economic conditions, including inflation, increases in interest rates, and volatility in foreign exchange rates, and their impact on spending;

•the impact of natural disasters and actual or threatened public health emergencies, such as the COVID-19 pandemic;

•our ability to attract and retain customers to use our products, to optimize the pricing for our products, to expand our sales to our customers, and to convince our existing customers to remain on our platform and increase their spend with us;

•our product and pricing strategies and their anticipated impacts on our business and results of operations;

•our growth strategy, including increasing usage within our installed base, addition of new customers, penetration of international markets, and expansion of our platform and capabilities;

•the evolution of technologies affecting our products and markets;

•our ability to innovate and provide a superior user experience and our intentions and strategy with respect thereto;

•~~our ability to successfully expand in our existing markets and into new markets, including international markets;~~

•the attraction and retention of key personnel;

•our ability to effectively manage our growth and future expenses;

•our ability to maintain, protect, and enhance our intellectual property rights;

•~~worldwide economic conditions, including inflation and increases in interest rates, and their impact on spending;~~ and

•our ability to comply with modified or new laws and regulations applying to our business, including privacy and data security regulations.

We caution you that the foregoing list does not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-

looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

SELECTED RISKS AFFECTING OUR BUSINESS

Investing in our common stock involves a high degree of risk because we are subject to numerous risks and uncertainties that could negatively impact our business, financial condition and results of operations, as more fully described below. These risks and uncertainties include, but are not limited to, the following:

•Failure to complete, or delays in completing, the Merger (as defined below) announced on July 31, 2023 and disruptions in our business caused by the potential Merger could materially and adversely affect our business, financial condition, and results of operations.

•We cannot be sure if or when the Merger will be completed, and the pendency of the Merger could adversely affect our business, financial condition, and results of operations

•We have a limited operating history with our current business model, which makes it difficult to evaluate our current business and future prospects and increases the risk of your investment.

•We have limited experience with respect to determining the optimal prices and pricing strategies for our products.

•We have a history of losses and our revenue growth rate could decline over time, and as our costs increase, we may not be able to generate sufficient revenue to achieve and sustain ~~profitability.~~profitability or maintain positive operating cash flows.

•Weakened global economic conditions, including market volatility, a downturn or recession, rising inflation and interest rates, and the economic and other impacts of geopolitical conflicts, may harm our industry, business, and results of operations.

•Unfavorable movements in foreign exchange rates may ~~harm our business and results of operations.~~

•~~The ongoing global coronavirus (“COVID-19”) pandemic could~~ harm our business and results of operations.

•If we are not able to manage our growth and expansion, or if our business does not grow as we expect, our operating results may suffer.

•Our business depends on our customers remaining on our platform and increasing their spend with us.

•If we are not able to develop enhancements to our products, increase adoption and usage of our products, and introduce new products that achieve market acceptance, our business could be harmed.

•If customers do not expand their use of our products beyond the current predominant use cases, our ability to grow our business and operating results may be adversely affected.

•Our quarterly results may fluctuate, and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.

•If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, and changing customer needs, requirements, or preferences, our products may become less competitive.

•The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be harmed.

•Interruptions or performance problems associated with our technology and infrastructure may adversely affect our business and operating results.

•Our ongoing and planned expenditures on cloud hosting providers and expenditures on transitioning our services and customers from our data center hosting facilities to public cloud providers are expensive and complex, may result in a negative impact on our cash flows, and may negatively impact our financial results.

•Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.

•Our reliance upon open source software could negatively affect our ability to sell our products and subject us to possible litigation.

•If we lose key members of our management team or are unable to attract and retain executives and employees we need to support our operations and growth, our business may be harmed.

•Any issues with properly managing the use of artificial intelligence in our products could adversely affect our business.

•If we cannot continue to maintain and develop our corporate culture as we grow, we could lose the innovation, teamwork, passion, and focus on execution that we believe contribute to our success.

•Our failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory schemes, standards, and other obligations related to data privacy and security (including security incidents) could harm our business. Compliance or the actual or perceived failure to comply with such obligations could increase the costs of our products, limit their use or adoption, and otherwise negatively affect our operating results and business.

•~~We have incurred substantial indebtedness that~~The current macro-economic environment coupled with our operating performance may decrease our ~~business flexibility,~~ability to access toliquidity either through capital ~~and/~~markets or ~~increase our borrowing costs.~~lending institutions.

•Because our long-term growth strategy involves further expansion of our sales to customers outside the United States, our business will be susceptible to risks associated with international operations.

•We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate these controls.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NEW RELIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)


		December 31, 2022		March 31, 2022			June 30, 2023		March 31, 2023
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	506,815	$	268,695	Cash and cash equivalents	$	240,699	$	625,727
Short-term investments	Short-term investments	293,356		559,984		Short-term investments	216,285		254,085
Accounts receivable, net of allowances of $2,547 and $3,073, respectively		197,926		226,182
Accounts receivable, net of allowances of $2,576 and $3,121, respectively						Accounts receivable, net of allowances of $2,576 and $3,121, respectively	132,002		234,287
Prepaid expenses and other current assets	Prepaid expenses and other current assets	21,433		29,447		Prepaid expenses and other current assets	19,678		17,747
Deferred contract acquisition costs	Deferred contract acquisition costs	16,805		24,058		Deferred contract acquisition costs	13,203		14,962
Total current assets	Total current assets	1,036,335		1,108,366		Total current assets	621,867		1,146,808
Property and equipment, net	Property and equipment, net	54,114		68,368		Property and equipment, net	48,141		48,509
Restricted cash	Restricted cash	5,786		5,775		Restricted cash	5,805		5,795
Goodwill	Goodwill	172,298		163,677		Goodwill	172,298		172,298
Intangible assets, net	Intangible assets, net	13,986		15,636		Intangible assets, net	10,128		11,603
Deferred contract acquisition costs, non-current	Deferred contract acquisition costs, non-current	6,691		10,463		Deferred contract acquisition costs, non-current	10,831		8,558
Lease right-of-use assets	Lease right-of-use assets	40,304		50,465		Lease right-of-use assets	16,641		19,678
Other assets, non-current	Other assets, non-current	5,657		4,916		Other assets, non-current	5,573		5,759
Total assets	Total assets	$	1,335,171	$	1,427,666	Total assets	$	891,284	$	1,419,008
Liabilities, redeemable non-controlling interest and stockholders’ equity	Liabilities, redeemable non-controlling interest and stockholders’ equity					Liabilities, redeemable non-controlling interest and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	29,261	$	32,545	Accounts payable	$	39,356	$	29,452
Accrued compensation and benefits	Accrued compensation and benefits	40,446		37,023		Accrued compensation and benefits	43,970		37,552
Other current liabilities	Other current liabilities	26,472		36,098		Other current liabilities	33,076		39,424
Convertible senior notes, current	Convertible senior notes, current	499,486		—		Convertible senior notes, current	—		500,044
Deferred revenue	Deferred revenue	294,759		398,754		Deferred revenue	313,139		370,987
Lease liabilities	Lease liabilities	11,233		11,103		Lease liabilities	8,992		10,928
Total current liabilities	Total current liabilities	901,657		515,523		Total current liabilities	438,533		988,387
Convertible senior notes, net		—		497,663

Lease liabilities, non-current	Lease liabilities, non-current	40,983		49,809		Lease liabilities, non-current	35,846		38,384
Deferred revenue, non-current	Deferred revenue, non-current	7,243		108		Deferred revenue, non-current	6,374		3,800
Other liabilities, non-current	Other liabilities, non-current	24,856		20,173		Other liabilities, non-current	30,430		24,897
Total liabilities	Total liabilities	974,739		1,083,276		Total liabilities	511,183		1,055,468
Commitments and contingencies (Note 10)
Commitments and contingencies (Note 7)						Commitments and contingencies (Note 7)
Redeemable non-controlling interest	Redeemable non-controlling interest	18,335		21,686		Redeemable non-controlling interest	27,214		23,105
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $0.001 par value; 100,000 shares authorized at December 31, 2022 and March 31, 2022; 69,118 shares and 66,988 shares issued at December 31, 2022 and March 31, 2022, respectively; and 68,857 shares and 66,728 shares outstanding at December 31, 2022 and March 31, 2022, respectively		68		66
Common stock, $0.001 par value; 100,000 shares authorized at June 30, 2023 and March 31, 2023; 70,483 shares and 69,786 shares issued at June 30, 2023 and March 31, 2023, respectively; and 70,223 shares and 69,526 shares outstanding at June 30, 2023 and March 31, 2023, respectively						Common stock, $0.001 par value; 100,000 shares authorized at June 30, 2023 and March 31, 2023; 70,483 shares and 69,786 shares issued at June 30, 2023 and March 31, 2023, respectively; and 70,223 shares and 69,526 shares outstanding at June 30, 2023 and March 31, 2023, respectively	70		69
Treasury stock - at cost (260 shares)	Treasury stock - at cost (260 shares)	(263)		(263)		Treasury stock - at cost (260 shares)	(263)		(263)
Additional paid-in capital	Additional paid-in capital	1,258,562		1,114,221		Additional paid-in capital	1,360,656		1,311,615
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(9,943)		(8,012)		Accumulated other comprehensive loss	(6,591)		(7,432)
Accumulated deficit	Accumulated deficit	(906,327)		(783,308)		Accumulated deficit	(1,000,985)		(963,554)
Total stockholders’ equity	Total stockholders’ equity	342,097		322,704		Total stockholders’ equity	352,887		340,435
Total liabilities, redeemable non-controlling interest and stockholders’ equity	Total liabilities, redeemable non-controlling interest and stockholders’ equity	$	1,335,171	$	1,427,666	Total liabilities, redeemable non-controlling interest and stockholders’ equity	$	891,284	$	1,419,008

See notes to condensed consolidated financial statements.

NEW RELIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended June 30,
		2022		2021		2022		2021			2023		2022
Revenue	Revenue	$	239,763	$	203,591	$	683,134	$	579,769	Revenue	$	242,628	$	216,459
Cost of revenue	Cost of revenue	61,316		68,793		189,992		192,319		Cost of revenue	54,440		63,893
Gross profit	Gross profit	178,447		134,798		493,142		387,450		Gross profit	188,188		152,566
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	69,261		53,362		202,760		153,460		Research and development	80,310		64,769
Sales and marketing	Sales and marketing	95,477		97,723		296,100		293,603��		Sales and marketing	94,019		104,420
General and administrative	General and administrative	42,799		35,614		124,312		113,193		General and administrative	46,849		39,030
Total operating expenses	Total operating expenses	207,537		186,699		623,172		560,256		Total operating expenses	221,178		208,219
Loss from operations	Loss from operations	(29,090)		(51,901)		(130,030)		(172,806)		Loss from operations	(32,990)		(55,653)
Other income (expense):	Other income (expense):									Other income (expense):
Interest income	Interest income	4,685		575		8,220		2,237		Interest income	4,593		1,110
Interest expense	Interest expense	(1,283)		(1,228)		(3,748)		(3,682)		Interest expense	(429)		(1,232)
Other income (expense)		192		(268)		190		(647)
Other expense, net										Other expense, net	(1,666)		(209)
Loss before income taxes	Loss before income taxes	(25,496)		(52,822)		(125,368)		(174,898)		Loss before income taxes	(30,492)		(55,984)
Income tax provision	Income tax provision	1,116		763		1,002		816		Income tax provision	2,830		267
Net loss	Net loss	$	(26,612)	$	(53,585)	$	(126,370)	$	(175,714)	Net loss	$	(33,322)	$	(56,251)
Net loss and adjustment attributable to redeemable non-controlling interest	Net loss and adjustment attributable to redeemable non-controlling interest	607		(9,121)		3,351		(19,175)		Net loss and adjustment attributable to redeemable non-controlling interest	(4,109)		6,012
Net loss attributable to New Relic	Net loss attributable to New Relic	$	(26,005)	$	(62,706)	$	(123,019)	$	(194,889)	Net loss attributable to New Relic	$	(37,431)	$	(50,239)
Net loss attributable to New Relic per share, basic and diluted	Net loss attributable to New Relic per share, basic and diluted	$	(0.38)	$	(0.96)	$	(1.83)	$	(3.04)	Net loss attributable to New Relic per share, basic and diluted	$	(0.54)	$	(0.76)
Weighted-average shares used to compute net loss per share, basic and diluted	Weighted-average shares used to compute net loss per share, basic and diluted	68,050		64,983		67,229		64,203		Weighted-average shares used to compute net loss per share, basic and diluted	69,546		66,421

See notes to condensed consolidated financial statements.

NEW RELIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended June 30,
		2022		2021		2022		2021			2023		2022
Net loss attributable to New Relic	Net loss attributable to New Relic	$	(26,005)	$	(62,706)	$	(123,019)	$	(194,889)	Net loss attributable to New Relic	$	(37,431)	$	(50,239)
Other comprehensive loss:	Other comprehensive loss:									Other comprehensive loss:
Unrealized gain (loss) on available-for-sale securities	Unrealized gain (loss) on available-for-sale securities	1,890		(1,749)		(1,931)		(2,938)		Unrealized gain (loss) on available-for-sale securities	841		(1,936)
Comprehensive loss attributable to New Relic	Comprehensive loss attributable to New Relic	$	(24,115)	$	(64,455)	$	(124,950)	$	(197,827)	Comprehensive loss attributable to New Relic	$	(36,590)	$	(52,175)

See notes to condensed consolidated financial statements.

NEW RELIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

Three Months Ended December 31, 2022 Three Months Ended December 31, 2021
Common Stock Additional
Paid-In
Capital Treasury Stock Accumulated
Other
Comprehensive Income
(Loss) Accumulated
Deficit Total
Stockholders’
Equity Common Stock Additional
Paid-In
Capital Treasury Stock Accumulated
Other
Comprehensive
Loss Accumulated
Deficit Total
Stockholders’
Equity
Shares Amount Shares Amount Shares Amount Shares Amount
Balance at beginning of period 68,568 $ 68 $ 1,215,315 260 $ (263) $ (11,833) $ (880,322) $ 322,965 65,639 $ 65 $ 1,008,363 260 $ (263) $ (1,208) $ (665,089) $ 341,868
Issuance of common stock upon exercise of stock options 100 — 1,932 — — — — 1,932 412 1 21,550 — — — — 21,551
Issuance of common stock for vested restricted stock units 450 — — — — — — — 345 — — — — — — —
Stock-based compensation expense — — 41,315 — — — — 41,315 — — 38,384 — — — — 38,384
Other comprehensive income (loss), net — — — — — 1,890 — 1,890 — — — — — (1,749) — (1,749)
Net loss attributable to New Relic — — — — — — (26,005) (26,005) — — — — — — (62,706) (62,706)
Balance at end of period 69,118 $ 68 $ 1,258,562 260 $ (263) $ (9,943) $ (906,327) $ 342,097 66,396 $ 66 $ 1,068,297 260 $ (263) $ (2,957) $ (727,795) $ 337,348


		Nine Months Ended December 31, 2022																				Nine Months Ended December 31, 2021																													Three Months Ended June 30, 2023																																					Three Months Ended June 30, 2022
		Common Stock			Additional Paid-In Capital				Treasury Stock						Accumulated Other Comprehensive Loss		Accumulated Deficit			Total Stockholders’ Equity		Common Stock					Additional Paid-In Capital				Treasury Stock						Accumulated Other Comprehensive Loss				Accumulated Deficit					Total Stockholders’ Equity					Common Stock								Additional Paid-In Capital					Treasury Stock									Accumulated Other Comprehensive Income (Loss)					Accumulated Deficit					Total Stockholders’ Equity					Common Stock									Additional Paid-In Capital				Treasury Stock							Accumulated Other Comprehensive Loss				Accumulated Deficit				Total Stockholders’ Equity
		Shares	Amount				Shares			Amount									Shares			Amount				Shares					Amount									Shares									Amount							Shares						Amount														Shares										Amount							Shares							Amount
Balance at beginning of period	Balance at beginning of period	66,988	$	66			$	1,114,221		260			$	(263)			$	(8,012)		$	(783,308)	$	322,704	64,019			$	64			$	1,001,309		260			$	(263)					$	(19)				$	(587,116)			$	413,975		Balance at beginning of period		69,786				$	69				$	1,311,615				260				$	(263)				$	(7,432)				$	(963,554)				$	340,435				66,988				$	66			$	1,114,221			260			$	(263)			$	(8,012)			$	(783,308)	$	322,704
Effect of adoption of ASU 2020-06		—	—		—				—		—				—		—			—		—		—			(100,136)				—			—			—				54,210					(45,926)
Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options	369	—		8,434				—		—				—		—			8,434		727		1			29,164				—			—			—				—					29,165			Issuance of common stock upon exercise of stock options		44				—					2,802					—					—				—					—					2,802					96					—				1,725				—				—			—				—				1,725
Issuance of common stock for vested restricted stock units		1,388	2		(2)				—		—				—		—			—		1,149		1			(1)				—			—			—				—					—
Issuance of common stock related to employee stock purchase plan		103	—		6,062				—		—				—		—			6,062		100		—			5,417				—			—			—				—					5,417
Issuance of common stock related to acquisition of business		270	—		12,112				—		—				—		—			12,112		401		—			13,487				—			—			—				—					13,487
Issuance of common stock for vested restricted and performance stock units																													Issuance of common stock for vested restricted and performance stock units	653			1			(1)			—						—					—				—				—					458					1				(1)					—					—					—					—				—

Stock-based compensation expense	Stock-based compensation expense	—	—		117,735				—		—				—		—			117,735		—		—			119,057				—			—			—				—					119,057			Stock-based compensation expense		—				—				46,240					—					—				—					—					46,240					—					—				36,668				—				—			—				—				36,668
Other comprehensive loss, net		—	—		—				—		—				(1,931)		—			(1,931)		—		—			—				—			—			(2,938)				—					(2,938)
Other comprehensive income (loss), net																													Other comprehensive income (loss), net	—			—			—			—						—					841				—				841					—					—				—					—					—					(1,936)					—				(1,936)
Net loss attributable to New Relic	Net loss attributable to New Relic	—	—		—				—		—				—		(123,019)			(123,019)		—		—			—				—			—			—				(194,889)					(194,889)			Net loss attributable to New Relic		—				—				—					—					—				—					(37,431)					(37,431)					—					—				—				—				—			—				(50,239)				(50,239)
Balance at end of period	Balance at end of period	69,118	$	68	$	1,258,562			260		$	(263)			$	(9,943)	$	(906,327)		$	342,097	66,396		$	66		$	1,068,297			260			$	(263)		$	(2,957)			$	(727,795)				$	337,348		Balance at end of period		70,483				$	70			$	1,360,656				260					$	(263)			$	(6,591)				$	(1,000,985)				$	352,887				67,542					$	67			$	1,152,613			260				$	(263)		$	(9,948)			$	(833,547)			$	308,922

See notes to condensed consolidated financial statements.

NEW RELIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Nine Months Ended December 31,					Three Months Ended June 30,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss attributable to New Relic	Net loss attributable to New Relic	$	(123,019)	$	(194,889)	Net loss attributable to New Relic	$	(37,431)	$	(50,239)
Net loss and adjustment attributable to redeemable non-controlling interest (Note 3)		(3,351)		19,175
Net loss and adjustment attributable to redeemable non-controlling interest (Note 2)						Net loss and adjustment attributable to redeemable non-controlling interest (Note 2)	4,109		(6,012)
Net loss:	Net loss:	$	(126,370)	$	(175,714)	Net loss:	$	(33,322)	$	(56,251)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:						Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	50,989		66,787		Depreciation and amortization	6,727		10,644
Amortization of deferred contract acquisition costs						Amortization of deferred contract acquisition costs	5,190		7,224
Stock-based compensation expense	Stock-based compensation expense	115,413		117,549		Stock-based compensation expense	46,437		34,882
Amortization of debt discount and issuance costs	Amortization of debt discount and issuance costs	1,823		1,766		Amortization of debt discount and issuance costs	206		593
Loss on facilities exit		10,840		—

Non-cash charges related to restructuring activities						Non-cash charges related to restructuring activities	3,167		—
Other	Other	2,008		(204)		Other	829		(352)
Changes in operating assets and liabilities, net of acquisition of business:	Changes in operating assets and liabilities, net of acquisition of business:					Changes in operating assets and liabilities, net of acquisition of business:
Accounts receivable, net	Accounts receivable, net	27,999		(3,053)		Accounts receivable, net	102,285		116,545
Prepaid expenses and other assets	Prepaid expenses and other assets	5,277		(2,990)		Prepaid expenses and other assets	(2,984)		(147)
Deferred contract acquisition costs	Deferred contract acquisition costs	(8,711)		(1,668)		Deferred contract acquisition costs	(5,704)		(416)
Lease right-of-use assets	Lease right-of-use assets	7,919		6,743		Lease right-of-use assets	1,629		2,562
Accounts payable	Accounts payable	(3,808)		2,922		Accounts payable	10,124		2,650
Accrued compensation and benefits and other liabilities	Accrued compensation and benefits and other liabilities	2,911		14,650		Accrued compensation and benefits and other liabilities	(191)		(4,562)
Lease liabilities	Lease liabilities	(8,696)		(5,888)		Lease liabilities	(810)		(4,457)
Deferred revenue	Deferred revenue	(96,859)		(67,228)		Deferred revenue	(55,274)		(65,906)
Net cash used in operating activities		(19,265)		(46,328)
Net cash provided by operating activities						Net cash provided by operating activities	78,309		43,009
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(2,774)		(3,177)		Purchases of property and equipment	(515)		(1,294)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	1,773		—		Proceeds from sale of property and equipment	415		943
Cash paid for acquisition, net of cash acquired		(7,507)		(7,192)

Purchases of short-term investments	Purchases of short-term investments	(50,373)		(175,668)		Purchases of short-term investments	—		(50,373)
Proceeds from sale and maturity of short-term investments	Proceeds from sale and maturity of short-term investments	313,975		212,328		Proceeds from sale and maturity of short-term investments	38,500		44,175
Capitalized software development costs	Capitalized software development costs	(12,194)		(9,406)		Capitalized software development costs	(4,279)		(3,387)
Net cash provided by investing activities		242,900		16,885
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	34,121		(9,936)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Payment of convertible senior notes						Payment of convertible senior notes	(500,250)		—

Proceeds from employee stock purchase plan		6,062		5,417
Proceeds from exercise of employee stock options	Proceeds from exercise of employee stock options	8,434		29,165		Proceeds from exercise of employee stock options	2,802		1,725
Net cash provided by financing activities		14,496		34,582
Net increase in cash, cash equivalents and restricted cash		238,131		5,139
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(497,448)		1,725
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	(385,018)		34,798
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	274,470		246,463		Cash, cash equivalents and restricted cash at beginning of period	631,522		274,470
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	512,601	$	251,602	Cash, cash equivalents and restricted cash at end of period	$	246,504	$	309,268
Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets:	Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets:					Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets:
Cash and cash equivalents	Cash and cash equivalents	$	506,815	$	245,827	Cash and cash equivalents	$	240,699	$	303,493
Restricted cash	Restricted cash	5,786		5,775		Restricted cash	5,805		5,775
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	512,601	$	251,602	Total cash, cash equivalents and restricted cash	$	246,504	$	309,268
Supplemental disclosure of cash flow information:

Cash paid for interest and income taxes		$	3,694	$	4,448
Noncash investing and financing activities:
Property and equipment purchased but not yet paid		$	194	$	3
Issuance of common stock for the acquisition of business		$	12,112	$	13,487
Acquisition holdback		$	3,300	$	7,250

See notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Description of Business and Summary of Significant Accounting Policies

Business—New Relic, Inc. (the “Company” or “New Relic”) was incorporated in Delaware on February 20, 2008, when it converted from a Delaware limited liability company called New Relic Software, LLC, which was formed in Delaware in September 2007. The Company ~~delivers a software~~provides an “all-in-one” observability platform ~~for~~that enables its customers to ~~land all~~plan, build, deploy, and operate their critical digital infrastructure by harnessing the power of data. The Company’s observability platform combines metrics, events, logs, traces, and other telemetry data ~~in one place and derive~~with our proprietary stack of analytical tools to rapidly generate actionable, ~~insights from that data in a unified front-end application.~~fact-based insights. The Company’s customers use the New Relic platform ~~provides users with a consistent~~to improve uptime, reliability, and ~~comprehensive view of~~operational efficiency, in order to optimize the digital experience for their ~~digital environment allowing them to observe and operate all the components of~~customers as well as within their ~~digital infrastructure.~~organizations.

Fiscal Year—The Company’s fiscal year ends on March 31. References to fiscal ~~2023~~2024 refer to the fiscal year ~~ended~~ending March 31, ~~2023.~~2024.

Basis of Presentation—The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, wholly owned or otherwise, and have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior-period amounts have been reclassified to conform with current-period presentation. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022,~~2023, as filed with the SEC on May ~~17, 2022~~23, 2023 (the “Annual Report”).

In the opinion of management, the unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, stockholders’ equity and cash flows for the interim period, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending March 31, ~~2023.~~2024. The condensed consolidated balance sheet as of March 31, ~~2022~~2023 included herein was derived from the audited financial statements as of that date.

Use of Estimates—The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Significant items subject to such estimates and assumptions include the fair value of share-based awards, fair value of purchased intangible assets and goodwill, variable consideration included in the transaction price for our customer contracts, useful lives of purchased intangible assets, unrecognized tax benefits, incremental borrowing rate used for operating lease liabilities, and the capitalization and estimated useful life of the Company’s software development costs.

These estimates are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from management’s estimates.

~~Concentration~~Summary of ~~Credit Risk~~Significant Accounting Policies—~~Financial instruments that potentially subject the Company~~There have been no material changes to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, and accounts receivable. The Company maintains its cash balances at financial institutions that management believes are high-credit, quality financial institutions, where deposits, at times, exceed the Federal Deposit Insurance Corporation (“FDIC”) limits. As ofDecember 31, 2022 and March 31, 2022, 97% and 96%, respectively, of cash, cash equivalents, and restricted cash were concentrated in the United States. The Company has not experienced any losses on cash and cash equivalents to date. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with typical commercial banking relationships. For the purpose of assessing concentrations of credit risk and customer significance, a group of customers under common control or customers that are affiliates of each other are regarded as a single customer. There was no customer that represented more than 10% of the Company’s accounts receivable balanceour significant accounting policies as of ~~December 31, 2022 or March 31, 2022. There was no customer that individually exceeded 10% of the Company’s revenue during~~and for the three ~~or nine~~ months ended ~~December 31, 2022 or 2021.~~

~~Significant Accounting Policies~~

~~Revenue Recognition—The Company generates revenue from consumption-based and subscription-based agreements that allow customers to access its products and/or platform over the internet~~June 30, 2023, as a service. The Company typically sells (1) a subscription-based agreement for a committed contractual amount that is apportioned ratably over the term of the subscription period, (2) a consumption-based agreement for a committed contractual amount where the committed contractual amount is drawn down as usage occurs and may or may not include a usage overage component, and (3) a consumption-based arrangement that is billed based on usage (“Pay as You Go”).

~~The Company determines revenue recognition through the following steps:~~

•~~identification of the contract, or contracts with a customer;~~

•~~identification of the performance obligations in the contract;~~

•~~determination of the transaction price;~~

•~~allocation of the transaction price~~compared to the ~~performance obligations~~significant accounting policies described in ~~the contract; and~~

•~~recognition of revenue, when, or as, the Company satisfies a performance obligation.~~

Usage above the commitment for consumption-based agreements is either recognized as revenue as the usage is incurred or as revenue as part of an estimate of total usage above the commitment. Total usage above the commitment is estimated by surveying usage in previous months along with other factors and projecting usage for the remaining term of the contract. The estimated usage-based revenues are constrained to the amount the Company expects to be entitled to receive in exchange for providing access to its platform. Revenue from subscription-based agreements is recognized on a ratable basis over the contractual subscription period of the agreement.

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

~~In October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2021-08,~~ ~~Business Combinations - Accounting for Contract Liabilities from Contracts with Customers (Topic 805),~~ which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under ASC 606 as if the entity had originated the contracts. The guidance is effective for fiscal years beginning after April 1, 2023, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this guidance.our Annual Report.

2. ~~Business Combinations~~

~~K2 Cyber Security Inc.~~

On September 14, 2022, the Company acquired all of the equity interests in K2 Cyber Security Inc. (“K2”), a company that provides a differentiated, signatureless approach to vulnerability and hack detection. The aggregate purchase price of $16.6 million consisted of approximately (i) $4.5 million in cash (of which t~~he Company held back approximately $3.3 million~~ ~~for 18 months after the transaction closing date for indemnification purposes,~~ ~~which has been accrued as a long-term liability~~) and (ii) 202,752 shares of the Company’s common stock with an aggregate fair value of approximately $12.1 million, after taking into account the holdback arrangement with the K2 founders, as described below. The fair value of the consideration transferred was determined based on a $59.74 per share price of the Company’s common stock on the closing date of the acquisition.

~~The total purchase price was allocated to the developed technology acquired~~ ~~with an estimated useful life o~~f three years and net assets assumed. Deferred tax related to the developed technology was deemed immaterial. The excess purchase price was recorded as goodwill, as set forth below. Goodwill generated from the acquisition was attributable to expected synergies from future growth and was not deductible for tax purposes.

~~The following table presents the preliminary purchase price allocation related to the acquisition (in thousands):~~


~~Cash consideration~~	$	~~4,497~~
~~Fair value of common shares~~	~~16,132~~
~~Total consideration~~	~~20,629~~
~~Post-business combination compensation expense~~	~~(4,019)~~
~~Total purchase price~~	~~16,610~~
~~Net assets assumed~~	~~(589)~~
~~Developed technology acquired~~	~~(7,400)~~
~~Goodwill~~	$	~~8,621~~

~~The acquisition was accounted for as a business combination in accordance with ASC 805. The estimated fair value of developed technology acquired of~~ ~~$7.4 million~~ was determined through the use of a third-party valuation firm using cost approach methodology. The direct transaction costs of the acquisition were accounted for separately from the business combination and expensed as incurred. ~~The business combination did not have a material impact on the condensed consolidated financial statements and therefore historical and pro forma disclosures have not been presented.~~

The acquisition also included a holdback arrangement with the two founders of K2, totaling approximately 67,278 shares of the Company’s common stock, contingent upon their continued employment with the Company. The fair value of these awards, which are subject to the recipients’ continued service, was $4.0 million and was excluded from the aggregate purchase price. These awards are recognized as stock-based compensation expenses over the vesting period, which is ~~24 and 36 months for the two founders, respectively.~~

~~CodeStream Inc.~~

On June 8, 2021, the Company acquired all of the equity interests in CodeStream Inc. (“CodeStream”), a company that provides an integrated developer collaboration platform. The aggregate purchase price of $28.6 million consisted of approximately $15.1 million in cash (of which t~~he Company held back approximately~~ ~~$7.3 million~~ ~~from the aggregate purchase price~~ ~~for 18 months after the transaction closing date, and all of~~ ~~which was subsequently paid out in December 2022 in accordance with the holdback term~~) and 202,561 shares of the Company’s common stock with an aggregate fair value of approximately $13.5 million. The fair value of the consideration transferred was determined based on a $66.58 per share price of the Company’s common stock on the closing date of the acquisition. The total purchase price was allocated to the developed technology acquired ~~with an estimated useful life of three years, net assets assumed, and a deferred tax liability related to the developed technology. The excess purchase price was recorded as goodwill.~~ The acquisition was accounted for as a business combination in accordance with ASC 805. The estimated fair value of developed technology acquired of $10.3 million was determined through the use of a third-party valuation firm using cost approach methodology. ~~The business combination did not have a material impact on the condensed consolidated financial statements and therefore historical and proforma disclosures have not been presented.~~

The acquisition also included a holdback arrangement with certain employees of CodeStream, totaling approximately 199,492 shares of the Company’s common stock, contingent upon their continued employment with the Company. The fair value of these awards, which are subject to the recipients’ continued service, was $13.3 million and was excluded from the aggregate purchase price. These awards are being recognized as stock-based compensation expense over the vesting period, which is ~~42 months.~~

3. Joint Venture

On July 13, 2018, the Company entered into an agreement with Japan Cloud Computing L.P. and M30 LLC (collectively, the “Investors”) to engage in the investment, organization, management and operation of New Relic K.K., a Japanese subsidiary of the Company that is focused on the sale of the Company’s products and services in Japan. On August 21, 2018, the investors initially contributed approximately $3.6 million (396 million Japanese Yen) in exchange for 40% of the outstanding common stock of New Relic K.K. On August 21, 2019, the Company and Investors additionally contributed approximately $1.5 million (156 million Japanese Yen) and approximately $1.0 million (104 million Japanese Yen), respectively, to subscribe to additional shares. As of ~~December 31, 2022,~~June 30, 2023, the Company owned approximately 60% of the outstanding common stock in New Relic K.K.

All of the common stock held by the Investors may be callable by the Company or puttable by the Investors upon certain contingent events. Should the call or put option be exercised, the redemption value would be determined based on a prescribed formula derived from the discrete revenues of New Relic K.K. and the Company and may be settled, at the Company’s discretion, with Company stock or cash. As a result of the put right available to the redeemable non-controlling interest holders in the future, the redeemable non-controlling interest in New Relic K.K. is classified outside of permanent equity in the Company’s consolidated balance sheet as of ~~December 31, 2022,~~June 30, 2023, and the balance is reported at the greater of the initial

carrying amount adjusted for the redeemable non-controlling interest’s share of earnings or losses, or its estimated redemption value. Accordingly, the Company adjusted the redeemable non-controlling interest by ~~$3.4~~$4.2 million at ~~December 31, 2022.~~June 30, 2023.

The following table summarizes the activity in the redeemable non-controlling interest for the periods indicated below (in thousands):


		Nine Months Ended December 31,					Three Months Ended June 30,
		2022		2021			2023		2022
Balance, beginning of period	Balance, beginning of period	$	21,686	$	3,389	Balance, beginning of period	$	23,105	$	21,686

Net loss attributable to redeemable non-controlling interest	Net loss attributable to redeemable non-controlling interest	(348)		(275)		Net loss attributable to redeemable non-controlling interest	(109)		(146)
Adjustment to redeemable non-controlling interest	Adjustment to redeemable non-controlling interest	(3,003)		19,450		Adjustment to redeemable non-controlling interest	4,218		(5,866)
Balance, end of period	Balance, end of period	$	18,335	$	22,564	Balance, end of period	$	27,214	$	15,674

4.3. Fair Value Measurements

The Company ~~classifies time deposits~~reports assets and ~~other investments that are highly liquid and have maturities of three months or less~~liabilities recorded at ~~the date of purchase as cash equivalents.~~

~~The Company’s restricted cash consists of compensating balances that must be maintained at a financial institution as collateral for~~fair value on the Company’s ~~standby letters~~consolidated balance sheets based upon the level of ~~credit relating~~judgment associated with inputs used to ~~its property leases.~~

The Company invests in certificates of deposit, commercial paper, corporate debt securities, U.S. treasury securities, and U.S. agency securities, which are classified as available-for-sale securities.

measure their fair value. The following tables present information about the Company’s financial assets measured at fair value on a recurring basis as of ~~December 31, 2022~~June 30, 2023 and March 31, ~~2022~~2023 based on the three-tier fair value hierarchy (in thousands):


											Fair Value Measurements as of June 30, 2023
											Quoted prices in active markets for identical assets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Cash and cash equivalents:										Cash and cash equivalents:
Money market funds										Money market funds	$	173,445	$	—	$	—	$	173,445

Short-term investments:										Short-term investments:
Certificates of deposit										Certificates of deposit	—		5,998		—		5,998

Corporate notes and bonds										Corporate notes and bonds	—		65,596		—		65,596
U.S. treasury securities										U.S. treasury securities	144,691		—		—		144,691

Total short-term investments										Total short-term investments	144,691		71,594		—		216,285
Restricted cash:										Restricted cash:
Money market funds										Money market funds	5,805		—		—		5,805
Total assets measured at fair value										Total assets measured at fair value	$	323,941	$	71,594	$	—	$	395,535

		Fair Value Measurements as of December 31, 2022									Fair Value Measurements as of March 31, 2023
		Level 1		Level 2		Level 3		Total			Quoted prices in active markets for identical assets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Cash and cash equivalents:	Cash and cash equivalents:									Cash and cash equivalents:
Money market funds	Money market funds	$	420,517	$	—	$	—	$	420,517	Money market funds	$	532,173	$	—	$	—	$	532,173

Short-term investments:	Short-term investments:									Short-term investments:
Certificates of deposit	Certificates of deposit	—		29,386		—		29,386		Certificates of deposit	—		5,961		—		5,961
Commercial paper	Commercial paper	—		2,954		—		2,954		Commercial paper	—		2,990		—		2,990
Corporate notes and bonds	Corporate notes and bonds	—		83,018		—		83,018		Corporate notes and bonds	—		65,378		—		65,378
U.S. treasury securities	U.S. treasury securities	177,998		—		—		177,998		U.S. treasury securities	179,756		—		—		179,756

Total short-term investments										Total short-term investments	179,756		74,329		—		254,085
Restricted cash:	Restricted cash:									Restricted cash:
Money market funds	Money market funds	5,786		—		—		5,786		Money market funds	5,795		—		—		5,795
Total		$	604,301	$	115,358	$	—	$	719,659
Included in cash and cash equivalents								$	420,517
Included in short-term investments								$	293,356
Included in restricted cash								$	5,786
Total assets measured at fair value										Total assets measured at fair value	$	717,724	$	74,329	$	—	$	792,053

		Fair Value Measurements as of March 31, 2022
		Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Money market funds		$	109,327	$	—	$	—	$	109,327

Short-term investments:
Certificates of deposit		—		126,885		—		126,885
Commercial paper		—		27,861		—		27,861
Corporate notes and bonds		—		85,065		—		85,065
U.S. treasury securities		320,173		—		—		320,173

Restricted cash:
Money market funds		5,775		—		—		5,775
Total		$	435,275	$	239,811	$	—	$	675,086
Included in cash and cash equivalents								$	109,327
Included in short-term investments								$	559,984
Included in restricted cash								$	5,775

There were no transfers between fair value measurement levels during the ~~nine~~three months ended ~~December 31, 2022~~June 30, 2023 and ~~2021.~~2022.

1411

The following table presents the Company’s available-for-sale securities as of ~~December 31, 2022~~June 30, 2023 (in thousands):


		Available-for-sale Investments as of December 31, 2022									Available-for-sale Investments as of June 30, 2023
		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value			Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value

Short-term investments:	Short-term investments:									Short-term investments:
Certificates of deposit	Certificates of deposit	$	29,500	$	—	$	(114)	$	29,386	Certificates of deposit	$	6,000	$	—	$	(2)	$	5,998
Commercial paper		2,974		—		(20)		2,954

Corporate notes and bonds	Corporate notes and bonds	85,907		—		(2,889)		83,018		Corporate notes and bonds	67,394		—		(1,798)		65,596
U.S. treasury securities	U.S. treasury securities	183,211		—		(5,213)		177,998		U.S. treasury securities	147,774		—		(3,083)		144,691

Total available-for-sale investments	Total available-for-sale investments	$	301,592	$	—	$	(8,236)	$	293,356	Total available-for-sale investments	$	221,168	$	—	$	(4,883)	$	216,285

The following table presents the Company’s available-for-sale securities as of March 31, ~~2022~~2023 (in thousands):


		Available-for-sale Investments as of March 31, 2022									Available-for-sale Investments as of March 31, 2023
		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value			Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value

Short-term investments:	Short-term investments:									Short-term investments:
Certificates of deposit	Certificates of deposit	$	127,500	$	—	$	(615)	$	126,885	Certificates of deposit	$	6,000	$	—	$	(39)	$	5,961
Commercial paper	Commercial paper	27,946		—		(85)		27,861		Commercial paper	2,994		—		(4)		2,990
Corporate notes and bonds	Corporate notes and bonds	87,259		—		(2,194)		85,065		Corporate notes and bonds	67,571		—		(2,193)		65,378
U.S. treasury securities	U.S. treasury securities	323,584		79		(3,490)		320,173		U.S. treasury securities	183,244		—		(3,488)		179,756

Total available-for-sale investments	Total available-for-sale investments	$	566,289	$	79	$	(6,384)	$	559,984	Total available-for-sale investments	$	259,809	$	—	$	(5,724)	$	254,085

The Company reviews its debt securities classified as short-term investments on a regular basis for impairment. For debt securities in unrealized loss positions, the Company determines whether any portion of the decline in fair value below the amortized cost basis is due to credit-related factors where the Company neither intends to sell nor anticipates that it is more likely than not that it will be required to sell prior to recovery of the amortized cost basis. The Company ~~consider~~considers factors such as the extent to which the market value has been less than the cost, any noted failure of the issuer to make scheduled payments, changes to the rating of the security, and other relevant credit-related factors in determining whether or not a credit loss exists. During the ~~nine~~three months ended ~~December 31, 2022~~June 30, 2023 and the twelve months ended March 31, ~~2022,~~2023, the Company did not recognize an allowance for credit-related losses on any of its investments.

As of ~~December 31, 2022~~June 30, 2023 and March 31, ~~2022,~~2023, securities that were in an unrealized loss position for more than 12 months were ~~$5.5~~$4.9 million and ~~$1.3~~$4.6 million, respectively. The unrealized losses were caused by changes in market interest rates or the widening of market spreads subsequent to the initial purchase of these securities, and not related to the underlying credit of the issuers or the underlying collateral. The unrealized losses on these investments are not considered an other-than-temporary impairment, because the decline in fair value is not attributable to credit quality and because the Company does not intend, and it is not likely that it will be required, to sell these securities before recovery of their amortized cost basis. As a result, the Company did not consider any of its available-for-sale securities to be impaired as of ~~December 31, 2022~~June 30, 2023 and March 31, ~~2022.~~2023.

The following table classifies the Company’s available-for-sale short-term investments by contractual maturities as of ~~December 31, 2022~~June 30, 2023 and March 31, ~~2022~~2023 (in thousands):


		December 31, 2022		March 31, 2022			June 30, 2023		March 31, 2023
Due within one year	Due within one year	$	165,992	$	354,774	Due within one year	$	179,676	$	165,143
Due after one year and within three years	Due after one year and within three years	127,364		205,210		Due after one year and within three years	36,609		88,942
Total	Total	$	293,356	$	559,984	Total	$	216,285	$	254,085

For certain other financial instruments, including accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.

Convertible Senior Notes

The Company’s 0.50% convertible senior notes due 2023 (the “Notes”) matured and were repaid in cash on May 1, 2023. No amount remains outstanding on the Notes as of June 30, 2023. As of ~~December~~March 31, ~~2022,~~2023, the fair value of the Notes ~~was $443.7~~were $449.4 million. The fair value was determined based on the quoted price of the Notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2 in the fair value hierarchy.

1512

5.4. Revenue

~~Accounts Receivable and Contract Assets~~Disaggregation of Revenue

The ~~Company performed procedures to evaluate~~following table presents revenue by category (in thousands):


	Three Months Ended June 30,
	2023		2022
Subscription	$	28,720	$	63,080
Consumption	213,908		153,379
Total revenue	$	242,628	$	216,459

The following table shows the ~~creditworthiness~~Company’s revenue by geographic areas, as determined based on the billing address of its customers and assess collectability of accounts. Using a current expected credit loss model, the Company determined that, while there may be a delay in collections due to the downturn in economic activity, there has not been a material impact to the risk of credit loss on accounts receivables as of December 31, 2022.(in thousands):

The Company receives payments from customers based upon billing cycles. As the Company performs under customer contracts, its right to consideration that is unconditional is considered to be accounts receivable. If the Company’s right to consideration for such performance is contingent upon a future event or satisfaction of additional performance obligations, the amount of revenues the Company has recognized in excess of the amount it has billed to the customer is considered to be a contract asset. Contract assets were $2.8 million and $1.5 million as of December 31, 2022 and March 31, 2022, respectively. The Company has no asset impairment charges related to contract assets for the periods presented.


	Three Months Ended June 30,
	2023		2022
United States	$	151,171	$	143,460
Europe, the Middle East, and Africa (“EMEA”)	44,000		34,716
Asia Pacific and Japan (“APAC”)	28,897		23,126
Other	18,560		15,157
Total revenue	$	242,628	$	216,459

Deferred Revenue and Performance Obligations

Deferred revenue ~~represents consideration~~consists of billings or payments received ~~from customers~~ in ~~excess~~advance of ~~revenues~~revenue being recognized. ~~The following table presents the changes to the Company’s deferred revenue for each of the periods presented below (in thousands):~~
Three Months Ended December 31, Nine Months Ended December 31,
2022 2021 2022 2021
Deferred revenue, beginning of period $ 285,286 $ 272,246 $ 398,862 $ 375,268
Contributions from contract asset (1,381) (1,022) 1,293 618
Billings 257,860 240,407 584,981 511,923
Revenue recognized (239,763) (203,591) (683,134) (579,769)
Deferred revenue, end of period $ 302,002 $ 308,040 $ 302,002 $ 308,040

For the three ~~and nine~~ months ended ~~December 31,~~June 30, 2023 and 2022, ~~and 2021,~~ the majority of revenue recognized was from the deferred revenue balances at the beginning of each period. For the three ~~and nine~~ months ended ~~December 31,~~June 30, 2023 and 2022, the Company recognized ~~$7.5~~$1.5 million and ~~$11.1 million, respectively, in revenue from performance obligations satisfied in prior periods. For the three and nine months ended December 31, 2021, the Company recognized $8.6 million and $9.7~~$6.8 million, respectively, in revenue from performance obligations satisfied in prior periods.

The aggregate unrecognized transaction price of the Company’s remaining performance obligations as of ~~December 31, 2022 and 2021~~June 30, 2023 was ~~$726.1 million and $609.9 million, respectively.~~$738.9 million. The Company expects approximately ~~75%~~70% to be recognized as revenue in the 12 months ~~ending December 31,~~following June 30, 2023, ~~93%~~91% of the balance as revenue in the 24 months following ~~December 31, 2022,~~June 30, 2023, and the remainder thereafter based on historical customer consumption patterns. However, the amount and timing of revenue recognition are generally dependent upon customers’ future consumption, which is inherently variable at customers’ discretion and can extend beyond the original contract term in cases where customers are permitted to roll over unused capacity to future periods, generally on the purchase of additional capacity at renewal.

The aggregate balance of remaining performance obligations represents contracted revenue that has not yet been recognized and does not include contract amounts which are cancellable by the customer and amounts associated with optional renewal periods.

~~Capitalized Contract Costs~~

The Company capitalizes certain contract acquisition costs primarily consisting of commissions, if the Company expects the benefit of the contact acquisition costs to be greater than one year. The balances of deferred costs to obtain customer contracts were $23.5 million and $34.5 million as of December 31, 2022 and March 31, 2022, respectively. In the three months ended December 31, 2022 and 2021, amortization from amounts capitalized was $6.0 million and $8.8 million, respectively. In the nine months ended December 31, 2022 and 2021, amortization from amounts capitalized was $19.7 million and $28.6 million, respectively. In the three months ended December 31, 2022 and 2021, amounts expensed as incurred were $14.7 million and $17.0 million, respectively. In the nine months ended December 31, 2022 and 2021, amounts expensed as incurred were $43.2 million and $46.5 million, respectively.

6.5. Property and Equipment

Property and equipment, net, consisted of the following (in thousands):


		December 31, 2022		March 31, 2022			June 30, 2023		March 31, 2023
Computers, software, and equipment	Computers, software, and equipment	$	14,595	$	13,854	Computers, software, and equipment	$	13,117	$	13,301
Site operation equipment	Site operation equipment	56,966		67,726		Site operation equipment	49,119		52,672
Furniture and fixtures	Furniture and fixtures	4,783		5,772		Furniture and fixtures	2,588		2,589
Leasehold improvements	Leasehold improvements	34,795		49,756		Leasehold improvements	21,885		21,877
Capitalized software development costs	Capitalized software development costs	85,548		79,808		Capitalized software development costs	94,556		90,075
Total property and equipment	Total property and equipment	196,687		216,916		Total property and equipment	181,265		180,514
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(142,573)		(148,548)		Less: accumulated depreciation and amortization	(133,124)		(132,005)
Total property and equipment, net	Total property and equipment, net	$	54,114	$	68,368	Total property and equipment, net	$	48,141	$	48,509

Depreciation and amortization expense related to property and equipment was ~~$10.0~~$4.8 million and ~~$10.3~~$8.0 million for the three months ended ~~December 31,~~June 30, 2023 and 2022, ~~and 2021, respectively, and $25.2 million and $31.9 million for the nine months ended December 31, 2022 and 2021,~~ respectively.

6. 0.5% Convertible Senior Notes and Capped Call

In May 2018, the Company issued $500.25 million in aggregate principal amount of the Notes in a private offering, including $65.25 million in aggregate principal amount of Notes pursuant to the exercise in full of the initial purchasers’ option to purchase additional Notes. The Notes ~~are~~were the Company’s senior unsecured obligations and ~~bear~~bore interest at a fixed rate of 0.5% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on November 1, 2018. ~~The Notes will mature on May 1, 2023, unless earlier converted or repurchased.~~ Each $1,000 principal amount of the Notes ~~will~~was initially be convertible into 9.0244 shares of the Company’s common stock (the “Conversion Option”), which iswas equivalent to an initial conversion price of approximately $110.81 per share. The ~~conversion rate is subject to adjustment under certain circumstances~~Notes matured and were repaid in accordance with the terms of the indenture governing the Notes. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate, in certain circumstances, for a holder who elects to convert its Notes in connection with such a corporate event. cash on May 1, 2023.

The ~~Notes became convertible at the option of their holders on November 1, 2022.~~

Until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at the option of the holder. On November 1, 2022, the Company was deemed to have elected to settle all conversions on or after November 1, 2022, with cash up to the principalnet carrying amount of the Notes was as follows (in thousands):


	June 30, 2023		March 31, 2023
Principal	$	—	$	500,250

Unamortized issuance costs	—		(206)
Net carrying amount	$	—	$	500,044

For the three months ended June 30, 2023 and ~~shares for any excess conversion value.~~

~~In accounting for~~2022, the transaction, the Notes were separated into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated conversion feature. The carrying amount of the equity component representing the Conversion Option was $102.5 million and was determined by deducting the fair value of the liability component from the proceeds received upon issuance of the Notes. The equity component was recorded in additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the Notes over the liability component (the “Debt Discount”) and the debt issuance costs were amortized to interest expense over the contractual term of the Notes at an effective interest rate ~~of 5.74%. This rate is inclusive of the issuance costs.~~

~~In accounting~~ for the ~~debt issuance costs of $11.6 million~~Notes was 0.98%. Interest expense related to the Notes ~~the Company allocated the total amount incurred to the liability and equity components using the same proportions~~was as the proceeds of the Notes. Issuance costs attributable to the liability component were $9.2 million and were amortized to interest expense using the effective interest method over the contractual term of the Notes. Issuance costs attributable to the equity component were $2.4 million and netted with the equity component in additional paid-in capital.follows (in thousands):


	Three Months Ended June 30,
	2023		2022

Amortization of issuance costs	$	206	$	593
Contractual interest expense	215		624
Total interest expense	$	421	$	1,217

In connection with the offering of the Notes, the Company entered into privately negotiated capped call transactions with certain financial institutions (the “Capped Calls”). The Capped Calls each ~~have~~had an initial strike price of approximately $110.81 per share, subject to certain adjustments, which ~~correspond~~corresponded to the initial conversion price of the Notes. The Capped Calls ~~have~~had initial cap prices of $173.82 per share, subject to certain adjustments. The Capped Calls ~~cover,~~covered, subject to ~~anti-~~

~~dilution~~anti-dilution adjustments, approximately 4.5 million shares of the Company’s common stock. Conditions that cause adjustments to the initial strike price of the Capped Calls mirror conditions that result in corresponding adjustments for the Notes. The Capped Calls are generally intended to reduce potential dilution to holders of the Company’s common stock upon any conversion of the Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset, as the case may be, subject to a cap based on the cap price. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $63.2 million incurred in connection with the Capped Calls was recorded as a reduction to additional paid-in capital. The ~~net impact related to stockholders’ equity has been included in additional paid-in capital and was a result of the issuance costs of $2.4 million and the purchase of~~ Capped Calls ~~noted above in~~expired upon the ~~amount of $63.2 million.~~

~~In the first quarter of fiscal 2022, the Company adopted ASU No. 2020-06,~~ ~~Accounting for Convertible Instruments and Contract on an Entity’s Own Equity~~. As a result of the adoption, the Conversion Option of $102.5 million and issuance costs of $2.4 million previously attributable to the equity component are no longer presented in equity. Similarly, the debt discount, which was equal to the carrying value of the embedded conversion feature upon issuance, is no longer amortized into income as interest expense over the life of the instrument. As a result, the Company recorded a $54.2 million decrease to the opening balance of accumulated deficit, a $100.1 million decrease to the opening balance of additional paid-in capital, and a $45.9 million increase to the opening balancematurity of the Notes ~~net~~ on ~~the consolidated balance sheet.~~

~~The Notes became current and were reclassified to short-term effective in the first quarter of fiscal year~~May 1, 2023. ~~For the three months ended December 31, 2022, the effective interest rate for the Notes was 0.98%. The net carrying amount of the liability component of the Notes was as follows (in thousands):~~

December 31, 2022 March 31, 2022
Principal $ 500,250 $ 500,250
Unamortized issuance costs (764) (2,587)
Net carrying amount $ 499,486 $ 497,663

~~Interest expense related to the Notes was as follows (in thousands):~~

Three Months Ended December 31, Nine Months Ended December 31,
2022 2021 2022 2021
Amortization of issuance costs $ 635 $ 590 1,823 1,766
Contractual interest expense 625 624 1,872 1,872
Total interest expense $ 1,260 $ 1,214 $ 3,695 $ 3,638

~~8. Goodwill and Purchased Intangibles Assets~~

~~In September 2022, the Company acquired all of the equity interests in K2. As of the closing of the acquisition, the estimated fair value of the acquired developed technology and goodwill was~~ ~~$7.4 million and $8.6 million, respectively. Refer to Note 2 — Business Combinations for more information.~~

~~The changes in the carrying amount of goodwill for the nine months ended December 31, 2022 consisted of the following (in thousands):~~


~~Goodwill as of March 31, 2022~~	$	~~163,677~~
~~Goodwill acquired~~	~~8,621~~
~~Goodwill as of December 31, 2022~~	$	~~172,298~~

During the three months ended December 31, 2022, the Company impaired certain intangible assets acquired as part of historical acquisitions, resulting in a write-down of the full book value of $6.3 million, net of accumulated amortization of $4.6 million. The impairment expense is included in cost of revenue on the Condensed Consolidated Statements of Operations.

~~Purchased intangible assets subject to amortization as of December 31, 2022 consisted of the following (in thousands):~~
Gross Carrying
Amount Accumulated
Amortization Net Carrying
Amount
Developed technology $ 28,600 $ (14,614) $ 13,986

~~Purchased intangible assets subject to amortization as of March 31, 2022 consisted of the following (in thousands):~~
Gross Carrying
Amount Accumulated
Amortization Net Carrying
Amount
Developed technology $ 27,500 $ (11,864) $ 15,636

Amortization expense of purchased intangible assets was $4.4 million and $2.0 million for the three months ended December 31, 2022 and 2021, respectively, and $9.0 million and $5.4 million for the nine months ended December 31, 2022 and 2021, respectively, and is included in cost of revenue on the Company’s condensed consolidated statements of operations.

~~Estimated future amortization expense as of December 31, 2022 was as follows (in thousands):~~
Fiscal Years Ending March 31, Estimated Total Future Amortization Expense
2023 (remaining three months) $ 2,383
2024 5,900
2025 4,470
Thereafter 1,233
$ 13,986

~~9. Leases~~

The Company leases office space under non-cancelable operating leases, which expire from 2023 to 2031. All of its office leases are classified as operating leases with lease expense recognized on a straight-line basis over the lease term.

Lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As these leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company considers information including, but not limited to, the lease term, the Company's credit rating and interest rates of similar debt instruments with comparable credit ratings. The lease right-of-use assets are also increased by any lease prepayments made and reduced by any lease incentives such as tenant improvement allowances. Options to extend the lease term are included in the lease term when it is reasonably certain that the Company will exercise the extension option.

The Company’s operating leases typically include nonlease components such as common-area maintenance costs. The Company has elected to include nonlease components with lease payments for the purpose of calculating lease right-of-use assets and liabilities, to the extent that they are fixed. Nonlease components that are not fixed are expensed as incurred as variable lease payments.

~~Leases with a term of one year or less are not recognized on the Company’s condensed consolidated balance sheet.~~

The Company continues to evaluate its real estate portfolio and adjust certain of its right-of-use assets and other lease-related assets including leasehold improvements, furniture and fixtures, and computer equipment for impairment. For the three months ended December 31, 2022, the Company incurred lease exit costs of $8.1 million, including $3.1 million for the impairment, $2.4 million for accelerated depreciation of leasehold improvements for certain facilities, and $2.6 million for accelerated depreciation of right-of-use assets where the Company has ceased the use of the space or the closing process has commenced. For the nine months ended December 31, 2022, the Company incurred lease exit costs of $10.8 million, including $4.7 million for the impairment, $2.4 million for accelerated depreciation of leasehold improvements for certain facilities, and $3.7 million for accelerated depreciation of right-of-use assets where the Company has ceased the use of the space or the closing process has commenced.

~~The following table presents information about leases on the condensed consolidated balance sheet (in thousands):~~

December 31, 2022 March 31, 2022
Assets
Lease right-of-use-assets $ 40,304 $ 50,465
Liabilities
Lease liabilities $ 11,233 $ 11,103
Lease liabilities, non-current 40,983 49,809
Total operating lease liabilities $ 52,216 $ 60,912

~~As of December 31, 2022, the weighted average remaining lease term was 4.7 years and the weighted average discount rate was 6.9%.~~

~~The following table presents information about leases on its condensed consolidated statement of operations (in thousands):~~
Three Months Ended December 31, Nine Months Ended December 31,
2022 2021 2022 2021
Operating lease expense $ 3,097 $ 3,418 $ 9,970 $ 10,372
Short-term lease expense 169 164 620 467
Variable lease expense 829 736 2,327 2,099

~~The following table presents supplemental cash flow information about the Company’s leases (in thousands):~~

Nine Months Ended December 31,
2022 2021
Cash paid for amounts included in the measurement of lease liabilities $ 11,403 $ 11,120
Operating lease assets obtained in exchange for new lease liabilities (1) 748 1,414

~~(1) Includes the impact of new leases as well as remeasurements and modifications to existing leases.~~

~~As of December 31, 2022, remaining maturities of lease liabilities were as follows (in thousands):~~

Fiscal Years Ending March 31, Operating Leases
2023 (remaining three months) $ 3,303
2024 14,340
2025 11,493
2026 11,699
2027 12,278
2028 6,281
Thereafter 2,014
Total operating lease payments $ 61,408
Less imputed interest (9,192)
Total operating lease liabilities $ 52,216

~~10.~~7. Commitments and Contingencies

Purchase Commitments—As of ~~December 31, 2022~~June 30, 2023 and March 31, ~~2022,~~2023, the Company had purchase commitments of ~~$550.3~~$489.1 million and ~~$549.4~~$518.3 million, respectively, primarily related to data center, cloud and hosting services.

Other Contingencies—In the normal course of business, the Company may agree to indemnify third parties with whom it enters into contractual relationships, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed, under certain conditions, to hold these third parties harmless against

specified losses, such as those arising from a breach of representations or covenants, other third-party claims that the Company’s products when used for their intended purposes infringe the intellectual property rights of such other third parties, or other claims made against certain parties. To date, the Company has not incurred any costs as a result of such obligations and has not accrued any liabilities related to such obligations in the consolidated financial statements. In addition, the Company indemnifies its officers, directors, and certain key employees while they are serving in good faith in their respective capacities. The Company does not currently believe there is a reasonable possibility that a loss may have been incurred under these indemnification obligations. To date, there have been no claims under any such indemnification provisions.

Legal Reserves and Typical Proceedings—The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. The Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Unless otherwise specifically disclosed in this note, the Company has determined that no provision for liability nor disclosure is required related to any claim against the Company because: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b)

a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current legal proceedings will have a material adverse effect on its financial position, results of operations, or cash flows.

401(k) Plan—The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. The Company is responsible for the administrative costs of the 401(k) plan and beginning on January 1, 2021, the Company has been making matching contributions to the 401(k) plan, up to a certain limit. Contributions to the 401(k) plan are discretionary. For the three months ended ~~December 31,~~June 30, 2023 and 2022, ~~and 2021,~~ the Company incurred expense of ~~$1.1~~$2.7 million and ~~$0.9 million, respectively, for matching contributions. For the nine months ended December 31, 2022 and 2021, the Company incurred expense of $5.0 million and $3.7~~$2.4 million, respectively, for matching contributions.

~~11.~~8. Common Stock and Stockholders’ Equity

~~Employee Stock Purchase Plan~~—The Company’s board of directors adopted, and the Company’s stockholders approved, the Company’s 2014 Employee Stock Purchase Plan (the “ESPP”), which became effective in December 2014. The ESPP initially reserved and authorized the issuance of up to 1,000,000 shares of common stock. The ESPP provides that the number of shares reserved and available for issuance under the ESPP automatically increases each April, beginning on April 1, 2015, by the lesser of 500,000 shares, 1% of the number of the Company’s common stock shares issued and outstanding on the immediately preceding March 31, or such lesser number of shares as determined by the Company’s board of directors. Offering periods are generally six months long and begin on February 15th and August 15th of each year. For the nine months ended December 31, 2022, 102,750 shares of common stock were purchased under the ESPP at an average price of $59.00. For the nine months ended December 31, 2021, 100,309 shares of common stock were purchased under the ESPP at an average price of $54.00. The intrinsic value of shares purchased during the nine months ended December 31, 2022 and 2021 was $0.9 million and $2.6 million, respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares. Stock-based compensation expense recognized related to the ESPP was $1.4 million and $1.1 million for the three months ended December 31, 2022 and 2021, respectively, and $4.2 million and $3.0 million for the nine months ended December 31, 2022 and 2021, respectively. As of December 31, 2022, 3,384,792 shares of common stock were available for issuance under the ESPP.

~~2008 Equity Incentive Plan~~—The Company’s board of directors adopted, and the Company’s stockholders approved, the 2008 Equity Incentive Plan, or the 2008 Plan, in February 2008. The 2008 Plan was terminated in connection with the Company’s initial public offering (“IPO”), and accordingly, no shares are available for future issuance under this plan. The 2008 Plan continues to govern outstanding awards granted thereunder.

~~2014 Equity Incentive Plan~~—The Company’s board of directors adopted, and the Company’s stockholders approved, the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), which became effective in December 2014. The 2014 Plan serves as the successor to the Company’s 2008 Plan. The 2014 Plan initially reserved and authorized the issuance of 5,000,000 shares of the Company’s common stock. Additionally, shares not issued or subject to outstanding grants under the 2008 Plan upon its termination became available under the 2014 Plan, resulting in a total of 5,184,878 available shares under the 2014 Plan as of the effective date of the 2014 Plan. Pursuant to the terms of the 2014 Plan, any shares subject to outstanding stock options or other stock awards under the 2008 Plan that (i) expire or terminate for any reason prior to exercise or settlement, (ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company or (iii) are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or

to satisfy the purchase price or exercise price of a stock award will become available for issuance pursuant to awards granted under the 2014 Plan. The 2014 Plan provides that the number of shares reserved and available for issuance under the plan automatically increases each April 1, beginning on April 1, 2015, by 5% of the outstanding number of shares of the Company’s common stock shares issued and outstanding on the immediately preceding March 31, or such lesser number of shares as determined by the Company’s board of directors. As of December 31, 2022, there were 14,980,528 shares available for issuance under the 2014 Plan.

The following table summarizes the Company’s stock option, restricted stock unit (“RSU”), and performance-based restricted stock unit (“PSU”) award activities for the ~~nine~~three months ended ~~December 31, 2022~~June 30, 2023 (in thousands, except exercise price, contractual term and fair value information):


		Options Outstanding						RSUs Outstanding						PSUs Outstanding										Options Outstanding								RSUs Outstanding								PSUs Outstanding
		Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value		Number of Shares	Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value		Number of Shares	Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (in years)			Aggregate Intrinsic Value				Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value		Number of Shares		Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value		Number of Shares		Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding - April 1, 2022		1,663	$	54.66	5.6	$	31,436	3,351	$	70.04	2.6	$	224,096	320	$	86.88	1.8			$	21,430
Outstanding - April 1, 2023																		Outstanding - April 1, 2023	1,126				$	64.43	5.2		$	19,983	3,747		$	60.46	2.2		$	282,148	1,449		$	49.43	1.8		$	109,125
Granted	Granted	—	—					2,932	51.32					307	72.05							Granted		—		—						626		71.82						233		90.28
Exercised/vested	Exercised/vested	(369)	22.83			13,494		(1,258)	65.56					(130)	89.05							Exercised/vested		(44)		61.96				586		(434)		60.97						(219)		83.71
Canceled/forfeited	Canceled/forfeited	(93)	70.00					(860)	61.26					(26)	71.07							Canceled/forfeited		(12)		78.26						(422)		62.68						(12)		82.89
Outstanding - December 31, 2022		1,201	$	63.26	5.5	$	8,839	4,165	$	60.02	2.3	$	235,110	471	$	77.49	1.8			$	26,625
Outstanding - June 30, 2023																		Outstanding - June 30, 2023	1,070				$	64.37	4.2		$	11,804	3,517		$	62.15	2.1		$	230,156	1,451		$	50.54	1.7		$	94,970

PSUs ~~granted under the 2014 Plan~~ are contingent upon the achievement of pre-determined market and service conditions. The number of shares of common stock to be issued at vesting will range from 0% to 200% of the target number based on the Company’s total shareholder return (“TSR”) relative to the performance of peer companies for each measurement period, over a one-year, two-year cumulative, and three-year cumulative period. In February 2023, the Company made a one-time grant to certain of its named executive officers and certain other key executives of PSUs, which have a target achievement at a $100 stock price hurdle within two years of the grant date. The award has a minimum stock price hurdle of $85 to vest any award shares. Beyond the target vesting tranche at $100 per share, two further vesting tranches are possible at the achievement of $115 and $135 stock price hurdles, respectively. If these market conditions are not met but service conditions are met, the PSUs will not vest; however, any stock-based compensation expense recognized to date will not be reversed. The Company uses a Monte Carlo simulation model to determine the fair value of its PSUs and recognizes expense using the accelerated attribution method over the requisite service period. The PSUs presented in the table above were calculated based on 100% expected achievement.

Employee Stock Purchase Plan— Offering periods under the Company’s 2014 Employee Stock Purchase Plan (the “ESPP”) are generally six months long and begin on February 15th and August 15th of each year. For the three months ended June 30, 2023 and 2022, no shares of common stock were purchased under the ESPP. Stock-based compensation expense recognized related to the ESPP was $0.9 million and $1.3 million for the three months ended June 30, 2023 and 2022, respectively.

Stock-Based Compensation Expense—Total stock-based compensation expense included in cost of revenue, research and development, sales and marketing, and general and administrative expenses for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2023 and 2022 ~~and 2021~~ were as follows (in thousands):


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended June 30,
		2022		2021		2022		2021			2023		2022
Cost of revenue	Cost of revenue	$	1,174	$	1,382	$	4,051	$	3,757	Cost of revenue	$	1,201	$	1,344
Research and development(1)	Research and development(1)	14,977		13,117		42,705		36,228		Research and development(1)	21,265		13,286
Sales and marketing	Sales and marketing	12,556		12,537		36,013		37,619		Sales and marketing	11,928		10,583
General and administrative ~~(1)~~	General and administrative ~~(1)~~	11,972		10,755		32,644		39,945		General and administrative ~~(1)~~	12,043		9,669
Total stock-based compensation expense ~~(2)~~	Total stock-based compensation expense ~~(2)~~	$	40,679	$	37,791	$	115,413	$	117,549	Total stock-based compensation expense ~~(2)~~	$	46,437	$	34,882

(1) ~~Includes $9.6~~These expenses include $4.6 million ~~acceleration~~ of share-based payment expense for the nine months ended December 31 2021, for one of the Company’s executives due to his departure at the end of June 2021. There was no corresponding expense for the nine months ended December 31, 2022.

~~(2) Includes $0.5 million stock-based compensation expense for the nine months ended December 31, 2021, due to~~accelerated vesting resulting from the restructuring activities ~~commenced~~discussed in ~~the first quarter of fiscal 2022. There was no corresponding expense for the nine months ended December 31, 2022. Refer to~~ Note 15 — ~~Restructuring for more information.~~11 below.

As of ~~December 31, 2022,~~June 30, 2023, unrecognized stock-based compensation cost related to outstanding unvested stock options was ~~$4.1~~$1.7 million, which is expected to be recognized over a weighted-average period of approximately ~~1.1~~0.7 years. As of ~~December 31, 2022,~~June 30, 2023, unrecognized stock-based compensation cost related to outstanding unvested RSUs was ~~$256.8~~$212.4 million, which is expected to be recognized over a weighted-average period of approximately ~~2.2~~2.0 years. As of ~~December 31, 2022,~~June 30, 2023, unrecognized stock-based compensation cost related to PSUs was ~~$19.1~~$54.8 million, which is expected to be recognized over a weighted-average period of approximately ~~1.8~~1.7 years.

~~12.~~9. Income Taxes

The Company is subject to income tax in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax. The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are indefinitely reinvested.

The Company recorded income tax expense of ~~$1.1~~$2.8 million and ~~$0.8~~$0.3 million for the three months ended ~~December 31,~~June 30, 2023 and 2022, ~~and 2021, respectively. The Company recorded income tax expense of $1.0 million and $0.8 million for the nine months ended December 31, 2022 and 2021,~~ respectively. The income tax expense for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2023 and 2022 is primarily related to foreign and U.S. state taxes. The income tax expense for the three and nine months ended December 31, 2021 is primarily related to foreign and U.S. state taxes partially offset by the release of the valuation allowance from the acquisition of CodeStream.

Based on the available evidence during the three ~~and nine~~ months ended ~~December 31, 2022,~~June 30, 2023, the Company believes it is not more-likely-than-not to realize tax benefits of U.S. and Japan losses incurred during the three ~~and nine~~ months ended ~~December 31, 2022.~~June 30, 2023. The primary difference between the effective tax rate and the statutory tax rate relates to the valuation allowance on the U.S. and Japan losses, foreign tax rate differences and state income taxes.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the Inflation Act) into law. The Inflation Act contains certain tax measures, including a corporate alternative minimum tax of 15% on some large corporations. The Company is currently evaluating the various provisions of the Inflation Act, but does not anticipate it will have a material effect on the condensed consolidated financial statements.

~~13.~~10. Net Loss Per Share

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, less shares subject to repurchase, and excludes any dilutive effects of employee share-based awards and warrants. Diluted net loss per share is computed giving effect to all potential dilutive common shares, including issuances of common stock upon exercise of stock options, purchases of shares under the Employee Stock Purchase Plan, and the vesting of restricted stock units and performance stock units. As the Company had net losses for each of the three ~~and nine~~ months ended ~~December 31,~~June 30, 2023 and 2022, ~~and 2021,~~ all potential common shares were determined to be anti-dilutive, resulting in basic and diluted net loss per share being equal. Additionally, the 4.5 million shares underlying the Conversion Option in the Notes were not considered in the calculation of diluted net loss per share as the effect would be anti-dilutive. The Notes were not convertible as of December 31, 2022.

2316

The following table sets forth the computation of net loss per share, basic and diluted (in thousands, except per share amounts):


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended June 30,
		2022		2021		2022		2021			2023		2022
Numerator:	Numerator:									Numerator:
Net loss attributable to New Relic	Net loss attributable to New Relic	$	(26,005)	$	(62,706)	$	(123,019)	$	(194,889)	Net loss attributable to New Relic	$	(37,431)	$	(50,239)
Denominator:	Denominator:									Denominator:
Weighted average shares used to compute net loss per share, basic and diluted	Weighted average shares used to compute net loss per share, basic and diluted	68,050		64,983		67,229		64,203		Weighted average shares used to compute net loss per share, basic and diluted	69,546		66,421
Net loss attributable to New Relic per share—basic and diluted	Net loss attributable to New Relic per share—basic and diluted	$	(0.38)	$	(0.96)	$	(1.83)	$	(3.04)	Net loss attributable to New Relic per share—basic and diluted	$	(0.54)	$	(0.76)

The following outstanding options, unvested ~~shares,~~RSUs, unvested PSUs, and ESPP shares were excluded (as common stock equivalents) from the computation of diluted net loss per common share for the periods presented as their effect would have been antidilutive (in thousands):


		As of December 31,			As of June 30,
		2022	2021		2023	2022
Options to purchase common stock	Options to purchase common stock	1,201	1,804	Options to purchase common stock	1,070	1,523
RSUs	RSUs	4,165	3,617	RSUs	3,517	4,502
PSUs	PSUs	471	320	PSUs	1,451	368
ESPP shares	ESPP shares	134	87	ESPP shares	95	128
		5,971	5,828
Total				Total	6,133	6,521

~~14. Revenue by Geographic Location~~11. Restructuring

~~The following table shows~~In the first fiscal quarter of 2024, the Company initiated a restructuring plan focused on realigning resources with the Company’s ~~revenue by geographic areas, as determined based on~~business needs in driving the ~~billing address~~growth of its ~~customers (in thousands):~~

Three Months Ended December 31, Nine Months Ended December 31,
2022 2021 2022 2021
United States $ 152,518 $ 134,687 $ 443,691 $ 391,127
EMEA 43,937 31,714 116,949 89,920
APAC 26,091 21,354 73,745 57,852
Other 17,217 15,836 48,749 40,870
Total revenue $ 239,763 $ 203,591 $ 683,134 $ 579,769

~~Substantially all~~consumption business, completion of ~~the Company’s long-lived assets were attributable~~its transition to ~~operations in the United States as~~a consumption business model, and improving business efficiency. The restructuring plan primarily consisted of ~~December 31, 2022 and March 31, 2022.~~

~~15. Restructuring~~

~~There were no restructuring charges incurred for~~a reduction of global workforce. During the three months ended ~~December 31, 2022 and 2021.~~

On August 17, 2022, the Company announced the adoption of a new restructuring plan to better align the Company’s organizational structure and operations with its strategic initiatives, resulting in a global workforce reduction and other cost saving initiatives. For the nine months ended December 31, 2022,June 30, 2023, the Company incurred restructuring costs of ~~approximately $7.2~~$21.7 million, inincluding $18.4 million related to employee wages and termination benefits, and ~~certain asset impairments directly attributable to~~$3.3 million in lease exit costs in connection with the March 2023 restructuring ~~activities. The~~plan described below. There were no restructuring costs incurred during the three months ended June 30, 2022.

In August 2022, a restructuring plan was ~~completed~~implemented to realign the Company’s cost structure with its business needs to refocus on top priorities, and in March 2023, the ~~second quarter~~Company implemented another restructuring plan to reduce the Company’s global real estate footprint in line with its Flex First philosophy. As a result of ~~fiscal~~the March 2023 restructuring, the Company accrued $17.9 million in lease liabilities and $7.1 million in restructuring reserves for other lease exit costs as of March 31, 2023.

The following table shows the Company’s restructuring charges for the ~~nine~~three months ended ~~December 31, 2022 and 2021~~June 30, 2023 (in thousands):
Nine Months Ended December 31,
2022 2021
Severance and other employee costs Asset impairment Total Severance and other employee costs Stock-based compensation Asset impairment Total
Cost of Revenue $ 404 $ 3 $ 407 $ — $ — $ — $ —
Research and Development 1,414 21 1,435 — — — —
Sales and Marketing 3,725 33 3,758 10,819 406 104 11,329
General and administrative 1,592 18 1,610 1,170 87 26 1,283
Total $ 7,135 $ 75 $ 7,210 $ 11,989 $ 493 $ 130 $ 12,612


	Three Months Ended June 30,
	2023
	Severance and other employee costs		Lease exit costs and accelerated depreciation		Total
Cost of Revenue	$	423	$	637	$	1,060
Research and Development	8,709		112		8,821
Sales and Marketing	7,212		573		7,785
General and administrative	2,054		1,937		3,991
Total	$	18,398	$	3,259	$	21,657

2517

Restructuring accrual

The following tables shows the activity in our restructuring accrual for the three months ended June 30, 2023 (in thousands):


	Total
Accrued balance as of March 31, 2023	$	7,067
Restructuring expenses related to severance (1)	13,808
Restructuring expenses related to other lease exit costs (2)	2,127
Payments of severance and other lease exit costs	(3,523)
Accrued balance as of June 30, 2023	$	19,479
Included in other current liabilities	$	12,598
Included in other liabilities, non-current	$	6,881

(1) These expenses exclude $4.6 million of accelerated vesting related to the restructuring plan approved in the first fiscal quarter of 2024.

(2) These expenses exclude the $1.9 million non-cash write-off of lease right of use assets and leasehold improvements, as well as a $0.7 million gain from the assignment of a lease related to the restructuring plan approved in March 2023.

12. Subsequent Events

On July 30, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Crewline Buyer, Inc., a Delaware corporation (“Parent”), and Crewline Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will be merged with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent (the “Merger”). Parent and Merger Sub are subsidiaries of investment funds advised by Francisco Partners Management, L.P. (“FP”) and TPG Capital Management, L.P. (“TPG”), US-based private equity firms.

Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), and as a result of the Merger, each share of common stock, par value $0.001 per share, of the Company (“Company Common Stock”) that is outstanding immediately prior to the Effective Time other than shares (i) held by the Company as treasury stock, (ii) owned by Parent or Merger Sub, (iii) owned by any direct or indirect wholly owned subsidiary of Parent or Merger Sub, (iv) that are Rollover Shares (as defined in the Merger Agreement), or (v) as to which statutory rights of appraisal have been properly and validly exercised, will be cancelled and extinguished and automatically converted into the right to receive cash in an amount equal to $87.00, without interest thereon, subject to any required withholding of taxes.

The board of directors of the Company (the “Board”), with Lew Cirne (together with certain of his affiliates, (the “Rollover Stockholder”) recusing himself, has unanimously approved and declared to be in the best interest of the Company and its stockholders, the Merger Agreement and the transactions contemplated thereby, including the Merger, and resolved to recommend that the stockholders of the Company adopt the Merger Agreement.

Assuming the satisfaction of the conditions set forth in the Merger Agreement, the Company expects the transactions contemplated thereby to close in late calendar year 2023 or early calendar year 2024.

The stockholders of the Company will be asked to vote on the adoption of the Merger Agreement and the Merger at a special stockholder meeting that will be held on a date to be announced as promptly as reasonably practicable following the customary SEC review process.

Consummation of the Merger is not subject to a financing condition, but is subject to customary closing conditions, including (i) approval of the Company’s stockholders, (ii) the expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other approvals, clearances or expirations of waiting periods under other antitrust laws, (iii) approvals, clearances or expirations of waiting periods under foreign investment screening laws, (iv) absence of any order or injunction prohibiting the consummation of the Merger, (v) subject to customary materiality qualifiers, the accuracy of the representations and warranties contained in the Merger Agreement and compliance with the covenants contained in the Merger Agreement and (vi) no Company Material Adverse Effect (as defined in the Merger Agreement) having occurred since the date of the Merger Agreement that is continuing.

The Merger Agreement contains customary representations, warranties and covenants, including, among others, covenants by the Company to conduct its businesses in the ordinary course between the execution and completion of the Merger Agreement, not to engage in certain kinds of transactions during such period (including the payment of dividends), to convene and hold a meeting of its stockholders to consider and vote upon the Merger, to cooperate with Parent in connection with obtaining financing for the transaction, to obtain regulatory consents, and, subject to certain customary exceptions, for its board of directors to recommend that its stockholders approve and adopt the Merger Agreement. The Merger Agreement also contains customary representations, warranties and covenants of Parent and Merger Sub, including a covenant to use reasonable best efforts to obtain the financing described below. The Merger Agreement contains a 45-day “go-shop” provision that allows the Company to, among other things, solicit, initiate, propose, induce, encourage or facilitate the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or Inquiry (as defined in the Merger Agreement) that constitutes, could constitute or is reasonably expected to lead to an Acquisition Proposal (as defined in the Merger Agreement). At the end of the go-shop period, the Company will cease such activities, and is subject to a customary “no-shop” provision that restricts the Company’s ability to, among other things, solicit Acquisition Proposals from third parties and to provide non-public information to, and engage in discussions or negotiations with, third parties regarding Acquisition Proposals after the go-shop period. The “no-shop” provision also allows the Company, under certain circumstances and in compliance with certain obligations set forth in the Merger Agreement, to provide non-public information to any person and its representatives that has made, renewed or delivered a bona fide Acquisition Proposal that either constitutes a Superior Proposal (as defined in the Merger Agreement) or is reasonably likely to lead to a Superior Proposal.

Parent and Merger Sub have secured committed financing, consisting of a combination of equity financing to be provided by investment funds affiliated with FP and TPG on the terms and subject to the conditions set forth in equity commitment letters provided by such funds, Rollover Shares (as defined in the Merger Agreement) from the Rollover Stockholder and debt financing to be provided by certain lenders (collectively, the “Lenders”) on the terms and subject to the conditions set forth in a debt commitment letter. The obligations of the Lenders to provide debt financing under the debt commitment letter are subject to a number of customary conditions.

The Merger Agreement contains certain termination rights for both the Company and Parent. If the Merger Agreement is terminated in connection with the Company entering into an alternative acquisition agreement in respect of a Superior Proposal entered into during the “go-shop” period, the termination fee payable by the Company to Parent will be $98 million. Upon termination of the Merger Agreement under specified circumstances, including with respect to the Company’s entry into an agreement with respect to a Superior Proposal other than described in the preceding sentence, the Board changing its recommendation or if the Company breaches its representations, warranties or covenants in a manner that would cause the related closing conditions to not be met, the Company will be required to pay Parent a termination fee of $196 million. A termination fee in the amount of $524 million will become payable by Parent in the event it fails to consummate the Merger after all conditions are met, if Parent breaches its representations, warranties or covenants in a manner that would cause the related closing conditions to not be met, or if either party terminates the Merger Agreement because the Merger has not been consummated by the Termination Date (described below), and at the time of such termination, the Company was otherwise entitled to terminate the Merger Agreement for either of the above reasons. Investment funds affiliated with FP and TPG have provided limited guarantees with respect to the payment of the termination fee payable by Parent in the event such termination fee becomes payable, as well as certain reimbursement obligations that may be owed by Parent pursuant to the Merger Agreement, subject to the terms and conditions set forth in the Merger Agreement and such limited guarantees. The Merger Agreement also provides that either party may specifically enforce the other party’s obligations under the Merger Agreement, provided that the Company may only cause Parent to close the transaction if certain conditions are satisfied, including the funding or availability of the debt financing.

In addition to the foregoing termination rights, and subject to certain limitations, the Company or Parent may terminate the Merger Agreement if the Merger is not consummated by 11:59 p.m., Pacific Time, on January 30, 2024 (the “Termination Date”), provided that (x) if all of the conditions to closing other than the obtainment of the applicable approvals under Antitrust Laws or Required Investment Screening Laws (each as defined in the Merger Agreement) are satisfied on or prior to the Termination Date, then the Termination Date shall automatically be extended to 11:59 p.m., Pacific time, on April 30, 2024 and (y) if as of the Termination Date as extended by the foregoing clause (x) all of the conditions to closing of the Merger other than the obtainment of the applicable approvals under Antitrust Laws or Required Investment Screening Laws are satisfied, then the Termination Date shall automatically be extended to 11:59 p.m., Pacific time, on July 30, 2024.

If the Merger is consummated, the Company Common Stock will be delisted from the New York Stock Exchange and deregistered under the Securities Exchange Act of 1934.

In connection with the Merger, the Company expects to incur significant expenses, such as transaction, professional services, and other costs. An estimate of these expenses cannot be made at this time.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in Part II, Item 1A “Risk Factors” included elsewhere in this report. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition or results of operations. See the section titled “Special Note Regarding Forward-Looking Statements” in this report. These statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments, except as required by law.

In addition to our results determined in accordance with U.S. generally accepted accounting principles (GAAP), ~~Non-GAAP Loss from Operations, a~~certain non-GAAP financial ~~measure, is~~measures are included in the section titled “Non-GAAP Financial Measures.” ~~This~~These non-GAAP financial ~~measure is~~measures are not meant to be considered in isolation from or as a substitute for, or superior to, comparable GAAP financial measures and should be read only in conjunction with our unaudited condensed consolidated financial statements prepared in accordance with GAAP. Our presentation of ~~this~~these non-GAAP financial ~~measure~~measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the GAAP-to-non-GAAP ~~reconciliation~~reconciliations included in the section titled “Non-GAAP Financial Measures,” to more fully understand our business.

Overview

New Relic ~~delivers a software~~is an “all-in-one” observability platform ~~for~~that enables our customers to ~~land all~~plan, build, deploy, and operate their critical digital infrastructure by harnessing the power of ~~their~~data. Our observability platform combines metrics, events, logs, traces, and other telemetry data ~~quickly and affordably in one place and derive~~with our proprietary stack of analytical tools to rapidly generate actionable, ~~insights from that data in a unified front-end application. This category of software products is generally referred to as observability.~~fact-based insights. Our customers use our ~~software~~ platform to ~~ensure that they can observe~~improve uptime, reliability, and ~~operate all of~~operational efficiency, in order to optimize the ~~components of their digital infrastructure and provide a quality~~ digital experience for their ~~customers. With a unified front end, purpose built on top~~customers as well as within their organizations. Our goal is to enable our customers to leverage the power of data-driven analytics to monitor, debug, and improve the ~~world’s most powerful telemetry data platform, the New Relic platform helps our users get a comprehensive~~performance and ~~consistent view~~security of all their digital ~~estate.~~infrastructure across the organization.

~~At present,~~While most observability software is targeted attoward a small subset of ~~the developer community~~developers that ~~works in~~focuses on the “operate” phase, of the developer lifecycle. These engineers are primarily concerned with the availability of the applications and infrastructure that are the primary components of a customer’s digital environment. However, a key component of our multi-year strategy is to help all software developers realize the largely dormant value of telemetry data. We fundamentallywe believe that telemetry data is ~~valuable in all~~also critical to the rest of the ~~phases~~software lifecycle, including the planning, building, and deployment phases. The New Relic platform differentiates itself by targeting the broader software development productivity market, helping them realize the value of largely dormant telemetry data that is wasted if not cultivated and analyzed in context. Our all-in-one observability platform helps remove the ~~developer lifecycle: plan,~~silos that plague organizations, empowering them to better understand their entire digital infrastructures in order to improve speed of innovation, operational excellence, system reliability, and cost management.

We host our applications and serve all our customers through a combination of cloud service providers and to a lesser extent our data centers whose infrastructure is managed by third parties. We continue to build ~~deploy~~out services and ~~operate.~~

~~To deliver on~~functionality in the public cloud with a goal to migrate our entire platform to the public cloud by the end of fiscal year 2024. As of June 30, 2023, we have migrated the majority of our platform and 100% of our customer data ingest to the public cloud. We expect this migration to reduce our cost of revenue due to the reduction in hosting-related costs. Additionally, this strategy ~~we make data ingest so affordable that~~provides us flexibility to service customers ~~have no reservations about populating~~in new and emerging regions and scale our deployment capabilities. We maintain a formal and comprehensive security program designed to ensure the security and integrity of our data, ~~platform with their growing amounts of telemetry data. We believe engineers are attracted to very large~~protect against security threats or data ~~sets,~~breaches, and ~~over time we intend to introduce ways for engineers in the plan, build and deploy phases of the developer lifecycle to realize significant value from that data.~~

We have built a massively scalable proprietary telemetry data platform, which is a unique competitive advantage and we are able to leverage that scale to offer more cost-effective solutions. Our unified front end and data-centric approach to observability gives our users a consistent and comprehensive view of their digital environment. This is in contrast to most other vendors we compete against that take an application-centric approach that forces users to toggle between a variety of stand-alone applications on top of purpose-built databases, effectively creating silos of data.

~~Our customers span the continuum from startups~~prevent unauthorized access to the ~~world’s largest corporations;~~data of our customers. Our technology uses multi-tenant architecture, enabling all our customers to share the ~~common thread among all of the users~~same version of our products isand platform capabilities while securely partitioning their data.

Historically, our platform was sold on a ~~desire~~subscription-based model. Since fiscal year 2021, we have been focused on shifting to ~~offer their constituents~~ a ~~top-tier digital experience.~~consumption-based model, and our revenues are now largely derived from consumption-based plans. We primarily sell our platform on a ~~consumption model;~~consumption-based model that directly relates the value our customers receive from our platform to what they pay for it in a manner that is highly intuitive and predictable for them. Customers on this pricing model pay for data ingest and provisioned users. For the three months ended June 30, 2023, 60% of our consumption-based revenues were derived from fees paid for data ingest and 40% were derived from fees paid for provisioned users. We engage with prospects and customers directly through our ~~field, inside~~in-house sales teams and on our website, as well as indirectly through channel partners. ~~The majority~~Approximately 35% of our customers are on ~~either~~ commitment contracts where they commit to an amount of spend over their contracted period in exchange for a discount on their usage pricing, orand approximately 65% of our customers are on “Pay as You Go” contracts

where they are charged for usage in arrears. Customers on committed contracts represent more than 88% of our total first quarter revenue. Our contracts are typically annual or multi-year in term length and are either billed upfront or in arrears. Our average contract term length is one year. Usage in excess of the commitment is generally invoiced in arrears. Some customers still contract under subscription-based plans. We expect to phase out most subscription-based plans as contract periods end and those contracts renew onto one of our consumption-based plans.

We offer a free tier of our New Relic ~~platform.~~platform as part of our go-to-market strategy to encourage users to try our services and create a pipeline for paid customers. As a result, our direct sales prospects may be familiar with our platform and may already be using it in a limited fashion. A core component of our growth strategy is to provide a friction-free

environment for developers to familiarize themselves with our solutions, and then offer incremental opportunities to derive ~~more~~additional value from our products either by in-product support, or engaging with our technically oriented customer adoption team.

Our revenue for the three months ended ~~December 31,~~June 30, 2023 and 2022 ~~and 2021~~ was ~~$239.8~~$242.6 million and ~~$203.6~~$216.5 million, respectively, representing year-over-year growth of ~~18%~~12%. ~~For~~Our gross margin for the ~~nine~~three months ended ~~December 31,~~June 30, 2023 and 2022 was 78% and ~~2021,~~71%, respectively, primarily driven by the transition of our ~~revenue was $683.1 million and $579.8 million, respectively, representing year-over-year growth of 18%.~~platform from local data centers to public cloud hosting providers. We continue to make significant expenditures and investments, including in personnel-related costs, sales and marketing, infrastructure and operations, and have incurred net losses in each period since our inception, including net losses attributable to New Relic of ~~$26.0~~$37.4 million and ~~$62.7~~$50.2 million for the three months ended ~~December 31,~~June 30, 2023 and 2022, ~~and 2021, respectively, and $123.0 million and $194.9 million for the nine months ended December 31, 2022 and 2021,~~ respectively. Our accumulated deficit as of ~~December 31, 2022~~June 30, 2023 was ~~$906.3~~$1,001.0 million.

Internationally, we currently offer our products in Europe, the Middle East, and Africa, (“EMEA”); Asia-Pacific, (“APAC”); and other non-U.S. locations, as determined based on the billing address of our customers, and our revenue from those regions constituted 18%, 12%, and 8%, respectively, of our revenue for the three months ended June 30, 2023, and 16%, 11%, and 7%, respectively, of our revenue for the three months ended December 31, 2022, and 16%, 10%, and 8%, respectively, of our revenue for the three months ended December 31, 2021. Our revenue from those regions constituted 17%, 11%, and 7%, respectively, of our revenue for the nine months ended December 31, 2022, and 16%, 10%, and 7%, respectively, of our revenue for the nine months ended December 31, 2021.June 30, 2022. We believe there is an opportunity to increase our international revenue overall and as a proportion of our ~~revenue, and~~total revenue. As a result, we are increasingly investing in our international operations and intend to ~~invest in~~ further ~~expanding~~expand our footprint in international markets. We plan to leverage commercial partnerships to expand our international footprint and believe commercial partnerships will be a highly effective way to accelerate international market penetration and lower new customer acquisition costs than had we pursued international expansion without these partnerships.

Our employee headcount has increased to 2,592 employees as of June 30, 2023 from 2,336 as of June 30, 2022. The increase in employee headcount was driven by our expansion plans where we hired additional team members primarily in research and development. We plan to continue to invest aggressively in the growth of our business to take advantage of our market opportunity.

Proposed Merger

On July 30, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Crewline Buyer, Inc., a Delaware corporation (“Parent”), and Crewline Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will be merged with and into New Relic, with New Relic surviving the merger as a wholly-owned subsidiary of Parent (the “Merger”). Parent and Merger Sub are subsidiaries of investment funds advised by Francisco Partners Management, L.P. and TPG Capital Management, L.P., U.S.-based private equity firms.

Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), and as a result of the Merger, each share of our common stock (subject to certain exceptions, including shares as to which statutory rights of appraisal have been properly and validly exercised), will be cancelled and extinguished and automatically converted into the right to receive cash in an amount equal to $87.00, without interest thereon, subject to any required withholding of taxes. The transaction is expected to close in late calendar year 2023 or early calendar year 2024, subject to customary closing conditions, including approval by our stockholders and receipt of regulatory approvals. Upon closing of the transaction, our common stock will be delisted from the New York Stock Exchange and deregistered under the Securities Exchange Act of 1934. See Note 12 contained in the “Notes to Condensed Consolidated Financial Statements” in Item 1 of Part I of this Quarterly Report on Form 10-Q for more information.

Impact of the ~~Ongoing COVID-19 Pandemic and~~ Current Economic Conditions and Macroeconomic Events

~~The continuing effects of the COVID-19 pandemic are highly unpredictable and could be significant, and the duration and extent to which they will impact our future~~Our results of operations, ~~and overall financial performance remains uncertain. The extent of the impact of the COVID-19 pandemic on our operational and financial performance~~including future revenue growth, will continue to depend on certain developments, including the duration of the pandemic, the successful rollout of vaccines and the efficacy and durability of such vaccines, especially in light of the emergence of new variant strains; impact on our customers and our sales cycles; impact on our customer, employee, and industry events; impact on our employee recruitment and attrition; and effect on our vendors, all of which remain uncertain and cannot be ~~predicted at this time.~~

We currently allow most of our employees to continue to work remotely if they prefer and as additional COVID-19 variants emerge, we will continue to evaluate our workforce strategies and operations, taking into consideration factors such as treatments, vaccine progress, and public health recommendations. We also continue to evaluate our real estate needs and havematerially impacted by unfavorable market conditions in the ~~past made~~United States and abroad that historically have reduced or disrupted the decision to exit certain office space leases. As we continue to assess our return-to-office needs, we are planning to exit additional office space leases which could result in further losses associated with our real estate lease assets. Our revenuetiming of business investments and ~~deferred revenue have been, in part, negatively impacted by~~spending on information technology. These unfavorable conditions and events currently include the lingering uncertainty of COVID-19 and the slowdown in economic activity ~~and uncertainty associated with the COVID-19 pandemic and the current economic conditions impacted~~caused by supply chain disruption, ~~market volatility,~~increasing inflation ~~rising~~and interest rates, ~~fluctuating currency exchange rates, and~~

labor shortages, ~~but at~~and Russia’s invasion of Ukraine. At this point, the extent of any continuing impact to our financial condition or results of operations, including cash flows, is uncertain, particularly as ~~the COVID-19 pandemic and the~~these current economic ~~uncertainty~~conditions continue to persist for an extended period of time. ~~With the~~While there is some recent volatility ofin multiple major foreign currencies against the U.S. dollar, ~~we are seeing more significant~~the impact ~~from~~of exchange rates on our ~~revenue growth and expenses in fiscal 2023 than in the previous fiscal year, and we expect the impact~~operating results is not projected to be ~~significant in the next quarter if we continue to experience similar or greater foreign currencies volatility against the U.S. dollar.~~material. Other factors affecting our performance are discussed below, although we caution you that the ~~COVID-19 pandemic and the~~ current economic conditions and macroeconomic events may also further impact these factors.

We have committed to reducing our global real estate footprint as part of our Flex First philosophy that enables employees to operate in a flexible work environment. In March 2023, we approved a restructuring plan, consisting primarily of real estate lease termination and other associated costs. In the first fiscal quarter of 2024, we announced the adoption of a new restructuring plan focused on realigning resources with our business needs in driving the growth of our consumption business. As a result of this and previously announced restructuring plans, we incurred charges of approximately $21.7 million for three months ended June 30, 2023, which are described in further detail in the Notes to Condensed Consolidated Financial Statements. There were no restructuring charges incurred during the three months ended June 30, 2022.

Factors Affecting Our Performance

Market Adoption of Our Platform. Our success, including our rate of customer expansions and renewals, is dependent on the market adoption of our platform. With the introduction of new technologies, the evolution of our platform and new market entrants, competition has intensified, and we expect competition to further intensify in the future. We employ a land and expand business model centered around offering a platform that is open, connected, and programmable. We believe that we have built a highly differentiated platform and we intend to continue to invest in building additional offerings, features, and functionality that expand our capabilities and facilitate the extension of our platform to new use cases. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. Our ability to improve market adoption of our platform will also depend on a number of other factors, including the competitiveness and pricing of our products, offerings of our competitors, success of international expansion, and effectiveness of our sales and marketing efforts.

Product-Led Innovation and Growth. We believe we have the most intuitive and powerful observability platform in the industry and have a proven track record of innovation in our industry. We intend to build upon that reputation by continuing to broaden the capabilities and features of our platform so more engineers can use it more often. In addition, we intend to drive significant product awareness, demand, adoption, and growth in new accounts by accelerating our self-service product marketing and sales initiatives. Our ~~pricing strategy,~~free tier of service encourages users to try our platform, and our product-led self-service model enables customers to increase the value they receive from the platform by adding additional data, users, and use cases. The easy-to-use, intuitive nature of our platform allows us to engage with these potential new customers in a more cost effective manner, which ~~relies primarily upon~~significantly reduces our customer acquisition costs.

International Growth. International markets present a ~~per-user license fee~~significant opportunity for us to land new customers for our platform. We believe that leveraging commercial partnerships is a highly effective way to acquire new customers at low acquisition costs, while enabling these customers to realize value from our observability platform more rapidly. We intend to develop new relationships and ~~payment~~leverage our existing relationships with distributors, resellers, service partners, hyperscalers, and global system integrators to grow our sales pipeline and drive new use cases as more businesses around the world accelerate their cloud native journey. Our ability to successfully expand within international markets will have a significant impact on our future operating performance.

Pricing Strategy. Since introducing our consumption-based model in fiscal year 2021, our customers have responded favorably. With our consumption-based model, our customers are charged based on actual usage, and we price all telemetry sources at the ~~quantity~~same rate without overage penalties. This removes barriers to adoption as it easily allows our customers to plan usage and forecast spend. We also offer varying commitment plans to best meet the needs of our customers, irrespective of size and maturity. As the power of our platform continues to grow and we help our customers solve their problems, we believe our customers will increase the number of users and the amount of data ingested into our ~~revenue is closely tied~~platform. As such, we believe that our shift from a subscription-based pricing plan to a consumption-based pricing plan will better meet the ~~usage~~needs of our ~~platform. Together with this pricing strategy, we~~

~~also have a robust free tier~~customers and ~~improved self-service capabilities, which we expect to continue to result in an~~ increase in our ability to attract and convert free users into new paying customers. For the three months ended June 30, 2023, approximately 88% of our revenues pertained to consumption-based pricing plans.

Retention and Expansion. A key factor in our success is the retention and expansion of our platform usage with our existing customers. In order for us to continue to grow our business, it is important to generate additional revenue from our existing customers, and we intend to do this in several ways. As a customer ramps on our platform, we ~~improve~~transition to a more traditional direct sales, or sales-led, model to help the customer expand the use of our platform and the value they receive. Our

existing ~~products~~customer base consists of more than 15,900 paid customers across multiple industry verticals and regions, providing us with a large market opportunity to grow our revenue by facilitating greater platform ~~capabilities~~engagement and ~~introduce~~addressing new ~~products,~~use cases. Our ability to retain existing customers and expand their usage of our platform will significantly impact our future revenues and revenue growth.

Cloud Optimization and Other Efficiency Initiatives. We have identified and are in the process of implementing several key initiatives for expanding our operating margin. For example, we ~~believe that~~have been optimizing our infrastructure by migrating from our own data centers to a significantly more efficient public cloud model to better match our growing demand and our operating costs. We have also begun leveraging the ~~demand~~strengths of multiple cloud providers to gain efficiencies for our ~~products will generally grow. We also believe that there is a significant opportunity for~~platform and our cost structure. As of June 30, 2023, we have migrated the majority of our platform to the public cloud, and we expect to complete this migration by the end of fiscal year 2024. Additionally, as we have continued to develop and expand our consumption-based model, we have gained critical insights into the varying components of the cost of the data, which has enabled us to ~~increase our revenue from sales to our current customers as they become more familiar with our products and adopt our products to address additional business use cases. In addition, we believe~~better align our pricing ~~strategy allows sales resources~~and drive gross margins. Our ability to ~~focus energy on helping customers increase their data ingestion~~effectively identify and ~~the number of users~~implement these efficiency initiatives will significantly impact our future operating expenses and ~~use cases.~~gross margin.

Key Operating Metrics

We review the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make key strategic decisions. The calculation of the key operating metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors.

Number of Active Customer Accounts. We believe the number of Active Customer Accounts is an important indicator of the growth of our business, the market adoption of our platform, and future revenue trends. We define an Active Customer Account at the end of any period as an individual account, as identified by a unique account identifier, aggregated at the parent hierarchy level, for which we have recognized any revenue in the fiscal quarter. For clarity, one customer with several individual accounts at its subsidiary levels would be collectively recognized as one Active Customer Account. As our customers grow their businesses and extend the use of our platform, they sometimes create multiple customer accounts with us for operational or other reasons. As such, when we identify a parent organization that has created a new Active Customer Account, this new Active Customer Account is combined with, and revenue from this new Active Customer Account is included with, the original Active Customer Account. In addition, our Active Customer Accounts metric is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity. We round the number of Active Customer Accounts that we report as of a particular date down to the nearest hundred.

For the three-month period ended ~~December 31, 2022,~~June 30, 2023, we had ~~15,700~~15,900 Active Customer Accounts, which is up ~~1,100~~800 from ~~14,600~~15,100 Active Customer Accounts for the three-month period ended ~~December 31, 2021~~June 30, 2022 and is ~~up 400~~down 100 sequentially from ~~15,300~~16,000 Active Customer Accounts for the three-month period ended ~~September 30, 2022.~~March 31, 2023.

Number of Active Customer Accounts with Revenue Greater than $100,000. Large customer relationships generally lead to scale and operating leverage in our business model. Compared with smaller customers, large customers present a greater opportunity for us to sell additional capacity because they often have larger budgets, a wider range of potential use cases, and greater potential for migrating new workloads to our platform over time. As a measure of our ability to scale with our customers and attract large enterprises to our platform, we count the number of Active Customer Accounts for which we have recognized greater than $100,000 in revenue in the trailing 12-months.

For the three-month period ended ~~December 31, 2022,~~June 30, 2023, we had ~~1,203~~1,241 Active Customer Accounts with trailing 12-month revenue greater than $100,000, which was a ~~13%~~9% increase compared to ~~1,064~~1,137 for the three-month period ended ~~December 31, 2021~~June 30, 2022 and a 3%1% increase compared to ~~1,171~~1,229 for the three-month period ended ~~September 30, 2022.~~March 31, 2023.

Percentage of Revenue from Active Customer Accounts Greater than $100,000. In addition to the number of Active Customer Accounts with revenue greater than $100,000, we also look at our percentage of overall revenue we receive from those accounts in any given quarter as an indicator of our relative performance when selling to our large customer relationships compared to our smaller revenue accounts. An increase in the percentage of revenue reflects relative higher growth in our large customer relationships, whereas a decrease in the percentage reflects relative higher growth in our performance with smaller revenue customers.

The percentage of our total revenue from Active Customer Accounts with trailing 12-month revenue greater than $100,000 was ~~84%~~85% for the three-month period ended ~~December 31, 2022,~~June 30, 2023, compared to ~~81% for the three-month period ended December 31, 2021 and~~ 83% for the three-month period ended ~~September~~June 30, ~~2022.~~2022 and 85% for the three-month period ended March 31, 2023.

Net Revenue Retention Rate. We believe the growth of our platform by our existing Active Customer Accounts is an important measure of the health of our business and our future growth prospects. We monitor our net revenue retention rate (“NRR”) to measure this growth. We expect our NRR to increase when Active Customer Accounts increase their usage of a product, extend their usage of a product to new applications, or adopt a new product. We expect our NRR to decrease when Active Customer Accounts cease or reduce their usage of a product.

To calculate NRR, we first identify the cohort of Active Customer Accounts that were Active Customer Accounts in the same quarter of the prior fiscal year. Next, we identify the measurement period as the 12-month period ending with the period reported and the prior comparison period as the corresponding period in the prior year. NRR is the quotient obtained by dividing the revenue generated from a cohort of Active Customer Accounts in the measurement period by the revenue generated from that same cohort in the prior comparison period.

Our NRR ~~increased~~decreased year-over-year ~~to 118% for the period ended December 31, 2022, compared~~ to 116% for the period ended ~~December 31, 2021~~June 30, 2023, compared to 120% for the period ended June 30, 2022 and decreased quarter-over-quarter from ~~119%~~118% for the period ended ~~September 30, 2022.~~March 31, 2023.

Key Components of Results of Operations

Revenue

~~For~~We primarily contract with our customers under consumption-based plans. These consumption-based plans tightly align the ~~periods presented, we offered access to~~value our customers receive from our platform with what our customers ultimately pay. Customers on these consumption-based plans pay for data ingest and provisioned users. We have been contracting with our customers under ~~consumption and~~consumption-based plans since fiscal year 2021. Our current revenues are largely derived from these plans. Prior to fiscal year 2021, we primarily contracted with our customers under subscription-based plans that include service and support for one or more of our products. For our paying customers, we offer a variety of pricing plans based on the particular product purchased. Our commitment plans typically have terms of one year, although someplans. The majority of our customers contract with us under committed spend contracts where they commit to an amount of spend over the contracted period in exchange for ~~shorter~~a discount on usage pricing or ~~longer periods; our Pay~~contract with us under “Pay as You GoGo” contracts where they are charged for usage in arrears. Our contracts are typically annual or multi-year in term length and are billed upfront or in arrears. Usage in excess of the commitment is generally invoiced in arrears. Some customers still contract under subscription-based plans. We expect to phase out most subscription-based plans ~~do not have a commitment. Most~~as contract periods end and those contracts renew onto one of our ~~revenue comes from contracts that are non-cancellable over the contract term.~~consumption-based plans.

We have and may continue to experience volatility ~~for~~from our remaining performance obligations and deferred revenue as a result of our shift to ~~our consumption pricing~~a consumption-based model. We had remaining performance obligations ~~in the amount~~ of ~~$726.1 million and $706.1~~$738.9 million as of ~~December 31, 2022 and March 31, 2022, respectively,~~June 30, 2023, consisting of both billed and unbilled consideration. Deferred revenue consists of billings or payments received in advance of revenue being recognized, and can fluctuate with changes in billing frequency and other factors. As a result of these factors, as well as ~~our~~the mix of ~~consumption~~consumption-based and ~~subscription~~subscription-based plans and billing frequencies, we do not believe that changes in our remaining performance obligations and deferred revenue in a given period are directly correlated with our revenue growth in that period.

~~The Company’s~~Our remaining performance obligations were ~~$726.1~~$738.9 million as of ~~December 31, 2022,~~June 30, 2023, of which ~~the Company expects~~we expect approximately ~~75%~~70% and 91% to be recognized as revenue in the 12 months ~~ending December 31,~~and 24 months, respectively, following June 30, 2023 based on historical customer consumption patterns. However, the amount and timing of revenue ~~recognition~~recognized from our remaining performance obligations are generally dependent upon customers’ future consumption, which is inherently variable ~~at customers’ discretion~~ and can extend beyond the original contract term in cases where customers are permitted to roll over unused capacity to future periods, generally on the purchase of additional capacity at renewal.

Historically, we have received a higher volume of orders in the fourth fiscal quarter of each year, and to a lesser extent our third fiscal quarter of each year. As a result, we have historically seen higher cash collections in the first and fourth fiscal quarters of each year, and our sequential growth in remaining performance obligations has historically been highest in the fourth fiscal quarter of each year, and to a lesser extent our third fiscal quarter of each year. With our shift to a ~~consumption based pricing~~consumption-based model, we expect over time that our revenue will more closely approximate our customer usage of our products and services, and thereby our revenue may experience seasonal fluctuations based upon our customer consumption patterns.

Cost of Revenue

Cost of revenue consists of expenses relating to hosting-related costs, salaries and benefits of operations and global customer support personnel, data center operations, depreciation and amortization, consulting costs, and payment processing fees. Personnel-related costs consist of salaries, benefits, bonuses, and stock-based compensation. We plan to continue increasing the capacity, capability, and reliability of our infrastructure to support the expected growth of our customer adoption and the number of products we offer, as customer usage is expected to continue to grow. Additionally, we are continuing to build out services and functionality in the public cloud, ~~with a view to migrating~~and have largely migrated our ~~entire~~ platform ~~over time~~ from third-party data center

hosting facilities to public cloud hosting providers. WeWhile the transition to cloud hosting providers is largely complete, we are continuing to ~~decrease the amount of capital expenditures on hosting equipment for use in~~increase our ~~data center facilities as we~~efficiency regarding public cloud usage. We expect our transition to ~~greater dependence on~~the public cloud ~~hosting providers.~~to shift our hosting-related costs to a more variable cost structure rather than a fixed cost structure.

Gross Profit and Margin

Gross profit is equal to revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin has been, and will continue to be, affected by a number of factors, including the timing and extent of our investments in our hosting-related costs, operations and global customer support personnel, and the amortization of capitalized software. ~~Although~~As we have largely transitioned our platform to the public cloud, gross margin has increased during the three months ended June 30, 2023. We expect additional efficiency in our cloud usage and for gross margin to ~~fluctuate from period~~continue increasing as we continue to ~~period as a result of these factors,~~close legacy data centers and scale our ~~recent~~ public cloud ~~migration and,~~usage to ~~a lesser extent, our pricing transition, have contributed to lower gross margins.~~

reduce costs.

Operating Expenses

~~Personnel~~Personnel-related costs, which consist of salaries, benefits, bonuses, stock-based compensation and, with regard to sales and marketing expenses, sales commissions, are the most significant component of our operating expenses.

Research and Development. Research and development expenses consist primarily of ~~personnel~~personnel-related costs and an allocation of our general overhead expenses. We continue to focus our research and development efforts on increasing our platform’s functionality by adding new ~~features and~~ products and ~~increasing the functionality and~~features while enhancing the ease of use of our existing products. We capitalize the portion of our software development costs that meets the criteria for capitalization.

We plan to continue to hire employees for our engineering, product management, and design teams to support our research and development efforts. ~~As a result, we expect our research and development expenses to continue to increase in absolute dollars for the foreseeable future, although~~Although our research and development expenses may fluctuate from period to period depending on fluctuations in our revenue and the timing and extent of our research and development ~~expenses.~~activities, we expect our research and development expenses to continue to increase in absolute dollars for the foreseeable future.

Sales and Marketing. Sales and marketing expenses consist of ~~personnel~~personnel-related costs for our sales, marketing, and business development employees and executives. A significant majority of sales commissions are currently expensed as incurred. Previously, sales commissions attributable to acquiring new customer contracts were capitalized and amortized on a straight-line basis over the anticipated period of benefit. Therefore, sales commission expenses ~~will~~are expected to be ~~larger~~greater than sales commission payouts until ~~we have fully recognized~~ the remaining capitalized ~~commissions expenses~~amounts from prior periods ~~under our subscription model.~~have been fully expensed. Sales and marketing expenses also include the costs of our marketing and brand awareness programs, including our free tier offering.

~~We expect that~~In our transition to the consumption-based model, our go-to-market operations ~~in our consumption-based business model will be~~have become more efficient, and ~~require~~have required less investment, than in our former more traditional ~~subscription~~subscription-based model. As we continue to transition our business to the consumption-based model, we are focusing on further sales efficiency. In furtherance of this strategy shift, we have ~~reallocated some~~reduced our spending ~~from~~in sales and marketing and reallocated those funds to increase our investment onin research and development. While we expect our sales and marketing expenses to decrease as a percentage of our revenue over the long term, our sales and marketing expenses, both in absolute dollars and as a percentage of our revenue, may fluctuate from period to period depending on fluctuations in our revenue and the timing and extent of our sales and marketing ~~expenses.~~initiatives.

General and Administrative. General and administrative expenses consist primarily of ~~personnel~~personnel-related costs for our administrative, legal, human resources, information technology, finance ~~and accounting~~ employees and executives. Also included are ~~non-personnel~~non-personnel-related costs, such as legal and other professional fees.

We plan to continue to expand our business both domestically and internationally, and we expect to increase the size of our general and administrative function to support the growth of our business. ~~As a result, we expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future. However,~~Although we expect our general and administrative expenses to remain flat or decrease modestly as a percentage of our revenue over the long term, ~~although~~we expect our general and administrative expenses to continue to increase in absolute dollars for the immediate future as we continue to scale our business. General and administrative expense as a percentage of our revenue may fluctuate from period to period depending on ~~the timing and extent of~~how rapidly we decide to scale our ~~general and administrative expenses, such as litigation or accounting costs.~~business.

Other Income (Expense)

Other income (expense), consists ~~primarily~~ of interest income, primarily due to income earned on money market funds and short-term investments, offset by interest expense and ~~foreign exchange~~ gains and ~~losses.~~losses from transactions denominated in a currency other than the functional currency.

3025

Results of Operations

The following tables summarize our consolidated statements of operations data for the periods presented and as a percentage of our revenue for those periods.


											Three Months Ended June 30,
		Three Months Ended December 31,				Nine Months Ended December 31,					2023				2022
		2022		2021		2022		2021			Amount		% of revenue		Amount		% of revenue

		(in thousands, except per share amounts)									(in thousands, except per share amounts)
Revenue	Revenue	$	239,763	$	203,591	$	683,134	$	579,769	Revenue	$	242,628	100	%	$	216,459	100	%
Cost of revenue (1)	Cost of revenue (1)	61,316		68,793		189,992		192,319		Cost of revenue (1)	54,440		22		63,893		30
Gross profit	Gross profit	178,447		134,798		493,142		387,450		Gross profit	188,188		78		152,566		70
Operating expenses:	Operating expenses:									Operating expenses:
Research and development (1)	Research and development (1)	69,261		53,362		202,760		153,460		Research and development (1)	80,310		33		64,769		30
Sales and marketing (1)	Sales and marketing (1)	95,477		97,723		296,100		293,603		Sales and marketing (1)	94,019		39		104,420		48
General and administrative (1)	General and administrative (1)	42,799		35,614		124,312		113,193		General and administrative (1)	46,849		19		39,030		18
Total operating expenses	Total operating expenses	207,537		186,699		623,172		560,256		Total operating expenses	221,178		91		208,219		96
Loss from operations	Loss from operations	(29,090)		(51,901)		(130,030)		(172,806)		Loss from operations	(32,990)		(13)		(55,653)		(26)
Other income (expense):	Other income (expense):									Other income (expense):
Interest income	Interest income	4,685		575		8,220		2,237		Interest income	4,593		2		1,110		1
Interest expense	Interest expense	(1,283)		(1,228)		(3,748)		(3,682)		Interest expense	(429)		—		(1,232)		(1)
Other income (expense)		192		(268)		190		(647)
Other expense, net										Other expense, net	(1,666)		(1)		(209)		—
Loss before income taxes	Loss before income taxes	(25,496)		(52,822)		(125,368)		(174,898)		Loss before income taxes	(30,492)		(12)		(55,984)		(26)
Income tax provision	Income tax provision	1,116		763		1,002		816		Income tax provision	2,830		1		267		—
Net loss	Net loss	$	(26,612)	$	(53,585)	$	(126,370)	$	(175,714)	Net loss	$	(33,322)	(13)	%	$	(56,251)	(26)	%
Net loss and adjustment attributable to redeemable non-controlling interest	Net loss and adjustment attributable to redeemable non-controlling interest	607		(9,121)		3,351		(19,175)		Net loss and adjustment attributable to redeemable non-controlling interest	(4,109)		(2)		6,012		3
Net loss attributable to New Relic	Net loss attributable to New Relic	$	(26,005)	$	(62,706)	$	(123,019)	$	(194,889)	Net loss attributable to New Relic	$	(37,431)	(15)	%	$	(50,239)	(23)	%
Net loss attributable to New Relic per share, basic and diluted	Net loss attributable to New Relic per share, basic and diluted	$	(0.38)	$	(0.96)	$	(1.83)	$	(3.04)	Net loss attributable to New Relic per share, basic and diluted	$	(0.54)			$	(0.76)
Weighted-average shares used to compute net loss per share, basic and diluted	Weighted-average shares used to compute net loss per share, basic and diluted	68,050		64,983		67,229		64,203		Weighted-average shares used to compute net loss per share, basic and diluted	69,546				66,421

(1) Includes stock-based compensation expense as follows:
Three Months Ended December 31, Nine Months Ended December 31,
2022 2021 2022 2021
(in thousands)
Cost of revenue $ 1,174 $ 1,382 $ 4,051 $ 3,757
Research and development 14,977 13,117 42,705 36,228
Sales and marketing 12,556 12,537 36,013 37,619
General and administrative (2)
11,972 10,755 32,644 39,945
Total stock-based compensation expense (3)
$ 40,679 $ 37,791 $ 115,413 $ 117,549


	Three Months Ended June 30,
	2023				2022
	Amount		% of revenue		Amount		% of revenue

	(in thousands)
Cost of revenue	$	1,201	—	%	$	1,344	1	%
Research and development (1)	21,265		9		13,286		6
Sales and marketing	11,928		5		10,583		5
General and administrative	12,043		5		9,669		4
Total stock-based compensation expense	$	46,437	19	%	$	34,882	16	%

~~(2) Includes $9.6~~(1) These expenses include $4.6 million ~~acceleration~~ of share-based payment expense for the nine months ended December 31, 2021 for one of our executives due to his departure at the end of June 2021. There was no corresponding expense for the nine months ended December 31, 2022.

~~(3) Includes $0.5 million stock-based compensation expense for the nine months ended December 31, 2021 due to the~~accelerated vesting resulting from restructuring ~~activities commenced in April 2021. There was no corresponding expense for the nine months ended December 31, 2022. Refer to Note 15~~ — ~~Restructuring contained in the “Notes to Condensed Consolidated Financial Statements” in Item 1 of Part I of this Quarterly Report on Form 10-Q for more information.~~activities.

3126

Three Months Ended December 31, Nine Months Ended December 31,
2022 2021 2022 2021
(as a percentage of revenue)
Revenue 100 % 100 % 100 % 100 %
Cost of revenue (1) 26 34 28 33
Gross profit 74 66 72 67
Operating expenses:
Research and development (1) 28 26 29 26
Sales and marketing (1) 40 49 43 51
General and administrative (1) 18 17 18 20
Total operating expenses 86 92 90 97
Loss from operations (12) (26) (18) (30)
Other income (expense):
Interest income 2 — 1 —
Interest expense (1) (1) (1) (1)
Other income (expense), net — — — —
Loss before income taxes (11) (27) (18) (31)
Income tax provision (benefit) — — — —
Net loss (11) % (27) % (18) % (31) %
Net loss and adjustment attributable to redeemable non-controlling interest — (4) — (3)
Net loss attributable to New Relic (11) % (31) % (18) % (34) %

~~(1) Includes stock-based compensation expense as follows:~~
Three Months Ended December 31, Nine Months Ended December 31,
2022 2021 2022 2021
(as a percentage of revenue)
Cost of revenue — % 1 % 1 % 1 %
Research and development 6 6 6 6
Sales and marketing 6 6 5 6
General and administrative 5 5 5 7
Total stock-based compensation expense 17 % 18 % 17 % 20 %
Revenue

Revenue by category

Three Months Ended December 31, Change Nine Months Ended December 31, Change
2022 2021 Amount % 2022 2021 Amount %
(dollars in thousands)
United States $ 152,518 $ 134,687 $ 17,831 13 % $ 443,691 $ 391,127 $ 52,564 13 %
EMEA 43,937 31,714 12,223 39 116,949 89,920 27,029 30
APAC 26,091 21,354 4,737 22 73,745 57,852 15,893 27
Other 17,217 15,836 1,381 9 48,749 40,870 7,879 19
Total revenue $ 239,763 $ 203,591 $ 36,172 18 % $ 683,134 $ 579,769 $ 103,365 18 %


	Three Months Ended June 30,				Change
	2023		2022		Amount		%

	(dollars in thousands)
Subscription	$	28,720	$	63,080	$	(34,360)	(54)	%
Consumption	213,908		153,379		60,529		39
Total revenue	$	242,628	$	216,459	$	26,169	12	%

~~Total~~Subscription revenue decreased $34.4 million, or 54%, while consumption revenue increased ~~$36.2~~$60.5 million, or ~~18%~~39%, in the three months ended ~~December 31, 2022~~June 30, 2023, compared to the same period of ~~2021.~~ 2022. The increase in consumption over subscription revenue aligns with the Company’s transition to a consumption-based model.

Revenue by geographic areas


	Three Months Ended June 30,				Change
	2023		2022		Amount		%

	(dollars in thousands)
United States	$	151,171	$	143,460	$	7,711	5	%
Europe, the Middle East, and Africa (“EMEA”)	44,000		34,716		9,284		27
Asia Pacific and Japan (“APAC”)	28,897		23,126		5,771		25
Other	18,560		15,157		3,403		22
Total revenue	$	242,628	$	216,459	$	26,169	12	%

Our revenue from the United States increased ~~$17.8~~$7.7 million, or ~~13%~~5%, our revenue from EMEA increased ~~$12.2~~$9.3 million, or ~~39%~~27%, our revenue from APAC increased ~~$4.7~~$5.8 million, or ~~22%~~25%, and our revenue from other regions increased ~~$1.4~~$3.4 million, or 9%22% in the three months ended ~~December 31, 2022,~~June 30, 2023, compared to the same period of ~~2021,~~2022, primarily as a result of growth in our customer base and increase in consumption.

Cost of Revenue

~~Total~~


	Three Months Ended June 30,				Change
	2023		2022		Amount		%

	(dollars in thousands)
Cost of revenue	$	54,440	$	63,893	$	(9,453)	(15)	%

Cost of revenue ~~increased $103.4~~decreased $9.5 million, or ~~18%~~15%, in the ~~nine~~three months ended ~~December 31, 2022~~June 30, 2023, compared to the same period of ~~2021. Our revenue from~~2022. The decrease was primarily due to a $6.5 million decrease in hosting-related costs and a $2.7 million decrease in depreciation expense as the ~~United States~~Company continues its transitions out of legacy data centers and into a more efficient public cloud hosting environment.

Gross Profit and Margin


	Three Months Ended June 30,						Change
	2023			2022			Amount		%

	(dollars in thousands)
Gross profit	$	188,188		$	152,566		$	35,622	23	%
Gross margin %	78		%	71		%

Gross profit increased ~~$52.6~~$35.6 million, or ~~13%~~23%, ~~our revenue from EMEA increased $27.0 million, or 30%, our revenue from APAC increased $15.9 million, or 27%, and our revenue from other regions increased $7.9 million, or 19%~~ in the ~~nine~~three months ended ~~December 31, 2022,~~June 30, 2023 compared to the same period of ~~2021,~~2022. The increase was primarily ~~as a result of~~attributable to an increase in our revenues driven by growth in our customer base and increase

in customer consumption, and a reduction in ~~addition to revenue recognized from variable consideration.~~

~~Cost of Revenue~~

Three Months Ended December 31, Change Nine Months Ended December 31, Change
2022 2021 Amount % 2022 2021 Amount %
(dollars in thousands)
Cost of revenue $ 61,316 $ 68,793 $ (7,477) (11) % $ 189,992 $ 192,319 $ (2,327) (1) %

~~Cost~~our cost of revenue ~~decreased $7.5~~driven by scaling our business via public cloud hosting providers.

Research and Development


	Three Months Ended June 30,				Change
	2023		2022		Amount		%

	(dollars in thousands)
Research and development	$	80,310	$	64,769	$	15,541	24	%

Research and development expenses increased $15.5 million, or ~~11%~~24%, in the three months ended ~~December 31, 2022,~~June 30, 2023 compared to the same period of ~~2021.~~2022. The ~~decrease~~increase was primarily due to a $14.9 million decrease in hosting-related costs, consulting, and software expenses and a $1.5 million decrease in personnel-related costs. The decrease was partially offset by a $9.3 million increase in allocated costs, including facilities, depreciation, facilities exit costs, and the impairment of certain acquired technologies.

Cost of revenue decreased $2.3 million, or 1%, in the nine months ended December 31, 2022, compared to the same period of 2021. The decrease was primarily due to a $9.0 million decrease in hosting-related costs, consulting, and software expenses and a $0.5 million decrease in travel expenses. The decrease was partially offset by a $4.2 million increase in allocated costs, including facilities, depreciation, facilities exit costs, the impairment of certain acquired technologies, a $2.4 million increase in personnel-related costs, and a $0.5 million increase in other miscellaneous expenses.

~~Research and Development~~

Three Months Ended December 31, Change Nine Months Ended December 31, Change
2022 2021 Amount % 2022 2021 Amount %
(dollars in thousands)
Research and development $ 69,261 $ 53,362 $ 15,899 30 % $ 202,760 $ 153,460 $ 49,300 32 %

~~Research and development expenses increased $15.9 million, or 30%, in the three months ended December 31, 2022 compared to the same period of 2021. The increase was primarily a result of~~ an increase in personnel-related costs of ~~$12.1~~$17.3 million driven by an increase in headcount, salary and equity-based compensation, a $3.6 million increase in allocated costs, including facilities, depreciation, and facilities exit costs, and a $2.2 million increase in consulting and software expenses. The increase was partially offset by $2.0 million decrease in travel and other miscellaneous expenses.

~~Research and development expenses increased $49.3 million, or 32%, in the nine months ended December 31, 2022 compared to the same period of 2021. The increase was primarily~~as a result of ~~an increase in personnel-related costs of $38.0 million, driven by an increase in headcount, salary and equity-based compensation,~~the restructuring plans aiming to realign the Company’s resources towards a $7.5 million increase in allocated costs, including facilities, depreciation, and facilities exit costs, a $2.4 million increase in consulting and software expenses, and a $1.7 million increase in travel and other miscellaneous expenses.consumption business-model. The increase was partially offset by a ~~$0.3~~$1.8 million decrease in ~~hosting service credits.~~depreciation, consulting, travel, and other expenses driven by initiatives to improve business efficiency.

Sales and Marketing

Three Months Ended December 31, Change Nine Months Ended December 31, Change
2022 2021 Amount % 2022 2021 Amount %
(dollars in thousands)
Sales and marketing $ 95,477 $ 97,723 $ (2,246) (2) % $ 296,100 $ 293,603 $ 2,497 1 %


	Three Months Ended June 30,				Change
	2023		2022		Amount		%

	(dollars in thousands)
Sales and marketing	$	94,019	$	104,420	$	(10,401)	(10)	%

Sales and marketing expenses decreased ~~$2.2~~$10.4 million, or 2%10%, in the three months ended ~~December 31, 2022~~June 30, 2023 compared to the same period of ~~2021.~~2022. The decrease was primarily a result of a ~~$3.4 million decrease in personnel-related cost, a $2.3~~$5.1 million decrease in travel expenses, ~~and~~ a ~~$0.9~~$4.1 million ~~decrease in allocated costs, including facilities and depreciation. The decrease was partially offset by a $1.9 million increase in marketing programs, a $1.0 million increase in consulting and~~

~~software expenses, and a $1.5 million increase in other miscellaneous expenses. The~~net decrease in personnel-related costs ~~was due~~offset by an increase in personnel-related costs incurred to realign the ~~impact of higher commission amortization expenses~~Company’s resources towards a consumption business-model, and a $1.1 million decrease in ~~the same period last year when we first shifted~~marketing programs aligning with our initiatives to ~~a consumption-business model from our subscription-business model.~~improve business efficiency.

~~Sales~~General and ~~marketing~~Administrative


	Three Months Ended June 30,				Change
	2023		2022		Amount		%

	(dollars in thousands)
General and administrative	$	46,849	$	39,030	$	7,819	20	%

General and administrative expenses increased ~~$2.5~~$7.8 million, or 1%20%, in the ~~nine~~three months ended ~~December 31, 2022~~June 30, 2023 compared to the same period of ~~2021.~~2022. The increase was due to an increase in personnel-related costs of $5.4 million, partially driven by an increase in stock-based compensation. The increase in personnel-related costs also includes increased compensation costs due to the restructuring plans aimed to realign the Company’s resources towards a consumption business-model. The increase was also attributable to a $2.1 million increase in consulting service fees.

Other Income (Expense)


	Three Months Ended June 30,				Change
	2023		2022		Amount		%

	(dollars in thousands)
Other income (expense)	$	2,498	$	(331)	$	2,829	NM

NM indicates not meaningful.

Other income increased by $2.8 million in the three months ended June 30, 2023 compared to the same period of 2022. The increase was primarily a result of a $8.4 million increase in marketing program expenses, a $6.1 million increase in travel expenses, and a $2.4 million increase in other miscellaneous expenses. The increase was partially offset by a $7.0 million decrease in personnel-related costs and a $6.9 million decrease in allocated costs, including facilities and depreciation. The decrease in personnel-related costs was due to the impact of higher restructuring costs that were incurred in the same period last year.

~~General and Administrative~~

Three Months Ended December 31, Change Nine Months Ended December 31, Change
2022 2021 Amount % 2022 2021 Amount %
(dollars in thousands)
General and administrative $ 42,799 $ 35,614 $ 7,185 20 % $ 124,312 $ 113,193 $ 11,119 10 %

General and administrative expenses increased $7.2 million, or 20%, in the three months ended December 31, 2022 compared to the same period of 2021. The increase was primarily a result of an increase in personnel-related costs of $4.4 million driven by an increase in headcount, salary and equity-based compensation, a $2.5 million increase in allocated costs, including facilities, depreciation and lease exit expenses, a $0.7 million increase in travel expenses, and a $0.5 million increase in consulting and software. The increase was partially offset by a $1.0 million decrease in other miscellaneous expenses.

General and administrative expenses increased $11.1 million, or 10%, in the nine months ended December 31, 2022 compared to the same period of 2021. The increase was primarily a result of a $5.2 million increase in personnel-related costs driven by an increase in headcount, salary and equity-based compensation, a $3.7 million increase in travel expenses, a $1.6 million increase in allocated costs, including facilities, depreciation, and lease exit expenses, and a $0.6 million increase in consulting, software, and other miscellaneous expenses.

~~Other Income (Expense)~~

Three Months Ended December 31, Change Nine Months Ended December 31, Change
2022 2021 Amount % 2022 2021 Amount %
(dollars in thousands)
Other income (expense) $ 3,594 $ (921) $ 4,515 490 % $ 4,662 $ (2,092) $ 6,754 323 %

~~Other income increased by $4.5 million, or 490%, in the three months ended December 31, 2022 compared to the same period of 2021. The increase was primarily a result of a $4.1~~$3.5 million increase in interest income ~~and~~offset by a ~~$0.4~~$1.4 million decrease in other expenses.

~~Other income increased by $6.8 million, or 323%, in the nine months ended December 31, 2022 compared to the same period of 2021.~~ The ~~increase was primarily a result of a $6.0 million~~ increase in interest income ~~and a $0.8 million decrease in other expenses.~~is primarily due to the current interest rate environment.

3428

Provision for ~~(Benefit from)~~ Income Tax


		Three Months Ended December 31,						Change				Nine Months Ended December 31,						Change					Three Months Ended June 30,						Change
		2022			2021			Amount		%		2022			2021			Amount		%			2023			2022			Amount		%

		(dollars in thousands)																					(dollars in thousands)
Loss before income taxes	Loss before income taxes	$	(25,496)		$	(52,822)		$	27,326	52	%	$	(125,368)		$	(174,898)		$	49,530	28	%	Loss before income taxes	$	(30,492)		$	(55,984)		$	25,492	46	%
Effective tax rate	Effective tax rate	(4.38)		%	(1.44)		%					(0.80)		%	(0.47)		%					Effective tax rate	(9.28)		%	(0.48)		%
Income tax provision	Income tax provision	$	1,116		$	763		$	353	46	%	$	1,002		$	816		$	186	23	%	Income tax provision	$	2,830		$	267		$	2,563	960	%

We recognized an income tax expense of ~~$1.1~~$2.8 million for the three months ended ~~December 31, 2022~~June 30, 2023 as compared to an income tax expense of ~~$0.8~~$0.3 million for the same period of ~~2021.~~2022. The ~~change of $0.4 million, or 46%,~~increase was mostly related to an increase in foreign ~~taxes.~~

Weearnings as a result of catch-up on intercompany revenue on foreign lease restructuring expenses previously recognized an income tax expense of $1.0 million for the nine months ended December 31, 2022 as compared to an income tax expense of $0.8 million for the same period of 2021. The change of $0.2 million, or 23%, was mostly related to an increaseunder U.S. GAAP in ~~U.S. state taxes.~~fiscal year 2023.

Net Loss and Adjustment Attributable to Redeemable Non-controlling Interest

Three Months Ended December 31, Change Nine Months Ended December 31, Change
2022 2021 Amount % 2022 2021 Amount %
(dollars in thousands)
Net loss and adjustment attributable to redeemable non-controlling interest $ 607 $ (9,121) $ 9,728 107 % $ 3,351 $ (19,175) $ 22,526 117 %


	Three Months Ended June 30,				Change
	2023		2022		Amount		%

	(dollars in thousands)
Net loss and adjustment attributable to redeemable non-controlling interest	$	(4,109)	$	6,012	$	(10,121)	NM

NM indicates not meaningful.

Net loss and adjustment attributable to redeemable non-controlling interest decreased by ~~$9.7~~$10.1 million ~~or 107%,~~ in the three months ended ~~December 31, 2022,~~June 30, 2023, compared to the same period of ~~2021.~~2022. The decrease was related to the redeemable non-controlling interest’s associated loss and adjustment to estimated redemption value of our joint venture in New Relic K.K.

Net loss and adjustment attributable to redeemable non-controlling interest decreased by $22.5 million, or 117%, in the nine months ended December 31, 2022, compared to the same period of 2021. The decrease was related to the redeemable non-controlling interest’s associated loss and adjustment to estimated redemption value of our joint venture in New Relic K.K.

3529

Non-GAAP Financial Measures

~~In addition to our results determined in accordance with U.S. generally accepted accounting principles (GAAP), Non-GAAP Income (Loss) from Operations, a~~The non-GAAP financial ~~measure, is included in the section titled “Non-GAAP Financial Measures.” This non-GAAP financial measure is~~measures discussed below are not meant to be considered in isolation from or as a substitute for, or superior to, comparable GAAP financial measures and should be read only in conjunction with our unaudited condensed consolidated financial statements prepared in accordance with GAAP. Our presentation of ~~this~~these non-GAAP financial ~~measure~~measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the GAAP-to-non-GAAP ~~reconciliation included in the section titled “Non-GAAP Financial Measures,”~~reconciliations provided below to more fully understand our business.

Non-GAAP Gross Margin, Non-GAAP Income (Loss) From Operations, and Non-GAAP Net Income (Loss)

To supplement our consolidated financial statements presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-GAAP ~~income (loss) from operations and non-GAAP net income (loss) attributable to New Relic. We define~~gross margin, non-GAAP income (loss) from operations and non-GAAP net income (loss) ~~attributable to New Relic~~. We define non-GAAP gross margin, non-GAAP income (loss) from operations and non-GAAP net income (loss) as the respective GAAP balance, adjusted for, as applicable: (1) stock-based ~~compensation expense,~~compensation-related expenses, (2) ~~amortization of stock-based compensation capitalized in software development costs, (3)~~ the amortization of purchased intangibles, ~~(4) employer payroll tax expense on equity incentive plans, (5)~~(3) amortization of debt discount and issuance costs, ~~(6) the transaction costs related to acquisitions, (7)~~(4) lawsuit litigation cost and other expense, ~~(8) net loss~~(5) restructuring charges, and ~~adjustment attributable to redeemable non-controlling interest, and (9) restructuring charges.~~(6) non-GAAP tax adjustment. We use non-GAAP financial measures, including non-GAAP gross margin, non-GAAP income (loss) from operations and non-GAAP net income (loss) ~~attributable to New Relic,~~, 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 our financial performance. In addition, our bonus opportunity for eligible employees and executives is based in part on non-GAAP income (loss) from operations.

We believe these measures are useful to investors, as a supplement to GAAP measures, in evaluating our operational performance. We have provided below a reconciliation of GAAP gross margin to non-GAAP gross margin, a reconciliation of GAAP income (loss) from operations to non-GAAP income (loss) from operations, and a reconciliation of GAAP net income (loss) ~~attributable to New Relic~~ to non-GAAP net income (loss) ~~attributable to New Relic.~~. We believe non-GAAP gross margin, non-GAAP income (loss) from operations, and non-GAAP net income (loss) ~~attributable to New Relic~~ are useful to investors and others in assessing our operating performance due to the following factors:

Stock-based compensation-related expenses. Our stock-based compensation-related expenses include stock-based compensation expense, ~~and~~ amortization of stock-based compensation capitalized in software development costs. and employer payroll tax expense on equity incentive plans. We utilize share-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of our 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~~. We view 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.

~~Employer payroll tax expense on equity incentive plans.~~ Wefurther exclude 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 our 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 our business.

Amortization of purchased intangibles. We view 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. Amortization of purchased intangibles varies in amount and frequency and is significantly impacted by the timing and size of our acquisitions. We find it useful to exclude these non-cash charges from our operating expenses to assist in budgeting, planning, and forecasting future periods. The use of intangible assets contributed to our revenues during the periods presented and will also contribute to our revenues in future periods. Amortization of purchased intangible assets will recur in future periods.

Amortization of debt discount and issuance costs. In May 2018, we issued $500.25 million of our 0.50% convertible senior notes due 2023 (the “Notes”), which ~~bear~~bore interest at an annual fixed rate of 0.5%. The ~~effective interest rate of the~~ Notes wa~~s 5.74%.~~ ~~Effective April~~matured and were repaid in cash on May 1, ~~2021 we adopted ASU No. 2020-06,~~ ~~Accounting for Convertible Instruments and Contract on an Entity’s Own Equity~~. As a result of the adoption, the debt conversion option and debt issuance costs previously attributable to the equity component are no longer presented in equity. Similarly, the debt discount, which was equal to the carrying value of the embedded conversion feature upon issuance, is no longer amortized into income as interest expense over the life of the instrument. This resulted in a $54.2 million decrease to the opening balance of accumulated deficit, a $100.1 million decrease to the opening balance of additional paid-in capital, and a $45.9 million increase to the opening balance of the Notes, net on the consolidated balance sheet.2023. The debt issuance costs were amortized as interest expense. The expense for the amortization of 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.

~~Transaction costs related to acquisitions.~~ We may from time to time incur direct transaction costs related to acquisitions. We believe it is useful to exclude such charges because we do not consider such amounts to be part of the ongoing operation of our business.

Lawsuit litigation cost and other expense. We may from time to time incur charges or benefits related to litigation or transactions that are outside of the ordinary course of our business. We believe it is useful to exclude such charges or benefits because we do not consider such amounts to be part of the ongoing operation of our business and because of the singular nature of the claims underlying the matter.

~~Net loss and adjustment to redeemable non-controlling interest.~~
We allocate the net loss and adjust the value of redeemable non-controlling interest in connection with our joint venture in New Relic K.K. Starting from the period ended December 31, 2022, we also include the net loss attributable to redeemable non-controlling interest as a non-GAAP item. As such, prior periods have been adjusted to reflect this change. We believe it is useful to exclude the net loss and adjustment to redeemable non-controlling interest because it may not be indicative of our future operating results and that investors benefit from an understanding of our operating results without giving effect to this adjustment.

Restructuring charges. In ~~April 2021, we commenced a restructuring plan to realign our cost structure to better reflect significant product and business model innovation over the prior 12 months. In~~ August 2022, we commenced a ~~new~~ restructuring plan to realign our cost structure with our business needs as we ~~move~~moved to focus our resources on top ~~priorities.~~priorities, and in March 2023, we approved a new restructuring plan in connection with the reduction of our global real estate footprint in line with our Flex First philosophy. In the first fiscal quarter of 2024, the Company announced the adoption of a new restructuring plan focused on realigning resources with the Company’s business needs in driving the growth of its consumption business. As a result of ~~each of these~~this and previously announced restructuring plans, we incurred charges of approximately ~~$7.2~~$21.7 million consisting of employee wages, termination benefits, and ~~$12.6 million~~lease exit costs for the ~~nine~~three months ended ~~December 31, 2022 and 2021, respectively, for employee terminations and other costs associated with the restructuring plans.~~June 30, 2023. We believe it is appropriate to exclude the restructuring charges because they are not indicative of our future operating results.

Non-GAAP tax adjustment. We used a long-term projected non-GAAP tax rate to provide consistency across interim reporting periods with non-GAAP net income. As we have forecasted to be non-GAAP profitable on an annual basis starting in fiscal year 2024, we applied the non-GAAP tax rate prospectively in the first fiscal quarter of 2024. In determining our non-GAAP tax rate, we excluded the impact of nonrecurring items and made assumptions including those about tax legislation and our tax positions. We projected a 24.0% non-GAAP tax rate based on non-GAAP financial projections and applied it to the non-GAAP profit before tax.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, or superior to, financial information prepared in accordance with GAAP. 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 differ from non-GAAP financial measures used by other companies in our industry and exclude expenses that may have a material impact on our reported financial results.

The following tables present our non-GAAP gross margin, non-GAAP income (loss) from operations and our non-GAAP net income (loss) ~~attributable to New Relic~~ and reconcile our GAAP ~~income (loss)~~gross margin to non-GAAP gross margin, GAAP loss from operations to non-GAAP income (loss) from operations and our GAAP net ~~income (loss) attributable to New Relic~~loss to our non-GAAP net income (loss) ~~attributable to New Relic~~ for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2023 and 2022 ~~and 2021~~ (in thousands):


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended June 30,
		2022		2021		2022		2021			2023		2022
GAAP loss from operations	GAAP loss from operations	$	(29,090)	$	(51,901)	$	(130,030)	$	(172,806)	GAAP loss from operations	$	(32,990)	$	(55,653)
Plus: Stock-based compensation expense		40,679		37,791		115,413		117,549
Plus: Stock-based compensation-related expenses										Plus: Stock-based compensation-related expenses	43,720		36,379

Plus: Amortization of purchased intangibles	Plus: Amortization of purchased intangibles	4,467		2,006		9,050		5,358		Plus: Amortization of purchased intangibles	1,475		2,291
Plus: Transaction costs related to acquisitions		—		—		929		361
Plus: Amortization of stock-based compensation capitalized in software development costs		2,024		640		3,517		1,680

Plus: Lawsuit litigation cost and other expense	Plus: Lawsuit litigation cost and other expense	—		59		88		59		Plus: Lawsuit litigation cost and other expense	2,573		(174)
Plus: Employer payroll tax on employee equity incentive plans		619		956		2,231		2,552

Plus: Restructuring charges ~~(1)~~	Plus: Restructuring charges ~~(1)~~	—		(151)		7,210		12,119		Plus: Restructuring charges ~~(1)~~	21,657		—
Non-GAAP income (loss) from operations	Non-GAAP income (loss) from operations	$	18,699	$	(10,600)	$	8,408	$	(33,128)	Non-GAAP income (loss) from operations	$	36,435	$	(17,157)

Three Months Ended December 31, Nine Months Ended December 31,
2022 2021 2022 2021
GAAP net loss attributable to New Relic $ (26,005) $ (62,706) $ (123,019) $ (194,889)
Plus: Stock-based compensation expense 40,679 37,791 115,413 117,549
Plus: Amortization of purchased intangibles 4,467 2,006 9,050 5,358
Plus: Transaction costs related to acquisitions — — 929 361
Plus: Amortization of stock-based compensation capitalized in software development costs 2,024 640 3,517 1,680
Plus: Lawsuit litigation cost and other expense — 59 88 59
Plus: Employer payroll tax on employee equity incentive plans 619 956 2,231 2,552
Plus: Amortization of debt discount and issuance costs 636 590 1,823 1,766
Plus: Net loss and adjustment to redeemable non-controlling interest (2)
(607) 9,121 (3,351) 19,175
Plus: Restructuring charges (1)
— (151) 7,210 12,119
Non-GAAP net income (loss) attributable to New Relic $ 21,813 $ (11,694) $ 13,891 $ (34,270)


	Three Months Ended June 30,
	2023		2022
GAAP net loss	$	(33,322)	$	(56,251)
Plus: Stock-based compensation-related expenses	43,720		36,379

Plus: Amortization of purchased intangibles	1,475		2,291


Plus: Lawsuit litigation cost and other expense	2,573		(174)

Plus: Amortization of debt discount and issuance costs	206		593
Plus: Restructuring charges	21,657		—
Less: Non-GAAP tax adjustment	(5,884)		—
Non-GAAP net income (loss)	$	30,425	$	(17,162)

~~(1) For the nine months ended December 31, 2021, restructuring related charge~~Non-GAAP income (loss) from operations and non-GAAP net income (loss) for the ~~stock-based compensation expense~~periods presented reflects the same trends discussed above in “Results of ~~$0.5 million was included on its respective line items. There was no corresponding expense for the nine months ended December 31, 2022.~~

(2) Beginning from the period ended December 31, 2022, net loss attributable to redeemable non-controlling interest is included in the non-GAAP reconciliation. As such, reclassifications have been made to prior periods to conform with the current presentation.

Operations.” Although we have generated non-GAAP income from operations and non-GAAP net income ~~attributable to New Relic~~ in the three ~~and nine~~ months ended ~~December 31, 2022,~~June 30, 2023, and although we expect that these numbers will improve over time with increased efficiencies, we have generated non-GAAP loss from operations and non-GAAP net loss ~~attributable to New Relic~~ in prior recent periods.

Free Cash Flow

We define free cash flow, a non-GAAP financial measure, as GAAP net cash provided by (used in) operating activities reduced by purchases of property and equipment and capitalized software development costs. We believe information regarding free cash flow provides useful supplemental information to investors.

The following table presents a reconciliation of free cash flow to net cash provided by ~~(used in)~~ operating activities, the most directly comparable financial measure calculated in accordance with GAAP, for the periods presented (in thousands):


		Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended June 30,
		2022		2021		2022		2021			2023		2022
Net cash used in operating activities		$	(24,828)	$	(19,197)	$	(19,265)	$	(46,328)
Net cash provided by operating activities										Net cash provided by operating activities	$	78,309	$	43,009
Capital expenditures	Capital expenditures	(358)		(351)		(2,774)		(3,177)		Capital expenditures	(515)		(1,294)
Capitalized software development costs	Capitalized software development costs	(4,287)		(3,359)		(12,194)		(9,406)		Capitalized software development costs	(4,279)		(3,387)
Free cash flow (Non-GAAP)	Free cash flow (Non-GAAP)	$	(29,473)	$	(22,907)	$	(34,233)	$	(58,911)	Free cash flow (Non-GAAP)	$	73,515	$	38,328
Net cash provided by investing activities		$	58,654	$	11,687	$	242,900	$	16,885
Net cash provided by financing activities		$	1,932	$	21,551	$	14,496	$	34,582
Net cash provided by (used in) investing activities										Net cash provided by (used in) investing activities	$	34,121	$	(9,936)
Net cash provided by (used in) financing activities										Net cash provided by (used in) financing activities	$	(497,448)	$	1,725

3932

Liquidity and Capital Resources
Nine Months Ended December 31,
2022 2021
(in thousands)
Cash used in operating activities $ (19,265) $ (46,328)
Cash provided by investing activities 242,900 16,885
Cash provided by financing activities 14,496 34,582
Net increase in cash, cash equivalents and restricted cash $ 238,131 $ 5,139


	Three Months Ended June 30,
	2023		2022

	(in thousands)
Cash provided by operating activities	$	78,309	$	43,009
Cash provided by (used in) investing activities	34,121		(9,936)
Cash provided by (used in) financing activities	(497,448)		1,725
Net increase (decrease) in cash, cash equivalents and restricted cash	$	(385,018)	$	34,798

Sources of Cash and Material Cash Requirements

To date, we have financed our operations primarily through the issuance of the Notes, private and public equity financings and customer payments. As disclosed in Note 76 — 0.5% Convertible Senior Notes and Capped Call, in May 2018, we issued $500.25 million in aggregate principal amount of Notes in a private offering, including $65.25 million in aggregate principal amount of Notes pursuant to the ~~“Notes~~exercise in full of the initial purchasers’ option to ~~Condensed Consolidated Financial Statements”~~purchase additional Notes. The Notes matured and were repaid in ~~Item 1 of Part I of this Quarterly Report on Form 10-Q, our 0.5% Convertible Senior Notes and Capped Call will mature~~cash on May 1, 2023. ~~We may seek to repurchase a portion of our 0.5% Convertible Senior Notes pursuant to open market purchases or privately negotiated transactions in advance of their maturity date.~~ We believe that our existing cash, cash equivalents, and short-term investment balances, together with cash generated from operations, will be sufficient to meet our working capital and capital expenditure requirements ~~and debt retirement obligations~~ for at least the next 12 months.

We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash balances, and issuance of equity or debt securities. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the timing of our public cloud migration and the related decreased spending on capital expenditures, the introduction of new and enhanced products, seasonality of our billing activities, the timing and extent of spending to support our growth strategy, the continued market acceptance of our products, and competitive pressures. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies and intellectual property rights. We may need or choose to raise additional funds from equity or debt securities in order to meet those capital requirements. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely affected.

Our material cash requirements consist of obligations under leases for office space and purchase ~~commitments and our 0.5% Convertible Senior Notes.~~commitments. Except as set forth in Note ~~9 — Leases~~6 – 0.5% Convertible Senior Notes and Capped Call and Note 107 — Commitments and Contingencies contained in the “Notes to Condensed Consolidated Financial Statements” in Item 1 of Part I of this Quarterly Report on Form 10-Q, there were no material changes to our material cash requirements as disclosed in our audited consolidated financial statements for the fiscal year ended March 31, ~~2022~~2023 in our Annual ~~Report on Form 10-K for the fiscal year ended March 31, 2022 (our “Annual Report”), as filed with the Securities and Exchange Commission (“SEC”), on May 17, 2022.~~Report.

Operating Activities

During the ~~nine~~three months ended ~~December 31, 2022,~~June 30, 2023, cash ~~used in~~provided by operating activities was ~~$19.3~~$78.3 million, ~~as a result~~which was an increase of ~~a net loss~~$35.3 million compared to the same period of ~~$126.4 million, adjusted by non-cash charges of $181.1 million and a change of $74.0 million in our operating assets and liabilities.~~2022. The ~~change in our operating assets and liabilities was the result of a $96.9 million decrease in deferred revenue, a $8.7 million~~ increase in ~~deferred contract acquisition and fulfillment costs, a $8.7 million decrease in lease liabilities, and a $3.8 million decrease in accounts payable. The decrease was offset~~cash provided by a $28.0 million decrease in account receivable, a $7.9 million decrease in lease right-of-use assets, a $5.3 million decrease in prepaid and other assets, and a $2.9 million increase in accrued compensation and benefits and other liabilities.

~~During the nine months ended December 31, 2021, cash used in~~ operating activities was $46.3 million as a result of a net loss of $175.7 million, adjusted by non-cash charges of $185.9 million and a change of $56.5 million in our operating assets and liabilities. The change in our operating assets and liabilities wasis primarily due to increased cash receipts related to the result of a $67.2 million decrease in deferred revenue, a $5.9 million decrease in lease liabilities, a $3.1 million increase in accounts receivable, a $3.0 million increase in prepaid and other assets, and a $1.7 million increase in deferred contract acquisition and fulfillment costs. This wasCompany’s continued business growth, partially offset by a ~~$14.7 million increase in accrued compensation and benefits and other liabilities, a $6.7 million~~ decrease in ~~lease right-of-use assets, and a $2.9 million increase in accounts payable.~~

cash due to timing of payments.

Investing Activities

Cash provided by investing activities during the ~~nine~~three months ended ~~December 31, 2022~~June 30, 2023 was $242.9 million, primarily as a result of proceeds from the maturity and sale of short-term investments of $314.0 million and proceeds from sale of property and equipment of $1.8 million. This was partially offset by the purchase of short-term investments of $50.4$34.1 million, an increase ~~in capitalization~~ of ~~software development costs~~$44.1 million compared to the same period of ~~$12.2 million,~~2022. The increase is primarily due to reduced purchases of ~~property and equipment of $2.8 million, and a net payment of $7.5 million which was held back for an acquisition that occurred in the prior year.~~

~~Cash provided~~investments, offset by ~~investing activities during the nine months ended December 31, 2021 was $16.9 million, primarily as a result of~~reduced proceeds from ~~the maturity and sale~~sales of short-term investments of $212.3 million. This was partially offset by purchases of short-term investments of $175.7 million, cash paid for acquisition, net of cash acquired, of $7.2 million, purchases of property and equipment of $3.2 million, and increases in capitalization of software development costs of $9.4 million.investments.

Financing Activities

Cash ~~provided by~~used in financing activities during the ~~nine~~three months ended ~~December 31, 2022~~June 30, 2023 was ~~$14.5~~$497.4 million, ~~which~~an increase of $499.2 million compared to the same period of 2022. The increase was primarily due to the ~~result~~repayment of ~~proceeds received from~~ the ~~purchase of shares of common stock pursuant to our employee stock purchase plan of $6.1 million and from the exercise of stock options of $8.4 million.~~Notes upon maturity.

Cash provided by financing activities during the nine months ended December 31, 2021 was $34.6 million, which was the result of proceeds received from the purchase of shares of common stock pursuant to our employee stock purchase plan of $5.4 million and from the exercise of stock options of $29.2 million.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”). In the preparation of these consolidated financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates.

There have been no significant changes in our critical accounting policies and estimates during the ~~nine~~three months ended ~~December 31, 2022~~June 30, 2023 as compared to the critical accounting policies and estimates described in our Annual Report.

Recent Accounting Pronouncements

See Note 1 — Description of Business and Summary of Significant Accounting Policies contained in the “Notes to Condensed Consolidated Financial Statements” in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

The majority of our subscription and ~~usage-based~~consumption-based agreements are denominated in U.S. dollars. A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies and subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro and Japanese Yen. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statements of operations. As exchange rates may fluctuate significantly between periods, our non-U.S. dollar denominated revenue and operating expenses may also experience significant fluctuations between periods as we convert these to U.S. dollars. Volatile market conditions arising from the macro environment have and may in the future result in significant changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar has and may in the future negatively affect our revenue expressed in U.S. dollars. As the impact of foreign currency exchange rates are not projected to be material to our operating results, we have not engaged in any foreign currency hedging transactions. As our international operations grow, we will continue to reassess our approach to managing the risks relating to fluctuations in currency rates. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our historical consolidated financial statements.

Interest Rate Risk

We had cash and cash equivalents of ~~$506.8~~$240.7 million as of ~~December 31, 2022,~~June 30, 2023, consisting of bank deposits and money market funds. These interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in our interest income have not been significant. We have an agreement to maintain cash balances at a financial institution of no less than $5.8 million as collateral for several letters of credit in favor of our landlords. The letters of credit carry a fixed interest rate of 1%.

We had short-term investments of ~~$293.4~~$216.3 million as of ~~December 31, 2022,~~June 30, 2023, consisting of certificates of deposit, commercial paper, corporate notes and bonds, and U.S. treasury securities. Our investments in marketable securities are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of these investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.

A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.

In March 2018, we issued $500.25 million aggregate principal amount of the Notes. The fair value of the Notes is subject to interest rate risk, market risk and other factors due to the conversion feature in the Notes. The fair value of the Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines. The interest and market value changes affect the fair value of the Notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Additionally, we carry the Notes at face value less unamortized issuance on our balance sheet, and we present the fair value for required disclosure purposes only.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~December 31, 2022,~~June 30, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Controls

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended ~~December 31, 2022~~June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

4235

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. We have received, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves, our partners and our customers by determining the scope, enforceability and validity of third-party proprietary rights, or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors

We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition, or results of operations. This description includes any material changes to and supersedes the description of the risk factors disclosed in Part I, Item 1A of our Annual Report. We have marked with an asterisk (*) those risks described below that reflect substantive changes from the risks disclosed in Part I, Item 1A of our Annual Report.

The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations. Our business could be harmed by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing these risks, you should also refer to the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and accompanying notes.

Risk Factors Related to the Merger Transaction

There may be unexpected delays in the completion of the Merger, or the Merger may not be completed at all. Delays or a failure to complete the Merger could have a material adverse effect on our stock price as well as on our business, financial condition and results of operations.*

On July 30, 2023, we entered into the Merger Agreement with Parent and Merger Sub. The Merger is expected to close in late calendar year 2023 or early calendar year 2024, assuming that all of the conditions in the Merger Agreement are satisfied or, if permitted, waived. There can be no assurance that the Merger will be consummated. The consummation of the Merger is subject to certain regulatory approvals and customary closing conditions. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct to the extent specified in the Merger Agreement and the other party having performed in all material respects its obligations under the Merger Agreement. There can be no assurance that these and other conditions to closing will be satisfied in a timely manner or at all. Moreover, the Merger Agreement provides that either we or Parent may terminate the Merger Agreement in certain circumstances, including if the Merger has not occurred by 11:59 p.m., Pacific time, on January 30, 2024, subject to extensions if certain conditions set forth in the Merger Agreement are met. Certain events may delay the completion of the Merger or result in a termination of the Merger Agreement. Some of these events are outside the control of either party. In particular, the Merger must be approved by the affirmative vote of a majority of the outstanding shares of our Common Stock and is subject to the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Further, certain risks may be exacerbated by a delay in the completion of the Merger, including, among others: our ability to attract, retain and motivate our employees, including key personnel; difficulties maintaining relationships with customers, service providers and partners; delays or deferments of certain business decisions by our customers, prospective customers, service providers and partners; the diversion of significant management time and resources towards the completion of the Merger; the inability to pursue alternative business opportunities or make appropriate changes to our business because the Merger Agreement requires us to use reasonable best efforts to conduct our business in the ordinary course of business and not engage in certain kinds of transactions prior to the completion of the Merger; litigation relating to the Merger and the costs related thereto; and the incurrence of significant costs, expenses, and fees for professional services and other transaction costs in connection with the Merger, in addition to significant transaction costs, including legal, financial advisory, accounting, and other costs we have already incurred. Delays in completing the Merger or the failure to complete the Merger at all could negatively affect our future business and financial results, and, in that event, the market price of our Common Stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the Merger will be

completed. Additionally, a failure to complete the Merger in a timely manner may result in a decline in investor confidence in us and our business, stockholder litigation could be brought against us, relationships with current and prospective customers, service providers, investors and other partners may be adversely impacted and we may be unable to retain key personnel. We can neither assure you that the conditions to the completion of the Merger will be satisfied or, if permitted, waived or that any adverse change, effect, event, circumstance, occurrence or state of facts that could give rise to the termination of the Merger Agreement will not occur, nor provide any assurances as to whether or when the Merger will be completed.

The pendency of the Merger could adversely affect our business, financial condition and results of operations.*

In connection with the pending Merger, some of our current or prospective customers, partners or service providers may delay or defer decisions to do business with us, which could negatively impact our revenues, earnings, cash flows and expenses, regardless of whether the Merger is completed. Moreover, some of our current or prospective customers may delay using our platform, or may engage with a competitor’s platform instead. Additionally, any disruptions to our business resulting from the announcement and pendency of the Merger, including adverse changes in our relationships with customers, partners, service providers or employees may continue or intensify in the event the Merger is not consummated or is significantly delayed. In addition, under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger. These restrictions may prevent us from pursuing certain strategic transactions, undertaking certain capital projects, undertaking certain financing transactions and otherwise pursuing other actions that are not in the ordinary course of business, even if such actions could prove beneficial, and may cause us to forego certain opportunities we might otherwise pursue absent the Merger Agreement. Further, the pendency of the Merger may make it more difficult for us to effectively recruit, retain and incentivize employees and key personnel and may cause distractions from our strategy and day-to-day operations for our current employees and management, all of which could materially adversely affect our business, financial condition and results of operations.

Litigation may arise in connection with the Merger, which could be costly, prevent or seriously delay the consummation of the Merger, divert management’s attention and otherwise materially harm our business, financial condition and results of operations.*

We, as well as members of our board of directors, may be named as defendants in actions related to the Merger. Regardless of the outcome of any future litigation related to the Merger, such litigation may be time-consuming, expensive and may distract our management from day-to-day operations of our business. The cost of litigation and the diversion of management’s attention and resources to address the claims and counterclaims in any litigation related to the Merger may materially adversely affect our business, financial condition and results of operations. If the Merger is not consummated for any reason, litigation could be filed in connection with the failure to consummate the Merger. Any litigation related to the Merger may result in negative publicity or an unfavorable impression of us, which could adversely affect the price of our common stock, impair our ability to recruit or retain employees, damage our relationships with our customers, potential customers, service providers and partners, or otherwise materially harm our business, operations and financial condition. We cannot assure you as to the outcome of such litigation, including the amount of costs associated with defending such claims or any other liabilities that may be incurred in connection with the litigation of such claims. Whether or not plaintiffs in potential litigation are successful, the litigation may delay the completion of the Merger in the expected timeframe, or may prevent the Merger from being completed altogether.

Risks Related to Our Business and Our Industry

We have a limited operating history with our current business model, which makes it difficult to evaluate our current business and future prospects and increases the risk of your investment.

We were founded in 2007, launched our first commercial product in 2008, launched our New Relic platform in 2019, and introduced our updated ~~pricing strategy~~consumption-based model in ~~2020.~~fiscal year 2021. This limited operating history with our current business model limits our ability to forecast our future operating results and subjects us to a number of uncertainties, including our ability to plan for and model future growth. Our historical revenue growth, data ingest growth, and other metrics should not be considered indicative of our future performance. We have encountered and will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as determining appropriate investments of our limited resources, market adoption of our existing and future products and platform capabilities, competition from other companies, acquiring and retaining customers, transition of customers onto our new buying programs, hiring, integrating, training and retaining skilled personnel, developing new products and platform capabilities, determining prices and pricing structures for our products and platform capabilities, unforeseen expenses, and challenges in forecasting accuracy. If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change, or if we do not address these risks successfully, our operating and financial results and our business could suffer.

We have limited experience with respect to determining the optimal prices and pricing structures for our products and have employed evolving pricing models, which subject us to challenges that could make it difficult for us to derive value from our customers and may adversely affect our operating results.

We have evolved our pricing models over time and we expect that they will continue to evolve. For example, in fiscal 2021, we updated our pricing strategy to calculate customer spend based upon their consumption. Customers may be charged upon their usage in arrears, which we refer to as “Pay as You Go,” or they may commit to a minimum spend over their contracted period in exchange for a discount on their usage pricing. Consumption under this model is measured by number of users and data ingested into our system, thereby collapsing what had previously been a number of different products priced in individualized ways into a simplified strategy that is intended to drive consumption across our platform.

We have seen that the ~~pricing~~ transition to our consumption-based model has negatively impacted our revenue and deferred revenue for certain customers at the time of their renewal. For example, some customers have decided to take advantage of our ~~consumption pricing~~consumption-based model and choose smaller upfront commitments in favor of spending on actual consumption in excess of committed amounts. Whether our consumption ~~pricing~~ model will prove successful is subject to numerous uncertainties, including but not

limited to: customer demand, renewal and expansion rates, our ability to further develop and scale infrastructure, the ability of our sales force to successfully execute new sales strategies, tax and accounting implications, pricing, our costs, and the product offerings and pricing models and strategies of our ~~costs.~~competitors. In addition, the metrics we use to gauge the status and success of our consumption pricing model may continue to evolve as significant trends emerge.

We have seen indications of acceptance of our ~~pricing~~consumption-based model from our customers and the market in ~~general,~~general; however, if our pricing model fails to gain continued or broader customer and market acceptance, our business and results of operations could be harmed. In addition, our evolving pricing models may allow competitors with different pricing models to attract customers unfamiliar or uncomfortable with our pricing models, which would cause us to lose business or modify our pricing models, both of which could adversely affect our revenues and operating margins.

We expect that we will continue to evolve our pricing model, including as a result of global economic ~~conditions;~~conditions, reductions in our customers’ spending levels ~~generally;~~generally, the introduction of new products and ~~services;~~services, the evolution of existing products and ~~services;~~services, or changes in how computing infrastructure is broadly consumed. We have introduced and expect to continue to introduce variations to our pricing models and other pricing programs that provide broader usage and cost predictability for our customers. Although we may believe that these pricing changes will drive net new customers, increase customer adoption, and support our transition to a consumption-based model, it is possible that they will not and may potentially cause confusion with our customers, which could negatively impact our business, revenue, and other financial results. If we have difficulty determining the appropriate price structure for our products, we may be required from time to time to further revise our pricing structure, increase billing frequency, or reduce our prices, which could adversely affect our business.

We have a history of losses and our revenue growth rate could decline over time. As our costs increase, we may not be able to generate sufficient revenue to achieve and sustain profitability.*

We have incurred net losses in each fiscal period since our inception, including net loss attributable to New Relic of ~~$123.0~~$37.4 million and ~~$194.9~~$50.2 million in the ~~nine~~three months ended ~~December 31,~~June 30, 2023 and 2022, ~~and 2021,~~ respectively. At ~~December 31, 2022,~~June 30, 2023, we had an accumulated deficit of ~~$906.3~~$1,001.0 million. We expect to continue to expend substantial financial and other resources on, among other things:

•investments in our research and development team, and the development of new platform offerings, capabilities, features, and functionality;

•expansion of our operations and infrastructure, both domestically and internationally;

•hiring of additional employees; and

•general administration, including legal, accounting, and other expenses related to our growing operations and infrastructure.

In addition, we are currently migrating our entire platform over time from third-party data center hosting facilities to public cloud hosting providers, and our costs and gross margins are significantly influenced by the prices we are able to negotiate with them, which in certain cases are also our competitors. These investments may not result in increased revenue or growth of our business. Our revenue growth rate experienced decline in previous periods and it could decline again over time. Accordingly, we may not be able to generate sufficient revenue to offset our expected cost increases and to achieve and sustain profitability. If we fail to achieve and sustain profitability, our operating results and business would be harmed.

Weakened global economic conditions, including market volatility, any downturn or recession, rising inflation and interest rates, and the economic and other impacts of geopolitical conflicts, may harm our industry, business, and results of operations.

Our overall performance depends in part on worldwide economic conditions. Global financial developments and downturns, even those seemingly unrelated to us or the information technology industry, may harm us. The United States and other key international economies are being impacted by supply chain disruption, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies, actual or perceived instability in the banking system, including due to recent bank failures, inflation, rising interest rates, labor shortages and overall uncertainty with respect to the economy. Businesses may look, and in many cases are looking, to rationalize their spending in response to such factors, which could impact our sales and renewal rates and negatively impact our business. Further, global events, such as Russia’s invasion of Ukraine, may lead to or continue to result in disruption, instability, deterioration and volatility in global markets and industries that could negatively impact our business, financial condition and results of operations.

Furthermore, the revenue growth and potential profitability of our business depends on demand for software applications and products generally, and ~~application performance monitoring~~APM and our other offerings specifically. In addition,

our revenue is dependent on the number of users of our products and the degree of adoption of such users with respect to our products and platform capabilities. Historically, during economic downturns there have been reductions in spending on information technology systems as well as pressure for extended billing terms and other financial concessions, which would limit our ability to grow our business and negatively affect our operating results. These conditions affect the rate of information technology spending and could adversely affect our customers’ ability or willingness to purchase our products, delay prospective customers’ purchasing decisions, reduce the value or duration of their commitments or amount of their spend, or affect renewal rates, all of which could harm our operating results.

We are exposed to foreign currency exchange rate fluctuations, which may harm our business and results of operations.*

While we have historically transacted in U.S. dollars with substantially all of our customers and vendors, we have transacted in foreign currencies and will continue to transact in foreign currencies in the future. In addition, our international subsidiaries may maintain net assets that are denominated in currencies other than the functional operating currencies of these entities. Accordingly, changes in the value of foreign currencies relative to the U.S. dollar can affect our revenue and operating results as we convert these to U.S. dollars. Volatile market conditions arising from the macro environment have and may in the future result in significant changes in exchange rates, and with the recent volatility of multiple major foreign currencies against the U.S. dollar, we ~~are seeing~~have seen more significant impact from exchange rates on our revenue growth and expenses in fiscal 2023 than in the previous fiscal year, and we expect the impact to be ~~significant~~significant in ~~the next quarter~~fiscal 2024 if we continue to experience similar or greater foreign currencies volatility against the U.S. dollar. As a result of such foreign currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business and results of operations.

In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected. We do not currently maintain a program to hedge transactional exposures in foreign currencies. However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.

We have experienced significant growth in prior periods and our historical growth rates may not be indicative of our future growth. If we are not able to manage our growth and expansion, or if our business does not grow as we expect, our operating results may suffer.

We have experienced significant growth in our customer adoption and have expanded and ~~intend to~~may continue to significantly expand our operations, including our domestic and international employee headcount. This growth has placed, and will continue to place, significant demands on our management and our operational and financial infrastructure and we may not be able to sustain revenue growth consistent with prior periods, or at all.

To manage our growth effectively, we must continue to improve our operational, financial, and management systems and controls by, among other things:

•effectively attracting, training, integrating, and retaining a large number of new employees, particularly members of our research and development teams and employees and consultants in jurisdictions outside of the United States;

•further improving our key business systems, processes, and information technology infrastructure, including our cloud services, to support our business needs;

•enhancing our information, training, and communication systems to ensure that our employees are well-coordinated and can effectively communicate with each other and our customers; and

•improving our internal control over financial reporting and disclosure controls and procedures to ensure timely and accurate reporting of our operational and financial results.

If we fail to manage our expansion, implement and transition to our new systems, implement improvements, or maintain effective internal controls and procedures, our costs and expenses may increase more than we plan and we may lose the ability to increase our customer adoption, enhance our existing solutions, develop new solutions, satisfy our customers, respond to competitive pressures, or otherwise execute our business plan. If we are unable to manage our growth, our operating results likely will be harmed.

Our business depends on our customers remaining on our platform and increasing their spend with us. Any decline in our customer expansions and renewals would harm our future operating results.*

Our future success depends in part on our ability to retain and expand our platform usage with our current customers. If our customers do not remain on our platform or increase their spend with us, our revenue may decline, and our operating results may be harmed.

In addition, in order for us to maintain or improve our operating results, it is important that our customers renew their commitments or remain on our platform and increase their spend when the contract term expires. Many of our customers may start their accounts on a free tier and have no obligation to enter into a paid commitment or incur spend above the free tier. Our customers that enter into paid commitments have no obligation to renew after the expiration of the contractual term nor an obligation to remain on our platform and incur additional usage fees. Commitments are most often one year in length, and, our customers may renew for lower commitment amounts or instead use our Pay as You Go model, under which they are billed in arrears for their usage. To the extent we are not successful increasing customer budget available to spend on our products and services, whether through demonstrating our value or increasing their contractual commitment level in-line with their usage, there is no guarantee that our customers will grow their consumption with us. Also, in the past, some of our customers have elected not to renew their agreements with us, and we cannot accurately predict future net expansion rates. Moreover, certain legacy customers with annual subscriptions entered into prior to our consumption ~~pricing~~ model have the right to cancel their agreements prior to the termination of the subscription term. Additionally, some customers have decided to remain and may continue to remain within the limitations of our free-tier or lower-priced offerings.

Our customer expansions and renewals may decline or fluctuate as a result of a number of factors, including: customer usage, customer satisfaction with our products and platform capabilities and customer support, our prices, including as a result of changes to our pricing strategy, the prices of competing products, mergers and acquisitions affecting our customer base, consolidation of affiliates’ multiple accounts into a single account, the effects of uncertain global economic conditions, including as a result of the global COVID-19 pandemic and Russia’s invasion of Ukraine, or reductions in our customers’ spending levels generally.

If we are not able to develop enhancements to our products, increase adoption and usage of our products, and introduce new products and capabilities that achieve market acceptance, our business could be harmed.

Our ability to attract new customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our existing products, increase adoption and usage of our products, and introduce new products and capabilities. The success of any enhancement or new products depends on several factors, including timely completion, competitive pricing, adequate quality testing, introduction, integration with existing technologies and our platform, and market acceptance. Any products that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, or may not achieve the broad market acceptance necessary to generate sufficient revenue. If we are unable to successfully enhance our existing products to meet customer requirements, increase adoption and usage of our products, or develop new products, our business and operating results will be harmed.

If customers do not expand their use of our products beyond the current predominant use cases, our ability to grow our business and operating results may be adversely affected.

Most of our customers currently use our products to support application performance management functions, and the majority of our revenue to date has been from our application performance management products. Our ability to grow our business depends in part on our ability to persuade current and future customers to expand their use of our software to additional use cases across our entire platform. If we fail to achieve market acceptance of our software, or if a competitor establishes a more widely adopted solution, our ability to grow our business and financial results will be adversely affected. In addition, as the amount of data stored for a given customer grows, that customer may have to limit or decrease usage in order to stay within budgeted amounts or lower their cost. If their fees grow significantly, customers may react adversely to this pricing model, particularly if they perceive that the value of our software has become eclipsed by such fees or otherwise.

Failure to effectively align our marketing and sales capabilities with our consumption pricing structure and increase sales efficiency could harm our ability to increase our customer adoption and achieve broader market acceptance of our products.

Our ability to increase our customer adoption and achieve broader market acceptance of our products will depend to a significant extent on our ability to align our marketing and sales capabilities with our consumption pricing structure and increase sales efficiency.

The effectiveness of our marketing programs has varied over time and may vary in the future due to competition, and we are continuously making adjustments to increase our emphasis on overall product experience and reorient our sales

organization around customer success. All of these efforts have required and will continue to require us to invest significant resources. If we are unable to hire, develop, and retain talented sales personnel, if our sales personnel are unable to achieve desired productivity levels in a reasonable period of time or unable to successfully execute sales strategies in connection with our pricing model changes, or if our sales and marketing programs are not effective, our ability to increase our customer adoption and achieve broader market acceptance of our products could be harmed.

In particular, we may in the future need to further adjust our go-to-market cost structure and target metrics, particularly as they relate to how we structure, effect, and compensate our sales teams to become more efficient and effective at selling under the consumption-based ~~business~~ model. Any adjustments in compensation structure could negatively affect the productivity of our sales teams, and there is no assurance that we will be able to successfully implement the adjustments in a timely or cost-effective manner, or that we will be able to realize all or any of the expected benefits from such adjustments.

If we are unable to develop and grow a broad base of high-spend customers, many of which we expect to be large enterprise customers, while mitigating the risks associated with serving such customers, our business, financial position, and results of operations may suffer.

Our growth strategy is dependent, in large part, upon developing and growing a broad base of high-spend customers, many of which we expect to be large enterprise customers. Sales to large customers involve risks that may not be present or that are present to a lesser extent with sales to smaller entities, such as longer sales cycles, more complex customer requirements, substantial upfront sales costs, and less predictability in completing some of our sales. For example, enterprise customers may require considerable time to evaluate and test our applications and those of our competitors prior to making a purchase decision and placing an order. A number of factors influence the length and variability of our sales cycle, including the need to educate potential customers about the uses and benefits of our applications, the discretionary nature of purchasing and budget cycles, and the competitive nature of evaluation and purchasing approval processes. As a result, the length of our sales cycle, from identification of the opportunity to deal closure, may vary significantly from customer to customer, with sales to large enterprises typically taking longer to complete. Moreover, large enterprise customers often begin to deploy our products on a limited basis, but nevertheless demand extensive configuration, integration services, and pricing negotiations, which increase our upfront investment in the sales effort with no guarantee that these customers will deploy our products widely enough across their organization to justify our substantial upfront investment.

In addition, our ability to improve our sales of products to large enterprises is dependent on us continuing to attract and retain sales personnel with experience in selling to large organizations. Also, because security breaches with respect to larger, high-profile enterprises are likely to be heavily publicized, there is increased reputational risk associated with serving such customers. If we are unable to continue to increase sales of our products to large enterprise customers while mitigating the risks associated with serving such customers, our business, financial position, and results of operations may suffer.

Our quarterly results may fluctuate and our recent operating results may not be a good indication of our future performance. If we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.

Our quarterly financial results may fluctuate widely as a result of the risks and uncertainties described in this report, many of which are outside of our control. In addition, our pricing model may give rise to a number of risks reflected in risk factors titled “We have limited experience with respect to determining the optimal prices and pricing structures for our products and have employed evolving pricing models, which subject us to challenges that could make it difficult for us to derive value from our customers and may adversely affect our operating results” and “If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.” If our financial results fall below the expectations of investors or any securities analysts who follow our stock, the price of our common stock could decline substantially.

We believe that quarter-to-quarter comparisons of our revenue, operating results, and cash flows may not be meaningful and should not be relied upon as an indication of future performance. If our revenue or operating results fall below the expectations of investors or securities analysts in a particular quarter, or below any guidance we may provide, the price of our common stock could decline.

~~Because users are able to configure~~If our ~~platform to collect and store confidential, personal~~information technology systems or ~~proprietary information, security concerns could result in additional cost and liability to us~~data, or inhibit sales of our products.*

~~Our operations and~~ those of ~~service providers~~third parties upon which we rely, ~~involve protection~~are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm, loss of revenue or profits, loss of customers or sales, and other adverse consequences.

In the ordinary course of our business, we and the third parties upon which we rely, process, collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share proprietary, confidential, and sensitive data, including personal data, intellectual property, ~~along with the storage~~ and transmission and processing of our customers’ proprietary data, which customers might choose to have include some personally identifiable information. While we have developed systems and processes to protect the integrity,

confidentiality and security of our customers’ data, our security measures or those of our third-party service providers could fail and result in unauthorized access to or disclosure, modification, misuse, loss or destruction of such data and there can be no assurance that these measures will be effective.

Further, we may experience delays in developing and deploying remedial measures designed to address any identified vulnerabilities. Any security breaches, computer malware (including as a result of advance threat intrusions), malicious code (such as viruses and worms), software bugs, ransomware, supply-chain attacks, server malfunctions, software or hardware failures, computer hacking, cyber-attacks, ransomware, phishing attacks and other social engineering schemes, denial or degradation of service attacks, credential harvesting, internal and external personnel misconduct or error, unauthorized access or use, device theft, loss of data or information technology assets, and other types of security incidents experienced by us or our third-party service providers, could expose us to a risk of loss of confidential, personal or proprietary information, loss of business, severe reputational damage adversely affecting customer or investor confidence, regulatory investigations and orders, litigation, demands, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, and significant costs for investigation, remediation and incentives offered to customers or other business partners in an effort to maintain business relationships after a breach and other liabilities.trade secrets.

Cyber-attacks, ~~intrusions and other~~ malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of proprietary, confidential, and sensitive data and information technology systems, and those of the third parties upon which we rely. Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including bytraditional computer “hackers,” threat actors, ~~internal and external~~“hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), ~~computer hackers,~~sophisticated nation states, and nation-state-supported actors, foreign governments and cyber terrorists, continue to increase generally as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Suchactors. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including cyber-attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services. ~~Ransomware~~

We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.

In particular, severe ransomware attacks are becoming increasingly prevalent ~~and severe~~ and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversions of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments. ~~Supply-chain~~Remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.

We rely on third-party service providers and technologies to operate critical business systems to process proprietary, confidential, and sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks have increased in frequency and severity, and we

cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems or the information technology systems of our third-party partners with whom we work. Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

~~The costs~~ Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to ~~us to investigate and mitigate network security problems, bugs, viruses, worms, malicious software programs~~integrate companies into our information technology environment and security ~~vulnerabilities~~program.

Any of the previously identified or similar threats could ~~be significant,~~cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our proprietary, confidential, and ~~while we have implemented security measures to protect~~sensitive data or our ~~data security and~~ information technology systems, or those of the third parties upon whom we rely. A security incident or other interruption could disrupt our ~~efforts~~ability (and that of third parties upon whom we rely) to ~~address these problems~~provide our platform, products, and services.

We may ~~not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity and other harm to~~expend significant resources or modify our business ~~and our competitive position.~~activities to try to protect against security incidents. Certain data privacy and security obligations may require us to implement and maintain specific, industry-standard, or reasonable security measures to protect our information technology systems and ~~information. If our products or~~proprietary, confidential, and sensitive data . While we have implemented security measures are perceived as weak or actually compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials, or otherwise, our customersdesigned to protect against security incidents, there can be no assurance that these measures will be effective. We take steps to detect and remediate vulnerabilities, but we may ~~curtail or stop using our products, our reputation could~~not be ~~damaged, our business may be harmed,~~able to detect and ~~we could incur significant liability. We may be unable to anticipate or prevent~~remediate all vulnerabilities because the threats and techniques used to ~~obtain unauthorized access or to sabotage systems because they~~exploit the vulnerability change frequently and ~~generally~~ are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after ana security incident has occurred. These vulnerabilities pose material risks to our business. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. As we increase our customer adoption and our brand becomes more widely known and recognized, we may become more of a target for third parties seeking to compromise our security systems or gain unauthorized access to our customers’ data. Additionally, with ~~so many of~~ our ~~employees now working remotely due~~transition to the ~~COVID-19 pandemic,~~flex-first model, we may face an increased risk of attempted security breaches and incidents. Moreover, if a high-profile security breach occurs with respect to another cloud platform provider, our customers and potential customers may lose trust in the security of cloud platforms generally, which could adversely impact our ability to retain existing customers or attract new ones. ~~Additionally, future acquisitions could also expose us to additional cybersecurity risks and vulnerabilities from any newly acquired information technology infrastructure.~~

Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences. If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences.

If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections), additional reporting requirements and/or oversight, restrictions on processing sensitive information (including personal data), litigation (including class claims), indemnification obligations, negative publicity, reputational harm, monetary fund diversions, interruptions in our operations (including availability of data), financial loss, and other similar harms. Security incidents and attendant consequences may cause customers to stop using our platform, deter new customers from using our platform, and negatively impact our ability to grow and operate our business. If we are not able to detect and indicate activity on our platform that might be nefarious in nature or design processes or systems to reduce the impact of similar activity at a third-party service provider, our customers could suffer harm. In such

cases, we could face exposure to legal claims, particularly if the customer suffered actual harm. ~~We cannot assure you that any~~

Our contracts may not contain limitations of liability, ~~provisions~~and even where they do, there can be no assurance that limitations of liability in our contracts ~~for a security lapse or breach would be enforceable or adequate or would otherwise~~are sufficient to protect us from ~~any~~ liabilities, damages, or ~~damages with respect~~claims related to ~~any particular claim.~~our data privacy and security obligations. We also cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims related to a security ~~breach,~~incident, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our expansion rates, financial condition, operating results, and reputation.

~~The ongoing global coronavirus (“COVID-19”) pandemic could harm~~In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our ~~business and results of operations.~~

~~The continuing effects of the COVID-19 pandemic are highly unpredictable~~organization and could be ~~significant,~~used to undermine our competitive advantage or market position.

The reliability and ~~the duration and extent to which they will impact~~continuous availability of our ~~future results of operations and overall financial performance remains uncertain. While the rollout of COVID-19 vaccines~~platform is ongoing, the timing and speed of vaccination rollouts and acceptance and the lifting of occupancy limits and movement restrictions varies from location to location is evolving, and to varying degrees remains unknown.

~~In light of the ongoing uncertainty relating to the COVID-19 pandemic, we have taken precautionary measures intended to minimize the risk of the virus~~critical to our ~~employees,~~success. However, software such as ours can contain errors, defects, security vulnerabilities or software bugs that are difficult to detect and correct, particularly when such vulnerabilities are first introduced or when new versions or enhancements of our platform, service, and products are released. Additionally, even if we are able to develop a patch or other fix to address such vulnerabilities, such fix may be difficult to push out to our customers or otherwise be delayed. Additionally, our business depends upon the appropriate and the communities in which we operate, which could negatively impact our business. Although we have reopened all our offices and held in-person meetings and events in compliance with applicable government orders and guidelines, the majoritysuccessful implementation of our ~~employees continue to work remotely and in-person meetings remain limited. While the travel bans and other restrictions that were implemented~~platform by federal, state, or local authorities at the beginning of the pandemic have been lifted or relaxed generally, some of these restrictions have been re-imposed in some areas at different times due to the proliferation of new variants, among other developments, and new restrictions may be implemented. While we have a distributed workforce and our ~~employees are accustomed to working remotely, our workforce is not normally fully remote and our employees travel frequently to establish and maintain relationships with one another and with~~customers. If our customers ~~partners, and investors. In addition,~~fail to use our management team has, and will likely continue, to spend significant time, attention and resources monitoring the COVID-19 pandemic and seeking to minimize the risk of the virus and manage its effects on our business and workforce. Furthermore, with most of our employees continuing to work remotely, we are at increased risk of cyber security-related breaches. We continue to take steps to monitor and enhance the security of our systems, IT infrastructure, networks, and data; however, the unprecedented scale of remote work may require additional personnel and resources, which nevertheless cannot be guaranteed to fully safeguard all systems, IT infrastructure networks, and data upon which we rely. The COVID-19 pandemic may also have long-term effects on the nature of the office environment and remote working, which has and may continue to bring changesplatform according to our ~~real estate lease assets.~~

The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration of the pandemic and the successful rollout of vaccines and the efficacy and durability of such vaccines, especially in light of the emergence of new variant strains; impact onspecifications, our customers may suffer a security incident on their own systems or other adverse consequences. Even if such an incident is unrelated to our security practices, it could result in our incurring significant economic and ~~our sales cycles; impact on our customer, employee,~~operational costs in investigating, remediating, and ~~industry events; impact on our employee recruitment and attrition; and effect on our vendors, all of which are uncertain and cannot be predicted at this time. In addition, COVID-19 may continue~~implementing additional measures to ~~disrupt the operations of~~further protect our customers from their own vulnerabilities and ~~partners for an indefinite period of time, including as a~~could result of travel restrictions and/or business shutdowns, all of which could negatively impact our business and results of operations, including cash flows. Our revenue and deferred revenue have been negatively impacted, in part, by the slowdown in activity associated with the COVID-19 pandemic, but at this point, the extent of the impact to our financial condition or results of operations, including cash flows, is uncertain, particularly as the COVID-19 pandemic continues to persist for an extended period of time. Meanwhile, our shift to consumption-based pricing contracts, where the revenue we receive is tied to our customers’ actual usage of our products, may further exacerbate the uncertainty with respect to the revenue we receive from our customers. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this ‘‘Risk Factors’’ section.reputational harm.

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, and changing customer needs, requirements, or preferences, our products may become less competitive.

The software industry is subject to rapid technological change, evolving industry standards and practices, and changing customer needs, requirements, and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. If we are unable to develop and sell new products that satisfy our customers and provide enhancements and new features for our existing products and platform capabilities that keep pace with rapid technological and industry change, our revenue and operating results could be adversely affected. Further, the value of our platform to customers increases to the extent they are able to use it for all of their telemetry data. We need to continue to invest

in technologies, services, and partnerships that increase the ease with which customers can ingest data into our platform. If new technologies emerge that are able to deliver competitive products and applications at lower prices, more efficiently, more conveniently, or more securely, such technologies could adversely impact our ability to compete.

Our platform must also integrate with a variety of network, hardware, mobile, and software platforms and technologies, and we need to continuously modify and enhance our products and platform capabilities to adapt to changes and innovation in these technologies. If developers widely adopt new software platforms, we would have to develop new versions of our products and platform capabilities to work with those new platforms. This development effort may require significant engineering, marketing, and sales resources, all of which would affect our business and operating results. Any failure of our products and platform capabilities to operate effectively with future infrastructure platforms and technologies could reduce the demand for our products. If we are unable to respond to these changes in a cost-effective manner, our products may become less marketable and less competitive or obsolete, and our operating results may be negatively affected. Similarly, application stores such as those operated by Apple and Google, may change their technical requirements or policies in a manner that adversely impacts the way in which we or our partners or customers collect, use, and share data from users. If the use of our products does not comply with these requirements, customers may not be able to use our products for their intended purposes and our business could be harmed.

We are dependent upon lead generation strategies to drive our sales and revenue. If these marketing strategies fail to continue to generate sales opportunities, our ability to grow our revenue will be adversely affected.

We are dependent upon lead generation strategies, including our expanded free tier offering, to generate sales opportunities. These strategies may not be successful in continuing to generate sufficient sales opportunities necessary to increase our revenue. To the extent that we are unable to successfully attract and grow paying customers, we will not realize the intended benefits of these marketing strategies and our ability to grow our revenue will be adversely affected.

The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be harmed.

The markets in which we compete are rapidly evolving, significantly fragmented, and highly competitive. Our observability platform combines functionality from numerous traditional product categories, and hence we compete in each of these categories with home-grown and open-source technologies, as well as a number of different vendors.

With respect to ~~application performance monitoring,~~our unified Observability platform, we compete with vendors such as Datadog, Inc. and Dynatrace, Inc. Since our platform combines functionality from more than 30 traditional product categories, we compete in each of these categories with home-grown and open source technologies, as well as a number of different commercial vendors. For example, for APM, we compete with providers such as Cisco Systems, ~~Inc. and Dynatrace,~~ Inc. With respect to log management, we compete with Elastic NV and Splunk, Inc. With respect to infrastructure monitoring, we compete with diversified technology vendors such as International Business Machines Corporation, BMC Software, Inc. and CA, Inc. (a subsidiary of Broadcom, Inc.);, and with native solutions from cloud providers such as Amazon Web Services, Inc., Microsoft Corporation, and Google ~~LLC; and with independent vendors such as Datadog, Inc.~~LLC. In addition, we may increasingly choose to allow third-party hosting providers to offer our solutions directly through their

customer marketplaces. An increasing number of sales through cloud provider marketplaces could reduce both the number of customers with whom we have direct commercial relationships as well as our profit margins on sales made through such marketplaces.

Some of our competitors and potential competitors are larger and have greater name recognition, longer operating histories, more established customer relationships, larger budgets, and significantly greater resources than we do, and have the operating flexibility to bundle competing products and services with other software offerings at little or no perceived incremental cost, including offering them at a lower price as part of a larger sale. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements. In addition, some competitors may offer products or services that address one or a limited number of functions at lower prices or with greater depth than our products. Our current and potential competitors may develop and market new technologies with comparable functionality to our products and platform capabilities, and this could lead to us having to decrease prices in order to remain competitive.

With the introduction of new technologies, the evolution of our products and platform capabilities and new market entrants, we expect competition to intensify in the future. Moreover, as we expand the scope of our solutions, we may face additional competition. Additionally, some potential customers, particularly large organizations, may elect to develop their own internal products. If one or more of our competitors were to merge or partner with another of our competitors or another large diversified technology company, the change in the competitive landscape could also adversely affect our ability to compete effectively. For example, in March 2017, Cisco Systems, Inc. completed its purchase of AppDynamics, Inc., in November 2018, Broadcom Inc. completed its acquisition of CA, Inc., ~~and,~~ in October 2019, Splunk Inc. completed its acquisition of SignalFX, Inc., in September 2021, Dynatrace, Inc. acquired SpectX, and in November 2022, Datadog, Inc. completed its acquisition of Cloudcraft. If we are unable to maintain our current pricing or fail to gain market acceptance of our updated pricing strategy due to the competitive pressures, our margins will be reduced, and our operating results will be negatively affected. In addition,

pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses, or the failure of our solutions to achieve or maintain more widespread market acceptance, any of which could harm our business.

Due to differences between our legacy subscription-based ~~pricing~~ model and our transition to a consumption-based ~~pricing~~ model, we may not have visibility into our future financial position and results of operations.

We have historically employed a subscription-based ~~model and~~model. As a result, for contracts entered into prior to our ~~consumption pricing~~transition to a consumption-based model, we recognize revenue from customers ratably over the terms of their subscriptions. A portion of the revenue we report in each quarter is derived from the recognition of revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed subscriptions in any single quarter may have a small impact on our revenue for that quarter. However, such a decline will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our solutions, and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future ~~periods. As a result, due to this historical reliance on a subscription-based business model,~~periods, such as the effects of the global COVID-19 pandemic ~~to date were not fully reflected in~~on our results of operations ~~until later periods.~~in recent years.

Because our customers have flexibility in the timing of their consumption under our ~~pricing~~consumption-based model, we do not have the same visibility into the timing of revenue recognition as we did under the subscription-based model. There is a risk that customers will consume our platform at a different pace than we expect, and our actual results may differ from our forecasts.

Seasonality may cause fluctuations in our sales and operating results.*

We have experienced seasonality in our sales and operating results in the past, and we believe that we will continue to experience seasonality in the future. Historically, we have received a higher volume of orders in the fourth fiscal quarter of each year, driven largely by contract renewals, and to a lesser extent our third fiscal quarter of each year. As a result, we have historically seen higher cash collections in the first and fourth fiscal quarters of each year, and our sequential growth in remaining performance obligations has historically been highest in the fourth fiscal quarter of each year, and to a lesser extent our third fiscal quarter of each year. With our shift to a ~~consumption based pricing~~consumption-based model, ~~in fiscal 2022,~~ we expect over time that our revenue will more closely approximate our customer usage of our products and services, and thereby our revenue may experience seasonal fluctuations based upon our customer consumption patterns. For example, in recent years, we have seen a seasonal decline in consumption usage on an aggregate basis around the Christmas holiday in mid-December that begins to recover in January as the users of our platform return to work. For customers under ~~consumption based pricing~~consumption-based models that exhibit this seasonal pattern, we would have a corresponding revenue decrease for the impacted period of seasonally reduced usage. As we near completion of our transition to a consumption business model, the impacts of seasonality will be more pronounced on our results of operations.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources.

Assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, which include variable consideration, stock-based compensation, and business combinations. For example, the calculations to derive variable consideration require a combination of quantitative and qualitative inputs, which include estimates of our customers’ future consumption and estimates regarding the collectability of consumption above committed amounts, that are based largely on an assessment of information (historical, current and forecasted) that is reasonably available to us at that time.

As a result, the timing of recognizing revenue in any given quarter, including the extent to which revenue from transactions in a given period may not be recognized until a future period, can be variable and difficult to predict and our results of operations may be adversely affected if such assumptions change or if actual circumstances differ from those in our assumptions. This could result in fluctuations in our revenue from period to period, which may make these comparisons less meaningful and make it difficult for us, securities analysts and investors to accurately forecast our revenue and operating results, which could cause our results of operations to differ from our financial outlook or the expectations of securities analysts and investors, potentially resulting in a decline in the market price of our common stock. In addition, our ~~consumption pricing~~

consumption-based model has only been in place since fiscal 2021 and we are continuing to refine our assumptions and estimates. As we continue to obtain more historical data, we expect that our ability to forecast and derive these estimates will improve over time.

Interruptions or performance problems associated with our technology and infrastructure may adversely affect our business and operating results.*

Our continued growth depends in part on the ability of our existing and potential customers to access our products and platform capabilities at any time and within an acceptable amount of time. We have experienced, and may in the future experience, disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of users accessing our products and platform capabilities simultaneously, denial or degradation of service attacks, computer viruses, natural disasters, climate change and extreme ~~weather related~~weather-related events, terrorism, war, telecommunications and electrical failures, cyberattacks or other security-related incidents. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times and as our products and platform capabilities become more complex and our user traffic increases. If our products and platform capabilities are unavailable or if our users are unable to access our products and platform capabilities within a reasonable amount of time or at all, our business would be negatively affected. As we expand our business, our customers increasingly rely on our customer support personnel to realize the full benefits that our platform provides, and if we do not help our customers quickly resolve issues and provide effective ongoing support, our ability to maintain and expand our platform usage to existing and new customers could suffer, and our reputation with existing or potential customers could suffer. In addition, to the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be adversely affected.

In addition, we currently serve our customers from third-party data centers and a combination of cloud hosting providers. The continuous availability of our products and platform capabilities depends on the operations of our data center facilities, on our cloud hosting providers, on a variety of network service providers, on third-party vendors, and on our own site operations staff. We depend on our third-party providers’ abilities to protect our data center facilities against damage or interruption from natural disasters, power or telecommunications failures, criminal acts, and similar events. If there are any lapses of service, damage to the facilities, or prolonged cloud hosting provider service disruptions or downtime affecting our platform, we could experience lengthy interruptions in our products and platform capabilities as well as delays and additional expenses in arranging new facilities and services. In addition, we are in the process of migrating our entire platform over time from third-party data center hosting facilities to public cloud hosting providers. After we complete this migration, we will rely extensively on these public cloud providers to provide our clients and their users with fast and reliable access to our products. Even with current and planned disaster recovery arrangements, which, to date, have not been tested in an actual crisis, our business could be harmed. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue, subject us to liability, and cause us

to issue credits or cause customers not to renew their commitments or increase their spend with us, any of which could harm our business.

We depend and rely on SaaS technologies and related services from third parties in order to operate critical functions of our business and interruptions or performance problems with these technologies or services may adversely affect our business and operating results.

We depend and rely on software-as-a-service, or SaaS, technologies and related services from third parties in order to operate critical functions of our business, including billing and order management, financial accounting services, and customer relationship management services. If these services become unavailable due to extended outages or interruptions, security vulnerabilities, or cyber-attacks, because they are no longer available on commercially reasonable terms or prices, or due to other unforeseen circumstances, our expenses could increase, our ability to manage these critical functions could be interrupted, and our processes for and ability to manage sales of our products, recognize revenue, and support our customers could be impaired, all of which could adversely affect our business and operating results.

Defects or disruptions in our products and platform capabilities could diminish demand, harm our financial results, and subject us to liability.

Our customers use our products and platform capabilities for important aspects of their businesses, and any errors, defects, or disruptions to our products and platform capabilities or other performance problems with our products and platform capabilities could hurt our brand and reputation and may damage our customers’ businesses. We provide regular product updates, which may contain undetected errors when first introduced or released. In the past, we have discovered software errors, failures, vulnerabilities, and bugs in our products and platform capabilities after they have been released and new errors in our existing products and platform capabilities may be detected in the future. Real or perceived errors, failures, or bugs in our products and platform capabilities could result in negative publicity, loss of or delay in market acceptance of our products, loss of competitive position, delay of payment to us, lower renewal rates, or claims by customers for losses sustained by them. In

such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem. In addition, we may not carry insurance sufficient to compensate us for the losses that may result from claims arising from defects or disruptions in our products and platform capabilities. As a result, we could lose future sales and our reputation, and our brand could be harmed.

Our ongoing and planned investments in cloud hosting providers and expenditures on transitioning our services and customers from our data center hosting facilities to public cloud providers are expensive and complex, may result in a negative impact on our cash flows, and may negatively impact our financial results.

We have made and will continue to make substantial investments in our cloud hosting providers to support our growth and provide enhanced levels of products and platform capabilities to our customers. We have been continuing to decrease the amount of capital expenditures on hosting equipment for use in our data center hosting facilities as we transition to greater dependence on cloud hosting providers. If costs associated with cloud hosting services utilized to support our growth continue to be greater than originally expected or if we are required to make larger continuing investments in our data centers than we anticipated, the negative impact on our operating results would likely exceed our expectations. Furthermore, if we determine to no longer utilize our data centers and related property, and equipment sooner than planned, we may be forced to accelerate expense recognition as a result of the shorter estimated life of such assets. In addition, ongoing or future improvements to our cloud infrastructure may be more expensive than we anticipate, and may not yield the expected savings in operating costs or the expected performance benefits. We may not be able to maintain or achieve cost savings from our investments, which could harm our financial results.

We plan to continue to invest resources in connection with transitioning our customers and services to third-party cloud hosting providers and may encounter obstacles in completing the transition. Additionally, due to the difficulty in predicting usage of our cloud hosting providers related to customers recently migrated or customers to be migrated from our data centers, we may not be able to accurately forecast our expenditures on such cloud hosting services, which may increase the variability of our results of operations.

In addition, we may need to change our current operations infrastructure in order for us to achieve profitability and scale our operations efficiently, which makes our future prospects even more difficult to evaluate. For example, in order to grow our sales in a financially sustainable manner, we may need to further customize our offering and modify our go-to-market strategy to reduce our operating and customer acquisition costs. If we fail to implement these changes on a timely basis or are unable to implement them effectively, our business may suffer.

Because our long-term growth strategy involves further expansion of our sales to customers outside the United States, our business will be susceptible to risks associated with international operations.*

During the ~~nine~~three months ended ~~December 31, 2022,~~June 30, 2023, we derived approximately ~~35%~~38% of our total revenue from customers outside the United States. A component of our growth strategy involves the further expansion of our operations and customer adoption internationally. Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States. We have limited operating experience in international markets, and we cannot assure you that our expansion efforts into international markets will be successful. Our international expansion efforts may not be successful in creating further demand for our products outside of the United States or in effectively selling our products in the international markets we enter. Our current international operations and future initiatives involve a variety of risks, including:

•changes in a specific country’s or region’s political or economic conditions;

•unexpected changes in regulatory requirements, taxes, or trade laws;

•economic and political uncertainty around the world, including uncertainty regarding U.S foreign and domestic policies;

•regional data security and privacy laws and regulations and the unauthorized use of, or access to, commercial and personal information;

•differing labor regulations where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations;

•challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs;

•difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems;

•significant reliance upon, and potential disputes with, local business partners;

•increased travel, real estate, infrastructure, and legal compliance costs associated with international operations;

•currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future;

•limitations on our ability to repatriate earnings;

•the impact of public health epidemics on our employees, partners and customers, such as the coronavirus epidemic ~~currently impacting~~that has impacted various regions throughout the ~~world;~~world in recent years;

•laws and business practices favoring local competitors, or general preferences for local vendors;

•limited or insufficient intellectual property protection;

•exposure to liabilities under anti-corruption, export controls and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act, and similar laws and regulations in other jurisdictions; and

•adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash or create other collection difficulties.

Our limited experience operating our business internationally increases the risk that recent and any potential future expansion efforts will not be successful. If substantial time and resources invested to expand our international operations do not result in a successful outcome, our operating results and business will suffer.

In addition, in February 2022, Russia launched a large-scale military attack on Ukraine. The invasion significantly amplified pre-existing geopolitical tensions. It is not possible to predict the full extent of the broader consequences of Russia’s ongoing invasion of Ukraine, including sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, currency exchange rates and financial markets. Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from such conflict.

If we lose key members of our management team or are unable to attract and retain executives and employees we need to support our operations and growth, our business may be harmed.*

Our success and future growth depend largely upon the continued services of our executive officers and other key employees in the areas of research and development, marketing, sales, services, and general administrative functions. From time to time, there may be changes in our executive management team or other key employees resulting from the hiring or departure of these personnel. For example, in fiscal 2022, Lew Cirne, our founder and former Chief Executive Officer, transitioned from his role as Chief Executive Officer to Executive Chairman of our Board of Directors and Williams Staples, our former President and Chief Product Officer was promoted to Chief Executive Officer. In the first quarter of fiscal ~~2023, Mark Sachleben, our former Chief Financial Officer, retired~~2024, we announced that Lew Cirne would be transitioning from Executive Chairman to non-executive Chair of the ~~position~~Board, and ~~transitioned into an advisory role at the company and David Barter became our Chief Financial Officer. In addition, Mark Dodds joined us~~that Kristy Friedrichs resigned as our Chief ~~Revenue~~Operating Officer, effective as of December 31, 2023. While we seek to manage these transitions carefully, including by establishing strong processes and procedures and succession planning, these and any other such changes may result in ~~the second quarter~~a loss of ~~fiscal 2023.~~institutional knowledge and cause disruptions to our business.

Our executive officers and other key employees are employed on an at-will basis, which means that these personnel could terminate their employment with us at any time. Any changes in our senior management team in particular, even in the ordinary course of business, may be disruptive to our business. While we seek to manage these transitions carefully, including by establishing strong processes and procedures and succession planning, such changes may result in a loss of institutional knowledge and cause disruptions to our business. In addition, new executive hires may fail to achieve any anticipated benefits. If our senior management team fails to work together effectively or execute our plans and strategies on a timely basis as a result of management turnover or otherwise, our business could be harmed.

In addition, to execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel is intense, especially for engineers experienced in designing and developing software and SaaS, applications and experienced sales professionals. If we are unable to attract such personnel in locations where we are located, we may need to hire in other locations as well as consider alternative flexible work options, which may add to the complexity and costs of our business operations. ~~Complexities~~

Moreover, to realign resources with our business needs, we have undergone reductions in ~~hiring~~our workforce, including most recently in the first quarter of fiscal 2024, and may in the ~~need~~future implement other reductions in workforce or restructurings. Any reduction in workforce or restructuring may yield unintended consequences and costs, such as attrition beyond the intended reduction in workforce, delays in the development of critical technology or business optimization programs due to gaps in knowledge transfer and new employee ramp up time, the distraction of employees, and reduced employee morale, and could adversely affect our reputation as an employer, which could make it more difficult for ~~flexible work arrangements have heightened during~~us to hire new employees in the ~~COVID-19 pandemic.~~ future and increase the risk that we may not achieve the anticipated benefits from the reduction in workforce.

We ~~have~~have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications, especially during the ~~current~~ period of heightened employee attrition in the U.S. and other ~~countries.~~countries in recent years. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees

or we have breached their legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, or experiences significant volatility, it may adversely affect our ability to recruit and retain key employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be adversely affected.

We use artificial intelligence in our business, and challenges with properly managing its use could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations.*

We have incorporated, and expect in the future we will continue to incorporate, artificial intelligence (“AI”) solutions into our product offerings, and these applications may become important in our operations over time. We use AI in our products to help customers faster troubleshoot issues in their technology stack. For example, we leverage large language models to help engineers create queries using our customer NRQL query language, navigate and understand data, and identify and fix errors in software code.

Our competitors or other third parties may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations. Additionally, if the content, analyses, or recommendations that AI applications assist in producing are or are alleged to be deficient, inaccurate, or biased, our business, financial condition, and results of operations may be adversely affected.

The use of AI applications, including large language models, has resulted in, and may in the future result in, cybersecurity incidents that implicate the personal data of end users of such applications. Any such cybersecurity incidents related to our use of AI applications could adversely affect our reputation and results of operations. AI also presents emerging ethical issues and if our use of AI becomes controversial, we may experience brand or reputational harm, competitive harm, or legal liability. The continued rapid evolution of AI, including potential government regulation of AI, has required and will continue to require significant resources to develop, test and maintain our products and features to help us implement AI ethically in order to minimize unintended, harmful impact.

If we fail to enhance our brand, or to do so in a cost-effective manner, our ability to expand our customer adoption will be impaired and our financial condition may suffer.

We believe that our development of the New Relic brand is critical to achieving widespread awareness of our existing and future solutions, and, as a result, is important to attracting new customers and retaining existing customers. We also believe that the importance of brand recognition will increase as competition in our market increases. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts, including our ability to do so in a cost-effective manner, and on our ability to provide reliable and useful products at competitive prices. In the past, our efforts to build our brand have involved significant expenses, and we may have to expend significant resources again in the future in connection with brand promotion and marketing activities. Brand promotion and marketing activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand.

If we cannot continue to maintain and develop our corporate culture as we grow, we could lose the innovation, teamwork, passion, and focus on execution that we believe contribute to our success, and our business may be harmed.

We believe that our corporate culture has been a critical component to our success. We have invested substantial time and resources in building our team. As we grow and mature as a public company, and as we continue to expand internationally and adopt more flexible work arrangements, we may find it difficult to continue to maintain and develop our corporate culture. There have been changes in our senior executive management team resulting from the hiring, promotion, or departure of these personnel, and we expect to also recruit and hire other senior executives in the future. Such management changes subject us to a number of risks, such as risks pertaining to the creation of new management systems and processes and differences in management style, any of which could adversely impact our corporate culture. In addition, we may need to continue to adapt our corporate culture and work environments to such changing circumstances. Any failure to preserve our culture could negatively affect our future success, including our ability to recruit and retain personnel and effectively focus on and pursue our corporate objectives.

Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our operating results and financial condition.

We have in the past acquired or invested in, and may in the future seek to acquire or invest in businesses, joint ventures, products and platform capabilities, or technologies that we believe could complement or expand our products and platform capabilities, enhance our technical capabilities, or otherwise offer growth opportunities. For example, in the third quarter of fiscal 2021, we acquired Pixie Labs Inc., a company that provides a next generation machine intelligence observability solution for developers using Kubernetes, in the first quarter of fiscal 2022, we acquired CodeStream Inc., a company that provides an integrated developer collaboration platform, and in the second quarter of fiscal 2023, we acquired K2 Cyber Security Inc., a company that provides a differentiated, signatureless approach to vulnerability and hack detection. Any acquisition or investment may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable opportunities, whether or not the transactions are completed, and may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products and platform capabilities, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us, their software is not easily adapted to work with our platform, or we have difficulty retaining the customers of any acquired business due to changes in ownership, management, or otherwise. These transactions may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available for development of our existing business. Any such transactions that we are able to complete may not result in any synergies or other benefits we had expected to achieve, which could result in impairment charges that could be substantial. In addition, we may not be able to find and identify desirable acquisition targets or business opportunities or be successful in entering into an agreement with any particular strategic partner. These transactions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if the resulting business from such a transaction fails to meet our expectations, our operating results, business, and financial condition may suffer or we may be exposed to unknown risks or liabilities.

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We provide service level commitments under some of our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide credits or refunds for prepaid amounts related to unused portion of our contractual commitments or face contract terminations, which could adversely affect our revenue.

Some of our customer agreements provide service level commitments. If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our products and platform capabilities, we may be contractually obligated to provide these customers with service credits or refunds for prepaid amounts related to unused portion of our contractual commitments, or we could face contract terminations. Our revenue could be significantly affected if we suffer unscheduled downtime that exceeds the allowed downtimes under our agreements with our customers. Any extended service outages could adversely affect our reputation, revenue, and operating results.

If third parties, such as customers, partners and third-party software developers fail to maintain interoperability, availability, or privacy compliance controls in the integrations and applications that they provide, our services that rely upon such integrations may have less value to customers, become less marketable, or less competitive, and our brand and financial performance could be harmed.

We provide software that enables customers, partners and third-party software developers to build integrations and applications with our products and extend the functionality of our platform capabilities. This presents certain risks to our business, including:

•customers, partners and third-party developers may not continue developing or supporting the integrations and applications that they provide or they may favor a competitor’s or their own competitive offerings over ours;

•we cannot provide any assurance that these integrations and applications meet the same quality standards that we apply to our own development efforts, and, to the extent they contain bugs, defects, or security risks, they may create disruptions in our customers’ use of our software or negatively affect our brand;

•we do not currently provide support or warranties related to the functionality, security, and integrity of the data transmission or processing for integrations and applications developed by customers, partners and third-party software developers, and users may seek warranties or be left without support and potentially cease using our products if the developers do not provide warranties or support for their integrations and applications; and

•these customers, partners and third-party software developers may not possess the appropriate intellectual property rights to develop and share their integrations and applications or the legal basis and privacy and security compliance measures to process or control personal information that flows through our systems.

While many of these risks are not within our control to prevent, our brand and financial performance could be harmed if these integrations and applications do not perform to our customers’ satisfaction and if that dissatisfaction is attributed to us.

Sales to government entities and highly regulated organizations are subject to a number of challenges and risks.

We may sell to U.S. federal, state, and local, as well as foreign, governmental agency customers, as well as to customers in highly regulated industries such as financial services, telecommunications and healthcare. Sales to such entities are subject to a number of challenges and risks. Selling to such entities can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. Government contracting requirements may change and in doing so restrict our ability to sell into the government sector until we have attained the revised certification. Government demand and payment for our products are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our products.

Further, governmental and highly regulated entities may demand contract terms that differ from our standard arrangements and are less favorable than terms agreed with private sector customers. Such entities may have statutory, contractual, or other legal rights to terminate contracts with us or our partners for convenience or for other reasons. Any such termination may adversely affect our ability to contract with other government customers as well as our reputation, business, financial condition and results of operations.

We have incurred substantial indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, and we may still incur substantially more debt, which may adversely affect our operations and financial results.

~~As of December 31, 2022, we had $500.25 million (undiscounted) principal amount of indebtedness under our 0.50% convertible senior notes due 2023 (the “Notes”). Our indebtedness may:~~

•~~limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, or other general business purposes;~~

•~~limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions, or other general business purposes;~~

•~~require us to use a substantial portion of our cash flow from operations to make debt service payments, such as those at maturity of the Notes, which occurs on May 1, 2023;~~

•~~limit our flexibility to plan for, or react to, changes in our business and industry;~~

•~~place us at a competitive disadvantage compared to our less leveraged competitors; and~~

•~~increase our vulnerability to the impact of adverse economic and industry conditions.~~

Further, the indenture governing the Notes, or the indenture, does not restrict our ability to incur additional indebtedness and we and our subsidiaries may incur substantial additional indebtedness in the future, subject to the restrictions contained in any future debt instruments existing at the time, some of which may be secured indebtedness.

Servicing our debt will require a significant amount of cash. We may not have sufficient cash flow from our business to pay our substantial debt, and we may not have the ability to raise the funds necessary to settle conversions of the Notes in cash or to repurchase the Notes upon a fundamental change, which could adversely affect our business and results of operations.*

Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness, such as the amounts owed at maturity of the Notes on May 1, 2023, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our indebtedness and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity or debt capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, particularly during times of market volatility and general economic instability, which could result in a default on our debt obligations.

Further, holders of the Notes will have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a “fundamental change” (as defined in the indenture) before the maturity date of the Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any. In addition, on November 1, 2022, we were deemed to have elected to settle all conversions on or after November 1, 2022, with cash up to the principal amount of the Notes and shares for any excess conversion value. Upon conversion of the Notes, we will be required to make cash payments in respect of the Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Notes being surrendered or pay cash with respect to Notes being converted.

~~The capped call transactions may affect the value of the Notes and our common stock.~~

In connection with the pricing of the Notes, we entered into capped call transactions with certain financial institutions (the “Capped Calls”). The Capped Call transactions are generally intended to reduce potential dilution to holders of our common stock upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset, as the case may be, subject to a cap.

In connection with establishing their initial hedges of the Capped Calls, these financial institutions or their respective affiliates likely purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the Notes. These financial institutions or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the Notes and prior to the maturity of the Notes (and are likely to do so during any observation period related to a

~~conversion of Notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Notes.~~

The potential effect, if any, of these transactions and activities on the price of our common stock or the Notes will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our common stock.

~~Provisions in the indenture for the Notes may deter or prevent a business combination that may be favorable to our stockholders.~~

If a fundamental change occurs prior to the maturity date of the Notes, holders of the Notes will have the right, at their option, to require us to repurchase all or a portion of their Notes. In addition, if a “make-whole fundamental change” (as defined in the indenture) occurs prior to the maturity date, we will in some cases be required to increase the conversion rate of the Notes for a holder that elects to convert its Notes in connection with such make-whole fundamental change.

Furthermore, the indenture will prohibit us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Notes. These and other provisions in the indenture could deter or prevent a third party from acquiring us even when the acquisition may be favorable to our stockholders.

~~Conversion of the Notes may dilute the ownership interest of existing stockholders, including holders who had previously converted their Notes, or may otherwise depress the price of our common stock~~.*

The conversion of some or all of the Notes may dilute the ownership interests of existing stockholders to the extent we deliver shares of our common stock upon conversion of any of the Notes and the potential dilution is not reduced or offset by the Capped Calls we entered into. On November 1, 2022, we were deemed to have elected to settle all conversions on or after November 1, 2022, with cash up to the principal amount of the Notes and shares for any excess conversion value. The Notes became convertible at the option of their holders on November 1, 2022. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

As of our fiscal year ~~end~~edended March 31, ~~2022,~~2023, we hadhad U.S. federal and state net operating losses of approximately ~~$776.7~~$650.7 million and ~~$449.3~~$423.4 million, respectively. Other than federal net operating losses arising in tax years beginning after December 31, 2017, the federal and state net operating loss carryforwards will begin to expire, if not utilized, beginning in ~~2028~~2035 and ~~2022,~~2024, respectively. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under the 2017 federal income tax law, as modified by the federal tax law changes enacted in March 2020, federal net operating losses incurred in tax years beginning after December 31, 2017 may be carried forward indefinitely, but,

for taxable years beginning after December 31, 2020, the deductibility of such federal net operating losses is limited. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations. In addition, for state income tax purposes, there may be periods during which the use of net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.

We are subject to taxation in numerous U.S. states and territories and in non-U.S. countries. As a result, our effective tax rate is derived from a combination of applicable tax rates in the various places that we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in each of such places. Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including passage of federal income tax law changes, changes in the mix of our profitability from jurisdiction to jurisdiction, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes and other changes in tax laws. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.

Risks Related to Laws and Regulations

We are subject to stringent and rapidly changing U.S. and foreign laws, regulations, rules, industry standards, contractual obligations, policies, and other obligations relating to data privacy ~~data protection,~~ and ~~data~~ security. ~~The~~Our actual or perceived failure to comply with such obligations by us, our customers, or third parties with whom we work could lead to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm, ~~our reputation,~~loss of customers or sales, and other adverse business consequences.*

In the ordinary course of business, we process personal data and other proprietary, confidential, and sensitive data, including business data, trade secrets, intellectual property, and sensitive third-party data. Our data processing activities may subject us to ~~significant fines~~numerous data privacy and liability, or otherwise adversely affect our business.*

~~We, our customers,~~security obligations, such as various laws, regulations, guidance, industry standards, external and ~~third parties who we work with are subject to numerous evolving~~internal privacy and ~~increasingly stringent domestic and foreign laws~~security policies, contractual requirements, and other obligations relating to data privacy and security.

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and ~~data security that are increasing~~other similar laws (e.g., wiretapping laws). For example, the ~~cost~~federal Health Insurance Portability and ~~complexity~~Accountability Act of ~~operating our business.~~

~~Foreign laws~~1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), imposes specific requirements relating to the data privacy, ~~data protection,~~security, and ~~data security are undergoing a period~~transmission of ~~rapid change~~individually identifiable health information. As another example, the Controlling the Assault of Non-Solicited Pornography and ~~have become more stringent in recent years.~~Marketing Act of 2003 ("CAN-SPAM”) and the Telephone Consumer Protection Act of 1991 (“TCPA”) impose specific requirements on communications with customers. For example, the TCPA imposes various consumer consent requirements and other restrictions on certain telemarketing activity and other communications with consumers by phone, fax or text message. TCPA violations can result in significant financial penalties, including penalties or criminal fines imposed by the Federal Communications Commission or fines of up to $1,500 per violation imposed through private litigation or by state authorities. As another example, the California Consumer Privacy Act of 2018 (“CCPA”) applies to personal data of consumers, business representatives, and employees, and requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights. The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages. In addition, the California Privacy Rights Act of 2020 (“CPRA”) expands the CCPA’s requirements, including by adding a new right for individuals to correct their personal data and establishing a new regulatory agency to implement and enforce the law. Other states, such as Virginia and Colorado, have also passed comprehensive data privacy and security laws, and similar laws are being considered in several other states, as well as at the federal and local levels. These developments further complicate compliance efforts, and increase legal risk and compliance costs for us, the third parties upon whom we rely, and our customers.

Outside the United States, an increasing number of laws, regulations, and industry standards govern data privacy and security. For example, the European Union’s General Data Protection Regulation (“EU GDPR”) ~~took effect in the European Union (“EU”) in May 2018 and has also been transposed into national law in~~, the United ~~Kingdom~~Kingdom’s GDPR

(“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018), and China’s Personal Information Protection Law (“~~UK”~~PIPL”)~~. The GDPR imposes~~ impose strict requirements for processing personal ~~information,~~data. For example, under the EU GDPR, companies may face temporary or definitive bans on data processing and ~~subjects noncompliant companies to~~other corrective actions, personal data, fines of up to the greater of 20 million Euros or 4% of their global annual revenues, ~~restrictions~~whichever is great, or ~~prohibitions on~~private litigation related to processing of personal ~~information,~~data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests. In Canada, the Personal Information Protection and ~~private litigation. Laws~~Electronic Documents Act (“PIPEDA”) and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), may apply to our operations and our operations in ~~EU member~~Australia may subject us to Australia’s Privacy Act of 1988. We also have operations in Japan, Singapore, South Korea, Israel, and India and may be subject to new and emerging data privacy regimes in Asia, such as Japan’s Act on the Protection of Personal Information, Singapore’s Personal Data Protection Act, South Korea’s Personal Information Protection Act, Israel’s Protection of Privacy Law, 5741-1981, and India’s proposed Digital Personal Data Protection Bill. Additionally, several states and ~~the UK also impose restrictions on direct marketing communications and~~localities have enacted measures related to the use of ~~cookies~~artificial intelligence and ~~similar technologies online,~~machine learning in products and ~~a new regulation proposed in the EU called the e-Privacy Regulation may make such restrictions more stringent. Furthermore,~~services. For example, in Europe, there is a proposed regulation related to artificial intelligence (“AI”) that, if adopted, could impose onerous obligations related to the use of AI-related systems. We may have to change our business practices to comply with such obligations.

~~Globally, certain~~In the ordinary course of business, we transfer personal data from Europe and other jurisdictions to the United States or other countries. Europe and other jurisdictions have enacted laws requiring data ~~localization laws and have imposed requirements for cross-border transfers of personal information. For example, the GDPR and other European data protection laws generally prohibit~~to be localized or limiting the transfer of personal ~~information~~data to ~~countries outside~~other countries. In particular, the European Economic Area (“~~EEA,”~~EEA”)~~, such as~~ and the United Kingdom (“UK”) have significantly restricted the transfer of personal data to the United States ~~that~~and other countries whose privacy laws it believes are ~~not considered by the European Commission to provide an adequate level~~inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data ~~protection. Swiss~~localization and ~~UK law contain similar~~cross-border data transfer restrictions as the GDPR. The European Commission recently released a set of Standard Contractual Clauses (“SCCs”), a mechanism to transfer data outside of the EEA, which imposes additional obligations to carry out cross-border data transfers.laws. Although there are currently ~~valid~~various mechanisms ~~available~~that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, these ~~jurisdictions,~~mechanisms are subject to legal challenges, and there ~~remains some uncertainty regarding the future of these cross-border data transfers. Countries outside of Europe have enacted~~is no assurance that we can satisfy or are considering similar cross-border data transfer restrictions and laws requiring local data residency and restricting cross-border data transfers, which could increase the cost and complexity of doing business. If we elect to rely on these measures to lawfully transfer personal data to the ~~new SCCs~~United States.

If there is no lawful manner for us to transfer personal data ~~transfers, we may be required~~from the EEA, the UK or other jurisdictions to ~~incur significant time and resources to update our contractual arrangements and to comply with new obligations. The new SCCs may increase~~ the ~~legal risks and liabilities under European privacy, data protection, and data security laws. If we cannot implement a valid mechanism for cross-border personal information transfers,~~United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including ~~increased exposure to regulatory actions, penalties, data processing restrictions or bans,~~the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and ~~reduced demand for~~injunctions against our ~~services. Loss~~processing or transferring of personal data necessary to operate our ~~ability~~business. Additionally, companies that transfer personal data out of the EEA and UK to ~~import personal information from Europe and elsewhere may also require us~~other jurisdictions, particularly to ~~increase our data processing capabilities outside the U.S. at significant expense.~~

Other foreign jurisdictions are also passing and proposing more stringent privacy, data protection and data security laws. For example, Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais) (Law No. 13,709/2018) (“LGPD”), Australia Privacy Act of 1988, and Canada’s Personal Information Protection and Electronic Documents Act (“PIPEDA”) impose strict requirements for processing the personal information of individuals and may apply to our operations. We also have operations in Japan, Singapore, South Korea, and India and may be subject to new and emerging data privacy regimes in Asia, such as Japan’s Act on the Protection of Personal Information, Singapore’s Personal Data Protection Act, South Korea’s Personal Information Protection Act, and India’s proposed Digital Personal Data Protection Bill.

In the United States, ~~federal, state~~are subject to increased scrutiny from regulators, individual litigants, and ~~local governments~~activist groups. Some European regulators have ~~enacted numerous~~ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations.

In addition to data privacy ~~data protection,~~ and ~~data~~ security laws, ~~including data breach notification laws, personal information privacy laws, health information privacy laws, consumer protection laws (e.g., Section 5 of~~we are contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the ~~Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).~~future. For example, the California Consumer Privacy Act (“CCPA”), which took effect on January 1, 2020, gives California residents expanded rights to access and delete their personal information, opt-out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations (up to $7,500 per violation), as well as a private right of action for data breaches that is expected to increase data breach litigation. Additionally, the California Privacy Rights Act of 2020 (“CPRA”) substantially expanded the CCPA, including applying to personal information of business representatives and employees and establishing a new regulatory agency to implement and enforce the law. Aspects of the CCPA and CPRA and their interpretation and enforcement remain uncertain.

Other states are considering or have also enacted privacy and data security laws. For example, Virginia, Utah, Colorado, and Connecticut have similarly enacted comprehensive privacy laws, all of which differ from the CCPA and become effective in 2023. A patchwork of differing state privacy and data security laws would increase the cost and complexity of operating our business and increase our exposure to liability.

Wewe may also be subject to ~~federal laws related~~the Payment Card Industry Data Security Standard (“PCI DSS”). The PCI DSS requires companies to ~~privacy, data protection,~~adopt certain measures to ensure the security of cardholder information, including using and data security, such as the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and the Telephone Consumer Protection Act (“TCPA”). HIPAA, as amended by the Health Information Technologymaintaining firewalls, adopting proper password protections for Economic and Clinical Health Act (“HITECH”), imposes specific requirements relating to the privacy, security, and transmission of individually identifiable health information. The TCPA imposes specific requirements relating to marketing to individuals using technology such as telephones, mobilecertain devices and ~~text messages. TCPA violations~~software, and restricting data access. Noncompliance with PCI-DSS can result in ~~significant financial~~ penalties ranging from $5,000 to $100,000 per month by credit card companies, litigation, damage to our reputation, and revenue losses. We also rely on vendors to process payment card data, who may be subject to PCI DSS, and our business may be negatively affected if our vendors are fined or suffer other consequences as ~~businesses can incur penalties or criminal fines imposed~~a result of PCI DSS noncompliance.

We are also bound by ~~the Federal Communications Commission or~~contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be ~~fined up to $1,500 per violation through private litigation or state attorneys general or other state actor enforcement. Class action suits are the most common method for private enforcement.~~

~~Like our legal obligations, the demands our customers place on us relating to~~successful. For example, certain privacy ~~data protection, and data security are becoming more stringent. Laws~~laws, such as the GDPR and the CCPA, ~~increasingly~~ require ~~companies~~our customers to impose specific contractual restrictions on their service providers. We publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security. If these policies, materials or statements are ~~also~~found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to ~~the terms of our~~investigation, enforcement actions by regulators or other adverse consequences.

Obligations related to data privacy and ~~data~~ security ~~policies, representations, certifications, publications, contractual~~are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty. Additionally, these obligations may be subject to differing applications and ~~other~~interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying with these obligations ~~related~~requires us to ~~privacy, data protection,~~devote significant resources, which may necessitate changes to our services, information technologies, systems, and ~~data security, including operating rules~~practices and ~~standards imposed by industry organizations such as PCI-DSS. Although we endeavor~~ to ~~comply with our obligations, we and the~~those of any third parties that process personal data on ~~which we rely~~our behalf. In addition, these obligations may ~~at times fail to do so or may be perceived to have failed to do so. Such failures could subject~~require us to ~~regulatory enforcement action as well as costly legal claims by affected individuals or our customers.~~

We strive to comply with applicable privacy, data protection, and data security laws and other obligations, but we cannot fully determine the impact that current or future such laws and other obligations may have onchange our business ~~or operations.~~model. We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and

security obligations. Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations. Such laws or obligations may be inconsistent from one jurisdiction to another, subject to differing interpretations, and courts or regulators may deem our efforts to comply as insufficient. Preparing for and attempting to comply with these obligations requires significant resources and, potentially, changes to our technologies, systems, and practices and those of any third parties that process personal information on our behalf.

If we or the third parties on which we rely ~~on to operate our business and deliver our services~~ fail, ~~to comply,~~ or are perceived ~~as failing~~ to have failed, to address or comply with ~~our legal, contractual, or other~~applicable data privacy and security obligations, ~~relating to privacy, data protection, or data security, or our policies and documentation relating to personal information,~~ we could face ~~governmental~~significant consequences, including but not limited to: government enforcement ~~action;~~actions (e.g., investigations, fines, penalties, audits, inspections, and similar), litigation ~~with~~(including class-action claims); additional reporting requirements and/or oversight, bans on processing personal data, and orders to destroy or not use personal data. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers, ~~individuals~~interruptions or ~~others; fines and civil~~stoppages in our business operations (including, interruptions or ~~criminal penalties for us or company officials; obligations~~stoppages of data collection needed to ~~cease offering~~train our ~~services~~algorithms, inability to process personal data or to ~~substantially modify them in ways that make them less effective~~operate in certain ~~jurisdictions; negative~~jurisdictions, limited ability to develop or commercialize our products, expenditure of time and resources to defend any claim or inquiry, adverse publicity, ~~and harm~~or substantial changes to our ~~brand and reputation; and reduced overall demand for our services. Such developments could adversely affect our~~ business ~~financial condition, and results of~~model or operations.

We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate these controls.

Our products are subject to U.S. export controls, and we incorporate encryption technology into certain of our products. Governmental regulation of encryption technology and regulation of imports or exports of encryption products, or our failure to obtain required import or export authorization for our products, when applicable, could harm our international sales and adversely affect our revenues. Compliance may also create delays in the introduction of our product releases in international markets, prevent our customers with international operations from deploying our products or, in some cases, prevent the export of our products to some countries altogether. If we fail to comply, we could be subject to both civil and criminal penalties, including substantial fines, possible incarceration for employees and managers for willful violations, and the possible loss of export or import privileges. For example, following Russia’s invasion of Ukraine in February 2022, the United States and other countries announced sanctions against Russia and Belarus, which include restrictions on selling or importing goods, services, or technology in or from affected regions and travel bans and asset freezes impacting connected individuals and political, military, business, and financial organizations in Russia and Belarus, and the United States and other countries could impose wider sanctions and take other actions as the conflict continues to escalate. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, financial condition and results of operations.

We are subject to the tax laws of various jurisdictions, which are subject to unanticipated changes and to interpretation, which could harm our future results.*

We are subject to income taxes in the United States and foreign jurisdictions, and our domestic and international tax liabilities are subject to the allocation of expenses in differing jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings and losses in countries with differing statutory tax rates, certain non-deductible expenses as a result of acquisitions, the valuation of deferred tax assets and liabilities, and changes in federal, state, or international tax laws and accounting principles.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. Based on our current analysis of the provisions, we do not believe this legislation will have a material impact on our consolidated financial statements. Further, each jurisdiction has different rules and regulations governing sales and use, value added, and similar taxes, and these rules and regulations are subject to varying interpretations that change over time. Certain jurisdictions in which we did not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties, and interest, and we may be required to collect such taxes in the future. In addition, we may be subject to income tax audits by many tax jurisdictions throughout the world, many of which have not established clear guidance on the tax treatment of SaaS-based companies. In addition, the COVID-19 pandemic and resulting use of flexible work policies may increase the probability of payroll tax audits. Any tax assessments, penalties, and interest, or future requirements may adversely affect our results of operations. Moreover, imposition of such taxes on us going forward would effectively increase the cost of our products to our customers and might adversely affect our ability to retain existing customers or to gain new customers in the areas in which such taxes are imposed.

In addition, the application of the tax laws of various jurisdictions, including the United States, to our international business activities is subject to interpretation and depends on our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing, or determine that the manner in which we operate our business does not achieve the intended tax consequences. As we operate in numerous taxing jurisdictions, the application of tax laws can also be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions. For instance, it is not uncommon for taxing authorities in different countries to have conflicting views, with respect to, among other things, the manner in which the arm’s length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property.

Further, the Organization for Economic Co-Operation and Development (“OECD”) has been working on a project to act to prevent what it refers to as base erosion and profit shifting (“BEPS”). Most recently, the OECD, through an association of almost 140 countries known as the “inclusive framework,” has announced a consensus to address, among other things, perceived challenges presented by global digital commerce (“Pillar 1”) and the perceived need for a minimum global effective tax rate of 15% (“Pillar 2”). On December 15, 2022, the European Union formally adopted the Pillar Two Directive and EU member states are expected to enact the Pillar Two Directive into domestic law by December 31, 2023. Other countries are taking similar actions. We are evaluating developments to determine whether Pillar 2 will materially impact our financial position in the future. Any material change in tax laws or policies, or their interpretation, resulting from BEPS initiatives could result in a higher effective tax rate on our earnings and have an adverse effect on our financial condition, results of operations, and cash flows.

Risks Related to Our Intellectual Property

We may incur significant costs due to claims for alleged infringement of proprietary rights.

There is considerable patent, copyright, trademark, trade secret, and other intellectual property development activity in our industry. Our success depends in part on not infringing upon the intellectual property rights of others and how we prepare for and handle claims of infringement. From time to time, our competitors or other third parties may claim that we are infringing upon their intellectual property rights, and we may be found to be infringing upon such rights. We may receive claims that our products, platform capabilities, and underlying technology infringe or violate the claimant’s intellectual property rights. In addition, agreements with customers and other third parties may include indemnification provisions under which we agree to indemnify them in the event of claims of infringement of certain proprietary rights. Any claims or litigation, regardless of merit, could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products and platform capabilities, or require that we comply with other unfavorable terms.

Even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating results. We expect that the occurrence of infringement claims is likely to grow as the market for our products grows. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources.

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.*

Our success depends to a significant degree on our ability to protect our proprietary technology and our brand. We rely on a combination of trademarks, trade secret laws, patent, copyrights, service marks, contractual restrictions, and other

intellectual property laws and confidentiality procedures to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our technology and our business may be harmed. In addition, defending our intellectual property rights might entail significant expense. Any patents, trademarks, or other intellectual property rights that we obtain may be challenged by others or invalidated through administrative process or litigation. As of ~~December 31, 2022,~~June 30, 2023, we had 4153 issued patents in the United States and abroad and 2824 patent applications pending in the United States and abroad. Despite our issued patents and pending patent applications, we may be unable to maintain or obtain patent protection for our technology. In addition, our existing patents and any patents issued in the future may not provide us with competitive advantages, or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and platform capabilities and use information that we regard as proprietary to create products and services that compete with ours. Effective patent, trademark, copyright, and trade secret protection may not be available to us in every country in which our products are available. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. As we expand our international activities, our exposure to unauthorized copying and use of our products and platform capabilities and proprietary information will likely increase. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with other parties. No assurance can be given that these agreements will be effective in controlling

access to and distribution of our proprietary information. Further, these agreements may not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our products and platform capabilities.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Further, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our products and platform capabilities, impair the functionality of our products and platform capabilities, delay introductions of new solutions, result in our substituting inferior or more costly technologies into our products, or injure our reputation.

Our reliance upon open source software could negatively affect our ability to sell our products and subject us to possible litigation.

We rely heavily upon open source software for the operation of our products and platform capabilities and expect to continue to do so in the future. During fiscal 2021, we strengthened this commitment when we announced that we are making our agents, integrations, and SDKs available under an open source license, and that we are standardizing our future observability offerings in OpenTelemetry, a Cloud Native Computing Foundation project that is an emerging standard for software instrumentation. As a result of our use of open source software in our offerings, as well as our contributions of code to open source software projects, we, including companies that we have acquired, may face claims from others claiming ownership of, or seeking to enforce the terms of, incompatible or conflicting licenses or other rights. This may include a demand to release the open source software, derivative works, or our proprietary source code that was developed using such software. These claims could also result in litigation, require us to purchase a costly license, or require us to devote additional research and development resources to change our platform, any of which would have a negative effect on our business and operating results. In addition, if the license terms for the software we utilize change, additional licenses from third parties may be required or we may be forced to reengineer or discontinue our products and platform capabilities or incur additional costs. In addition, open source licensors generally do not provide warranties, support, indemnity, or assurance of title or controls on origin of the software which may lead to greater risks. Likewise, some open source projects have known security and other vulnerabilities and architectural instabilities and are provided on an “as-is” basis which, if not properly addressed, could negatively affect the performance of our product. While we have established processes to help alleviate these risks, we cannot assure that these measures will reduce or completely shield us from these risks. Moreover, we cannot be certain that we, including companies that we have acquired, have not incorporated software in our products and platform capabilities in a manner that is inconsistent with the terms of the applicable proprietary rights that may govern their use, or our own policies and procedures.

Our continued shift to increase reliance upon open source software will also present increased risk from the standpoint of competition. Because any software source code we contribute to open source projects is publicly available, our ability to protect our intellectual property rights with respect to such software source code may be limited or lost entirely. Anyone may obtain access to the source code for our open source features and then redistribute it (either in a modified or unmodified form), and we may be unable to prevent our competitors or others from using such software source code for competitive purposes, or for commercial or other purposes beyond what we intended. For instance, our conversion of the license terms for our agents, integrations and SDKs from our historical proprietary licenses to open source licenses may allow the use of our previous proprietary code with competitor’s platforms. Additionally, we make the source code of our proprietary features publicly available, which may enable others to compete more effectively. Such competition can develop without the degree of overhead and lead time required by traditional proprietary software companies, due to the permissions allowed under open source licensing. It is possible for competitors to develop their own software, including software based on our products, potentially reducing the demand for our services.

Risks Related to Ownership of Our Common Stock

Our stock price has been and will likely continue to be subject to fluctuations, which may be volatile and due to factors beyond our control.*

The market price of our common stock is subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this report, factors that could cause fluctuations in the market price of our common stock include the following:

•actual or anticipated fluctuations in our operating results;

•seasonal and end-of-quarter concentration of our transactions and variations in the number and size of transactions that close in a particular quarter;

•the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections;

•failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates and publication of other news by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

•ratings changes by any securities analysts who follow our company;

•actions instituted by activist shareholders or others that could disrupt our ongoing business, divert resources, increase our expenses, and distract our management;

•announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

•changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

•price and volume fluctuations in the overall stock market from time to time, including as a result of trends in the economy as a whole;

•changes in accounting standards, policies, guidelines, interpretations, or principles;

•actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

•changes in our pricing models and practices or those of our competitors;

•developments or disputes concerning our intellectual property or our products and platform capabilities, or third-party proprietary rights;

•cybersecurity attacks or incidents;

•announced or completed acquisitions of businesses or technologies by us or our competitors;

•new laws or regulations or new interpretations of existing laws, or regulations applicable to our business;

•changes in our board of directors or management;

•announced or completed equity or debt transactions involving our securities;

•sales of shares of our common stock by us, our officers, directors, or other stockholders;

•lawsuits filed or threatened against us; and

•other events or factors, including those resulting from war, incidents of terrorism, public health epidemics or pandemics, bank failures, or responses to any of these ~~events.~~events or factors.

In addition, the market for technology stocks and the stock markets in general have experienced extreme price and volume fluctuations. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. Moreover, fluctuations in our quarterly operating results and the price of our common stock may be particularly pronounced in the current economic environment due to the uncertainty associated with the global economic conditions and the global COVID-19 pandemic. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business, results

of operations, financial condition, and cash flows. A decline in the value of our common stock, including as a result of one or more factors set forth above, may result in substantial losses for our stockholders.

Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.

The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers, and significant stockholders, a large number of shares of our common stock becoming available for sale, or the perception in the market that holders of a large number of shares intend to sell their shares. Further, the Notes may become in the future convertible at the option of their holders prior to their scheduled terms under certain circumstances. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. Additionally, the shares of common stock subject to outstanding options under our equity incentive plans and the shares reserved for future issuance under our equity incentive plans, as well as shares issuable upon vesting of restricted stock awards, will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations. We have also registered shares of common stock that we may issue under our employee equity incentive plans. Accordingly, these shares may be able to be sold freely in the public market upon issuance as permitted by any applicable vesting requirements.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

•authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock;

•require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

•specify that special meetings of our stockholders can be called only by the Chair of our board of directors, our Chief Executive Officer, or by our board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors;

•establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;

•provide that our board of directors is divided into three classes, with each class serving three-year staggered terms, until our 2023 annual meeting of stockholders when the classes will be fully phased out;

•prohibit cumulative voting in the election of directors;

•provide that our directors may be removed only for cause until our 2023 annual meeting of stockholders;

•provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and

•require the approval of our board of directors or the holders of at least sixty-six and two-thirds percent (66 2/3%) of our outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our common stock to decline.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the U.S. federal district courts will be the exclusive forums for the adjudication of certain disputes, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for:

•any derivative action or proceeding brought on our behalf;

•any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee of New Relic to us or our stockholders;

•any action asserting a claim against us or any of our directors, officers, or other employees arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; and

•any action asserting a claim against us or any of our directors, officers, or other employees that is governed by the internal affairs doctrine.

This exclusive-forum provision would not apply to suits brought to enforce a duty or liability created by the Securities Act of 1933, as amended, the Exchange Act or any claim for which the U.S. federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, ourOur amended and restated ~~certificate of incorporation~~bylaws further ~~provides~~provide that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause or causes of action arising under the Securities Act of 1933, as amended, including all causes of action asserted against any defendant to such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters for any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.

We do not intend to pay dividends on our common stock so any returns will be limited to changes in the value of our common stock.

We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation, and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, our ability to pay cash dividends on our common stock may be prohibited or limited by the terms of any future debt financing arrangements. Any return to stockholders will therefore be limited to the increase, if any, of our stock price, which may never occur.

If securities or industry analysts do not continue to publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If industry analysts cease coverage of us, the trading price for our common stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline. In addition, independent industry analysts, such as Gartner and Forrester, often provide reviews of our products and platform capabilities, as well as those of our competitors, and perception of our offerings in the marketplace may be significantly influenced by these reviews. We have no control over what these industry analysts report, and because industry analysts may influence current and potential customers, our brand could be harmed if they do not provide a positive review of our products and platform capabilities or view us as a market leader.

General Risk Factors

Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.

Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate, especially in a volatile economic environment. Our estimates and forecasts relating to the size and expected growth of our market may prove to be inaccurate. Even if the market in which we compete meets our size estimates and forecasted growth, our business could fail to grow at similar rates, if at all.

Natural disasters and other events beyond our control could harm our business.*

Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce, and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power ~~shortages,~~shortages, pandemics, including the ongoing COVID-19 pandemic, ~~effects~~effects of climate change, extreme weather, flooding and other events beyond our control. We rely on our network and third-party infrastructure and enterprise applications, internal technology systems, and our website for our development, marketing, operational support, hosted products, and sales activities. The west coast of the United States contains active earthquake zones and this area has also historically experienced, and is projected to continue to experience, climate-related events including drought and water scarcity, flooding, warmer temperatures, wildfires and air quality impacts and power shut-offs associated with wildfire prevention. Although we maintain crisis management and disaster response plans, in the event of a major earthquake, hurricane or other extreme weather event, or catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development, lengthy interruptions in service, breaches of data security, and loss of critical data, all of which could have an adverse effect on our future operating results.

Climate change and related environmental issues could have a material adverse impact on our business, financial condition and results of operations.*

Climate change-related events, such as increased frequency and severity of storms, floods, wildfires, droughts, hurricanes, freezing conditions, and other natural disasters, may have an increasingly adverse impact on our business, financial condition and results of operations. Our major sites in California are vulnerable to such climate change effects, which have caused regional short-term systemic failures in the U.S. and elsewhere. For example, in California, increasing intensity of drought throughout the state and annual periods of wildfire danger increase the probability of planned power outages in the communities where we work and live. While this danger has a low-assessed risk of disrupting normal business operations, it has the potential to impact employees’ abilities to stay connected effectively. Climate-related events, including the increasing frequency of extreme weather events and their impact on critical infrastructure in the U.S. and internationally, have the potential to disrupt our business, the business of our third-party suppliers, and/or the business of our customers, and may cause us to experience higher attrition, losses, and additional costs to maintain or resume operations. Regulatory developments and changing market dynamics regarding climate change may also impact adversely our business, financial condition and results of operations.

The nature of our business requires the application of complex revenue recognition rules. Significant changes in U.S. GAAP from the adoption of recently issued accounting standards and other non-financial reporting standards could materially affect our financial position and results of operations.

We prepare our financial statements in accordance with GAAP, which is subject to interpretation or changes by the FASB, the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. New accounting pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future, which may have a significant effect on our financial results. Any difficulties in implementation of changes in accounting principles, including the ability to modify our accounting systems, could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us. In addition, certain choices in the method of implementation of any new standard that may be adopted may have an adverse impact on our potential as an acquirer or an acquiree in a business combination.

In addition, as we identify ~~Environment,~~Environmental, Social and Governance (“ESG”) topics for voluntary disclosure and work to align with the recommendations of the Sustainability Accounting Standards Board (“SASB”) and our own ESG materiality assessment, we have made and, in the future may continue to make or expand, our disclosures in these areas. Statements about our ESG initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. If

our ESG-related data, processing and reporting are incomplete or inaccurate, or if we fail to achieve progress on our metrics on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.

We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs. If additional capital is not available, we may have to delay, reduce, or cease certain investments.

We may in the future require additional capital to ~~settle the Notes upon maturity on May 1, 2023,~~ operate our business and respond to business opportunities that may arise, including the need to develop new products and platform capabilities or enhance our existing products and platform capabilities, enhance our operating infrastructure, protect our intellectual property, pursue possible acquisitions of complementary businesses and technologies, respond to a decline in the level of adoption or usage of our platform, or address other circumstances. We may not be able to timely secure additional debt or equity financing on favorable terms, or at all, especially in light of recent volatility and disruptions in the debt and equity markets. Any debt financing obtained by us could involve restrictive covenants relating to financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions, and could require us to use a portion of our cash flows to make debt service payments, which could place us at a competitive disadvantage relative to our less leveraged peers. If we raise additional funds through further issuances of equity, convertible debt securities, or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences, and privileges senior to those of holders of our common stock, including registration rights. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to support our business and to respond to business challenges could be significantly limited, and our business, operating results, financial condition, and prospects could be harmed.

The requirements of being a public company and a growing and increasingly complex organization may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of the New York Stock Exchange, and other applicable securities rules and regulations. Compliance with these rules and regulations increases our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increases demand on our systems and resources.

In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies or as market practices develop. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

As a result of disclosure of information in our filings with the SEC, our business and financial condition have become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be adversely affected, and even if the claims do not result

in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.

From time to time, public companies are subject to campaigns by investors seeking to increase short-term stockholder value through actions such as financial restructuring, increased debt, special dividends, stock repurchases, management changes or sales of assets or the entire company. If stockholders attempt to effect such changes or acquire control over us, responding to such actions would be costly, time-consuming and disruptive, which could adversely affect our results of operations, financial results and the value of our common stock. These factors could also make it more difficult for us to attract and retain qualified employees, executive officers and members of our board of directors.

6861

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

6962

Item 6. Exhibits

Exhibit
No.

Description of Exhibit

Incorporated by Reference

Filed
Herewith

Exhibit
No.

Description of Exhibit

Incorporated by Reference

Filed
Herewith

Form

File No.

Exhibit

File Date

Form

File No.

Exhibit

File Date

2.1

Agreement and Plan of Merger, dated as of July 30, 2023, by and among Parent, Merger Sub and the Company.

8-K

001-36766

2.1

July 31, 2023

3.1

Amended and Restated Certificate of Incorporation of the Registrant, as amended.

8-K

001-36766

3.1

August 19, 2021

3.1

Amended and Restated Certificate of Incorporation of the Registrant, as amended.

8-K

001-36766

3.1

August 19, 2021

3.2

Amended and Restated Bylaws of the Registrant.

8-K

001-36766

3.1

February 7, 2023

3.2

Amended and Restated Bylaws of the Registrant.

8-K

001-36766

3.1

February 7, 2023

10.1

Form of Change in Control and Severance Agreement.

10-Q

001-36766

10.1

August 4, 2022

10.1

Agreement by and between New Relic, Inc. and JANA Partners LLC, dated as of April 17, 2023

8-K

001-36766

10.1

April 18, 2023

10.2

Form of Special Performance Unit Award Grant Notice under the 2014 Equity Incentive Plan, and related form agreements

8-K

001-36766

10.1

February 7, 2023

10.3

Offer Letter between the Registrant and David Barter, dated as of August 1, 2022.

10-Q

001-36766

10.3

November 9, 2022

10.4

Offer Letter between the Registrant and Thomas Lloyd, dated as of August 17, 2022.

10-Q

001-36766

10.4

November 9, 2022

10.5

Offer Letter between the Registrant and Mark Dodds, dated as of August 26, 2022.

10-Q

001-36766

10.5

November 9, 2022

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1(1)

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.1(1)

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

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101.INS

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101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

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101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

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(1)The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any of the Registrant’s filings under the Securities Act of 1933, as amended, irrespective of any general incorporation language contained in any such filing.

7063

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			NEW RELIC, INC.
Date:	~~February 7,~~July 31, 2023
		By:	/s/ David Barter
			David Barter
			Chief Financial Officer
			(Principal Financial and Accounting Officer and Duly Authorized Signatory)

7164



	Three Months Ended December 31, 2022														Three Months Ended December 31, 2021
	Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity		Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount				Shares	Amount								Shares	Amount				Shares	Amount
Balance at beginning of period	68,568	$	68	$	1,215,315	260	$	(263)	$	(11,833)	$	(880,322)	$	322,965	65,639	$	65	$	1,008,363	260	$	(263)	$	(1,208)	$	(665,089)	$	341,868
Issuance of common stock upon exercise of stock options	100	—		1,932		—	—		—		—		1,932		412	1		21,550		—	—		—		—		21,551
Issuance of common stock for vested restricted stock units	450	—		—		—	—		—		—		—		345	—		—		—	—		—		—		—


Stock-based compensation expense	—	—		41,315		—	—		—		—		41,315		—	—		38,384		—	—		—		—		38,384
Other comprehensive income (loss), net	—	—		—		—	—		1,890		—		1,890		—	—		—		—	—		(1,749)		—		(1,749)
Net loss attributable to New Relic	—	—		—		—	—		—		(26,005)		(26,005)		—	—		—		—	—		—		(62,706)		(62,706)
Balance at end of period	69,118	$	68	$	1,258,562	260	$	(263)	$	(9,943)	$	(906,327)	$	342,097	66,396	$	66	$	1,068,297	260	$	(263)	$	(2,957)	$	(727,795)	$	337,348


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	$	28,600	$	(14,614)	$	13,986


Fiscal Years Ending March 31,	Estimated Total Future Amortization Expense
2023 (remaining three months)	$	2,383
2024	5,900
2025	4,470
Thereafter	1,233
	$	13,986


Fiscal Years Ending March 31,	Operating Leases
2023 (remaining three months)	$	3,303
2024	14,340
2025	11,493
2026	11,699
2027	12,278
2028	6,281
Thereafter	2,014
Total operating lease payments	$	61,408
Less imputed interest	(9,192)
Total operating lease liabilities	$	52,216