NEWR - Earnings call transcript Q1 2019

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Operator

Good afternoon. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the New Relic First Quarter Fiscal Year 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Mr. of you Head conference. begin Investor Parker, may Relations, your Jon

Jon Parker

you. to earnings year welcome afternoon, conference Relic’s Thank and fiscal New Good first quarter call. XXXX

may and Founder me financial call statements. conference projection materially events, expressed conditions, or statements. differ refers market CEO, Joining other New that forward-looking Officer, is Relic’s and in statement statement. expectations, are Lew Sachleben. future today contains Actual Cirne; those a including to forward-looking Chief Any Today’s characterizations Financial Mark future results and from forward-looking these projections of

For with titled to described today, risks more information SEC, the Factors. about as refer factors statements, Risk issued that the the filed may as in cause particularly in our differ actual from to results well release most materially our recent section earnings please XX-K forward-looking Form

today. commentary the one-time in earnings in today’s may of metrics. in include Our Relic. visit over the periodic earnings not reports, we to into accompanies to to insight in But more Relic’s or an call reported use the from, prepared our a financial that, turn and I results Relations release operating webcast information Lew. for call We between New additional today, use measures believe and business be may tool results these issued measures. or website that in for that financial provides measures non-GAAP nature should investors release, that to greater with Investor section you our be of a these be SEC or non-GAAP financial with me about This ongoing additional our GAAP. will the or substitute of learn considered encourage offer let non-GAAP provide replay these Reconciliations can incremental found evaluating for, And provide earnings metrics to presentation isolation access may results. as GAAP issued our may note we a on release and today future update New in At not accordance times, detail metrics our to trends.

Lew Cirne

XX% to which income afternoon non-GAAP a results. Jon, to review the quarter up start to our million, year-over-year Thanks, with operating deliver $X.X worked the first of had $XXX.X help both and who financial We tirelessly fiscal Relics My revenue year to ranges. solid million, today’s good call strong XXXX New to of everyone joining results. and thanks Relic’s X,XXX these of guidance exceeded QX

our dominant June, during to Analyst DevOps by manage it’s our that to their be customer cloud, in methodologies. operate monitor, needs its all digital companies whether sizes of is experiences or increase to recent and technical organization As Investor innovation, Day and pace systems. use to we delivering Today, and every applications vision compelling the shared migrating DevOps digital platform of adopting

of all customers organizational mission as levels risk. faster. a production in their which Our they at change this resulting and environment, into on means By as well increasing are rate definition, more complexity the technical introduce to higher move

increasing overcome empowers companies these the ultimately reduce business with need they Relic and including New improve risk and forward-thinking outcomes, their This helps of to brand this organizations driving data innovation. the and speed visibility increase revenue, building value. complexity, productivity

tasked digital drive executives production technology the business and an their developers, operations without software with initiatives value teams viewed These creating technology chain focused We’re on disruption. part for into and transformation. of to integral are three to releasing are who critical professionals

larger components driving levels product unification third, Relic flawless the are speed products encouraging, aligning of our we Relic of remained performance product. still New and to QX, contributing pent agility has adoption. single see across market; highest experience. with we pane I teams this confidence from in of conversations stems while In and these months record product Infrastructure globe, have our go-to-market products our ARR demand we a market, DevOps with portion adoption with Infrastructure offer to experience, our cloud In to first, The digital view, deals customer just broader ahead. of after and to are XX for a delivering stages efforts business. infrastructure strongest glass. focusing have near By of cloud, more second greater to the in percentage for from the on autonomy their said earlier to scaling already foundational in up adoption its that, instrument this enable who can environment. the DevOps at data how infrastructure; digital companies is become the their have deliver our Part attaching incredibly the help from digital QX, a with teams reflects the non-APM transformation new percentage we of Impressively, New application new broader and ever meaningful customer customers the increasingly Having runway of them

only products, could highlighted application XX% by to grow currently that estimates monitored workloads year the but are X% As by this that have Gartner we XXXX. before, of any APM

ever ARR our breadth our From their we QX, SMB our we year both our best do while both us. believe as well it largest the Underscoring front of ever SMB enterprise our was in momentum, this transactions. While signed underscore perspective, deal, ARR, deal, see we businesses ARR a go-to-market helps grew enterprise solid much to total have federal XX% and see QXs. as ever a largest opportunity seven-figure to in as the immense of just higher APM as platform, the market portion, the this start than of addressable given we

and from country the dare the by a this was One to world is smash-hit don’t that that quarter doesn’t the parent most I Games, Epic Fortnite. customer who I game. single have truly stories the of a exciting know of developers obsessed with has child I the say, phenomenon talk It storm. taken playing

your growing experience of optimizing Epic their utilizing on maintaining a reliability Relic New on APM global to Games relies enriching today. It Fortnite, young Fortnite, launched to household, Now, stunning about working with have games while to popular Hosted closely if these and million you players, I to world the and to don’t online of Relic infrastructure. Relic you a tell Web growing Services, also rapidly the health one New of are outcomes. New quickly registered know a support They in I XXX understand year-ago fastest in the user had of the now they’ve have focused Amazon it’s has scale their in and players. services. operations most the of have adults achieve

can the scale Now, of most. part it started enterprise so up the Fortnite’s that busiest that Every needs bring because it we’re to customers. up the recognition isn’t New our our deeply received Relic, by make end We to recently experience written because sure this data Insights the a customers, services process story, me. matters needs, your cost their peak just for that’s Peer and and purchase thrilled was world the who challenges be is the getting Monitoring company that Relic today and highest on can much of and up own end-users, technology IT I Choice designed can that software because that Gartner’s days, And facing can’t their inside cloud, an service, founding stand-up flawless there when prohibitive to Customers’ speaking always that on day businesses insightful Gartner Application in their only happy customers digital you instrumenting the IT we my delivering of our customers center. scale market. the modern for more believe systems to data IT New would has mission. if exemplifies Since distinction week, are decisions. user in confident And score as Suites. in this this we’re many ensure the to we systems running are leaders required are your that platform on performance. work for to of last New stand to as achieved has by and customers, every counting of people be Relic I’m priority decision-makers, make recognized XXXX of our at ratings Insights help Performance a online from been Peer This reviews professionals in

and too was expensive ripe couple For only in enterprise hard-to-use with that products people our use. actually long, of a industry could

responsible on building for our meaning New software teams running Relic self adopted base, modern our customer widespread is our ubiquity software. the across prides and throughout our how

most Our out of value of thousands platform. hundreds sometimes and users who have our get successful customers

we continue our product Our maintain DevOps rates the deliver make our cloud across needed innovations strategy, To platform, the joy a to job is and platform. win high pace become realize category win the to to our to use.

support week few recently for deep and Kubernetes distributed months, Over the past we’ve mostly tracing. launched last

on deploying no everywhere in making an modern We brainer continue it to be to New focused environments. Relic

teams We looking strong turn celebrated And we our their to over I see digital Mark additional just anniversary by as we’re we throughout run ‘XX I’ll in platform great the our Our to continue a start to XX-year from hard this through our shared. modernize had it companies evidenced unified fall fiscal year, And business. some to have to now, exciting for early to while demand at FutureStack work announcements expect results at numbers. series. are a event our journey, Earlier as company. and still we

Mark Sachleben

Lew. Thanks,

a results presented versus during presentation comparability As on and ASC year the ASC call, method. the included under XXX, today’s earnings accompanying we today’s prior a investor which aid in results modified To call, available release is which website. relations reconciliation using our retrospective we help quarter fiscal XXXX with are year’s table reminder, the our under XXX, first financial press investor adopted

paying ever $XXX,XXX XX% year, year-ago Now, Revenue first our past. flat last beyond ended XX,XXX, paid XXX and best of XX increase total compared paid XX% to than represents from an quarter a performance. was million both our the this that expanding over up up Overall, business quarter, quarter, customers for threshold. and financials. QX the figure business We logos year-over-year. more $XXX.X accounts accounts growth turning The QX to with new the per prior of relatively form remained

we expansion As Analyst here. programmatically more opportunities focusing resource, of past we’ve are see our given quarters Day, market the and recent and our particular our we up both the significant at discussed few business in

are our paid We this growth. early the on of and additions results XXXK focus, are reflected account which ARR with paid pleased account continued both

from net on XXX%, points which also expansion QX strategic current rate more efforts and was increased based installed focus our dollar Our base. X the year-ago to figure in our reflects

approximately the XX% point particularly revenue, are we was of for XX% the period pleased Given over with year being around base low the result. expansion and the end in of last this the past year, our the QX this in our At recurring of seasonal from annualized same enterprise typically QX, up metric business year.

to to non-U.S. geographic XX% $XX.X U.S. up while represented quarter the of grew also million, revenue revenue for split. revenue quarter. in up for year-over-year. revenue million XX% of the XX% quarter Turning $XX.X Non-U.S. our the was year-over-year

moving to ASC Relations like and that the issued profit loss Investor can GAAP point expense historic found profitability our standard earnings today would specified, and to metrics otherwise reconciliation non-GAAP be release our and reported I’ll forward on I full all in non-GAAP discussing items, metrics available out are and accounting Before XXX. website. going A between and as unless under be

margin the year-ago. record an XX%, from improvement XX% in Our a gross was

as the $X.X come at same line capacity. $XX.X we operating additional compared As in XX% and compared previous under we comes year year. to the year. strongest-ever $XX.X Sales XXX,XXX full same back costs to in and benefit domestic higher do we year. million R&D the million this quarter to With year, last start down figure guidance million were contemplated in were a standard, the expenses about European included marketing on compared towards hiring same and $XX our look than to the $XX.X quarter million the expenses, slightly last the and Overall, we expect had reflected to compared regard marketing roughly sales more particularly the costs $XX.X million fiscal a region were comparable to G&A million capitalization levels. strong quarter our prior in million experienced last costs accounting quarter. $XX.X hiring due quarter to

net diluted to an the share with year. our last was opportunities. compared X% quarter continued of results investment reflecting operating of loss per million basis, we particularly Looking of the basic in negative expect profitability a $X.X loss market achieved of in operating quarter compared robust confidence X% in of to another $X.XX $X.X or per QX, same or non-GAAP year. income record and hiring revenue in we revenue $X.XX the our On net income Overall, a same operating and last ahead, million share quarter

We strong and Turning cash last sheet. $XXX up May, total generation $XXX quarter. million and our million quarter’s convertible quarter-over-quarter, to revenue in last digit the first our at short-term total. offering from as cash, guidance our approximately to mid million, $XXX the the on debt favorably deferred X% single in flow balance the up Elsewhere balance quarter compared XX% which from of investments, quarter Much of decline the our with ended well from gain to as cash sheet, equivalents which down quarter. closed ended year-over-year high coming for

QX, deferred to into revenue to anticipate we As QX. single low decline we mid from digits look

activity our $XX.X driven operations flow capital as defined expenditures strong from Cash was cash seasonally by $XX.X from cash collection following and software Free QX. significant flow. million. cash operations to was capitalized minus Turning in billing million,

fiscal For expect we $XX cash and to and million ‘XX, from be $XX operations be all million cash of $XX million. to and flow continue between million between $XX to free

We in seasonally quarters and cash our pickup lighter operating and QX flow expect in QX. this quarter CapEx beginning a physical for

turn the will quarter outlook our second the of and XXXX to for I Now, fiscal full-year.

the from $XXX.X range XXth, quarter million ending million. to $XXX.X expect to For we second fiscal revenue September

income diluted This of $X.XX range in million. operating income non-GAAP $X.XX. million expect to We net to to non-GAAP the would $X.X $X.X of lead share per

increase revenue prior our to of guidance XXXX, we For to $XXX an million $XXX between million, expect $XXX.X million to the full $XXX.X from fiscal million. from range year now

result as will implies, to fiscal like continue expect ahead. our as QX growth which us ‘XX. the and in will our reinvest ramp the lower I’d enter of net continued up lead to with in income We prior profitability QX. improvement of $X.XX from to guidance range between would $XX this the we questions. $X.XX level probable in that of guidance We portion to a revised in of believe please our to open Overall, between diluted expect prior income our to $X.XX. interest to an offering. per expected million million improvement million, operating a million. non-GAAP $XX convertible an guidance share $XX This This income for half investments second go result we And call reflects non-GAAP of debt success of to guidance $X.XX, $XX to Operator, set for of that, also from as

Operator

[Operator Instructions] Michael question first line And the your comes of from Turits from James. Raymond

open. is line Your

Robert Majek

afternoon. Robert Michael. is Majek actually Good for This on

out just support so So, integration has for response rolled that Can far? the you Kubernetes. initiative and customer what the recently about and talk you of been importance

Lew Cirne

for I Certainly. not that Mark. Lew, going one’s be to imagine

Mark Sachleben

I’ll let you take it.

Lew Cirne

Yes.

highly cost to and about containers what these to and it does in our adopt service scale, dynamic micro at technology really So, Kubernetes for them reduce enabling and really the we’re customers toil excited environments. involved and

it the us But, largely delighted economic we’re our technology. been have open-source requirements asking customers breadth into involve other into And for. entire highly so, deliver Relic was to to using And and data Kubernetes of customers visibility orchestrate allows our does add that something Due visibility we collect. platform, our that with the integrated that it strength environment directly new New the all could we environment.

we that Kubernetes other other So, data, they our health can right alongside products. data see provide data application love and our of the the that customers out

And we responsive we do been a has have of Kubernetes. more strong. roadmap So, to in want very than healthy

we’ve first market more on done there’s done offering. in we’re great the feedback getting certainly, be but from our So, to what

Robert Majek

more really That’s Thanks. just one helpful. me. for Maybe

customers certain cases one use Do comes monitoring. to area? it use log fact the competing highlighted we to of to in for the how at when you capability day, products more have Just get plan your analyst that

Lew Cirne

that We do a are we particularly monitoring the infrastructure. as is of data coming see which is data out the source directly that or complementary running log of from collect, from the applications they

that with a are we the this of our where have technology, so, that’s we point logging strategy providers. and And leading in is And time. today many complementary integrations at

serve we we’ve a we like in and opportunity are for lot that’s so, now. feel we got on focused market today of And where

Operator

Your & line Cowen Derrick comes Company. of Wood from the next question from

Your line is open.

Derrick Wood

job just Great. legacy the mentioned that. I displacements. Thanks to on starting quarter. At drill see analyst more APM on nice day, the wanted and down you’re And you to

the a to is they do a legacy And a initial to be and similar reason you larger land when due First, Greenfield expand legacy that do there that to rip to tend a are or out other cloud generally environment? second, catalysts shift seeing? or is in deals displacement, then, you’re

Lew Cirne

someone simulate we that are might monitoring Great on-premise Relic experience. highlighted three for leave focus question. New adoption, and where the the will DevOps for customer legacy remarks, digital areas business a prepared in the transaction of things cloud vendor And a that

three the in a often a that generation when on-premise cloud a where us. successful today. and vendor and those core And a ease-of-use them advantage digital turn we might And help the initiatives And recognize so, and any customer opportunity focusing in environment demand have we then our a then, on of more pricing And to or culture total be areas. become tooling cost ownership, in TCL, such of land developing or well-suited then, DevOps they -- and for expand strategic that replace of more migrating to experience. -- legacy have start customer and we be prefers the those where strong company, they to when is their to that’s not that’s previous strategy

Derrick Wood

any at move are one, to XX% from I efficiency put the last a been to the curious gross XX% And of of deck slide peers, if comparison to such I’m what’s the behind and over the just factor cost squeeze what of relative the could relative drives peers highest in guys couple earning one. Mark, you out you margin years.

Mark Sachleben

noticing it’s side that slide. appreciate the It’s that. I hand -- on always of to be left So, you nice

of Lew number And when started things. started from it we we a So, day on efficiency that worked the when starts and Jim, fact with and one.

on come. was tends so, later margins worry our later always team efficiency don’t And think worry later, the gross I attitude to you and never because about just that about

customers So, focused an very from data amounts of our could in efficient on were support the get-go, very manner. a that infrastructure and support large we

for continues that to us. so, And pay dividends

you the which we’ve a When costs, just able ease-of-use value. increase quick generally our look we’ve enterprise into is the the because expanded even deploy has to been and easy our costs, our to a and product. is factor support support Another has of services margins to product as at those time higher gross install burden, very

those factors migrated we So, of and larger fees, we’ve toward to as are couple a tending drive are the just the more to focused, Those which Also, transactions, helped more business were significant. our even a number. bit like have when a old tailwind, things be SMB a that. card has credit the of that had days tended be in more lower enterprise

toward as or number to on infrastructure an and we forward we that make due drive continue That they at. do levels so those investments the pressure as said, are in -- our all to -- we and percent migrating see we’ll see the currently have so, we the And that see to that go coming gross margins additional capacity. helped level, we do more mentioned, XX

Operator

the of Bank. next Your comes from line Powell Gray from question Deutsche

Your open. line is

Gray Powell

percentage customer quantify it’s replacement? way rough to is whether versus existing of expanding So, landing with are deals, or Greenfield new a customer that a the there

Mark Sachleben

and in typically on relatively dipping how a get part or what we’ll And to first land and to of or more grows, of then, expand, of expand year an initiative modest see at strategy. by in we the environmental will workloads they’ll the a there. -- with in they And -- what large will into product, get go water as how account. of the enter or that add their are in see expand -- that will that they the to as And other our opportunity. because we different toe customer will $XXX,XXX typical is expand The a we value vast is mentioned, but we involved Lew will can think to ARR. to that’s Greenfield as they our there, the the for from $XX,XXX new majority digital in bring the applications, and go From kind of is that the number, I for it clouds get New migration someone new they more enterprise land that other use, done will Relic direction. be cloud, deals involved us easy kind be with Greenfield will parts organization Generally,

Gray Powell

know both than driver of And any really then, cost main pretty questions. each you did I if lines, couple margin you’ve outperform you a through and there I more may. in just XXX% the particular answered and guys one nicely gross there the fact on more this quarter? Was already flowed But, operating of metric. beat on revenue

Mark Sachleben

performance, that helped from with obviously our the were line, We revenue, helped. bottom

We’re while business been of A quite operational come investments. seeing seeing investing improvements. years, efficiencies a for those number from We’ve we’re now. in

the We better also the than to in mentioned expected from benefit move had, XXX. as script,

of commissions than of was higher expense expected. our because I had percentage a of $XXX,XXX think of incremental we it the about improvement capitalization

Operator

from question line next comes Your JP Auty Morgan. the of from Sterling

open. is line Your

Ugam Kamat

Sterling. Hi, on guys. actually for is Kamat This Ugam

prepared products. and it you Lew, remarks, infrastructure mentioned So, -- in about is but of highest quarter one the your attaching record the

an product? off Just understand customers and upsell upsell an leads like are APM it product the helps gain you solution way whether and is to owning infrastructure is more new or it other is you buy business, where just or it just seeing infrastructure that go or like wanted already

Lew Cirne

is they a provide place. love one idea one And as a of with our all customers come former in us history mind all as the they leader that XX-year all of our love where, described in vendor in virtually the customers solving. are infrastructure prospects and and APM, APM part obviously you then, our scenario given to APM having our minimum It of they’re the predominantly of product problem

so, center run And run of At all the attaches applications. to application, why day people cloud the that’s is we what on application are gravity. infrastructure build for so well. the and of end it this But, to believe is money on the spending and

believe And important role have to play add-on our an centric a view our us our very and so, value a help with strategic we that to for we strategy, infrastructure goals. to and application business increase like and it’s customers natural products with

Ugam Kamat

one Got you. And for you. Mark,

capitalization sales because You and of XXX,XXX. I say mentioned about it higher of customer marketing would life? expense to Is billings over the larger higher amortizing versus a tune of

Mark Sachleben

Yes. driven It’s capitalized. the be that’s commissions and what to of made we the by -- of numbers one would our percentage commission just and assumptions

Jon Parker

This is Jon.

clear, get the be as XXX% capitalized to of certain pieces commission. we not don’t our capitalize say filings, certain There requirements. in to Just due we -- actually don’t that are we’re

assumptions commissions actually So, year out. total our going the to it around just is relative played incurred capitalized percentage what related to would what we be into certain of had actually made

Operator

line from comes of from question Jennifer next Lowe Your the UBS.

Your line is open.

Jennifer Lowe

wanted versus bit see touch product of long do functionality, of to of relevant And the benefiting uplift adoption, sort monetization being price some table stay think evolving just stake How then to to little world? Kubernetes an I in you as tracing, out attached that roll these innovations distributed about SKUs? higher and opportunities obviously this a driving do train support, as on years. the innovation innovation you a over around you to

Lew Cirne

an think market. that an applications that And growing by the Well, Gartner and to X% today of all, XX% grow exciting quote we’re monitoring incredibly XXXX. large in could by under of and first -- vendors monitored of APM we

abundant in market to pursue. We’re an

service move distributed more touch as excited XX, in see example want all tracing, say XX of XX, like in, might services, because logging they health in to very more for the about, micro production. And action, so, running concert to companies we’re and that an somebody architecture,

a relationship those of only see what’s that of, you’re And visibility a transaction distributed third you allows those if services. is, it tracing of stop tracing XX those services. gap so Relic you cool short got other services, as the install then on will all New runs through distributed that instrumenting about until to you’ve And

for So, growth we provide customers believe incentive as to their of environment it has that our more interconnected. becomes more to our will perhaps certainly business. instrument the drive it more for And potential

are So, have our dollar and subscribers net healthy we rate. customers expansion

we will continue business just believe them, believe And results to favorable. we by delighting be so the

Jennifer Lowe

early And the effort you that about for? me. last sort as technical of just productivity for be call, there an what the more expand feedback are On the you one any for was talked opportunity maybe added one of just of I’m curious, on you the lever role sales things is? that Are to Just the seeing out hold of color the would great. growth.

Mark Sachleben

Yes.

us. -- emphasis for We’ve we that. So, been been that’s doing an

the field, use account our pushing folks who go understand to As in sell particularly had out learn, help with this we mentioned, been have our before customers the after -- sales, sell we how a record quarter hiring executives, help the out help last or quarter. Relic. both we And to the New

know that ones best. the us are the customers best product best, Our know

to we’re to continue so expect we from do. so, nice returns seeing those something investments, And

constantly larger have, of rep levels, more different ratios to account at ratios those you as technical we tweaking the accounts, to attractive. more get folks we there be looking at tend We’re obviously toward and the higher

as we do there to returns and the we year. continue the something to of we go are So, throughout good expect seeing rest

Operator

comes Singh question Stanley. from next Morgan the line of from Your Sanjit

open. is line Your

Sanjit Singh

if long-term, the well over that’s you in of do but those And about underpenetrated customers. have my how guys of you as companies the past you what size to been get your in this software? prepared XXX,XXX, Citrix, extent opportunity that question to an wanted comment infrastructure your solutions VMWare, mass remarks, is, your the be. able made what I XXX,XXX to all a terms customer I see the get and beyond opportunity. guess, what extends Lew, might your you infrastructure ubiquitous your whether APM -- products other type for it’s the to base look opened at thoughts on market

Lew Cirne

be to that. potential the has It

that’s particularly digital. DevOps, most the idea enterprises focused cloud, the and most of the And business of enterprises growth We’re that -- one the the high-end democratizing in of world, that the the see aggressively is to market. strength at one love of perspective, the the adopting opportunity are largest we from greatest believe and use, on moment on the those category of I a reasons while how our we easy product,

And although we customer long to think may love our way people more about when count use so be always products. success, it

is it about think ubiquity an to way other The within customer. enterprise

before. this the before times them couple this, tools, created or use remember, this had category was in APM to So, history of specialists hard-to-use said that New I you sad use a of that these prior how knew arcane of But, life. two customers hard one probably to I three most Relic

with And thousands these within our make Relic, so, enterprises. that easiest it cases people hundreds product some we want or in to but New of use

And we using our think And number so, using think important of companies our changing terms that’s like product. of product, about I way our to of only not people of category. number in but number

Sanjit Singh

you about what the within us to and strategic can and way the to your relevance developer to just Microsoft how you strong about a guys to us engagement last the Relic When enthusiasm of Thank doing think importance one comment. think I quarters. maintain of non-enterprise developer on the we the tries maybe you start community? several with drive level growth follow-up that the its its greater, to look sort But, community. last is about that development are Can And talk New at we’ve talk of to specifically dovetail acquires you. maintain community? seen to GitHub

Lew Cirne

Sure.

adopting software big that down. change DevOps your seeing we’re silo So, and companies on that between your building are software is is operating and breaking that particularly the the really

to able they of move to code. companies but but and from building number as those so architectures So, quickly to It’s code, writing for to high using the teams the of in teams it, and our in for application problem explosion responsibility go back smaller this a of why And big their that resolve developers, also, software. making not people monolithic they’re can responsibility they’re production, broader application, that’s delivers teams availability. they have writing application because see if then, be service there’s you need have primarily only piece the their type

the pushing out no moving need for move order Now, to a And manage you health the IT have there change And keep organizational a you they And organizations, move running. system structure, was community. tried and that’s generation to why to of the tools that’s is people. be And why introducing previous traditional team operations that is fit In for way those to that that the world that was only rapidly responsibility in aren’t when why central said to risk so change. no more production. to applications to relevant where operations to production faster. means developers there faster, to we’re

Operator

Your comes Greg the Securities. McDowell next of question from line from JMP

Your line is open.

Greg McDowell

I Great. to to Thank you for back One Lew, for you. and Mark. for Lew minute. then go one want infrastructure a

whether not come some business. hit in And new and you you point I ever just on you’re the pent we’ve the product strongest product. words, it the mentioned, attaching expand just inflection of was of you’ve You made product additional the to demand. mentioned was finally out And you wondering, market up -- the hoping think just selling in way product can with I functionality you’ve you’ve I put And you this was percentage or the whether players other an the or made feels the there. or like it and highest changes that’s something has or

was just infrastructure. in quick And hoping bit follow-up. with a little happened three, expand last I just months five So, one four, on the you could what

Lew Cirne

Yes. great It’s question. it’s the really And a combination.

visibility we and product and points things and integrations been to deliver more the like with what the products. the continue functionality more we’ve of Kubernetes doing in So, infrastructure

infrastructure customers call just to for this love the an our We’ve have platform, -- we’re it’s are center or So, the infrastructure help have don’t think the how fact customers behind. they tools They want and resonating that’s the of belong product that a between to thing and our to application get -- our market to They product. whether talked try about and the I a picture of in and the understand things. of kind dozens like have But, to to in between then, dynamics. help they It’s And it’s they production well interrelated, And browsers the switch certainly out tools easy of production. the APM application well-known same watch didn’t investments both. the most figure earlier with have a is really and for want the that. market. to enterprise windows of are or don’t they gravity try and to also complete application to bunch tab in these are

a so, that. it’s natural add And to visibility infrastructure to thing

got us. So, it that product play this we’ve of the markets why that’s makes platform in sense and we understanding believe in front

Greg McDowell

a question, get today paid may And be later we accounts Mark getting anticipating the business shift. metric. or on just the tomorrow I I’m mix

investors with from seen paid and enterprise. mix why a have in this on enterprise tremendous appreciate shift the you’ve think growth just the that accounts flat maybe rate I to helpful. business quarter-to-quarter, the little company But, would most success would of be explanation type

Mark Sachleben

nailed focus talked I the of our you and the about quarter, added. our we’re We’ve with the on record and terms and of QX And quarter added. where of number we has enterprise results energies number that are that’s of our in where of a over accounts accounts. been focused a record a in terms very we have that we’re accounts there. enterprise this had side more great XXXK focus number in We seeing investment much the pleased think the is we on is And been. So, has fairly larger volatile did -- terms

low-end, volatility the there’s a variability. On lot and of

out last accounts Just turned than ARR three year half the quarters that of less paid $X,XXX as year us quarter, those and an a paid example, less in a ARR. in nearly of $X,XXX accounts than us

segment when at on going we’re back. time, that going -- critical being be at. something superefficient segment that not driving not line to that to is over it’s it’s But, driving economics. something top But, to in of top something that is work terms look we that so -- line really it’s And we’ve got to

Operator

from question Goldman And Hulsing Sachs. from of line comes your next Jesse the

open. Your is line

Kevin Kumar

on Kevin Hi. taking Jesse. This my is for question. Thanks for Kumar

what what’s ARR implies and during profile some math of quarter. driving acceleration next in Can growth our your your business the at that you couple you for topline the sustainable over mix, strength Looking the mid think talk about midmarket years? market is

Lew Cirne

will Mark that. some I stab Sure. This at a is Lew. color. provide can And take then,

this we’re with SMB with on New strategy surrounded we Relic. of by and midmarket how how tend high-potential pursuing really We’re platform, product. more are APM we focus and pleased is developing on, invest other focusing high-growth, with that business The our these companies to

of that that’s we efficient so, SMB representative had our transaction in mentioned being And nice business, quarter the And operating that in the well to commercial value there. delivering and at seven-digit a just from and segment. we part doing of

has So, done that the feel part I our team about business. work. of And great excellent

And so, of nice the over work we’ve to starting really it’s few just hard a show results. years doing lot is been last

Mark Sachleben

were XXX side X,XXX-person go-to-market been and at I you where And years to over we’ve been you we And companies, back six we’ve that more focused engine when where on as I think guess of at investing accounts SMB. time, of business, just in. sort look ago, five, on the it go the to migrated, for has mid-market opposed when we more look focus our getting

highest the we right accounts ones now, the focused I getting the potential. in, on think, are with

think going we’ve have meaningful. been small been to very for so, And to And with companies them be approaching in lot at lifetime pleased at spend results results Relic X,XXX, be and we’ve that of achieve. the been with we and relatively able XXX been the New a could where companies then look market them. -- more targeted I And those after the that some we’ve

Operator

comes Koenig question the from Steve next line Wedbush. from of Your

is Your open. line

Steve Koenig

and I’ll as the gentlemen, Hi, you for and today. you for more motion says question ask some assumption knock penetrate market application it that Is it expand off standardization just going projects, project lend for or decision the are default use a can of a market be is your enterprises each one New a where to this development time? standard wondering, to to new and going project, any by itself place can with at is the more that decision sales you winning really continue I’m the enterprise Relic. to go

Lew Cirne

their there proving we the gotten declared from building declared but standard, there of time we proving with even by align a running to the are anything CTO I how of cloud. deliver, great We’ve standard and value end-users enterprise. many where the your our may within that again, level. Well, well our from a like already like get typically demand the standard it companies. spring to the not deliver people often, software customers few we ourselves virtually we software future de time believe facto for all software something And internally that’s from be in

we’d So, that earning there like like with we advanced in faster customers customers. environment older around an that that doing our something that. and at with the or over But most you’re may running And be standard not time. guardrails our say love to some position better get

Operator

Jack the comes from line Andrews question next Needham Company. of from Your and

open. is line Your

Jack Andrews

last up to I on a maybe follow Steve’s question just wanted little.

initial movement what budget the organization, what of that, shed sheer You sizes the in just light Officer their you $X guess like? closer if with Chief in Maybe because this here? from look think of perhaps And to some I point with as million to the this Just to deal customers at your move need somebody software? dollars dynamics do the terms you the purchasing the Digital talked in of in of kind the Does about trying process on plus it dollars on process? up terms just does help involved revenue. engage in around around about to sales you of towards higher engage process early that

Lew Cirne

Sure.

the XXX,XXX said a enterprise about customer. average a those our it’s spend for So, in past if you at year are about in enterprise segment, we’ve subscriptions. what look customer the And

fine That’s be will lifetime an that So, rarely value of that’s total too. attractive. at those the But us. for enterprise. level with spend an number average at customers C And level that’s

are many that that. customers are there below So,

remarks. our to the level. And departmental a we conversation on time, love DevOps conversation they the they prepared specific have cloud about get over becoming need adoption, in level, and more engage that senior often three and project, care conversations the to at care care then, are will I in themes their embracing level often agile digital around CTOs, talked invariably about Those So, strategy. our we will value. about prove about senior and in they the

ask level, right. they the And may for those and by what care we be so, about transform doing or organizations have or and successful migrating When their get what faster. no departmental That’s Kubernetes, at we about level, instrumentation with them our help C to the are people whereas Node.js cloud will the DevOps users we and conversations. end departmental to

a And of so, level deal ability part large right nice big improvement our is to in sizes. have we’re the why at right conversation the seeing

Operator

And your Jaluria the from question line Rishi of next from comes Davidson. D.A.

Your line is open.

Rishi Jaluria

you terms expect a the Lew, sense and terms the that the that. you alongside for sales that in solidifying to expansion any maybe new that consider sort with really And I medium sort a terms then, for us what Mark. Can have of you if of of And term near headquarters. need of give different in in investments motion of follow-up there’s European then over expansion?

Lew Cirne

Sure. And in on ask I one. may Mark chime to the European

certainly Relic to opportunity, their we rather presence there our by Relic -- be attract more New will in able being are we opening comfortable New data many believe will our a U.S. about excited hosted to feel European of who being in center. with customers Europe, that data up European are We just than

are excited of talent team to and the European that region. products go parts in we’re the Europe impressed have our the always of on and in and was week, investing being with very was by the we the there, I the with I on people just people the that’s and how last the our well resonating ground So, and office there. side And market. with we’re received market energy course,

Mark Sachleben

And it’s the in to go that strategy a I would say we’ve seen guess market I U.S. that comparable

enterprise Dublin in But, opening different a couple team fairly a out prove see and is to we overall the We And deliberate will but to there, forward. with U.S., U.S. where want take going and We ratios bring our we test the a years measured markets But, couple is, the is the it’s team started that Our it after rest in of strategy. things. see something approach entering similar we sales there our it tweak we we overspend world. countries then quickly. fairly we once U.S. -- at things, too different pace similar to don’t Europe a feeling Europe did U.S., be years the behind here inside great the certain to And we’ll demand opportunity and there Dublin

Rishi Jaluria

quarter. That’s was Thanks. a understand raised help it on Mark, flow and us the outperformed not on I a full-year. But, collections And guidance much strong a why maybe Can it? and raising flow helpful. income cash flow full-year operating basis given Thanks. how guidance understand cash maintaining you you you’re is QX strong cash for quarter.

Mark Sachleben

Sure.

and into the physical if got you territory, look evolved some quarters. in and you years, couple the some investments that into particularly patterns coming dip to year, last QX couple negative you cash coming back to last historically, So, going tend next be we’ve down QX up and look flow of see that due in infrastructure where are

QX, in to back remarks, to beyond. that we looking couple additional half looking the we we we set going next We But of this do ‘XX want head as then, toward in the So, to overall, come success quarters. it expect at, forward of fiscal up ourselves to realm. investment for in and out go at in are the positive mentioned as the year. negative And second we expect

incremental of QX looking so, at And next we’re the -- QX. in some investment and rest

Operator

back call closing time. are will over presenters some this questions further I There no for at turn remarks. our the to

Jon Parker

And Thank look all to soon. Thanks. to you you for talking everyone today. call joining forward the

Operator

This concludes call. conference today’s

disconnect. may You now

New Relic (NEWR) 7 Aug 182019 Q1 Earnings call transcript