NEWR - Earnings call transcript Q2 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 Second Quarter Fiscal 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. Investor may of your Relations, Righetti begin you conference. Tony

Tony Righetti

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

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

and factors For more refer SEC. may information issued the recent to results subsequent differ earnings XX-Q in our from about today, please filings that statements, with described cause well as most risks actual the forward-looking as release materially our to Form

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

Lew Cirne

$X.X more of with good the New points along I’m joining another and over to ranges improvement million, These results the investments XX% and an quarter to exceeded ARR an sequential enterprise enterprise review Tony, everyone $XXX.X results. quarter report prior financial that than income to bottom of year, fiscal steady of revenue second million, call penetrate guidance today’s outcomes are growth our to pleased from of and of non-GAAP year-over-year. increase the $XXX,XXX midmarket the with XX% non-APM XX% of afternoon further Relic second advantage Thanks, results, more DevOps accounts the Relic’s on QX, XXXX world. throughout we least product. bookings, we platform. outstanding digital X,XXX for and paying in of quarter demonstrate dominant and top line basis made and feel We our and focus as record New again, ARR. software continue operating Once from with as on last New platform relentless becoming accounts new Overall, customer and the an we’ve during which at multi-tenant managing underscored momentum each monitoring, quarter Sales of systems. to was led a Relic execution a Infrastructure from quarter maintained totaled XXX% this around build being the application-centric service by than contributions operating Insights

than the top to anyone market. growth application-centric the layer our strategic drive is the to the at layer us of stack, the this digital customer places in this the looking Being digital Let at customers, paramount investments. line experience. complex into Visibility closest me better for for We explain. most do scale

are all our that running of Microservices, and at rapidly Serverless in Computing, modern infrastructure layer. the interesting today customers Computing, Containers service adopting really are is what’s Cloud Now target these technologies technologies down critical code. visibility application in underlying the browser cloud they from application application way and complete And running the their through the that the mobile it’s or to all the infrastructure. have

platform. view our essence, continue monitoring opportunity majority we APM concert we our a products our in to perspective, entire using that calls, of New is Relic on today. with is, greatest into currently non-APM in of believe activating connects as provide data of uniquely all products points segment of in not our From go-to-market production the to covered lies work which a market previous is valuable, In these environment. a a the single holistic software platform, customers’

the driving professionals activation during base dollar valuable and side XXXX. Our period, it our investments believe is in and business in transformations. ubiquity you XXX% operation an significant When critical the our return favorable sales at growth by every over been rate expansion a initiatives digital past our how on focusing than customers the year is the highest responsible of technology success quite achievement, teams capacity customer reflected have ARR skewed and of dollar made developers, factor solutions executives We that enterprise net on encounters rate today. underscores the our company scale At same find installed expansion our and team towards three high-level, enterprises having amongst heavily the net offering. common impact, yet solutions are our had for since expansion more in and QX customer fiscal incremental in investments

And agility these enable second, to digital market to because we’re are illustrated adoption build growth great customer experience, larger by adoption, customer new the their XX% digital year-over-year now accounts. strategic products product we cloud, efforts transformation, and attaching accounts components and at infrastructure; ARR first their grew brand and enterprise market; to and DevOps paying delivering have third, experience bottom flawless greater which activating a buyers. aligning now we’re By digital to digital business, XXX our the as teams line. more as broader with go-to-market stands teams impact year, for of to quarter-end per at well our by foundational DevOps, $XXX,XXX The to more in most XX% with autonomy to which non-consumption totals to than deals their at deliver ourselves their offer reaching driving initiatives, cloud scaling is in

to me One technologies on election hiring returns, fit, experience, media of hires. team for consistently second into the XXX their share Network stage at and these first-half as USA modern Relic by XXXX like experience performance team digital stay election their New industry for the product help our like of underpins this a their browser Relic hires of largest added journey FutureStack visibility Network, itself content video that readers how are come room, prepared of an to An dashboards is is Kubernetes, traffic digital market USA moment development team Today on-demand. more mobile, On year strategic night. business peak capture Inside opportunities, their USA Network this insight the and product and The demand as business, the we integration San have members performance Today tonight, namely sales and customer war as delivering set the have plan Today They this reps, fiscal customers’ customer In which of of to modern moments and aggressive effort. key truth enterprise over sales outcome Relic’s capacity on the deeply customers have a order the year. designated night event in everyday, properties. of these second-half the everything monitoring focused of in They election to join from rich their advertisers’ beginning record the is and innovation is with for second USA technology and have results modernizing data is and to our technology alignment. areas on well those such order discuss forecasted New updates core by superior New their shown of solutions a natural on metrics. we at and ongoing for the in. as tonight ahead differentiates bulk in Today Francisco, throughout monitor that provide XXX Network and having of turned media

we platform. no growth We productivity, prospects used being continue revenue in to more to work In to throughout see brand world-class trend and continued hard end excited to increasing software the our to the of more the improve business value. from closing, are organization. often of to driving for We bring building talent about outcomes

for share SaaS us larger their multi-tenant customers modern that has as model operating to opportunity from much Mark value technology our provide This continuously color we – of growing strategy points data customers I turn financials. meaningful In positions and Our the systems. our this monitoring, will us provide upmarket moving continual chain value is call continue flexibility performance to outsized entire and to application-centric an the help drives understand and market the connect to managing across digital multibillion-dollar management, capturing environment. to on application than over scenario, the applications. within required an evolving our favorably these the now more digital for

Mark Sachleben

Lew. Thanks,

accompanying results table ASC fiscal this in results to release ASC reconciliation financial year under the prior call, today’s call. press A XXXX During under presented are earnings year’s XXX XXX. available is

well was paid $XXX,XXX to year, $XXX.X up installed base as both XX% year accounts increased turning We QX expansions to accounts from the than XXX of ended landed, the XX% This and represents a second paying year-over-year. per products. cross-sell application financials. Revenue million usage, as more additional the Now new coverage up for compared quarter, business derived ago. growth expanded with

year-ago as installed rate same business same base Our is QX the end XX% uptick which the At in of of encouraging from XX% over an dollar-based approximately increase around net enterprise expansion QX, given of a result the was last the up period our ARR, was XXX%, in year. period. slight period,

Our XX,XXX, this as fluctuate focus XXXX, near-term updates fiscal our economical provide optimize low-end in year-end growth resources the to relatively within the will again accounts fiscal installed of at is opportunities over only base remained That metric business sequentially. moderately This for year we flat continue expected total upmarket and said, the to beginning market. we in toward metric. paid to

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

metrics we’ll loss release profit historical between all point GAAP to would expense like in non-GAAP found be that forward A discussing our and are Gross the can out and earnings profitability moving XX%. otherwise reconciliation I metrics full unless issued going today. specified, and Before was be non-GAAP. margin of to items,

With Operating $X.XX robust fiscal $X.X $XX.X in per X% to full marketing of million, the our data new year, by million, European center operating diluted operating compared last negative primarily loss attributable of our expenses margin second capitalized upside, decline expect in to share capacity anticipated. same a million result our QX new as in basic the same same year. the be portion G&A and $XX.X compared and of stated to and of For as were QX we quarter million, share in hires outperformance strong hiring driven quarter $XX.X same expectations per region. non-linear costs the million, modestly revenue in had was quarter Overall, to last or XX%, the million were Relic or quarter expanding R&D to well. The Overall, year. compared New of million to $X.X to than revenue, to to hiring expenses, was $X.XX, year. around larger we X% start we $XX.X income gross the year. earlier, a of regard And last of our last expect same and dates an year. to we U.S. quarter. expenses $XX.X compared quarter was income sales to net loss in net compared being costs million, $XX.X in were revenue last another the quarter

year-over-year favorably included roughly our contributing total on Turning million. balance result by million. $XXX account, ended balance short-term upfront. million One quarter up We to our which the ended quarter-over-quarter, X% to deal from by existing a with two-year our ARR factor $XX sheet. and total. increased and second cash deal approximately million-dollar with million deferred revenue at which revenue This paid deferred $XXX revenue sheet, XX% was to the expansion last guidance payment up quarter Elsewhere $X investments, full compared approximately cash, million, the equivalents $XXX non-current of range our deferred business quarter’s

QX, in into we to increase look the basis revenue on As single we anticipate percentage mid from digits deferred QX. a

and Cash defined from capital to cash expenditures $XXX,XXX from Turning cash $X.X operations million. flow. was was Free as minus outflow. software capitalized operations cash flow

to continue cash we $XX XXXX, year now $XX We earlier to primarily fiscal due be million additional San million to of million, million. be of expect consolidation later and build and to to of million million, expect and all offices cash million flow our be from up million CapEx free expectations office $XX $XX the For data capacity. to $XX $XX between $XX outs, between $XX from and to operations center physical Francisco

the quarter Now I will outlook our for full turn and XXXX. year the to third fiscal

fiscal $XXX.X expect million to the XX, ending from we quarter December third million. For to revenue $XXX.X range

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

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

of $XX non-GAAP million. will million, $XX an improvement lead of guidance attributable $X.XX, to from income guidance $X.XX. net between non-GAAP $X.XX We earlier diluted to an share per in of to million to operating $X.XX million $XX our improvement to of New to Relic expect the prior between from $XX income range This

ramp time to the upper-end of mid of XXXX that, second-half, As expect the full-year indicates, call CapEx our expectations QX guidance we which for the in single open operating up headcount at please digits. questions. fiscal in the result margins signaled with go the like investments call earnings And to Operator, low and ahead. to I would we for our at

Operator

from your Cowen Wood of the And Derrick from comes [Operator Company. Instructions] & first question line

open. is Your line

Derrick Wood

job little rates of now I wanted getting just seen or is Nice really What ask maybe on quarter. improvement are on drivers to that rate behind that mix color? going is renewal quarters it enterprise cetera, net et is retention give or of whether the that something five revenue up, it’s higher, enterprise more up-sells, the thanks. you’ve year-over-year why the on Is bit this trending Great, a better? also within there the the calculation.

Lew Cirne

delighted and question, the – a great driving it’s are I see. multi-factor to do we’re factors that think A that multiple improvements

the enterprise yes, also that to standardize single First there’s in enterprises seeing such that upside course, so our customers as a the rate. more that and within see have much a just immensely. of these more in now early we’re accounts, secular trend is, enterprise XX% much what in And, increases, innings demand our mix journey run of is of to as market helps and our those a just platform then is desire And we’re everything. on

a to customers easy our what’s are tools having between a to software with So environment. of on our platform frustrated in enterprise application-centric, as to standardize works and switch it’s love want platform single to on a view multiple digital they it that use They going comprehensive have service, well. the the is

is And in spends, them what so spend, gives opportunity to customer delighted XX,XXX? about confidence their that that makes our great them, there’s increase we front more us, where we’re think of average and

Mark Sachleben

Yes.

Lew Cirne

account. …per just how potential this run. only and month more our news is to room more think customer that value that again we year, and X,XXX quarter. much customers, still XX,XXX for that little believe over a enterprise than wonderful That’s has our we But per to up year is. deliver substantially a a much There’s per

So room there’s to run. lot of a

Derrick Wood

just guess, Great. to follow-up And that. I a

starting people technical support impacting or or that’s reps. you the cycles of you or Is guys or too adding curious sizes impact productivity? quota-carrying see how I’m much overall early have that? SCs that been on to sales it more think sales focused I to are deal

Lew Cirne

entire the doing again, the the they comfortable that, the track. our the because larger be to way more platform more see environment, platform, they and understand our as we standardize seeing the to to customers up and more we’re single your be relates on a it answering Well, know will that and enough we’re on completely want successful And breadth stepping – investments. depth are we’ll of to that right although to

life quota-carrying that so for makes easier reps. obviously our And makes

And and thesis. is that And do And done to mean into doesn’t thesis what full But that work, incredibly that delivers to far results. there. bearing seeing with the there’s they so more that this out our that’s to because so our – we’re we’re been goal our step of when the investing in sophisticated up substantial customers potential value. to they it is substantial amounts platform. get do, platform, completely And is understand

Mark Sachleben

Derrick, Yes, I’ll just Mark. on this is in jump that.

hiring that Our educate our believe most of and know way we And best us customers. more to that are educated more customers those a the folks and ones technical help our is those great best.

Derrick Wood

quarter. Great Great. the All Thanks. right. on job

Operator

of question next the comes line your from Auty JPMorgan. Sterling And from

open. is line Your

Ugam Kamat

this Kamat Sterling. for guys, on Hey, actually is Ugam

wanted that just deeper dive customer. you signed I deal to multi-year into a So the with

becomes seeing customers we from normal to the one-time and is portion As multiyear? should penetrate more business. course this And you Are you a a business item? this enterprise lock that in just a or going to interest forward, larger like of consider of be

Lew Cirne

see the would a What you expanding. generally up, see – that’s our of occasionally, I us take And think stepping But get enterprise push base, don’t a are market is see still And still our we customers not necessarily one-time customers deal multi-year, that’s enterprise customers can more item, pay I relatively but rare – for annually our generally. we that. our they’re speaking, a That’s say. and customers upfront. we and we’ll that’s in is the we’ll going direction

Ugam Kamat

that or you you the talk you venture that to partnership go-to-market your release? can follow-up, financials, any announced press have other Japanese them? about a with in as And joint impact Okay. Any

Lew Cirne

recently. very just – that can as days it’s you early we relatively announced That’s –

we’re going as market we with great that look partner in is short-term about opportunity. We’ve to we’re the in very joint that at attractive. impact that modest. being the a and very be that venture excited think But we got So very

We really it of we we fair – would to best have that served with felt Japan. in customers like at and up to do we think joint a do, penetrate really like enterprises in penetrate order best the a But can set was going already we venture. it number thus we to market, like think and we partner we

long-term, great think but have impact very that the be we will modest. expectations – they for we have we short-term think So can venture,

Ugam Kamat

Thank Okay. so guys. you much,

Operator

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

Your line is open.

Jack Andrews

you question. things if going how of my just the and thanks your could then an given to about there’s be IBM Hat? maybe acquisition pending was wondering are what in Good Red how if taking terms partnership? update for afternoon, I could you – with potential talk implications of And IBM’s

Lew Cirne

Sure.

with of they we’ve for So why also the one partnership to and IBM so quite well. worked the ours. they’re They customer think, that I of has been that’s partner sometime fortunate And substantial reasons deep use – of a of them, for deliver can have thousands the software and breadth their digital on of some appreciation what platform to because depth projects. and our do IBMers our

to being measurement customers In is or run on in reach vision the in and we our Hat in may more they we an from cloud, with provider They that, environments. me expensive and the to that to have independent thing that partnership it bit acquisition, helps the for for the reach need service cloud about be particular this, or visibility of an in journey this like his talking our certain to they come a they’re remember And recognize from to their interesting of makes providing it own. Arvind about to and space, to going well, party on as feel that in about people value the fact sense supreme independent Switzerland us the I think enterprises and is our help service monitoring too. itself. us to workloads a order success platform more measure difficult more multi going the cloud. be particular the independent Red Hat, company that the they that way, So and Red like Switzerland We

Hat workloads to just there’s great on run a draw little of anything, to we a if in view our of Red Red customers environments, their that, many Hat. run parallel bit So,

believe the result just and synergy there’s more So only a IBM that as we technical combination of Red of Hat.

Jack Andrews

type not you they there’s if another, whether the the you’re as Great. currently an customers, use then specifically Thanks. are wondering want but could guess, mean, I you’re maybe Relic do what serve same seeing software program tools I you? Relic – developer lead also interest discussed at essentially that who can develop for to appetite ask, to just in mechanism companies New Lew, of FutureStack? APIs for I’m terms if generation using of own I And New and your this just

Lew Cirne

they it, production tools need it want see particularly small, our small being the our to custom what being But Well, they visit, of recognize what teams And to particularly Relic solution. the a really development so that customer present in in platform way what out want New visibility that is presented customers complete it ourselves how customers that out to of I they tool also development unique that see to this build they how custom to exactly is, a came internal much something do – observing bit exactly has we provide measure round but to see accelerate how platform and because report our of in to help complete the or I even. enterprise think frankly, every of could they environment, that there customers solution development. customer evolve start a enterprise the they from to in every enterprises, exactly measure need to to requires

customers our and present begun entire to how rather so, wheel data. solution to – customize wanted and DevOps reinvent analyze to full that we become for internal we possible it that developers than have journey and our Relic on New to performance to – collect And on making at making the

and customers platform. higher will and customer and healthier value for we with developer our the that we relationships, result customers vision early laying in something the that’s run. think much groundwork resonating we’re believe stronger economics it’s So while giving the our that And long in ultimately, it’s better it’s that days,

Jack Andrews

my Great. Thanks questions. for taking

Operator

question And from Jennifer from your Lowe comes next UBS. the of line

open. line Your is

Fatima Boolani

sales you incentives Thank This want around contribution, question for the is better Jen. Maybe if to of you, Boolani very be taking continues afternoon. for to I on the Fatima strong. non-APM Good understand behalf bookings question. a And Lew, that well, sustain may. you’re or giving specific to quote able non-APM organization contributions? the And if follow-up I of additional of in really have there’s then form as I retirement to that level to a be level kickers

Lew Cirne

Sure. or No, specific This any demand or incent we to unified to that introducing platform. our responding are a collection tools or nature to of are a not reps incentives customers the go What spiffs our is from is to anything to skews. the pull of market from sales market. drive we a

help”. discover APM Relic to product, our often but customers performance I to first And in see of the and recognize, leading and addition “Hey, New then because so they application stuff world-class other would love

and of to conversation the so to an reps a platform easy the start they them other in Insights, for that products. They time, and depth powerful and they the then can sales to. like be their And breadth see same but water product in that with product dipping may toe how their over for explain investment it’s our is have them grow product quickly to said for

is. So great, it’s and because natural and demand organic alignment it’s market the it’s with it’s an where

Fatima Boolani

side. the sort you level a the move the the think the walking or deferred deferred sort of up the as the through you of the I lower you maybe more But us appreciate question and effort SMB sort revenue. fade customers market one-time nature and Mark, increasingly of And, us if penetrate of model of helpful. types much. more outperformance of of you base. I Thank on out inputs those around into help enterprise? Can economic so if multi-quarter on revenue about think into and about customer go-forward you will, lower pruning, the you you for the very That’s long-term complexion

Mark Sachleben

Sure.

that few few customers the bigger monthly. enterprise – the our a mentioned have base annually. we I multi-year. the – last one-time commercial And this and much now over yes, and significant have many of that of is SMB and million changing, quarter benefit even that back business, had go So if migrated business us years so $X that’s on – to had paid those high-end had our years, you SMB In we we paying a ago been you general, that the

mix So increase, said, shifts. tend that most That in to business. any over tend we early to over drift duration still an is the lot of deferred impacts their oddities revenue getting that ones and we it’s have each of highlight slowly that our upward course. underlying It’s too to our duration. deferred customers. year this for quarter, – we – enterprise well, or co-terms, there but period time, that around big are most puts But as this we billings billings durations couple and difference seen and/or there renewals caution an of think, we renewing versus to using takes like tend about things quarter our of every something upward. as that, upward probably I but next But had timing SMB – on really it the think of time. the it’s better, but there’s more we’ll takes run don’t the are a first that. see see we’ve someone or point, that’s because get the We a every of business of – are impacts better At it’s a we’ve those ago, But health We see there’s some generally real – drift, seen we’ll years, that still meaningful mentioned the meaningful quarter. in and climb puts very in number. we’ll – – quarter. of our our again, still than But At in point, starting, drift so indicator

Fatima Boolani

appreciate That was the color. clear. I

Operator

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

Your line is open.

Gray Powell

me letting for Thanks ask Okay. the question.

can. And do or I or changes if how at the see either do approaches? any Starting calendar that the just demand at migrations a direction? in off maybe can feel pace cloud all as you anything XXXX influence you of couple, macro environments then about a high-level, So in growth

Lew Cirne

brand. of demand order an digital. strong there. that they feels rich. to increasing win it recognize various their as an been historically. It’s not demand has in is to succeed It in have option with of their Enterprises be and relevant as to areas and is The The it’s business,

to so driving each that’s in ourselves to driving three demand adopt customer we themes experience. them and them the those. that go customers digital And it’s driving and our help DevOps immense when we those succeed to attach computing. them for It’s in invest to of And cloud are

largely is feel constrained healthy that market for foreseeable not by we So that’s future. certainly opportunity the we’re and and like unchanged

Gray Powell

Got it.

competitive And a question. Okay. then maybe

player an what market, APM So as feel is versus APM that’s do into the infrastructure player your moving moving infrastructure that’s you biggest an into advantage the space?

Lew Cirne

Well, of is run we the applications. to purpose believe that infrastructure whole

that And a software. especially in environment to on the if is the production it. the we custom touch environment hardest most is software often it’s the computer run software. don’t The You complex believe you most thing of changes buy want thing software, unless the

as a Like on election digital, Network Today to about year ago I election digital. to just as in election seeing fact, on in, ago, night night about night, them their helped as that’s they are change on as in on they order how ago in and stage in what changing production actually rapidly two deliver on the what are to – were for were years earlier, how competing succeed election experience. to real-time results two talked possible. a order on I software they flawless have effectively years businesses stated respond customer real-time, succeed the spoke pouring they USA In And you literally

is And so the about changing infrastructure the problem application. that you’re not infrastructure important change visibility right? is if solve more harder you important, at think – your very your we believe but to So rate,

some the with the And of of relatively business various And where infrastructure solve where rounded value easier throw we watching leadership so position there. most complexity is. clear market It’s the off that got is, then problem a pieces we’ve data. out most it’s all the in

be too it’s so of challenge And monitoring technical not dismissive of the to infrastructure.

or it. that of We’re moves downhill from in infrastructure-centric and a lot uphill. application, going kind But company a believe they’re investing it’s a whereas is we’re we – the working a technology –

Gray Powell

much. That’s very helpful. very you it. Thank Got

Operator

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

Your line is open.

Rishi Jaluria

let Hey, Lew. start, guys, guess, for I taking me thanks question. my

together talked the As on with you infrastructure you having to, one is that value the talk prop and about your APM everything and different common expanded how New all you’ve value Relic’s all platform. kind of about products

another ask me tangential because of area doing. Let log you’re that’s kind me that’s management, what about to to

of You’re have partnering value product not But kind prop that and that? of then for having I a now management follow-up if with have why your log on versus on Splunk Sumo sticks platform and Mark. the whatnot out a and one likes of partnering? own it And

Lew Cirne

Sure.

source, story. the round visibility can important most customers believe like roadmap and primary So data problems strengths been that we what has our the a solve messages then support complementary where in And our of that data to done application. places, we’ve we feel further the of course, logging of our log today prioritize going the on what’s And, capabilities. what partner leverage in that source out is they’re for – which are is on sources complementary product

companies. from log data and secondary believe the and So augment we partner we collect with solutions some it management we with we log data that many primary then come

we stand where that’s So today.

it’s customers, like our which too We little recognize adjacency us asking say, adjacencies where they’d a are continually next. to and pursue will We’re go there early interesting next. just many to

Rishi Jaluria

think, But Okay, this pretty from question. big operating to benefit relative And, quarter, saw X% side. a a quarter, last the housekeeping XXX of more especially you great. Thanks. I about margin Mark, on

how for getting the Just rest XXXX matter we of into what Thanks. head sort and should hopefully we benefit you’re year FY thinking the XXXX of be this about from then? anymore doesn’t until

Mark Sachleben

to we’ve think trying I’m historically. what said

be commissions is the the talked to commissions a that about being million end we big on – throughout that’s them. be for benefit coming we now year. think, dollars capitalize The of year, talked fairly the consistent on of it about, sales actually us And the going the, a quarter. think, I we fact probably the to I couple

where tend a third those we to bit have the tend strong. relatively be quarters, the little sales with And so enterprise in the – particularly focus to commissions that quarters larger fourth be and

we the be benefits slight been year. a to materially have as it’s we’ll So than the say, first-half would in of it’s uptick, QX. But different XXX I I QX in and get into don’t the going think

Rishi Jaluria

you. it. Okay, got Thank

Operator

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

Your line open. is

Keith Weiss

is Sanjit. Weiss for This Keith sitting Excellent. actually in

ask APM you for guys in of space. environment on sustaining at reality? the the really what And sort that quarters. much of better, doing closely for if in more over and current not out accelerating to over the to overall business turning could guys There broadly two that we guys? like One, Mark’s we environment the we could acceleration saw to the materially line. of anything of seeing be billings the lot along want see are billings. perhaps still at warning for well. you is a from you quarter, adjust the deferreds, a least is the kind or But good that at look more Elastic competitive IPO environment. Given you the anything your around very competitive two, kind was that When long-term changing questions to of ground leading What’s in there what too like look growth couple business, at of competitive particularly really view then past on point discussion on about past extraordinarily scale? there getting that’s I anything And

Lew Cirne

we’d for is Well, enterprise in or say particular, is, lot turning to speak great that it’s Keith, you us cranking the of proud kind the what’s is, showing very of capacity. first business again that, really question, to strength we’re with of a results, and this

being demonstrated so We enterprise that opportunity. and when execute motion, and well was to our the sales it’s journey. succeed early and recall that we’re we’re had number well reps I competing and brand business especially We XX% see us. on early there, execute. that’s front we had build of plenty done enterprise is them we working there’s for never and ability small we’ve went But accounts. of effectively. enterprise if and in enterprise think us growth And into of just those of And Part we with to very an that our days. pretty a there enterprise yet, to continue You of public clear, that support grow capability to

in only has me, might really moved particularly but cloud the have be how great is, thing deals it’s that’s where long-term. that many RFPs think been years moved New we a ago, – only very do us tell we the for said can were they many a over environment. consider discipline when these and – have customers, that to tailwind short, the were commitment our workload offering. if five a it if on-premise would for I on-premise give some market us felt enterprise they and short-term running modern would we’ll we it other build do on you a glad disciplined bring to no said, an that, to on-premise that had Relic now to they about we benefit, a from regret focus We you not I place we an offerings you because that like can’t then of that

our lot application-centric running then customers. go in scale a space. favor, at we for being our our particularly matters big works all a deal believe APM forward, customers. that We is to we our as And in So the think

their Our from ability quite differentiated our offerings. is to digital competitors our transformations in support customers well

no like So a win, don’t deal competitive to if position, can feel it’s confident of our in particularly in there’s plenty we excited modern us we environment. reason running for and remain and there’s

Keith Weiss

super how Got Mark. can to productivity of some sales part seeing related That’s in for could bigger ramping the it. update up motion are give sneak your overall a an And that Can the us of of now if enterprise us And give I milestones becoming you business. maybe of helpful. much color been on one much, year? or trending? you Any over kind that’s on sort additional how course you guys

Mark Sachleben

us. how bring teams. to and as think, the as continue great what we a territories to we from structure We’ve learned to said, lot how onboard, hire, terms reps everything – we learn I it’s ramp lot in best to him Lew of look a to how that journey how been a for to making best and for

are to those those we So continue but I learn, we think things like we’ve feel gotten are like at. better that things

see we that, increasing. done we’ve as so, And productivity

comes first your They’re day here, days. them sales team. now, is team we’re that your the XX some it’s duration as of low. when not that early the of pretty And at what the pretty duration where from just productive nearly percentage-wise, quickly, Obviously, point in but one hire you get you that reps we’re to was average it growing not

starts so retain productivity always, you nice to gains. you folks lead as and durations increase to those And can as – duration the

still are. work we – where we’ve got do – So, we to we’re where with here, but comfortable

on investments. that of to focus kind technical can in of services feel we’ve supplement last the had and couple about by we quarters the support, You good investing over reps those personnel technical tell technical the

think to got – we’ve I I we’re to Lew about So the accomplished, learn as still said, feel first what I’ll plenty and think, a admit, yet be good have we we’ve do. we’re, to we – lot

Keith Weiss

you Thank great guys, quarter. Excellent. and much, very

Operator

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

line open. Your is

Steve Koenig

Hi, gentlemen, taking my for lot question. thanks a

said, customer the And needs around I buyers. DevOps talked market your was So comment, of by you aligning you at activating thereby about near the efforts with intrigued go-to-market the really customer by adoption, your non-consumption – new start experience. and cloud where call, reaching the Lew,

there’s that what lot consuming you’re market What reaching unpack us? of for kinds So – bit more non-consuming there’s right that you’re a that statement. not in little aspects other calling of just a a any now, are buyers you lot sure I’m Can now? of or maybe

Lew Cirne

Yes.

me let clarify that So bit. a

do any in primarily, it’s today roles. sort there different necessarily – not place. buyers think I so new have still running applications not It’s APM in product are of many production more that

XX%? something Gardner of was statement it the so like, And

Mark Sachleben

X%. currently X%,

Lew Cirne

over as workloads, – application X% next the that have they said today, they – months it’s or ago growing XX% to when to six and growing X% Yes, years. about several of XX% was

driving massive such us, So we’re that. believe a a just part front in just big opportunity we that’s of of

when if that – one custom have put of some is be choose environment shouldn’t advisory isn’t that their people the applications, just you driver board, car with – every X% of car like because This we APM, on survey insurance – their insurance, standard our should something for should population. for right? production to the we’re category. it vast They deployed of just of democratizing the Now majority choose should it’s just

they’re we’re figure democratizing those that’s right? easy And So do products use and out and massive industry-leading growth leverage going deploy the we us. category with margins, – recognize a reason the way a our that strengths why category are is, democratize a to that and cost-effective the to to we’re that to for to so opportunity that’s way in profitable

Steve Koenig

adopters mean, this I your Customer democratizing… early Board the Advisory that is suggests way that And the of you. vanguard, Thank in in they’re

Lew Cirne

They are.

Steve Koenig

to mainstream adopters … of increasing and APM APM? adoption last early – of more attributes the to should just follow-up the give SaaS-based the question What more of of category? the are What way specifically question. that my are –

Lew Cirne

the the bought as will Well, whole top of of of people operating reduce recognize think companies. business that line The the the the playing drive back-office. these as to the that can top more as their companies in on just into opposed a the technology, that These top of line the strategy cost with the line enable digital that software, adopters growth the of will earliest be. of are they two to offence more a were type compete that cloud are technologies. first companies types successful effectively are These companies technology

cloud people have who years have the XX mainstream. Relic and five, adopted that mindset New are today. becoming more But that – so so Relic ago to many is was why New more moving bit that’s tend to now. a avant-garde completely adopted New And earlier mindset adopt And Relic companies

Steve Koenig

much. very Thanks Gotcha.

Operator

the comes Raymond from line of Instructions] from [Operator James. Turits next Your Michael question

is line open. Your

Robert Majek

Majek on Hi, is actually for today. this Robert Michael

potential application we XX% pricing evolving go you from so see time, revenue a over growth penetration to that? X% sense workload can get you As of just the from how do

Lew Cirne

our continually I launched a running grew here a Well, of that opened a to we the optimize fully that business. first expensive APM pricing, the and market experiments to say, offered with way product, there we’re larger market. as product we little oversight dramatically use up and that much would When experiments less our opportunity

top believe that. and might and we a bottom our the experimentation But our financial if So our can of pricing lot favor, enough have we’ll impact really do always space – then we’ll with around if that to to to consider and suggest substantially adjustments discipline we help certainly data grow line thought that anything redefine and that model. our

value. As on it with and net pricing, Relic – stands always today, we’ve in dollar the understand that’s digital though attractive our serious adopt who their we value and New got the expansion we’re customers reflected a And and even sell rate. see the operations, the solution, they value-based

Mark Sachleben

we consume like Yes. the we pricing, want on first with Relic. couple make I something to where cloud it just to now years for can And I friendly customers we come guess, another easy that, there offered of way were our New out our to introduced to ago, add buy. that, a we

guess, deploy to And I New of We very more want important more, neutral was lot to New to Relic more want over we was but look an value So what we at will spend Relic, to can long-term they’re margins, we think we about them. and account, become be dollars want New just see because customer – account maintain that the easier those, how everywhere. think to our getting a it optimize a to will we is, the something attractive. really gross spend lot we – and that where customers think conversely coming it we from but at do we – and felt made pricing, about when for Relic

Robert Majek

us for on more just you internationally? one just to doing Can expand maybe me. update what then And you’re Thanks. an give

Lew Cirne

Sure.

up. well as mentioned we just set that we in Australia. So expand continue as the Europe, joint venture we Japan to in Otherwise, our

And internationally strategy headquartered to Australia Our grow. in continues APAC focused. be to tends business relatively our

would We we deploy to terms them somewhat a resources we into of we say, to new like entering really where efficiently I think, can markets. conservative country. I market, in pretty are, affectively a and a jump good and before path deploy see

so in that have we’ve sales what a already market country, after And world. go targeted including customers got can feet comes countries, it the and when customers and put technical both on ground, a we over the this the at really to on where base. look resource. – all focusing on we’ll feet look at We we can we’ll then But

internationally. be that in primarily Europe. And it the so will – overall, we investing continue to primarily investing we’re in – near-term, But we’re do

We going good to a expect forward. of be driver growth our that

Robert Majek

Thanks a lot.

Operator

question next the your line JMP. Suppiger comes And of from Erik from

is line open. Your

Erik Suppiger

reach taking expansion. are Yes. Thanks assumptions I sales expecting come the want expansion How required in your what sales hires? terms fiscal new question. And for to you kind you course making of full for over the what the to time productivity are in to – back of XXXX? force of a percentage-wise the

Lew Cirne

$X path the rates put billion $X specific team run of disclose But a or size we we’ve billion want team. rate. not beat growth of of the did a March we obviously, there. the XX, to the out So

imagine, help target. can growing towards that team to get we’re our sales aggressively you so, And fairly us

– year a productivity. four full about assume we reps, sales to to to enterprise our For productivity quarters

generally, little the the guidelines. teams, are commercial it’s For quicker But and those bit than SMB a that.

Erik Suppiger

comment you year? growth made you last the would the compare Can that to this organization your compare year how sales in would growth

Lew Cirne

specifics. a I to your obviously, top to your as I We’re capacity line. not mean, imagine. same, around question same the sales productivity basically getting guess to has If the – you rate can grow into as productivity stays

resources aggressively We’re well. as in investing non-sales

get too the many So want I there. of details to into don’t

Erik Suppiger

you. Very good. Thank

Operator

And your from next of question BMO Capital comes from Bachman Keith Markets. the line

line is Your open.

Jung Pak

Jung for question Pak on A international Bachman. Keith is This thanks. Hi, opportunities.

very JV modest But You in Germany revenue being from to meaningful can help. a a talked about Japan expect ramp way? when you

Lew Cirne

ago, I guess. Germany, XX,XXX, opening announced announced – just an I’ll it recently availability month in a call a month, We zone

Mark Sachleben

Pretty recent.

Lew Cirne

Pretty recent.

certainly a I that good if our name there. well – publicity, out as it’s gets think is, think, as I So,

could help. that made feet ground on the do so, And We and have in investment we’ve Germany.

We break-out we market as a being don’t of grow we look But continue attractive. that that give our and at investment, so country international business. to certainly

at cloud You the spend can see, big – look market. a a obviously there, you big it’s

to So we there. expect we continue we’d returns. like anywhere to see to And obviously, invest, invest

Jung Pak

follow-up a change competitive or process, the Great. type dynamics. on saying And you Thanks Are increasingly very any in the in of competitive the you’re that elastic against? much. vendors competing

Lew Cirne

it’s we’re No, search box, out a performance thing to we different market. not just engage different of elastic do the from and database. But just It’s what we in availability. honest. we tune seeing That’s from at do how very the a all great specifically for enough be how

of that. earlier beyond continuing trends has that I platform tilts ease not is see a for just to further a ask from Those what aside towards are market the So just all things the favoring go say would think the been application can there the our – in general, change substantial favor. the market and environment. that SaaS market that to we and environment competitive favoring in in I’ve shared favoring delivery, in But use the entire

Jung Pak

this Thanks remarks. time. questions for very back to some Lew much. And are there the no turn over further at I’ll closing call

Lew Cirne

important to my on night the a customers what’s for and on helping our hats with New great they’ve first-half the that deliver for Today quarter an obviously the flawless election election. want this in country, It’s I those and joining to experience Well, going USA a and a just night in shareholders the year. to the great so we’re want X,XXX our for see off we’re done in everyone, Relic’s thank, exceptional and delivering work great delighted to call who real-time Network for

and at great. of about a evening. us and coming face that’s to thanks have succeed Conference all AWS can later talk you month, DevOps. cloud event see with and And this just Amazon face to And So where partners helping and meet up our great digital we you the we encourage customers come

Operator

today’s conference call. concludes This

You disconnect. may now

New Relic (NEWR) 6 Nov 182019 Q2 Earnings call transcript