New Relic (NEWR) 6 Aug 192020 Q1 Earnings call transcript

Company Profile

Participants

Tony Righetti	Investor Relations
Lew Cirne	Chief Executive Officer and Founder
Mark Sachleben	Chief Financial Officer
Sterling Auty	JPMorgan
Jack Andrews	Needham & Company
Robert Oliver	Robert W. Baird & Co.
Sanjit Singh	Morgan Stanley
Fatima Boolani	UBS
Derrick Wood	Cowen and Company
Chris Merwin	Goldman Sachs
Michael Turits	Raymond James & Associates, Inc.
Erik Suppiger	JMP Securities
Steve Koenig	Wedbush Securities
Keith Bachman	Bank of Montreal
Gray Powell	Deutsche Bank
Rishi Jaluria	D.A. Davidson & Co.

Call transcript

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Operator

Good afternoon. My name is Rob, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the New Relic First Quarter Fiscal 2020 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

Investor may Righetti, your Relations, Tony begin you conference. Mr.

Tony Righetti

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

and Founder me CEO, Joining New Sachleben. Relic’s are Lew today Cirne, CFO, Mark and

call materially statement a Today’s expectations, refers results forward-looking future including statement. projections conference future and differ of All to obligation law. in statements, of provided intend information financial characterizations is these conference Actual New that no as required date projections statements. this assumes from other market to call statements. forward-looking events, contains and and those Any expressed hereof or by forward-looking conditions, except as forward-looking may is the in not update Relic these does

factors materially Copies the may to recent our or to website obtained by that results Form well visiting today, refer please in and about from with documents the statements, earnings the subsequent actual differ Relic’s website. SEC. release Relations our issued Investor most of New SEC’s be XX-K as these as cause more may For described forward-looking risks information filings

measures our commentary accordance investors may issued can not results an release in but between for, GAAP. Our with include be our metrics measures. financial financial believe reported prepared additional considered in in information Reconciliations the for these isolation measures and from, substitute results that will note or use as be financial evaluating non-GAAP a today. earnings GAAP found these tool non-GAAP that for ongoing in to of trends, use We operating today provides and non-GAAP

may call, section one-time may, results. webcast materials insights the offer provide in or This to visit New nature may encourage not, to I on today’s additional an Relations or metrics. reports, we replay release, accompany to issued a supplemental in provide our that may greater Investor about New today, times, we access update into periodic Relic. the these earnings our SEC At of metrics our Relic’s release and business or be future detail learn website more earnings of you incremental

the me turn let Lew. that, With over call to

Lew Cirne

Tony. Thank you,

closed leveraging The growth in on by expertise significant driven with visibility application year-over-year fiscal our focus largely first cross-selling moving code quarter our base. by XX%, our upmarket continued installed into of of XXXX revenue and

While quarterly revenue was sales our quarter, targets. to we execute net This expansion rate. enough above resulted meet and guidance headcount not lower-than-expected a the and for in revenue well balance dollar-based deferred did

organizational limited these against the platform complete release soft of not time, the this go-to-market the aggressively product the of and by new but year to are and was a we fiscal and do are results, product-related largely a quarter. backdrop compounded the pleased same user of transitions. first-half the At of an seasonally to interface We with believe consequence anomaly they moving our

New Longer-term, operations a Relic’s of the powerful the initiatives, One. foundation of the innovation. platform of common, next engineering years we nearly Relic of decade One for anticipate New benefits platform, we as view to these time, which two the The align Relic our culmination New

on product model visualizing this of We opportunity and was reimagined a long-term. Relic the growth downstream makes entity-centric, this delay New up in effort and believe experience pan-enterprise, the the first-half, a expansions the over This an fewer user we customer period. The is was cost – compulsory entire but releases customer’s having as in lands data a in over the integration developed impact environment. and as for feature and possible One adverse across dependencies revenue-generating well future that durable investment introductions,

user gradually and our standards, the recognition microservice with that strategy adopt containers. our open platform The architectures from this early logic originated source base would underpinning

market, monitoring and out, is which initially our trend, emerged at than projected this with rate turns observability landscape. different call we a expansion faster competitive it a As current an we of

conjunction competitiveness New prefer believe being composable derived dashboarding, future of distributed tracing, and much and observability configurable with by benefits fashion Relic users metric operating the our broadly trends. today One this Developers enhances New in We adhering to application needs the we instrumentation address our logging group, extensibility tools, plan continue data with Relic in provide. can programmability only capabilities both the of to platform. that increasing this of the To the and

quarters. telemetry a act to instrumentation step as our AWS augment third-party Expanding increasing three number and products extensibility for our telemetry out-of-the-box the from customers for and from open cloud of to and their released providers, leverage products giving strategy AIOps monitoring these entire observing in Lambda of a agents, All ingesting source May New sources, and environment. expect logging single of will access to an technologies. first our platform coming through deliver We our from in Relic

and differentiating One’s also New and We New One, as customers envision whereby feature Relic capabilities those digitally businesses. being drive of applications their programmability own transformed Relic applications a on top create partners

of One’s products, and Relic capabilities New we with businesses. expand for performance single we are deliver additional digital customers’ managing extensibility to ability our our the advancing As platform programmability a

two revenue-generating structure On of entrepreneurial-minded side; first product monitoring; infrastructure; a teams One, the which few a in side completed general quarter: five resulted groups: objectives the the after manager of core client consisting we operational on an transition logging; organization, and application operating of change quarters the business, critical AIOps. we accomplished focused model during in

growing, and further larger innovation expect to to under a us model thereby address and a velocity enabling of We our dollar market. accountability share this multi-billion increase

This an and expansion new leadership the year organization the a for past new local as well effort been strategies in bringing now the EMEA. unique approximately Region, establishing offices as Two, our European with and included is sales regional of under to ongoing leaders. hierarchy by shaped has

to this as drivers the us international the of XXXX. are EMEA result Our most significant of expected fiscal by APAC, and improvements demonstrate markets, key growth and a initiative are end for

our will We potential believe for One, future our these operational investments improve Relic initiatives, growth. in combined with New

the with with of in productivity growth headcount year. second-half However, first-half platform the expected record the fiscal and throughout enablement operational are the associated training of dislocations companywide in and XXXX, the resulted changes to conjunction fiscal from release new impact that

We are maintaining guidance in XXXX. stability line fiscal we on the and bottom of full-year our the ranges second-half expect top based

turn the the to to over now on call color financials. I’ll more Mark provide

Mark Sachleben

Lew. Thanks,

like the turning to the additional following I financials, to sales Before would offer attainment. color headcount on and

particular, quarterly the primarily significantly attributable execution. to to recent and First, shortfall structure to the expected EMEA, short The partially sales and, and long-term are is EMEA underperformance the to changes soft improve U.S. in both sales in being

would to the and build fiscal headcount GM of Second, building growth the QX be first are I company. like scalable note that the full quarter go-to-market will in than expected the quarter the across of and regional to lower moving XXXX which anticipate respective was model. hire operations leaders year. The will throughout product lead quickly we processes steadily headcount to appropriately, second

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

decrease compared net Our period. for lower in of the in to installed total activity year expect be We the amount fiscal will was a this to in believe the improvement quarter anticipate our an while QX annualized compared QX we driven in a XXX%, to dollar-based point year low base. year-over-year and, this The we as well. QX decline metric QX upsell XXX% QX, was by expansion relative rate ago from

of the contribution and the At was Non-APM enterprise of XX% end up XX% new above ARR. of Insights bookings period XX% same last year. combined XX% ARR, of QX, New quarter during Relic greater Relic of the around new from the business New with as were approximately ARR from Infrastructure than

while grew $XX.X the XX% non-U.S. split, was terms In for quarter million year-over-year. up XX% for million, $XX.X of geographic revenue quarter, revenue up to also the U.S. year-over-year,

For expectations, was last margin million, ahead revenue of compared share growth, quarter $X.XX, to commissions Overall, $X.XX of was lower payments. year. net income last XX%. X% same to to quarter the our revenue, income in the operating non-GAAP or lower-than-expected million, and same attributable lower QX, headcount year. was $X.X our our X% Non-GAAP non-GAAP gross of compared in was New of operating diluted income or $X.X per Non-GAAP because primarily sales bonus Relic

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

expectations. X% equivalents result the at balance below Turning to first total. year-over-year, $XXX from but sheet, We sheet. the of $XXX our $XXX short-term with ended million, revenue the cash and our cash, up investments, last approximately down was slightly This total million on balance deferred quarter XX% Elsewhere sequentially. our quarter’s million up quarter ended

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

expect of ending the revenue million. we be to $XXX quarter second the For September in $XXX million XX, to range

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

that note anomalous $XX on included an low-to-mid percentage an the years to XXXX. million XXXX basis QX revenue a QX million $X deferred expect sequentially. to digits totaling fiscal in headwind decline equates that We single two Please and payment results deferred in covering

$XXX revenue guidance. $XXX fiscal expect from the is to which full from For year unchanged million, range million we XXXX, to prior

to unchanged non-GAAP to from $XX our income income net attributable the of Relic $X.XX operating diluted to expect lead $X.XX. prior million, guidance. per non-GAAP We share to would of range $XX in New This also million

the modeling of would Before Q&A, moving like I to year. with to the the assist to remainder following provide

updating maintaining revenue. first-half are and items We the to XX% margin cash our lower-than-expected gross outlook following XX% to reflect deferred

be expenditure we down down expect from remain $XX $XX million and and is and million and cash million be $XXX from expectations $XX million Cash between between free $XX we $XX which million, million; flow and $XXX $XXX $XXX operations between million $XX million, Capital million. to million. is and to from which expect

ahead. open like would Operator, for go I that, with the questions. please call to And

Operator

And Instructions] Sterling of first from from comes your [Operator Auty JPMorgan. the question line

is line open. Your

Unidentified Analyst

Sterling. Matt Thanks is for taking… This for guys. Hi, on

Sterling Auty

from being Pluralsight, hiring. expect point would guys. actually it you getting get? to Are a number Hi, making difficult a of and normally behind we in about to schedule rate We’ve candidates just of that thanks. is companies, the where terms hire PTC Yes, unemployment the heard to others more

Lew Cirne

focus and our serious have. We’ve plan. apply our get our started think need which executing factor. that for number I more discipline, than we to on issue scale, to one an we of effort about of that’s It’s on company really really not hiring at the

think I is under our So this control. more

Sterling Auty

competitive a execution, with these then you elements the not that that one instead get you’re read a in this are Relic in net why until New that into actually And all given rate, market of need Okay. One, you there? One where and New follow-up at they disadvantage competitive expansion today, out is, it’s should with we issue Relic

Lew Cirne

We to and a The certainly operational contributing factor. product factors that we particular, multiple are expansion to geo had in net QX a with, the moving a in distraction that in moving execution model, have – rate. that distraction sales broadly model was GM had challenges on the We Europe. to around

the yes, environment But market competitive has dynamic. is the third become that as evolved has factor the more

And was for there than involved of do us work But today ago. winning so more to competitive there’s in about position. still our years a feel more long-term great couple we a deal

We interface comfortable think customer feedback it our we’re force encouraging. us to – introducing is very timeframe. for user and them recognize that’s unique to pace than customers. is it the a new them yet has And We help rather a One it we onto at our as New on that to can adopt Relic them this this want capabilities, on

we make with thoughtful well works been sure are using and how we’ve software. customers it so approaching how to introduce the our it market And our in

So that to. up all adds

go. the a for it I QX, that of with managing enthusiasm there a in had and transition that transition short-term impact We’re with was through we’ll our to lot new went performance. But lot this we focus of think, that and tradition, platform, on where

Sterling Auty

you. Thank it. Got

Operator

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

Your open. is line

Jack Andrews

specific there the more more of some this taking the on the where really feature, I maybe which One. or light that to customer afternoon. felt wonder for around you if doing Is self highlight just educating New a base programmability discovery differentiated? are, Relic guess, Good your and Thanks on in could you’re very was around specifically, you are of journey of my I you shed terms their benefits question. part, capabilities this, things regarding

Lew Cirne

I’m asked. right. glad All you

use that So in and customer just was right are the discover had the aggressively want to any to sure we make big around we when call, and how not how Relic make but it. could release. to are New into launched And a release own, last release May our New a Relic it for that with using that wanted earnings we on pushing time observe a we to we adopt One our did first due was natural customers we and this how and out market their customers

We’re given one encouraged usage, customer that by what it’s we’re on discovered seeing it where on they’ve their own. largely been

see on of feature dashboarding July. increase that a For XX% the uptick, in we capability, or month engagement example, our in month-over-month

applications to So the we’re One and enabled our is done but which release we on Relic of And released our excited technical the New yet incredibly of field our Relic encouraged since by to for about we we not have remain capabilities, customers. field have build customers. that. I top One near-term, to in New What plan the launch to programmability

of the order the what’s scale, feedback positive. But beyond and customers, kind people out to coming this resoundingly One first on we New of developing that’s needs top at for this to own Relic developing and to obviously, in people shortly. So community application are the on expand our is the work platform for our

ready. So getting on down we’re heads that

got excited just successful. potential on focus that making to and about We’re we its

Jack Andrews

that. appreciate I

some model five looks product the additional prompted operating Just into like in groups as organization a now? shed what follow-up, could on you light what change the

Lew Cirne

Certainly.

we’ve prior So change, a that product to organization. had monolithic

products, products market to drive the leader many New that like, have And entrepreneurial business introduction the empowered will common for their these for time grown and we compete our So with Relic the having is all as fully leaders win of deliver segments that we their will integrate the and growth. responsible can as now and of of one product right to in accountable One a felt all and now business products. have growth especially do, fully and we as platform skews the products has

the of model that And change. benefits so we’re seeing already

but change. competitive – that, environment the delight focused I’m we focus early evolving an We’re it’s that for it’s with of area in far be time on us our really And highlighted more because delivering to the products very for us, customers. is pleased we’ve and

Jack Andrews

taking for questions. Great. my Thanks

Operator

Oliver The next question Rob from from comes Baird. the line of

Your open. line is

Robert Oliver

for a Thanks question. Great. my had for follow-up one you. And then Mark. taking quick Lew, I for

things source, and aren’t like evolution the observability. microservice the your competitive know I I to for Just of environment mentioned you those and new architectures open moving know users.

then to the out your And buying And talk can user the evolution you tease is, here the what product trying had One moved about follow-up. lands Relic Thanks, and multiple decision New So I’m stack? that lands has and your little away there if were core from quick to any a in and move? bit up I market? a the other quarter, somebody is this

Lew Cirne

Sure.

So particular, product into strategy. how it we when in our ways, about we three market factors pillars is feel like think the our evolving, strategy in three towards product to extensibility,

ingest data open log to need source types open Relic the We data. New types of extensibility. could metric more from into data be dimensional or platform. Examples of source or is projects, first The of data, data

So extensibility that’s part the strategy. of our

to being with that the intelligence, is data be our out key that that SignifAI real second strategy. of it. more and our capabilities able smarter of of acquisition part with And are of The part come AIOps do

to. the I And stool which the programmability, spoken of leg is third

decisions infrastructure. market, a operations we to the a tend around always CTO, I’d of – and focus on that developer, the That the complement to professional had they relates it VP the and as manager with to track. Engineering way the the go-to-market are the make strength and that development, So is developing up say, development what all we’ve the

We well. have infrastructure attaches product it strong very and a

highest So peer our focus often the with the are purchased operations attaching on to over to like it, we have is well of And to the feel low. XX% our but leader. is a customers product on who way infrastructure the product ASPs development ASPs relatively focus professional growth best

Robert Oliver

sales, And is Thanks. with then of know larger success talked at accounts I little a people wondering, you’ve bit you helpful. some some follow-up, had one guys technical and That’s Mark. Great. parking somebody about person have shortfall broader just just the and to technical to that Auty’s just visibility that the earlier, Sterling APM? hire platform guys. Thanks, that, is that than question hiring sales harder area much selling maybe is in a

Lew Cirne

Yes.

would was shortfall, wasn’t hiring the So I say, Board. across more area. It the in one concentrated

than think there’s the any more parts but I so organization. issue I of in some the technical back in say sales wouldn’t area, other

to continue and that while up. success take and with we a do folks to our continue to customers. we to – out are capability quite do We aggressively And see move to services ramp those grow

the So, are getting we end the – continue of the to we hired at last that team year people we ramped. hire

they helping. so are And

seeing technical renewals of those taking get Our is and it’s on more time part, part teams our to effort, to get more upsells.

they those in to continue So feel there we I think – accounts. them. are in got success We but we’ve places like great have we it’s where deployed higher see calorie, success and

Operator

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

line Your open. is

Sanjit Singh

for bit Hi. that improvement you script, in talk I second-half about overall And, guidance. the – doesn’t think a you want to the little assume Thank business. your the Mark, an there said taking was in I question.

given you impact challenges guidance? think you gives saw as confidence about or what the of Given second-half, the will some in QX, full-year that, the product improve the that the roadmap, you in business

Mark Sachleben

delivering Well, organizational some about want. got us feel product – the Lew of now. customers the we’ve talked we what roadmap, we are as like We behind transitions

bit little positive that change, longer. comes the to the They’re already. model, we to those. take going that to see starting as accountability along see improvements EMEA, in starting we’re place. starting But about, are the talked take results a GM And with those of to So it’s with

with feel given feel for the feel XXXX. our confident we we’ve about that target of comfortable – billion-dollar rest we year. so fiscal guidance We still run of the end the revenue with rate for good And

feel first-half, with we but we’re we to some like that. as on bumps the be journey do so And in we’ve the towards way, milestone. in feel along – good a There feel overall that are we good going confident our seen

Sanjit Singh

Got what had conducted state specifically, as monitoring your to in on of the there agent-based follow-up. out market? evolving And going the of application a are a maybe, that and And of the in Any distributed model is, is itself? margin, if of agent-based there? of less an to question from view, New it. in I you is we’re Relic for do how approach? then implications And approach tracing a Lew, sort the think more thoughts

Lew Cirne

no Certainly. in that in tracing place many think use Well, distributed I question many agents there including have cases. is that a circumstances environments,

are of be data, the agents environment. our that However, will a data order primary only the in can’t to source of but rely observe customers source on entire

about our spoke that’s So price when our one strategy, step strategy why is I extensibility. of

highly they – for enterprise. instrument possible, to not applications their And coming If quickly no choice approach. possible a many differentiated, so to they large hand. as take example, visibility They’re data to have all as to rewrite embrace put and it highly want agents, as agent-based our let’s only by as but an from going want into not to software we valuable, take, which is

tools focused our extensibility I’ve – That’s And don’t to they team will see want there be strategy very is instrument going They what to why they to that pockets But within data. observe all or in delivering application. of the sources different different However, see want the so use couple our products important. of on one want vision to and by telemetry see other on that quarters. to got is to hand it be to next place. the want extensibility

pillars, New simple to our recognize you’re the to data. customers and announcements see intelligence is customers One of this Relic some so applications that going build our And complement data in throughout users, presentable to certainly And other of and which near-term. that this and go our static programmability. cloud that us year two rest And going in to Once the are that’s beyond is – going to all demanding do make to enable in only They and our are that. want leverage dashboards. they the

do what about opportunity And the differentiation. very so we’re some us should will on that a that put give to really daylight excited leapfrog

Sanjit Singh

New of been a speak That’s helpful. very quick that different years. dramatically is just for out, architecture one roll several capability sort commensurate storing DB, in changed follow-up Has that, Relic data behind today? are or of handling which and way? New that and the the One I Relic If could And terms has available you the evolved to platform in with

Lew Cirne

products I’d massive parts monitoring complement what customers only they’ve of we Relic other say may running Well, had New many with or big scale logging. is, the infrastructure is told used have still say, days, to capabilities specializations And on that us evolved a they’ve us we’ve at which have stack, of the and in NRDB, could that come load. other launch and the us handle saying,

scalable shows architecture So also scale early don’t – even to they’re on research as the What How most it? most to what of logging offering faster at our have on last on is if logs. as this built dramatically is in solutions I technology really well telemetry than our collection And data believe on logging work a been source at to scale. And perform our open earnings our source we already at compared the built call, with we’ve a service, that that multi-tenant evolved mentioned technologies. we competitors, data well hard environment evolving work gathering just be ours. for have open we technologies

data. metric open tools shops and that’s at So consume called tools of using. that like source also – we’ve are what modern kinds other modern technology Prometheus hard our many involving what’s to And dimensional been work

evolution is complete. that So mostly

extra we’ve And collecting. good the of the will data at that, it. up data, along agent tying loose with have ends with we the on always that We’re that all capability to been then in bring

Sanjit Singh

you, helpful. Thank Very Lew.

Operator

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

open. is line Your

Fatima Boolani

questions. maybe the you This Fatima our some the for with you shared and execution on Mark, of you with taking on there. afternoon. Jen. for of softness commentary start Good to some Thank to is respect

We’re of impacting wondering sales are I how if environment Brexit macro-related the relates some to demand have that cycles and and there? elements if some that? higher-level there the you potentially about purchasing a thinking dynamics And may, And it perhaps follow-up, exacerbated macro – are could some patterns then as

Mark Sachleben

primary there’s focus feel on the the issues been some changes. had Our a size there. good we like that, He’s start has new challenges macro additional in our scale, there, execution there. of and And We the opportunity At internal for than and come middle us. external that issues it’s made leader quarter. in more

I us than I largely we’ve So, generally will time to it’s rebuild it macro issues. – feel those But got within more like we’ve the take and team. control think, our now behind

Fatima Boolani

I’m granularity more some of the know offering, monitoring. of That’s with non-APM if or Understood. if bookings. you monitoring the infrastructure of Infrastructure specificity I then and app ARR you XX% blurring between and regards the helpful. you the combined us uptake, both And And in just can talked Lew will, lines, really past, being to around you about and Insights excess about give product wondering have talked infrastructure because in

that of a to it So that’s attach better you in to wanted really place have And faster and what velocity? at drive understand from penetration us. Thank sort mechanisms you.

Mark Sachleben

Sure.

half things. continues – of think. our got with That there – that, a attaching the of will well. below our Infrastructure third aggressive more – is Insights that with base XX%. beyond anything I we’ve the But was infrastructure We average over customer highest well be the over is mentioned, to as to more after sell talked spend than not I our although say more a are really going said, we couple think have is ops broken buyer, about Lew product. of we we’ve So is and that. Infrastructure, spend about using – product out

to infrastructure the to We cover of have expand got sale environment. One a So do is, state. we’ve the we whole just be the to beyond things. want couple of application to

at we’ve So that got that better be and process. to sales motion

got lead some We to with to The infrastructure is, point. us we’ve want second getting the lead thing at into accounts. capability new to develop

And we’ll on that’s we working as forward. that so something as go be

product we’re the and that very citizen in first-class So, on of infrastructure portfolio. a a focused New making being kind Relic’s

And really that with something I that we’ll the helps think, GM that’s a lot doing. us. so spending model, be time And of

that that going product. We – more infrastructure person now wakes I I the really customers our have up getting hand? someone thinking that is how morning think more delighting infrastructure am am GM those of accountability That every And customers successfully? about I How now in to help.

Fatima Boolani

That’s helpful. very Thank you.

Operator

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

Your line is open.

Derrick Wood

Thanks, guys.

impacted results, target QX a and a So than typical reason backfilling out weaker the And you new whether us you you’re the productivity shortfall do would the of perhaps maybe described for you headcount retention the the is headcount changes time more to the QX? for coming maybe remind or sales as weaker then guide. Could touch how normally to what reps? having ramp on

Mark Sachleben

to also ramping talked And first. a from think parts I that standpoint. typically, year, the – take critical we the is critical in to productivity that a that technical be support rep developing unit a of sales end Representative. Obviously, component that extends component the both that folks unit sales and successful The of field. Sure. about is Typically, the a

lower what We you that’s In would in quarter. say, first terms was, would actually I QX terms strength than expect first-half sales a rep a of ours I of the – attrition. think, of in was saw, in that attrition, Representative sales

that’s going been I So think well.

a fiscal reps throughout lot hire did we of XXXX. hand, other the On

to that stay them. – And continue can that so to we’ve they we’re got ramp ramping successful make they sure in and and

Derrick Wood

products side, seeing kind additional there. Okay, we curious taking roll how demand had they the but and from second-half? changes, you look upgrade, kind roadmap? make want color we of sale that, major maybe nice out, this to to about pent-up as I’m customers upgrade new we demand again, to the the impact think I into much you mean, as the you kind look of new at up perhaps of see customers are structural longer And, move talked absorb purchases, the free a these may do this and

Lew Cirne

I’m more to strong and that – a with competitors. – and growth it’s healthy we the be does And that and attract market with growing. happen scale at, that

And the ago. I sale, of of couple number a involved is days calories in so and that years completing a impacting, in say, think, equivalent

so And impact of I how the that’s it. characterize

effort demand involved say market So I wouldn’t say, – much the as completing sale. so it’s necessarily in the

Derrick Wood

taking my right. questions. Okay. for All Thanks

Operator

from of comes Chris the Sachs. question line next Merwin Goldman Your from

open. line Your is

Chris Merwin

great. very don’t to much. based a been product. launched, if from about believe on heard be that Thanks Okay, to or just already that’s solution the log then adjacent they really log a quick feedback that finding But correct vendors they’re this I just of And wanted the just that I had ask wrong. the taking, a you’re customers, I’m me that’s more would I you’ve something is some want follow-up. of replacement?

Lew Cirne

is, about want log New It’s because they interested our it to What’s diagnose to all to time need don’t product, customers Relic repair. from logging when data driving they’re problem. very leave our in they a

open and especially we real purchased an they application are log having was when do messages a see in or that feel availability even or by Relic, sometimes or have a don’t application logs they problem. on of harder product if, log have, commercial that emitted another maybe to when benefit the have for source be That’s can you solving often an seeded that context, do. visibility problems, like offering, they to specific a if the impossible that specific were application performance offering, we production those So for New value if may example,

our are why excited about customers So that’s it.

by That’s to they that a in so kind or that use there worth some for what vulnerability in keep whether want year’s if the was contrast, use the the handle of data, not are of some logging security, use or aiming past. in customers Now we’re products there might see to past a compromised case case.

et the security We’re not after going cetera. buyer,

everything else integrating we repair by to certainly we the want in we log in detect with with most So solution But integrated to expect many have Relic. fastest to New solutions customers. deliver and time coexist logs

Chris Merwin

year-on-year. be show that great. sales as looks new Okay, the it do customer that And just the more And within expansion the will pointed or enterprise to base? if there, just related all slowed challenge, some in we a bit logos out? of see that like then form up recovery of you on Was execution little growth,

Lew Cirne

I expect bigger. think that the the to slow number base sales as forward, the over mentioned. to that was increase attributable we to that generally – that gets shortfall And we time going

number. or that, either growth the franchise As come you those that know, are customers over into that through $XXX,XXX a

a a we’ll that But our the where forward over I continue to is, situation expansion – at lot are have we going comes rate. see slightly to we customers increase declining the of from expect in rate, think the at slower And number $XXX,XXX. what expansion a

the So I would two differentiate numbers – a bit. two little those

rate expansion primarily already are accounts us in Our paying $XXX,XXX. is driven that by growth

of $XXX,XXX. over And think what I payers. so absolute rate number the versus that’s where expansion the drives

Chris Merwin

you. Thank Okay, great.

Operator

of line the from comes question Michael next James. Turits from Your Raymond

open. is line Your

Michael Turits

business last thanks it guys, of lots and question. APM – little was that. to accelerate terms the seems the the clear the the But seem But you’re in a the goals. moves Lew, bit taking that making non-APM to isn’t were it it like of Hey, trajectory piece below of long-term above that for targets target my quarter, long-term

perspective? is obviously, as is mostly really from people APM to, Because you’re for changed? saying? really to And there’s stuff. multi-siloed a some just APM if seems competitors product? assume, I But mean, want competitive really, it I now APM? what’s it as What execution slowed, down so buy what slowed is of would And who a What kind specifically

Lew Cirne

products. about is customers a their Insights one for vote a Peer product, actually we’re APM our just which APM mechanism number bit and Gartner by speak favorite our to And with product. Well, rated

and like of we a So it and feel of, still asking APM ingesting more But as are there’s I mentioned APM – earlier, and that strong market extensibility it. do for is does kind strong, need data I growing what customers automatically. us a our beyond to little

in visibility solutions source manual the monitoring instrumentation an way. control they’re use over help see Some that an to agent them enterprise that. Other instrumentation, willing just want parts or in their to want an to parts of drop enterprise with open effortless and more of

is data our is agents, all for from with come all so into where we’re are automatically and what our put feel as and customers that the And surface market data other well customers a on to put asking our focused And we that delivering data, headed. that for place I as of may sources, our cloud. that’s like the what

their to to a you applications, especially kinds entire you the for And instrumentation workloads, of very want that when from and with ages don’t they for cost very possible. important, customers want because amount strategic go the many story least different across effort with in of state, do want visibility that’s do having

possible bit that And as something instances. when is so And makes sense approach. with an as little rapidly then do complement more in agent it with you to those it the that to do a way manual,

Michael Turits

to drill Lew, seeing? do sense you which competitors to on I the down guess, was What are that makes I get to where like…? me. trying bit they all to more little look a competition,

Lew Cirne

mean few open data stuff. see and and I source historical lots for are managing of a collecting on dashboarding – competitors in the on are site have see in sources, time strength yes, of that – that sort in – invest a involved that infrastructure. deciding centric on-premise customers infrastructure There lots Sure. angles. and to We install solutions solutions from we

customer sort in and much open evolved list vendors I’d this real-time what’s these types great they of to of of results. been see space. in see competitors, interesting, to more deliver availability all years some to competitors had same many for and in everything markets clearly, responding performance source to has the of attracted inside the We’ve, APM the kind more demand say as it’s of need kind larger, infrastructure-centric coming of

Operator

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

is open. line Your

Erik Suppiger

Thanks question. the taking Yes. for

just an reach the the it of a If clear quarter? an how people but not about me to been if First you to talk timing takes headcount what productivity, off, then has year the bit the in started you a a this secondly, us little cause can hiring issue? give was about why And such this it for can impact quarter? – and long the would it’s hiring

Lew Cirne

just under the X,XXX the increase June last people Q answer of – from an XX. was to So close the of question, That was as first of roughly headcount our the that was XX-ish so filed. or

terms of we so, rate, in. something that’s that And disappointed were in that certainly hiring

was mentioned, I it Board. the As across

and – the some things organizationally performance through the had think transitions that terms quarter. it’s went impact a How in-quarter are we for I of the performance? of does in the distractions Well, impact more of

that we I expense planned. beat think had, was income the was headcount. by fact talked operating above had our we that we hiring toward when about That shortfall was driven a lower-than-expected what geared the the more

Erik Suppiger

Okay.

the hiring a the the So not was billings in or in pipeline correct? factor terms piece, is of that

Lew Cirne

was correct. missing That’s big hiring our targets. sales impact The not – on a the

Erik Suppiger

Thank right. you. All Okay.

Operator

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

Your line is open.

Steve Koenig

very you much. Thank Terrific.

So question for Lew. you,

new be in getting you really the sales You plan for get want done, be the you do? product I’m to does to So preserved? in vision what is through of the that or really in and reorg in those really want back to mature where it your of mature mature you being Or to your targets? need a more where product that to will products need on get to the use be a do terms numbers, to your roadmap to get need matter new the out with and compelling track? on customers really vision educating products be laid near-term your And – APM wondering, financial you’ve that their there, out getting for executing you to investment

Lew Cirne

deliver to customers’ products products certainly expect we these need deliver needs. great meet these to a a That’s question. confidence are track lot on and gate. I of of our would on happen out that that And to we the say,

with product but have the on product not our we’ve focus appropriate put example, infrastructure For level the is there fully very leveraging we strong, go-to-market infrastructure.

from to And why existing kicked the off – go to great described going be focus logging that’s within largely is in which new we’ve so we it to place are small earlier accounts Other market. around the focus that’s our our energy full estate, recently use And to to effort go-to-market case strength. our like in troubleshooting, I scrutiny. that question and on departments it with products the an

business managers only think and love our customers to I also accountable, we’ve fully that their not products. selling think going come But the general are from those delivering results to that We offer we’re great products manager a about, really model general friends there. lot these to moved the tell but where

us benefit. There will yield big a like, are how going the exactly deliver is for growth are delivering at that accountable to they’re of questions these entrepreneurs for think And very rapidly that that’s best Relic. that focused a and change those New I on product can results, business lot I drive

Steve Koenig

product out organization like to terms your if that fall reorg, reorg, initiatives improvements say, what do of product Like which in the from, will the you reorg, a how that’s I sales the come those out, incremental new from timeline? those about to getting guess, results were SKUs things of So benefits first? the timeline come the helpful. some of

Lew Cirne

I data logs, or get say, But don’t quarter to with too say coming we these the from deliver places. ingesting would Well, need two, want from dimensional from we extensibility, – in timelines. to that the I’d more metrics precise other right,

of that So the in couple we that’s to work deliver have next quarters.

there’s When enterprise roadmap use want the that really understand to a And we customers do, influence make that that technology. demand customer seven-digit they particularly they standardization will that want thinking before of about think a backlog when to commitment. their decisions,

are I to can want have have very we’re benefit. that – But milestones And important on. quarter, execution they focused it’s that the we these are high urgency are it for given our a shorter-term too – we to could working the position expectations rather the show those timeframes with asking or customers in set to short-term our just don’t benefit, going they deliver on in So believe really we specific had and help market. because we challenge capabilities,

Operator

from Keith from Montreal. comes question the line of Bank next your of Bachman And

open. is line Your

Keith Bachman

given order bit go I’m that question. different you. a last to little Thank going in Hi.

flow to You’ve it, call the down due but $XX lower, that you to taken could DR I’m if confirm by, the for moving going year And cash assume your million. targets that? that’s

it’s fact, if, with DR loaded? that you – is, expectations, second – if follow lowering the back-end the the And lower of expectations you’re not in even revenue part more commensurate that if why

Mark Sachleben

Yes. you that’s has year The model. the revenue year, for driven in shortfall confirm guidance. – as the by big a AAR know, of say, the impact I largely And would that that first-half the DR, with – will the the ARR I decline in coming on

half ARR results you sort of those And year, year. guidance the has have then for – interpolate the the revenue second-half. impact less second the QX, less of about for of numbers quarter, and less the we’ve every can the talked The the for and an on

the up think portion. And given, gymnastics your the you revenue with going of And around with you have ARR then come so own in. the come when math guidance I view the the the DR comfortable do on to on we’ve – – is and that are to we the timing

Operator

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

is open. Your line

Gray Powell

questions. the taking for Thanks Great.

guidance right But think QX. in billings high-teens math So I growth normalized I today implies have hopefully, here. I’m traveling the

how year we in second-half rate that directionally the should worse? think about just the growth same better of or Just

Mark Sachleben

– revenue color of – more We’re those further given QX will Typically, billings seasonality QX continue. for terms our our for But in – company. and the then in the we’re to the softer than We be point, at the and to specifics expect March. the the in the this for a tends buying we’re trends QX. such – giving enterprise second-half, not cycle more little do December in enterprise the on – not given that past we first-half are or been of the in QX. giving and Q becoming say, guidance getting the year for beyond and what DR the has we’ve an I bit

Operator

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

Your line is open.

Rishi Jaluria

Hey, guys, taking thank my you questions. for

has Lew, a first, start faster the the prepared has you expected, which that in been and happened made than microservices was just comment the headwind. of little of think, remarks, I you one like let adoption me bit

that adoption product arguably, competitive Just a of understand, a Kubernetes greater me space then it’s And actual core kind less Kubernetes around headwind, API? got and I’ve the given actual have a like why monitoring And would of you of help strategy microservices. follow-up. be an something in

Lew Cirne

Sure.

to So of I right we our believe But the great from the all the think while it a it’s call, in opportunity several terms focus and capabilities of call bet long-term the our in on did off doing further expense trade these that our quarters, have incremental We future. a Relic was market could enhanced absolute, last the New I in perspective, within the market. environments. which One, a macro smaller for was that the features, position made microservice but features –

because Let’s manual take, our automatic services. you’ve APM kinds isn’t to for with example, to microservices because nature suited often different do. want our instrumentation that application their agents agents little well just complement services, environments, got many in many of in some the more customers more of many, happens a And instrumentation, environments, that microservices

at the And so be instrumentation automatic it, it’s best nut still and sufficient. do, is not we’re may to harder

places to from data platform And that agents important. is that. case, consuming in and why focused our deliver other on on that’s than just in I really we’re our being rather so good really at So flexible why spoken extensibility to

work kind more more of had the in Now short-term. and future. we so earlier let’s in for that have have of strengthening the in the business capabilities that say, did the would at would on captured we area we platform had our perhaps Then we foundational focused expense more

same look for position feel wouldn’t when the set got up that have now Relic that we we we’ve down impact strategic in have the now road, us New One that I would market. we the the like However, maximum

short-term good take the impact secular microservices, the So I while tradeoff. how are focused about we business a have think but to we that’s moved on the it did as some it to long-term. that’s tailwind

Operator

back questions. all management I to have we for for over some And the call remarks. the that turn is closing will time

Lew Cirne

in wanted the their the I that amazing thoughts and friends users deliver we When you company. sign share they’ll was thank New founding I be upon, about all off. to XXXX, end and a we software for Well, let’s found call. before just idea Relic, joining great it, a of build foundation tell which couple love the

today. principles And founding still are in so deep my those heart

we excited lot about and done. in when number is the like the their insights great rating. of highest highest their most And monitoring, – asks proud of customers we’ve vendor favorite of application peer the feel that and us. have rating the very ratings, I’m performance I I’m – rights Gartner peer highest then a have really received work opportunity front of the we who recommendation and It’s score, is about

up this good an this work is So But again, we challenge us. excites and is our me work pursuing for market that and what evolving, as we are good large do really opportunity what that’s about really in But the to our game in call is upon that do. opportunity. how us exciting strengths challenge – is relevant how

– of So, than pleased New vision And roadmap we’re started quarter, our of Relic’s the but excited today we we’re getting with results not in about journey. just the I have been. more I’m ever

keep you excited on businesses. working we for help you deliver and we for thank great to so and digital coming your call. our And for on we’re And thank visibility customers the delivering them questions

Operator

today’s This concludes conference call.

disconnect. now may You

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