NEWR - Earnings call transcript Q4 2020

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Operator

Good day and welcome to New Relic Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.

At this time, I would like to turn the conference over to Peter Goldmacher, Vice President of Investor Relations. Please go ahead.

Peter Goldmacher

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

Joining me Mike today Cirne; are New Relic’s CEO Sachleben; COO CFO, and and and President, Christenson. Mark Founder, Lew

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

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

believe non-GAAP results Our additional and include operating commentary investors today trends. our tool will which financial provide use evaluating for an to in we measures,

our replay to a periodic may today’s earnings or section visit these release, issued Relations and maybe can for our as access reports, may reported should our not At the offer more between to However, or one-time provide on isolation insight GAAP about or from to to website of metrics. learn SEC GAAP. webcast information greater that substitute supplement in Relic. non-GAAP materials we accordance for considered into release New earnings business financial and release we metrics in New in issued measures call you future This not Relic’s prepared our results of or Reconciliations in accompany today, be financial an in encourage earnings detail nature, these may be times, provide update a found with I our additional the Investor today. incremental metrics results.

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

Lew Cirne

Good and joining thanks today’s call. afternoon you of for to all

the in This months? salutations times actually times. all contend probably living struggle in truth is, is last two How and everyday. to. heard truly that I face with are one We great and living in the are many we This that respond number We know times. unprecedented and for emails have unprecedented you the

And as it to needs software ever. relates software, than world the more

this Imagine world the world. to Software I’d that more And COVID-XX like At COVID-XX, is a a virtually lifeblood the all horrible actually if in virus, take world. make XX to me. internet hit the clear, years point mere the unknown if of were you virus thought experience that was to ago. this what is with time, that

was connect There are But to few delivered online capable toy, and you internet to BBS the do deliver supplies was of to people no or telephone no for not modems intents expensive, teacher were the to to AOL. need a a very video or distance. do XXk resource now and way to all work to education purposes to shopping, struggling educations right no online. get their is our and at a fad there their was a home, incredible you. way needed available way calls doing no There conferencing, long There get of like was kids much me online. help a There to at important ecommerce, There there for instantly to with all. is they further no was

small believed difficult that the a times. world deliver been it’s our our the of indispensable. all niche But sizes, We’ve And was always no disconnected and ever organizations mission have instrument companies and through And help paralyzed way perfect and New yet to the parts, so have COVID-XX unprecedented internet noble than a In world would Relic’s and been finding mission would around incredibly here now software. we of truly world thank software. important. are is yes, more this more

We the customers vertical. do in have ecommerce

education. customers delivering We online have

customers provide now We segments, simply that games unexpected even delivering in platforms, customers spiked these all With ever. unprecedented those that conferencing. yes video have than depend availability people and has an performance the ways. our have their We deliver couldn’t and facilities traffic on and more

call our We platform observability Relic we a help by New single, scalable, customers One. delivering

websites their place. you digital data our and properties. New to We experience need One from web end telemetry and performance One. the data, UI All from in a together their in important called to much it be in to Relic from think one Relic captured know deliver accurately how digital applications, these just do, infrastructures, New and these and beautiful their they it’s to and customers much brings applications order applications these these completely how operational user about from and what measures need their logs. When needs

to of small a hundred uncommon a It’s pretty customer by telemetry a us for standards. that’s our send month, few not gigabytes a customer

over only be that at it that and that could it New place single from been coming use they have Relic three every from infrastructure. telemetry month. What from the customers coming some data be petabytes That Relic all, the tell it logs, the they our sent love us of have scale. coming continually applications, We customers New could as data put is this to us can could

single a - all the to databases who our scale to for at ground was the people anticipate to We petabyte that Source multi-tenant we technologies. Unlike built the design need and very that scale. today. and to deliver didn’t way managed from on a at other up Open this, work we some fine kind work scaled individually in of be approach Those NRDB were customers built therefore database need for tenant

that the preparing very for XX for of New secret for a at to trade-off work work help the short-term. goes no more short-term years be was expense align in difficult Relic. is a XXXX could but calls. a fiscal Any trade-offs the company year us involved. company and next There of things investing It’s candid, important to those that pain lot challenging the future tough the around the through And time involved of expedient doing are it’s

that So and going into natural fiscal of course it happened what didn’t was I’ve easier previous in XXXX of as said make we the ourselves, any on calls.

that confident I One most behind XXXX thankful the could year. as throughout made I’m we are establish us starts for where we our today. growth in to executed new excited think now for is and I’m sense, went it people company. business we brought all we the better of the that But and positioned are we New we ourselves have transitional into parts that Relic To very I’m with the have to transition through our talent very next and years. in about

in drive quarters. forward. We’ve articulate Mike – of clear is company New you Most clarity brought gotten level have the great execution and of recent to align class executive. to got a Christenson. a accountability company a some came to were about business. everyone business, he’s that couple that think helped world around Mike we of and sense we have to that you opportunity he’s the our could driving and remarkable our simplify. Relic exactly the joined what need goal us Align How see is He’s new leaders if Day Investor

and to very I’m for thankful from Strategy Officer. come the heights. of APJ raising even to the Officer And brought and I’m work that have great needle a Product Chen a help closely the wanted great that Dmitri also of us New with confident international business. company actually and move a was very – moment with Strategy Bill his Wayne the game the We’ve a into going team new talent doing. Staples doing Chief Officer, [ph]. was proud greater we’re at take our has to he’s just Wayne as Chief him customer and Chief work brought joining industry the I leader, redefine to been has kind Bill company for He us impact Kurbol joined Relic. and our fantastic Relic job, to remember the that as forward We is been immense in met, that to he I New I prior

products. new the On shifted some side, incredible product we’ve

The AI. Relic New is first

period. We’re have the after very Beta market successful a in very this excited to

New we have Relic the Because our is most events, most believe the logs we because today alerts. offering AI on Relic powerful, data New our space. rely AI in the platform and and in so most those telemetry complete, metrics many customers traces all from

to perfect they alert and noise Relic more complement and come reduce them proactive of anomalies issues is customers the predict the AI for help production to larger detection New do before outages. problems our

AI. to That our looking opportunities realize hard point where hard have in customers our in alert thanks savings noise, to Relic a reduction be that XX% customers Some save plus of companies New to dollars. many dollar seen can are going at time at are direct

thing I’m second Edge very recently this Tracing excited is shift The and with very Relic Infinite New capability. we about

how you about containers have about As some past people asked microservices APM. in how and the think of impacted have

been is most the the complex environment. sampling. industry means as they we things application do through the call the transactions What the the of One tail-based in it and ability asking flow that worst ability customers slowest capture is the for to have erroneous the and what to and a

service, that and to the ones send from a the special erroneous update to do way and all in with. New because environment our competition their deal cloud the Relic and to competitors Edge tenant complex us that a customer does inspect very single and their customer piece slow and we of install back piece that. the differentiates in aggregate require needs much software and those manage traces up of software But a that’s it

customers to software. our XXXX, managing be Its want their don’t management

in New to that manage. but We Relic capability Edge in them logic regions cloud industry. what this the be service delivers our their managed that that believe shows our we it beat close that where in quote customers run by in sits can doesn’t Relic so our and customers. want exactly believe deployed We’ve multi-tenant software, a [indiscernible] it’s We unique multiple nobody New to customers this need APM.

I roadmap, to and We I’ve that. mean excited could are at roadmap I’m never you at been I this Relic’s do go hard you more But position for detail than I things work, now. our very truly tell today. New I can wish that opportunity right our great about more exciting into a

share the great hand good improved them, said this, crisis, Mike. great I’d them. I from to are companies by destroyed it companies are quote Andy bad Grove. by like Before off companies to Andy a survive

question the history the in and of of the in truly Now no that Andy history is great is technology. greatest CEO Intel of companies the technology one there’s Grove one of

I’m Relic. I I’m to make company. biased, New think a And kind so premature we’re it I declaration us for of great be would a Founder. that of believe

believe I we our ourselves? But here’s Why to core crisis the want to of things I It ends starts during judged did be will. us and do believe, I how that? great by, with we improve our do really with and people values. XXXX

during we’re core them Annual every bold, we’re an connected. kickoff, just accountable, And if mattered. passionate, truly then day, say not you and we’re authentic companies crisis. things we’re They’re are do live in this values like We that it’s things great times you

times happening things. deliver we’re I’m thankful their challenging is excited to During everybody, I’m great still to year. working where in the this, great with when kids do headed all incredible to the a parents that with room work next people the they’re Relic. their dealing trying be great we the ask and incredible jump amazing helping who’s very and about to at we be And to results done. proud for days. times, cultures dog all meeting. our into these I’m This [indiscernible] had like do things,

With to it Mike. to I’m going hand that over

Mike Christenson

customer on Lew. an results hiring. and topics renewal four in ended We that Those conferences at our execution, XQ. And success of heard But most investor in selling Day were corporate update organization. start I’d are XQ like as update four with at some the sales for the sales Those you important objectives to on I’ll are in XXXK These that Thanks know discuss us execution, you yield. objectives events and December customers some of based I’ll provide new management portfolio and and and topics an platform, our most sales ARR, Today Investor provide in December. topics. our redefined since December.

portfolio selling management. last management our our on did simplified segmentation, customer call reengineering renewal we our the training simplified our addition, product of we In a of system what finally and fall. that then we new capabilities we motion And a did lot announced

All into was in was us that through of to done that XQ. XQ important very for carry it and work

series and of ran in sales XQ, pricing packaging our products, we addition compensation. experiments in In a

the of lot in quite well through of quarters, But two recession? been we a a XQ headwind was changes. felt a clearly, responded Stating as the quarter went We not better, have beginning organization very good the obvious, we it encountered to So but we have in March. change the as and January the beginning and February. those moved would through our clearly of had we pandemic the

In some cases the impact and clear. of pandemic were the recession the

We airline have have data monitoring, customers these lower before application industry, industry than infrastructure for These they in and did clearly monitoring and analyzing events the hospitality the requirements customers retail. log hit.

lengthening impact were that cutting terms. small as and of requesting began some a less more were our these in began in imposing working cases Sales an home. there from other people clear. But extended payment business. aggregate Fortunately, cycles was Customers was flexible and cost programs the percentage verticals are

Having stronger. even our through so in to drivers and our as pursue can we operational however go $X impact billion is What said our is and cloud goal are business perhaps believe the that that, say and XXXX we revenue, were today transformation, of on business, that’s our continue our improved as strong digital resilience the of we of to year quantify. will execution. results our as XXXX key beyond do And they financial as in the difficult getting migration sales of this drivers execution we that fiscal

monitoring, of own custom a the programmable full ways. data about use XQ ramps. the a Platform finally all sales focused the of They platforms, platform. platform. talk our Relic that access The agreement these send the New In applications And on our New and platform. me an monitoring on platform. success fiscal platform Observability flexible in analytics. provide They sources, on other selling customers Relic the selling platform. log in platform. selling also capabilities let use performance One the third-party typically variety we our of our important and essential now from XQ, So capabilities measure team Application in build of all We to the their infrastructure they have customers of it’s with and three

strong One feel pace maturity about the XQ good sales of the tell can our and value the is adoption, feel we that, and I of Platform. customers What was you quite about adoption we our platform platform good to teams platform our in New communicate of in Observability customers, Relic direction ability to our

let about So ARR aggregate is million. management. At the our next talk $XXX XQ, me portfolio end of

some are said a recession, we the million ones in of economic the who we’re stress. those pay business and severe of that year us a pandemic As middle so experiencing an $XXX customers

alone at deal they with we’re these Some of not not need as them challenges. and fact having the in are shouldn’t likely to contracts surprise XXXX renew fiscal level to did fiscal their XXXX. This in in anyone same to

portfolio set and built system usage risk we that identifies customer What customer when can you, we risk. it have execute any variables plans that tell repeatable It management and of products identify mitigation a of is monitors our helps on based health. a us we

experiencing them when So that navigate customers work hard we every with improve identify will to New them work any day we and help with mitigate. they’re Relic relationship. work system our them And to to with challenges we monitor, can help that their

Our our number challenges to customers. we’re when dealing these one priority is with keep

and will pressure on ARR section. net impact on new downward the undoubtedly two Mark new and expansion in that ARR. of The rate to annualized pressure preserve renewal in headwinds his put discuss dollar will is Our based reported long-term priority, yields the the

talk would I like hiring. lastly, So to about

in strong is at our Relic. company position leadership our about our is Fortunately, financially. a New And team prospects excited very

and joined weeks, attract exceptional still career Jay great Chief Relic to and few So environment we’re in long at last our Accenture. that we’re successful Peoplesoft Snyder Officer as us even in a Dell in at a after to a strong to and EMC people. position prior the challenging New In and Customer able talent hire

Kumar including has EMEA; Management, an this organization leader Marketing CMO, a person we’ve new and Marketing Product And in our of and joined Seema variety comes experience extensive in with hired Salesforce finally for Marketing. Product In Corporate end addition, Officer VMware roles from ServiceChannel, she announced company has Chief XQ. will be a the our of at

of it So I financial helpful I’ll Mark now this pass more is you to over and provide commentary hope in our Mark? prospective details. to the to

Mark Sachleben

Thanks Mike.

the Let’s line review December up range $XXX in was of perspective $XXX $XXX was million above quarter guidance and $XXX year-over-year at of million with ending you for million fourth on Revenue million the fiscal discuss before Investor our to meet in our in the ARR XXXX. fiscal quarter in $XXX the financials ARR XX% I between and we fourth up million. Day. XX.X% XXXX, guidance our

was in sequentially. low million have Total $XXX ahead for XX% guidance date and deferred our revenue of up the growth XX.X% quarter

operating for revenue For time in quarter compared million to million hard this in debt bills. ago the X% paying $X.X retention to $X.X Couple was year all dynamics non-GAAP quarter have income our bad the the would of or customers their quarter. X% of revenue note, of we accrued to first million fourth $X.X or of

reason While modeling some to we them to bills expect aren’t eventually those paid. will. there’s of get But

we’re as Second challenging more current business. still environment in and investing as is, the the important structurally,

our We’re about ability optimistic still space grow. very to the and observability

profitability. Non-GAAP to $X.XX was Relic fourth income the of XXXX. So net fiscal to attributable compared New our in quarter focus growth share on $X.XX remains over diluted per

operating flow cost defined was cash capitalized Turning was QX minus as million. million. by cash cash for flow, $XX.X provided to activities development and in used CapEx Free activities $XX.X cash software operating

cash, up last sheet cash balance short-term million March investments $XXX and our XX, in of from in we equivalents quarter. As had $XXX million

Operating For Non-GAAP XX% fiscal XX% Non-GAAP in year. flow income a flow $XX.X to revenue as the compared $XX diluted was is XXXX. to Relic reported year. margins up from fiscal cash net to gross was year. operating $X.XX year income cash was were share ago $XX.X $XX was last million $XXX million free per down fiscal attributable million last full million million same million from New and from year last XXXX. XX% $X.XX million Non-GAAP $XX.X compared $XXX down

the compared XXXK threshold. end quarter. and in accounts in existing almost we added XXX mix number that over more ago than accounts a year to year new at XX XX% up with QX, to coming In up to customers business paid paid with a ARR XXX represents well customers This business as as crossing last XXXK of

we our XX% quarter. accounts and XXXK year last is in XX% quarter ARR XX% from up that This ago more from ARR, the than generated of spending in quarter

a on around with we We their metric accounts. on previously XXXK believe spend spend percent from their of based based shared is more indicative business ARR accounts size. new this from coming opportunity rather customers you measures What it metric a as of more than than that business enterprise larger

Our quarter the in our was from expansion XXX% XXX% the the from quarter period. and XXX% rate for best from down annualized But expansion last dollar rate based net year. up ago year

fourth margin. minute two quarter to Gross spend XX%. want in discussing I relatively a was consistent or gross the margin

take that to XXs margin This in to near cloud the the expectation that cloud in as the the moving years in to move is is low investment and back our However making the This class will XXXX centers. three gross sunset will high gross our a the guidance public significant data range. execute. represents best complete, But public for XXs. we we’ll fiscal fully about undertaking margin our come we’re is to when in

period time. will Mechanically even a for down come of margins though gross

fiscal as a We on capital in the more project positive operating XXXX income. expect the impact will cash migration savings and reduction offset in expenditures will have flow than

a decision. strategy. business we primarily While operating strategic aligned a cloud perfectly element is feel The long-term more with consideration driven it is our public in is of financial good almost every by as move

front Turning us the is to of challenging, is environment opportunity large in while We guidance, it is believe is the temporary. current long-lived. also

well advantage most take we When So we’re large selling to continue equipped the of aggressively going will large the some cash balance sales in business. and of with in invest force compelling the and the our improves, market. observability trained be environment the technology to ready

In encouraging. the and see poor visibility we near very is term what however can isn’t

that through reality compounded challenging cannot sales working unfortunate bill. portion based our smaller of a primarily environment, pay businesses the by installed We’re their a

fiscal reluctantly So only is time that this we’ll against give rescind at for until guidance for backdrop guidance XXXX visibility we and improves. our quarter one ARR

the Our first is quarter fiscal guidance as XXXX of follows. for

net $XXX be per share positive $XXX to to million of revenue million to in to loss Relic to breakeven. attributable negative $X.XX operating and range $X.XX. will forecasting between New a We’re loss of $X non-GAAP This the non-GAAP million of diluted

In quarter to addition, ARR XX% we’re of first end XX% to period forecasting year-over-year. grow the

for that, with And it to Q&A. back turn to operator like I’d the

Operator

our today question Please Stanley. Instructions] is of first ahead. Morgan [Operator go from Sanjit Singh

Sanjit Singh

you as questions everyone I and team well and doing Thank well are the on employees taking is New hope the well. for doing Relic

So to guess into, you’re is first in environment, much seeing but to sort the place the what Mark. dive of start I

then If you a start trends seen any April digital the see if quarter just other sort the And sort seeing of could March, there? and maybe could May in do as through from through that end then, customers benefits we have you you of since you us usage got are properties? of what surge of walk

Mark Sachleben

obviously so As we we when might deal down did impact most an hold customers two the there. back impact us, see year on weeks impact, an of adverse last have did hit. year an would we decided And a say who the that’s entered things fiscal slow at see been end looking to and and couple large I the the really of of our weeks March, critical of for really

the impact very adapt to on terms to for their annual customers quickly also quarterly preservation payment billing mode. just cash – We go looking an saw in

the I end And was pretty think new that. March. see going did we of into it So all

continue are trends to our think a extent, there spike great it’s is and those of we’re I a then some April. which April, serve to And seeing we customers just as them. entered we entered As certain

cash particularly small April initially collection the on slow. April very a in standpoint was think I from side, saw we

I instead lot pretty going did things. we just of things of was companies to bill that their people think weekly at that and as see in to home, monthly like back nicely early May used But come were in bills work a of getting run that. terms paying

So we’re though and quarter regard. that’s that comfortable we we in half. outlook and out cautious first Overall forward to that say, to see would are going their look first I about customers continue our cautious tone as our

Sanjit Singh

Understood.

As or continue would for Lew, overall observability I I hopefully follow-up all seems out and well. grow market be we’re doing and the this guess fantastically it it Michael to for pretty of to get to going

And the new the big improvements so, of product all releases. and with the in platform

think us I is isn’t. consolidating plus who spend of a going trying and understand to lot what within to be who’s are and accounts type XXXK

different XX With around tools at probably corporation. this, to was report enterprise large long unsustainable that’s some It the I the there a think monitoring us over backup seems haul.

I could more conservative wondering walk a diligence functionality space in Relic you on spend So points be may the New could due be [ph] consolidated why environment. as sort this of us and it if capability through for was

Lew Cirne

its happy I’m speak Sanjay, to Lew. that Sure, to

customers. really to starts consolidator we a think our that literally data think collect I a I naturally our Day. database telemetry we ingest at and our Unlike that built it any The petabytes of competitors technology data in about position shared be and Investor from collection it to custom some with have we’ve platform. multi-tenant fair strong are of of bit which our

So is our there in scale that customer we can’t no base. really handle

all the today And for future. regardless APM one up logs it’s or the into whether business is fact or of What that’s foresee data we database digital in the infrastructure data. going

performance were you go to disadvantage. in that to and to has you vendor a single-tenant cost going that consolidate consolidate, different data into a a to run at designed different usually so a running If into and they places want architecture be want and don’t databases

going capabilities data we’re the the can data have this our the platform have still we because to the be share data effectively capability. year. scale it So to and of we throughout because our opportunity the telemetry can more course telemetry operate to for cost ubiquitous we collection nature on of believe at an that of most deliver customers because But

Sanjit Singh

sounds the It Great. QX. strong congrats on exciting and

Operator

Morgan. from go Please next ahead. question Our JP of is Sterling Auty

Q –Sterling Auty

the other looking your to I made going that for the in of the more So manifest impact, June XXXK here the make comments want the than than spending in that itself the in the of you negative less customers that disproportionally XXXK. those understand versus to guidance are you at terms paying think sure In I words quarter. customers. it’s terms in smaller how impact represented those

Mark Sachleben

Sterling, Mark. its

seeing expect – we’re think I at in smaller it we both the low end customers.

is much I and spend spend their reduce are manifest to gone both time with I what so where take spend high we’re think just longer then seeing And are they’ll little segments. customers their others you got pay some can’t or reduce down on Relic. - they and the think But seeing they in where business so it has bit themselves. deals reducing projects end, either been and situations have we’re disrupted to going dramatically New their business and to

and And the them. to New zero. the in people we Relic good working with see over news is see leaving don’t that, don’t people Mike going we said adjust in they’re and so needs we’ll business to them be partners the as with understand We long-term their through but want work franchise don’t see as XXXK, remarks. We We good prepared we’re particularly to challenges. going

we kind so for and that’s us. these with long-term we want long-term We’re sure the those to customers ARR, focused North on and make protect Star relationship of

Q –Sterling Auty

Okay and then one follow-up.

sales on last new nine the in over of the to retention you terms [ph] top able out [ph] leads? being six that’s customer And experience passed some to newer base. the like in of levels? next on months? of funnel you activity the In What particular seeing market the that So what’s terms happening the in what’s that of of are kind fill solutions

Mike Christenson

a give one have we that that would is, of shot, I’ll customers. the do paying we say have again advantages XX,XXX Mark. I

those our So the new from vast ARR of ARR, majority comes existing customers.

So new above XXXK going logos, top existing through is great we’re have XXXK the XXXX we FY did this selling to more a under and customers. period and to lot of through and funnel of really power our happy and with of that. time But we’re

described terrific this But using three in all quarter we obviously. I are on where momentum ramps adoption and good we call logs. with people platform of remarks saw them core momentum earlier In as terrific, APM what infrastructure the in my

they’re using with platform. all and a the it at So capabilities true platform capabilities it as the including of as the newer looking

Q –Sterling Auty

Thank you. it. Got

Operator

Our today next George [indiscernible]. is [indiscernible] from from question

Unidentified Participant

of can of kind some how base? losses that you customer is The much that to the in sense So year-over-year feel distract and just give then side? competitive losses, is us much how customer a on digging you within customer the

Mike Christenson

and growth easy that make we’re customers the customers value is, them it want of investments heard would making on customers. experience have want customers terms their the we in do we XXXK. customer as What buy easy improve to try, we still a to resume X,XXX customer are to and get of lower and and spend. to real we to to want great paying experience, focus size Obviously XX,XXX have and I of have say end customer at range you’ve across XXXK entire But New nearly a we again our smaller over that a grow count Relic

a than aggregate a What what I end we is, had describe decline low I slight would $X in ARR total – say at million. The is the customers. for less is decline that will although

a of bit number down, that turnaround a it’s ARR. big had you dollar drift terms not although and in I expect of to would So

Unidentified Participant

All just question. one follow-up right

sense near term you either then investing the front. On hiring would sales? the us plans, for quarter give me a and versus Mark, full of can oriented the for and R&D next year say how

Mark Sachleben

Sure.

continuing a So long-term opportunity capitalize ahead to are feel us. opportunity. we like for we good on we investing very growth, want we of And have that

definitely gone to in Arcelor are that, We’ll We’ve everything able do hiring. environment investing. in hiring been we’ve to be seamlessly But like companies transition to obviously to we’ll gone So more of has has and [ph] favor the hire. that virtual. continue fairly hired

we’ll go throughout board R&D like So to a see I It’s percentage picked spend fairly a the feel that up. across year to pull continue last that. up do as would like we’re continuing be year. to steadily the hiring bit. We certainly

to execute We we add plans on These great we to able capacity. be and to sale improve systems so a lot the continue want as and situated and to side, to will latter want investing pass the continue of year. to to Hopefully. we’ve be things the so have And over we’re want of side well. half and as continue our on there as We the things on improve G&A well. got times those,

Unidentified Participant

you. Thank

Operator

Barclays. Lenschow today Please ahead. next of Our Raimo is go question

Raimo Lenschow

separately. that gave kind It and number? together upsell taking for APM can [indiscernible] one my do that Thanks fit really and to that. of helpful. for logs in least terms One you Lew, the for will everything versus of question of us on infrastructure thanks that really you then to a the of like how and was think about ARR, was disclosure Mark. like have you. Thank observability growth you’re around how versus at and do that and we’re talking old for kind of assumption? the little lower Mark I bit churn gross think Lew, now need kind as extra doing about the word about number understanding helpful. How conceptually talk extra And what higher What’s I then you seeing

Lew Cirne

think seconds a bad Sure. capability simplified need to and a when count. goes you, state. continually the know because because changes monitoring tells The have same to telling that ask, were solve you is, customers you have thing difference and the ask a you when is to How is it you’re you then watches thing in observability about questions it is mystery you into a tell going didn’t you the it’s by to you giving way where problem capability One or precious real-time trying thinks – like about we to problem why our about think observability.

data have have So if as haven’t running why to or fast you outage you prevent up at back help need get figured you and problem that in order an you a disposal. there to is outage possible. all as can to the understand things your Anything

it time, ask You need could an in metrics. ability any data of in immense the amount or infrastructure real that question of data be logs and to or

infrastructure of vendor, next so [ph] not all it should so there’s as language by advancing And to and that logs step we customers database, the application that’s data idea query seamless of that of want it one vendorship data. be that’s unique of we be our to the so to are use in take transition and I kind don’t same we same why and or believe tools and where a saying we we, only believe types provided go between ask customers. you it’s important data the or And kind companies further with a that one literally other question these whether are

Raimo Lenschow

Thank you.

Lew Cirne

Mark?

Mark Sachleben

terms for had you churn the QX. upsell question In of on versus

be rates we’re as larger that to on in April at May. but the to looking I new and we’re May We the what said we expecting The and April quarter We through came expect line upsell. now, a And close churn seeing look with ARR as it into a year the through impact be we’re than I on pipeline, is saw ago. impacted. good probably midway

be with So as larger that will as a new go last churn fairly we’re the been pickup through churn, we is the we but consistent on seeing impact QX. think year in

Raimo Lenschow

you. Thank Okay, perfect.

Operator

Oliver Baird. next today go ahead. Please Our from of will come question Rob

Q –Rob Oliver

had and XXXK Great, to customers for run some question at quarter. been really kind Mark, you. follow-up on weeks to those point, Day for the your XXX I good was it is question. rate. Thanks it welcome been was a focused ARR last of had Mike that of XX and few for afternoon Analyst and very Mike know would goal first guys. My like – then better the added this detailed said taking year at out it quarter laid Appreciated a sounds plan get for much last you. you quarterly not and you I solid, my Peter, quick have at a

did more quarter? you bit and elaborate where logs of a on a more conducted about little that little you you bit Can usage some terms platform about, mention saw pricing you you some were packaging that little of prepared product the had bit. mentioned you talk in and and remarks you experiment your and in was strong? if could Can this a wondering, particular strength talk

Mike Christenson

customers a actually XXX that XXXK. so lot not that we this who of have a a we range spend net to In a are above I We to or net customers in number have big below few Obviously They look were XXXK than customers the They’re gotten closer a logs platform. was platform. a help. dipped really at help. exploring environment as would XXXK more complete come numbers pretty felt capabilities, might good good. Sure. a full target. still was to dipping to customers of the is did of getting a that, People customers number The that that XXXK. like new had and report capabilities so that. getting about gross Logs that who beginning say have our are we below

as as optimistic momentum to working that sometime So XXXK entire in get that. XXXX we over of of They’re customers. important terms want regains spend. fundamental our course to we able as to customers. and a organization new FY The XXX understands we’ll quarter, I’m able about looking There’s level you more to difference technology that broader be to provide to They’re that partner. answer a business you a call. they capabilities of when hoping looking to in with of range get that that per be observed the have that I’m

Q –Rob Oliver

I for mentioned the right aren’t just high is happen down Great. on the Mark and to that should guiding gross to model? how of impact that something think do side. guys know that that about year. kind think margin But trend on could that then Thanks we of you away How XXs. the trajectory about Thanks gentlemen. Mike you you, that we

Mark Sachleben

overtime. trend down think gross will I the overtime, will down margin it trend

to of margin bottom This we’re gross about center drop reductions go But that positive probably QX. quarter so more think over save in kind we CapEx and as goes then will the at be the will out well do see than project, that we the high the I expect we’ll million year in throughout cash impact for expect project more cash line. be of XXs as looking hit down And years then, of and data data we’ll saving that the costs. to $X But margin through to in than gross next center. CapEx spending the of the we improvement couple the as flow we thereto build as life in actual over be course

Q –Rob Oliver

again. Thanks

Operator

Yun Kim Rosenblatt ahead. Securities. go Our Please question next from is of

Q –Yun Kim

Congrats on a solid QX.

growth real ARR your model the previous maybe that. question. around then Just you more following-up you trends or quick introduced come pricing see metric of towards are the just seeing customers in number will you platform continued What plus Thanks. customers XXXK to of larger stabilize pipeline, plus last be and you continue see levels and likely on kind simply from just the higher current year? XXXK at that the average should on [Indiscernible] of do do for increase which deals

Mike Christenson

the that say to customers. we getting ARR would in expecting XXXK increases more per XXXKs uniform. huge across I we’re most average are be the the traction distribution getting not Where is

So in that a fill up. we average moving lot have to around people

per point from but up customers that XXXK models bit is getting that roughly of have more at ones XXXK. the think I a moving customers, average our we forecasting view more and likely do a XXXK basically we the same more that math ARR are have

of sorry – the your of half question? second terms In

Q –Yun Kim

what’s pricing, pricing Yes, question around platform there? the

Mike Christenson

that customers few We so the we and have call of think I I customers different of and become encourage to to a expect I’ll to of as of its capabilities in and beyond capabilities XXXK and full us of been our the more and access comfortable number the of XXXX tests I many rest platform received our that we been see change platform business with they pay perhaps our and their as capabilities. a What by they all has how earlier how to of virtually having we working that different for with said over that to platform. customers of with the flexibility customers on how them well my them in consumption experiment full the I’m remarks terms models more give range and platform do to our our try FY really explore customers. happy

Q –Yun Kim

the versus on Mark you difference of to plus see to or Is expect going expansion a down much. forward sales customers and and plus Thank the XXXK for between there Quick plus? you customers kind XXXK those low higher for do XXXK so question churn noticeable more rate go rate. noticeable material for what churn rate in to the more low be or be customers a trend you like Thanks.

Mark Sachleben

we definitely tend expansion Yes, over two under quite XXXK that rate between see a than bit Sure. XXXK. to distinction a lower the be

obviously They’re their the And changes. as the committed to and customer XXXK behavior threshold so downgrade of reasons really over more want the that’s, we expect business to continue a the better to is continue. that both as that’s to because well get that’s driving trying and driving But that so really up expect one over to improve number ARR we we’re we numbers numbers the more expansion XXXK. really opportunities distinction that lower but and

Q –Yun Kim

Great. Thank so you much.

Operator

Our from Jennifer UBS. Please is today next ahead. go with Lowe question

Jennifer Lowe

bigger on, opportunities there seeing what’s rolling going those. create new out they the out But to introduced potentially just out quite some Application some shifting new in product the you’re are they’re step. that instrument terms of One. talked to and you we the cloud, start, customers that technologies picture to from the through of bit digital demand down I’m what working your Relic they environment challenges still to that projects how for of things for that ensue a try transformation that. hearing back and New the apps, a specifically? that of current maybe just of curios willingness Maybe you’re types taking sort with to their trickles your with sort like new about of even a The are demand

Lew Cirne

so. and in digitally in a further translate that, they thankful behavior. world for like There’s the way habits long-term do Lew. application and and turning those revenue is is in think of the set cloud this But And our it’s successes does to because Long-term, that help companies of our that learning – in that just have than for everyone But customers this short-term to it into digital. the That done business more Relic business it be nature to the doesn’t short-term depending makes be company in that have that no they’re this. corresponding about move may believe be mission We on category but and macroeconomic of conferencing, move not we as new cases. might could benefits. driving many them, some more to have and necessarily it we business and environment usage necessarily not could This long-term of past. spikes is change have instant handle those in shopping in well to sudden more traffic seeing But that important more more and unquestionably could New new in to video think there existing.

Jennifer Lowe

And then just one for Mark.

indefinite of up hopefully there reduce they the it own talk It get a usage they about can their those is just you are where we time back As the as three-year, and horizon, customers mechanics How is on issue customers they grace to to in a should it’s as six-month manifest? normal [indiscernible]. that potentially where the looking as who businesses. what scale does the downsize are deal in with period usage that returns the come scenario world expectation actually that, or reset to but is kind

Mark Sachleben

to some right it go billing, of Sure, From be the of easy want spectrum any to can those. an customers that’s one. just quarterly annual from

have of XX net from relatively customers that all who other months can right. pay we you say are pretty or once and straight pay can’t to we’ll up then payment live net those the the say in go so make worst XX to want and literally okay end for we forward case, easy spectrum just At people six do. and you to go the Some

something be understanding we mindful, the for to can. get needs, around time you and that as that. for to and spectrum their impact and pay around lightly got run not free we’ll business when When all can us want a do to same thresholds a You product that you at we’ve six just understanding to the well. it’s some a being months again it’s and these across Obviously, put customer, that’s up but really us and things huge then milestones it start while

Jennifer Lowe

Thank you.

Operator

from go Rishi next D.A. Our come of Please question Davidson. Jaluria ahead. will

Rishi Jaluria

out Glad to little the bit to back hear a you’re going to wanted staying I safe about ask churn question. there.

around metrics customers the single, product, You etc. disclosed at and XXXK Day of your Analyst multi the adoption. some

get business. to point Then product as multi increase for can single what what directionally for a you alongside rates adding [indiscernible]. for it be you maybe with sense start for looking product does a customers customers discount make to to got churn products I follow-up. kind concessions new help their or customers Just expansion Mark that sense about struggling. were At talking at matter of and rate like They’re types between and maybe that those look etc. of customers

Mark Sachleben

of that have better. our in at March, When Relic. we value, [ph] or their our new expansion end look best for our better, RPP are ARR we been platform that’s another. of so XX% another more QX that’s get they characteristics the from best customers We ARR broadly, customers came churn like platform New their a have that’s for lot adopt had they asset. to us half about and We full there. was about Sure, We’ve and look customer more users, our goal. – characteristics making best did they using customers, feel more have we progress the That who our those and customers or and when at some are now our access it vehicle platform, that had

to So we as drive want platform. to full many customers

our what our the reduce go-to-market We goal. everything and customers that’s platform product the full could As from do to friction our and have working so then so we to every got the for of it, that would one from sure that’s platform, to now. to never New doing adopting it’s easy heard to make customers hard standstill at a go having to too we’re Relic

that’s else, discussion reduce trying you customers or to number spend a and APM. it’s us some think all my spending likely point it. the downgrade to can if just oppose certainly reduction offering more on and of use use to our I trying one-off to is customer when something across of is because of come terms a In either I give to that solution. to products. a to comfortable customers that their that to they – taking they can say of just you Obviously, much as They’re spend have, it’s want host be spend but A less part of much get likely full them help to about is issue want come who platform sort the using

these driving through pushing one that’s numbers why And we’re this that’s the and why key focus we year. go so this is of as

Rishi Jaluria

couldn’t [indiscernible] helpful. it. old talked in QX one want so find you of Thanks. this for got apologize definition on on fiscal right, XXX what’s the it’s XX% the what that That’s [indiscernible]. it ARR But based missed was will the guidance year XXXX to growth ARR and XXX then the All that’s XX%. that ARR put In as you picture. based I the of new replacing I if to about

Mark Sachleben

sure. Okay,

will at end end just end At QX and XXX XXX. of be last fiscal we quarter year And So QX of we September the at were as QX, for I so at the the ARR – comparable. XXXX of on end June end end the that end the were of we was you based the at at QX of we XXX we mentioned, of give were XXX last year old definition the of XXX. were

So just numbers year. standpoint those the apples-to-apples are for last ARR on an

ARR partner you definition of will We and but $X-ish [ph] the support million we’ll that true historical general just to reconciliation perspective. be number that. wanted for of new numbers But quarter, coming I full out of the includes in be those out in it’s and a some ARR give to these coming

Rishi Jaluria

That’s Thank really helpful. so you much.

Operator

from Our James. of ahead. question Raymond is Robert next Please go Majek

Robert Majek

customers as of what on be may had can environment, and you’ve and if up far changed prior you forward? how for with functionality question, in in terms this that the asking the through down following us would goes, are as just R&D product some Just curios of walk they going conversations have the

Lew Cirne

of it’s our been tools savings customers that in particular. by most how tools. on reducing many platform many so vendors recently and Sure, standardizing use, number what and from one on, standardizing I cost I can realize Like I can get the replicate from

there’s the So logs market when is excitement logs they’re – certainly context valuable there’s we have separate and that in are very application in logs more offering and is that not application-aware. they’re the context when the in fast and scalable there and are

of really So the end as market’s evolving. the this think how at day that’s example I an of about –

mobile think and delivers like ensure these sure its for to monitoring. think those they’re the you infrastructure and serve got monitoring products we they’ve they – just is on and Is has make of is all monitoring and tools great engineer, it things bulletproof browser monitoring working different think monitoring a I lessons to observability every we need stack experience. full that and like application want that whatever about

platform it to we sure to think production works who professional every about want production tools We Relic the So we make take that can contributes want anybody flawlessly. to the use engineer where that impact that need that’s that code New so how has as. whole

Robert Majek

just perhaps then And me. you. Thank one helpful. from quick more That’s more one

quarter. our PO uptick more in give driving in you this that some terms wins color your an just saw of You pipeline here? are Can us

Mark Sachleben

Sure.

in PO tick our So for us QX does up. generally

that they’ll and bump suppose during some such a get of deals that’s year until is March. doesn’t for renewal in full do in a the we the do lot Our And so when months. and March, just commit then when co-term ARR annual months deals their December. side their maybe that upgrade in we’ll billing comes They’ll of are business the in cycle three course XX

a deals March the an three-month revenue, standpoint months. XX impact from because on in IPO our of it our XX-month have an does on to ARR. not gone from impact on is basically really But our PO prepay So

bit the the And so that QX number that’s other one quarters. of relatively a up [indiscernible] to drives

Robert Majek

lot. a Thanks

Operator

next Wood question come will Derrick Our go from Cowen of Company. and Please ahead.

Derrick Wood

and follow-up. distress Can to that work from you and just Any bookings And on one from speak of your of much I the how in sense verticals much then from flipside? revenue have so since for how I revenue guess us home? out you’ve verticals in comes seen incremental you’d give terms a SMB strength call from

Mike Christenson

little what base big XXXK customers enterprise. the you cannot the Yes, observability is, guess so base end I through and spend end our I XX,XXX they customer entire bit segment. across and little high is there paying bottom spend there’s companies top. are spend of XXXK at that to amount in at small – companies a But that more large look the XXXK high big lot at is our customer the on SMB pay the bit would a say and that the are huge with And you businesses a small and spend customer it’s of per end say the big a XXK more if there end the very companies enterprise or look year, us. XXK higher

that to that the would way make hard describe I So it’s distinction. That’s it.

Derrick Wood

distress? the on And

Mark Sachleben

I people you you distress. two say, certainly that entertainment our the XX% seeing that in as impact gaming I stand industries. at are doing range at place. then of base out when look verticals think heavily as in look It’s sheltering well. can imagine. are would alone to are On and in we’re installed that XX% We don’t the

Mike Christenson

gaming and supportive have had some entertainment impact. as businesses negative Subscription,

Derrick Wood

Right. And my you so I really then upside nice billings. second more mean you anyone. guys had guess to question, for calculated or I Mark on

results acceleration big cautious like a do reported had kind than a see. I of XXXK certainly and more your customers. commentary which You But seems

and you of kind deferred side factors there where billings help in specifically between maybe on the delta some results the one-time quarter. touch are the on the on that just tone You and

Mark Sachleben

I was wondering, who’s going to speak.

the terms appreciate it strong that. billing, a quarter were we of In helped, was and we

So that good. was

went trying durations that We But billing our there’s quite in been think think year. a and like I certainly quarter set anything factor. into expectations, with I terms to last what so the that. achievable and we’ve bit after don’t depending through things as was unusual. modest past and we’ve said one the quarter-to-quarter fluctuate on

and we’re was So quarter pleased that. a with it good

are other look the out the we we’re On want this out realistic hand, there. to make sure we year, headwinds about that as

be opportunity. to still But QX. U other Pick bumps V, to a heads they’re along progress. were to is about expect about down long-term in do way. momentum and I we your as we think came But to going term going We the our starting uncertainty and had open like the great to go making the we feel acknowledge of know hand, economy out there’s be and still L some on still is good we There and certainly up we work [indiscernible]. we going that keep feel it the the and near that we’re We after. logo.

Derrick Wood

you. Thank sense. Yes. it. Got Makes

Operator

Bachman of next question will come Montreal. of from go ahead. Bank Your Please Keith

Keith Bachman

I’ll you concurrently. my Thank ask and questions

on nicely year. product down be improving to net QX, we economy First wanted Mark, up versus balanced feedback your should as in retention year-over-year. the get this It you was reported set. But how just thinking still I an about

wondering thinking should year-over-year? it how should that year-over-year, about Just about year-over-year, is improving flat kind we down we be should be be thinking should of – be

portfolio Thanks ahead compare be I there are I’ll accounts and second it the you that ask versus to call. about existing my accounts that’s to against And your at think that out and sell your new talked there to ahead just you capabilities wondering of what’s outset as go [indiscernible] much. you, about contrast any and to up today from particularly just Lew, other AI improving me. we capability go and existing was the and and should to additive opening or could if additive is able being is your question very

Mark Sachleben

rate half as impact going upsells the to I’ll first well an as on in churn. We question take both expansion there’s think first. the the be

first year And second in and up how would we’ll to point give the half half, then so we things see are in rate going about that. expansion later decline net days

Keith Bachman

Okay margin, XXX, mean when the that decline you right? you from say

Mark Sachleben

I year-over-year. would say from

Keith Bachman

Okay.

Mark Sachleben

and QX strong Our somewhat tends seasonal. be to

Lew Cirne

product. AI the on then And

excited in market. to have We’re it the

you ago. SignifAI we of company Some the remember, bought of months out may came acquisition about this that great of XX called

alert, particularly when they think alert customers, don’t fact is So and something goes is what thousands. wrong, it have get that differentiated it, one get reduction the they we and about that might many we noise

AI you assume it going same and thing the and they’re really wrong. to help sift of need You can’t noise so and to understand the what you kind use just all reduce through all is

We that particular think we’ve area. that in capability strongest got the

We also many back think I which you in problem have technology for and Radar, starting I with if years, XXXX. Has detection to automate resolution. launched

we’ve think it. I under marketed

in as capabilities and accelerate so combination Quadrant story really look use our companies. phony of favorite possible and that do some AI a that’s as third well more the to roadmap. to their user in help Magic But peer such space at of – and great again told our make day. and proud interesting this easier what about and also row. quite excited that. is, think I’m part problem the with and as ability the wrong ease highest we and that’s ranked year we’re to that normal and are saying, with these troubleshoot. do haven’t have Magic to the rapidly reviewed get the we did the as as other customers AI But of solve we they to we very of issue It’s our as it much a I accomplishment. to product have big our number one kind and We capability the if marks, surface way you APM product And what’s Gartner a or fourth peer review in on that is like of like AI your Quadrant their end to at the and year-after-year And important,

Keith Bachman

Congratulations. Okay, thank you.

Operator

gentlemen and time. Ladies at this

disconnect also you the call. today’s question-and-answer lines. the conference and will thank may New and for you session all Relic conclude earnings conclude attending presentation now We your We

New Relic (NEWR) 15 May 202020 Q4 Earnings call transcript