NEWR - Earnings call transcript Q1 2022

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Operator

Good day, and welcome to the New Relic First Quarter and Fiscal Year 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask question. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Peter Goldmacher, VP of Investor Relations. ahead. go Please

Peter Goldmacher

have thanks call. and Relations our fiscal you QX about Hi, today's published the chance Today's press questions. line for comments a Bill earnings all hope for and call We hour together Investor a letter then 'XX an and prepared release. and with everyone, your ago earnings joining had on website Mark, to begin we'll letter read from our with will open up our

make will and we call, statements, based including our outlook this During expectations business our forward-looking today. strategies, on about we which as predictions and of

Our with actual most could materially SEC. call, this the our XX-Q discuss recent including uncertainties, number due to upcoming results Also, risks non-GAAP during and of in will financial differ measures. risk we XX-K filed factors certain be the and a to

most GAAP to are our non-GAAP GAAP Bill. We there our like for to the is an be will in its measures reconciled intended hours. replay call this These audio not directly over have release. our webcast available and website, measures Investor in results. finally, comparable And a it to substitute earnings turn with a those financial being that, Relations to And few I'd in entirety be from

Bill Staples

million last for quarter our the XX% quarter of beating Thanks, that earnings Peter, just everyone fiscal strong provided guidance $XXX first revenue, the and to the year, thanks FY joining $XXX and 'XX QX business over a our we in to $XXX year-over-year. call. We million start delivering growing million had

customers priorities opportunity, new back serve ago, of forward. but of paint the and as I call XXXX, a new your It move a my to better business foundation CEO, to want New our our last numbers view going platform bold was July we growth the into my necessary and the role consumption we One year Before answer to and then XX, our my market, and in lay the questions, to Relic introduced earnings this strategy first the step and model take for dive world. A business.

them they fixing impacting disproportionate Observability root something They doesn't spend know, wrong. engineers help unhealthy. planning, world, deploying company COVID the segment that's to past matter digital reactively systems and production engineers, not developers monitor on accelerated really size only late, software every the experiences employs partners in intense software by in today growing enough the It vendors production experiences. only digital spend to it's customers, year there architecting, serve satisfy the more As is software Nearly that love, what and once time more systems no amount faster terribly and focus digital that's and and skilled troubleshoot you or are has customers, create defined the the are continues and the are But and to not and of too is highly their and time on much prevention. employees. stuff. begins telemetry engineers These of went somewhere reactive, the enough on help built maintain experiences to of toil simply too use cool a to and demand. building, to they The and data increase. doing them innovate pressure which building too cause complexity move symptoms

of To software help Relic, engineering engineers across more are three observability is potential get with get we developers that the the grow broader, our vision data-driven past vision to customers what and believe, I on why. data perfect aspire things we will and software, helping uncover At higher. build unique and to our overtime. the a there, are to of our cycle. life telemetry whose There millions daily by making impact we and much obsessed much about the Our are believe observability business, New approach master fundamental

all-in-one data telemetry platform. a New First, offers Relic purpose-built

regulatory and Our data their an including This telemetry insights customers customers the economics. sources, our telemetry and integrations ingesting, blazing storing with from different our and of the the GDPR, data from a even with massive of FedRAMP, already telemetry ML many than AI metrics, the help a we've ever. advanced to finance silos performance. standards, privacy APIs strong of we and because at eliminating noise, with more in operate approach hundreds provide for actively Ops cloud for and use swift agents, compliance trust [ph] foundational now data HIPAA-compliant own in open more of with this signals SOCX, ingesting of traces data to through And easily most petabytes New than many last scale Customers solution types. platform platform the petabytes week, We events, across observability ecosystem are digital throughout competitors us is strategy, entire data largest single source and accessible customers data techniques, real-time thereby allowing employing all Relic making industry's truth security, of our fundamentally or to their a and is incredible secure across taken logs analyzing enterprise of AI unlocking as our with and first estate. posture telemetry data we're science

offer all targeting of of experiences, and data integrated powerful full price top experience focused a on for the they stores those points; Second, engineers and that New and call on and developers each provides and resolving incidents, tools in bundle user price. warm SKUs, disparate place engineers same production with observability. analysis platform this with data, Relic one Competitors

the just into cloud focused site on the of taking not the million of much and build IT with. delighting the data telemetry of XX New who engineers Relic help reaching tools to potential begin Many thinking environments. developer customers they're use not because and through developers is experience can by the needs more software have approach, broadly observability the of day, bringing and power flow about every troubleshooting of operations, innovation code, these how first them users to observability, reliability yet engineers ultimately professional considering production developers a users already estimated

offers Third, value of all model unique scaled New with with a predictable, Relic and this more affordable consumption-based is pricing value. that

dimensions; platform Our two just consumed is in access. user ingest data and

an in the to leads First, order can data, which spots to more teams $X.XX this to platform forcing at Competitors telemetry our query for be store higher to ingest, just incidents. customers costs, data for unified a than value only gigabyte data the contain engineering prices ingested. and multiples unprecedented several instrument blind sample what allows and

price users our Second, all of infrastructure. This collaboration, more all per in productivity more unique have platform we the allows of place, predictable with organizations. user, integrated data increasing and giving across consistent, that access incredibly buyers model usage and received engineering scales for and consumption provide one to pricing systems, enhancing full therefore, instead tools one value observe in

audacious are to as investors passionate for committed and multi-year support achievable the goal. our towards and work and We this stockholders ongoing this and of vision, we grateful focus Relics and

quarter-after-quarter? I'll work an audacious company help long-term doing I've identified progress. for five. we five CEO, priorities. and such each As how progress strategic on identified an with vision, measure quarter us our and the all wonder, is our may how prioritizing new are objectives, these success behind The aligned each can of you You criteria gauge our Each how measurable to these update against provide we've now we're entire

growth rates. to priority market is revenue return our to top Our

customers and As are consumption crowning and a which business, ability growth gauge with anticipate to accelerating is we've deliver guidance in help to value the we willing show revenue pay for revenue our our progress. our our and reports, quarters our starting success this year-over-year We year-over-year efficient in to in revenue We measures updated an you innovate through the QX, priority increases quarterly aim that manner. metric this to growth and measure ahead.

vision pivoted model model, the revenue as the front-end starting and our QX. we ready customers' and platform earlier. foundation end, a quarters, foundation described the that we've bring to existing With to contracts migrated business replatformed to new for an products eight we're in I For scaling on decelerated that deceleration has are laid, towards focused consumption the growth back-end, while and pricing

I call, to guidance to at the the pleased compared growth our year-over-year earnings quarter report XX% beginning our that last in quarter. revenue, increase provided in the million last as significant we're we As to and of of press the million a just mentioned $XXX million $XXX year, over first release $XXX fiscal over

migration the business priority our model. second business of to is complete new Our the to

because successfully will fiscal strong growth that we After half migrating migrated our from of will another follow platform, to and three they indication the majority our of and the is of value high than this Our of our repeatable to revenue the priority quarters quarter, to disciplined, consumption of we market, business we've growth suit. customers create our automatically will of up in of the goal already fiscal migrate from the This committed revenue more this quarter, committed prior a momentum. is a XX% end and year. as by XX% of the end XX% believe engine our by revenue be a the model of lead which for aspire and full scalable; consumption systematic, benefit innovation their to will and

we reported the and to three of of have important introducing X,XXX service. number will The our more up [ph] a tier. primary of on is Relic three market end pay first, our One, this for through priority Without self-service experience simply self-service willing free X,XXX priority One increase accounts would in product for great through we more to thousands strong last product, third ago, quarters reasons; have cards see paying New is XXX% than deliver funnel, an a the of PAYG fiscal not quarter. Our entered offer product-led signed for our New the This and funnel way and Relic which than since fit. half developers of be developers the is customers. starting the quarter, with growth as we grow validation credit product Since priority

sales-led within helping led grow paying experimentation self-service customers, to as number to experience to the them also the adoption us nurture able third, higher signals to further we and we opportunities pool new higher accounts, of And accounts. nurture early expansion. expand of Second, sales including our identify the and levels graduating service, we're

deliver to Our value is customers. and innovation fourth to priority platform methodically

unique customer we're success, rankings. analyst and We innovation, vision will through each showcase reports quarter industry-leading how achieving our

is believe sessions This engineering able were innovation to conference enjoyed best Relic, quarter It's hallmark quarter, product integration, we what success. enabling engineers FutureStack introduce this more we of many We rivaling Kubernetes and with held annual benefiting world's and observability, observe from our widespread, following many this engineers was the One viewing from conference. they the another record is organizations. which innovation. we Relic friction. New unlocks the days New marketing teams the company's mainstream, truly thousands the deliver and we developer of in on-demand indices our with this attendance In and adoption now which services zero see early the environment so their to that catapulted experience Kubernetes magical a is see Pixi

teams with Errors firefighting New full proactive, enhance another We stack observability innovations and for of and past them few also included and engineering for teams more this context platform-wide, errors than logging experience. entire believe New partnership quarters and during DevOps Relic to rather into just aggregated New over Ops, for the start. come, platform kind which quarters to One user. These Relic that stack provides Inbox, We top closely value in free network excited Relic NetOps Only the also One increased incidents. resolve our are incredible pulling platform teams [ph], enables we delivering Explorer New were AI every collaborate triage New consumption to of the many Relic experience other will and across fuel introduced Kentik, Relic their helping first that's errors customers, the on

growth business our potential to priority costs. more the realized to will in is achieve order and internal our all competitive to need and fifth faster of efficiency. alignment areas rates, with and final reach that and execution move improve less Our friction, We

team and business run we functions our moments real-time marketing, are internal customers their We overall consuming objectives across across data so accelerating the with in the company's Every serve and has stitching finance executive product, planning, systematizing rhythms that together the my our prioritization execution and priority. in and platform. can clear and better their sales accountability success as overriding on better

on SaaS enterprise to driving our getting our are many and we're We traction to already typical reduction of these returning rates. gross COGS And margin fronts.

new to also data As Anita leader Khurana, systematizing of world With turn a Officer, internal walk hired and the team, that, excited Mark Officer the our owner about our vision systems. the around weeks companies Manav our few and Chairman. help our Christie product across Operating it company impact of and Officer, to New under I business and you, this CEO CFO, a self-service his part but leaders, Cirne, new ago, Lew to and bringing She's Friedrich's set our at Relic, world, And joining I've of Relic. is be something honored the all time it to execution internal product Chief our full our the Data an aspects skill we serve I'll really promoted for the profound the Sachleben, all some to functions. together to shared with for on burgeoning contributions for Lynch, New financial amazing Founder of Chief experience, especially Mark. as of group make Relics self-service for responsible marketing a Over to of humbled and us and I'm special was incredibly Chief GM This to is grow. organization and through through there for quarter. exciting terrific with special I'm Growth to results be our from leadership. over grateful people that technology. full worked

Mark Sachleben

results briefly spend the good time as and of a some we our parts to the most Bill, on everyone to helping consumption and like Thanks, understand then transition our evening I'd financial and important moving recap to afternoon financial good business. everyone model call. to continue

loss non-GAAP 'XX, reported of year For consideration million to million. an increased GAAP and This guidance $XXX.X $XX.X our of loss operations QX guidance $XXX revenue for churn. loss non-GAAP of of to million was EPS $X.XX, of operations between beat million, of million million, set $XX by $X.XX $X.XX was a GAAP for we fiscal we and ahead variable of of driven ahead top from and from million. consuming first a between ahead provided of loss $XXX and of between excess was we for revenue $X.XX. quarter better-than-expected was $XX line a was loss our the their loss guidance contract a $XX.X in of EPS our customers

this to results half accelerating and our return to line growth with the top to we pleased are continue We of year-over-year in quarter, expect second this fiscal year.

growth our be mentioned, market is back which priority one intermediate to a As along Bill XX% number to was that get and step QX about positive estimate to the path. term, at we rates, in

million and guidance million, We million. second initiating of $XXX to revenue to $XX a between quarter operating non-GAAP $XXX of are between $XX million loss

midpoint at between the to of year $XX.X full range increase $XXX of to a increasing guidance $XXX $XXX between also million are the of $XXX a million range an million, We revenue from million of to million range.

we customers are between are keeping $XX by consumption are million that a on increases seeing in product This of investments increase line including $XX our guidance which fiscal in our we we and lower initial trends proof is For believe the guidance year, success current business, points and churn, in and off. paying non-GAAP strategy customer focused from driven operating the for loss the top full million. are

out sales we plan, to New the well as our business, an comp of and we comp we year. upon better rolled which aligns the more improve talking transforming July, QX consumes are the impact but plan, made the standpoint new our loss interest been ways operational a operating Relic. not rather financial Since Operationally, new non-GAAP are in our been our with about model. expect transformation last as New deal, took have to our in we've Relic anything as the both one a customer on another introduced force our In in you step we One We as reps interest from which big of customers. throughout the paid signing sales model our many the new

and has of of upfront the value focus it's understands on commitments We're on is Our embraced customer a there now sure the making the platform. focus early excited seeing results contractual about large potential. more as less of sales a change is the force and

on want of of things. I model, the In terms to impact our a financial the couple of transformation highlight

The first company. consumption-based are now is no a as any disclosing subscription-based whereas metrics, those ARR-related reminder longer that we are we ARR are or a metrics

continue business move the in useful momentum the model consumption and is to RPO, of The a the metrics changes the those revenue we as of second understanding that our deferred and less are dynamics transition.

from changes commitments; acquisition. this aforementioned renewal of customer the comp first, reps or driving early no factors, upgrades these consumption, including: of are a large plan stem Specifically, or and at change contract upon on true-ups a focus less means means number renewals not time initial

when the of reason lower to thus in we'd for Second, of commits we are hit actually recognize that consumption for in we is favor drawdown opting doesn't of things our finally, variable commitment the pay-as-you-consume a X deferred largest structure. incremental highlight and And few of quarter. revenue. a or for generally are some like other excess other, revenue. in customers deferred upfront arrears There accelerate built Furthermore, consideration,

Churn of are well end fiscal the the of on be model our won't target on our quarter, exceed to the rare. better and of by of fiscal result, number that of customer of was There entering that this The better to significantly XX% products, the track model, As our service. factors in revenue XX% is year. holdouts we drove the that year-over-year. model and this majority new including contracts new and not are on year, better first end aren't very converted have renewing are the business site legacy sequentially over of licenses fiscal we new down renewals a multi-year the as 'XX, quarter

drive you earliest it to churn, want backwards-looking while get I reflected our will conversions take but a continue metric. We down in give as expect to new this a the to on to update NRR, given an for to NRRs model.

August first see original trend This at encouraged cohort tracking is to the to signed their of calendar commitment. is cohort pool their our us consumption model which of in year; around commitments; each excess consumption so year is excess track point September level. should September believe largest and [ph] renewals cohort signed time. confidence gives customers new their feel are consuming small, they annual of good we of year APO the XX% The XXXX finish in cohort the modest last finish the cohort the to consistently commitment well to in in but most consumption at on ahead on-track see we shows funds is commitments. The of uptick monthly prior their a The December we're about this the year that through We the same of acceleration with commitment. still cohort, that

ahead costs. last you the implementing with flat led discussed in unit call. earnings all infrastructure revenue was progress in the beat efficiencies in cloud sequentially, lower COGS driven of Lastly, and we our to the expectations slightly which This by was

is the to that, intermediate over continue margins for in and efficient Bill our to questions. As mentioned, of to high priorities I'll towards term. the XX% turn goal it With run XX% of business, gross to we our drive one an operator

Operator

Kingsley come with question Berenberg. Crane will from first [Operator Instructions] The

Kingsley Crane

Hi, talking questions. my for thanks

of industry's So, full with HIPAA-compliant The the benefits are solution. the approach we stack so becoming fully clear talked often first vision. about this

care means the solutions this hear from the to love about space? existing how differs And would this customers more I So, market? in for health what then in

Bill Staples

you, Kingsley. Great Thank question.

our week, BAA we last week. actually and mentioned, signed HIPAA we've you As in compliance first the announced first already

our was and are announced question, and So encouraging that of news competitors compliance. really between what that types well. breadth your other the data HIPAA offer around To covered difference the as what we by centers data

logs platform and data Many investments that competitors there system. benefits because One types, it's truth only security all traces, and class data that and breadth compliance protect which unifies offer, who to of and metrics, type, of that so we're financial therefore, we've we because across of telemetry telemetry telemetry scale. logging the of customers' as architectural our monitoring able massive is our one And data into offer is And Relic operating are types. offer do single source limited for one data events, service platform compliance of of system, HIPAA the like New the made a that logical they're able we compliance in ensure all a a not this to [ph].

Kingsley Crane

helpful. already that's top mean really That's On One a revenue, I goal. returned to around follow-up. growth rates Thanks. your market great XX%,

XXX% reach how XX% should the model of algorithm we So Just it's of think Do XX% X% customers, customers? maybe there? from growth is about with with to any ARR think new this new more that you figure? a clarity more

Mark Sachleben

Yes, to have Mark. see. this We'll is

We expect dollar come they new customers as spend. defined to by us in is the first

but the dollars of volume the is spend customer high, quite our vast new meaning majority per low. so customer level pay-as-you-go come actual at And is in the the

any if fairly actual dollars, getting continue the in to that getting successful big we in come of be new loan to low. in dollars the we're even expect increases increases as customer customers, quarter, big So total in given

growth we be coming when expansion. as at we're from the the even so our of existing vast forward and go levels, majority would customer And market

Kingsley Crane

Great.

Okay.

Thank it you. sure You made makes sense.

Operator

question the question with come from And Sanjeet next from sorry, the Singh next is - will Stanley. Morgan

Sanjit Singh

the questions. like get better would One, part congrats this sort next Thank segment transition with number There's impressive. framework on equation. that element the you is strategy that of is of New over to really a market should go-to-market to down the And of market the which quarters. and the we of understanding marking walk be of to to one the several of for I sort sort I XX% the Bill, the progress very that appreciate taking Relic

customer at on focus sort So the a mix customers, adds and but revenue many years. prior of to enterprise for when upmarket was looked the you we XXX,XXX the focus into this big from of enterprise, a move and became CEO,

those segments with think get consumption-based you market expand getting to to the back think rates growth, better to over with current time, get as model? you of think more which then able going do segments we what be to As you to growth that And you'll and do you're initially? market to market try effectively most rates traction

Bill Staples

Yes.

and Mark think address the to that at be in of place that data. historically, - started adoption more continue data of platform engaging all we're I of our to we large driving users model, that and the users of the customers customers more enterprise, consumption that delivering expansion; can value with there's levels look question XXX,XXX existing across the that innovation the continues higher there types increased on did consumption data large we that plus taking to nurture as for advantage and well know, last you to true. by Even in a and the

growth. of continue So contribute and the we majority contribute our to enterprise to revenue expect customers revenue large - those medium to and

One help starting As I the otherwise, engagement in threshold platform wouldn't really laid building experience strategy and only product start of new Relic that we and of mentioned, sales their for that to self-service but observability are default. year, this fit. our I on looking focus levels really Because last not then is cohort the that for platform one out as from pay the it gives reach to a next-generation users with cohort though, that both them the once engage model standardize and and product self-service of aspects of validates a market New new through a can customers by spend with on of is entire the us they the continue that

a in for that. bit shared having the success investor As letter, quite we we're of

new X,XXX highlighted last we PayGo accounts this think I quarter.

We and also the run came $XXX,XXX. XX,XXX through spending in rate quarter, tier of are of those over that customers now free the and accounts four more than of nearly highlighted last for above annual

the of your that of serving. part will over are But from amount get not the paying increasingly, we increasingly, contribute revenue to accounts we're that the time, I answers able number that only that of segment. So strategy hope question? to

Sanjit Singh

super That's Absolutely, interesting. Bill.

it of their month-to-month Do in just [ph] my terms but of remember the I comments that cohorts. they early think return consumption, with spend hit where X contract? from their patterns of cohort data about early, in tracking fly of their into As behavior the spend. that I accelerating you to to starts the going Any the get with higher exceed I XX% wanted can to some it function correctly, cohorts guesses of August-September certain - more a think they're a that follow-up, of platform these was what the is consumption? month of and X on commitment to If December, we guess, to flattish, they they're the tell contract work early amount of it time? Is or have that the of early to terms on learnings, the sort early these I caveat

Bill Staples

full things of the see going skeptical, But one of a So looking plan, bias conversions. think pricing new in early there's the consumption that. better things the And growth existing conclusions I model, about versus the of Sanjit, little the definitive rates the from a significantly is lot type one previous new we on arrangement to an a do - they APM-only is cohort companies general, too channels the when about legacy look software in, in right? a come market over, is have make point customers that to numbers. at we And at the transitioned moved any an typically APM, platform. would to I over customers out a versus we time it's the those spend just And of they've new converts software unfortunately. hear and when They a customer that's

to have them of spend. and think value, using their they around they'll well, APM. that level for on it a And to be certain takes try while And level and realize, so manage used I the mind I in of a

directly think Now to that full commitment see broad And is I that this start those realized, takes time, bit right in in they numbers, regularly we I have data the and consumption platform. the little from on user come see a levels. pretty more. and time see worth those model, of we and benefits, wow, exceed Over those those - But sign versus they've start start. to to this grow consumption to numbers

Sanjit Singh

color. That you appreciate that And for Mark. makes sense, of it quite early I thank

Peter Goldmacher

question? next Operator,

Operator

And from Rob question Oliver Please will with ahead. come go next Baird. the

Robert Oliver

I guys, vision user you stack kind future really are Thank evening. base like my taking of in growth articulated invested that free think seems benefit really positioned guys that. Good really the to quarter, having Great. you've clearly uniquely guys spent vision a you in, for Bill, you, is extensive and from product-led this one question. with that time have the

Just that. of on a questions couple

I is product one probably like companies. of think original the Adobe growth

have What you of happen and things in see nuts bolts some order a doing or of that feedback you sort to need you there. internally now? so platform? to get to what the just that cohorts that and guys create question, using use know you're And happen where and able practical Relic primarily want virtuous the customers in of about And can experience for the are some of are at response cycle cases? ton are New of on APM tell early Sanjit And apply they to kind those to I to then sticking talked New integrate that Relic Mark One you Or new are that whole to your cohorts.

Bill Staples

Yes. Thank you, Rob.

a as really product fit. strategy companies market and that said, validation of in strong the our things of features product have lag the the first of in really Every data the source self-service other Product particular techniques we training way we the learned but you a your some and like out to think that health successfully of part for important span And the obsess bit we've studied is your getting things of friction about how and an experience system, signal is users, ingesting and credit the want It's and might nurturing you something and friction of growth analyzing product remove. a thinking done as it's You're right. the from, that advantage have cases, it, master removing getting and about experience, with with to the about started that of of experience observability, all of really because or as friction well. go building engineer, the that is I includes of And to product use it employing the value from of take just adding gets the not the like your it's adding card. we're bill, reviewing capabilities.

frac those also our existing to that's and point the a in out It's accounts I'd because so annoy those energy value same platform. valuable the And to getting accounts extremely about friction from spent not of only lead get enabling large team new way platform. friction self-service and that, And growing removing sales the on for has valuable points. lot more customers points increasingly of their

Relic. of of described, large getting usage of go those maybe Mark resetting from their kind for and they're on that pattern the us sales-led As what accounts have They APM. rightsizing through phase New used expectations this

the platform product-led the on value across removing such growth. position the is well. from strong friction a we're why platform them engaging for and all And getting It's so taking beneficial as of

usage seeing of that expectation the yes, are an in, new observability self-service with the we from platform start. those really customers terms In patterns, of adopting coming

monitoring and not base expansion. conversion that they're then directly go customer their our often expect than New their the they're and of you'd world-class we start Relic quickly they they're more the logs Explorer breadth APM. ingesting from applications migration, of as to broadly and Newell has just use through more making the that that existing the with monitoring capabilities a provide But So, customer infrastructure,

So hope I answers your Mark are of their growth that different different. a markedly question? usage as remarked, result also patterns, that and as is their

Robert Oliver

lot helpful. a really Bill. color, Thanks That's the for all it. I appreciate does. It

Peter Goldmacher

Operator, next question?

Operator

from come Turits go will question Please next The Michael with Capital. KeyBanc ahead.

Michael Turits

Hey in nice of guys, very here. a quarter lot of terms upturns

start exactly just wanted to sure I I the the Mark, to upside in First, we clearly what drove make revenue acceleration want and you. identify with quarter.

an to also I want to sure over what churn, it is it consumption upside. customers legacy expectations. is but in And that and uptick think the just you that close revenue out churn? drove in I the then then relative were it's converting make clear called

Bill Staples

drivers were customers over. terms Sure. of primary in in Michael, converting the churn

expected. we better with a customers job than did over we converting so And had

that last ratio relevance in I X% a customers declining metric. metric QX color of fact, to that And that more bit we might point And X disclosed X% the migrated negative the give is in in in in around quarter QX I'll in that number QX. have metric remember think little to over. and the the give In past around year, you we feel conversion was the it where we going you That XX% not we're actually beyond because was QX. majority this

conversion negative, a beginning renewal results. better customers were And we for to how overall quarter, was the up by And we end quarter. rates the that compare able stronger-than-expected mean, we expected. I look the that that, many at by than base the of the of to at Although we of in total when number were QX had our renew

new migrated Specifically, customers growing contract. focus the may consumption we churned to year. commitment out have though customers decreased, and those current may previous who their of now can and over them nurturing more instead in a even have on remain quarters And

one So the that was source revenue of upside.

other period. which, recognized excess you of as in consideration, driven in know, by that we was consumption the variable commitment The is

other so one And the was that drivers. of

modest, as In many fact, still look that we have consuming are customers overall to terms that consideration about, a versus we of commitment. I at in good as Xx had QX their customers in recognized for And but sign we relatively numbers the a QX. think,

Michael Turits

new a as go your could some are have that actually do and I'll time in guess, interesting. Mark, NRR But for other I'll Bill, when we think you And I with start got strategic metric we customers as time well to down think I increase? hit the that frame question

Mark Sachleben

to for customer be we increasing count, expect that So the this year.

had As key customers high flat. this - was that's the Bill that quarter, convert - was number mentioned, priorities. And look to relatively free tier. it And of low-end a of one at relatively we it our we

was those free Pago migrations the that new by so the to - tier the last free tier offset And was customers. August. We're anniversarying introduced because that big

quarter a our additions, continue total start PayGo but to the the this see numbers course I we increase they'll number imagine, of then to account think will grow So And we that fair as should decrease. have year. this I fiscal over

trailing NRR, that the that's metric. - a I of terms is think In

reality ticking in - to the we'll NRR see is you'll So start I to see reaccelerate increase up. of the advance and think revenue start start to the

Michael Turits

Thanks, Thanks, Okay. Bill. Mark.

Mark Sachleben

Operator, next question, please?

Operator

next George And Iwanyc will from Oppenheimer. with the question come

George Iwanyc

you question. Thank my taking for

Mark, you're give comp focused of you platform sales concerned? from kind kind you able And us and that new where And perspective staffing now now? a bring hiring attrition? the far of in - are are consumption, on place the as with to comfortable is seen sense plan as in of can you With right people Have any a type you of

Mark Sachleben

software year. attrition for The high Sure. QX in relative enterprise the is always company of an sale, to the a different. no We're rest

team QX I a them is tail QX, in of throughout think now. obviously I embraced, educating it I what the over right say was topic people. how far. do the so well quarter, last think, required. the industry, job education of very been And could of and did, couple hot last - came a into would this only and But attrition has end QX, letting did every and the they coming trust quarters year the in we go general, lot industry good throughout know as we and actually a into But us of then we

over the I in this I strong QX very attainment think a into and think - skeptics group win the to starting were be can from attractive. even people was QX, are we're realizing, that wow,

And attracting it new internal of kind talent buying bought we and and that had we're team in I I we've in So folks, able the think to the want. think in. is sell to good success

Bill Staples

company say overall. tag that, of CEO from that me embracing be the transition in functions with as as really with. quarter the no from And seem as opportunity other their haven't the just can the what a perspective. I Mark and fantastic model. to expect to team does as spent organization, go-to-market would bit consumption their And as company well the I'll well lot share the have pretty it's on the more said, and great really we it with results a understanding a with able drive to in of ability getting historically I with of they with can that. own you to rewards as what's Maybe a really function mind time spend CEO time little were onto get earlier much the excited this as and the that was and relics quarter, And quotas imagine, and attain experience, I go-to-market

is who a an as CEOs, of lot speak with a that attrition, attrition. also challenge, I've of had other also terms In industry-wide facing to chance

at our doubt, workforce LinkedIn, down read I the this changing only of of of think, jobs couple point the share considering saying in I Microsoft, a published only decelerated. one no months. up But It's the gone it's XX% seen is calendar study was last good news attrition. we've to also year record

that we're and address for, our And to so hand-in-hand. to that the employees in continue great and to we've going steps work success really make go invest their feel taken company's New in to like the we make company to Relic a sure success

Mark Sachleben

that a are reason on the increase the spite steps of helping for that. big compensation want mentioned one in adjustment Yes. income adjustment maybe fairly about the of the comment July in follow effective you our year top steps just X for and and at that X, that was look sure starting big people a the was of I about to a we've noticed and took flat - did Bill compensated. as our the compensation July guidance. board for taken - engaged operating may to and everyone compensation in And kept guidance we just line that we have X. make And company we means on guidance we did

George Iwanyc

That's great. you. Thank

Mark Sachleben

question, please? next Operator,

Operator

next The from Yun will Capital. come question Loop with Kim

Yun Kim

a Congrats on solid you. quarter. Thank

making are guys you pretty think I here. progress good a

consumption more be increasing revenue December - at the And or your understand driven consumption, the of the to say just will some trying strength between Is mix model. number trying dynamics to it your understand model, like do revenue near the seat I in by users? in quarter? seasonality around whether it's but fair in count to consumption your least that consumption the you variability the Just expect in and in the upside then the the know term, just

Mark Sachleben

It is true.

a such, more us - driven users more by are We consumption consumption And is data. and or company. as for

so driving what's That's growth. driving top what's line. And that is our

seasonality, a many smooth to of a seasonality thousands of terms In inevitably, out customers, expect with revenue we recognize of some in so are top and flatter, others expect our in the It up we we don't that base any way go might of period or And as line too of customer don't those a forward. consideration, of jump lot tends much variable over peaks. month the we really certain

Yun Kim

it? how it Okay, you a be great. want based they'll so specify simply if I whatever. doesn't It's just contracts, Is using, sure, just on your guys of increasing that or - number to are the fact more looking make in that at though, users consumption. users are

Mark Sachleben

Yes.

the makes the seats. over go amount number, that for for seasonal employing business. have and a pool a you And adjusting users, of So it's seats period customer then certain spend incredibly month can the attractive just a that can to at you rate can adding spend same a through put down through or they And that it's data or commits just if something fluctuations, draw but your don't you of and it doing XX-month And what period think - as at quite well have something. in funds offer worry about not I we over that's means known isn't yet, you to charged which you flexibility sense ever because that for that perhaps of that or you're X customers consume year that - if of you get rate, get you the use

charged of get that. instead excess don't You

or it And so seats. that's draw how ingesting easing data it either you down, by is

Yun Kim

always efforts traditional the these on to of can attract your redirecting your the like out, the new it stepping comparing have up the opportunity? new regard of about some attract may ramping pricing as model back; talk are And of described customers then, expansion to you whenever just to you or faster focusing new using look Are whole customers that than some pointed expanding customers they than kind sounds customers? it. who you any just at made to older in rather pricing progress their be Got you you customers

Bill Staples

customers. at Yes. The there's for that - about the about approach, think way our I New now I way Relic, - go-to-market is contract really highest highest contract most we sales-led Bill, think value have go-to-market, there's three this approaches top and our which

workforce dedicated have the of around We consumption that their nurtures adoption relationship, their platform. and

separate And motion starts that It's We have really with self-service. around a led. product the go-to-market free tier.

soon card is So just or approach. as then prompted then using. hit users X as credit And X our thresholds begin commitments, consume the And required, freely. you on continue partner-led to and in to data, third the credit you're put a card

and partnership resellers. contributor partner, now strategic biggest Our right the and other being AWS have that there revenue we along to MSPs the many with probably

of we led of number self-service And parts go-to-market different being the sales but obviously majority large terms and those in so increasing from of to accounts, base, three our in motion. relevance with in of tactics. all different with our customer invest The continues revenue company the of come

Yun Kim

link? Got a Or one X-year basis kind under maybe expect on Mark. got expect multiyear last again? to of with them for renew renew multi-year to up, you do term, question some you. of contract you I When those coming them of large shorter kind renewals customers annual a do

Mark Sachleben

them to would on basis. of go a X-year expect most I

accommodate combination pool most flexibility. go and pricing great to certainty; model - So it's sizes expect what right we customers customers is really for X-year that and of all of But a business, I It price the multiyear for their that - large if realize the is large, our gives customer. find so very model. customers, require they we that them. funds do but annual good our them our And by would to of very for that. we'll attractive what's A would flexibility,

Yun Kim

Okay, so you great. Thank much.

Mark Sachleben

question, please? Operator, next

Operator

from The Cowen. Wood next will come question with Derrick

Nick Altmann

Derek. on This for Nick actually Altmann is

sales being derived guys in speaking, guys talked historically is how investing the You portion. the tweaks with the have customer organization. you're compensated success incentivized have you pretty how compensation mentioned But more heavily some that to consumption you and made force about from

can update critical pretty you would that So be Because seems an driving maybe piece. sort like that consumption of it give us in there.

Bill Staples

Yes.

compensation consumption. Just XXX% the model clarify, to is derived of from new

of believe part spend consumption. change more invest a XXX% more as that So strategic in - willing at helping from quarter. the to pivot of lower as they're and increased consideration the is it's revenue that? to the a anything the that over out going we're from beating platform - platform, and of first the driven commitment And consume XXX% our going derived our And quarter. time, them be as complete and Mark realize because to time. of for churn variable that spend beginning consumption upfront rolled to force, we sales we the really our now revenue contributing more success Mark, when And our value we you'd believe it's as already from add customer report to shared, this well able over to on expectations that

Mark Sachleben

think don't Yes, so. I

covered. think I you

Nick Altmann

then ago, - year drive with frameworks higher you wanting interoperate, consumption was little maybe to And higher-level I bit maybe it. piece. become more about open question. a going help just Around talked guys just to Got to a source the a a ask

that update an great. as to of be that's give could there if going, just So sort you would how

Bill Staples

natively telemetry of our new to. charting and resources customers previously Yes. contributions open from open whenever we often treat to authoritative the many customers try different ingest year we on community, has and built helps system telemetry agents. that That's systems it And committed of the so source important their what agents. well. members existing time just truth stores also We've open that now between the now source. incident, and as contribute our - We data and first-class like a any application In use many to they're Great from proprietary we the look can and good one is that adds very they connect engineers of middle for that's as against partners increasingly, troubleshoot, for well. Kubernetes, community And put open reconcile data also metric our now open Prometheus, go basically also have source, support and telemetry that to seeing source. into taken because open have And in ensure industry were platform. supporting crisis. It's middle data and standard tools then many to adds vendors which data the question. and different visualize Grafana, our to not thing. That's data. of source contributor a we data Thank platform source operators as to we the through really sourced you. platform for gone their Yes, a place and many last That friction. announced those an a all the proprietary to We've

it's those types, own from whether of data all our to it platform. see all connect own our one and in So open proposition from the That's value strata from or our customers love source able being place. core agents systems of

than through lot more far, so we And data those seeing even channels a We're going expected. source it's well. open coming really in

large So on. data to it's one of the year-over-year contributors that the growth reported we've

Operator

And the Jack from with come will Andrews question Needham. final

Jack Andrews

outside a terms you of in you letter, you for on who just you could talked AWS. the distribution? Could of gaining laying about the ecosystem really elaborate you do moving think for the incremental broader In needle groundwork be

Bill Staples

in that as we was of partners we and to for Starting channel we with And today, did have ISVs about going with well obviously grow. a our across other earlier some AWS, invest that about many business technology that When forward. through with I we us, major cloud want in more think Yes. providers, today New works we that business partner an partner we and clouds to see think well. set to partnerships. broadly partnership as the and see reseller nurture as run talking channel and increasingly providers partners that have through cloud and partner is nurture well new us for strategic existing increasingly, go-to-market to customers we want channel available want as a the We but MSPs Relic channels as other

We team looking at as have that a well.

ahead. I to that in think the Relic's partners, And of to growth the contribute continue I stool a so when it's about leg expect will third quarters New

Jack Andrews

very much. Thanks

Bill Staples

we'll conferences All for joining so of as again your you at coming to see right. Thank and calls allows. in the soon. for Relic, in today. forward Thanks. I meeting weeks look interest the you much Thank our and investor you you opportunity many New call in

Operator

The you has Thank now attending And now concluded. you presentation. conference for today's disconnect. may

New Relic (NEWR) 4 Aug 212022 Q1 Earnings call transcript