NEWR - Earnings call transcript Q2 2022

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Operator

Good day and welcome to the New Relic Second Quarter Fiscal Year 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Peter Goldmacher, Vice President Investor Relations. Please go ahead.

Peter Goldmacher

Hi everyone and thanks for joining our Q2 fiscal 2022 earnings call. earnings on hope Relations to everyone's letter with letter hour about read a together and ago had today's published our website Investor an our We release. press a chance then begin will for from; Mark the prepared Today's we'll call up with open questions. Bill comments and and your line

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

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

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

Bill Staples

Thank welcome call to everyone. you, the and Peter

company great last the of see laid the going the results. our year I first to through its just the beginning and our of is walk call. us out a priorities, new to the to of for the financial quarter to We minute, show five of against this ago numbers our like earnings a strategy Mark to market each chapter This turnaround progress it's in bold I'd observability strength marks in growth quarter walk in and Relic. detailed completion but New our one through you beginning at the made move the disrupt

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

our create that As this willing competitive in a market. business, customers a pay for value are to consumption ability demonstrates to

quarter, rate, as year-over-year revenues primary this and excess XX% well for report commitments, six year highest XX% The in of was year-over-year growth reported $XXX a to from retention the customers growth last quarter we million their as rates. for up of twofold the higher consuming in XX% pleased are driver quarters. We and ago

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

Our last committed end XX% goal revenues more this is to than a the the of That's quarter. by migrate on new now XX% year. improvement business model. from of are X-point the fiscal of

Our number grow is third customers. paying the of to priority

business we turnaround on our new were During ensuring and customers the focused retaining that we their to model business. migrating our

customers total the moved of customer pricing tier. Some plateau our smaller This to paid of then and our last the several to over our counts free quarters. decline led

total services than X,XXX signed and credit Relic. paid customers primary this starting growth and customer with ago, we're New more year that excellent, with last the higher funnel the customer provide one to driving is an we growth our is an New over since of X,XXX nearly thousands partners way One up levels count growth. paying from our nurture Relic have of quarter, XX,XXX growing tier. Since This for teams increase sales customers entered have developers for offer reported cards, one XXX% These free direct now for introducing again through quarter. of funnel The Relic qualified product-led New self-service,

wins total but strength vendors. the we with in fintech able backs UK-based the million. by healthy biggest of including of logos up platform. of a $X.X started further, also a to sales driven customer competitive takeout’s ever problems account contract with this concept as our that quarter is, contract A well Europe of account of the displacing determined our efforts of new This seeing in against new we number major We entirely, this opportunities, The a when one competitors. company example great as, several also our them a as their competitor landed greenfield value ultimately team's fulfilled proof marketplace with solve customer alliance. was were from demonstrating AWS win small We're ended a better our primary all-in-one the that already through logo

New one transitioned customer example, recently who returned to XXXX For from away Relic platform. our in

a the reoccurring began sizable technical surprise from the to customer's they experience gaps business theme. grew, As and bills competition,

this One account. opportunity the to ended reintroducing of competitor and up in displaced to Relic the better spotted customers' them needs completely address our New partners the and One

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

was product our This from quarter another hallmark organization. of innovation

addition we made small platform, monitoring. and improvements this for small services the the of quarter, sometimes thousands and two so Pixie across network available to In new purchase major not

CodeStream initiative inside While to observability, value that to their approach new collaborate New days, introduced large offers alerts minutes. choice. with an and telemetry environment developers production simplified debug IO, also Last fellow new developers it's dramatically still that and industry-first growing seeing expands to ready-made New we're reach October, believe innovation to early growth their engineers realize Relic product-led applications and empowers late adoption in a CodeStream, of with of another from we customers directly and catalog In for increases development our dashboards healthy help more we these and month, Relic instant observability. existing announced is instrument we observability issues, the workloads. of a ability IO sources, also TAM. short

into and of release, occasionally available code-focused user code-related and developers, product incidents later This DevOps, on-ramp among Microsoft we will will an only other and along new in full millions month Azure purchase Teams other to Code, user CodeStream partnership lower-priced VS cohort Coinciding As reach in tools. source we developer with a Studio, through yet Visual new time. and to specifically for The of with announced to GitHub monetizing to type over now for this anticipate not popular paid direct announced part users engineers of and more, in this with be strategic Microsoft to offer embraced platform, available begin QX. new launch integrations core assist a a of type, capabilities the users the user pulled have a be are this crafted therefore, observability serves platform who don't new observability will as user we a core license. have or users paid lead of

efficiency. that were faster is that to less developing Our with We and this people. reach and rates rates, the recruiting, of to friction, progress lower attrition competitive greater our to a our Fundamental in is all showed hiring order quarter. final fifth and growth our We three execution, made and years. internal strong improve our more employees, priority realize of and this achieve all we quarter, we achieved We past cost. areas to in efficiency potential while full move business dramatically able need focus alignment talented quarter top great and retaining strongest to

to stride. sales really achieved the hit team QX its Our sales of their than in beginning the organization past quotas More quarters. is six

the fostering engagement remain Our internal internal across shows culture. survey focused board improving on and is strong a we employee morale

a efficiency front, few gross non-GAAP margins GAAP On for remained the and XX% at margin financial was reasons. XX% gross

short so experience, cloud First, I more serve lead to the move customer term, public I to opportunity, outside better regions lower encouraged international accelerate to increased will the can but in US. customers and we churn better to cost believe our medium team This long-term.

public impact growth investments, medium returns and our forward Second, we're operational driver to users cost but on-premise, long-term. to continues centers strong. pressure the over cloud. more these near-term, will profit investing both data gross will attractive Data and be margins, where of is while in continues margins higher. on major these data attract data to believe today margins straddling and our provide our meaningful are put we especially opportunities over the Pulling benefits But

And it but the moves and has and against been for not SRE/IT operators to a are we XX our whom observability New business, four our our to For opinions taking millions practice along and a observability what and long believe the company. company to plan the setbacks them the business. playing and same four refer developers and as are the we're execution in don't an on made made bringing last passion meetings any the the a Relic success website. the to many the engineering, by the of inflection more and unexpected please yet, Relic exciting we're who by to quarters way, and who I since taking few. and it and is a Relic, There early market more true we'll is we DNA It's serve most authentic accountable. Only tenacious long-term so New Relic regard, of this approach way we other professional tackle days the Today be letter observability. we work will can them, the alignment stop many part decisions quarters moves and founding with The developer-first has and for I million and of are any being and be and connection whom to believe, strategic on in values, exciting of bold living customers of last details data-centric challenges such to early they by point professionals, approach in the published to takes we still to boldly Only our me observability. to prioritize, the realignment powerful road the is execute. data-driven today New our there But leader. business sense did we're show of is investors New is We the game. ahead. the anticipate, made investor way a approach

connect the eliminate app only of data sets a teams consumption for that estate systems a dependencies blind with monetized spots pricing view a their gigabyte. and all their that between what organization for they and Only teams ingest has been pay One only sources of model, so Relic surround they on the them. to model telemetry to enterprises shifted them to Relic user has true data platform Relic New We As app, engineering across a full allows those all New allows then engineering and with types just simplified and standardize and after business use. New engineering $X.XX

even over dedication resignation. challenges solve core be Relic took reasons, potential we New giving to for customers' to our these you am more fierce the employees, throughout hardest a for than of comes is that, get adversity living the the thrilling believe despite ahead their And ever road our despite going full our more to the journey the for and global despite so than year turnaround, ability grateful and here. values I'm great problems For to behind past I I strength. their to a With Mark. confident competition, us, with our pandemic, the company. in as With reach all

Mark Sachleben

call. to Bill Thanks, and elements the briefly and results financial afternoon spend some model. evening our everyone good important time to financial recap some I'd like and discussing our good then of on

of $X.XX. beat of million. we revenue non-GAAP guidance $XX GAAP customers a commitments, million guidance a stronger first and $X.XX, $X.XX million. GAAP of and of in well for of loss of between set $XX a by For from EPS of reported a year our non-GAAP and as provided and million, retention and ahead million our between their line $XX of primarily million loss loss This $XXX we second by was loss rates. as excess $X.X consuming loss driven of was million, was $X.XX the quarter fiscal from is of was $XXX ahead ahead the top quarter guidance EPS between 'XX, of in the loss $XXX for operations we operations

returned results discussed. growth we We with line this line ahead are have a top to quarter the and pleased of acceleration to excited time year-over-year our quarter previously

number our priority was get revenue intermediate one to another that term mentioned, the to in and continues back growth be positive to Bill As along QX path. market rates step

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

midpoint a now increasing range between a range. also loss, million $XXX to of a we million, revenue $XXX regard increase the year loss non-GAAP are year full guidance $XX.X million range to to million of seeing an With from of million to to guidance that full to $XX line from guiding the We between our to operating previous increase in at $XXX are $XXX a our from $XX an million is by $XX of trends seen between improvement the of commitments in are $XX of our driven million above consumption we guidance loss including, we This increases in have million, business customers. three million. between first, current top of

revenue seeing finally, retention been that has for healthy from year. patterns both And a improved are a have renewal the the on from customers model unit perspective. we consumption Second, customer and

see to highlight investments paying success off. signs continue focused customer There We other things are and positive few to we'd like a that are product strategy for our this quarter. that on

beginning there consuming excess stronger of models said, reason is difficult is the have conservative revenue been shows of model customers in are ensure we a main guidance. a the to exceeded as recognition revenue, forecast in purposes consideration. at that in in The approach forecasting for we variable to revenue are consideration of excess our period. that of As this a our a our consumption of The approximates their reasons primary in large commitment, consumption the especially, than spikes up towards commitments, contract. is consumption, take is revenue of estimated from set to that commitment at the has reasonably a it avoid end our beginning have at Because and commitment to purpose two any of order variable consideration more variable

commitment grows function conservative period excess period, and or more to be consideration a as the and the a over consistent term the the duration of over more assuming forecast. are revenue of over accurate grow consumption recognized the tends more a of means time. of variable beginning the at This we as build commitment able consumption create that of We commitment in to of remains to commitment, consumption data truer points estimate get

most far, of at rate. consuming our variable have accounts been So at slightly to steady consideration increasing a

set, refine our forward more we forecasts. developing move data we continue work As will and and to towards more a models historical get accurate larger and

churn. better sequentially contributing important down driving service. improvement was as Overall improved in this top to factor rates and the results our second contracts better year-over-year, continue customer to once and better were is renewal factors quarter The churn line The again improve. products,

difference in value. us. continues comfort we to was and successful during we Consumption aggregate, We QX We nice year familiarity expect due for and take customer cohorts, worth churn. model, we to from is to typically case to moment the consumes a make the energy ahead noting line commitment saw QX they In time are the customer a That and renewals amount given is internally sequential And to in renewal I uptick the QX and over which also platform course greater with of translates first consumption, customers the consumption And had our it our our increase are in customers ticked track between a improve more both NRR, about commitments. in above to cohort that product customers the commitment strong a Also, seeing net a increasing backwards-looking percentage this largely of $XXX,XXX the active to in of metric. and for overall are more of churn in their commitments go-to-market in count for important aggregate we with will this performance actually of that with active and XX% factors continue increase period, customer to accounts and teams reflected of are down time. growth. quarter. talk drive engaged better a spending want but driving rates, seeing contract commitment a an their a in to QX. get sure to than take discuss NRR renewal NRX mean $XXX,XXX externally. and of both particular, it's while and the of revenue what a are commitments, top When in and we

to QX, XXs and expect mid-XXs low XX%, As across data expectations margins have on These in low term the short of driven Bill non-GAAP customer change the results we're and margin growth base. the for in mentioned, to and our public in by been our for non-GAAP gross gross previous range range to driving margin QX, we from Also, at in relatively improving cloud factors moderated guidance the seeing focused was gross flat acceleration in modest EMEA a APJ. primarily flat move our we've now QX.

to our margins term. intermediate gross in we to However, ability high remain margin, our continue confident gross worldwide improve in cloud we complete XX% and our XX% as drive to to of the towards the move goal

bottom growth may margin, line we said, expenses, believe and prioritize operating in stated efficiency of have This but as improving we In Bill we to the benefits. will his fifth near-term across focused near-term over top terms continue our line costs are on That organization. impact objective, results. long-term

more provided want questions. the details And open and useful deferred the revenue these everyone the ahead we metrics less you. Finally, and We dynamics now, turn consumption are your changes model that it the Operator, to letter. go understanding to in remind like up. and we'd to those RPO, please of over investor to move it of business. a dynamics in around the Thank momentum

Operator

Thank now Kingsley the question Berenberg. We’ll from session. go And first ahead. Crane you. comes begin the question-and-answer Instructions] with Please [Operator

Kingsley Crane

Hi. Thank you.

of end way So stands back to looking today of in you ahead And turnaround? specifically the getting what why growth? market is now the then, the

Bill Staples

We initiated I turnaround to a to lot Kingsley. Hi, anniversary know you Thank mark felt in of was one-year it this important for And it so you planned of and wrap you nutshell. the QX. pretty but follow that we this last closely, kind really that question. this know a of

out declining and capture revenue value vision underlying know we We our experiences. data product that a series growth. and integrated consolidated increased quarterly compete from all and our a consumption. our And and to of our shifted in we of time, and streamlined pricing for model you our faced new the platform better at set we bold competition saw subscription with As to packaging where and customers market. We simplified business reports

quarters ago, been model contracts rates We've the to innovating that patiently the waiting of financials. growth four of commitments true platform With diligently now, completion new we've all along plan our contractual and those pricing migrating value customer have the revenue sharing growth accelerating and new motion when you results to way we progress our experiences, in operational onto driving the go-to-market a to changes For changes year turnaround complete new been our time our consumption model. we business and shifting realization the of our demonstrated Relic. feel what and mark even and now year-over-year beyond announced chapter is a we for New beginning been

In on working. refining it's at the strategy out, it's we in increased rates. Customers value your and sound. execution execution are the And about as against focusing model of the consuming execute continuing ahead, here second with ever is the of greater terms question, part put efficiency about really from strategy. to of look increasing our efficiency is that The we The business and on place. strategy

Kingsley Crane

you It for said be the team. That's Bill. well and should really gratifying

Just one quick follow-up.

You've entry the mentioned devs. product CodeStream New can to new Relic product. the to introduce IO's the barriers lower potential to for

how space new user three at you've you also When updated seat-based of all model. white pricing you think initiatives, unlocked? have look do You the growth much more these

Bill Staples

Great question again, Kingsley.

it's think I incredible.

the all million today about engineers observability of across one practice think major observability market the you vendors. say If

in and start a community, greater of What few a data platform a fostering world. a starts open and IDC to whether the operations. by is customer insights many customers XX or unlocks studies, working all for allow quick a to really can our open ready-made can partner benefit an or source any from engineering. in where observability open professional million to of or more vendor The to CodeStream observability ours it there action. through market source can it's get millions from other IT know to contribute data does we and that commercial access ecosystem insights clicks more flow developers from approach into And data-driven and with As them are

Relic long new that operationally even professional opens production a scale same has a as and opens game been every operations, get up that the is occasionally, is observability at done said because what be in their to or into in dataset on expert incident who they is completely fix we've get observability to of very very and maybe have to on changes It's One And innovation, to observability. year that to up behalf order get for anymore. heavy do developer from and CodeStream flow, it a exciting in taken you and believe observability New write don't today it new Today developers focused telemetry code I talking developers the then cases but reactive. access it and and collecting greater You both use value response. CodeStream really of customers involved operators. all that don't they our use tools data pulled bugs. only takes to into puts day And about

developers And so millions greater millions up to more -- the it platform potentially mid to long-term. the over opens

Kingsley Crane

Deep again. understanding. Thanks

Bill Staples

you. Thank

Operator

comes The ahead. go Oliver from with question Baird. Please next Rob

Rob Oliver

Great. for I my I for question. one have a Mark. Good taking guys. and you evening Thanks for follow-up then had Bill

So a Kingsley's of to follow-up question. bit a

of converting can checks much the product. Pixie associated both follow-up. you're too enhancement you was that's have a then new with had I the model? a about doing Thanks. containers terms probably to and how And CodeStream, a FutureStack what's great some having mover enhancements of around platform. made it been new to in discussions in what it, needle early a on revenue monitoring talk with customers It's and these that of guys talk I but now of It and terms improvements of network really with about think that's buzz is conversations accounts supporting and to and the You in guys that Pixie, considerable the about an you

Bill Staples

value really organization highlighting terms for for Thanks so Yeah. innovation. our needle the that moving It's in see differentiated customers. the of to product exciting

with FutureStack and of announced great Relic One Pixie, when sourcing. mentioned integration open we buzz New the You

weeks skyrocket. with GitHub source were had great few number And here pleased [ph] really the in who to stars, projects moment project ago from Relic there. the the just of interest number well customer adoption in and updates a It In actually fully-enabled roadmap is also at team healthy actually just space sales the source play developers is same of sales now New which express exceeds we major major interest as the We itself, conversations some many, announcements popular early Kukon continue Pixie. has very see as open around and and well many open the a competitors. great and to the as is value proposition of

customer So not to we're being appears monitoring with with ago. very excited to be strong. CodeStream and unlocked. thing stages, to many days launched see the performance We've joint starting also early get go-to-market is there partnership worked but And that Kentek. got Same network just list

very and the of early, Microsoft of world. are there been with Microsoft it's developer a So but popular use one millions who highlight tools the really millions big platforms has most developers the buzz the and partnership as in exciting,

And Visual so them. advantage well grateful the and also integrates note takes Teams. platforms partnership audiences a new does I'll platform well. products VS great while own reaching also support Microsoft with happen to customers Microsoft us our non-Microsoft Microsoft for as opportunity for CodeStream GitHub, of Code, for It with the and Studio, their we're as use tools it who

those those of advantage all well. to Jira take supported excited of also Slack, and flywheels as already environment out development popular very bond the we're platforms another Intelligence So

Rob Oliver

Mark helpful just for you. Very Thank color. Bill. it. it. Got you, Appreciate And one

in converted. You guys nice of terms had percentage a that of have customers move

now to of You're consumption the XX% on up business model.

ceiling. not being potentially are be you that a converting you would -- like guys. ceiling XX Thanks, a the think said traditionally I or meaningful had you pace? of success now customers should had And guys we maybe the think guys given at having

Mark Sachleben

Sure.

aren't is think is We're agreements target to end think multiyear I up the after points for well obviously such end the year. are of generally for there March, the path ones next of that. coming we I ceiling. who XX% our March. And on the this towards renewal don't that aren't said until we've XX% what

some there to think run time. their business but will it'll we'd I get take that over we just point, these to contracts our And love beyond that time entire core. given at have have

multiyear, in beyond a are get would - multimillion-dollar take little certainly more as March. But we next these XX -- expect to will we that forward love to bit oftentimes do we So go contracts and over get time.

Rob Oliver

Thanks clarification. Okay. guys. that it. Thanks, for Appreciate

Operator

question from with comes next go The Andrews Please Jack Needham. ahead.

Jack Andrews

Good afternoon on the ask if congratulations I wonder could financial and and I may. see one to I product results. if question one

the could product could if there I Pixie. have? is on Pixie's a the regarding use you last the follow-up question side frame capability on wondering that cases So just you that are was you us sort to? just of EDPS for other how important apply And technology

Bill Staples

operating and Pixie. system use deploying platform Yes. with agents turnaround to would it. signals from time for easily to developers into started platform system Linux allows case with customers Thank instrumentation today And in spend that the capture you it the and events for information the data metrics we the that to that We've Pixie our that custom question. telemetry EDPS is a the turn point very that low-level us have can and initially capture it Pixie consume. log and standard insertion

that on the and choose the capture or and our network through operating environment advanced back can launched haven't evaluate capture flowing so so that visualization. We in any automatically locally go platform, work. that the to Kubernetes for upfront also it of send the an very correlation, they kernel to or do cloud that using Pixie, with system also and to so lightweight scripting But actually simple through for customers it's don't retention, data have them extensible they

use unlocks or infrastructure network it not so monitoring, -- developer potentially application advanced the just cases forth. across and really application So, enormous profiling potential but traditional profiling security many

on anticipate be one value expand it's powerful we over able So, time. a and platform we'll very to

Jon Andrews

the I that commitments way a net the that are renewal color. appreciate question committing you're of to just to follow-up is rate upon type expansion now? customers as seeing what for And there a frame

Mark Sachleben

Yes.

or to cohort come year. have program cohort separate -- And at So, customer of The what I a set one QX and commitments the to look been now same have when two commitments and one one think up. I end is at that first talk for committed what we consumption. committed gone And commitments, commitments had year, the through. a things; we customers year ago of we on the that's would -- is to we about see in that a has aggregate

out period. is consumes the see the we've one over period. behavior actually consumption they When a see on The in is And renewal we type look the as driving commitments is a increasing thing how happened that much of their of continuing. that the So, when look QX. overall QX, we we and other for QX the and customer And that continue rate the that consumption. that's QX, -- where commitments. kind -- forecast said consumption other exceeds ahead continuing during QX behavior of at And we commitment. one-year at to running consume And

And that us things line those trends overall QX out are put to driving done. we've the driven and are that top so the and two those forecast growth are what's QX

Jon Andrews

much. Got Thanks very it.

Operator

Sanjit from comes ahead. question Stanley. go Singh Please next with The Morgan

Sanjit Singh

quarter multiple which in it results million. biggest QX it's question up and strong and QX, this I taking $XX sequential but might last increase up be like this really in Thank you When impressive the at growth congrats very was years million, quarter dollar is the dollar look the for sequential quarter. $X -- I off, on looks

how for dollar say question of spirit a I churn the of coming came you Mark expansion? And this platform? lower much increase about the the sequential sort being when in three guess So, we $XX to buckets? be of to will sort of from million, much then from that think QX? would across Any those how of from came net on relative out sort new frame to How came previous way much driver

Mark Sachleben

we're there. So, now think an to We've a of And is the job room churn improved quarters. couple continued go. for a doing mentioned We still having that impact. I certainly good have

to forward. to And improve so -- is we'll goal our I that think, continue going

So that's an had impact.

commitment the is of think for consumption customers. the ahead I impact our larger

said. to That at come board you pretty impact board customers has coming be a spend. new low-level think tend also. on I our an is piece But third on customers The that

So get dollar expansion total they And -- spend thereafter first modest. numbers dollar, pretty once they spend amounts every even is the an is added then, of dollar customers when the good dollar. we dollar

consumes. what we've our would fact new how on. is, have factor early pretty are there be a terms design, customer But recognition big point to is in I driver point a we that's approach the ahead of out our the cautious tends guess in modest. in there. letter would the want variable by to other consideration. investor consuming So And where and consideration the we to integration. of take demand. we that. how at I description that done our And broad a I revenue align done And the I And look variable very And with way is took customers

models. accurate -- models more better-and-better as to better getting have we're predictive more are Our more get And able we data.

think impact revenue. I on having an recognize how so that And we that's -- is also

Sanjit Singh

ingest That's helpful. would cohorts? of And dimensions in growth, data -- did be along growth growth to those some the the compared color ingest did did cohort you how also just then, cohort, how to how hear data also QX of or data-driven, QX paid the look super encouraging those the one paid -- as Any at user growth metrics two Mark. more and that recent follow-up there

Mark Sachleben

one a been cohort the So first cohort that full cohort the anniversaried, has September QX through That's first that is right? the has was the year.

set so of are slightly are example, doing set. that QX levels, I we're QX. running QX think got And versus when at And data terms QX and QX consumption and seeing in data for of what ahead overall that look we've we

to Now the more emphasizing field still cohort And start. then was so. remember, up emphasizing Back initial our commitments QX that we were our comp at was plan commitments.

they So that up The XX%. little was were subsequent our less a model. up onto cohort cohorts when new renewed

still -- I comp learning improve. we more in customers August been can we're of as our the So this. big or as it. It obviously And at new driven I last July about another getting But when doing good also change with and learn stronger have and think both plan familiarity we're go-to-market still we've we're things And that. on we at obviously, think And a it our cohorts. we overall think part lot was a a April. introduced model we we through but you well quarters. learned was it's But the I I a We've lot then by we're we August. big relatively can -- changed better-and-better getting organization. and go is our couple That for these move of have to product as think our results, that's really think seeing

Sanjit Singh

the Really appreciate color. you all much. very thank Mark,

Operator

comes Securities. question The next go ahead. Suppiger with from Please Erik JMP

Erik Suppiger

customers, levels? their on questions, of where of other a recommending from you the are Yes. commitment the you the taking can think some versus referring commitment overage? – how contribution consistent or how Kind Thanks you question. to are good the of trying Where the for we quarter. customers Congrats with approach are

Mark Sachleben

primary our So goal is consumption.

way, it driven when commitments. Our old In plan customer consumes consumption, longer We're our a contracts. around a commitment. of we compensation not comp old doing – the their were much life plan was is over is how subscription-based, all no by model, sales to that. We're looking the

more driver than data not that's primary obviously, more Sure The to and So that is people is but us feel better for indicator a us. we more leading and a getting get commitment smaller us bigger motivating people we to is that to real send a – for the factor out data. the force. like of is value that motivating commitment

end want day, and around platform, data to increase be get so grow driven of At migrate And to more well. consumption. value. we'll of continue But users. do to that's to how will we most we able growth the continue users continue the their is what and make that's to more as customers driving and value user they So sure the to what is really come do

Erik Suppiger

that consumption is side? the coming from revenue is to the of majority So suggest

Mark Sachleben

a one It's mix. with mix. us say, broad it a multi the or early as a a There's continue start really cohorts. one in thousands in was And number got way of relatively cohort, go It generalizations. We've as to look might for if through hit adjusted each learn quarterly customers we draw, I'd we'll other, as modest had to gone now to you It's be they look we the that too at hundreds. cohort through. to this dates. from and We've model their anniversary

Erik Suppiger

Okay. the retention rate. net Then quick on

you the is for $XX,XXX. what that or dynamic accounts $XX,XXX for rate basis retention net explain, greater why the is Your than it than Can higher sub is?

Mark Sachleben

I in big think read is numbers, a the small there small base.

they something $XX,XXX a customers that have are up base. real paying our got you couple customer in $XX,XXX – see big We've much and over can a up to hurry, a growing of of adds to XXX. That all change a sudden percentage You've and nicely. number of you got is us the thousand go small is the our is versus when much the get dollars above other or it's tougher – just base base high of

Erik Suppiger

Thank sense. you. makes That’s Okay.

Operator

Capital. Michael Please from go comes KeyBanc Turits from question next The ahead.

Michael Turits

amazing double-digit big Hey, the rates. done execution strong job picture quarter. you've congrats question. a now and really growth you've an on got on Bill, Obviously,

strategy product the focus perhaps shifts So even more so. to

of products. monitoring would some you're I about this that there but observability you out from point, at you are are strong also know that companies So have there? And really developers or the differentiate strategically other developer-focused what doing talked players how other

do the well-known some how field? differentiate So players in what you leading the of are doing really from

Bill Staples

prior telemetry, a in react we you if question. production. new by laid reminding and to including Thanks, about collecting would the space, this Michael. to And be great largely out on focused I think it's incidents vendors, all start year, Relic developers everyone, Yeah. been last New to by strategy, it's driven helping

New engineering a today, reactive use about times that cases begin to could only current prioritize help to every the that, ways variety – very experiences, their And deploying our than all you help do business incident is help Because are not time investments, observability spend have outages think and it's this back right small where be process. and right? we that be create beneficial them create think it it the have very to fundamental on customers it about value, engineers, investors, so cycle, those spent belief innovation. it's Relic, for what lot be collect more testing the and production. life It's think the When subset and this proactive, planning but to space TAMs. customer company we motivated that, value but customers in and with, When by, telemetry building creating is though on many step with when help can better the many, going that, engineers to you focusing And it, is their our and other phases today, you production of of validating more time, we around they're just into that in their to of in innovation, innovation, a to that you about, TAM population. software, engineers accelerate total nature, the better them build all to of response greater also and prevent then And customer is troubleshoot used customers. a to around

IO more see and we it's picture the more behind use new to strategic CodeStream impetus the to can big also shift data is developers, fundamental user year, more case like how view data that innovations the and and for over time. well as cycle. software of like, use unlock cases the so tooling, That's us development as And that data for going and you're to took across by telemetry pricing life premise which the and last for model that unlock we

Michael Turits

but one of conversion can How you've within And increased How then measure was the paying how you. that the that the paying go, expanding there per where things we you're mean, actually percentage of investor Mark letter user was of the you in pricing is we increasing enterprise? that that decreased. as take efficiency? increase had model, adoption you the really for I pay And do users rate current user can measure that? and the customers

Mark Sachleben

the is platform. getting of things using Well, the us them just key for one

it, lot driven we've investments to new push people of numbers. mentioned, we and some just of a get And platform. – organizations. within people just invest This the the to hearing additional the get will necessarily platform. to just And And want really those about just organization, and we we could using them power people, understand not that's that's us out, so think the more a be case. trying And an word get

we so as to make as that. do And possible easy it want to

get be they'll will using – to people not have the they XXX-gig value will add lime And that, able grow. continue, We are they get ultimately we hit they'll once or and they're confidence it, a if significant much that once they paid, and there, from we've and grow seen become to paying and then become paying larger And accounts. customers. they stage continue evidence the to ultimately lot of then more

improve that for sorts is once people of it's So rates and our deployed using primary get using they the product. conversion our a and funnel And the do look we goal, the of lot will them. would they then things I and and But see the in of become confidence into it, the us, goal and at do we platform, larger on to have to to larger and to try the say, about using those all and customers. paid at start primarily we end day all people using start go we because getting evidence --

Michael Turits

turnaround. for congrats big taking on the the questions and Thanks

Operator

question Please go Loop comes ahead. Capital Yun from next The with Kim Markets.

Yun Kim

talk Congrats $XXX,XXX quarter had customers the Bill you the on plus Mark. a good and in in new Can you you. Thank about success quarter. adding

this And continues it your are are new rate, because talk at your the to who new older Can the a were existing about customers pricing platform? model, to over or should attracted so, or see $XXX,XXX faster because simply to think joined this in XX who Thanks. capacity customer the past accounts customers was enterprise expect they you to just I now also new move committed they higher new plus best while. we plus ramp? whether sales $XXX,XXX then these relatively performance customers to months are continue

Bill Staples

the on yes, credit and that then add customers your definitely we or you. it's the I'd investor find these the of start start answer free with tier think take new existing to I'll highlighting first a from bold. that relatively are is Yes. answer short with side Thank question, since some letter, And I the introduced that. we I'll self-service maybe exciting are the and base? move numbers your And now X,XXX so pay X,XXX an have alone. increase we customers card XX from quarter, in in line additional spending quarter noted as the go well an six model to more last quarter an than this increase four year, than from in that to $XX,XXX model, increase we customers $XXX,XXX. last X,XXX and XXX spending to more from

customers new are customers example that last the those PayGo a that of great up tier $XXX,XXX free came So year $XXX,XXX. of excess are model through spending within and now in

from existing with have they while. it number platform consumption on that rate may now And greater Relic expanding services spending excess are be across than a the New using the expect would access, able now it we $XXX,XXX. XX,XXX have in full and large base the And now that customers and who a from to of are to I customers of a get for to the the One. pool I us for platform continue grow our remainder consuming them been at more model think

Yun Kim

been so today, one. mix It Okay. be seems I'll a meaningfully And Mark. a address Thanks. you this changing question much consideration excess has is like Great. another in how driven the And revenue to consumption have of quarter-over-quarter? I that at topic of seems variable commitment? for by then metric your qualitatively least Can hot ask

Mark Sachleben

the variable first customers design really how Early, a been have zero. it the has quarter, of last you of we zero, recognized quarter-over-quarter. a commitment. consuming Since If to would by go to number rate cautious back right? the ago, no we of we year, their variable last just would been quarters, We get approach have so as model, certainly had you changing Well, to excess took been the September Sure. had on gotten QX couple consideration. year into in

and better models And to when these you get up. we pretty quarter, was it to that so balance Your sets, it has And things consumption your right? September into took. data out, then you you've get the get modest tick we got QX levels. And equal started customers overall get actually better then QX, to into and revenue

where equal. has So you got everything -- to that's be actually

So it increasing. has been

I we lot it's -- of to zero. started that at think it's attributable that a the fact

past numbers, over We again, it's as continue to it would expect kind not year, of to we've more are But our a hard because say than it's to that of quickly expect do time. the guidance larger and as necessarily to customers over I we get continue And as to has -- consume increase. indicative commit. the grow percentage they certainly, things that. given big

Yun Kim

Thank Okay. so you Great. much.

Operator

ahead. The Wood next question from Derrick with Please comes go Cowen.

Derrick Wood

could could what I'll of better predictability congratulations. and in some rec. rev consideration Mark, kind you the there's the rev And data you looked like and shift maybe on factor and now percentages the that QX, a the can one this do moving echo my see think you. and on given parts double And all rec how help some two? again. And year contract of it but of that and in just the you curve that and that -- more QX, year like two rec and QX, of shape in click compare shifting of Thank in in that mix get I'll Great. sounds year like QX shift with variable mechanics us past, how has consumption, you've us sort rev

Mark Sachleben

Derrick, kicking it. just I double triple on not this I is to want think clicking.

in I you'd a a ball. as world, crystal perfect completely mentioned, we perfect started out -- linearly. we a And have don't world. live do to in this we it. in don't So perfect cautious Obviously, able We appropriately be

are as more also assumptions And month, every remember, get we our data. quarter changing customer behavior more and every So changing. is

these folks A consuming they sudden are the we've have at just all got available got to -- who a that put make And make be information. is a that lot to best to we've a of level sustained, drop. ramp-up together event? to with of we've onetime forecast And are folks up. maybe a a ramp going who or got overconsuming, Some start low the of an assessment to is

kind As says set, historical draw on of at we that over a period. we'll in we sort that results larger rest a behavior typically this get of contract and of can get better have this we this behavior greater and data the more -- the better history

so, this to course refine -- And we've able certainly to of models. improve will continue It's the those year, be we I gotten think over it. at to better

in And the we look bit and so, to of was be continue the I probably time. quarters. to of -- September improve just would in fourth subsequent QX, that quarter over a our say, expected But the when you little skew contract than larger at percentage towards we'll cohort the that

Derrick Wood

Bill helpful. And for one That's Understood. you. maybe

with being model. between price ones put You talking AWS pricing consumption-based compared differences couple out guys a you Datadog a talked and about blog of or to, about disruptive the

the of one costs reasons. out being called displacements this You some on call competitive with

is, in question guess there complaint I my market? And how much see of prevalent you pricing a vendors? other So out how is opportunity displacing do the in

Bill Staples

tackle question. the question. a Yes. structure year value our the about It's turnaround structure I customers that necessarily drove and It's parts as the one of cost of to first what pricing plan It's not a of regularly to us observability. hear pricing the from price of differently. points more last

save blind it And more have variability on. more going more the what's of And going maybe it your is Relic, the seasonal because the spike does. low today, them doesn't or headcount predictability,X when versus by structure. as operating Relic cost way conversations. competitive their as Everyone gives -- the user New like? much priced out lets you system And regularly we in data you're and more then they as because does understand necessarily doesn't competitor, a look engineering but enterprise as feel less much the much are instrument New spending headcounts very of spot with you of customer you infrastructure would getting the component they or because up come dollar For much value, at a money get price spend with

find user it a instrument that So of and lets because predictability. lot and data have advantageous, customers combination more them pricing, more

Derrick Wood

Great. you. Thank

Operator

go question comes D.A. Jaluria ahead. with from The next Please Davidson [ph]. Rishi

Rishi Jaluria

Jaluria very guys. This now, question. longer Thanks Hey, Rishi much D.A. is RBC for no with Davidson. my taking

me. quick ones two for Just

pushed timing Can what investor drill to the in target update wanted explain give for years customers maybe on up the to outlook looks stays side of the completing more by us the that's And XX% talked is. gross I letter on margin got margins. for you level migrations the you the gross margin? at I've than being And First, down an a like? then two case, you be if you. why data versus mix why and the would the it follow-up. us lower Can Thank data about gross

Mark Sachleben

Sure.

So, to out centers data that a We our of in ago. know, That's couple the happening. we've as of cloud. Chicago, you moving started years been been getting

end kind think that about and running by the of XXXX. complete course largely of was -- -- I its talked that being we fiscal

Pacific internationally, and Asia opening doing we've in to is, what EMEA. addition, the In moving cloud the up region, been so in

bit and we better we the was time that a customers, term. planned as mentioned the business results our And offer something quicker earlier given but horizon so the Bill over that long longer forward do better our pulled we had for our a can

would hit the longer over term. on the of short-term get a we bit benefit those gross make little take investments margin to So

profit data. price low In the our no-brainer customers margin to terms very their our margin, telemetry a want our send profit of for it data, intentionally and of a a make we data each versus to at because -- we all -- of of our priced low us users

cheap? felt is want bit for it than and eye-popping. to a just we you store me We do it. make them like of for little a think number I It's Yeah People say think you for sure. for take easy in cheaper it this And with it to handle so sort to to can really it well that really going

business as feel we possible. drives other do the much and much more users wanted bottom hand, we we that easy what data to line decision the get a And to so that our as -- profitable profit and get for profit the And are sure as the make as towards that value with ultimately because specifically users in we that customer the it was users. this of that's on mentioned make a while one-thirds. that will we those getting time, like to way now past And mix closer We long-term for again think is there right get that, And if is data. that it fine getting we're the quarter over back that two-thirds, XX-XX stays data.

Rishi Jaluria

All gave right, win wanted wonderful. backs, maybe appreciate great That's I think hear. another question. to just to customer which helpful. And the then, us to you is I go competition I on color really

Thanks. we Just as down year over think that you've the the past trending product about rates, has how-- both if pricing gone competitive overall, been your transitions? win and

Bill Staples

credit platform it competitive from as benefiting those very card lower but and deals. on And the selling X accounts attract to growing and year, we rates, tier able in of we'd be the multimillion-dollar some free have itself. When to It's also of other The the definitely numbers translates friction has the only quarter. I stronger transformation to for stand each product large value Yes. retain than and our integration and best the us, pay-as-you-go that guess the customers value there's over between simplification there product to of not about willing the it's the talked that we've put give product are the speak contracts, the helping customers customer and done where and in evidence model. of now customer the last the that and to engineers is strength be removal churn of then

recently our be perspective, of out field shifting loyalty all pricing really work and market new together the the focused winning them happy keep accounts for a product to the customers go-to-market both more our a competitive very customers term. long customer on for and from a value we've win that and obviously motion it's and trust the to incentives think perspective, I made but there from even moves

Rishi Jaluria

Great. right. Thank All you much. so

Operator

session. turn over back closing to to remarks. the like question-and-answer Staples for our any would Bill concludes conference This I

Bill Staples

patience growing and forward again your through thank our quarter. your you the interest as for success We for get future thank Relic. call reporting to questions. and and again you Thanks the all a on it quarter operator meet exciting the to with continue to day. your we quarters customers a Relic. in and you, Thank for and work joining today for in our business very and Have meet road you looking Obviously and excited New New for turnaround as we continue throughout this investors the We're out quarter. plan great on our

Operator

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

may You disconnect. now

New Relic (NEWR) 9 Nov 212022 Q2 Earnings call transcript