Earnings call transcript Q3 2023

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Operator

Good afternoon. My name is Matt, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the New Relic Third Quarter Fiscal Year 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

my President introduce Corporate of you. now Friedrichowitz, Finance. host, Senior Vice Investor pleasure is your to Ingo Thank It Relations and

may You begin.

Ingo Friedrichowitz

earnings third Good fiscal to and our afternoon, year welcome XXXX call. quarter

our On intended the Staples, Executive Relations remarks Officer. and investor prepared Officer; release website, Financial slide are to you Barter, which Chief the our summary our and call. earnings our press Chief today’s David On with call me supplement Bill Investor is can deck, during find the

In addition, be ir.newrelic.com, few an audio this call replay in available will of hours. website, on our a

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

materially and certain will due of the filed discussed in metrics noted, all differ number SEC. upcoming of and factors risk be during could uncertainties, we measures. on are the most quarter this a risks expense call discuss recent profitability our XX-Q and with non-GAAP the today’s results. otherwise Also third financial our non-GAAP to results Unless actual to including XX-Q Our call,

reconciled those measures our are most release. directly to comparable in for measures be GAAP not results. These financial non-GAAP a to the earnings intended substitute have GAAP We our

turn And over with to I’d like it that, to Bill.

Bill Staples

non-GAAP profitability innovation, and platform focused of revenue a Thanks, driven the transformation have million and $XXX despite an across powerful Ingo. execution. we I’m pleased result This uneven income, differentiated product exceeded of including company economic nearly the model well-executed guidance. watermarks Revenue is the climate. pricing business, for we $XX and was our quarter. to our announce another both and generated We high million, operating

rate an in third of adding a this with on paid start is the category. than new strong We quarter. significantly logo our me platform other more XXX customers, quarter, competitors growth which new ahead in execution net saw go-to-market Let update

free new growing at use result product to pace usage. Relic’s product-led and customers own credit you pay a which our success unique motion, As they paying that it in growth and love of perpetual begin a as to customers New card scale with with their know, tier a allows is in with fall then the starts

from free XXXX, Forbes tier observability planet. the customer and base, Our Relic adopted customers, includes verticals. institutions well range most XXX, of ubiquitously public growing spanning our sector of along tens of the thousands Global engineers New a of Fortune This leading on companies with industry engaged makes platform paid

wins large we a logo share of of where me couple drove lands competitors. new examples Let head-to-head versus leading

improve we closed observability a access off a their supports spend on standardizing XX And to cost one operations than pioneer, First, increase a as their better their Relic the leading different engineers their is scaling productivity order service them rapid practice growth to Confluent, consolidate eight in strategic to partner with Confluent second, with and from we to chose the to who Relic. in more financial that New tools BlackLine, platform streaming in capabilities standardizing New is with management have order and move data on better of TCO. performance. competitor agreement platform,

new customers well winning who industry-leading as through New growth strategic engine on rates our Relic. new standardizing clearly we’re at as are So logos

it. everyone ago. we’re our base key platform how few just expansion expanding One Relic. is in I’d use of customers our revenue a within growth important their most the blogged in term, our existing driving for read more to for model, by which all-in-one I value pricing our short success about Perhaps however, is encourage factor weeks driving New

our and lower platform. different which Relic economies standardize New on translates to better but of as offer a to better a way, way doesn’t scale just customers observability, price TCO

our elastic data observability unlike scaling cloud for of savings This infrastructure driving pricing by making can of usage with model their where monthly optimization spend. example, in trends use how and significant translate own efforts modern competitors, peaks. are For instead to aligns pricing of pay our actual customers service customers their follows cloud their

Our also key in spend incremental differentiator result leading much and cost can per lower is gigabyte versus competitors. a

Our monitoring. customers for pricing Xx more Infra enjoy and value than APM host-based

very to on tool log Our can Xx pricing leading Xx more competitors. well management also stacks value get market. Customers up every the than against

in lower results All ownership. of of cost overall this total

looking Relic economy deliver is Xx can more customers leading value Relic standardize every efficiency, an leading more on as where the than New is competitors In than uneven New for business platform. our choice.

few Let me observability growth result advantages largest how base. and time. commerce for customer ecosystem Latin in pricing in within been existing for platform our more with of share to value has standardizing the examples America, our some a meet on MercadoLibre, just innovation our online

the This quarter, computing and a cloud-native growing which New commitment foundation-driven in is to they OpenTelemetry more proud OpenTelemetry. needs, already observability including use their support of top contributor category. doubled our Relic than their to large is a standard, supporting

one their showcase across network to and world’s a that consumption MLOps. mission-critical their growth, support using game examples this is and just and which is observability commitment OpenTelemetry in These addition are mobile, is to leading New their few Relic’s companies, of of category. fueled a quarter Hill William Next, embrace also entertainment the why capabilities they by quadrupled

often what It’s gets said, measured improved. gets

our software they their to large business their digital of be help idle identifying their be can helps their improve and measure two top their It insights, improve This to written improve helps and in them them. performance experiences can drive performance. ways. can helps line business deliver that Relic poorly we small, help digital the efficiencies which so the as them customers, to They continue bottom by them also fixed. line reclaimed software systems or New

why paying base nurture continues lose. consumption grow ability to observability performance an and afford drive is current our throughout an for economic land grows can’t only stronger mission-critical the This in new It’s to uneven opportunity business you increase more The positively despite economy. headwinds. to investment to customers

simultaneously are improving to catalyze this We three things success.

for to customers. product increasing our fuel First, innovation value continues

efficient pricing an is model third, bringing focused way pay differentiator a standardize leadership and more observability and platform all-in-one our our new for And energy important economy. our new execution. Second, this especially is platform, in on to

One our might how quarter last nine terrific pricing, engineering over drove increase such year. wonder now with To margin four-point performing points gross is efforts. a Relic our margin? this let’s and to the in New team The that, answer gross focus on shift product

same relative cloud-native We margin who of achieve enjoy are a peers benefits the software to levels. XX% gross now business. operating impressive especially these This to is margin on-premise

how quarters. even is has been innovation proud able but more the significant engineering deliver in of recent improvements, only simultaneously team drive to launched major I’m also many not, What efficiency

just examples a is Let three having me impact. of innovation business where share

We’re seeing strong traction really our log-in with capability.

log rich New a save and data, share moving low This to gigabyte money including of our The cost better in along versus with accounts dozens to and also this and a features a log quarter, log anomaly we can telemetry rich management combination took detection authentication, expansion organic experience, of multiple their now experience continue base, we their get by per across is capability, engineers. they customers log for for management realize to Relic leading see all competitors. in available

Relic to Second, an in our their serve is choice, strategy the them our existing continue through important and because customers pay for alongside their easily part New all we by of and expand data New cloud infrastructure keep provider we commitments. to This enabling Relic our best of their their to use hyperscalers. cloud cloud apps platform resident

Azure perpetual our experience. potential inside to This try entirely This service. quarter, for opens Azure tier experiences millions funnel New already customers paid the for now Relic buy all engineers our we an as launched And new are native Azure to free addition exciting discover, a it’s us, and an in of and the of customers base. Azure accessible and existing

vulnerability launch last last the period. really throughout management the preview launched We quarter our preview a healthy month went saw Third, engagement very and well.

management into builds their vulnerabilities for zero APM our automatically New on with strengthen in our to every code allowing deployment. heritage get Relic’s and customers insights one vulnerability of APM, configuration

In those across more Snyk AWS tools them addition, where unlike New allowing plan Relic, platform security our to from multiple aggregate into Lacework their and and allows stack. to focus competitors, signals them prioritize integrate to security to and approach to

sales January, which is focused very In paths, customers. teams capability, are gigabyte special data general Data part we for of available acceptance this Plus a this announced availability in-product quarter acceptance per additional sales bundle and our of and gigabyte. payment with and our We at an executing both per $X.XX of or increase $X.XX saw promising price-existing play as launched ingest monetization

gives to Let’s the now road success long-term confidence me the focus what of in our shift and business. our ahead

drive few my set continue joined in momentum. gratitude express to Relic who excellence it New are and quarters to The helping we been my team today who confidence the in want First, Relic, and I all standards is gain at we than leaders in tenure operational the has last stronger for New and management have and do. high

global work turmoil. Thousands our already and and despite demonstrate would hard undertake of are started. just done, and we uneven pandemic, economy companies world around and believe to getting unrest company and our transforming the they the what Relics and market grit social customers to exceptionally business as continue resilience few commitment I despite political with have we’re

the and expanding ever this our to increasing across largest of we of continues customer growth. the I strong. is paid Consumption and base the revenue base and commitments customers increase healthy, in capture of existing opportunity given remains new new our ahead platform. with value quarter committed have ability on to Next, the customers revenue The our improve quarter. pace believe sequential third significant in

our feedback that customers across quarters would overall to and cohorts. programs, on measures We’ve locking business see We’ve of company our the model buying been the platform revenues. this investors quarter. faster like on over more than cohort modern these transition are the finishing continue metrics baselines new the durable We heard using to consumption growing last our much of six

customers all with in to panel May. plan, with Day growth details with this they to platform. an our FYXXXX you updated strategy from product We’re coming excited We strategy and FYXXXX the Analyst and share our and why to you, customer will you’ll choose this we going analysts along as hear share May. like a our meeting, In would use plan forecast them benchmark go-to-market forward, well we as our invite directly and investors financial of measures where to

exact We’re excited tuned May. Stay date you in the and venue. meet for to

profitable operating revenue both. Last, margin And QX are growth. first both we in in we the since to our accelerated committed we growth. the for corner do and time can turned on profitability QX, transition We In began.

we’ve no on exclusive. mutually Look not dial than gross income. are margin further We operating both how moved and the

And this XX.X%, and a engineering we by margin. team’s gross ago, delivering our while, improvements value. XX.X% quarters quarter, ran on Four increase, driven architectural customer we cloud reported focus in nine innovation point at and optimization increasing parallel,

loss increase. Just These durable ago, same this we’re business reported of quarters $XX.X a we to reported sequential time a build substantial as revenue non-GAAP of quarter, excited $XX.X a on. million. we two million, the the to that at profit are improvements And

In change. quarter-over-quarter. company, improved all product, well stronger we’re social our a economic, leverage as execution closing, as growing through them and as go-to-market customers navigate partner technological and positioned We to a helping our feel strategic and operating

and all-in-one efforts platform their competitors customers’ their they as while standardized engineering efficiency team New top support drive our line less of increasing simple shed productivity Relic. optimized efficient Our to is and

is QX in outperform our the to our and execution team strategy. to ability of testament of a power strong Our

I’ll With to Dave, you. turn over that, it

David Barter

you, Thank Bill.

team revenue our both for operating top third of income. and the quarter. exceeded end the executed in well guidance Our We

XX% of a Our revenue was $XXX.X income a was representing margin of Operating $XX.X ago. increase from year million, million, an X.X%.

Our a count share was diluted million. per on $X.XX of $XX.X share earnings

a for quickly is company. Profitability turning the strength into

yielding with is a quarter summer year. point point execution, to margin increased and dividends. Gross increase tangible focused a last started over increase last X XX%, Our which X a last restructuring over

cloud cloud architectural our cost. to optimizations engineering and improvements continues Our lower to team implement

Our commenced work engineering legacy centers. remaining data our also shutdown team to three has

gross XX% regions strategic serve in start efficiency, on growth cloud near profitability. we environments to now our can introducing and new margin customers and With reaching AWS cloud focus drive more to

recently we As example, on and Microsoft Azure. New we’ve cloud EMEA, Relic an launched a in environment launched

on beyond operational and Looking and margin focus pleased profit, gross our with excellence. I’m gross efficiency

opportunities leverage find drive and to continue scale. We to

we’re Equally, cost. fixed lower finding opportunities also to

cost, reduced further XX%. resulting in would non-cash footprint, we real quarter, our million the estate onetime be Without During this a $X.X margin our operating expense. over

work have to still we our energized progress. I’m do, While by

meaningful Our levels the engineering, efficiency-focused thoughtful efforts to delivering in which of climbed of enable almost investment has is profit. revenue, business XX% while

will be Relic year, expect to margins. Looking I able operating produce at next New durable double-digit

starting commercial The other emerge our to strength that’s is execution.

this expanding performed logos highlighted, new Bill and quarter we relationships. landing As well

see in XX-Q. our clear evidence this You’ll of

RPO increased Adoption is where in million. Similar commitments. will and execution to performance representing of contractual remaining done, increase tangible growth efforts enhance our customers The an overconsume RPO focused points. to obligation, gives profitability, there our year-over-year, top to continue Our be $XXX or of XX% line but able proof is consumption work contracts yielding our to be we healthy is reducing situations levels. us very growth confidence driving their versus at more

shift to sheet. equivalents $XXX and with Let’s the We cash the ended in balance quarter investments. cash, million

convertible is X. May coming have that We note on a due

hand. We expect on to cash with our repay this

would in our additional We shareholders. not dilute or currently interested are time this at that pursuing financing

flow. believe business We to will improving generate cash continue free of the levels

we there while flow to be in phase some as margin monthly track consumption free fluctuations our margin, noting operating our might and quarter-to-quarter expect invoicing. We continue to cash

to let’s that, fiscal and QX on the guidance year full for move XXXX. With

points. consumption typical then follow pattern for QX holiday the on December words, into last less the January. of contemplates outlook Our earnings In in pattern and a with other we is and customer usage One, described post usage our in line peaked how few call. seasonal of it

QX our expected first elements in lower These the QX. when two business in fourth increase quarter points fiscal taken into in are day. revenue fewer guidance, two Two, that has model the are revenue of a averaged account million our seasonal than are $X.X sequential days per of part resulting and business we in

will costs expect between normal $XX we headwind XXXX, payroll for the in million the Factoring year-over-year. the tax quarter $XXX to of due $XXX and and of of these approximately of by our growth XXX(k) And beginning XX% to impacted year be XX% calendar reset. revenue fiscal million, fourth three, year representing million points

diluted operations between from $XX and income million $X.XX and share non-GAAP non-GAAP million per expect $XX $X.XX. We and between earnings

million the For expect now revenue XXXX, fiscal million. $XXX.X full and we increasing between we’re year our outlook, $XXX.X and

per income non-GAAP million range in expect range $XX.X $X.XX. $X.XX be to from share be to a to diluted operations earnings $XX.X non-GAAP to We million a of in of and

our very with our plan. quarter I’m our third we’re growth. I’m we on focus and conclude, strategy, in on performance pleased the and delivering executing the delivered by To very long-term Equally, profitable energized focused

With that, open let’s Operator? up questions. the for call

Operator

of The Instructions] Credit Fred is with question the Suisse. first Thank from you. Lee line [Operator

line Your is now open.

Fred Lee

and wondering quarter. And quarter questions was a the what was versus the congratulations percentage taking for the outstanding derived you platform of quick APM-only Thank follow-up. on have from an I legacy revenue. then I

David Barter

That’s a great question.

drove The about the think contracts about revenue. was I consumption XX% of legacy modern XX%. the

Fred Lee

you. your much your how the versus the engineering efficiencies increase margin detailed incredible expense Thank the gross Okay. performance, performance, to And the was you optimization, price on on then regarding related call? of cloud

Bill Staples

make cloud of due Majority team, there is that one. improvements that of take I’ll architectural engineering the Yes, service just focused to really on improvement our better. overall the and efficiency our performance

Fred Lee

very you Great Thank quarter. great. Okay, much.

Bill Staples

Fred. much, so Thanks

David Barter

Fred. Thanks,

Operator

The next Wood question. is with Cowen. of for Derrick question line Thank your you from the

is line open. now Your

Unidentified Analyst

the Derrick. strong. very Great, RPO was Andrew growth thanks. for It’s Dave,

within wondering is deals? that. benefit Just by in that And duration there to looks CRPO any customer Was legacy how multiyear driven switching there?

David Barter

question. It’s a great

you a were to XX-month the or on whether If basis, XX-month believe at XX%. that duration, was look up I about a

But contracts. it and go of volume as the did very savings expansion new up around pleased to driven total plan. the consumption CRPO just pleased how to two was a a the overall also started we three-year show So tick with RPO and customers contracts by with also bit didn’t much little and – were

Unidentified Analyst

it what more kicking share is very rate seems strong. Any this a that into on the uptick metrics had new gear? and win like to competitive Great. Bill, this dynamic activity And quarter, or displacement an

Bill Staples

Yes.

and to the example, team during For displace able quarter. XX our different competitors EMEA our was tools of XX customers

we I years put really driven place build ago all-in-one off it’s think of platform. an that strategy the two in to

fragmentation. bring we have too it. hear, you helps from investors tool concern If concern have this observability continue practice. hungry the is wanted customers, platform that their is heard high for value. thought one a two told remember, we and been to we them price we number disruption, was And and for ripe we observability, they that standardize the Customers is that the The for that to number really category

between can drive get a will engineers approach stop platform done their work efficiency faster swiveling So their and because spend. screens and in

built In the and be show We’ve been we customer problems. hard building the those were down consumption essence, what true strength only we we climate the for. heads that an current observability believe of And exciting two opportunity years business. business is to And our ago. really strategy road what economic to first solve ahead the is coming saw accelerates this

Unidentified Analyst

Great. Thanks. Congrats on the quarter.

Operator

your Singh you line next The question. with Sanjit from Morgan Thank the for of question Stanley. is

Your line open. is now

Sanjit Singh

cloud I my topic for probably Thank you What’s optimization? saw is in of to could itself, optimization? appreciate December you sort bigger that one questions taking enabling extent If a the on this the excellent quarter of that category congrats it. themes angles, what want of QX role it optimization, that the ask observability the sort the you Is both across observability, and software. And this the in to I’d for target results. about cost really has cloud of a from the cloud you trend address quarter? results cost

Bill Staples

them help did our line and why supports we about the our hyperscalers two is money. our bottom New it’s obvious, help question, cloud important initiatives it consumption we line things. make consumption as mission-critical, for customers. is Yes, the both We really we to do and really immune customers It’s save so Thanks, this reported see of down base. cases quarter. helps by that cloud think answering in Sanjit. of the use observability money, some top in slowing Relic And while all aren’t observability three them slowdowns, because That’s to

customers To there are and where efficiency, infrastructure are New use more apps help efficiencies their Relic performing understand how and drive be gained. our to to

part, a optimize performance, experiences, drive role therefore, it’s for in help their helping every fighting using we business play dollar. and better priority also Customers increase Relic top to services. every more more efficiency, now product a sell deliver who’s that them key their we cloud So in reach customers, and for its right but drive business line. digital harder And

around for New customer And turn Every years absolutely. is had is will Absolutely reset believe happen they just accelerating is But will ago. efficiencies. two for optimization we’re observability ultimately base looking off Yes, services? observability? through So within Relic’s going consumption No company immune. economic our the that we vendor we vision not. the that

Sanjit Singh

XX That’s of do really evolved the the sort I answer. operating we’ve over at seen And quarters, so financial of has does four impressive. together managing May. it’s and last get margin sense a Bill. But held super over the of rule in. framework operating the how that of it’s of in the any sort model obviously, Like been terms appreciate financials? and have thumb? expansion years has imagine in really you when gross in the margin, we a terms the sort look four rule of all probably Because makes financial thoughtful, of I really, When the the materially we last growth topic

sustained in of growth sort few You that are of XXXX. guys calendar the one

terms you years, over will, of in we as managing couple And sort the of the your ahead operating business? philosophy, look of so what’s if next

Bill Staples

he in you it That our actually Dave, Day, for about as But and turn to. the of actually May the a how let to me business. thinking insights is can terms few key over share Investor we’re topic alluded

David Barter

timely. great Yes. very a It’s question. It’s

to feel sitting in we drive and what in our we’ve XX think out like four between there plan we down balance all barely to what opportunity do I as is turn with in growth contracts, nice that years an about the consumption a the we just happens May, we’re discussed customers take all into weeks but with excited and and think As profitability. Board over next customers line

are of rates highlighted, And I as talked about market think we improving levels think then profitability. there growth. of we’ve we

with we XX out we’re everyone rule XX. business rule as road a to a excited around model of just continues to to And you And map play of to one frankly, logically, have it’s get that to inning so it how forward. get how just and beyond to quite on Sanjit, road of know, where the continue we inning drive share kind as by map

Sanjit Singh

Congrats of again. Make sense. ton Well, looking to May. forward

David Barter

so Thanks much.

Operator

the Thank JMP you your The Erik from of next is question. with Securities. for Suppiger question line

Your line now is open.

Erik Suppiger

you the any your taking consumption for updates, metrics run just questions. questions. Thanks curious One, Two metrics. have related if to Yes. rate

to and I’m I are that any of competitors, you players after that sound very I increase talked What of you comparable. was share. quarter, you your are would well their some think last share $XX defend about of if curious in then seeing of you like you had Splunk, secondly, seeing curious the discounting going maybe anything market. if by kind out log of space? suggested million. that market you order And you’re their in you behavior doing – some management,

Bill Staples

start is it. Yes. inherently last questions the that question. first I run did of a volatile. quarter for share with as a updates CRR rate metric the some lot around got about CRR. one, and Thanks I’ll

we the provide for And for will healthy, share with you why business best for consumption of metric accounted on forward. good excited and I is we’re to in consumption revenue, results. which majority was again, report can revenue our a not models just to And reflected with. in it that was Ultimately, quarter, with rates. with consumption you to and chosen, path very set was revenue for our not historical built so we it a QX in help we’ve the benchmark based say view overall to because May come the that benchmark back it’s that’s metrics our of

an takeouts yet have good in Both success second seeing our the question their logs enabled also which business, with services, competitive So on coming now majority who are management our not of product log management, really much we is And by the customers really around their into one for platform. yet. bringing other the up. money, we save opportunity seeing log our every solution good see that against market. but where it’s help engineers in we observability their drive pretty we’re logging true, all-in-one us It’s success all to that don’t And bring for platform competitors play differently with data all reacting strategy. of customers place

Erik Suppiger

a have a you of from Just follow-up come say is that. not environments your that at you business more you’re Would of customers more displacing their from on logs enabled business coming competitive are this where competitor? point? seeing Or your

Bill Staples

do metrics That’s other effective the platform. Yes. It’s I lot into new now telemetry alluded and a are really tool logs and would to of variety different course, instrumented, say migrating places. the our increasingly growth are and consolidating – from a data comes have infrastructures consolidation apps I not are that customers And problem at we’re in of earlier that or comes really that cloud. our to greenfield, then, of that from

Erik Suppiger

you. Thank good. Very

Operator

Thank you next of The with Tindle James. question. Adam for your line from the Raymond question is

Your line now is open.

Unidentified Analyst

I Thanks last how after quarter on is And impact you update was taking factor does the $XX on our for This Mark question. Yes. give could early renewals – wondering if for into… an of this Adam. million. was

David Barter

Excuse me.

little. a up broke You

to the You’re perhaps. very mic, Closer faint.

Unidentified Analyst

up. picked its Yes,

factor does on update an provide – in last was the you can quarter? renewals in growth the plans? quarter. it then And early how after $XX then So And million

David Barter

very feel for customer remarks seeing expansion the the who like of open really were me for existing overconsuming, that up We the But in a all – successful. [ph] tapering we and drive saw are segment the engagement about was for of an the early a we as renewals in of felt opportunity add quite market. new deals. of in wrap customers, contract. to consolidation around up it tool in We a uptick number new up saw to a second. the good overall, give it number line customers really growth we’re Well, new that us allowed we on with But workloads you. business. We’ll significant felt scenarios. overall, And maybe Bill’s healthy it their We like consumption pull

Bill Staples

Yes. as to and motion stronger ability execute as committed close and a consumption seek getting commitment that customer more practiced that consuming one, quarter gap our expect as having that where each It I’ll ahead of with their a quarter, our between we in sales to first is continue was add conversation in just close consumption. fact, teams gap, RPO early increased in also part original that’s get the you’d on, reflected and capture and to consumption on to a where thanks but start that to as commitments commitment able as incremental gap. we capture well we’re healthy were in to XX-Q, we in to results signal it’s to process revenue new the the ability our renewal that shared able that that our close is

Operator

is from with Jaluria for next the RBC. Rishi question. your line The of question you Thank Okay.

line open. Your is now

Richard Poland

for taking Jaluria. Poland Rishi Richard mu is for This question. Thanks on

directional just increase, much price And the on metrics Plus. terms incremental of Data base then if us in be maybe any haven’t on of give this you just base on Data just it’s is curious Just in is at as there, SKU. in there’s adoption could that fully the Plus increase would given but the color point? Plus if terms SKU, reflected how any as I that the of price know kind on well you customer Data the of

David Barter

the and Plus. adoption not. ingest hybrid certainly which and a healthy standard Data above price is of renewals a of just $X.XX average through we this climb, for renewals, telemetry to both telemetry both Price through Data data and we saw represents standard went Average was the continues It telemetry. the on Plus as weighted quarter

framework we working as overall, like feel our paradigm expected. is and So pricing

Richard Poland

should the Got then versus view that just we how just an terms component it. the think – there That’s about updated is forward? And in seats data of kind of going helpful. and

David Barter

think relationships. it’s their about accounts up, right now, – accounts going to I XX-XX. new upon by particularly where depending are It’s account, how move with ramping new around

paces. different about on And so right probably across come portfolio, different in But in users aggregate rates and now, XX-XX. the again, at

Richard Poland

it. Thank you. Got

David Barter

You are welcome.

Operator

your from The Thank Securities. question. Wedbush of Taz question line Koujalgi you next is with the for

Your line is now open.

Taz Koujalgi

of Hey any characterize the June impact guys. of being from taking my increase in a you from you by that I in or any received have the frame? customers? any And question quantify that can tailwind One, price can price and on how time that for Thanks the the July sort you question. sort had, – I is think, results? increase benefit

David Barter

and the is is but But increase – window. really the a it June quarter back also quarter. see a So for very our price not we arguably, to FutureStack, again, past that’s started acceptance in it in May in, big of terms again, expirations. it. into some We us was in smallest June, expirations. really at healthy announced period went of we It of that And for saw September effect this

model competitively So pricing they we I more our offering charge is. And where have pushback. telemetry ingest, how competitors not the again, the of just lot and priced elemetry think a everybody much to relative received understands so for

Taz Koujalgi

acceleration and line. follow-up. math and If the One the right, I’m sales on down Thanks. in marketing was had spend a looks you top nice your it doing the quarter, like year-over-year

to think just is we Or continue should while is about else your But marketing top slow So that top driving anything isolating? going forward, system a thing. that’s [ph] that’s your line growth? Should trending there forward? good there down that how lag line

David Barter

you’re suggested opportunity the couple to a We starting – we like calls and ago. greater think percolate through we efficiency, guess greater with to that see I operate I I think P&L. scale, an felt had question. we Great

Taz Koujalgi

Thank you.

Operator

of question and next Cikos you line your Needham Thank for is The with the question. Mike Company. from

now is line open. Your

Mike Cikos

question having you earlier had here. is tonight. apologize to where if want did on back, earnings think Hi, questions narrower commitments. I the else is this with wanted about an gap success did Bill drive that juggling me of I’m what see guys And that for there versus referenced versus the to if I was that duplicating closed anything gap. here. that over that be I we’re today that to I’m what that But gap I to like renewals to a far was as early But there’s closed Thanks else anything hearing time program. three it that. think had you’re of closed to those attributed I couple would customers or sounded I ago? I want getting who months see And there as driving circle conversation gap on consuming this this able first us been just know guys.

Bill Staples

Yes.

future we’ve quarters structure we been really pulled are better early it As renewals makes few forward a driving it comfortable helping success better for The first with you from I of Practice will. those gets commit a minute a teams more customers, helping quarter. doing contracts amount getting commitments quarters. revenue said every if perfect now. early, our significant And and saw accordingly. is And ago,

forecasting receiving where healthy commitments are uptick as well which business go on in year helps also consumption capturing as consumption value for driver ahead. a that gap. We also that close primary seeing the their already Obviously, in in-quarter customers renewals might the the is

And XX-Q. healthy our shared also results in you in increase we driving see that the so that’s in commitments. that RPO a can And

Mike Cikos

That’s you. about, XXX% customer is in more But commitment. over guess around here. really of I question know say Thank consuming And their of quarters that the spoken a on And I tack customer is great. first behavior. I just north previous two-porter let’s if we’ve could one a there.

even And so for down curious that guess I’m to severe consumption in commitment. size that macro? Is of kind more correct the just still they’ll or manage their Is that. right that I course case? on today’s

is other we’re curious, greater far as as to focus the we’re I’m from on maybe on strategic more then, previous strategic those more annual to from duration focusing of be just why contracting. I some about know hear level, the the And multi-year opposed multi-year customers? RPO would curious as just talking a question increased commitments and And the again, here. a

Bill Staples

that what encourage let behavior I’ll one, we economy, more than relationships. long-term Customers question the consumption important And as thanks. only investors pay in in incredibly for the multi-year uneven our Yes, part I out model to business really you I’ll think Dave about business ever. model inherent behaviors think with. it’s consumption but building take because the to is even business an value this of they advantageous the they use. customer tackle started consumption this

still dealing where decades old penalties and for era If with on compare host us pricing for overages. with pre-cloud a they customers model charge based they based you rates competitors, charge peak

Our pricing use. model matches they what only They have customers service. really expect today from a cloud pay what to for

when they think up manage with and have to should or commitments for comes consumption, usage time infrastructure be right their the bring down usage. line what it renewed, new as the contracts be. to their their so in and also ability they to it And spend their automatically and And scales apps

we New value makes really best incredibly category. because in that of offer the in especially business, All an Relic this economy and observability attractive

continue and feature, our many we see ways, a to in that they’re behaviors customers So we’re they’re benefit proud a them. to those do provide

Dave? On the question, multi-year

David Barter

question. It’s a great

hyperscalers. think like comes it commitments customers, One multi-year we multi-year, kind of the and of our with that things through they’ve to about I made

as get for there So or Azure well. of can peel either reserve for and piece can where think it it their a they for us, AWS observability, part of really works contracting their ultimately we off that process commitment the I in and

three that maybe forward a they of gosh, a of forward two then some a is, with and year say dimension hot, will if there’s they access of of it’s New that some tendencies make fund make similar a rollouts additional a Snowflake pool the pull running Mongo I to to And platform. if commitment, that or Relic Another to pull where can they an funds them also commitment. customers the or gives it have opportunity would our

multiyear market just think I few works in a overall, naturally this So for reasons. well just

Mike Cikos

that. the of appreciate color do additional really I you. from great. Thank you both That’s on

Operator

Thank you with Yun question The line is Loop of Kim the from for question. your Markets. next Capital

line Your open. is now

Yun Kim

Thank you.

So quarter. on solid a congrats

questions billing dynamic, If Just trend following you’re deferred seeing. there? can that the Are balance – explain that was lot. up Non-current up around multiyear upfront? multi-years you on you revenue the a several

David Barter

typically. Not No.

billing upfront. typically not We’re

adaptation twist the we’ve invoicing general basis. monthly or on Our a consumption, and made more is actually billing to switching

Yun Kim

up then It renewals decline the rate Okay. very that’s half. – understanding or my were in the in Great. large the assuming the just from prior large – lag some were effect net there well queued am second performed a of like sounds that’s did I there some quarter. that a sequentially. retention And renewals But rate lot is quarters.

So to that should we mentioned expect up in even at that strong forward or the stay reflect going perhaps the you guys NRR flat least to quarter? inch renewal

David Barter

reflects to Yes. rolling XX-month view. really that It

a long exactly it’s happened arithmetic. great of a right, It’s given you’re indication the in quarter metric. such not what horizon So the

Yun Kim

taken you then And mentioned Bill, kind on the renewals. of in talking is measurements Great. you or you have than Okay. renewals efforts Is different your last one of on guys the different that question. put Or proactive that more some of renewals something guys special pricing pricing renewals? in about that value-based for on just you’re that when remarks? mentioned prepared you special some

Bill Staples

took referring was capability special vulnerability to in I on our management Yes. to pricing availability that we January. general

contract quarter, to a pull a We’re into who’ve capability contracts the this the for and are this renewal forward preview want secure in whose to been opportunity for who that quarter, discount. giving customers up

our customers customers those add gigabyte. pricing to pretty is their offering, add-on or price discounts bundled quarter, to retail willing for the for this negotiating forward charges $X.XX in value contracts which the data some sales get healthy their capability $X.XX it’s vulnerability per that Plus are for the sooner. help or Our And Data is to pull management teams

Yun Kim

Thank Great. for much. me. so it Okay. you That’s

Operator

line Thank the question with you Pinjalim for Bora from is JP The next Morgan. your of question.

is now line open. Your

Unidentified Analyst

Hey is Pinjalim. Noah on This guys. for

pro the the Just trends quarter operating better sense so? two mentioned just call maybe to you touch levers If our was in if Can trying just some questions case, consumption what then pull on get the that next of that from that’s margins looked for this the expecting it a like that, were are to double-digit near of term you the And think what I for year. of end. achieve you and linearity forma January? Thanks. earlier on

Bill Staples

patterns Yes. quarter the business. this linearity the the patterns months in ago, And pattern I’ll through to of and we speak very January. XX of the saw the are seasonal similar. consumption year,

us, not last our pretty quarter last earnings the clear and in and seasonal be should anticipated seasonality a January, seeing As yet. well surprise to element It’s a our year business in guided highs managing is all Dave We accordingly. it investors. understood we’re element said, of resume report we our not not their are and it up to we’re back to made that customers, but in the we at seasonal some believe consumption from surprise point well. this business

model think customer quarters a this all reflects of unique we And value Not one fact, for we’re businesses. business advantage really alike and many passing look competitive the that in customers. real to and

that hope the answers linearity So question.

Dave?

David Barter

we’re And in taking toll chapters I then in regards profitability, to think or this gate.

kind got look to we round margin. I our adjust that So were of to We to think summer, about if up you we – getting of X% kind a ourselves our quickly announced started cost to last first of structure. restructuring started

we’re that place that where into analyst towards like remarks, not if we’re and had that we’re level – this an working XX% signal quarter, margin where seemed And and five-point we round, satisfied area looking to take year increments, of what wanted kind at models, taking line crossed operating think, in at to will. next XX%. Now profitability, wanted we’re the we’ve feel at of durable going at XX%. a it quarter sitting to but last kind given that I investors, Clearly, a at confident we’re next – at at the you where I feel And think about we’re we about of we XX%. I we particularly like about steps and signal prepared about we success we’re the in our again,

Unidentified Analyst

quarter. Got and it. Thanks on congrats the

David Barter

Thanks so much.

Operator

Genuity. the The next line from you Crane of your question is for Canaccord question. Thank with Kingsley

open. now is line Your

Kingsley Crane

I I this time. Hi, is this thanks been in. Bill, I’m thinking fitting Azure on want some touch Service. you. sure for about know for me to gratifying you’ve for Native the

monitor more Or to to demand unlocking So what are total excited about customers from their more would of users you Is cloud it have driving more from not Relic? adoption about? New workloads? about that existing had this is more Azure exposure

Bill Staples

those frankly. reasons, New they about single all heart, Great time and obviously helping on spent and team Azure. has glad the we dear I day, of benefit engineers integration us of fit native job could both lot for millions I of Azure Microsoft excited their having Microsoft can this into a fantastic And question, And know know in and integrating Azure because my near every Kingsley, so you is a launch I’m console. done to use and Relic. from just

Relic. New discover can You

can infrastructure every single application, collecting every events, New cloud. – clicks, the can can You with single metrics, traces free our just can It’s Azure directly even pay look host all inside and your And and you it is when more it is for like subscribe of into the cloud. a Azure logs and few New you subscription. Azure just like inject on cool just what’s agents you at their to they to started But few And begin Relic’s clicks. on Relic, a come running with get cloud.

that’s We to for all existing Microsoft. benefit customers valuable next experience customers well. come also new but that’s described. the New from for our And also to data comes and incredibly I cloud infrastructure commitments them, So to already the who economic experience just the stays as can they and and your data telemetry think now Azure value with use those commitments of New to They within for environment have you Relic apps. your can of New pay collect to Relic, into Relic

really a win it’s So everybody. for

Kingsley Crane

That’s helpful. have Azure on wondering is which a consumption margins, quarter. this if Will. gross as quite were will really that Thanks material And follow-up, that ramps, I’m any just factor seller

David Barter

I think intentional have excited to to EMEA, and a our our tried actually in to almost a little on less we’re our Azure, investments remarks margin. Azure – But headwind because think well, our investment it’s in headwind we call And prepared natural scale It’s a in of overall, gross out. it investment highlight gross bit scales, as margin. I great of

a forward out profitable Microsoft So with deep highly cloud. but that partnership very growth, again, to, building and high looking

Kingsley Crane

for me. Great, Dave. That’s thanks it

Bill Staples

Thanks.

David Barter

Thanks so much.

Operator

of the from Thank you question next The for is your line KeyBanc. Michael question. Turits with

now line open. is Your

Michael Turits

gap just Hey David the I guys. back closing the and come and Bill. wanted question Hey to consumption. to

make I’ll I sure So understand.

the closing you’re gap, early. by So renewing

I their So people are commits mean early. upping

going So since a them go – that? discounts they? no they consumption. from Are should rate? the a at higher over are they’re do pricing, there’s penalty on to what Or to you incents unit for And them volume not offering why

David Barter

think I and people we guess, with That’s I expanding. net from think reach and the saw about CTO just question. customers, and new the early great from I work out Michael, ACR renewing it million a [ph] I when to over of CFO $XX

digital I think Relic more cloud, for the taking it’s whether it’s out broadly, transformation with economy that certainly idea more this they’re tools. or using in New

just with think us and as year customers contract that go with the I top plan enterprises, I keep whatever it line fiscal creates an so with in and might off they And well-run try ultimately again guess, ahead opportunity, have. worked and, their they spend to for get their I’ve commitments, in line

pervasive certainly, like every and all than think will those offer signaling to discounts, customers but almost particular software tend company, We just for be more segment. I one incentives rather

Michael Turits

rate that two the what giving point, to David. is. you it there’s not did if is consumption but rate you And indicator leading One you’re consumption a I the Thanks at way then know one ways about will. think

You’ve been – did XX% growth.

growth. guided teens You high to

are people that terms product same expand. a renewing of apples-to-apples commitments consumption the when products not rate on I for if basis XX% renew, So growth also or that high-teens ballpark above think – call I not guess they basis, also, about in it, whether of is they’re whether on and for an in

renewals So or consumption high rate high teens coming in teens? the same

David Barter

Yes. I agreements high particularly at in mean early and I some much in coming higher, teens think renewals. renewals certainly we coming the ultimately were saw

really line in like the RPO, a So on at whether with ceiling you RPO raising I felt from nicely look think contracts. we contractual perspective, the very or current expansion, total

December, I’d will, correlates, what January, is I back think consumption, that revenue. come you we it the certainly element seasonal certainly it’s consumption think about way if highlighted, is think but peaked with in Bill I when in say auto

the between to I follows two understand The its pattern, nuances So think tracking seasonal years. we question, and the if prior what the there a consumption dimension, which the contracts and pretty I I your think is to is consumption. closely in close natural expected

Michael Turits

– very then much thanks Okay, very great impressive. And job guys.

David Barter

Thanks, Michael.

Operator

for time. question. questions There no Thank additional you your waiting at this are

So the the conference back closing I’ll pass to management any for team remarks.

Bill Staples

for your again questions thanks the Relic. call everyone today and interest joining your New Hey in and

events upcoming in inviting And to of in analysts you you one February many are Day upcoming May. March. see then. that and you very to investors we Thank the our much. Analyst investor last See excited and reminder We’re all in

Operator

for call. conference That participation. concludes the your you Thank

disconnect now your may You lines.

New Relic (NEWR) 7 Feb 232023 Q3 Earnings call transcript