Focused execution led to revenue of $239.8
million, up 18% year over year
GAAP gross margin increased 8 pts., non-GAAP
gross margin increased 9 pts. to 77.6%
GAAP and non-GAAP operating margin improved 13
pts., non-GAAP profitability hit 7.8%
New Relic, Inc. (NYSE: NEWR), the all-in-one observability
platform for every engineer, announced financial results for the
third quarter of fiscal year 2023.
“We executed the quarter with relentless focus on our customers,
product innovation and operations, and beat the high end of our
guidance for revenue and profitability,” said New Relic CEO Bill
Staples. “We are well positioned for continued growth with our
all-in-one observability platform and consumption business model.
We are attracting new customers at a rapid pace and growing with
our existing customer base as they expand their observability
practices and continue with their digital transformation and cloud
adoption. Profitability is turning into a strength for New Relic as
we continue to accelerate our focus on profitable growth.”
Fiscal 2023 Third Quarter Results:
- Revenue: Third quarter revenue was $239.8 million, up
18% from $203.6 million one year ago.
- Gross Margin and Non-GAAP Gross Margin(1): Third quarter
gross margin was 74.4%, compared to 66.2% one year ago, an increase
of 8.2 percentage points year over year. Non-GAAP gross margin for
the third quarter was 77.6%, compared to 68.2% one year ago, up 9.4
percentage points year over year.
- Operating Income and Non-GAAP Operating Income(1): Third
quarter loss from operations was $(29.1) million, compared to
$(51.9) million one year ago, an improvement of $22.8 million year
over year, and an improvement of $16.2 million quarter over
quarter. Non-GAAP operating income for the third quarter was $18.7
million, compared to $(10.6) million loss one year ago, an increase
of $29.3 million year over year, and an increase of $11.8 million
quarter over quarter.
- Operating Margin and Non-GAAP Operating Margin(1): Third
quarter operating margin was (12.1)%, compared to (25.5)% one year
ago, an increase of 13.4 percentage points year over year. Non-GAAP
operating margin for the third quarter was 7.8%, compared to (5.2)%
one year ago, up 13.0 percentage points year over year.
- Net Income Per Share and Non-GAAP Net Income Per
Share(1): For the third quarter, fully diluted net loss per
share was $(0.38), compared to $(0.96) one year ago, while non-GAAP
fully diluted net income per share was $0.32, compared to $(0.18)
loss per share one year ago.
- Cash, Cash Equivalents and Short-Term Investments: Third
quarter cash, cash equivalents and short-term investments were
$800.2 million.
- Cash Flows From Operating Activities and Free Cash Flow:
Trailing four quarter cash flows from operating activities was
$30.7 million, compared to $(17.8) million one year ago, an
increase of $48.5 million year over year. Trailing four quarter
free cash flow was $9.9 million, compared to $(37.1) million one
year ago, an increase of $47.0 million year over year.
Recent Business Highlights:
- Landing New Customers — Its product-led growth (PLG)
engine again added more than 800 net new paid platform customers
during the third quarter. In addition, enterprise customers like
BlackLine, Pandora, Hong Kong Airport Authority, and Veritas
committed to the New Relic all-in-one platform as the observability
platform for their businesses.
- Expanding into DevSecOps — Launched vulnerability
management for general availability to help enterprises monitor
their software security posture along with performance in one
connected platform. Vulnerability management is now available out
of the box to all eligible customers and available without
additional configuration.
- Expanding its Cloud with Microsoft — Launched Azure
Native service to allow all Azure customers to natively install
supported New Relic agents from inside Azure. Customers can now
discover, onboard and pay for New Relic via Azure marketplace and
spend down Azure consumption commitments. In addition, they can
choose to store their New Relic telemetry data in Azure.
- Broadening Platform Breadth — Launched change tracking
for general availability, collaboration public preview, upgraded
error tracking, Data Plus for self-service customers, Roku
monitoring, and 10+ other significant innovations to give
developers and engineers more integrated capabilities that
alternate providers sell separately.
- Growing its Technology Partner Ecosystem — New Relic
continued to grow its technology partner ecosystem, and now offers
integrations with 525+ cloud services, open source tools, and
enterprise technologies to empower every engineer to start with
observability in minutes.
Financial Outlook:
New Relic is providing guidance for its fiscal fourth quarter
ending March 31, 2023 as follows:
- Revenue between $240 million and $242 million, representing
year-over-year growth of 16.6% and 17.6% respectively.
- Non-GAAP operating income between $12 million and $14
million(2).
- Non-GAAP net income attributable to New Relic per diluted share
between $0.20 and $0.23(2).
New Relic is providing raised guidance for its fiscal year
ending March 31, 2023 as follows:
- Revenue between $923.1 million and $925.1 million, representing
year-over-year growth of 17.5% and 17.8% respectively.
- Non-GAAP operating income between $20.4 million and $22.4
million(2).
- Non-GAAP net income attributable to New Relic per diluted share
between $0.40 and $0.43(2).
Conference Call Information:
New Relic will host a conference call at 2:00 p.m. PT / 5:00
p.m. ET to review the financial results and business outlook with
the investment community. A live webcast and replay of the event
will be available on the New Relic Investor Relations website at
http://ir.newrelic.com.
What:
New Relic third quarter of fiscal year
2023 results conference call
When:
February 7, 2023 at 2:00 p.m. Pacific Time
/ 5:00 p.m. Eastern Time
Online Registration:
https://events.q4inc.com/attendee/782483991
_______
(1) This press release uses non-GAAP financial metrics that are
adjusted for the impact of various GAAP items. See the section
titled “Non-GAAP Financial Measures” and the tables entitled
“Reconciliation from GAAP to Non-GAAP Results” below for
details.
(2) New Relic has not reconciled its expectations as to non-GAAP
income from operations or non-GAAP net income per diluted share to
their most directly comparable GAAP measures as a result of
uncertainty regarding, and the potential variability of,
reconciling items such as stock-based compensation expense, lawsuit
litigation cost and other expense, employer payroll taxes on equity
incentive plans and gain or loss from lease modification.
Accordingly, reconciliation is not available without unreasonable
effort, although it is important to note that these factors could
be material to New Relic’s results computed in accordance with
GAAP.
About New Relic
As a leader in observability, New Relic empowers engineers with
a data-driven approach to planning, building, deploying, and
running great software. New Relic delivers the only unified data
platform that empowers engineers to get all telemetry—metrics,
events, logs, and traces—paired with powerful full stack analysis
tools to help engineers do their best work with data, not opinions.
Delivered through the industry’s first usage-based consumption
pricing that’s intuitive and predictable, New Relic gives engineers
more value for the money by helping improve planning cycle times,
change failure rates, release frequency, and mean time to
resolution. This helps the world’s leading brands including adidas
Runtastic, American Red Cross, Australia Post, Banco Inter, Chegg,
GoTo Group, Ryanair, Sainsbury’s, Signify Health, TopGolf, and
World Fuel Services (WFS) improve uptime, reliability, and
operational efficiency to deliver exceptional customer experiences
that fuel innovation and growth. www.newrelic.com.
Forward-Looking Statements
This press release and the earnings call referencing this press
release contain “forward-looking” statements, as that term is
defined under the federal securities laws, including but not
limited to statements regarding: (a) our expectations regarding
future financial performance, including our revenue outlook, and
our underlying assumptions about demand, customer behavior, and our
positioning for growth and continued profitability; (b) our plans
and intentions to win new customers, expand existing relationships,
and further expand our platform; (c) our commitment to certain
initiatives and strategic plans and our ability to accomplish them,
including our areas of focus and plans for growth; (d) expectations
for our products, including Vulnerability Management, and
anticipated customer adoption; (e) expectations for the results of
our broader platform and technology partnership initiatives,
including availability on Azure Native and integration of features;
(f) our outlook on financial results for the fourth quarter and the
full year of fiscal 2023, including as to revenue, expected
year-over-year revenue growth, non-GAAP income from operations,
non-GAAP net income attributable to New Relic per diluted share,
accelerating revenue growth, and non-GAAP profitability in fiscal
2023, and the drivers and various factors related thereto; (g) our
expectations for the impact of macroeconomic factors on our
business and financial results, including the anticipated impact of
volatile foreign exchange rates; (h) our expectations for the
results of efforts to drive breadth and depth of adoption across
our customer base; (i) the relationship between consumption, CRR,
and ACR, and profitable growth and value creation in the long-term,
as well as potential trends in commitments and consumption over
commitments going forward; (j) New Relic’s competitive advantage
obtained by its new data-centric approach; (k) anticipated impacts
of the macroeconomic environment on New Relic’s business and
financial results; and (l) our ability to improve efficiency and
achieve lower customer acquisition costs and higher productivity in
the future, as well as the results of initiatives to reduce costs.
These forward-looking statements are based on New Relic’s current
assumptions, expectations and beliefs and are subject to
substantial risks, uncertainties, assumptions and changes in
circumstances that may cause New Relic’s actual results,
performance or achievements to differ materially from those
expressed or implied in any forward-looking statement.
The risks and uncertainties referred to above include, but are
not limited to, New Relic’s ability to determine optimal prices for
its products and the potential challenges presented by New Relic’s
evolving pricing models; the effect of the macroeconomic factors on
New Relic’s business and on global economies and financial markets
generally; unfavorable movements in foreign currency exchange
rates; New Relic’s ability to generate sufficient revenue to
achieve and sustain profitability, particularly in light of its
significant ongoing expenses; New Relic’s short operating history
in an evolving industry; New Relic’s ability to manage its
significant recent growth; the dependence of New Relic’s business
on its customers remaining on its platform and increasing their
spend with New Relic; New Relic’s ability to develop enhancements
to its products, increase adoption and usage of its products and
introduce new products that achieve market acceptance; the
dependence on customers expanding their use of New Relic’s products
beyond the current predominant use cases; the effect of the
COVID-19 pandemic on New Relic’s business and on global economies
and financial markets generally; New Relic’s ability to expand its
marketing and sales capabilities and increase sales of its
solutions; privacy concerns, including changes in privacy laws and
regulations, which could result in additional cost and liability to
New Relic or inhibit sales; New Relic’s ability to effectively
compete in intensely competitive markets and respond effectively to
rapidly changing technology, evolving industry standards and
changing customer needs, requirements or preferences; fluctuation
of New Relic’s quarterly results; New Relic’s dependence on lead
generation strategies to drive sales and revenue; interruptions or
performance problems associated with New Relic’s technology and
infrastructure; New Relic’s dependence on SaaS technologies and
related services from third parties; defects or disruptions in New
Relic’s products; estimates or judgments relating to New Relic’s
critical accounting policies; the expense and complexity of New
Relic’s ongoing and planned investments in cloud hosting providers
and expenditures on transitioning its services and customers from
its data center hosting facilities to public cloud providers; risks
associated with international operations; New Relic’s ability to
protect its intellectual property rights; risks related to the
acquisition and integration of businesses or technologies; risks
related to sales to government entities and highly regulated
organizations; certain risks associated with incurring
indebtedness, including risks related to servicing New Relic’s
convertible senior notes and related capped call transactions; and
other “Risk Factors” set forth in New Relic’s most recent filings
with the Securities and Exchange Commission (the “SEC”).
Further information on these and other factors that could affect
New Relic’s financial results and the forward-looking statements in
this press release and in the earnings call referencing this press
release is included in the filings New Relic makes with the SEC
from time to time, particularly under the captions “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” including our Annual Report on Form
10-K and subsequent Quarterly Reports on Form 10-Q and subsequent
filings. Copies of these documents may be obtained by visiting New
Relic’s Investor Relations website at http://ir.newrelic.com or the
SEC’s website at www.sec.gov.
All information provided in this press release and in the
earnings call is as of the date hereof and New Relic assumes no
obligation and does not intend to update these forward-looking
statements, except as required by law.
Non-GAAP Financial Measures
New Relic discloses the following non-GAAP financial measures in
this press release and the earnings call referencing this press
release: non-GAAP income (loss) from operations, non-GAAP gross
profit, non-GAAP gross margin, non-GAAP operating expenses (sales
and marketing, research and development, general and
administrative), non-GAAP operating margin, non-GAAP net income
(loss) attributable to New Relic, non-GAAP net income (loss)
attributable to New Relic per diluted share, non-GAAP net income
(loss) attributable to New Relic per basic share and free cash
flow. New Relic uses each of these non-GAAP financial measures
internally to understand and compare operating results across
accounting periods, for internal budgeting and forecasting
purposes, for short- and long-term operating plans, and to evaluate
New Relic’s financial performance. In addition, New Relic’s bonus
plan for eligible employees and executives is based in part on
non-GAAP income (loss) from operations. New Relic believes these
non-GAAP financial measures are useful to investors, as a
supplement to GAAP measures, in evaluating its operational
performance, as further discussed below. New Relic’s non-GAAP
financial measures may not provide information that is directly
comparable to that provided by other companies in its industry, as
other companies in its industry may calculate non-GAAP financial
results differently, particularly related to non-recurring and
unusual items. In addition, there are limitations in using non-GAAP
financial measures because the non-GAAP financial measures are not
prepared in accordance with GAAP and may be different from non-GAAP
financial measures used by other companies and exclude expenses
that may have a material impact on New Relic’s reported financial
results.
Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. A reconciliation of the
historical non-GAAP financial measures to their most directly
comparable GAAP measures has been provided in the financial
statement tables included below in this press release.
New Relic defines non-GAAP income (loss) from operations,
non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating
expenses (sales and marketing, research and development, general
and administrative), non-GAAP operating margin, non-GAAP net income
(loss) attributable to New Relic, non-GAAP net income (loss)
attributable to New Relic per diluted share and non-GAAP net income
(loss) attributable to New Relic per basic share as the respective
GAAP balances, adjusted for, as applicable: (1) stock-based
compensation expense, (2) amortization of stock-based compensation
capitalized in software development costs, (3) the amortization of
purchased intangibles, (4) employer payroll tax expense on equity
incentive plans, (5) amortization of debt discount and issuance
costs, (6) the transaction costs related to acquisitions, (7)
lawsuit litigation cost and other expense, (8) net loss and
adjustment to redeemable non-controlling interest, and (9)
restructuring charges. Non-GAAP net income (loss) per basic and
diluted share is calculated as non-GAAP net income (loss)
attributable to New Relic divided by weighted-average shares used
to compute net income (loss) attributable to New Relic per share,
basic and diluted, with the number of weighted-average shares
decreased to reflect the anti-dilutive impact of the capped call
transactions entered into in connection with the 0.50% Convertible
Senior Notes due 2023 issued in May 2018. New Relic defines free
cash flow as GAAP cash from operations, minus capital expenditures
and minus capitalized software. Investors are encouraged to review
the reconciliation of these historical non-GAAP financial measures
to their most directly comparable GAAP financial measures.
Management believes these non-GAAP financial measures are useful
to investors and others in assessing New Relic’s operating
performance due to the following factors:
Stock-based compensation expense and amortization of stock-based
compensation capitalized in software development costs. New Relic
utilizes share-based compensation to attract and retain employees.
It is principally aimed at aligning their interests with those of
its stockholders and at long-term retention, rather than to address
operational performance for any particular period. As a result,
share-based compensation expenses vary for reasons that are
generally unrelated to financial and operational performance in any
particular period.
Amortization of purchased intangibles. New Relic views
amortization of purchased intangible assets as items arising from
pre-acquisition activities determined at the time of an
acquisition. While these intangible assets are evaluated for
impairment regularly, amortization of the cost of purchased
intangibles is an expense that is not typically affected by
operations during any particular period.
Employer payroll tax expense on equity incentive plans. New
Relic excludes employer payroll tax expense on equity incentive
plans as these expenses are tied to the exercise or vesting of
underlying equity awards and the price of New Relic’s common stock
at the time of vesting or exercise. As a result, these taxes may
vary in any particular period independent of the financial and
operating performance of New Relic’s business.
Amortization of debt discount and issuance costs. Following New
Relic’s adoption of ASU No. 2020-06, Accounting for Convertible
Instruments and Contract on an Entity’s Own Equity, the expense for
the amortization of debt issuance costs (including those
attributable to New Relic’s convertible senior notes due in 2023)
is a non-cash item, and New Relic believes the exclusion of this
interest expense will provide for a more useful comparison of our
operational performance in different periods.
Transaction costs related to acquisitions. New Relic may from
time to time incur direct transaction costs related to
acquisitions. New Relic believes it is useful to exclude such
charges because it does not consider such amounts to be part of the
ongoing operation of New Relic’s business.
Lawsuit litigation cost and other expense. New Relic may from
time to time incur charges or benefits related to litigation that
are outside of the ordinary course of New Relic’s business. New
Relic believes it is useful to exclude such charges or benefits
because it does not consider such amounts to be part of the ongoing
operation of New Relic’s business and because of the singular
nature of the claims underlying the matter.
Net loss and adjustment to redeemable non-controlling interest.
New Relic allocates the net loss and adjusts the value of
redeemable non-controlling interest in connection with its joint
venture in New Relic K.K. Starting from the period ended December
31, 2022, New Relic also includes the net loss attributable to
redeemable non-controlling interest as a non-GAAP item. As such,
prior periods have been adjusted to reflect this change. New Relic
believes it is useful to exclude the net loss and adjustment to
redeemable non-controlling interest because it may not be
indicative of future operating results and that investors benefit
from an understanding of the company’s operating results without
giving effect to this adjustment.
Restructuring charges. In April 2021, New Relic commenced a
restructuring plan to realign its cost structure to better reflect
significant product and business model innovation over the prior 12
months. In August 2022, New Relic commenced a new restructuring
plan to realign its cost structure with its business needs as it
moves to focus its resources on top priorities. As a result of each
of these restructuring plans, New Relic incurred charges of
approximately $7.2 million and $12.6 million for the nine months
ended December 31, 2022 and 2021, respectively, for employee
terminations and other costs associated with the restructuring
plans. New Relic believes it is appropriate to exclude the
restructuring charges because they are not indicative of its future
operating results.
Anti-dilutive impact of capped call transactions. In connection
with the issuance of its convertible senior notes due in 2023, New
Relic entered into capped call transactions to offset potential
dilution from the embedded conversion feature in the notes.
Although New Relic cannot reflect the anti-dilutive impact of the
capped call transactions under GAAP, New Relic does reflect the
anti-dilutive impact of the capped call transactions in non-GAAP
net loss attributable to New Relic per share, basic and diluted, to
provide investors with useful information in evaluating the
financial performance of the company on a per share basis.
Additionally, New Relic’s management believes that the non-GAAP
financial measure free cash flow is meaningful to investors because
management reviews cash flows generated from operations after
taking into consideration capital expenditures and the
capitalization of software development costs due to the fact that
these expenditures are considered to be a necessary component of
ongoing operations.
Operating Metrics
Active Customer Accounts. New Relic defines an Active Customer
Account at the end of any period as an individual account, as
identified by a unique account identifier, aggregated at the parent
hierarchy level, for which New Relic has recognized any revenue in
the fiscal quarter. The number of Active Customer Accounts that is
reported as of a particular date is rounded down to the nearest
hundred.
Number of Active Customer Accounts with Revenue Greater than
$100,000. As a measure of New Relic’s ability to scale with its
customers and attract large enterprises to its platform, New Relic
counts the number of Active Customer Accounts for which it has
recognized greater than $100,000 in revenue in the trailing
12-months.
Percentage of Revenue from Active Customer Accounts Greater than
$100,000. New Relic also looks at its percentage of overall revenue
it receives from its Active Customer Accounts with revenue greater
than $100,000 in any given quarter as an indicator of its relative
performance when selling to New Relic’s large customer
relationships or its smaller revenue accounts.
Net Revenue Retention Rate (“NRR”). NRR monitors the growth in
use of New Relic’s platform by its existing active customer
accounts and allows New Relic to measure the health of its business
and future growth prospects. To calculate NRR, New Relic first
identifies the cohort of Active Customer Accounts that were Active
Customer Accounts in the same quarter of the prior fiscal year.
Next, New Relic identifies the measurement period as the 12-month
period ending with the period reported and the prior comparison
period as the corresponding period in the prior year. NRR is the
quotient obtained by dividing the revenue generated from a cohort
of Active Customer Accounts in the measurement period by the
revenue generated from that same cohort in the prior comparison
period.
New Relic is a registered trademark of New Relic, Inc.
All product and company names herein may be trademarks of their
registered owners.
New Relic, Inc.Condensed Consolidated Statements of
Operations(In thousands, except per share data; unaudited)
Three Months Ended December
31,
Nine Months Ended December
31,
2022
2021
2022
2021
Revenue
$
239,763
$
203,591
$
683,134
$
579,769
Cost of revenue
61,316
68,793
189,992
192,319
Gross profit
178,447
134,798
493,142
387,450
Operating expenses: Research and development
69,261
53,362
202,760
153,460
Sales and marketing
95,477
97,723
296,100
293,603
General and administrative
42,799
35,614
124,312
113,193
Total operating expenses
207,537
186,699
623,172
560,256
Loss from operations
(29,090
)
(51,901
)
(130,030
)
(172,806
)
Other income (expense): Interest income
4,685
575
8,220
2,237
Interest expense
(1,283
)
(1,228
)
(3,748
)
(3,682
)
Other income (expense)
192
(268
)
190
(647
)
Loss before income taxes
(25,496
)
(52,822
)
(125,368
)
(174,898
)
Income tax provision
1,116
763
1,002
816
Net loss
$
(26,612
)
$
(53,585
)
$
(126,370
)
$
(175,714
)
Net loss and adjustment attributable to redeemable non-controlling
interest
607
(9,121
)
3,351
(19,175
)
Net loss attributable to New Relic
$
(26,005
)
$
(62,706
)
$
(123,019
)
$
(194,889
)
Net loss attributable to New Relic per share, basic and diluted
$
(0.38
)
$
(0.96
)
$
(1.83
)
$
(3.04
)
Weighted-average shares used to compute net loss per share, basic
and diluted
68,050
64,983
67,229
64,203
New Relic, Inc.Condensed Consolidated Balance Sheets(In
thousands, except par value; unaudited)
December 31, 2022
March 31, 2022
Assets Current assets: Cash and cash equivalents
$
506,815
$
268,695
Short-term investments
293,356
559,984
Accounts receivable, net of allowances of $2,547 and $3,073,
respectively
197,926
226,182
Prepaid expenses and other current assets
21,433
29,447
Deferred contract acquisition costs
16,805
24,058
Total current assets
1,036,335
1,108,366
Property and equipment, net
54,114
68,368
Restricted cash
5,786
5,775
Goodwill
172,298
163,677
Intangible assets, net
13,986
15,636
Deferred contract acquisition costs, non-current
6,691
10,463
Lease right-of-use assets
40,304
50,465
Other assets, non-current
5,657
4,916
Total assets
$
1,335,171
$
1,427,666
Liabilities, redeemable non-controlling interest, and
stockholders’ equity Current liabilities: Accounts payable
$
29,261
$
32,545
Accrued compensation and benefits
40,446
37,023
Other current liabilities
26,472
36,098
Convertible senior notes, current
499,486
-
Deferred revenue
294,759
398,754
Lease liabilities
11,233
11,103
Total current liabilities
901,657
515,523
Convertible senior notes, net
-
497,663
Lease liabilities, non-current
40,983
49,809
Deferred revenue, non-current
7,243
108
Other liabilities, non-current
24,856
20,173
Total liabilities
974,739
1,083,276
Redeemable non-controlling interest
18,335
21,686
Stockholders’ equity: Common stock, $0.001 par value
68
66
Treasury stock - at cost (260 shares)
(263
)
(263
)
Additional paid-in capital
1,258,562
1,114,221
Accumulated other comprehensive loss
(9,943
)
(8,012
)
Accumulated deficit
(906,327
)
(783,308
)
Total stockholders’ equity
342,097
322,704
Total liabilities, redeemable non-controlling interest and
stockholders’ equity
$
1,335,171
$
1,427,666
New Relic, Inc.Condensed Consolidated Statements of Cash
Flows(In thousands; unaudited)
Nine Months Ended December
31,
2022
2021
Cash flows from operating activities: Net loss attributable
to New Relic:
$
(123,019
)
$
(194,889
)
Net loss and adjustment attributable to redeemable non-controlling
interest
(3,351
)
19,175
Net loss:
$
(126,370
)
$
(175,714
)
Adjustments to reconcile net loss to net cash used in operating
activities: Depreciation and amortization
50,989
66,787
Stock-based compensation expense
115,413
117,549
Amortization of debt discount and issuance costs
1,823
1,766
Loss on facilities exit
10,840
-
Other
2,008
(204
)
Changes in operating assets and liabilities, net of acquisition of
businesses: Accounts receivable, net
27,999
(3,053
)
Prepaid expenses and other assets
5,277
(2,990
)
Deferred contract acquisition costs
(8,711
)
(1,668
)
Lease right-of-use assets
7,919
6,743
Accounts payable
(3,808
)
2,922
Accrued compensation and benefits and other liabilities
2,911
14,650
Lease liabilities
(8,696
)
(5,888
)
Deferred revenue
(96,859
)
(67,228
)
Net cash used in operating activities
(19,265
)
(46,328
)
Cash flows from investing activities: Purchases of property
and equipment
(2,774
)
(3,177
)
Proceeds from sale of property and equipment
1,773
-
Cash paid for acquisition, net of cash acquired
(7,507
)
(7,192
)
Purchases of short-term investments
(50,373
)
(175,668
)
Proceeds from sale and maturity of short-term investments
313,975
212,328
Capitalized software development costs
(12,194
)
(9,406
)
Net cash provided by investing activities
242,900
16,885
Cash flows from financing activities: Proceeds from employee
stock purchase plan
6,062
5,417
Proceeds from exercise of employee stock options
8,434
29,165
Net cash provided by financing activities
14,496
34,582
Net increase in cash, cash equivalents and restricted cash
238,131
5,139
Cash, cash equivalents and restricted cash at beginning of period
274,470
246,463
Cash, cash equivalents and restricted cash at end of period
$
512,601
$
251,602
New Relic, Inc.Reconciliation from GAAP to Non-GAAP
Results(In thousands, except per share data; unaudited)
Three Months Ended December
31,
Nine Months Ended December
31,
2022
2021
2022
2021
Reconciliation of gross profit and gross
margin: GAAP gross profit
$
178,447
$
134,798
$
493,142
$
387,450
Plus: Stock-based compensation
1,174
1,382
4,051
3,757
Plus: Amortization of purchased intangibles
4,467
2,006
9,050
5,358
Plus: Amortization of stock-based compensation capitalized in
software development costs
2,024
640
3,517
1,680
Plus: Employer payroll tax on employee equity incentive plans
47
63
166
168
Plus: Restructuring charges (1)
-
-
407
-
Non-GAAP gross profit
$
186,159
$
138,889
$
510,333
$
398,413
GAAP gross margin
74.4
%
66.2
%
72.2
%
66.8
%
Non-GAAP adjustments
3.2
%
2.0
%
2.5
%
1.9
%
Non-GAAP gross margin
77.6
%
68.2
%
74.7
%
68.7
%
Reconciliation of operating
expenses: GAAP research and development
$
69,261
$
53,362
$
202,760
$
153,460
Less: Stock-based compensation expense
(14,977
)
(13,117
)
(42,705
)
(36,228
)
Less: Employer payroll tax on employee equity incentive plans
(230
)
(301
)
(849
)
(861
)
Less: Restructuring charges (1)
-
-
(1,435
)
-
Non-GAAP research and development
$
54,054
$
39,944
$
157,771
$
116,371
GAAP sales and marketing
$
95,477
$
97,723
$
296,100
$
293,603
Less: Stock-based compensation expense
(12,556
)
(12,537
)
(36,013
)
(37,619
)
Less: Employer payroll tax on employee equity incentive plans
(132
)
(182
)
(488
)
(570
)
Less: Restructuring charges (1)
-
143
(3,757
)
(10,925
)
Non-GAAP sales and marketing
$
82,789
$
85,147
$
255,842
$
244,489
GAAP general and administrative
$
42,799
$
35,614
$
124,312
$
113,193
Less: Stock-based compensation expense
(11,972
)
(10,755
)
(32,644
)
(39,945
)
Less: Transaction costs related to acquisitions
-
-
(929
)
(361
)
Less: Lawsuit litigation cost and other expense
-
(59
)
(88
)
(59
)
Less: Employer payroll tax on employee equity incentive plans
(210
)
(410
)
(728
)
(953
)
Less: Restructuring charges (1)
-
8
(1,610
)
(1,194
)
Non-GAAP general and administrative
$
30,617
$
24,398
$
88,313
$
70,681
Reconciliation of income (loss) from
operations and operating margin: GAAP loss from
operations
$
(29,090
)
$
(51,901
)
$
(130,030
)
$
(172,806
)
Plus: Stock-based compensation expense
40,679
37,791
115,413
117,549
Plus: Amortization of purchased intangibles
4,467
2,006
9,050
5,358
Plus: Transaction costs related to acquisitions
-
-
929
361
Plus: Amortization of stock-based compensation capitalized in
software development costs
2,024
640
3,517
1,680
Plus: Lawsuit litigation cost and other expense
-
59
88
59
Plus: Employer payroll tax on employee equity incentive plans
619
956
2,231
2,552
Plus: Restructuring charges (1)
-
(151
)
7,210
12,119
Non-GAAP income (loss) from operations
$
18,699
$
(10,600
)
$
8,408
$
(33,128
)
GAAP operating margin
-12.1
%
-25.5
%
-19.0
%
-29.8
%
Non-GAAP adjustments
19.9
%
20.3
%
20.3
%
24.1
%
Non-GAAP operating margin
7.8
%
-5.2
%
1.3
%
-5.7
%
Reconciliation of net income
(loss): GAAP net loss attributable to New Relic
$
(26,005
)
$
(62,706
)
$
(123,019
)
$
(194,889
)
Plus: Stock-based compensation expense
40,679
37,791
115,413
117,549
Plus: Amortization of purchased intangibles
4,467
2,006
9,050
5,358
Plus: Transaction costs related to acquisitions
-
-
929
361
Plus: Amortization of stock-based compensation capitalized in
software development costs
2,024
640
3,517
1,680
Plus: Lawsuit litigation cost and other expense
-
59
88
59
Plus: Employer payroll tax on employee equity incentive plans
619
956
2,231
2,552
Plus: Amortization of debt discount and issuance costs
636
590
1,823
1,766
Plus: Net loss and adjustment to redeemable non-controlling
interest (2)
(607
)
9,121
(3,351
)
19,175
Plus: Restructuring charges (1)
-
(151
)
7,210
12,119
Non-GAAP net income (loss) attributable to New Relic
$
21,813
$
(11,694
)
$
13,891
$
(34,270
)
Non-GAAP net income (loss) attributable to New Relic per
share: Basic
$
0.32
$
(0.18
)
$
0.21
$
(0.53
)
Diluted
$
0.32
$
(0.18
)
$
0.20
$
(0.53
)
Shares used in non-GAAP per share calculations: Basic
68,050
64,983
67,229
64,203
Diluted
68,823
64,983
67,805
64,203
(1) For the nine months ended
December 31, 2021, restructuring related charge for the stock-based
compensation expense of $0.5 million was included on its respective
line items. There was no corresponding expense for the nine months
ended December 31, 2022.
(2) Beginning from the period
ended December 31, 2022, net loss attributable to redeemable
non-controlling interest is included in the non-GAAP
reconciliation. As such, reclassifications have been made to prior
periods to conform with the current presentation.
New Relic, Inc.Reconciliation of GAAP Cash Flows from Operating
Activities to Free Cash Flow(In thousands; unaudited)
Three
Months Ended December 31, Nine Months Ended December 31,
2022
2021
2022
2021
Net cash used in operating activities
$
(24,828
)
$
(19,197
)
$
(19,265
)
$
(46,328
)
Capital expenditures
(358
)
(351
)
(2,774
)
(3,177
)
Capitalized software development costs
(4,287
)
(3,359
)
(12,194
)
(9,406
)
Free cash flows (Non-GAAP)
$
(29,473
)
$
(22,907
)
$
(34,233
)
$
(58,911
)
Net cash provided by investing activities
$
58,654
$
11,687
$
242,900
$
16,885
Net cash provided by financing activities
$
1,932
$
21,551
$
14,496
$
34,582
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230206005705/en/
Investor Contact Ingo Friedrichowitz New Relic, Inc.
IR@newrelic.com
Media Contact Kerry Baker New Relic, Inc
PR@newrelic.com
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