New Relic (NEWR) Q1 2022 Earnings Call Transcript | The Motley Fool


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New Relic (NYSE:NEWR)
Q1 2022 Earnings Call
Aug 03, 2021, 5:00 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good day, and welcome to the New Relic first-quarter and 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, VP of investor relations. Please go ahead.

Peter GoldmacherVice President of Investor Relations

Hi, everyone, and thanks for joining our Q1 fiscal ’22 earnings call. We published a letter on our Investor Relations website about an hour ago and hope you all have had a chance to read our letter together with today’s earnings press release. Today’s call will begin with prepared comments from Bill and Mark, and then we’ll open up the line for your questions. During this call, we will make forward-looking statements, including about our business outlook and strategy, which we based on our predictions and expectations as of today.

Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors in our most recent 10-K and upcoming 10-Q to be filed with the SEC. Also, during this call, we will discuss certain non-GAAP financial measures. We have reconciled those to the most directly comparable GAAP financial measures in our earnings release. These non-GAAP measures are not intended to be a substitute for our GAAP results.

And finally, this call in its entirety is being webcast from our Investor Relations website, and an audio replay will be available there in a few hours. And with that, I’d like to turn it over to Bill.

Bill StaplesChief Executive Officer

Thanks, Peter, and thanks to everyone for joining our Q1 FY ’22 earnings call. We had a strong start in the first quarter of our fiscal year, delivering just over $180 million revenue, beating the $172 million to $174 million guidance that we provided last quarter and growing the business 11% year over year. Before we dive into the numbers and then answer your questions, I want to take this opportunity, my first earnings call in my new role as CEO, to step back and paint my view of the market, our strategy, and our priorities going forward. A year ago, last July 30, 2020, we introduced the New Relic One platform and consumption business model to the world.

It was a bold but necessary move to serve our customers better and lay a new foundation of growth for the business. As you know, the past year of COVID has only accelerated the move to digital experiences. Nearly every company in the world, no matter the size or segment, employs digital experiences to serve their customers, partners, and employees. These digital experiences are built by highly skilled software developers and engineers, and there simply are not enough of them to satisfy the demand.

The pressure on them to innovate faster is growing more intense and the complexity and toil of the software systems they create and maintain continues to increase. They spend a disproportionate amount of time planning, architecting, building, fixing, and deploying software, only defined once it’s in production and begins impacting customers, that something somewhere went terribly wrong. Observability vendors today use telemetry data to help production engineers reactively monitor and troubleshoot systems that are unhealthy. But that’s too late, too reactive, too much focus on symptoms, and not enough on the root cause and prevention.

It doesn’t help engineers spend more time doing what they really love, which is building cool stuff. Our vision is much broader, and we believe our potential much higher. At New Relic, we aspire to help millions of developers and engineers build more perfect software, by making observability a daily data-driven approach to engineering across the software life cycle. To get there, we are obsessed with helping our customers master telemetry data to get past the what and uncover the why.

There are three fundamental things about our vision of observability that are unique and whose impact on the business, I believe, will grow over time. First, New Relic offers a purpose-built all-in-one Telemetry Data Platform. Our customers are already ingesting petabytes of telemetry data from many sources, including our own agents, open standards, APIs or an ecosystem with hundreds of integrations thereby eliminating data silos and unlocking insights across their entire digital estate. Customers trust New Relic with their telemetry data because we’ve taken a strong regulatory posture in security, privacy, and compliance with SOC2, GDPR, FedRAMP.

And as of last week, we’re now the industry’s first HIPAA-compliant observability solution across all data types. We use advanced data science techniques, employing AI and ML throughout the platform to help our customers sift through the data and more easily find signals from the noise, making AIOps more accessible than ever. And we operate this telemetry platform at massive cloud scale, actively ingesting, storing and analyzing in real time many petabytes of metrics, events, logs, and traces with blazing performance. This is fundamentally a different approach than most of our competitors and is foundational to our strategy, allowing us to provide a secure single source of truth for telemetry data for even the largest of enterprise customers with incredible economics.

Second, New Relic provides developers and engineers with integrated and powerful analysis tools on top of this data, the full platform experience in one place and for one price. Competitors offer a bundle of SKUs, each with disparate user experiences, data stores, and price points all targeting those same production engineers focused on resolving incidents, and they call that observability. New Relic is thinking much more broadly about the users of observability, considering not just the needs of IT operations, site reliability engineers, and cloud engineers, by taking a developer-first approach and bringing the power of telemetry data into the flow of tools developers already use every day, ultimately reaching the estimated 28 million professional developers who build the software to begin with. Many of these potential users have yet to experience how observability can help them because they’re focused on delighting customers through innovation in code, not troubleshooting production environments.

Third, New Relic offers all of this value with a unique consumption-based pricing model that is more predictable, affordable, and scaled with value. Our platform is consumed in just two dimensions: data ingest and user access. First, our unified Telemetry Data Platform allows customers to ingest, store and query the data for an unprecedented value at just $0.25 a gigabyte ingested. Competitors’ prices can be several multiples higher than this for data, forcing engineering teams to sample the instrument in order to contain costs, which only leads to more blind spots and incidents.

Second, we have integrated all of our tools and provide full platform access for one price per user, giving buyers incredibly consistent, predictable pricing that scales with usage and therefore value received instead of infrastructure. This unique consumption model allows more users to observe more data and systems all in one place, enhancing collaboration and increasing productivity across the engineering organization. We are passionate and committed to this multiyear vision and grateful for the ongoing focus in support of our Relics, investors, and stockholders as we work toward this audacious yet achievable goal. You may wonder, with such an audacious long-term vision, how are we prioritizin
g the work? And how can you measure our progress quarter after quarter? As our new CEO, I’ve identified five strategic priorities.

The entire company is now aligned behind these objectives, and we’ve identified measurable success criteria for each to help us all gauge our progress. Each quarter, I’ll provide an update on how we’re doing against each of these five. Our top priority is to return our revenue to market growth rates. As a consumption business, this is the crowning metric, which measures our ability to innovate value that customers are willing to pay for and deliver it in an efficient manner.

We measure our success with this priority through…


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