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Aug. 4, 2021, 6:08 a.m. EDT

10-Q: NEW RELIC, INC.

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(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in Part II, Item 1A "Risk Factors" included elsewhere in this report. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition or results of operations. See the section titled "Special Note Regarding Forward-Looking Statements" in this report. These statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments, except as required by law. Overview New Relic delivers the observability platform for engineers to plan, build, deploy and operate more perfect software. We offer a comprehensive suite of products delivered on an open and extensible cloud-based platform that enables organizations to collect, store and analyze massive amounts of data in real time so they can better operate their applications and infrastructure and improve their digital customer experience. New Relic One is our purpose-built offering for customers to land all of their telemetry data quickly and affordably in one place, and to translate that data into actionable insights. We believe a truly unified front-end that sits on top of a single database helps our users avoid complexity and confusion that would be associated with relying instead upon multiple different but related products. Our revenue for the three months ended June 30, 2021 and 2020 was $180.5 million and $162.6 million, respectively, representing year-over-year growth of 11%. Although we have experienced substantial revenue growth in historical periods, we have had difficulty maintaining our historical growth rates as our business has scaled, even in the periods where our revenue grew in absolute terms. Meanwhile, we have continued to make significant expenditures and investments, including in personnel-related costs, sales and marketing, infrastructure and operations, and have incurred net losses in each period since our inception, including net losses attributable to New Relic of $78.4 million and $29.8 million for the three months ended June 30, 2021 and 2020, respectively. Our accumulated deficit as of June 30, 2021 was $611.3 million. Internationally, we currently offer our products in Europe, the Middle East, and Africa, ("EMEA"); Asia-Pacific, ("APAC"); and other non-U.S. locations, as determined based on the billing address of our customers, and our revenue from those regions constituted 16%, 10%, and 7%, respectively, of our revenue for the three months ended June 30, 2021, and 16%, 9%, and 6%, respectively, of our revenue for the three months ended June 30, 2020. We believe there is an opportunity to increase our international revenue overall and as a proportion of our revenue, and we are increasingly investing in our international operations and intend to invest in further expanding our footprint in international markets. Our employee headcount has decreased to 1,934 employees as of June 30, 2021 from 2,232 as of June 30, 2020, partially as a result of the restructuring plan we implemented in April 2021 to realign our cost structure and resources. The COVID-19 pandemic continues to affect the U.S. and the world and has resulted in authorities implementing numerous measures to contain the virus. The extent of the impact of the COVID-19 pandemic on our operational and financial performance will continue to depend on certain developments, including the duration of the pandemic; impact on our customers and our sales cycles; impact on our customer, employee, and industry events; impact on our employee recruitment and attrition; and effect on our vendors, all of which remain uncertain and cannot be predicted at this time. We will continue to actively monitor the situation and have taken and may take further actions that alter our business operations as may be required or recommended by federal, state, or local authorities, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders. As the development, distribution and public acceptance of treatments and vaccines progress, we continue to evaluate and refine our operational strategies. Our revenue and deferred revenue have been, in part, negatively impacted by the slowdown in activity associated with the COVID-19 pandemic, but at this point, the extent of any continuing impact to our financial condition or results of operations, including cash flows, is uncertain, particularly as the COVID-19 pandemic continues to persist for an extended period of time. Furthermore, due to our historical reliance upon a subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our results of operations until future periods. Other factors affecting our performance are discussed below, although we caution you that the COVID-19 pandemic may also further impact these factors.

In addition, on July 30, 2020, we announced an updated pricing strategy that prices customer spend based upon their consumption; customers may be charged upon their usage in arrears, which we refer to as "Pay as You Go," or they may commit to a minimum spend over their contracted period in exchange for a discount on their usage pricing, which we refer to as "Annual Pool of Funds." Consumption under this model is measured by the number of users and data ingested into our system, thereby collapsing what had previously been a number of different products priced in individualized ways into a simplified strategy that is intended to drive consumption across our platform. Although we have seen, in the near term, that this transition has had a negative impact on our results of operations, we believe that this pricing model transition will continue to increase our new and existing customer adoption and allow us to better retain and expand within our existing customer accounts over the long term, and thereby have a positive impact on sales and marketing productivity. However, due to our historical reliance upon a subscription-based business model, improvement in the market adoption of our products due to this pricing model transition would not be fully reflected in our results of operations until future periods.

Number of Active Customer Accounts. We believe that the number of Active Customer Accounts is an important indicator of the growth of our business, the market acceptance of our platform and future revenue trends. We define 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 we have recognized any revenue in the fiscal quarter. As our customers grow their businesses and extend the use of our platform, they sometimes create multiple customer accounts with us for operational or other reasons. As such, when we identify a parent organization that has created a new Active Customer Account, this new Active Customer Account is combined with, and revenue from this new Active Customer Account is included with, the original Active Customer Account. In addition, our Active Customer Accounts metric is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity. We round the number of Active Customer Accounts that we report as of a particular date down to the nearest hundred.

Key Components of Results of Operations Revenue

Gross Profit and Margin

Results of Operations The following tables summarize our consolidated statements of operations data for the periods presented and as a percentage of our revenue for those periods.







                                                                                       Three Months Ended June 30,
                                                                                         2021                2020
                                                                                     (in thousands, except per share
                                                                                                amounts)
        Revenue                                                                     $   180,484          $ 162,585
        Cost of revenue (1)                                                              59,264             33,273
        Gross profit                                                                    121,220            129,312
        Operating expenses:
        Research and development (1)                                                     48,730             40,844
        Sales and marketing (1)                                                         102,813             85,136
        General and administrative (1)                                                   43,565             29,434
        Total operating expenses                                                        195,108            155,414
        Loss from operations                                                            (73,888)           (26,102)
        Other income (expense):
        Interest income                                                                     938              2,781
        Interest expense                                                                 (1,226)            (6,104)
        Other expense                                                                      (336)              (395)
        Loss before income taxes                                                        (74,512)           (29,820)
        Income tax provision (benefit)                                                     (453)               332
        Net loss                                                                    $   (74,059)         $ (30,152)
        Net loss and adjustment attributable to redeemable non-controlling interest      (4,355)               396
        . . .
        


Aug 04, 2021

COMTEX_390915882/2041/2021-08-04T06:08:00

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