Q2 FY17 Financial Results · 2016-11-07 · outlook on financial results for the third quarter of...

Q2 FY17 Financial ResultsNovember 7, 2016

1©2008-16 New Relic, Inc. All rights reserved.

This presentation contains “forward-looking” statements, as that term is defined under the federal securities laws. Any statement that refers to expectations, projections or other characterizations of future events, including financial projections and future market conditions, is a forward-looking statement. Statements included in this presentation that are forward-looking statements include but are not limited to statements regarding our future financial performance, such as our outlook on financial results for the third quarter of fiscal year 2017 and for the full fiscal 2017, including revenue, non-GAAP operating income, non-GAAP earnings per share, cash from operations, free cash flow, gross margin, capital expenditures, and expenses as a percentage of revenue, and the release of our New Relic Infrastructure offering. These forward-looking statements are based on our assumptions, expectations and beliefs as of the date of this presentation and are subject to substantial risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ materially from those expressed or implied in any forward-looking statement. We assume no obligation and do not intend to update these forward-looking statements, except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to our November 7, 2016 press release, as well as the risks described in our most recent Form 10-Q filed with the Securities and Exchange Commission (“SEC”), particularly in the section titled Risk Factors.

This presentation also contains certain non-GAAP financial measures as defined by the SEC rules. These non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. Please refer to our November 7, 2016 press release for additional information as to why we believe these non-GAAP financial measures are useful to investors and others in assessing our operating performance. As required by Regulation G, we have provided a reconciliation of those measures to their most directly comparable GAAP measures, which is available in the appendix to this presentation. However, we have not reconciled our expectations as to non-GAAP gross margin, Non-GAAP loss from operations, non-GAAP net loss per share or free cash flow in future periods to their most directly comparable GAAP measure because certain items, namely stock-based compensation, lawsuit litigation expenses and employer payroll taxes on equity incentive plans, are out of our control or cannot be reasonably predicted. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to our results computed in accordance with GAAP.

2

Forward-Looking Statements and Non-GAAP Financial Measures

©2008-16 New Relic, Inc. All rights reserved.

3

Strong Financial Performance


• Land, expand, standardize model driven by increasing penetration of the enterprise and expanding product portfolio

• Recurring revenue business with industry leading net revenue retention metrics

• Growing, multibillion dollar market opportunity

$30

$63

$110

$181

$257

FY13 FY14 FY15 FY16 FY17E

FY17 revenue based on midpoint of guidance; See Appendix for an explanation of how we calculate paid business accounts, revenue per average paid

business account and $100K+ per year paid business accounts.

Historical Revenue ($M)

Q2’14 Q2’17

$14.3M Revenue $63.4M

>7,500 Paid Business Accounts >14,500

~$8,000Revenue per Average Paid

Business Account~$17,750

>50$100K+ Per Year Paid

Business Accounts>400

2 # of Paid Products 5

4

Our History of Innovation and Growth


2007

2016

>14,000 Paid Business Accounts

See Appendix for an explanation of how we calculate paid business accounts.

5©2008-16 New Relic, Inc. All rights reserved.

Creating a Global Movement - #Customerlove

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Second Quarter Fiscal 2017 Key Highlights


REVENUE UP 48% YOY

RECORD 81% GAAP / 83% NON-GAAP GROSS MARGIN

~1200 BPS GAAP/NON-GAAP OPERATING MARGIN IMPROVEMENT VS. Q216

$1M+ EXPANSION DEAL LEVERAGING NEW CLOUD PRICING OPTION

FOURTH CONSECUTIVE QUARTER OF POSITIVE CASH FROM OPERATIONS

See Appendix for reconciliation of Non-GAAP metrics, including gross margin and operating margin.

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Third Quarter and Fiscal 2017 Outlook*


Q3 FY17 Guidance

REVENUE: $65.5-66.5M OPERATING LOSS: ($7.2) – ($8.2M) EPS: ($0.14) – ($0.16)

CASH FROM OPERATIONS NEAR BREAK-EVEN

FY17 Guidance

REVENUE: $255.0 – 258.0M OPERATING LOSS: ($30.5) – ($32.5M) EPS: ($0.58) – ($0.62)

GROSS MARGIN AROUND 81-82%

CASH FROM OPERATIONS POSITIVE FOR FULL-YEAR; FREE CASH FLOW NEGATIVE FOR FULL-YEAR

CAPEX SPEND TOWARDS LOWER-END OF $32-$34M, DRIVEN BY FACILITIES BUILD-OUTS, CLOUD INFRASTRUCTURE

*Operating loss, earnings per share, gross margin and free cash flow presented on a non-GAAP adjusted basis; Q3 FY17 EPS assumes 52.4M weighted average shares outstanding; FY17

EPS assumes 52.2M weighted average shares outstanding; See Appendix for how we define free cash flow, and for a reconciliation of these non-GAAP measures against the most directly

comparable GAAP measure.

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Best-in-Class Gross Margins


Source: Company earnings releases filed with the SEC covering the last six months reported as of November 7, 2016. Peers identified based on Wall

Street Research comparable SaaS company groupings.

50%

60%

70%

80%

90%GAAP Gross Margin vs. SaaS Peers

Peer Average = 66%

NEWR

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Consistent Historical Net Expansion Rates


90%

100%

110%

120%

130%

140%

150%

Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

116%

Do

lla

r-B

as

ed

Ne

t E

xp

an

sio

n R

ate

s

See Appendix for an explanation of how we calculate dollar-based net expansion rate.

121%

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Steady Growth Of Large Paid Business Accounts


50

150

250

350

450

Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

Fiscal Quarter

Paid Business Accounts > $100k in Annual Subscription Revenue

See Appendix for an explanation of how we define $100K+/Year paid business accounts.

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Adding Customers At Higher Average Revenues


$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

5,000

7,000

9,000

11,000

13,000

15,000

Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17

Annualiz

ed

Subscrip

tion R

evenue / A

vera

ge P

aid

Busin

ess A

ccount

Paid

Busin

ess A

ccounts

$17,753

7,552

14,538

$8,058

See Appendix for an explanation of how we define paid business accounts.

90%76%

66%

24%

20%22%

14%

18%16%

17%

19%

19%

112%

144%

133%123%

112%

0%

25%

50%

75%

100%

125%

150%

FY14 FY15 FY16 FY17E

S&M R&D G&A COGS

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Increased Scale Delivering Operating Leverage


Expenses as a Percentage of Revenue (%)

Expenses and COGS are presented on a non-GAAP basis; see Appendix for reconciliation to the most directly comparable GAAP measures; FY17 Based on midpoint of guidance.

Monthly Recurring Revenue (MRR)

Our monthly recurring revenue represents the revenue that we would contractually expect to receive from those customers over the following month, without any increase or reduction in any of their subscriptions.

Number of Paid Business Accounts

We define the number of paid business accounts at the end of any particular period as the number of accounts at the end of the period as identified by a unique account identifier for which we have recognized revenue on the last day of the period indicated. A single organization or customer may have multiple paid business accounts for separate divisions, segments, or subsidiaries.

>$100K and >$1M / year paid business accounts represents paid business accounts who have MRR greater than $100,000 divided by twelve or $1,000,000 divided by twelve, respectively.

We define our annualized revenue per average paid business account as the annualized revenue for the current period divided by the average of the number of paid business accounts at the end of the current period and the end of the prior period.

Dollar-Based Net Expansion Rate

Our dollar-based net expansion rate compares our recurring subscription revenue from customers from one period to the next. We measure our dollar-based net expansion rate on a monthly basis because many of our customers change their subscriptions more frequently than quarterly or annually.

To calculate our annual dollar-based net expansion rate, we first establish the base period monthly recurring revenue from all our customers at the end of a month. This represents the revenue we would contractually expect to receive from those customers over the following month, without any increase or reduction in any of their subscriptions.

We then (i) calculate the actual monthly recurring revenue from those same customers at the end of that following month; then (ii) divide that following month’s recurring revenue by the base month’s recurring revenue to arrive at our monthly net expansion rate; then (iii) calculate a quarterly net expansion rate by compounding the net expansion rates of the three months in the quarter; and then (iv) calculate our annualized net expansion rate by compounding our quarterly net expansion rate over an annual period.

Free Cash Flow

We define free cash flow as cash from operating activities minus purchases of property and equipment minus capitalized software development costs.

13

Appendix - Definitions


14

Appendix - Non-GAAP To GAAP Reconciliation


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Appendix - Non-GAAP To GAAP Reconciliation


Q2 FY17 Financial Results · 2016-11-07 · outlook on financial results for the third quarter of...

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