New Relic Announces Second Quarter Fiscal Year 2022 Results

Rhea-AI Summary

New Relic, Inc. (NYSE: NEWR) reported an 18% year-over-year revenue increase to $196 million for Q2 FY2022, achieving a GAAP gross margin of 67%. However, the company incurred a GAAP operating loss of $(47.0) million, higher than $(42.9) million in Q2 FY2021. The non-GAAP operating loss was $(6.4) million, a slight increase from $(5.3) million year-over-year. With cash reserves totaling $784 million, New Relic expects Q3 FY2022 revenue between $198 million and $202 million. Future outlook reflects continued growth, despite ongoing operational losses.

Positive

• 18% year-over-year revenue increase to $196 million.
• GAAP gross margin at 67% and non-GAAP gross margin at 69%.
• Q3 FY2022 revenue guidance of $198 million to $202 million, reflecting 19% to 22% growth.

Negative

• GAAP operating loss increased to $(47.0) million from $(42.9) million year-over-year.
• Non-GAAP operating loss increased to $(6.4) million from $(5.3) million year-over-year.
• Cash reserves decreased from $817 million in Q1 FY2022 to $784 million in Q2 FY2022.

Second quarter revenue increased 18% year-over-year to $196 million

Quarterly GAAP operating loss of $(47.0) million; Non-GAAP operating loss of $(6.4) million

SAN FRANCISCO--(BUSINESS WIRE)-- New Relic, Inc. (NYSE: NEWR), the observability company, today announced financial results for the second quarter of fiscal year 2022.

“This quarter marks the completion of our business turnaround and the beginning of a new chapter of growth for New Relic,” said Bill Staples, CEO, New Relic. “We recently laid out five strategic priorities to guide our company forward, and we are pleased with the progress we’ve already made in advancing these objectives. Today, New Relic has a strong foundation for the future, as we continue our work to help millions of developers and engineers build better software by making observability a daily part of a data-driven engineering approach, across the entire software lifecycle.”

Second Quarter Fiscal Year 2022 Financial Highlights:

• Revenue of $196 million, compared to $166 million for the second quarter of fiscal 2021, a year-over-year increase of 18%.
• GAAP gross margin of 67% and non-GAAP gross margin of 69%.
• GAAP loss from operations was $(47.0) million, compared to $(42.9) million for the second quarter of fiscal 2021.
• Non-GAAP loss from operations was $(6.4) million, compared to $(5.3) million for the second quarter of fiscal 2021.
• GAAP net loss attributable to New Relic per basic and diluted share was $(0.84), compared to a loss of $(0.79) per basic and diluted share for the second quarter of fiscal 2021.
• Non-GAAP net loss attributable to New Relic per diluted share was $(0.10), compared to $(0.07) per diluted share for the second quarter of fiscal 2021.
• Cash provided by operating activities was $(37.0) million and free cash flow was $(40.8) million for the second quarter of fiscal 2022.
• Cash, cash equivalents and short-term investments were $784 million at the end of the second quarter of fiscal 2022, compared with $817 million at the end of the first quarter of fiscal 2022.
• Remaining performance obligations were $597 million at the end of the second quarter of fiscal 2022, compared with $654 million at the end of the first quarter of fiscal 2022. This represents the aggregate unrecognized transaction price of remaining performance obligations as of each of September 30, 2021 and June 30, 2021.

Key Operating Metrics*:
	Sep-20	Dec-20	Mar-21	Jun-21	Sep-21
	2Q21	3Q21	4Q21	1Q22	2Q22
Active Customer Accounts	14,500	13,900	14,100	14,100	14,300
Active Customer Accounts >$100,000	894	913	945	964	1,011
Percentage of Revenue from Active Customer Accounts >$100,000	77%	78%	79%	79%	81%
Net Revenue Retention Rate (NRR)	119%	115%	112%	111%	112%

* Beginning with the first quarter of fiscal 2022, we introduced new key operating metrics and changed the methodology we are using to count customer accounts. Total customer accounts are now aggregated at the parent hierarchy level and include any account for which we have recognized any revenue in the fiscal quarter. Please refer to the appendix for the definitions of these new key operating metrics.

Recent Business Highlights:

• Launched New Relic Instant Observability, the industry's largest open source ecosystem of quickstarts and partner integrations.
• Launched Industry’s Most Comprehensive Global Research on Observability.
• Promoted Bill Staples to CEO effective July 1, 2021.

Outlook:

• Third Quarter Fiscal 2022 Outlook:
  • Revenue between $198 million and $202 million, representing year-over-year growth of approximately 19% and 22%.
  • Non-GAAP loss from operations between $(10) million and $(12) million.
  • Non-GAAP net loss attributable to New Relic per diluted share between $(0.15) and $(0.18)
• Full-Year Fiscal 2022 Outlook:
  • Revenue between $778 million and $782 million, representing year-over-year growth of approximately 16% and 17%.
  • Non-GAAP loss from operations between $(35) million and $(39) million.
  • Non-GAAP net loss attributable to New Relic per diluted share between $(0.54) and $(0.60).

New Relic has not reconciled its expectations as to non-GAAP income (loss) from operations or non-GAAP net income (loss) 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.

Conference Call and Investor Letter Details:

• What: New Relic financial results for the second quarter of fiscal year 2022 and outlook for the third quarter and the full year of fiscal 2022.
• When: November 8, 2021 at 2:00 P.M. Pacific Time (5:00 P.M. Eastern Time)
• Dial in: To access the call in the United States, please dial (844) 757-5730, and for international callers, please dial (412) 542-4120. Callers may provide confirmation number 10160817 to access the call more quickly, and are encouraged to dial into the call at least 15 minutes prior to the start to prevent any delay in joining.
• Webcast: http://ir.newrelic.com (live and replay)
• Investor Letter: Available at http://ir.newrelic.com
• Replay: Following the completion of the call through 11:59 PM Eastern Time on November 15, 2021, a telephone replay will be available by dialing (877) 344-7529 from the United States or (412) 317-0088 internationally with conference ID 10160817.

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 One delivers the only unified data platform that empowers engineers to get all telemetry—metrics, events, logs and traces—paired with the most powerful full stack analysis tools to help engineers get past the ‘what’ to uncover the ‘why.’ Delivered through the industry’s only consumption pricing that’s intuitive and predictable, New Relic gives engineers more value for the money by helping improve planning cycle times, decrease change failure rates, accelerate release frequency and reduce mean time to resolution. This helps the world’s leading brands including AB InBev, Australia Post, Banco Inter, Chegg, Gojek, REI, Signify Health, TopGolf, World Fuel Services (WFS) and Zalora improve uptime and reliability, drive operational efficiency and deliver exceptional customer experiences that fuel innovation and growth. Uncover the ‘why’ with New Relic at 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: New Relic’s future financial performance, including its outlook on financial results for the third quarter and the full year of fiscal 2022, such as revenue, non-GAAP loss from operations, non-GAAP net loss attributable to New Relic per diluted share, New Relic’s ability to achieve its five strategic priorities, including statements regarding reacceleration of revenue growth and returning to market growth rates, ability to exceed its target revenue percentage on the new consumption model, growing the number of paying customers, delivering unique value and demonstrating its differentiated platform vision, and improving internal execution efficiency and costs, improvement in gross margins, churn, benefits and features of new products and partnerships, expectations of New Relic’s ability to forecast consumption and its revenue mix in the intermediate and longer-term, expectations regarding growth and margin performance as a result of the transition to the cloud, expectations of growth in awareness and increased adoption in the observability community, and related ability to continue to drive growth in New Relic’s data, paid users and accounts. 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 COVID-19 pandemic on New Relic’s business and on global economies and financial markets generally; 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; 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) gain or loss from lease modification, (9) adjustment to redeemable non-controlling interest, and (10) 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. In May 2018, New Relic issued $500.25 million of convertible senior notes due in 2023, which bear interest at an annual fixed rate of 0.50%. The effective interest rate of the convertible senior notes was approximately 5.74%. Effective April 1, 2021 New Relic adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contract on an Entity’s Own Equity. As a result of the adoption, the debt conversion option and debt issuance costs previously attributable to the equity component are no longer presented in equity. Similarly, the debt discount, which was equal to the carrying value of the embedded conversion feature upon issuance, is no longer amortized into income as interest expense over the life of the instrument. The debt issuance costs are amortized as interest expense. The expense for the amortization of debt issuance costs 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.

Gain or loss from lease modification. New Relic may incur a gain or loss from modification related to lease agreements. 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 benefit or charge from such events.

Adjustment to redeemable non-controlling interest. New Relic adjusts the value of redeemable non-controlling interest in connection with its joint venture in New Relic K.K. New Relic believes it is useful to exclude the 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 past 12 months. As a result of the restructuring plan, New Relic incurred charges of approximately $13.0 million for employee terminations and other costs associated with the restructuring plan. Most of these charges consisted of cash expenditures and stock-based compensation expense and were recognized in the first quarter of fiscal 2022. New Relic believes it is appropriate to exclude the restructuring charges because it is 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 income (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.

Condensed Consolidated Statements of Operations
(In thousands, except per share data; unaudited)
	Three Months Ended September 30,								Six Months Ended September 30,
	2021				2020				2021				2020
Revenue	$	195,694			$	166,054			$	376,178			$	328,639
Cost of revenue		64,262				45,198				123,526				78,471
Gross profit		131,432				120,856				252,652				250,168
Operating expenses:
Research and development		51,368				44,628				100,098				85,472
Sales and marketing		93,067				89,378				195,880				174,514
General and administrative		34,014				29,798				77,579				59,232
Total operating expenses		178,449				163,804				373,557				319,218
Loss from operations		(47,017	)			(42,948	)			(120,905	)			(69,050	)
Other income (expense):
Interest income		724				2,220				1,662				5,001
Interest expense		(1,228	)			(6,216	)			(2,454	)			(12,320	)
Other expense		(43	)			(604	)			(379	)			(999	)
Loss before income taxes		(47,564	)			(47,548	)			(122,076	)			(77,368	)
Income tax provision		506				380				53				712
Net loss	$	(48,070	)		$	(47,928	)		$	(122,129	)		$	(78,080	)
Net loss and adjustment attributable to redeemable non-controlling interest		(5,699	)			377				(10,054	)			773
Net loss attributable to New Relic	$	(53,769	)		$	(47,551	)		$	(132,183	)		$	(77,307	)
Net loss attributable to New Relic per share, basic and diluted	$	(0.84	)		$	(0.79	)		$	(2.07	)		$	(1.28	)
Weighted-average shares used to compute net loss per share, basic and diluted		64,277				60,545				63,811				60,237

Condensed Consolidated Balance Sheets
(In thousands, except par value; unaudited)
	September 30, 2021				March 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	231,918			$	240,821
Short-term investments		551,594				575,254
Accounts receivable, net of allowances of $2,251 and $2,633 respectively		103,103				174,027
Prepaid expenses and other current assets		24,759				21,944
Deferred contract acquisition costs		29,852				36,210
Total current assets		941,226				1,048,256
Property and equipment, net		78,993				91,308
Restricted cash		5,643				5,642
Goodwill		163,677				144,253
Intangible assets, net		19,933				12,986
Deferred contract acquisition costs, non-current		19,846				32,579
Lease right-of-use assets		53,019				57,425
Other assets, non-current		5,143				6,170
Total assets	$	1,287,480			$	1,398,619
Liabilities, redeemable non-controlling interest, and stockholders’ equity
Current liabilities:
Accounts payable	$	37,888			$	24,171
Accrued compensation and benefits		31,879				37,196
Other current liabilities		13,004				19,174
Deferred revenue		271,687				373,594
Lease liabilities		8,928				7,886
Total current liabilities		363,386				462,021
Convertible senior notes, net		496,482				449,380
Lease liabilities, non-current		54,705				59,924
Deferred revenue, non-current		559				1,674
Other liabilities, non-current		17,037				8,256
Total liabilities		932,169				981,255
Redeemable non-controlling interest		13,443				3,389
Stockholders’ equity:
Common stock, $0.001 par value		65				64
Treasury stock - at cost (260 shares)		(263	)			(263	)
Additional paid-in capital		1,008,363				1,001,309
Accumulated other comprehensive loss		(1,208	)			(19	)
Accumulated deficit		(665,089	)			(587,116	)
Total stockholders’ equity		341,868				413,975
Total liabilities, redeemable non-controlling interest and stockholders’ equity	$	1,287,480			$	1,398,619

Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)
	Six Months Ended September 30,
	2021				2020
Cash flows from operating activities:
Net loss attributable to New Relic	$	(132,183	)		$	(77,307	)
Net loss and adjustment attributable to redeemable non-controlling interest	$	10,054			$	(773	)
Net loss:	$	(122,129	)		$	(78,080	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		45,426				43,404
Stock-based compensation expense		79,758				66,575
Amortization of debt discount and issuance costs		1,176				11,010
Other		(124	)			2,354
Changes in operating assets and liabilities:
Accounts receivable, net		70,924				45,980
Prepaid expenses and other assets		(2,362	)			473
Deferred contract acquisition costs		(758	)			(19,662	)
Lease right-of-use assets		5,077				(1,086	)
Accounts payable		15,191				14,870
Accrued compensation and benefits and other liabilities		(12,111	)			1,941
Lease liabilities		(4,177	)			1,008
Deferred revenue		(103,022	)			(40,729	)
Net cash provided by (used in) operating activities		(27,131	)			48,058
Cash flows from investing activities:
Purchases of property and equipment		(2,826	)			(12,641	)
Cash paid for acquisition, net of cash acquired		(7,192	)			-
Purchases of short-term investments		(134,350	)			(227,347	)
Proceeds from sale and maturity of short-term investments		155,613				173,950
Capitalized software development costs		(6,047	)			(6,843	)
Net cash provided by (used in) investing activities		5,198				(72,881	)
Cash flows from financing activities:
Proceeds from employee stock purchase plan		5,417				6,494
Proceeds from exercise of employee stock options		7,614				2,650
Net cash provided by financing activities		13,031				9,144
Net decrease in cash, cash equivalents and restricted cash		(8,902	)			(15,679	)
Cash, cash equivalents and restricted cash at beginning of period		246,463				298,164
Cash, cash equivalents and restricted cash at end of period	$	237,561			$	282,485

Reconciliation from GAAP to Non-GAAP Results
(In thousands, except per share data; unaudited)
	Three Months Ended September 30,								Six Months Ended September 30,
	2021				2020				2021				2020
Reconciliation of gross profit and gross margin:
GAAP gross profit	$	131,432			$	120,856			$	252,652			$	250,168
Plus: Stock-based compensation		1,303				1,622				2,375				3,124
Plus: Amortization of purchased intangibles		1,676				1,276				3,352				2,552
Plus: Amortization of stock-based compensation capitalized in software development costs		620				265				1,040				504
Plus: Employer payroll tax on employee equity incentive plans		53				50				105				141
Non-GAAP gross profit	$	135,084			$	124,069			$	259,524			$	256,489
GAAP gross margin		67	%			73	%			67	%			76	%
Non-GAAP adjustments		2	%			2	%			2	%			2	%
Non-GAAP gross margin		69	%			75	%			69	%			78	%
Reconciliation of operating expenses:
GAAP research and development	$	51,368			$	44,628			$	100,098			$	85,472
Less: Stock-based compensation expense		(12,147	)			(10,450	)			(23,111	)			(19,254	)
Less: Employer payroll tax on employee equity incentive plans		(261	)			(210	)			(560	)			(559	)
Non-GAAP research and development	$	38,960			$	33,968			$	76,427			$	65,659
GAAP sales and marketing	$	93,067			$	89,378			$	195,880			$	174,514
Less: Stock-based compensation expense		(13,548	)			(14,537	)			(25,082	)			(27,845	)
Less: Employer payroll tax on employee equity incentive plans		(143	)			(157	)			(388	)			(516	)
Less: Restructuring charges (1)		3				-				(11,068	)			-
Non-GAAP sales and marketing	$	79,379			$	74,684			$	159,342			$	146,153
GAAP general and administrative	$	34,014			$	29,798			$	77,579			$	59,232
Less: Stock-based compensation expense		(10,573	)			(8,758	)			(29,190	)			(16,352	)
Less: Transaction costs related to acquisition		0				-				(361	)			-
Less: Lawsuit litigation cost and other expense		-				(37	)			-				(37	)
Less: Employer payroll tax on employee equity incentive plans		(326	)			(294	)			(543	)			(443	)
Less: Restructuring charges (1)		6				-				(1,202	)			-
Non-GAAP general and administrative	$	23,121			$	20,709			$	46,283			$	42,400
Reconciliation of income (loss) from operations and operating margin:
GAAP loss from operations	$	(47,017	)		$	(42,948	)		$	(120,905	)		$	(69,050	)
Plus: Stock-based compensation expense		37,571				35,367				79,758				66,575
Plus: Amortization of purchased intangibles		1,676				1,276				3,352				2,552
Plus: Transaction costs related to acquisition		-				-				361				-
Plus: Amortization of stock-based compensation capitalized in software development costs		620				265				1,040				504
Plus: Lawsuit litigation cost and other expense		-				37				-				37
Plus: Employer payroll tax on employee equity incentive plans		783				711				1,596				1,659
Plus: Restructuring charges (1)		(9	)			-				12,270				-
Non-GAAP income (loss) from operations	$	(6,376	)		$	(5,292	)		$	(22,528	)		$	2,277
GAAP operating margin		-24	%			-26	%			-32	%			-21	%
Non-GAAP adjustments		21	%			23	%			26	%			22	%
Non-GAAP operating margin		-3	%			-3	%			-6	%			1	%
Reconciliation of net income (loss):
GAAP net loss attributable to New Relic	$	(53,769	)		$	(47,551	)		$	(132,183	)		$	(77,307	)
Plus: Stock-based compensation expense		37,571				35,367				79,758				66,575
Plus: Amortization of purchased intangibles		1,676				1,276				3,352				2,552
Plus: Transaction costs related to acquisition		-				-				361				-
Plus: Amortization of stock-based compensation capitalized in software development costs		620				265				1,040				504
Plus: Lawsuit litigation cost and other expense		-				37				-				37
Plus: Employer payroll tax on employee equity incentive plans		783				711				1,596				1,659
Plus: Amortization of debt discount and issuance costs		589				5,544				1,176				11,010
Plus: Adjustment to redeemable non-controlling interest		5,840				-				10,235				-
Plus: Restructuring charges		(9	)			-				12,270				-
Non-GAAP net income (loss) attributable to New Relic	$	(6,699	)		$	(4,351	)		$	(22,395	)		$	5,030
Non-GAAP net income (loss) attributable to New Relic per share:
Basic	$	(0.10	)		$	(0.07	)		$	(0.35	)		$	0.08
Diluted	$	(0.10	)		$	(0.07	)		$	(0.35	)		$	0.08
Shares used in non-GAAP per share calculations:
Basic		64,277				60,545				63,811				60,237
Diluted		64,277				60,545				63,811				61,567
(1) Restructuring related charge for the stock-based compensation expense of $0.5 million is included on its respective line items.

Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flow
(In thousands; unaudited)
	Three Months Ended September 30,								Six Months Ended September 30,
	2021				2020				2021				2020
Net cash provided by (used in) operating activities	$	(37,003	)		$	12,910			$	(27,131	)		$	48,058
Capital expenditures		(600	)			(4,416	)			(2,826	)			(12,641	)
Capitalized software development costs		(3,187	)			(3,175	)			(6,047	)			(6,843	)
Free cash flow (Non-GAAP)	$	(40,790	)		$	5,319			$	(36,004	)		$	28,574
Net cash provided by (used in) investing activities	$	791			$	(666	)		$	5,198			$	(72,881	)
Net cash provided by financing activities	$	8,234			$	7,720			$	13,031			$	9,144

 

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Investor Contact

Peter Goldmacher

New Relic, Inc.

503-336-9280

IR@newrelic.com

Media Contact

New Relic, Inc

PR@newrelic.com

Source: New Relic Corporate Communications

FAQ

What were New Relic's second quarter earnings for fiscal year 2022?

New Relic reported second quarter earnings of $196 million, an 18% increase year-over-year.

What is the third quarter revenue outlook for New Relic?

New Relic expects third quarter revenue to be between $198 million and $202 million.

What was New Relic's GAAP operating loss for Q2 FY2022?

New Relic reported a GAAP operating loss of $(47.0) million for Q2 FY2022.

How did New Relic's cash reserves change in Q2 FY2022?

Cash reserves decreased from $817 million at the end of Q1 FY2022 to $784 million at the end of Q2 FY2022.

What is the forecast for New Relic's full-year revenue for fiscal year 2022?

New Relic forecasts full-year revenue between $778 million and $782 million for FY2022.