Business Wire | May 13, 2021 04:06PM EDT

New Relic Announces Fourth Quarter and Full Fiscal Year 2021 Results

May 13, 2021

SAN FRANCISCO--(BUSINESS WIRE)--May 13, 2021--New Relic, Inc. (NYSE: NEWR), the observability company, today announced financial results for the fourth quarter and full fiscal year 2021 ended March 31, 2021. The company also announced the promotion of Bill Staples to Chief Executive Officer, effective July 1, 2021. Mr. Staples will succeed founder and Chief Executive Officer, Lew Cirne, who will transition to Executive Chairman of the Board at the same time.

"FY21 was a transformational year for New Relic, and we are a fundamentally better company entering FY22. The investments we've made in our product and platform, and our move to a consumption model, are resonating with the market as we've aligned our entire company around our customers and their success," said Lew Cirne, founder and CEO, New Relic. "The time is ideal for me to hand over the reins to Bill to execute on our vision and strategy. It has been an honor and joy to serve as New Relic's CEO for nearly fourteen years, and I look forward to continuing to serve as Executive Chairman. I couldn't be more excited for our future under Bill's leadership."

Fourth Quarter Fiscal Year 2021 Financial Highlights:

* Revenue of $173 million, compared to $160 million for the fourth quarter of fiscal 2020. * GAAP gross margin of 67% and non-GAAP gross margin of 69%. * GAAP loss from operations was $(54.3) million, compared to $(27.5) million for the fourth quarter of fiscal 2020. * Non-GAAP income (loss) from operations was $(18.5) million, compared to $3.5 million for the fourth quarter of fiscal 2020. * GAAP net loss attributable to New Relic per basic share was $(0.98), compared to $(0.47) per basic share for the fourth quarter of fiscal 2020. * Non-GAAP net income (loss) attributable to New Relic per diluted share was $(0.27), compared to $0.14 per diluted share for the fourth quarter of fiscal 2020. * Cash provided by operating activities was $28.5 million and free cash flow was $21.8 million for the fourth quarter of fiscal 2021. * Cash, cash equivalents and short-term investments were $816 million at the end of the fourth quarter of fiscal 2021, compared with $785 million at the end of the third quarter of fiscal 2021. * Remaining performance obligations were $727 million at the end of the fourth quarter of fiscal 2021, compared with $648 million at the end of the third quarter of fiscal 2021. This represents the aggregate unrecognized transaction price of remaining performance obligations as of each of March 31, 2021 and December 31, 2021.

Fiscal 2021 Financial Highlights:

* Revenue of $668 million, up 11% compared with fiscal 2020. * GAAP loss from operations was $(171.4) million, compared with $(85.5) million for fiscal 2020. * Non-GAAP income (loss) from operations was $(24.6) million, compared with $25.0 million for fiscal 2020. * GAAP net loss attributable to New Relic per basic share was $(3.15), compared with $(1.52) per basic share for fiscal 2020. * Non-GAAP net income (loss) attributable to New Relic per diluted share was $(0.33), compared to $0.66 per diluted share for fiscal 2020.

Key Operating Metrics*:

Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21

Annual RecurringRevenue, or ARR (in $569 $591 $608 $642 $648 $649 $669 $674millions)

Dollar-Based Net 109% 112% 109% 116% 100% 98% 108% 99%Expansion Rate

Percentage of ARR fromPaid Business Accounts 70% 71% 72% 75% 76% 77% 79% 80%> $100,000

Paid Business Accounts 881 908 927 995 1,025 1,039 1,051 1,048> $100,000

* In the fourth quarter of fiscal 2020, we adjusted the way we define ARR to include partner revenue and revenue from support subscriptions. This change results in immaterial differences in the presentation of some numbers in the chart above compared to our disclosures in historical filings. Please refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 for our definition of ARR and the differences between these disclosures.

Recent Business Highlights:

* Promoted Bill Staples to CEO effective July 1, 2021. Staples will succeed Founder & CEO Lew Cirne who will transition to Executive Chairman of the Board at the same time. * Joined the Cloud Native Computing Foundation Governing Board. * Named a leader in the 2021 Gartner Magic Quadrant for Application Performance Monitoring for the ninth time. * Announced a restructuring plan to realign cost structure to better reflect significant product and business model innovation. * Launched new capabilities in New Relic Applied Intelligence. * Introduced New Relic Explorer, a reimagined full-stack observability offering.

Outlook:

* First Quarter Fiscal 2022 Outlook: Revenue between $172 million and $174 million, representing year-over-year growth of between 6% and 7%, respectively. Non-GAAP loss from operations of between $(24) million and $(26) million. Non-GAAP net loss attributable to New Relic per diluted share between $(0.37) and $(0.40). * Full Year Fiscal 2022 Outlook: Revenue between $709 million and $711 million, representing year-over-year growth of approximately 6%. Non-GAAP loss from operations of between $(53) million and $(55) million. Non-GAAP net loss attributable to New Relic per diluted share between $(0.80) and $(0.83). 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 fourth quarter and full fiscal 2021 and outlook for the first quarter and the full year of fiscal 2022. * When: May 13, 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 10154373 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 May 20, 2021, a telephone replay will be available by dialing (877) 344-7529 from the United States or (412) 317-0088 internationally with conference ID 10154373.

About New Relic

The world's best engineering teams rely on New Relic to visualize, analyze and troubleshoot their software. New Relic One is the most powerful cloud-based observability platform built to help organizations create more perfect software. Learn why developers trust New Relic for improved uptime and performance, greater scale and efficiency, and accelerated time to market 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 first quarter and full year of fiscal 2022, such as revenue, non-GAAP loss from operations, non-GAAP net loss attributable to New Relic per diluted share, statements regarding expectations of reacceleration in revenue growth, that much of the heavy lifting of the business model transition is behind New Relic, intention to continue aggressive spending on New Relic's data center transition and to drive data ingest, timing of completion of our transition to our public cloud, expectations around gross margins, RPO growth and churn, future increases in cross-department user adoption as a result of new product features, acceleration in AIOps revenue as users take advantage of new offerings, future improvements in customer acquisition costs, anticipation of increase productivity from sales reps under New Relic's growth initiatives, plans to build out ecosystems of alliances ad channels partners and providers, anticipated consumption spending from current customers and increased data consumption by developers, expectations around New Relic's momentum and related ability to drive financial performance as a result of these changes. 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; the expense and complexity of New Relic's ongoing and planned investments in data center hosting facilities and expenditures on cloud hosting 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) lease exit costs and accelerated depreciation, (3) amortization of stock-based compensation capitalized in software development costs, (4) the amortization of purchased intangibles, (5) employer payroll tax expense on equity incentive plans, (6) amortization of debt discount and issuance costs, and in certain periods (7) the transaction costs related to acquisitions, (8) lawsuit litigation cost and other expense, (9) gain or loss from lease modification, and (10) adjustment to redeemable non-controlling interest. 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.

Lease exit costs and accelerated depreciation. In fiscal year 2020, New Relic entered into an agreement to exit the lease of its 123 Mission premises in San Francisco, California. In connection with this agreement and subsequent relocation, New Relic accelerated depreciation and other expenses associated with the remaining lease term. New Relic believes it is useful to exclude this depreciation and these other expenses because it does not consider such amounts to be part of the ongoing operation of its business.

Amortization of purchased intangibles and transaction costs related to acquisitions. 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. Similarly, New Relic views acquisition-related expenses as events that are not necessarily reflective of operational performance during a period.

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.

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%. This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity, and debt issuance costs, which reduce the carrying value of the convertible debt instrument. The debt discount is amortized as interest expense together with the issuance costs of the debt. The expense for the amortization of debt discount and debt issuance costs is a non-cash item, and we believe the exclusion of this interest expense will provide for a more useful comparison of our operational performance in different periods.

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. In fiscal year 2021, New Relic made an adjustment to 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.

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

New Relic defines 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 New Relic has 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.

New Relic's monthly recurring revenue represents the revenue that New Relic would contractually expect to receive from those customers over the following month, including partner revenue or revenue from support subscriptions, without any increase or reduction in any of their subscriptions.

Similarly, annual recurring revenue ("ARR") represents the revenue New Relic would contractually expect to receive from those customers over the following 12-month period, including partner revenue or revenue from support subscriptions, without any increase or reduction in any of their contractual commitments. The net change New Relic reports in ARR reflects any increase in ARR from existing customers and new customers, which is referred to as "new ARR," as well as any reduction in ARR from customers who reduced their spend or terminated their relationship with New Relic, which is referred to as "lost ARR."

For contracts entered into under New Relic's consumption-based pricing model, New Relic only recognizes as ARR the committed contractual amount for customers under the Annual Pool of Funds model; therefore, the definition of ARR would not include contracts under the Pay as You Go model. Meanwhile, ARR for contracts under Annual Pool of Funds is calculated as the original dollar commitment for the annual contract period, plus any incremental additional dollar commitments added during the term of the period. ARR is measured without reference or adjustments for historic data usage, and therefore excludes assumptions related to overage spend or expected or received overages above committed amounts.

New Relic's dollar-based net expansion rate compares its recurring revenue from customers from one period to the next. It is increased when customers increase their contractual spend amounts in order to increase their use of New Relic's products or use additional products. New Relic's dollar-based net expansion rate is reduced when customers decrease or terminate their contractual spend amounts in order to decrease or cease use of New Relic's products or use fewer products.

New Relic is a registered trademark of New Relic, Inc.

All product and company names herein may be trademarks of their registered owners.

Condensed ConsolidatedStatements ofOperations (In thousands, exceptper share data;unaudited) Three Months Ended March Year Ended March 31, 31,

2021 2020 2021 2020

Revenue $ 172,669 $ 159,657 $ 667,648 $ 599,510

Cost of revenue 57,125 28,073 181,564 103,237

Gross profit 115,544 131,584 486,084 496,273

Operating expenses: Research and 43,606 41,301 174,851 148,159 developmentSales and marketing 94,796 89,608 361,702 334,319

General and 31,450 28,155 120,931 99,284 administrativeTotal operating 169,852 159,064 657,484 581,762 expensesLoss from operations (54,308 ) (27,480 ) (171,400 ) (85,489 )

Other income (expense):Interest income 1,153 3,538 7,888 15,482

Interest expense (6,352 ) (6,035 ) (24,901 ) (23,695 )

Other income (108 ) 106 (1,918 ) 2,934 (expense), netLoss before income (59,615 ) (29,871 ) (190,331 ) (90,768 )taxesIncome tax provision (717 ) (1,307 ) 559 211 (benefit)Net loss $ (58,898 ) $ (28,564 ) $ (190,890 ) $ (90,979 )

Net loss andadjustmentattributable to $ (2,779 ) $ 605 $ (1,720 ) $ 2,042 redeemablenon-controllinginterestNet loss attributable $ (61,677 ) $ (27,959 ) $ (192,610 ) $ (88,937 )to New RelicNet loss attributableto New Relic per $ (0.98 ) $ (0.47 ) $ (3.15 ) $ (1.52 )share, basic anddilutedWeighted-averageshares used to compute 62,621 59,351 61,070 58,601 net loss per share,basic and dilutedCondensed Consolidated Balance Sheets(In thousands, except par value; unaudited)March 31, 2021March 31, 2020AssetsCurrent assets:Cash and cash equivalents$

240,821

$

292,523

Short-term investments575,254

512,574

Accounts receivable, net of allowance for doubtful accounts of $2,633 and $3,636, respectively174,027

147,361

Prepaid expenses and other current assets21,944

15,979

Deferred contract acquisition costs36,210

32,016

Total current assets1,048,256

1,000,453

Property and equipment, net91,308

100,294

Restricted cash5,642

5,641

Goodwill144,253

45,112

Intangible assets, net12,986

13,691

Deferred contract acquisition costs, non-current32,579

28,141

Lease right-of-use assets57,425

57,777

Other assets, non-current6,170

7,325

Total assets$

1,398,619

$

1,258,434

Liabilities, redeemable non-controlling interest, and stockholders' equityCurrent liabilities:Accounts payable$

24,171

$

12,565

Accrued compensation and benefits37,196

29,054

Other current liabilities19,174

13,120

Deferred revenue373,594

313,161

Lease liabilities7,886

8,682

Total current liabilities462,021

376,582

Convertible senior notes, net449,380

427,044

Lease liabilities, non-current59,924

57,394

Deferred revenue, non-current1,674

3,166

Other liabilities, non-current8,256

1,940

Total liabilities981,255

866,126

Redeemable non-controlling interest3,389

1,669

Stockholders' equity:Common stock, $0.001 par value64

60

Treasury stock - at cost (260 shares)(263

)

(263

)

Additional paid-in capital1,001,309

780,479

Accumulated other comprehensive income(19

)

4,869

Accumulated deficit(587,116

)

(394,506

)

Total stockholders' equity413,975

390,639

Total liabilities, redeemable non-controlling interest and stockholders' equity$

1,398,619

$

1,258,434

Condensed Consolidated Balance Sheets (In thousands, except par value; unaudited) March 31, March 31, 2021 2020Assets Current assets: Cash and cash equivalents $ 240,821 $ 292,523

Short-term investments 575,254 512,574

Accounts receivable, net of allowance for 174,027 147,361 doubtful accounts of $2,633 and $3,636, respectivelyPrepaid expenses and other current assets 21,944 15,979

Deferred contract acquisition costs 36,210 32,016

Total current assets 1,048,256 1,000,453

Property and equipment, net 91,308 100,294

Restricted cash 5,642 5,641

Goodwill 144,253 45,112

Intangible assets, net 12,986 13,691

Deferred contract acquisition costs, non-current 32,579 28,141

Lease right-of-use assets 57,425 57,777

Other assets, non-current 6,170 7,325

Total assets $ 1,398,619 $ 1,258,434

Liabilities, redeemable non-controlling interest, and stockholders' equityCurrent liabilities: Accounts payable $ 24,171 $ 12,565

Accrued compensation and benefits 37,196 29,054

Other current liabilities 19,174 13,120

Deferred revenue 373,594 313,161

Lease liabilities 7,886 8,682

Total current liabilities 462,021 376,582

Convertible senior notes, net 449,380 427,044

Lease liabilities, non-current 59,924 57,394

Deferred revenue, non-current 1,674 3,166

Other liabilities, non-current 8,256 1,940

Total liabilities 981,255 866,126

Redeemable non-controlling interest 3,389 1,669

Stockholders' equity: Common stock, $0.001 par value 64 60

Treasury stock - at cost (260 shares) (263 ) (263 )

Additional paid-in capital 1,001,309 780,479

Accumulated other comprehensive income (19 ) 4,869

Accumulated deficit (587,116 ) (394,506 )

Total stockholders' equity 413,975 390,639

Total liabilities, redeemable non-controlling $ 1,398,619 $ 1,258,434 interest and stockholders' equityCondensed Consolidated Statements of Cash Flows(In thousands; unaudited)Year Ended March 31,

2021

2020

Cash flows from operating activities:Net loss attributable to New Relic$

(192,610

)

$

(88,937

)

Net loss and adjustment attributable to redeemable non-controlling interest$

1,720

$

(2,042

)

Net loss:$

(190,890

)

$

(90,979

)

Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization89,312

75,743

Stock-based compensation expense135,143

99,536

Amortization of debt discount and issuance costs22,336

21,107

Gain on lease modification-

(3,006

)

Other3,610

(1,399

)

Changes in operating assets and liabilities:Accounts receivable, net(27,084

)

(28,425

)

Prepaid expenses and other assets(7,571

)

760

Deferred contract acquisition costs(46,953

)

(39,505

)

Lease right-of-use assets959

21,751

Accounts payable11,766

7,436

Accrued compensation and benefits and other liabilities18,778

5,044

Lease liabilities1,519

(19,374

)

Deferred revenue58,941

44,730

Net cash provided by operating activities69,866

93,419

Cash flows from investing activities:Purchases of property and equipment(18,737

)

(58,218

)

Cash paid for acquisition, net of cash acquired(41,536

)

(4,250

)

Purchases of short-term investments(405,054

)

(391,079

)

Proceeds from sale and maturity of short-term investments335,964

395,559

Capitalized software development costs(13,494

)

(6,641

)

Net cash used in investing activities(142,857

)

(64,629

)

Cash flows from financing activities:Investment from redeemable non-controlling interest-

978

Proceeds from employee stock purchase plan14,425

13,603

Proceeds from exercise of employee stock options6,865

11,632

Net cash provided by financing activities21,290

26,213

Net increase (decrease) in cash, cash equivalents and restricted cash(51,701

)

55,003

Cash, cash equivalents and restricted cash at beginning of period298,164

243,161

Cash, cash equivalents and restricted cash at end of period$

246,463

$

298,164

Condensed Consolidated Statements of Cash Flows (In thousands; unaudited) Year Ended March 31,

2021 2020

Cash flows from operating activities: Net loss attributable to New Relic $ (192,610 ) $ (88,937 )

Net loss and adjustment attributable to $ 1,720 $ (2,042 )redeemable non-controlling interestNet loss: $ (190,890 ) $ (90,979 )

Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization 89,312 75,743

Stock-based compensation expense 135,143 99,536

Amortization of debt discount and issuance costs 22,336 21,107

Gain on lease modification - (3,006 )

Other 3,610 (1,399 )

Changes in operating assets and liabilities: Accounts receivable, net (27,084 ) (28,425 )

Prepaid expenses and other assets (7,571 ) 760

Deferred contract acquisition costs (46,953 ) (39,505 )

Lease right-of-use assets 959 21,751

Accounts payable 11,766 7,436

Accrued compensation and benefits and other 18,778 5,044 liabilitiesLease liabilities 1,519 (19,374 )

Deferred revenue 58,941 44,730

Net cash provided by operating activities 69,866 93,419

Cash flows from investing activities: Purchases of property and equipment (18,737 ) (58,218 )

Cash paid for acquisition, net of cash acquired (41,536 ) (4,250 )

Purchases of short-term investments (405,054 ) (391,079 )

Proceeds from sale and maturity of short-term 335,964 395,559 investmentsCapitalized software development costs (13,494 ) (6,641 )

Net cash used in investing activities (142,857 ) (64,629 )

Cash flows from financing activities: Investment from redeemable non-controlling - 978 interestProceeds from employee stock purchase plan 14,425 13,603

Proceeds from exercise of employee stock options 6,865 11,632

Net cash provided by financing activities 21,290 26,213

Net increase (decrease) in cash, cash equivalents (51,701 ) 55,003 and restricted cashCash, cash equivalents and restricted cash at 298,164 243,161 beginning of periodCash, cash equivalents and restricted cash at end $ 246,463 $ 298,164 of periodReconciliation from GAAP to Non-GAAP Results(In thousands, except per share data; unaudited)Three Months Ended March 31,

Year Ended March 31,

2021

2020

2021

2020

Reconciliation of gross profit and gross margin:GAAP gross profit$

115,544

$

131,584

$

486,084

$

496,273

Plus: Stock-based compensation1,343

1,466

5,939

5,303

Plus: Lease exit costs and accelerated depreciation expense-

-

-

73

Plus: Amortization of purchased intangibles1,676

368

5,505

1,663

Plus: Amortization of stock-based compensation capitalized in software development costs379

182

1,222

835

Plus: Employer payroll tax on employee equity incentive plans100

99

277

285

Non-GAAP gross profit$

119,042

$

133,699

$

499,027

$

504,432

GAAP gross margin67

%

82

%

73

%

83

%

Non-GAAP adjustments2

%

2

%

2

%

1

%

Non-GAAP gross margin69

%

84

%

75

%

84

%

Reconciliation of operating expenses:GAAP research and development$

43,606

$

41,301

$

174,851

$

148,159

Less: Stock-based compensation expense(10,750

)

(8,630

)

(40,964

)

(31,703

)

Less: Lease exit costs and accelerated depreciation expense-

-

-

(326

)

Less: Employer payroll tax on employee equity incentive plans(637

)

(603

)

(1,350

)

(1,244

)

Non-GAAP research and development$

32,219

$

32,068

$

132,537

$

114,886

GAAP sales and marketing$

94,796

$

89,608

$

361,702

$

334,319

Less: Stock-based compensation expense(11,735

)

(12,866

)

(54,695

)

(43,548

)

Less: Lease exit costs and accelerated depreciation expense-

-

-

(2,240

)

Less: Employer payroll tax on employee equity incentive plans(601

)

(456

)

(1,272

)

(1,071

)

Non-GAAP sales and marketing$

82,460

$

76,286

$

305,735

$

287,460

GAAP general and administrative$

31,450

$

28,155

$

120,931

$

99,284

Less: Stock-based compensation expense(8,271

)

(6,078

)

(33,545

)

(18,982

)

Less: Lease exit costs and accelerated depreciation expense-

-

-

(1,002

)

Less: Transaction costs related to acquisition-

-

(885

)

(251

)

Less: Lawsuit litigation cost and other expense-

(10

)

(254

)

(1,531

)

Less: Employer payroll tax on employee equity incentive plans(342

)

(198

)

(901

)

(442

)

Non-GAAP general and administrative$

22,837

$

21,869

$

85,346

$

77,076

Reconciliation of income (loss) from operations and operating margin:GAAP loss from operations$

(54,308

)

$

(27,480

)

$

(171,400

)

$

(85,489

)

Plus: Stock-based compensation expense32,099

29,040

135,143

99,536

Plus: Lease exit costs and accelerated depreciation expense-

-

-

3,641

Plus: Amortization of purchased intangibles1,676

368

5,505

1,663

Plus: Transaction costs related to acquisition-

-

885

251

Plus: Amortization of stock-based compensation capitalized in software development costs379

182

1,222

835

Plus: Lawsuit litigation cost and other expense-

10

254

1,531

Plus: Employer payroll tax on employee equity incentive plans1,680

1,356

3,800

3,042

Non-GAAP income (loss) from operations$

(18,474

)

$

3,476

$

(24,591

)

$

25,010

GAAP operating margin-31

%

-17

%

-26

%

-14

%

Non-GAAP adjustments20

%

19

%

22

%

18

%

Non-GAAP operating margin-11

%

2

%

-4

%

4

%

Reconciliation of net income (loss):GAAP net loss attributable to New Relic$

(61,677

)

$

(27,959

)

$

(192,610

)

$

(88,937

)

Plus: Stock-based compensation expense32,099

29,040

135,143

99,536

Plus: Lease exit costs and accelerated depreciation expense-

-

-

3,641

Plus: Amortization of purchased intangibles1,676

368

5,505

1,663

Plus: Transaction costs related to acquisition-

-

885

251

Plus: Amortization of stock-based compensation capitalized in software development costs379

182

1,222

835

Plus: Lawsuit litigation cost and other expense-

10

254

1,531

Plus: Employer payroll tax on employee equity incentive plans1,680

1,356

3,800

3,042

Plus: Amortization of debt discount and issuance costs5,704

5,389

22,336

21,107

Plus: Adjustment to redeemable non-controlling interest3,141

-

3,141

-

Less: Gain on lease modification-

-

-

(3,006

)

Non-GAAP net income (loss) attributable to New Relic$

(16,998

)

$

8,386

$

(20,324

)

$

39,663

Non-GAAP net income (loss) attributable to New Relic per share:Basic$

(0.27

)

$

0.14

$

(0.33

)

$

0.68

Diluted$

(0.27

)

$

0.14

$

(0.33

)

$

0.66

Shares used in non-GAAP per share calculations:Basic62,621

59,351

61,070

58,601

Diluted62,621

60,717

61,070

60,396

Reconciliation fromGAAP to Non-GAAPResults (In thousands, exceptper share data;unaudited) Three Months Ended March Year Ended March 31, 31,

2021 2020 2021 2020

Reconciliation ofgross profit and gross margin:GAAP gross profit $ 115,544 $ 131,584 $ 486,084 $ 496,273

Plus: Stock-based 1,343 1,466 5,939 5,303 compensationPlus: Lease exit costs - - - 73 and accelerated depreciation expensePlus: Amortization of 1,676 368 5,505 1,663 purchased intangiblesPlus: Amortization ofstock-basedcompensation 379 182 1,222 835 capitalized insoftware developmentcostsPlus: Employer payroll 100 99 277 285 tax on employee equity incentive plansNon-GAAP gross profit $ 119,042 $ 133,699 $ 499,027 $ 504,432

GAAP gross margin 67 % 82 % 73 % 83 %

Non-GAAP adjustments 2 % 2 % 2 % 1 %

Non-GAAP gross margin 69 % 84 % 75 % 84 %

Reconciliation of operating expenses:GAAP research and $ 43,606 $ 41,301 $ 174,851 $ 148,159 developmentLess: Stock-based (10,750 ) (8,630 ) (40,964 ) (31,703 )compensation expenseLess: Lease exit costs - - - (326 )and accelerated depreciation expenseLess: Employer payroll (637 ) (603 ) (1,350 ) (1,244 )tax on employee equity incentive plansNon-GAAP research and $ 32,219 $ 32,068 $ 132,537 $ 114,886 developmentGAAP sales and $ 94,796 $ 89,608 $ 361,702 $ 334,319 marketingLess: Stock-based (11,735 ) (12,866 ) (54,695 ) (43,548 )compensation expenseLess: Lease exit costs - - - (2,240 )and accelerated depreciation expenseLess: Employer payroll (601 ) (456 ) (1,272 ) (1,071 )tax on employee equity incentive plansNon-GAAP sales and $ 82,460 $ 76,286 $ 305,735 $ 287,460 marketingGAAP general and $ 31,450 $ 28,155 $ 120,931 $ 99,284 administrativeLess: Stock-based (8,271 ) (6,078 ) (33,545 ) (18,982 )compensation expenseLess: Lease exit costs - - - (1,002 )and accelerated depreciation expenseLess: Transaction - - (885 ) (251 )costs related to acquisitionLess: Lawsuit - (10 ) (254 ) (1,531 )litigation cost and other expenseLess: Employer payroll (342 ) (198 ) (901 ) (442 )tax on employee equity incentive plansNon-GAAP general and $ 22,837 $ 21,869 $ 85,346 $ 77,076 administrativeReconciliation ofincome (loss) from operations andoperating margin:GAAP loss from $ (54,308 ) $ (27,480 ) $ (171,400 ) $ (85,489 )operationsPlus: Stock-based 32,099 29,040 135,143 99,536 compensation expensePlus: Lease exit costs - - - 3,641 and accelerated depreciation expensePlus: Amortization of 1,676 368 5,505 1,663 purchased intangiblesPlus: Transaction - - 885 251 costs related to acquisitionPlus: Amortization ofstock-basedcompensation 379 182 1,222 835 capitalized insoftware developmentcostsPlus: Lawsuit - 10 254 1,531 litigation cost and other expensePlus: Employer payroll 1,680 1,356 3,800 3,042 tax on employee equity incentive plansNon-GAAP income (loss) $ (18,474 ) $ 3,476 $ (24,591 ) $ 25,010 from operationsGAAP operating margin -31 % -17 % -26 % -14 %

Non-GAAP adjustments 20 % 19 % 22 % 18 %

Non-GAAP operating -11 % 2 % -4 % 4 %marginReconciliation of net income (loss):GAAP net loss $ (61,677 ) $ (27,959 ) $ (192,610 ) $ (88,937 )attributable to New RelicPlus: Stock-based 32,099 29,040 135,143 99,536 compensation expensePlus: Lease exit costs - - - 3,641 and accelerated depreciation expensePlus: Amortization of 1,676 368 5,505 1,663 purchased intangiblesPlus: Transaction - - 885 251 costs related to acquisitionPlus: Amortization ofstock-basedcompensation 379 182 1,222 835 capitalized insoftware developmentcostsPlus: Lawsuit - 10 254 1,531 litigation cost and other expensePlus: Employer payroll 1,680 1,356 3,800 3,042 tax on employee equity incentive plansPlus: Amortization of 5,704 5,389 22,336 21,107 debt discount and issuance costsPlus: Adjustment toredeemable 3,141 - 3,141 - non-controllinginterestLess: Gain on lease - - - (3,006 )modificationNon-GAAP net income $ (16,998 ) $ 8,386 $ (20,324 ) $ 39,663 (loss) attributable to New RelicNon-GAAP net income(loss) attributable to New Relic per share:Basic $ (0.27 ) $ 0.14 $ (0.33 ) $ 0.68

Diluted $ (0.27 ) $ 0.14 $ (0.33 ) $ 0.66

Shares used innon-GAAP per share calculations:Basic 62,621 59,351 61,070 58,601

Diluted 62,621 60,717 61,070 60,396

Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flow(In thousands; unaudited)Three Months Ended March 31,

Year Ended March 31,

2021

2020

2021

2020

Net cash provided by operating activities$

28,481

$

61,753

$

69,866

$

93,419

Capital expenditures(2,938

)

(8,513

)

(18,737

)

(58,218

)

Capitalized software development costs(3,755

)

(2,178

)

(13,494

)

(6,641

)

Free cash flow (Non-GAAP)$

21,788

$

51,062

$

37,635

$

28,560

Net cash provided by (used in) investing activities$

(9,989

)

$

38,450

$

(142,857

)

$

(64,629

)

Net cash provided by financing activities$

11,164

$

13,325

$

21,290

$

26,213

View source version on businesswire.com: https://www.businesswire.com/news/home/20210513005962/en/

CONTACT: Investor Contact Peter Goldmacher New Relic, Inc. 503-336-9280 IR@newrelic.com

CONTACT: Media Contact PR@newrelic.com