New Relic (NEWR) reported its first-quarter 2019 results on Aug. 7. The maker of real-time reporting and monitoring software posted revenue growth of 35% on the back of steady new-customer gains and a 118% dollar-based net expansion rate. The broad-based success allowed management to boost its guidance for the full fiscal year.
New Relic fiscal Q1 results: The raw numbers
|
Metric |
Q1 2019 |
Q1 2018 |
Change (YOY) |
|---|---|---|---|
|
Revenue |
$108.2 million |
$80.1 million |
35% |
|
Non-GAAP operating income |
$8.7 million |
($5.4 million) |
N/A |
|
Non-GAAP net income |
$9.1 million |
($4.9 million) |
N/A |
|
Non-GAAP EPS |
$0.15 |
($0.09) |
N/A |
Data source: New Relic. GAAP = generally accepted accounting principles. Non-GAAP = adjusted. EPS = earnings per share.
What happened with New Relic this quarter?
- Revenue of $108 million came in almost $2 million higher than the top of management's guidance range.
- Customers who spend more than $100,000 per year with New Relic jumped 35% to 748 at the end of the quarter.
- Total paid businesses were "over 17,000" at quarter end. This represents a 10% growth rate year over year. Management said this modest growth rate is a result of the company intentionally focusing its attention on higher-value customers.
- International sales accounted for 32% of total revenue.
- Gross margin expanded 200 basis points to 85%.
- Free cash flow was $42 million.
- Non-GAAP net income of $9.1 million, or $0.15 per share, came in ahead of guidance.
Image source: Getty Images.
What management had to say
CEO and founder Lew Cirne commented that it was an "outstanding start to our fiscal year."
He also elaborated on the factors that are driving the company's strong growth rates: "We are driving efficient growth by aligning our go-to-market efforts around three of the most pressing challenges facing enterprise IT today: migrating to the cloud, adopting DevOps, and delivering a compelling digital customer experience. We believe that the combination of our multitenant cloud platform and deep domain expertise uniquely serves a multibillion-dollar, high-growth market for monitoring, managing, and operating digital systems."
During his prepared remarks on the conference call with investors, Cirne also reminded investors of the immense growth opportunity that lies ahead of the application performance management (APM) software industry in general: "Gartner estimates that only 5% of application workloads are currently monitored by any APM products, but that this could grow to 20% by the year 2021. While we see our addressable market as much higher than just the APM portion, given the breadth of our platform, we do believe this helps underscore the immense opportunity we see in front of us."
Looking forward
Management fully expects that the company's strong growth rate will persist for some time. As a result, they offered the following guidance for the current quarter:
| Metric | Guidance Range | Implied Change |
|---|---|---|
| Revenue | $110.5 million to $112.5 million | 30% to 33% |
| Non-GAAP operating income | $4.5 million to $5.5 million | N/A |
| Non-GAAP EPS | $0.11 to $0.12 | N/A |
Data source: New Relic.
The strong start to the year also allowed management to raise its financial projections for the fiscal year:
| Metric | New Guidance Range |
Old Guidance Range |
|---|---|---|
| Revenue | $457.5 million to $462.5 million | $452 million to $458 million |
| Non-GAAP operating income | $18 million to $22 million | $15 million to $20 million |
| Non-GAAP EPS | $0.39 to $0.46 | $0.29 to $0.37 |
Data source: New Relic.
Cirne ended his prepared remarks on the call with analysts by reaffirming his belief that the company's future continues to look as bright as ever: "And while we're still early in our journey, we continue to see strong demand for our unified platform from companies looking to modernize their digital business."
