New Relic (NEWR) 23 May 232023 Q4 Earnings call transcript

Good afternoon. My name is Hannah, and I will be your conference operator today. At this time, I would like to welcome everyone to the New Relic Fourth Quarter Fiscal Year 2023 Earnings Conference Call. [Operator Instructions].

Thank you. pleasure of your Finance. Investor my Senior Ingo now President Vice Relations is to host, introduce Friedrichowitz, It and Corporate you. Thank

You may begin.

year Good quarter to welcome XXXX fiscal afternoon, earnings our call. and and fourth

and today's website, is with investor call during summary release prepared Officer. Staples, Executive Chief are On intended find our David Investor the remarks the our Relations me Barter, our and which to can our supplement slide Bill call. Chief deck, Officer; you On press Financial earnings

an hours. addition, this will In replay audio call ir.newrelic.com be of website, our in available on a few

During forward-looking base business our our we of today's we expectations outlook and call, as on will statements, including predictions which today. make and strategies, about

and year Our in call Also otherwise risk discuss actual results. of non-GAAP results Form differ XXXX during due today's will certain could with non-GAAP measures. discussed metrics risks including financial our this uncertainties, factors materially the fiscal to on are on of XX-K the profitability Unless file the we expense SEC. and all call, number noted, a

for comparable GAAP those are intended directly release. substitute the be most These measures not financial We have a our reconciled non-GAAP in to measures results. GAAP to earnings our

to like And with to Bill. it that, I'd turn over

prior agility year-over-year around volatility. fourth and XX% occasion revenue focus Ingo. I'm market on company's run pleased tested amidst consistent results as Thank and XXXX you, ending world the economic inflation Others with quarter and growth fiscal XXXX same to execution, every delivered nearly year our uncertainty, level our and a the note. at the year. strong

model. first our against true strategy steady consumption made our also We category's to progress business pioneer

XX% our just product Data business, total revenue team upgrades major our year our premium competitive today. market through to consumption year-over-year over management, demonstrates our SKU, year-over-year, This platform including just a launches defined data benefit of of Plus, came delivering In and XX% name many model how vulnerability is QX, market-leading in business growing XX% the a user our excluding the The in new and over migrations. and from at few. innovation, experience

deliver a this modern and to of a infra Relic's solution to innovation visibility astounding New experience X-point To simultaneously OpenAI Generative and to also of is year illustrates fiscal margin we're able that market They and course driving year while is the decade. brand-new start improvement an over with AI first unified experience, be logs and observability for next already monitoring gross the got with which an the and assistant, the defining first ATM, quick engineering. world-class breadth

income so market to shift many QX. first with year whole not profitability growth, watermark for The in are growth, revenue quarter, million durable at increased company year-over-year distraction Consistent margins of the who on companies an $XX the operating executed year in double-digit today, delivering income a innovation a operating positive much the new this such world profitable note. with the and are impressive there high towards company ending closing

across the work which a for year. customers company, terrific hard and grateful all FY terrific very made I'm the such 'XX

our of our platform quarter, fourth new category. now quarter. adding net saw which this ahead more growth XXX go-to-market Let's other into how strong many in a competitors new dive once execution paid logo the We significantly is rate, than again unfolded customers, in

allows paying use product customers motion, unique New they our result them in begin Relic. or commit We decide to budgets under with credit multiyear to growth then is customers pay As product-led it annual at to the follow then in offer a and perpetual usage. free of naturally they we tier a contracts now their own growing love with that the pace you discounts starts efficient with new to and know, which success as additional and as scale cards

Our together organizations customer government, actively every care engaged all engineers paid and and free customers. teams base adopted free customers, and active it XX,XXX entrepreneurs our These includes including than more in reflects with large sizes, most segment New than XX,XXX enterprise, of And now tier digital a observability more constitute customers, of XX,XXX organizations, the Relic platform. vertical. and ubiquitously making natives

head-to-head a leading versus large but examples Let of share land, me of wins couple new-logo competitors. we drove

First, a leading standardize and achieve full overages, them Relic. getting a from model telecommunications competitor stack to on an provider using This customer agreement experienced which host-based needed the we observability. with constrained New closed to pricing all capabilities was

Wall savings vendor observability even Street to New Relic. targets, uptime leading reliability achieve after spending planned. and able X-figure After, our than more signed rating customers' plan was not prior with originally Xx a agency Second, their the

With to has agency the New one access to than in goals. capabilities cost their Relic, more achieve scaling customer XX now better with platform to enable this business

as well getting are We lenders that Relic increasingly leading through also These industry-leading New new who ROI choice. best the growth are Relic. are the on New new matter winning reflect the a economic at engine reality making on as standardizing investments, focused expenses customers for wins customers strategic rates and our observability

quarters. Let's ensuing in turn sales to to customer our tend remember and to land the PLG through important expand motion small base. our we that It's efficient then

few be each customers Equally, CIO environment. contractual support we've continues digital the helping situations given assist helping and of our in As a the in priority base. their our given comes to consumption quarter growth contracts of tools pressures, commitment. been expand their top initiatives we've customer current their motion, where customers cloud provide from been majority their this in and focused exceeds their a result even quarters, to past kinetic In the consolidate transformation any on as

a us. of few examples our customers me share just with expanding Let are how

as chain logs the Relic doubled of replace quarter First, rolling decided with this retailer have a with long-time leading sales. a is commitment North additional customer their their been this American at with Relic. renewal retail store their point New out almost solution They annual and novel to New instrumentation

communications been on standardization global already their them has data an open Second, this ingest makes key telemetry, to large different leader which multiyear customers' for cloud-based X-figure A increased commitment. the to materially expansion it more from a easier driver for commitment systems. has

the them, for Relic contributor being a to the choice to and given natural standard leading commitment their in New category. open inventory was

a their is high leading office, to of financial to as front services digital to Third, gain times transformation than company commitment through Relic by comprehensive monitoring increased more company insights, its a needed tools reliability. uptime their financial they consolidate various and X services ensure New this going

upon with that. to contract. business to New entire global from for by Relic's And doubled New more subscription provider consumption contract shifting shift a the customer delivered a Relic application all-in-one more does This than a exactly the its platform commitment unlocking platform. value

base we are optimization which customer to our for with pleased optimization. are trends, not us takes the we data cloud and expansion, immune user form While of

fourth all anticipated guided we pattern, seasonal we quarter, and we X toward quarter, expected in In saw which meet optimization happening cohorts. the this specific

while at progress commitment. between -- most we commitment, see First, the and steady we their customers far optimization to reducing made have ahead often continue consumption are when of gap consuming occurring

spend the consumption quarter with customers to we Second, this more growth largest largest across where saw tends steady our spending all pronounced cohorts, are optimization while budgets be set.

consumption entertainment of nearly usage they New part consumption and in largest competitors. holidays, optimization only be run our were had to reaching demand on which we annualized down practice the X $XX supporting avoid pay closer quarter. the and million proud then million online of remain their of example, rate and a annualized standard the $XX by use scaled to who high happy a companies For healthy, during but drug over to what for appreciate They ability customer rate and Relic billing, peak penalty scale usage seasonal is

the and as during believe customers optimization allows us this customers as from efforts. deepens our with emerge partnership faster to optimizations work We their we such grow

up in increased As seen RPO is and current as quarters, room customers business strong several share. customers last over win time to We their market their export the ready. the growth consumption well climate as to serve opened expand our an view have

technical our in We've to the hallmark note Next, highlight on areas. multiple I'd of like innovations platform. strengthened some All-in-One our recent

We AI, which derive users access generative insights dramatically to I our to as New with the Relic mentioned Logs, first earlier, were will announcement of and ability industry's simplify assistant, observability in First, we market first to first support data. to with time. simultaneously performance track our cost ML introduce ops, real monitoring in also telemetry to and category market and allowing in customers from metrics were GPT, first for OpenAI

stack Second, CodeStream build more who on delivers with capabilities to identify leading truly competitive into allows market-leading like key our Visual more infrastructure-focused with and they X/X velocity. production competitors. engineers achieve more infrastructure at Confluence Relic reaching are One, has the VS and can Coldstream all wins performance, visibility for even core languages. tools New deep developers in with code capability third, before cost moved launching competitors. we and our engineering coding issues with become to leading full hit so Studio Capital software accelerate others us off to This developers inside Intelligence, empowering developer integration And Code, quickly line that insights APM of

our and Thursday. at Analyst this to excited We're innovation Day platform share more advantages about future map road

to with is as well also of road complexity applications the now the observability. medium that increased ahead. grow term, fact and is driving a in optimizations as generative remain in confident only long explosion to cloud In AI, operating success shift cloud start an continue persistent tailwinds: customer our observability Let's But which digital segment We're including promise to migration use. transformation, the loaded I'm technical in new business what secular need of in paying for of term, short you consumption will model, which a life. the

strengthen. continue We'll to

modern of user automatically of buying part customer X adopt As more FY for sign but QX the successfully consumption revenue pricing, and and business -- XX%. up leading In they XX% grew We than when with only a incremental Gartner we consider of and already build usage. from data preferred to consumption our at revenue usage way our our our becoming exited XX% business. customer of programs 'XX, recognizes consumption not total on also recognized doing business

and completion business. to our accelerate migration very successful with of the We've the the subscription next X will our migration migrations to X Completing to been of these benefits X in the have plan quarters. base now

it the with in I as indicated unlocks earlier. growth customers potential example First, provided

model, forward. metrics operate to consumption, have business less more you the business will and that Second, additional share it the end business. this helps which in cost excited we understand means reduce and model going plan to complexity also at and consumption help us We're only about that to focus of the X shift, and

see person to the event welcome everyone hope you of join and to can't live tune many who person stream. Thursday, the this We in in at into

our about would prior growth business. Bookings David, in a to quarters. thoughts consumption to in like In to and strong. increased we prospects. I incredibly over medium- share many few growth quite customers our were turning with QX, excited line consumption long-term QX and saw strength Before in I'm their on bookings

We hot also focused and otherwise increased large thereby who and customers are optimization on healthy saw efficiency by growth. offsetting naturally

Consumption April. trends growth came limited the the but through March, rebound in optimization back

control enter on prudent focus to fiscal continuing new as are what We year. the we and we be

of continue other they will with as of or to deals deliver the between their the contracts. we multiyear order gap And to and lifetime over revenue annual book to day to But customers We hard close and consumption will to the new the existing us empower committed we value consumption every work usage. recognize in their timing customers businesses, with decide and commitments.

operational control standards our also and the pace continue and our We excellence. innovation to of of excellence raise

simplify because by the accelerating contemplated shed. This over is see accelerating quarters. faster more and this subscription end to opportunity poised we This the exit at X lower than growth and year. of with subscription calendar the business our meaningfully, contracts efficient will for is year our we the the legacy company X a start of to profitable We largely cost the business next

for will define of us with opportunity practice market continue Generative achieve and tremendous goal We is making leading AI ubiquitous engineer every to and to for the our our team. dramatically a innovation. observability simplify

infrastructure and investments continued unique integrated simple logs a fully and our Our build APM all-in-one on experience platform message. delivering in and

of there's customers for the productivity way top while During better engineers. they efforts line their their no achieve times, the efficiency and seek, also economic increasing these to improving

business our to designed in tough believe perform I was times.

well believe While our take positioned for company immediately may in always revenue, our it to and I profitability. and growth share meaningful we're not we position market see

with you. I'll Dave, it turn to that, over

of end Thank operating you, revenue Bill. for We top the and exceeded our guidance income.

our in an charge $XXX.X was write booked excess ago. revenue XX.X%. million, of real $XX.X the from a was the restructuring XX% increase margin representing a This Operating estate. excludes Our to year quarter off income of million,

Our of earnings count on per share a diluted was million. share $X.XX XX.X

revenue more the pleased the base customer quarter. than growth We're our and from XX,XXX with on of approximately expansions seasonal cloud our from have new more results. QX shift ago. in customers, business our pattern consumption customers now impact customers continued than the of subscriptions optimization consumption. represented Consumption year of We and of consumption to Cloud model, XX% a XX% the up did

in As expected, consumption below seasonally the did December. peak decline realized

expand counterpoint back guidance. peak. we April time In level of climbed we customer we A was and in did when than not return pullback prior the of this the expected the until that consumption our while with consumption However, commitments. the December it trend March, longer the to the to end, depth in it took to was provided

about growth healthy many expanded with with commitments. and encouraged customer-based March commitments. the and number are their December not quarters us During growth, in XX% line in knowing who We're QX, with RPO increased contractual a driven by remain pleased of consuming future We how yet contractual customers expansions. by year-over-year,

had who levels consuming the customers down coming healthier to position growth Furthermore, believe been these factors for levels. year. X at company in have the We come elevated

compared profitability. X.X our up We're company's points cloud the architectural over points last margin enhancements. to initiatives progress. Gross to optimization and Turning reflects XX%, to and This quarter climbed own last with year. pleased X

revenue Azure our continues data to grow of on cost decline, Our expand invest while business retire to to we centers. and and Microsoft

cloud more footprint expect is and coming efficiency new their team while to our regions. not to with year hyperscalers engineering expanding optimization. Our the in finished capture They

the quarter, steps double-digit towards margins. produce also could durable During we took we fourth ensuring

in we March, of by our XX% As charge nature. restructuring communicated eliminated in excess noncash estate. charge real we Over our was this

planned product quarter, year. for and our our investment the also During the investment we sales coming

the investing to of including will expect We portion R&D, capitalize. revenue XX% more we required approximately in that continue

greater We new investments growth margins. We're believe to product-led with consumption logs graduating generative to the enable sales-led combined improvement and us combined model, a with our in company infrastructure in excited that efficiency. believe for The releases. motion, and upcoming AI, and customers. will will value Overall, will platform efficiency significant product durable provide to customers sales G&A the with lead margin a double-digit profitability to scale increased meaningful gross we our

in cash, We $XXX to cash shift the sheet. balance Let's the equivalents ended and investments. fourth with quarter million

repay our note $XXX May our on convertible on on that cash call, came indicated we we earnings As last X. due used million of to hand the

cash of last believe we than more now of cash As is week, have $XXX a company the million cash, We strong equivalents and in position. investments.

free with million We are interested the of or shareholders. $XXX flow. the our cash, of expectation believe levels We additional pursuing investments. to of will will time generate in financing more we continue or our flow free $XXX at this million and generate cash fiscal approximately dilute not business cash cash in It's improving end year would equivalents currently that approximately

starting let's strength step of business become full are and flow With the QX to to move for cash a to guidance in will the believe up. both our measures and we year profitability continue fiscal XXXX. that, still While days, on early clear

develop for year, we X factors our the coming influenced guidance thinking. As the

compel and First, the outside These factors It's control. It's clear when us not in to prudent. there rearview unfold. climate is us is be activity of optimization will macro immediately uncertainty fully cloud how mirror. not things the clear our to

at And second, an as Relic exciting highlighted, New is Bill inflection point.

transition $XXX migrations XX% customer going a revenue We of and successful the churn and will introduce benefit complete excess with a acquire over hard be the It is business efficiently including has now this. migrations. likely XX,XXX are relationships. coming revenue. of Consumption year, the been very We customers X we in the without for better years business new work. more of expand time We customers in of to XX%, after operating press and believe but will doing approximately consumption and million

unlocks It profitability.

will XXXX second of of half fiscal year profitability the expect half to margin fiscal in compared the Xx We in second approximately operating year our XXXX. be

this shift unlocks believe also We growth.

from strong, coming infrastructure Our to and coming year our meaningful levels deliver AI contract, generative will able excited under confident for to we exit the and year. profitability. growth a poised customers pipeline of will be benefit We're capabilities. our innovation is logs the We're and expanded consumption

fiscal for approximately XXXX consumption grow by in to revenue points Factoring of XX%, quarter revenue. these the our will first expect year offset be of contraction we which the subscription

of a XX%. we $XXX representing approximately million, between XX% growth result, $XXX and As expect total to revenue million

million between and from income operations non-GAAP million. expect $XX $XX We

full the approximately year be the by revenue. will XXXX, contraction revenue to For XX%, expect fiscal offset we our consumption of which subscription grow

billion, revenue total to and XX% $X.XX between $X.XX expect growth approximately billion representing XX%. We of

We $XXX and million $XXX between income operations million. non-GAAP from expect

To conclude, financial been at with improvement. and has rate. pleased our Consumption model I substantial healthy revenue am a the growing

shareholders flow. delivering believe measurably and cash enhanced profitability are levels and we're a business. We of I customers offering better

to deliver XX next shift in expect the in consumption the and market profitability With to with line levels leaders. of largely behind growth shareholders months, us we to

you'll Day this webcast. Stock will insights listen Thursday new go-to-market and to strategy We observability York or our I holding attend XX, perspective our There a on to financial customer will and innovation greatly trends. the the sharing Analyst you We're I'm model. hearing also afternoon, May on emerging New be at encourage be forward enjoy the their panel. looking sure Exchange. to pipeline,

With that, let's up questions. the call for open Operator?

of question The first the Rob from with Oliver [Operator line Baird. is Instructions]

like here? macro, some 'XX. to if there's that is clearly color a line Is it one, Number this first you factored churn is contemplated you what anything there bit, is of X And top guidance is, that uncertainties? that that are be for is around to addition factor it it side appreciate product more would little there's which Or Or then to incremental? in guide David, say some gave to last Is consumption? which latter But part subscription point churn. in portfolio may. normal like in of for probe I that how you. to you the I a you coming sort in is I'd mentioned, going the on the the sounds currently? is migrations the which of the the

for question. so much thanks Rob, the

I'll say is what churn that before. contemplated a is contemplated at above levels churn certainly we've seen beyond and step think to I go even

pretty I the think we're where residual that point know we at well. customers

it the in how latter QX QX, of got idea idea think of of think if unfold. an clustered, will March. we have kind the an will, we think will will in But you We unfold. be this I part of migrations how I

And so transitions certainly my weighs involved on having model with before. that mind, been business

certainly over that's that kind our in XX% basis. day-by-day is we thing my consumption consumption So on at revenue, course, thinking. a the model, of of And look certainly, which then, being influenced first the of

began consumption So of we planned, we again, looked know And -- April. team we how carefully very exited then pretty how occur March, the and we that thesis place. optimizations carefully with our to in at have how taken optimizations we've cloud I cloud future. could on think, the the in we then work the that current knowing go-to-market expect kind environment, around our

the to regards up. part follow sorry, second In

the think I around that, your go I second me But before into I question? there let answer question products. -- a was part of first did

You Yes. that. I did. appreciate

logs. maybe excited -- represent we're Okay. of be We're follow-up this them that you XX%. revenue. specifically we what our you've they not generative have I X now since terms let those towards of just the you're infrastructure ton think if looking may, I a for modeled contribute second at with could customers, that come slide would customers haven't or getting made you of it. then of to obviously, And what then just flus of guys, specifically Bill. And enhancements some was me we're -- out terms or for arrived. part, progress in it on but Bill, the what say percentage about to consumption quick in Got capabilities maybe way. AI alluding the I

people taking of Relic the platform. So clearly, New full more

we move of that strength typically sort the you Is land usage. period pick start solution? had you play how lag Can out talk land get guys the to as does about people this you that mentioned to You a given guys from see of up where in tend with increase more expansions? to comfortable sort small. enterprise How there have usually consumption

unified is the about the specifically on at more so talking Analyst we've Yes. we're deeply short, land have Day. the last we only expand. it's X front really really in since our how business to will I consumption, our base to we unpack question, back call, exciting topics about go-to-market end been couple customer not of new Good leaders the and share, that and I'll see this think and subscription this got over Rob. and from vibrant, But And a of to end, in been healthy, engaged transitioned Thursday both platform, grown We've event the making, and product years. -- earnings long but our talk we've going November

customers are You in just quickly new the see the platform. supplemental can into how coming investor

with And small as through you and through add card. things. really tier come which mentioned, the nurtured they then they they at then credit X grow their pace the start is as And free us

is them at data more nurture services sales in instrumenting enterprise more who again company can enterprise discounts get sellers, which or itself annual users, with addressable from attention us more naturally which our their actually of then lead contract, and on of maybe we pick on that humans and additional secures form organization. get opportunity others. product, within way First, help up through product can or our budget depending the spend total as their work a ISRs accelerate teams an motions to total do or connect their where faster to from additional the and them business they into for off product-led we them technical in them dependent to signals as they sending adding needs, experiences, than then growth well some obviously usage the And grow the but the

X them those humans -- as so signals customers see, we We time. there, as with over larger accelerating the feeding growth we're soon connecting opportunities in sales-led that happen terms we're for then organization mature fully off see to it can into quarters quarters. and And product times, within Other us. X of a few timing, into takes a sometimes we customers see to

the Canaccord. Your of Kingsley line with Crane next from is question

Bill, one should this I Bill, Grok. for being experience? comment AI the the Grok the And Dave. impact with with for customer pathway this Is of about one to appreciate the for So market consumption? on near we think How drive term? improving first business generative in to then what is

with believe large topic. news siting on your individually. about ourselves I set data sure sets. filled for I'm of AI, New us feeds generative what up like Relic thrives holds Yes. generative for the of emergence really are collectively which mine each and well lots excitement AI of

As and we're and with the about and data truly be where and have you time, query observability talk all the stored platform we ingested only a accessed can know, to API all it X sources types data platform language. unified

consumption, who for to is opportunity So take advantage data increases us to more in the the data term, short and technology customers this bring obviously. want of

help insights it we generative AI those then quickly unlock And out build them as our capabilities. can more

allowed market of last of introduce out to MLP innovating insights that first to with how we've be dramatically an get first platform, able couple of simplify to to data rock, telemetry will model the GPT the in It years. New first been unified solution, is this and be the a reasons market One an AI open to assistant all-in-one to we've to generative us the with data. which support been Relic first AI monitoring

Thursday event. to excited live We're a more with demo that, on analyst the fact, share here in at potentially

to in you from So I'd encourage that. tuned

and side model years help ago, easier the and grow, standardize really from We platform to to shifted business we the when to the aligned make and systems to efficient pivoted of less also model place. our low specific as business as competitors. On with engineers the business cost in pricing uniquely and instrument X on Remember, more be model product to packaging New it's put it's data. it Relic allow going data how and intentionally to with higher-priced users possible offsetting we

top represents a Groch that to using Relic the on by dramatically simplifying data New scan insights engagement the and to data then user of from large over natural ability increase time get opportunity language.

we who host-based that on meters. model competitors helps capture data actually are ingest really So priced models believe us expensive that are expansion business our still better than effectively

exciting. Bill, helpful context really and that's certainly

So for to at numbers, growth like is growth of look a most should embedded driven the the revenue conversions it Dave, rate nonconsumption when year. conversion we guided that total we this in How of from looks by about think consumption next excess in being consumption in guidance?

Yes, have in out to lay figure out better how it we that's future slides.

And change that we maybe won't a be quarter-over-quarter. step rate I dollar step about think when the to is see million what consumption -- about quarter-over-quarter. way the dollar. up it will progressively is think There the and it down think it you'll best exit of subscription, will for exited $XX around

So occurs. will shift this subscription that from as people is be happen what in case is optimization growth expectation an initial there before will our consumption, to

at shift a the catalyst, near-term adopt people from as net-net, a not looking capabilities. probably and more And we're more but consumption subscription longer-term to so I'd as actually say, catalyst

Our thesis think just around growing to core this I the over you supplemental effect or we the was the were drivers, and last consumption year, in XX% migrations of put in QX. exclude if investor

XX% think about grow plus way is around to a better year probably again, think or growing the were year-over-year, is you'll thesis growing minus I or this in And see points. of minus the year last that it that we it XX%, this will migrations, year, ends up kind consumption around XXs plus few. a of in is Our excluding few that what

the and kind model So but then drivers the core SEC set both terms trends. helps that of geography, up in in of also hopefully, terms of you the

with Our is Mike next Needham. Cikos from question

open [indiscernible] for other more you credibility to developers. the to and telemetry leaning telemetry into Matt momentum is cases specifically around why you, of This being aren't we is the open field and Mike. Bill, use telemetry? picked Relic talk open competitors with building start also New importance customers? And on proactive with up Can your in that

Open it telemetry emerging an been X going first would forward. Thank that you. recognized emerging important We've that project something be we've joined, I was in years, deeply Yes. actually, about I it. when as has something been and excited that cloud been our as standard cognitive category for to investing computing foundation a

and In can the capturing fact, to data a X that this defines data vendor-neutral. a top model of and be for which effectively standard, a we're which standard data data, telemetry of contributors is way sending

believe future because to of by device hardware and allows every the engineers And then be We system can all telemetry systems, telemetry observability that fig technologies it's that coming data. admit will of every important the in insights platform language, every away. often a those one piece of way data will then at or data deliver of service, capture and data, scale winning every cloud that the those capture all incredibly that the in off default switch and operating very efficient platform can every on

making customers exactly to that's configure I of the standards. they recognition in only Many think want that value allow flexibility give them platform it nurturing what without what and a to and and building vendor the to is adopt been for. been that but starting choice best of it But separate from standard, not will possible it embrace on, get starting standard. only that unlock it's having focusing that to makes more efficiency, customers. to we've open the focused going And I it way as to and of So -- by to make. that insights them easier most not has unlock get proprietary the data get the recognized experience. also And technology Relic go and this economy picking in that's on, think the especially agents to New choices instrumentation that's

specifically, from Awesome. anticipated more help data think the in guidance? David, That's benefit Relic And helpful. the incorporated very plus pricing benefit what's about adoption bundle? of you the investors And can implied New

it's a question. great Yes,

We Data price. benefit Bill, still started again continuing December it's the you recall, if overall, tailwind that of plus, renewal March, it the early our for cohort to we'd price saw think and -- Plus. days data I'd it year. structural kind say, was first I associated probably a capture think factored with certainly in the big I we've is this say getting in cohort of

we're the very with getting the benefit, think Customers of vulnerability are through the some whether adoption. certainly FedRAMP, it's I pleased additional IPA. features like management,

data overall, both give time. and a of I us way. will So Adoption its that over is around And Plus again, probably those structural price X well the it's elements tailwind think mix on

on that well in So say we're I of area. kind our way would

next Lee Our Suisse. Fred is question Credit with from

first This is question on for Fred. the Tim for is Bill, you.

is been You competitors integrated recently in which do it have some expect on you impact it examples you concrete rate? competitive launched a us a of to historically? the as how Could pane marketing give new, to monitoring itself And differentiated infrastructure solution. especially glass APM deeply and marketplace how win single relative your

in we calling been for Thanks last for infrastructure another We've that connecting may devices it and that infrastructure infrastructure valuable end it's the so services us, that on far. first as used applications is chance that through user. the that a and experience We're just way theme experience really engineers the to get the for really those really, up And to infrastructure. can years level. Great journey launched. the been from infrastructure that acquisition. monitoring improving But And total the really silo What's All-in-One new then we connects the infrastructure excited a an monitoring and the a only run us. to It introduced that all this, experience how to the We few to was understanding move out. take think a And users for week. to applications to platform. about be question. is the about ago was

striving what now this connected been that and we've infrastructure services that deliver differentiated. can And see that's unique and X and so spot experience engineers applications to There's correlated. go is in to and

health that the the Relic for the known and correlated. within ATM is apps both experience you and see New of underneath is services infrastructure world-class, the those So can

the also applications the set the from on You things. services can those them correlation see between experience running infrastructure and of and

and this that are and your joining now systems result happening. all is depending are or pinpoint when cascading The on see -- layer impact that. infrastructure teams to application, can from the on as well to what ours wrong where in with It's And deliver also engineers impacts any ability where tease of through try if you it's stack, other in apart the failures in something experience. experience, radius this new the a whether as issue happen is the call the understand the the goes blast or goal of the to to of tends

for X is can monitoring just cost process. last, Xx got to in no-brainer infrastructure major of to already infrastructure Relic Xx that it's at and cost to I'd monitoring expensive is to much and New incremental a TCO get better. other total With add the the save and an that host be New customer per experience with the less money incremental Relic deeply say Relic, so New maybe differentiation now APM connected any alternative that's the using And points solution,

And then, you in a the line you to assume seems from year, then million at a $XX on And look revenue subscription a losing on you so had we in much the It guiding more years in $XXX consumption that XX% in the the consumption? imply roughly them. us next will if consumption gave you're to growth into -- excluding revenue, haircut. roughly revenue go-forward as like migrations, meaningful past that converts for revenue, subscription the only basis, subscription million cut and that Dave, roughly that revenue if lost X% we numbers uplift converted over few

the that so year, higher has wondering, of you quarters, rates? X cohort customer off fundamentally over were relative customers that that expect subscription about And different something the there I'm to churn last is to the migrate will that cohort migrating of X next structurally customers and

be a as top quarter, cohort, question. will We say, and we've it's And I'd be and churn. material of and a out they're have a tends higher of my traditionally bottom it them there I of as top great a the be And are a of pyramid. think Yes, as think number then is I will actually to bottom And cohort a think a at the with -- people my have some think I'll is contracts, Tim, out cohort. I probably press down run the churn my also Think couple I about middle given those probably qualify free of it cohort had for have it kind in in any And into, that there who more they and in those tier. very out cohort, the top what I X-figure average cohort. middle that I of free contracts have think potentially I a the challenge line that could called what the use I about want. customers earlier guess, is should accomplish bottom tier is, customers, just I is X,XXX of -- cohort I to X,XXX cohort,

migration. to the not pressure the So we've some been to little X quarters I over press a have well ultimately I as next standpoint will some a for X I think of surprise X And guess kind customer from complete the ACR this as pressure count years. at it's as huge I over

bit point quickly. the And that little behave do. have the to to adopters I get prior the of which transition ways, bit in people think any and last that will where you little kind earlier a than different a move work wave more You this were obviously

that's have bit could conservative a so cautious Tim, performance where And or bit being the more different more these little a characteristics. little reason, for

question of Jaluria is with line from RBC. the Rishi next Our

Analyst side, it start little generative forward tooling their of generative the code wanted I I improvement the what that AI, and by like which Thursday, almost developer which about thinking really the investments of potential you driver? And a of of on really exponentially. applications, you're XX% tailwind new a going written the then have of to talking bit we're number there, kind like deck. in appreciate to about you workloads? but own, here maybe about quick all to And about for AI follow-up. want a thinking make helpful win secular good how is at got share as mini I've by feels to secular just at So of its almost out of this being another in right able a is with a right? developer up slide ahead It's Day sort of Can looking to. talk productivity Microsoft XX% to drive conference to those that is capitalize right the question, user some a generative AI be asking

question, Rishi. Great Yes.

Generative Generative mentioned X talked of the to secular being We growth complexity. earlier, public AI cloud and into other and about both third excited AI's, And way adapt already, a technology one about and it's it's being transformation; digital incorporate you new being applications. layer As the to another new as about mentioned, I technical think very and cloud tailwind. the X because, we're potentially migration

OpenAIs, of not look for also provide performance were associated why could them. wanted applications we a cost only said, to market AI the because based observability need monitoring generative It's like on. fourth and provide you we You to at a GPT, it, to first to driver new with first the that to of be those with about wave driving it's applications engineers enhanced think as applications ability applications but

we're believe And up Generative industries, setting impact be all will AI ourselves segments. transformative we the across of there ultimately, because, all

well, Like also which really the SKUs And so we though, been growing successfully, best the in to high-priced AI has really data be but in aligned observability we engagement. where observability monetize there. class really our is other incorporating is key with said, post-base part want model business competitors Generative the experience, really on category uniquely data into user actually on monetize ingest other both ingest, on where I

speed the And and have increasingly power of observability why to making for also there and insight. simplify vision category we that's New innovating engineer. every Relic can launch that dramatically we're access we to And believe to reaching ubiquitous observability we AI Logs. unlock of first generative the And itself were

measuring New to capabilities with the slide Great. usage across multiple greater Relic have full wanted I right. XX, helpful. multiple coding. really how That's subtle All usage you you can competitor platform across versus adoption And if Slide of platform? and you sort color a made then just maybe a very drive get efforts deck help of And talk of understand capabilities us on that? the about to you sense, what are in

connect for remove wanted from for that product-led we're chart the a the capabilities the think I yet terms that standardizing X enterprise New them every you more experience, it's away use remove It's click how Relic platform question. we an of Good leading their in see Relic. packaging which it. to integrated we've see APM, we vendor Relic chart their moment is particular not aware which way drive else all-in-one in and our strength not this the makes of now growth happening, than Yes. with It's to barriers, all who to reflects I the on And think that standardization is which X ago, connected X years need anyone maybe number platform for it engineer on done to can foresaw more be is efficient, motion barriers, new the infrastructure of. because New through came New experience very practice. the but more observability APM and And easy. to prevent customers inside of And only can and pricing adoption pricing model. that would the I'm packaging

Again, see and are we where engaging and in. human know and unlock of customers it quick The to more with thing customers for I'll quickly revenues. not using scale. to our so take so that train and X yet also more the that expansion to how into application. feed our engaging they interested get them sales grow the us And into customers more the and logs expansion are last at are and value again can of signals enable then about is say they to flowing into it conversations product come makes the our allows once bring logs much the away can budgets They them the and start it's organization click the for customers platform those and

Erik is question line next JMP Securities. from of The Suppiger the with

equity rumors talk there in curious you First bit New your you to little of grow about off, then respond -- at had to mentioned a any comments curious, just I'm been rate. market that? can you private objective And obviously, I'm there's Relic, that to have are secondly, interest if

of I market think when XX%. you're about Was to that making there you've suggested reach timing the that intend you any growth? comments rate

don't talk the about And Dave, Why one. second can first I take the you one?

more have that on Of on we also course, coming up Thursday.

about With market. Journal question article about assume are in the first regarding the Wall part your rumors speaking you're of the Street rumors I rumors, There always of the a transaction.

you As committed best interest company would. don't the imagine, any We're company of public to can we on directly them. our as acting comment in our and shareholders

Thursday strategy. on to also customers for we're on execute on we'll focused attend. those focused be what all and And today's discussion, that's creation value our continuing who our For can

listen encourage in. out to and So you come

the to and regards in market updated also I to then model. in -- think receive Thursday, Erik, on Erik, market you'll financial an growth, regard

growth. is Just to profitable be clear, our focus on

about plus. talk a our map of And get so a rule XX we'll we're to to how and going road lot

seeing you're to how XX%. that certainly, get prepared guidance, we're I a guide XX%. And on heard XX%, and on think this XX% think you of through our profitability to think pathway I to I know we as remarks, in working to

to believe the transition setting all next as about we excited up pretty that that we're customers the year subscription of path. that well something is that be so on And we we're consumption, in complete

excited to X So the our look all come particularly we watch as bringing pretty operating to the model. we're view together, together, business pieces is are and forward pieces that we

come more So Thursday afternoon. on to

is next Cowen. TD Wood The Derrick question from with line the of

there in for guide? the on have I on it's done? headwinds, you X what how for those both factored on of just And optimization. guidance you're derisking Derek. color XX% you Andrew is consumption wonder any that more into give could Dave, kind if of how you much the assuming for

optimization through you our That's of Obviously, we carefully but a pledge this got customer the the cohorts, perfect, time a has can't question. went through that great how cohorts. we to place. lot We I going really taken spent

view plays exited March, you best and began then how our looking the out. have how at our we think I think we very game we April how

think you the this I to unfolds. view terms So of in how have our closest pin

do QX apples-to-apples you like to you're about How then sounds average, on big And it share quarter. was gain those budget seeing renewal quarter. came It more is Great. strong bookings a Okay. the expected? was on relative renewals? how there? kind of just What growth you commitments talk Maybe a in what

with through it highlight expanded. to of the in to I as I we consumption in still well as you I an We Yes. percolate wait saw in even terms have of is that think keep for expanded current. terms pleased happen. you and with on would just thing RPO, guess both Again, for mind were that commitment, to it total how really

is if takes consumption the so bit in it little right now value. commitment, where you for Similar a and a And to there take a be I of customer based to where guiding up difference friends down business on of implement bookings can takes but the on ultimately, but model garner with were still some time. to points our our time subscription, it I'd guiding several

quarter for commercial the generate up and end, taking a we business the value, revenue. end, execution But December garner they quarter once growth. around I'm was commitments so good good pleased was pleased And setting expanded a March with

with Morgan next Our question from Sanjit Singh Stanley. is

there thinking want QX bridging about the in we're you quarter, guide that how in And X just on month about little what maybe the with May and the build you and in March quarter? contextualize Is thinking as to that seeing usage the trends sets into results of about kind I way of of of April. a sort you're sort question. less the further QX of or last talked and and the any up bit could sort expand sort that

question. great a It's

we unfolded were seasonal as was the what that tried and share say, outside in kind in then our it It I'd cloud certainly that down as And of peak the we in we I that did was then to expected. the trough seasonal we had the shared February, in component in of, think curve March, of our and as something -- happened actually that and prepared was think holidays peak because was it was April. deeper came hit see think I And the we didn't peaking I remarks, our remarks coming in -- kind back element. March hitting we the planned. optimization through but

what excluding or greater. kind reflected prior and And of a that's in the so we're we slightly where really curvature in migrations tracking about growing and different is XX% along year, looking were remark QX in at

by business to subscriptions working exit we're over going our very together consumption just continue migrating business and with Again, time we the around the have closely And the model that that's think points. think XX%, now. a why right handful think I of or we And to year be we around what we'll closer we're plus to remarks probably this that's I minus bringing continue customers tracking year. to X the shared model

go-forward just their a more with Are usage to customers think then one. Okay. still basis? something in seeing And about the Great. end dynamic of that a Is a to on line get quick reducing commitments? or their towards still contracts you're

focus that our pattern kicking It type to and is. We that's from of where multiyear customers contracts out, been and playing avoid that do to dynamic see has in. early also renewing shifting

will here a continue And a for the be of couple quarters. to next focus is and area so focus that

Our is the from question with Wedbush. next of Imtiaz Koujalgi line

X-part have question. a I

What the subscription is from to to moves for given rate consumption. it X initial run does initially for way months the the the spend long consumption they their or a them arrangement? quantify how to customer that years? is had color now looks when you any drop years. on go customers that to in far seen migrating in of been Can then You've their or almost quarters few like? comment what model And take on to the from last you've the what anecdotes drop terms in subscription subscription back so Any

because I if one been it they vary satisfactory a data of not ingesting we'll maybe It's general, that which was answer or extensive has what In massive amounts great have see lot. logs and an a amount is fully the arrangement. example a somebody of something for I'm as for are using sure cohorts fixed-price a question,

And so really about as set think how I think to observability. they up

accounts. what pullback some excellence the our and an of that's advisers where from instrument optimization perspective, usually probably around results that my of least either the I I've in results there's right an our center think -- there And our a pullback using the to gauged in way. at technical usually really implementation as is or observability

And they I sending answer. a rationalization that best cohort footprint there better workloads. as example, customer going expand a give and recently start process, as it people standard I've takes, cohort seen does that that a suddenly you answer and I time saw by amount it into an But new practices exact and where of I for unfortunately is doesn't an capabilities a can where vary yield and you wish had but identify start to I Prometheus to

then And a follow-up. just it. Got

that revenue of that 'XX. growth. revenue last when growth. like should onwards, looks 'XX base year, -- drag you fiscal line that with to overall overall on growth year fiscal by So consumption your migrating then Does the that's in was next be mean this the a it your be most your you'll by consumption And

any drag have like the -- shouldn't any You from

Correct.

But can up to all we X I X if X really think clearly, quarters. we called it preference. in quarters, that's our wrap out

it working be hard we'll this up to So year. wrap

quarters. that as that headwind. more X 'XX, So But into clearly, year where But could that fiscal take it we the would again, than wouldn't motivated. go be we have we're first

Turits with is Michael question KeyBanc. from next The

proceed. may You

quarters, of Microsoft sorry starting I'm one optimization competitors cloud didn't even covered and your you And be [de-sells]. quarter, optimization the the rebounding. and slower this in the LAP was. about the seem before. also usage stable and do though in competitor growth of this And observability were. your talked have seeing big And a about of talked rate And if was to But prior much effects cloud growth guys

quarter? what's of getting the and this last So had at been terms derivative to worse who difference those worse target to been in the versus quarter second seems and seemed quarter from which a in least improve stable have this your perspective slightly, other trajectory, X got

Michael. Thanks, Yes.

let thought at a we this guidance, As laid crack out and it. about David earlier, the me so take

are about really the X there's ongoing plan we apart. trends As 'XX, thought FY for to that useful tease

as visible both as strongly, our past for well The first it's quarters of future business. our been not share to the prospects for unpack well. that more long-term in growing from That's been in has source and is us, as it XX-K a confidence supplemental and consumption business the now you very in we're on the past. to It's our and excited and investor Thursday

and the subscription been of and that's for And total I the we've success including with disaggregation offsetting prospects increased migration -- why have last understand the been company been the that. has the growth of questions that churn. so many and final been driving equally the visible continues The on including subscription one, our chapter second, of around now have consumption having though, business, that and is from to which profitability. drag

opportunity Even competitors. can dollar every term the value ongoing that about customers their and optimization X look we model, cloud for got around New talking and at, we also the the and provider, cloud long X GCP Azure And spend. It's -- of the to hyperscale optimization the third to that though asking customers standardize Relic also New they an when or doing cloud The getting for customers the for you're optimization, And an we're Relic. with but the so not AWS from may all-in-one talk are being only applies macro or opportunity easiest we've offset optimization see on to we're that about because in are of we us higher-priced optimization be effects efforts. their that

see sending in number cases, independent from also doing. they're optimization or data be us. we again platform hyperscaler cloud of And users have some may them, of optimizing they their the the the that they amount in public that's

realized do a company growth with New these in is profitability. at strategy our 'XX thing looked that we total accelerates plan, the trends right Relic's square FY and to we X As to

we're the business 'XX, going long-term accelerate New consumption Relic choose growth by the to those and FY efforts for So standard. the of optimization as embracing customers helping

to we by at and the a simplify anticipated. the to accelerating hadn't going grow consumption also business previously that We're customers transition subscription over of those rate consumption

a broader total higher company as in on gives on and a answer X So over rate can our and time. business hopefully having well question, that to we have company, optimization you growth on there longer total trends X as cloud probably interplay model higher those color rate by growth how focus but the the was strategy. increased profitability perspective grow

Raymond Mark with from Cash is Our last question James.

Mark that for The times higher building platform while Bill, questions gotten the maybe far. the and for a as customers to there's subs off so expectation of adoption few in is churn This including alluded on strength top Right. you've who Adam. you've couple cohort. of an a

typically where So products And are churning? customers these you? customers fewer are buying those going in

of that are very In our X customers free subscriptions. XX,XXX probably size, consumption of and X,XXX of kind business, contracts, those XX,XXX And X,XXX talked about number the those in say, about and Dave long X number the disaggregation tier. a of small customers moderate large for X,XXX tail, about a of customers, small of then in contracts question. a of figure belong X,XXX medium cohorts, we talk Good total Yes.

free staying start They're back Relic. we New saves which They going money, tier forward, qualify those with it being continue opportunity will time. and do into an they're just going over a anywhere them So them not and we customers. to to let's on -- nurture have paid with X,XXX. for we believe

longer the years for low customer other a And in They're exhibit ago, still They XX And a behaviors have once card, to signed cancel realize model. legacy frankly New The may lot of customers, need long-tail consumption of with Relic. credit choose Relic. may have still base X,XXX up those they engagement. ago just them that the into years signed X maybe they of for don't model up subscription, the they're paying New they nurture no to service. even we

We'll to large gotten in customers we of model and believe, had subscription the as they've X to -- lot our opportunities terms. said, pricing we've have years a Dave success in moving think success very customers, been despite medium favorable often that subscription I continue, those customer for the have past. previous For size the move,

because deal at. do pressure where great they've the need And so there's get And negotiation more reluctant got they're increased them and them to to been come they they've into move now move that to time that we know model. has a the consumption to

your back go Others, to choose try choose to own post to route. may Some open to go it see and source to competitors. we

believe stay on Relic, spend or pricing will lower on New will a but many different potentially New majority Relic. stay We But the arrangement. with

factored all that's has guide 'XX. so into And the what for been FY

Very our filings. last ask a you guys your K, if months, going helpful. to of be one, provided David, typically you number And then, XX X are recognized you but besides I could Relic published that RPOs XX-month RPOs seeing New XX% has

CRPO find or year So of the could growth an period? XX-month update you on the rate ago value per

the months RPO? XX For

Yes.

that if find not, way mechanisms of I'll it other roll a at I But See to we're our have if fingertips. my reporting. into X

March it of we're but think March looking I $XXX XX 'XX. million for for compared about XX% $XXX of think -- at to about roughly, million I up was

call. as concludes for That you. you well session your question-and-answer Thank as today's participation. Thank today's

now may lines. disconnect your You