New Relic Announces Second Quarter Fiscal Year 2019 Results

New Relic, Inc. (NYSE: NEWR), provider of real-time insights for software-driven businesses, today announced financial results for the second quarter of fiscal year 2019 ended September 30, 2018.

Results for the second quarter exceeded our expectations and marked a successful first half of FY19, said Lew Cirne, CEO and founder, New Relic. Enterprise DevOps teams are under pressure to move faster and deliver high-performing software, at scale. Thats why theyre increasingly adopting New Relic as the single platform to manage the performance of their critical digital initiatives “ from the customer experience, through applications to the underlying infrastructure.

Second Quarter Fiscal Year 2019 Financial Highlights*:

  • Revenue of $114.9 million, compared to $84.7 million for the second quarter of fiscal 2018.
  • GAAP loss from operations was $(5.5) million, compared to $(14.8) million for the second quarter of fiscal 2018.
  • Non-GAAP income from operations was $9.7 million, compared to a loss of $(3.5) million for the second quarter of fiscal 2018.
  • GAAP net loss attributable to New Relic per basic share was $(0.15), compared to a loss of $(0.27) per basic share for the second quarter of fiscal 2018.
  • Non-GAAP net income attributable to New Relic per diluted share was $0.20, compared to a loss of $(0.06) per basic share for the second quarter of fiscal 2018.
  • Cash, cash equivalents and short-term investments were $731.1 million at the end of the second quarter of fiscal 2019, compared with $720.9 million at the end of the first quarter of fiscal 2019.

*New Relic adopted Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method on April 1, 2018. Unless otherwise stated, the financial metrics for reporting periods during fiscal year 2019 provided in this release are presented in compliance with ASC 606, which replaced ASC 605, Revenue Recognition (ASC 605). The financial metrics for reporting periods prior to fiscal year 2019 are presented as previously disclosed in conformity with ASC 605. A reconciliation between our performance with respect to certain financial metrics under ASC 606 to ASC 605 has been included in the appendix to this release.

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Second Quarter & Recent Business Highlights:

  • $100K+ Paid Business Accounts as of September 30, 2018 of 786, compared to 586 as of September 30, 2017.
  • 56% of ARR from Enterprise Paid Business Accounts as of September 30, 2018, compared to 51% as of September 30, 2017.
  • Dollar-Based Net Expansion Rate for the second quarter of fiscal 2019 of 124%, compared to 123% as of the second quarter of fiscal 2018.
  • Added Michael Christenson, Managing Director of Allen & Company LLC, and Caroline Watteeuw, Executive Vice President and Chief Information Officer of Caliber Home Loans, to the Board of Directors, effective August 21, 2018, bringing the total number of directors to nine.
  • Signed a definitive agreement establishing a Japanese joint venture with Japan Cloud.

Outlook:

New Relic has not reconciled its expectations as to non-GAAP income from operations or non-GAAP net income per diluted share to their most directly comparable GAAP measure as a result of uncertainty regarding, and the potential variability of, reconciling items such as stock-based compensation, lawsuit litigation expenses and employer payroll taxes on equity incentive plans. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to New Relics results computed in accordance with GAAP.

  • Third Quarter Fiscal 2019 Outlook:
    • Revenue between $118.5 million and $120.5 million, representing year-over-year growth of between 29% and 31%, respectively.
    • Non-GAAP income from operations of between $3.5 million and $4.5 million.
    • Non-GAAP net income attributable to New Relic per diluted share between $0.12 and $0.13.
  • Full Year Fiscal 2019 Outlook:
    • Revenue between $466.5 million and $469.5 million, representing year-over-year growth of between 31% and 32%, and an increase from prior guidance of between $457.5 million and $462.5 million that was issued on August 7, 2018.
    • Non-GAAP income from operations of between $22.0 million and $24.0 million, an improvement from prior guidance of between $18.0 million and $22.0 million that was issued on August 7, 2018.
    • Non-GAAP net income attributable to New Relic per diluted share between $0.42 and $0.48, an improvement from prior guidance of between $0.39 and $0.46 that was issued on August 7, 2018.

Conference Call Details:

  • What: New Relic financial results for the second quarter of fiscal year 2019 and outlook for the third quarter and the full year of fiscal 2019
  • When: November 6, 2018 at 2:00 P.M. Pacific Time (5:00 P.M. Eastern Time)
  • Dial in: To access the call in the U.S., please dial (866) 393-4306, and for international callers, please dial (734) 385-2616. Callers may provide confirmation number 9225017 to access the call more quickly, and are encouraged to dial into the call 10 to 15 minutes prior to the start to prevent any delay in joining.
  • Webcast: http://ir.newrelic.com (live and replay)
  • Replay: Following the completion of the call through 11:59 PM Eastern Time on November 13, 2018, a telephone replay will be available by dialing (855) 859-2056 from the United States or (404) 537-3406 internationally with conference ID 9225017.

About New Relic

New Relic provides the real-time insights that software-driven businesses need to innovate faster. New Relics cloud platform makes every aspect of modern software and infrastructure observable, so companies can find and fix problems faster, build high-performing DevOps teams, and speed up transformation projects. Learn why more than 50% of the Fortune 100 trust New Relic at newrelic.com.

Forward-Looking Statements

This press release and the earnings call referencing this press release contain forward-looking statements, as that term is defined under the federal securities laws, including but not limited to statements regarding New Relics future financial performance, including its outlook on financial results for the third quarter and for the full year of fiscal 2019, such as revenue, non-GAAP income from operations, non-GAAP net income per diluted share, free cash flow, gross margins, operating margins, deferred revenue, physical capital expenditures, capitalized software, cash from operations, anticipated headcount, including hiring plans for the remainder of fiscal 2019, fiscal 2019 capital expenditures, and market trends and opportunity, including the anticipated success of New Relics application-centric strategy, the ability to become the dominant platform for monitoring, managing, and operating digital systems, the increasing use of software to improve business outcomes, the opportunity in the market segment that is currently not using a monitoring platform, the market opportunity beyond APM, New Relics favorable position within the technology value chain, the ability to provide meaningful value to evolving modern digital environments using New Relics multi-tenant model, the growth of the platform or any individual product, New Relics customer adoption, including any fluctuations to the paid business accounts metric as New Relic focuses toward upmarket opportunities and optimizing for economical growth, New Relics ability to scale, the pace of hiring activity and seasonality. These forward-looking statements are based on New Relics current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties, assumptions and changes in circumstances that may cause New Relics 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 Relics ability to generate sufficient revenue to achieve and sustain profitability, particularly in light of its significant ongoing expenses; New Relics short operating history in an evolving industry; New Relics ability to manage its significant recent growth; the development of the overall market for SaaS business software; the dependence of New Relics business on its customers purchasing additional subscriptions and products from it and renewing their subscriptions; New Relics 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 Relics products beyond the current predominant use cases; New Relics ability to determine optimal prices for its products; New Relics ability to expand its marketing and sales capabilities and increase sales of its solutions to large enterprises while mitigating the risks associated with serving such customers; privacy concerns, including changes in privacy laws and regulations, which could result in additional cost and liability to New Relic or inhibit sales; New Relics ability to effectively compete in the intensely competitive market for application performance monitoring solutions and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs, requirements or preferences; fluctuation of New Relics quarterly results, New Relics dependence on lead generation strategies to drive sales and revenue; interruptions or performance problems associated with New Relics technology and infrastructure; defects or disruptions in New Relics products; the expense and complexity of New Relics ongoing and planned investments in data center hosting facilities; risks associated with international operations; New Relics ability to protect its intellectual property rights; certain risks associated with incurring indebtedness, including risks related to servicing New Relics convertible senior notes and related capped call transactions; and other Risk Factors set forth in New Relics most recent filings with the Securities and Exchange Commission (the SEC).

Further information on these and other factors that could affect New Relics 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 Managements Discussion and Analysis of Financial Condition and Results of Operations, including in the Quarterly Report on Form 10-Q and subsequent filings. Copies of these documents may be obtained by visiting New Relics Investor Relations website at http://ir.newrelic.com or the SECs 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 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 margin, non-GAAP sales and marketing expense, non-GAAP research and development expense, non-GAAP general and administrative expense, non-GAAP net income (loss), non-GAAP net income per diluted share, non-GAAP net loss 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 Relics financial performance. In addition, New Relics bonus plan for eligible employees and executives is based in part on non-GAAP income (loss) from operations. New Relic believes they are useful to investors, as a supplement to GAAP measures, in evaluating its operational performance, as further discussed below. New Relics 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 Relics 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 gross profit, non-GAAP sales and marketing expense, non-GAAP research and development expense, non-GAAP general and administrative expense, non-GAAP income (loss) from operations and non-GAAP net income (loss) as the respective GAAP balances, adjusted for, as applicable: (1) stock-based compensation expense, (2) amortization of stock-based compensation capitalized in software development costs, (3) the amortization of purchased intangibles, (4) the transaction costs related to acquisition, (5) lawsuit litigation expense, (6) employer payroll tax expense on equity incentive plans, and (7) amortization of debt discount and issuance costs. Non-GAAP net income (loss) per basic and diluted share is calculated as non-GAAP net income (loss) divided by weighted average shares used to compute net income (loss) per share attributable to common stockholders, 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 Relics operating performance due to the following factors:

Stock-based compensation and amortization of stock-based compensation capitalized in software development costs. New Relic utilizes share-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of its stockholders and at long-term retention, rather than to address operational performance for any particular period. As a result, share-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period.

Amortization of purchased intangibles and transaction costs related to acquisition. 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 expense. New Relic may from time to time incur charges or benefits that are outside of the ordinary course of New Relics business related to litigation. 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 Relics 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 Relics 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 Relics business.

Amortization of debt discount and issuance costs. In May 2018, New Relic issued approximately $500 million of convertible senior notes due in 2023, which bear interest at an annual fixed rate of 0.50%. The imputed 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.

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) per basic and diluted share to provide investors with useful information in evaluating the financial performance of the company on a per share basis.

Additionally, New Relics 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 Relics dollar-based net expansion rate compares its recurring subscription revenue from customers from one period to the next. It is increased when customers increase their use of New Relics products, use additional products, or upgrade to a higher subscription tier. New Relics dollar-based net expansion rate is reduced when customers decrease their use of New Relics products, use fewer products, or downgrade to a lower subscription tier.

New Relics monthly recurring revenue represents the revenue that New Relic would contractually expect to receive from those customers over the following month, without any increase or reduction in any of their subscriptions. Similarly, annual recurring revenue represents the revenue that New Relic would contractually expect to receive from those customers over the following 12-month period, without any increase or reduction in any of their subscriptions.

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. New Relic defines an enterprise paid business account as a paid business account that New Relic measures to have over 1,000 employees.

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

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

           
Condensed Consolidated Statements of Operations
(In thousands, except per share data; unaudited)    
Three Months Ended September 30, Six Months Ended September 30,
2018   2017 2018 2017
Revenue $ 114,896 $ 84,685 $ 223,117 $ 164,783
Cost of revenue   18,447     15,694     35,497     30,671  
Gross profit 96,449 68,991 187,620 134,112
Operating expenses:
Research and development 23,962 18,266 46,565 36,532
Sales and marketing 61,142 51,261 118,630 100,622
General and administrative   16,880     14,305     31,591     28,247  
Total operating expenses   101,984     83,832     196,786     165,401  
Loss from operations (5,535 ) (14,841 ) (9,166 ) (31,289 )
Other income (expense):
Interest income 3,259 512 5,104 969
Interest expense (5,597 ) (21 ) (8,263 ) (43 )
Other income (expense), net   (435 )   (152 )   (1,277 )   162  
Loss before income taxes (8,308 ) (14,502 ) (13,602 ) (30,201 )
Income tax provision   225     189     546     424  
Net loss (8,533 ) (14,691 ) (14,148 ) (30,625 )
Net loss attributable to redeemable non-controlling interest   197         197      
Net loss attributable to New Relic $ (8,336 ) $ (14,691 ) $ (13,951 ) $ (30,625 )
Net loss per share, basic and diluted $ (0.15 ) $ (0.27 ) $ (0.25 ) $ (0.57 )
Weighted-average shares used to compute net loss per share, basic and diluted   56,706     54,699     56,446     54,201  
 
       
Condensed Consolidated Balance Sheets
(In thousands, except par value; unaudited)
September 30, March 31,
2018 2018
Assets
Current assets:
Cash and cash equivalents $ 196,797 $ 132,479
Short-term investments 534,311 115,441
Accounts receivable, net of allowance for doubtful accounts of $1,551 and $1,728, respectively 76,019 99,488
Prepaid expenses and other current assets 18,049 15,591
Deferred contract acquisition costs, current   23,409        
Total current assets 848,585 362,999
Property and equipment, net 62,738 53,899
Restricted cash 8,203 8,202
Goodwill 11,828 11,828
Intangible assets, net 918 1,312
Deferred contract acquisition costs, non-current 22,731
Other assets   4,525     5,086  
Total assets $ 959,528   $ 443,326  
Liabilities, redeemable non-controlling interest and stockholders equity
Current liabilities:
Accounts payable $ 10,618 $ 2,985
Accrued compensation and benefits 20,323 17,414
Other current liabilities 9,823 8,619
Deferred revenue   181,764     189,633  
Total current liabilities 222,528 218,651
Convertible senior notes, net 395,824
Deferred rent, non-current 10,291 8,147
Deferred revenue, non-current 8,917 649
Other liabilities, non-current   722     775  
Total liabilities 638,282 228,222
Commitments and contingencies
Redeemable non-controlling interest 3,399
Stockholders equity:
Common stock, $0.001 par value 57 56
Treasury stock – at cost (260 shares) (263 ) (263 )
Additional paid-in capital 597,248 521,119
Accumulated other comprehensive loss (573 ) (324 )
Accumulated deficit   (278,622 )   (305,484 )
Total stockholders equity   317,847     215,104  
Total liabilities, redeemable non-controlling interest and stockholders equity $ 959,528   $ 443,326  
 
       
Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)
Six Months Ended September 30,
2018 2017
Cash flows from operating activities:
Net loss attributable to New Relic $ (13,951 ) $
Net loss attributable to redeemable non-controlling interest (197 )
Net loss: (14,148 ) (30,625 )
Adjustments to reconcile net loss to net cash provided by operating activities: .
Depreciation and amortization 24,823 11,553
Stock-based compensation expense 24,860 19,845
Amortization of debt discount and issuance costs 7,292
Other 588 384
Changes in operating assets and liabilities:
Accounts receivable 23,345 22,522
Prepaid expenses and other assets 724 (5,450 )
Deferred contract acquisition costs (17,415 )
Accounts payable 1,960 (530 )
Accrued compensation and benefits and other liabilities 4,570 2,786
Deferred revenue 639 (3,453 )
Deferred rent   976     (431 )
Net cash provided by operating activities 58,214 16,601
Cash flows from investing activities:
Purchases of property and equipment (14,255 ) (14,394 )
Purchases of short-term investments (496,229 ) (55,126 )
Proceeds from sale and maturity of short-term investments 76,683 56,432
Capitalized software development costs   (3,062 )   (1,486 )
Net cash used in investing activities (436,863 ) (14,574 )
Cash flows from financing activities:
Investment from redeemable non-controlling interest 3,596
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $ 11,582 488,669
Purchase of capped call related to convertible senior notes (63,182 )
Proceeds from employee stock purchase plan 4,887 3,029
Proceeds from exercise of employee stock options   8,998     17,264  
Net cash provided by financing activities   442,968     20,293  
Net increase in cash, cash equivalents and restricted cash 64,319 22,320
Cash, cash equivalents and restricted cash, beginning of period   140,681     96,420  
Cash, cash equivalents and restricted cash, end of period $ 205,000   $ 118,740  
 
                   
Reconciliation of ASC 605 to ASC 606 Statements of Operations- GAAP
(In thousands, except per share data; unaudited)    
Three Months Ended September 30,     Six Months Ended September 30,

 

2018

        2018  
ASC 605 Adjustments ASC 606     ASC 605 Adjustments ASC 606
Revenue $ 114,483 $ 413 $ 114,896 $ 222,736 $ 381 $ 223,117
Cost of revenue   18,447         18,447         35,497             35,497  
Gross profit 96,036 413 96,449 187,239 381 187,620
Operating expenses:
Research and development 23,962 23,962 46,565 46,565
Sales and marketing 65,009 (3,867 ) 61,142 124,207 (5,577 ) 118,630
General and administrative   16,880         16,880         31,591             31,591  
Total operating expenses   105,851     (3,867 )   101,984         202,363     (5,577 )       196,786  
Loss from operations (9,815 ) 4,280 (5,535 ) (15,124 ) 5,958 (9,166 )
Other income (expense):
Interest income 3,259 3,259 5,104 5,104
Interest expense (5,597 ) (5,597 ) (8,263 ) (8,263 )
Other income (expense), net   (435 )       (435 )       (1,277 )           (1,277 )
Loss before income taxes (12,588 ) 4,280 (8,308 ) (19,560 ) 5,958 (13,602 )
Income tax provision   225         225         546             546  
Net loss   (12,813 )   4,280     (8,533 )       (20,106 )   5,958         (14,148 )
Net loss attributable to redeemable non-controlling interest 197 197 197 197
                       
Net loss attributable to New Relic $ (12,616 ) $ 4,280 $ (8,336 ) $ (19,909 ) $ 5,958 $ (13,951 )
                       
Net loss per share, basic and diluted $ (0.22 ) $ 0.07   $ (0.15 )     $ (0.35 ) $ 0.10       $ (0.25 )
Weighted-average shares used to compute net loss per share, basic and diluted   56,706       56,706         56,446           56,446  
 
Reconciliation from GAAP to Non-GAAP Results                                
(In thousands, except per share data; unaudited)
Three Months Ended September 30, Six Months Ended September 30,
2018 2017 2018 2017
As Reported Impacts from Without Adoption As Reported As Reported Impacts from Without Adoption As Reported
(ASC 606) Adoption (ASC 605) (ASC 605) (ASC 606) Adoption (ASC 605) (ASC 605)

Reconciliation of gross profit and gross margin:

GAAP gross profit $ 96,449 $ (413 ) $ 96,036 $ 68,991 $ 187,620 $ (381 ) $ 187,239 $ 134,112
Plus: Stock-based compensation 895 895 603 1,588 1,588 1,129
Plus: Amortization of purchased intangibles 197 197 397 394 394 794
Plus: Amortization of stock-based compensation capitalized in software development costs 174 174 238 363 363 474
Plus: Employer payroll tax on employee equity incentive plans   87         87     39     184         184     85  
Non-GAAP gross profit $ 97,802   $ (413 ) $ 97,389   $ 70,268   $ 190,149   $ (381 ) $ 189,768   $ 136,594  
GAAP gross margin 84 % 84 % 81 % 84 % 84 % 81 %
Non-GAAP adjustments   1 %   1 %   2 %   1 %   1 %   2 %
Non-GAAP gross margin   85 %   85 %   83 %   85 %   85 %   83 %

Reconciliation of operating expenses:

GAAP research and development $ 23,962 $ $ 23,962 $ 18,266 $ 46,565 $ $ 46,565 $ 36,532
Less: Stock-based compensation (3,858 ) (3,858 ) (3,305 ) (7,121 ) (7,121 ) (6,141 )
Less: Employer payroll tax on employee equity incentive plans   (269 )       (269 )   (169 )   (617 )       (617 )   (431 )
Non-GAAP research and development $ 19,835   $   $ 19,835   $ 14,792   $ 38,827   $   $ 38,827   $ 29,960  
GAAP sales and marketing $ 61,142 $ 3,867 $ 65,009 $ 51,261 $ 118,630 $ 5,577 $ 124,207 $ 100,622
Less: Stock-based compensation (6,028 ) (6,028 ) (3,875 ) (10,818 ) (10,818 ) (8,181 )
Less: Employer payroll tax on employee equity incentive plans   (209 )       (209 )   (218 )   (561 )       (561 )   (594 )
Non-GAAP sales and marketing $ 54,905   $ 3,867   $ 58,772   $ 47,168   $ 107,251   $ 5,577   $ 112,828   $ 91,847  
GAAP general and administrative $ 16,880 $ $ 16,880 $ 14,305 $ 31,591 $ $ 31,591 $ 28,247
Less: Stock-based compensation (3,052 ) (3,052 ) (2,439 ) (5,333 ) (5,333 ) (4,394 )
Less: Transaction costs related to acquisition (330 ) (330 ) (330 ) (330 )
Less: Employer payroll tax on employee equity incentive plans   (95 )       (95 )   (65 )   (233 )       (233 )   (138 )
Non-GAAP general and administrative $ 13,403   $   $ 13,403   $ 11,801   $ 25,695   $   $ 25,695   $ 23,715  

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

GAAP loss from operations $ (5,535 ) $ (4,280 ) $ (9,815 ) $ (14,841 ) $ (9,166 ) $ (5,958 ) $ (15,124 ) $ (31,289 )
Plus: Stock-based compensation 13,833 13,833 10,222 24,860 24,860 19,845
Plus: Amortization of purchased intangibles 197 197 397 394 394 794
Plus: Transaction costs related to acquisition 330 330 330 330
Plus: Amortization of stock-based compensation capitalized in software development costs 174 174 238 363 363 474
Plus: Employer payroll tax on employee equity incentive plans   660         660     491     1,595         1,595     1,248  
Non-GAAP income (loss) from operations $ 9,659   $ (4,280 ) $ 5,379     $ (3,493 )   $ 18,376     $ (5,958 )   $ 12,418     $ (8,928 )
GAAP operating margin (5 )% (9 )% (18 )% (4 )% (7 )% (19 )%
Non-GAAP adjustments   13 %   13 %   14 %   12 %   13 %   14 %
Non-GAAP operating margin   8 %   4 %   (4 )%   8 %   6 %   (5 )%

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

GAAP net loss attributable to New Relic $ (8,336 ) $ (4,280 ) $ (12,616 ) $ (14,691 ) $ (13,951 ) $ (5,958 ) $ (19,909 ) $ (30,625 )
Plus: Stock-based compensation 13,833 13,833 10,222 24,860 24,860 19,845
Plus: Amortization of purchased intangibles 197 197 397 394 394 794
Plus: Transaction costs related to acquisition 330 330 330 330
Plus: Amortization of stock-based compensation capitalized in software development costs 174 174 238 363 363 474
Plus: Employer payroll tax on employee equity incentive plans 660 660 491 1,595 1,595 1,248
Plus: Amortization of debt discount and issuance costs   4,952         4,952         7,292         7,292      
Non-GAAP net income (loss) attributable to New Relic $ 11,810   $ (4,280 ) $ 7,530   $ (3,343 ) $ 20,883   $ (5,958 ) $ 14,925   $ (8,264 )
Non-GAAP net income (loss) per share:
Basic $ 0.21 $ (0.08 ) $ 0.13 $ (0.06 ) $ 0.37 $ (0.11 ) $ 0.26 $ (0.15 )
Diluted $ 0.20 $ (0.07 ) $ 0.13 $ (0.06 ) $ 0.35 $ (0.10 ) $ 0.25 $ (0.15 )
Shares used in non-GAAP per share calculations:
Basic 56,706 56,706 54,699 56,446 56,446 54,201
Diluted 59,848 59,848 54,699 59,639 59,639 54,201
 
   
Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flows
(In thousands; unaudited)          
Three Months Ended September 30, Six Months Ended September 30,
2018   2017   2018   2017  
Net cash provided by (used in) operating activities $ 7,830 $ (1,080 ) $ 58,214 $ 16,601
Capital expenditures (7,215 ) (6,980 ) (14,255 ) (14,394 )
Capitalized software development costs   (1,212 )   (754 )   (3,062 )   (1,486 )
Free cash flows (Non-GAAP) $ (597 ) $ (8,814 ) $ 40,897   $ 721  
Net cash used in investing activities $ (377,594 ) $ (2,423 ) $ (436,863 ) $ (14,574 )
Net cash provided by financing activities $ 11,687 $ 8,921 $ 442,968 $ 20,293

Investors
New Relic, Inc.
Tony Righetti, 503-336-9280
[email protected]
or
Media
New
Relic, Inc.
Andrew Schmitt, 415-869-7109
[email protected]

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