New Relic (NYSE:NEWR) Q1: Strong Sales, Upgrades Full Year Guidance

Adam Hejl /
2021/08/03 4:20 pm EDT

Application performance management software company New Relic (NYSE:NEWR) reported strong growth in the Q1 FY2022 earnings announcement, with revenue up 11% year on year to $180.4 million. New Relic made a GAAP loss of $74 million, down on its loss of $30.1 million, in the same quarter last year.

Is now the time to buy New Relic? Access our full analysis of the earnings results here, it's free.

New Relic (NEWR) Q1 FY2022 Highlights:

  • Revenue: $180.4 million vs analyst estimates of $173.1 million (4.25% beat)
  • EPS (non-GAAP): -$0.25 vs analyst estimates of -$0.38
  • Revenue guidance for Q2 2022 is $182 million at the midpoint, above analyst estimates of $175.2 million
  • The company lifted revenue guidance for the full year, from $710 million to $732.5 million at the midpoint, a 3.16% increase
  • Free cash flow of $4.78 million, down 78% from previous quarter
  • Net Revenue Retention Rate: 111%, up from 99% previous quarter
  • Gross Margin (GAAP): 67.1%, in line with previous quarter

“We aspire to help millions of developers and engineers build better software, faster and with less toil, by making observability a daily part of a data-driven engineering approach across the entire software lifecycle,” said Bill Staples, CEO, New Relic.

Founded in 2008, New Relic (NYSE:NEWR) makes a monitoring software that collects, scores, and analyses performance data about a client's IT stack.

The demand for application performance monitoring software has been increasing as businesses undergo digital transformation.

Sales Growth

As you can see below, New Relic's revenue growth has been solid over the last year, growing from quarterly revenue of $162.5 million, to $180.4 million.

New Relic Total Revenue

This quarter, New Relic's quarterly revenue was once again up 11% year on year. We can see that the company increased revenue by $7.81 million quarter on quarter. That's a solid improvement on the $6.32 million increase in Q4 2021, so shareholders should appreciate the re-acceleration of growth.

Analysts covering the company are expecting the revenues to grow 5.77% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Large Customers Growth

You can see below that at the end of the quarter New Relic reported 964 enterprise customers paying more than $100,000 annually, a decrease of 84 on last quarter. We have no doubt shareholders would like to see the company regain its sales momentum. We want to mention that New Relic changed the methodology how they account for customers, which had an impact on these numbers.

New Relic customers paying more than $100,000 annually

Key Takeaways from New Relic's Q1 Results

With market capitalisation of $4.44 billion New Relic is among smaller companies, but its more than $817.1 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were very impressed by the strong improvements in New Relic’s revenue retention rate. On the other hand, it was unfortunate to see that the revenue growth was still quite weak. Overall, we think this was still a decent quarter. The company is flat on the results and currently trades at $68.32 per share.

New Relic may have had a decent quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our full report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.