New Relic is one of the great devops and cloud success stories
They've hit some interesting opportunities and challenges at $650,000,000 in ARR
5 Interesting Learnings:
They've hit some interesting opportunities and challenges at $650,000,000 in ARR
5 Interesting Learnings:
#1. Growth has slowed to 17%, leading a relatively low multiple of about 6.6x ... vs 30x or more of faster growing peer company
But -- customer growth is actually quite strong. Pricing and NRR are the challenges.
But -- customer growth is actually quite strong. Pricing and NRR are the challenges.
#2. NewRelic has gone upmarket with the market, with 77% of its revenue now from $100k+ deals ... up from just 70% 5 quarters ago
As the overall space has matured, New Relic has driven ACV up impressively
As the overall space has matured, New Relic has driven ACV up impressively
#3. But low NRR has been the big drag on growth. NRR has fallen to 100% or even a smidge lower this year, from 112%+ last year.
If NRR had been 120% like many comps, with the >same< customer growth ... New Relic would probably be a $20B+ company ... with >same< customer base
If NRR had been 120% like many comps, with the >same< customer growth ... New Relic would probably be a $20B+ company ... with >same< customer base
Some of the NRR drop initially probably was due to Covid, but the Cloud has since rebounded
So New Relic is doing 2 interesting things:
#4. First, they've revived their Free tier. It's hard to go "back down market" once you've left it, but it's led to 10x the sign-ups already
So New Relic is doing 2 interesting things:
#4. First, they've revived their Free tier. It's hard to go "back down market" once you've left it, but it's led to 10x the sign-ups already
#5. Second, they are moving aggressively from subscription to consumption-based pricing.
While the opposite of what many of us have been doing for 10+ years, it's led to a 15%+ revenue bump in customers moving to consumption pricing
While the opposite of what many of us have been doing for 10+ years, it's led to a 15%+ revenue bump in customers moving to consumption pricing
Many B2D and API and service-related companies have moved toward consumption-based pricing
In the end, Wall Street is now OK with this as long as the end metrics (NRR + growth) are still SaaS-like
I've personally seen this work well in many portfolio cos (sub -> consumption)
In the end, Wall Street is now OK with this as long as the end metrics (NRR + growth) are still SaaS-like
I've personally seen this work well in many portfolio cos (sub -> consumption)
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