According to Gartner, the Application Performance Management market grew 13% to $2.93 billion in 2016. With enterprise businesses continuing to rapidly adopt cloud technologies, the APM market is expected to reach $5.6 billion by 2020. The market is led by Dynatrace with 14.2% share followed by IBM with 8% share and New Relic (NYSE: NEWR) with 6.3% share.
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New Relic’s Financials
New Relic’s second quarter revenues grew 33% to $84.7 million, ahead of the market’s forecast of $82.98 million. GAAP loss from operations was $(14.8) million or $(0.27) per share, compared to $(14.3) million or $(0.28) per share a year ago. Non-GAAP loss was $(3.5) million or $(0.06) per share compared to analyst estimate of ($0.09) per share.
Paid Business Accounts as of September 30, 2017 were approximately 15,900. New customers added during the quarter included 21st Century Fox, Absa Bank, Ancestry, Carnival Corporation, Dominion Enterprises, Dunkin Brands Group, East Carolina University, Expedia, Farm Credit Services of America, John Hancock Financial, Kurt Geiger Limited, MercadoLibre, Morningstar, MuleSoft, Nationwide Mutual Insurance Company, Norwegian Cruise Lines, Pearson, Procore Technologies, Red Hat, Reed Elsevier, Scripps Network, and Testo SE & Co. KGaA.
For the third quarter, New Relic expects revenue between $88.3 million and $89.8 million, representing y-o-y growth of between 30% and 32%. Non-GAAP loss from operations is expected between $(4) million or $(0.07) per share and $(5) million or $(0.09) per share. The Street was looking for revenues of $89.31 million and a ($0.07) loss per share.
New Relic forecast Full Year Fiscal 2018 revenue at $346.5 -$349.5 million, representing y-o-y growth of between 31% and 33%. Its revenue in fiscal 2017 was $263.5 million, up 45% compared with fiscal 2016. Non GAAP net loss is expected between $(13) million or $(0.21) per share and $(14) million or $(0.22) per share. The Street was looking for revenues of $348.8 million and a ($0.23) loss per share.
New Relic’s New Offerings
New Relic is seeing increasing traction in the more traditional large-enterprise market. During the quarter, New Relic introduced new and expanded support for Microsoft Azure and Amazon Web Services (AWS) technologies for New Relic APM and New Relic Infrastructure. This would provide DevOps teams the ability to correlate, analyze, and alert on application and infrastructure performance from a single source.
It also announced the New Relic Navigators Partner Program to help partners increase speed and visibility for their customers’ cloud migration and transformation projects with easy-to-deploy instrumentation, alerting, and analytics. It also launched New Relic Radar, NRQL Baseline Alerting, and New Relic APM Error Profiles, powered by New Relic Applied Intelligence (NRAI) to help customers use monitoring data to uncover and resolve problems faster.
New Relic is one of the very few Billion Dollar Unicorns in the APM market to have gone public. Early this year, before it could go public, Billion Dollar Unicorn and rival AppDynamics was acquired by Cisco for $3.7 billion.
New Relic had gone public in December 2014 and raised $115 million by selling 5 million shares at a price of $23 each. Prior to the listing, it had raised $214.5 million in venture funding from investors including Fidelity Investments, Wellington Management, T. Rowe Price, Passport Capital, BlackRock, Dragoneer Investment Group, Benchmark, Passport Ventures, Tenaya Capital, Trinity Ventures, DAG Ventures, Allen & Company, and Four Rivers Group. Its valuation had grown steadily from $750 million in 2013 to $1 billion as of April 2014.
Its stock is trading at $59.8 with a market cap of $3.17 billion. It touched a 52-week high of $59.9 last month and has recovered from the 52-week low of $27.85 it had fallen to in December last year.
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