InvestorPresentation · This presentation contains “forward-looking” statements, as that term is defined under the federal securities laws. Any statemen t that refers to expectations,

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Investor Presentation3Q20February 4, 2020


This presentation contains “forward-looking” statements, as that term is defined under the federal securities laws. Any statement that refers to expectations, projections, targets or other characterizations of future events, including financial projections and future market conditions, is a forward-looking statement. Statements included in this presentation that are forward-looking statements include but are not limited to statements regarding market trends and opportunity, our future financial performance, such as our outlook on financial results for the fourth quarter of fiscal year 2020 and for the full fiscal year 2020, such as revenue, non-GAAP operating income, non-GAAP earnings per share, non-GAAP operating margin, free cash flow margin, non-GAAP operating expenses, deferred revenue, operating cash flow, free cash flow, and gross margin. These forward-looking statements are based on our assumptions, expectations and beliefs as of the date of this presentation and are subject to substantial risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ materially from those expressed or implied in any forward-looking statement. We assume no obligation and do not intend to update these forward-looking statements, except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to our February 4, 2020 press release, as well as the risks described in our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, particularly in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

This presentation also contains certain non-GAAP financial measures as defined by SEC rules. These non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. Please refer to our February 4, 2020 press release for additional information as to why we believe these non-GAAP financial measures are useful to investors and others in assessing our operating performance. As required by Regulation G, we have provided a reconciliation of those measures to their most directly comparable GAAP measures, which is available in the appendix to this presentation. However, we have not reconciled our expectations as to non-GAAP operating income, non-GAAP earnings per share, non-GAAP gross margin, non-GAAP operating margin, non-GAAP expenses as a percentage of revenue, or free cash flow in future periods to their most directly comparable GAAP measure because certain items, namely stock-based compensation expense, lawsuit litigation cost and other expense, employer payroll taxes on equity incentive plans and gain or loss from lease modification, are out of our control or cannot be reasonably predicted. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to our results computed in accordance with GAAP.

Forward-Looking Statements and Non-GAAP Financial Measures


Investment Highlights

Recurring revenue, SaaS model with high gross margins

Large, rapidly growing market opportunity

New Relic One Observability platform for modern IT environments

Multi-tenant, scalable cloud native architecture

Bolstering leadership for long-term growth


New Relic, Inc. (NEWR)

Platform Leadership & Innovation

Customer Success Employee Success

New Relic One Platform

Delivered new product capabilities, including logging, serverless and programmability

13 Global Offices

~2,000 Employees

2019 Fortune Best Workplace in Tech

Financial Growth

FY19 Revenue of $479M

Q3’20 Revenue:$153M, 23% yoy

Q3’20 926 $100K+ paid business accounts

92% Recommendation rate, Gartner Peer Insights


Trends Driving Major Market Opportunities

By 2021, at least 50%of global GDP will be digitized

Source: IDC FutureScape: Multiplied Innovation Takes Off, Powered by AI, Distributed Public Cloud, Microservices, Developer Population Explosion, Greater Specialization and Verticalization, and Scaling Trust


Digital Transformation Requires Observability

ProgrammableOpen Connected


The New Relic One Observability Platform

Open Connected Programmable

Instrument everything so you have no blind spots

Build unique applications that drive your business

Understand quickly and act more effectively


The New Relic One Platform

Traces

Metrics

Serverless

Logs

NRDB

NR Proprietary Agents

METRICS

TRACESLOGS

APPS

SERVICES

HOSTS

OpenTelemetry


Our Journey

Mobile, Synthetics,

Browser Monitoring

Infrastructure Monitoring

APM

Logs,Serverless

Open Instrumentation

NRDB

Programmability

2008 Today


Growth Drivers

Add new logosExpand installed base ARR

Further penetrate international markets


Observability Market is Large & Rapidly Expanding

2019Performance

Analysis TAM 1

Infra

Logs App

Observability$12B

Platform TAM$21B 2

2017APM TAM 1

APM$3B

1 Graphics created by New Relic based on Gartner research. Source: Gartner, Forecast: Enterprise Infrastructure Software, Worldwide, 2017-2023, 3Q19 Update, September 2019. 2019 TAM derived from all Performance Analysis subsegments within the IT Operations Market. 2017 TAM derived from Performance Analysis: APM sub-segment within the IT Operations Market.

2 Platform TAM is calculated by summing: (i) the number of addressable global companies with more than 200 employees based on industry data from S&P Capital IQ Database (segmented into two cohorts of 200-999 and 1,000+ employees) multiplied by (ii) the average ARR per customer within each cohort, using internal ARR and customer data for the quarter ended September 30, 2019. For this calculation, we also assumed customer adoption of 3+ products within the Platform.


$0

$25

$50

$75

$100

$125

$150

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Financial Highlights

• Mid-point of FY 2020 guidance• See appendix for non-GAAP reconciliations.

*

23%Year-Over-Year

3Q20 Revenue GrowthNon-GAAP

3Q20 Gross MarginNon-GAAP

3Q20 Operating Margin

2%Non-GAAP LTM Free

Cash Flow Margin

84% 2%

$0

$200

$400

$600

2015 2016 2017 2018 2019 2020*

Annual Revenue$ Millions

40% CAGR

Quarterly Revenue$ Millions

2015 2016 20182017 2019 2020


Key Operating Metrics

3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20

Annualized Dollar-Based Net

Expansion Rate125% 141% 118% 124% 122% 131% 109% 112% 109%

% ARR from Enterprise Paid

Business Accounts52% 54% 55% 56% 56% 61%* 62% 62% 62%

Paid Business Accounts >$100K 629 703 748 786 816 858 881 906 926

Annualized Revenue / Avg. Paid Business

Account>$22,500 >$23,000 >$25,000 >$27,000 >$29,000 >$31,000 >$33,000 >$34,500 >$36,500

* Period included changes to the categorization of existing paid business accounts to reflect that they had expanded beyond the 1,000 employee threshold. See appendix for definitions.


Target Operating Model

(% of Revenue) FY15 FY16 FY17 FY18 FY19 3Q20 DriverLong-Term

Target

Gross Margin 81% 81% 82% 84% 85% 84% Continued investments in delivery, support and services 80–84%

Sales & Marketing 76% 66% 59% 53% 49% 50% Increased mix of productive reps, renewals, installed base 35–38%

Research & Development 20% 22% 19% 17% 18% 19% Scale advantage of product

portfolio 15–18%

General & Administrative 18% 16% 14% 14% 12% 13% Economies of Scale 7–9%

Operating Income / (Loss) (33%) (23%) (10%) (0%) 6% 2% 25%+

Free Cash Flow (32%) (8%) (2%) 3% 14% (22%) 30%+

Note: Metrics are Non-GAAP, exclude stock-based compensation, amortization of purchased intangibles, litigation and acquisition-related expenses and reflect the adoption of ASC 606 beginning in FY19. See Appendix for reconciliation and definition of free cash flow. The future financial results presented are hypothetical amounts for achievement of certain scenarios and are not projections, guidance or an outlook for the company’s future financial results.


Fourth Quarter and Fiscal 2020 Outlook

Q4 FY20 Guidance

Revenue: $154M – $156M Non-GAAP operating income: ($2M) – Break-even Non-GAAP EPS: $0.02 – $0.06

Deferred revenue to sequentially increase in the low 30s on a percentage basis

FY20 Guidance

Revenue: $594M – $596M Non-GAAP operating income: $19M – $21M Non-GAAP EPS: $0.54 – $0.59

Operating cash flow: $67M – $72M; Free cash flow: $3M – $8M

Q4 FY20 EPS assumes 60.8M weighted average diluted shares outstanding, which excludes 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; FY20 EPS assumes 60.6M weighted average common shares outstanding which excludes 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; See appendix for non-GAAP reconciliations and how we define free cash flow.


Appendix


GAAP to Non-GAAP Reconciliation, Q3’20


Definitions

Monthly and Annual Recurring Revenue (MRR and ARR)Our monthly recurring revenue represents the revenue that we 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.

Enterprise ARR is defined as ARR from paid business accounts with >1,000 employees.

Number of Paid Business AccountsWe define 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 we have recognized revenue on the last day of the period indicated. A single organization or customer may have multiple paid business accounts for separate divisions, segments, or subsidiaries. We define an enterprise paid business account as a paid business account that we measure to have over 1,000 employees.

>$100K and >$1M / year paid business accounts represents paid business accounts who have ARR greater than $100,000 or $1,000,000, respectively.

We define our annualized revenue per average paid business account as the annualized revenue for the current period divided by the average of the number of paid business accounts at the end of the current period and the end of the prior period.

Dollar-Based Net Expansion RateOur dollar-based net expansion rate compares our recurring subscription revenue from customers from one period to the next. We measure our dollar-based net expansion rate on a monthly basis because many of our customers change their subscriptions more frequently than quarterly or annually.

To calculate our annual dollar-based net expansion rate, we first establish the base period monthly recurring revenue from all our customers at the end of a month. This represents the revenue we would contractually expect to receive from those customers over the following month, without any increase or reduction in any of their subscriptions.

We then (i) calculate the actual monthly recurring revenue from those same customers at the end of that following month; then (ii) divide that following month’s recurring revenue by the base month’s recurring revenue to arrive at our monthly net expansion rate; then (iii) calculate a quarterly net expansion rate by compounding the net expansion rates of the three months in the quarter; and then (iv) calculate our annualized net expansion rate by compounding our quarterly net expansion rate over an annual period.

Free Cash FlowWe define free cash flow as cash from operating activities minus purchases of property and equipment and capitalized software development costs.

Documents

InvestorPresentation · This presentation contains “forward-looking” statements, as that term is defined under the federal securities laws. Any statemen t that refers to expectations,