Listen only mode. Should you need assistance? Please call conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one, to withdraw yourself on the question you may press star and two. Please also note today's event is being recorded. At this time, At this time, I'd like to turn the conference call over to Peter Goldmacher, Vice President of Investor Relations. Sir, please go ahead. Thank you, operator. Good afternoon, everyone, and thanks for joining our Q4 Fiscal 2021 earnings call. We published a letter on our investor relations website about one hour ago, and we hope everyone's had a chance to read our letter together with today's earnings press release. Because of the level of detail we provided across these two documents, today's call will begin with Lew providing brief opening remarks, and then we'll dive right into your questions. During this call, we will make forward-looking statements, including about our business outlook and strategies, which we base on our predictions and expectations as of today. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors in our most recent 10-Q to be filed with the SEC. Also during this call, we will discuss certain non-GAAP financial measures. We've reconciled those to the most directly comparable GAAP financial measures in our earnings release. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being webcast from our investor relations website, and an audio replay will be available there in a few hours. With that, I'd like to turn it over to Lew. Thank you very much, Peter, and welcome everyone to the call. I think you would all agree there's a lot of news to share today. We want to leave lots of time for your questions. I'm going to have a few comments at the very end about the really exciting news about the transition of leadership and my moving on to the executive chairman role. I want to first lead off and talk a bit about the quarter and the fiscal year. As everyone knows, it was a very transitional year for us, where we made bold bets to do transformative things for our company with an eye toward the long-term success and growth of the business. We have more conviction than ever in that strategy, which really was the brainchild of Bill Staples. We're pleased with the progress we're making towards that. We're diligently focused on migrating as much of the customer base over to the New Relic One model as possible. As we see customers migrate over, we're really pleased with how they consume against their commitment and how we believe that will result in a strength in the business going forward. It was a particularly good quarter for product. We believe that core to all of this is a strong product that will drive usage and consumption, and therefore business growth. Now we're thrilled that as of the start of fiscal year, we've aligned everybody in the company, including compensation programs, with the consumption model that we are fully committed to, which again, we think will bear fruit over the course of the fiscal year 2022. With that, we'll hand it over to you for your questions. Operator, we're ready for questions. Ladies and gentlemen, at this time, if you would like to ask a question, please press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speaker phone, we ask you please pick up your handset before pressing the keys to ensure the best sound quality. With that in mind, it is star and then one to join the question queue. Our first question today comes from Sanjit Singh from Morgan Stanley. Please go ahead with your question. Thank you for taking the questions. Sad to see you go, Lew, but I know you are leaving the company in good hands in terms of the CEO role. I know you're going to be the executive chairman, you're leaving the company in good hands with Bill. It's been great working with you and hope to continue the relationship going forward. My question is sort of really on kind of the path forward from here, and particularly as it relates to sort of metrics. I think I understand the business model transition. Two questions. I think the earnings letter talks about 59% of the base being transitioned to the new model. When do we expect that to be fully transitioned? That's number one. Second, on metrics. It seems like we're moving to net revenue retention, which is, as you sort of say, a backward-looking metric. What is the metrics that we should be focusing on? Is it something like RPO that gives us a more forward-looking indicator about how the pace of the transition and hopefully underlying growth starts to improve over the next several quarters? The investor letter talks a bit about the transition to the New Relic One pricing. We're at about close to 60% as of the end of March, and we're looking at being over 80% at the end of FY 2022, so a year from March. At that point we'll be pretty well done other than we do have contracts that are multi-year agreements where those will time out and as they expire over the next couple of years, they'll transition to consumption billing. We're very pleased with the fact that we've got more than half of our business now on the consumption model. And by the end of the year, we'll be getting to effectively the whole business there. That's good news. In terms of the metrics going forward, it's really all about revenue, and then that's why we talked about net revenue retention. Internally, we look at all sorts of metrics, as you can imagine. For us, it's really about accounts, users, and data, primarily users and data. That's what drives our top line. Internally as a company, we are all aligned around growing data and growing users. That's what we're very focused on. In terms of the externally focused metrics, it's really about revenue and the net revenue retention. That's what we encourage folks to look at, and we think is going to be really the most telling indicator of our business. As we've talked about in the letter, we're facing a headwind at this point as we make this transition. We're looking at the back half of the year, and we're confident that revenue growth will start to re-accelerate in the back half of the year. If I could just follow up on that last point. Given that as you say that there's still a transition as it relates to revenue growth over the next couple of quarters, wouldn't it make more sense to share some of those internal data around paid users, data consumption, just for investors to see those trend lines to see how the progress in terms of executing on the business model transition? Understanding that revenue growth is a near term, is it going to continue to be under pressure? Yeah. We've given some of that data in the investor letter talking about data growth, and we talk about the data growth year-over-year and how that has been expanding. I think it went from roughly 70% year-over-year to 80%, in the low eighties over the last 12 months. We have given indications of how that data is growing. We also are looking, and we've given some information around the low end of our business, the self-service portion of our business, and some of the growth characteristics of that business, which we think are very interesting and good data points for folks to take a look at. We're still in this process. We haven't had customers complete a full 12 months in the annual pool of funds in consumption billing yet. We've got to be a little cautious with what we give out because we know how those things tend to get extrapolated and things. We have given a fair amount of information in the letter about how that's going. Got it. I appreciate it, Mark, and congrats to Bill on the new CEO role. Thank you. Our next question comes from Kingsley Crane from Berenberg. Please go with your question. Thank you. Also want to extend congrats to Bill and to Lew for what you've built in New Relic and for now leading the company in a new capacity. Two questions. One is on some of the comments you've made in the letter about spend contribution from users and data. You've said you've seen 65% users, 35% data. You've also said that you expect this to return to 70/30, but it also may go to 60/40, and it may affect gross margin. Just some clarification on where you see this trending and how it might affect gross margins would be helpful. Sure. It's roughly 2/3, 1/3. I think it depends a little bit on the customer mix. Larger customers tend to be a little bit skewed more heavily toward data than users. At the lower end, they can be more skewed a little bit toward users than data. We put 2/3, 1/3 out there. In our longer term models, we're looking at 70/30 as being the likely case. On the other hand, we want to let folks know to the extent we're very successful in attracting even more data than we've assumed, then that could push that closer to 60/40. In that case, it would have a modest impact on gross margins, we think that would be more than worth it given the increased data would inevitably drive the top line higher. Okay. That's fair. Thank you. Second would be, in the letter you call out that you will anniversary the model transition in the back half of this fiscal year, and you expect a re-acceleration in growth. Your guidance implies 6%-7% growth in Q1 and 6% in fiscal year. How should we think about the transitional headwinds as we progress through this year? We continue to face headwinds as we're getting through the next two quarters. We've got Q1, then Q2. Remember, we introduced this new program last August. At that point, we'll have our first cohort of customers that just is anniversary. At that point we'll have a full year behind us, and then as we look out at consumption and we look out at the trends we're seeing, we're confident that revenue will accelerate in the back half, starting in the second half of the year, Q3 and then into Q4. Okay. That's clear. All right, thank you again. Congrats. Our next question comes from Rob Oliver from Baird. Please go ahead with your question. Great. Thank you, guys, and apologize for any background noise here. Bill, congratulations to you, and Lew, best wishes to you, and it's been fun working with you over the years. My question is on the state of the sales force right now. You guys asked your enterprise sales force to completely change the way they sell, and just curious now, particularly coming into the new year, about the state of the sales force, how they've responded to the change in the pricing model, how they're executing on that so far, and if all the changes that have been needed in the sales force have all been made. Yeah, thanks for that question. This is Bill Staples here. I'll take that one. We spend the first month of our fiscal year, so the month of April, in a lot of sales enablement training, onboarding to the new compensation model for them. Spent a lot of time talking through the shift to consumption, the value that holds for customers, and the best ways to engage customers to help them solve their business problems. Universally, the feedback that I heard out of that sales training and enablement was very positive. I think it really changes the nature of the relationship that our sales relationship managers get to have with the customer, shifting away from these more combative negotiation-type conversations to really how can we solve your business problem? How can we put New Relic to work for you? Unlocking that value with the customer, which drives consumption and now fully aligned with their compensation model. It's really a win for the customer, a win for our sales team, and I've seen a lot of enthusiasm and engagement by the sales organization on the new model. I think we were off to a great start the first month, six weeks of the quarter are looking good, and looking forward to seeing the progress throughout the year. As Mark said, completing that transition from 60% of our customers in the model at the end of Q4 to well over 80% by the end of the fiscal year. Great. Thanks, guys. I'll hold it there. Appreciate it, Bill. Thanks again. Congrats again. Our next question comes from Robert Majek from Raymond James. Please go ahead with your question. Great, thanks, and congrats to Bill and Lew. It looks like your ingestion volumes were generally flattish from November to February as I eyeball the chart, but then picked up in March. I know in the letter you talked about seeing some green shoots around engagement. Is the pick-up in March an example of that, and should we expect a smoother ramp-up from here on? The data volumes, I think they did level off around the holiday season in November, December, and into January. It was a little slower of an upstart. That's pretty typical seasonal pattern that we see. A lot of the ramp-up to the holiday season in the observability workload happens before Black Friday, in anticipation of those spikes in volume. There is some seasonal leveling off during the holidays. We had a bit of a slow ramp-up. I think we chalk it up to COVID and some of the variation there. I think, though, we have seen an uptick in data and in definitely in engagement since then. The investor letter goes into some great detail in terms of the innovation in Q4, as well as the impact that's had on user engagement, increasing the number of users and the frequency with which they engage. That hypothesis that we had that increased data would lead to increased users is showing up now, and we're excited to see both of those grow, although there will be occasional seasonal variations like. Can you go into more detail on the renewal churn you're seeing? Does it have to do with hesitation around the new consumption model, or is it indicative of a more competitive environment? You gave us a few examples in the letter, but if you can elaborate more broadly on what you're hearing from customers, that would be helpful. Yeah, a large part of that is the fact that we are now no longer focused on commitment. Our focus is getting folks onto the new model. It's collaborative. We want them to commit to whatever level of spend they're comfortable with. Once they do that's when the work starts. Okay, let's get them consuming, let's get them consuming more. I think when you look at the old metrics of ARR, that's been a headwind to ARR because we're no longer focused on that. We've been talking about that now for a couple quarters, and as we get into this year, the comp plans are being aligned around that. I think the biggest issue has been us changing our strategy, now being more aligned with the customers and being comfortable with whatever lower level of commitment they want to commit to. I think that's been a big change. I think customers like that. I think it's better for overall efficiency in getting deals done, and we've seen that accelerate the rate at which we can convert customers. It's fewer calories. Less energy is taken now to convert a customer to the new model now that we've gotten away from worrying about the level of commitment. We also have some customers who are not comfortable committing to large numbers, even though they know, and they've told us, that they're going to spend a lot more than they're committing to. There's no penalty for that. We don't charge higher rates because they went over their commitment or something like that. We have some large customers who have just said, "I'm going to keep spending. I'm going to grow my spend, but you know what? I want to commit to a much lower level." We're comfortable with that. The critical thing for us will be to watch that consumption like a hawk and make sure that it is continuing as expected. Those are some of the dynamics that are going on that make that overall commitment level less of an indicator of how things are really going. Appreciate the color, thanks. Our next question comes from George Iwanyc from Oppenheimer. Please go ahead with your question. All right. Thank you for taking my question, and congratulations, Bill, and we thank you for your perspective over the years. Looking at the sales comments that you made, can you give us a sense of maybe the type of person you're hiring right now? Are you hiring a more technical person to focus on the customer success part of the equation at this point? Yeah, definitely the importance of having our technical sales field involved in those conversations on an ongoing basis is more important than ever. We're hiring there, as well as relationship managers that have a history of nurturing ongoing supportive relationships with customers versus sometimes you see the pattern of more aggressive kind of negotiation type sales leadership. With the consumption model, really pivoted to focusing on long-term relationships and value realization. The vendors that are more indicative of that model are the ones that we're recruiting from, and also, as you noted, a shift to more technical sellers as well as our solution consultants. Following up on that, just from a self-service perspective, can you maybe give us some color on how you're shifting your marketing dollars, how you're leaning on ecosystem partners to accelerate the engagement process of those accounts and users? You bet. Yeah, as you noted, likely in the investor letter, our new self-service business is rapidly expanding. That's a great indication of the strength of the product and the value that customers are finding there as they transition from our free tier into a paid model. With the confidence we're getting there, increasingly shifting some dollars, more dollars into marketing and top of funnel than we have in the past. I wouldn't say that it's being driven out of pure marketing spend. It's really been much more driven on the brand and the word of mouth as the mind share grows around the New Relic One platform. On the overall signs around self-serve business, I think, as you may have noted, our total paying accounts for the first quarter in quite a few quarters leveled out, and we see that largely driven by the growth in the self-serve business and the strength there we believe will continue and reverse the trend of declining paid customers in the future quarters. Thank you. Our next question comes from Yun Kim from Loop Capital Markets. Please go ahead with your question. Thank you. First, congrats on Bill on the promotion. I think you guys are already at least two quarters into the new pricing model. For those customers who have changed over to the new pricing model, how long does it take on average before they reach the revenue run rate that was somewhat same or similar to the old model? Yeah, it's a good question, and it obviously varies by customer. We have been studying over the last two and a half quarters that we've been in that model for the customers who've adopted. What we're seeing is it takes about a month or so for them to right-size their consumption based on users and data, the new pricing meters. Once that right-sizing is done, the first month usage begins to steadily grow. As we've noted before, starting with data, ingesting more data because of the low cost per gigabyte that we offer, and then that attracting more users. Now we're seeing both data and users grow healthy for the customers that have been in the model for several months. Yeah. The only thing I would add in to that comment is, it's interesting. We have multiple datasets, but one where customers are converting over from the historical model. That was subscription-based, host-based pricing, primarily APM driven, that we're migrating to a platform to a consumption model. We have another cohort of customers that is brand new to the New Relic. They came on with the New Relic platform as their only knowledge of New Relic and the consumption model as their core pricing mechanism. The behavior of the two customers is quite different. The customers that convert over, in their minds, they have a value prop, a legacy spend level, and so they'll be, in some ways, influenced by what they used to be doing, what they used to be spending. We'll see some behavior modifications where it looks like they're trying to do some gymnastics to fit in that spend or do some things because they've got that historic perspective. New customers, on the other hand, tend to come in and embrace the platform and start to grow data and users right from the get-go. I think those growth rates are what we think will be more indicative of the future once we've gotten everyone migrated over and people, again, get out of that historic perspective of a host-based and an APM only in a silo type view of the product. Okay, great. That was very helpful. One of the main goals of the new pricing model is to encourage use of more of your products, and try to have the customers adopt New Relic as their enterprise standard. Are you seeing that trend materialize with those customers who have adopted the new pricing model? Previously, maybe they were only doing APM and maybe a couple of modules. I know it's only been two and a half quarters, but are you starting to see at least pilot projects that kind of is leveraging some of the other newer products that they previously did not use? Absolutely. Yes. The number of data types and the breadth of adoption, we are seeing expand. I think we've shared some of that data, again, in the investor letter, and the one previous to this quarter as well. Very healthy adoption across the platform for customers that moved to the new model. I'll note we also launched major improvements to our logging product last month, after Q4 ended, and the growth in logging in particular as an expansion, new product in the platform has been phenomenal. Definitely seeing breadth of platform adoption for customers who moved to the new consumption model. Okay, that's good to hear. I got one quick question for Mark. Can you remind us what the billing frequency is under the new model? Is it monthly, quarterly, annually? Primarily it is annual up front. Okay. For the new pricing model, right? The consumption-based? Yeah. For the consumption. Obviously once they hit their commit, then it gets to monthly overages. When they make a commitment, the vast majority of our customers are annual upfront. Okay. A pay-go business, the low end is monthly. Okay, great. Okay. Thank you so much. Our next question comes from Michael Turits from KeyBanc. Please go ahead with your question. Hey, guys. Lew, of course, congratulations to you, and on everything you've accomplished. One for Mark, one for Bill. For Mark, if there is a, let's call it an accounting or model headwind to revenue growth that makes that not representative right now, first of all, do I understand it that it's the difference between consumption as we go versus what were a higher level of commits, and therefore a tough comp at this point as we go to anniversary? Can you normalize for that in some way to let us know, at least based on current trends, where we might emerge once we anniversary that from a growth perspective? Well, in the old world, we would have gotten an upfront commitment at the time of renewal. Right? We would have gotten, say, a 15 or 20% uptick in committed spend. On March 31, someone does that, and then we start recognizing that subscription on April 1 at the higher level. In the new world, they migrate over at that existing spend. On April 1, there's no difference from March 31, right? April's revenue is the same as March revenue. It's only when consumption increases and gets to the point where that consumption looks like it's going to be higher than their historical commitment, where we start to recognize incremental revenue. That tends to be pushed out a little bit, and I would say it's pushed out a couple quarters on average. It depends on a lot of things, I would say that's kind of a decent proxy. You do have this at time of commitment, instead of getting the initial immediate bump, you do have a delay. Now on the flip side, historically, a lot of our customers would have been overconsuming before the end of their contract period was up, and they would just get away effectively with overconsuming until the renewal period. At this point, we'll actually capture some of that in the period in which they're consuming, because the revenue will be more closely tied to their actual consumption. Initially, there is that headwind, but then we catch up in the back half of the year. Do you feel like you can take a shot at normalizing to see where we emerge past, in terms of growth, past the anniversary? We're looking at all sorts of numbers and trends around that. We've given out guidance, our revenue guidance for the year. Certainly, our long-term goals that we've talked about is to get back to market rate growth. We want to be able to do that. It's kind of apples and oranges trying to compare the two over the next one or two couple quarters. If I get a Bill question. The Bill question is, I wonder how things are going competitively in the sense that you've pursued maybe more focused and defined monitoring or observability strategy around, you've expanded into logging metrics, traces, et cetera. Some of your competitors have gotten broader than that, looking at areas like workflows, security, or are part of larger organizations like ServiceNow has been doing observability, and Splunk is broader. How do you feel like you're doing competing against what looks like a field that is approaching things from a more broader strategic perspective? I wouldn't characterize it as a broader strategic perspective. I feel really good about our competitive position, honestly. The bulk of our opportunity is greenfield, although when we do come up against competitors, we're seeing some phenomenal wins again, against some of the leading vendors. Our strategy's just fundamentally different. While they may be expanding into, say, security as you've mentioned, we're increasingly moving other directions. The product roadmap, as Lew noted, this quarter in Q4 was phenomenal. I'm really excited by where we're going to take observability in FY 2022 and the roadmap ahead. You're going to see continued innovation and differentiation from New Relic One, not chasing tail lights of competitors and some of the things that they've already chosen to do, but really chart our own course, which we think is most valuable for customers. Thanks, Bill. Our next question comes from Erik Suppiger from JMP Securities. Please go ahead with your question. Yeah, thanks for taking the question. Congratulations, Lew. First off on the consumption model, what is the sales compensation like? Is it just a regular renewal that the salesperson gets on the commitment, and then they get paid on the consumption piece on a monthly basis, or how does that look? Secondly, can you update us where you are in terms of the transition off of AWS? Sure. On the sales compensation, we pay on, it is 100% on consumption. It is users and data and that's the dollar run rate, basically, of the consumption of their customers. Every month, you have a patch and you look at what the consumption of your patch is on the first of the month. You look at what your consumption is on your patch on the last day of the month, and the change, the increase is how you get paid. You work down quota by getting that consumption to increase, and you get monthly compensation on that. That's the sales compensation. On the migration to AWS and the cloud, that is going well. As we noted in the letter, the gross margin in Q4 was impacted by some spend that had shifted from Q3, as well as we had had a reclass of some expenses from R&D expense to our COGS line. That is going well. We expect gross margins to take a dip in Q1. I would say Q1 will likely be where we're into the 60s, a little bit lower gross margin, and then we expect them to start climbing to get back to the low 70s for the year. We do expect gross margins to climb up into the 80s as we continue this migration Back to the 80% range, I should say, as we continue migration into fiscal 2023. In FY 2022, we expect about a $40 million hit to our COGS and bottom line because of the double bubble, if you will. The migration expenses, the fact that we're carrying still the legacy costs, the costs associated with our internal data center, as well as driving our business to the cloud. That's a substantial headwind in the year. Very good. Thank you. Our next question comes from Sterling Auty from JP Morgan. Please go ahead with your question. Yeah. Thanks, guys. First, Bill, congratulations. Lew, not only congratulations, but thank you for all the years of innovation that certainly has benefited us, all of us. Thanks again. Onto the business, I'm curious with the new pricing model, can you give us a sense of the type of industry and the type of users that you're seeing the greatest traction with? In other words, is there a particular kind of trend that you're seeing in the type of companies and the type of users that are attracted to the new model? On industry, I think it's cross-industry. I don't see much trend in terms of where we're more successful than others. In terms of the type of user or type of engineer, New Relic historically has been very attractive for developers and those who adopt our APM solution that requires often involvement with deploying our agents with the code. Increasingly as well, we're seeing, given our stronger product offering with logging and infra and other solutions, more breadth adoption across IT, so enterprise and operators embracing New Relic One as a platform. Broadening into SRE and more the operator space as well. If I could add one detail that is a little bit of a trend, though, we called to it in the letter. Our pay-as-you-go business is remarkably strong. Why I think that matters is that is pure product, and it tends to be ahead of where larger enterprises go because smaller companies can be more nimble. The fact that we see such a rapid growth in the number of pay-as-you-go customers exceeding our expectations, and the fact that the number of pay-as-you-go customers that go above 25K with no direct sales involvement, that's a testimony to the amazing product that really Bill built and transformed in the last year and a bit, just driving business growth. Our hope is that also shows up broadly across the whole business in a similar way over the long term. Got it. As a follow-up, I wonder if we could revisit the user versus data mix contribution. I guess I wasn't clear. Where do you think that settles out over the long term, and why? I guess I would say rough numbers, two-thirds, one-third. We want to drive that. Obviously, the higher the user count for us, the better as a percentage, given gross margins. That's a much higher gross margin on our user base than on the data. It does depend on our customer mix. We think overall our customer mix is going to be, I would say, if anything, shifting more toward smaller and medium-sized customers as opposed to the large enterprises. We'll get plenty of those, but if you look at where we are when we're at $2 billion, if you will, that mix, I think is such that we'll be probably a little bit more skewed toward the higher user count and lower as a percentage of the total. We do push data. If we're really successful in pushing data, then we could see that number drift above a third, and it could go as high as 40%. Again, that would be great in our minds because we think that'd be a leading indicator to then getting more users later on. I think, roughly speaking, I would say think two-thirds, one-third as a decent estimate. Understood. Thank you. Our next question comes from Jack Andrews from Needham. Please go ahead with your question. Good afternoon. Thanks for taking my question, and I'll echo my congratulations to Bill and Lew. I want to ask a question on the partner side of things. Could you just talk about how your channel of MSPs and systems integrators have absorbed this consumption-based change, and are they fully educated on the change, or just what is kind of the feedback that you're getting from that group? Yeah. Our MSPs have been lagging, I think where our sales team has been. The shift to consumption, the new pricing model impacts them as well, and the self-service tools that are needed to support them have not been fully available. I'd say it's been lagging, but it's an important area of investment for us that we're prioritizing for this fiscal year and expect to help us to accelerate growth in the coming quarters ahead Okay, thanks. Just I want to ask a higher-level question, which is just how do you think about elasticity of demand in this market when you're weighing, I guess, price versus users and data? Do you think that you've found the sweet spot here? Do you think there may be opportunities to perhaps further optimize what you can potentially capture in terms of data and market share? That's a good question. We've been asking ourselves that lately, and doing some studies with external vendors around price elasticity now that we've been in market for coming up on the anniversary in July. We think it's a good time, given we pioneered this model, kind of introduced and set the price to check in and getting some really valuable data, and we'll be making any necessary pricing changes as a result of that. I think it's a bit too early to share the specifics on what might change, but it's definitely something we're looking at and wanting to be able to maximize our revenue share as a result of the attractive pricing model that we've introduced. Thanks for the color. Ladies and gentlemen, once again, if you would like to ask a question, please press star and then one. To withdraw your question, you may press star and two. Our next question comes from Derrick Wood from Cowen and Company. Please go ahead with your question. Oh, thanks. Congrats, Lew and Bill, and good luck on the next chapters. Maybe first, Bill, can you give us a little more color on the go-to-market restructuring that you guys announced and kind of more specifically what you've done? One of the points in the press release was that you believe productivity levels are higher in a consumption model. Could you just flesh that out in terms of why you think that's the case? Thanks for asking the question. As we noted with the restructuring, as you probably know, our sales and marketing spend has been much higher than our peers historically. We feel like this change really sets us up to be both more competitive, but also really aligned with the strategy and focusing our sellers on driving consumption versus those upfront commits. I think the traction that we're seeing also in that self-service space, think of that as not just validation of the product and a very highly efficient adoption model, but also a really highly efficient customer acquisition channel where those customers come in, are getting value, they want to increase their spend. As we noted in the investor letter, we're seeing a number of customers going beyond 25,000, even 100,000 in spend, and those become highly qualified and engaged customers that our sales team then engages and expands. The efficiency really comes by reducing and focusing that go-to-market motion on consumption. Coupled together with that product-led growth or self-service model really is the complementary benefits that we're seeing play out there. I think this sets us up well for FY 2022, as I mentioned earlier, to begin again to grow paid accounts overall. We're going to see that expand as we believe and also continue in the back half of the year as Mark noted, to see accelerating revenue growth as well. Yeah. Okay. That makes sense. Thanks. One for Mark. The 100K account number was down sequentially for the first time. It sounds like most of that's due to the shift off of subscription contracts. Can you just tell us how churn has trended during this model transition over the last couple of quarters? I think you may have mentioned a couple losses in the quarter, but if you could give a little more color there. Thanks. Yeah, sure. When we talk about churn, historically, we've talked about churn and thought about churn as churn is any time someone goes from a certain level of spend to a reduced level of spend. That was churn, right? That was a downgrade. In our new modeling, we want to just be careful about how we're talking about things. Churn is if a customer goes to zero and they churn out of our business, that obviously is really bad. We want to prevent that and do everything we can to prevent that. I think a lot of the go-to-market restructuring work we're doing is aimed at that, making sure people are engaged. If they're engaged, they won't churn out, they'll keep using. When we look back, what we're seeing is some customers are reducing their spend. Sometimes that's a bad thing, and sometimes it's a fine thing, right? They are going to continue to consume. It's all around consumption. I think we just want to be thoughtful about how we use all these terms. When we look back at the trends we've been seeing, one of the big reasons we went to this model last summer was that we felt like we had too many customers who were stuck on APM only as New Relic customers, and we knew that wasn't a long-term win for us or for the customer. We had too many times where we felt like the customer really wasn't getting enough out of our solution, and we felt that was a big change we had to make to drive different results. That resulted in the platform introduction. New Relic went into production last August, which the product obviously changed dramatically, but also our go-to-market motion where we're changing and we're driving, we're compensating our reps on consumption. Now the reps have an incentive to be engaged with customers on a monthly, if not weekly or daily basis. They want to be making sure that customers are doing that. We've made all these changes to try and address what we felt like was a churn number that was above where we wanted it to be. As we get into this year, we're confident that that is having good results, that we're getting more engaged with our customers, that customers are adopting more of the platform, that we'll be able to improve the number of customers who leave New Relic, and our overall downgrades or and churn numbers. We're confident we'll be able to improve those as we go through this year. Great. Thanks for the color. Our next question comes from Keith Bachman from Bank of Montreal. Please go ahead with your question. Hi. Thank you very much. Mark, I wanted to see if you could offer any color on, given the platform that you have today and the new pricing model, how do you see the dynamics of growth driven by new logos versus existing customers? Sure. Our business is going to be primarily driven, in the short term, by expansion of existing business and consumption increases from existing customers. No doubt about that. That base can grow modestly, and it dwarfs the net new that we get in for new customers. A new customer for us is someone who we define as someone who comes in and goes from not paying us to paying us. The vast majority of those customers come in at the pay-go, at the self-serve pay-as-you-go threshold, where they are a free tier customer, they migrate to paying. You can see, and we talked about, you've seen the information around how they grow. They get to a $25K or so threshold in annual spend, and then maybe they become a sales opportunity, and then we grow them from there. The first couple of dollars are new, and the next, hopefully, millions that we get from that customer are all expansion. The vast majority of it is expansion. On the other hand, what we are very focused on is the number of new customers we get in. That's what we really do. When you think about our new business, we look at the key metric there is how many new customers we're getting in, and the secondary metric is how much in committed spend and consumption are we getting in from those new customers. Hopefully that addresses it. Yeah. That's where I wanted to follow up on is, the majority of your new dollars are still going to come from existing customers. You've only had two quarters, so I realize it may be a bit premature, but how do you see your growth driven by the consumption model associated with your new customers? Previously, we used the term net expansion, but you don't want to use that. Any kind of conjecture or guidelines you might be able to provide about, given the new consumption model, how you think growth is going to trend with your existing customer base? Well, we're keeping, as you can imagine, a very close eye on these numbers. We look at all sorts of different cohorts of customers that have transitioned. How are they growing? New customers, how are they growing? What we speculated we're seeing to be the case, where after this initial period, customers tend to increase data consumption first. Our data price is very attractive, and our customers recognize that. They say, "You know what? It's pretty cheap. I'm going to put some data in there." The data growth starts, and that's what we see early, and then that drives the user growth a couple of months down the line. Then I think what we're hoping for and expecting is that's somewhat of a virtuous cycle. New users come on, and they bring in more data. We've seen early indications of these trends happening. We're pleased with the numbers we see. We want to get a little more time on our belt before we start talking too broadly about them or take them to the bank. Yeah. Understood. Okay. I'm going to try to sneak one more in, just on the channel. The question was asked previously. Mine's a little bit broader, but how do you get mind share, you think, with channel partners? What I mean by that, how do you make sure that the channel is making at least comparable money working with New Relic based on the new consumption model? I just wondered what your tactics are to try to make sure you retain channel mind share as you're going through this multi-phase transition. Yeah. When we think about channel partners, obviously the opportunity in it for them has to be equally compelling as it is for our customers. We've been working through the arrangement in how they are able to both price and sell the consumption model as well as benefit from it. Also working on a product roadmap that can support that from a self-service experience perspective so that they can onboard customers and support the customer as well. I think the opportunity is there, especially we're seeing in the EMEA and APJ markets, the need for that partner channel, a demand for the partner channel and the sales funnel is amazingly clear, and as I mentioned earlier, we're going to be investing there in FY2022 to expand that channel and support those partners. Okay. All right. Well, best of luck to all. Many thanks. Okay. I know we're about out of time for questions, and before I hand off to Lew, just want to say a couple other comments about things that have come up. One is on our outlook for the year. I mentioned the $40 million double bubble spend we have on hitting gross margin. We also have a change to our commission accounting. If you remember 606 a couple of years ago, we all went from expensing commissions to amortizing them. In our case, it was generally over three years, and the bulk of commissions were amortized. Now that we are moving to a consumption-based model and a sales commission plan that's based on consumption, we are actually going back to expensing commissions, in the year in which they're earned, the period in which they're earned. That's going to be in the $35-ish million of a hit to our sales and marketing expense line this year. That is not a cash item. You'll see that in the numbers. I just want folks to be able to model that out accurately. The only other comment I would like to make is around visibility. I've heard a number of comments from folks over the last couple quarters about visibility and how visibility changes with the move to the consumption model. Visibility, I would look at it as being just about as good for a consumption company as it is for a subscription company. The reality is, we're looking at our customers and how they're consuming on a daily basis now. In the old model, you did have a commitment for one year, but then at the end of that year, they could upgrade, they could downgrade, and a lot of times you didn't necessarily have good visibility into what was going to happen there. We're in a consumption model, we're paying much closer attention to this, and these trends generally don't really change dramatically from one period or one day to the next, one week to the next. You can look at historical trends and actually gain quite a bit of confidence in terms of outlook going forward. We're in a unique period right now. We're in the midst of a transition, so I would say that does have an impact. The near-term visibility, I think, for the quarter is very good. It'll get better over the course of the year for the longer term, as we get through the transition. As we've said a couple of times, we want to wait till we get through the one-year period, and we see the anniversary and see behaviors at the end of the contracts and at the anniversary dates before we get too far ahead of ourselves. I just want to point that out because I know that's been a question on people's minds, and it is something that we feel like over time, consumption model will continue to afford us very good visibility into the revenue outlook. With that, I will hand it over to Lew. Okay. Thank you very much, and thanks to everybody for your questions, the call, and in particular, I'm personally touched by the kind words that were shared by most of you. Just as a founder, every founder, they dream for their company to have success. When I started New Relic nearly 14 years ago, I had no idea it would just exceed my highest hopes to get to where we are today. Yet, like any other founder, your real hope is that your company outlasts you and that, at the right time, when there is a time for next leader, that that person matches and aligns with core values. That's so true in the case of Bill. I'm thrilled that Bill is moving into this role. I'm also personally excited to code again every day, and focus on innovation. I think the New Relic One platform is an innovator's dream, and so there's more to be done there, and I hope to contribute in that way as well as just being the best helper and advisor and confidant Bill could have as CEO. I truly believe we're just getting started, and that all of the hard work we've done in the last year is now ready and well set to bear fruit, especially with such strong leadership from Bill starting on July 1st. Thank you all for your time today and for your interest in New Relic, and we are excited to continue on our noble mission. Ladies and gentlemen, that will conclude today's conference. We do thank you for attending.