Good morning to day two of the Morgan Stanley TMT Conference. I'm Sanjit Singh. I'm the infrastructure software analyst on the software team at Morgan Stanley. We're super excited to have the management team from New Relic. CEO Bill Staples is joining us this morning, as well as CFO David Barter, who's sitting here up front. It's a little bit break from the norm. The team has, you know, created a 15-minute presentation to walk through some of the things that are evolving in the business. With that, I'm gonna hand it over to Bill to walk through the slides. Thanks, Sanjit. Hello, everyone. Thanks for being here today. It is a pleasure to be with you. as Sanjit said, I wanted to just share some of the fundamentals about New Relic that I think make it a really interesting company. It's straightforward, pretty simple to spot a high-performing company, right? You just look at the fundamental metrics, performance of revenue, profit, cash flow, quarter-over-quarter, year-over-year. It's a little bit harder to follow a company in transition, and that's what New Relic's been through the last couple of years, ’cause you've got the legacy business that's shedding, and you've got the new strategy and the inherent risk of that, and disaggregating how that is performing versus the legacy business is always a challenge. We look forward to updating investors with exactly that, a look back at how our new business is performing, disaggregating that from our legacy business. Sharing metrics that you can benchmark our progress on going forward. That's in May. Today, I wanna talk about five fundamentals that go into our strategy that make New Relic a high-performing company of the future, what we're building. The first fundamental that I look at when I look for a high-performing company is a company that benefits from secular tailwinds, from drivers outside the business that compel it to move forward and perform well. With observability, there are three. Cloud migrations continue to expand. The public cloud continues to expand at rapid rates. While consumption may take a hit in the short term, given the economy, cloud migrations are not slowing down. What I recently heard from a GSI that I was speaking with made a lot of sense. They said, "The cloud migrations that have insufficient observability are the ones that always fail." Observability is a critical component to helping companies do their transition to public cloud. The second one that also makes a lot of sense is the role of observability in digital transformation. As companies strive to reach new channels, new customers, having a data-driven approach to measure the effectiveness of that engagement and to optimize the customer experience and the business performance is critical. Observability fuels that digital transformation as well. Third is the ongoing technical complexity of building in a cloud-first environment, managing multi-cloud environments, as well as your own data center. The explosion of new technologies like Kubernetes, container-based environments, serverless computing, all of that technical complexity requires engineers to take a data-driven approach to engineering. New Relic benefits from all three of those secular tailwinds, and we've taken them into account in how we build our product, how we price our product, and how we go to market. Let's share the second fundamental. The slides will advance here. Someone might need to do it for me. The button doesn't appear to be working. The second fundamental that I look for when I look at a high-performing company is a company that solves the fundamental problems in that category. I think there are three. When I spoke to customers when I first joined New Relic, they highlighted three real problems they face with observability. The first is the ability to capture the volumes of data associated with observability. The difference between monitoring and observability is monitoring, you're looking kind of in the rearview mirror at your business. You're seeing how it performed over time, when it was up, when it was down. With observability, we're trying to capture all of the data you would need, so you could debug and diagnose the performance and answer questions that you didn't even think about when you first launched that digital service. The volumes of data are incredible, and what customers are facing is an enormous challenge collecting, storing, and querying that data at scale. Other vendors approach this using a combination of open source and proprietary technology. That also has challenges with the performance, the scale, and the cost. New Relic has a different approach. The second challenge that customers expressed is they can't get enough insights from the data. The volume of data is so big, the ability to capture the insights is so difficult because their engineers are faced with swiveling between different tools to get the job done. In our recent observability survey, we found many customers have more than a dozen tools in their environment to help them get visibility into their digital systems. That's both a problem from a budget perspective, planning, budgeting, forecasting, and paying for dozens of tools. It's a challenge from a productivity perspective. Last, customers often express that the price of observability is too high. They can't actually deploy the technology everywhere they need visibility because the unit costs are so high, they feel price-constrained. What are we doing to solve that at New Relic? With New Relic, we are the only observability vendor to provide an all-in-one platform-based observability offering. We have a proprietary data platform that runs with incredible scale. We ingest exabytes of data every year on behalf of our customers. We run in multiple clouds, and we do it with incredibly low costs. We accept any data source, any data type of telemetry into our platform, and we can do it with the best economics in the category. We also then put all of our analytics tools together. Whether you're an infrastructure engineer, an application engineer, a mobile engineer, a security engineer, you can come to New Relic and get access to all of that data and actually look across the entire stack to understand the health of your digital business and to answer the questions you might have that you never anticipated asking when you first rolled out the service. Third, we've also been transitioning our customers to a new platform-based pricing model that allows them to more simply budget and forecast and pay for observability at the scale they need going forward. The benefits of this are real. If you look at just a handful of metrics here from Pic Pay, Brazil's largest payment app, Toyota, a leading automobile manufacturer, and Tesco, the third-largest retailer in the world, all using New Relic and all benefiting from the service that we provide to help them save money and to help them make money. New Relic provides benefits in both dimensions. For example, with measuring uptime, Gartner estimates that companies who suffer downtime can cost upwards of $100,000 to millions of dollars for every hour of downtime. A dollar lost that we can save is a dollar gained. We also help engineering teams move more quickly, innovate more rapidly to help the business reach more customers more quickly, therefore increasing their top line. Finally, we're able to help engineering teams spot inefficiencies, places where they've got infrastructure, applications where they can optimize and save money as well. From a product perspective, we're really just getting started. This is a chart that shows the history of innovation at New Relic, a company that's known for its innovation in technology since it was founded in 2008. In the last few years, we have had a revolution in innovation. Major innovations, multiple major innovations launched just the last few years, and we're just getting started. In our Investor Day in May, we'll share a long-term product roadmap and investment thesis for our R&D team. The third thing I look for with great performing companies are companies who are going after big, audacious goals. Companies who have a large TAM to go after. New Relic defines the observability TAM a little bit different than our competitors, and it aligns with our business model. We see the explosion of telemetry data as the first opportunity to help customers capture that data and store it, allow them to query it on their behalf. The first aspect or dimension of growth for New Relic is our ability to capture the data. There is an explosion of telemetry data caused by the shift to public cloud, caused by digital transformation, caused by the standardization of telemetry data through bodies like OpenTelemetry, and we provide the most efficient high-scale data platform to capture that data. Second is the access of users. Engineers today, for the most part, do not use data to make decisions throughout the software life cycle. Observability is a new, a nascent practice with most teams. We are the only observability provider that focus on delivering insights in exchange for value. We monetize user seats. When we look at IDC, we see 25 million engineers, only a fraction of which use observability tools today. We see that as an opportunity to unlock their productivity by delivering insights to them throughout the software life cycle. The fourth fundamental I'll cover quickly is an efficient machine, a company that knows how to bring the technology to the customer in a very efficient manner. At New Relic, we have been focusing on this for the last couple of years with great success. The first thing we've introduced, which is unique to our category, is a free tier that allows engineers to fall in love with our software, use it without having to put in a credit card and without an end date. This has allowed us to capture tens of thousands of active customers who are using New Relic but not yet paying for it. It's a well of customers that we then draw on every quarter, as we nurture their consumption above those free tier limits into a paid offering. The last few quarters, we've announced that we've gained 800 net new paying customers each quarter. That's a faster customer growth rate than nearly every one of our competitors. Third, once a customer is paying for our product and they love the service and they need help scaling or they wanna negotiate a contract to get discounts, we graduate them into our sales-led motion, where they get additional technical services and support to scale their consumption higher. That leads to enterprise adoption and standardization that drives that flywheel further as more engineers get involved in New Relic. Finally, I look for increasing or improving business performance, and New Relic has delivered this the last few quarters with some great surprises. For example, non-GAAP gross margin has expanded 9 points in the last four quarters. This is driven by great engineering work. Our service runs 100% in the public cloud. We bear the cost of all of that data and compute on behalf of our customers, and we're able to do that now at nearly 78% gross margin, an improvement, as I said, of 9 points in the last four quarters. We've also hit an inflection point on operating margin. As you can see, the last two quarters, we've inflected and now driving 8% or operating margin profits and driving toward durable double-digit profits in the quarters to come. One of the things that we're excited to share in May is our path to Rule of 40, and excited to talk more about that in the coming weeks. Just to close up, I believe New Relic's a really interesting company, a company that's been in transition, but is betting on the fundamentals that will lead to long-term success. We are tackling a market with secular tailwinds that compel and drive our business forward. We solve the key problems that our customers have with the category of software that we're in. We're tackling a massive under-penetrated TAM. This really is the early days of observability and bringing data to engineers to help them make decisions across the software life cycle. We're building a very efficient go-to-market machine that can deliver that software in the hands of customers more economically than we ever have. We have improving business performance and excited to share how our new business is performing in the coming weeks at our May Investor Day. With that, we'll take some questions. Thank you, Bill. Looking forward to what will be a pretty eventful update in May on the Investor Day. I want to start off with a couple of questions. It's a big picture one. I get this question not just for New Relic, but for, you know, most of the players that are playing in the category that you're in, is I like the category. Investors say, "I like the category, but the market's really crowded, and I can't tell who's going to be the one that sort of, you know, sustainably grows or sort of breaks out of the pack." How do you think about competing in a market that does have multiple viable alternatives in a way that can sustain growth and profits over time? Yeah. I think, it's one of the reasons I wanted to lay out these fundamentals actually, is because when you think about successful companies, behind the financials are solid strategy. Mm-hmm. One of the fundamental things that we've done the last couple of years is shift from a subscription-centered business to a consumption-centered business. Now, there are many nuances involved in that, but the fundamental difference is that with a consumption-oriented business, you are betting on customer success. We only recognize revenue when usage occurs. Usage only occurs, especially over time, when customers see value from that usage. By shifting to consumption, we're putting our customers at the center of everything we do. That means our go-to-market team, and you hear this, as customers come to New Relic from our competitors, they often comment how New Relic go-to-market swarms them with technical services, with support, with the relationship and connections to partners that they need to be successful in a way that our competitors don't. It's because we're incentivized to do that. We wanna give them great service so their usage continues to grow and evolve. Same thing from the product perspective. A lot of great technology companies go build great features and great technology, but if it doesn't align with the business model and drive value for the customer, then that innovation is unrealized. With New Relic now, our innovation is powered with a passion for delivering customer value that translates to revenue and business success. That inherently is a, I think, a fundamental difference in a crowded market that will set New Relic apart in the coming years. Is the team's sort of fundamental assumption is that, is this a winner-take-most category, or is it just a giant, you know, a really, really big category that can support multiple players? Definitely the latter. Mm-hmm. This is a evolving category, still very nascent, I believe, in its development. Yes, we've seen monitoring tools for a decade. Mm-hmm. Monitoring tools are not observability. As I mentioned, those fundamental customer problems of capturing data at scale, delivering insights in real time across the stack of telemetry data types and across the technology stack and doing it with great economics, that is the set of observability problems to solve. Very few companies actually can do that well. I think it's gonna be a market with multiple winners that will continue to expand for the next decade. Well, around the time when you took over as CEO, the growth trajectory of the business was sort of high single digits, low double digits. You're now well into the high teens. Still below market growth. When we think about, obviously there's some macro issues to work through, but sort of getting back to market growth and potentially exceeding that, what sort of timeline should investors expect to get to that level of growth? Setting the macro situation aside, because we're not immune to customers obsessing about are they getting the most value from every dollar they spend at New Relic. In fact, we embrace that. As a consumption company, I told you earlier, we only recognize revenue when usage occurs. We're in that conversation constantly with customers to make sure that their ongoing value can be sustained. Setting again the macro aside. Mm-hmm. That's one of the things that we're really excited about the May Investor Day, is to disaggregate the business, to show how the new business that we've been transitioning into is performing separate from the legacy business that we're shedding. You know, if you've seen these transitions before, you know that, when you look at the businesses in aggregate, it's common to see that, you know, more middle of the road performance. Obviously, legacy businesses shed, they take time to shed, they perform lower than, the new modern business that we've been building. We're excited to disaggregate those results and then share the path forward, as I said, and, our goal of it, of being a Rule of 40+ company in the quarters to come. Look for that in May. Yeah. Stay tuned. Had one more question and then, you know, for the audience, we are gonna turn it over to you guys for Q&A. You know, raise your hands for, if you wanna ask Bill a question. The follow-up question's around cloud cost optimization, we've seen at the hyperscale level, we've seen it at the data platform level, as well as in sort of the observability market. From what New Relic is seeing within its customer base, I guess two questions. How long does a cloud optimization project initiative take? What percentage of the base is currently engaged in these types of initiatives or these types of behaviors? Yeah. Well, I think, nearly every company that's had some footprint in the public cloud is looking at their cloud bill and with an eye for efficiency. Mm-hmm. Right? It's one of the benefits of a consumption business that we have and that cloud vendors have, is the ability to only pay for what you use. It's the easiest way to say, "Am I really getting value from everything that I'm using?" In particular with public cloud, it's also easy because companies have been in transition. They've been moving from data center into public cloud. That migration process is always a little bit messy. Then once you're in public cloud, you can optimize and drive efficiency. Many customers do that, and it can the timeline of how long it takes can vary. You know, maybe I can provide an example through our own results. Mm-hmm. You saw that chart I showed earlier, a four-quarter increase of gross margins, 9 points. Mm-hmm. ...to 78%. We feel that's a margin that can be durable. In fact, we're not satisfied with 78%. We'd like to get it north of 80% over time. We're investing as we shed our legacy data centers. We're in the final stages of that, investing in more hyperscaler growth to reach more audiences. That aside, that four-quarter improvement in gross margin was largely a result of both cloud optimization and architectural investments that we made to make our service more efficient. Those are not, you know, single week, or couple of month investments. Those are multi-quarter investments for us and for many of our customers that we help facilitate through observability. Yeah. On the gross margin side, for a data-intensive solution like New Relic is, you know, the 78% is right there with the best in class, in the cloud ecosystem. Let me turn it over to the audience for any questions. We have one question right here, and then we'll follow up. Question one. How does share- Yeah, I'll repeat the question. We're not. One- There we go. We're on. There we go. How does share shift effectively? The other thing is, the whole sector, it seems you struggle under just there's a fairly limited budget for monitoring. There always will be. Why not or where if you end up with a significantly lower price generating the same revenues over a wider range of applications, or if not, why doesn't that dynamic occur? Great questions. First, when we talk about share, I think it's important to look at there's obviously market share often talked about in terms of revenue, and then there's customer share talked about in terms of the, a number of customers we're reaching. There's obviously correlation between those two things. From a revenue share perspective, you can all see in aggregate, we have been underperforming peers in our category. As I talked about, we've got this phenomenon of a transitioning business with a legacy business we're shedding and a new business we're growing, we'll disaggregate that and share the growth rates of the new business with investors in May. From a customer share perspective, however, we outperform nearly every one of our peers, at least in the last several quarters. We've been acquiring customers, net new paid platform customers at a rate of 800, plus the last several quarters. If you compare that again versus peers, it is, nearly best in class. That then bodes well for long-term revenue growth as those customers come into the platform and mature their consumption. On the second question, how do we grow the business if our unit prices are so much lower? That's a great question as well. I shared a recent blog about a month ago on New Relic's pricing model and the low cost of incremental data. Encourage you all to read it if you haven't read it, because I think it's one of the distinct advantages that New Relic has, especially in this economy, where customers are looking for value. They're looking for ways to save money and be more efficient. New Relic offers that. It's part of our strategy, in fact, to use our beachhead of APM that we've been best in class in for a decade and make it a no-brainer for customers to standardize on New Relic and bring all of their logs, all of their infra, all of their observability workloads to New Relic with a low incremental price. Now, how can we perform over time relative to peers given that? Well, first, I'll just say, customers are gonna seek value over time no matter what. This category is ripe with competitors who have tarnished their reputation with pricing that's punitive and the customers don't see value in. Over time, pricing that's high does not win customer loyalty and trust. The second thing I'll say is, as I mentioned in the presentation section, customers feel price-constrained. They have to sample today and leave themselves exposed to blind spots because the unit prices are so high. Oftentimes I don't see customers spending necessarily less with New Relic. I see them spending the same amount but getting more value because they're able to cover more of their estate or all of their estate, whereas before, they had to really constrain the value in order to stay within budget. Okay, we had a question up front. Thank you. Just to expand a bit on those questions. Is it, what is the majority of the business? Is it still APM? If not, can you elaborate on what else it might be? Talk about the relevant pricing also. Finally, of those 800 per quarter customers, can you give a sense of their revenue level and how they integrate? What are customers using in the platform? We've shared a metric, and we'll unpack this even more in May around the top four capabilities and how that has trended over the last several quarters. We've shown you know, sequential improvement in that. I don't recall we shared it last quarter, but in the prior two or three quarters, I know we shared it. The top four capabilities, just to remind you, are APM, infrastructure, logs, and browser. Those are the top four capabilities by usage. I believe we're nearly, and we may be above 1/3 of our customers now use all four of those top capabilities. In May, we'll unpack that again more and show, we're planning to show a more extensive view at capability adoption. Look forward to that. I will say, you know, two years ago, three years ago, when a customer came to New Relic, they largely came for APM, and they started with APM, and our strategy was to remove the packaging and pricing barriers between APM and the rest of the platform, so they could just naturally expand inside the product with no packaging or price barriers. What we've done in the intervening years, and it leads to what you see with those 800 net new customers coming in, is they no longer just start with APM. A majority of our customers come in, and they get, by default, infra, logs, and APM all at the same time, all with their first instance. That's because the product nurtures and delivers that experience, as well as the customers are looking for a more full stack experience to understand really what's going across those technology layers. That's in part driving this trend of increasing capability usage. We also, as I shared earlier, our sales team, our technical teams, are focused on driving expansion now. The customers who may be came to us a few years ago with APM, they're in need of logs and infra, and they need to instrument you know, as their infrastructure expands into public cloud, as their applications continue to grow, they need observability for those. We're helping bring that full stack observability experience to all of those. You asked about new revenue coming from these new customers, and that again is one of the metrics that we'd like to share more in May. I will characterize it as we have in the past, which is customers often start small. Engineers like to try the tool, they like to make sure it works for them, and then more organically expand adoption. For New Relic, that is the path in which we go to market, as I shared from the free tier to credit card, from the credit card to contract, and sales-led expansion. It takes time for those customers to grow. Their overall revenue contribution, I think we've shared in the past of this kind of pay-go, self-serve experience, is around 10% of our revenues. Those graduations occur, and the expansion occurs beyond that. I hope that answers your question. With that, we're all out of time. Thank you so much, Bill, for the presentation, sharing your slides, your thoughts on New Relic. Really appreciate it. Thank you, Sanjit Singh. Great to be here.