Prospectus Summary
PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the following summary together with the more detailed information appearing elsewhere in this prospectus, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, the terms “New Relic,” “the company,” “we,” “us,” and “our” in this prospectus refer to New Relic, Inc. and its subsidiaries.NEW RELIC, INC.
Our Mission
Software is becoming the lifeblood of almost every organization, large and small, around the world. Our mission is to empower organizations to build the best modern software possible and to improve their business intelligence using the data flowing through and about that software. This software data contains massive amounts of information about customer behaviors, user experiences, and overall software performance. New Relic enables organizations to gain visibility into this data to make better, faster, data-driven decisions.
Overview
We are building a new category of enterprise software we call Software Analytics. Our cloud-based suite of products enables organizations to collect, store, and analyze massive amounts of software data in real time. We design all our products to be highly intuitive and frictionless; they are easy to deploy, and customers can rapidly, often within minutes, realize benefits and results. With our products, technology users can quickly find and fix performance problems as well as predict and prevent future issues. Business users such as product managers can get answers to how their new product launch is being received, or how a pricing change impacted customer retention, without waiting for help from IT. Software developers can build better applications faster, as they can see how their software will perform and is actually performing for end-users. As of September 30, 2014, we collected, stored, and analyzed over 690 billion data points daily across more than 4 million application instances and monitored user experiences on over a million website domains and from over one billion mobile application installs. As of September 30, 2014, we had over 250,000 users. We define a user as an email address associated with an account that has deployed our software code, called agents, and from which we receive data from at least one application. As of September 30, 2014, we had 10,590 paid business accounts.
Software has become critical to businesses and consumers worldwide, from online retailing to social networking to customer relationship management. This software is found in applications and throughout the architectures on which those applications run: servers, websites, operating systems, mobile devices, and other IT assets. The use of this software generates huge volumes of data, but historically, organizations collected and analyzed only a small fraction of this data due to technology and business constraints. Legacy software products were typically customized, expensive, required training, and were thus limited to business-critical applications within large organizations. As a result, the vast majority of software data has been underutilized.
We saw the opportunity for Software Analytics to empower technology and business users to make use of this underutilized software data. We provide developers with our agents to add to their applications and infrastructure quickly and easily. Our cloud-based, big data database collects and organizes our users’ data for analysis through a simple dashboard interface that users can easily configure to monitor their key metrics and quickly make queries using simple phrases. Our intuitive and frictionless product design results in users being able to quickly receive analysis of their data. With this visibility, developers can significantly improve the quality of their software, and business and technology users can get real-time insights into their data.
Our Software Analytics solution is comprised of an integrated suite of products, a big data database, and an open platform. All of our products have a simple user interface, and require minimal training or integration. Our products for technology users focus on software performance management and monitoring and consist of New Relic APM, New Relic Mobile, New Relic Servers, New Relic Browser, and New Relic Synthetics. New Relic Insights provides big data analytics to both business and technology users that enable them to easily extract actionable information from the massive quantities of unstructured and structured data flowing through their software. New Relic Platform offers a plugin architecture including application programming interfaces, or APIs, and software development kits, or SDKs, for customers and partners to embed and extend our solution into their products. Today, there are over 475 New Relic Platform plugins to extend our functionality to other applications and infrastructures.
Our go-to-market strategy combines grassroots user adoption with both low-touch and high-touch sales approaches. Our products are easy to download and use, which has allowed us to build a large base of users and smaller organizations without an enterprise sales organization. We are building a direct enterprise sales and support operation in order to better market to and support these larger organizations, which represent a growing portion of our revenue.
We have achieved rapid customer adoption, high customer retention, and significant growth since our founding. For our fiscal years ended March 31, 2012, 2013, and 2014, our revenue was $11.7 million, $29.7 million, and $63.2 million, respectively, representing year-over-year growth of 154% from the fiscal year ended March 31, 2012 to the fiscal year ended March 31, 2013, and 113% from the fiscal year ended March 31, 2013 to the fiscal year ended March 31, 2014. For the six months ended September 30, 2013 and 2014, our revenue was $26.1 million and $48.0 million, respectively, representing year-over-year growth of 83%. We had net losses of $7.5 million, $22.5 million, and $40.2 million for our fiscal years ended March 31, 2012, 2013, and 2014, respectively, and $18.6 million and $19.4 million for the six months ended September 30, 2013 and 2014, respectively.
Industry Background
Importance of Software for Businesses and Consumers
Software has become a central element of business and consumer life. Businesses rely upon their software applications to interact with their customers, employees, and partners to increase revenue and improve operational efficiency. Businesses and consumers use software on a variety of devices in more of their day-to-day activities. Users increasingly expect their software to be fast and reliable, and they can quickly replace the applications they use if they are unsatisfied with their experience.
Advent of Cloud Architectures and SaaS
Historically, legacy on-premise architectures required companies to purchase and maintain the complete IT stack including storage, servers, networking, and applications. In contrast, cloud architectures enable companies to subscribe for and access computing resources as needed. This has provided a wide range of economic and technology benefits including applications that are easier to deploy, maintain, use, and integrate.
Explosion of Mobility
The greatly increased functionality of smartphones and tablets, and the ubiquity of high-bandwidth Internet access, have led to an explosion in mobile devices and mobile applications. These devices and the applications they run need to be supported by completely new software architectures that are fundamentally different and separate from legacy, on-premise IT architectures. Mobility has increased pressures on software performance and greatly expanded the variety, velocity, and volume of data available for analysis.
Growing Importance of Developers
The increasing ubiquity of software has led to greater importance and roles for the developers who build and maintain that software. These developers are increasingly able to create and influence major technology trends such as adoption of cloud architectures, open source, and new programming languages and frameworks to improve the time-to-market and performance of their applications.
Emergence of Big Data Technologies for Unstructured and Structured Data
Historically, companies have relied on on-premise databases from vendors such as Oracle, IBM, and Microsoft. Over the past few years, a wide variety of technologies have been introduced to greatly increase the ability to collect and analyze the rapidly growing variety, velocity, and volume of data, commonly referred to as big data. Today, an increasing number of companies are investing in technology and personnel to gain a competitive advantage using big data to enable real-time, data-driven decisions.
New Complexities for Technology Users, Business Users, and Software Developers
Business and consumer applications are running on both cloud and legacy architectures and are built with a multitude of programming languages. This has created significant challenges and complexities for technology users, business users, and software developers. The success or failure of businesses is increasingly determined by the availability, accessibility, response time, and quality of their users’ experience.
Our Solution
We have developed our Software Analytics suite of products, big data database, and open platform to help technology and business users make real-time, data-driven decisions to improve business and IT performance. In addition, developers can build better software, build it faster, and keep it running optimally for end-user experiences. Our solution collects, stores, and analyzes vast quantities of unstructured and structured data flowing through and about our users’ software. We currently offer an integrated suite of seven products that we continue to enhance and expand:
This suite of products uses a common infrastructure to enable customers to:
analysis. Our New Relic Insights product also includes a field for real-time ad-hoc queries with corresponding answers in a range of visual and graphical formats. We also intend to release platform features that enable users to create and publish customized data apps and make them available to non-technical business users.
Key Elements of Our Solution
Benefits of Our Solution
Our Market Opportunity
For technology users, we believe Gartner’s category of IT Operations Management, or ITOM, captures a subset of our market opportunity. According to Gartner, Inc., a global market research firm, the worldwide ITOM market was $19.1 billion in 2013 and is projected to grow to $27.9 billion in 2018. We believe this generally captures the purchases by larger enterprises of existing legacy solutions, but does not include the opportunity with smaller enterprises that cannot afford such solutions or potential deployments by larger enterprises made feasible by emerging solutions like ours.
We believe our market opportunity with business users is largely untapped. According to Gartner, the worldwide market for business intelligence software was $14.4 billion in 2013 and is projected to grow to $21.9 billion in 2018. However, we believe the majority of our market opportunity with business users exists with use cases for which a viable solution has not been historically available.
Our Growth Strategy
Risks Associated With Our Business
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. Some of these risks are:
Corporate Information
We were formed in Delaware in September 2007 as New Relic Software, LLC. We converted from a Delaware limited liability company to a Delaware corporation and changed our name to New Relic, Inc. in February 2008. Our principal executive offices are located at 188 Spear Street, Suite 1200, San Francisco, California 94105, and our telephone number is (650) 777-7600. Our website address is www.newrelic.com. Information contained on or that can be accessed through our website does not constitute part of this prospectus and inclusions of our website address in this prospectus are inactive textual references only.
“New Relic,” the New Relic logo, and other trademarks or service marks of New Relic appearing in this prospectus are our property. This prospectus contains additional trade names, trademarks, and service marks of other companies. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.
Implications of Being an Emerging Growth Company
As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise applicable generally to public companies. These provisions include:
We will remain an emerging growth company until the earliest to occur of: the last day of the fiscal year in which we have more than $1.0 billion in annual revenue; the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; and the last day of the fiscal year ending after the fifth anniversary of our initial public offering. We may choose to take advantage of some, but not all, of the available benefits under the JOBS Act. We are choosing to irrevocably “opt out” of the extended transition periods available under the JOBS Act for complying with new or revised accounting standards, but we intend to take advantage of the other exemptions discussed above. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.