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Billion Dollar Unicorns: New Relic Moves Deeper into Enterprise

Posted on Friday, Aug 28th 2015

IT organizations are increasingly under pressure to optimize the availability and performance of their applications and key business services. According to a Research and Markets report, the application performance management (APM) market is expected to grow from $2.72 billion in 2014 to $ 4.98 billion by 2019, at a CAGR of 12.86%. Billion Dollar Unicorn club member New Relic is a key player in this market.

New Relic’s Offerings

San Francisco-based New Relic was founded in 2008 by entrepreneur Lew Cirne after he sold his earlier venture Wily to Computer Associates or currently CA Technologies. Today, New Relic is seen as an innovator in this field and Gartner has placed it as a Magic Quadrant leader for three years now.

New Relic initially focused on bridging application monitoring and business intelligence for mid-sized to smaller enterprises, but their recent moves indicate that they are now focusing on larger enterprises. They recently launched the general availability of their Docker monitoring solution. They have also expanded the New Relic Software Analytics Cloud to more dynamically monitor microservices through re-imagined Service Maps and a new Alerting platform.

They have also joined Cloud Foundry Foundation, enabling Cloud Foundry users to take advantage of the New Relic Software Analytics Cloud to build modern applications.

They have announced a new European Development Center in Barcelona, one of their growth initiatives across Europe. They have also partnered with Salesforce.com, joining their Analytics Cloud Partner Ecosystem, to help companies better understand how customers are engaging with their digital brand.

New Relic’s Financials

New Relic reported first quarter revenue of $38.1 million, up 69% over the year, ahead of analyst estimates of $35.49 million. GAAP loss from operations was $15.1 million, compared with $10.3 million a year ago. Non-GAAP net loss per share was $0.21, beating the consensus estimate of loss of $0.25 per share.

They ended the quarter with total Paid Business Accounts of 12,440 and cash, cash equivalents and short-term investments of $195 million. New customers in the quarter included: ABOL Software, Buongiorno SpA, CarSales.com.au, Charles Tyrwhitt, Cvent, Fox Sports, MultiPlus SA, Pipedrive, RBM Technologies, Shutterstock, SlingTV, and Univision.

Expanded customer relationships in the quarter included 23andme, AOL Inc., Confused.com, Cox Media Group, GoDaddy, Hearst Corporation, HomeAway, News Corp., Nextdoor, One Kings Lane, OpenJaw Technologies, Ping Identity, Ryanair, Urban Outfitters, and Westfield Labs.

For the second quarter of fiscal 2016, New Relic expects revenue between $40.2 million and $41.2 million, representing y-o-y growth between 59% and 62%. Non-GAAP net loss per share is expected between $0.22 and $0.24. For the full year fiscal 2016, they expect revenue between $168 million and $171 million, translating to y-o-y growth between 52% and 55%. Non-GAAP net loss per share is expected between $0.91 and $0.97. Analysts expect New Relic to post loss of $0.93 per share for the current year.

APM Market Landscape

New Relic is one of the latest IPOs in the APM market. In December 2014, New Relic had raised $115 million by selling 5 million shares at a price of $23 each. Prior to the listing, they had raised $214.5 million in venture funding from investors including Fidelity Investments, Wellington Management, T. Rowe Price, Passport Capital, BlackRock, Dragoneer Investment Group, Benchmark, Passport Ventures, Tenaya Capital, Trinity Ventures, DAG Ventures, Allen & Company, and Four Rivers Group. Their valuation had grown steadily from $750 million in 2013 to $1 billion as of April 2014.

Their rival in the larger enterprise space AppDynamics is also expected to be looking for an IPO after raising $120 million last year.

Earlier this month, enterprise software vendor BMC acquired the technology assets of startup Boundary for an undisclosed sum. Boundary has a SaaS-based application monitoring platform that is able to alert developers on code updates as they happen.

Apart from BMC and AppDynamics, other application-monitoring and IT operations software vendors that New Relic competes with include Dynatrace (spun off from Compuware), CA Technologies, IBM, Microsoft, and HP. Among the newer companies, it competes with AppDynamics and AppNeta.

New Relic is trading at $33.45 with a market cap of $1.59 billion. It hit a 52-week high of $38.87 early this month.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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