Shares of the observability company New Relic Inc. fell in after-hours trading today after it delivered fourth quarter earnings results that missed expectations and followed up with weak guidance.
The San Francisco-based company reported a loss before certain costs such as stock compensation of 24 cents per share, amounting to a net loss of $55.5 million in its fiscal fourth quarter. New Relic’s revenue for the period came to $205.8 million, up 19% from the same period one year ago. The results were mixed, with Wall Street modeling a smaller loss of 21 cents per share on slightly lower revenue of $204.9 million.
For fiscal 2022, New Relic reported that its loss had widened to $250.4 million, with revenue coming to $785.5 million. The stock tanked, losing almost 9% of its value in after-hours trading having stayed flat earlier in the day.
New Relic is a leading player in the so-called observability space. It sells tools for enterprises to monitor their applications and DevOps environments. It’s popular with developers as it allows them to identify problems with their apps easily and find a way to fix them.
In a statement, New Relic Chief Executive Bill Staples (pictured) said the year just gone was a success, with the company delivering revenue that was well in excess of the $710 million it guided for one year ago.
“This was a transformative year for New Relic and I’m very proud of all the hard work our people put in to get here,” Staples said. “I am excited to continue to execute against our top priority of revenue growth as we build on the progress we made in FY22.”
The company had implemented a new business model as part of its transition to the cloud, reducing its product prices while doing so. The idea was to sacrifice some near-term profit in order to secure customers on longer subscriptions.
The plan seems to be working as New Relic saw its number of active accounts rise to 14,800 by the end of the quarter, up from 14,100 in the same period one year ago. Meanwhile, its active accounts that deliver at least $100,000 in annual revenue rose to 1,099, up from 945 such accounts a year earlier. New Relic’s net revenue retention rate, which is a metric that measures how much revenue the company squeezes from its existing customer base, rose seven percentage points to 119%.
Unfortunately for New Relic, though it continues to grow its customer base it’s also bleeding cash. And that is unlikely to change any time soon. For the first quarter, New Relic is forecasting a loss of between 38 cents and 35 cents per share on revenue of $212 million to $214 million.
Wall Street is looking for a much smaller loss of 8 cents per share on revenue of $211.3 million.
The full year picture doesn’t get much better, with New Relic forecasting a loss of 37 cents to 31 cents per share on revenue of $920 million to $930 million. That contrasts wildly with Wall Street’s expectation of a penny per share profit on sales of $913.87 million.