EX-99.1 2 newrex991q22020.htm EXHIBIT 99.1 Document
Exhibit 99.1

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New Relic Announces Second Quarter Fiscal Year 2020 Results
Second quarter revenue increased 27% year-over-year to $145.8 million
Quarterly GAAP operating loss of $(16.9) million; Non-GAAP operating income of $11.2 million
San Francisco – November 5, 2019 – New Relic, Inc. (NYSE: NEWR), the industry’s largest and most comprehensive cloud-based observability platform built to help customers create more perfect software, today announced financial results for the second quarter of fiscal year 2020.

“We delivered a record number of platform innovations on top of the New Relic One observability platform during the second fiscal quarter, including New Relic Logs, New Relic Metrics, New Relic Traces, and programmability,” said Lew Cirne, CEO and founder, New Relic. “The reaction to these capabilities during our global FutureStack events over the past two months has been incredibly positive. Field training and enablement is underway and we are committed to engaging our significant base and improving execution in the second half.”
Second Quarter Fiscal Year 2020 Financial Highlights:
 
•Revenue of $145.8 million, compared to $114.9 million for the second quarter of fiscal 2019.
•GAAP loss from operations was $(16.9) million, compared to $(5.5) million for the second quarter of fiscal 2019.
•Non-GAAP income from operations was $11.2 million, compared to $9.7 million for the second quarter of fiscal 2019.
•GAAP net loss attributable to New Relic per basic share was $(0.32), compared to a loss of $(0.15) per basic share for the second quarter of fiscal 2019.
•Non-GAAP net income attributable to New Relic per diluted share was $0.24, compared to $0.20 per diluted share for the second quarter of fiscal 2019.
•Cash, cash equivalents and short-term investments were $771.5 million at the end of the second quarter of fiscal 2020, compared with $768.9 million at the end of the first quarter of fiscal 2020.
Second Quarter & Recent Business Highlights:
 
•$100K+ Paid Business Accounts as of September 30, 2019 of 906, compared to 786 as of September 30, 2018.
•62% of ARR from Enterprise Paid Business Accounts as of September 30, 2019, compared to 56% as of September 30, 2018.
•Dollar-Based Net Expansion Rate for the second quarter of fiscal 2020 of 112%, compared to 124% as of the second quarter of fiscal 2019. 
•Michael Christenson joined as President, Chief Operating Officer. [http://ir.newrelic.com/press-releases/Press-Release-Details/2019/New-Relic-Announces-Management-Changes--Michael-Christenson-Will-Join-as-President-Chief-Operating-Officer/]
•Rated highest in 2019 Gartner Peer Insights ‘Voice of the Customer’: Application Performance Monitoring. [http://ir.newrelic.com/press-releases/Press-Release-Details/2019/New-Relic-Rated-Highest-in-2019-Gartner-Peer-Insights-Voice-of-the-Customer-Application-Performance-Monitoring/]
•Delivered industry’s first observability platform that is open, connected and programmable, enabling companies to create more perfect software. [http://ir.newrelic.com/press-releases/Press-Release-Details/2019/New-Relic-Delivers-Industrys-First-Observability-Platform-That-Is-Open-Connected-and-Programmable-Enabling-Companies-to-Create-More-Perfect-Software/]

Exhibit 99.1

Outlook:

New Relic has not reconciled its expectations as to non-GAAP income from operations or non-GAAP net income per diluted share to their most directly comparable GAAP measures as a result of uncertainty regarding, and the potential variability of, reconciling items such as stock-based compensation expense, lawsuit litigation cost and other expense, employer payroll taxes on equity incentive plans and gain or loss from lease modification. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to New Relic’s results computed in accordance with GAAP.
•Third Quarter Fiscal 2020 Outlook:
◦Revenue between $148.0 million and $150.0 million, representing year-over-year growth of between 19% and 21%, respectively.
◦Non-GAAP income from operations of between $3.0 million and $4.0 million.
◦Non-GAAP net income attributable to New Relic per diluted share between $0.12 and $0.13.
•Full Year Fiscal 2020 Outlook:
◦Revenue between $588.0 million (up from $586 million) and $593.0 million, representing year-over-year growth of between 23% and 24%, respectively.
◦Non-GAAP income from operations of between $21.0 million (up from $20 million) and $25.0 million.
◦Non-GAAP net income attributable to New Relic per diluted share between $0.60 (up from $0.55) and $0.67 (up from $0.63).
Conference Call Details:
•What: New Relic financial results for the second quarter of fiscal year 2020 and outlook for the third quarter and the full year of fiscal 2020.
•When: November 5, 2019 at 2:00 P.M. Pacific Time (5:00 P.M. Eastern Time)
•Dial in: To access the call in the U.S., please dial (833) 241-7256, and for international callers, please dial (647) 689-4220. Callers may provide confirmation number 4695879 to access the call more quickly, and are encouraged to dial into the call 10 to 15 minutes prior to the start to prevent any delay in joining.
•Webcast: http://ir.newrelic.com (live and replay)
•Replay: Following the completion of the call through 11:59 p.m. Eastern Time on November 12, 2019, a telephone replay will be available by dialing (800) 585-8367 from the United States or (416) 621-4642 internationally with conference ID 4695879.
About New Relic

New Relic is the industry’s largest and most comprehensive cloud-based observability platform built to help customers create more perfect software. The world’s best software and DevOps teams rely on New Relic to move faster, make better decisions and create best-in-class digital experiences. If you run software, you need to run New Relic. Learn why more than 50% of the Fortune 100 trust New Relic to make the world’s software run at newrelic.com.
Forward-Looking Statements

This press release and the earnings call referencing this press release contain “forward-looking” statements, as that term is defined under the federal securities laws, including but not limited to statements regarding: New Relic’s future financial performance, including its outlook on financial results for the third quarter and for the full year of fiscal 2020, such as revenue, non-GAAP income from operations, non-GAAP net income attributable to New Relic per diluted share, cash from operations, free cash flow, gross margins, operating margins, deferred revenue, capital expenditures and capitalized software; New Relic being acutely focused on driving better results from its go-to-market organization in the second half; New Relic’s expectation of being in a position to better leverage its scale, significant installed base, and entire observability platform going forward; the benefits resulting from management changes, including regarding New Relic’s $1 billion annual revenue goal and the reallocation of Mr. Cirne’s time to driving strategic product initiatives; New Relic’s confidence in its ability to execute in the second

Exhibit 99.1

half; the scalability of certain deals due to organizational enhancements and the broader field enablement that accompanies the general availability of New Relic’s new product offerings; anticipated improvements in deferred revenue in subsequent quarters; and New Relic’s key initiatives for the second half of fiscal 2020. These forward-looking statements are based on New Relic’s current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties, assumptions and changes in circumstances that may cause New Relic’s actual results, performance or achievements to differ materially from those expressed or implied in any forward-looking statement.

The risks and uncertainties referred to above include, but are not limited to, New Relic’s ability to generate sufficient revenue to achieve and sustain profitability, particularly in light of its significant ongoing expenses; New Relic’s short operating history in an evolving industry; New Relic’s ability to manage its significant recent growth; the development of the overall market for SaaS business software; the dependence of New Relic’s business on its customers purchasing additional subscriptions and products from it and renewing their subscriptions; New Relic’s ability to develop enhancements to its products, increase adoption and usage of its products and introduce new products that achieve market acceptance; the dependence on customers expanding their use of New Relic’s products beyond the current predominant use cases; New Relic’s ability to determine optimal prices for its products; New Relic’s ability to expand its marketing and sales capabilities and increase sales of its solutions to large enterprises while mitigating the risks associated with serving such customers; privacy concerns, including changes in privacy laws and regulations, which could result in additional cost and liability to New Relic or inhibit sales; New Relic’s ability to effectively compete in intensely competitive markets and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs, requirements or preferences; fluctuation of New Relic’s quarterly results; New Relic’s dependence on lead generation strategies to drive sales and revenue; interruptions or performance problems associated with New Relic’s technology and infrastructure; New Relic’s dependence on SaaS technologies and related services from third parties; defects or disruptions in New Relic’s products; the expense and complexity of New Relic’s ongoing and planned investments in data center hosting facilities; risks associated with international operations; New Relic’s ability to protect its intellectual property rights; risks related to the acquisition and integration of businesses or technologies; certain risks associated with incurring indebtedness, including risks related to servicing New Relic’s convertible senior notes and related capped call transactions; and other “Risk Factors” set forth in New Relic’s most recent filings with the Securities and Exchange Commission (the “SEC”).

Further information on these and other factors that could affect New Relic’s financial results and the forward-looking statements in this press release and in the earnings call referencing this press release is included in the filings New Relic makes with the SEC from time to time, particularly under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and subsequent filings. Copies of these documents may be obtained by visiting New Relic’s Investor Relations website at http://ir.newrelic.com or the SEC’s website at www.sec.gov.

All information provided in this press release and in the earnings call is as of the date hereof and New Relic assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
Non-GAAP Financial Measures

New Relic discloses the following non-GAAP financial measures in this press release and the earnings call referencing this press release: non-GAAP income from operations, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (sales and marketing, research and development, general and administrative), non-GAAP operating margin, non-GAAP net income attributable to New Relic, non-GAAP net income attributable to New Relic per diluted share, non-GAAP net income attributable to New Relic per basic share and free cash flow. New Relic uses each of these non-GAAP financial measures internally to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate New Relic’s financial performance. In addition, New Relic’s bonus plan for eligible employees and executives is based in part on non-GAAP income from operations. New Relic believes these non-GAAP financial measures are useful to investors, as a supplement to GAAP measures, in evaluating its operational

Exhibit 99.1

performance, as further discussed below. New Relic’s non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate non-GAAP financial results differently, particularly related to non-recurring and unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on New Relic’s reported financial results.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of the historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.
New Relic defines non-GAAP income from operations, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (sales and marketing, research and development, general and administrative), non-GAAP operating margin, non-GAAP net income attributable to New Relic, non-GAAP net income attributable to New Relic per diluted share and non-GAAP net income attributable to New Relic per basic share as the respective GAAP balances, adjusted for, as applicable: (1) stock-based compensation expense, (2) lease exit costs and accelerated depreciation, (3) amortization of stock-based compensation capitalized in software development costs, (4) the amortization of purchased intangibles, (5) employer payroll tax expense on equity incentive plans, (6) amortization of debt discount and issuance costs, and in certain periods (7) the transaction costs related to acquisitions, (8) lawsuit litigation cost and other expense and (9) gain or loss from lease modification. Non-GAAP net income per basic and diluted share is calculated as non-GAAP net income attributable to New Relic divided by weighted-average shares used to compute net income attributable to New Relic per share, basic and diluted, with the number of weighted-average shares decreased to reflect the anti-dilutive impact of the capped call transactions entered into in connection with the 0.50% Convertible Senior Notes due 2023 issued in May 2018. New Relic defines free cash flow as GAAP cash from operations, minus capital expenditures and minus capitalized software. Investors are encouraged to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.

Management believes these non-GAAP financial measures are useful to investors and others in assessing New Relic’s operating performance due to the following factors:
Stock-based compensation expense and amortization of stock-based compensation capitalized in software development costs. New Relic utilizes share-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of its stockholders and at long-term retention, rather than to address operational performance for any particular period. As a result, share-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period.
Lease exit costs and accelerated depreciation. New Relic entered into an agreement to exit the lease of its 123 Mission premises in San Francisco, California. In connection with this agreement and subsequent relocation, New Relic accelerated depreciation and other expenses associated with the remaining lease term. New Relic believes it is useful to exclude this depreciation and these other expenses because it does not consider such amounts to be part of the ongoing operation of its business.
Amortization of purchased intangibles and transaction costs related to acquisitions. New Relic views amortization of purchased intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of purchased intangibles is an expense that is not typically affected by operations during any particular period. Similarly, New Relic views acquisition-related expenses as events that are not necessarily reflective of operational performance during a period.
Lawsuit litigation cost and other expense. New Relic may from time to time incur charges or benefits related to litigation that are outside of the ordinary course of New Relic’s business. New Relic believes it is useful to exclude

Exhibit 99.1

such charges or benefits because it does not consider such amounts to be part of the ongoing operation of New Relic’s business and because of the singular nature of the claims underlying the matter.
Employer payroll tax expense on equity incentive plans. New Relic excludes employer payroll tax expense on equity incentive plans as these expenses are tied to the exercise or vesting of underlying equity awards and the price of New Relic’s common stock at the time of vesting or exercise. As a result, these taxes may vary in any particular period independent of the financial and operating performance of New Relic’s business.
Amortization of debt discount and issuance costs. In May 2018, New Relic issued $500.25 million of convertible senior notes due in 2023, which bear interest at an annual fixed rate of 0.50%. The effective interest rate of the convertible senior notes was approximately 5.74%. This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity, and debt issuance costs, which reduce the carrying value of the convertible debt instrument. The debt discount is amortized as interest expense together with the issuance costs of the debt. The expense for the amortization of debt discount and debt issuance costs is a non-cash item, and we believe the exclusion of this interest expense will provide for a more useful comparison of our operational performance in different periods.
Gain or loss from lease modification. New Relic may incur a gain or loss from modification related to lease agreements. New Relic believes it is useful to exclude such charges or benefits because it does not consider such amounts to be part of the ongoing operation of New Relic’s business and because of the singular nature of benefit or charge from such events.
Anti-dilutive impact of capped call transactions. In connection with the issuance of its convertible senior notes due in 2023, New Relic entered into capped call transactions to offset potential dilution from the embedded conversion feature in the notes. Although New Relic cannot reflect the anti-dilutive impact of the capped call transactions under GAAP, New Relic does reflect the anti-dilutive impact of the capped call transactions in non-GAAP net income attributable to New Relic per share, basic and diluted, to provide investors with useful information in evaluating the financial performance of the company on a per share basis.
Additionally, New Relic’s management believes that the non-GAAP financial measure free cash flow is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures and the capitalization of software development costs due to the fact that these expenditures are considered to be a necessary component of ongoing operations.
Operating Metrics

New Relic defines the number of paid business accounts at the end of any particular period as the number of accounts at the end of the period as identified by a unique account identifier for which New Relic has recognized revenue on the last day of the period indicated. A single organization or customer may have multiple paid business accounts for separate divisions, segments, or subsidiaries. New Relic defines an enterprise paid business account as a paid business account that New Relic measures to have over 1,000 employees.
New Relic’s monthly recurring revenue represents the revenue that New Relic would contractually expect to receive from those customers over the following month, without any increase or reduction in any of their subscriptions. Similarly, annual recurring revenue represents the revenue that New Relic would contractually expect to receive from those customers over the following 12-month period, without any increase or reduction in any of their subscriptions.

New Relic’s dollar-based net expansion rate compares its recurring subscription revenue from customers from one period to the next. It is increased when customers increase their use of New Relic’s products, use additional products, or upgrade to a higher subscription tier. New Relic’s dollar-based net expansion rate is reduced when customers decrease their use of New Relic’s products, use fewer products, or downgrade to a lower subscription tier.

Exhibit 99.1

New Relic is a registered trademark of New Relic, Inc.
All product and company names herein may be trademarks of their registered owners.


Investor Contact
Tony Righetti
New Relic, Inc.
503-336-9280
IR@newrelic.com
Media Contact
Andrew Schmitt
New Relic, Inc.
415-869-7109
pr@newrelic.com

Exhibit 99.1

Condensed Consolidated Statements of Operations
(In thousands, except per share data; unaudited)
 Three Months Ended September 30,Six Months Ended September 30,
 2019201820192018
Revenue$145,815  $114,896  $286,825  $223,117  
Cost of revenue25,149  18,447  48,762  35,497  
Gross profit120,666  96,449  238,063  187,620  
Operating expenses:
Research and development34,132  23,962  68,471  46,565  
Sales and marketing80,157  61,142  157,007  118,630  
General and administrative23,278  16,880  46,378  31,591  
Total operating expenses137,567  101,984  271,856  196,786  
Loss from operations(16,901) (5,535) (33,793) (9,166) 
Other income (expense):
Interest income4,011  3,259  8,151  5,104  
Interest expense(5,888) (5,597) (11,707) (8,263) 
Other income (expense), net315  (435) 3,293  (1,277) 
Loss before income taxes(18,463) (8,308) (34,056) (13,602) 
Income tax provision660  225  624  546  
Net loss$(19,123) $(8,533) $(34,680) $(14,148) 
Net loss attributable to redeemable non-controlling interest509  197  897  197  
Net loss attributable to New Relic$(18,614) $(8,336) $(33,783) $(13,951) 
Net loss attributable to New Relic per share, basic and diluted$(0.32) $(0.15) $(0.58) $(0.25) 
Weighted-average shares used to compute net loss per share, basic and diluted58,372  56,706  58,161  56,446  


Exhibit 99.1

Condensed Consolidated Balance Sheets
(In thousands, except par value; unaudited)
September 30, 2019March 31, 2019
Assets
Current assets:
Cash and cash equivalents$242,407  $234,356  
Short-term investments529,068  510,372  
Accounts receivable, net of allowance for doubtful accounts of $2,153 and $2,457, respectively76,954  120,605  
Prepaid expenses and other current assets17,029  21,838  
Deferred contract acquisition costs29,331  27,161  
Total current assets894,789  914,332  
Property and equipment, net100,742  80,742  
Restricted cash5,658  8,805  
Goodwill41,512  41,512  
Intangible assets, net12,975  13,855  
Deferred contract acquisition costs, non-current26,349  26,218  
Lease right-of-use assets61,766  —  
Other assets, non-current6,580  4,763  
Total assets$1,150,371  $1,090,227  
Liabilities, redeemable non-controlling interest and stockholders’ equity
Current liabilities:
Accounts payable$19,502  $10,249  
Accrued compensation and benefits22,805  23,537  
Other current liabilities14,057  14,572  
Deferred revenue233,176  267,000  
Lease liabilities7,780  —  
Total current liabilities297,320  315,358  
Convertible senior notes, net416,341  405,937  
Lease liabilities, non-current61,513  —  
Deferred rent, non-current—  11,025  
Deferred revenue, non-current39  4,597  
Other liabilities, non-current1,184  947  
Total liabilities776,397  737,864  
Redeemable non-controlling interest2,814  2,733  
Stockholders’ equity:
Common stock, $0.001 par value59  58  
Treasury stock - at cost (260 shares)(263) (263) 
Additional paid-in capital708,761  654,759  
Accumulated other comprehensive income1,955  645  
Accumulated deficit(339,352) (305,569) 
Total stockholders’ equity371,160  349,630  
Total liabilities, redeemable non-controlling interest, and stockholders’ equity$1,150,371  $1,090,227  


Exhibit 99.1

Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)
 Six Months Ended September 30,
 20192018
Cash flows from operating activities:
Net loss attributable to New Relic$(33,783) $(13,951) 
Net loss attributable to redeemable non-controlling interest(897) (197) 
Net loss:$(34,680) $(14,148) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization37,268  24,823  
Stock-based compensation expense44,546  24,860  
Amortization of debt discount and issuance costs10,404  7,292  
Gain on lease modification(3,006) —  
Other(1,465) 588  
Changes in operating assets and liabilities:
Accounts receivable, net43,651  23,345  
Prepaid expenses and other assets368  724  
Deferred contract acquisition costs(18,038) (17,415) 
Lease right-of-use assets17,512  —  
Accounts payable3,208  1,960  
Accrued compensation and benefits and other liabilities275  4,570  
Lease liabilities(16,157) —  
Deferred revenue(38,382) 639  
Deferred rent—  976  
Net cash provided by operating activities45,504  58,214  
Cash flows from investing activities:
Purchases of property and equipment(31,570) (14,255) 
Purchases of short-term investments(263,321) (496,229) 
Proceeds from sale and maturity of short-term investments247,379  76,683  
Capitalized software development costs(3,053) (3,062) 
Net cash used in investing activities(50,565) (436,863) 
Cash flows from financing activities:
Investment from redeemable non-controlling interest978  3,596  
Proceeds from issuance of convertible senior notes, net of issuance costs—  488,669  
Purchase of capped call related to convertible senior notes—  (63,182) 
Proceeds from employee stock purchase plan5,933  4,887  
Proceeds from exercise of employee stock options3,054  8,998  
Net cash provided by financing activities9,965  442,968  
Net increase in cash, cash equivalents and restricted cash4,904  64,319  
Cash, cash equivalents and restricted cash at beginning of period243,161  140,681  
Cash, cash equivalents and restricted cash at end of period$248,065  $205,000  


Exhibit 99.1

Reconciliation from GAAP to Non-GAAP Results
(In thousands, except per share data; unaudited)
 Three Months Ended September 30,Six Months Ended September 30,
 2019201820192018
Reconciliation of gross profit and gross margin:
GAAP gross profit  $120,666  $96,449  $238,063  $187,620  
Plus: Stock-based compensation expense1,300  895  2,522  1,588  
Plus: Lease exit costs and accelerated depreciation expense73  —  73  —  
Plus: Amortization of purchased intangibles440  197  880  394  
Plus: Amortization of stock-based compensation capitalized in software development costs227  174  434  363  
Plus: Employer payroll tax on employee equity incentive plans49  87  153  184  
Non-GAAP gross profit$122,755  $97,802  $242,125  $190,149  
GAAP gross margin83 %84 %83 %84 %
Non-GAAP adjustments1 %1 %1 %1 %
Non-GAAP gross margin84 %85 %84 %85 %
Reconciliation of operating expenses:
GAAP research and development$34,132  $23,962  $68,471  $46,565  
Less: Stock-based compensation expense (7,434) (3,858) (14,462) (7,121) 
Less: Lease exit costs and accelerated depreciation expense(326) —  (326) —  
Less: Employer payroll tax on employee equity incentive plans(153) (269) (521) (617) 
Non-GAAP research and development$26,219  $19,835  $53,162  $38,827  
GAAP sales and marketing$80,157  $61,142  $157,007  $118,630  
Less: Stock-based compensation expense(10,533) (6,028) (19,592) (10,818) 
Less: Lease exit costs and accelerated depreciation expense(2,240) —  (2,240) —  
Less: Employer payroll tax on employee equity incentive plans(123) (209) (438) (561) 
Non-GAAP sales and marketing$67,261  $54,905  $134,737  $107,251  
GAAP general and administrative$23,278  $16,880  $46,378  $31,591  
Less: Stock-based compensation expense(4,091) (3,052) (7,970) (5,333) 
Less: Lease exit costs and accelerated depreciation expense(1,002) —  (1,002) —  
Less: Transaction costs related to acquisition—  (330) —  (330) 
Less: Lawsuit litigation cost and other expense—  —  (1,521) —  
Less: Employer payroll tax on employee equity incentive plans(61) (95) (192) (233) 
Non-GAAP general and administrative$18,124  $13,403  $35,693  $25,695  
Reconciliation of income (loss) from operations and operating margin:
GAAP loss from operations$(16,901) $(5,535) $(33,793) $(9,166) 
Plus: Stock-based compensation expense23,358  13,833  44,546  24,860  
Plus: Lease exit costs and accelerated depreciation expense3,641  —  3,641  —  
Plus: Amortization of purchased intangibles440  197  880  394  
Plus: Transaction costs related to acquisition—  330  —  330  
Plus: Amortization of stock-based compensation capitalized in software development costs227  174  434  363  
Plus: Lawsuit litigation cost and other expense—  —  1,521  —  
Plus: Employer payroll tax on employee equity incentive plans386  660  1,304  1,595  
Non-GAAP income from operations$11,151  $9,659  $18,533  $18,376  
GAAP operating margin(12)%(5)%(12)%(4)%
Non-GAAP adjustments20 %13 %18 %12 %
Non-GAAP operating margin8 %8 %6 %8 %
Reconciliation of net income (loss):
GAAP net loss attributable to New Relic$(18,614) $(8,336) $(33,783) $(13,951) 
Plus: Stock-based compensation expense23,358  13,833  44,546  24,860  
Plus: Lease exit costs and accelerated depreciation3,641  —  3,641  —  
Plus: Amortization of purchased intangibles440  197  880  394  
Plus: Transaction costs related to acquisition—  330  —  330  
Plus: Amortization of stock-based compensation capitalized in software development costs227  174  434  363  
Plus: Lawsuit litigation cost and other expense—  —  1,521  —  
Plus: Employer payroll tax on employee equity incentive plans386  660  1,304  1,595  
Plus: Amortization of debt discount and issuance costs5,239  4,952  10,404  7,292  
Less: Gain on lease modification—  —  (3,006) —  
Non-GAAP net income attributable to New Relic$14,677  $11,810  $25,941  $20,883  
Non-GAAP net income attributable to New Relic per share:
Basic$0.25  $0.21  $0.45  $0.37  
Diluted$0.24  $0.20  $0.43  $0.35  
Shares used in non-GAAP per share calculations:
Basic58,372  56,706  58,161  56,446  
Diluted60,174  59,848  60,246  59,639  


Exhibit 99.1

Reconciliation of GAAP Cash Flows from Operating Activities to Free Cash Flows
(In thousands; unaudited)
 Three Months Ended September 30,Six Months Ended September 30,
 2019201820192018
Net cash provided by operating activities$8,988  $7,830  $45,504  $58,214  
Capital expenditures(15,336) (7,215) (31,570) (14,255) 
Capitalized software development costs(1,670) (1,212) (3,053) (3,062) 
Free cash flows (Non-GAAP)$(8,018) $(597) $10,881  $40,897  
Net cash used in investing activities$(5,176) $(377,594) $(50,565) $(436,863) 
Net cash provided by financing activities$7,694  $11,687  $9,965  $442,968