New Relic Adds One Risk Factor Post-Q2 Earnings Beat

Shares of New Relic, Inc. (NEWR) climbed ~39% this week, driven by the company’s better-than-expected second-quarter fiscal 2022 performance. NEWR provides a range of products on its cloud-based platform, with a primary focus on observability.

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We’re taking a look at the company’s financials and changes in its key risk factors that investors should know about.

Q2 Financial Results

Revenue increased 17.8% year-over-year to $195.69 million, outperforming estimates by $13.5 million. Meanwhile, the number of active customer accounts (ACAs) dipped marginally to 14,300 from 14,500 a year ago; however, the number of ACAs greater than $100,000 jumped to 1,011 from 894 a year ago.

Bill Staples, CEO of NEWR, said, “This quarter marks the completion of our business turnaround and the beginning of a new chapter of growth for New Relic. We recently laid out five strategic priorities to guide our company forward, and we are pleased with the progress we have already made in advancing these objectives.”

A net loss of $0.10 per share came in narrower than analysts’ estimates by $0.03. NEWR incurred a net loss of $0.07 per share in the same quarter last year.

Furthermore, NEWR forecasts revenue to be between $198 million and $202 million for the fiscal third-quarter, indicating a year-over-year growth of between 19% and 22%. Meanwhile, net loss per share is expected to be in the range of $0.15 per share to $0.18 per share. (See Insiders’ Hot Stocks on TipRanks)

Risk Factors

Now, let’s take a look at the changes in the company’s key risk factor profile.

According to TipRanks’ Risk Factors tool, NEWR’s top risk category is Finance & Corporate, accounting for 45% of the total 58 risks identified, against the sector average of 44%. In its recent Q2 report, the company has added one key risk factor under the Finance & Corporate risk category.

According to NEWR, its operations could be affected if the company’s estimates or judgments associated with critical accounting policies turn out to be incorrect.

Assumptions and estimates used in making consolidated financial statements include factors such as variable consideration, stock-based compensation, and business combinations.

Additionally, the timing of revenue recognition can differ from estimates, which can affect the results of operations, causing further fluctuations in revenue from period to period.

Meanwhile, NEWR’s consumption pricing model has been in effect since July 2020, and the company continues to refine its assumptions and estimates. As it gathers more historical data, NEWR expects to improve its ability to forecast and derive estimates.