Aligning New Relic to Deliver More and More Value to Our Customers and Users

Last summer when we launched New Relic One, we embarked on a journey to transform our product and the way our users engage with it, so that they could get more value from the full power of our platform. A critical part of this strategy was our shift to a consumption-based business model that focuses on delivering more and more value to our users. We doubled-down on putting users at the center of everything we do–and we’re seeing strong momentum in the marketplace among customers and users as a result.

To continue to succeed, however, we knew we had to take a hard look at our business and make meaningful changes to organize our operations in better support of our users and delivering value to them, specifically:

• A consumption-based business model requires a different go-to-market approach than a traditional SaaS subscription-based model. Thus, we’re simplifying roles in Sales and Customer Adoption to drive better alignment and focus on our users and their success.
• New Relic has historically out-spent our peers on Sales, Marketing, and G&A as we built out our SaaS business model; now, spend in these areas must decrease to further invest in Product and R&D to continue to deliver transformational innovation.

Changes like these are difficult, even when they are in the best interests of customers, users, shareholders, and the long-term success of the business and its employees. True to our values and culture, we are taking a number of steps to support and help ease the transition for colleagues who are leaving the company as a result of these changes. Today marks by far the hardest part of the transformation we have undertaken.

Our new strategy—coupled with today’s changes—realigns our entire company around helping our customers realize the full value of our platform to solve the challenges in their businesses. When customers realize value, they use more of our platform, which fuels the growth of our business. This is the right next step in our journey to focus everyone at New Relic on our users and their success.

Below is the full text of the email sent by Founder & CEO Lew Cirne to all Relics today.

Relics,

Today we’re announcing changes to align New Relic’s growth and success more directly to our customers and their adoption and consumption of our platform. These changes will ensure every Relic is focused on delivering value to our users so that they use New Relic more and more to achieve success in delivering more perfect software. While I know these changes are the right move for our business, I’m saddened to share that as a result, we will be reducing our workforce by nearly 120 employees in the US, and up to 40 internationally. If your role is impacted, you have already received an invite to a meeting within the next 24 hours where you will receive more details–and additional information is included below. Region by region, we will send a follow up email when all meetings are complete.

Making this kind of decision, and having to say goodbye to so many talented Relics, is the most difficult thing I’ve ever had to do as a CEO, and I know it will be hard for you as well. Not only have these team members and valued colleagues helped build New Relic into the company we are today, they have become friends who are very dear to our hearts. Today, we must all be focused on the well-being of our fellow Relics impacted by this news.

To stay true to our values, we’re doing all we can to support impacted Relics and help ease their transition from New Relic, including:

• Severance packages of 3 months of full pay and target bonus/incentives,
• Extended benefits coverage with COBRA through December 31, 2021 in the US and based on local norms elsewhere,
• Equity vesting through June 30, 2021 including the removal of the one-year equity vesting cliff for new hires,
• Extended mental health and employee assistance benefits,
• Individual career outplacement support to help find their next career opportunity faster, and
• Giving impacted Relics their laptops and work equipment to keep for personal use.

We are taking this approach globally regardless of start date, and we may adjust some packages up so that they exceed local guidelines, as appropriate.

It is important to me that impacted Relics have information in their hands as quickly as possible. Due to the scale of the changes, we aren’t able to meet everyone in 1:1s today. Impacted Relics will be invited to 1:1s or webinar-style group meetings. If your role is impacted, you have already received an invitation to a meeting in the next 24 hours. For US-based Relics whose role is being eliminated, the invite is titled, “Leaving New Relic”, where you will receive more information about your severance package. For Relics in EMEA whose role may be impacted, your leader has sent an invitation for today that mentions this restructuring in the notes. For APJ-based Relics whose role may be impacted, the meeting is titled, “Role Redundancy Notification Meeting”.

For Relics who are not impacted by these changes, I ask that you be patient as we focus on these very important conversations as impacted Relics deserve all of our attention today. Along with my leadership team, I will be hosting two Global All-Hands meetings tomorrow to share more information, answer your questions and talk through our path forward.

Now that I have covered the specifics, I want to share how we came to this decision.

Last summer when we launched New Relic One, we embarked on a journey to transform our product and the way our users engage with it, so that they could get more value from the full power of our platform. A critical part of this strategy was our shift to a consumption-based business model that focuses on delivering value to our users so that they use New Relic more and more in their day-to-day work. Over the last two quarters, we have seen strong traction and I have more conviction than ever in our strategy.

However, to succeed, we knew we had to take a hard look at our business and make meaningful changes to organize our operations in better support of our users and delivering that value to them, specifically:

• A consumption-based business model requires a different go-to-market approach than a traditional SaaS subscription-based model. Thus, we’re simplifying roles in Sales and Customer Adoption to drive better alignment and focus on our users and their success.
• New Relic has historically out-spent our peers on Sales, Marketing, and G&A as we built out our SaaS business model; now, spend in these areas must decrease to further invest in Product and R&D to continue to deliver transformational innovation.

Our new strategy—coupled with today’s organizational changes—realigns our entire company around helping our customers realize the full value of our platform to solve the challenges in their businesses. When customers realize value, they use more of our platform, which fuels the growth of our business. We are seeing strong adoption and usage as users discover and engage with our new platform, and we know the way that we do business must change as a result. Today marks by far the hardest part of the transformation we have undertaken.

My sincere thanks to all of the Relics who have played an important role in getting us to where we are today, especially those who will be leaving New Relic. You have my commitment that we will take care of you and set you up for your next chapter.

As difficult as these changes are, I know that they are the right path for our customer, users, shareholders and business, and ultimately the right thing for our Relics who remain so that we are best positioned for growth. We have an immense opportunity ahead of us, and we will succeed by focusing everyone in our business on our users and their continued success.

Lew

_{This post contains “forward-looking” statements, as that term is defined under the federal securities laws, including but not limited to statements regarding the timing and benefits of New Relic’s restructuring plan, including any increase in value to New Relic’s users as a result of these changes, New Relic’s ability to align spending levels, anticipated changes to New Relic’s go-to-market roles and investment in innovation, the restructuring process, including timing and extent of the meetings with impacted employees, New Relic’s further investment in platform capabilities, its anticipated ability to eliminate barriers to adoption, and New Relic’s immense opportunity and future business success. The achievement or success of the matters covered by such 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. Further information on factors that could affect New Relic’s financial and other results and the forward-looking statements in this post is included in the filings New Relic makes with the SEC from time to time, including in New Relic’s most recent Form 10-Q, particularly under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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. New Relic assumes no obligation and does not intend to update these forward-looking statements, except as required by law.}