New Relic Inc (NEWR) 2015 Q4 法說會逐字稿

Good afternoon. My name is Heather, and I will be your conference operator today. At this time, I would like to welcome everyone to the New Relic fourth-quarter FY15 earnings conference call.

(Operator Instructions)

I will now introduce your conference leader, Jon Parker, Director of Strategic Finance & Investor Relations. You may begin your conference.

Thank you. Good afternoon, and welcome to New Relic's fourth-quarter and full FY15 earnings conference call. Joining me today are Lew Cirne, New Relic's Founder and CEO; and Mark Sachleben, New Relic's Chief Financial Officer.

The primary purpose of today's call is to provide you with information regarding our fourth-quarter FY15 performance, in addition to our financial outlook for our first-quarter and full-year FY16. Some of our discussion and responses to your questions may contain forward-looking statements, including but not limited statements regarding our future financial performance. Including our financial outlook, our market opportunity and market trends, customer adoption of our products, our momentum and our ability to execute on our vision.

These statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward-looking statements. Information concerning such risks and uncertainties and assumptions related to our business is contained in our earnings press release issued today. As well as risks described in our filings with the Securities and Exchange Commission from time to time, particularly under the captions Risk Factors, and Managements' Discussion and Analysis of Financial Condition and Results of Operations.

Our commentary today will include non-GAAP financial measures. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. But know that these measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release issued today, a copy of which can be found on our website.

At times, in our prepared comments and in responses to your questions, we may offer incremental metrics to provide greater insight into the dynamics of our business or our quarterly results. Please be advised this additional detail may be one-time in nature, and we may or may not provide an update in the future on these metrics. I encourage you to visit our Investor Relations website at IR.NewRelic.com to access our earnings press release issued today, periodic SEC reports, a webcast replay of today's call or to learn more about New Relic.

With that, let me turn the call over to Lew.

Thanks, Jon, and good afternoon to everyone joining us today. Our fourth quarter closed out a momentous year for New Relic.

Revenue for the fiscal year grew to $110 million, up 75% year-over-year, and to $33 million for the quarter, up 68% from last Q4. I'm proud of this strong performance, yet I believe we are still in the very early innings of our opportunity. As companies across the globe transform their businesses through software, we are seeing the New Relic Software Analytics Platform continue to gain traction in the market.

New Relic exists to help companies deliver amazing customer experiences through their software. And that's important, because today, every business is becoming a software business. With the advent of cloud computing and mobile, companies of all sizes are using software to connect with their customers in new and powerful ways, to drive both top- and bottom-line results. Companies who have used software strategically -- what I call playing offense with software -- are increasingly turning to New Relic to help them propel the success of their digital initiatives.

We believe our vision, as well as the power of our unique, integrated cloud-based platform, are resonating with customers across industries and driving our success. Our financial results throughout the year are in part a testament to the strength of our team, and the value we deliver every day. I'd like to take a moment to congratulate our employees on their hard work, and thank our customers and partners for their trust in New Relic.

We entered FY15 with two primary goals for the year. First, aggressively grow our presence in the enterprise market, while continuing to grow and extend our leadership in the SMB market. And second, expand upon our heritage in APM by successfully evolving into a multi-product software analytics platform. We exceeded our goals on both of these fronts in FY15, and in Q4 in particular, as our results demonstrate.

The tangible results we've seen in the new business, as well as the evolution of our pipeline, have shown our ability to deliver upon our broader platform vision. And our business today comprises a healthy mix of SMB and large enterprises, which we believe confirms that we are succeeding in the Fortune 10, all the way to the Fortune 1 Million. As this is our year-end call, Mark and I are going to disclose a couple of additional metrics throughout our prepared remarks, to help provide visibility into the progress we are making on these goals.

In terms of our go-to-market strategy, we have seen increasing traction with our investments in the field, growing our business across enterprise, as well as SMB. However, the investments we are making in the enterprise, in particular, are bearing fruit. Resulting in wins this quarter with notable customers such as Aramark, the Center of Medicaid and Medicare, GE Capital, National Geographic Society, Panasonic, REI, Telus and many others.

Underscoring this point, we delivered a strong large-deal quarter. Overall in FY15, our total number of six-figure transactions was up over 100% year-over-year, while we saw several customers land or grow into seven-figure-a-year relationships. Overall, we counted more than a quarter of the Fortune 100 as customers at the end of FY15, and expect this number to grow in FY16. Although we've only had enterprise reps in the field for four quarters, we have seen stronger results to the enterprise, and we believe we are just getting started.

At the same time, we remain focused on delivering strong growth in our SMB business. Several of the aforementioned $100,000-plus transactions were in the SMB market, which we see as underscoring our value proposition to companies of all sizes. Many of these companies are in the process of becoming the large enterprises of tomorrow, and we are delighted to help these companies grow and transform the world through software.

They also represent some of our most fierce and loyal advocates, as well as early adopters of our new offerings. In fact, one of our largest Insights deals to-date closed this past quarter with a couple-hundred-person video advertising company, who is using Insights to understand the performance of their newly deployed algorithm. And how changes in its infrastructure impact its traffic patterns and error rates. Overall for the quarter, we also closed business with fast growing customers such as Atlassian, Docker, GrubHub, Kochava, TangoMe and TrustPilot.

Our second goal for the year was to expand from being an APM Company to a software analytics platform. With regards to that goal, we entered the fiscal year with two paid products -- Web and Mobile APM. But ended the year with five, adding three brand-new SKUs to the market -- Insights, Browser and Synthetics.

On our third-quarter call, I mentioned that more than 10% of new monthly recurring revenue added in that quarter came from non-APM products. This figure grew to over 20% in the fourth quarter. Overall for the year, our number of multi-product customers increased by over 4X -- roughly 15% paying for more than one product at year-end. Going forward, we generally expect to update these metrics on an annual basis.

Our new products are clearly gaining momentum, and our sales team is executing on our strategy to sell across the product portfolio. Browser and Synthetics continue to see strong adoption, likely due in part to how highly they complement our customers' APM investments. Designed and built from scratch with the goal of working seamlessly with APM, I think of these new products going together like chocolate and peanut butter.

Insights delivered a record quarter, and we signed our biggest deal to date, with a large global cable provider which is using Insights to better understand the customer end-user experience. Using Insights, this large enterprise can now see how power users are engaging with its product offerings in real-time. Separately, we saw many Insights customers from prior quarters increase their subscription, as they've discovered expanded use cases and value that expand what they're doing with this versatile product.

Overall, we believe our platform is deeply resonating in the market, as evidenced by a growing number of customers signing up for all five of our paid offerings. In Q4, we saw a new customers like Ladbrokes Australia, one of Australia's largest gaming companies, sign up for our entire platform. Ladbrokes can experience weekend traffic spikes of as much as 100 times the weekday traffic. They selected New Relic Software Analytics Platform to help them deliver a world-class customer experience for their online gaming software.

First, they are using New Relic APM to identify and quickly resolve application bottlenecks. Second, they are using New Relic Synthetics to continually check critical business transactions and receive alerts if there are any slowdowns. Third, they use New Relic Browser to understand user performance by region and help them improve the overall browser performance time.

Fourth, they use New Relic Mobile to monitor and help optimize the performance of their iOS app. And finally, they use New Relic Insights to better understand user behavior, as well as opportunities to improve the performance, availability and operating costs of their infrastructure.

By leveraging our entire software analytics platform, Ladbrokes has been able to gain greater visibility into their business, helping them to deliver on the goal of providing a world-class customer experience. I believe this success across our two strategic priorities stems from our differentiated, cloud-based software analytics platform and our rapid pace of innovation.

Regarding SaaS delivery, we're all-in with the commitment to cloud-based delivery of our software. This is a strategic advantage that allows New Relic to rapidly deliver innovations to our entire customer base, while providing for a lower total cost of ownership than on-premise solutions. We believe the leader in the software analytics market will be the Company who fully embraces the cloud delivery model.

Additionally, we believe our proprietary, multi-tenant Insights database technology -- which leverages remarkably fast real-time performance to power our platforms -- is the only such technology of its kind. In turn, we think it has helped create a set of competitive advantages that will continue to compound over time.

Let me give you an example of how our architecture and the ability to leverage common functionality across our platform enables us to quickly and successfully deliver new products to market. Our Synthetics product was first staffed with a small team of talented developers in early FY15. Within two quarters, we quickly built and delivered a fully featured and competitive offering to the market.

Like all New Relic products, New Relic Synthetics automatically appeared as a tab in every single one of our hundreds of thousands of user screens, the moment it became generally available -- unlike on-premise offerings. In our fourth quarter of FY15 -- the first full quarter in the market for Synthetics -- it drove well-over $1 million of incremental annualized subscription revenue, with particular strength in the enterprise. We're able to deliver a powerful new product in such relatively short order in part because of the value contained in our purpose-built cloud platform that forms a foundation for our entire product suite.

As we continue to deliver new products to market, we're seeing customers increasingly trust our software analytics platform. In particular, Synthetics and Insights influenced many deals, as companies of all sizes are beginning to make long-term commitments to New Relic to solve a growing host of issues in support of their digital initiatives. We believe these companies are now seeing power and long-term potential of our platform, and are making a decision to grow with us and our innovation.

We continued to deliver meaningful innovations to the market in the fourth quarter, with several important extensions to Insights, in particular. In February, we announced the beta of mobile events for Insights. This new technology is designed to provide out-of-the-box analytics on mobile application data, delivering real-time answers about the performance of companies' mobile businesses. In March, we released Data Apps, which helps our customers make data from Insights actionable and accessible to every knowledge worker.

We also further built out our management team in Q4. John Gray joined as Senior Vice President of Business Development, where he will lead all aspects of partner strategy for the Company. And continue the build-out of our global ecosystems of systems integrators, resellers and technology partners like Amazon, Microsoft, Salesforce and Rackspace.

Our customers are already significant users of these cloud platforms, with more than half actually reporting data to New Relic from AWS-based applications, for instance. We plan to increase the focus on our ecosystem as we seek to further leverage the mega-trends that drive our business, such as the emergence of cloud architectures and big data. John brings more than three decades of leadership experience, having recently been the channels leader for LivePerson, and previously led technology channels for Oracle.

On a more bittersweet note, Patrick Moran, our CMO, will be departing after this quarter. He plans to return to his roots by working with emerging companies as an entrepreneur and resident at Benchmark Capital.

Patrick was a very early employee at New Relic, and helped to build the incredible SMB engine that has driven growth for the Company for many years. I consider myself truly fortunate to have worked with someone as amazing and talented as Patrick. But the fact remains, the Company is evolving. We all wish him well in his future endeavors.

We have begun the search for his replacement. But in the meantime, we believe we have the best marketing bench in the business, as underscored by several awards. And we do not expect our team to miss a beat.

To wrap up, as we look out into FY16, our priorities for the year remain largely the same, which include continuing to execute on our multi-product software analytics vision. And driving further success with New Relic's platform in enterprise market, while extending our leadership position in SMB. The growing confidence we have in both initiatives is evidenced in the guidance that Mark will provide shortly.

We remain focused on building easy-to-use, yet powerful and beautiful products that help companies drive actionable insights from their software applications. We believe our passion for building great products is translating into success for our customers, which will continue to drive strong downstream results for our business. And now, let me turn the call over to Mark for more detail on our financials.

Thanks, Lew. And again, welcome, everyone, to the call today.

For the quarter, revenue came in at $33.4 million, up 68% year-over-year, driven by growth across all products. Ended the quarter with 11,910 paid business accounts, up 31% from the end of FY14. This figure includes more than 200 customers paying us over $100,000 per year, up well-over 100% from the end of FY14. It also includes a number of customers paying us more than $1 million in annual subscription revenue.

As Lew also alluded to, we believe this growth is due to customers seeing increased value from our software analytics platform. Our combined success in moving up market, and with multi-product deals, helped drive the average annualized revenue per paid business account to $11,523, up 27% year-over-year, and 8% quarter-over-quarter.

Our dollar-based net expansion rate came in at 130% in Q4. As predicted, this was down a bit from the levels we saw in Q3. But our Q4 result was better than expected, due to strong cross-sell of our new products. While we are again pleased with this quarter's results, it is important for us to reiterate, as we did in last quarter's call, that we expect this rate could moderate in the coming quarters.

We saw further success internationally in the quarter, as our non-US revenue grew to $11.2 million, up 79% year-over-year. US revenue was $22.2 million, up 63% year-over-year. While early, we are already seeing strong results from our initial field presence in the UK that we mentioned last quarter.

We continue to have a focused country strategy, but we will be modestly broadening our reach in FY16 to meet customer demand. As a reminder, though our revenue is spread out across the globe, to-date, we have very little currency exposure on the top line, as nearly all of our revenue has been denominated in US dollars.

Before moving on to the profit and loss items, I would like to point out that I will be discussing certain non-GAAP results related to expense and profitability metrics going forward. A full reconciliation between historical GAAP and non-GAAP results can be found in our earnings press release issued today.

Gross margin for the quarter was 81% compared to 83% for Q4 of last year, and unchanged from Q3. This better-than-expected result stemmed from our top-line out-performance. However, we continue to expect gross margins to moderate in the near-term and range around 79% to 80% in FY16, as we invest to support recent product releases.

In terms of our operating expenses, sales and marketing costs were $24.3 million compared with $15.7 million for the year-ago period, and $24 million in the third quarter of the most recent fiscal year. This growth largely affects the continued build-out of our sales and marketing teams. We believe we are seeing strong returns, and will continue to reinvest heavily in these teams in FY16. That said, we do expect to see leverage from some of the investments we made in FY15.

Research and Development expenses were $6.5 million compared to $4.1 million for Q4 of last year, and $5.7 million for Q3 of this year. We plan to continue our aggressive investments in New Relic Software Analytics Platform, and expect R&D to remain a key priority for the Company to help support our growth. G&A expenses were $6.5 million compared to $3.3 million last year, and $5.6 million in Q3, largely reflecting our first full quarter of public Company operating costs, and increased headcount.

Overall, our expense in the quarter produced an operating loss of $10.2 million compared with the $6.5 million in Q4 last year, and $11.8 million for Q3. This resulted in an operating margin loss of 31% in the quarter versus a loss of 33% a year ago, and a loss of 40% in the third quarter. Which, if you'll recall, included expenses related to our user conference.

Our net loss per share for Q4 was $0.22, based upon a weighted average share count of 47 million. This compares to a net loss per share of $0.18, based upon pro forma weighted average share count of 37.1 million of Q4 of last year -- a share count that assumes the conversion of preferred stock.

Quickly running through our financials for the year, revenue was $110 million, up 75% over last year. Gross margin was 81% versus 83% in FY14. Operating margin was a loss of 33% versus a loss of 44% in FY14. And our net loss per share was $0.85 versus $0.78 a year ago.

Turning to our balance sheet, we ended the fourth quarter with $201 million of cash, cash equivalents and short-term investments, down from $205 million at the end of the previous quarter. Elsewhere on the balance sheet, our short-term deferred revenue balance grew to $29.2 million, up from $10.4 million in Q4 of last year, and compared to $23.5 million in Q3.

We have continued to see a shift toward longer billing periods as we have moved deeper into the enterprise. Our dollar-weighted, average billing period ending the year was 3.8 months, up from 2.5 months at the end of FY14. We expect deferred revenue to grow faster than revenue throughout FY16. But as we've noted previously, we do not consider deferred revenue to be a reliable indicator of our underlying business momentum and accordingly, we do not currently view it as a key metric.

Now let me turn to our outlook for the first quarter of FY16 and for the year as a whole. We are initiating our outlook as follows. For the first fiscal quarter ending June 30, we expect revenue to range from $34.5 million to $35.5 million, for growth of 53% to 57% year-over-year. We expect a non-GAAP operating loss of $11 million to $12 million. This would lead to a non-GAAP net loss per share in the range of $0.23 to $0.26, based upon a weighted average share count of 47.3 million.

For the FY16, we expect revenue to range from $155 million to $159 million, for growth of 40% to 44% year-over-year. We expect a non-GAAP operating loss of $46 million to $50 million. This would lead to a non-GAAP net loss per share in the range of $0.95 to $1.03, based upon a weighted average share count of 49 million. When modeling our expenses from a seasonality perspective, please note that our annual future stack conference will occur in third fiscal quarter again this year.

In summary, we are pleased with the progress we are making across our product portfolio and go-to-market efforts. However, as Lew mentioned earlier, we believe we are just scratching the surface of a very large and growing opportunity for software analytics. And that our vision is increasingly gaining traction in the marketplace, and helping to drive our momentum.

And with that, I'll now open the floor for your questions.

(Operator Instructions)

Your first question comes from the line of Sterling Auty with JPMorgan.

Hi, this is Ken Telanian in for Sterling. Looking at the growth differential between revenue and paid business accounts, there's an implied increase in ARPU. I was wondering how much of that uptick is from customer expansions versus evidence of success in the up market?

It's a combination of the two. We've been focused on growing higher accounts into the enterprise, and getting the right accounts, in terms of the growth in the number of net new accounts. And we've been successful in doing that. As we've done that, we've been both expanding the accounts that we've had, as well as getting larger accounts to join upfront. So I think it's a blend of the two that's creating the increase in the ARPU.

Could you give a rough idea of the split? Contribution?

You know, I think we aren't going to give out that explicit metric. But we're pleased to see growth coming from both those.

Okay, great. Great quarter. Thanks.

Your next question comes from the line of Keith Weiss with Morgan Stanley.

Thank you guys for taking the question, and very nice quarter. I was hoping you could give us some color on your efforts of building out that enterprise sales force, both in terms of how well you guys are doing in scaling up that organization, number one.

And number two, given that you were already in 25% of the Fortune 100, it would seem that either you've had a fast start of that initiative, or you've already made some progress even without that enterprise sales force into the Fortune 100. And if so, what is having that enterprise sales force do? How does that get you to propel that faster, if you will?

Thanks, Keith. This is Lew. Great question. And just as a reminder, when we brought in Hilarie Koplow-McAdams as our Chief Revenue Officer a little over a year ago, we, I think it's safe to say, brought in a world-class talent that really is [evidently] capable of building a fantastic enterprise sales force. And she has been successful in doing that in partnership with our enterprise leader, Erica Schultz.

Yes, we did have a number of enterprise customers prior to both executives joining and prior to our first enterprise field presence. We've always focused on building a product that's easy to fall in love with, no matter what size a company you are. So we have a number of enterprise companies fall in love with the product without needing a rep to visit them. But as you can imagine, driving a higher deal size is a lot harder to do, and sometimes impossible for certain accounts, without building that direct relationship.

So that's what we invest in doing. The numbers are a testament to the fact that our investments in the field are leading to higher ASPs and increasing penetration into enterprise accounts, both in number of accounts and breadth of presence in the account. And thirdly, in terms of the number of products these accounts are purchasing from us.

Got it. And then if I could sneak in one for Mark. Really nice increase in the FY16 revenue guide over what we were looking in at our model. But it also looks like you're expanding out the -- or growing expenses a little bit faster than what we had originally been looking for.

Can you talk to us about the balance between growth and the path towards profitability that you're looking at FY16? And how should we be thinking about that eventual path towards profitability? Is it a little bit further scaled out? Or are there more elements of leverage than what perhaps is indicated with that initial FY16 guide?

We see a great opportunity ahead of us. I think this past year, as we've been investing heavily, particularly in the growth of the enterprise and scaling out that organization, we've seen attractive returns. And we see a continued great future there. So we expect to continue to invest aggressively in growing out the sales organizations, the enterprise as well as the SMB team. We just see such an attractive opportunity ahead of us, we think it makes sense to reinvest in the business.

In terms of how we think about the long-term profitability, we want to continue to march toward breakeven, and then profitability in our long-term model. We don't have a definitive timeframe for that, but we want to make continued progress quarter by quarter, and then getting to profitability.

And Keith, I'm just going to add something to that, being such a passionate product person. I think one of the things we really were encouraged by last quarter is how well products we built in-house attached. We've got increasing confidence in our ability to succeed with products that we build.

And so while I'm not going to speak about product road map, you're also going to see more R&D investments in the future. We don't intend to be a five-product company forever. We intend to deliver more products over the coming years.

Excellent. Thank you very much, guys.

Your next question comes from the line of Greg McDowell with JMP Securities.

Great, thank you very much. Lew, first question for you. You articulated how you exceeded your two main goals in FY15, and talked a lot about expanding the SKUs and becoming more of a platform company. I was hoping you could spend a few minutes just outlining some of your goals in FY16, whether that's adding additional SKUs or doing something different? Thank you.

You know, how I think of 2016 is -- honestly, 2015 was the year for us to establish a newer engine that fully attacks the enterprise opportunity, while not losing what's special about our SMB leadership position. So really that was about building out the model to work for that, establishing a new enterprise go-to-market engine, et cetera. And then, of course, expanding the path of products.

This year I think it's largely about execution more than it is about thinking up new ideas on how to grow the business. I think it's about doing what we think we can do. And then, in the background, in my mind, while I've got a world-class team that's great at execution on the ideas that we have in place, my job is to think about growing the business beyond the current year, and what do we need to do there. It's obviously way too early for me to share my thinking with you on that. But that's what's keeping me up at night, is looking beyond the current fiscal year end.

Great, thanks. And Mark, one quick one for you. Obviously, great growth in the annualized subscription revenue per customer. And I know you'd be reticent to talk about ARR among SMB versus mid-market versus enterprise. But I was hoping you could just qualitatively talk about the change in ARR in the different customer segments in FY15, and the trends you expect in FY16? Thanks.

Sure. We're fortunate in that we're seeing growth in ARR across all segments, and we'd like to see that continue. The largest growth is obviously in the enterprise segment. I think they've got the largest opportunity, and so those rates are growing the quickest. But we are seeing nice growth in the mid-market, and the SMB segment as well.

Thank you.

Your next question comes from the line of Brent Thill with UBS.

Good afternoon. Lew, on Insights, I'm curious if you could just provide a little more color around what you're starting to see in terms of deployment sizes, and how that's influencing the broader suite? And for Mark, when you talk about the success in the enterprise, is there a common theme that's jumping out, in terms of vertical adoption or initial order size, or any other themes that you're seeing evolve as you're pushing up into the enterprise?

Okay, so Insights had another record quarter. All of our products had a great quarter. But with respect to Insights, we are pleased to see a number of customers expand their investment in Insights, and also an expansion of use cases. One of my favorite examples is this cool company called FlightStats. FlightStats provides real-time, very accurate statistics on where any flight is in the world. Their data is essentially very valuable to lots of people. And they used Insights for a variety of use cases.

First of all, because their data is so valuable to lots of people, they discovered in Insights that there's a lot of other possibly competitive sites scraping the data off their web pages. So they could detect those bad actors, and then stop them from doing that, based on the real-time ability that Insights was providing. And of course, these can pop up at any time in real-time. So being able to detect that in real-time and take action on it had a meaningful impact on their business. It also reduced their bandwidth consumption by 50%.

But then they also used Insights to actually discover they had two categories of users. There's the casual user, like you or I, that are just wondering whether your wife is late when you're picking her up at the airport. But then there are professional users that were relying on this software, like taxi drivers or limo drivers, as part of their job. They use that to tweak their business model, understanding what's the behavior of the professional user versus the consumer.

And that's actually impacting their business. So we love it when the data we provide helps our customers not only keep the site running, but actually improve the fundamentals of their business. And FlightStats is a great example of that.

The last thing I'd say about Insights is, we've discovered that this is a core technology that I think is going to be fundamental to our competitive advantage going forward. Not only as a product, but the database underneath Insights -- this multi-tenant cloud database. We've built a super cluster that collects an enormous amount of data, so that our customers don't have to build a super cluster.

In the last 30 days -- I'm looking at an Insights dashboard right now that tells me that we collected a little over 4 trillion events in the last 30 days, or about a quadrillion events in the last quarter, for our customers. And in the last hour alone -- basically since this earnings call started, or a little earlier -- our customers have queried 5.1 trillion events. And the medium query time on that is nine milliseconds. That's just mind boggling. What you can do in real-time with our database, we don't think has a peer, certainly in multi-tenant technology.

So we're going to build on top of this. This is why we are using the word platform more. We think there are more product opportunities on top of this core technology. In fact, one of the products that built on top of this Insights data base is Synthetics, which is why we can so rapidly get a new product in the market.

It was built on top of the Insights database technology. So we're going to continue to invest in it. We think that it's something that's not built on off-the-shelf componentry. It's something we've built in-house, and we think it's a sustainable competitive advantage for us.

And in terms of the enterprise success we've had, it's really across the board, when we look at verticals. We've sliced the data every way imaginable, and it's been very broad. There's no segment that we could come up with that is more than 20% or so of our base. So we're very pleased with how broad that has been.

In terms of the deal size and the entry, a year ago, the largest initial transaction we did in enterprise customer was probably a couple hundred thousand dollars. In, I think, September or October timeframe, we did a $0.5 million initial deal, and this past quarter, we did -- our initial transaction was much larger than that. So we're seeing nice growth in some of the initial transactions.

At the same time, I think our core go-to-market strategy remains the same. Which is go in with a smaller deal to start -- $100,000-range deal, annual subscription, to start. And get a foothold, and then grow the deal from there. We're seeing a lot of success with that, and that's how we expect to continue to really approach that market.

Great, thank you.

Your next question comes from the line of James Westman with Raymond James.

Hi, it's Michael Turits. I'll take it; I'm filling in for James. I'm not sure if anyone has really drilled down with you guys on just any change in the competitive landscape? Who are you seeing? Are you going up against any of the more legacy people, or trying to do any legacy displacement at this point?

The competitive landscape is largely unchanged from what's been discussed either during our IPO road show or S1 or in prior calls. Our strategy is, we see so much opportunity in new software projects. As I said in my prepared remarks, we particularly do well in projects that I think of as playing offense with software, using software to reach the digital user.

Those projects don't have incumbents present, typically. They're often done outside of IT. Or if they are done inside of IT, they are using latest technologies, and they're often using cloud computing, for example, or mobile. So they're a perfect fit for our strength, and they certainly have a preference for cloud.

We're rather disciplined in not chasing business that insists on a non-premise solution. That means there's some deals we're not going to take, and that might be considered by other companies as a competitive win over us. We feel like that's just business that we don't want to go after. Because, look, my first time as an entrepreneur, it was a non-premise company, and I know how hard it is to be successful in non-premise in the cloud. We'd rather just be a world-class cloud Company, and we feel like we're going to have great win rates when that's the landscape.

Okay. And then just one follow-up for Mark. Obviously there would naturally be a shift as you move to enterprise, but how are you doing in terms of conversions overall to annual billing?

You know, I think we're doing well there. You could see that in our deferred revenue number. I mentioned that the weighted average billing period over the past year went up from 2.5 months at the end of FY14 to 3.8 at the end of FY15. And I think that's a reflection both of new customers coming in -- particularly enterprise that are willing to pay up front. As well as existing customers at time of renewal, where we'll migrate them from a monthly billing to a quarterly or annual billing cycle.

Okay, great. Thanks very much.

(Operator Instructions)

Your next question comes from the line of Derrick Wood with Susquehanna International Group.

Great, thanks. If you look at the 11,000 installed base, I suspect a majority are still just deploying the core APM product. You've obviously had a host of other products released over the last few years. How much of that installed base do you think is right for cross-selling some of the newer products? And how do you rank your efforts in going after this?

Well, I think that's one of the things that we're most pleased with in the last quarter, going from a miniscule number of customers, with both the two products we had a year ago, all the way up to 15% in the customer base in one year. Given that three of the products were brand new in the year, we think that's an attach rate that, honestly, pleasantly surprised us.

And that's why I mentioned earlier, why we're increasingly confident -- not only in our ability to build new products, but obviously more importantly, to deliver success in the market with them. So we've got a ways to go. I wouldn't say this is just going to happen by itself.

But we've certainly gotten past the threshold, where we've got a team that's confident taking multiple products to market. And in fact, the fact that we've got this full platform also is a reason why customers are selecting us, even if they only want one product to start.

Okay. And then what we hear, when you're selling up-market, you do very well when a developer is involved in the buying cycle. I would think that is often true when enterprises were moving to dev-ops model. So Lew, like I said, be curious to hear what you think about how the world is going to dev ops, and where you see -- how big of an opportunity in the enterprise from that standpoint?

Well, you know, I'm reminded of -- look at Amazon Web Services. They recently announced that, that's a $5 billion a year business. And that was entirely driven by forward-thinking developers and dev ops, right? And so these trends rarely come top down from the CIO. I think we've got a rather enviable position to have such a strong brand, with hundreds of thousands of active developers using our product.

That having been said, we think the operations person is a very important person to like. Just last week, we introduced two major features that were targeted at making operations person love our software just as much as developers do. We aren't going to ignore that important constituency.

But I feel like it's a more straightforward or doable challenge to move from delighting developers to delighting operations, than the other way around. Developers tend to be at the tip of the speer in identifying and championing next-generation leaders, and we hope to be one of them.

Okay, if I could just squeeze one more in here. I think you guys are getting a lot of traction in the public cloud environment, like Microsoft Azure, and you mentioned Amazon. Is this a material revenue contributor yet? And what kind of growth are you seeing out of the platform-as-a-service arenas?

I'm looking at my attorney to see what material means in this case. But I'd say that it's super important to us, and something we have a strong leadership position in. It's a meaningful number of our customers. I think it's over 50% of our customers are in a public cloud environment.

If you do the math, given that we have 11,910 customers, I don't know of another vendor that can claim that number of customers in any environment. So ipso facto, we probably are the leader in monitoring applications running in the cloud. So why on earth would you monitor an application in the cloud with non-premise technology -- is the other way to think about it.

This is strategic for us. We're delighted to see that it's also helping customers get more comfortable adopting the cloud. One of the big questions the customer will have before they move a work load to the cloud is -- how can I be confident it will work as well or better? And we give them that confidence, because we can monitor the application in the on-premise environment, as well as the cloud environment.

So we'll help with the migration, and obviously the ongoing maintenance and running of that application in the cloud. The cloud providers understand that. That's why we think John Gray, in his new Business Development leadership role, has a great opportunity to help us really drive a great ecosystem play.

Great, thank you.

There are no further questions at this time. I will turn the call back over to Jon Parker for closing remarks.

Thanks. And thanks, everyone, for all of your questions. We also look forward to seeing many of you at the upcoming JPMorgan 43rd Annual Technology, Media and Telecom Conference in Boston. That's on May 19, so hope to see many of you there. And talk to you all soon. Thank you.

This concludes today's conference call. You may now disconnect.