New Relic Inc., the observability software provider, delivered strong first quarter results today with a smaller than expected loss and revenue that came in ahead of Wall Street’s expectations.

The company reported a loss before certain costs such as stock compensation of 25 cents per share on revenue of $180.5 million, up 11% from a year ago. Analysts had been looking for a bigger loss of 39 cents per share on revenue of just $172.7 million, so the company can be pleased with its performance.

It was the first earnings call for New Relic since industry veteran Bill Staples took over as its Chief Executive Officer from former incumbent Lew Cirne. Staples had previously served as New Relic’s president and chief product officer before the surprise announcement in May.

Staples said in a statement today that New Relic is fully engaged in its mission to help millions of developers and engineers build better software. “My top priority is to return our revenue to market growth rates by making this vision a reality for engineers, and delivering unique value to our customers to support their success,” he said.

Staples has a tough job on his hands though. New Relic, which sells application and DevOps monitoring tools that help developers detect problems with their software applications, has been sailing some choppy waters of late. The company has struggled to transition to a cloud business model. In order to differentiate its value proposition better, last year it announced a major overhaul of its product pricing, saying users would end up paying less as a result.

That may have been a popular move with customers but perhaps not so much with investors. For all its efforts, the company remains unprofitable, and earlier this year announced it was laying off 7% of its workforce.

One worrying item in New Relic’s report today was that its total number of active customer accounts stayed flat at 14,100, the same as the previous quarter and down from 15,400 one year ago. There was however a small sequential jump in its number of active customer accounts worth more than $100,000 per year, which rose from 945 the previous quarter, to 964 today. New Relic said 79% of its revenue is derived from those accounts.

The slow rate of new customer acquisition may explain why New Relic’s stock lost almost 2% in after-hours trading.

That said, Pund-IT Inc. analyst Charles King told SiliconANGLE that investors appear to be happy with Staples’ performance as CEO overall, noting that while the company’s share price dipped when he first took over in May, it has gained quite a bit since then.

“With hopes of returning to normal placed on hold due to COVID-19 variant outbreaks, many companies are likely to be looking to maximize the value and efficiency of their engineering and developer teams,” King said. “New Relic is well-positioned to benefit from organizations hoping to achieve those goals.”

During the quarter, New Relic announced a key update to its product, adding a new Kubernetes Experience that enables instant insights into the software container orchestration system without needing to update any code or sample data first. powered by Auto-Telemetry with Pixie, a technology the company got its hands on when it acquired a startup called Pixie Labs Inc. in December.

“New Relic is in the middle of its transformation, and at the crux of the problem is the transition to the new subscription licensing,” said Constellation Research Inc. analyst Holger Mueller. “Long term this is valued by investors because of its steadines, but transitioning is tricky and takes time. New Relic’s task is to find a path to profitability quickly.”

Turning a profit will take time, but New Relic said it’s optimistic for the current quarter and full year, at least. In its statement, it called for a loss of 15 cents to 11 cents per share on revenue of $181 million to $183 million, which is better than Wall Street’s forecast of a 20 cent loss on $173.9 million in revenue.

For the full year, New Relic is looking at total revenue of $730 million to $735 million, ahead of the analysts’ consensus of $710.8 million.

Image: New Relic/Facebook