Quantcast
Last updated on April 16, 2014 at 17:34 EDT

NetSuite Announces Fourth Quarter And Fiscal 2012 Financial Results

January 31, 2013

SAN MATEO, Calif., Jan. 31, 2013 /PRNewswire/ — NetSuite Inc. (NYSE: N), the industry’s leading provider of cloud-based financials / ERP software suites, today announced operating results for its fourth quarter and fiscal year ended December 31, 2012.

Total revenue for the fourth quarter of 2012 was $85.0 million, representing a 33% increase over the prior year. Total revenue for the year was $308.8 million, a year-over-year increase of 31%.

Cash flow from operations was $13.4 million in the fourth quarter of 2012, an increase of $1.7 million, or 15%, over the same period last year. Cash flow from operations was $54.3 million for the year, an increase of $18.0 million, or 50%, over the prior year.

On a GAAP basis, net loss for the fourth quarter of 2012 was $9.6 million, or $(0.13) per share, as compared to a net loss of $7.6 million, or $(0.11) per share, in the fourth quarter of 2011. GAAP net loss for the year ended December 31, 2012 was $35.2 million, or $(0.50) per share, as compared to a GAAP net loss of $32.0 million, or $(0.48) per share, in 2011.

Non-GAAP net income for the fourth quarter of 2012 was $4.6 million, or $0.06 per share, as compared to non-GAAP net income of $3.4 million, or $0.05 per share, in the fourth quarter of 2011. Non-GAAP net income for the year ended December 31, 2012 was $19.1 million, or $0.26 per share, as compared to non-GAAP net income of $10.8 million, or $0.15 per share, in 2011.

“In a year that saw Microsoft once again fail to deliver cloud-native ERP solutions, and in a quarter that saw SAP miss their most recent top- and bottom-line forecast as more large enterprises moved to the cloud, NetSuite delivered its best year ever,” said NetSuite CEO Zach Nelson. “And we continue to put even more distance between us and our competitors with the introduction of new capabilities like NetSuite SuiteCommerce which transforms operational business systems into customer-facing commerce solutions.”

Conference Call

In conjunction with this announcement, NetSuite will host a conference call at 2:00 p.m. PST (5:00 p.m. EST) today to discuss the Company’s fourth quarter and fiscal 2012 financial results, and our outlook for the first quarter and fiscal 2013. A live audio webcast and replay of the call, together with detailed financial information, will be available in the Investor Relations section of NetSuite’s website at www.netsuite.com/investors. The live call can be accessed by dialing 888-663-2241 (U.S.) or 913-312-1486 (outside the U.S.) and referencing passcode: 4228229. A replay of the call can also be accessed by dialing 888-203-1112 (U.S.) or 719-457-0820 (outside the U.S.), and referencing passcode: 4228229.

About NetSuite

NetSuite Inc. is the industry’s leading provider of cloud-based financials / Enterprise Resource Planning (ERP) software suites. In addition to financials/ERP software suites, NetSuite offers a broad suite of applications, including accounting, Customer Relationship Management (CRM), Professional Services Automation (PSA) and Ecommerce that enables companies to manage most of their core business operations in its single integrated suite. NetSuite’s “real-time dashboard” technology provides an easy-to-use view into up-to-date, role-specific business information. For more information about NetSuite, please visit www.netsuite.com.

Cautionary Note Regarding Forward-Looking Statements

This press release and NetSuite’s scheduled conference call contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to, among other things, expectations, plans, prospects and financial results for NetSuite, including, but not limited to, our expectations regarding our products, market demand, future earnings, revenue and market share growth. These forward-looking statements are based upon the current expectations and beliefs of NetSuite’s management as of the date of this press release and conference call, and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. All forward-looking statements made in this press release and during the conference call are based on information available to us as of the date thereof, and NetSuite disclaims any obligation to update these forward-looking statements.

In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: the market for on-demand services may develop more slowly than expected or than it has in the past; continued adverse and unpredictable macro-economic conditions or reduced investments in on-demand applications and information technology spending; quarterly operating results may fluctuate more than expected; unexpected disruptions of service at one or more of our data centers may occur; a security breach may impact operations; risks associated with material defects or errors in our software or the effect of undetected computer viruses could impact operations; the risk of technological developments and innovations by others; our ability to successfully identify other businesses and technologies for acquisition that will complement our business and the ability to successfully acquire and integrate those businesses and technologies; the risk of loss of power or disruption in Internet service; failure to manage growth and effectively scale the organization; failure to protect and enforce our intellectual property rights; assertions by third parties that we infringe their intellectual property rights; the ability to manage operations when faced with competitive pricing and marketing strategies by competitors or changing macro-economic conditions; the risk of losing key employees; evolving government regulation of the Internet and Ecommerce; changes to current accounting rules; changes in foreign exchange rates, and general political or destabilizing events, including war, conflict or acts of terrorism; and other risks and uncertainties.

Customers who purchase our services should make sure the decisions are based on features that are currently available. Please be advised that any unreleased services or features from NetSuite referenced in today’s discussion or other public statements are not currently available and may not be delivered on time or at all.

For a detailed discussion of these and other cautionary statements, please refer to the risk factors discussed in filings with the U.S. Securities and Exchange Commission (“SEC”), including but not limited to our Annual Report on Form 10-K filed on February 28, 2012, and any subsequently filed reports on Forms 10-Q and 8-K. All documents are available through the SEC’s Electronic Data Gathering Analysis and Retrieval system (“EDGAR”) at www.sec.gov or NetSuite’s website at www.netsuite.com.

Non-GAAP Financial Measures

Our stated results include certain non-GAAP financial measures, including non-GAAP operating income, net income, weighted average shares outstanding, and net income per share. Non-GAAP operating income and non-GAAP net income exclude expenses related to stock-based compensation expense, amortization of intangible assets, transaction costs for business combinations and costs associated with the settlement of a patent dispute. Non-GAAP operating income and non-GAAP net income exclude these expenses as they are often excluded by other companies to help investors understand the operational performance of their business, and in the case of stock-based compensation, can be difficult to predict. We believe these adjustments provide useful comparative information to investors.

We consider these non-GAAP financial measures to be important because they provide useful measures of our operating performance and are used by our management for that purpose. In addition, investors often use measures such as these to evaluate the operating performance of a company. Non-GAAP results are presented for supplemental informational purposes only for understanding our operating results. The non-GAAP results should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from non-GAAP measures used by other companies.

A copy of this press release can be found on our Investor Relations website at www.netsuite.com/investors. The contents of the website are not incorporated by reference into this press release.

NOTE: NetSuite and the NetSuite logo are service marks of NetSuite Inc.

                                                                         NetSuite Inc.
                                                             Condensed Consolidated Balance Sheets
                                                                     (dollars in thousands)
                                                                          (unaudited)

                                                                                                            December 31,
                                                                                                       2012                  2011
                                                                                                       ----                  ----
    Assets
    Current assets:
    Cash and cash equivalents                                                                                 $185,859            $141,448
    Accounts receivable, net of allowances of $701 and $396                                          64,861                39,105
              as of December 31, 2012 and December 31, 2011,
              respectively
    Deferred commissions                                                                             26,959                22,968
    Other current assets                                                                              9,049                 8,693
                                                                                                      -----                 -----
    Total current assets                                                                            286,728               212,214
    Property and equipment, net                                                                      27,210                21,823
    Deferred commissions, non-current                                                                 4,784                 3,585
    Goodwill                                                                                         35,661                27,564
    Other intangible assets, net                                                                     12,420                12,162
    Other assets                                                                                      2,972                 3,832
                                                                                                      -----                 -----
    Total assets                                                                                              $369,775            $281,180
                                                                                                              ========            ========
    Liabilities and total equity
    Current liabilities:
    Accounts payable                                                                                            $3,476              $1,905
    Deferred revenue                                                                                154,051               105,800
    Accrued compensation                                                                             18,806                17,748
    Accrued expenses                                                                                 11,974                 8,285
    Other current liabilities                                                                         9,948                 7,829
                                                                                                      -----                 -----
    Total current liabilities                                                                       198,255               141,567
    Long-term liabilities:
    Deferred revenue, non-current                                                                     7,365                 5,898
    Other long-term liabilities                                                                       5,386                 5,705
                                                                                                      -----                 -----
    Total long-term liabilities                                                                      12,751                11,603
                                                                                                     ------                ------
    Total liabilities                                                                               211,006               153,170
                                                                                                    -------               -------
    Total equity:
    Common stock                                                                                        727                   688
    Additional paid-in capital                                                                      535,853               470,485
    Accumulated other comprehensive income                                                              950                   369
    Accumulated deficit                                                                            (378,761)            (343,532)
                                                                                                   --------              --------
    Total equity                                                                                    158,769               128,010
                                                                                                    -------               -------
    Total liabilities and total equity                                                                        $369,775            $281,180
                                                                                                              ========            ========

                                                                  NetSuite Inc.
                                                 Condensed Consolidated Statements of Operations
                                           (dollars and shares in thousands, except per share amounts)
                                                                   (unaudited)

                                                 Three months ended                            Twelve months ended
                                                    December 31,                                   December 31,
                                                    ------------                                   ------------
                                               2012                 2011                  2012                   2011
                                               ----                 ----                  ----                   ----
    Revenue:
    Subscription and support                          $68,534                          $54,191                         $252,903  $199,579
    Professional services and other          16,472                9,902                55,922                 36,747
                                             ------                -----                ------                 ------
    Total revenue                            85,006               64,093               308,825                236,326
    Cost of revenue:
    Subscription and support (1)             11,135                8,741                41,857                 33,083
    Professional services and other
     (1)                                     15,488               10,327                53,706                 37,777
                                             ------               ------                ------                 ------
    Total cost of revenue                    26,623               19,068                95,563                 70,860
                                             ------               ------                ------                 ------
    Gross profit                             58,383               45,025               213,262                165,466
                                             ------               ------               -------                -------
    Operating expenses:
    Product development (1)                  14,429               11,916                52,739                 43,531
    Sales and marketing (1)                  42,563               31,963               154,294                120,172
    General and administrative (1)           10,134                8,112                38,469                 31,951
                                             ------                -----                ------                 ------
    Total operating expenses                 67,126               51,991               245,502                195,654
                                             ------               ------               -------                -------
    Operating loss                           (8,743)              (6,966)             (32,240)                (30,188)
    Other income /(expenses) and
     income taxes, net                         (878)                (649)               (2,989)                (1,819)
                                               ----                 ----                ------
    Net loss                                 (9,621)              (7,615)             (35,229)                (32,007)
                                             ======                                    =======                =======
    Net loss per share                                 $(0.13)                          $(0.11)                          $(0.50)   $(0.48)
                                                       ======                           ======                           ======    ======
    Weighted average number of shares
     used in computing net loss per
     common share                            71,977               68,285                70,713                 66,919
                                             ======               ======                ======                 ======

                                      (1) Includes stock-based compensation expense, amortization of
                                          intangible assets, transaction costs for business combinations
                                          and costs associated with settlement of patent dispute as
                                          follows:

                                          Three months ended December
                                                         31,                               Twelve months ended
                                                                                               December 31,
                                                                                             ------------
                                               2012                 2011                  2012                   2011
                                               ----                 ----                  ----                   ----
    Cost of revenue:
    Subscription and support                           $1,135                             $870                           $4,691    $3,568
    Professional services and other           1,612                1,083                 5,978                  4,138
    Operating expenses:
    Product development                       3,999                3,316                15,301                 12,015
    Sales and marketing                       4,283                3,528                16,588                 13,437
    General and administrative                3,148                2,253                11,803                  9,662
                                              -----                -----                ------                  -----
    Total                                             $14,177                          $11,050                          $54,361   $42,820
                                                      =======                          =======                          =======   =======

                                                                                                                                             NetSuite Inc.
                                                                                                                 Reconciliation of Net Loss Per Share to Non-GAAP Net Income Per Share
                                                                                                                      (dollars and shares in thousands, except per share amounts)
                                                                                                                                              (unaudited)

                                                                                                                                                                                          Three months ended              Twelve months ended
                                                                                                                                                                                             December 31,                     December 31,
                                                                                                                                                                                             ------------                     ------------
                                                                                                                                                                                        2012                 2011    2012                   2011
                                                                                                                                                                                        ----                 ----    ----                   ----
    Reconciliation between GAAP operating loss and non-GAAP operating income:
    Operating loss                                                                                                                                                                             $(8,743)           $(6,966)                       $(32,240) $(30,188)
    Reversal of non-GAAP expenses:
    Stock-based compensation (a)                                                                                                                                                      12,503               10,149  48,442                 38,315
    Amortization of intangible assets and business combination costs (b)                                                                                                               1,674                  901   5,919                  3,785
    Costs associated with settlement of patent dispute (c)                                                                                                                                 -                    -       -                    720
                                                                                                                                                                                         ---                  ---     ---                    ---
    Non-GAAP operating income                                                                                                                                                                   $5,434             $4,084                         $22,121   $12,632
                                                                                                                                                                                                ======             ======                         =======   =======
    Numerator:
    Reconciliation between GAAP net loss and non-GAAP net income:
    Net loss                                                                                                                                                                                   $(9,621)           $(7,615)                       $(35,229) $(32,007)
    Stock-based compensation (a)                                                                                                                                                      12,503               10,149  48,442                 38,315
    Amortization of intangible assets and business combination costs (b)                                                                                                               1,674                  901   5,919                  3,785
    Costs associated with settlement of patent dispute (c)                                                                                                                                 -                    -       -                    720
                                                                                                                                                                                         ---                  ---     ---                    ---
    Non-GAAP net income                                                                                                                                                                         $4,556             $3,435                         $19,132   $10,813
                                                                                                                                                                                                ======             ======                         =======   =======
    Denominator:
    Reconciliation between GAAP and non-GAAP weighted average shares used in computing basic and diluted net income / (loss) per common share:
    Weighted average number of shares used in computing net loss per common                                                                                                           71,977               68,285  70,713                 66,919
    share
    Effect of dilutive securities (stock options and restricted stock awards) (d)                                                                                                      2,999                3,863   3,461                  4,287
                                                                                                                                                                                       -----                -----   -----                  -----
    Non-GAAP weighted average shares used in computing non-GAAP net                                                                                                                   74,976               72,148  74,174                 71,206
    income per common share

    GAAP net loss per share                                                                                                                                                                     $(0.13)            $(0.11)                         $(0.50)   $(0.48)
                                                                                                                                                                                                ======             ======                          ======    ======
    Non-GAAP net income per share                                                                                                                                                                $0.06              $0.05                           $0.26     $0.15
                                                                                                                                                                                                 =====              =====                           =====     =====

Use of Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements presented on a GAAP basis, NetSuite uses non-GAAP measures of operating income, net income, weighted average shares outstanding and net income per share, which are adjusted to exclude stock-based compensation expense, amortization of acquisition-related intangible assets, transaction costs for business combinations and costs associated with the settlement of a patent dispute and includes dilutive shares where applicable. We believe these adjustments are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of NetSuite’s underlying operating results and trends and our marketplace performance.

The non-GAAP results are an indication of our baseline performance that are considered by management for the purpose of making operational decisions. In addition, these non-GAAP results are the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for operating loss, net loss or basic and diluted net loss per share prepared in accordance with generally accepted accounting principles in the United States. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations.

While a large component of our expense in certain periods, we believe investors may want to exclude the effects of these items in order to compare our financial performance with that of other companies and between time periods:

    (a)             Stock-based compensation is a non-
                    cash expense accounted for in
                    accordance with FASB ASC Topic
                    718.  We believe that the
                    exclusion of stock-based
                    compensation expense allows for
                    financial results that are more
                    indicative of our operational
                    performance and provide for a
                    useful comparison of our operating
                    results to prior periods and to
                    our peer companies because stock-
                    based compensation expense varies
                    from period to period and company
                    to company due to such things as
                    differing valuation methodologies
                    and changes in stock price.

    (b)             Amortization of intangible assets
                    and transaction costs related to
                    business combinations resulted
                    principally from mergers and
                    acquisitions.  Expense for the
                    amortization of intangible assets
                    is a non-cash item, and we
                    believe the exclusion of this
                    amortization expense provides for
                    a useful comparison of our
                    operating results to prior periods
                    and to our peer companies.  In Q2
                    2012, certain customers acquired
                    in a previous business combination
                    transitioned from their legacy
                    service offering to a NetSuite
                    service offering or terminated
                    their service completely.  As a
                    result, we recorded a $401,000
                    impairment charge related to the
                    legacy product's developed
                    technology intangible asset.  This
                    impairment charge is included in
                    amortization of intangible assets.
                     Business combinations result in
                     non-continuing operating expenses
                    which would not otherwise have
                    been incurred by us in the normal
                    course of our business operations.
                     We believe the exclusion of
                     acquisition related expense items
                    allows for financial results that
                    are more indicative of our
                    continuing operations and provide
                    for a useful comparison of our
                    operating results to prior periods
                    and to our peer companies.

    (c)             In 2011, we entered into a patent
                    cross licensing agreement with a
                    large technology company which,
                    among other things, resolved a
                    patent dispute over our alleged
                    past usage of the other party's
                    technology.  This resolution
                    resulted in a charge in the second
                    quarter of 2011.  We believe the
                    impact of this patent cross
                    licensing agreement on our
                    financial statements is not
                    indicative of our continuing
                    operations and its exclusion
                    allows for financial statements
                    that provide for a useful
                    comparison of our operating
                    results to prior periods and to
                    our peer companies.

    (d)             These securities are anti-dilutive
                    on a GAAP basis as a result of the
                    Company's net loss, but are
                    considered dilutive on a non-GAAP
                    basis in periods where the Company
                    has reported positive non-GAAP
                    earnings.

                                                          NetSuite Inc.
                                         Condensed Consolidated Statements of Cash Flows
                                                      (dollars in thousands)
                                                           (unaudited)

                                                                           Twelve Months Ended December 31,
                                                                           --------------------------------
                                                                                  2012                    2011
                                                                                  ----                    ----
    Cash flows from operating activities:
    Net loss                                                                              $(35,229)             $(32,007)
    Adjustments to reconcile net loss to net cash provided
     by operating activities:
    Depreciation and amortization                                               11,006                   9,177
    Amortization of other intangible assets                                      4,580                   3,786
    Provision for accounts receivable allowances                                   616                     328
    Stock-based compensation                                                    48,442                  38,315
    Amortization of deferred commissions                                        45,312                  34,666
    Excess tax benefit on stock-based compensation                                (297)                      -
    Changes in operating assets and liabilities, net of
     acquired assets and liabilities:
    Accounts receivable                                                        (25,913)                (12,093)
    Deferred commissions                                                       (50,504)                (44,429)
    Other current assets                                                          (443)                   (837)
    Other assets                                                                   818                      84
    Accounts payable                                                             1,030                     725
    Accrued compensation                                                           940                   5,721
    Deferred revenue                                                            49,524                  30,529
    Other current liabilities                                                    5,453                   2,376
    Other long-term liabilities                                                 (1,037)                    (68)
                                                                                ------                     ---
    Net cash provided by operating activities                                   54,298                  36,273
                                                                                ------                  ------
    Cash flows from investing activities:
    Purchases of property and equipment                                        (11,843)                 (8,586)
    Capitalized internal use software                                           (3,041)                   (816)
    Cash paid in business combination                                           (9,221)                 (1,850)
                                                                                ------                  ------
    Net cash used in investing activities                                      (24,105)                (11,252)
                                                                               -------                 -------
    Cash flows from financing activities:
    Payments under capital leases                                                 (726)                   (483)
    Payments under capital leases and long-term debt -
     related party                                                              (1,550)                 (1,117)
    RSU acquired to settle employee withholding liability                         (257)                   (269)
    Excess tax benefit on stock-based compensation                                 297                       -
    Proceeds from issuance of common stock, net of
     issuance costs                                                             15,968                  14,044
                                                                                ------                  ------
    Net cash provided by financing activities                                   13,732                  12,175
                                                                                ------                  ------
    Effect of exchange rate changes on cash and cash
     equivalents                                                                   486                     (46)
                                                                                   ---                     ---
    Net change in cash and cash equivalents                                     44,411                  37,150
    Cash and cash equivalents at beginning of period                           141,448                 104,298
                                                                               -------                 -------
    Cash and cash equivalents at end of period                                            $185,859              $141,448
                                                                                          ========              ========

(Logo: http://photos.prnewswire.com/prnh/20090924/SF81218LOGO-b)

SOURCE NetSuite Inc.


Source: PR Newswire