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NetSuite Announces Third Quarter 2009 Results
PR Newswire
Nov 04, 2009
SAN MATEO, Calif., Nov. 4 /PRNewswire-FirstCall/ -- NetSuite Inc. (NYSE: N), a leading vendor of cloud computing business management software suites, today announced operating results for its third quarter ended September 30, 2009.
Total revenue for the third quarter of 2009 was $41.7 million. Revenue from the Americas for the third quarter of 2009 was $34.7 million, while revenue from international regions was $7.0 million.
On a GAAP basis, net loss for the third quarter of 2009 was $8.0 million, or $(0.13) per share, as compared to a net loss of $6.2 million, or $(0.10) per share, for the third quarter of 2008.
Non-GAAP net income for the third quarter of 2009 was $348,000, or $0.01 per share, as compared to a non-GAAP net loss of $1.7 million, or $(0.03) per share, for the third quarter of 2008.
Items presented on a non-GAAP basis exclude expenses related to stock-based compensation, the amortization of intangible assets, and transaction costs for business combinations. A reconciliation of GAAP net income/(loss) to non-GAAP net income/(loss) is provided below in a table immediately following the Condensed Consolidated Statements of Operations, along with an explanation of why these non-GAAP financial measures are useful to investors and how they are used by management.
"We are very pleased to report record revenue and record cash flow, and to report our highest number of NetSuite OneWorld customer wins in any quarter," said NetSuite CEO Zach Nelson. "Our customer wins and new SuiteCloud partnerships indicate customers are running from legacy applications like SAP and Microsoft Great Plains to NetSuite's cloud computing offerings."
NetSuite's Third Quarter 2009 Highlights Include:
-- Announced that three technology companies that recently completed IPOs
have chosen NetSuite to run key business processes: LogMeIn, OpenTable
and SolarWinds.
-- Announced that Jollibee, one of the world's largest fast-food chains,
chose NetSuite OneWorld to manage subsidiaries and divisions across
China, Vietnam and the U.S.
-- Partnered with Fujitsu to distribute, resell, and support NetSuite
Release J, Japan's first and only fully-localized, Software as a Service
business management suite.
-- Launched NetSuite on the iPhone with support for dashboards, sales order
records, customer records, click-to-call and more.
-- Integrated United States Postal Service shipping services with NetSuite,
providing instant access to key USPS services, including price quotes,
shipping label generation, package tracking numbers and customs
documentation.
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 third quarter financial results. 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 Web site at http://www.netsuite.com/investors. The live call can be accessed by dialing 800-227-9428 (U.S.) or 785-830-1925 (outside the U.S.) and referencing passcode: 385-8094. 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: 385-8094.
About NetSuite
NetSuite Inc. is a leading vendor of cloud computing business management software suites for mid-sized businesses and divisions of large companies. NetSuite enables companies to manage core business operations in a single system, which includes accounting/ERP, customer relationship management (CRM), and Ecommerce. NetSuite's patent-pending "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
NetSuite's scheduled conference call will contain forward-looking statements relating to expectations, plans, prospects and financial results for NetSuite, including our stated expectation for 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 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 during the conference call will be based on information available to the Company 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 the Company's data center may occur; a security breach may impact operations; risks associated with material defects or errors in the Company's 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; failure to protect and enforce our 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; increased demands on employees and costs associated with operating as a public company; evolving government regulation of the Internet and Ecommerce; changes to current accounting rules; and general political or destabilizing events, including war, conflict or acts of terrorism; and other risks and uncertainties.
Customers who purchase our service 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 the Company's Annual Report on Form 10-K filed on March 13, 2009, 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 Web site at www.netsuite.com.
Non-GAAP Financial Measures
The Company's stated results include certain non-GAAP financial measures, including non-GAAP operating income/(loss), net income/(loss), weighted average shares outstanding, and net income/(loss) per share. Non-GAAP net income/(loss) excludes expenses related to stock-based compensation expense, amortization of intangible assets and transaction costs for business combinations. Non-GAAP net income/(loss) excludes 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. The Company considers these events to be non-routine, and believes these adjustments provide useful comparative information to investors.
The Company considers these non-GAAP financial measures to be important because they provide useful measures of the operating performance of the Company and are used by the Company's management for that purpose. In addition, investors often use measures such as these to evaluate the financial performance of a company. Non-GAAP results are presented for supplemental informational purposes only for understanding the Company's 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 the Company's Investor Relations Web site at www.netsuite.com/investors. The contents of the Web site are not incorporated by reference into this press release.
Click here to download the press release, financial tables and non-GAAP reconciliation.
NetSuite and the NetSuite logo are registered service marks of NetSuite Inc.
NetSuite Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
(unaudited)
December 31, September 30,
2008 2009
---- ----
Assets
Current assets:
Cash and cash equivalents $123,638 $97,768
Accounts receivable, net of allowances
of $589 and $652 as of December 31,
2008 and September 30, 2009, respectively 26,675 24,975
Deferred commissions 11,363 10,205
Other current assets 2,385 3,672
----- -----
Total current assets 164,061 136,620
Property and equipment, net 15,413 15,302
Deferred commissions, non-current 1,688 1,044
Goodwill 17,824 26,739
Other intangible assets, net 8,712 18,638
Other assets 2,636 2,469
----- -----
Total assets $210,334 $200,812
======== ========
Liabilities and equity
Current liabilities:
Accounts payable $2,893 $2,149
Deferred revenue 66,667 63,461
Accrued compensation 10,863 9,963
Accrued expenses 5,758 4,799
Other current liabilities 4,363 4,825
----- -----
Total current liabilities 90,544 85,197
Long-term liabilities:
Deferred revenue, non-current 7,204 6,006
Other long-term liabilities 3,199 2,382
----- -----
Total long-term liabilities 10,403 8,388
------ -----
Total liabilities 100,947 93,585
------- ------
Equity:
NetSuite Inc. stockholders' equity 108,992 107,499
Noncontrolling interest 395 (272)
--- ----
Total equity 109,387 107,227
------- -------
Total liabilities and equity $210,334 $200,812
======== ========
NetSuite Inc.
Condensed Consolidated Statements of Operations
(Dollars and shares in thousands, except per share amounts)
(unaudited)
Three months ended
------------------
September December March June September
30, 2008 31, 2008 31, 2009 30, 2009 30, 2009
-------- -------- -------- -------- --------
Revenue $40,404 $41,401 $41,567 $40,304 $41,705
Cost of revenue (1) 13,733 13,069 13,035 13,556 14,493
------ ------ ------ ------ ------
Gross profit 26,671 28,332 28,532 26,748 27,212
------ ------ ------ ------ ------
Operating expenses:
Product development (1) 6,056 6,926 6,788 6,770 7,369
Sales and marketing (1) 20,221 19,516 18,797 18,264 19,478
General and
administrative (1) 6,426 6,766 6,910 6,717 8,323
----- ----- ----- ----- -----
Total operating
expenses 32,703 33,208 32,495 31,751 35,170
------ ------ ------ ------ ------
Operating loss (6,032) (4,876) (3,963) (5,003) (7,958)
Other income /
(expenses) and income
taxes, net (411) 166 17 (169) (318)
---- --- -- ---- ----
Net loss (6,443) (4,710) (3,946) (5,172) (8,276)
Less: Net loss
attributable to the
noncontrolling interest 201 245 201 182 247
--- --- --- --- ---
Net loss attributable
to NetSuite Inc. $(6,242) $(4,465) $(3,745) $(4,990) $(8,029)
======= ======= ======= ======= =======
Net loss per share attributable to NetSuite Inc. common
shareholders $(0.10) $(0.07) $(0.06) $(0.08) $(0.13)
====== ====== ====== ====== ======
Weighted average number of shares used in
computing net loss
per common share 60,436 60,838 61,248 61,853 62,100
====== ====== ====== ====== ======
----------------------------
(1) Includes stock-based compensation expense, amortization of intangible
assets and transaction costs for business combinations as follows:
Three months ended
------------------
September December March June September
30, 2008 31, 2008 31, 2009 30, 2009 30, 2009
-------- -------- -------- -------- --------
Cost of revenue $1,113 $1,056 $1,044 $1,238 $1,373
Product development 1,147 1,451 1,350 1,443 1,709
Sales and marketing 1,234 1,239 1,204 1,462 2,242
General and
administrative 1,048 1,253 1,155 1,534 3,053
----- ----- ----- ----- -----
Total stock-based
compensation expense,
amortization of
intangible assets and
transaction costs for
business combinations $4,542 $4,999 $4,753 $5,677 $8,377
====== ====== ====== ====== ======
NetSuite Inc.
Reconciliation of Net Loss Per Share to Non-GAAP Net Income / (Loss) Per
Share
(Dollars and shares in thousands, except per share amounts)
(unaudited)
Three months ended
------------------
September December March June September
30, 2008 31, 2008 31, 2009 30, 2009 30, 2009
-------- -------- -------- -------- -------
Numerator:
Reconciliation between
GAAP and non-GAAP net
loss:
Net loss attributable
to NetSuite Inc. $(6,242) $(4,465) $(3,745) $(4,990) $(8,029)
Reversal of stock-based
compensation expense,
amortization of
intangible assets and
transaction
costs for business
combinations (a) 4,542 4,999 4,753 5,677 8,377
----- ----- ----- ----- -----
Non-GAAP net
income / (loss)
attributable to :
NetSuite Inc. $(1,700) $534 $1,008 $687 $348
======= ==== ====== ==== ====
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 share 60,436 60,838 61,248 61,853 62,100
Effect of dilutive
securities (stock
options, restricted
stock awards and
warrants) (b) - 2,976 2,710 2,520 2,874
--- ----- ----- ----- -----
Non-GAAP weighted
average shares used
in computing non-GAAP
net income / (loss)
per common share 60,436 63,814 63,958 64,373 64,974
====== ====== ====== ====== ======
GAAP net loss per share
attributable to NetSuite
Inc. common shareholders $(0.10) $(0.07) $(0.06) $(0.08) $(0.13)
====== ====== ====== ====== ======
Non-GAAP net income /
(loss) per share
attributable
to NetSuite Inc.
common shareholders $(0.03) $0.01 $0.02 $0.01 $0.01
====== ===== ===== ===== =====
Use of Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements presented
on a GAAP basis, NetSuite uses non-GAAP measures of net income / (loss),
weighted average shares outstanding and net income / (loss) per share,
which are adjusted to exclude stock-based compensation expense,
amortization of acquisition-related intangible assets and transaction
costs for business combinations to include 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 ind
(a) Stock-based compensation is a non-cash expense accounted for in
accordance with Statement of Financial Accounting Standards No. 123(R)
for options granted after January 1, 2006, and Accounting Principles
Board Opinion No. 25 for options granted before January 1, 2006.
Amortization of intangible assets and transaction costs related to
business combinations resulted principally from mergers and acquisitions.
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.
(b) 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)
Nine months ended
September 30,
-------------
2008 2009
---- ----
Cash flows from operating activities:
Net loss attributable to NetSuite Inc. $(11,399) $(16,764)
Adjustments to reconcile net loss to net
cash provided by / (used in)
operating activities:
Depreciation and amortization 3,823 5,171
Amortization of other intangible assets 967 2,413
Provision for accounts receivable allowances 507 1,309
Stock-based compensation 7,411 14,335
Amortization of deferred commissions 17,112 14,719
Loss on disposal of property and equipment 43 33
Noncontrolling interests (851) (629)
Changes in operating assets and liabilities,
net of acquired assets and liabilities:
Accounts receivable (4,410) 1,766
Deferred commissions (15,242) (12,913)
Other current assets (366) (1,211)
Other assets (342) 198
Accounts payable (285) (574)
Accrued compensation 926 (1,179)
Deferred revenue (800) (4,992)
Other current liabilities (972) (218)
Other long-term liabilities 186 (241)
--- ----
Net cash provided by / (used in) operating
activities (3,692) 1,223
------ -----
Cash flows from investing activities:
Proceeds from disposal of property and equipment 18 -
Purchases of property and equipment (4,496) (4,113)
Capitalized internal use software (184) (188)
Advances on line of credit - (70)
Business combinations, net of cash received (28,221) (21,930)
Acquisition of other intangible assets - (275)
--- ----
Net cash used in investing activities (32,883) (26,576)
------- -------
Cash flows from financing activities:
Payment of stock offering costs (950) -
Payments under capital leases and long-term debt (1,182) (1,191)
Proceeds from issuance of common stock 1,897 715
----- ---
Net cash used in financing activities (235) (476)
---- ----
Effect of exchange rate changes on cash and cash
equivalents 438 (41)
--- ---
Net change in cash and cash equivalents (36,372) (25,870)
Cash and cash equivalents at beginning of period 169,408 123,638
------- -------
Cash and cash equivalents at end of period $133,036 $97,768
======== =======
(Logo: http://www.newscom.com/cgi-bin/prnh/20090924/SF81218LOGO-b)
SOURCE NetSuite Inc.
Copyright (2009) PR Newswire. All Rights Reserved.
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