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NetSuite Announces Fourth Quarter and Fiscal 2009 Financial Results
* Reports Record Revenue of $43.0 Million for the Fourth Quarter of 2009
* Reports Record Quarterly and Annual Operating Cash Flow, Improving Annually by $13.7 Million versus 2008
* Displays Continued Up Market Success with a Quarterly Record Average Selling Price for New Customers
* Records All Time Quarterly Record Number of NetSuite OneWorld Sales
SAN MATEO, Calif., Feb. 4 /PRNewswire-FirstCall/ -- NetSuite Inc. ( NYSE: N), a leading vendor of cloud computing business management software suites, today announced operating results for its fourth quarter and fiscal year ended December 31, 2009.
Total revenue for the year was $166.5 million, a year-over-year increase of 9%. Total revenue for the fourth quarter was $43.0 million. Revenue from the Americas for the fourth quarter of 2009 was $35.0 million, while revenue from international regions was $8.0 million. NetSuite added approximately 295 new customers in the fourth quarter.
On a GAAP basis, net loss for the fourth quarter of 2009 was $6.5 million, or $(0.10) per share, compared to a net loss of $4.5 million, or $(0.07) per share in the fourth quarter of 2008. On a GAAP basis, net loss for the year ended December 31, 2009 was $23.3 million, or $(0.38) per share, compared to a net loss of $15.9 million, or $(0.26) per share in 2008. GAAP operating loss for the year ended December 31, 2009 was $23.5 million, compared to a GAAP operating loss of $18.4 million in 2008.
Non-GAAP net income for the fourth quarter of 2009 was $1.3 million, or $0.02 per share, as compared to a non-GAAP net income of $534,000, or $0.01 per share, for the fourth quarter of 2008. Non-GAAP net income for the year ended December 31, 2009 improved 236% to $3.4 million, or $0.05 per share, compared to a non-GAAP net loss of $2.5 million, or $(0.04) per share in 2008. Non-GAAP operating income for the year ended December 31, 2009 was $3.2 million, compared to a non-GAAP operating loss of $5.0 million in 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) and GAAP operating income/(loss) to non-GAAP operating 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.
"In a year that saw many of our ERP competitors' sales decline, NetSuite achieved record financial results," said Zach Nelson, CEO of NetSuite. "Our ten year head start in delivering cloud computing business applications bodes well for us in 2010 as companies continue to move their core business applications from 1990's style client-server offerings to NetSuite solutions that have cloud computing at their core."
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 2009 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 www.netsuite.com/investors. The live call can be accessed by dialing 877-419-6593 (U.S.) or 719-325-4793 (outside the U.S.) and referencing passcode: 319-4008. 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: 319-4008.
About NetSuite
NetSuite Inc. is a leading vendor of cloud computing business management software suites for mid-sized businesses and divisions of large enterprises. NetSuite enables companies to manage core key 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
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 stated expectation for 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 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 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 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 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 operating 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,
-------------------------
2008 2009
---- ----
Assets
Current assets:
Cash and cash equivalents $123,638 $96,355
Accounts receivable, net of allowances
of $589 and $921 as of December 31,
2008 and 2009, respectively 26,675 25,776
Deferred commissions 11,363 11,726
Other current assets 2,385 4,922
-------- --------
Total current assets 164,061 138,779
Property and equipment, net 15,413 14,731
Deferred commissions, non-current 1,688 1,040
Goodwill 17,824 28,095
Other intangible assets, net 8,712 17,073
Other assets 2,636 2,506
-------- --------
Total assets $210,334 $202,224
======== ========
Liabilities and equity
Current liabilities:
Accounts payable $2,893 $1,147
Deferred revenue 66,667 66,973
Accrued compensation 10,863 10,562
Accrued expenses 5,758 5,154
Other current liabilities 4,363 5,716
-------- --------
Total current liabilities 90,544 89,552
Long-term liabilities:
Deferred revenue, non-current 7,204 5,748
Other long-term liabilities 3,199 2,217
-------- --------
Total long-term liabilities 10,403 7,965
-------- --------
Total liabilities 100,947 97,517
-------- --------
Equity:
NetSuite Inc. stockholders' equity 108,992 104,833
Noncontrolling interest 395 (126)
-------- --------
Total equity 109,387 104,707
-------- --------
Total liabilities and equity $210,334 $202,224
======== ========
NetSuite Inc.
Condensed Consolidated Statements of Operations
(Dollars and shares in thousands, except per share amounts)
(unaudited)
Three months ended
--------------------------------------------------------------
December 31, March 31, June 30, September 30, December 31,
2008 2009 2009 2009 2009
---- ---- ---- ---- ----
Revenue $41,401 $41,567 $40,304 $41,705 $42,964
Cost of
revenue (1) 13,069 13,035 13,556 14,493 15,021
------- ------- ------- ------- -------
Gross profit 28,332 28,532 26,748 27,212 27,943
------- ------- ------- ------- -------
Operating
expenses:
Product
development
(1) 6,926 6,788 6,770 7,369 7,650
Sales and
marketing
(1) 19,516 18,797 18,264 19,478 19,626
General
and
administrative
(1) 6,766 6,910 6,717 8,323 7,265
------- ------- ------- ------- -------
Total
operating
expenses 33,208 32,495 31,751 35,170 34,541
------- ------- ------- ------- -------
Operating
loss (4,876) (3,963) (5,003) (7,958) (6,598)
Other income /
(expenses)
and income
taxes, net 166 17 (169) (318) (120)
------- ------- ------- ------- -------
Net loss (4,710) (3,946) (5,172) (8,276) (6,718)
Less: Net
loss
attributable
to the
noncontrolling
interest 245 201 182 247 178
------- ------- ------- ------- -------
Net loss
attributable
to NetSuite
Inc. $(4,465) $(3,745) $(4,990) $(8,029) $(6,540)
======= ======= ======= ======= =======
Net loss
per share
attributable
to NetSuite
Inc. common
shareholders $(0.07) $(0.06) $(0.08) $(0.13) $(0.10)
======= ======= ======= ======= =======
Weighted
average
number
of shares
used in
computing
net loss
per common
share 60,838 61,248 61,853 62,100 62,545
======= ======= ======= ======= =======
(1) Includes stock-based compensation expense, amortization of intangible
assets and transaction costs for business combinations as follows:
Three months ended
--------------------------------------------------------------
December 31, March 31, June 30, September 30, December 31,
2008 2009 2009 2009 2009
---- ---- ---- ---- ----
Cost of
revenue $1,056 $1,044 $1,238 $1,373 $1,634
Product
development 1,451 1,350 1,443 1,709 2,139
Sales and
marketing 1,239 1,204 1,462 2,242 2,170
General
and
administrative 1,253 1,155 1,534 3,053 1,935
------- ------- ------- ------- -------
Total
stock-
based
compensation
expense,
amortization
of
intangible
assets
and
transaction
costs
for
business
combinations 4,999 $4,753 $5,677 $8,377 $7,878
======= ======= ======= ======= =======
NetSuite Inc.
Condensed Consolidated Statements of Operations
(Dollars and shares in thousands, except per share amounts)
(unaudited)
Year ended
------------------------------
December 31, December 31,
2008 2009
---- ----
Revenue $152,476 $166,540
Cost of revenue (1) 48,582 56,105
-------- --------
Gross profit 103,894 110,435
-------- --------
Operating expenses:
Product development (1) 21,516 28,577
Sales and marketing (1) 76,943 76,165
General and administrative (1) 23,804 29,215
-------- --------
Total operating expenses 122,263 133,957
-------- --------
Operating loss (18,369) (23,522)
Other income / (expenses) and income
taxes, net 1,409 (590)
-------- --------
Net loss (16,960) (24,112)
Less: Net loss attributable to the
noncontrolling interest 1,096 808
-------- --------
Net loss attributable to NetSuite Inc. $(15,864) $(23,304)
======== ========
Net loss per share attributable to
NetSuite Inc. common
shareholders $(0.26) $(0.38)
Weighted average number of shares used in
computing net loss per common share 60,385 61,941
(1) Includes stock-based compensation expense, amortization of intangible
assets and transaction costs for business combinations as follows:
Year ended
------------------------------
December 31, December 31,
2008 2009
---- ----
Cost of revenue $2,988 $5,289
Product development 3,629 6,641
Sales and marketing 3,375 7,078
General and administrative 3,386 7,677
Total stock-based compensation expense
and amortization of intangible assets $13,378 $26,685
======== ========
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
--------------------------------------------------------------
December 31, March 31, June 30, September 30, December 31,
2008 2009 2009 2009 2009
---- ---- ---- ---- ----
Reconciliation
between GAAP
and non-GAAP
operating
income / (loss):
Operating
loss $(4,876) $(3,963) $(5,003) $(7,958) $(6,598)
Reversal of
stock-based
compensation
expense,
amortization
of intangible
assets and
transaction
costs for
business
combinations
(a) 4,999 4,753 5,677 8,377 7,878
------- ------- ------- ------- -------
Non-GAAP
operating
income $123 $790 $674 $419 $1,280
======= ======= ======= ======= =======
Numerator:
Reconciliation
between GAAP
and non-GAAP
net income /
(loss):
Net loss
attributable
to NetSuite
Inc. $(4,465) $(3,745) $(4,990) $(8,029) $(6,540)
Reversal
of stock-
based
compensation
expense,
amortization
of intangible
assets and
transaction
costs for
business
combinations
(a) 4,999 4,753 5,677 8,377 7,878
------- ------- ------- ------- -------
Non-GAAP
net income
attributable
to:
NetSuite
Inc. $534 $1,008 $687 $348 $1,338
======= ======= ======= ======= =======
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 60,838 61,248 61,853 62,100 62,545
Effect of
dilutive
securities
(stock
options,
restricted
stock
awards
and
warrants)
(b) 2,976 2,710 2,520 2,874 2,914
------- ------- ------- ------- -------
Non-GAAP
weighted
average
shares
used in
computing
non-GAAP
net
income /
(loss)
per
common
share 63,814 63,958 64,373 64,974 65,459
======= ======= ======= ======= =======
GAAP net
loss per
share
attributable
to NetSuite
Inc.
common
shareholders $(0.07) $(0.06) $(0.08) $(0.13) $(0.10)
======= ======= ======= ======= =======
Non-GAAP
net income
per share
attributable
to NetSuite
Inc. common
shareholders $0.01 $0.02 $0.01 $0.01 $0.02
======= ======= ======= ======= =======
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)
Year ended
------------------------------
December 31, December 31,
2008 2009
---- ----
Reconciliation between GAAP and non-GAAP
operating income / (loss):
Operating loss $(18,369) $(23,522)
Reversal of stock-based compensation
expense, amortization of intangible
assets and transaction costs for
business combinations (a) 13,378 26,685
-------- --------
Non-GAAP operating income $(4,991) $3,163
======== ========
Numerator:
Reconciliation between GAAP and non-GAAP
net income / (loss):
Net loss attributable to NetSuite Inc. $(15,864) $(23,304)
Reversal of stock-based compensation
expense, amortization of intangible
assets and transaction costs for
business combinations (a) 13,378 26,685
-------- --------
Non-GAAP net income / (loss)
attributable to :
NetSuite Inc. $(2,486) $3,381
======== ========
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 60,385 61,941
Effect of dilutive securities (stock
options, restricted stock awards
and warrants) (b) - 2,646
-------- --------
Non-GAAP weighted average shares used
in computing non-GAAP net income /
(loss) per common share 60,385 64,587
======== ========
GAAP net loss per share attributable to
NetSuite Inc. common shareholders $(0.26) $(0.38)
======== ========
Non-GAAP net income / (loss) per share
attributable to NetSuite Inc. common
shareholders $(0.04) $0.05
-------- --------
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
that are an indication of our baseline performance 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 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.
(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)
Year ended
---------------------
December 31,
2008 2009
---- ----
Cash provided by / (used in) from operating
activities:
Net loss attributable to NetSuite Inc. $(15,864) $(23,304)
Adjustments to reconcile net loss to net
cash provided by / (used in) operating
activities:
Depreciation and amortization 5,330 7,107
Amortization of other intangible assets 1,604 3,627
Provision for accounts receivable
allowances 773 1,692
Stock-based compensation 11,774 20,718
Amortization of deferred commissions 22,709 19,946
Loss on disposal of property and
equipment 34 12
Noncontrolling interests (1,096) (808)
Changes in operating assets and
liabilities, net of acquired assets
and liabilities:
Accounts receivable (8,722) 353
Deferred commissions (20,217) (19,663)
Other current assets (552) (2,367)
Other assets (516) 224
Accounts payable (170) (1,249)
Accrued compensation 1,925 (578)
Deferred revenue (3,312) (2,241)
Other current liabilities (3,258) 1,743
Other long-term liabilities 590 (454)
-------- --------
Net cash provided by / (used in) operating
activities (8,968) 4,758
-------- --------
Cash flows used in investing activities:
Proceeds from disposal of property and
equipment 28 -
Purchases of property and equipment (7,265) (6,104)
Capitalized internal use software (266) (254)
Advances on line of credit (330) (157)
Business combinations, net of cash
received (28,725) (21,937)
Acquisition of other intangible assets (275) (275)
-------- --------
Net cash used in investing activities (36,833) (28,727)
-------- --------
Cash flows used in financing activities:
Purchase of noncontrolling interest - (3,000)
Payments under capital leases and
long-term debt (1,589) (1,638)
Proceeds from issuance of common stock 720 1,415
-------- --------
Net cash used in financing activities (869) (3,223)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents 900 (91)
-------- --------
Net change in cash and cash equivalents (45,770) (27,283)
Cash and cash equivalents at beginning
of period 169,408 123,638
-------- --------
Cash and cash equivalents at end of
period $123,638 $96,355
======== ========
(Logo: http://www.newscom.com/cgi-bin/prnh/20090924/SF81218LOGO-b)
SOURCE NetSuite Inc.
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