NetSuite Announces Fourth Quarter And Fiscal 2012 Financial Results

     NetSuite Announces Fourth Quarter And Fiscal 2012 Financial Results

-- Record Q4 Revenue of $85.0 Million, a 33% Year-over-Year Increase

-- Record 2012 Revenue of $308.8 Million, 31% Growth over Prior Year

-- 2012 Operating Cash Flow of $54.3 Million, 50% Growth over Prior Year

PR Newswire

SAN MATEO, Calif., Jan. 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
 as of December31, 2012 and December31,      64,861     39,105
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    $   68,534      $   54,191      $   252,903    $  199,579
support
Professional        16,472          9,902           55,922         36,747
services and other
Total revenue       85,006          64,093          308,825        236,326
Cost of revenue:
Subscription and    11,135          8,741           41,857         33,083
support (1)
Professional
services and other  15,488          10,327          53,706         37,777
(1)
Total cost of       26,623          19,068          95,563         70,860
revenue
Gross profit        58,383          45,025          213,262        165,466
Operating expenses:
Product development 14,429          11,916          52,739         43,531
(1)
Sales and marketing 42,563          31,963          154,294        120,172
(1)
General and         10,134          8,112           38,469         31,951
administrative (1)
Total operating     67,126          51,991          245,502        195,654
expenses
Operating loss      (8,743)         (6,966)         (32,240)       (30,188)
Other income /
(expenses) and      (878)           (649)           (2,989)        (1,819)
income taxes, net
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   71,977          68,285          70,713         66,919
net loss per common
share
                    Includes stock-based compensation expense, amortization of
(1)                 intangible assets, transaction costs for business
                    combinations and costs associated with settlement of
                    patent dispute as follows:
                    Three months ended              Twelve months ended
                                                    December 31,
                    December 31,
                    2012            2011            2012           2011
Cost of revenue:
Subscription and    $   1,135       $   870         $   4,691      $  3,568
support
Professional        1,612           1,083           5,978          4,138
services and other
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         3,148           2,253           11,803         9,662
administrative
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    1,674      901        5,919       3,785
(b)
Costs associated with settlement  —          —          —           720
of patent dispute (c)
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    1,674      901        5,919       3,785
(b)
Costs associated with settlement  —          —          —           720
of patent dispute (c)
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     2,999      3,863      3,461       4,287
stock awards) (d)
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:

     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
(a)  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.
     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
(b) 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.
     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
(c) 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.
     These securities are anti-dilutive on a GAAP basis as a result of the
(d) 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             (297)             —
compensation
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   (1,550)           (1,117)
debt - related party
RSU acquired to settle employee withholding   (257)             (269)
liability
Excess tax benefit on stock-based             297               —
compensation
Proceeds from issuance of common stock, net   15,968            14,044
of issuance costs
Net cash provided by financing activities     13,732            12,175
Effect of exchange rate changes on cash and   486               (46)
cash equivalents
Net change in cash and cash equivalents       44,411            37,150
Cash and cash equivalents at beginning of     141,448           104,298
period
Cash and cash equivalents at end of period    $   185,859       $  141,448

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

SOURCE NetSuite Inc.

Website: http://www.netsuite.com
Contact: Investor Relations, Carolyn Bass, Market Street Partners,
+1-415-445-3232, ir@netsuite.com; or Media, Mei Li, NetSuite Inc.,
+1-650-627-1063, meili@netsuite.com
 
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