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, firstname.lastname@example.org; or Media, Mei Li, NetSuite Inc., +1-650-627-1063, email@example.com
NetSuite Announces Fourth Quarter And Fiscal 2012 Financial Results
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