Published: February 14, 2008
NetSuite Announces Fourth Quarter and Fiscal Year 2007 Results
SAN MATEO, Calif., Feb. 14 /PRNewswire-FirstCall/ -- NetSuite Inc.
(NYSE: N), a leading vendor of on-demand, integrated business management
application suites that include Accounting / Enterprise Resource Planning
(ERP), Customer Relationship Management (CRM) and Ecommerce software for small
and medium-sized businesses and divisions of large companies, today announced
operating results for its fourth quarter and fiscal year ended December 31,
2007.
(Logo: http://www.newscom.com/cgi-bin/prnh/20021024/SFTH024LOGO)
NetSuite announced record revenue for the fourth quarter and fiscal year
ended December 31, 2007. Total revenue for the year was $108.5 million, a
year-over-year increase of 62%. Total revenue for the fourth quarter was
$31.7 million, a 57% increase over the fourth quarter of 2006, and a
13% increase over the third quarter of 2007. The fourth quarter of 2007
marked the 33rd consecutive quarter of increased revenue for NetSuite.
On a GAAP basis, net loss for the fourth quarter of 2007 was
$(3.3 million), or $(0.22) per share, compared to $(8.1 million), or
$(1.25) per share in the fourth quarter of 2006. On a GAAP basis, net loss
for the year ended December 31, 2007 was $(23.9 million), or $(2.45) per
share, compared to $(35.7 million), or $(6.42) per share, in 2006.
Net loss on a non-GAAP basis for the fourth quarter of 2007 was
$(842,000), or $(0.01) per share, compared with $(3.9 million), or $(0.07) per
share in the fourth quarter of 2006, an improvement of 78%. Net loss on a
non-GAAP basis for the year ended December 31, 2007 was $(5.7 million), or
$(0.10) per share, compared to $(20.4 million), or $(0.36) per share, in 2006,
an improvement of 72%.
Net loss on a non-GAAP basis excludes stock-based compensation. Net loss
per share on a non-GAAP basis also includes certain adjustments to outstanding
shares of common stock based upon the conversion of convertible preferred
stock to common stock and the issuance of common stock in connection with the
Company's Q4 07 initial public offering. A reconciliation of net loss and net
loss per share on a non-GAAP basis to their comparable measures on a GAAP
basis is provided below in a table immediately following the Condensed
Consolidated Statements of Operations.
"Our fourth quarter and fiscal year 2007 results capped off the best year
in our history by every measure," said Zach Nelson, CEO of NetSuite. "We head
into 2008 with tremendous market, customer and product momentum, not just in
the U.S. but around the world."
Revenue from the Americas for the year ended 2007 was $89.3 million, while
revenue from international regions doubled to $19.2 million. The Company
added approximately 430 new customers in the fourth quarter and ended the year
with over 5,600 active customers. The NetSuite platform had more than
930,000 unique log-ins during the fourth quarter, making it one of the most
widely used software as a service applications in the world.
In addition, NetSuite's Board of Directors recently elected Ms. Deborah
Farrington as the Board's Lead Independent Director. Ms. Farrington is
expected to serve in this capacity for two years following the annual
stockholder meeting expected to take place in May 2008.
Outlook
Based on information as of February 14, 2008, NetSuite is providing the
following outlook for its first quarter of 2008 and its full fiscal year 2008:
Q1 FY08: For the first quarter of 2008, NetSuite expects total revenue in
the range of $33 million to $34 million. Non-GAAP net loss, which excludes
the non-cash impact of stock-based compensation expense, is expected to be
in the range of $(1.5 million) to $(0.5 million). Non-GAAP loss per share
is expected to be in the range of approximately $(0.02) to $(0.01).
Weighted average shares for the quarter are estimated to be approximately
60.1 million shares.
Full Year FY08: For the full year 2008, NetSuite expects total revenue in
the range of $153 million to $156 million. Non-GAAP net loss, which
excludes the non-cash impact of stock-based compensation expense, is
expected to be in the range of $(2.5 million) to $(0.5 million). Non-GAAP
loss per share is expected to be in the range of approximately $(0.04) to
$(0.01). Weighted average shares for the year are estimated to be
approximately 61.3 million shares.
Conference Call
NetSuite will host a conference call to discuss its fourth quarter and
full fiscal year 2007 results at 2:00 p.m. Pacific Standard Time today. A
live audio webcast of the conference call, together with detailed financial
information, can be accessed through the investors section of the Company's
web site at http://www.netsuite.com/investors. In addition, an archive of the
webcast can be accessed through the same link for at least 30 days.
Participants may also call into the conference call by calling 888-727-7693
domestically and 913-312-1481 internationally. A replay of the call will be
available at 888-203-1112 or 719-457-0820, passcode 6478447, until midnight
(PST) February 16, 2008.
About NetSuite
NetSuite Inc. is a leading vendor of on-demand, integrated business
management application suites for small and medium-sized businesses. NetSuite
enables companies to manage core business operations in a single system, which
includes Accounting / Enterprise Resource Planning (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.
Cautionary Note Regarding Forward-Looking Statements
This press release and scheduled conference call contain forward-looking
statements relating to expectations, plans, prospects, or financial results
for NetSuite, which include but are not limited to the outlook stated above.
These forward-looking statements are based upon current expectations and
beliefs of NetSuite's management as of February 14, 2008 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 in this press release are based on information
available to the Company as of the date hereof, 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; 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; the risk of loss of power or disruption in Internet
service; failure to manage growth; the ability to manage operations when faced
with competitive pricing and marketing strategies by competitors; 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 e-commerce; changes to current accounting rules; general political,
economic and market conditions and events, including war, conflict or acts of
terrorism; and other risks and uncertainties.
For a detailed discussion of these and other cautionary statements, please
refer to the risk factors discussed in filings with U.S. Securities and
Exchange Commission ("SEC"), including but not limited to the Company's
Registration Statement on Form S-1/A filed on December 19, 2007, and any
subsequently filed reports on Forms 10-K and 10-Q. All documents are
available through the SEC's Electronic Data Gathering Analysis and Retrieval
system (EDGAR) at http://www.sec.gov or NetSuite's website at
http://www.netsuite.com.
Non-GAAP Financial Measures
The Company's stated results include certain non-GAAP measures, including
net loss, weighted average shares outstanding, and net loss per share.
Non-GAAP net loss excludes stock-based compensation as these expenses are
non-cash items that are difficult to predict and are often excluded by other
companies. Additionally, non-GAAP weighted average shares outstanding, the
denominator for the non-GAAP net loss per share calculation, assumes the
conversion of preferred stock and the issuance of common stock as part of the
Company's Initial Public Offering had occurred at the beginning of the
applicable period. 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 measures to be important because they
provide useful measures of the operational 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 Investors page of
NetSuite's website at http://www.netsuite.com/investors.
NOTE: NetSuite and the NetSuite logo are registered service marks of
NetSuite Inc.
NETSUITE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS -- UNAUDITED
(In thousands)
December 31,
2006 2007
ASSETS
Current assets:
Cash and cash equivalents $9,910 $169,408
Accounts receivable, net 15,274 19,252
Deferred commissions 11,871 13,241
Other current assets 935 1,778
Total current assets 37,990 203,679
Property and equipment, net 5,513 12,068
Deferred commissions, non-current 3,353 2,275
Other assets 1,197 1,309
Total assets $48,053 $219,331
LIABILITIES, CONVERTIBLE PREFERRED STOCK,
MINORITY INTEREST, AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable $1,770 $2,788
Deferred revenue 52,660 66,368
Accrued compensation 6,614 8,552
Other current liabilities 9,102 13,603
Total current liabilities 70,146 91,311
Long-term liabilities:
Line of credit from related party 7,013 -
Deferred revenue, non-current 19,109 11,172
Other long-term liabilities 1,453 4,257
Total long-term liabilities 27,575 15,429
Total liabilities 97,721 106,740
Minority interest 1,945 1,330
Convertible preferred stock 125,654 -
Stockholders equity (deficit) (177,267) 111,261
Total liabilities, convertible
preferred stock, minority interest
and stockholders' equity (deficit) $48,053 $219,331
NETSUITE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
(In thousands, except per share data)
Three Months Ended Year Ended
Dec. Sept. Dec. Dec. Dec.
31, 30, 31, 31, 31,
2006 2007 2006 2007
Revenue $20,189 $28,065 $31,734 $67,202 $108,541
Cost of revenue (1) 6,535 8,440 9,583 22,993 33,766
Gross Profit 13,654 19,625 22,151 44,209 74,775
Operating expenses:
Product development (1) 5,420 3,683 4,990 20,690 23,703
Sales and marketing (1) 12,207 14,083 16,026 43,892 57,932
General and
administrative (1) 4,137 3,622 4,423 14,619 16,720
Total operating
expenses 21,764 21,388 25,439 79,201 98,355
Operating loss (8,110) (1,763) (3,288) (34,992) (23,580)
Other income (expense),
net, including the effect
of minority interest and
income taxes (7) (32) 6 (730) (326)
Net loss $(8,117) $(1,795) $(3,282) $(35,722) $(23,906)
Net loss per common share $(1.25) $(0.21) $(0.22) $(6.42) $(2.45)
Weighted average number of
shares used in computing
net loss per common share 6,469 8,412 15,246 5,567 9,774
(1) Includes stock-based
compensation expense as
follows:
Three Months Ended Year Ended
Dec. Sept. Dec. Dec. Dec.
31, 30, 31, 31, 31,
2006 2007 2006 2007
Cost of revenue $10 $125 $183 $19 $1,703
Product development 2,419 256 1,478 8,885 10,376
Sales and marketing 27 46 225 75 2,540
General and
administrative 1,794 215 554 6,329 3,605
Total stock-based
compensation expense $4,250 $642 $2,440 $15,308 $18,224
NETSUITE INC.
RECONCILIATION OF NET LOSS PER SHARE TO NON-GAAP NET LOSS PER SHARE --
UNAUDITED
(In thousands, except per share data)
Three Months Ended Year Ended
Dec. Sept. Dec. Dec. Dec.
31, 30, 31, 31, 31,
2006 2007 2006 2007
Numerator:
Reconciliation between
GAAP and non-GAAP Net
loss:
Net loss applicable to
common shareholders,
as reported $(8,117) $(1,795) $(3,282) $(35,722) $(23,906)
Reversal of
amortization of stock
based-compensation (a) 4,250 642 2,440 15,308 18,224
Non-GAAP net loss: $(3,867) $(1,153) $(842) $(20,414) $(5,682)
Denominator:
Reconciliation between
GAAP and non-GAAP
weighted average shares
used in computing basic
and diluted net loss
per common share:
Weighted average number
of shares used in
computing basic and
diluted net loss per
common share 6,469 8,412 15,246 5,567 9,774
Pro forma adjustments
to reflect assumed
weighted average
effect of issuing
shares in initial
public offering on
January 1, 2006 (b) 6,765 6,765 5,883 6,765 6,543
Pro forma adjustments
to reflect assumed
weighted average
effect of conversion
of preferred stock
on January 1, 2006
based on conversion
price set at initial
public offering
date (c) 44,677 44,677 38,849 44,677 43,207
Non-GAAP weighted
average shares used
in computing
non-GAAP basic and
diluted net loss
per common share 57,911 59,854 59,978 57,009 59,524
GAAP net loss per
share $(1.25) $(0.21) $(0.22) $(6.42) $(2.45)
Non-GAAP net loss per
share $(0.07) $(0.02) $(0.01) $(0.36) $(0.10)
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 loss, weighted average
shares outstanding and net loss per share, which are adjusted to exclude
stock-based compensation expense, and 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 indicators management uses as a basis for our planning and forecasting
of future periods. The presentation of this addition
(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. While
a large component of our expense in certain periods, we believe
investors want to exclude the effects of stock-based compensation
expense in order to compare our financial performance with that of
other companies and between time periods.
(b) Represents common shares issued in the company's IPO as if the shares
were issued as of the beginning of the comparable periods. We believe
investors want to give effect to the issuance for prior periods in
order to compare our financial performance with that of other
companies and between time periods.
(c) Represents common shares from the conversion of convertible preferred
shares as if the shares were converted as of the beginning of the
comparable periods. Convertible preferred shares were converted into
common shares as of December 20, 2007, the date of our IPO. We believe
investors want to give effect to the conversion for prior periods in
order to compare our financial performance with that of other
companies and between time periods.
NETSUITE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED
(in thousands)
Year Ended December 31,
2006 2007
Cash flows from operating
activities:
Net loss $(35,722) $(23,906)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 2,584 3,380
Provision for accounts receivable
allowances 432 530
Stock-based compensation 15,308 18,224
Amortization of deferred commissions 12,762 19,752
Loss on disposal of property and
equipment - 1
Minority interest (240) (614)
Accrued interest on notes from
stockholders (156) (56)
Changes in operating assets and
liabilities 7,800 (13,192)
Net cash provided by operating activities 2,768 4,119
Cash flows from investing activities:
Purchases of property and equipment (1,903) (4,670)
Proceeds from disposal of property
and equipment - 6
Capitalized internal use software (447) (108)
Net cash used in investing activities (2,350) (4,772)
Cash flows from financing activities:
Proceeds from refundable prepaid
royalities 1,903 -
Proceeds from line of credit
from related party 9,046 1,000
Payments on line of credit from
related party (9,282) (8,000)
Proceeds from notes receivable
from stockholders - 4,429
Payments under capital leases (820) (1,133)
Proceeds from issuance of common stock 325 163,509
Proceeds received from sale of
subsidiary stock 6,716 -
Net cash provided by financing activities 7,888 159,805
Effect of exchange rate on cash and
cash equivalents (53) 346
Net increase in cash and cash equivalents 8,253 159,498
Cash and cash equivalents at beginning
of period 1,657 9,910
Cash and cash equivalents at end of period $9,910 $169,408
SOURCE NetSuite Inc.
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