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Samuel Jamieson

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NetSuite announces third quarter 2010 financial results and raises outlook for fiscal year 2010

  • Reports Record Revenue of $49.7 Million, 19% Growth over Prior Year
  • Recurring Revenue Grows 19% Year-over-Year to $41.8 Million
  • Non-GAAP Net Income Grows by Over 600% Year-over-Year

SAN MATEO, Calif—November 4, 2010—NetSuite Inc. (NYSE: N), the industry’s leading provider of cloud-based financials / ERP software suites, today announced operating results for its third quarter ended September 30, 2010.

Total revenue for the third quarter of 2010 was $49.7 million, representing a 19% increase over the prior year. Subscription and support revenue for the third quarter was $41.8 million, representing 19% growth over the same period in the prior year.

GAAP operating loss for the third quarter of 2010 was $6.6 million, compared to a GAAP
operating loss of $8.0 million in the third quarter of 2009. On a GAAP basis, net loss for the third quarter of 2010 was $7.0 million, or $(0.11) per share, as compared to a net loss of $8.0 million, or $(0.13) per share in the third quarter of 2009.

Non-GAAP operating income for the third quarter of 2010 improved 600% year-over-year,
growing to $2.9 million, as compared to non-GAAP operating income of $419,000 in the third quarter of 2009. Non-GAAP net income for the third quarter of 2010 was $2.6 million, or $0.04 per share, as compared to non-GAAP net income of $348,000, or $0.01 per share, for the third quarter of 2009.

“It was another great quarter at NetSuite, and our record results and raised outlook reinforce that customers are running to the NetSuite Cloud from pre-Web applications like Microsoft Dynamics Great Plains. We are hitting the tipping point as traditional, inflexible mid-market ERP approaches are thrown out in favor of NetSuite’s modern cloud-based approach to running a business," said Zach Nelson, CEO of NetSuite. “We are again raising our 2010 outlook for revenue, operating cash flow and non-GAAP net income based on the accelerating adoption of NetSuite’s cloud computing applications by enterprises around the world.”

Conference Call
In conjunction with this announcement, NetSuite will host a conference call at 2:00 p.m. PDT
(5:00 p.m. EDT) today to discuss the company’s third quarter 2010 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.co.uk/investors.

The live call can be accessed by dialing 888-617-5714 (U.S.) or 719-325-2339 (outside the U.S.) and referencing passcode: 848-5915. 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: 848-5915.

About NetSuite
NetSuite Inc is the industry’s leading provider of cloud-based financials/ERP software suites. NetSuite enables companies to manage core key business operations in a single system, which includes Enterprise Resource Planning (ERP), Accounting, Customer Relationship Management (CRM), and Ecommerce. 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.co.uk.

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 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 Quarterly Report on Form 10-Q filed on August 6, 2010, and any subsequently filed reports on Forms 10-Q, 10-K 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.co.uk.

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 operating income/(loss) and 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 operating income/(loss) and 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.co.uk/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.

NOTE: NetSuite and the NetSuite logo are registered service marks of NetSuite Inc.