NETSUITE ANNOUNCES RECORD THIRD QUARTER 2008 RESULTS
Revenue of $40.4 Million Up 44% Over Q3 2007
Ending Cash Balance of $133.0 Million
SAN MATEO, Calif.—November 3, 2008—NetSuite Inc. (NYSE: N), a leading vendor of on-demand, integrated business management software suites for mid-market enterprises and divisions of large companies, today announced operating results for its third quarter, which ended September 30, 2008.
Total revenue for the third quarter was $40.4 million, a 44% increase over the third quarter of 2007, and an 11% increase over the second quarter of 2008. The third quarter of 2008 marked the 36th consecutive quarter of increased revenue for NetSuite.
On a GAAP basis, net loss for the third quarter of 2008 was $(6.2 million), or $(0.10) per share, compared to $(1.8 million), or $(0.21) per share in the third quarter of 2007.
Net loss on a non-GAAP basis for the third quarter of 2008 was $(1.7 million), or $(0.03) per share, compared with $(1.2 million), or $(0.02) per share in the third quarter of 2007. As a result of the strengthening of the US dollar, the Company recorded $874,000 in net foreign exchange rate losses resulting from the revaluation of assets and liabilities during the third quarter of 2008. Excluding the impact of foreign exchange losses, the non-GAAP loss for the quarter was $(826,000) or $(0.01) per share. Foreign exchange gains and losses were not significant in prior periods, and the Company has implemented hedging strategies intended to minimize the impact of foreign exchange rates fluctuations in future quarters.
Items presented on a non-GAAP basis exclude expenses related to stock-based compensation and the amortization of intangible assets. A reconciliation of net loss and net loss per share on a non-GAAP basis and a non-GAAP loss excluding the impact of foreign exchange losses to their comparable measures on a GAAP basis is provided below in a table immediately following the Condensed Consolidated Statements of Operations.
Revenue from the Americas for the third quarter of 2008 was $33.2 million, while revenue from international regions outside of the Americas was $7.2 million and now comprises 18% of total revenue. The Company added more than 300 new customers in the third quarter.
Short-term deferred revenue grew to $64.2 million as of September 30, 2008, as compared to $59.8 million at December 31, 2007 and $56.0 million at September 30, 2007. These comparisons exclude the accounting impact of the Company's 2006 agreements with distribution partners related to its Japanese subsidiary. A reconciliation of our deferred revenue with and without these agreements is available at the C ompany's Investor Relations Web site at www.netsuite.com/investors.
"We are pleased with our record third quarter results, and we believe our top-line growth makes us the fastest-growing ERP-based suite in the market," said Zach Nelson, CEO of NetSuite. "While market conditions remain unpredictable, we believe that the cost-reduction and productivity enhancements provided by NetSuite's on-demand integrated suite will be highly sought after by customers as they navigate through these turbulent times."
NetSuite will host a conference call to discuss its third quarter 2008 results at 2:00 p.m. Pacific Standard Time ("PST") today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the Company's Investor Relations 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 877-795-3638 domestically and 719-325-4792 internationally. A replay of the call will be available at 888-203-1112 or 719-457-0820, passcode 6244166 , until 12:00 midnight PST on November 8, 2008.
NetSuite Inc. is a leading vendor of on-demand, integrated business management software suites for mid-sized businesses and divisions of large companies. NetSuite enables mid-market 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 the scheduled conference call contain forward-looking statements relating to expectations, plans, prospects, or financial results for NetSuite, including our stated expectation for market share growth. These forward-looking statements are based upon current expectations and beliefs of NetSuite's management as of November 3, 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; general changing and unpredictable macro-economic conditions including recent market volatility; the risk of technological developments and innovations by others; our ability to successfully identify other business 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; 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.
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 13, 2008, and any subsequently filed reports on Forms 10-K, 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 net loss, weighted average shares outstanding, and net loss per share. Non-GAAP net loss excludes expenses related to stock-based compensation expense and the amortization of intangible assets. Non-GAAP net loss excludes these expenses as they are non-cash items, 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. Additionally, non-GAAP weighted average shares outstanding, the denominator for the non-GAAP net loss per share calculation for the periods during 2007 assumes that 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 has also provided non-GAAP loss and loss per share excluding foreign exchange losses for the third quarter of 2008 for comparability purposes due to the unusual magnitude of these losses, and the actions undertaken to reduce the likelihood of incurring a similar magnitude of net gain or loss in future periods.
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 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 Company's Investor Relations Web site at www.netsuite.com/investors.
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.