CEO Zach Nelson addressing the crowd at SuiteWorld 2014. Credit: NetSuite via Flickr.
Shares of NetSuite (N) stock fell marginally in late trading after reporting better-than-expected fourth-quarter revenue growth, while earnings met estimates. Here's a closer look at the final totals versus Wall Street's projections:
| NetSuite | Revenue | YoY Growth | EPS | YoY Growth |
|---|---|---|---|---|
| Consensus estimate | $155.33 million | 35.1% | $0.10 | 25% |
| Q4 actuals | $157.87 million | 37.3% | $0.10 | 25% |
| DIFFERENCE | +$2.54 million | +2.2% | $0.00 | 0% |
Sources: S&P Capital IQ and NetSuite press release.
For the year, NetSuite reported $556.3 million in revenue, and $0.32 a share in profits after adjusted for one-time and non-cash items such as stock-based compensation. Analysts were expecting $553.75 million and $0.33, respectively, S&P Capital IQ reportts.
The bigger story may be what CEO Zach Nelson says about his company's growth compared to its peers. To hear him tell it, NetSuite is beating not just SAP (SAP -0.34%), but also Salesforce.com (CRM -0.39%). He said in a press release:
The fourth quarter of 2014 was our seventh consecutive quarter of more than 30% year-over-year recurring revenue growth. In addition, fiscal year 2014 represents a fifth consecutive year of accelerating recurring revenue growth, which, based on public disclosures, we believe is a record unmatched by any publicly traded on-premise or cloud software company during the last five years.
What went right: Big gains in deferred revenue contributions -- up more than 41% last year -- helped offset GAAP losses while producing meaningful cash flow. NetSuite generated $74.9 million in cash from operations in 2014, up from $62.2 million the year prior.
What went wrong: Higher expenses cost NetSuite on the earnings line. Sales and administrative investment rose 45.2% in the fourth quarter. Product development costs rose 24.7% during the same period.
What's next: NetSuite didn't include guidance in its press release. What do analysts say? According to S&P Capital IQ, the company is on track to earn $162.67 million in first-quarter revenue and $0.09 in profit. Both figures would make for a significant improvement over the same period last year ($122.96 million in revenue and $0.06 in adjusted per share profit, respectively).
Longer term, analysts have NetSuite generating 31.2% average annual earnings growth during the next three-to-five years.
