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Shares of NetSuite (NYSE:N) dropped nearly 12% Friday after the business operations software specialist released fourth-quarter results.
Why it's happening
Quarterly revenue climbed 37% year over year to $157.9 million, which translated to 21% growth in adjusted net income to $7.5 million, or $0.10 per share. Analysts, on average, had expected NetSuite to achieve earnings of $0.10 per share on slightly lower revenue of $155.4 million.
This marks the company's seventh consecutive quarter of more than 30% recurring revenue growth, and its fifth of accelerating recurring revenue growth -- ",,, which, based on public disclosures," said NetSuite CEO Zach Nelson, "we believe is a record unmatched by any publicly traded on-premise or cloud software company during the last five years."
That's all well and good, but if investors have one nitpick, it's that NetSuite's bottom-line growth is not keeping pace with its increasing sales. NetSuite's fourth-quarter operating expenses climbed more than 36% to $128.3 million, notably including a 24.7% increase in product development expenses to $28.5 million and a 45.2% bump in sales and marketing to $82.9 million. Even so, I would argue these expenses are absolutely necessary as NetSuite fights for market share in its burgeoning, high-tech industry. All things considered this early in the game, I think NetSuite's results are as solid as they come.
Steve Symington has no position in any stocks mentioned. The Motley Fool recommends NetSuite. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.