NetSuite's Q1 handily clears hurdles

NetSuite delivered a strong first quarter as non-GAAP earnings and revenue were better than expected.

The company, which touted a "changing of the guard taking place in the ERP market," reported a first quarter net loss of $22.2 million, or 29 cents a share, on revenue of $123 million, up 34 percent from a year ago. Non-GAAP earnings were 6 cents a share.

Wall Street was looking for non-GAAP first quarter earnings of 2 cents a share on revenue of $120.9 million.

For 2014, NetSuite projected revenue to be between $540 million to $545 million. Wall Street was looking for 2014 sales of $539.8 million. For the second quarter, NetSuite projected revenue of $130 million to $132 million with non-GAAP earnings of 2 cents a share to 3 cents a share. Wall Street was looking for revenue of $131 million and non-GAAP earnings of 4 cents a share. 

NetSuite indicated that it would spend more in the second quarter on sales and marketing, product development and infrastructure. 

The company's shares have been whacked in 2014 along with other software as a service stocks. 

On a conference call with analysts CEO Zach Nelson said:

We added roughly 310 new customers to our installed base and we did it with an average selling price that was more than 90 percent higher than the prior year. While that ASP was somewhat skewed by a couple of very large enterprise deals even removing those from the calculations, resulted in average selling price at was up approximately 50 percent from Q1 2013.

Large deals were inked for NetSuite's OneWorld suite and SuiteCommerce. Nelson noted that a large deal for NetSuite is $200,000 and above. "These large deals have a tendency to be lumpy. The good news was that the lumps came this quarter. We're cautiously optimistic about our continued success moving upmarket," said Nelson.

Among the key figures:

• Headcount on March 31, 2014 was 2,550, up 31 percent from a year ago. 
• NetSuite ended the quarter with cash and equivalents of $465.26 million.
• Deferred revenue for the first quarter was $224.3 million, up from $211.7 million a year ago.
• Subscription revenue in the fourth quarter was $99.4 million and services sales were $23.56 million.