NetSuite delivers solid first quarter, cuts earnings outlook
NetSuite reported a solid first quarter and CEO Zach Nelson said that the company's "two-tier ERP" approach can drive sales going forward. However, NetSuite's outlook was mixed as it wrestles with currency fluctuations.
The on-demand ERP vendor on Thursday reported a first quarter net loss of $7.7 million, or 12 cents a share, on revenue of $53.4 million, up 21 percent from a year ago (statement). Non-GAAP earnings were $1.9 million, or 3 cents a share. Wall Street was looking for earnings of 3 cents a share on revenue of $52.9 million.
As for the outlook, NetSuite projected second quarter earnings of 2 cents a share on revenue of $55 million to $56 million. Wall Street was looking for earnings of 4 cents a share.
For 2011, NetSuite projected earnings of 13 cents a share to 15 cents a share on revenue of $228 million to $230 million. Wall Street was expecting earnings of 18 cents a share on revenue of $227.7 million.
Why the mixed outlook? International expenses have hurt NetSuite's operations abroad. NetSuite said expenses will be higher throughout the year as it funds international units but lacks revenue contribution currently. The issue is that NetSuite expenses overseas are denominated in strong currencies, which are then translated to the U.S. dollar, which is weak.
Nelson said that channel partnerships as well as larger enterprises looking at NetSuite as an ERP option were driving bookings.
"CIOs are loathe to throw out legacy ERP, but they are looking for a way to roll out cloud technologies," said Nelson. Under two-tier ERP, legacy ERP systems stay, but NetSuite is layered on top of it.
Nelson touted JC Penney's purchasing unit, which moved to NetSuite's OneWorld and relegated its old systems to plumbing.
Other key items:
- Calculated billings were $61.8 million in the quarter, up 30 percent from a year ago.
- Deferred revenue in the first quarter was $83.9 million.
- NetSuite ended the quarter with 1,116 workers.