Revenues increase 35% YoY
On July 23, 2015, NetSuite (N) declared its 2Q15 results and reported revenues of $177.3 million, a 35% YoY (year-over-year) increase in comparison to 2Q14. Cash flow from operations increased from $18.6 million in 2Q14 to $23.9 million in 2Q15.
On a GAAP (generally accepted accounting principles) basis, the net loss for 2Q15 was $32.3 million with EPS (earnings per share) of -$0.41 compared to a net loss of $23.2 million and EPS of -$0.31 in 2Q14. Non-GAAP net income reported for 2Q15 was $1.7 million with EPS of $0.02 compared to non-GAAP net income of $4.8 million and EPS of $0.06 in 2Q14. In comparison, Oracle (ORCL) and VMware (VMW) reported revenues of $10.71 billion and $1.52 billion, respectively, in the last quarter.
“NetSuite’s strong financial results, not just this quarter but over the last several years, validate our belief that to survive, all businesses need to transform their operations with cloud-based business application suites. While NetSuite saw particular strength in our retail, manufacturing and wholesale distribution verticals, what is truly amazing is the breadth of companies transforming their operations and their industries with NetSuite,” said NetSuite CEO Zach Nelson. “From the billion-dollar valuation ‘unicorn’ companies to transformational companies such as American Express Global Travel and HP, the common thread is the NetSuite platform enabling them to thrive in the era of the cloud.”
The revenue growth of NetSuite in the last ten years has been -13.60%, and EPS growth is negative as well at -31.20%. However, in the last 12 months, revenues have grown in excess of 30% and free cash flow has increased by 8.5% in the same period.
Asset growth of NetSuite over the past five years has grown by 36.5% in comparison to revenue growth of 22.3% in the same period which indicates low efficiency of the firm. However, investors need to take into account that operating margins of the firm are expanding. Currently, NetSuite is trading close to its 52-week low of $82.87. Its price-to-book (or PB) ratio of 22.49x and the price-to-sales ratio of 10.97x are close to their three-year lows of 22.13x and 10.81x, respectively.
To gain exposure to NetSuite, you can invest in the First Trust ISE Cloud Computing Index Fund ETF (SKYY) and the iShares North American Tech-Software ETF (IGV). The stock accounts for 2.62% and 0.71% of the portfolios, respectively.