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NetSuite has been hiring ahead of what it considers a lengthy period of migration to the cloud. Credit: NetSuite via Facebook.
Shares of NetSuite stock rose 0.35% as of 7:04 p.m. ET Thursday evening as investors were unmoved by first-quarter results that beat expectations. Here's a closer look at the final totals versus Wall Street's projections:
|N||Revenue||YOY Growth||EPS||YOY Growth|
|Consensus estimate||$161.5 million||31.3%||$0.05||(16.7%)|
|Q1 actuals||$164.82 million||34%||$0.11||83.3%|
Sources: S&P Capital IQand NetSuite press release.
Commenting on the results, CEO Zach Nelson said in a press release:
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NetSuite's fiscal year 2015 started strong with record first quarter results, as we grew recurring revenue year-over-year by more than 30 percent for our eighth consecutive quarter, and beat our outlook on revenue, operating cash flow and non-GAAP earnings per share.What's even more exciting is that we are just at the beginning of a multi-year business system replacement cycle, as companies move from legacy, pre-Internet applications to NetSuite's solution designed to run companies in a modern cloud-centric world.
What went right: Cash from operations ballooned 46.6%year over year, to $28 million, a good sign for a business that needs to keep reinvesting in marketing and development to take advantage of the coming migration Nelson speaks about in the press release. Eight consecutive quarters of 30%-plus revenue growth suggests the transition may already be well underway.
What went wrong: Less clear is whether NetSuite is winning larger, longer-term deals. Deferred revenue fell more than 30% -- from $12.8 million in last year's first quarter to $8.9 million in the current Q1. For companies like NetSuite, which collect cash upfront to provide service over a specified period, growing deferred revenue is a key indicator of long-term health.
What's next:NetSuite chose not to include a second-quarter outlook in its press release. Analysts tracked by S&P Capital IQ have the company generating $172.07 million in revenue and $0.06 a share in adjusted profit, versus $131.79 million and $0.06 a share in last year's Q2. Longer term, analysts have NetSuite growing earnings by an average of 17.97%annuallyduring the next three-to-five years.
And in terms of the overall business? Investors should keep a close eye on growth in cash from operations and deferred revenue. Continued divergence between these two might signal trouble.
The article NetSuite Inc. Beats on Revenue, Earnings, but Investors Remain Unmoved originally appeared on Fool.com.
Tim Beyersalways goes for the top-floor suite. When he can get it, that is. Tim is also a member of theMotley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim'sweb homeandportfolio holdingsor connect with him onGoogle+,Tumblr, or Twitter, where he goes by@milehighfool. 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.
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