NetSuite Announces Second Quarter 2009 Results

- Posts Third Consecutive Quarter of Non-GAAP Operating Income and Non-GAAP
Net Income

SAN MATEO, Calif., July 30 /PRNewswire-FirstCall/ -- NetSuite Inc. (NYSE: N),
a leading vendor of cloud computingbusiness management software suites, today
announced operating results for its second quarter ended June 30, 2009.

(Logo: http://www.newscom.com/cgi-bin/prnh/20090730/SF54700LOGO)

Total revenue for the second quarter of 2009 was $40.3 million, a 10% increase
over the second quarter of 2008. Revenue from the Americas for the second
quarter of 2009 was $32.5 million, while revenue from international regions
was $7.8 million.

On a GAAP basis, net loss for the second quarter of 2009 was $5.0 million, or
$(0.08) per share, as compared to $3.1 million, or $(0.05) per share, in the
second quarter of 2008.

Non-GAAP net income for the second quarter of 2009 was $687,000, or $0.01 per
share, as compared to a non-GAAP net loss of $900,000, or $(0.01) per share,
for the second quarter of 2008.

Items presented on a non-GAAP basis exclude expenses related to stock-based
compensation, the amortization of intangible assets, and transaction costs for
business combinations. A reconciliation of GAAP net income/(loss) to non-GAAP
net income/(loss) is provided below in a table immediately following the
Condensed Consolidated Statements of Operations, along with an explanation of
why these non-GAAP financial measures are useful to investors and how they are
used by management.

"We were very pleased with our financial performance and strategic execution
during the quarter. Once again, we delivered top-line and bottom-line results
that exceeded expectations. We also generated operating cash in the quarter,
well ahead of our plan. We remain on target to achieve our objective of
posting break-even operating cash flow for 2009," commented Zach Nelson, CEO
of NetSuite. "We're particularly pleased that we not only acquired more new
customers during the quarter, but we did so at a higher average sales price. A
recent industry report indicates that NetSuite was rated as the fastest
growing vendor in the top ten vendors of financial managements systems in
North America. As customers accelerate their movement to cloud computing we
believe NetSuite will continue to take share from our competitors."

NetSuite's Second Quarter 2009 Highlights Include:
-- Appointed Edward Zander, former Motorola CEO and Sun Microsystems
President, to its Board of Directors.
-- Announced that NetSuite and NetSuite OneWorld have become the first
generally available Software as a Service (SaaS) business management
suites to be certified in Germany.
-- Announced that NetSuite OneWorld was accredited by the Institute of
Chartered Accountants in England & Wales.
-- Added Google Checkout functionality to its platform providing instant
payment options for buyers in 140 countries.
-- Announced a new Financial Planning module to enable business
performance
management for strategy, planning and execution.
-- Received several awards including: a Top 15 CRM Small and Medium
Business Software Award for 2009 by strategic advisory service ISM
Inc.;
a 2009 CRM Excellence Award from Customer Interaction Solutions
magazine
for NetSuite CRM; winner of Best of SaaS Showplace Award for OpenAir
by
THINKstrategies, Inc.; and Network World, a prestigious IT
publication,
listed NetSuite as one of the top 10 cloud computing companies to
watch
alongside technology leaders Amazon and Google.
-- Unveiled a new Financial Edition to help companies speed deployment of
business processes to the cloud.

-- Announced the availability of OpenAir Mobile for Apple's iPhone.

Conference Call
In conjunction with this announcement, NetSuite will host a conference call at
2:00 p.m. PDT (5:00 p.m. EDT) today to discuss the company's second quarter
financial results and outlook for the third quarter. A live audio webcast and
replay of the call, together with detailed financial information, will be
available in the Investor Relations section of NetSuite's Web site at
http://www.netsuite.com/investors. The live call can be accessed by dialing
877-548-7907 (U.S.) or 719-325-4905 (outside the U.S.) and referencing
passcode: 354-9759. A replay of the call can also be accessed by dialing
888-203-1112 (U.S.) or 719-457-0820 (outside the U.S.), and referencing
passcode: 354-9759.

About NetSuite
NetSuite Inc. is a leading vendor of cloud computing business management
software suites for mid-sized businesses and divisions of large companies.
NetSuite enables mid-market companies to manage core business operations in a
single system, which includes accounting/ERP, customer relationship management
(CRM), and Ecommerce. NetSuite's patent-pending "real-time dashboard"
technology provides an easy-to-use view into up-to-date, role-specific
business information. For more information about NetSuite, please visit
www.netsuite.com.

Cautionary Note Regarding Forward-Looking Statements
This press release and the scheduled conference call contain forward-looking
statements relating to expectations, plans, prospects and financial results
for NetSuite, including our stated expectation for future earnings, revenue
and market share growth. These forward-looking statements are based upon the
current expectations and beliefs of NetSuite's management as of the date of
this release, and are subject to certain risks and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements. All forward-looking statements in this press
release are based on information available to the Company as of the date
hereof, and NetSuite disclaims any obligation to update these forward-looking
statements.

In particular, the following factors, among others, could cause results to
differ materially from those expressed or implied by such forward-looking
statements: the market for on-demand services may develop more slowly than
expected or than it has in the past; continued adverse and unpredictable
macro-economic conditions or reduced investments in on-demand applications and
information technology spending; quarterly operating results may fluctuate
more than expected; unexpected disruptions of service at the Company's data
center may occur; a security breach may impact operations; risks associated
with material defects or errors in the Company's software or the effect of
undetected computer viruses could impact operations; the risk of technological
developments and innovations by others; our ability to successfully integrate
our acquisition of QuickArrow, Inc.; our ability to successfully identify
other businesses and technologies for acquisition that will complement our
business and the ability to successfully acquire and integrate those
businesses and technologies; the risk of loss of power or disruption in
Internet service; failure to manage growth; failure to protect and enforce our
intellectual property rights; the ability to manage operations when faced with
competitive pricing and marketing strategies by competitors or changing
macro-economic conditions; the risk of losing key employees; increased demands
on employees and costs associated with operating as a public company; evolving
government regulation of the Internet and Ecommerce; changes to current
accounting rules; and general political or destabilizing events, including
war, conflict or acts of terrorism; and other risks and uncertainties.

Customers who purchase our service should make sure the decisions are based on
features that are currently available. Please be advised that any unreleased
services or features from NetSuite referenced in today's discussion or other
public statements are not currently available and may not be delivered on time
or at all.

For a detailed discussion of these and other cautionary statements, please
refer to the risk factors discussed in filings with the U.S. Securities and
Exchange Commission ("SEC"), including but not limited to the Company's Annual
Report on Form 10-K filed on March 13, 2009, and any subsequently filed
reports on Forms 10-Q and 8-K. All documents are available through the SEC's
Electronic Data Gathering Analysis and Retrieval system ("EDGAR") at
www.sec.gov or NetSuite's Web site at www.netsuite.com.

Non-GAAP Financial Measures
The Company's stated results include certain non-GAAP financial measures,
including non-GAAP operating income/(loss), net income/(loss), weighted
average shares outstanding, and net income/(loss) per share. Non-GAAP net
income/(loss) excludes expenses related to stock-based compensation expense,
amortization of intangible assets and transaction costs for business
combinations. Non-GAAP net income/(loss) excludes these expenses as they are
often excluded by other companies to help investors understand the operational
performance of their business, and in the case of stock-based compensation,
can be difficult to predict. The Company considers these events to be
non-routine, and believes these adjustments provide useful comparative
information to investors.

The Company considers these non-GAAP financial measures to be important
because they provide useful measures of the operating performance of the
Company and are used by the Company's management for that purpose. In
addition, investors often use measures such as these to evaluate the financial
performance of a company. Non-GAAP results are presented for supplemental
informational purposes only for understanding the Company's operating results.
The non-GAAP results should not be considered a substitute for financial
information presented in accordance with generally accepted accounting
principles, and may be different from non-GAAP measures used by other
companies.

A copy of this press release can be found on the Company's Investor Relations
Web site at www.netsuite.com/investors. The contents of the Web site are not
incorporated by reference into this press release.

NetSuite and the NetSuite logo are registered service marks of NetSuite Inc.

NetSuite Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
(unaudited)
December 31, June 30,
2008 2009
---- ----
Assets
Current assets:
Cash and cash equivalents $123,638 $116,387
Accounts receivable, net of allowances of
$589 and $647 as of
December 31, 2008 and June 30,
2009, respectively 26,675 25,080
Deferred commissions 11,363 9,998
Other current assets 2,385 3,768
----- -----
Total current assets 164,061 155,233
Property and equipment, net 15,413 15,152
Deferred commissions, non-current 1,688 1,165
Goodwill 17,824 17,628
Other intangible assets, net 8,712 10,555
Other assets 2,636 2,375
----- -----
Total assets $210,334 $202,108
======== ========
Liabilities and equity
Current liabilities:
Accounts payable $2,893 $2,291
Deferred revenue 66,667 62,894
Accrued compensation 10,863 9,808
Accrued expenses 5,758 4,772
Other current liabilities 4,363 3,889
----- -----
Total current liabilities 90,544 83,654
Long-term liabilities:
Deferred revenue, non-current 7,204 5,635
Other long-term liabilities 3,199 2,958
----- -----
Total long-term liabilities 10,403 8,593
------ -----
Total liabilities 100,947 92,247
------- ------
Equity:
NetSuite Inc. stockholders' equity 108,992 109,855
Noncontrolling interest 395 6
--- --
Total equity 109,387 109,861
------- -------
Total liabilities and equity $210,334 $202,108
======== ========

NetSuite Inc.
Condensed Consolidated Statements of Operations
(Dollars and shares in thousands, except per share amounts)
(unaudited)

Three months ended
------------------
June September December March June
30, 30, 31, 31, 30,
2008 2008 2008 2009 2009
---- ---- ---- ---- ----
Revenue $36,553 $40,404 $41,401 $41,567 $40,304
Cost of revenue (1) 11,665 13,733 13,069 13,035 13,556
------ ------ ------ ------ ------
Gross profit 24,888 26,671 28,332 28,532 26,748
------ ------ ------ ------ ------
Operating expenses:
Product
development (1) 4,452 6,056 6,926 6,788 6,770
Sales and
marketing (1) 19,401 20,221 19,516 18,797 18,264
General and
administrative (1) 5,145 6,426 6,766 6,910 6,717
----- ----- ----- ----- -----
Total operating
expenses 28,998 32,703 33,208 32,495 31,751
------ ------ ------ ------ ------
Operating loss (4,110) (6,032) (4,876) (3,963) (5,003)
Other income /
(expenses) and
income taxes, net 580 (411) 166 17 (169)
--- ---- --- -- ----
Net loss (3,530) (6,443) (4,710) (3,946) (5,172)
Less: Net loss
attributable to the
noncontrolling
interest 402 201 245 201 182
--- --- --- --- ---
Net loss attributable
to NetSuite Inc. $(3,128) $(6,242) $(4,465) $(3,745) $(4,990)
======= ======= ======= ======= =======
Net loss per share
attributable to
NetSuite Inc. common
shareholders $(0.05) $(0.10) $(0.07) $(0.06) $(0.08)
====== ====== ====== ====== ======
Weighted average
number of shares
used in
computing net loss
per common share 60,160 60,436 60,838 61,248 61,853
====== ====== ====== ====== ======

(1) Includes stock-based compensation expense, amortization of intangible
assets and transaction costs for business combinations as follows:

Three months ended
------------------
June September December March June
30, 30, 31, 31, 30,
2008 2008 2008 2009 2009
---- ---- ---- ---- ----
Cost of revenue $525 $1,113 $1,056 $1,044 $1,238
Product development 548 1,147 1,451 1,350 1,443
Sales and marketing 568 1,234 1,239 1,204 1,462
General and
administrative 587 1,048 1,253 1,155 1,534
--- ----- ----- ----- -----
Total stock-
based
compensation
expense
amortization
of
intangible
assets and
transaction
costs for
business
combinations $2,228 $4,542 $4,999 $4,753 $5,677
====== ====== ====== ====== ======

NetSuite Inc.
Reconciliation of Net Loss Per Share to Non-GAAP Net Income / (Loss) Per
Share
(Dollars and shares in thousands, except per share amounts)
(unaudited)

Three months ended
------------------
June September December March June
30, 30, 31, 31, 30,
2008 2008 2008 2009 2009
---- ---- ---- ---- ----
Numerator:
Reconciliation
between GAAP and
non-GAAP net loss:
Net loss
attributable
to NetSuite
Inc. $(3,128) $(6,242) $(4,465) $(3,745) $(4,990)
Reversal of
stock-based
compensation
expense,
amortization
of intangible
assets and
transaction
costs for
business
combinations
(a) 2,228 4,542 4,999 4,753 5,677
----- ----- ----- ----- -----
Non-GAAP net
income /(loss)
attributable to
:
NetSuite
Inc. $(900) $(1,700) $534 $1,008 $687
===== ======= ==== ====== ====
Denominator:
Reconciliation
between GAAP and
non-GAAP
weighted average
shares used in
computing basic
and diluted net
loss per common
share:
Weighted
average
number of
shares used in
computing
net loss
per common
share 60,160 60,436 60,838 61,248 61,853
Effect of
dilutive
securities
(stock options,
restricted
stock awards
and warrants)
(b) - - 2,976 2,710 2,520
--- --- ----- ----- -----
Non-GAAP
weighted
average
shares used in
computing non-
GAAP net
income /
(loss)
per common
share 60,160 60,436 63,814 63,958 64,373
====== ====== ====== ====== ======
GAAP net loss per
share attributable
to NetSuite Inc.
common
shareholders $(0.05) $(0.10) $(0.07) $(0.06) $(0.08)
====== ====== ====== ====== ======
Non-GAAP net loss
per share
attributable to
NetSuite
Inc. common
shareholders $(0.01) $(0.03) $0.01 $0.02 $0.01
====== ====== ===== ===== =====

Use of Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements presented on
a GAAP basis, NetSuite uses non-GAAP measures of net income / (loss),
weighted average shares outstanding and net income / (loss) per share,
which are adjusted to exclude stock-based compensation expense,
amortization of acquisition-related intangible assets and transaction
costs for business combinations to include dilutive shares where
applicable. We believe these adjustments are appropriate to enhance an
overall understanding of our past financial performance and also our
prospects for the future. These adjustments to our current period GAAP
results are made with the intent of providing both management and
investors a more complete understanding of NetSuite's underlying operating
results and trends and our marketplace performance. The non-GAAP results
are an indication of our baseline performance that are considered by
management for the purpose of making operational decisions. In addition,
these non-GAAP results are the primary indicators management uses as a
basis for our planning and forecasting of future periods. The presentation
of this additional information is not meant to be considered in isolation
or as a substitute for net loss or basic and diluted net loss per share
prepared in accordance with generally accepted accounting principles in
the United States. Non-GAAP financial measures are not based on a
comprehensive set of accounting rules or principles and are subject to
limitations.
(a) Stock-based compensation is a non-cash expense accounted for in
accordance with Statement of Financial Accounting Standards No.
123(R) for options granted after January 1, 2006, and Accounting
Principles Board Opinion No. 25 for options granted before January 1,
2006. Amortization of intangible assets and transaction costs related
to business combinations resulted principally from mergers and
acquisitions. While a large component of our expense in certain
periods, we believe investors may want to exclude the effects of
these items in order to compare our financial performance with that
of other companies and between time periods.
(b) These securities are anti-dilutive on a GAAP basis as a result of the
Company's net loss, but are considered dilutive on a non-GAAP basis
in periods where the Company has reported positive non-GAAP earnings.

NetSuite Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Six months ended
June 30,
--------
2008 2009
---- ----
Cash flows from operating activities:
Net loss $(5,157) $(8,735)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization 2,484 3,334
Amortization of other
intangible assets 180 1,274
Provision for accounts
receivable allowances 228 868
Stock-based compensation 3,657 8,825
Amortization of deferred
commissions 11,269 10,111
Loss on disposal of property
and equipment 43 33
Noncontrolling interests (650) (383)
Changes in operating assets and
liabilities, net of acquired
assets and liabilities:
Accounts receivable (3,031) 1,176
Deferred commissions (10,663) (8,228)
Other current assets (217) (1,117)
Other assets (112) 213
Accounts payable 947 (1,031)
Accrued compensation 687 (1,046)
Deferred revenue 1,221 (5,610)
Other current liabilities (1,464) (454)
Other long-term liabilities 288 (50)
--- ---
Net cash used in operating
activities (290) (820)
---- ----
Cash flows from investing activities:
Proceeds from disposal of
property and equipment 18 -
Purchases of property and
equipment (2,713) (2,159)
Capitalized internal use software (159) (128)
Business combinations, net of
cash received (28,210) (3,412)
Acquisition of other intangible
assets - (275)
--- ----
Net cash used in investing
activities (31,064) (5,974)
------- ------
Cash flows from financing activities:
Payment of offering costs (560) -
Payments under capital leases and
long-term debt (783) (791)
Proceeds from issuance of common
stock 248 494
--- ---
Net cash used in financing
activities (1,095) (297)
------ ----
Effect of exchange rate changes on
cash and cash equivalents 411 (160)
--- ----
Net change in cash and cash
equivalents (32,038) (7,251)
Cash and cash equivalents at
beginning of period 169,408 123,638
------- -------
Cash and cash equivalents at end of
period $137,370 $116,387
======== ========

SOURCE NetSuite Inc.

Media, Mei Li of NetSuite Inc., +1-650-627-1063, meili@netsuite.com; or
Investor Relations, Carolyn Bass of Market Street Partners, +1-415-445-3232,
ir@netsuite.com, for NetSuite