As the cloud technology matures with time, more and more businesses are deploying their application software on cloud. NetSuite (N, Financial) is one such company that has been benefiting from cloud technology and has been recording sustained grown in past few quarters. The company provides ERP (Enterprise Resource Planning) software and also has the SAAS (Software As Application Service) business model for its application software with a recurring licensing cost.
Quarter overview
The company recently reported its last quarter results for the fiscal 2014 and was firing all cylinders. The company recorded growth of 37% year over year, to record $157.9 million as compared to $115 million in the same quarter previous year. This was a record quarter growth for the company. On an annual basis, the consolidated revenue for the fiscal 2014 increased by 34%, to record $556.3 million as compared to $414.5 million in the fiscal 2013.
The operating expense of the company in the last quarter of fiscal 2014, increased to $128.3 million from $94.2 million in the same quarter previous year. The company is making strategic sales and marketing promotional activities with allocated budget of $82.9 million spend on sales and marketing activities as compared to $57.0 million spent in the same quarter last year. The sales promotional activities will certainly have a positive impact in the longer run.
Non-GAAP net income gained 21% year over year, to record $7.5 million as compared to $6.2 million in the same quarter previous year. For the fiscal 2014, non-GAAP net income increased by 25.6% to record $25 million as against $19.9 million for fiscal 2013.
The company recorded its seventh consecutive quarter of growth for the Q4-2014 with over 30% year-over-year recurring revenue growth. In addition, fiscal year 2014 represents a fifth consecutive year of accelerating recurring revenue growth.
Journey ahead
NetSuite is focusing on various aspects to improve its profitability. With its high-end products and innovation, the company is among the top 10 global providers of Cloud-enabled software solutions. The strategic move of focusing on Cloud-enabled services is gaining good response from consumers. As a result, consensus of analysts anticipates NetSuite to grow by 42% next year while in the next five years it is expected to achieve an annual growth rate of 25.07%.
Moreover, having delivered fantastic results in the Q4-2014, NetSuite is expecting better times ahead from its integrated Cloud-deployed business application and ERP software. This can be exemplified by the fact that the company has increased the expenses on sales and marketing to gain further momentum.
NetSuite is expecting this market to boom in the future. To make full use of the existing potential of these markets, NetSuite is making considerable investments in the product and the sales model with an aim to improve its standing.
Conclusion
The company has been focused on innovations to maintain a heavy product portfolio, this benefits in having a stronger grip of the ERP and the business software market. NetSuite regularly adds new features to its existing software’s that helps the company in maintaining low attrition rate of the client opting for SAAS business model, and also helps in getting new customers. Market analyst are also very optimistic for the growth of the company in the next five years. Considering the growth momentum of the company, I feel this technology stock is worth buying for long-term returns.
