NetSuite: Channel Driving 40 Percent Of New Business

NetSuite's channel partners drove 40 percent of the cloud application vendor's new-business bookings in 2013, the company said Thursday.

"We saw continued success in our channel business," CEO Zach Nelson said during a conference call with financial analysts, discussing the financial results of NetSuite's fourth quarter and fiscal 2013. Not only did new-business bookings grow, Nelson said, "I'm pleased to say we saw the rate of [channel] new-business growth accelerate over the prior year."

For the fourth quarter ended Dec. 31, NetSuite reported sales of $115 million, up 35 percent from $85 million in the fourth quarter of 2012. But the cloud software company's net loss widened to $20.2 million from $9.6 million in the year-ago quarter.

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For all of fiscal 2013 ended Dec. 31, NetSuite reported sales of $414.5 million, up 34 percent from $308.8 million in fiscal 2012. But the company's reported loss doubled to $70.4 million from $35.2 million in the previous fiscal year.

"This is the fourth year of accelerating revenue growth," Nelson said, noting that recurring revenue grew 37 percent in the fourth quarter and the company added 430 new customers. Average selling prices increased 20 percent in the quarter.

Subscription and support revenue increased 36.5 percent in the fourth quarter to $93.6 million and grew 31.9 percent for all of fiscal 2013 to $333.6 million. Professional services revenue increased 30.2 percent in the fourth quarter to $21.4 million and grew 44.8 percent for all of fiscal 2013 to $81 million. The company closed out the year with $450 million in cash.

Asked about NetSuite's channel sales, Nelson said the company's potential market is "the Fortune 5 million" and NetSuite needs its channel and systems integrator partners to reach all those potential customers.

"I don't think there's any [software-as-a-service] company, quite frankly, that's doing 40 percent of their new business through the channel," the CEO said. He added that the breakdown of NetSuite's direct and indirect sales is "getting pretty darn close to 50-50."

NetSuite has remained unprofitable as it focuses on growth. "Much of the investment we have made over the last several years has been to accelerate out top-line growth," Nelson said, and the company's "investments in people, product and customers paid off in a big way in 2013." In 2014, the company will continue to "invest aggressively" in hiring, especially in product development, sales and services, he said.

The company is forecasting that sales for fiscal 2014, ending Dec. 31, will grow to between $535 million and $540 million.

Thursday NetSuite also said that Roku, the developer of the popular streaming platform for delivering video, music and games to TVs, has adopted NetSuite's OneWorld cloud-based suite of business management applications.

PUBLISHED JAN. 30, 2014