NetSuite Reports 50 Percent Year-Over-Year Channel Growth

The company's indirect sales are growing faster than direct sales, said CEO Zach Nelson in a conference call Thursday with financial analysts to discuss the vendor's second quarter earnings. Sales through the company's North America channel operations have grown 50 percent year-over-year, he said.

For the second quarter ended June 30, NetSuite reported revenue of $74.7 million, up 29 percent from $57.8 million in the same period one year earlier. The company reported a net loss of $9.9 million, a slight increase from the $9.8 million loss the company reported one year ago.

"In a quarter that saw many enterprise software companies struggle, NetSuite had one of its best quarters ever," Nelson said. "We saw continued growth across our financial metrics and exceeded our previously stated outlook on revenue, cash flow and non-GAAP [earnings per share] significantly."

Revenue from subscriptions and related support was $61.0 million, up 27 percent year-over-year, while revenue from professional services was $13.7 million.

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Cash flow in the quarter was $15.2 million, up 80 percent from $6.7 million from last year. Nelson referred to the positive metric as "profitability viewed through the lens of cash flow."

During the conference call Nelson touted NetSuite's growing popularity in the channel. In May the company recruited Blytheco, one of Sage's top VARs, to launch a cloud computing practice based on NetSuite's applications. NetSuite also enlisted the accounting firm Grant Thornton LLP to become a NetSuite systems integrator.

Nelson said NetSuite always believed that the channel would play an important role in the company's growth, but executives weren't sure how quickly that would happen. "It was up to the channel to switch to the cloud," he said, noting the need for solution providers to adopt new business models.

"They're making that change," he said. "It's hard not to be excited about what we're seeing in the indirect model right now."

During the quarter NetSuite also expanded its product line by adding the NetSuite SuiteCommerce cloud-based ecommerce applications.

NetSuite is forecasting that revenue in the current (third) quarter will be $77.5 million to $78.0 million. For all of fiscal 2012 the company is forecasting revenue in the range of $300 million to $305 million.