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NetSuite Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 31, 2012 06:04AM

NetSuite Inc. (N) filed Quarterly Report for the period ended 2012-09-30. Next Gen Metals, Inc. has a market cap of $4.64 billion; its shares were traded at around $65.4 with and P/S ratio of 19.6.



Highlight of Business Operations:

Subscription and support cost of revenue: Subscription and support cost of revenue for the nine months ended September 30, 2012 increased $6.4 million, or 26%, compared to the same period in 2011. The increase was primarily due to a $3.3 million increase in personnel costs resulting from an increase in headcount and annual salary increases. Additionally, data center and other costs increased by $2.7 million due to an increase in vendor prices, support costs, depreciation and other operational costs associated with an increase in our data center capacity and activity. In the second quarter of 2012, we also recorded a $401,000 impairment charge related to the acquired QA developed technology intangible asset because the legacy customers migrated to another NetSuite product or terminated their service completely.

Professional services and other cost of revenue: Professional services and other cost of revenue for the three months ended September 30, 2012 increased $4.6 million, or 47%, compared to the same period in 2011. The increase was primarily the result of a $3.1 million increase in personnel costs, an $812,000 increase in overhead expense allocations and a $567,000 increase in fees related to outsourced consulting services. Personnel costs increased due to an increase in headcount, annual merit increases and incentive bonuses. Overhead expense allocations increased due to an increase in higher overhead costs, which are primarily facility costs, and an increase in headcount which is the basis for the allocation. Outsourced consulting fees increased due to an increase in demand for our professional services and an increase in training expenses for professional services consultants.

Sales and marketing expenses for the nine months ended September 30, 2012 increased $23.5 million, or 27%, as compared to the same period in 2011. The increase was primarily the result of a $17.5 million increase in personnel costs, a $3.9 million increase in marketing expenses and a $2.2 million increase in overhead expense allocations and other operating expenses, net. The increase in personnel costs related primarily to increases in commission and payroll expenses resulting from higher sales and an increase in headcount. Additionally, personnel costs include a $2.3 million increase in stock-based compensation resulting primarily from the issuance of annual equity awards. Marketing expenses increased by $3.9 million primarily due to a $2.5 million increase in on-line and corporate marketing expenses and $1.4 million in costs associated with our annual user conference, trade shows and other promotional events. Overhead allocation and other operating expenses, net increased due to an increase in overhead cost allocations which consist primarily of facility costs.

General and administrative expenses for the nine months ended September 30, 2012 increased $4.5 million, or 19%, as compared to the same period in 2011. The increase was primarily the result of a $5.3 million increase in personnel costs, a $2.1 million increase in other operational costs, a $1.3 million increase in overhead costs and a $736,000 increase in acquisition transaction costs. These cost increases were partially offset by a $4.3 million increase in overhead expense cost allocations to other departments and a $720,000 decrease in patents expenses. The increase in personnel costs resulted from an increase in headcount, an increase in merit pay and an increase in other payroll costs such as recruiting. Other operational costs increased primarily due to an increase in costs related to general administrative services and $507,000 in additional sales taxes. Overhead costs increased primarily due to an increase in facility costs at various locations. Additionally, we incurred $736,000 in transaction costs in connection with our acquisition of SAC during the second quarter of 2012. Our overhead expense allocations to other departments increased due to an increase in allocated costs such as facility costs, information technology costs and recruiting costs. Our patent costs decreased due to a $720,000 patent settlement expense recorded in 2011, but not incurred in 2012.

Sales and marketing expenses for the three months ended September 30, 2012 increased $8.3 million, or 27%, as compared to the same period in 2011. The increase was primarily the result of a $5.7 million increase in personnel costs, a $1.8 million increase in marketing expenses and an $841,000 increase in overhead expense allocations and other operating expenses, net. The increase in personnel costs related primarily to increases in commission and payroll expenses resulting from higher sales and an increase in headcount. Additionally, personnel costs include a $677,000 increase in stock-based compensation resulting primarily from the issuance of annual equity awards. Marketing expenses increased by $1.8 million primarily due to a $1.0 million increase in on-line and corporate marketing expenses and $800,000 in costs associated with a vendor annual user conference, trade shows and other promotional events. Overhead allocation and other operating expenses, net increased due to an increase in overhead cost allocations which consist primarily of facility costs.

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