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From Wall Street Financial Analystto SaaS Leader:
Jason Maynard on the Economics of the Recurring Revenue Business Model
Jason Maynard, EVP Strategy, NetSuite (NYSE:N)@jasonamaynardMarch 22, 2016
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Cautionary Note: Forward Looking Statement
This presentation contains “forward-looking” statements that involve risks and uncertainties and assumptions. These statements are based on information available to NetSuite management at the time of this presentation.
Actual results could differ materially from our current expectations as a result of many factors, including, but not limited to, risks associated with quarterly fluctuations in our business and results of operations;; current macro-economic conditions and the possibility they could deteriorate;; changes in business plans of our SuiteCloud partners and other strategic partners;; and the effects of competition1. These and other risks and uncertainties associated with our business are described in our most recently filed annual report on Form 10-K for the year ending 12/31/152 and any subsequently filed reports on Form 10-K, 10-Q or 8-K. These filings are available on the SEC’s website at www.sec.gov and on NetSuite’s website at www.netsuite.com.
We assume no obligation and do not intend to update any forward looking statements. Customers who purchase our services should make sure the decisions are based on features that are currently available. Please be advised that any unreleased services or features from NetSuite that are not currently available may not be delivered on time, or at all.3
(1)These factors should be tailored to the specific forward looking statements in the presentation.(2)This date needs to be updated to refer to the year for which the most recent 10-K has been filed or else remove the reference to the date.(3)This language can be removed from internal presentations where no customers or prospects will be present like the internal all hands presentation (but there is no harm if it is left in).
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Economics is extremely useful as a form of employment for economists.
John Kenneth Galbraith
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CUSTOMER SUCCESS
COST, TIME & RISK
PREDICTABLE
Economics of the Cloud Model
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COST, TIME & RISKFAVOR THE CUSTOMER
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IT’S THE END OF LEGACY SOFTWARE AS WE KNOW IT
COSTLY CUSTOMIZATIONS
IMPLEMENT ONCE, NEVER UPGRADEUGLY SOFTWARE MONOLITHIC
CLOSED SYSTEMS
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REAL ROI
QUICK USER ADOPTIONUsers get the KPIs, Reports, Workflows, Alerts, UX that gets them loving the product immediately and wanting more
CONCENTRATE ON ADDING VALUELeading Practice allow project teams and users to spend time on value add processes rather than basic configuration
Improve business immediately rather than re-implementing the old system
QUICKER TIME TO VALUE
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PREDICTABLE REVENUE STREAM FOR VENDORS
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SUBSCRIPTION MODEL IS AN INVESTMENT
•Revenue is recognized over the course of the contract•While this results in a cash flow trough since expenses are still recognized up front, after reaching break even, the returns are significant
-‐2
-‐1.5
-‐1
-‐0.5
0
0.5
1
1.5
2
2.5
Year 1 Year 2 Year 3 Year 4
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**Midpoint of the range of FY2016 outlook of $950 to $970 million provided on NetSuite’s Q4 2015 earnings call as of January 28, 2016
THRIVING THROUGH UNCERTAIN TIMES
$109$153 $167
$193$236
$309
$415
$556
$741
$960Outlook**
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E
NetSuite Fiscal Year Annual Revenue ($M)
NetSuite IPO
NetSuite grew 16% Recurring Revenue & 9% Topline Revenue
Great Recession
Greek Debt Crisis 2015
US Government Shutdown 2013
US Debt Downgrade
2011
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THIS ONLY WORKS IF CUSTOMERS REMAIN SUCCESSFUL
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TRUSTED BY 30,000 ORGANIZATIONSEVERY SIZE. EVERY INDUSTRY. IN EVERY PART OF THE WORLD.
GLOBAL LEADERS EVERY INDUSTRY NEXT GEN DISRUPTORS
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STARTUP STATE OF MIND
THINK GLOBAL DELIVER LOCAL
ADAPTABLE TO CHANGE
THE POWER OF DATA
AGGREGATION
EVERY COMPANY IS A CLOUD COMPANY
Pillars of Customer Success
1 2 3 4 5
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Lesson 1: EVERY COMPANY IS A CLOUD COMPANY
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RIDESFRIENDSRESUMES SPORTS
YOU
THINGS
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CHANGING EVERY INDUSTRY
ManufacturingSell B2B, B2C, retail, on marketplaces.Direct access to customers
ServicesUnified billingInternet and new media
WDB2B, digital supply chain and B2C. Selling outcomes.
SoftwareSubscription managementUsage-based billing
RetailOmnichannel as a matter of survival
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Lesson 2: ADAPTABLE TOCHANGE
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NEW MARKETS
NEW PRICING
NEW PRODUCTS, SERVICES, & BUNDLES
NEW CHANNELS
BUSINESS MODEL INNOVATION
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RELEASE PREVIEW
RELEASE PREVIEW
RELEASE PREVIEW
RELEASE PREVIEW
NETSUITE UPGRADE
10% UPGRADE
30% UPGRADE
REMAINING UPGRADED
PHASE 1 PHASE 2 PHASE 3 PHASE 4
PHASE 1 CUSTOMERS
PHASE 2 CUSTOMERS
PHASE 3 CUSTOMERS
PHASE 4 CUSTOMERS
ACCOUNT SNAPSHOT
CUSTOMIZATION ISN’T A DIRTY WORD
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Lesson 3: POWER OF DATA AGGREGATION
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RIDESFRIENDSRESUMES SPORTS
YOU
THINGS
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156,981,866Sales Orders
20,711,450Purchase Orders
150,858,709Items SKUs
186,757,955Invoices
2,328,287Services Projects
YTD: Jan – Aug FY15
500,000,000+Application Requests/day
9+ Terabytes of data added every day
CLOUD ONLY SCALE
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Lesson 4: THINK GLOBAL & DELIVER LOCAL
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GLOBAL OPPORTUNITY
MULTI-CURRENCY
MULTI-TAX
MULTI-LINGUAL
MULTI-SUBSIDIARY
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Lesson 5: STARTUP STATE OF MIND
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DIGITAL DISRUPTION IS THIS GENERATIONS Y2K
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SMALL COMPANIES MUST ACT BIG
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BIG COMPANIES
MUST ACT SMALL
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THANK YOU