01—Abstract
Summary
Summary of the 10-K filed March 6, 2017. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. (CRM) filed its 10-K for the fiscal year ending January 31, 2017, reporting significant revenue growth driven primarily by its subscription and support services.
The company's core offerings in Sales Cloud and Service Cloud continue to be strong contributors, supported by expansion into new areas like Commerce Cloud through strategic acquisitions. Financially, Salesforce demonstrated robust top-line growth, with total revenues increasing by 26% year-over-year to $8.4 billiona. While the company continues to invest heavily in sales and marketing (47% of total revenues), and research and development (14% of total revenues), it achieved a modest operating income.
The company also actively pursued a growth strategy through acquisitions, notably Demandware, Quip, and Krux, to broaden its product portfolio and market reach. Investors should note the company's ongoing commitment to cloud-based solutions and its strategy of cross-selling and upselling to an expanding customer base.
02—Key points
Key Highlights
- Total revenues grew 26% year-over-year to $8.4 billion, primarily driven by subscription and support services which constituted 92% of total revenue.
- The company continued its aggressive acquisition strategy, completing several key acquisitions in fiscal 2017, including Demandware (digital commerce), Quip (productivity), and Krux (data management), significantly expanding its capabilities and market presence.
- Sales Cloud and Service Cloud remained the largest contributors to subscription and support revenue, showing 13% and 28% growth respectively.
- Marketing and Sales expenses represented 47% of total revenues, indicating continued investment in customer acquisition and brand building.
- Research and Development expenses accounted for 14% of total revenues, reflecting ongoing investment in product innovation and integration of acquired technologies.
- The company reported a net income of $179.6 million for fiscal 2017, a significant turnaround from a net loss in the prior year, aided by a substantial tax benefit.
- Salesforce maintains a strong balance sheet with $2.2 billion in cash, cash equivalents, and marketable securities, providing ample liquidity for operations and future investments.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Salesforce, Inc. kept $0.04.
- Revenue$8.39B100.0%
- Cost of revenue−$2.19B26.1%
- Gross profit$6.20B73.9%
- Operating costs−$5.99B71.3%
- Operating income$218.0M2.6%
- Interest, other & tax$105.0M1.3%
- Net income$323.0M3.8%
Where FY2017 revenue went
$8.39B- Other operating costs: $4.73B, 56% of revenue
- Cost of revenue: $2.23B, 27% of revenue
- R&D: $1.21B, 14% of revenue
- Operating income: $218.0M, 2.6% of revenue
Kept 2.6% as operating incomeOperating income $218.0M · 2.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed March 6, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $8.39B$6.67B | +25.9% |
| Cost of Revenue | $2.23B— | — |
| Gross Profit | $6.20B$5.01B | +23.7% |
| R&D Expenses | $1.21B$946.30M | +27.7% |
| Operating Expenses | $5.99B$4.90B | +22.2% |
| Operating Income | $218.00M$114.92M | +89.7% |
| Interest Expense | $89.00M$72.48M | +22.8% |
| Net Income | $323.00M-$47.43M | +781.1% |
| EPS (Basic) | $0.47$-0.07 | +771.4% |
| EPS (Diluted) | $0.46$-0.07 | +757.1% |
| Shares Outstanding (Basic) | 688.00M661.65M | +4.0% |
| Shares Outstanding (Diluted) | 700.00M661.65M | +5.8% |
05—Questions
Frequently Asked Questions
What was Salesforce's revenue performance in fiscal year 2017?
Salesforce reported total revenues of $8.4 billion for the fiscal year ended January 31, 2017, representing a 26% increase compared to the previous year. Subscription and support revenues, the primary revenue driver, grew 25% to $7.8 billion.
How did Salesforce's acquisition strategy impact its business in fiscal year 2017?
Salesforce made significant strategic acquisitions in fiscal 2017, including Demandware, Quip, and Krux. These acquisitions aimed to enhance its Customer Success Platform, expand into new markets like digital commerce, and strengthen its capabilities in areas like artificial intelligence and data management. The acquisitions contributed to revenue growth and broadened the company's service offerings.
What is the company's approach to customer acquisition and retention?
Salesforce continues to invest heavily in marketing and sales, which represented 47% of total revenues in fiscal 2017. Key strategies include cross-selling and upselling to existing customers, expanding go-to-market capabilities, and fostering the development of third-party applications on its platform. The company also focuses on reducing customer attrition, with an attrition rate reported between eight and nine percent during fiscal 2017.
How did Salesforce manage its operating expenses in fiscal year 2017?
Operating expenses increased in absolute terms due to continued investments in growth, particularly in marketing and sales, and research and development. Marketing and sales expenses were 47% of total revenue, and R&D was 14%. Despite these investments, the company achieved operating income of $64.2 million for fiscal 2017, a notable improvement from the prior year's loss.
06—Continue