01—Abstract
Summary
Summary of the 10-Q filed November 25, 2008. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. (CRM) reported solid year-over-year growth in its third-quarter fiscal 2009 results, with total revenues increasing by 43% to $276.5 milliona for the three months ended October 31, 2008.
This growth was primarily driven by a 44% surge in subscription and support revenue, reflecting an expanding customer base. The company also saw a significant increase in operating income, rising to $16.1 millionb from $6.1 million in the prior year's comparable period. This improved profitability, despite a substantial increase in stock-based expenses, demonstrates operational leverage.
The balance sheet remains robust, with cash, cash equivalents, and marketable securities growing to $804.6 millionc, providing ample liquidity. The company continues to invest in growth, evidenced by increased headcount and the recent acquisition of InStranet, Inc., positioning itself for sustained expansion in the software-on-demand market. Despite the positive top-line and bottom-line performance, investors should note the significant impact of stock-based compensation expenses, which totaled $19.3 million for the quarter.
Additionally, the company experienced a $2.0 milliond loss related to investments in money market funds where fair value declines were deemed other-than-temporary, highlighting some market headwinds. Management's outlook suggests continued revenue growth, though the rate may moderate as the business scales. The company remains focused on expanding its software-on-demand offerings and its global reach, indicating a long-term growth strategy.
02—Key points
Key Highlights
- Total revenues increased by 43% year-over-year to $276.5 million for the third quarter of fiscal 2009.
- Subscription and support revenue grew by 44%, indicating strong customer adoption and retention.
- Operating income improved significantly, reaching $16.1 million, up from $6.1 million in the prior year's quarter.
- Cash, cash equivalents, and marketable securities grew to $804.6 million, reflecting a healthy liquidity position.
- The company made strategic acquisitions, including InStranet, Inc., to expand its service offerings.
- Stock-based expenses remain substantial, totaling $19.3 million for the quarter, impacting net income.
- Investments in The Reserve Fund resulted in a $1.2 million other-than-temporary impairment loss.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2009, Salesforce, Inc. kept $0.04.
- Revenue$276.5M100.0%
- Cost of revenue−$56.3M20.4%
- Gross profit$220.1M79.6%
- Operating costs−$204.0M73.8%
- Operating income$16.1M5.8%
- Interest, other & tax−$6.0M2.2%
- Net income$10.1M3.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2009filed November 25, 2008Financial Statements
| Revenue | $276.49M |
| Cost of Revenue | $56.35M |
| Gross Profit | $220.14M |
| R&D Expenses | $26.27M |
| Operating Expenses | $204.01M |
| Operating Income | $16.13M |
| Interest Expense | -$3.84M |
| Net Income | $10.12M |
| EPS (Basic) | $0.02 |
| EPS (Diluted) | $0.02 |
| Shares Outstanding (Basic) | 486.54M |
| Shares Outstanding (Diluted) | 500.53M |
05—Questions
Frequently Asked Questions
What was Salesforce's revenue and profit performance for the quarter?
For the three months ended October 31, 2008, Salesforce reported total revenues of $276.5 million, a 43% increase compared to the same period last year. Net income was $10.1 million, or $0.08 per diluted share, an increase from $6.5 million in the prior year's quarter. Operating income also saw significant improvement, reaching $16.1 million.
How is Salesforce's cash position and liquidity?
Salesforce maintained a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $804.6 million as of October 31, 2008. This represents a substantial increase from $571.0 million at the end of the prior year's comparable period, indicating healthy cash generation and prudent treasury management.
What is the impact of stock-based compensation on Salesforce's financials?
Stock-based compensation continues to be a significant expense for Salesforce. For the third quarter of fiscal 2009, stock-based expenses amounted to $19.3 million, representing approximately 7% of total revenues. While this impacts reported net income, it is a common practice in the technology sector for employee compensation and retention.
Did Salesforce make any significant acquisitions during the quarter?
Yes, Salesforce acquired InStranet, Inc. in August 2008 for $31.6 million in cash. InStranet offers a knowledge management application, and this acquisition is intended to expand Salesforce's CRM customer service and support offerings.
06—Continue