01—Abstract
Summary
Summary of the 10-Q filed May 28, 2010. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. (CRM) reported solid year-over-year revenue growth of 24% for the three months ended April 30, 2010, reaching $376.8 milliona.
This growth was primarily driven by a 24% increase in Subscription and Support revenues, which now constitute 93% of total revenue. The company demonstrated improving profitability, with Income from Operations increasing to $33.1 millionb from $30.1 million in the prior year period, despite a rise in operating expenses as a percentage of revenue. Financially, Salesforce maintained a strong liquidity position with $1.9 billion in cash, cash equivalents, and marketable securities.
Operating cash flow saw a significant improvement, increasing by 46% year-over-year to $143.2 millionc, reflecting efficient customer billing and collections. The company also successfully closed a $575 million convertible senior notes offering in January 2010, strengthening its financial flexibility.
02—Key points
Key Highlights
- Total revenues increased by 24% to $376.8 million in Q1 FY2011 (ended April 30, 2010) compared to Q1 FY2010.
- Subscription and Support revenues, the primary revenue driver, grew 24% to $350.7 million, representing 93% of total revenues.
- Income from Operations increased to $33.1 million, up from $30.1 million in the prior year period.
- Operating cash flow improved significantly by 46% year-over-year, reaching $143.2 million.
- The company's cash, cash equivalents, and marketable securities totaled $1.9 billion as of April 30, 2010, indicating a strong liquidity position.
- Salesforce issued $575 million in 0.75% convertible senior notes in January 2010, enhancing its financial resources.
- The company announced the subsequent acquisition of Jigsaw Data Corporation for approximately $142 million in cash, indicating strategic expansion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2011, Salesforce, Inc. kept $0.05.
- Revenue$376.8M100.0%
- Cost of revenue−$71.6M19.0%
- Gross profit$305.2M81.0%
- Operating costs−$272.2M72.2%
- Operating income$33.0M8.8%
- Interest, other & tax−$15.3M4.1%
- Net income$17.7M4.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2011filed May 28, 2010Financial Statements
Q1 FY2011 against Q1 FY2010
| Line item | Q1 FY2011Q1 FY2010 | Change |
|---|---|---|
| Revenue | $376.81M$304.92M | +23.6% |
| Cost of Revenue | $71.58M$61.80M | +15.8% |
| Gross Profit | $305.23M$243.12M | +25.5% |
| R&D Expenses | $40.12M$31.58M | +27.0% |
| Operating Expenses | $272.18M$213.00M | +27.8% |
| Operating Income | $33.05M$30.12M | +9.7% |
| Interest Expense | $7.06M$208K | +3294.2% |
| Net Income | $17.75M$18.44M | −3.7% |
| EPS (Basic) | $0.04$0.04 | −6.7% |
| EPS (Diluted) | $0.03$0.04 | −13.3% |
| Shares Outstanding (Basic) | 512.13M492.82M | +3.9% |
| Shares Outstanding (Diluted) | 529.00M501.40M | +5.5% |
05—Questions
Frequently Asked Questions
What is Salesforce's revenue growth for the quarter, and what are the key drivers?
For the three months ended April 30, 2010, Salesforce reported a 24% increase in total revenues, reaching $376.8 million. This growth was primarily driven by a 24% rise in Subscription and Support revenues, which now account for 93% of total revenue. The increase was attributed to acquiring new customers, expanding subscriptions with existing customers, and upgrades.
How is Salesforce's profitability trending, and what is impacting operating expenses?
Salesforce's Income from Operations increased to $33.1 million for the quarter, up from $30.1 million in the prior year period. While Marketing and Sales expenses remained the largest cost category at 47% of revenue, and R&D and G&A also saw absolute dollar increases, the company managed its costs to achieve a higher operating income. Stock-based expenses were $26.5 million for the quarter, a significant component impacting profitability.
What is Salesforce's current financial health and liquidity position?
Salesforce maintains a strong liquidity position with $1.9 billion in cash, cash equivalents, and marketable securities as of April 30, 2010. Operating cash flow also showed significant improvement, increasing by 46% year-over-year to $143.2 million, demonstrating effective cash generation from operations. The company also bolstered its financial resources by issuing $575 million in convertible senior notes in January 2010.
Are there any significant ongoing legal matters that investors should be aware of?
Salesforce disclosed that on May 18, 2010, Microsoft filed a patent infringement lawsuit against the company. While Salesforce intends to defend itself vigorously and currently does not believe the resolution will have a material adverse effect on its financial condition, it acknowledges that the lawsuit could be material to the net income or cash flows of a particular quarter. The company also notes that it is subject to other intellectual property claims and lawsuits in the normal course of business.
06—Continue