10-QPeriod: Q1 FY2011

Salesforce, Inc. Quarterly Report for Q1 Ended Apr 30, 2010

Filed May 28, 2010For Securities:CRM

Summary

Salesforce, Inc. (CRM) reported solid year-over-year revenue growth of 24% for the three months ended April 30, 2010, reaching $376.8 million. 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 million 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 million, 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.

Financial Highlights

50 data points
Beta

Revenue

$376.81M

81.0% Gross Margin

Net Income

$17.75M

4.7% Net Margin

EPS (Diluted)

$0.03

Total Assets

$2.49B

Cash & Equivalents

$690.79M

Free Cash Flow

$131.49M

Financial Statements
Beta
Revenue$376.81M
Cost of Revenue$71.58M
Gross Profit$305.23M
R&D Expenses$40.12M
Operating Expenses$272.18M
Operating Income$33.05M
Interest Expense$7.06M
Net Income$17.75M
EPS (Basic)$0.04
EPS (Diluted)$0.03
Shares Outstanding (Basic)512.13M
Shares Outstanding (Diluted)529.00M

Key Highlights

  • 1Total revenues increased by 24% to $376.8 million in Q1 FY2011 (ended April 30, 2010) compared to Q1 FY2010.
  • 2Subscription and Support revenues, the primary revenue driver, grew 24% to $350.7 million, representing 93% of total revenues.
  • 3Income from Operations increased to $33.1 million, up from $30.1 million in the prior year period.
  • 4Operating cash flow improved significantly by 46% year-over-year, reaching $143.2 million.
  • 5The company's cash, cash equivalents, and marketable securities totaled $1.9 billion as of April 30, 2010, indicating a strong liquidity position.
  • 6Salesforce issued $575 million in 0.75% convertible senior notes in January 2010, enhancing its financial resources.
  • 7The company announced the subsequent acquisition of Jigsaw Data Corporation for approximately $142 million in cash, indicating strategic expansion.

Frequently Asked Questions

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.

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.

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.

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.