01—Abstract
Summary
Summary of the 10-Q filed September 9, 2010. Cited figures are marked; the original filing is the authoritative source.
Salesforce.com, Inc. (CRM) reported its financial results for the second quarter of fiscal year 2011, ending July 31, 2010.
The company demonstrated robust revenue growth, with total revenues increasing by 25% year-over-year to $394.4 milliona. This growth was primarily driven by a 26% increase in subscription and support revenues, highlighting the continued demand for its core CRM services. While operating expenses increased across R&D, marketing and sales, and general and administrative functions to support growth, income from operations remained relatively stable year-over-year at $29.7 million.
The company's net income attributable to salesforce.com was $14.7 millionb, a decrease from the prior year's $21.2 million, impacted by increased interest expenses related to its recent convertible senior notes issuance and higher operating expenses. Despite the net income decline, the company maintained a strong liquidity position with $1.9 billion in cash, cash equivalents, and marketable securities.
02—Key points
Key Highlights
- Total revenues grew 25% year-over-year to $394.4 million for the three months ended July 31, 2010.
- Subscription and support revenues, the primary revenue driver, increased 26% to $369.0 million.
- Income from operations remained strong at $29.7 million, though slightly up from $29.5 million in the prior year's quarter.
- Net income attributable to salesforce.com decreased to $14.7 million ($0.11/share diluted) from $21.2 million ($0.17/share diluted) in the prior year's quarter.
- The company acquired Jigsaw Data Corporation for approximately $148.5 million in cash, expanding its data services capabilities.
- Cash, cash equivalents, and marketable securities totaled $1.9 billion, indicating a strong liquidity position.
- Operating expenses increased across all categories (R&D, Marketing & Sales, G&A) to support growth initiatives and headcount expansion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2011, Salesforce, Inc. kept $0.04.
- Revenue$394.4M100.0%
- Cost of revenue−$77.8M19.7%
- Gross profit$316.6M80.3%
- Operating costs−$286.9M72.7%
- Operating income$29.7M7.5%
- Interest, other & tax−$14.9M3.8%
- Net income$14.7M3.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2011filed September 9, 2010Financial Statements
Q2 FY2011 against Q2 FY2010
| Line item | Q2 FY2011Q2 FY2010 | Change |
|---|---|---|
| Revenue | $394.37M$316.06M | +24.8% |
| Cost of Revenue | $77.79M$62.50M | +24.5% |
| Gross Profit | $316.58M$253.56M | +24.9% |
| R&D Expenses | $42.93M$31.10M | +38.0% |
| Operating Expenses | $286.90M$224.08M | +28.0% |
| Operating Income | $29.68M$29.49M | +0.7% |
| Interest Expense | $7.18M$293K | +2352.2% |
| Net Income | $14.74M$21.20M | −30.4% |
| EPS (Basic) | $0.03$0.04 | −35.3% |
| EPS (Diluted) | $0.03$0.04 | −35.3% |
| Shares Outstanding (Basic) | 517.85M495.38M | +4.5% |
| Shares Outstanding (Diluted) | 536.70M506.26M | +6.0% |
05—Questions
Frequently Asked Questions
What is the company's primary revenue source and how is it performing?
Salesforce.com's primary revenue source is subscription and support fees for its enterprise cloud computing CRM applications. For the quarter ended July 31, 2010, these revenues grew by 26% year-over-year to $369.0 million, representing 94% of total revenues, indicating strong customer adoption and retention.
How did the acquisition of Jigsaw Data Corporation impact the financial statements?
The acquisition of Jigsaw Data Corporation for approximately $148.5 million in cash (plus potential contingent consideration) occurred in May 2010. While Jigsaw's revenues and earnings were not material to the Q2 FY11 results, the acquisition contributed $133.3 million to goodwill and $28.1 million to intangible assets. The integration is expected to enhance Salesforce's data services capabilities.
What is the company's liquidity position and how has it changed?
Salesforce.com maintained a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $1.9 billion as of July 31, 2010. This represents an increase from $1.7 billion at January 31, 2010, bolstered by operating cash flows and proceeds from the January 2010 convertible senior note offering.
Why did net income decrease despite revenue growth?
Net income attributable to salesforce.com decreased to $14.7 million from $21.2 million year-over-year. This was primarily due to a significant increase in interest expense, largely from the $575 million convertible senior notes issued in January 2010, and higher operating expenses related to increased headcount and investments in research and development, marketing, and sales to support business growth.
06—Continue