10-QPeriod: Q2 FY2011

Salesforce, Inc. Quarterly Report for Q2 Ended Jul 31, 2010

Filed September 9, 2010For Securities:CRM

Summary

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 million. 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 million, 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.

Financial Highlights

52 data points
Beta

Revenue

$394.37M

80.3% Gross Margin

Net Income

$14.74M

3.7% Net Margin

EPS (Diluted)

$0.03

Total Assets

$2.70B

Cash & Equivalents

$409.93M

Free Cash Flow

$48.27M

Financial Statements
Beta
Revenue$394.37M
Cost of Revenue$77.79M
Gross Profit$316.58M
R&D Expenses$42.93M
Operating Expenses$286.90M
Operating Income$29.68M
Interest Expense$7.18M
Net Income$14.74M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)517.85M
Shares Outstanding (Diluted)536.70M

Key Highlights

  • 1Total revenues grew 25% year-over-year to $394.4 million for the three months ended July 31, 2010.
  • 2Subscription and support revenues, the primary revenue driver, increased 26% to $369.0 million.
  • 3Income from operations remained strong at $29.7 million, though slightly up from $29.5 million in the prior year's quarter.
  • 4Net 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.
  • 5The company acquired Jigsaw Data Corporation for approximately $148.5 million in cash, expanding its data services capabilities.
  • 6Cash, cash equivalents, and marketable securities totaled $1.9 billion, indicating a strong liquidity position.
  • 7Operating expenses increased across all categories (R&D, Marketing & Sales, G&A) to support growth initiatives and headcount expansion.

Frequently Asked Questions

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.

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.

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.

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.