01—Abstract
Summary
Summary of the 10-Q filed November 24, 2010. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. reported its third-quarter fiscal 2011 financial results for the period ending October 31, 2010.
The company demonstrated robust top-line growth, with total revenues increasing by 30% year-over-year to $429.1 milliona, driven primarily by a 31% surge in subscription and support revenues. This growth was fueled by new customer acquisition, existing customer upgrades, and improved renewal rates, indicating strong market demand for Salesforce's cloud-based CRM solutions. While revenue growth was substantial, operating expenses also increased, particularly in marketing and sales, reflecting continued investment in customer acquisition and international expansion.
Despite increased operating expenses, operating income saw a modest increase of 17%, reaching $35.2 millionb. The company's balance sheet strengthened, with total assets growing to $2.74 billion, supported by a significant increase in cash and marketable securities.
However, the company also issued convertible senior notes in January 2010, leading to a notable increase in interest expense. Overall, the filing indicates a company in a strong growth phase, successfully expanding its customer base and revenue, while strategically investing in future growth.
02—Key points
Key Highlights
- Total revenues increased by 30% to $429.1 million for the three months ended October 31, 2010, compared to $330.5 million in the prior year period.
- Subscription and support revenues, the primary revenue driver, grew by 31% to $403.0 million, showcasing strong customer adoption and retention.
- Operating income increased by 17% to $35.2 million, despite a 38% rise in marketing and sales expenses, indicating effective cost management relative to revenue growth.
- Cash and cash equivalents and marketable securities significantly increased to $1.8 billion as of October 31, 2010, up from $1.07 billion in the prior year period, providing substantial liquidity.
- The company acquired Jigsaw Data Corporation for $161.9 million and increased its ownership in Salesforce Japan to 96%, demonstrating strategic investments for expansion and consolidation.
- Interest expense rose significantly to $7.4 million due to the issuance of convertible senior notes in January 2010, impacting net income.
- The company announced plans to purchase land for a new global headquarters for approximately $278.0 million, signaling long-term commitment and expansion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2011, Salesforce, Inc. kept $0.05.
- Revenue$429.1M100.0%
- Cost of revenue−$82.1M19.1%
- Gross profit$347.0M80.9%
- Operating costs−$311.8M72.7%
- Operating income$35.2M8.2%
- Interest, other & tax−$14.1M3.3%
- Net income$21.1M4.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2011filed November 24, 2010Financial Statements
Q3 FY2011 against Q3 FY2010
| Line item | Q3 FY2011Q3 FY2010 | Change |
|---|---|---|
| Revenue | $429.09M$330.55M | +29.8% |
| Cost of Revenue | $82.13M$65.57M | +25.3% |
| Gross Profit | $346.96M$264.98M | +30.9% |
| R&D Expenses | $47.30M$32.76M | +44.4% |
| Operating Expenses | $311.80M$234.84M | +32.8% |
| Operating Income | $35.16M$30.14M | +16.6% |
| Interest Expense | $7.37M$292K | +2425.3% |
| Net Income | $21.07M$20.69M | +1.8% |
| EPS (Basic) | $0.04$0.04 | −5.9% |
| EPS (Diluted) | $0.04$0.04 | −6.3% |
| Shares Outstanding (Basic) | 523.55M498.24M | +5.1% |
| Shares Outstanding (Diluted) | 548.18M514.38M | +6.6% |
05—Questions
Frequently Asked Questions
What was Salesforce's revenue growth in the third quarter of fiscal 2011?
Salesforce reported a 30% increase in total revenues for the three months ended October 31, 2010, reaching $429.1 million, up from $330.5 million in the same period last year. This growth was predominantly driven by a 31% increase in subscription and support revenues.
How has Salesforce's financial position evolved, particularly regarding cash and debt?
Salesforce's liquidity position strengthened, with cash, cash equivalents, and marketable securities totaling $1.8 billion as of October 31, 2010, a significant increase from $1.07 billion in the prior year. However, the company incurred higher interest expense due to the issuance of $575.0 million in convertible senior notes in January 2010.
What major strategic investments or acquisitions did Salesforce make during this period?
During this period, Salesforce acquired Jigsaw Data Corporation for approximately $161.9 million in cash, aiming to enhance its data services. Additionally, the company increased its ownership in Salesforce Japan from 73% to 96% for $151.0 million, consolidating its stake in the Japanese market.
What are the key drivers of Salesforce's increased operating expenses?
Operating expenses increased primarily due to significant investments in marketing and sales, up 38% to $200.5 million, reflecting a strategy to acquire new customers and expand internationally. Research and development expenses also rose by 45% to $47.3 million, driven by increased headcount aimed at service upgrades and new technology development.
06—Continue