01—Abstract
Summary
Summary of the 10-Q filed May 26, 2011. Cited figures are marked; the original filing is the authoritative source.
Salesforce.com, Inc. (CRM) reported its first-quarter fiscal year 2012 results for the period ending April 30, 2011.
The company demonstrated robust top-line growth, with total revenues increasing by 34% year-over-year to $504.4 milliona, driven primarily by a 35% surge in subscription and support revenues. This growth reflects strong customer acquisition and retention. Despite the revenue growth, the company reported a net loss from operations of $2.8 million, a shift from a profitable quarter in the prior year.
This was largely due to a significant increase in operating expenses, particularly in marketing and sales (up 44% year-over-year) and research and development (up 63% year-over-year), as Salesforce continues to invest heavily in growth initiatives and infrastructure, including recent acquisitions. The company's balance sheet remains strong, with cash, cash equivalents, and marketable securities totaling $1.5 billionb. However, the company also highlighted the activation of its convertible senior notes' conversion feature, which reclassifies a portion of these notes as a current liability and has a dilutive effect on earnings per share.
Management expressed confidence in the company's liquidity and ability to fund its operations and growth plans, while acknowledging the expectation of lower diluted earnings per share in fiscal year 2012 due to continued investment. Investors should note the company's ongoing aggressive investment in sales and marketing to drive customer acquisition and expansion, which is pressuring short-term profitability.
The substantial increase in R&D also signals a commitment to product innovation and platform development. The acquisition of Radian6 shortly after the quarter's end further underscores Salesforce's strategy of expanding its cloud offerings through strategic M&A.
02—Key points
Key Highlights
- Total revenues grew 34% to $504.4 million for the first quarter of FY2012, compared to $376.8 million in the prior year's first quarter.
- Subscription and support revenues, the core of the business, increased 35% to $473.5 million, representing 94% of total revenues.
- Operating expenses saw significant increases, with Marketing and Sales up 44% and Research and Development up 63% year-over-year, reflecting substantial investments in growth.
- The company reported a net loss from operations of $2.8 million for the quarter, a decline from operating income of $33.1 million in the prior year's quarter.
- Cash, cash equivalents, and marketable securities remained strong at $1.5 billion, indicating solid liquidity.
- Convertible senior notes became convertible at the holder's option, leading to their classification as a current liability and a dilutive effect on EPS.
- International revenues (Europe and Asia Pacific) grew by 40%, now representing 33% of total revenues, indicating expanding global reach.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2012, Salesforce, Inc. kept $0.00.
- Revenue$504.4M100.0%
- Cost of revenue−$103.1M20.4%
- Gross profit$401.3M79.6%
- Operating costs−$404.1M80.1%
- Operating income−$2.8M0.6%
- Interest, other & tax$3.3M0.7%
- Net income$530,0000.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2012filed May 26, 2011Financial Statements
Q1 FY2012 against Q1 FY2011
| Line item | Q1 FY2012Q1 FY2011 | Change |
|---|---|---|
| Revenue | $504.36M$376.81M | +33.8% |
| Cost of Revenue | $103.07M$71.58M | +44.0% |
| Gross Profit | $401.30M$305.23M | +31.5% |
| R&D Expenses | $65.29M$40.12M | +62.7% |
| Operating Expenses | $404.10M$272.18M | +48.5% |
| Operating Income | -$2.80M$33.05M | −108.5% |
| Interest Expense | $3.67M$7.06M | −48.0% |
| Net Income | $530K$17.75M | −97.0% |
| Shares Outstanding (Basic) | 533.82M512.13M | +4.2% |
| Shares Outstanding (Diluted) | 564.25M529.00M | +6.7% |
05—Questions
Frequently Asked Questions
What was Salesforce's revenue performance in the first quarter of fiscal year 2012?
Salesforce reported a 34% increase in total revenues, reaching $504.4 million for the quarter ended April 30, 2011, compared to $376.8 million in the same period of the prior year. Subscription and support revenues, the primary revenue driver, grew by 35% to $473.5 million.
How did Salesforce manage its expenses, and what was the impact on profitability?
Operating expenses increased significantly, with Marketing and Sales expenses rising 44% and Research and Development expenses increasing by 63% year-over-year. These substantial investments in growth, coupled with increased stock-based compensation and amortization of intangibles, led to a net loss from operations of $2.8 million for the quarter, a shift from the $33.1 million operating income reported in the prior year's quarter.
What is the company's current financial position and liquidity?
Salesforce maintained a strong liquidity position with $1.5 billion in cash, cash equivalents, and marketable securities as of April 30, 2011. Net cash provided by operating activities was $139.5 million, demonstrating healthy cash generation from core operations.
What is the significance of the convertible senior notes becoming convertible?
The convertible senior notes became convertible at the holder's option, triggering a reclassification of a portion of the notes to a current liability on the balance sheet. This also introduces a dilutive effect on diluted earnings per share, meaning more shares could be outstanding if conversion occurs.
06—Continue