01—Abstract
Summary
Summary of the 10-Q filed September 6, 2011. Cited figures are marked; the original filing is the authoritative source.
Salesforce.com, Inc. (CRM) reported its second-quarter results for the period ending July 31, 2011, showcasing robust revenue growth, up 38% year-over-year to $546 milliona.
This strong performance was primarily driven by a 38% increase in subscription and support revenues, indicating continued demand for its core CRM services. The company also saw significant growth in its international markets, with revenues from Europe and Asia Pacific up 50% year-over-year. Despite this top-line growth, the company incurred a net loss of $4.3 millionb for the quarter, a shift from the net income of $14.7 million in the prior year, largely due to increased operating expenses, particularly in marketing and sales, which rose 52% of revenue.
This investment in growth, including expanded R&D and sales headcount, reflects Salesforce's strategy to capture market share and expand its social enterprise offerings through continued product development and strategic acquisitions, such as Radian6, which was acquired in May 2011. For the first six months of the fiscal year, total revenues grew 36% to $1.05 billionc. The company maintained a healthy cash position with $449.8 million in cash and cash equivalents and $1.29 billion in cash, cash equivalents, and marketable securities as of July 31, 2011.
The company continues to invest heavily in growth, with marketing and sales expenses representing 52%d of revenues for the six-month period. Management anticipates continued significant investment in fiscal 2012, which is expected to lead to lower diluted earnings per share compared to fiscal 2011, signaling a focus on long-term market expansion over immediate profitability.
02—Key points
Key Highlights
- Total revenues increased by 38% to $546.0 million for the three months ended July 31, 2011, compared to $394.4 million in the prior year period.
- Subscription and support revenues, the primary revenue driver, grew by 38% to $509.3 million.
- International revenues (Europe and Asia Pacific) showed strong growth, increasing by 50% year-over-year to $179.1 million.
- Operating expenses increased significantly, leading to a net loss of $4.3 million for the quarter, compared to a net income of $14.7 million in the prior year.
- Marketing and sales expenses represented a substantial 52% of total revenues for the quarter and six-month period, reflecting investment in growth.
- The company acquired Radian6 in May 2011 for approximately $336.6 million to expand its social media capabilities.
- Cash, cash equivalents, and marketable securities stood at $1.29 billion as of July 31, 2011, indicating a solid liquidity position.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2012, Salesforce, Inc. lost $0.01.
- Revenue$546.0M100.0%
- Cost of revenue−$120.9M22.1%
- Gross profit$425.1M77.9%
- Operating costs−$440.8M80.7%
- Operating income−$15.7M2.9%
- Interest, other & tax$11.5M2.1%
- Net income−$4.3M0.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2012filed September 6, 2011Financial Statements
Q2 FY2012 against Q2 FY2011
| Line item | Q2 FY2012Q2 FY2011 | Change |
|---|---|---|
| Revenue | $546.00M$394.37M | +38.4% |
| Cost of Revenue | $120.91M$77.79M | +55.4% |
| Gross Profit | $425.09M$316.58M | +34.3% |
| R&D Expenses | $73.39M$42.93M | +71.0% |
| Operating Expenses | $440.84M$286.90M | +53.7% |
| Operating Income | -$15.75M$29.68M | −153.1% |
| Interest Expense | $3.85M$7.18M | −46.5% |
| Net Income | -$4.27M$14.74M | −128.9% |
| EPS (Basic) | $-0.01$0.03 | −127.3% |
| EPS (Diluted) | $-0.01$0.03 | −127.3% |
| Shares Outstanding (Basic) | 540.37M517.85M | +4.3% |
| Shares Outstanding (Diluted) | 540.37M536.70M | +0.7% |
05—Questions
Frequently Asked Questions
What is the primary driver of Salesforce's revenue growth?
Salesforce's primary revenue driver is its subscription and support services. For the three months ended July 31, 2011, this segment grew by 38% year-over-year, contributing $509.3 million to total revenues, underscoring the continued demand for its core CRM offerings.
Why did Salesforce report a net loss in the current quarter despite revenue growth?
While Salesforce experienced strong revenue growth, the company reported a net loss of $4.3 million for the quarter. This was primarily due to a significant increase in operating expenses, particularly in marketing and sales, which grew by 52% of revenues. This increased spending reflects the company's strategic investment in expanding its market share, R&D, and sales force, as well as costs associated with acquisitions, such as Radian6.
What is the significance of the Radian6 acquisition?
Salesforce acquired Radian6 in May 2011 for approximately $336.6 million. Radian6 is a social media monitoring, measurement, and engagement solutions provider. This acquisition is part of Salesforce's strategy to expand its 'social enterprise' market opportunities by integrating social media capabilities into its existing platform.
How is Salesforce's international growth performing?
Salesforce demonstrated strong growth in its international markets. Revenues from Europe and Asia Pacific combined increased by 50% year-over-year to $179.1 million for the quarter. The company expects its international revenue to continue to grow as a percentage of total revenue.
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