01—Abstract
Summary
Summary of the 10-Q filed November 29, 2011. Cited figures are marked; the original filing is the authoritative source.
Salesforce.com, Inc. (CRM) reported its third-quarter results for the period ending October 30, 2011.
The company demonstrated strong revenue growth, with total revenues increasing by 36% year-over-year to $584.3 milliona. This growth was primarily driven by its Subscription and Support segment, which saw a 36% increase to $549.2 million. Despite the revenue surge, the company reported a net loss of $3.8 million for the quarter, a shift from a net income of $21.1 million in the prior year period.
This shift to a loss was influenced by increased operating expenses, particularly in Marketing and Sales (up 52% of revenue) and Research and Development (up 13% of revenue), as well as significant stock-based compensation expenses and amortization of acquired intangible assets. The company also saw a substantial increase in its cash and cash equivalents, ending the quarter with $503.0 millionb, up from $424.3 million at the start of the fiscal year, and maintained a strong overall liquidity position with $1.3 billion in cash, cash equivalents, and marketable securities. The company continued its aggressive acquisition strategy, with notable acquisitions of Radian6 and Assistly during the fiscal year.
These acquisitions contributed to a significant increase in goodwill on the balance sheet. Management highlighted its focus on expanding its social enterprise offerings and continued investment in its cloud computing platform and sales force. Investors should note the increased operating expenses, which are attributed to strategic investments in growth, and the shift to a net loss, while also recognizing the robust revenue growth and healthy cash position.
02—Key points
Key Highlights
- Total revenues increased by 36% year-over-year to $584.3 million for the three months ended October 31, 2011.
- Subscription and Support revenue, the primary revenue driver, grew by 36% to $549.2 million.
- The company reported a net loss of $3.8 million for the quarter, a decline from a net income of $21.1 million in the prior year period.
- Operating expenses, particularly in Marketing & Sales and Research & Development, increased significantly, impacting profitability.
- Cash, cash equivalents, and marketable securities stood at $1.3 billion as of October 31, 2011.
- The company made significant acquisitions, including Radian6 and Assistly, contributing to a substantial increase in goodwill.
- The company continued to invest heavily in sales and marketing, which represented 52% of total revenues.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2012, Salesforce, Inc. lost $0.01.
- Revenue$584.3M100.0%
- Cost of revenue−$128.6M22.0%
- Gross profit$455.7M78.0%
- Operating costs−$465.9M79.7%
- Operating income−$10.2M1.7%
- Interest, other & tax$6.4M1.1%
- Net income−$3.8M0.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2012filed November 29, 2011Financial Statements
Q3 FY2012 against Q3 FY2011
| Line item | Q3 FY2012Q3 FY2011 | Change |
|---|---|---|
| Revenue | $584.26M$429.09M | +36.2% |
| Cost of Revenue | $128.56M$82.13M | +56.5% |
| Gross Profit | $455.69M$346.96M | +31.3% |
| R&D Expenses | $76.05M$47.30M | +60.8% |
| Operating Expenses | $465.85M$311.80M | +49.4% |
| Operating Income | -$10.16M$35.16M | −128.9% |
| Interest Expense | $3.86M$7.37M | −47.7% |
| Net Income | -$3.76M$21.07M | −117.8% |
| EPS (Basic) | $-0.01$0.04 | −118.7% |
| EPS (Diluted) | $-0.01$0.04 | −120.0% |
| Shares Outstanding (Basic) | 543.39M523.55M | +3.8% |
| Shares Outstanding (Diluted) | 543.39M548.18M | −0.9% |
05—Questions
Frequently Asked Questions
What is Salesforce's primary revenue source, and how is it performing?
Salesforce's primary revenue source is Subscription and Support, which accounted for 94% of total revenues in the nine months ended October 31, 2011. This segment showed strong performance, growing 36% year-over-year to $549.2 million for the three months ended October 31, 2011, indicating continued demand for their core CRM services.
Why did Salesforce report a net loss in this quarter despite strong revenue growth?
The net loss of $3.8 million for the quarter, compared to a profit in the prior year, was primarily driven by increased operating expenses. These include higher investments in Marketing and Sales (up to 52% of revenue), Research and Development (up to 13% of revenue), significant stock-based compensation expenses, and amortization of intangible assets resulting from recent acquisitions like Radian6 and Assistly.
What is the company's financial health and liquidity situation?
Salesforce maintains a strong liquidity position. As of October 31, 2011, the company had $1.3 billion in cash, cash equivalents, and marketable securities. Net cash provided by operating activities was $351.2 million for the nine months ended October 31, 2011, indicating healthy cash generation from its core operations.
How are recent acquisitions impacting the company's financials?
Salesforce has been actively acquiring companies, such as Radian6 and Assistly, to expand its offerings, particularly in social enterprise and customer service. These acquisitions have led to a significant increase in goodwill ($732.1 million as of October 31, 2011) and intangible assets, as well as increased amortization expenses, which impact profitability. The company is integrating these businesses to drive future growth.
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