01—Abstract
Summary
Summary of the 10-Q filed November 28, 2012. Cited figures are marked; the original filing is the authoritative source.
Salesforce.com, Inc. (CRM) reported its results for the third quarter of fiscal year 2013, ending October 31, 2012.
The company experienced significant year-over-year revenue growth of 35%, reaching $788.4 milliona, primarily driven by its subscription and support services. Despite strong top-line growth, Salesforce reported a net loss of $220.3 million for the quarter, a substantial increase from the $3.8 million net loss in the prior year. This widened net loss is largely attributable to a significant one-time, non-cash charge of $149.1 million to establish a valuation allowance for deferred tax assets, a key factor impacting profitability.
Operationally, the company continued to invest heavily in marketing and sales (54% of revenue) and research and development (15% of revenue) to fuel its growth strategy. Furthermore, Salesforce completed several strategic acquisitions during the period, including Buddy Media for $735.8 millionb and GoInstant for $50.6 million, which contributed to a substantial increase in goodwill on the balance sheet.
While these acquisitions are expected to drive future growth, they also led to increased amortization expenses and integration costs. Despite the net loss, the company maintained a healthy cash position, with $1.4 billionc in cash, cash equivalents, and marketable securities, and reported positive cash flow from operations.
02—Key points
Key Highlights
- Total revenues increased by 35% year-over-year to $788.4 million for the third quarter of fiscal 2013.
- Subscription and support revenue remains the dominant revenue stream, accounting for 94% of total revenue.
- Net loss widened significantly to $220.3 million, primarily due to a $149.1 million non-cash charge for a deferred tax asset valuation allowance.
- Operating expenses, particularly marketing and sales (54% of revenue) and R&D (15% of revenue), reflect continued investment in growth.
- Significant acquisitions were completed, including Buddy Media for $735.8 million and GoInstant for $50.6 million, increasing goodwill substantially.
- The company ended the quarter with $1.4 billion in cash, cash equivalents, and marketable securities.
- Cash flow from operations remained positive at $455.3 million for the first nine months of the fiscal year.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2013, Salesforce, Inc. lost $0.28.
- Revenue$788.4M100.0%
- Cost of revenue−$186.2M23.6%
- Gross profit$602.1M76.4%
- Operating costs−$656.3M83.2%
- Operating income−$54.2M6.9%
- Interest, other & tax−$166.1M21.1%
- Net income−$220.3M27.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2013filed November 28, 2012Financial Statements
Q3 FY2013 against Q3 FY2012
| Line item | Q3 FY2013Q3 FY2012 | Change |
|---|---|---|
| Revenue | $788.40M$584.26M | +34.9% |
| Cost of Revenue | $186.25M$128.56M | +44.9% |
| Gross Profit | $602.15M$455.69M | +32.1% |
| R&D Expenses | $114.07M$76.05M | +50.0% |
| Operating Expenses | $656.34M$465.85M | +40.9% |
| Operating Income | -$54.19M-$10.16M | −433.5% |
| Interest Expense | $8.19M$3.86M | +112.2% |
| Net Income | -$220.30M-$3.76M | −5765.2% |
| EPS (Basic) | $-0.39$-0.01 | −5100.0% |
| EPS (Diluted) | $-0.39$-0.01 | −5100.0% |
| Shares Outstanding (Basic) | 568.81M543.39M | +4.7% |
| Shares Outstanding (Diluted) | 568.81M543.39M | +4.7% |
05—Questions
Frequently Asked Questions
What is the primary reason for the significant increase in net loss compared to the previous year?
The substantial increase in net loss is primarily due to a one-time, non-cash charge of $149.1 million recorded in the third quarter of fiscal year 2013. This charge was to establish a valuation allowance against a significant portion of the company's deferred tax assets, reflecting an assessment of the likelihood of future realization.
How are the recent acquisitions impacting the company's financial statements?
Salesforce completed significant acquisitions, including Buddy Media and GoInstant. These acquisitions have contributed to revenue growth but also resulted in increased goodwill on the balance sheet, higher amortization of purchased intangibles, and integration costs, impacting operating expenses and profitability.
What is the company's liquidity position?
Salesforce maintained a strong liquidity position, with $1.4 billion in cash, cash equivalents, and marketable securities as of October 31, 2012. The company also generated $455.3 million in cash flow from operating activities during the first nine months of the fiscal year.
What is the outlook for future profitability given the current results?
While revenue growth remains strong, Salesforce anticipates continuing to incur net losses on a GAAP basis for the next several quarters due to ongoing investments in growth, including hiring, acquisitions, and product development. The company emphasizes its non-GAAP measures which exclude certain non-cash expenses to provide a view of ongoing operational performance.
06—Continue