01—Abstract
Summary
Summary of the 10-Q filed May 24, 2013. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. (CRM) reported its first quarter fiscal year 2014 results, ending April 30, 2013, showing continued revenue growth but also an increased net loss compared to the prior year.
Total revenues grew 28% year-over-year to $892.6 milliona, driven primarily by subscription and support services. However, the company posted a net loss of $67.7 million, widening from a $19.5 million loss in the same period last year. This increased loss was influenced by significant investments in marketing and sales, research and development, and higher stock-based compensation expenses.
The company also successfully raised substantial capital through a $1.15 billionb convertible senior notes offering, bolstering its cash position to $3.1 billion in cash, cash equivalents, and marketable securities. Despite the net loss, the company's operating cash flow remained positive and strengthened year-over-year. Key strategic developments during the quarter included the issuance of new convertible senior notes and the completion of a four-for-one stock split.
The company continues to emphasize its strategy of transforming customers into 'customer companies' through its cloud-based solutions. While growth in revenues is robust, investors should monitor the increasing operating expenses and net loss, alongside the company's significant cash reserves and ongoing investment in future growth.
02—Key points
Key Highlights
- Total revenues increased by 28% to $892.6 million, driven by a 29% rise in subscription and support revenue.
- Net loss widened to $67.7 million from $19.5 million in the prior year's quarter, primarily due to increased operating expenses.
- Operating expenses rose significantly, with Marketing and Sales up 26%, Research and Development up 39%, and General and Administrative up 28%.
- The company successfully raised $1.15 billion through the issuance of 0.25% convertible senior notes.
- Cash, cash equivalents, and marketable securities increased significantly to $3.1 billion.
- A four-for-one stock split was completed in April 2013, affecting share and per share data.
- Operating cash flow increased to $283.2 million from $213.2 million in the prior year's quarter.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2014, Salesforce, Inc. lost $0.08.
- Revenue$892.6M100.0%
- Cost of revenue−$209.0M23.4%
- Gross profit$683.6M76.6%
- Operating costs−$728.2M81.6%
- Operating income−$44.5M5.0%
- Interest, other & tax−$23.2M2.6%
- Net income−$67.7M7.6%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2014filed May 24, 2013Financial Statements
Q1 FY2014 against Q1 FY2013
| Line item | Q1 FY2014Q1 FY2013 | Change |
|---|---|---|
| Revenue | $892.63M$695.47M | +28.4% |
| Cost of Revenue | $208.99M$151.55M | +37.9% |
| Gross Profit | $683.64M$543.92M | +25.7% |
| R&D Expenses | $131.94M$94.78M | +39.2% |
| Operating Expenses | $728.18M$566.16M | +28.6% |
| Operating Income | -$44.54M-$22.25M | −100.2% |
| Interest Expense | $11.88M$6.37M | +86.5% |
| Net Income | -$67.72M-$19.48M | −247.7% |
| EPS (Basic) | $-0.12$-0.04 | −200.0% |
| EPS (Diluted) | $-0.12$-0.04 | −200.0% |
| Shares Outstanding (Basic) | 588.38M552.60M | +6.5% |
| Shares Outstanding (Diluted) | 588.38M552.60M | +6.5% |
05—Questions
Frequently Asked Questions
What was Salesforce's revenue growth in the reported quarter?
Salesforce reported total revenues of $892.6 million for the three months ended April 30, 2013, representing a 28% increase compared to $695.5 million in the same period last year. Subscription and support revenue, the company's primary revenue driver, increased by 29% to $842.2 million.
Why did Salesforce's net loss increase year-over-year?
The net loss widened from $19.5 million in Q1 FY2013 to $67.7 million in Q1 FY2014. This increase was primarily driven by substantial investments in operating expenses, including a 39% rise in Research and Development ($131.9M), a 26% increase in Marketing and Sales ($466.5M), and a 28% increase in General and Administrative expenses ($129.8M). Stock-based compensation expenses and amortization of purchased intangibles also contributed to the higher operating costs.
How did Salesforce's cash position change during the quarter?
Salesforce's cash, cash equivalents, and marketable securities significantly increased to $3.1 billion as of April 30, 2013, up from $1.8 billion as of January 31, 2013. This increase was largely due to the net proceeds from the issuance of $1.15 billion in convertible senior notes.
What was the impact of the convertible senior notes issuance?
In March 2013, Salesforce issued $1.15 billion of 0.25% convertible senior notes due April 1, 2018. This transaction significantly strengthened the company's liquidity. The issuance also involved concurrent convertible note hedge transactions and warrant transactions to manage potential dilution.
06—Continue