10-QPeriod: Q3 FY2014

Salesforce, Inc. Quarterly Report for Q3 Ended Oct 31, 2013

Filed November 25, 2013For Securities:CRM

Summary

Salesforce, Inc.'s (CRM) 10-Q filing for the period ending October 30, 2013, reveals robust revenue growth, primarily driven by its subscription and support services, which increased by 36% year-over-year for the quarter. This growth is attributed to acquiring new customers, upgrades from existing ones, and reduced attrition rates. Despite strong top-line performance, the company reported a net loss of $124.4 million for the quarter, widening from a loss of $220.3 million in the prior year's comparable period. This increased loss is largely due to significant operating expenses, including substantial investments in marketing and sales, research and development, and general administrative costs, exacerbated by the impact of stock-based compensation and amortization of acquired intangible assets. The company completed a major acquisition of ExactTarget for approximately $2.6 billion, which significantly impacted its balance sheet with increased goodwill and intangible assets, as well as its cash flows due to the financing of this acquisition through debt. Despite the reported net loss, the company's cash flow from operations remained positive, demonstrating its ability to generate cash from its core business activities.

Financial Highlights

49 data points
Beta

Revenue

$1.08B

75.1% Gross Margin

Net Income

-$124.43M

-11.6% Net Margin

EPS (Diluted)

$-0.21

Total Assets

$8.10B

Cash & Equivalents

$651.75M

Free Cash Flow

$65.16M

Financial Statements
Beta
Revenue$1.08B
Cost of Revenue$268.19M
Gross Profit$807.85M
R&D Expenses$170.69M
Operating Expenses$905.78M
Operating Income-$97.93M
Interest Expense$22.93M
Net Income-$124.43M
EPS (Basic)$-0.21
EPS (Diluted)$-0.21
Shares Outstanding (Basic)600.47M
Shares Outstanding (Diluted)600.47M

Key Highlights

  • 1Total revenues increased by 36% to $1.076 billion for the three months ended October 31, 2013, compared to $788.4 million in the prior year period.
  • 2Subscription and support revenues grew by 36% to $1.004 billion, indicating strong demand for the core CRM services.
  • 3The company reported a net loss of $124.4 million for the quarter, compared to a net loss of $220.3 million in the prior year's comparable period. The net loss per share was $(0.21) compared to $(0.39) in the prior year.
  • 4Operating expenses increased significantly, with Marketing and Sales expenses at $581.2 million and Research and Development at $170.7 million, reflecting ongoing investments in growth and integration of ExactTarget.
  • 5The company completed the acquisition of ExactTarget for approximately $2.6 billion, which contributed significantly to goodwill ($1.84 billion) and intangible assets ($706 million).
  • 6Cash and cash equivalents decreased to $651.8 million from $747.2 million at the beginning of the fiscal year, partly due to investing activities, including acquisitions.
  • 7Net cash provided by operating activities was $137.9 million for the quarter, up from $105.9 million in the prior year period.

Frequently Asked Questions

Salesforce reported total revenues of $1.076 billion for the three months ended October 31, 2013, a 36% increase compared to $788.4 million in the same period last year. This growth was primarily driven by subscription and support revenues, which rose 36% to $1.004 billion.

The company reported a net loss of $124.4 million for the three months ended October 31, 2013, or $(0.21) per share. This is an improvement from the net loss of $220.3 million, or $(0.39) per share, reported in the comparable period last year.

Significant operating expenses, including marketing and sales ($581.2 million) and research and development ($170.7 million), contributed to the net loss. These expenses are driven by investments in growth, talent, and the integration of acquired businesses, alongside substantial stock-based compensation and amortization of intangible assets.

Salesforce acquired ExactTarget for approximately $2.6 billion. This acquisition significantly increased the company's goodwill and intangible assets on the balance sheet and was financed through debt, impacting cash flows and interest expenses. The results of ExactTarget are included in the financial statements from the acquisition date.

As of October 31, 2013, Salesforce had $1.085 billion in cash, cash equivalents, and marketable securities. The company generated $137.9 million in cash from operating activities during the quarter, indicating positive cash flow from operations despite the reported net loss.