01—Abstract
Summary
Summary of the 10-Q filed August 26, 2014. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. (CRM) reported its financial results for the second quarter and first half of fiscal year 2015, ending July 31, 2014.
The company demonstrated strong revenue growth, with total revenues increasing by 38% year-over-year to $1.32 billiona for the quarter and $2.55 billion for the first half. This growth was primarily driven by subscription and support revenues, which accounted for 93-94% of total revenue, and was further bolstered by the acquisition of ExactTarget in the prior year. Despite robust revenue expansion, Salesforce reported a net loss of $61.1 million for the quarter and $158.0 million for the first half, compared to a net income of $76.6 million and $8.9 million respectively in the prior year periods.
The increased losses were largely attributable to significant operating expenses, particularly in marketing and sales (51%b of revenue), and substantial stock-based compensation expenses. The company continues to invest heavily in growth initiatives, including R&D and sales force expansion, which are impacting short-term profitability but are expected to drive long-term value.
02—Key points
Key Highlights
- Total revenues for the three months ended July 31, 2014, increased by 38% to $1.32 billion compared to the prior year period.
- Subscription and support revenues, the primary revenue driver, grew 37% year-over-year to $1.23 billion for the quarter.
- The company reported a net loss of $61.1 million for the quarter, a significant shift from the net income of $76.6 million in the same period last year.
- Operating expenses, particularly marketing and sales, continue to be a substantial portion of revenue (51% of total revenues for the quarter), reflecting continued investment in growth.
- Deferred revenue increased to $2.35 billion as of July 31, 2014, indicating strong future revenue potential from existing contracts.
- The company held $1.7 billion in cash, cash equivalents, and marketable securities as of July 31, 2014, providing ample liquidity.
- Salesforce continues to manage convertible senior notes, with a portion of the 0.75% notes converted and repaid during the period.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2015, Salesforce, Inc. lost $0.05.
- Revenue$1.32B100.0%
- Cost of revenue−$307.8M23.3%
- Gross profit$1.01B76.7%
- Operating costs−$1.04B79.2%
- Operating income−$33.4M2.5%
- Interest, other & tax−$27.7M2.1%
- Net income−$61.1M4.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2015filed August 26, 2014Financial Statements
Q2 FY2015 against Q2 FY2014
| Line item | Q2 FY2015Q2 FY2014 | Change |
|---|---|---|
| Revenue | $1.32B$957.09M | +37.8% |
| Cost of Revenue | $307.83M$217.72M | +41.4% |
| Gross Profit | $1.01B$739.38M | +36.7% |
| R&D Expenses | $203.11M$148.08M | +37.2% |
| Operating Expenses | $1.04B$779.23M | +34.0% |
| Operating Income | -$33.43M-$39.86M | +16.1% |
| Interest Expense | $18.31M$19.66M | −6.8% |
| Net Income | -$61.09M$76.60M | −179.7% |
| EPS (Basic) | $-0.10$0.13 | −176.9% |
| EPS (Diluted) | $-0.10$0.12 | −183.3% |
| Shares Outstanding (Basic) | 617.02M593.96M | +3.9% |
| Shares Outstanding (Diluted) | 617.02M624.66M | −1.2% |
05—Questions
Frequently Asked Questions
What was Salesforce's revenue performance in the reported quarter?
Salesforce reported total revenues of $1.32 billion for the three months ended July 31, 2014, representing a 38% increase compared to $957.1 million in the same period last year. This growth was primarily driven by subscription and support revenues.
Why did Salesforce report a net loss despite strong revenue growth?
The net loss of $61.1 million for the quarter (compared to net income last year) was primarily due to significant operating expenses. Key contributors include continued heavy investment in marketing and sales (51% of revenue), research and development, and substantial stock-based compensation expenses, which are part of the company's strategy for long-term growth and employee retention.
How is Salesforce managing its debt obligations, specifically the convertible senior notes?
Salesforce has convertible senior notes outstanding. During the six months ended July 31, 2014, a portion of the 0.75% senior notes were converted, and the company repaid $297.6 million of the principal balance. The company also has 0.25% senior notes that were not convertible at the holder's option during this period.
What is the company's liquidity position as of July 31, 2014?
Salesforce maintained a strong liquidity position with $1.7 billion in cash, cash equivalents, and marketable securities as of July 31, 2014. Accounts receivable were also substantial at $834.3 million.
06—Continue