01—Abstract
Summary
Summary of the 10-Q filed November 21, 2016. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. reported its third-quarter fiscal year 2017 results, showcasing robust revenue growth driven primarily by its subscription and support services, which increased by 24% year-over-year to $1.98 billiona.
The company's strategic acquisitions, notably Demandware, Quip, and SteelBrick, are contributing to its expansion into new market segments like cloud commerce and productivity tools. While total operating expenses also increased due to these investments and headcount growth, the company maintained a focus on managing its marketing and sales expenses as a percentage of revenue. Despite a net loss of $37.3 millionb for the quarter, largely influenced by significant stock-based expenses and amortization of acquired intangibles, the company generated positive operating income and cash flow from operations.
The balance sheet reflects substantial growth in goodwill and intangible assets resulting from acquisitions, alongside a strong cash position. Investors should note the company's ongoing investments in R&D and sales, which are expected to fuel future growth, though they also contribute to higher operating expenses.
02—Key points
Key Highlights
- Total revenues increased by 25% year-over-year to $2.14 billion for the three months ended October 31, 2016.
- Subscription and support revenues, the primary revenue driver, grew 24% to $1.98 billion.
- The company completed several strategic acquisitions, including Demandware, Quip, and SteelBrick, significantly expanding its product offerings and market reach.
- Operating expenses increased to $1.56 billion, driven by investments in R&D, marketing, sales, and general administrative functions, partly due to recent acquisitions and headcount growth.
- Net loss for the quarter was $37.3 million, primarily impacted by significant stock-based compensation and amortization of acquired intangibles.
- Generated $1.46 billion in net cash provided by operating activities for the nine months ended October 31, 2016.
- Goodwill and intangible assets increased significantly due to business combinations, reflecting strategic investments in growth.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2017, Salesforce, Inc. lost $0.02.
- Revenue$2.14B100.0%
- Cost of revenue−$585.5M27.3%
- Gross profit$1.56B72.7%
- Operating costs−$1.56B72.6%
- Operating income$3.0M0.1%
- Interest, other & tax−$40.3M1.9%
- Net income−$37.3M1.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2017filed November 21, 2016Financial Statements
Q3 FY2017 against Q3 FY2016
| Line item | Q3 FY2017Q3 FY2016 | Change |
|---|---|---|
| Revenue | $2.14B$1.71B | +25.3% |
| Gross Profit | $1.56B$1.29B | +21.0% |
| R&D Expenses | $311.46M$239.21M | +30.2% |
| Operating Expenses | $1.56B$1.24B | +25.0% |
| Operating Income | $3.04M$43.43M | −93.0% |
| Interest Expense | $21.95M$18.25M | +20.3% |
| Net Income | -$37.31M-$25.16M | −48.3% |
| EPS (Basic) | $-0.05$-0.04 | −25.0% |
| EPS (Diluted) | $-0.05$-0.04 | −25.0% |
| Shares Outstanding (Basic) | 690.47M664.13M | +4.0% |
| Shares Outstanding (Diluted) | 690.47M664.13M | +4.0% |
05—Questions
Frequently Asked Questions
What was Salesforce's revenue performance in the third quarter of fiscal year 2017?
Salesforce reported total revenues of $2.14 billion for the three months ended October 31, 2016, representing a 25% increase compared to the same period in the prior year. Subscription and support revenues, accounting for 93% of total revenues, grew by 24% to $1.98 billion, driven by new customer acquisition and upgrades from existing customers.
How have recent acquisitions impacted Salesforce's financial results?
Salesforce made several key acquisitions during the period, including Demandware, Quip, and SteelBrick. These acquisitions have contributed to revenue growth and expanded the company's offerings, particularly in cloud commerce and productivity solutions. The acquisitions also led to a significant increase in goodwill and intangible assets on the balance sheet and contributed to higher operating expenses due to integration costs and associated amortization.
What is Salesforce's profitability and cash flow position?
For the three months ended October 31, 2016, Salesforce reported a net loss of $37.3 million. However, the company generated $1.46 billion in net cash provided by operating activities for the first nine months of the fiscal year, indicating strong operational cash generation despite the reported net loss. The company also maintained a healthy cash and cash equivalents and marketable securities balance of $1.8 billion as of October 31, 2016.
06—Continue