01—Abstract
Summary
Summary of the 10-Q filed November 22, 2017. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc.'s (CRM) Form 10-Q for the period ending October 30, 2017, showcases robust revenue growth driven by its core subscription and support services.
Total revenues increased by 25% year-over-year for both the three and nine-month periods, reaching $2.7 billiona and $7.6 billion respectively. This growth was primarily fueled by strong performance in their Sales Cloud and Service Cloud offerings. The company continues to invest heavily in research and development and marketing and sales, as evidenced by the significant increases in these expense categories.
The balance sheet reflects a healthy cash position and a substantial amount of deferred revenue, indicating strong future revenue potential. While the company generated positive income from operations and net income for the three months ended October 31, 2017, the nine-month period showed a significant decrease in net income compared to the prior year, primarily due to a large tax benefit recorded in the prior year related to the Demandware acquisition. The company's liquidity remains strong, with substantial cash, cash equivalents, and marketable securities.
02—Key points
Key Highlights
- Total revenues grew by 25% year-over-year to $2.7 billion for the third quarter and $7.6 billion for the first nine months of fiscal 2018.
- Subscription and support revenues, the primary revenue driver, increased by 25% year-over-year for both periods, representing 92-93% of total revenues.
- Operating expenses, particularly R&D and Marketing & Sales, saw significant increases in absolute dollars to support growth and ongoing innovation.
- Income from operations improved substantially for the three-month period, reaching $116.0 million, compared to $3.0 million in the prior year.
- The company maintains a strong liquidity position with over $3.6 billion in cash, cash equivalents, and marketable securities as of October 31, 2017.
- Deferred revenue remains a significant balance at $4.4 billion, indicating strong future revenue streams from contracted services.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2018, Salesforce, Inc. kept $0.04.
- Revenue$2.68B100.0%
- Cost of revenue−$692.8M25.9%
- Gross profit$1.99B74.1%
- Operating costs−$1.83B68.4%
- Operating income$155.0M5.8%
- Interest, other & tax−$48.0M1.8%
- Net income$107.0M4.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed November 22, 2017Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $2.68B$2.14B | +24.9% |
| Cost of Revenue | $714.00M— | — |
| Gross Profit | $1.99B$1.56B | +27.4% |
| R&D Expenses | $394.00M$311.46M | +26.5% |
| Operating Expenses | $1.83B$1.56B | +17.7% |
| Operating Income | $155.00M$3.04M | +5005.4% |
| Interest Expense | $13.00M$21.95M | −40.8% |
| Net Income | $107.00M-$37.31M | +386.8% |
| EPS (Basic) | $0.15$-0.05 | +400.0% |
| EPS (Diluted) | $0.14$-0.05 | +380.0% |
| Shares Outstanding (Basic) | 717.00M690.47M | +3.8% |
| Shares Outstanding (Diluted) | 738.00M690.47M | +6.9% |
05—Questions
Frequently Asked Questions
What was Salesforce's revenue performance in this quarter?
Salesforce reported strong revenue growth, with total revenues increasing by 25% year-over-year to $2.7 billion for the three months ended October 31, 2017, and $7.6 billion for the nine months ended October 31, 2017. This growth was primarily driven by its subscription and support services, which also grew by 25%.
How did the company's profitability fare in this reporting period?
For the three months ended October 31, 2017, Salesforce reported a net income of $51.4 million, a significant improvement from a net loss of $37.3 million in the same period last year. However, for the nine months ended October 31, 2017, net income decreased to $59.9 million from $231.1 million in the prior year. This decrease was largely due to a substantial tax benefit recorded in the prior year related to the Demandware acquisition.
What is the company's financial health and liquidity position?
Salesforce maintains a strong financial position with $3.6 billion in cash, cash equivalents, and marketable securities as of October 31, 2017. The company also has $1.5 billion in accounts receivable and $4.4 billion in deferred revenue, indicating a healthy pipeline of future revenue and strong cash collection capabilities.
How is Salesforce investing in future growth?
The company continues to invest heavily in growth initiatives. Research and development expenses increased by $292.6 million for the nine months ended October 31, 2017, and marketing and sales expenses rose by $636.2 million over the same period, reflecting investments in product innovation, salesforce expansion, and brand awareness.
06—Continue