01—Abstract
Summary
Summary of the 10-Q filed May 31, 2018. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. (CRM) reported strong financial results for the quarter ended April 30, 2018, demonstrating robust top-line growth driven by its core subscription and support services.
Total revenues increased by a significant 25% year-over-year, with subscription and support revenues growing by 27% to $2.81 billiona. This growth was primarily fueled by new business acquisitions and upsells to existing customers, indicating continued customer adoption and retention. The company also reported a substantial increase in net income to $344 million, a significant improvement from the $1 million recorded in the prior year's comparable quarter, driven by both revenue growth and improved operating leverage as operating expenses as a percentage of revenue decreased.
The company ended the quarter with a strong liquidity position, bolstered by recent debt financings, positioning it well for future growth initiatives and potential acquisitions. Key operational highlights include the successful adoption of the new revenue recognition standard (Topic 606), which was implemented retrospectively, with no material impact on reported revenue but a change in recognition timing for certain contracts. The company also announced the acquisition of CloudCraze LLC, a commerce platform, in April 2018.
Financially, the company significantly strengthened its balance sheet through the issuance of new senior notes and repaid maturing convertible senior notes. The company ended the quarter with a substantial cash and cash equivalents balance of $5.9 billionb. Salesforce's focus on its customer success platform, coupled with effective sales and marketing strategies, continues to drive strong revenue growth and improving profitability, making it an attractive investment prospect.
02—Key points
Key Highlights
- Total revenues increased by 25% year-over-year to $3.0 billion.
- Subscription and support revenues grew by 27% to $2.81 billion, representing 93% of total revenues.
- Net income surged to $344 million, a substantial increase from $1 million in the prior year's quarter.
- Operating expenses as a percentage of total revenues decreased from 73% to 68%, indicating improved operating leverage.
- The company raised $2.5 billion in debt financing in April 2018, significantly boosting its cash and cash equivalents to $5.9 billion.
- Acquisition of CloudCraze LLC in April 2018 to enhance its commerce offerings.
- Successfully adopted new revenue recognition standard (Topic 606) with no material impact on revenue.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2019, Salesforce, Inc. kept $0.11.
- Revenue$3.01B100.0%
- Cost of revenue−$767.0M25.5%
- Gross profit$2.24B74.5%
- Operating costs−$2.05B68.1%
- Operating income$191.0M6.4%
- Interest, other & tax$153.0M5.1%
- Net income$344.0M11.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed May 31, 2018Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $3.01B$2.40B | +25.4% |
| Cost of Revenue | $767.00M— | — |
| Gross Profit | $2.24B$1.75B | +28.2% |
| R&D Expenses | $424.00M$376.00M | +12.8% |
| Operating Expenses | $2.05B$1.74B | +17.6% |
| Operating Income | $191.00M$4.00M | +4675.0% |
| Interest Expense | $27.00M$13.00M | +107.7% |
| Net Income | $344.00M$1.00M | +34300.0% |
| EPS (Basic) | $0.47— | — |
| EPS (Diluted) | $0.46— | — |
| Shares Outstanding (Basic) | 729.00M706.00M | +3.3% |
| Shares Outstanding (Diluted) | 754.00M722.00M | +4.4% |
05—Questions
Frequently Asked Questions
What was Salesforce's revenue performance in the quarter ended April 30, 2018?
Salesforce reported total revenues of $3.006 billion for the three months ended April 30, 2018, representing a 25% increase compared to $2.397 billion in the same period of the prior year. Subscription and support revenues, the company's primary revenue stream, grew by 27% to $2.810 billion.
How did Salesforce's profitability change in this quarter?
Salesforce showed significant improvement in profitability, with net income rising to $344 million for the quarter ended April 30, 2018, compared to just $1 million in the same quarter of the previous year. This was driven by strong revenue growth and a decrease in operating expenses as a percentage of total revenue, from 73% to 68%.
What is the company's liquidity position at the end of the quarter?
The company maintained a strong liquidity position, with cash and cash equivalents totaling $5.922 billion and marketable securities of $1.237 billion as of April 30, 2018. This was significantly boosted by approximately $2.5 billion in debt raised in April 2018.
Were there any significant acquisitions or accounting standard adoptions during this period?
Yes, Salesforce acquired CloudCraze LLC, a commerce platform, in April 2018. Additionally, the company adopted new accounting standard ASU 2014-09 (Topic 606) for revenue recognition, which was implemented retrospectively and did not materially impact reported revenue but adjusted recognition timing for certain contracts.
06—Continue