01—Abstract
Summary
Summary of the 10-Q filed November 28, 2018. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc.'s Form 10-Q filing for the period ending October 30, 2018, reveals robust revenue growth driven by its core subscription and support services, with a notable 26% increase in total revenues year-over-year to $3.4 billiona for the third quarter.
This growth was supported by strong performance across all cloud service offerings, particularly Sales Cloud and Service Cloud, and a consistent attrition rate. The company also demonstrated significant progress in expanding its operations through strategic acquisitions, notably MuleSoft and Datorama, which contributed positively to revenue and expanded market opportunities. Financially, Salesforce maintained a solid operational efficiency, with cost of revenues representing 26%b of total revenues and operating expenses at 71% of total revenues.
While operating expenses saw an increase in absolute terms, largely due to investments in research and development, marketing and sales, and the integration of acquired businesses, the company's ability to grow revenue outpaced expense growth in many areas. The company's balance sheet reflects substantial goodwill, primarily from recent acquisitions, and a growing debt load to finance these strategic initiatives, but overall liquidity remains strong with significant cash, cash equivalents, and marketable securities.
02—Key points
Key Highlights
- Total revenues increased by 26% to $3.4 billion for the three months ended October 31, 2018, compared to the same period in the prior year.
- Subscription and support revenues, the primary revenue driver, grew by 26% to $3.2 billion.
- The company completed significant acquisitions of MuleSoft and Datorama, contributing $104 million and $203 million in subscription and support revenues, respectively, for the nine months ended October 31, 2018.
- Operating expenses increased by $579 million, driven by investments in R&D, marketing and sales, and administrative costs, partly due to acquisitions.
- Net income for the quarter was $105 million, a slight decrease from $107 million in the prior year's comparable quarter, but the nine-month net income surged to $748 million from $154 million.
- The company's balance sheet shows a significant increase in Goodwill to $12.8 billion, primarily due to acquisitions.
- Total assets grew to $26.6 billion from $22.0 billion, largely driven by acquisitions and strategic investments.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2019, Salesforce, Inc. kept $0.03.
- Revenue$3.39B100.0%
- Cost of revenue−$889.0M26.2%
- Gross profit$2.50B73.8%
- Operating costs−$2.41B71.1%
- Operating income$92.0M2.7%
- Interest, other & tax$13.0M0.4%
- Net income$105.0M3.1%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2019filed November 28, 2018Financial Statements
Q3 FY2019 against Q3 FY2018
| Line item | Q3 FY2019Q3 FY2018 | Change |
|---|---|---|
| Revenue | $3.39B$2.68B | +26.6% |
| Cost of Revenue | $889.00M$714.00M | +24.5% |
| Gross Profit | $2.50B$1.99B | +26.0% |
| R&D Expenses | $481.00M$394.00M | +22.1% |
| Operating Expenses | $2.41B$1.83B | +31.6% |
| Operating Income | $92.00M$155.00M | −40.6% |
| Interest Expense | $33.00M$13.00M | +153.8% |
| Net Income | $105.00M$107.00M | −1.9% |
| EPS (Basic) | $0.14$0.15 | −6.7% |
| EPS (Diluted) | $0.13$0.14 | −7.1% |
| Shares Outstanding (Basic) | 760.00M717.00M | +6.0% |
| Shares Outstanding (Diluted) | 785.00M738.00M | +6.4% |
05—Questions
Frequently Asked Questions
What is the overall financial performance of Salesforce in this quarter?
Salesforce demonstrated strong top-line growth, with total revenues increasing by 26% to $3.4 billion for the three months ended October 31, 2018. The company also reported a significant increase in net income for the nine-month period, reaching $748 million, compared to $154 million in the prior year. This performance was fueled by robust subscription and support revenue growth and strategic acquisitions.
How did the acquisitions of MuleSoft and Datorama impact the financial results?
The acquisitions of MuleSoft and Datorama were significant drivers of revenue growth and market expansion. MuleSoft contributed $104 million in subscription and support revenue in the third quarter, while Datorama also added to the top line. These acquisitions also contributed to the substantial increase in goodwill on the balance sheet, reflecting the company's strategy to expand its platform capabilities.
What is the trend in operating expenses, and how is it impacting profitability?
Operating expenses increased by 32% year-over-year, primarily due to increased investments in research and development, marketing and sales, and general administrative costs. These increases were largely attributed to the integration of recent acquisitions and ongoing growth initiatives. While operating expenses grew, the company's revenue growth outpaced the growth in several expense categories, demonstrating continued operational efficiency. However, the increase in expenses, including amortization of acquired intangibles and stock-based expenses, did impact operating income.
What is the company's liquidity and capital structure like?
Salesforce maintained a strong liquidity position with $3.5 billion in cash, cash equivalents, and marketable securities as of October 31, 2018. The company also increased its debt significantly, largely to finance its acquisitions, with total debt rising to $3.7 billion. Despite increased leverage, the company reported compliance with all debt covenants, and its operating cash flow remains positive.
06—Continue