10-QPeriod: Q2 FY2020

Salesforce, Inc. Quarterly Report for Q2 Ended Jul 31, 2019

Filed August 23, 2019For Securities:CRM

Summary

Salesforce, Inc.'s Form 10-Q filing for the quarter ended July 31, 2019, reveals a period of robust revenue growth driven by its core subscription and support services. Total revenues increased by 22% year-over-year for the quarter, reaching $4.0 billion, with subscription and support revenue growing by 22% to $3.7 billion. This growth was primarily attributed to an increase in new business and upgrades from existing customers. The company's balance sheet shows a significant increase in operating lease right-of-use assets and liabilities due to the adoption of new lease accounting standards (Topic 842). Total assets grew to $33.3 billion, up from $30.7 billion at the fiscal year-end. While the company maintains a strong liquidity position with $6.0 billion in cash, cash equivalents, and marketable securities, it also incurred a notable $166 million non-cash charge related to the settlement of a Salesforce.org reseller agreement. Investors should note the company's ongoing investment in research and development and marketing and sales, which are key drivers of its growth strategy.

Financial Statements
Beta
Revenue$4.00B
Cost of Revenue$967.00M
Gross Profit$3.03B
R&D Expenses$607.00M
Operating Expenses$2.97B
Operating Income$58.00M
Interest Expense$29.00M
Net Income$91.00M
EPS (Basic)$0.12
EPS (Diluted)$0.11
Shares Outstanding (Basic)776.00M
Shares Outstanding (Diluted)795.00M

Key Highlights

  • 1Total revenues for the three months ended July 31, 2019, increased by 22% to $3.997 billion compared to $3.281 billion in the prior year's quarter.
  • 2Subscription and support revenues, the primary revenue driver, grew by 22% to $3.745 billion for the quarter.
  • 3The company adopted new lease accounting standards (Topic 842) in fiscal 2020, resulting in the recognition of significant operating lease right-of-use assets ($2.9 billion) and liabilities ($3.1 billion) on the balance sheet.
  • 4Operating expenses increased by 27% year-over-year for the quarter, driven by higher R&D and Marketing & Sales expenses, partially offset by a one-time $166 million loss on settlement of a Salesforce.org reseller agreement impacting total operating expenses.
  • 5Income from operations decreased to $58 million from $115 million year-over-year, reflecting increased operating expenses.
  • 6Net income for the quarter was $91 million ($0.11 per diluted share), a decrease from $299 million ($0.39 per diluted share) in the same period last year.
  • 7The company announced the acquisition of Tableau Software, Inc. for approximately $14.9 billion in stock and assumed awards, which closed after the end of this reporting period.

Frequently Asked Questions

Salesforce reported strong revenue growth, with total revenues for the three months ended July 31, 2019, increasing by 22% to $3.997 billion compared to $3.281 billion in the prior year's quarter. Subscription and support revenues, the core of their business, also grew by 22% to $3.745 billion.

The company adopted new lease accounting standards (Topic 842) effective February 1, 2019. This led to the recognition of significant operating lease right-of-use assets ($2.9 billion) and liabilities ($3.1 billion) on the condensed consolidated balance sheet as of July 31, 2019, making the current balance sheet not directly comparable to prior periods.

Salesforce recorded a one-time, non-cash operating expense charge of $166 million related to the settlement of the Salesforce.org reseller agreement during the quarter. This charge significantly impacted the reported operating expenses and income from operations.

The company maintains a healthy liquidity position with $6.0 billion in cash, cash equivalents, and marketable securities as of July 31, 2019. Net cash provided by operating activities was $436 million for the quarter. The company also has significant strategic investments, which contributed $109 million in net gains for the quarter, and continues to invest in R&D and sales & marketing for future growth.