10-QPeriod: Q3 FY2020

Salesforce, Inc. Quarterly Report for Q3 Ended Oct 31, 2019

Filed December 4, 2019For Securities:CRM

Summary

Salesforce, Inc. (CRM) reported its Q3 fiscal year 2020 results for the period ending October 31, 2019. The company saw significant revenue growth, with total revenues reaching $4.5 billion, a 33% increase year-over-year. This growth was primarily driven by a 34% increase in subscription and support revenues. A notable aspect of this quarter was the completion of two major acquisitions: Tableau Software, Inc. in August 2019 for $14.8 billion and ClickSoftware Technologies Ltd. in October 2019 for $1.4 billion. These acquisitions contributed to a substantial increase in assets, including goodwill and intangible assets, and also increased operating expenses due to amortization and integration costs. Despite the strong revenue growth, the company reported a net loss of $109 million for the quarter, compared to a net income of $105 million in the prior year's same quarter. This loss was influenced by a one-time $166 million charge related to the settlement of a reseller agreement with Salesforce.org, as well as increased operating expenses from R&D and marketing & sales, largely driven by the integration of recent acquisitions and stock-based compensation expenses.

Financial Highlights

51 data points
Beta

Revenue

$4.51B

74.9% Gross Margin

Net Income

-$109.00M

-2.4% Net Margin

EPS (Diluted)

$-0.12

Total Assets

$49.94B

Cash & Equivalents

$3.87B

Free Cash Flow

$128.00M

Financial Statements
Beta
Revenue$4.51B
Cost of Revenue$1.13B
Gross Profit$3.38B
R&D Expenses$774.00M
Operating Expenses$3.31B
Operating Income$65.00M
Interest Expense$27.00M
Net Income-$109.00M
EPS (Basic)$-0.12
EPS (Diluted)$-0.12
Shares Outstanding (Basic)879.00M
Shares Outstanding (Diluted)879.00M

Key Highlights

  • 1Total revenues increased by 33% year-over-year to $4.5 billion.
  • 2Subscription and support revenues grew by 34% year-over-year to $4.2 billion, representing 94% of total revenue.
  • 3The company completed two significant acquisitions: Tableau for $14.8 billion and ClickSoftware for $1.4 billion.
  • 4Goodwill increased substantially from $12.85 billion to $25.02 billion, reflecting the impact of acquisitions.
  • 5Despite revenue growth, the company reported a net loss of $109 million for the quarter, compared to a net profit of $105 million in the prior year.
  • 6Operating expenses increased by 37% to $3.31 billion, largely due to increased R&D, marketing & sales, and general & administrative costs, influenced by acquisitions and stock-based compensation.
  • 7Remaining Performance Obligation (RPO) increased by 22% year-over-year to $25.9 billion, indicating strong future revenue visibility.

Frequently Asked Questions

Salesforce reported total revenues of $4.5 billion for the three months ended October 31, 2019, representing a 33% increase compared to $3.4 billion in the same period last year. Subscription and support revenues, the primary revenue driver, grew by 34% year-over-year.

The company reported a net loss of $109 million ($0.12 per share) for the quarter, a decrease from a net income of $105 million ($0.13 per share) in the prior year's quarter. This was influenced by a significant increase in operating expenses, particularly R&D and marketing & sales, driven by recent acquisitions (Tableau and ClickSoftware), stock-based compensation, and a one-time $166 million charge related to the Salesforce.org reseller agreement settlement.

The acquisitions of Tableau and ClickSoftware, completed in August and October 2019 respectively, significantly impacted the balance sheet by increasing total assets, goodwill ($12.85 billion to $25.02 billion), and intangible assets. They also contributed to higher operating expenses due to amortization of acquired intangibles and integration costs. Revenue was also boosted, starting from the respective acquisition dates, and Tableau's contribution was $308 million to subscription and support revenue in the nine-month period.

Salesforce's Remaining Performance Obligation (RPO) increased by 22% year-over-year to $25.9 billion as of October 31, 2019. The current RPO, which is expected to be recognized within the next 12 months, also saw a significant increase of 28% to $12.8 billion. This strong growth in RPO provides good visibility into future revenue streams.