01—Abstract
Summary
Summary of the 10-Q filed December 4, 2019. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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 millionb 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.
02—Key points
Key Highlights
- Total revenues increased by 33% year-over-year to $4.5 billion.
- Subscription and support revenues grew by 34% year-over-year to $4.2 billion, representing 94% of total revenue.
- The company completed two significant acquisitions: Tableau for $14.8 billion and ClickSoftware for $1.4 billion.
- Goodwill increased substantially from $12.85 billion to $25.02 billion, reflecting the impact of acquisitions.
- Despite 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.
- Operating 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.
- Remaining Performance Obligation (RPO) increased by 22% year-over-year to $25.9 billion, indicating strong future revenue visibility.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2020, Salesforce, Inc. lost $0.02.
- Revenue$4.51B100.0%
- Cost of revenue−$1.13B25.1%
- Gross profit$3.38B74.9%
- Operating costs−$3.31B73.4%
- Operating income$65.0M1.4%
- Interest, other & tax−$174.0M3.9%
- Net income−$109.0M2.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2020filed December 4, 2019Financial Statements
Q3 FY2020 against Q3 FY2019
| Line item | Q3 FY2020Q3 FY2019 | Change |
|---|---|---|
| Revenue | $4.51B$3.39B | +33.0% |
| Cost of Revenue | $1.13B$889.00M | +27.6% |
| Gross Profit | $3.38B$2.50B | +35.0% |
| R&D Expenses | $774.00M$481.00M | +60.9% |
| Operating Expenses | $3.31B$2.41B | +37.5% |
| Operating Income | $65.00M$92.00M | −29.3% |
| Interest Expense | $27.00M$33.00M | −18.2% |
| Net Income | -$109.00M$105.00M | −203.8% |
| EPS (Basic) | $-0.12$0.14 | −185.7% |
| EPS (Diluted) | $-0.12$0.13 | −192.3% |
| Shares Outstanding (Basic) | 879.00M760.00M | +15.7% |
| Shares Outstanding (Diluted) | 879.00M785.00M | +12.0% |
05—Questions
Frequently Asked Questions
What was Salesforce's revenue performance in the third quarter of fiscal year 2020?
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.
What was the net income/loss for the quarter and what factors influenced it?
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.
How did the recent acquisitions of Tableau and ClickSoftware impact the financial statements?
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.
What is the outlook for future revenue based on the Remaining Performance Obligation (RPO)?
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.
06—Continue