01—Abstract
Summary
Summary of the 10-Q filed June 1, 2020. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. reported total revenues of $4.87 billiona for the first quarter of fiscal year 2021 (ended April 30, 2020), representing a 30% increase year-over-year.
Despite revenue growth, net income declined to $99 millionb from $392 million in the prior year's quarter, largely impacted by a decrease in gains from strategic investments and an increase in operating expenses, particularly in research and development and marketing and sales, partly due to acquisitions and increased headcount. The company ended the quarter with a strong liquidity position, holding $9.8 billion in cash, cash equivalents, and marketable securities. The filing also highlights the significant impact of the COVID-19 pandemic, which began to affect business trends in the latter half of the quarter.
This led to a slowdown in new business growth and a shortening of average contract durations. Salesforce implemented measures to support customers facing financial distress, which impacted operating cash flows. The company provided a one-time partial minimum commission guarantee to its sales force and incurred costs related to event cancellations and work-from-home transitions.
02—Key points
Key Highlights
- Total revenues increased by 30% year-over-year to $4.87 billion for the first quarter of fiscal year 2021.
- Net income decreased to $99 million from $392 million in the prior year's quarter, impacted by lower gains on strategic investments and increased operating expenses.
- Operating expenses, particularly R&D and Marketing & Sales, increased significantly due to acquisitions and investments in growth.
- The company maintained a strong liquidity position with $9.8 billion in cash, cash equivalents, and marketable securities.
- COVID-19 pandemic began impacting business in the latter half of the quarter, leading to slower new business growth and shorter contract durations.
- Remaining Performance Obligation (RPO) stood at $29.3 billion, an 18% increase year-over-year, indicating strong future revenue potential.
- Salesforce provided temporary financial flexibility to certain customers impacted by COVID-19, affecting operating cash flows.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2021, Salesforce, Inc. kept $0.02.
- Revenue$4.87B100.0%
- Cost of revenue−$1.25B25.8%
- Gross profit$3.61B74.2%
- Operating costs−$3.75B77.1%
- Operating income−$140.0M2.9%
- Interest, other & tax$239.0M4.9%
- Net income$99.0M2.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2021filed June 1, 2020Financial Statements
Q1 FY2021 against Q1 FY2020
| Line item | Q1 FY2021Q1 FY2020 | Change |
|---|---|---|
| Revenue | $4.87B$3.74B | +30.2% |
| Cost of Revenue | $1.25B$914.00M | +37.2% |
| Gross Profit | $3.61B$2.82B | +27.9% |
| R&D Expenses | $859.00M$554.00M | +55.1% |
| Operating Expenses | $3.75B$2.61B | +43.6% |
| Operating Income | -$140.00M$210.00M | −166.7% |
| Interest Expense | $25.00M$29.00M | −13.8% |
| Net Income | $99.00M$392.00M | −74.7% |
| EPS (Basic) | $0.11$0.51 | −78.4% |
| EPS (Diluted) | $0.11$0.49 | −77.6% |
| Shares Outstanding (Basic) | 896.00M771.00M | +16.2% |
| Shares Outstanding (Diluted) | 913.00M793.00M | +15.1% |
05—Questions
Frequently Asked Questions
How did the COVID-19 pandemic impact Salesforce's first quarter financial results?
The COVID-19 pandemic began to impact Salesforce's business in the latter half of the first quarter of fiscal year 2021. This led to a slowdown in new business growth and a reduction in the average contract duration for new and renewed business. The company offered temporary financial flexibility to some customers experiencing distress, which affected operating cash flows. Additionally, event cancellations and shifts to virtual experiences incurred incremental costs. Overall, the pandemic contributed to lower growth in new business than initially planned.
What is the current financial health of Salesforce based on this report?
Salesforce demonstrated robust revenue growth, increasing total revenues by 30% year-over-year to $4.87 billion. The company maintains a strong liquidity position with $9.8 billion in cash, cash equivalents, and marketable securities. However, net income declined significantly compared to the prior year, largely due to a decrease in gains from strategic investments and increased operating expenses related to acquisitions and growth initiatives. The Remaining Performance Obligation (RPO) of $29.3 billion indicates a solid foundation for future revenue.
What were the main drivers behind the increase in operating expenses?
Operating expenses increased significantly across Research and Development (R&D), Marketing and Sales, and General and Administrative functions. This increase was primarily driven by investments in headcount to support growth and integrate recent acquisitions like Tableau. Specific factors included increased employee-related costs, stock-based expenses, amortization of purchased intangible assets, and higher data center and development costs. Marketing and Sales also saw an impact from a one-time commission guarantee and the cancellation of in-person events.
How is Salesforce managing its international operations and foreign currency exposure?
Salesforce conducts business globally and is exposed to foreign currency exchange rate fluctuations. The company aims to minimize this risk through foreign currency forward contracts, though these are not designated as hedging instruments. Revenue from Europe was $1.03 billion, and from Asia Pacific was $461 million. The company is also transitioning its European structure to enable local subsidiaries to invoice in local currencies, aiming for better alignment between revenues and expenses. Foreign currency fluctuations had a modest adverse impact on revenue outside the Americas.
06—Continue