10-QPeriod: Q2 FY2021

Salesforce, Inc. Quarterly Report for Q2 Ended Jul 31, 2020

Filed August 28, 2020For Securities:CRM

Summary

Salesforce, Inc.'s 10-Q filing for the period ending July 31, 2020, demonstrates robust revenue growth, with total revenues reaching $5.2 billion, a 29% increase year-over-year. This growth was primarily driven by subscription and support services, which now constitute 94% of total revenue, indicating a strong shift towards their cloud-based offerings. The company also reported a significant increase in net income to $2.6 billion, largely influenced by a one-time $2.0 billion tax benefit related to the recognition of deferred tax assets, alongside a notable $617 million unrealized gain from a strategic investment. The company continues to expand its operational scale, highlighted by the acquisition of Vlocity for $1.4 billion. Despite this growth, operating expenses also rose, particularly in research and development and marketing and sales, reflecting ongoing investments in product development and go-to-market strategies. Remaining Performance Obligation (RPO) remained strong at $30.6 billion, indicating healthy future revenue streams, though cash flow from operations saw a slight year-over-year decrease, attributed to customer payment delays and strategic investments. Overall, the report showcases Salesforce's continued expansion and investment in future growth, albeit with some near-term impacts from the COVID-19 pandemic.

Financial Highlights

51 data points
Beta

Revenue

$5.15B

74.5% Gross Margin

Net Income

$2.63B

51.0% Net Margin

EPS (Diluted)

$2.85

Total Assets

$57.78B

Cash & Equivalents

$4.05B

Free Cash Flow

$315.00M

Financial Statements
Beta
Revenue$5.15B
Cost of Revenue$1.31B
Gross Profit$3.84B
R&D Expenses$898.00M
Operating Expenses$3.66B
Operating Income$178.00M
Interest Expense$25.00M
Net Income$2.63B
EPS (Basic)$2.90
EPS (Diluted)$2.85
Shares Outstanding (Basic)904.00M
Shares Outstanding (Diluted)922.00M

Key Highlights

  • 1Total revenues for the quarter increased by 29% year-over-year to $5.2 billion, driven by subscription and support services.
  • 2Net income surged to $2.6 billion, significantly boosted by a $2.0 billion one-time tax benefit and a $617 million unrealized gain from a strategic investment.
  • 3The company completed the acquisition of Vlocity for $1.4 billion, further expanding its service offerings.
  • 4Remaining Performance Obligation (RPO) stood at $30.6 billion, indicating strong future revenue visibility.
  • 5Operating expenses increased due to investments in R&D and sales & marketing, alongside amortization of purchased intangibles.
  • 6Cash provided by operating activities decreased by 2% year-over-year to $429 million, impacted by customer payment delays and go-to-market investments.
  • 7Cash, cash equivalents, and marketable securities totaled $9.3 billion, providing a strong liquidity position.

Frequently Asked Questions

Salesforce reported total revenues of $5.2 billion for the three months ended July 31, 2020, representing a 29% increase compared to the same period in the prior year. Subscription and support revenues were the primary driver of this growth.

Net income was significantly impacted by a one-time discrete tax benefit of approximately $2.0 billion, resulting from the recognition of deferred tax assets related to an intra-entity transfer of intangible property. Additionally, an unrealized gain of $617 million from an IPO of a strategic investment contributed to the substantial increase in net income.

Salesforce completed the acquisition of Vlocity for $1.4 billion in June 2020, and its results have been included in the consolidated financial statements since then, though they were not material to date. The company also continues to integrate the acquisition of Tableau from the prior year, which contributed significantly to revenue growth.

Salesforce's Remaining Performance Obligation (RPO) was $30.6 billion as of July 31, 2020, an increase of 21% year-over-year. Current RPO was $15.2 billion, up 26% year-over-year. This substantial RPO indicates a strong pipeline of contracted future revenue, providing good visibility into future sales.