01—Abstract
Summary
Summary of the 10-Q filed December 2, 2021. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. reported strong revenue growth of 24% year-over-year for the nine months ended October 31, 2021, reaching $19.2 billiona.
This growth was primarily driven by a significant increase in subscription and support revenues, which now constitute 93% of total revenue. The company successfully closed the substantial acquisition of Slack Technologies, Inc. in July 2021, which contributed to a notable increase in goodwill and intangible assets on the balance sheet. Despite robust revenue performance, the company's net income for the nine months was $1.47 billionb, a decrease from the prior year's $3.8 billion, largely due to the absence of a significant one-time tax benefit recorded in the previous year.
Operating expenses, particularly in marketing and sales, increased to support growth initiatives and integration efforts, reflecting continued investment in the business. The company's financial position remains solid, with cash, cash equivalents, and marketable securities totaling $9.4 billionc as of October 31, 2021. Remaining Performance Obligation (RPO) also saw a healthy increase to $36.3 billion, indicating strong future revenue visibility.
The company's debt level significantly increased due to new debt issuances to fund acquisitions. Investors should note the continued substantial stock-based compensation expenses and amortization of intangible assets impacting profitability, as well as ongoing investments in research and development and sales and marketing to drive future growth.
02—Key points
Key Highlights
- Total revenues increased by 24% year-over-year to $19.2 billion for the nine months ended October 31, 2021.
- Subscription and support revenue, the primary revenue driver, grew significantly and now represents 93% of total revenue.
- The acquisition of Slack Technologies, Inc. was completed in July 2021 for approximately $27.1 billion, significantly increasing goodwill and intangible assets.
- Cash provided by operations increased by 53% year-over-year to $4.0 billion for the nine months ended October 31, 2021.
- Remaining Performance Obligation (RPO) increased by 20% year-over-year to $36.3 billion, indicating strong future revenue visibility.
- Net income decreased to $1.47 billion for the nine months ended October 31, 2021, compared to $3.8 billion in the prior year, primarily due to a one-time tax benefit in the prior year.
- Total debt increased substantially, largely from new debt issuances to fund acquisitions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2022, Salesforce, Inc. kept $0.07.
- Revenue$6.86B100.0%
- Cost of revenue−$1.84B26.9%
- Gross profit$5.02B73.1%
- Operating costs−$4.98B72.6%
- Operating income$38.0M0.6%
- Interest, other & tax$430.0M6.3%
- Net income$468.0M6.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2022filed December 2, 2021Financial Statements
Q3 FY2022 against Q3 FY2021
| Line item | Q3 FY2022Q3 FY2021 | Change |
|---|---|---|
| Revenue | $6.86B$5.42B | +26.6% |
| Cost of Revenue | $1.84B$1.39B | +32.3% |
| Gross Profit | $5.02B$4.03B | +24.7% |
| R&D Expenses | $1.20B$902.00M | +33.4% |
| Operating Expenses | $4.98B$3.80B | +31.0% |
| Operating Income | $38.00M$224.00M | −83.0% |
| Interest Expense | $72.00M$25.00M | +188.0% |
| Net Income | $468.00M$1.08B | −56.7% |
| EPS (Basic) | $0.48$1.19 | −59.7% |
| EPS (Diluted) | $0.47$1.15 | −59.1% |
| Shares Outstanding (Basic) | 980.00M911.00M | +7.6% |
| Shares Outstanding (Diluted) | 1.00B939.00M | +6.6% |
05—Questions
Frequently Asked Questions
How did Salesforce's revenue perform in this quarter compared to the previous year?
Salesforce reported total revenues of $6.86 billion for the three months ended October 31, 2021, an increase of 27% from $5.42 billion in the same period last year. For the nine months ended October 31, 2021, revenues were $19.17 billion, a 24% increase from $15.44 billion in the prior year.
What was the impact of the Slack acquisition on the balance sheet?
The acquisition of Slack significantly increased Salesforce's assets. Goodwill rose from $26.3 billion to $48.0 billion, and intangible assets acquired through business combinations increased from $4.1 billion to $9.5 billion. This reflects the substantial premium paid for Slack and the associated acquisition accounting.
How did the company's profitability change, and what were the key drivers?
Net income for the nine months ended October 31, 2021, was $1.47 billion, a decrease from $3.81 billion in the prior year. This decrease was primarily due to a significant one-time tax benefit of approximately $2.0 billion recorded in the prior year's second quarter. While revenues grew strongly, operating expenses, including research and development, marketing and sales, and general and administrative expenses, also increased, reflecting investments in growth and the integration of acquisitions.
What is the company's liquidity position, and how has debt changed?
Salesforce maintained a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $9.4 billion as of October 31, 2021. However, the company's total debt increased significantly from $2.7 billion in January 2021 to $10.7 billion in October 2021, primarily due to $8.0 billion in senior notes issued in July 2021 to fund the Slack acquisition.
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