01—Abstract
Summary
Summary of the 10-Q filed August 25, 2022. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. (CRM) reported its second quarter fiscal year 2023 results, showcasing continued revenue growth driven by its subscription and support services.
Total revenues increased by 22% year-over-year to $7.72 billiona for the quarter, and 23% to $15.13 billion for the first six months of the fiscal year. While revenue growth remains robust, the company highlighted a more measured buying behavior from customers in July 2022, leading to stretched sales cycles and deal compression, which could impact future growth if sustained. Profitability saw a notable decline compared to the prior year, with net income for the quarter at $68 million ($0.07 diluted EPS) compared to $535 million ($0.56 diluted EPS) in the prior year.
This decrease was influenced by factors such as increased operating expenses, particularly in research and development and marketing and sales, as well as gains on strategic investments in the prior year. Despite these profitability pressures, the company maintained strong operating cash flow, generating $4.0 billionb for the first six months of the fiscal year. Salesforce also announced a new $10.0 billion share repurchase program in August 2022, signaling confidence and a commitment to returning value to shareholders.
02—Key points
Key Highlights
- Total revenues increased by 22% year-over-year to $7.72 billion for the second quarter and 23% to $15.13 billion for the first six months of fiscal 2023.
- Net income for the quarter decreased to $68 million from $535 million in the prior year, impacted by higher operating expenses and lower strategic investment gains.
- Diluted EPS decreased to $0.07 for the quarter, down from $0.56 in the prior year.
- Operating cash flow for the first six months of fiscal 2023 was strong at $4.0 billion, an increase of 11% year-over-year.
- Remaining performance obligation (RPO) grew 15% year-over-year to $41.6 billion as of July 31, 2022, indicating strong future revenue potential.
- The company noted a "measured buying behavior" from customers in July 2022, leading to stretched sales cycles and deal compression.
- Salesforce announced a new $10.0 billion share repurchase program in August 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2023, Salesforce, Inc. kept $0.01.
- Revenue$7.72B100.0%
- Cost of revenue−$2.13B27.6%
- Gross profit$5.59B72.4%
- Operating costs−$5.40B69.9%
- Operating income$193.0M2.5%
- Interest, other & tax−$125.0M1.6%
- Net income$68.0M0.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2023filed August 25, 2022Financial Statements
Q2 FY2023 against Q2 FY2022
| Line item | Q2 FY2023Q2 FY2022 | Change |
|---|---|---|
| Revenue | $7.72B$6.34B | +21.8% |
| Cost of Revenue | $2.13B$1.61B | +31.9% |
| Gross Profit | $5.59B$4.73B | +18.3% |
| R&D Expenses | $1.33B$1.02B | +30.3% |
| Operating Expenses | $5.40B$4.39B | +22.9% |
| Operating Income | $193.00M$332.00M | −41.9% |
| Net Income | $68.00M$535.00M | −87.3% |
| EPS (Basic) | $0.07$0.57 | −87.7% |
| EPS (Diluted) | $0.07$0.56 | −87.5% |
| Shares Outstanding (Basic) | 997.00M933.00M | +6.9% |
| Shares Outstanding (Diluted) | 1.00B950.00M | +5.4% |
05—Questions
Frequently Asked Questions
What is Salesforce's revenue performance for the reported period?
Salesforce reported robust revenue growth for the second quarter and the first six months of fiscal year 2023. Total revenues increased by 22% year-over-year to $7.72 billion for the quarter and by 23% to $15.13 billion for the six-month period. This growth was primarily driven by subscription and support revenues.
What impacted Salesforce's net income and earnings per share (EPS) in this quarter?
Net income and diluted EPS declined significantly compared to the prior year. For the second quarter, net income was $68 million ($0.07 diluted EPS), down from $535 million ($0.56 diluted EPS) in the same period last year. This decline was attributed to increased operating expenses, particularly in research and development and marketing and sales, and a notable decrease in gains on strategic investments compared to the prior year's strong performance.
Are there any concerns regarding customer demand or sales cycles?
Yes, Salesforce noted a "measured buying behavior" from customers starting in July 2022. This has resulted in stretched sales cycles and deal compression, which could negatively affect future revenue growth if sustained. However, the company stated there was no material impact on consolidated revenues or remaining performance obligation for the reported periods due to this trend.
What is the company's outlook on cash flow and capital allocation?
Salesforce demonstrated strong operating cash flow, generating $4.0 billion in the first six months of fiscal 2023, an 11% increase year-over-year. Additionally, the company announced a new $10.0 billion share repurchase program in August 2022, indicating management's confidence in the business and its commitment to returning capital to shareholders.
06—Continue