CRM platform provider
) reported wider-than-expected adjusted loss in the second-quarter
of fiscal 2015.
Salesforce's revenues of $1.32 billion not only increased 37.8%
from the year-ago quarter but also surpassed the Zacks Consensus
Estimate of $1.29 billion. Reported revenues also beat management's
guided range of $1.285 billion to $1.290 billion. The
year-over-year increase in revenue was primarily attributed to
rapid adoption of the company's cloud-based solutions, the
ExactTarget acquisition and a favorable foreign exchange impact.
Also, higher demand for Salesforce ExactTarget Marketing Cloud
platform, which is a part of the Salesforce1 Customer Platform,
supported the year-over-year increase in revenues. During the
quarter, Salesforce agreed to acquire "relationship-intelligence"
company RelateIQ Inc. This acquisition will provide Salesforce the
platform to build its marketing intelligence system.
During the quarter, the company's cloud-based solutions were
selected by a number of companies including Safeway and Fastweb.
Among its business segments, revenues from Subscription and Support
increased 36.5% from the year-ago quarter to $1.23 billion.
Professional Services and Other revenues increased 58.5% on a
year-over-year basis to $85.9 million.
Geographically, the company witnessed revenue growth of 39% in the
Americas while revenues from Europe and Asia increased 42% and 25%,
respectively, on a year-over-year basis.
Salesforce's adjusted gross profit (including stock-based
compensation but excluding amortization expenses) came in at $1.03
billion, up 35.4% from the year-ago quarter. However, gross margin
contracted 134 basis points (bps) to 78.3% from the year-ago
quarter, primarily due to the acquisition of ExactTarget.
Adjusted operating expenses (including stock-based compensation but
excluding amortization of acquisition-related intangibles)
increased 32.9% from the year-ago quarter to $1.03 billion,
primarily due to higher investments in research and development,
marketing and sales and general and administrative activities.
However, as a percentage of revenues, operating expenses contracted
287 bps from the year-ago quarter.
Salesforce reported adjusted operating income (including
stock-based compensation but excluding amortization of
acquisition-related intangibles) of $2.5 million, up from the
year-ago loss of $12.8 million primarily due to higher revenue base
and a drop in operating expenses as a percentage of revenues. The
ExactTarget acquisition and higher operational efficiencies also
impacted operating results.
Salesforce's adjusted net loss, including stock-based compensation
but excluding all one-time items on a proportionate tax basis, came
in at $26.3 million compared to a net income of $71.3 million
reported in the year-ago quarter.
Balance Sheet & Cash Flow
Salesforce exited the quarter with cash and cash equivalents and
marketable securities of $844.6 million compared with $879.1
million in the previous quarter. Accounts receivable were $834.3
million compared with $684.2 million in the prior quarter.
Total deferred revenue in the quarter was $2.35 billion, which
increased 31% on a year-over-year basis. Cash from operating
activities was $245.9 million compared with $473.1 million in the
For the third quarter of fiscal 2015, the company expects revenues
in the range of $1.365 billion to $1.370 billion, reflecting a
year-over-year increase of 27%, primarily due to the ExactTarget
acquisition. The Zacks Consensus Estimate is pegged at $1.370
billion. The company expects non-GAAP earnings per share in the
range of 12 cents to 13 cents for the third quarter. The Zacks
Consensus Estimate (including stock-based compensation expenses) is
pegged at a loss of 2 cents per share.
The company raised its full fiscal-year 2015 revenue guidance from
the previous range of $5.30 billion-$5.34 billion to $5.340
billion-$5.370 billion (year-over-year increase of 31% to 32%).
Salesforce also revised its non-GAAP earnings per share guidance
from the range of 49 cents-51 cents to 50 cents-52 cents. The
Zacks Consensus Estimate is pegged at revenues of $5.336 billion
and loss per share (including stock-based compensation expenses) of
Salesforce's adjusted loss per share in fiscal second quarter 2015
was wider than the Zacks Consensus Estimate. Revenues however
surpassed the consensus mark and increased on a year-over-year
basis, primarily impacted by growth across all it business segments
and Salesforce ExactTarget Marketing Cloud platform. The company
provided a positive third-quarter revenue guidance and raised its
fiscal 2015 guidance as well.
The higher number of deal wins was encouraging and so were the
geographical contributions. We consider the rapid adoption of
Salesforce1 Customer Platform to be a positive for the company.
Overall, the company's diverse cloud offerings and strong spending
on digital marketing remain catalysts. Moreover, strategic
acquisitions and the resultant synergies are expected to benefit in
the long run.
Considering increasing customer adoption and satisfactory
performances, market research firm Gartner acknowledged Salesforce
as the leading social CRM solutions provider. We believe that the
rapid adoption of Salesforce' platforms demonstrates its growing
opportunities in the ever-growing cloud computing segment.
Although, the company is growing reasonably in the cloud market,
growth prospects have been rationalized to a considerable extent
due to intensifying competition from International Business
), Oracle Corporation (
) and SAP AG (
). Moreover, currency fluctuations and an increase in investments
for international expansions and data centers could impact
Salesforce has a Zacks Rank #3 (Hold).
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