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Q2 2012 Earnings Call

August 18, 2011 5:00 pm ET


Graham Smith - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Marc Benioff - Co-Founder, Chairman and Chief Executive Officer

David Havlek -


Laura Lederman - William Blair & Company L.L.C.

Adam Holt - Morgan Stanley

Brent Thill - UBS Investment Bank

John DiFucci - JP Morgan Chase & Co

Thomas Ernst - Deutsche Bank AG

Heather Bellini - Goldman Sachs Group Inc.

Mark Moerdler - Sanford C. Bernstein & Co., Inc.

Bradley Whitt - Gleacher & Company, Inc.

Mark Murphy - Piper Jaffray Companies

Jason Maynard - Wells Fargo Securities, LLC

Kash Rangan - BofA Merrill Lynch



Good afternoon. My name is David, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 Fiscal Results Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. David Havlek, Senior Vice President of Investor Relations. Sir, you may begin your conference.

David Havlek

Thanks, David. I'd like to welcome everyone to's Second Quarter Fiscal Year 2012 Results Call. Here today to discuss our strong quarterly performance, are Marc Benioff, Chairman and CEO; as well as Graham Smith, our CFO.

Following Marc and Graham's prepared remarks today, we'll open things up to your questions. We now have 43 analysts covering the company and because we want to get as many of you as possible, we will be limiting each of you to one question today. A complete disclosure of our second quarter results can be found in a press release issued about an hour ago, as well as in our Form 8-K filed with the SEC. Additional financial information, including detailed historical financial statements and facts is available on our website. Our commentary today will primarily be in non-GAAP terms. Reconciliations between GAAP and non-GAAP metrics for both our reported results and our forward guidance can be found in our earnings press release.

At times in our prepared comments or in responses to your questions, we may offer incremental metrics to provide a greater understanding of our business or our quarterly results. Please be advised these additional details may be one-time in nature, and we may or may not update them in the future.

In addition, I remind you that this quarter is the last quarter in which the customer count metric will be provided as a regular part of our quarterly report. In the future, we expect to offer this metric periodically on a milestone basis. We're making this change because several of our recent acquisitions have had large number of users were linking those users to specific customer organizations can be extremely challenging and in some cases, impossible. As a result, we believe our traditional customer metric will be less meaningful over time.

With that, let me make this call official with a brief Safe Harbor. The primary purpose of today's call is to provide you with information regarding our fiscal second quarter performance. Some of our discussions or responses to questions may contain forward-looking statements. These statements are subject to risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, actual results could differ materially from our forward-looking statements. All of these risks and uncertainties and assumptions, as well as other information on potential factors that could affect our financial results are included in our reports filed with the SEC, including our recent report on Form 10-Q, particularly under the heading Risk Factors.

To access our Q2 release, including the GAAP to non-GAAP recons, our historical results, any of our SEC disclosures, a webcast replay today's call, or simply to learn more about salesforce, I encourage you to visit the Investor Relations website at

Finally, before I turn the call over to Marc, please be advised that we may reference certain unreleased services or features that is not yet available on today's discussion. We can't guarantee the future timing or availability of these services or features. As such, customers who purchase our services should make their purchase decisions based on services and features that are currently available.

With that, let me turn the call over to Marc to discuss our excellent second quarter. Marc?

Marc Benioff

Thanks, David. I'm absolutely delighted to discuss these strong second quarter results, just 2 quarters now into our fiscal year and we will soon exceed a $2.2 billion annual revenue run rate, validating both our growth strategy and our ability to execute on the incredible opportunity. I'll begin by reviewing some of these financial highlights. Number one, revenue of $546 million rose by 38%, and we haven't seen revenue grow that fast in almost 3 years, and that was one we are less than 1/2 our current size.

Non-GAAP EPS of $0.30 was at the high-end of our guided range, and we delivered that result even as our headcount has grown by more than 800 during the quarter. Deferred revenue increased by 37% to finish the quarter at $935 million, and operating cash flow rose by 9% to $83 million in the quarter, and we exit the quarter of nearly $1.3 billion of cash and equivalents on our balance sheets.

Our financial success was powered by another quarter of tremendous customer success. And during the quarter, we added roughly 6,300 net new customers, that's a company record, smashing past 100,000 customer milestone. And let me just say that, while we ended the quarter with 104,000 customers using our core Salesforce services, that number does not include the thousands more who are using Heroku and Radian6, which are 2 of our most recent acquisitions.

We also saw continued strength in big deals during the second quarter and all we signed more than 60, we signed more than sixty 7-figure transactions a 40% increase compared with last year, and we signed three, three 8-figure megadeals. In addition, I'm thrilled to tell you, we closed an additional 8-figure megadeal just after the quarter ended with a large telecommunications company that we will be announcing at Dreamforce.

Given this strong financial and customer momentum, we're again, raising our full year fiscal year '12 revenue guidance, which we now project at $2.22 billion to $2.23 billion.

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