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salesforce.com Inc. (CRM)

F3Q2011 Earnings Call Transcript

November 18, 2010 5:00 pm ET

Executives

David Havlek – VP, IR

Marc Benioff – Chairman and CEO

Graham Smith – EVP and CFO

Analysts

Stephanie Withers – Goldman Sachs

Heather Bellini – ISI Group

Mark Murphy – Piper Jaffray

Adam Holt – Morgan Stanley

Kash Rangan – Merrill Lynch

Stan Zlotsky – Deutsche Bank

Laura Lederman – William Blair

Brad Zelnick – Macquarie

Brent Thill – UBS

Presentation

Operator

Good afternoon. My name is Martin and I will be your conference operator today. At this time I would like to welcome everyone to the salesforce.com Q3 fiscal 2011 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you.

I will now like to turn the call over to David Havlek, Vice President of Investor Relations. Sir, you may begin your conference.

David Havlek

Thanks, Martin. I'd welcome everyone to salesforce.com's third quarter call. Joining me as always for our results today are Marc Benioff, Chairman and CEO as well as Graham Smith, CFO.

Following our prepared remarks today, we'll open things up to your questions. We're running on a very tight schedule so I ask that you respectfully limit yourself to a single question. Unfortunately I will be muting your calls after you ask your question in hopes to getting to as many of you as possible. Complete disclosure of our third 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 information including detailed historical financial statements and facts is available on our website. Our commentary today will include both GAAP and non-GAAP metrics. Reconciliations between GAAP and non-GAAP metrics for both our reported results and our forward guidance can be found in the press release.

At times in our prepared comments or in response to your questions, we may offer certain additional metrics to provide a greater understanding of our business or our quarterly results. Please be advised that we may or may not update these additional metrics on future calls.

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 third quarter 2011 performance. Some of our discussion or responses to your 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 Company results could differ materially from these forward-looking statements.

All these risks, 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 most recent report on Form 10-Q, particularly under the heading, Risk Factors. To access our Q3 press release, including the GAAP to non-GAAP reconciliations, our historical results, any of our SEC disclosures or simply to learn more about salesforce.com, I encourage you to visit our Investor Relations website at, salesforce.com/investor. In addition, a webcast of today's call will be available for 90 days and a dial-in replay will be made available through December 17.

Finally, before I turn the call over to Marc, please be advised, unreleased services or features referenced in today's discussion or in other public statements are not currently available and thus may not be delivered on time or at all. Customers who purchase our services should make the purchase decisions based on services and features that are currently available.

With that, let me turn the call over to Marc to discuss our results. Marc?

Marc Benioff

Hey, thanks very much, David, and I am delighted to share our outstanding third quarter results with everyone day. Here are the highlights from the third quarter. First, the Giants win the World Series, amazing. In other news, salesforce.com revenue for the third quarter rose to $429 million, an increase of roughly 30% from a year ago. This was our best growth performance in seven quarters and our annual revenue run rate is now more than $1.7 billion.

Non-GAAP EPS of $0.32 rose from $0.28 a year ago; we've seen our EPS guidance even as we increased our investment scenarios that are key for future growth.

Third quarter operating cash flow was approximately $74 million, an increase of more than a 100% from year ago, year-to-date we've generated almost $300 million in operating cash flow that's up more than 60% from the same period last year, our cash generation continues to be outstanding.

Finally while we have our important fourth quarter ahead of us as we close out fiscal year '11 I'm thrilled to announce the preliminary revenue estimate for fiscal year '12 of $1.97 billion to $2.0 billion. The high end of that range would make salesforce.com the first could computing company ever to achieve $2 billion in annual revenue and puts us in an elite group of our software companies to break through the $2 billion revenue threshold.

As evidence of our incredible growth after taking a decade to record our first $1 billion year in fiscal year 2009, we now expect to double in size to $2 billion in just three years later in fiscal year '12.

Customer momentum continues to be strong, during the third quarter we added approximately 4,800 net new customers taking our global customer community to more than 87,200 with more than 19,000 net new customers over the past year we've grown our customer base by more than 28%.

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