Salesforce.com Announces Fiscal 2015 Second Quarter Results

By PR Newswire,  August 21, 2014, 04:05:00 PM EDT


- Revenue of $1.32 Billion, up 38% Year-Over-Year

- Deferred Revenue of $2.35 Billion, up 31% Year-Over-Year

- Unbilled Deferred Revenue of Approximately $5.0 Billion, up 32% Year-Over-Year

- Operating Cash Flow of $246 Million, up 34% Year-Over-Year

- Raises FY15 Revenue Guidance by $30 million to $5.34 - $5.37 Billion

SAN FRANCISCO, Aug. 21, 2014 /PRNewswire/ -- Salesforce.com (NYSE:CRM), the world's #1 CRM platform (http://www.salesforce.com/), today announced results for its fiscal second quarter ended July 31, 2014.

"Salesforce.com continues to be the fastest growing top 10 software company with 38% year-over-year growth in revenue, and more than 30% year-over-year growth in deferred revenue and operating cash flow in the second quarter," said Marc Benioff, Chairman and CEO, salesforce.com. "I'm delighted to announce that we are once again raising our fiscal year 2015 revenue guidance by $30 million, to reach $5.37 billion at the high end of our range, which is a full year growth rate of 32%. We have now raised our fiscal 2015 revenue guidance by $170 million since we first initiated guidance last year."

Salesforce.com delivered the following results for its fiscal second quarter:       

Revenue:  Total Q2 revenue was $1.32 billion, an increase of 38% year-over-year.  Subscription and support revenues were $1.23 billion, an increase of 37% year-over-year.  Professional services and other revenues were $86 million, an increase of 58% year-over-year. 

Earnings per Share:  Q2 diluted GAAP loss per share was ($0.10), and diluted non-GAAP earnings per share was $0.13. The company's non-GAAP results exclude the effects of $142 million in stock-based compensation expense, $36 million in amortization of purchased intangibles, $10 million in net non-cash interest expense related to the company's convertible senior notes, including the related loss on conversions of our convertible 0.75% senior notes, due 2015, and is based on a projected long-term non-GAAP tax rate of 36.5%.  GAAP EPS calculations are based on a basic share count of approximately 617 million shares. Non-GAAP EPS calculations are based on approximately 648 million diluted shares outstanding during the quarter, including approximately 20 million shares associated with the company's convertible 0.75% senior notes due 2015.    

Cash:  Cash generated from operations for the fiscal second quarter was $246 million, an increase of 34% year-over-year.  Total cash, cash equivalents and marketable securities finished the quarter at $1.67 billion.

Deferred Revenue:  Deferred revenue on the balance sheet as of July 31, 2014 was $2.35 billion, an increase of 31% year-over-year. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the second quarter at approximately $5.0 billion, up 32% year-over-year.

As of August 21, 2014, salesforce.com is initiating revenue and EPS guidance for its third quarter of fiscal year 2015. In addition, the company is raising its full fiscal year 2015 revenue guidance and its EPS guidance previously provided on May 20, 2014.

Q3 FY15 Guidance:  Revenue for the company's third fiscal quarter is projected to be in the range of $1.365 billion to $1.370 billion, an increase of 27% year-over-year.

GAAP loss per share is expected to be in the range of ($0.13) to ($0.12), while diluted non-GAAP EPS is expected to be in the range of $0.12 to $0.13.  The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $147 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $36 million, and net non-cash interest expense related to the convertible senior notes, including loss on conversions, expected to be approximately $10 million.  EPS estimates assume a GAAP tax rate of approximately negative 30%, which reflects the estimated quarterly change in the tax valuation allowance, and a projected long-term non-GAAP tax rate of 36.5%.  Note that the tax valuation allowance adds complexity, causing potential volatility in our forecasted GAAP tax rate.  The GAAP EPS calculation assumes an average basic share count of approximately 630 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 664 million shares.

Full Year FY15 Guidance:  Revenue for the company's full fiscal year 2015 is projected to be in the range of $5.340 billion to $5.370 billion, an increase of 31% to 32% year-over-year.

GAAP loss per share is expected to be in the range of ($0.48) to ($0.46) while diluted non-GAAP EPS is expected to be in the range of $0.50 to $0.52.  The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $580 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $151 million, and net non-cash interest expense related to the convertible senior notes, including loss on conversions, expected to be approximately $47 million.  EPS estimates assume a GAAP tax rate of approximately negative 19%, which reflects the estimated annual change in the tax valuation allowance, and a projected long-term non-GAAP tax rate of 36.5%. Note that the tax valuation allowance adds complexity, causing potential volatility in our forecasted GAAP tax rate.  The GAAP EPS calculation assumes an average basic share count of approximately 624 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 657 million shares.

The following is a per share reconciliation of GAAP EPS to diluted non-GAAP EPS guidance for the third quarter and full fiscal year:



Fiscal 2015



Q3

FY2015







GAAP EPS Range*

 ($0.13) - ($0.12) 

 ($0.48) - ($0.46) 

Plus





Amortization of purchased intangibles

$                       0.05

$                       0.23

Stock-based expense

$                       0.22

$                       0.88

Amortization of debt discount, net

$                       0.02

$                       0.07

Less





Income tax effects and adjustments**

$                     (0.04)

$                     (0.20)

Non-GAAP diluted EPS

 $0.12 - $0.13 

 $0.50 - $0.52 







Shares used in computing basic net income per share (millions)

630

624

Shares used in computing diluted net income per share (millions)

664

657

* For Q3 & FY15 GAAP EPS loss, basic number of shares used for calculation.



** Beginning in FY15, the company's non-GAAP tax provision uses a long-term projected tax rate of 36.5%. 

Quarterly Conference Call

Salesforce.com will host a conference call at 2:00 p.m. (PDT) / 5 p.m. (EDT) to discuss its financial results with the investment community.  A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations Web site: http://www.salesforce.com/investor.  A live web broadcast of the event will be available on the salesforce.com Investor Relations website at www.salesforce.com/investor.  A live dial-in is available domestically at 866-901-SFDC or 866-901-7332 and internationally at 706-902-1764, passcode 81878539.  A replay will be available at (800) 585-8367 or (855) 859-2056 until midnight (EDT) September 25, 2014.

About salesforce.com



Salesforce.com is the world's largest provider of customer relationship management ( CRM ) software. For more information about salesforce.com (NYSE:CRM), visit: www.salesforce.com.

Any unreleased services or features referenced in this or other press releases or public statements are not currently available and may not be delivered on time or at all. Customers who purchase salesforce.com applications should make their purchase decisions based upon features that are currently available. Salesforce.com has headquarters in San Francisco, with offices in Europe and Asia, and trades on the New York Stock Exchange under the ticker symbol "CRM." For more information please visit http://salesforce.com or call 1-800-NO-SOFTWARE.

Non-GAAP Financial Measures: This press release includes information about non-GAAP EPS and non-GAAP tax rates (collectively the "non-GAAP financial measures").  Non-GAAP EPS estimates exclude the impact of the following non-cash items:  stock-based compensation, amortization of acquisition-related intangibles, the net amortization of debt discount on the company's convertible senior notes, and gains/losses on conversions of the company's convertible senior notes, as well as income tax adjustments.  The purpose of the non-GAAP tax rate is to quantify the excluded tax adjustments and the tax consequences associated with the above excluded non-cash expense items.  The company reports a projected long-term tax rate to eliminate the effects of non-recurring and period specific items which can vary in size and frequency. This projected long-term non-GAAP tax rate could be subject to change in the future for a variety of reasons, for example, significant changes in the company's geographic earnings mix including acquisition activity, or fundamental tax law changes in major jurisdictions where the company operates. These non-GAAP financial measures are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles.  The method used to produce non-GAAP financial measures is not computed according to GAAP and may differ from the methods used by other companies.  Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP.

The primary purpose of these non-GAAP measures is to provide supplemental information that may prove useful to investors who wish to consider the impact of certain non-cash items on the company's operating performance.  Non-cash stock-based compensation, amortization of acquisition-related intangible assets, the net amortization of debt discount on the company's convertible senior notes, and gains/losses on conversions of the company's convertible senior notes, are being excluded from the company's FY15 financial results because the decisions which gave rise to these expenses were not made to increase revenue in a particular period, but were made for the company's long-term benefit over multiple periods.  While strategic decisions, such as those related to the issuance of equity awards, resulting in stock-based compensation, the acquisitions of companies, or the issuance of convertible senior notes, are made to further the company's long-term strategic objectives and impact the company's statement of operations under GAAP measures, these items affect multiple periods and management is not able to change or affect these items in any particular period.  As such, supplementing GAAP disclosure with non-GAAP disclosure using the non-GAAP measures provides management with an additional view of operational performance by excluding expenses that are not directly related to performance in any particular period, and management uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the company's performance.

In addition, the majority of the company's industry peers report non-GAAP operating results that exclude certain non-cash or non-recurring items, such as certain one-time charges.  As significant unusual or discrete events occur, the results may be excluded in the period in which the events occur. Management believes that the provision of supplemental non-GAAP information will enable a more complete comparison of the company's relative performance. 

Specifically, management is excluding the following items from its non-GAAP EPS for Q2 and its non-GAAP estimates for Q3 and FY15:

  • Stock-Based Expenses:  The company's compensation strategy includes the use of stock-based compensation to attract and retain employees and executives.  It is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period.  Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period. 
  • Amortization of Purchased Intangibles:  The company views amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company's research and development efforts, trade names, customer lists and customer relationships, as items arising from pre-acquisition activities determined at the time of an acquisition.  While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
  • Amortization of Debt Discount:  Under GAAP, certain convertible debt instruments that may be settled in cash (or other assets) on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate.  Accordingly, for GAAP purposes we are required to recognize imputed interest expense on the company's $575 million of convertible senior notes due 2015 that were issued in a private placement in January 2010 and the company's $1.15 billion of convertible senior notes due 2018 that were issued in a private placement in March 2013.  The imputed interest rates were approximately 5.9% for the convertible notes due 2015 and approximately 2.5% for the convertible notes due 2018, while the actual coupon interest rates of the notes were 0.75% and 0.25%, respectively.  The difference between the imputed interest expense and the coupon interest expense, net of the interest amount capitalized, is excluded from management's assessment of the company's operating performance because management believes that this non-cash expense is not indicative of ongoing operating performance.  Management believes that the exclusion of the non-cash interest expense provides investors an enhanced view of the company's operational performance.
  • Non-Cash Gains/Losses on Conversion of Debt: Upon settlement of the company's convertible senior notes, we attribute the fair value of the consideration transferred to the liability and equity components of the convertible senior notes.  The difference between the fair value of consideration attributed to the liability component and the carrying value of the liability as of settlement date is recorded as a non-cash gain or loss on the statement of operations.  Management believes that the exclusion of the non-cash gain/loss provides investors an enhanced view of the company's operational performance. Beginning in the second quarter of FY15, this will be included in the Amortization of Debt Discount line.
  • Income Tax Effects and Adjustments: During fiscal 2014, the Company's non-GAAP tax provision excludes the tax effects of expense items described above and certain tax items not directly related to the current fiscal year's ordinary operating results. Examples of such tax items include, but are not limited to, changes in the valuation allowance related to deferred tax assets, certain acquisition-related costs and unusual or infrequently occurring items. Management believes the exclusion of these income tax adjustments provides investors with useful supplemental information about the Company's operational performance. During fiscal 2015, the Company began to compute and utilize a fixed long-term projected non-GAAP tax rate in order to provide better consistency across the interim reporting periods by eliminating the effects of non-recurring and period-specific items such as changes in the tax valuation allowance and tax effects of acquisitions-related costs, since each of these can vary in size and frequency. When projecting this long-term rate, the Company evaluated a three-year financial projection that excludes the impact of the following non-cash items: Stock-Based Expenses, Amortization of Purchased Intangibles, Amortization of Debt Discount, and Gains/Losses on Conversions of Debt. The projected rate also assumes no new acquisitions in the three-year period, and takes into account other factors including the Company's current tax structure, its existing tax positions in various jurisdictions and key legislation in major jurisdictions where the Company operates. The non-GAAP tax rate for fiscal 2015 is 36.5%. The Company intends to re-evaluate this long-term rate on an annual basis or if any significant events that may materially affect this long-term rate occur. This long-term rate could be subject to change for a variety of reasons, for example, significant changes in the geographic earnings mix including acquisition activity, or fundamental tax law changes in major jurisdictions where the Company operates.

"Safe harbor" statement under the Private Securities Litigation Reform Act of 1995:  This press release contains forward-looking statements about our financial results, which may include expected GAAP and non-GAAP financial and other operating results for the fiscal third quarter and the full fiscal year of 2015, including revenue, net income (loss), EPS, expected revenue run rate, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles and debt discount, non-cash interest expense and gains/losses on the conversions of debt, shares outstanding, and changes in deferred tax asset valuation allowances.  The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions.  If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the company's results could differ materially from the results expressed or implied by the forward-looking statements we make.

The risks and uncertainties referred to above include - but are not limited to - risks associated with possible fluctuations in the company's financial and operating results; the company's rate of growth and anticipated revenue run rate, including the company's ability to convert deferred revenue and unbilled deferred revenue into revenue and, as appropriate, cash flow, and the continued growth and ability to maintain deferred revenue and unbilled deferred revenue; errors, interruptions or delays in the company's service or the company's Web hosting; breaches of the company's security measures; the financial impact of any previous and future acquisitions, including ExactTarget; the nature of the company's business model; the company's ability to continue to release, and gain customer acceptance of, new and improved versions of the company's service; successful customer deployment and utilization of the company's existing and future services; changes in the company's sales cycle; competition; various financial aspects of the company's subscription model; unexpected increases in attrition or decreases in new business; the company's ability to realize benefits from strategic partnerships; the emerging markets in which the company operates; unique aspects of entering or expanding in international markets, the company's ability to hire, retain and motivate  employees and manage the company's growth; changes in the company's customer base; technological developments; regulatory developments; litigation related to intellectual property and other matters, and any related claims, negotiations and settlements; unanticipated changes in the company's effective tax rate; factors affecting the company's outstanding convertible notes and term loan; fluctuations in the number of shares we have outstanding and the price of such shares; foreign currency exchange rates; collection of receivables; interest rates; factors affecting our deferred tax assets and ability to value and utilize them, including the timing of when we once again achieve profitability on a pre-tax basis; the potential negative impact of indirect tax exposure; the risks and expenses associated with the company's real estate and office facilities space; and general developments in the economy, financial markets, and credit markets.

Further information on these and other factors that could affect the company's financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time, including the company's Form 10-Q that will be filed for the second quarter ended July 31, 2014, and our Form 10-K filed for the fiscal year ended January 31, 2014.  These documents are available on the SEC Filings section of the Investor Information section of the company's website at www.salesforce.com/investor.

Salesforce.com, inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

© 2014 salesforce.com, inc.  All rights reserved.  Salesforce, Sales Cloud, Service Cloud, ExactTarget Marketing Cloud, AppExchange, Salesforce1, and others are trademarks of salesforce.com, inc.  Other brands featured herein may be trademarks of their respective owners.

 



salesforce.com, inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)





Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



Revenues:























Subscription and support

$

1,232,587





$

902,844





$

2,379,893





$

1,745,065



Professional services and other

85,964





54,250





165,430





104,662



Total revenues

1,318,551





957,094





2,545,323





1,849,727



Cost of revenues (1)(2):























Subscription and support

218,918





160,908





427,865





314,458



Professional services and other

88,913





56,809





172,271





112,253



Total cost of revenues

307,831





217,717





600,136





426,711



Gross profit

1,010,720





739,377





1,945,187





1,423,016



Operating expenses (1)(2):























Research and development

203,109





148,079





391,467





280,018



Marketing and sales

671,958





480,621





1,311,313





947,111



General and administrative

169,087





150,534





331,182





280,284



Total operating expenses

1,044,154





779,234





2,033,962





1,507,413



Loss from operations

(33,434)





(39,857)





(88,775)





(84,397)



Investment income

2,655





4,387





4,433





7,741



Interest expense

(18,314)





(19,656)





(38,673)





(31,539)



Other expense

(3,876)





(1,678)





(14,723)





(2,552)



Loss before benefit from (provision for) income taxes

(52,969)





(56,804)





(137,738)





(110,747)



Benefit from (provision for) income taxes (3)

(8,119)





133,407





(20,261)





119,629



Net income (loss)

$

(61,088)





$

76,603





$

(157,999)





$

8,882



Basic net income (loss) per share

$

(0.10)





$

0.13





$

(0.26)





$

0.02



Diluted net income (loss) per share

$

(0.10)





$

0.12





$

(0.26)





$

0.01



Shares used in computing basic net income (loss) per share

617,016





593,955





614,797





591,210



Shares used in computing diluted net income (loss) per share

617,016





624,656





614,797





623,865



























(1)  Amounts include amortization of purchased intangibles from business combinations, as follows:



Cost of revenues

$

21,271





$

22,550





$

49,943





$

43,855



Marketing and sales

14,648





4,476





29,613





6,936



























(2)  Amounts include stock-based expenses, as follows:



Cost of revenues

$

12,977





$

9,981





$

24,787





$

20,659



Research and development

33,112





26,032





60,396





50,461



Marketing and sales

70,485





56,133





137,618





115,935



General and administrative

25,837





18,330





50,702





38,150



























(3)    The three and six months ended July 31, 2013 include a $128.8 million tax benefit recorded during the three months ended July 31, 2013 as a result of the partial release of the Company's tax valuation allowance.

 

 

salesforce.com, inc.

Condensed Consolidated Statements of Operations

As a percentage of total revenues:

(Unaudited)





Three Months Ended July 31,



Six Months Ended July 31,



2014



2013



2014



2013

Revenues:















Subscription and support

93%



94%



94%



94%

Professional services and other

7



6



6



6

Total revenues

100



100



100



100

Cost of revenues (1)(2):















Subscription and support

17



17



17



17

Professional services and other

6



6



7



6

Total cost of revenues

23



23



24



23

Gross profit

77



77



76



77

Operating expenses (1)(2):















Research and development

16



15



15



15

Marketing and sales

51



50



51



51

General and administrative

13



16



13



15

Total operating expenses

80



81



79



81

Loss from operations

(3)



(4)



(3)



(4)

Investment income

0



0



0



0

Interest expense

(1)



(2)



(1)



(2)

Other expense

0



0



(1)



0

Loss before benefit from (provision for) income taxes

(4)



(6)



(5)



(6)

Benefit from (provision for) income taxes

(1)



14



(1)



6

Net income (loss)

(5)%



8%



(6)%



0%



















(1)  Amortization of purchased intangibles from business combinations as a percentage of total revenues, as follows:



Cost of revenues

2%



2%



2%



2%

Marketing and sales

1



0



1



0



(2)  Stock-based expenses as a percentage of total revenues, as follows:



Cost of revenues

1%



1%



1%



1%

Research and development

3



3



2



3

Marketing and sales

5



6



5



6

General and administrative

2



2



2



2

 

 

 

salesforce.com, inc.

Condensed Consolidated Balance Sheets

(in thousands)





July 31,

 2014



January 31,

 2014



(unaudited)







Assets











Current assets:











Cash and cash equivalents

$

774,725





$

781,635



Short-term marketable securities

69,850





57,139



Accounts receivable, net

834,323





1,360,837



Deferred commissions

169,247





171,461



Land and building improvements held for sale

160,181





0



Prepaid expenses and other current assets (see additional metrics)

296,361





309,180



Total current assets

2,304,687





2,680,252



Marketable securities, noncurrent

827,183





482,243



Property and equipment, net (see additional metrics)

1,189,930





1,240,746



Deferred commissions, noncurrent

141,260





153,459



Capitalized software, net (see additional metrics)

449,499





481,917



Goodwill

3,492,713





3,500,823



Other assets, net (see additional metrics)

604,556





613,490



Total assets

$

9,009,828





$

9,152,930



Liabilities, temporary equity and stockholders' equity











Current liabilities:











Accounts payable, accrued expenses and other liabilities (see additional metrics)

$

891,062





$

934,324



Deferred revenue

2,316,574





2,473,705



Convertible 0.75% senior notes, net

265,102





542,159



Term loan, current

30,000





30,000



Total current liabilities

3,502,738





3,980,188



Convertible 0.25% senior notes, net

1,058,737





1,046,930



Term loan, noncurrent

240,000





255,000



Deferred revenue, noncurrent

36,330





48,410



Other noncurrent liabilities (see additional metrics)

865,277





757,187



Total liabilities

5,703,082





6,087,715



Temporary equity

6,178





26,705



Stockholders' equity:











Common stock

619





610



Additional paid-in capital

3,789,942





3,363,377



Accumulated other comprehensive income

11,163





17,680



Accumulated deficit

(501,156)





(343,157)



Total stockholders' equity

3,300,568





3,038,510



Total liabilities, temporary equity and stockholders' equity

$

9,009,828





$

9,152,930



 



salesforce.com, inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)





Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



Operating activities:























Net income (loss)

$

(61,088)





$

76,603





$

(157,999)





$

8,882



































Adjustments to reconcile net income (loss) to net cash provided by operating activities:























Depreciation and amortization

107,596





77,966





218,404





140,263



Amortization of debt discount and transaction costs

9,949





13,194





21,740





22,864



Loss on conversions of convertible senior notes

361





0





8,890





0



Amortization of deferred commissions

61,300





46,189





121,155





91,856



Expenses related to employee stock plans

142,411





110,476





273,503





225,205



Excess tax benefits from employee stock plans

6,815





1,278





(2,226)





(588)



Changes in assets and liabilities, net of business combinations:























Accounts receivable, net

(150,168)





(33,297)





526,514





336,592



Deferred commissions

(65,846)





(45,347)





(106,742)





(62,830)



Prepaid expenses and other current assets and other assets

23,636





(2,930)





27,913





(9,280)



Accounts payable, accrued expenses and other liabilities

142,638





(70,750)





(42,961)





(166,558)



Deferred revenue

28,289





9,801





(169,211)





(120,034)



Net cash provided by operating activities

245,893





183,183





718,980





466,372



Investing activities:























Business combinations, net of cash acquired

0





(2,592,571)





0





(2,614,732)



Nonrefundable deposits received for land

1,000





0





31,000





0



Strategic investments

(18,807)





(3,698)





(35,053)





(8,814)



Purchases of marketable securities

(284,928)





(56,458)





(535,464)





(320,745)



Sales of marketable securities

71,073





893,910





150,385





1,005,650



Maturities of marketable securities

16,762





6,046





23,960





20,604



Capital expenditures

(71,576)





(102,549)





(131,674)





(156,559)



Net cash used in investing activities

(286,476)





(1,855,320)





(496,846)





(2,074,596)



Financing activities:























Proceeds from borrowings on convertible senior notes, net

0





0





0





1,132,750



Proceeds from issuance of warrants

0





0





0





84,800



Purchase of convertible note hedge

0





0





0





(153,800)



Proceeds from term loan, net

0





298,500





0





298,500



Proceeds from employee stock plans

61,429





40,195





135,224





106,719



Excess tax benefits from employee stock plans

(6,815)





(1,278)





2,226





588



Payments on convertible senior notes

(13,692)





0





(297,584)





0



Principal payments on capital lease obligations

(40,341)





(12,108)





(50,935)





(20,607)



Principal payments on term loan

(7,500)





0





(15,000)





0



Net cash provided by (used in) financing activities

(6,919)





325,309





(226,069)





1,448,950



Effect of exchange rate changes

(5,664)





(1,281)





(2,975)





(8,090)



Net decrease in cash and cash equivalents

(53,166)





(1,348,109)





(6,910)





(167,364)



Cash and cash equivalents, beginning of period

827,891





1,927,990





781,635





747,245



Cash and cash equivalents, end of period

$

774,725





$

579,881





$

774,725





$

579,881



 

 

salesforce.com, inc.

Additional Metrics

(Unaudited)





Jul 31,

2014



Apr 30,

2014



Jan 31,

2014



Oct 31,

2013



Jul 31,

2013





Apr 30,

2013



Full Time Equivalent Headcount

15,145





14,239





13,312





12,770





12,571(1)







10,283





Financial data (in thousands):







































Cash, cash equivalents and marketable securities

$

1,671,758





$

1,529,888





$

1,321,017





$

1,085,307





$

930,008(2)







$

3,079,457(3)





Deferred revenue, current and noncurrent

$

2,352,904





$

2,324,615





$

2,522,115





$

1,734,619





$

1,789,648







$

1,733,160





Principal due on convertible senior notes and term loan

$

1,691,280





$

1,712,472





$

2,003,864





$

2,017,356





$

2,024,890







$

1,724,890









(1)

Includes approximately 1,900 full time equivalents from the acquisition of ExactTarget.

(2)

Reflects the acquisition of ExactTarget for cash in July 2013.

(3)

Includes $1.1 billion of net proceeds from the convertible 0.25% senior note offering and hedge transactions in March 2013.

 

 



Selected Balance Sheet Accounts (in thousands):





July 31,

 2014



April 30,

 2014



January 31,

 2014

Prepaid Expenses and Other Current Assets

















Deferred income taxes, net

$

51,395





$

48,556





$

49,279



Prepaid income taxes

21,511





22,838





23,571



Customer contract asset (4)

39,540





54,360





77,368



Prepaid expenses and other current assets

183,915





187,854





158,962





$

296,361





$

313,608





$

309,180



Property and Equipment, net

















Land and building improvements (5)

$

137,653





$

297,835





$

297,835



Computers, equipment and software

1,066,947





961,675





931,171



Furniture and fixtures

67,733





65,021





58,956



Leasehold improvements

341,372





313,535





296,390



Building in progress - leased facility

73,219





52,931





40,171





1,686,924





1,690,997





1,624,523



Less accumulated depreciation and amortization

(496,994)





(439,997)





(383,777)





$

1,189,930





$

1,251,000





$

1,240,746



Capitalized Software, net

















Capitalized internal-use software development costs, net of accumulated amortization

$

82,399





$

77,169





$

72,915



Acquired developed technology, net of accumulated amortization

367,100





378,650





409,002





$

449,499





$

455,819





$

481,917



Other Assets, net

















Deferred income taxes, noncurrent, net

$

8,815





$

9,738





$

9,691



Long-term deposits

20,270





18,027





17,970



Purchased intangible assets, net of accumulated amortization

386,121





400,962





416,119



Acquired intellectual property, net of accumulated amortization

10,792





11,967





11,957



Strategic investments

120,289





102,439





92,489



Customer contract asset (4)

6,384





10,989





18,182



Other

51,885





45,968





47,082





$

604,556





$

600,090





$

613,490



















(4)    Customer contract asset reflects future billings of amounts that were contractually committed by ExactTarget's existing customers as of the acquisition date. As the Company bills these customers this balance will reduce and accounts receivable will increase.













(5)    A portion of the land and building improvements was reclassified as land and building improvements held for sale which is included in current assets as of July 31, 2014.







July 31,

 2014



April 30,

 2014



January 31,

 2014

Accounts Payable, Accrued Expenses and Other Liabilities

















Accounts payable

$

83,604





$

36,723





$

64,988



Accrued compensation

308,901





259,517





397,002



Accrued other liabilities

324,011





274,792





235,543



Accrued income and other taxes payable

109,936





123,292





153,026



Accrued professional costs

22,111





19,309





15,864



Customer liability, current (6)

27,820





38,077





53,957



Accrued rent

14,679





14,891





13,944





$

891,062





$

766,601





$

934,324



Other Noncurrent Liabilities

















Deferred income taxes and income taxes payable

$

107,510





$

106,420





$

108,760



Customer liability, noncurrent (6)

4,403





8,897





13,953



Financing obligation, building in progress - leased facility

73,219





52,931





40,171



Long-term lease liabilities and other

680,145





634,679





594,303





$

865,277





$

802,927





$

757,187







(6)

Customer liability reflects the legal obligation to provide future services that were contractually committed by ExactTarget's existing customers but unbilled as of the acquisition date.

 



Selected Off-Balance Sheet Account





July 31,

 2014



April 30,

 2014



January 31,

 2014

Unbilled Deferred Revenue, a non-GAAP measure

$ 5.0bn



$ 4.8bn



$ 4.5bn



Unbilled deferred revenue represents future billings under our non-cancelable subscription agreements that have not been invoiced and, accordingly, are not recorded in deferred revenue.



The balances as of July 31, 2014, April 30, 2014, and January 31, 2014 exclude the remaining amount related to the fair value of unbilled deferred revenue associated with the acquisition of ExactTarget, which was initially recorded as part of business combination accounting, because these amounts are reflected on the balance sheet under "accounts payable, accrued expenses and other liabilities" and "other noncurrent liabilities".

 

Supplemental Revenue Analysis



Subscription and support revenue by cloud service offering (in millions):

Three Months Ended

 July 31, 2014



Six Months Ended

 July 31, 2014

Sales Cloud

$

610.1





$

1,186.7



Service Cloud

318.7





613.5



Salesforce1 Platform and Other

181.4





346.3



ExactTarget Marketing Cloud

122.4





233.4





$

1,232.6





$

2,379.9



 

 



Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



Total revenues by geography (in thousands):























Americas

$

940,946





$

678,535





$

1,817,323





$

1,309,643



Europe

246,532





173,705





477,342





336,531



Asia Pacific

131,073





104,854





250,658





203,553





$

1,318,551





$

957,094





$

2,545,323





$

1,849,727



As a percentage of total revenues:























Total revenues by geography:























Americas

71%





71%





71%





71%



Europe

19





18





19





18



Asia Pacific

10





11





10





11





100%





100%





100%





100%



 

 

Revenue constant currency growth rates

(as compared to the comparable prior periods)

Three Months Ended

July 31, 2014

compared to Three Months

Ended July 31, 2013



Three Months Ended

April 30, 2014

compared to Three Months

Ended April 30, 2013



Three Months Ended

July 31, 2013

compared to Three Months

Ended July 31, 2012

Americas

39%



39%



34%

Europe

36%



35%



34%

Asia Pacific

27%



26%



19%

Total growth

37%



37%



32%



We present constant currency information to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the weighted average exchange rate for the quarter being compared to for growth rate calculations presented, rather than the actual exchange rates in effect during that period.

 





July 31, 2014

compared to

July 31, 2013



April 30, 2014

compared to

April 30, 2013



January 31, 2014

compared to

January 31, 2013

Deferred revenue, current and noncurrent constant currency growth rates (as compared to the comparable prior periods)











Total growth

32%



33%



36%

 

 



Supplemental Diluted Share Count Information

(in thousands)





Three Months Ended

July 31,



Six Months Ended

July 31,



2014





2013





2014





2013



Weighted-average shares outstanding for basic earnings per share

617,016





593,955





614,797





591,210



Effect of dilutive securities (1):























Convertible 0.75% senior notes

7,698





12,977





8,097





13,270



Warrants associated with the convertible 0.75% senior note hedges

12,066





7,394





12,643





7,804



Employee stock awards

11,010





10,330





12,819





11,581



























Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share

647,790





624,656





648,356





623,865







(1)

The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the three and six months ended July 31, 2014 because the effect would have been anti-dilutive.

 

 



Supplemental Cash Flow Information



Free cash flow analysis, a non-GAAP measure



(in thousands)









Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



Operating cash flow























GAAP net cash provided by operating activities

$

245,893





$

183,183





$

718,980





$

466,372



Less:























Capital expenditures

(71,576)





(102,549)





(131,674)





(156,559)



Free cash flow

$

174,317





$

80,634





$

587,306





$

309,813





Our free cash flow analysis includes GAAP net cash provided by operating activities less capital expenditures. The capital expenditures balance does not include any costs related to the purchase and activities related to land activity, building improvements, building in progress - leased facilities, and strategic investments.

 



Comprehensive Income (Loss)

(in thousands)

(Unaudited)





Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



Net income (loss)

$

(61,088)





$

76,603





$

(157,999)





$

8,882



Other comprehensive loss, before tax and net of reclassification adjustments:























Foreign currency translation and other losses

(5,299)





(1,431)





(2,184)





(7,191)



Unrealized gains (losses) on investments

1,164





117





(4,333)





1,838



Other comprehensive loss, before tax

(4,135)





(1,314)





(6,517)





(5,353)



Tax effect

0





(1,173)





0





(545)



Other comprehensive loss, net of tax

(4,135)





(2,487)





(6,517)





(5,898)



Comprehensive income (loss)

$

(65,223)





$

74,116





$

(164,516)





$

2,984



 

 

salesforce.com, inc.

GAAP RESULTS RECONCILED TO NON-GAAP RESULTS

The following table reflects selected salesforce.com GAAP results reconciled to non-GAAP results

(in thousands, except per share data)

(Unaudited)





Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



Gross profit























GAAP gross profit

$

1,010,720





$

739,377





$

1,945,187





$

1,423,016



Plus:























Amortization of purchased intangibles (a)

21,271





22,550





49,943





43,855



Stock-based expenses (b)

12,977





9,981





24,787





20,659



Non-GAAP gross profit

$

1,044,968





$

771,908





$

2,019,917





$

1,487,530



Operating expenses























GAAP operating expenses

$

1,044,154





$

779,234





$

2,033,962





$

1,507,413



Less:























Amortization of purchased intangibles (a)

(14,648)





(4,476)





(29,613)





(6,936)



Stock-based expenses (b)

(129,434)





(100,495)





(248,716)





(204,546)



Non-GAAP operating expenses

$

900,072





$

674,263





$

1,755,633





$

1,295,931



Income from operations























GAAP loss from operations

$

(33,434)





$

(39,857)





$

(88,775)





$

(84,397)



Plus:























Amortization of purchased intangibles (a)

35,919





27,026





79,556





50,791



Stock-based expenses (b)

142,411





110,476





273,503





225,205



Non-GAAP income from operations

$

144,896





$

97,645





$

264,284





$

191,599



Non-operating income (loss) (c)























GAAP non-operating loss

$

(19,535)





$

(16,947)





$

(48,963)





$

(26,350)



Plus: Amortization of debt discount, net

9,216





12,352





20,200





21,592



Plus: Loss on conversion of debt

361





0





8,890





0



Non-GAAP non-operating loss

$

(9,958)





$

(4,595)





$

(19,873)





$

(4,758)



Net income























GAAP net income (loss)

$

(61,088)





$

76,603





$

(157,999)





$

8,882



Plus:























Amortization of purchased intangibles (a)

35,919





27,026





79,556





50,791



Stock-based expenses (b)

142,411





110,476





273,503





225,205



Amortization of debt discount, net

9,216





12,352





20,200





21,592



Loss on conversion of debt

361





0





8,890





0



Less:























Income tax effects and adjustments

(41,134)





(170,162)





(68,949)





(189,211)



Non-GAAP net income

$

85,685





$

56,295





$

155,201





$

117,259



Diluted earnings per share























GAAP diluted income (loss) per share (d)

$

(0.10)





$

0.12





$

(0.26)





$

0.01



Plus:























Amortization of purchased intangibles

0.06





0.04





0.12





0.08



Stock-based expenses

0.22





0.18





0.42





0.36



Amortization of debt discount, net

0.01





0.02





0.03





0.03



Loss on conversion of debt

0.00





0.00





0.01





0.00



Less:























Income tax effects and adjustments

(0.06)





(0.27)





(0.08)





(0.29)



Non-GAAP diluted earnings per share

$

0.13





$

0.09





$

0.24





$

0.19



Shares used in computing diluted net income per share

647,790





624,656





648,356





623,865







a)    Amortization of purchased intangibles were as follows:











Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



Cost of revenues

$

21,271





$

22,550





$

49,943





$

43,855



Marketing and sales

14,648





4,476





29,613





6,936





$

35,919





$

27,026





$

79,556





$

50,791







b)    Stock-based expenses were as follows:











Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



Cost of revenues

$

12,977





$

9,981





$

24,787





$

20,659



Research and development

33,112





26,032





60,396





50,461



Marketing and sales

70,485





56,133





137,618





115,935



General and administrative

25,837





18,330





50,702





38,150





$

142,411





$

110,476





$

273,503





$

225,205







c)

Non-operating income (loss) consists of investment income, interest expense and other expense.





d)

Reported GAAP loss per share was calculated using the basic share count.  Non-GAAP diluted earnings per share was calculated using the diluted share count.

 

 

salesforce.com, inc.

COMPUTATION OF BASIC AND DILUTED GAAP AND NON-GAAP NET INCOME (LOSS) PER SHARE

(in thousands, except per share data)

(Unaudited)





Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



GAAP Basic Net Income (Loss) Per Share























Net income (loss)

$

(61,088)





$

76,603





$

(157,999)





$

8,882



Basic net income (loss) per share

$

(0.10)





$

0.13





$

(0.26)





$

0.02



Shares used in computing basic net income (loss) per share

617,016





593,955





614,797





591,210





























Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



Non-GAAP Basic Net Income Per Share























Non-GAAP net income

$

85,685





$

56,295





$

155,201





$

117,259



Basic Non-GAAP net income per share

$

0.14





$

0.09





$

0.25





$

0.20



Shares used in computing basic net income per share

617,016





593,955





614,797





591,210





























Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



GAAP Diluted Net Income (Loss) Per Share























Net income (loss)

$

(61,088)





$

76,603





$

(157,999)





$

8,882



Diluted net income (loss) per share

$

(0.10)





$

0.12





$

(0.26)





$

0.01



Shares used in computing diluted net income (loss) per share

617,016





624,656





614,797





623,865





























Three Months Ended July 31,



Six Months Ended July 31,



2014





2013





2014





2013



Non-GAAP Diluted Net Income Per Share























Non-GAAP net income

$

85,685





$

56,295





$

155,201





$

117,259



Diluted Non-GAAP net income per share

$

0.13





$

0.09





$

0.24





$

0.19



Shares used in computing diluted net income per share

647,790





624,656





648,356





623,865



 

Logo - http://photos.prnewswire.com/prnh/20130612/SF30598LOGO

SOURCE salesforce.com



This article appears in: News Headlines

Referenced Stocks: CRM


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