Salesforce Announces Fiscal 2016 Fourth Quarter and Full Year Results

Raises FY17 Revenue Guidance to $8.08 Billion to $8.12 Billion

- Quarterly Revenue of $1.81 Billion, up 25% Year-Over-Year, 27% in Constant Currency

- Full Year Revenue of $6.67 Billion, up 24% Year-Over-Year, 27% in Constant Currency

- Quarterly Operating Cash Flow of $459 million, up 38% Year-Over-Year

- Full Year Operating Cash Flow of $1.61 Billion, up 37% Year-Over-Year

- Deferred Revenue of $4.29 Billion, up 29% Year-Over-Year, 31% in Constant Currency

- Unbilled Deferred Revenue of Approximately $7.1 Billion, up 25% Year-Over-Year

- Initiates First Quarter Revenue Guidance of $1.885 Billion to $1.895 Billion

Feb 24, 2016, 16:05 ET from Salesforce

SAN FRANCISCO, Feb. 24, 2016 /PRNewswire/ -- Salesforce (NYSE: CRM), the Customer Success Platform and world's #1 CRM company, today announced results for its fiscal fourth quarter and full fiscal year ended January 31, 2016.

"By any measure, this was a spectacular finish to the year with 27% revenue growth in constant currency for the fourth quarter, and for the full year," said Marc Benioff, chairman and CEO, Salesforce. "We are raising our fiscal year 2017 revenue guidance to $8.12 billion at the high end of our range -- unprecedented growth for a company of our size and scale."

"We increased our non-GAAP operating margin by 177 basis points, which drove outstanding full year operating cash flow of $1.6 billion, up 37% from a year ago," said Mark Hawkins, CFO, Salesforce. "We expect to continue to drive operating leverage and strong cash flow growth in fiscal 2017."

"We hit an all-time high in large transactions in fiscal 2016 as more and more companies look to Salesforce as their trusted advisor," said Keith Block, vice chairman, president and COO, Salesforce. "The tremendous response to our customer success platform is driving exceptional growth for Salesforce across every region, every cloud and every industry."

Salesforce delivered the following results for its fourth fiscal quarter and full fiscal year 2016:

Revenue:  Total Q4 revenue was $1.81 billion, an increase of 25% year-over-year, and 27% in constant currency.  Subscription and support revenues were $1.68 billion, an increase of 25% year-over-year.  Professional services and other revenues were $127 million, an increase of 28% year-over-year.

Full fiscal year 2016 revenue was $6.67 billion, an increase of 24% year-over-year, and 27% in constant currency.  Subscription and support revenues were $6.21 billion, an increase of 24% year-over-year.  Professional services and other revenues were $462 million, an increase of 28% year-over-year.

Earnings per Share:  Q4 GAAP loss per share was ($0.04), and non-GAAP diluted earnings per share was $0.19. For the full fiscal year 2016, GAAP loss per share was ($0.07), and non-GAAP diluted earnings per share was $0.75

Cash:  Cash generated from operations for the fourth quarter was $459 million, an increase of 38% year-over-year. Cash generated from operations for the full fiscal year 2016 was $1.61 billion, an increase of 37% year-over-year. Total cash, cash equivalents and marketable securities finished the year at $2.73 billion.

Deferred Revenue:  Deferred revenue on the balance sheet as of January 31, 2016 was $4.29 billion, an increase of 29% year-over-year, and 31% in constant currency. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the fourth quarter at approximately $7.1 billion, up 25% year-over-year.

As of February 24, 2016, the company is initiating revenue, earnings per share, and deferred revenue guidance for its first quarter of fiscal year 2017. In addition, the company is raising its full fiscal year 2017 revenue guidance previously provided on November 18, 2015. The company is also initiating earnings per share and operating cash flow guidance for its fiscal year 2017.

Q1 FY17 Guidance:  Revenue is projected to be approximately $1.885 billion to $1.895 billion, an increase of 25% year-over-year.

Diluted GAAP earnings per share is projected to be in the range of $0.00 to $0.01, while diluted non-GAAP earnings per share is projected to be in the range of $0.23 to $0.24.

On balance sheet deferred revenue growth is projected to be approximately 24% to 25% year-over-year.

Full Year FY17 Guidance:  Revenue is projected to be approximately $8.08 billion to $8.12 billion, an increase of 21% to 22% year-over-year.

GAAP loss per share is projected to be in the range of ($0.02) to $0.00, while diluted non-GAAP earnings per share is projected to be in the range of $0.99 to $1.01.

Operating cash flow growth is projected to be approximately 23% to 24% year-over-year.

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

 

Fiscal 2017

Q1

FY2017

GAAP EPS range*

$0.00 - $0.01

($0.02) - $0.00

Plus

Amortization of purchased intangibles

$                      0.05

$                      0.20

Stock-based expense

$                      0.22

$                      1.01

Amortization of debt discount, net

$                      0.01

$                      0.04

Less

Income tax effects and adjustments**

$                    (0.05)

$                    (0.24)

Non-GAAP diluted EPS

$0.23 - $0.24

$0.99 - $1.01

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

677

685

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

690

699

* For Q1 GAAP EPS, diluted number of shares used for calculation and expected tax rate of 80%. For FY17 GAAP EPS, basic number of shares used for calculation and expected tax rate of 105%.

** The Company's non-GAAP tax provision uses a long-term projected tax rate of 35%. 

 

For additional information regarding non-GAAP financial measures see the reconciliation of results and related explanations below.

Quarterly Conference Call Salesforce will host a conference call at 2:00 p.m. (PT) / 5:00 p.m. (ET) today to discuss its financial results with the investment community.  A live web broadcast of the event will be available on the Salesforce 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 25556157.  A replay will be available at (800) 585-8367 or (855) 859-2056 until midnight (ET) Mar. 24, 2016.

About Salesforce Salesforce, the Customer Success Platform and world's #1 CRM company, empowers companies to connect with their customers in a whole new way. Salesforce 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 about Salesforce, visit: www.salesforce.com.

"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 and non-operating results, including revenue, net income (loss), earnings per share, operating cash flow growth, operating margin improvement, deferred revenue growth, expected revenue run rate, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles, amortization of debt discount, and shares outstanding.  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 ability to maintain continued growth of deferred revenue and unbilled deferred revenue; errors, interruptions or delays in the company's services or the company's Web hosting; breaches of the company's security measures; the financial impact of any previous and future acquisitions; 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 services; 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 and strategic investments; 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 revolving credit facility; fluctuations in the number of company shares outstanding and the price of such shares; foreign currency exchange rates; collection of receivables; interest rates; factors affecting the company's deferred tax assets and ability to value and utilize them, including the timing of when the company will 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.  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.

© 2016 salesforce.com, inc.  All rights reserved.  Salesforce and other marks are trademarks of salesforce.com, inc.  Other brands featured herein may be trademarks of their respective owners.

Non-GAAP Financial Measures:  This press release includes information about non-GAAP earnings per share, non-GAAP tax rates, and non-GAAP free cash flow (collectively the "non-GAAP financial measures").  These non-GAAP financial measures are measurements of financial performance that are not prepared in accordance with U.S. generally accepted accounting principles and computational methods may differ from those 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. Management uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the company's performance.

The primary purpose of using non-GAAP measures is to provide supplemental information that may prove useful to investors who wish to consider the impact of certain non-cash or non-recurring items, such as certain one-time charges, on the company's operating performance. While strategic decisions, such as those related to the issuance of equity awards (resulting in stock-based compensation), mergers and acquisitions, real estate activity or the issuance of debt securities, 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, management believes that supplementing GAAP disclosure with non-GAAP disclosure that excludes items that are not directly related to performance in any particular period provides management and investors with a more complete view of the company's operational performance. Further, to the extent that other companies use similar methods in calculating non-GAAP measures, the provision of supplemental non-GAAP information can allow for a comparison of the company's relative performance against other companies that also report non-GAAP operating results.

Non-GAAP earnings per share excludes the impact of the following items:  stock-based compensation, amortization of acquisition-related intangibles, amortization of acquired leases, 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, gains/losses on sales of land and building improvements, and termination of office leases, as well as income tax adjustments.  These items are excluded because the decisions which gave rise to these items were not made to increase revenue in a particular period, but were made for the company's long-term benefit over multiple periods. 

The purpose of the non-GAAP tax rate is to quantify the excluded tax adjustments and the tax consequences associated with the above excluded 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, such as, 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. 

Specifically, management is excluding the following items from its non-GAAP earnings per share for Q4 and FY16 and its non-GAAP estimates for Q1 and FY17:

  • 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 and Acquired Leases:  The company views amortization of acquisition- and building-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, and acquired lease intangibles, 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 $1.15 billion of convertible senior notes due 2018 that were issued in a private placement in March 2013.  The imputed interest rate was approximately 2.5% for the convertible notes due 2018, while the actual coupon interest rate of the notes is 0.25%.  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. 
  • 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. 
  • Gain on Sales of Land and Building Improvements:  The company views the non-operating gains associated with the sales of the land and building improvements at Mission Bay to be a discrete item. 
  • Lease Termination Resulting From Purchase of Office Building: The company views the non-cash, one-time gain associated with the termination of its lease at 50 Fremont to be a discrete item. 
  • Income Tax Effects and Adjustments: Since fiscal 2015, the company has utilized 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 direct impact of the following non-cash items: stock-based expenses, amortization of purchased intangibles, amortization of acquired leases, amortization of debt discount, gains/losses on the sales of land and building improvements, gains/losses on conversions of debt, and termination of office leases. The projected rate also assumes no new acquisitions in the three-year period, and considers other factors including the company's tax structure, its tax positions in various jurisdictions and key legislation in major jurisdictions where the company operates. This long-term rate could be subject to change for a variety of reasons, such as significant changes in the geographic earnings mix, including acquisition activity, or fundamental tax law changes in major jurisdictions where the company operates. The company re-evaluates this long-term rate on an annual basis, and, as appropriate, if a significant event materially affects it. Its fiscal 2016 non-GAAP tax provision used a rate of 35.5 percent, which reflected the related tax impact from the recent U.S. Tax Court decision in Altera Corporation's litigation with the Internal Revenue Service. The company's fiscal 2017 fixed long-term projected non-GAAP tax rate is 35.0 percent.

The company defines the non-GAAP measure free cash flow as GAAP net cash provided by operating activities, less capital expenditures.  For this purpose, capital expenditures does not include our strategic investments, nor does it include any costs or activities related to our purchase of 50 Fremont land and building, and building in progress - leased facilities.

 

salesforce.com, inc. Condensed Consolidated Statements of Operations (in thousands, except per share data) (Unaudited)

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Revenues:

Subscription and support

$

1,682,660

$

1,345,358

$

6,205,599

$

5,013,764

Professional services and other

126,738

99,250

461,617

359,822

Total revenues

1,809,398

1,444,608

6,667,216

5,373,586

Cost of revenues (1)(2):

Subscription and support

318,944

258,027

1,188,967

924,638

Professional services and other

124,735

97,896

465,581

364,632

Total cost of revenues

443,679

355,923

1,654,548

1,289,270

Gross profit

1,365,719

1,088,685

5,012,668

4,084,316

Operating expenses (1)(2):

Research and development

250,860

205,990

946,300

792,917

Marketing and sales

890,375

736,140

3,239,824

2,757,096

General and administrative

203,924

181,371

748,238

679,936

Operating lease termination resulting from purchase of 50 Fremont

0

0

(36,617)

0

Total operating expenses

1,345,159

1,123,501

4,897,745

4,229,949

Income (loss) from operations

20,560

(34,816)

114,923

(145,633)

Investment income

3,990

2,983

15,341

10,038

Interest expense

(19,465)

(16,882)

(72,485)

(73,237)

Other expense (1)(3)

(9,228)

(4,783)

(15,292)

(19,878)

Gain on sales of land and building improvements

0

0

21,792

15,625

Income (loss) before provision for income taxes

(4,143)

(53,498)

64,279

(213,085)

Provision for income taxes

(21,366)

(12,267)

(111,705)

(49,603)

Net loss

$

(25,509)

$

(65,765)

$

(47,426)

$

(262,688)

Basic net loss per share

$

(0.04)

$

(0.10)

$

(0.07)

$

(0.42)

Diluted net loss per share

$

(0.04)

$

(0.10)

$

(0.07)

$

(0.42)

Shares used in computing basic net loss per share

669,025

637,219

661,647

624,148

Shares used in computing diluted net loss per share

669,025

637,219

661,647

624,148

(1)

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

 

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Cost of revenues

$

20,093

$

20,006

$

80,918

$

90,300

Marketing and sales

19,157

19,965

77,152

64,673

Other non-operating expense

759

0

3,636

0

(2)

Amounts include stock-based expense, as follows:

 

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Cost of revenues

$

20,206

$

14,907

$

69,443

$

53,812

Research and development

32,926

33,929

129,434

121,193

Marketing and sales

77,333

75,900

289,152

286,410

General and administrative

28,507

27,066

105,599

103,350

(3)

Amount includes approximately $10.3 million loss on conversions of our convertible 0.75% senior notes due January 2015 recognized during fiscal 2015.

 

 

salesforce.com, inc. Condensed Consolidated Statements of Operations As a percentage of total revenues: (Unaudited)

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Revenues:

Subscription and support

93

%

93

%

93

%

93

%

Professional services and other

7

7

7

7

Total revenues

100

100

100

100

Cost of revenues (1)(2):

Subscription and support

18

18

18

17

Professional services and other

7

7

7

7

Total cost of revenues

25

25

25

24

Gross profit

75

75

75

76

Operating expenses (1)(2):

Research and development

14

14

14

15

Marketing and sales

49

51

49

51

General and administrative

11

13

11

13

Operating lease termination resulting from purchase of 50 Fremont, net

0

0

(1)

0

Total operating expenses

74

78

73

79

Income (loss) from operations

1

(3)

2

(3)

Investment income

0

0

0

0

Interest expense

(1)

(1)

(1)

(1)

Other expense

0

0

0

0

Gain on sales of land and building improvements

0

0

0

0

Income (loss) before provision for income taxes

0

(4)

1

(4)

Provision for income taxes

(1)

(1)

(2)

(1)

Net loss

(1)

%

(5)

%

(1)

%

(5)

%

(1)

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

Cost of revenues

1

%

1

%

1

%

2

%

Marketing and sales

1

1

1

1

Other non-operating expense

0

0

0

0

(2)

Stock-based expense as a percentage of total revenues, as follows:

Cost of revenues

1

%

1

%

1

%

1

%

Research and development

2

2

2

2

Marketing and sales

4

5

4

5

General and administrative

2

2

2

2

 

salesforce.com, inc. Condensed Consolidated Balance Sheets (in thousands) (Unaudited)

January 31,   2016

January 31,   2015

Assets

Current assets:

Cash and cash equivalents

$

1,158,363

$

908,117

Short-term marketable securities

183,018

87,312

Accounts receivable, net

2,496,165

1,905,506

Deferred commissions

259,187

225,386

Prepaid expenses and other current assets (1)

250,594

245,026

Land and building improvements held for sale

0

143,197

Total current assets

4,347,327

3,514,544

Marketable securities, noncurrent

1,383,996

894,855

Property and equipment, net

1,715,828

1,125,866

Deferred commissions, noncurrent

189,943

162,796

Capitalized software, net

384,258

433,398

Goodwill

3,849,937

3,782,660

Strategic investments

520,721

175,774

Other assets, net (1)

378,762

460,219

Restricted cash

0

115,015

Total assets

$

12,770,772

$

10,665,127

Liabilities and stockholders' equity

Current liabilities:

Accounts payable, accrued expenses and other liabilities (1)

$

1,349,338

$

1,103,335

Deferred revenue

4,267,667

3,286,768

Total current liabilities

5,617,005

4,390,103

Convertible 0.25% senior notes, net

1,095,059

1,070,692

Loan assumed on 50 Fremont

198,888

0

Revolving credit facility

0

300,000

Deferred revenue, noncurrent

23,886

34,681

Other noncurrent liabilities (1)

833,065

894,468

Total liabilities

7,767,903

6,689,944

Stockholders' equity:

Common stock

671

651

Additional paid-in capital

5,705,386

4,604,485

Accumulated other comprehensive loss

(49,917)

(24,108)

Accumulated deficit

(653,271)

(605,845)

Total stockholders' equity

5,002,869

3,975,183

Total liabilities and stockholders' equity

$

12,770,772

$

10,665,127

(1)

In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (ASU 2015-17), "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes" which simplifies the presentation of deferred income taxes by requiring all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. The Company early adopted this standard retrospectively for the prior period presented.

 

salesforce.com, inc. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Operating activities:

Net loss

$

(25,509)

$

(65,765)

$

(47,426)

$

(262,688)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

131,912

117,938

525,750

448,296

Amortization of debt discount and transaction costs

7,177

8,460

27,467

39,620

Gain on sales of land and building improvements

0

0

(21,792)

(15,625)

50 Fremont lease termination, net

0

0

(36,617)

0

Loss on conversions of convertible senior notes

0

96

0

10,326

Amortization of deferred commissions

86,306

71,116

319,074

257,642

Expenses related to employee stock plans

158,972

151,802

593,628

564,765

Excess tax benefits from employee stock plans

(10,798)

(4,283)

(59,496)

(7,730)

Changes in assets and liabilities, net of business combinations:

Accounts receivable, net

(1,435,439)

(1,110,916)

(582,425)

(544,610)

Deferred commissions

(179,155)

(149,882)

(380,022)

(320,904)

Prepaid expenses and other current assets and other assets

39,191

11,318

50,772

45,819

Accounts payable, accrued expenses and other liabilities

241,710

204,867

253,986

159,973

Deferred revenue

1,445,043

1,097,472

969,686

798,830

Net cash provided by operating activities

459,410

332,223

1,612,585

1,173,714

Investing activities:

Business combinations, net of cash acquired

0

0

(58,680)

38,071

Proceeds from land and building improvements held for sale

0

0

127,066

223,240

Purchase of 50 Fremont land and building

0

0

(425,376)

0

Deposit and withdrawal for purchase of 50 Fremont land and building

0

(11,500)

115,015

(126,435)

Non-refundable amounts received for sale of land and building

0

0

6,284

0

Strategic investments

(41,293)

(45,820)

(366,519)

(93,725)

Purchases of marketable securities

(595,845)

(90,516)

(1,139,267)

(780,540)

Sales of marketable securities

86,005

46,552

500,264

243,845

Maturities of marketable securities

14,366

41,390

37,811

87,638

Capital expenditures

(68,465)

(85,354)

(284,476)

(290,454)

Net cash used in investing activities

(605,232)

(145,248)

(1,487,878)

(698,360)

Financing activities:

Proceeds from (payments on) revolving credit facility, net

0

0

(300,000)

297,325

Proceeds from employee stock plans

87,652

82,428

455,482

308,989

Excess tax benefits from employee stock plans

10,798

4,283

59,496

7,730

Payments on convertible senior notes

0

(181,633)

0

(568,862)

Principal payments on capital lease obligations

(13,486)

(9,383)

(82,330)

(70,663)

Payments on term loan

0

0

0

(285,000)

Net cash provided by (used in) financing activities

84,964

(104,305)

132,648

(310,481)

Effect of exchange rate changes

(4,097)

(20,878)

(7,109)

(38,391)

Net increase (decrease) in cash and cash equivalents

(64,955)

61,792

250,246

126,482

Cash and cash equivalents, beginning of period

1,223,318

846,325

908,117

781,635

Cash and cash equivalents, end of period

$

1,158,363

$

908,117

$

1,158,363

$

908,117

 

salesforce.com, inc. Additional Metrics (Unaudited) 

Jan 31, 2016

Oct 31, 2015

Jul 31, 2015

Apr 30, 2015

Jan 31, 2015

Oct 31, 2014

Full Time Equivalent Headcount

19,742

18,726

17,622

16,852

16,227

15,458

Financial data (in thousands):

Cash, cash equivalents and marketable securities

$

2,725,377

$

2,301,306

$

2,066,963

$

1,922,476

$

1,890,284

$

1,827,277

Strategic investments

$

520,721

$

496,809

$

477,886

$

318,716

$

175,774

$

132,150

Deferred revenue, current and noncurrent

$

4,291,553

$

2,846,510

$

3,034,991

$

3,056,820

$

3,321,449

$

2,223,977

Unbilled deferred revenue, a non-GAAP measure (1)

$

7,100,000

$

6,700,000

$

6,200,000

$

6,000,000

$

5,700,000

$

5,400,000

Principal due on our outstanding debt obligations

$

1,350,000

$

1,350,000

$

1,350,000

$

1,350,000

$

1,450,000

(4)

$

1,631,635

(3)

Excess tax provisions (benefits) from employee stock plans (2)

$

(10,798)

$

(44,607)

$

133

$

(4,224)

$

(4,283)

$

(1,221)

(1)

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.

(2)

Excess tax provisions (benefits) from employee stock plans relate to the exercising and vesting of stock-based awards. The amounts above are included as adjustments on the Company's Consolidated Statements of Cash Flows to reconcile net loss to net cash provided by operating activities for the three months ended as indicated.

(3)

In October 2014, the Company paid in full the outstanding balance of its term loan of $262.5 million and borrowed $300.0 million from its new revolving credit facility.

(4)

In January 2015, the 0.75% Convertible Senior Notes matured and the Company paid in full the remaining outstanding balance which was $179.8 million as of October 31, 2014.

 

Selected Balance Sheet Accounts (in thousands):

January 31,   2016

October 31,   2015

January 31,   2015

Prepaid Expenses and Other Current Assets (7)

Prepaid income taxes

$

22,044

$

23,167

$

21,514

Customer contract asset (5)

1,423

3,572

16,620

Other taxes receivable

27,341

32,187

27,540

Prepaid expenses and other current assets

199,786

210,378

179,352

$

250,594

$

269,304

$

245,026

Property and Equipment, net

Land

$

183,888

$

183,888

$

0

Buildings

614,081

614,349

125,289

Computers, equipment and software

1,281,766

1,259,210

1,171,762

Furniture and fixtures

82,242

77,606

71,881

Leasehold improvements

473,688

450,565

376,761

2,635,665

2,585,618

1,745,693

Less accumulated depreciation and amortization

(919,837)

(843,476)

(619,827)

$

1,715,828

$

1,742,142

$

1,125,866

Capitalized Software, net

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

$

123,065

$

114,058

$

96,617

Acquired developed technology, net of accumulated amortization

261,193

282,955

336,781

$

384,258

$

397,013

$

433,398

Other Assets, net (7)

Deferred income taxes, noncurrent, net

$

15,986

$

15,542

$

16,948

Long-term deposits

19,469

20,126

19,715

Purchased intangible assets, net of accumulated amortization

258,580

277,898

329,971

Acquired intellectual property, net of accumulated amortization

10,565

12,167

15,879

Customer contract asset (5)

93

115

1,447

Other

74,069

79,185

76,259

$

378,762

$

405,033

$

460,219

(5)

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.

 

January 31,   2016

October 31,   2015

January 31,   2015

Accounts Payable, Accrued Expenses and Other Liabilities (7)

Accounts payable

$

71,481

$

88,755

$

95,537

Accrued compensation

554,502

415,958

457,102

Accrued other liabilities

447,729

424,004

321,032

Accrued income and other taxes payable

205,781

153,981

184,844

Accrued professional costs

33,814

31,234

16,889

Customer liability, current (6)

6,558

10,315

13,084

Accrued rent

14,071

13,477

14,847

Financing obligation, building in progress-leased facility, current

15,402

11,930

0

$

1,349,338

$

1,149,654

$

1,103,335

Other Noncurrent Liabilities (7)

Deferred income taxes and income taxes payable

$

85,996

$

79,544

$

66,541

Customer liability, noncurrent (6)

66

81

1,026

Financing obligation, building in progress - leased facility

196,711

194,350

125,289

Long-term lease liabilities and other

550,292

569,816

701,612

$

833,065

$

843,791

$

894,468

(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.

(7)

In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (ASU 2015-17), "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes" which simplifies the presentation of deferred income taxes by requiring all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. The Company early adopted this standard retrospectively for all prior periods presented.

 

Supplemental Revenue Analysis

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

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Sales Cloud

$

708.9

$

631.3

$

2,699.0

$

2,443.0

Service Cloud

495.3

367.1

1,817.8

1,320.2

App Cloud and Other

294.5

206.6

1,034.7

745.3

Marketing Cloud

184.0

140.4

654.1

505.3

$

1,682.7

$

1,345.4

$

6,205.6

$

5,013.8

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Total revenues by geography (in thousands):

Americas

$

1,335,304

$

1,055,675

$

4,910,745

$

3,868,329

Europe

314,395

254,595

1,162,808

984,919

Asia Pacific

159,699

134,338

593,663

520,338

$

1,809,398

$

1,444,608

$

6,667,216

$

5,373,586

As a percentage of total revenues:

Total revenues by geography:

Americas

74

%

73

%

74

%

72

%

Europe

17

18

17

18

Asia Pacific

9

9

9

10

100

%

100

%

100

%

100

%

 

Revenue constant currency growth rates

(as compared to the comparable prior periods)

Three Months Ended January 31, 2016 compared to Three Months  Ended January 31, 2015

Three Months Ended October 31, 2015 compared to Three Months  Ended October 31, 2014

Three Months Ended January 31, 2015 compared to Three Months  Ended January 31, 2014

Americas

27%

27%

29%

Europe

32%

28%

32%

Asia Pacific

26%

25%

27%

Total growth

27%

27%

29%

 

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.

January 31, 2016 compared to January 31, 2015

October 31, 2015 compared to October 31, 2014

January 31, 2015 compared to January 31, 2014

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

Total growth

31%

30%

35%

 

We present constant currency information for deferred revenue, current and noncurrent to provide a framework for assessing how our underlying business performed excluding the effects of foreign currency rate fluctuations.  To present the information above, we convert the deferred revenue balances in local currencies in previous comparable periods using the United States dollar currency exchange rate as on the most recent balance sheet date.

 

Supplemental Diluted Share Count Information (in thousands)

Three Months Ended

January 31,

Fiscal Year Ended

January 31,

2016

2015

2016

2015

Weighted-average shares outstanding for basic earnings per share

669,025

637,219

661,647

624,148

Effect of dilutive securities (1):

Convertible senior notes (2)

2,314

0

1,302

5,381

Warrants associated with the convertible senior note hedges (2)

0

0

0

9,536

Employee stock awards

11,626

10,067

13,881

12,469

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

682,965

647,286

676,830

651,534

(1)

The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the three and twelve months ended January 31, 2016 and 2015 because the effect would have been anti-dilutive.

(2)

Upon maturity in fiscal 2015, the convertible 0.75% senior notes and associated warrants were settled. The 0.25% senior notes were not convertible, however there is a dilutive effect for shares outstanding for the three and twelve months ended January 31, 2016 and 2015.

 

Supplemental Cash Flow Information Free cash flow analysis, a non-GAAP measure (in thousands)

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Operating cash flow

GAAP net cash provided by operating activities

$

459,410

$

332,223

$

1,612,585

$

1,173,714

Less:

Capital expenditures

(68,465)

(85,354)

(284,476)

(290,454)

Free cash flow

$

390,945

$

246,869

$

1,328,109

$

883,260

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 Loss (in thousands) (Unaudited)

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Net loss

$

(25,509)

$

(65,765)

$

(47,426)

$

(262,688)

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

Foreign currency translation and other losses

(8,197)

(27,400)

(16,616)

(43,276)

Unrealized gains (losses) on investments

(9,530)

4,543

(9,193)

1,488

Other comprehensive loss, before tax

(17,727)

(22,857)

(25,809)

(41,788)

Tax effect

1,135

0

0

0

Other comprehensive loss, net of tax

(16,592)

(22,857)

(25,809)

(41,788)

Comprehensive loss

$

(42,101)

$

(88,622)

$

(73,235)

$

(304,476)

 

salesforce.com, inc. GAAP RESULTS RECONCILED TO NON-GAAP RESULTS The following table reflects selected GAAP results reconciled to non-GAAP results (in thousands, except per share data) (Unaudited) 

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Gross profit

GAAP gross profit

$

1,365,719

$

1,088,685

$

5,012,668

$

4,084,316

Plus:

Amortization of purchased intangibles (a)

20,093

20,006

80,918

90,300

Stock-based expense (b)

20,206

14,907

69,443

53,812

Non-GAAP gross profit

$

1,406,018

$

1,123,598

$

5,163,029

$

4,228,428

Operating expenses

GAAP operating expenses

$

1,345,159

$

1,123,501

$

4,897,745

$

4,229,949

Less:

Amortization of purchased intangibles (a)

(19,157)

(19,965)

(77,152)

(64,673)

Stock-based expense (b)

(138,766)

(136,895)

(524,185)

(510,953)

Plus:

Operating lease termination resulting from purchase of 50 Fremont

0

0

36,617

0

Non-GAAP operating expenses

$

1,187,236

$

966,641

$

4,333,025

$

3,654,323

Income from operations

GAAP income (loss) from operations

$

20,560

$

(34,816)

$

114,923

$

(145,633)

Plus:

Amortization of purchased intangibles (a)

39,250

39,971

158,070

154,973

Stock-based expense (b)

158,972

151,802

593,628

564,765

Less:

Operating lease termination resulting from purchase of 50 Fremont, net

0

0

(36,617)

0

Non-GAAP income from operations

$

218,782

$

156,957

$

830,004

$

574,105

Non-operating income (loss) (c)

GAAP non-operating loss

$

(24,703)

$

(18,682)

$

(50,644)

$

(67,452)

Plus:

Amortization of debt discount, net

6,188

7,738

24,504

36,575

Amortization of acquired lease intangible

759

0

3,636

0

Loss on conversion of debt

0

96

0

10,326

Less:

Gain on sales of land and building improvements

0

0

(21,792)

(15,625)

Non-GAAP non-operating loss

$

(17,756)

$

(10,848)

$

(44,296)

$

(36,176)

Net income

GAAP net loss

$

(25,509)

$

(65,765)

$

(47,426)

$

(262,688)

Plus:

Amortization of purchased intangibles (a)

39,250

39,971

158,070

154,973

Amortization of acquired lease intangible

759

0

3,636

0

Stock-based expense (b)

158,972

151,802

593,628

564,765

Amortization of debt discount, net

6,188

7,738

24,504

36,575

Loss on conversion of debt

0

96

0

10,326

Less:

Operating lease termination resulting from purchase of 50 Fremont, net

0

0

(36,617)

0

Gain on sales of land and building improvements

0

0

(21,792)

(15,625)

Income tax effects and adjustments

(49,998)

(41,063)

(167,221)

(146,741)

Non-GAAP net income

$

129,662

$

92,779

$

506,782

$

341,585

 

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Diluted earnings per share

GAAP diluted loss per share (d)

$

(0.04)

$

(0.10)

$

(0.07)

$

(0.42)

Plus:

Amortization of purchased intangibles

0.06

0.06

0.23

0.24

Amortization of acquired lease intangible

0.00

0.00

0.01

0.00

Stock-based expense

0.23

0.23

0.88

0.87

Amortization of debt discount, net

0.01

0.01

0.04

0.06

Loss on conversion of debt

0.00

0.00

0.00

0.02

Less:

Operating lease termination resulting from purchase of 50 Fremont, net

0.00

0.00

(0.05)

0.00

Gain on sales of land and building improvements

0.00

0.00

(0.03)

(0.02)

Income tax effects and adjustments

(0.07)

(0.06)

(0.26)

(0.23)

Non-GAAP diluted earnings per share

$

0.19

$

0.14

$

0.75

$

0.52

Shares used in computing diluted net income per share

682,965

647,286

676,830

651,534

a)

Amortization of purchased intangibles were as follows:

 

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Cost of revenues

$

20,093

$

20,006

$

80,918

$

90,300

Marketing and sales

19,157

19,965

77,152

64,673

$

39,250

$

39,971

$

158,070

$

154,973

b)

Stock-based expense was as follows:

 

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Cost of revenues

$

20,206

$

14,907

$

69,443

$

53,812

Research and development

32,926

33,929

129,434

121,193

Marketing and sales

77,333

75,900

289,152

286,410

General and administrative

28,507

27,066

105,599

103,350

$

158,972

$

151,802

$

593,628

$

564,765

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 January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

GAAP Basic Net Loss Per Share

Net loss

$

(25,509)

$

(65,765)

$

(47,426)

$

(262,688)

Basic net loss per share

$

(0.04)

$

(0.10)

$

(0.07)

$

(0.42)

Shares used in computing basic net loss per share

669,025

637,219

661,647

624,148

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Non-GAAP Basic Net Income Per Share

Non-GAAP net income

$

129,662

$

92,779

$

506,782

$

341,585

Basic Non-GAAP net income per share

$

0.19

$

0.15

$

0.77

$

0.55

Shares used in computing basic net income per share

669,025

637,219

661,647

624,148

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

GAAP Diluted Net Loss Per Share

Net loss

$

(25,509)

$

(65,765)

$

(47,426)

$

(262,688)

Diluted net loss per share

$

(0.04)

$

(0.10)

$

(0.07)

$

(0.42)

Shares used in computing diluted net loss per share

669,025

637,219

661,647

624,148

Three Months Ended January 31,

Fiscal Year Ended January 31,

2016

2015

2016

2015

Non-GAAP Diluted Net Income Per Share

Non-GAAP net income

$

129,662

$

92,779

$

506,782

$

341,585

Diluted Non-GAAP net income per share

$

0.19

$

0.14

$

0.75

$

0.52

Shares used in computing diluted net income per share

682,965

647,286

676,830

651,534

 

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SOURCE Salesforce



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