Salesforce Announces Fiscal 2016 Third Quarter Results

Initiates FY17 Revenue Guidance of $8.0 Billion to $8.1 Billion

- Quarterly Revenue of $1.71 Billion, up 24% Year-Over-Year, 27% in Constant Currency

- Deferred Revenue of $2.85 Billion, up 28% Year-Over-Year, 30% in Constant Currency

- Unbilled Deferred Revenue of Approximately $6.7 Billion, up 24% Year-Over-Year

- Initiates Fourth Quarter Revenue Guidance of $1.782 Billion to $1.792 Billion

- Raises FY16 Revenue Guidance to $6.64 Billion to $6.65 Billion

Nov 18, 2015, 16:05 ET from salesforce.com

SAN FRANCISCO, Nov. 18, 2015 /PRNewswire/ -- Salesforce (NYSE: CRM), the Customer Success Platform and world's #1 CRM company, today announced results for its fiscal third quarter ended October 31, 2015.

"Salesforce delivered yet another exceptional quarter with 27% constant currency growth in revenue and 30% constant currency growth in deferred revenue," said Marc Benioff, Chairman and CEO, Salesforce. "I'm delighted to announce that we expect to deliver our first $8 billion year during our fiscal year 2017, which puts us well on the path to reach $10 billion faster than any other enterprise software company."

"In Q3, we delivered strong top and bottom line growth, expanding non-GAAP operating margin by 221 basis points, which is our sixth consecutive quarter of year-over-year improvement," said Mark Hawkins, CFO, Salesforce. "For the full fiscal year 2016, we expect to deliver $6.65 billion in revenue at the high end of our range and we are increasing our non-GAAP EPS guidance to 75 cents at the high end of our range."

Salesforce delivered the following results for its fiscal third quarter 2016:

Revenue:  Total revenue was $1.71 billion, an increase of 24% year-over-year, and 27% in constant currency.  Subscription and support revenues were $1.60 billion, an increase of 24% year-over-year.  Professional services and other revenues were $116 million, an increase of 22% year-over-year.

Earnings per Share:  GAAP loss per share was ($0.04), and non-GAAP diluted earnings per share was $0.21.

Cash:  Cash generated from operations for the third quarter was $118 million, a decrease of 4% year-over-year. Cash generated from operations for the nine months year-to-date was $1.15 billion, an increase of 37% year-over-year. Total cash, cash equivalents and marketable securities finished the quarter at $2.30 billion.

Deferred Revenue:  Deferred revenue on the balance sheet as of October 31, 2015 was $2.85 billion, an increase of 28% year-over-year, and 30% in constant currency. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the quarter at approximately $6.7 billion, up 24% year-over-year.

As of November 18, 2015, the company is initiating revenue, earnings per share, and deferred revenue guidance for its fourth quarter of fiscal year 2016. In addition, the company is raising its full fiscal year 2016 revenue and earnings per share guidance previously provided on August 20, 2015. The company is also initiating revenue guidance for its fiscal year 2017.

Q4 FY16 Guidance:  Revenue is projected to be approximately $1.782 billion to $1.792 billion, an increase of 23% to 24% year-over-year.

GAAP loss per share is expected to be in the range of ($0.09) to ($0.08), while diluted non-GAAP earnings per share is expected to be in the range of $0.18 to $0.19.

On balance sheet deferred revenue growth is projected to be approximately 23% to 24% year-over-year.

Full Year FY16 Guidance:  Revenue is projected to be approximately $6.64 billion to $6.65 billion, an increase of 24% year-over-year.

GAAP loss per share is expected to be in the range of ($0.12) to ($0.11), while diluted non-GAAP earnings per share is expected to be in the range of $0.74 to $0.75.

Operating cash flow growth is projected to be approximately 24% to 25% year-over-year.

Full Year FY17 Guidance: Revenue for the company's full fiscal year 2017 is projected to be approximately $8.0 billion to $8.1 billion, an increase of 20% to 22% year-over-year. The company will provide its expectations for FY17 GAAP EPS, non-GAAP EPS, and operating cash flow when it announces its fourth quarter and full fiscal year 2016 results in February 2016.

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 2016

Q4

FY2016

GAAP EPS range*

 ($0.09) - ($0.08) 

 ($0.12) - ($0.11) 

Plus

Amortization of purchased intangibles

$                    0.06

$                    0.23

Amortization of acquired leases

$                         -

$                    0.01

Stock-based expense

$                    0.24

$                    0.89

Amortization of debt discount, net

$                    0.01

$                    0.04

Less

Gain on sale of land and building improvements

$                         -

$                  (0.03)

Lease termination resulting from purchase of office building

$                         -

$                  (0.05)

Income tax effects and adjustments**

$                  (0.04)

$                  (0.23)

Non-GAAP diluted EPS

 $0.18 - $0.19 

 $0.74 - $0.75 

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

669

661

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

683

674

* For Q4 & FY16 GAAP EPS loss, basic number of shares used for calculation, and expected tax rates of 

 (610%) and 220%, respectively.

** The Company's non-GAAP tax provision uses a long-term projected tax rate of 35.5%. 

 

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 66984466.  A replay will be available at (800) 585-8367 or (855) 859-2056 until midnight (ET) Dec. 17, 2015.

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, deferred revenue growth, expected revenue run rate, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles, amortization of acquired leases and debt discount, non-cash interest expense and gains/losses on the conversions of debt, gains/losses on the sales of land and building improvements, termination of operating lease, 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 ability to maintain continued growth of 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; 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 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 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.  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.

© 2015 salesforce.com, inc.  All rights reserved.  Salesforce, Sales Cloud, Service Cloud, 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 October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Revenues:

Subscription and support

$

1,596,333

$

1,288,513

$

4,522,939

$

3,668,406

Professional services and other

115,634

95,142

334,879

260,572

Total revenues

1,711,967

1,383,655

4,857,818

3,928,978

Cost of revenues (1)(2):

Subscription and support

303,045

238,746

870,023

666,611

Professional services and other

120,638

94,465

340,846

266,736

Total cost of revenues

423,683

333,211

1,210,869

933,347

Gross profit

1,288,284

1,050,444

3,646,949

2,995,631

Operating expenses (1)(2):

Research and development

239,212

195,460

695,440

586,927

Marketing and sales

818,820

709,643

2,349,449

2,020,956

General and administrative

186,818

167,383

544,314

498,565

Operating lease termination resulting from purchase of 50 Fremont, net

0

0

(36,617)

0

Total operating expenses

1,244,850

1,072,486

3,552,586

3,106,448

Income (loss) from operations

43,434

(22,042)

94,363

(110,817)

Investment income

3,507

2,622

11,351

7,055

Interest expense

(18,249)

(17,682)

(53,020)

(56,355)

Other expense (1)(3)

(7,093)

(372)

(6,064)

(15,095)

Gain on sales of land and building improvements

21,792

15,625

21,792

15,625

Income (loss) before provisions for income taxes

43,391

(21,849)

68,422

(159,587)

Provisions for income taxes

(68,548)

(17,075)

(90,339)

(37,336)

Net loss

$

(25,157)

$

(38,924)

$

(21,917)

$

(196,923)

Basic net loss per share

$

(0.04)

$

(0.06)

$

(0.03)

$

(0.32)

Diluted net loss per share

$

(0.04)

$

(0.06)

$

(0.03)

$

(0.32)

Shares used in computing basic net loss per share

664,131

629,548

659,160

619,748

Shares used in computing diluted net loss per share

664,131

629,548

659,160

619,748

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

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Cost of revenues

$

20,296

$

20,351

$

60,825

$

70,294

Marketing and sales

18,966

15,095

57,995

44,708

Other non-operating expense

761

0

2,877

0

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

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Cost of revenues

$

17,516

$

14,118

$

49,237

$

38,905

Research and development

31,534

26,868

96,508

87,264

Marketing and sales

69,561

72,892

211,819

210,510

General and administrative

25,706

25,582

77,092

76,284

(3) Amount includes approximately $10.2 million loss on conversions of our convertible 0.75% senior notes due January 2015 recognized during the nine months ended October 31, 2014.

 

salesforce.com, inc.

Condensed Consolidated Statements of Operations

(As a percentage of total revenues)

(Unaudited)

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

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

17

18

17

Professional services and other

7

7

7

7

Total cost of revenues

25

24

25

24

Gross profit

75

76

75

76

Operating expenses (1)(2):

Research and development

14

14

14

15

Marketing and sales

48

52

49

51

General and administrative

11

12

11

13

Operating lease termination resulting from purchase of 50 Fremont, net

0

0

(1)

0

Total operating expenses

73

78

73

79

Income (loss) from operations

2

(2)

2

(3)

Investment income

0

0

0

0

Interest expense

(1)

(1)

(1)

(1)

Other expense (1)

0

0

0

0

Gain on sales of land and building improvements

2

1

1

0

Income (loss) before provisions for income taxes

3

(2)

2

(4)

Provisions for income taxes

(4)

(1)

(2)

(1)

Net loss

(1)

%

(3)

%

0

%

(5)

%

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

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

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:

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Cost of revenues

1

%

1

%

1

%

1

%

Research and development

2

2

2

2

Marketing and sales

4

5

4

5

General and administrative

1

2

2

2

 

salesforce.com, inc.

Condensed Consolidated Balance Sheets

(in thousands)

October 31,  2015

January 31,  2015

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

1,223,318

$

908,117

Short-term marketable securities

134,687

87,312

Accounts receivable, net

1,060,726

1,905,506

Deferred commissions

208,133

225,386

Prepaid expenses and other current assets

311,909

280,554

Land and building improvements held for sale

0

143,197

Total current assets

2,938,773

3,550,072

Marketable securities, noncurrent

943,301

894,855

Property and equipment, net

1,742,142

1,125,866

Deferred commissions, noncurrent

148,147

162,796

Capitalized software, net

397,013

433,398

Goodwill

3,849,054

3,782,660

Strategic investments

496,809

175,774

Other assets, net

396,727

452,546

Restricted cash

0

115,015

Total assets

$

10,911,966

$

10,692,982

Liabilities and stockholders' equity

Current liabilities:

Accounts payable, accrued expenses and other liabilities

$

1,149,693

$

1,103,335

Deferred revenue

2,827,285

3,286,768

Total current liabilities

3,976,978

4,390,103

Convertible 0.25% senior notes, net

1,088,910

1,070,692

Loan assumed on 50 Fremont

198,851

0

Revolving credit facility

0

300,000

Deferred revenue, noncurrent

19,225

34,681

Other noncurrent liabilities

878,048

922,323

Total liabilities

6,162,012

6,717,799

Stockholders' equity:

Common stock

664

651

Additional paid-in capital

5,410,377

4,604,485

Accumulated other comprehensive loss

(33,325)

(24,108)

Accumulated deficit

(627,762)

(605,845)

Total stockholders' equity

4,749,954

3,975,183

Total liabilities and stockholders' equity

$

10,911,966

$

10,692,982

 

salesforce.com, inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Operating activities:

Net loss

$

(25,157)

$

(38,924)

$

(21,917)

$

(196,923)

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

Depreciation and amortization

134,236

111,954

393,838

330,358

Amortization of debt discount and transaction costs

7,138

9,420

20,290

31,160

Gain on sales of land and building improvements

(21,792)

(15,625)

(21,792)

(15,625)

50 Fremont lease termination, net

0

0

(36,617)

0

Loss on conversions of convertible senior notes

0

1,340

0

10,230

Abandonment of leasehold improvement

7,086

0

7,086

0

Amortization of deferred commissions

78,934

65,371

232,768

186,526

Expenses related to employee stock plans

144,317

139,460

434,656

412,963

Excess tax benefits from employee stock plans

(44,607)

(1,221)

(48,698)

(3,447)

Changes in assets and liabilities, net of business combinations:

Accounts receivable, net

15,262

39,792

853,014

566,306

Deferred commissions

(80,030)

(64,280)

(200,867)

(171,022)

Prepaid expenses and other current assets and other assets

33,841

6,588

4,495

34,501

Accounts payable, accrued expenses and other liabilities

57,577

(1,933)

12,276

(44,894)

Deferred revenue

(188,898)

(129,431)

(475,357)

(298,642)

Net cash provided by operating activities

117,907

122,511

1,153,175

841,491

Investing activities:

Business combinations, net of cash acquired

(27,759)

38,071

(58,680)

38,071

Proceeds from land and building improvements held for sale

127,066

192,240

127,066

223,240

Purchase of 50 Fremont land and building

0

0

(425,376)

0

Deposit for purchase of 50 Fremont land and building

0

(114,935)

115,015

(114,935)

Non-refundable amounts received for sale of land available for sale

0

0

6,284

0

Strategic investments

(30,330)

(12,852)

(325,226)

(47,905)

Purchases of marketable securities

(200,001)

(154,560)

(543,422)

(690,024)

Sales of marketable securities

91,153

46,908

414,259

197,293

Maturities of marketable securities

7,166

22,288

23,445

46,248

Capital expenditures

(80,041)

(73,426)

(216,011)

(205,100)

Net cash used in investing activities

(112,746)

(56,266)

(882,646)

(553,112)

Financing activities:

Proceeds from revolving credit facility, net

0

297,325

0

297,325

Proceeds from employee stock plans

98,016

91,337

367,830

226,561

Excess tax benefits from employee stock plans

44,607

1,221

48,698

3,447

Payments on convertible senior notes

0

(89,645)

0

(387,229)

Principal payments on capital lease obligations

(10,945)

(10,345)

(68,844)

(61,280)

Payments on revolving credit facility and term loan

0

(270,000)

(300,000)

(285,000)

Net cash provided by (used in) financing activities

131,678

19,893

47,684

(206,176)

Effect of exchange rate changes

(2,872)

(14,538)

(3,012)

(17,513)

Net increase in cash and cash equivalents

133,967

71,600

315,201

64,690

Cash and cash equivalents, beginning of period

1,089,351

774,725

908,117

781,635

Cash and cash equivalents, end of period

$

1,223,318

$

846,325

$

1,223,318

$

846,325

 

salesforce.com, inc.

Additional Metrics

(Unaudited) 

Oct 31, 2015

Jul 31, 2015

Apr 30, 2015

Jan 31,  2015

Oct 31,  2014

Jul 31, 2014

Full Time Equivalent Headcount

18,726

17,622

16,852

16,227

15,458

15,145

Financial data (in thousands):

Cash, cash equivalents and marketable securities

$

2,301,306

$

2,066,963

$

1,922,476

$

1,890,284

$

1,827,277

$

1,671,758

Strategic investments

$

496,809

$

477,886

$

318,716

$

175,774

$

132,150

$

120,289

Deferred revenue, current and noncurrent

$

2,846,510

$

3,034,991

$

3,056,820

$

3,321,449

$

2,223,977

$

2,352,904

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

$

6,700,000

$

6,200,000

$

6,000,000

$

5,700,000

$

5,400,000

$

5,000,000

Principal due on our outstanding debt obligations

$

1,350,000

$

1,350,000

$

1,350,000

$

1,450,000

$

1,631,635

$

1,691,280

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

$

(44,607)

$

133

$

(4,224)

$

(4,283)

$

(1,221)

$

6,815

(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 Condensed Consolidated Statements of Cash Flows to reconcile net loss to net cash provided by operating activities for the three months ended as indicated.

 

Selected Balance Sheet Accounts (in thousands):

October 31,  2015

July 31,  2015

January 31,  2015

Prepaid Expenses and Other Current Assets

Deferred income taxes, net

$

42,605

$

45,032

$

35,528

Prepaid income taxes

23,167

20,763

21,514

Customer contract asset (3)

3,572

6,172

16,620

Other taxes receivable

32,187

28,625

27,540

Prepaid expenses and other current assets

210,378

229,699

179,352

$

311,909

$

330,291

$

280,554

Property and Equipment, net

Land

$

183,888

$

183,888

$

0

Buildings

614,349

581,036

125,289

Computers, equipment and software

1,259,210

1,231,106

1,171,762

Furniture and fixtures

77,606

77,240

71,881

Leasehold improvements

450,565

419,040

376,761

2,585,618

2,492,310

1,745,693

Less accumulated depreciation and amortization

(843,476)

(767,126)

(619,827)

$

1,742,142

$

1,725,184

$

1,125,866

Capitalized Software, net

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

$

114,058

$

109,022

$

96,617

Acquired developed technology, net of accumulated amortization

282,955

305,013

336,781

$

397,013

$

414,035

$

433,398

Other Assets, net

Deferred income taxes, noncurrent, net

$

7,236

$

8,576

$

9,275

Long-term deposits

20,126

18,627

19,715

Purchased intangible assets, net of accumulated amortization

277,898

296,861

329,971

Acquired intellectual property, net of accumulated amortization

12,167

13,868

15,879

Customer contract asset (3)

115

136

1,447

Other

79,185

77,364

76,259

$

396,727

$

415,432

$

452,546

(3) Customer contract asset reflects future billings of amounts that are contractually committed by ExactTarget's existing customers as of the acquisition date in July 2013 that will be billed in the next 12 months. As the Company bills these customers this balance will reduce and accounts receivable will increase.

October 31,  2015

July 31,  2015

January 31,  2015

Accounts Payable, Accrued Expenses and Other Liabilities

Accounts payable

$

88,755

$

99,286

$

95,537

Accrued compensation

415,958

345,833

457,102

Accrued other liabilities

424,004

462,573

321,032

Accrued income and other taxes payable

154,020

131,475

184,844

Accrued professional costs

31,234

28,781

16,889

Customer liability, current (4)

10,315

9,645

13,084

Accrued rent

13,477

12,933

14,847

Financing obligation, building in progress-leased facility, current

11,930

7,528

0

$

1,149,693

$

1,098,054

$

1,103,335

Other Noncurrent Liabilities

Deferred income taxes and income taxes payable

$

113,801

$

111,294

$

94,396

Customer liability, noncurrent (4)

81

97

1,026

Financing obligation, building in progress - leased facility

194,350

157,562

125,289

Long-term lease liabilities and other

569,816

574,564

701,612

$

878,048

$

843,517

$

922,323

(4)

Customer liability reflects the legal obligation to provide future services that were contractually committed by ExactTarget's existing customers but unbilled as of July 2013. As these services are invoiced, this balance will decrease and deferred revenue will increase.

 

Supplemental Revenue Analysis

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

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Sales Cloud

$

688.7

$

625.0

$

1,990.1

$

1,811.7

Service Cloud

469.5

339.6

1,322.4

953.1

App Cloud (5) and Other

269.1

192.4

740.4

538.7

Marketing Cloud

169.0

131.5

470.1

364.9

$

1,596.3

$

1,288.5

$

4,523.0

$

3,668.4

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Total revenues by geography (in thousands):

Americas

$

1,258,148

$

995,331

$

3,575,441

$

2,812,654

Europe

302,704

252,982

848,413

730,324

Asia Pacific

151,115

135,342

433,964

386,000

$

1,711,967

$

1,383,655

$

4,857,818

$

3,928,978

As a percentage of total revenues:

Total revenues by geography:

Americas

73

%

72

%

74

%

72

%

Europe

18

18

17

18

Asia Pacific

9

10

9

10

100

%

100

%

100

%

100

%

(5) Formerly Salesforce1 Platform

 

Revenue constant currency growth rates

(as compared to the comparable prior periods)

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

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

Three Months Ended October 31, 2014 compared to Three Months  Ended October 31, 2013

Americas

27%

28%

29%

Europe

28%

29%

34%

Asia Pacific

25%

25%

25%

Total growth

27%

28%

30%

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.

 

October 31, 2015 compared to October 31, 2014

July 31, 2015 compared to July 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

30%

33%

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

(share data in thousands)

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Weighted-average shares outstanding for GAAP basic earnings per share

664,131

629,548

659,160

619,748

Effect of dilutive securities (1):

Convertible senior notes (2)

1,437

5,333

964

7,175

Warrants associated with the convertible senior note hedges (2)

0

12,857

0

12,714

Employee stock awards

12,162

10,800

12,212

12,639

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

677,730

658,538

672,336

652,276

(1)

The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the three months ended October 31, 2015 and 2014 and the nine months ended October 31, 2015 and 2014 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 nine months ended October 31, 2015 and 2014.

 

Supplemental Cash Flow Information

Free cash flow analysis, a non-GAAP measure

(in thousands)

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Operating cash flow

GAAP net cash provided by operating activities

$

117,907

$

122,511

$

1,153,175

$

841,491

Less:

Capital expenditures

(80,041)

(73,426)

(216,011)

(205,100)

Free cash flow

$

37,866

$

49,085

$

937,164

$

636,391

Our free cash flow analysis includes GAAP net cash provided by operating activities less capital expenditures. The capital expenditures balance 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 facilitates. 

 

Comprehensive Loss

(in thousands)

(Unaudited)

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Net loss

$

(25,157)

$

(38,924)

$

(21,917)

$

(196,923)

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

Foreign currency translation and other (losses)

(1,173)

(13,692)

(8,419)

(15,876)

Unrealized gains (loss) on investments

(2,873)

1,278

337

(3,055)

Other comprehensive loss, before tax

(4,046)

(12,414)

(8,082)

(18,931)

Tax effect

(1,135)

0

(1,135)

0

Other comprehensive loss, net of tax

(5,181)

(12,414)

(9,217)

(18,931)

Comprehensive loss

$

(30,338)

$

(51,338)

$

(31,134)

$

(215,854)

 

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 October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Gross profit

GAAP gross profit

$

1,288,284

$

1,050,444

$

3,646,949

$

2,995,631

Plus:

Amortization of purchased intangibles (a)

20,296

20,351

60,825

70,294

Stock-based expense (b)

17,516

14,118

49,237

38,905

Non-GAAP gross profit

$

1,326,096

$

1,084,913

$

3,757,011

$

3,104,830

Operating expenses

GAAP operating expenses

$

1,244,850

$

1,072,486

$

3,552,586

$

3,106,448

Less:

Amortization of purchased intangibles (a)

(18,966)

(15,095)

(57,995)

(44,708)

Stock-based expense (b)

(126,801)

(125,342)

(385,419)

(374,058)

Plus:

Operating lease termination resulting from purchase of 50 Fremont, net

0

0

36,617

0

Non-GAAP operating expenses

$

1,099,083

$

932,049

$

3,145,789

$

2,687,682

Income from operations

GAAP income (loss) from operations

$

43,434

$

(22,042)

$

94,363

$

(110,817)

Plus:

Amortization of purchased intangibles (a)

39,262

35,446

118,820

115,002

Stock-based expense (b)

144,317

139,460

434,656

412,963

Less:

Operating lease termination resulting from purchase of 50 Fremont, net

0

0

(36,617)

0

Non-GAAP income from operations

$

227,013

$

152,864

$

611,222

$

417,148

Non-operating loss (c)

GAAP non-operating income (loss)

$

(43)

$

193

$

(25,941)

$

(48,770)

Plus:

Amortization of debt discount, net

6,148

8,638

18,317

28,838

Amortization of acquired lease intangible

761

0

2,877

0

Loss on conversion of debt

0

1,339

0

10,229

Less:

Gain on sales of land and building improvements

(21,792)

(15,625)

(21,792)

(15,625)

Non-GAAP non-operating loss

$

(14,926)

$

(5,455)

$

(26,539)

$

(25,328)

Net income

GAAP net loss

$

(25,157)

$

(38,924)

$

(21,917)

$

(196,923)

Plus:

Amortization of purchased intangibles (a)

39,262

35,446

118,820

115,002

Amortization of acquired lease intangible

761

0

2,877

0

Stock-based expense (b)

144,317

139,460

434,656

412,963

Amortization of debt discount, net

6,148

8,638

18,317

28,838

Loss on conversion of debt

0

1,339

0

10,229

Less:

Operating lease termination resulting from purchase of 50 Fremont, net

0

0

(36,617)

0

Gain on sales of land and building improvements

(21,792)

(15,625)

(21,792)

(15,625)

Income tax effects and adjustments

(3,016)

(36,729)

(117,223)

(105,678)

Non-GAAP net income

$

140,523

$

93,605

$

377,121

$

248,806

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Diluted earnings per share

GAAP diluted loss per share (d)

$

(0.04)

$

(0.06)

$

(0.03)

$

(0.32)

Plus:

Amortization of purchased intangibles

0.06

0.05

0.18

0.18

Amortization of acquired lease intangible

0.00

0.00

0.00

0.00

Stock-based expense

0.21

0.21

0.65

0.63

Amortization of debt discount, net

0.01

0.01

0.03

0.04

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

(0.03)

(0.02)

(0.03)

(0.02)

Income tax effects and adjustments

0.00

(0.05)

(0.19)

(0.15)

Non-GAAP diluted earnings per share

$

0.21

$

0.14

$

0.56

$

0.38

Shares used in computing diluted net income per share

677,730

658,538

672,336

652,276

a) Amortization of purchased intangibles were as follows:

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Cost of revenues

$

20,296

$

20,351

$

60,825

$

70,294

Marketing and sales

18,966

15,095

57,995

44,708

$

39,262

$

35,446

$

118,820

$

115,002

b) Stock-based expense was as follows:

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Cost of revenues

$

17,516

$

14,118

$

49,237

$

38,905

Research and development

31,534

26,868

96,508

87,264

Marketing and sales

69,561

72,892

211,819

210,510

General and administrative

25,706

25,582

77,092

76,284

$

144,317

$

139,460

$

434,656

$

412,963

c) Non-operating income (loss) consists of investment income, interest expense, other expense and gain on sales of land and building improvements.

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 October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

GAAP Basic Net Loss Per Share

Net loss

$

(25,157)

$

(38,924)

$

(21,917)

$

(196,923)

Basic net loss per share

$

(0.04)

$

(0.06)

$

(0.03)

$

(0.32)

Shares used in computing basic net loss per share

664,131

629,548

659,160

619,748

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Non-GAAP Basic Net Income Per Share

Non-GAAP net income

$

140,523

$

93,605

$

377,121

$

248,806

Basic Non-GAAP net income per share

$

0.21

$

0.15

$

0.57

$

0.40

Shares used in computing basic net income per share

664,131

629,548

659,160

619,748

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

GAAP Diluted Net Loss Per Share

Net loss

$

(25,157)

$

(38,924)

$

(21,917)

$

(196,923)

Diluted net loss per share

$

(0.04)

$

(0.06)

$

(0.03)

$

(0.32)

Shares used in computing diluted net loss per share

664,131

629,548

659,160

619,748

Three Months Ended October 31,

Nine Months Ended October 31,

2015

2014

2015

2014

Non-GAAP Diluted Net Income Per Share

Non-GAAP net income

$

140,523

$

93,605

$

377,121

$

248,806

Diluted Non-GAAP net income per share

$

0.21

$

0.14

$

0.56

$

0.38

Shares used in computing diluted net income per share

677,730

658,538

672,336

652,276

 

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 Q3 and its non-GAAP estimates for Q4 and FY16:

  • 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: 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 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 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. 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 unless a significant event may materially affect it. As a result of the recent U.S. Tax Court's opinion in Altera Corporation's litigation with the Internal Revenue Service, the company revised its fiscal 2016 non-GAAP tax rate from 36.5 percent to 35.5 percent during the quarter ended October 31, 2015 to account for the related tax impact. The year-to-date tax impact was fully recognized in the company's Q3 tax provision.

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.

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

 

SOURCE salesforce.com



RELATED LINKS

http://www.salesforce.com