Salesforce.com Announces Fiscal 2014 Third Quarter Results

Guides Fiscal 2015 Revenue to More Than $5 Billion

- Revenue of $1.08 Billion, up 36% Year-Over-Year

- Deferred Revenue of $1.73 Billion, up 34% Year-Over-Year

- Unbilled Deferred Revenue of Approximately $4.20 Billion, up 40% Year-Over-Year

- Operating Cash Flow of $138 Million, up 30% Year-Over-Year

- Raises FY14 Revenue Guidance to $4.050 - $4.055 Billion

- Initiates FY15 Revenue Guidance of $5.15 - $5.20 Billion

18 Nov, 2013, 16:05 ET from salesforce.com

SAN FRANCISCO, Nov. 18, 2013 /PRNewswire/ -- Salesforce.com (NYSE: CRM), the world's #1 CRM platform (http://www.salesforce.com/), today announced results for its fiscal third quarter ended October 31, 2013.

(Logo: http://photos.prnewswire.com/prnh/20130612/SF30598LOGO)

"Salesforce.com is the first enterprise cloud computing company to deliver a $1 billion quarter, with outstanding third quarter revenue growth at 36%," said Marc Benioff, Chairman and CEO, salesforce.com. "Given the strong customer response to our next generation social and mobile cloud technologies, I'm delighted to announce that we expect to deliver our first $5 billion year during our fiscal year 2015."

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

Revenue:  Total Q3 revenue was $1.08 billion, an increase of 36% year-over-year, benefited in part by the acquisition of ExactTarget which closed in July 2013.  Subscription and support revenues were $1.00 billion, an increase of 36% year-over-year.  Professional services and other revenues were $72 million, an increase of 50% year-over-year. 

Earnings per Share:  Q3 diluted GAAP loss per share was ($0.21), and diluted non-GAAP earnings per share was $0.09. The company's non-GAAP results exclude the effects of $142 million in stock-based compensation expense, $49 million in amortization of purchased intangibles, and $13 million in net non-cash interest expense related to the company's convertible senior notes, and is based on a non-GAAP tax rate of approximately 27%.  GAAP EPS calculations are based on a basic share count of approximately 600 million shares. Non-GAAP EPS calculations are based on approximately 640 million diluted shares outstanding during the quarter, including approximately 26 million shares associated with the company's convertible 0.75% senior notes due 2015.    

Cash:  Cash generated from operations for the fiscal third quarter was $138 million, an increase of 30% year-over-year.  Total cash, cash equivalents and marketable securities finished the quarter at $1.09 billion.

Deferred Revenue:  Deferred revenue on the balance sheet as of October 31, 2013 was $1.73 billion, an increase of 34% year-over-year, benefited in part by the acquisition of ExactTarget. Current deferred revenue increased by 38% year-over-year to $1.69 billion, benefited in part by longer invoice durations.  Non-current deferred revenue decreased by 26% year-over-year to $48 million. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the third quarter at approximately $4.20 billion, up 40% year-over-year.

As of November 18, 2013, salesforce.com is initiating revenue and EPS guidance for its fourth quarter of fiscal year 2014. In addition, the company is raising its full fiscal year 2014 revenue and updating its EPS guidance previously provided on August 29, 2013. The company is also initiating revenue guidance for fiscal year 2015.

Q4 FY14 Guidance:  Revenue for the company's fourth fiscal quarter is projected to be in the range of $1.124 billion to $1.129 billion, an increase of 35% year-over-year.

GAAP net loss per share is expected to be in the range of ($0.25) to ($0.24), while diluted non-GAAP EPS is expected to be in the range of $0.05 to $0.06.  The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $145 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $47 million, and net non-cash interest expense related to the convertible senior notes, expected to be approximately $12 million.  EPS estimates assume a GAAP tax rate of approximately negative 1%, which reflects the estimated quarterly change in the tax valuation allowance, and a non-GAAP tax rate of approximately 36%.  The GAAP EPS calculation assumes an average basic share count of approximately 609 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 654 million shares.

Full Year FY14 Guidance:  Revenue for the company's full fiscal year 2014 is projected to be in the range of $4.050 billion to $4.055 billion, an increase of 33% year-over-year.

GAAP net loss per share is expected to be in the range of ($0.45) to ($0.44) while diluted non-GAAP EPS is expected to be in the range of $0.33 to $0.34.  The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $512 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $147 million, and net non-cash interest expense related to the convertible senior notes, expected to be approximately $47 million.  EPS estimates assume a GAAP tax rate of approximately 31%, which reflects the estimated annual change in the tax valuation allowance, and a non-GAAP tax rate of approximately 35%. Note that the tax valuation allowance adds complexity, causing potential volatility in our forecasted GAAP tax rate.  The GAAP EPS calculation assumes an average basic share count of approximately 598 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 635 million shares.

Full Year FY15 Guidance: Revenue for the company's full fiscal year 2015 is projected to be in the range of $5.15 billion to $5.20 billion.  The company will provide its expectations for FY15 GAAP and non-GAAP EPS when it announces its fourth quarter fiscal year 2014 results in February 2014.

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

Fiscal 2014

Q4

FY2014

GAAP EPS Range*

($0.25) - ($0.24)

($0.45) - ($0.44)

Plus

Amortization of purchased intangibles

$                0.07

$                0.23

Stock-based expense

$                0.22

$                0.81

Amortization of debt discount, net

$                0.02

$                0.07

Less

Income tax effects and adjustments**

$              (0.01)

$              (0.33)

Non-GAAP diluted EPS

 $0.05 - $0.06 

 $0.33 - $0.34 

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

609

598

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

654

635

* For Q4 & FY14 GAAP EPS loss, basic number of shares used for calculation

** The company's non-GAAP tax provision excludes the tax effects of expense items described above and certain tax items not directly related to the current fiscal year ordinary operating results.  Examples of such tax items include, but are not limited to, changes in the valuation allowance related to deferred tax assets, certain acquisition-related costs and unusual or infrequently occurring items. 

Quarterly Conference Call

Salesforce.com will host a conference call to discuss its fiscal third quarter results at 2:00 p.m. Pacific Time today.  A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations Web site: http://www.salesforce.com/investor.  In addition, an archive of the audiocast can be accessed through the same link.  Participants who choose to call in to the conference call can do so by dialing domestically 866-901-SFDC or 866-901-7332 and internationally at +1 706-902-1764, passcode 97787647.  A replay will be available at 800-585-8367 or +1 855-859-2056, passcode 97787647, until midnight (Eastern Time) December 18, 2013.

About salesforce.com

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

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

Non-GAAP Financial Measures:  This press release includes information about non-GAAP EPS and non-GAAP tax rates (collectively the "non-GAAP financial measures").  Non-GAAP EPS estimates exclude the impact of the following non-cash items:  stock-based compensation, amortization of acquisition-related intangibles, and the net amortization of debt discount on the company's convertible senior notes, as well as income tax adjustments.  The purpose of the non-GAAP tax rate is to quantify the excluded tax adjustments and the tax consequences associated with the above excluded non-cash expense items.  These non-GAAP financial measures are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles.  The method used to produce non-GAAP financial measures is not computed according to GAAP and may differ from the methods used by other companies.  Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP.

The primary purpose of these non-GAAP measures is to provide supplemental information that may prove useful to investors who wish to consider the impact of certain non-cash items on the company's operating performance.  Non-cash stock-based compensation, amortization of acquisition-related intangible assets, and the net amortization of debt discount on the company's convertible senior notes are being excluded from the company's FY14 financial results because the decisions which gave rise to these expenses were not made to increase revenue in a particular period, but were made for the company's long-term benefit over multiple periods.  While strategic decisions, such as those related to the issuance of equity awards, resulting in stock-based compensation, the acquisitions of companies, or the issuance of convertible senior notes, are made to further the company's long-term strategic objectives and impact the company's statement of operations under GAAP measures, these items affect multiple periods and management is not able to change or affect these items in any particular period.  As such, supplementing GAAP disclosure with non-GAAP disclosure using the non-GAAP measures provides management with an additional view of operational performance by excluding expenses that are not directly related to performance in any particular period, and management uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the company's performance.

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

Specifically, management is excluding the following items from its non-GAAP EPS for Q3 and its non-GAAP estimates for Q4 and FY14:

  • Stock-Based Expenses:  The company's compensation strategy includes the use of stock-based compensation to attract and retain employees and executives.  It is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period.  Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period. 
  • Amortization of Purchased Intangibles:  The company views amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company's research and development efforts, trade names, customer lists and customer relationships, as items arising from pre-acquisition activities determined at the time of an acquisition.  While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
  • Amortization of Debt Discount:  Under GAAP, certain convertible debt instruments that may be settled in cash (or other assets) on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate.  Accordingly, for GAAP purposes we are required to recognize imputed interest expense on the company's $575 million of convertible senior notes due 2015 that were issued in a private placement in January 2010 and the company's $1.15 billion of convertible senior notes due 2018 that were issued in a private placement in March 2013.  The imputed interest rates were approximately 5.9% for the convertible notes due 2015 and approximately 2.5% for the convertible notes due 2018, while the actual coupon interest rates of the notes were 0.75% and 0.25%, respectively.  The difference between the imputed interest expense and the coupon interest expense, net of the interest amount capitalized, is excluded from management's assessment of the company's operating performance because management believes that this non-cash expense is not indicative of ongoing operating performance.  Management believes that the exclusion of the non-cash interest expense provides investors an enhanced view of the company's operational performance.
  • Income Tax Effects and Adjustments: The company's non-GAAP tax provision excludes the tax effects of expense items described above and certain tax items not directly related to the current fiscal year's ordinary operating results.  Examples of such tax items include, but are not limited to, changes in the valuation allowance related to deferred tax assets, certain acquisition-related costs and unusual or infrequently occurring items.  Management believes the exclusion of these income tax adjustments provides investors with useful supplemental information about the company's operational performance.

"Safe harbor" statement under the Private Securities Litigation Reform Act of 1995:  This press release contains forward-looking statements about expected GAAP and non-GAAP financial and other operating results for the fourth fiscal quarter and the full fiscal year of 2014, and the full fiscal year of 2015, including revenue, net income (loss), EPS, expected revenue run rate, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles and debt discount, non-cash interest expense, shares outstanding, and changes in deferred tax asset valuation allowances.  The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions.  If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the company's results could differ materially from the results expressed or implied by the forward-looking statements we make.

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

Further information on these and other factors that could affect the company's financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time, including the company's Form 10-Q that will be filed for the third quarter ended October 31, 2013, and our Form 10-K filed for the fiscal year ended January 31, 2013.  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.

© 2013 salesforce.com, inc.  All rights reserved.  Salesforce, Sales Cloud, Service Cloud, Marketing Cloud, AppExchange, Salesforce Platform, 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, 

2013

2012

2013

2012

Revenues:

Subscription and support

$ 1,004,476

$  740,600

$ 2,749,541

$ 2,083,313

Professional services and other

71,558

47,798

176,220

132,201

Total revenues

1,076,034

788,398

2,925,761

2,215,514

Cost of revenues (1)(2):

Subscription and support

198,809

134,183

513,267

361,446

Professional services and other

69,378

52,065

181,631

138,771

Total cost of revenues

268,187

186,248

694,898

500,217

Gross profit

807,847

602,150

2,230,863

1,715,297

Operating expenses (1)(2):

Research and development

170,690

114,074

450,708

308,292

Marketing and sales

581,229

428,507

1,528,340

1,178,456

General and administrative

153,859

113,757

434,143

318,452

Total operating expenses

905,778

656,338

2,413,191

1,805,200

Loss from operations

(97,931)

(54,188)

(182,328)

(89,903)

Investment income

1,110

3,887

8,851

15,521

Interest expense

(22,929)

(8,190)

(54,468)

(22,593)

Other expense

(4,291)

(4,360)

(6,843)

(4,776)

Loss before benefit from (provision for) income taxes

(124,041)

(62,851)

(234,788)

(101,751)

Benefit from (provision for) income taxes

(393)

(157,446)

119,236

(147,850)

Net loss 

$   (124,434)

$ (220,297)

$   (115,552)

$   (249,601)

Basic net loss per share (3)

$          (0.21)

$        (0.39)

$          (0.19)

$          (0.45)

Diluted net loss per share (3)

$          (0.21)

$        (0.39)

$          (0.19)

$          (0.45)

Shares used in computing basic net loss per share (3)

600,467

568,812

594,346

559,836

Shares used in computing diluted net loss per share (3)

600,467

568,812

594,346

559,836

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

Cost of revenues

$       33,844

$     23,247

$       77,699

$       58,363

Marketing and sales

15,211

2,995

22,147

8,829

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

Cost of revenues

$       12,119

$       9,336

$       32,778

$       24,453

Research and development

27,935

21,984

78,396

53,740

Marketing and sales

73,296

55,304

189,231

142,072

General and administrative

28,186

18,488

66,336

51,530

(3)

Prior period results have been adjusted to reflect the four-for-one stock split through a stock dividend which occurred in April 2013 (See Supplemental Diluted Share Count Information for additional details).

 

 

 

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,

2013

2012

2013

2012

Revenues:

Subscription and support

93%

94%

94%

94%

Professional services and other

7

6

6

6

Total revenues

100

100

100

100

Cost of revenues (1)(2):

Subscription and support

19

17

18

17

Professional services and other

6

7

6

6

Total cost of revenues

25

24

24

23

Gross profit

75

76

76

77

Operating expenses (1)(2):

Research and development

16

15

15

14

Marketing and sales

54

54

52

53

General and administrative

14

14

15

14

Total operating expenses

84

83

82

81

Loss from operations

(9)

(7)

(6)

(4)

Investment income

0

0

0

1

Interest expense

(2)

(1)

(2)

(1)

Other expense

(1)

0

0

0

Loss before benefit from (provision for) income taxes 

(12)

(8)

(8)

(4)

Benefit from (provision for) income taxes 

(0)

(20)

4

(7)

Net loss

(12)%

(28)%

(4)%

(11)%

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

Cost of revenues

3%

3%

3%

3%

Marketing and sales

1

0

1

0

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

Cost of revenues

1%

1%

1%

1%

Research and development

3

3

3

2

Marketing and sales

7

7

6

6

General and administrative

3

2

2

2

 

 

salesforce.com, inc.

Condensed Consolidated Balance Sheets

(in thousands)

October 31,

January 31,

2013

2013

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$     651,750

$     747,245

Short-term marketable securities

51,792

120,376

Accounts receivable, net

604,045

872,634

Deferred commissions

126,054

142,311

Prepaid expenses and other current assets (see additional metrics)

367,245

133,314

Total current assets

1,800,886

2,015,880

Marketable securities, noncurrent

381,765

890,664

Property and equipment, net (see additional metrics)

1,205,349

604,669

Deferred commissions, noncurrent

109,273

112,082

Capitalized software, net (see additional metrics)

505,829

207,323

Goodwill

3,495,021

1,529,378

Other assets, net (see additional metrics)

599,511

168,960

Total assets

$  8,097,634

$  5,528,956

Liabilities, temporary equity and stockholders' equity

Current liabilities:

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

$     839,302

$     597,706

Deferred revenue

1,686,262

1,798,640

Convertible 0.75% senior notes, net

541,125

521,278

Term loan, current

30,000

0

Total current liabilities

3,096,689

2,917,624

Convertible 0.25% senior notes, net

1,041,083

0

Term loan, noncurrent

262,500

0

Deferred revenue, noncurrent

48,357

64,355

Other noncurrent liabilities

702,918

175,732

Total liabilities

5,151,547

3,157,711

Temporary equity

33,731

53,612

Stockholders' equity:

Common stock (1)

603

586

Additional paid-in capital (1)

3,121,481

2,410,892

Accumulated other comprehensive income 

16,806

17,137

Accumulated deficit

(226,534)

(110,982)

Total stockholders' equity

2,912,356

2,317,633

Total liabilities, temporary equity and stockholders' equity

$  8,097,634

$  5,528,956

(1)

Prior period results have been adjusted to reflect the four-for-one stock split through a stock dividend which occurred in April 2013 (See Supplemental Diluted Share Count Information for additional details).

 

salesforce.com, inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Three Months Ended October 31,

Nine Months Ended October 31,

2013

2012

2013

2012

Operating activities:

Net loss

$ (124,434)

$ (220,297)

$ (115,552)

$ (249,601)

Adjustments to reconcile net loss to net

cash provided by operating activities:

Depreciation and amortization

114,347

59,960

254,610

159,400

Amortization of debt discount and transaction costs

13,343

6,471

36,207

17,511

Amortization of deferred commissions

48,008

39,070

139,864

111,099

Expenses related to employee stock plans

141,536

105,112

366,741

271,795

Excess tax benefits from employee stock plans 

(1,578)

(3,160)

(2,166)

(28,905)

Changes in assets and liabilities, net of business combinations:

Accounts receivable, net

(4,502)

33,664

332,090

270,802

Deferred commissions

(57,968)

(48,251)

(120,798)

(115,591)

Prepaid expenses, current assets and other assets

23,822

195,312

14,542

140,080

Accounts payable, accrued expenses, and other liabilities

40,404

(13,204)

(126,154)

(29,393)

Deferred revenue

(55,119)

(48,762)

(175,153)

(91,873)

Net cash provided by operating activities

137,859

105,915

604,231

455,324

Investing activities:

Business combinations, net of cash acquired

0

(515,760)

(2,614,732)

(574,751)

Land activity and building improvements

0

0

0

(4,106)

Strategic investments

(9,017)

(1,657)

(17,831)

(5,451)

Purchases of marketable securities

(99,050)

(213,505)

(419,795)

(808,409)

Sales of marketable securities

16,820

82,085

1,022,470

630,317

Maturities of marketable securities

427

41,992

21,031

126,879

Capital expenditures

(72,702)

(51,054)

(229,261)

(125,079)

Net cash used in investing activities

(163,522)

(657,899)

(2,238,118)

(760,600)

Financing activities:

Proceeds from borrowings on convertible senior notes, net

0

0

1,132,750

0

Proceeds from issuance of warrants

0

0

84,800

0

Purchase of convertible note hedge

0

0

(153,800)

0

Proceeds from term loan, net

0

0

298,500

0

Proceeds from employee stock plans

110,710

76,483

217,429

203,874

Excess tax benefits from employee stock plans

1,578

3,160

2,166

28,905

Principal payments on capital lease obligations

(12,440)

(7,664)

(33,047)

(22,717)

Principal payments on term loan

(7,500)

0

(7,500)

0

Net cash provided by financing activities

92,348

71,979

1,541,298

210,062

Effect of exchange rate changes 

5,184

995

(2,906)

9,650

Net increase (decrease) in cash and cash equivalents

71,869

(479,010)

(95,495)

(85,564)

Cash and cash equivalents, beginning of period

579,881

1,000,730

747,245

607,284

Cash and cash equivalents, end of period

$  651,750

$  521,720

$  651,750

$  521,720

 

salesforce.com, inc.

Additional Metrics

(Unaudited)

Oct 31,

Jul 31,

Apr 30,

Jan 31,

Oct 31,

Jul 31,

2013

2013

2013

2013

2012

2012

Full Time Equivalent Headcount

12,770

12,571(1)

10,283

9,801

9,319

8,765

Financial data (in thousands):

Cash, cash equivalents and marketable securities 

$ 1,085,307

$    930,008(2)

$ 3,079,457(3)

$ 1,758,285

$ 1,416,050

$ 1,804,265

Deferred revenue, current and noncurrent

$ 1,734,619

$ 1,789,648

$ 1,733,160

$ 1,862,995

$ 1,291,703

$ 1,337,184

Principal due on convertible senior notes and term loan

$ 2,017,356

$ 2,024,890

$ 1,724,890

$    574,890

$    574,890

$    574,890

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

(2) Reflects the acquisition of ExactTarget for cash in July 2013.

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

Selected Balance Sheet Accounts (in thousands):

Oct 31, 

Jul 31,

Jan 31, 

2013

2013

2013

Prepaid Expenses and Other Current Assets

     Deferred income taxes, net

$       23,441

$       14,157

$         7,321

     Prepaid income taxes

24,562

25,965

21,180

     Customer contract asset (4)

110,534

150,498

0

     Prepaid expenses and other current assets

208,708

165,008

104,813

$    367,245

$    355,628

$    133,314

Property and Equipment, net

     Land

$    248,263

$    248,263

$    248,263

     Building improvements

49,572

49,572

49,572

     Computers, equipment and software

918,338

877,175

328,318

     Furniture and fixtures

57,518

51,687

38,275

     Leasehold improvements

278,639

252,828

193,181

1,552,330

1,479,525

857,609

     Less accumulated depreciation and amortization

(346,981)

(294,664)

(252,940)

$ 1,205,349

$ 1,184,861

$    604,669

Capitalized Software, net

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

$       70,277

$       66,578

$       59,647

     Acquired developed technology, net of accumulated amortization

435,552

470,802

147,676

$    505,829

$    537,380

$    207,323

Other Assets, net

     Deferred income taxes, noncurrent, net

$         8,711

$         8,189

$       19,212

     Long-term deposits

5,093

13,917

13,422

     Purchased intangible assets, net of accumulated amortization

431,358

448,976

49,354

     Acquired intellectual property, net of accumulated amortization

12,273

12,820

13,872

     Strategic investments

70,005

65,984

51,685

     Customer contract asset (4)

36,342

48,029

0

     Other

35,729

35,513

21,415

$    599,511

$    633,428

$    168,960

(4) Customer contract asset reflects future billings of amounts that were contractually commited by ExactTarget's existing customers as of the acquisition date.  

Accounts Payable, Accrued Expenses and Other Liabilities

     Accounts payable

$       45,162

$       66,859

$       14,535

     Accrued compensation

304,985

239,961

311,595

     Accrued other liabilities

275,467

227,626

138,165

     Accrued income and other taxes payable

110,382

93,767

120,341

     Accrued professional costs

13,945

16,751

10,064

     Customer liability, current (5)

78,057

106,075

0

     Accrued rent

11,304

13,044

3,006

$    839,302

$    764,083

$    597,706

Other Noncurrent Liabilities

     Deferred income taxes and income taxes payable

$       96,082

$       86,658

$       49,074

     Long-term lease liabilities and other

583,085

570,114

126,658

     Customer liability, noncurrent (5)

23,751

30,583

0

$    702,918

$    687,355

$    175,732

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

Selected Off-Balance Sheet Accounts

Oct 31,

Jul 31,

Jan 31, 

2013

2013

2013

Unbilled Deferred Revenue, a non-GAAP measure

$4.2bn

$3.8bn

$3.5bn

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

The balances as of October 31, 2013 and July 31, 2013 exclude the amount related to the fair value of unbilled deferred revenue associated with the acquisition of ExactTarget because these amounts are reflected on the balance sheet under "accounts payable, accrued expenses and other liabilities" and "other noncurrent liabilities".  

Supplemental Revenue Analysis

Three Months Ended October 31, 

Nine Months Ended October 31, 

2013

2012

2013

2012

Revenues by geography (in thousands):

Americas

$    769,400

$    547,399

$ 2,079,043

$ 1,540,326

Europe

194,932

133,791

531,463

376,694

Asia Pacific

111,702

107,208

315,255

298,494

$ 1,076,034

$    788,398

$ 2,925,761

$ 2,215,514

As a percentage of total revenues:

Revenues by geography:

Americas

72%

69%

71%

70%

Europe

18

17

18

17

Asia Pacific

10

14

11

13

100%

100%

100%

100%

Revenue constant currency growth rates

 

Three Months Ended

 

Three Months Ended

Three Months Ended

(as compared to the comparable prior periods)

October 31, 2013

compared to Three Months

Ended October 31, 2012

July 31, 2013

compared to Three Months

Ended July 31, 2012

October 31, 2012

compared to Three Months

Ended October 31, 2011

Americas

41%

34%

38%

Europe

39%

34%

41%

Asia Pacific

17%

19%

30%

Total growth

37%

32%

37%

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, 2013

July 31, 2013

January 31, 2013

compared to 

compared to 

compared to 

October 31, 2012

July 31, 2012

 January 31, 2012

Deferred revenue, current and noncurrent constant currency growth rates

 (as compared to the comparable prior periods)

Total growth

34%

34%

34%

Supplemental Diluted Share Count Information (1)

(in thousands)

Three Months Ended October 31, 

Nine Months Ended October 31, 

2013

2012

2013

2012

Weighted-average shares outstanding for basic earnings per share 

600,467

568,812

594,346

559,836

Effect of dilutive securities (2):

Convertible 0.75% senior notes

15,288

11,412

13,943

10,908

Warrants associated with the convertible 0.75% senior note hedges

10,631

5,200

8,746

4,496

Employee stock awards

13,681

14,680

12,888

15,176

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

640,067

600,104

629,923

590,416

(1)

Following the stockholders' approval, the Company amended its certificate of incorporation on March 20, 2013, to increase the number of authorized shares of common stock from 400.0 million to 1.6 billion and effect a four-for-one stock split of the common stock through a stock dividend. Accordingly, all share and per share data presented herein reflect the impact of the increase in authorized shares and the stock split.

(2)

The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for the three and nine months ended October 31, 2013 and 2012 because the effect would have been anti-dilutive.

Supplemental Cash Flow Information

Free cash flow analysis, a non-GAAP measure

(in thousands)

Three Months Ended October 31, 

Nine Months Ended October 31, 

2013

2012

2013

2012

 Operating cash flow 

 GAAP net cash provided by operating activities 

$    137,859

$    105,915

$    604,231

$    455,324

 Less: 

 Capital expenditures 

(72,702)

(51,054)

(229,261)

(125,079)

 Free cash flow 

$       65,157

$       54,861

$    374,970

$    330,245

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 and strategic investments. 

Comprehensive Income (Loss)

(in thousands)

(Unaudited)

Three Months Ended October 31, 

Nine Months Ended October 31, 

2013

2012

2013

2012

 Net loss 

$   (124,434)

$   (220,297)

$   (115,552)

$   (249,601)

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

      Foreign currency translation and other gains (losses) 

5,590

3,134

(1,601)

10,081

      Unrealized gains (losses) on investments 

(450)

1,252

1,388

1,411

 Other comprehensive income (loss), before tax 

5,140

4,386

(213)

11,492

 Tax effect 

427

(467)

(118)

(526)

 Other comprehensive income (loss), net of tax 

5,567

3,919

(331)

10,966

 Comprehensive loss 

$   (118,867)

$   (216,378)

$   (115,883)

$   (238,635)

 

 

salesforce.com, inc.

GAAP RESULTS RECONCILED TO NON-GAAP RESULTS 

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

(in thousands, except per share data)

(Unaudited)

Three Months Ended October 31,

Nine Months Ended October 31,

2013

2012

2013

2012

Gross profit

GAAP gross profit

$ 807,847

$ 602,150

$2,230,863

$1,715,297

Plus:

Amortization of purchased intangibles (a)

33,844

23,247

77,699

58,363

Stock-based expenses (b) 

12,119

9,336

32,778

24,453

Non-GAAP gross profit

$ 853,810

$ 634,733

$2,341,340

$1,798,113

Operating expenses

GAAP operating expenses

$ 905,778

$ 656,338

$2,413,191

$1,805,200

Less:

Amortization of purchased intangibles (a)

(15,211)

(2,995)

(22,147)

(8,829)

Stock-based expenses (b) 

(129,417)

(95,776)

(333,963)

(247,342)

Non-GAAP operating expenses

$ 761,150

$ 557,567

$2,057,081

$1,549,029

Income from operations

GAAP loss from operations

$  (97,931)

$  (54,188)

$  (182,328)

$    (89,903)

Plus:

Amortization of purchased intangibles (a)

49,055

26,242

99,846

67,192

Stock-based expenses (b) 

141,536

105,112

366,741

271,795

Non-GAAP income from operations

$   92,660

$   77,166

$   284,259

$   249,084

Non-operating income (loss) (c)

GAAP non-operating loss

$  (26,110)

$    (8,663)

$    (52,460)

$    (11,848)

Plus: Amortization of debt discount, net

12,547

6,358

34,139

17,448

Non-GAAP non-operating income (loss)

$  (13,563)

$    (2,305)

$    (18,321)

$      5,600

Net income

GAAP net loss

$(124,434)

$(220,297)

$  (115,552)

$  (249,601)

Plus:

Amortization of purchased intangibles (a)

49,055

26,242

99,846

67,192

Stock-based expenses (b)

141,536

105,112

366,741

271,795

Amortization of debt discount, net

12,547

6,358

34,139

17,448

Less:

Income tax effects and adjustments 

(21,096)

132,226

(210,307)

57,977

Non-GAAP net income 

$   57,608

$   49,641

$   174,867

$   164,811

Diluted earnings per share (e)

GAAP diluted loss per share (d)

$     (0.21)

$     (0.39)

$       (0.19)

$       (0.45)

Plus:

Amortization of purchased intangibles

0.08

0.04

0.16

0.11

Stock-based expenses

0.22

0.18

0.58

0.46

Amortization of debt discount, net

0.02

0.01

0.05

0.03

Less:

.

.

Income tax effects and adjustments 

(0.02)

0.24

(0.32)

0.13

Non-GAAP diluted earnings per share 

$      0.09

$      0.08

$        0.28

$        0.28

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

640,067

600,104

629,923

590,416

a) Amortization of purchased intangibles were as follows:

Three Months Ended October 31,

Nine Months Ended October 31,

2013

2012

2013

2012

Cost of revenues

$   33,844

$   23,247

$     77,699

$     58,363

Marketing and sales

15,211

2,995

22,147

8,829

$   49,055

$   26,242

$     99,846

$     67,192

b) Stock-based expenses were as follows:

Three Months Ended October 31,

Nine Months Ended October 31,

2013

2012

2013

2012

Cost of revenues

$   12,119

$     9,336

$     32,778

$     24,453

Research and development

27,935

21,984

78,396

53,740

Marketing and sales

73,296

55,304

189,231

142,072

General and administrative

28,186

18,488

66,336

51,530

$ 141,536

$ 105,112

$   366,741

$   271,795

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

e) Prior period results have been adjusted to reflect the four-for-one stock split through a stock dividend which occurred in April 2013 (See Supplemental Diluted Share Count Information for additional details).

 

 

 

salesforce.com, inc.

COMPUTATION OF BASIC AND DILUTED GAAP AND NON-GAAP NET INCOME (LOSS) PER SHARE (1)

(in thousands, except per share data)

(Unaudited)

Three Months Ended October 31,

Nine Months Ended October 31,

2013

2012

2013

2012

GAAP Basic Net Loss Per Share

Net loss 

$(124,434)

$(220,297)

$(115,552)

$(249,601)

Basic net loss per share 

$     (0.21)

$     (0.39)

$     (0.19)

$     (0.45)

Shares used in computing basic net loss per share

600,467

568,812

594,346

559,836

Three Months Ended October 31,

Nine Months Ended October 31,

2013

2012

2013

2012

Non-GAAP Basic Net Income Per Share

Non-GAAP net income 

$   57,608

$   49,641

$ 174,867

$ 164,811

Basic Non-GAAP net income per share 

$      0.10

$      0.09

$      0.29

$      0.29

Shares used in computing basic net income per share 

600,467

568,812

594,346

559,836

Three Months Ended October 31,

Nine Months Ended October 31,

2013

2012

2013

2012

GAAP Diluted Net Loss Per Share

Net loss 

$(124,434)

$(220,297)

$(115,552)

$(249,601)

Diluted net loss per share 

$     (0.21)

$     (0.39)

$     (0.19)

$     (0.45)

Shares used in computing diluted net loss per share 

600,467

568,812

594,346

559,836

Three Months Ended October 31,

Nine Months Ended October 31,

2013

2012

2013

2012

Non-GAAP Diluted Net Income Per Share

Non-GAAP net income 

$   57,608

$   49,641

$ 174,867

$ 164,811

Diluted Non-GAAP net income per share 

$      0.09

$      0.08

$      0.28

$      0.28

Shares used in computing diluted net income per share

640,067

600,104

629,923

590,416

(1)

Prior period results have been adjusted to reflect the four-for-one stock split through a stock dividend which occurred in April 2013 (See Supplemental Diluted Share Count Information for additional details).

 

SOURCE salesforce.com



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