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

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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