Salesforce.com Announces Fiscal Fourth Quarter and Full Year Results

First Enterprise Cloud Computing Company to Exceed $1.8 Billion Annual Revenue Run Rate

- Raises FY12 Revenue Guidance to $2.03 - $2.05 Billion

- Record Quarterly Revenue of $457 Million, up 29% Year-Over-Year

- Record Full Year Revenue of $1.657 Billion, up 27% Year-Over-Year

- Q4 Operating Cash Flow of $166 Million, up 81% Year-Over-Year

- Full Year Operating Cash Flow of $459 Million, up 69% Year-Over-Year

- Deferred Revenue of $935 million, up 33% Year-Over-Year

- 5,100 Net New Customers in the Quarter

- Total Customers at 92,300 up 27% Year-Over-Year

Feb 24, 2011, 16:05 ET from salesforce.com

SAN FRANCISCO, Feb. 24, 2011 /PRNewswire/ -- Salesforce.com (NYSE: CRM), the enterprise cloud computing company, today announced results for its fiscal fourth quarter and full fiscal year ended January 31, 2011.

(Logo:  http://photos.prnewswire.com/prnh/20050216/SFW105LOGO)

“Our current outlook puts salesforce.com on track to be the first enterprise cloud computing company to report more than $2 billion in revenue,” said Marc Benioff, chairman and CEO salesforce.com. “While it took us a decade to achieve our first billion dollars, we anticipate reaching $2 billion just three years later.”

Salesforce.com delivered the following results for its fiscal fourth quarter and full year 2011:

Revenue: Total Q4 revenue was $457 million, an increase of 29% on a year-over-year basis.  Subscription and support revenues were $429 million, an increase of 31% on a year-over-year basis.  Professional services and other revenues were $28 million, an increase of 6% on a year-over-year basis.  

For the full fiscal year 2011, the company reported revenue of $1.657 billion, an increase of 27% from the prior year. Subscription and support revenues were $1.551 billion, an increase of 28% on a year-over-year basis.  Professional services and other revenues were $106 million, an increase of 10% on a year-over-year basis.

Earnings Per Share:  Q4 GAAP diluted earnings per share decreased 50% year-over-year to $0.08, and non-GAAP diluted earnings per share increased 3% year-over-year to $0.31.  The company’s non-GAAP results exclude the effects of approximately $42 million in stock-based compensation expense, approximately $7 million in amortization of purchased intangibles, and approximately $2 million in non-cash interest expense related to the company’s convertible senior notes.  All EPS calculations are based on 140 million diluted shares outstanding during the quarter.

All Q4 EPS results include a one-time tax benefit of approximately $8 million, associated with the extension of the Federal R&D tax credit.

For the full fiscal year 2011, GAAP diluted earnings per share decreased 25% year-over-year to $0.47, and non-GAAP diluted earnings per share increased 6% year-over-year to $1.22. The company’s non-GAAP results exclude the effects of approximately $120 million in stock-based compensation, approximately $20 million in amortization of purchased intangibles, and approximately $19 million in non-cash interest expense related to the convertible senior notes.  All EPS calculations are based on 137 million diluted shares outstanding during the year.

Customers: Net paying customers, excluding customers from the Heroku and Dimdim acquisitions, rose approximately 5,100 during the quarter to finish at approximately 92,300, an increase of 27% for the full year. During FY2011, the company added approximately 19,800 net new customers.  

Cash: Cash generated from operations for the fiscal fourth quarter was $166 million, up 81% year-over-year. For the full fiscal year 2011, operating cash flow totaled $459 million, up 69% year-over-year. Total cash, cash equivalents and marketable securities finished the year at approximately $1.4 billion, a decrease of approximately $319 million from the prior year.

Deferred Revenue: Deferred revenue on the balance sheet as of January 31, 2011 was $935 million, an increase of 33% on a year-over-year basis.

For fiscal year 2012, the company is raising its prior revenue guidance provided on November 18, 2010. As of February 24, 2011, salesforce.com is initiating guidance for its first quarter, fiscal year 2012, and initiating EPS guidance for fiscal year 2012.

Q1 FY12:  Revenue for the company’s first fiscal quarter is projected to be in the range of approximately $480 million to approximately $482 million.

GAAP EPS is expected to be in the range of approximately negative ($0.01) to approximately negative ($0.02), while diluted non-GAAP EPS is expected to be in the range of approximately $0.26 to approximately $0.27. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $48 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $11 million, and non-cash interest expense related to the convertible senior notes, expected to be approximately $3 million.  EPS estimates assume a GAAP tax rate of 70%, and a non-GAAP tax rate of 35%. For the purpose of the EPS calculation, assume an average basic share count of approximately 134 million shares, and an average fully diluted share count of approximately 142 million shares.

Full Year FY12 Guidance:  The company is raising its projected full fiscal year 2012 revenue from guidance previously provided on November 18, 2010. Revenue for the company’s full fiscal year 2012 is projected to be in the range of approximately $2.03 billion to approximately $2.05 billion.

For the company’s full fiscal year 2012, diluted GAAP EPS is expected to be in the range of approximately $0.08 to approximately $0.11 while diluted Non-GAAP EPS is expected to be in the range of approximately $1.35 to approximately $1.38.  The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $227 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $40 million, and non-cash interest expense related to the convertible senior notes, expected to be approximately $11 million.  EPS estimates assume a GAAP tax rate of 38%, and a non-GAAP tax rate of 35%. For the purpose of the EPS calculation, assume an average fully diluted share count of approximately 145 million shares.

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

Fiscal 2012

Q1

FY2012

GAAP EPS Range*

($0.01) - ($0.02)

$0.08 -$0.11

Plus

Amortization of purchased intangibles

$0.08

$0.28

Stock-based expense

$0.33

$1.57

Amortization of debt discount

$0.02

$0.08

Less

Income tax effect of certain Non-GAAP items

($0.15)

($0.66)

Non-GAAP diluted EPS

$0.26-$0.27

$1.35-$1.38

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

134

-

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

142

145

* For Q1 GAAP EPS loss, basic number of shares used for calculation

Quarterly Conference Call

Salesforce.com will host a conference call to discuss its fourth quarter fiscal year 2011 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 at http://www.salesforce.com/investor.  In addition, an archive of the webcast 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 salesforce.com or 42391465.  A replay will be available at 800-642-1687 or +1 706-645-9291, passcode 42391465, until midnight (Eastern Time) March 23, 2011.

About Salesforce.com

Salesforce.com is the enterprise cloud computing company that has transformed the way companies collaborate and communicate. Salesforce.com is leading the effort to bring Cloud 2, the next paradigm for computing, to the enterprise by offering its customers the social collaboration, mobility and openness that are the hallmark of this new world. The company’s platform and application services include:

Salesforce.com offers the fastest path to customer success with cloud computing. As of January 31, 2011, salesforce.com manages customer information for approximately 92,300 customers including Allianz Commercial, Dell, Japan Post, Kaiser Permanente, KONE, and SunTrust Banks.

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://www.salesforce.com, or call 1-800-NO-SOFTWARE.

Non-GAAP Financial Measures:  This press release includes information about non-GAAP earnings per share and non-GAAP tax rates (collectively the “non-GAAP financial measures”).  Non-GAAP earnings estimates exclude the impact of the following non-cash items:  stock-based compensation, amortization of acquisition-related intangibles, and the amortization of debt discount on the company’s convertible senior notes, as well as the tax consequences associated with these items.  The purpose of the non-GAAP tax rate is to quantify the excluded tax consequences of the excluded expense items.  These non-GAAP estimates 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 amortization of debt discount on the company’s convertible senior notes are being excluded from the company’s FY11 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 to issue stock-based compensation, acquire a company, or issue convertible senior notes, are made to further the company’s long-term strategic objectives and impact the company’s income statement 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.  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 Q4 and FY11, and its estimated non-GAAP estimates for Q1 and FY12:

  • Stock-Based Expenses:  The company’s compensation strategy is to use stock-based compensation to attract and retain key 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 an acquired company’s research and development efforts, customer lists and customer relationships, as items arising from pre-acquisition activities.  These are costs that are determined at the time of an acquisition.  While it is continually viewed for impairment, amortization of the cost is a static expense, one that are 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 subordinated notes that were issued in a private placement in January 2010.  The imputed interest rate is approximately 5.9%, while the coupon interest rate is 0.75%.   The difference between the imputed interest expense and the coupon interest expense 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:  The company’s estimated non-GAAP effective tax rate is lower than the estimated GAAP effective tax rate due to the exclusion of the expense items described above.  

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995:  This press release contains forward-looking statements about expected GAAP revenue and GAAP and non-GAAP earnings per share for the first fiscal quarter of 2012 and the full fiscal year, the company’s expected tax rates, stock-based compensation expenses, amortization expenses, and shares outstanding.  The achievement or success of the matters covered by such forward-looking statements involve 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; rate of growth and anticipated revenue run rate; 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 emerging markets in which we operate; 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; fluctuations in the number of shares we have outstanding and the price of such shares; foreign currency exchange rates; interest rates; the company’s plans to build our new global headquarters in San Francisco, California and the associated costs; 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-K that will be filed for the fiscal year ended January 31, 2011.  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.

Copyright (c) 2011 salesforce.com, inc.  All rights reserved.  Salesforce and the "no software" logo are registered trademarks of salesforce.com, inc., and salesforce.com owns other registered and unregistered trademarks.  Other names used 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 January 31,

Fiscal Year Ended January 31,

2011

2010

2011

2010

Revenues:

Subscription and support

$428,534

$327,394

$1,551,145

$1,209,472

Professional services and other

28,333

26,655

105,994

96,111

Total revenues

456,867

354,049

1,657,139

1,305,583

Cost of revenues (1):

Subscription and support

61,116

42,428

208,243

159,172

Professional services and other

31,195

25,631

115,570

98,753

Total cost of revenues

92,311

68,059

323,813

257,925

Gross profit

364,556

285,990

1,333,326

1,047,658

Operating expenses (1):

Research and development

57,530

36,447

187,887

131,897

Marketing and sales

233,217

168,552

792,029

605,199

General and administrative

74,200

55,472

255,913

195,290

Total operating expenses

364,947

260,471

1,235,829

932,386

Income (loss) from operations

(391)

25,519

97,497

115,272

Investment income

9,426

10,628

37,735

30,408

Interest expense

(3,290)

(1,207)

(24,909)

(2,000)

Other expense

(1,366)

(262)

(6,025)

(1,299)

Income before provision for income taxes and noncontrolling interest

4,379

34,678

104,298

142,381

Benefit (provision) for income taxes

6,491

(12,263)

(34,601)

(57,689)

Consolidated net income

10,870

22,415

69,697

84,692

Less: Net income (loss) attributable to noncontrolling interest

43

(2,021)

(5,223)

(3,973)

Net income attributable to salesforce.com

$10,913

$20,394

$64,474

$80,719

Basic net income per share attributable to salesforce.com common shareholders

$0.08

$0.16

$0.50

$0.65

Diluted net income per share attributable to salesforce.com common shareholders

$0.08

$0.16

$0.47

$0.63

Shares used in computing basic net income per share

132,344

126,235

130,222

124,462

Shares used in computing diluted net income per share

140,199

130,687

136,598

128,114

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

Cost of revenues

$    3,541

$    3,248

$     12,158

$     12,570

Research and development

6,778

4,388

18,897

13,129

Marketing and sales

19,955

11,408

56,451

39,722

General and administrative

11,440

6,901

32,923

23,471

salesforce.com, inc.

Condensed Consolidated Statements of Operations

As a percentage of total revenues:

(Unaudited)

Three Months Ended January 31,

Fiscal Year Ended January 31,

2011

2010

2011

2010

Revenues:

Subscription and support

94%

92%

94%

93%

Professional services and other

6

8

6

7

Total revenues

100

100

100

100

Cost of revenues:

Subscription and support

13

12

13

12

Professional services and other

7

7

7

8

Total cost of revenues

20

19

20

20

Gross profit

80

81

80

80

Operating expenses:

Research and development

13

10

11

10

Marketing and sales

51

48

48

46

General and administrative

16

16

15

15

Total operating expenses

80

74

74

71

Income (loss) from operations

0

7

6

9

Investment income

2

3

2

2

Interest expense

(1)

0

(2)

0

Other expense

0

0

0

0

Income before provision for income taxes and noncontrolling interest

1

10

6

11

Benefit (provision) for income taxes

1

(4)

(2)

(5)

Consolidated net income

2

6

4

6

Less: Net income (loss) attributable to noncontrolling interest

0

0

0

0

Net income attributable to salesforce.com

2%

6%

4%

6%

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

Cost of revenues

1%

1%

1%

1%

Research and development

1

1

1

1

Marketing and sales

4

3

3

3

General and administrative

3

2

2

2

salesforce.com, inc.

Condensed Consolidated Balance Sheets

(in thousands)

January 31,

January 31,

2011

2010

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$424,292

$1,011,306

Short-term marketable securities

72,678

230,659

Accounts receivable, net

426,943

320,956

Deferred commissions

67,774

47,388

Deferred income taxes

27,516

40,116

Prepaid expenses and other current assets

55,721

55,734

Total current assets

1,074,924

1,706,159

Marketable securities, noncurrent

910,587

485,083

Property and equipment, net (see additional metrics)

387,174

89,711

Deferred commissions, noncurrent

48,842

28,140

Deferred income taxes, noncurrent

41,199

27,579

Capitalized software, net (see additional metrics)

127,987

34,809

Goodwill

396,081

48,955

Other assets, net (see additional metrics)

104,371

39,765

Total assets

$3,091,165

$2,460,201

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$18,106

$14,791

Accrued expenses and other liabilities (see additional metrics)

345,121

203,162

Deferred revenue

913,239

690,177

Total current liabilities

1,276,466

908,130

0.75% Convertible senior notes due 2015, net

472,538

450,198

Income taxes payable, noncurrent

18,481

17,551

Long-term lease liabilities and other

25,487

13,485

Deferred revenue, noncurrent

21,702

14,171

Total liabilities

1,814,674

1,403,535

salesforce.com stockholders' equity:

Common stock

133

127

Additional paid-in capital

1,098,604

938,544

Accumulated other comprehensive gain (loss)

6,719

(1,430)

Retained earnings

171,035

106,561

Total stockholders' equity  controlling interest

1,276,491

1,043,802

Total stockholders' equity noncontrolling interest

0

12,864

Total stockholders' equity

1,276,491

1,056,666

Total liabilities and stockholders' equity

$3,091,165

$2,460,201

salesforce.com, inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Three Months Ended January 31,

Fiscal Year Ended January 31,

2011

2010

2011

2010

Operating activities:

Consolidated net income

$   10,870

$      22,415

$    69,697

$      84,692

Adjustments to reconcile net income to net

cash provided by operating activities:

Depreciation and amortization

23,738

15,287

75,746

53,177

Amortization of debt discount and transaction costs

1,982

728

19,621

728

Amortization of deferred commissions

22,605

17,932

80,159

63,891

Expenses related to stock-based awards

41,714

25,945

120,429

88,892

Excess tax benefits from employee stock plans

10,777

(19,003)

(35,991)

(51,539)

Changes in assets and liabilities:

Accounts receivable, net

(169,833)

(129,877)

(102,507)

(54,522)

Deferred commissions

(56,004)

(39,318)

(121,247)

(82,336)

Prepaid expenses and other current assets

8,464

10,812

2,001

(3,899)

Other assets

(365)

(781)

(9,770)

(1,405)

Accounts payable

(5,254)

(826)

1,246

(1,588)

Accrued expenses and other current liabilities

36,684

29,333

132,004

64,498

Deferred revenue

240,384

158,913

227,693

110,322

Net cash provided by operating activities

165,762

91,560

459,081

270,911

Investing activities:

Business combinations, net of cash acquired

(247,994)

(7,499)

(403,331)

(11,999)

Land activity and building improvements

(269,944)

0

(277,944)

0

Strategic investments

(13,605)

0

(20,105)

(4,400)

Changes in marketable securities

179,346

109,558

(270,287)

(312,716)

Capital expenditures

(30,576)

(7,056)

(90,887)

(49,501)

Net cash provided by (used in) investing activities

(382,773)

95,003

(1,062,554)

(378,616)

Financing activities:

Proceeds from borrowings on convertible debt

0

567,094

0

567,094

Proceeds from issuance of warrants

0

59,283

0

59,283

Purchase of convertible note hedge

0

(126,500)

0

(126,500)

Purchase of subsidiary stock

(19,721)

0

(171,964)

0

Proceeds from the exercise of stock options

44,406

60,990

160,402

93,856

Excess tax benefits from employee stock plans

(10,777)

19,003

35,991

51,539

Principal payments on capital lease obligations

(3,198)

(2,215)

(10,355)

(8,119)

Net cash provided by financing activities

10,710

577,655

14,074

637,153

Effect of exchange rate changes

290

4,200

2,385

(1,976)

Net increase (decrease) in cash and

cash equivalents

(206,011)

768,418

(587,014)

527,472

Cash and cash equivalents, beginning of period

630,303

242,888

1,011,306

483,834

Cash and cash equivalents, end of period

$ 424,292

$ 1,011,306

$  424,292

$ 1,011,306

salesforce.com, inc.

Additional Metrics

(Unaudited)

Jan 31,

Oct 31,

Jul 31,

Apr 30,

Jan 31,

Oct 31,

2011

2010

2010

2010

2010

2009

Full Time Equivalent Headcount

5,306

4,758

4,447

4,106

3,969

3,814

Financial data (in thousands):

Cash, cash equivalents and marketable

  securities

$1,407,557

$1,802,440

$1,858,928

$1,901,548

$1,727,048

$1,070,092

Deferred revenue, current and noncurrent

$934,941

$694,557

$683,019

$664,529

$704,348

$545,435

Selected Balance Sheet Accounts (in thousands):

Jan 31,

Oct 31,

Jan 31,

2011

2010

2010

Capitalized Software, net

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

$29,154

$27,931

$22,675

    Acquired developed technology, net of accumulated amortization

98,833

51,568

12,134

$127,987

$79,499

$34,809

Other Assets, net

    Deferred professional services costs, noncurrent portion

$10,201

$10,347

$5,639

    Long-term deposits

12,114

12,372

11,084

    Deposit related to land purchase

0

8,000

0

    Purchased intangible assets, net accumulated amortization

31,660

8,716

6,746

    Acquired intellectual property, net of accumulated amortization

5,874

4,153

0

    Strategic investments

27,065

10,678

6,288

    Other

17,457

14,928

10,008

$104,371

$69,194

$39,765

Property and Equipment, net

    Land

$248,263

$0

$0

    Building improvements

10,115

0

0

    Computers, equipment and software

115,736

104,773

87,608

    Furniture and fixtures

20,462

18,535

17,325

    Leasehold improvements

100,380

88,054

71,882

494,956

211,362

176,815

    Less accumulated depreciation and amortization

(107,782)

(95,284)

(87,104)

$387,174

$116,078

$89,711

Accrued Expenses and Other Current Liabilities

    Accrued compensation

$148,275

$104,919

$90,223

    Accrued other liabilities

112,840

114,134

46,188

    Accrued other taxes payable

41,355

30,885

27,757

    Accrued professional costs

12,548

15,837

10,740

    Accrued rent

22,323

21,852

19,830

    Income taxes payable

7,780

9,644

8,424

$345,121

$297,271

$203,162

Three Months Ended January 31,

Fiscal Year Ended January 31,

2011

2010

2011

2010

Revenues by geography (in thousands):

Americas

$                      308,526

$                      244,362

$                   1,135,019

$    923,823

Europe

82,933

64,012

291,784

232,367

Asia Pacific

65,408

45,675

230,336

149,393

$                      456,867

$                      354,049

$                   1,657,139

$ 1,305,583

As a percentage of total revenues:

Revenues by geography:

Americas

68

%

69

%

68

%

71

%

Europe

18

18

18

18

Asia Pacific

14

13

14

11

100

%

100

%

100

%

100

%

Supplemental Revenue Analysis (1)

Three Months Ended

Three Months Ended

Three Months Ended

January 31, 2011

October 31, 2010

July 31, 2010

Revenue constant currency growth rates (as compared to the comparable quarter a year ago)

Americas

26%

26%

22%

Europe

41%

38%

30%

Asia Pacific

35%

53%

53%

Total growth

30%

31%

26%

(1)  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 exchange rates in effect at the end of each

quarter for  growth rate calculations presented, rather than the actual exchange rates in effect during that period.

Supplemental Cash Flow Information

Free cash flow analysis, a non-GAAP measure

(amounts in thousands)

Three Months Ended January 31,

Fiscal Year Ended January 31,

2011

2010

2011

2010

Operating cash flow

$                      165,762

$                        91,560

$                      459,081

$    270,911

GAAP net cash provided by operating activities

Less:

Capital expenditures

(30,576)

(7,056)

(90,887)

(53,901)

Free cash flow

$                      135,186

$                        84,504

$                      368,194

$    217,010

salesforce.com, inc.

GAAP RESULTS RECONCILED TO NON-GAAP RESULTS

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

(amounts in thousands, except per share data)

(unaudited)

Three Months Ended January 31,

Fiscal Year Ended January 31,

2011

2010

2011

2010

Gross profit

GAAP gross profit

$ 364,556

$ 285,990

$ 1,333,326

$ 1,047,658

Plus:

Amortization of purchased intangibles (b)

5,721

2,328

15,459

8,010

Stock-based expenses (c)

3,541

3,248

12,158

12,570

Non-GAAP gross profit

$ 373,818

$ 291,566

$ 1,360,943

$ 1,068,238

Operating expenses

GAAP operating expenses

$ 364,947

$ 260,471

$ 1,235,829

$    932,386

Less:

Amortization of purchased intangibles (b)

(1,146)

(796)

(4,209)

(3,241)

Stock-based expenses (c)

(38,173)

(22,697)

(108,271)

(76,322)

Non-GAAP operating expenses

$ 325,628

$ 236,978

$ 1,123,349

$    852,823

Income from operations

GAAP income (loss) from operations

$      (391)

$   25,519

$      97,497

$    115,272

Plus:

Amortization of purchased intangibles (b)

6,867

3,124

19,668

11,251

Stock-based expenses (c)

41,714

25,945

120,429

88,892

Non-GAAP income from operations

$   48,190

$   54,588

$    237,594

$    215,415

Non-operating income (a)

GAAP non-operating income

$     4,770

$     9,159

$        6,801

$      27,109

Plus:  Amortization of debt discount

2,430

728

19,079

728

Non-GAAP non-operating income

$     7,200

$     9,887

$      25,880

$      27,837

Net income attributable to salesforce.com

GAAP net income attributable to salesforce.com

$   10,913

$   20,394

$      64,474

$      80,719

Plus:

Amortization of purchased intangibles

6,867

3,124

19,668

11,251

Stock-based expenses

41,714

25,945

120,429

88,892

Amortization of debt discount

2,430

728

19,079

728

Less:

Income tax effect of Non-GAAP items

(18,854)

(10,714)

(57,544)

(34,582)

Non-GAAP net income attributable to salesforce.com

$   43,070

$   39,477

$    166,106

$    147,008

Diluted earnings per share

GAAP diluted earnings per share

$       0.08

$       0.16

$          0.47

$          0.63

Plus:

Amortization of purchased intangibles

0.05

0.02

0.14

0.09

Stock-based expenses

0.30

0.20

0.88

0.69

Amortization of debt discount

0.01

0.00

0.14

0.00

Less:

Income tax effect of  Non-GAAP items

(0.13)

(0.08)

(0.41)

(0.26)

Non-GAAP diluted earnings per share attributable to salesforce.com

$       0.31

$       0.30

$          1.22

$          1.15

Shares used in computing diluted net income per share

140,199

130,687

136,598

128,114

a)

Non-operating income consists of investment income, interest expense and other expense

b)

Amortization of purchased intangibles were as follows:

Three Months Ended January 31,

Fiscal Year Ended January 31,

2011

2010

2011

2010

Cost of revenues

$     5,721

$     2,328

$      15,459

$        8,010

Marketing and sales

1,146

796

4,209

3,241

$     6,867

$     3,124

$      19,668

$      11,251

c)

Stock-based expenses were as follows:

Three Months Ended January 31,

Fiscal Year Ended January 31,

2011

2010

2011

2010

Cost of revenues

$     3,541

$     3,248

$      12,158

$      12,570

Research and development

6,778

4,388

18,897

13,129

Marketing and sales

19,955

11,408

56,451

39,722

General and administrative

11,440

6,901

32,923

23,471

$   41,714

$   25,945

$    120,429

$      88,892

salesforce.com, inc.

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

The following reflects the calculation of Basic and Diluted Net Income Per Share

(amounts in thousands, except per share data)

Three Months Ended January 31,

Year Ended January 31,

2011

2010

2011

2010

GAAP Basic Net Income Per Share

Net income attributable to salesforce.com

$ 10,913

$ 20,394

$   64,474

$   80,719

Basic net income per share attributable to salesforce.com common stockholders

0.08

0.16

0.50

0.65

Shares used in computing basic net income per share attributable to salesforce.com common stockholders

132,344

126,235

130,222

124,462

Three Months Ended January 31,

Year Ended January 31,

2011

2010

2011

2010

Non-GAAP Basic Net Income Per Share

Non-GAAP net income attributable to salesforce.com

$ 43,070

$ 39,477

$ 166,106

$ 147,008

Basic Non-GAAP net income per share attributable to salesforce.com common stockholders

0.33

0.31

1.28

1.18

Shares used in computing basic net income per share attributable to salesforce.com common stockholders

132,344

126,235

130,222

124,462

Three Months Ended January 31,

Year Ended January 31,

2011

2010

2011

2010

GAAP Diluted Net Income Per Share

Net income attributable to salesforce.com

$ 10,913

$ 20,394

$   64,474

$   80,719

Diluted net income per share attributable to salesforce.com common stockholders

0.08

0.16

0.47

0.63

Shares used in computing diluted net income per share attributable to salesforce.com common stockholders

140,199

130,687

136,598

128,114

Three Months Ended January 31,

Year Ended January 31,

2011

2010

2011

2010

Non-GAAP Diluted Net Income Per Share

Non-GAAP net  income attributable to salesforce.com

$ 43,070

$ 39,477

$ 166,106

$ 147,008

Diluted  Non-GAAP net income per share attributable to salesforce.com common stockholders

0.31

0.30

1.22

1.15

Shares used in computing diluted net income per share attributable to salesforce.com common stockholders

140,199

130,687

136,598

128,114

SOURCE salesforce.com



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