Salesforce.com Announces Fiscal Second Quarter Results

Company Announces Record Revenue of $394 Million, an Increase of 25% Year-Over-Year

-- Raises FY11 Revenue Guidance to $1.595 Billion to $1.6 Billion

-- Operating Cash Flow of $76M, up 66% Year-Over-Year

-- Deferred Revenue of $683 million, up 24% Year-Over-Year

-- 5,100 Net New Customers in Quarter

-- Total Customers at 82,400, up 30% Year-Over-Year

19 Aug, 2010, 16:23 ET from salesforce.com, inc.

SAN FRANCISCO, Aug. 19 /PRNewswire-FirstCall/ -- Salesforce.com (NYSE: CRM), the enterprise cloud computing company, today announced results for its fiscal second quarter ended July 31, 2010.

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"We're delighted today to raise our full fiscal year 2011 revenue guidance to a range of $1.595 billion to $1.6 billion," said Marc Benioff, chairman and CEO, salesforce.com. "Our accelerating revenue growth in the second quarter, combined with an excellent quarter of new business worldwide, gives us confidence to raise our guidance to this exciting new milestone."

Salesforce.com delivered the following results for the second quarter:

Revenue: Total Q2 revenue was $394 million, an increase of 25% on a year-over-year basis. Subscription and support revenues were $369 million, an increase of 26% on a year-over-year basis. Professional services and other revenues were $25 million, an increase of 12% on a year-over-year basis.

Earnings per Share: Q2 GAAP diluted earnings per share decreased 35% year-over-year to $0.11, and non-GAAP diluted earnings per share was flat year-over-year at $0.29. The company's non-GAAP results exclude the effects of $27 million in stock-based compensation expense, approximately $5 million in amortization of purchased intangibles, and $6 million in non-cash interest expense related to the company's convertible senior notes. All EPS calculations are based on 134 million diluted shares outstanding during the quarter.

Customers: Net paying customers rose approximately 5,100 during the quarter, approximately 4,600 via organic growth and another 500 as a result of the company's acquisition of Jigsaw Data Corporation during the quarter. The number of total net paying customers at the end of the fiscal second quarter was approximately 82,400. Since July 31, 2009, the company has added approximately 19,200 net paying customers, an increase of roughly 30%.

Cash: Cash from operations for the fiscal second quarter was approximately $76 million, up 66% year-over-year. Total cash, cash equivalents and marketable securities finished the quarter at roughly $1.9 billion, an increase of approximately $829 million from the prior year including approximately $500 million in net proceeds from the company's convertible senior note financing in January 2010.

Deferred Revenue: Deferred revenue on the balance sheet as of July 31, 2010 was $683 million, an increase of 24% on a year-over-year basis.

As of August 19, 2010, salesforce.com is initiating guidance for its third quarter, fiscal year 2011. For its fiscal year 2011, the company is updating the guidance provided on May 20, 2010.

Q3 FY11 Guidance: Revenue for the company's third quarter is projected to be in the range of approximately $408 million to approximately $410 million.

GAAP diluted EPS is expected to be in the range of approximately $0.14 to approximately $0.15, while non-GAAP diluted EPS in Q3 is expected to be in the range of approximately $0.30 to approximately $0.31. The company's non-GAAP EPS estimate excludes the effects of stock-based compensation expense, expected to be approximately $27 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $5 million and non-cash interest expense related to the convertible senior notes, expected to be approximately $6 million. EPS estimates assume a GAAP tax rate of 41%, and a non-GAAP tax rate of 38%. All EPS estimates assume an average diluted share count of approximately 137 million shares.

Full Year FY11 Guidance: The company is raising its full fiscal year 2011 revenue from the guidance previously provided on May 20, 2010.  Revenue for the company's full fiscal year 2011 is projected to be in the range of approximately $1.595 billion to approximately $1.6 billion.

For the company's full fiscal year 2011, diluted GAAP EPS is expected to be in the range of approximately $0.43 to approximately $0.45, while diluted non-GAAP EPS is expected to be in the range of approximately $1.15 to approximately $1.17. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $117 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $18 million, and non-cash interest expense related to the convertible senior notes, expected to be approximately $23 million. EPS estimates assume a GAAP tax rate of 41%, and a non-GAAP tax rate of 38%. All EPS estimates assume an average diluted share count of approximately 136 million shares.

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

Fiscal 2011

Q3

FY2011

GAAP diluted EPS Range

$0.14-$0.15

$0.43-$0.45

Plus

Amortization of purchased intangibles

0.04

0.15

Stock-based expense

0.20

0.85

Amortization of debt discount

0.04

0.17

Less

Income tax effect of certain Non-GAAP items

(0.12)

(0.45)

Non-GAAP diluted EPS

$0.30-$0.31

$1.15-$1.17

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

137

136

Quarterly Conference Call

Salesforce.com will host a conference call to discuss its second 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. A replay will be available at 800-642-1687 or +1 706-645-9291, passcode 91722955, until midnight (Eastern Time) September 10, 2010.

About salesforce.com

Salesforce.com is the enterprise cloud computing company. Based on salesforce.com's real-time, multitenant architecture, the company's platform and CRM applications (http://www.salesforce.com/crm) have revolutionized the way companies collaborate and communicate with their customers, including:

  • The Sales Cloud, for sales force automation and contact management
  • The Service Cloud, for customer service and support solutions
  • Chatter, for social collaboration
  • The Force.com platform, for custom application development
  • The AppExchange, the world's leading marketplace for enterprise cloud computing applications

Salesforce.com offers the fastest path to customer success with cloud computing. As of July 31, 2010, salesforce.com manages customer information for approximately 82,400 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 purchased 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 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 do 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 within 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 Q2 and its estimated non-GAAP estimates for Q3 and FY2011:

  • 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 is typically not 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 0.75% convertible subordinated notes that were issued in a private placement in January 2010. The imputed interest is at a rate of approximately 5.9%. 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 is not indicative of ongoing operating performance and because it is a non-cash expense. 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 third fiscal quarter of 2011 and the full fiscal year, the company's expected tax rates, stock-based compensation expenses, amortization expenses, and shares outstanding and references to unreleased services and features. 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 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; 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 quarter ended July 31, 2010 and our Form 10-K filed for the fiscal year ended January 31, 2010. 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) 2010 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 July 31,

Six Months Ended July 31,

2010

2009

2010

2009

Revenues:

Subscription and support

$368,951

$293,440

$719,663

$575,208

Professional services and other

25,421

22,621

51,522

45,777

Total revenues

394,372

316,061

771,185

620,985

Cost of revenues (1):

Subscription and support

48,981

38,971

93,038

75,999

Professional services and other

28,809

23,525

56,333

48,297

Total cost of revenues

77,790

62,496

149,371

124,296

Gross profit

316,582

253,565

621,814

496,689

Operating expenses (1):

Research and development

42,930

31,103

83,052

62,687

Marketing and sales

182,401

146,214

358,268

284,481

General and administrative

61,569

46,759

117,762

89,909

Total operating expenses

286,900

224,076

559,082

437,077

Income from operations

29,682

29,489

62,732

59,612

Investment income

8,735

7,747

16,610

12,277

Interest expense

(7,185)

(293)

(14,245)

(501)

Other expense

(1,765)

(1,072)

(3,738)

(701)

Income before provision for income taxes and noncontrolling interest

29,467

35,871

61,359

70,687

Provision for income taxes

(12,884)

(14,030)

(24,900)

(29,853)

Consolidated net income

16,583

21,841

36,459

40,834

Less: Net income attributable to noncontrolling interest

(1,839)

(643)

(3,970)

(1,200)

Net income attributable to salesforce.com

$14,744

$21,198

$32,489

$39,634

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

$0.11

$0.17

$0.25

$0.32

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

$0.11

$0.17

$0.24

$0.31

Shares used in computing basic net income per share

129,462

123,846

128,747

123,526

Shares used in computing diluted net income per share

134,176

126,566

133,437

125,894

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

Cost of revenues

$    3,186

$    3,171

$    6,260

$    6,327

Research and development

4,041

2,950

8,143

6,034

Marketing and sales

12,317

9,317

24,527

19,259

General and administrative

7,071

5,439

14,153

10,920

salesforce.com, inc.

Condensed Consolidated Statements of Operations

As a percentage of total revenues:

(Unaudited)

Three Months Ended July 31,

Six Months Ended July 31,

2010

2009

2010

2009

Revenues:

Subscription and support

94%

93%

93%

93%

Professional services and other

6

7

7

7

Total revenues

100

100

100

100

Cost of revenues:

Subscription and support

13

12

12

12

Professional services and other

7

8

7

8

Total cost of revenues

20

20

19

20

Gross profit

80

80

81

80

Operating expenses:

Research and development

11

10

11

10

Marketing and sales

46

46

47

46

General and administrative

16

15

15

14

Total operating expenses

73

71

73

70

Income from operations

7

9

8

10

Investment income

2

2

2

2

Interest expense

(2)

0

(2)

0

Other expense

0

0

0

(1)

Income before provision for income taxes and noncontrolling interest

7

11

8

11

Provision for income taxes

(3)

(4)

(3)

(5)

Consolidated net income

4

7

5

6

Less: Net income attributable to noncontrolling interest

0

0

(1)

0

Net income attributable to salesforce.com

4%

7%

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

3

3

3

3

General and administrative

2

2

2

2

salesforce.com, inc.

Condensed Consolidated Balance Sheets

(in thousands)

July 31,

January 31,

2010

2010

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$409,925

$1,011,306

Short-term marketable securities

332,342

230,659

Accounts receivable, net

228,550

320,956

Deferred commissions

47,093

47,388

Deferred income taxes

44,088

40,116

Prepaid expenses and other current assets

50,138

55,734

Total current assets

1,112,136

1,706,159

Marketable securities, noncurrent

1,116,661

485,083

Fixed assets, net

100,946

89,711

Deferred commissions, noncurrent

30,396

28,140

Deferred income taxes, noncurrent

36,255

27,579

Capitalized software, net

64,186

34,809

Goodwill

184,539

48,955

Other assets, net

53,357

39,765

Total assets

$2,698,476

$2,460,201

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$20,745

$14,791

Accrued expenses and other current liabilities

236,034

194,738

Income taxes payable

8,890

8,424

Deferred revenue

662,897

690,177

Total current liabilities

928,566

908,130

0.75% Convertible senior notes due 2015, net

461,182

450,198

Income taxes payable, noncurrent

18,474

17,551

Long-term lease liabilities and other

14,577

13,485

Deferred revenue, noncurrent

20,122

14,171

Total liabilities

1,442,921

1,403,535

salesforce.com stockholders' equity:

Common stock

130

127

Additional paid-in capital

1,093,591

938,544

Accumulated other comprehensive gain (loss)

7,855

(1,430)

Retained earnings

139,050

106,561

Total stockholders' equity controlling interest

1,240,626

1,043,802

Total stockholders' equity noncontrolling interest

14,929

12,864

Total stockholders' equity

1,255,555

1,056,666

Total liabilities and stockholders' equity

$2,698,476

$2,460,201

salesforce.com, inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Three Months Ended July 31,

Six Months Ended July 31,

2010

2009

2010

2009

Operating activities:

Consolidated net income

$16,583

$21,841

$36,459

$40,834

Adjustments to reconcile net income to net

cash provided by operating activities:

Depreciation and amortization

17,793

12,144

32,298

24,289

Amortization of debt discount

5,533

0

10,984

0

Amortization of deferred commissions

18,106

15,315

37,595

30,261

Expenses related to stock-based awards

26,615

20,877

53,083

42,540

Excess tax benefits from employee stock plans

(22,902)

(15,687)

(32,190)

(25,135)

Changes in assets and liabilities:

Accounts receivable, net

(41,413)

(22,816)

97,538

97,870

Deferred commissions

(20,248)

(14,136)

(39,556)

(25,005)

Prepaid expenses and other current assets

181

1,308

10,120

(1,819)

Other assets

(2,703)

2,683

(4,142)

(118)

Accounts payable

5,583

(2,368)

3,925

(2,990)

Accrued expenses and other current liabilities

57,378

27,057

37,394

8,120

Deferred revenue

15,590

(363)

(24,229)

(45,016)

Net cash provided by operating activities

76,096

45,855

219,279

143,831

Investing activities:

Purchase of subsidiary stock

0

0

(1,273)

0

Business combinations, net of cash acquired

(151,503)

0

(151,503)

0

Investments in privately-held companies

(2,000)

(700)

(2,500)

(700)

Changes in marketable securities

(234,030)

(138,393)

(729,973)

(381,031)

Capital expenditures

(27,831)

(18,628)

(39,521)

(32,056)

Net cash used in investing activities

(415,364)

(157,721)

(924,770)

(413,787)

Financing activities:

Proceeds from the exercise of stock options

34,127

5,139

71,643

14,307

Excess tax benefits from employee stock plans

22,902

15,687

32,190

25,135

Principal payments on capital lease obligations

(2,123)

(2,258)

(4,041)

(3,506)

Net cash provided by financing activities

54,906

18,568

99,792

35,936

Effect of exchange rate changes

3,493

(2,238)

4,318

(3,645)

Net decrease in cash and

cash equivalents

(280,869)

(95,536)

(601,381)

(237,665)

Cash and cash equivalents, beginning of period

690,794

341,705

1,011,306

483,834

Cash and cash equivalents, end of period

$409,925

$246,169

$409,925

$246,169

Supplemental cash flow disclosure:

Cash paid (received) during the period for:

Interest

2,351

285

2,566

492

Income taxes, net of tax refunds

723

16,791

(4,790)

21,074

salesforce.com, inc.

Additional Metrics

(Unaudited)

Jul 31,

Apr 30,

Jan 31,

Oct 31,

Jul 31,

Apr 30,

2010

2010

2010

2009

2009

2009

Full Time Equivalent Headcount

4,447

4,106

3,969

3,814

3,653

3,607

Financial data (in thousands):

Cash, cash equivalents and marketable

  securities

$1,858,928

$1,901,548

$1,727,048

$1,070,092

$1,030,406

$983,824

Deferred revenue, current and noncurrent

$683,019

$664,529

$704,348

$545,435

$549,010

$549,373

Three Months Ended July 31,

Six Months Ended July 31,

2010

2009

2010

2009

Revenues by geography (in thousands):

Americas

$274,669

$226,008

$533,953

$446,658

Europe

65,545

55,992

132,387

107,594

Asia Pacific

54,158

34,061

104,845

66,733

$394,372

$316,061

$771,185

$620,985

As a percentage of total revenues:

Revenues by geography:

Americas

70

%

72

%

69

%

72

%

Europe

17

18

17

17

Asia Pacific

13

10

14

11

100

%

100

%

100

%

100

%

SUPPLEMENTAL REVENUE ANALYSIS (1)

Three Months Ended

Three Months Ended

July 31, 2010

April 30, 2010

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

Americas

22%

18%

Europe

30%

24%

Asia Pacific

53%

50%

Total revenue growth

26%

22%

(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 in to 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 July 31,

Six Months Ended July 31,

2010

2009

2010

2009

Operating Cash flow

$ 76,096

$ 45,855

$ 219,279

$ 143,831

GAAP Net cash provided by operating activities

Less:

Capital expenditures

(27,831)

(18,628)

(39,521)

(32,056)

Free cash flow

$ 48,265

$ 27,227

$ 179,758

$ 111,775

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 July 31,

Six  Months Ended July 31,

2010

2009

2010

2009

Gross Profit

GAAP gross profit

$ 316,582

$ 253,565

$ 621,814

$ 496,689

Plus:

Amortization of purchased intangibles (b)

3,891

1,696

5,570

3,714

Stock-based expenses (c)

3,186

3,171

6,260

6,327

Non-GAAP Gross profit

$ 323,659

$ 258,432

$ 633,644

$ 506,730

Operating expenses

GAAP operating expenses

$ 286,900

$ 224,076

$ 559,082

$ 437,077

Less:

Amortization of purchased intangibles (b)

(1,225)

(802)

(2,050)

(1,643)

Stock-based expenses (c)

(23,429)

(17,706)

(46,823)

(36,213)

Non-GAAP operating expenses

$ 262,246

$ 205,568

$ 510,209

$ 399,221

Income from operations

GAAP income from operations

$   29,682

$   29,489

$   62,732

$   59,612

Plus:

Amortization of purchased intangibles (b)

5,116

2,498

7,620

5,357

Stock-based expenses (c)

26,615

20,877

53,083

42,540

Non-GAAP income from operations

$   61,413

$   52,864

$ 123,435

$ 107,509

Non-operating income (loss) (a)

GAAP non-operating income (loss)

$      (215)

$     6,382

$   (1,373)

$   11,075

Plus:  Amortization of debt discount

5,533

0

10,984

0

Non-GAAP non-operating income

$     5,318

$     6,382

$     9,611

$   11,075

Net income attributable to salesforce.com

GAAP net income attributable to salesforce.com

$   14,744

$   21,198

$   32,489

$   39,634

Plus:

Amortization of purchased intangibles

5,116

2,498

7,620

5,357

Stock-based expenses

26,615

20,877

53,083

42,540

Amortization of debt discount

5,533

0

10,984

0

Less:

Income tax effect of Non-GAAP items

(13,274)

(8,243)

(25,493)

(15,763)

Non-GAAP net income attributable to salesforce.com

$   38,734

$   36,330

$   78,683

$   71,768

Diluted earnings per share

GAAP diluted earnings per share

$       0.11

$0.17

$0.24

$0.31

Plus:

Amortization of purchased intangibles

0.04

0.02

0.06

0.04

Stock-based expenses

0.20

0.17

0.40

0.35

Amortization of debt discount

0.04

0

0.08

0

Less:

Income tax effect of  Non-GAAP items

(0.10)

(0.07)

(0.19)

(0.13)

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

$       0.29

$0.29

$       0.59

$0.57

Shares used in computing diluted net income per share

134,176

126,566

133,437

125,894

a)

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

b)

Amortization of purchased intangibles were as follows:

Three Months Ended July 31,

Six Months Ended July 31,

2010

2009

2010

2009

Cost of revenues

$     3,891

1,696

$     5,570

$     3,714

Marketing and sales

1,225

802

2,050

1,643

$     5,116

$     2,498

$     7,620

$     5,357

c)

Stock-based expenses were as follows:

Three Months Ended July 31,

Six Months Ended July 31,

2010

2009

2010

2009

Cost of revenues

$     3,186

$     3,171

$     6,260

$     6,327

Research and development

4,041

2,950

8,143

6,034

Marketing and sales

12,317

9,317

24,527

19,259

General and administrative

7,071

5,439

14,153

10,920

$   26,615

$   20,877

$   53,083

$   42,540

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 July 31,

Six  Months Ended  July 31,

2010

2009

2010

2009

GAAP Basic Net Income Per Share

Net income attributable to salesforce.com

$ 14,744

$ 21,198

$ 32,489

$ 39,634

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

0.11

0.17

0.25

0.32

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

129,462

123,846

128,747

123,526

Three Months Ended July 31,

Six  Months Ended  July 31,

2010

2009

2010

2009

Non-GAAP Basic Net Income Per Share

Non-GAAP net Income attributable to salesforce.com

$ 38,734

$ 36,330

$ 78,683

$ 71,768

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

0.30

0.29

0.61

0.58

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

129,462

123,846

128,747

123,526

Three Months Ended July 31,

Six  Months Ended  July 31,

2010

2009

2010

2009

GAAP Diluted Net Income Per Share

Net Income attributable to salesforce.com

$ 14,744

$ 21,198

$ 32,489

$ 39,634

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

0.11

0.17

0.24

0.31

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

134,176

126,566

133,437

125,894

Three Months Ended July 31,

Six Months Ended July 31,

2010

2009

2010

2009

Non-GAAP Diluted Net Income Per Share

Non-GAAP net  income attributable to salesforce.com

$ 38,734

$ 36,330

$ 78,683

$ 71,768

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

0.29

$     0.29

0.59

0.57

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

134,176

126,566

133,437

125,894

SOURCE salesforce.com, inc.



RELATED LINKS

http://www.salesforce.com