Salesforce.com Announces Fiscal Third Quarter Results Company Initiates Fiscal Year 2013 Revenue Guidance of $2.880 - $2.920 Billion

- Record Quarterly Revenue of $584 Million, up 36% Year-Over-Year

- Deferred Revenue of $918 Million, up 32% Year-Over-Year

- Operating Cash Flow of $129 Million, up 74% Year-Over-Year

- Non-GAAP Diluted EPS of $0.34, up 6% Year-Over-Year

- Raises FY12 Revenue Guidance to $2.255 - $2.259 Billion

- Initiates FY13 Revenue Guidance of $2.880 - $2.920 Billion

SAN FRANCISCO, Nov. 17, 2011 /PRNewswire/ -- Salesforce.com (NYSE: CRM), the enterprise cloud computing (http://www.salesforce.com/cloudcomputing/) company, today announced results for its fiscal third quarter ended October 31, 2011.

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

"Salesforce.com is the first enterprise cloud computing company to exceed a $2.3 billion annual revenue run rate," said Marc Benioff, Chairman and CEO, salesforce.com. "And today, we're excited to announce that we expect to reach a $3.0 billion annual revenue run rate during our fiscal year 2013."

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

Revenue: Total Q3 revenue was $584 million, an increase of 36% on a year-over-year basis.  Subscription and support revenues were $549 million, an increase of 36% on a year-over-year basis.  Professional services and other revenues were $35 million, an increase of 34% on a year-over-year basis.  

Earnings per Share: Q3 GAAP net loss per share was ($0.03), and non-GAAP diluted earnings per share increased 6% year-over-year to $0.34. The company's non-GAAP results exclude the effects of approximately $57 million in stock-based compensation expense, approximately $18 million in amortization of purchased intangibles, and approximately $3 million in net non-cash interest expense related to the company's convertible senior notes.  Non-GAAP EPS calculations are based on 142 million diluted shares outstanding during the quarter, including approximately 3 million shares associated with the convertible senior notes and warrants. GAAP EPS calculations are based on a basic share count of approximately 136 million shares.  

Cash: Cash generated from operations for the fiscal third quarter was $129 million, an increase of 74% on a year-over-year basis. Total cash, cash equivalents and marketable securities finished the quarter at approximately $1.3 billion.

Deferred Revenue: Deferred revenue on the balance sheet as of October 31, 2011 was $918 million, an increase of 32% on a year-over-year basis.

As of November 17, 2011, salesforce.com is initiating guidance for its fourth quarter, fiscal year 2012.  For its fiscal year 2012, the company is raising the guidance provided on August 18, 2011. In addition, the company is initiating revenue guidance for fiscal year 2013.

Q4 FY12 Guidance: Revenue for the company's fourth fiscal quarter is projected to be in the range of approximately $620 million to approximately $624 million.

For the fourth fiscal quarter, the company expects to report a GAAP net loss per share of approximately ($0.06) to ($0.05), while diluted non-GAAP EPS is expected to be approximately $0.39 to $0.40. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $79 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $19 million, and net non-cash interest expense related to the company's convertible senior notes, expected to be approximately $3 million. EPS estimates assume a GAAP tax rate of 46%, and a non-GAAP tax rate of 32%. For the purpose of the EPS calculation, the company assumed an average basic share count of approximately 138 million shares, and an average diluted share count of approximately 144 million shares.

Full Year FY12 Guidance: The company is raising its full fiscal year 2012 revenue guidance to be in the range of approximately $2.255 billion to approximately $2.259 billion. For the full fiscal year 2012, the company expects to report a GAAP net loss per share of approximately ($0.12) to ($0.11), while diluted non-GAAP EPS is expected to be approximately $1.32 to $1.33.  The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $238 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $67 million, and net non-cash interest expense related to the convertible senior notes, expected to be approximately $11 million. EPS estimates assume a GAAP tax rate of 62%, and a non-GAAP tax rate of 31%. For the purpose of the EPS calculation, the company assumed an average basic share count of approximately 136 million shares, and an average diluted share count of approximately 143 million shares.

Full Year FY13 Guidance: The company is initiating revenue guidance for fiscal year 2013 with projected revenue in the range of approximately $2.880 billion to approximately $2.920 billion.  This guidance includes projected revenue for the company's recently announced acquisition of Model Metrics, which the company expects to close during its fiscal fourth quarter.  The company will provide its expectations for FY13 GAAP and non-GAAP EPS, when it announces its fourth quarter, fiscal year 2012 results in February, 2012.

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


Fiscal 2012


Q4

FY2012




GAAP EPS Range*

($0.06) - ($0.05)

($0.12) - ($0.11)

Plus



Amortization of purchased intangibles

$0.13

$0.47

Stock-based expense

$0.55

$1.67

Net amortization of debt discount

$0.02

$0.08

Less



Income tax effect of certain Non-GAAP items

(0.25)

(0.78)

Non-GAAP diluted EPS

$0.39-$0.40

$1.32-$1.33




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

138

136

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

144

143




* For Q4 & FY12 GAAP EPS loss, basic number of shares used for calculation





Quarterly Conference Call

Salesforce.com will host a conference call to discuss its third quarter fiscal year 2012 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 24669052.  A replay will be available at 800-642-1687 or +1 706-645-9291, passcode 24669052, until midnight (Eastern Time) December 16, 2011.

About Salesforce.com

With 100,000+ customers, salesforce.com is the enterprise cloud computing company that is leading the shift to the social enterprise. Social enterprises leverage social, mobile and open cloud technologies to put customers at the heart of their business. Based on salesforce.com's real-time, multitenant architecture, the company's platform and application services include:


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 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 net amortization of debt discount on the company's convertible senior notes are being excluded from the company's FY12 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 Q3 and its non-GAAP estimates for Q4 and FY12:

  • 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 it is continually viewed 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 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, 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:  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 EPS for the fourth fiscal quarter of 2012 and the full fiscal year, the company's expected revenue run rate and revenues in fiscal 2013, 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; the company's 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; collection of receivables; interest rates; the company's plans to build and expand the company's 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-Q that will be filed for the fiscal quarter ended October 31, 2011, and our Form 10-K 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.

©2011 salesforce.com, inc.  All rights reserved. Salesforce.com, Salesforce, Chatter, Sales Cloud, Service Cloud, Radian6, Jigsaw, AppExchange, Force.com, Heroku, and all associated logos are trademarks of salesforce.com, inc. in the United States and other countries.  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 October 31,


Nine Months Ended October 31,






2011


2010


2011


2010













Revenues:











Subscription and support


$ 549,182


$ 402,948


$ 1,531,965


$ 1,122,611


Professional services and other


35,078


26,139


102,661


77,661


   Total revenues


584,260


429,087


1,634,626


1,200,272













Cost of revenues (1):










Subscription and support


96,306


54,089


260,693


147,127


Professional services and other


32,259


28,042


91,848


84,375


   Total cost of revenues


128,565


82,131


352,541


231,502













Gross profit



455,695


346,956


1,282,085


968,770













Operating expenses (1):










Research and development


76,049


47,305


214,734


130,357


Marketing and sales


304,571


200,544


842,043


558,812


General and administrative


85,232


63,951


254,016


181,713


   Total operating expenses


465,852


311,800


1,310,793


870,882













Income (loss) from operations


(10,157)


35,156


(28,708)


97,888













Investment income



5,136


11,699


18,303


28,309

Interest expense



(3,859)


(7,374)


(11,376)


(21,619)

Other income (expense)


30


(921)


(4,001)


(4,659)













Income (loss) before benefit (provision) for income taxes and noncontrolling interest

(8,850)


38,560


(25,782)


99,919













Benefit (provision) for income taxes


5,094


(16,192)


18,288


(41,092)













Consolidated net income (loss)


(3,756)


22,368


(7,494)


58,827













Less: Net loss attributable to noncontrolling interest

0


(1,296)


0


(5,266)













Net income (loss) attributable to salesforce.com

$   (3,756)


$   21,072


$      (7,494)


$      53,561













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

$     (0.03)


$       0.16


$        (0.06)


$          0.41













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

$     (0.03)


$       0.15


$        (0.06)


$          0.40













Shares used in computing basic net income per share

135,847


130,888


134,824


129,461













Shares used in computing diluted net income per share

135,847


137,044


134,824


135,007

























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









Cost of revenues


$     4,138


$     2,357


$      12,168


$        8,617


Research and development


12,197


3,976


31,224


12,119


Marketing and sales


29,123


11,969


80,024


36,496


General and administrative


11,548


7,330


35,742


21,483



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,







2011


2010


2011


2010

Revenues:












Subscription and support



94%


94%


94%


94%


Professional services and other


6


6


6


6


   Total revenues



100


100


100


100














Cost of revenues (1):











Subscription and support



16


13


16


12


Professional services and other


6


6


6


7


   Total cost of revenues



22


19


22


19














Gross profit




78


81


78


81














Operating expenses (1):











Research and development



13


11


13


11


Marketing and sales



52


47


52


47


General and administrative



15


15


15


15


   Total operating expenses


80


73


80


73














Income (loss) from operations



(2)


8


(2)


8














Investment income




1


3


1


2

Interest expense




(1)


(2)


(1)


(2)

Other income (expense)



0


0


0


0














Income (loss) before benefit (provision) for income taxes and noncontrolling interest


(2)


9


(2)


8














Benefit (provision) for income taxes


1


(4)


1


(3)














Consolidated net income (loss)



(1)


5


(1)


5














Less: Net loss attributable to noncontrolling interest


0


0


0


(1)














Net income (loss) attributable to salesforce.com


(1)%


5%


(1)%


4%








































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









Cost of revenues



1%


0%


1%


1%


Research and development


2


1


2


1


Marketing and sales



5


3


5


3


General and administrative


2


2


2


2



salesforce.com, inc.

Condensed Consolidated Balance Sheets

(in thousands)















October 31,



January 31,






2011



2011






(unaudited)













Assets








Current assets:









Cash and cash equivalents


$    502,987



$    424,292


Short-term marketable securities


142,861



72,678


Accounts receivable, net


312,331



426,943


Deferred commissions



71,799



67,774


Deferred income taxes



38,834



27,516


Prepaid expenses and other current assets (see additional metrics)

79,428



55,721










Total current assets



1,148,240



1,074,924










Marketable securities, noncurrent


650,845



910,587

Property and equipment, net (see additional metrics)

504,827



387,174

Deferred commissions, noncurrent


48,616



48,842

Deferred income taxes, noncurrent


70,857



41,199

Capitalized software, net (see additional metrics)

199,413



127,987

Goodwill




732,062



396,081

Other assets, net (see additional metrics)


156,418



104,371










Total assets




$ 3,511,278



$ 3,091,165










Liabilities, temporary equity and stockholders' equity





Current liabilities:








Accounts payable



$      28,265



$     18,106


Accrued expenses and other liabilities (see additional metrics)

409,150



345,121


Deferred revenue



905,055



913,239


Convertible senior notes, net


490,119



0










Total current liabilities



1,832,589



1,276,466










Convertible senior notes, net



0



472,538

Income taxes payable, noncurrent


30,204



18,481

Long-term lease liabilities and other

52,559



25,487

Deferred revenue, noncurrent

12,766



21,702

Total liabilities




1,928,118



1,814,674










Temporary equity



84,771



0










Stockholders' equity:








Common stock



136



133


Additional paid-in capital



1,330,735



1,098,604


Accumulated other comprehensive income

3,977



6,719


Retained earnings



163,541



171,035










Total stockholders' equity



1,498,389



1,276,491










Total liabilities, temporary equity and stockholders' equity

$ 3,511,278



$ 3,091,165



salesforce.com, inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

       (Unaudited)
















Three Months Ended October 31,


Nine Months Ended October 31,







2011


2010


2011


2010

Operating activities:











Consolidated net income (loss)




$   (3,756)


$   22,368


$   (7,494)


$   58,827

Adjustments to reconcile net income (loss) to net









cash provided by operating activities:











Depreciation and amortization



41,553


19,710


111,385


52,008


Amortization of debt discount and transaction costs

2,138


6,655


6,470


17,639


Amortization of deferred commissions


26,862


19,959


76,453


57,554


Expenses related to stock-based awards


57,006


25,632


159,158


78,715


Excess tax benefits from employee stock plans


(6,892)


(14,578)


(11,012)


(46,768)


Changes in assets and liabilities:











     Accounts receivable, net


30,101


(30,212)


120,152


67,326


     Deferred commissions



(33,611)


(25,687)


(80,252)


(65,243)


     Prepaid expenses and other current assets

9,035


(16,583)


(9,959)


(6,463)


     Other assets



4,693


(5,263)


67


(9,405)


     Accounts payable



5,944


2,575


8,928


6,500


     Accrued expenses and other current liabilities

13,081


57,926


(4,936)


95,320


     Deferred revenue



(17,445)


11,538


(17,800)


(12,691)




























     Net cash provided by operating activities

128,709


74,040


351,160


293,319














Investing activities:











Business combinations, net of cash acquired



(66,115)


(3,834)


(364,785)


(155,337)

Land activity and building improvements



(6,654)


(8,000)


(13,090)


(8,000)

Strategic investments




(21,508)


(4,000)


(34,723)


(6,500)

Changes in marketable securities



39,167


280,340


187,287


(449,633)

Capital expenditures




(34,678)


(20,790)


(107,043)


(60,311)




























     Net cash provided by (used in) investing activities

(89,788)


243,716


(332,354)


(679,781)














Financing activities:











Purchase of subsidiary stock




0


(150,970)


0


(152,243)

Proceeds from the exercise of stock options

15,794


44,353


90,362


115,996

Excess tax benefits from employee stock plans


6,892


14,578


11,012


46,768

Contingent consideration payment related to prior business combinations

0


0


(16,200)


0

Principal payments on capital lease obligations


(7,685)


(3,116)


(21,796)


(7,157)




























     Net cash provided by (used in) financing activities

15,001


(95,155)


63,378


3,364














Effect of exchange rate changes



(729)


(2,223)


(3,489)


2,095














Net increase (decrease) in cash and










cash equivalents





53,193


220,378


78,695


(381,003)














Cash and cash equivalents, beginning of period


449,794


409,925


424,292


1,011,306














Cash and cash equivalents, end of period


$ 502,987


$ 630,303


$ 502,987


$ 630,303



salesforce.com, inc.

Additional Metrics


(Unaudited)


















Oct 31,


Jul 31,


Apr 30,


Jan 31,


Oct 31,


Jul 31,




2011


2011


2011


2011


2010


2010















Full Time Equivalent Headcount


6,953


6,352


5,513


5,306


4,758


4,447





























Financial data (in thousands):














Cash, cash equivalents and marketable














  securities


$                                  1,296,693


$                                  1,286,658


$                                 1,522,285


$  1,407,557


$  1,802,440


$  1,858,928


Deferred revenue, current and noncurrent


$                                     917,821


$                                     935,266


$                                    915,133


$     934,941


$     694,557


$     683,019





























Selected Balance Sheet Accounts (in thousands):
















Oct 31,


Jan 31,












2011


2011










Prepaid Expenses and Other Current Assets














    Deferred professional services costs


$                                     13,563


$                                     17,908










    Prepaid income taxes


13,137


720










    Prepaid expenses and other current assets


52,728


37,093












$                                     79,428


$                                     55,721
























Property and Equipment, net














    Land


$                                    248,263


$                                   248,263










    Building improvements


34,974


10,115










    Computers, equipment and software


223,288


115,736










    Furniture and fixtures


24,622


20,462










    Leasehold improvements


125,838


100,380












656,985


494,956










    Less accumulated depreciation and amortization


(152,158)


(107,782)












$                                   504,827


$                                   387,174
























Capitalized Software, net














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


$                                     35,475


$                                     29,154










    Acquired developed technology, net of accumulated amortization


163,938


98,833












$                                   199,413


$                                   127,987
























Other Assets, net














    Deferred professional services costs, noncurrent portion


$                                       5,707


$                                     10,201










    Long-term deposits


13,887


12,114










    Purchased intangible assets, net of accumulated amortization


45,410


31,660










    Acquired intellectual property, net of accumulated amortization


13,895


5,874










    Strategic investments


55,035


27,065










    Other


22,484


17,457












$                                   156,418


$                                   104,371






































Accrued Expenses and Other Current Liabilities














    Accrued compensation


$                                   145,116


$                                   148,275










    Accrued other liabilities


134,741


112,840










    Accrued income and other taxes payable


78,819


49,135










    Accrued professional costs


22,836


12,548










    Accrued rent


27,638


22,323












$                                   409,150


$                                   345,121




































Three Months Ended October 31,


Nine Months Ended October 31,








2011


2010


2011


2010





Revenues by geography (in thousands):














Americas


$                                   397,118


$                                   292,540


$                                1,104,052


$    826,493






Europe


103,864


76,464


300,315


208,851






Asia Pacific


83,278


60,083


230,259


164,928






















$                                   584,260


$                                   429,087


$                                1,634,626


$ 1,200,272



















As a percentage of total revenues:



























Revenues by geography:














Americas


68

%

68

%

68

%

69

%





Europe


18


18


18


17






Asia Pacific


14


14


14


14






















100

%

100

%

100

%

100

%














































Supplemental Revenue Analysis
















Three Months Ended


Three Months Ended


Three Months Ended










October 31, 2011


July 31, 2011


October 31, 2010










compared to Three Months


compared to Three Months


compared to Three Months










Ended October 31, 2010


Ended July 31, 2010


Ended October 31, 2009







Revenue constant currency growth rates (as compared to the













    comparable prior periods)




























Americas


36%


34%


26%








Europe


29%


36%


38%








Asia Pacific


31%


33%


53%








Total growth


34%


34%


31%





















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 Diluted Sharecount Information













(in thousands)
















Three Months Ended October 31,


Nine Months Ended October 31,








2011


2010


2011


2010




















Weighted-average shares outstanding for basic earnings per share


135,847


130,888


134,824


129,461






Effect of dilutive securities (2):














Convertible senior notes


2,190


1,513


2,451


993






Warrants associated with the convertible senior note hedges


372


0


737


0






Employee stock awards


3,762


4,643


4,330


4,553






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


142,171


137,044


142,342


135,007



















(2) The effects of these dilutive securities were not included in the GAAP calculation of diluted earnings/loss per share for the three and nine months ended October 31, 2011 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,








2011


2010


2011


2010






Operating cash flow:  














GAAP net cash provided by operating activities


$                                   128,709


$                                     74,040


$                                   351,160


$    293,319






Less:














Capital expenditures


(34,678)


(20,790)


(107,043)


(60,311)






Free cash flow


$                                     94,031


$                                     53,250


$                                   244,117


$    233,008



















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 the building of our new global headquarters and strategic investments.





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,














2011


2010


2011


2010


Gross profit










GAAP gross profit


$ 455,695


$ 346,956


$ 1,282,085


$ 968,770


Plus:










Amortization of purchased intangibles (b)


17,469


4,168


42,937


9,738


Stock-based expenses (c)


4,138


2,357


12,168


8,617












Non-GAAP gross profit


$ 477,302


$ 353,481


$ 1,337,190


$ 987,125












Operating expenses










GAAP operating expenses


$ 465,852


$ 311,800


$ 1,310,793


$ 870,882


Less:










Amortization of purchased intangibles (b)


(953)


(1,013)


(4,499)


(3,063)


Stock-based expenses (c)


(52,868)


(23,275)


(146,990)


(70,098)












Non-GAAP operating expenses


$ 412,031


$ 287,512


$ 1,159,304


$ 797,721












Income from operations










GAAP income (loss) from operations


$ (10,157)


$   35,156


$    (28,708)


$   97,888


Plus:










Amortization of purchased intangibles (b)


18,422


5,181


47,436


12,801


Stock-based expenses (c)


57,006


25,632


159,158


78,715












Non-GAAP income from operations


$   65,271


$   65,969


$    177,886


$ 189,404












Non-operating income (a)










GAAP non-operating income


$     1,307


$     3,404


$        2,926


$     2,031


Plus:  Amortization of debt discount, net


2,721


5,665


8,191


16,649












Non-GAAP non-operating income


$     4,028


$     9,069


$      11,117


$   18,680












Net income attributable to salesforce.com










GAAP net income (loss) attributable to salesforce.com


$   (3,756)


$   21,072


$      (7,494)


$   53,561


Plus:










Amortization of purchased intangibles


18,422


5,181


47,436


12,801


Stock-based expenses


57,006


25,632


159,158


78,715


Amortization of debt discount, net


2,721


5,665


8,191


16,649


Less:










Income tax effect of Non-GAAP items


(25,383)


(13,197)


(75,311)


(38,690)


Non-GAAP net income attributable to salesforce.com


$   49,010


$   44,353


$    131,980


$ 123,036












Diluted earnings per share










GAAP diluted earnings (loss) per share (d)


$     (0.03)


$       0.15


$        (0.06)


$       0.40


Plus:










Amortization of purchased intangibles


0.13


0.04


0.33


0.09


Stock-based expenses


0.40


0.19


1.13


0.58


Amortization of debt discount, net


0.02


0.04


0.06


0.12


Less:










Income tax effect of  Non-GAAP items


(0.18)


(0.10)


(0.53)


(0.28)


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


$       0.34


$       0.32


$          0.93


$       0.91












Shares used in computing diluted net income per share


142,171


137,044


142,342


135,007





















a)

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

























b)

Amortization of purchased intangibles were as follows:












Three Months Ended October 31,


Nine Months Ended October 31,




2011


2010


2011


2010












Cost of revenues


$   17,469


$     4,168


$      42,937


$     9,738


Marketing and sales


953


1,013


4,499


3,063




$   18,422


$     5,181


$      47,436


$   12,801





















c)

Stock-based expenses were as follows:












Three Months Ended October 31,


Nine Months Ended October 31,




2011


2010


2011


2010












Cost of revenues


$     4,138


$     2,357


$      12,168


$     8,617


Research and development


12,197


3,976


31,224


12,119


Marketing and sales


29,123


11,969


80,024


36,496


General and administrative


11,548


7,330


35,742


21,483




$   57,006


$   25,632


$    159,158


$   78,715











d)

Reported GAAP loss per share was calculated using the basic share count.









Non-GAAP diluted earnings per share was calculated using the diluted share count.









salesforce.com, inc.

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

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

(in thousands, except per share data)


(Unaudited)










Three Months Ended October 31,


Nine Months Ended October 31,



2011


2010


2011


2010











GAAP Basic Net Income (loss) Per Share


















Net income (loss) attributable to salesforce.com

$ (3,756)


$ 21,072


$   (7,494)


$   53,561











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

(0.03)


0.16


(0.06)


0.41











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

135,847


130,888


134,824


129,461






























Three Months Ended October 31,


Nine Months Ended October 31,



2011


2010


2011


2010











Non-GAAP Basic Net Income Per Share


















Non-GAAP net income attributable to salesforce.com

$ 49,010


$ 44,353


$ 131,980


$ 123,036











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

0.36


0.34


0.98


0.95











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

135,847


130,888


134,824


129,461






























Three Months Ended October 31,


Nine Months Ended October 31,



2011


2010


2011


2010











GAAP Diluted Net Income (loss) Per Share


















Net income (loss) attributable to salesforce.com

$ (3,756)


$ 21,072


$   (7,494)


$   53,561











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

(0.03)


0.15


(0.06)


0.40











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

135,847


137,044


134,824


135,007






























Three Months Ended October 31,


Nine Months Ended October 31,



2011


2010


2011


2010











Non-GAAP Diluted Net Income Per Share


















Non-GAAP net income attributable to salesforce.com

$ 49,010


$ 44,353


$ 131,980


$ 123,036











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

0.34


0.32


0.93


0.91











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

142,171


137,044


142,342


135,007



SOURCE salesforce.com



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