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.
"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:
GAAP EPS Range*
($0.06) - ($0.05)
($0.12) - ($0.11)
Amortization of purchased intangibles
Net amortization of debt discount
Income tax effect of certain Non-GAAP items
Non-GAAP diluted EPS
Shares used in computing basic net income per share (millions)
Shares used in computing diluted net income per share (millions)
* 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.
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:
- Salesforce Chatter, a private social network for your business
- Salesforce Sales Cloud, for sales force automation and contact management
- Salesforce Service Cloud, for customer service and support solutions
- Salesforce Radian6, for social media monitoring and engagement
- Salesforce Data.com, the most complete source of accurate business data
- AppExchange, the leading marketplace for enterprise cloud computing applications
- Force.com, for custom application development
- Heroku, for building social and mobile apps in Ruby
- Database.com, the world's first enterprise cloud database
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.