SALESFORCE.COM, INC. SAN FRANCISCO, May 18, 2016 /PRNewswire/ -- Salesforce (NYSE: CRM), the Customer Success Platform and world's #1 CRM company, today announced results for its fiscal first quarter ended April 30, 2016.
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"We're thrilled that first quarter revenue growth accelerated to 28% year-over-year in constant currency," said Marc Benioff, chairman and CEO, Salesforce. "Given the strong response to our Customer Success Platform, we are raising our fiscal 2017 revenue guidance by $80 million to reach $8.2 billion at the high end of the range."
"Operating cash flow grew 43% in the first quarter from a year ago, surpassing the $1 billion quarterly milestone for the first time in our company's history," said Mark Hawkins, CFO, Salesforce. "We also expanded our non-GAAP operating margin by 283 basis points, which is our eighth consecutive quarter of year-over-year improvement."
"Our first quarter was an extremely strong start to our fiscal year, with outstanding execution across the board," said Keith Block, vice chairman, president and COO, Salesforce. "We continued to drive larger and more strategic transactions in the first quarter, including yet another 9-figure transaction. No other enterprise software company is building strategic relationships of this size and scale--and certainly not at this pace."
Salesforce delivered the following results for its first fiscal quarter 2017:
Revenue: Total revenue was $1.92 billion, an increase of 27% year-over-year, and 28% in constant currency. Subscription and support revenues were $1.78 billion, an increase of 26% year-over-year. Professional services and other revenues were $141 million, an increase of 33% year-over-year.
Earnings per Share: GAAP diluted earnings per share was $0.06, and non-GAAP diluted earnings per share was $0.24.
Cash: Cash generated from operations was $1.05 billion, an increase of 43% year-over-year. Total cash, cash equivalents and marketable securities finished the quarter at $3.72 billion.
Deferred Revenue: Deferred revenue on the balance sheet as of April 30, 2016 was $4.01 billion, an increase of 31% year-over-year, and 32% in constant currency. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the first quarter at approximately $7.6 billion, up 27% year-over-year.
As of May 18, 2016, the company is initiating revenue, earnings per share, and deferred revenue guidance for its second quarter of fiscal year 2017. In addition, the company is raising its full fiscal year 2017 revenue, earnings per share and operating cash flow guidance previously provided on February 24, 2016.
Q2 FY17 Guidance: Revenue is projected to be approximately $2.005 billion to $2.015 billion, an increase of 23% year-over-year.
GAAP diluted earnings per share is projected to be $0.03 to $0.04, while non-GAAP diluted earnings per share is projected to be $0.24 to $0.25.
On balance sheet deferred revenue growth is projected to be 26% to 28% year-over-year.
Full Year FY17 Guidance: Revenue is projected to be approximately $8.16 billion to $8.20 billion, an increase of 22% to 23% year-over-year.
GAAP diluted earnings per share is projected to be $0.20 to $0.22, while non-GAAP diluted earnings per share is projected to be $1.00 to $1.02.
Operating cash flow growth is projected to be 25% to 26% year-over-year.
The following is a per share reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share guidance for the next quarter and full fiscal year:
Fiscal 2017
-----------
Q2 FY2017
--- ------
GAAP diluted EPS range* $0.03 - $0.04 $0.20 - $0.22
Plus
Amortization of
purchased intangibles $0.05 $0.21
Stock-based expense $0.24 $1.04
Amortization of debt
discount, net $0.01 $0.04
Less
Gains on sales of
strategic investments $ - $(0.02)
Income tax effects and
adjustments** $(0.09) $(0.47)
------ ------
Non-GAAP diluted EPS $0.24 - $0.25 $1.00 - $1.02
Shares used in computing
diluted net income per
share (millions) 699 700
* For Q2 and FY17, the expected
tax rates are 38% and 27%,
respectively.
** The Company's non-GAAP tax
provision uses a long-term
projected tax rate of 35%.
For additional information regarding non-GAAP financial measures see the reconciliation of results and related explanations below.
Quarterly Conference Call
Salesforce will host a conference call at 2:00 p.m. (PT) / 5:00 p.m. (ET) today to discuss its financial results with the investment community. A live web broadcast of the event will be available on the Salesforce Investor Relations website at www.salesforce.com/investor. A live dial-in is available domestically at 866-901-SFDC or 866-901-7332 and internationally at 706-902-1764, passcode 78127862. A replay will be available at (800) 585-8367 or (855) 859-2056 until midnight (ET) June 18, 2016.
About Salesforce
Salesforce, the Customer Success Platform and world's #1 CRM company, empowers companies to connect with their customers in a whole new way. Salesforce 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 about Salesforce, visit: www.salesforce.com.
"Safe harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements about our financial results, which may include expected GAAP and non-GAAP financial and other operating and non-operating results, including revenue, net income (loss), earnings per share, operating cash flow growth, operating margin improvement, deferred revenue growth, expected revenue run rate, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles, amortization of debt discount, and shares outstanding. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the company's results could differ materially from the results expressed or implied by the forward-looking statements we make.
The risks and uncertainties referred to above include -- but are not limited to -- risks associated with possible fluctuations in the company's financial and operating results; the company's rate of growth and anticipated revenue run rate, including the company's ability to convert deferred revenue and unbilled deferred revenue into revenue and, as appropriate, cash flow, and ability to maintain continued growth of deferred revenue and unbilled deferred revenue; errors, interruptions or delays in the company's services 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 services; successful customer deployment and utilization of the company's existing and future services; changes in the company's sales cycle; competition; various financial aspects of the company's subscription model; unexpected increases in attrition or decreases in new business; the company's ability to realize benefits from strategic partnerships and strategic investments; the emerging markets in which the company operates; unique aspects of entering or expanding in international markets, the company's ability to hire, retain and motivate employees and manage the company's growth; changes in the company's customer base; technological developments; regulatory developments; litigation related to intellectual property and other matters, and any related claims, negotiations and settlements; unanticipated changes in the company's effective tax rate; factors affecting the company's outstanding convertible notes and revolving credit facility; fluctuations in the number of company shares outstanding and the price of such shares; foreign currency exchange rates; collection of receivables; interest rates; factors affecting the company's deferred tax assets and ability to value and utilize them; the potential negative impact of indirect tax exposure; the risks and expenses associated with the company's real estate and office facilities space; and general developments in the economy, financial markets, and credit markets.
Further information on these and other factors that could affect the company's financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time. 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.
© 2016 salesforce.com, inc. All rights reserved. Salesforce and other marks are trademarks of salesforce.com, inc. Other brands featured herein may be trademarks of their respective owners.
salesforce.com, inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Revenues:
Subscription
and support $1,775,493 $1,405,287
Professional
services and
other 141,110 105,880
------- -------
Total
revenues 1,916,603 1,511,167
Cost of revenues (1)(2):
Subscription
and support 335,828 274,241
Professional
services and
other 161,153 107,561
------- -------
Total cost of
revenues 496,981 381,802
Gross profit 1,419,622 1,129,365
Operating expenses (1)(2):
Research and
development 260,970 222,128
Marketing and
sales 895,860 736,938
General and
administrative 210,806 175,811
Operating
lease
termination
resulting
from
purchase of
50 Fremont 0 (36,617)
Total
operating
expenses 1,367,636 1,098,260
Income from
operations 51,986 31,105
Investment
income 8,122 4,561
Interest
expense (22,011) (16,675)
Other expense
(1) (13,806) (918)
Gains on
sales of
strategic
investments 12,864 0
------ ---
Income before
benefit from
(provision
for) income
taxes 37,155 18,073
Benefit from
(provision
for) income
taxes (3) 1,604 (13,981)
----- -------
Net income $38,759 $4,092
======= ======
Basic net
income per
share $0.06 $0.01
Diluted net
income per
share $0.06 $0.01
Shares used
in computing
basic net
income per
share 677,514 653,809
Shares used
in computing
diluted net
income per
share 686,799 664,310
(1) Amounts include amortization of
purchased intangibles from
business combinations, as
follows:
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Cost of revenues $22,215 $19,690
Marketing and sales 15,386 20,027
Other non-operating expense 706 815
(2) Amounts
include
stock-
based
expense,
as
follows:
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Cost of revenues $26,634 $15,381
Research and development 35,168 31,242
Marketing and sales 95,474 70,534
General and administrative 31,643 25,403
(3) During the three months ended April
30, 2016, the Company early
adopted Accounting Standards
Update No. 2016-09, "Improvements
to Employee Share-Based Payment
Accounting (Topic 718)" ("ASU
2016-09"), which addresses among
other items, updates to the
presentation and treatment of
excess tax benefits related to
stock-based compensation. The
Company has adopted changes to the
consolidated statements of
operations on a prospective basis.
salesforce.com, inc.
Consolidated Statements of Operations
(As a percentage of total revenues)
(Unaudited)
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Revenues:
Subscription and support 93% 93%
Professional services and other 7 7
--- ---
Total revenues 100 100
Cost of revenues (1)(2):
Subscription and support 18 18
Professional services and other 8 7
--- ---
Total cost of revenues 26 25
Gross profit 74 75
Operating expenses (1)(2):
Research and development 14 15
Marketing and sales 46 49
General and administrative 11 11
Operating lease termination
resulting from purchase of 50
Fremont 0 (2)
--- ---
Total operating expenses 71 73
Income from operations 3 2
Investment income 0 0
Interest expense (1) (1)
Other expense (1) (1) 0
Gains on sales of strategic
investments 1 0
--- ---
Income before benefit from
(provision for) income taxes 2 1
Benefit from (provision for)
income taxes 0 (1)
--- ---
Net income 2% 0%
=== ===
(1) Amortization of purchased
intangibles from business
combinations as a percentage of
total revenues, as follows:
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Cost of revenues 1% 1%
Marketing and sales 1 1
Other non-operating expense 0 0
(2) Stock-
based
expense as
a
percentage
of total
revenues,
as
follows:
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Cost of revenues 1% 1%
Research and development 2 2
Marketing and sales 5 5
General and administrative 2 2
salesforce.com, inc.
Consolidated Balance Sheets
(in thousands)
April 30, January 31,
2016 2016
---- ----
(unaudited)
Assets
Current assets:
Cash and cash
equivalents $1,799,083 $1,158,363
Short-term
marketable
securities 232,109 183,018
Accounts
receivable, net 1,192,965 2,496,165
Deferred
commissions 243,890 259,187
Prepaid expenses
and other
current assets 306,625 250,594
Total current
assets 3,774,672 4,347,327
Marketable
securities,
noncurrent 1,684,260 1,383,996
Property and
equipment, net 1,711,472 1,715,828
Deferred
commissions,
noncurrent 180,245 189,943
Capitalized
software, net 407,030 384,258
Goodwill 4,129,656 3,849,937
Strategic
investments 520,750 520,721
Other assets,
net 409,185 370,910
Total assets $12,817,270 $12,762,920
=========== ===========
Liabilities and stockholders'
equity
Current liabilities:
Accounts
payable,
accrued
expenses and
other
liabilities $1,093,197 $1,349,338
Deferred revenue 3,991,906 4,267,667
Total current
liabilities 5,085,103 5,617,005
Convertible
0.25% senior
notes, net 1,095,104 1,088,097
Loan assumed on
50 Fremont 198,066 197,998
Deferred
revenue,
noncurrent 15,008 23,886
Other noncurrent
liabilities 839,725 833,065
------- -------
Total
liabilities 7,233,006 7,760,051
--------- ---------
Stockholders' equity:
Common stock 678 671
Additional paid-
in capital 6,217,946 5,705,386
Accumulated
other
comprehensive
loss (28,577) (49,917)
Accumulated
deficit (605,783) (653,271)
-------- --------
Total
stockholders'
equity 5,584,264 5,002,869
--------- ---------
Total
liabilities and
stockholders'
equity $12,817,270 $12,762,920
=========== ===========
salesforce.com, inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Operating activities:
Net income $38,759 $4,092
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 132,772 127,927
Amortization of debt discount and
transaction costs 7,185 5,861
Gains on sales of strategic
investments (12,864) 0
50 Fremont lease termination 0 (36,617)
Amortization of deferred
commissions 88,514 77,155
Expenses related to employee stock
plans 188,919 142,560
Changes in assets and liabilities, net of business
combinations:
Accounts receivable, net 1,307,312 979,170
Deferred commissions (63,519) (50,092)
Prepaid expenses and other current
assets and other assets (56,671) (11,274)
Accounts payable, accrued expenses
and other liabilities (286,228) (239,072)
Deferred revenue (293,117) (264,629)
-------- --------
Net cash provided by operating
activities (1) 1,051,062 735,081
--------- -------
Investing activities:
Business combinations, net of cash
acquired (1,799) (12,470)
Purchase of 50 Fremont land and
building 0 (425,376)
Deposit for purchase of 50 Fremont
land and building 0 115,015
Non-refundable amounts received
for sale of land available for
sale 0 2,852
Strategic investments (22,061) (144,462)
Purchases of marketable securities (589,336) (207,225)
Sales of marketable securities 222,934 192,184
Maturities of marketable
securities 23,285 14,446
Capital expenditures (83,301) (71,087)
------- -------
Net cash used in investing
activities (450,278) (536,123)
-------- --------
Financing activities:
Proceeds from employee stock plans 89,141 155,015
Principal payments on capital
lease obligations (49,968) (16,825)
Payments on revolving credit
facility and term loan 0 (300,000)
Net cash provided by (used in)
financing activities (1) 39,173 (161,810)
------ --------
Effect of exchange rate changes 763 (3,309)
--- ------
Net increase in cash and cash
equivalents 640,720 33,839
Cash and cash equivalents,
beginning of period 1,158,363 908,117
--------- -------
Cash and cash equivalents, end of
period $1,799,083 $941,956
========== ========
(1) During the three months ended April
30, 2016, the Company early
adopted Accounting Standards
Update No. 2016-09, "Improvements
to Employee Share-Based Payment
Accounting (Topic 718)" ("ASU
2016-09"), which addresses among
other items, updates to the
presentation and treatment of
excess tax benefits related to
stock based compensation. Excess
tax benefits are no longer
classified as a reduction of
operating cash flows. The Company
has adopted changes to the
consolidated statements of cash
flows on a retrospective basis.
The impact for the three months
ended April 30, 2015 to net cash
provided by operating activities
and net cash used in financing
activities was $4,224.
salesforce.com, inc.
Additional Metrics
(Unaudited)
Apr 30, Jan 31, Oct 31, Jul 31, Apr 30, Jan 31,
2016 2016 2015 2015 2015 2015
---- ---- ---- ---- ---- ----
Full Time Equivalent
Headcount 21,119 19,742 18,726 17,622 16,852 16,227
Financial data (in thousands):
Cash, cash equivalents
and marketable
securities $3,715,452 $2,725,377 $2,301,306 $2,066,963 $1,922,476 $1,890,284
Strategic investments $520,750 $520,721 $496,809 $477,886 $318,716 $175,744
Deferred revenue,
current and
noncurrent $4,006,914 $4,291,553 $2,846,510 $3,034,991 $3,056,820 $3,321,449
Unbilled deferred
revenue, a non-GAAP
measure (1) $7,600,000 $7,100,000 $6,700,000 $6,200,000 $6,000,000 $5,700,000
Principal due on our
outstanding debt
obligations $1,350,000 $1,350,000 $1,350,000 $1,350,000 $1,350,000 $1,450,000
(1) Unbilled deferred revenue
represents future billings
under our non-cancelable
subscription agreements that
have not been invoiced and,
accordingly, are not recorded
in deferred revenue.
Selected Balance Sheet Accounts (in thousands):
April 30, January 31,
2016 2016
---- ----
Prepaid Expenses
and Other
Current Assets
Prepaid income
taxes $24,329 $22,044
Other taxes
receivable 28,117 27,341
Prepaid expenses
and other
current assets 254,179 201,209
------- -------
$306,625 $250,594
======== ========
Property and
Equipment, net
Land $183,888 $183,888
Buildings and
building
improvements 618,510 614,081
Computers,
equipment and
software 1,321,660 1,281,766
Furniture and
fixtures 85,327 82,242
Leasehold
improvements 499,108 473,688
-------
2,708,493 2,635,665
Less accumulated
depreciation
and
amortization (997,021) (919,837)
-------- --------
$1,711,472 $1,715,828
========== ==========
Capitalized
Software, net
Capitalized
internal-use
software
development
costs, net of
accumulated
amortization $131,376 $123,065
Acquired
developed
technology, net
of accumulated
amortization 275,654 261,193
------- -------
$407,030 $384,258
======== ========
Other Assets,
net
Deferred income
taxes,
noncurrent, net
(1) $17,597 $15,986
Long-term
deposits 23,650 19,469
Purchased
intangible
assets, net of
accumulated
amortization 267,722 258,580
Acquired
intellectual
property, net
of accumulated
amortization 10,564 10,565
Other 89,652 66,310
$409,185 $370,910
======== ========
Accounts
Payable,
Accrued
Expenses and
Other
Liabilities
Accounts payable $54,583 $71,481
Accrued
compensation 386,410 554,502
Accrued other
liabilities 433,631 454,287
Accrued income
and other taxes
payable 154,550 205,781
Accrued
professional
costs 30,095 33,814
Accrued rent 15,789 14,071
Financing
obligation -
leased
facility,
current 18,139 15,402
------ ------
$1,093,197 $1,349,338
========== ==========
Other Noncurrent
Liabilities
Deferred income
taxes and
income taxes
payable (1) $85,579 $85,996
Financing
obligation -
leased facility 202,246 196,711
Long-term lease
liabilities and
other 551,900 550,358
------- -------
$839,725 $833,065
======== ========
(1) In November 2015, the FASB
issued Accounting Standards
Update No. 2015-17 (ASU
2015-17), "Income Taxes (Topic
740): Balance Sheet
Classification of Deferred
Taxes" which simplifies the
presentation of deferred income
taxes by requiring all deferred
tax assets and liabilities to
be classified as noncurrent on
the balance sheet.
Supplemental Revenue Analysis
Subscription
and support
revenue by
cloud service
offering (in
millions): Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Sales Cloud $724.6 $630.4
Service Cloud 540.1 407.7
App Cloud and
Other 325.9 224.0
Marketing Cloud 184.9 143.2
-----
$1,775.5 $1,405.3
======== ========
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Total revenues
by geography
(in
thousands):
Americas $1,413,229 $1,115,120
Europe 327,854 258,805
Asia Pacific 175,520 137,242
------- -------
$1,916,603 $1,511,167
========== ==========
As a percentage
of total
revenues:
Total revenues
by geography:
Americas 74% 74%
Europe 17 17
Asia Pacific 9 9
--- ---
100% 100%
=== ===
Revenue constant
currency growth
rates Three Months Ended Three Months Ended Three Months Ended
(as compared to
the comparable
prior periods) April 30, 2016 January 31, 2016 April 30, 2015
compared to Three Months compared to Three Months compared to Three Months
Ended April 30, 2015 Ended January 31, 2015 Ended April 30, 2014
-------------------- ---------------------- --------------------
Americas 27% 27% 27%
Europe 33% 32% 28%
Asia Pacific 29% 26% 27%
Total growth 28% 27% 27%
We present constant currency information to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the weighted average exchange rate for the quarter being compared to for growth rate calculations presented, rather than the actual exchange rates in effect during that period.
April 30, 2016 January 31, 2016 April 30, 2015
compared to compared to compared to
April 30, 2015 January 31, 2015 April 30, 2014
-------------- ---------------- --------------
Deferred
revenue, prior
current and periods)
noncurrent
constant
currency
growth
rates (as
compared to
the
comparable
Total growth 32% 31% 36%
We present constant currency information for deferred revenue, current and noncurrent to provide a framework for assessing how our underlying business performed excluding the effects of foreign currency rate fluctuations. To present the information above, we convert the deferred revenue balances in local currencies in previous comparable periods using the United States dollar currency exchange rate as on the most recent balance sheet date.
Supplemental Diluted Share Count Information
(share data in thousands)
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Weighted-average shares
outstanding for basic
earnings per share 677,514 653,809
Effect of dilutive securities:
Convertible senior notes
(1) 945 0
Warrants associated with
the convertible senior
note hedges (1) 0 0
Employee stock awards 8,340 10,501
----- ------
Adjusted weighted-average
shares outstanding and
assumed conversions for
diluted earnings per share 686,799 664,310
======= =======
(1) The 0.25% senior notes were
not convertible, however
there is a dilutive effect
for shares outstanding for
the three months ended April
30, 2016.
Supplemental Cash Flow Information
Free cash flow analysis, a non-GAAP measure
(in thousands)
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Operating cash flow (1)
GAAP net
cash
provided
by
operating
activities $1,051,062 $735,081
Less:
Capital
expenditures (83,301) (71,087)
------- -------
Free cash
flow $967,761 $663,994
======== ========
Our free cash flow analysis includes GAAP
net cash provided by operating activities
less capital expenditures. The capital
expenditures balance does not include our
strategic investments, nor does it include
any costs or activities related to our
purchase of 50 Fremont land and building,
and building -leased facilities.
(1) During the three months ended
April 30, 2016, the Company
early adopted ASU 2016-09. As
a result, excess tax benefits
are no longer classified as a
reduction of operating cash
flow. For more information,
refer to the consolidated
statements of cash flows for
disclosures relating to
changes in operating cash
flows.
Comprehensive Income (Loss)
(in thousands)
(Unaudited)
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Net income $38,759 $4,092
Other comprehensive income (loss),
before tax and net of
reclassification adjustments:
Foreign currency
translation and
other gains
(losses) 10,256 (1,855)
Unrealized gains
(losses) on
investments 11,084 (2,389)
------ ------
Other
comprehensive
income (loss),
before tax 21,340 (4,244)
Tax effect 0 0
--- ---
Other
comprehensive
income (loss),
net of tax 21,340 (4,244)
------ ------
Comprehensive
income (loss) $60,099 $(152)
======= =====
salesforce.com, inc.
GAAP RESULTS RECONCILED TO NON-GAAP RESULTS
The following table reflects selected GAAP results reconciled to non-GAAP results.
(in thousands, except per share data)
(Unaudited)
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Non-GAAP gross profit
---------------------
GAAP
gross
profit $1,419,622 $1,129,365
Plus:
Amortization
of
purchased
intangibles
(a) 22,215 19,690
Stock-
based
expense
(b) 26,634 15,381
------ ------
Non-
GAAP
gross
profit $1,468,471 $1,164,436
---------- ----------
Non-GAAP operating
expenses
------------------
GAAP
operating
expenses $1,367,636 $1,098,260
Less:
Amortization
of
purchased
intangibles
(a) (15,386) (20,027)
Stock-
based
expense
(b) (162,285) (127,179)
Plus:
Operating
lease
termination
resulting
from
purchase
of 50
Fremont 0 36,617
Non-
GAAP
operating
expenses $1,189,965 $987,671
---------- --------
Non-GAAP income from
operations
--------------------
GAAP
income
from
operations $51,986 $31,105
Plus:
Amortization
of
purchased
intangibles
(a) 37,601 39,717
Stock-
based
expense
(b) 188,919 142,560
Less:
Operating
lease
termination
resulting
from
purchase
of 50
Fremont 0 (36,617)
Non-
GAAP
income
from
operations $278,506 $176,765
-------- --------
Non-GAAP non-operating
loss (c)
----------------------
GAAP
non-
operating
loss $(14,831) $(13,032)
Plus:
Amortization
of
debt
discount,
net 6,226 6,059
Amortization
of
acquired
lease
intangible 706 815
Less:
Gains
on
sales
of
strategic
investments (12,864) 0
------- ---
Non-
GAAP
non-
operating
loss $(20,763) $(6,158)
-------- -------
Non-GAAP net income
-------------------
GAAP
net
income $38,759 $4,092
Plus:
Amortization
of
purchased
intangibles
(a) 37,601 39,717
Amortization
of
acquired
lease
intangible 706 815
Stock-
based
expense
(b) 188,919 142,560
Amortization
of
debt
discount,
net 6,226 6,059
Less:
Operating
lease
termination
resulting
from
purchase
of 50
Fremont 0 (36,617)
Gains
on
sales
of
strategic
investments (12,864) 0
Income
tax
effects
and
adjustments (91,814) (48,291)
------- -------
Non-
GAAP
net
income $167,533 $108,335
======== ========
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Non-GAAP diluted
earnings per share
-------------------
GAAP
diluted
net
income
per
share $0.06 $0.01
Plus:
Amortization
of
purchased
intangibles 0.05 0.06
Amortization
of
acquired
lease
intangible 0.00 0.00
Stock-
based
expense 0.28 0.21
Amortization
of
debt
discount,
net 0.01 0.01
Less:
Operating
lease
termination
resulting
from
purchase
of 50
Fremont 0.00 (0.06)
Gains
on
sales
of
strategic
investments (0.02) 0.00
Income
tax
effects
and
adjustments (0.14) (0.07)
Non-
GAAP
diluted
earnings
per
share $0.24 $0.16
===== =====
Shares
used
in
computing
diluted
net
income
per
share 686,799 664,310
a) Amortization of purchased
intangibles were as follows:
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Cost of revenues $22,215 $19,690
Marketing and sales 15,386 20,027
------ ------
$37,601 $39,717
======= =======
b) Stock-based expense
was as follows:
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Cost of revenues $26,634 $15,381
Research and development 35,168 31,242
Marketing and sales 95,474 70,534
General and administrative 31,643 25,403
------ ------
$188,919 $142,560
======== ========
c) GAAP non-operating loss
consists of investment income,
interest expense, other
expense and gains on sales of
strategic investments.
salesforce.com, inc.
COMPUTATION OF BASIC AND DILUTED GAAP AND NON-GAAP NET INCOME PER SHARE
(in thousands, except per share data)
(Unaudited)
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
GAAP Basic Net Income Per
Share
Net income $38,759 $4,092
Basic net
income per
share $0.06 $0.01
Shares used in
computing
basic net
income per
share 677,514 653,809
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Non-GAAP Basic Net Income Per
Share
Non-GAAP net
income $167,533 $108,335
Basic Non-GAAP
net income per
share $0.25 $0.17
Shares used in
computing
basic net
income per
share 677,514 653,809
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
GAAP Diluted Net Income Per
Share
Net income $38,759 $4,092
Diluted net
income per
share $0.06 $0.01
Shares used in
computing
diluted net
income per
share 686,799 664,310
Three Months Ended April 30,
----------------------------
2016 2015
---- ----
Non-GAAP Diluted Net Income
Per Share
Non-GAAP net
income $167,533 $108,335
Diluted Non-
GAAP net
income per
share $0.24 $0.16
Shares used in
computing
diluted net
income per
share 686,799 664,310
Non-GAAP Financial Measures: This press release includes information about non-GAAP earnings per share, non-GAAP tax rates, and non-GAAP free cash flow (collectively the "non-GAAP financial measures"). These non-GAAP financial measures are measurements of financial performance that are not prepared in accordance with U.S. generally accepted accounting principles and computational methods may differ from those 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. Management uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the company's performance.
The primary purpose of using non-GAAP measures is to provide supplemental information that may prove useful to investors who wish to consider the impact of certain non-cash or non-recurring items on the company's operating performance and to enable investors to evaluate the company's results in the same way management does. These non-cash or non-recurring items generally consist of one-time items resulting from strategic decisions that affect multiple periods or periods unrelated to when the actual items were incurred. Management believes that supplementing GAAP disclosure with non-GAAP disclosure that excludes items that are not directly related to performance in any particular period provides investors with a more complete view of the company's operational performance and allows for meaningful period-to-period comparisons and analysis of trends in the company's business. Further, to the extent that other companies use similar methods in calculating non-GAAP measures, the provision of supplemental non-GAAP information can allow for a comparison of the company's relative performance against other companies that also report non-GAAP operating results.
Non-GAAP earnings per share excludes the impact of the following items: stock-based compensation, amortization of acquisition-related intangibles, amortization of acquired leases, the net amortization of debt discount on the company's convertible senior notes, gains/losses on sales of land and building improvements, gains on sales of strategic investments, and termination of office leases, as well as income tax adjustments. These items are excluded because the decisions which gave rise to these items were not made to increase revenue in a particular period, but were made for the company's long-term benefit over multiple periods.
The purpose of the non-GAAP tax rate is to quantify the excluded tax adjustments and the tax consequences associated with the above excluded items. The company reports a projected long-term tax rate to eliminate the effects of non-recurring and period-specific items, which can vary in size and frequency. This projected long-term non-GAAP tax rate could be subject to change in the future for a variety of reasons, such as, for example, significant changes in the company's geographic earnings mix including acquisition activity or fundamental tax law changes in major jurisdictions where the company operates.
Specifically, management is excluding the following items from its non-GAAP earnings per share for Q1 and its non-GAAP estimates for Q2 and FY17:
-- 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 and Acquired Leases: The company
views amortization of acquisition- and building-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, and acquired lease intangibles, as items
arising from pre-acquisition activities determined at the time of an
acquisition. While these intangible assets are continually evaluated for
impairment, amortization of the cost of purchased intangibles is a
static expense, one that is not typically affected by operations during
any particular period.
-- Amortization of Debt Discount: Under GAAP, certain convertible debt
instruments that may be settled in cash (or other assets) on conversion
are required to be separately accounted for as liability (debt) and
equity (conversion option) components of the instrument in a manner that
reflects the issuer's non-convertible debt borrowing rate. Accordingly,
for GAAP purposes we are required to recognize imputed interest expense
on the company's $1.15 billion of convertible senior notes due 2018 that
were issued in a private placement in March 2013. The imputed interest
rate was approximately 2.5% for the convertible notes due 2018, while
the actual coupon interest rate of the notes is 0.25%. 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.
-- Gains on Sales of Strategic Investments: The company views gains on
sales of its strategic investments resulting from acquisitions initiated
by the company in which an equity interest was previously held as
discrete events and not indicative of operational performance during any
particular period. Management believes that the exclusion of these gains
provides investors an enhanced view of the company's operational
performance.
-- Lease Termination Resulting From Purchase of Office Building: The
company views the non-cash, one-time gain associated with the
termination of its lease at 50 Fremont to be a discrete item.
-- Income Tax Effects and Adjustments: The Company utilizes a fixed
long-term projected non-GAAP tax rate in order to provide better
consistency across the interim reporting periods by eliminating the
effects of non-recurring and period-specific items such as changes in
the tax valuation allowance and tax effects of acquisitions-related
costs, since each of these can vary in size and frequency. When
projecting this long-term rate, the Company evaluated a three-year
financial projection that excludes the direct impact of the following
non-cash items: stock-based expenses, amortization of purchased
intangibles, amortization of acquired leases, amortization of debt
discount, gains/losses on the sales of land and building improvements,
gains on sales of strategic investments, and termination of office
leases. The projected rate also assumes no new acquisitions in the
three-year period, and considers other factors including the Company's
tax structure, its tax positions in various jurisdictions and key
legislation in major jurisdictions where the company operates. This
long-term rate could be subject to change for a variety of reasons, such
as significant changes in the geographic earnings mix including
acquisition activity, or fundamental tax law changes in major
jurisdictions where the company operates. The Company re-evaluates this
long-term rate on an annual basis or if any significant events that may
materially affect this long-term rate occur. The non-GAAP tax rates for
fiscal 2017 is 35.0 percent, and was 35.5 percent for fiscal 2016.
The company defines the non-GAAP measure free cash flow as GAAP net cash provided by operating activities, less capital expenditures. For this purpose, capital expenditures does not include our strategic investments, nor does it include any costs or activities related to our purchase of 50 Fremont land and building, and building - leased facilities.
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SOURCE Salesforce
