SALESFORCE.COM, INC. SAN FRANCISCO, Aug. 31, 2016 /PRNewswire/ -- Salesforce (NYSE: CRM), the Customer Success Platform and world's #1 CRM company, today announced results for its second fiscal quarter ended July 31, 2016.
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"Second quarter revenue grew 25% in dollars, and 26% in constant currency, propelling Salesforce past the $2 billion quarterly revenue milestone. No other enterprise software company of our size is growing at this pace," said Marc Benioff, chairman and CEO, Salesforce. "At Dreamforce, you're going to see the next generation of Salesforce when we unveil Salesforce Einstein, the world's first comprehensive artificial intelligence platform for CRM. I've never been more excited about the innovation happening at Salesforce."
"Salesforce grew deferred revenue by 26% in dollars, and 27% in constant currency in the second quarter. We also delivered another quarter of year-over-year non-GAAP operating margin improvement, even as we closed our largest acquisition ever with Demandware," said Mark Hawkins, CFO, Salesforce. "Despite significant FX headwinds which impacted many of our key financial metrics, I'm pleased to raise our top-line guidance for the full fiscal year 2017 to $8.325 billion in revenue at the high end of the range."
Salesforce delivered the following results for its second fiscal quarter 2017:
Revenue: Total revenue was $2.04 billion, an increase of 25% year-over-year, and 26% in constant currency. Subscription and support revenues were $1.89 billion, an increase of 24% year-over-year. Professional services and other revenues were $151 million, an increase of 33% year-over-year.
Earnings per Share: GAAP diluted earnings per share was $0.33, and was benefited by an approximate $266 million release of a portion of the tax valuation allowance as a result of the acquisition of Demandware. Non-GAAP diluted earnings per share was $0.24.
Cash: Cash generated from operations was $251 million, a decrease of 18% year-over-year. Total cash, cash equivalents and marketable securities finished the quarter at $1.72 billion.
Deferred Revenue: Deferred revenue on the balance sheet as of July 31, 2016 was $3.82 billion, an increase of 26% year-over-year, and 27% in constant currency. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the second quarter at approximately $8.0 billion, up 29% year-over-year. This includes approximately $300 million related to unbilled deferred revenue from the Demandware acquisition.
As of August 31, 2016, the company is initiating revenue, earnings per share, and deferred revenue guidance for its third quarter of fiscal year 2017. In addition, the company is raising its full fiscal year 2017 revenue, maintaining non-GAAP earnings per share guidance, and updating its operating cash flow guidance, previously provided on June 1, 2016. The company is also raising its full fiscal year GAAP earnings per share guidance, previously provided on May 18, 2016. This guidance includes the impact of acquisitions that have closed to date or have signed and are expected to close in the company's third quarter of fiscal 2017.
Q3 FY17 Guidance: Revenue is projected to be approximately $2.11 billion to $2.12 billion, an increase of 23% to 24% year-over-year.
GAAP loss per share is projected to be ($0.05) to ($0.04), while non-GAAP diluted earnings per share is projected to be $0.20 to $0.21.
On balance sheet deferred revenue growth is projected to be approximately 20% year-over-year.
Full Year FY17 Guidance: Revenue is projected to be approximately $8.275 billion to $8.325 billion, an increase of 24% to 25% year-over-year.
GAAP diluted earnings per share is projected to be $0.27 to $0.29, while non-GAAP diluted earnings per share is projected to be $0.93 to $0.95.
Operating cash flow growth is projected to be 20% to 21% 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
-----------
Q3 FY2017
--- ------
GAAP (loss) EPS
range* ($0.05) - ($0.04) $0.27 - $0.29
Plus
Amortization of
purchased
intangibles $0.10 $0.33
Stock-based
expense $0.28 $1.15
Amortization of
debt discount,
net $0.01 $0.04
Less
Gains on sales of
strategic
investments $ - $(0.02)
Income tax
effects and
adjustments** $(0.14) $(0.84)
------ ------
Non-GAAP diluted
EPS $0.20 - $0.21 $0.93 - $0.95
Shares used in
computing basic
net income per
share (millions) 693 688
Shares used in
computing
diluted net
income per share
(millions) 711 703
* For Q3 GAAP (loss) EPS, basic number of shares used for
calculation and expected tax rate of 60%. For FY17 GAAP EPS,
diluted number of shares used for calculation and expected
tax rate of 1325%.
** 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 57940359. A replay will be available at (800) 585-8367 or (855) 859-2056 until midnight (ET) September 30, 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), diluted 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; foreign currency exchange rates; 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; 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)
Six Months Ended July 31,
Three Months Ended July 31,
---------------------------
2016 2015 2016 2015
---- ---- ---- ----
Revenues:
Subscription and support $1,886,080 $1,521,319 $3,661,573 $2,926,606
Professional services and other 150,538 113,365 291,648 219,245
------- ------- ------- -------
Total revenues 2,036,618 1,634,684 3,953,221 3,145,851
Cost of revenues (1)(2):
Subscription and support 360,943 292,737 696,771 566,978
Professional services and other 164,636 112,647 325,789 220,208
------- ------- ------- -------
Total cost of revenues 525,579 405,384 1,022,560 787,186
Gross profit 1,511,039 1,229,300 2,930,661 2,358,665
Operating expenses (1)(2):
Research and development 291,506 234,100 552,476 456,228
Marketing and sales 934,931 793,691 1,830,791 1,530,629
General and administrative 252,051 181,685 462,857 357,496
Operating lease termination
resulting from purchase of 50
Fremont 0 0 0 (36,617)
--- --- --- -------
Total operating expenses 1,478,488 1,209,476 2,846,124 2,307,736
Income from operations 32,551 19,824 84,537 50,929
Investment income 11,916 3,283 20,038 7,844
Interest expense (20,708) (18,096) (42,719) (34,771)
Other income (expense) (1) 524 1,947 (13,282) 1,029
Gains on sales of strategic
investments 0 0 12,864 0
--- --- ------ ---
Income before benefit from
(provision for) income taxes 24,283 6,958 61,438 25,031
Benefit from (provision for)
income taxes (3) 205,339 (7,810) 206,943 (21,791)
------- ------ ------- -------
Net income (loss) $229,622 $(852) $268,381 $3,240
======== ===== ======== ======
Basic net income (loss) per
share $0.34 $0.00 $0.40 $0.00
Diluted net income (loss) per
share $0.33 $0.00 $0.39 $0.00
Shares used in computing basic
net income (loss) per share 681,126 659,366 678,929 656,636
Shares used in computing diluted
net income (loss) per share 695,968 659,366 691,714 672,231
Amounts include
amortization of
purchased intangibles
from business
combinations, as
(1) follows:
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Cost of revenues $25,544 $20,839 $47,759 $40,529
Marketing and sales 23,151 19,002 38,537 39,029
Other non-operating expense 642 1,301 1,348 2,116
(2) Amounts include stock-based expense, as follows:
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Cost of revenues $23,495 $16,340 $50,129 $31,721
Research and development 38,624 33,732 73,792 64,974
Marketing and sales 86,323 71,724 181,797 142,258
General and administrative 33,868 25,983 65,511 51,386
(3) Amounts include a $265.7 million
tax benefit recorded during the
three months ended July 31, 2016
as a result of the release of a
portion of the valuation allowance
related to the Demandware, Inc.
acquisition.
salesforce.com, inc.
Consolidated Statements of Operations
(As a percentage of total revenues)
(Unaudited)
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Revenues:
Subscription and support 93% 93 % 93% 93%
Professional services and other 7 7 7 7
--- --- --- ---
Total revenues 100 100 100 100
Cost of revenues (1)(2):
Subscription and support 18 18 18 18
Professional services and other 8 7 8 7
--- --- --- ---
Total cost of revenues 26 25 26 25
Gross profit 74 75 74 75
Operating expenses (1)(2):
Research and development 14 14 14 14
Marketing and sales 46 49 46 49
General and administrative 12 11 12 11
Operating lease termination resulting from purchase
of 50 Fremont 0 0 0 (1)
--- --- --- ---
Total operating expenses 72 74 72 73
Income from operations 2 1 2 2
Investment income 0 0 1 0
Interest expense (1) (1) (1) (1)
Other income (expense) (1) 0 0 0 0
Gains on sales of strategic
investments 0 0 0 0
--- --- --- ---
Income before benefit from
(provision for) income taxes 1 0 2 1
Benefit from (provision for)
income taxes 10 0 5 (1)
--- --- --- ---
Net income (loss) 11% 0 % 7% 0%
=== === === ===
(1) Amortization of purchased
intangibles from
business combinations as
a percentage of total
revenues, as follows:
Three Months Ended Six Months Ended
July 31, July 31,
2016 2015 2016 2015
---- ---- ---- ----
Cost of revenues 1% 1% 1% 1%
Marketing and sales 1 1 1 1
Other non-operating expense 0 0 0 0
(2) Stock-based expense as a
percentage of total
revenues, as follows:
Three Months Ended Six Months Ended
July 31, July 31,
2016 2015 2016 2015
---- ---- ---- ----
Cost of revenues 1% 1% 1% 1%
Research and development 2 2 2 2
Marketing and sales 4 4 5 4
General and administrative 2 2 1 2
salesforce.com, inc.
Consolidated Balance Sheets
(in thousands)
July 31, January 31,
2016
2016
----
(unaudited)
Assets
Current assets:
Cash and cash equivalents $1,115,226 $1,158,363
Short-term marketable
securities 59,057 183,018
Accounts receivable, net 1,323,114 2,496,165
Deferred commissions 236,750 259,187
Prepaid expenses and other
current assets 543,852 250,594
------- -------
Total current assets 3,277,999 4,347,327
Marketable securities,
noncurrent 545,663 1,383,996
Property and equipment, net 1,728,243 1,715,828
Deferred commissions,
noncurrent 169,245 189,943
Capitalized software, net 626,214 384,258
Goodwill 6,029,895 3,849,937
Strategic investments 548,258 520,721
Other assets, net 1,455,797 370,910
--------- -------
Total assets $14,381,314 $12,762,920
=========== ===========
Liabilities and
stockholders' equity
Current liabilities:
Accounts payable, accrued
expenses and other
liabilities $1,567,896 $1,349,338
Deferred revenue 3,808,200 4,267,667
--------- ---------
Total current liabilities 5,376,096 5,617,005
Convertible 0.25% senior
notes, net 1,102,150 1,088,097
Term loan 496,646 0
Loan assumed on 50 Fremont 198,133 197,998
Deferred revenue, noncurrent 15,361 23,886
Other noncurrent liabilities 1,060,352 833,065
--------- -------
Total liabilities 8,248,738 7,760,051
--------- =========
Stockholders' equity:
Common stock 685 671
Additional paid-in capital 6,519,267 5,705,386
Accumulated other
comprehensive loss (11,215) (49,917)
Accumulated deficit (376,161) (653,271)
-------- --------
Total stockholders' equity 6,132,576 5,002,869
--------- ---------
Total liabilities and
stockholders' equity $14,381,314 $12,762,920
=========== ===========
salesforce.com, inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Operating activities:
Net income (loss) $229,622 $(852) $268,381 $3,240
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 149,361 131,675 282,133 259,602
Amortization of debt discount and transaction costs 6,868 7,291 14,053 13,152
Gains on sales of strategic investments 0 0 (12,864) 0
50 Fremont lease termination 0 0 0 (36,617)
Amortization of deferred commissions 88,783 76,679 177,297 153,834
Expenses related to employee stock plans 182,310 147,779 371,229 290,339
Changes in assets and liabilities, net of business combinations:
Accounts receivable, net (73,167) (141,418) 1,234,145 837,752
Deferred commissions (70,643) (70,745) (134,162) (120,837)
Prepaid expenses and other current assets and other
assets (9,728) (18,072) (66,399) (29,346)
Accounts payable, accrued expenses and other
liabilities (46,666) 193,771 (332,894) (45,301)
Deferred revenue (206,062) (21,830) (499,179) (286,459)
-------- ------- -------- --------
Net cash provided by operating activities (1) 250,678 304,278 1,301,740 1,039,359
------- ------- --------- ---------
Investing activities:
Business combinations, net of cash acquired (2,798,194) (18,451) (2,799,993) (30,921)
Purchase of 50 Fremont land and building 0 0 0 (425,376)
Deposit for purchase of 50 Fremont land and building 0 0 0 115,015
Non-refundable amounts received for sale of land
available for sale 0 3,432 0 6,284
Strategic investments, net (390) (150,434) (22,451) (294,896)
Purchases of marketable securities (285,795) (136,196) (875,131) (343,421)
Sales of marketable securities 1,610,724 130,922 1,833,658 323,106
Maturities of marketable securities 27,253 1,833 50,538 16,279
Capital expenditures (96,030) (64,883) (179,331) (135,970)
------- ------- -------- --------
Net cash used in investing activities (1,542,432) (233,777) (1,992,710) (769,900)
---------- -------- ---------- --------
Financing activities:
Proceeds from term loan, net 495,550 0 495,550 0
Proceeds from employee stock plans 133,878 114,799 223,019 269,814
Principal payments on capital lease obligations (12,795) (41,074) (62,763) (57,899)
Payments on revolving credit facility 0 0 0 (300,000)
--- --- --- --------
Net cash provided by (used in) financing activities (1) 616,633 73,725 655,806 (88,085)
------- ------ ------- -------
Effect of exchange rate changes (8,736) 3,169 (7,973) (140)
------ ----- ------ ----
Net increase (decrease) in cash and cash equivalents (683,857) 147,395 (43,137) 181,234
Cash and cash equivalents, beginning of period 1,799,083 941,956 1,158,363 908,117
--------- ------- --------- -------
Cash and cash equivalents, end of period $1,115,226 $1,089,351 $1,115,226 $1,089,351
========== ========== ========== ==========
(1) During the six months ended July 31,
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 and six months
ended July 31, 2015 was a decrease
of $133 and increase of $4,091 to
net cash provided by operating
activities with a correlating
offset of equal amounts to net cash
provided by (used in) financing
activities, respectively.
salesforce.com, inc.
Additional Metrics
(Unaudited)
Jul 31, Apr 30, Jan 31, Oct 31, Jul 31, Apr 30,
2016 2016 2016 2015 2015 2015
---- ---- ---- ---- ---- ----
Full Time Equivalent
Headcount (1) 23,247 21,119 19,742 18,726 17,622 16,852
Financial data (in
thousands):
Cash, cash equivalents and
marketable securities $1,719,946 $3,715,452 $2,725,377 $2,301,306 $2,066,963 $1,922,476
Strategic investments $548,258 $520,750 $520,721 $496,809 $477,886 $318,716
Deferred revenue, current
and noncurrent $3,823,561 $4,006,914 $4,291,553 $2,846,510 $3,034,991 $3,056,820
Unbilled deferred revenue, a
non-GAAP measure (2) $8,000,000 $7,600,000 $7,100,000 $6,700,000 $6,200,000 $6,000,000
Principal due on our
outstanding debt
obligations (3) $1,850,000 $1,350,000 $1,350,000 $1,350,000 $1,350,000 $1,350,000
(1) Full time equivalent headcount
includes 1,050 from the July 2016
acquisition of Demandware, Inc.
(2) 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. As
of July 31, 2016, $300.0 million
of the balance presented relates
to Demandware, Inc.
(3) In July 2016, the Company borrowed
$500.0 million under a term loan
facility to partially fund the
acquisition of Demandware, Inc.
Selected Balance Sheet Accounts
(in thousands): July 31, April 30, January 31,
2016 2016 2016
---- ---- ----
Prepaid Expenses and Other
Current Assets
Prepaid income taxes $23,504 $24,329 $22,044
Customer contract asset (4) 225,004 4,950 1,423
Other taxes receivable 28,749 28,117 27,341
Prepaid expenses and other
current assets 266,595 249,229 199,786
------- ------- -------
$543,852 $306,625 $250,594
======== ======== ========
Property and Equipment, net
Land $183,888 $183,888 $183,888
Buildings and building
improvements 619,071 618,510 614,081
Computers, equipment and
software 1,374,949 1,321,660 1,281,766
Furniture and fixtures 95,995 85,327 82,242
Leasehold improvements 531,760 499,108 473,688
------- ------- -------
2,805,663 2,708,493 2,635,665
Less accumulated depreciation
and amortization (1,077,420) (997,021) (919,837)
---------- -------- --------
$1,728,243 $1,711,472 $1,715,828
========== ========== ==========
Capitalized Software, net
Capitalized internal-use
software development costs, net
of accumulated amortization $133,388 $131,376 $123,065
Acquired developed technology,
net of accumulated amortization 492,826 275,654 261,193
------- ------- -------
$626,214 $407,030 $384,258
======== ======== ========
(4) Customer contract asset reflects
future billings of amounts that are
contractually committed by
SteelBrick and Demandware's existing
customers as of the acquisition date
that will be billed in the next 12
months. As the Company bills these
customers this balance will reduce
and accounts receivable will
increase.
July 31, April 30, January 31,
2016 2016 2016
---- ---- ----
Other Assets, net
Deferred income taxes,
noncurrent, net $22,545 $17,597 $15,986
Long-term deposits 27,426 23,650 19,469
Purchased intangible assets,
net of accumulated
amortization 803,076 267,722 258,580
Acquired intellectual
property, net of accumulated
amortization 9,839 10,564 10,565
Customer contract asset,
noncurrent (5) 496,461 11,928 93
Other (6) 96,450 77,724 66,217
------ ------ ------
$1,455,797 $409,185 $370,910
========== ======== ========
Accounts Payable, Accrued
Expenses and Other
Liabilities
Accounts payable $101,404 $54,583 $71,481
Accrued compensation 469,009 386,410 554,502
Non-cash equity liability 76,043 0 0
Accrued other liabilities 520,854 429,870 447,729
Accrued income and other taxes
payable 205,737 154,550 205,781
Accrued professional costs 33,717 30,095 33,814
Customer contract liability
(7) 124,775 3,761 6,558
Accrued rent 16,966 15,789 14,071
Financing obligation -leased
facility, current (8) 19,391 18,139 15,402
------ ------ ------
$1,567,896 $1,093,197 $1,349,338
========== ========== ==========
Other Noncurrent Liabilities
Deferred income taxes and
income taxes payable $89,053 $85,579 $85,996
Customer contract liability,
noncurrent (7) 272,608 6,165 66
Financing obligation -leased
facility (8) 201,779 202,246 196,711
Long-term lease liabilities
and other 496,912 545,735 550,292
------- ------- -------
$1,060,352 $839,725 $833,065
========== ======== ========
(5) Customer contract asset, noncurrent,
reflects future billings of amounts
that are contractually committed by
SteelBrick and Demandware's existing
customers as of the acquisition date
over a period of 72 months. As the
Company bills these customers this
balance will reduce and accounts
receivable will increase.
(6) In April 2015, the FASB issued ASU
2015-03 which simplifies the
presentation of debt issuance costs
by requiring debt issuance costs to
be presented as a deduction from the
corresponding debt liability rather
than an asset. The Company
retrospectively adopted this
standard for the January 31, 2016
balance sheet presented, which
resulted in an adjustment of $7.9
million to Other.
(7) Customer contract liability reflects
the legal obligation to provide
future services that are
contractually committed to
SteelBrick and Demandware's existing
customers but unbilled as of the
acquisition dates. As these services
are invoiced, this balance will
decrease and deferred revenue will
increase.
(8) As of January 31, 2016, 350 Mission
was in construction. In March 2016,
construction was completed on the
building.
Supplemental Revenue Analysis
Subscription and support
revenue by cloud Three Months Ended July 31, Six Months Ended July 31,
service offering (in
millions):
2016 2015 2016 2015
---- ---- ---- ----
Sales Cloud $754.9 $671.0 $1,479.5 $1,301.4
Service Cloud 575.4 445.2 1,115.5 852.9
App Cloud and Other 353.4 247.2 679.3 471.2
Marketing Cloud 202.4 157.9 387.3 301.1
----- ----- ----- -----
$1,886.1 $1,521.3 $3,661.6 $2,926.6
======== ======== ======== ========
Three Months Ended July 31, Six Months Ended July 31,
-------------------------
2016 2015 2016 2015
---- ---- ---- ----
Total revenues by geography
(in thousands):
Americas $1,495,201 $1,202,173 $2,908,430 $2,317,293
Europe 347,320 286,904 675,174 545,709
Asia Pacific 194,097 145,607 369,617 282,849
------- ------- ------- -------
$2,036,618 $1,634,684 $3,953,221 $3,145,851
========== ========== ========== ==========
As a percentage of total
revenues:
Total revenues by geography:
Americas 73% 74% 74% 74%
Europe 17 17 17 17
Asia Pacific 10 9 9 9
--- --- --- ---
100% 100% 100% 100%
=== === === ===
Revenue constant currency growth
rates (as compared to the
comparable prior periods) Three Months Ended Three Months Ended Three Months Ended
July 31, 2016 April 30, 2016 July 31, 2015
compared to Three Months compared to Three Months compared to Three Months
Ended July 31, 2015 Ended April 30, 2015 Ended July 31, 2014
------------------- -------------------- -------------------
Americas 24% 27% 28%
Europe 32% 33% 29%
Asia Pacific 29% 29% 25%
Total growth 26% 28% 28%
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.
July 31, 2016 April 30, 2016 July 31, 2015
compared to compared to compared to
July 31, 2015 April 30, 2015 July 31, 2014
------------- -------------- -------------
Deferred
revenue, periods)
current and
noncurrent
constant
currency
growth rates
(as compared
to the
comparable
prior
Total growth 27% 32% 33%
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 July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Weighted-average shares outstanding for basic
earnings per share 681,126 659,366 678,929 656,636
Effect of dilutive securities:
Convertible senior notes (1) 2,977 0 1,961 728
Employee stock awards 11,865 0 10,824 14,867
------ --- ------ ------
Adjusted weighted-average shares outstanding
and assumed conversions for diluted earnings
per share 695,968 659,366 691,714 672,231
======= ======= ======= =======
(1) The 0.25% senior notes were
not convertible, however
there is a dilutive effect
for shares outstanding for
the three and six months
ended July 31, 2016 and the
six months ended July 31,
2015.
Supplemental Cash Flow Information
Free cash flow analysis, a non-GAAP
measure
(in thousands)
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Operating cash flow
GAAP net cash provided by operating
activities $250,678 $304,278 $1,301,740 $1,039,359
Less:
Capital expenditures (96,030) (64,883) (179,331) (135,970)
------- ------- -------- --------
Free cash flow $154,648 $239,395 $1,122,409 $903,389
======== ======== ========== ========
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.
Comprehensive Income (Loss)
(in thousands)
(Unaudited)
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Net income (loss) $229,622 $(852) $268,381 $3,240
Other comprehensive income
(loss), before tax and net
of reclassification
adjustments:
Foreign currency translation
and other losses (10,407) (5,391) (151) (7,246)
Unrealized gains on
investments 25,896 5,599 36,980 3,210
------ ----- ------ -----
Other comprehensive income
(loss), before tax 15,489 208 36,829 (4,036)
Tax effect 1,873 0 1,873 0
----- --- ----- ---
Other comprehensive income
(loss), net of tax 17,362 208 38,702 (4,036)
------ --- ------ ------
Comprehensive income (loss) $246,984 $(644) $307,083 $(796)
======== ===== ======== =====
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 July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Non-GAAP gross profit
---------------------
GAAP gross profit $1,511,039 $1,229,300 $2,930,661 $2,358,665
Plus:
Amortization of purchased
intangibles (a) 25,544 20,839 47,759 40,529
Stock-based expense (b) 23,495 16,340 50,129 31,721
------ ------ ------ ------
Non-GAAP gross profit $1,560,078 $1,266,479 $3,028,549 $2,430,915
---------- ---------- ---------- ----------
Non-GAAP operating expenses
---------------------------
GAAP operating expenses $1,478,488 $1,209,476 $2,846,124 $2,307,736
Less:
Amortization of purchased
intangibles (a) (23,151) (19,002) (38,537) (39,029)
Stock-based expense (b) (158,815) (131,439) (321,100) (258,618)
Plus:
Operating lease termination
resulting from purchase of 50
Fremont 0 0 0 36,617
--- --- --- ------
Non-GAAP operating expenses $1,296,522 $1,059,035 $2,486,487 $2,046,706
---------- ---------- ---------- ----------
Non-GAAP income from operations
-------------------------------
GAAP income from operations $32,551 $19,824 $84,537 $50,929
Plus:
Amortization of purchased
intangibles (a) 48,695 39,841 86,296 79,558
Stock-based expense (b) 182,310 147,779 371,229 290,339
Less:
Operating lease termination
resulting from purchase of 50
Fremont 0 0 0 (36,617)
--- --- --- -------
Non-GAAP income from operations $263,556 $207,444 $542,062 $384,209
-------- -------- -------- --------
Non-GAAP non-operating loss (c)
------------------------------
GAAP non-operating loss $(8,268) $(12,866) $(23,099) $(25,898)
Plus:
Amortization of debt discount,
net 6,264 6,110 12,490 12,169
Amortization of acquired lease
intangible 642 1,301 1,348 2,116
Less:
Gains on sales of strategic
investments 0 0 (12,864) 0
--- --- ------- ---
Non-GAAP non-operating loss $(1,362) $(5,455) $(22,125) $(11,613)
------- ------- -------- --------
Non-GAAP net income
-------------------
GAAP net income (loss) $229,622 $(852) $268,381 $3,240
Plus:
Amortization of purchased
intangibles (a) 48,695 39,841 86,296 79,558
Amortization of acquired lease
intangible 642 1,301 1,348 2,116
Stock-based expense (b) 182,310 147,779 371,229 290,339
Amortization of debt discount,
net 6,264 6,110 12,490 12,169
Less:
Operating lease termination
resulting from purchase of 50
Fremont 0 0 0 (36,617)
Gains on sales of strategic
investments 0 0 (12,864) 0
Income tax effects and
adjustments (297,107) (65,916) (388,921) (114,207)
-------- ------- -------- --------
Non-GAAP net income $170,426 $128,263 $337,959 $236,598
======== ======== ======== ========
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Non-GAAP diluted earnings per share
-----------------------------------
GAAP diluted net income per share $0.33 $0.00 $0.39 $0.00
Plus:
Amortization of purchased intangibles 0.07 0.06 0.12 0.12
Amortization of acquired lease intangible 0.00 0.00 0.00 0.00
Stock-based expense 0.26 0.22 0.54 0.43
Amortization of debt discount, net 0.01 0.01 0.02 0.02
Less:
Operating lease termination resulting from
purchase of 50 Fremont 0.00 0.00 0.00 (0.05)
Gains on sales of strategic investments 0.00 0.00 (0.02) 0.00
Income tax effects and adjustments (0.43) (0.10) (0.56) (0.17)
----- ----- ----- -----
Non-GAAP diluted earnings per share $0.24 $0.19 $0.49 $0.35
===== ===== ===== =====
Shares used in computing Non-GAAP diluted
net income per share (d) 695,968 672,627 691,714 672,231
a) Amortization of purchased
intangibles were as follows:
Three Months Ended Six Months Ended
July 31, July 31,
------------------ ----------------
2016 2015 2016 2015
---- ---- ---- ----
Cost of revenues $25,544 $20,839 $47,759 $40,529
Marketing and sales 23,151 19,002 38,537 39,029
------ ------ ------ ------
$48,695 $39,841 $86,296 $79,558
======= ======= ======= =======
b) Stock-based expense was
as follows:
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Cost of revenues $23,495 $16,340 $50,129 $31,721
Research and
development 38,624 33,732 73,792 64,974
Marketing and
sales 86,323 71,724 181,797 142,258
General and
administrative 33,868 25,983 65,511 51,386
------ ------ ------ ------
$182,310 $147,779 $371,229 $290,339
======== ======== ======== ========
c) GAAP non-operating loss
consists of investment income,
interest expense, other expense
and gains on sales of strategic
investments.
d) For the three months ended July
31, 2015, the shares used in
computing Non-GAAP diluted net
income per share include the
dilutive effects from employee
stock awards and convertible
senior notes. However, as there
was a GAAP net loss for the
respective period, these do not
impact the shares used in
computing GAAP diluted net
income per share as the effects
would be anti-dilutive.
salesforce.com, inc.
COMPUTATION OF BASIC AND DILUTED GAAP AND NON-GAAP NET INCOME (LOSS) PER SHARE
(in thousands, except per share data)
(Unaudited)
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
GAAP Basic Net Income (Loss) Per Share
Net income (loss) $229,622 $(852) $268,381 $3,240
Basic net income per share $0.34 $0.00 $0.40 $0.00
Shares used in computing basic net income (loss) per share 681,126 659,366 678,929 656,636
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Non-GAAP Basic Net Income Per Share
Non-GAAP net income $170,426 $128,263 $337,959 $236,598
Basic Non-GAAP net income per share $0.25 $0.19 $0.50 $0.36
Shares used in computing basic Non-GAAP net income per
share 681,126 659,366 678,929 656,636
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
GAAP Diluted Net Income (Loss) Per Share
Net income (loss) $229,622 $(852) $268,381 $3,240
Diluted net income per share $0.33 $0.00 $0.39 $0.00
Shares used in computing diluted net income (loss) per
share 695,968 659,366 691,714 672,231
Three Months Ended July 31, Six Months Ended July 31,
--------------------------- -------------------------
2016 2015 2016 2015
---- ---- ---- ----
Non-GAAP Diluted Net Income Per Share
Non-GAAP net income $170,426 $128,263 $337,959 $236,598
Diluted Non-GAAP net income per share $0.24 $0.19 $0.49 $0.35
Shares used in computing diluted Non-GAAP net income per
share 695,968 672,627 691,714 672,231
Non-GAAP Financial Measures: This press release includes information about non-GAAP diluted earnings per share, non-GAAP tax rates, non-GAAP free cash flow, and constant currency results (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 diluted 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 Q2 and its non-GAAP estimates for Q3 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 and Losses 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.
-- 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 rate for
fiscal 2017 is 35.0 percent.
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.com
