SAN FRANCISCO, Dec. 3, 2019 /PRNewswire/ -- Salesforce
(NYSE: CRM), the global leader in CRM, today announced results for
its fiscal third quarter ended October 31,
2019.
"We're now on track to double our revenue in five years," said
Marc Benioff, Chairman and co-CEO,
Salesforce. "With Customer 360, only Salesforce is providing
companies with a single source of truth, bringing them even closer
to their customers across every touchpoint."
"We had strong growth across our clouds and regions in the
quarter as more companies turn to Salesforce as a trusted advisor
in their digital transformations," said Keith Block, co-CEO, Salesforce. "With these
trusted customer relationships, continuous innovation and our
phenomenal Trailblazer ecosystem, we have never been better
positioned for the future."
Salesforce delivered the following results for its fiscal third
quarter:
Revenue: Total third quarter revenue was $4.5 billion, an increase of 33% year-over-year,
and 34% in constant currency. Subscription and support revenues
were $4.24 billion, an increase of
34% year-over-year. Professional services and other revenues were
$274 million, an increase of 22%
year-over-year.
Earnings per Share: Third quarter GAAP loss per share was
$0.12, and non-GAAP diluted earnings
per share was $0.75. Mark-to-market
accounting of the company's strategic investments, required by ASU
2016-01, benefited GAAP loss per share by $0.01 based on a U.S. tax rate of 25% and
non-GAAP diluted earnings per share by $0.01 based on a non-GAAP tax rate of 22.5%.
Cash: Cash generated from operations for the third
quarter was $298 million, an increase
of 108% year-over-year. Total cash, cash equivalents and marketable
securities ended the third quarter at $6.53
billion.
Remaining Performance Obligation: Remaining performance
obligation ended the third quarter at approximately $25.9 billion, an increase of 22% year-over-year.
Current remaining performance obligation ended the third quarter at
approximately $12.8 billion, an
increase of 28% year-over-year, 28% in constant currency.
As of December 3, 2019, the
company is initiating revenue, earnings per share and current
remaining performance obligation growth guidance for its fourth
quarter of fiscal year 2020. The company is maintaining its revenue
guidance previously provided on November 20,
2019, and raising its GAAP earnings per share guidance,
non-GAAP earnings per share guidance, and operating cash flow
guidance previously provided on August 22,
2019 for the full fiscal year 2020. The company is
initiating revenue guidance for its first quarter of fiscal year
2021. The company is maintaining its revenue guidance previously
provided on November 20, 2019 for
full fiscal year 2021.
This guidance assumes no change to the value of the company's
strategic investment portfolio resulting from ASU 2016-01 as it is
not possible to forecast future gains and losses. In addition, the
guidance below is based on estimated GAAP tax rates that reflect
the company's currently available information, and excludes
forecasted discrete tax items such as excess tax benefits from
stock-based compensation. The GAAP tax rates may fluctuate due to
future acquisitions or other transactions.
|
Q4 FY20
Guidance
|
|
Full Year
FY20
Guidance
|
|
Q1 FY21
Guidance
|
|
Full Year
FY21
Guidance
|
Revenue
|
$4.743 - $4.753
billion
|
|
$16.99 - $17.00
billion
|
|
$4.800 - $4.835
billion
|
|
$20.80 - $20.90
billion
|
Y/Y Growth
|
~32%
|
|
~28%
|
|
28% - 29%
|
|
22% - 23%
|
GAAP (loss) earnings
per share
|
($0.04) -
($0.03)
|
|
$0.44
-$0.45
|
|
N/A
|
|
N/A
|
Non-GAAP earnings per
share
|
$0.54 -
$0.55
|
|
$2.89 -
$2.90
|
|
N/A
|
|
N/A
|
Operating Cash Flow
Growth (Y/Y)
|
N/A
|
|
22% - 23%
|
|
N/A
|
|
N/A
|
Current Remaining
Performance Obligation Growth (Y/Y)
|
~21%
|
|
N/A
|
|
N/A
|
|
N/A
|
The following is a per share reconciliation of GAAP diluted
(loss) earnings per share to non-GAAP diluted earnings per share
guidance for the next quarter and the full year:
|
Fiscal
2020
|
|
Q4
|
|
FY20
|
GAAP (loss) earnings
per share range(1)(2)
|
($0.04) -
($0.03)
|
|
$0.44
-$0.45
|
Plus
|
|
|
|
Amortization of
purchased intangibles
|
$
|
0.30
|
|
$
|
0.94
|
Stock-based
expense
|
$
|
0.55
|
|
$
|
2.09
|
Less
|
|
|
|
Income tax effects
and adjustments(3)
|
$
|
(0.27)
|
|
$
|
(0.58)
|
Non-GAAP diluted
earnings per share(2)
|
$0.54 -
$0.55
|
|
$2.89 -
$2.90
|
|
|
|
|
Shares used in
computing basic net (loss) income per share (millions)
|
888
|
|
829
|
Shares used in
computing diluted net income per share (millions)
|
914
|
|
850
|
|
(1) The
Company's GAAP tax provision is expected to be approximately 146%
for the three months ended January 31, 2020, and approximately 37%
for the year ended January 31, 2020. The GAAP tax rates may
fluctuate due to discrete tax items, future acquisitions or other
transactions.
|
(2) The
Company's projected GAAP and Non-GAAP basic and diluted earnings
(loss) per share assumes no change to the value of our strategic
investment portfolio resulting from ASU 2016-01 as it is not
possible to forecast future gains and losses. While historically
the company's strategic investment portfolio has had a positive
impact on the company's financial results, that may not be true for
future periods, particularly in periods of significant market
fluctuations that affect the publicly traded companies within the
company's strategic investment portfolio. The impact of future
gains or losses from the company's strategic investment portfolio
could be material.
|
(3) The
Company's Non-GAAP tax provision uses a long-term projected tax
rate of 22.5%, which reflects currently available information and
could be subject to change.
|
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 webcast 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 5494828. A replay will be available at
(800) 585-8367 or (855) 859-2056 until midnight (ET) Jan. 2, 2020.
About Salesforce
Salesforce, the global leader in CRM, 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 the company's financial and
operating results, which may include expected GAAP and non-GAAP
financial and other operating and non-operating results, including
revenue, net income, diluted earnings per share, operating cash
flow growth, operating margin improvement, expected revenue growth,
expected current remaining performance obligation growth, expected
tax rates, the one-time accounting non-cash charge that was
incurred in connection with
the Salesforce.org combination; stock-based compensation
expenses, amortization of purchased intangibles, shares
outstanding, market growth and sustainability goals. 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 it makes.
The risks and uncertainties referred to above include -- but are
not limited to -- risks associated with the effect of general
economic and market conditions; the impact of geopolitical events;
the impact of foreign currency exchange rate and interest rate
fluctuations on our results; our business strategy and our plan to
build our business, including our strategy to be the leading
provider of enterprise cloud computing applications and platforms;
the pace of change and innovation in enterprise cloud computing
services; the seasonal nature of our sales cycles; the competitive
nature of the market in which we participate; our international
expansion strategy; the demands on our personnel and infrastructure
resulting from significant growth in our customer base and
operations, including as a result of acquisitions; our service
performance and security, including the resources and costs
required to avoid unanticipated downtime and prevent, detect and
remediate potential security breaches; the expenses associated with
our data centers and third-party infrastructure providers;
additional data center capacity; real estate and office facilities
space; our operating results and cash flows; new services and
product features, including any efforts to expand our services
beyond the CRM market; our strategy of acquiring or making
investments in complementary businesses, joint ventures, services,
technologies and intellectual property rights; the performance and
fair value of our investments in complementary businesses through
our strategic investment portfolio; our ability to realize the
benefits from strategic partnerships, joint ventures and
investments; the impact of future gains or losses from our
strategic investment portfolio, including gains or losses from
overall market conditions that may affect the publicly traded
companies within our strategic investment portfolio; our ability to
execute our business plans; our ability to successfully integrate
acquired businesses and technologies; our ability to continue to
grow unearned revenue and remaining performance obligation; our
ability to protect our intellectual property rights; our ability to
develop our brands; our reliance on third-party hardware, software
and platform providers; our dependency on the development and
maintenance of the infrastructure of the Internet; the effect of
evolving domestic and foreign government regulations, including
those related to the provision of services on the Internet, those
related to accessing the Internet, and those addressing data
privacy, cross-border data transfers and import and export
controls; the valuation of our deferred tax assets and the release
of related valuation allowances; the potential availability of
additional tax assets in the future; the impact of new accounting
pronouncements and tax laws; uncertainties affecting our ability to
estimate our tax rate; uncertainties regarding our tax obligations
in connection with potential jurisdictional transfers of
intellectual property, including the tax rate, the timing of the
transfer and the value of such transferred intellectual property;
the impact of expensing stock options and other equity awards; the
sufficiency of our capital resources; factors related to our
outstanding debt, revolving credit facility, term loan and loan
associated with 50 Fremont; compliance with our debt covenants and
lease obligations; current and potential litigation involving us;
and the impact of climate change.
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 it makes 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.
© 2019 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 millions,
except per share data)
|
(Unaudited)
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
Subscription and
support
|
$
|
4,239
|
|
$
|
3,168
|
|
$
|
11,480
|
|
$
|
9,038
|
Professional services
and other
|
274
|
|
224
|
|
767
|
|
641
|
Total
revenues
|
4,513
|
|
3,392
|
|
12,247
|
|
9,679
|
Cost of revenues
(1)(2):
|
|
|
|
|
|
|
|
Subscription and
support
|
870
|
|
676
|
|
2,275
|
|
1,887
|
Professional services
and other
|
264
|
|
213
|
|
740
|
|
618
|
Total cost of
revenues
|
1,134
|
|
889
|
|
3,015
|
|
2,505
|
Gross
profit
|
3,379
|
|
2,503
|
|
9,232
|
|
7,174
|
Operating expenses
(1)(2):
|
|
|
|
|
|
|
|
Research and
development
|
774
|
|
481
|
|
1,935
|
|
1,368
|
Marketing and
sales
|
2,063
|
|
1,588
|
|
5,584
|
|
4,421
|
General and
administrative
|
477
|
|
342
|
|
1,214
|
|
987
|
Loss on settlement of
Salesforce.org reseller agreement (3)
|
0
|
|
0
|
|
166
|
|
0
|
Total operating
expenses
|
3,314
|
|
2,411
|
|
8,899
|
|
6,776
|
Income from
operations
|
65
|
|
92
|
|
333
|
|
398
|
Gains on strategic
investments, net
|
6
|
|
63
|
|
396
|
|
417
|
Other
expense
|
(7)
|
|
(27)
|
|
(19)
|
|
(71)
|
Income before benefit
from (provision for) income taxes
|
64
|
|
128
|
|
710
|
|
744
|
Benefit from
(provision for) income taxes
|
(173)
|
|
(23)
|
|
(336)
|
|
4
|
Net income
(loss)
|
$
|
(109)
|
|
$
|
105
|
|
$
|
374
|
|
$
|
748
|
Basic net income
(loss) per share
|
$
|
(0.12)
|
|
$
|
0.14
|
|
$
|
0.46
|
|
$
|
1.00
|
Diluted net income
(loss) per share
|
$
|
(0.12)
|
|
$
|
0.13
|
|
$
|
0.45
|
|
$
|
0.97
|
Shares used in
computing basic net income (loss) per share
|
879
|
|
760
|
|
809
|
|
746
|
Shares used in
computing diluted net income (loss) per share
|
879
|
|
785
|
|
829
|
|
772
|
|
(1) Amounts
include amortization of intangible assets acquired through business
combinations, as follows:
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cost of
revenues
|
$
|
157
|
|
$
|
62
|
|
$
|
280
|
|
$
|
153
|
Marketing and
sales
|
109
|
|
67
|
|
242
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Amounts
include stock-based expense, as follows:
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cost of
revenues
|
$
|
54
|
|
$
|
42
|
|
$
|
143
|
|
$
|
119
|
Research and
development
|
169
|
|
81
|
|
348
|
|
228
|
Marketing and
sales
|
249
|
|
180
|
|
625
|
|
474
|
General and
administrative
|
71
|
|
48
|
|
158
|
|
133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Amount
represents a one-time non-cash charge related to the settlement of
the reseller agreement between Salesforce and Salesforce.org, a
related party.
|
salesforce.com,
inc.
|
Consolidated
Statements of Operations
|
(As a
percentage of total revenues)
|
(Unaudited)
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
Subscription and
support
|
94
|
%
|
|
93
|
%
|
|
94
|
%
|
|
93
|
%
|
Professional services
and other
|
6
|
|
|
7
|
|
|
6
|
|
|
7
|
|
Total
revenues
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
Cost of revenues
(1)(2):
|
|
|
|
|
|
|
|
Subscription and
support
|
19
|
|
|
20
|
|
|
19
|
|
|
20
|
|
Professional services
and other
|
6
|
|
|
6
|
|
|
6
|
|
|
6
|
|
Total cost of
revenues
|
25
|
|
|
26
|
|
|
25
|
|
|
26
|
|
Gross
profit
|
75
|
|
|
74
|
|
|
75
|
|
|
74
|
|
Operating expenses
(1)(2):
|
|
|
|
|
|
|
|
Research and
development
|
17
|
|
|
14
|
|
|
16
|
|
|
14
|
|
Marketing and
sales
|
46
|
|
|
47
|
|
|
45
|
|
|
46
|
|
General and
administrative
|
11
|
|
|
10
|
|
|
10
|
|
|
10
|
|
Loss on settlement of
Salesforce.org reseller agreement
|
0
|
|
|
0
|
|
|
1
|
|
|
0
|
|
Total operating
expenses
|
74
|
|
|
71
|
|
|
72
|
|
|
70
|
|
Income from
operations
|
1
|
|
|
3
|
|
|
3
|
|
|
4
|
|
Gains on strategic
investments, net
|
0
|
|
|
2
|
|
|
3
|
|
|
4
|
|
Other
expense
|
0
|
|
|
(1)
|
|
|
0
|
|
|
0
|
|
Income before benefit
from (provision for) income taxes
|
1
|
|
|
4
|
|
|
6
|
|
|
8
|
|
Benefit from
(provision for) income taxes
|
(3)
|
|
|
(1)
|
|
|
(3)
|
|
|
0
|
|
Net income
(loss)
|
(2)
|
%
|
|
3
|
%
|
|
3
|
%
|
|
8
|
%
|
|
(1)
Amounts include amortization of intangible assets
acquired through business combinations as a percentage of total
revenues, as follows:
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cost of
revenues
|
4
|
%
|
|
2
|
%
|
|
2
|
%
|
|
2
|
%
|
Marketing and
sales
|
2
|
|
|
2
|
|
|
2
|
|
|
2
|
|
|
(2) Stock-based expense as a
percentage of total revenues, as follows:
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cost of
revenues
|
1
|
%
|
|
1
|
%
|
|
1
|
%
|
|
1
|
%
|
Research and
development
|
4
|
|
|
2
|
|
|
3
|
|
|
2
|
|
Marketing and
sales
|
6
|
|
|
5
|
|
|
5
|
|
|
5
|
|
General and
administrative
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
salesforce.com,
inc.
|
Consolidated
Balance Sheets
|
(in
millions)
|
(Unaudited)
|
|
|
October 31,
2019
|
|
January 31,
2019
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
3,868
|
|
$
|
2,669
|
Marketable
securities
|
2,661
|
|
1,673
|
Accounts receivable,
net
|
2,573
|
|
4,924
|
Costs capitalized to
obtain revenue contracts, net
|
813
|
|
788
|
Prepaid expenses and
other current assets
|
1,111
|
|
629
|
Total current
assets
|
11,026
|
|
10,683
|
Property and
equipment, net
|
2,365
|
|
2,051
|
Operating lease
right-of-use assets (1)
|
3,150
|
|
0
|
Costs capitalized to
obtain revenue contracts, noncurrent, net
|
1,103
|
|
1,232
|
Strategic
investments
|
1,760
|
|
1,302
|
Goodwill
|
25,022
|
|
12,851
|
Intangible assets
acquired through business combinations, net
|
4,987
|
|
1,923
|
Capitalized software
and other assets, net
|
529
|
|
695
|
Total
assets
|
$
|
49,942
|
|
$
|
30,737
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable,
accrued expenses and other liabilities
|
$
|
2,881
|
|
$
|
2,691
|
Operating lease
liabilities, current (1)
|
735
|
|
0
|
Unearned
revenue
|
6,858
|
|
8,564
|
Total current
liabilities
|
10,474
|
|
11,255
|
Noncurrent
debt
|
2,824
|
|
3,173
|
Noncurrent operating
lease liabilities (1)
|
2,535
|
|
0
|
Other noncurrent
liabilities
|
830
|
|
704
|
Total
liabilities
|
16,663
|
|
15,132
|
Stockholders'
equity:
|
|
|
|
Common
stock
|
1
|
|
1
|
Additional paid-in
capital
|
31,243
|
|
13,927
|
Accumulated other
comprehensive loss
|
(74)
|
|
(58)
|
Retained
earnings
|
2,109
|
|
1,735
|
Total stockholders'
equity
|
33,279
|
|
15,605
|
Total liabilities and
stockholders' equity
|
$
|
49,942
|
|
$
|
30,737
|
|
(1)
Reflects the modified retrospective adoption of Accounting
Standards Update No. 2016-02, "Leases (Topic 842)", which the
Company adopted on February 1, 2019.
|
salesforce.com,
inc.
|
Consolidated
Statements of Cash Flows
|
(in
millions)
|
(Unaudited)
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Operating
activities:
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
(109)
|
|
$
|
105
|
|
$
|
374
|
|
$
|
748
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
608
|
|
257
|
|
1,502
|
|
707
|
Amortization of costs
capitalized to obtain revenue contracts, net
|
221
|
|
190
|
|
647
|
|
561
|
Expenses related to
employee stock plans
|
543
|
|
351
|
|
1,274
|
|
954
|
Loss on settlement of
Salesforce.org reseller agreement
|
0
|
|
0
|
|
166
|
|
0
|
Gains on strategic
investments, net
|
(6)
|
|
(63)
|
|
(396)
|
|
(417)
|
Changes in assets and
liabilities, net of business combinations:
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
(29)
|
|
(48)
|
|
2,599
|
|
1,965
|
Costs capitalized to
obtain revenue contracts, net
|
(246)
|
|
(186)
|
|
(543)
|
|
(450)
|
Prepaid expenses and
other current assets and other assets
|
(183)
|
|
82
|
|
(252)
|
|
(4)
|
Accounts
payable
|
22
|
|
(42)
|
|
63
|
|
79
|
Accrued expenses and
other liabilities
|
243
|
|
8
|
|
(50)
|
|
(390)
|
Operating lease
liabilities
|
(200)
|
|
0
|
|
(546)
|
|
0
|
Unearned
revenue
|
(566)
|
|
(511)
|
|
(2,139)
|
|
(1,686)
|
Net cash provided by
operating activities
|
298
|
|
143
|
|
2,699
|
|
2,067
|
Investing
activities:
|
|
|
|
|
|
|
|
Business
combinations, net of cash acquired
|
94
|
|
(130)
|
|
(339)
|
|
(5,115)
|
Purchases of
strategic investments
|
(346)
|
|
(108)
|
|
(567)
|
|
(292)
|
Sales of strategic
investments
|
138
|
|
83
|
|
403
|
|
89
|
Purchases of
marketable securities
|
(438)
|
|
(343)
|
|
(1,944)
|
|
(634)
|
Sales of marketable
securities
|
427
|
|
79
|
|
888
|
|
1,352
|
Maturities of
marketable securities
|
358
|
|
10
|
|
551
|
|
98
|
Capital
expenditures
|
(170)
|
|
(136)
|
|
(507)
|
|
(428)
|
Net cash provided by
(used in) investing activities
|
63
|
|
(545)
|
|
(1,515)
|
|
(4,930)
|
Financing
activities:
|
|
|
|
|
|
|
|
Proceeds from
issuance of debt, net
|
0
|
|
0
|
|
0
|
|
2,966
|
Proceeds from
employee stock plans
|
179
|
|
185
|
|
550
|
|
568
|
Principal payments on
financing obligations (1)
|
(14)
|
|
(2)
|
|
(159)
|
|
(110)
|
Repayments of
debt
|
(150)
|
|
(1)
|
|
(352)
|
|
(1,028)
|
Net cash provided by
financing activities
|
15
|
|
182
|
|
39
|
|
2,396
|
Effect of exchange
rate changes
|
(18)
|
|
6
|
|
(24)
|
|
29
|
Net increase
(decrease) in cash and cash equivalents
|
358
|
|
(214)
|
|
1,199
|
|
(438)
|
Cash and cash
equivalents, beginning of period
|
3,510
|
|
2,319
|
|
2,669
|
|
2,543
|
Cash and cash
equivalents, end of period
|
$
|
3,868
|
|
$
|
2,105
|
|
$
|
3,868
|
|
$
|
2,105
|
|
(1)
Previously referred to as principal payments on capital lease
obligations.
|
salesforce.com,
inc.
|
|
|
Additional
Metrics
|
|
|
(Unaudited)
|
|
|
|
|
|
|
October 31,
2019
|
|
July 31,
2019
|
|
Apr 30,
2019
|
|
Jan 31,
2019
|
|
Oct 31,
2018
|
|
Jul 31,
2018
|
Full Time
Equivalent Headcount (1)
|
47,677
|
|
40,571
|
|
37,485
|
|
35,995
|
|
34,391
|
|
32,717
|
Financial data (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents
and marketable securities (2)
|
$
|
6,529
|
|
$
|
6,042
|
|
$
|
6,379
|
|
$
|
4,342
|
|
$
|
3,450
|
|
$
|
3,427
|
Strategic
investments
|
1,760
|
|
1,614
|
|
1,548
|
|
1,302
|
|
1,251
|
|
1,202
|
Operating lease
liabilities (3)
|
3,270
|
|
3,047
|
|
3,058
|
|
NA
|
|
NA
|
|
NA
|
Principal due on the
Company's outstanding debt obligations (4)
|
2,845
|
|
2,996
|
|
3,197
|
|
3,198
|
|
3,699
|
|
3,700
|
Net cash provided by
operating activities
|
298
|
|
436
|
|
1,965
|
|
1,331
|
|
143
|
|
458
|
Capital
expenditures
|
170
|
|
178
|
|
159
|
|
167
|
|
136
|
|
170
|
|
(1) Full time
equivalent headcount includes 5,231 from third quarter fiscal 2020
acquisitions.
|
(2) We paid
approximately $1.1 billion of cash consideration for business
combinations during the nine months ended October 31, 2019, offset
by approximately $644 million of cash and cash equivalents acquired
in connection with the August 2019 acquisition of Tableau as well
as approximately $110 million of cash and cash equivalents
from other acquisitions.
|
(3) Effective
February 1, 2019, the Company adopted Topic 842 using the modified
retrospective method. Accordingly, the results for prior periods
were not adjusted to conform to the current period measurement or
recognition of results.
|
(4) The Company
repaid $200 million and $150 million of the 2021 Term Loan in June
2019 and October 2019, respectively. In November 2019, the Company
repaid the remaining $150 million of the 2021 Term Loan.
|
Supplemental Revenue Analysis
Remaining Performance Obligation
Transaction price allocated to the remaining performance
obligations represents contracted revenue that has not yet been
recognized, which includes unearned revenue and unbilled amounts
that will be recognized as revenue in future periods. Transaction
price allocated to the remaining performance obligation is
influenced by several factors, including seasonality, the timing of
renewals, average contract terms and foreign currency exchange
rates. Unbilled portions of the remaining transaction price
denominated in foreign currencies are revalued each period based on
the period end exchange rates.
The portion of the remaining performance obligation that is
unbilled is not recorded on the balance sheet. Remaining
performance obligation consisted of the following (in
billions):
|
Current
|
|
Noncurrent
|
|
Total
|
As of October 31,
2019 (1)
|
$
|
12.8
|
|
$
|
13.1
|
|
$
|
25.9
|
As of July 31,
2019
|
12.1
|
|
13.2
|
|
25.3
|
As of April 30,
2019
|
11.8
|
|
13.1
|
|
24.9
|
As of January 31,
2019
|
11.9
|
|
13.8
|
|
25.7
|
As of October 31,
2018
|
10.0
|
|
11.2
|
|
21.2
|
As of July 31,
2018
|
9.8
|
|
11.2
|
|
21.0
|
As of April 30,
2018
|
9.6
|
|
10.8
|
|
20.4
|
As of January 31,
2018
|
9.6
|
|
11.0
|
|
20.6
|
|
(1) Includes $550
million of Remaining Performance Obligation related to the Tableau
business combination in August 2019.
|
Unearned Revenue
Unearned revenue represents amounts that have been invoiced in
advance of revenue recognition and is recognized as revenue when
transfer of control to customers has occurred or services have been
provided. The change in unearned revenue was as follows (in
millions):
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Unearned revenue,
beginning of period
|
$
|
7,142
|
|
$
|
5,883
|
|
$
|
8,564
|
|
$
|
6,995
|
Billings and
other*
|
3,886
|
|
2,870
|
|
9,996
|
|
7,956
|
Contribution from
contract asset
|
61
|
|
11
|
|
112
|
|
36
|
Revenue recognized
ratably over time
|
(4,047)
|
|
(3,169)
|
|
(11,270)
|
|
(9,093)
|
Revenue recognized
over time as delivered
|
(184)
|
|
(161)
|
|
(530)
|
|
(460)
|
Revenue recognized at
a point in time
|
(282)
|
|
(62)
|
|
(447)
|
|
(126)
|
Unearned revenue from
business combinations
|
282
|
|
4
|
|
433
|
|
68
|
Unearned revenue, end
of period
|
$
|
6,858
|
|
$
|
5,376
|
|
$
|
6,858
|
|
$
|
5,376
|
|
*Other includes,
for example, the impact of foreign currency
translation
|
Disaggregation of Revenue
Subscription and Support Revenue by the Company's service
offerings
Subscription and support revenues consisted of the following (in
millions):
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Sales
Cloud
|
$
|
1,168
|
|
$
|
1,020
|
|
$
|
3,371
|
|
$
|
2,989
|
Service
Cloud
|
1,140
|
|
917
|
|
3,247
|
|
2,657
|
Salesforce Platform
and Other
|
1,287
|
|
742
|
|
3,041
|
|
2,029
|
Marketing and
Commerce Cloud
|
644
|
|
489
|
|
1,821
|
|
1,363
|
|
$
|
4,239
|
|
$
|
3,168
|
|
$
|
11,480
|
|
$
|
9,038
|
The above subscription and support revenue includes
approximately $308 million of revenue
contributed from the acquisition of Tableau for the period,
reflected in Salesforce Platform and Other.
Total Revenue by Geographic Locations
Revenues by geographical region consisted of the following (in
millions):
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Americas
|
$
|
3,216
|
|
$
|
2,425
|
|
$
|
8,649
|
|
$
|
6,864
|
Europe
|
880
|
|
641
|
|
2,421
|
|
1,876
|
Asia
Pacific
|
417
|
|
326
|
|
1,177
|
|
939
|
|
$
|
4,513
|
|
$
|
3,392
|
|
$
|
12,247
|
|
$
|
9,679
|
|
|
|
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Americas
|
71
|
%
|
|
71
|
%
|
|
71
|
%
|
|
71
|
%
|
Europe
|
20
|
|
|
19
|
|
|
20
|
|
|
19
|
|
Asia
Pacific
|
9
|
|
|
10
|
|
|
9
|
|
|
10
|
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency Growth Rates
The Company presents constant currency information to provide a
framework for assessing how the Company's 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.
Revenue constant currency growth rates were as follows:
|
Three Months
Ended
October 31, 2019
compared to Three Months
Ended October 31, 2018
|
|
Three Months
Ended
July 31, 2019
compared to Three Months
Ended July 31, 2018
|
|
Three Months
Ended
October 31, 2018
compared to Three Months
Ended October 31, 2017
|
Americas
|
33%
|
|
20%
|
|
25%
|
Europe
|
42%
|
|
30%
|
|
31%
|
Asia
Pacific
|
28%
|
|
27%
|
|
26%
|
Total
growth
|
34%
|
|
23%
|
|
26%
|
The Company presents constant currency information for current
remaining performance obligation to provide a framework for
assessing how the Company's underlying business performed excluding
the effects of foreign currency rate fluctuations. To present
the information, the Company converted the current remaining
performance obligation balances in local currencies in previous
comparable periods using the United
States dollar currency exchange rate as of the most recent
balance sheet date.
Current remaining performance obligation constant currency
growth rates were as follows:
|
October 31,
2019
compared to
October 31, 2018
|
|
July 31,
2019
compared to
July 31, 2018
|
Total
growth
|
28%
|
|
25%
|
Supplemental Strategic Investment Information
Gains on strategic investments, net
All fair value adjustments of the Company's publicly traded and
privately held equity investments are recorded through the
statement of operations. Therefore, the Company anticipates
additional volatility to the Company's statements of operations in
future periods, due to changes in market prices of the Company's
investments in publicly held equity investments and the valuation
and timing of observable price changes and impairments of the
Company's investments in privately held securities. These changes
could be material based on market conditions and events. The
results for the current fiscal period are not indicative of the
results to be expected for any subsequent quarter or fiscal
year.
Gains and losses recognized on strategic investments were as
follows (in millions):
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Unrealized gains
(losses) recognized on publicly traded equity securities,
net
|
$
|
(84)
|
|
$
|
(14)
|
|
$
|
132
|
|
$
|
262
|
Unrealized gains
recognized on privately held equity securities, net
|
77
|
|
18
|
|
199
|
|
99
|
Realized gains on
sales of equity securities, net
|
14
|
|
59
|
|
76
|
|
68
|
Losses on debt
securities, net
|
(1)
|
|
0
|
|
(11)
|
|
(12)
|
Gains on strategic
investments, net
|
$
|
6
|
|
$
|
63
|
|
$
|
396
|
|
$
|
417
|
Supplemental Debt Information
The carrying values of the Company's borrowings were as follows
(in millions):
Instrument
|
|
Date of
issuance
|
|
Maturity
date
|
|
October 31,
2019
|
|
January 31,
2019
|
2021 Term
Loan
|
|
May 2018
|
|
May 2021
|
|
150(1)
|
|
$
|
499
|
2023 Senior
Notes
|
|
April 2018
|
|
April 2023
|
|
994
|
|
993
|
2028 Senior
Notes
|
|
April 2018
|
|
April 2028
|
|
1,489
|
|
1,488
|
Loan assumed on 50
Fremont
|
|
February
2015
|
|
June 2023
|
|
194
|
|
196
|
Total carrying value
of debt
|
|
|
|
|
|
2,827
|
|
3,176
|
Less current portion
of debt
|
|
|
|
|
|
(3)
|
|
(3)
|
Total noncurrent
debt
|
|
|
|
|
|
$
|
2,824
|
|
$
|
3,173
|
|
(1) The Company
repaid $200 million and $150 million of the 2021 Term Loan in June
2019 and October 2019, respectively. In November 2019, the Company
repaid the remaining $150 million of the 2021 Term Loan.
|
salesforce.com,
inc.
|
GAAP Results
Reconciled to non-GAAP Results
|
The following table
reflects selected GAAP results reconciled to non-GAAP
results.
|
(in millions, except
per share data)
|
(Unaudited)
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Non-GAAP gross
profit
|
|
|
|
|
|
|
|
GAAP gross
profit
|
$
|
3,379
|
|
$
|
2,503
|
|
$
|
9,232
|
|
$
|
7,174
|
Plus:
|
|
|
|
|
|
|
|
Amortization of
purchased intangibles (1)
|
157
|
|
62
|
|
280
|
|
153
|
Stock-based expense
(2)
|
54
|
|
42
|
|
143
|
|
119
|
Non-GAAP gross
profit
|
$
|
3,590
|
|
$
|
2,607
|
|
$
|
9,655
|
|
$
|
7,446
|
Non-GAAP operating
expenses
|
|
|
|
|
|
|
|
GAAP operating
expenses
|
$
|
3,314
|
|
$
|
2,411
|
|
$
|
8,899
|
|
$
|
6,776
|
Less:
|
|
|
|
|
|
|
|
Amortization of
purchased intangibles (1)
|
109
|
|
67
|
|
242
|
|
164
|
Stock-based expense
(2)
|
489
|
|
309
|
|
1,131
|
|
835
|
Non-GAAP operating
expenses
|
$
|
2,716
|
|
$
|
2,035
|
|
$
|
7,526
|
|
$
|
5,777
|
Non-GAAP income
from operations
|
|
|
|
|
|
|
|
GAAP income from
operations
|
$
|
65
|
|
$
|
92
|
|
$
|
333
|
|
$
|
398
|
Plus:
|
|
|
|
|
|
|
|
Amortization of
purchased intangibles (1)
|
266
|
|
129
|
|
522
|
|
317
|
Stock-based expense
(2)
|
543
|
|
351
|
|
1,274
|
|
954
|
Non-GAAP income from
operations
|
$
|
874
|
|
$
|
572
|
|
$
|
2,129
|
|
$
|
1,669
|
Non-GAAP
non-operating income (loss) (3)
|
|
|
|
|
|
|
|
GAAP non-operating
income (loss)
|
$
|
(1)
|
|
$
|
36
|
|
$
|
377
|
|
$
|
346
|
Plus:
|
|
|
|
|
|
|
|
Amortization of debt
discount, net
|
0
|
|
0
|
|
0
|
|
4
|
Non-GAAP
non-operating income (loss)
|
$
|
(1)
|
|
$
|
36
|
|
$
|
377
|
|
$
|
350
|
Non-GAAP net
income
|
|
|
|
|
|
|
|
GAAP net income
(loss)
|
$
|
(109)
|
|
$
|
105
|
|
$
|
374
|
|
$
|
748
|
Plus:
|
|
|
|
|
|
|
|
Amortization of
purchased intangibles (1)
|
266
|
|
129
|
|
522
|
|
317
|
Stock-based expense
(2)
|
543
|
|
351
|
|
1,274
|
|
954
|
Amortization of debt
discount, net
|
0
|
|
0
|
|
0
|
|
4
|
Less:
|
|
|
|
|
|
|
|
Income tax effects
and adjustments
|
(23)
|
|
(108)
|
|
(228)
|
|
(438)
|
Non-GAAP net
income
|
$
|
677
|
|
$
|
477
|
|
$
|
1,942
|
|
$
|
1,585
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Non-GAAP diluted
earnings per share
|
|
|
|
|
|
|
|
GAAP diluted net
income (loss) per share
|
$
|
(0.12)
|
|
$
|
0.13
|
|
$
|
0.45
|
|
$
|
0.97
|
Plus:
|
|
|
|
|
|
|
|
Amortization of
purchased intangibles
|
0.30
|
|
0.17
|
|
0.63
|
|
0.41
|
Stock-based
expense
|
0.60
|
|
0.45
|
|
1.54
|
|
1.23
|
Amortization of debt
discount, net
|
0.00
|
|
0.00
|
|
0.00
|
|
0.01
|
Less:
|
|
|
|
|
|
|
|
Income tax effects
and adjustments
|
(0.03)
|
|
(0.14)
|
|
(0.28)
|
|
(0.57)
|
Non-GAAP diluted
earnings per share
|
$
|
0.75
|
|
$
|
0.61
|
|
$
|
2.34
|
|
$
|
2.05
|
Shares used in
computing Non-GAAP diluted net income per share
|
898
|
|
785
|
|
829
|
|
772
|
Reported GAAP loss per share was calculated using the basic
share count. Non-GAAP diluted earnings per share was calculated
using the diluted share count which includes approximately 19
million shares of dilutive securities related to employee stock
awards.
1) Amortization
of purchased intangibles were as follows:
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cost of
revenues
|
$
|
157
|
|
$
|
62
|
|
$
|
280
|
|
$
|
153
|
Marketing and
sales
|
109
|
|
67
|
|
242
|
|
164
|
|
$
|
266
|
|
$
|
129
|
|
$
|
522
|
|
$
|
317
|
|
2) Stock-based
expense was as follows:
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cost of
revenues
|
$
|
54
|
|
$
|
42
|
|
$
|
143
|
|
$
|
119
|
Research and
development
|
169
|
|
81
|
|
348
|
|
228
|
Marketing and
sales
|
249
|
|
180
|
|
625
|
|
474
|
General and
administrative
|
71
|
|
48
|
|
158
|
|
133
|
|
$
|
543
|
|
$
|
351
|
|
$
|
1,274
|
|
$
|
954
|
|
3) GAAP
non-operating income consists of investment income, interest
expense, gains on strategic investments, net and other
income.
|
salesforce.com,
inc.
|
Computation of
Basic and Diluted GAAP and non-GAAP Net Income (Loss) Per
Share
|
(in millions, except
per share data)
|
(Unaudited)
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
GAAP Basic Net
Income (Loss) Per Share
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
(109)
|
|
$
|
105
|
|
$
|
374
|
|
$
|
748
|
Basic net income
(loss) per share
|
$
|
(0.12)
|
|
$
|
0.14
|
|
$
|
0.46
|
|
$
|
1.00
|
Shares used in
computing basic net income (loss) per share
|
879
|
|
760
|
|
809
|
|
746
|
|
|
|
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Non-GAAP Basic Net
Income Per Share
|
|
|
|
|
|
|
|
Non-GAAP net
income
|
$
|
677
|
|
$
|
477
|
|
$
|
1,942
|
|
$
|
1,585
|
Basic Non-GAAP net
income per share
|
$
|
0.77
|
|
$
|
0.63
|
|
$
|
2.40
|
|
$
|
2.12
|
Shares used in
computing basic Non-GAAP net income per share
|
879
|
|
760
|
|
809
|
|
746
|
|
|
|
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
GAAP Diluted Net
Income (Loss) Per Share
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
(109)
|
|
$
|
105
|
|
$
|
374
|
|
$
|
748
|
Diluted net income
(loss) per share
|
$
|
(0.12)
|
|
$
|
0.13
|
|
$
|
0.45
|
|
$
|
0.97
|
Shares used in
computing diluted net income (loss) per share
|
879
|
|
785
|
|
829
|
|
772
|
|
|
|
|
|
|
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Non-GAAP Diluted
Net Income Per Share
|
|
|
|
|
|
|
|
Non-GAAP net
income
|
$
|
677
|
|
$
|
477
|
|
$
|
1,942
|
|
$
|
1,585
|
Diluted Non-GAAP net
income per share
|
$
|
0.75
|
|
$
|
0.61
|
|
$
|
2.34
|
|
$
|
2.05
|
Shares used in
computing diluted Non-GAAP net income per share
|
898
|
|
785
|
|
829
|
|
772
|
Non-GAAP Financial Measures: This press release
includes information about non-GAAP diluted earnings per share,
non-GAAP tax rates and constant currency revenue and constant
currency current remaining performance obligation growth rates
(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 and to
enable investors to evaluate the company's results in the same way
management does. Management believes that supplementing GAAP
disclosure with non-GAAP disclosure 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, to the extent
applicable, the impact of the following items: stock-based
compensation, amortization of acquisition-related intangibles, and
previously the net amortization of debt discount on the company's
convertible senior notes, as well as income tax adjustments. These
items are excluded because the decisions that give rise to them are
not made to increase revenue in a particular period, but instead
for the company's long-term benefit over multiple
periods.
Specifically, management is excluding the following items from
its non-GAAP earnings per share, as applicable, for the periods
presented in the Q3 FY20 financial statements and for its non-GAAP
estimates for Q4 and FY20:
- 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, and in some cases, 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, which is not
typically affected by operations during any particular period.
Although we exclude the amortization of purchased intangibles from
these non-GAAP measures, management believes that it is important
for investors to understand that such intangible assets were
recorded as part of purchase accounting and contribute to revenue
generation.
- Gains on Strategic Investments, net: Upon the adoption of
Accounting Standards Update 2016-01 on February 1, 2018, the company is required to
record all fair value adjustments to its equity securities held
within the strategic investment portfolio through the statement of
operations. As it is not possible to forecast future gains and
losses, the company assumes no change to the value of its strategic
investment portfolio in its GAAP and non-GAAP estimates for future
periods.
- 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 items such as changes in the tax
valuation allowance and tax effects of acquisition-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 and the amortization of
purchased intangibles. The projected rate also assumes no new
acquisitions in the three-year period, and considers other factors
including the company's expected tax structure, its tax positions
in various jurisdictions and key legislation in major jurisdictions
where the company operates. For fiscal 2020, the company uses a
projected non-GAAP tax rate of 22.5%, which reflects currently
available information, as well as other factors and assumptions.
The non-GAAP tax rate could be subject to change for a variety of
reasons, including the rapidly evolving global tax environment,
significant changes in the company's geographic earnings mix due to
acquisition activity, or other changes to the company's strategy or
business operations. The company will re-evaluate its long-term
rate as appropriate.
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SOURCE Salesforce