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SalesForce.com (CRM) reported QE October 2011 financial results on Thursday, November 17, 2011
1 - All financial data below is GAAP, which results in a lower financial performance.
2 - SalesForce.com also reports Non-GAAP, which results in a higher earnings per share.
3 - Non-GAAP does not include stock-based compensation expense, amortization of purchased intangibles, non-cash interest expense related to convertible senior notes, and the related tax consequences.
4 - See full management disclosure lower in this post.
SalesForce.com (CRM) Reports 4th Consecutive Operating Loss: Loss per Share -$0.03
SalesForce.com (CRM) Prelude QE October 2011 How do you describe this dog and pony show of questionable financial performance, hyped press releases, and "locker room talk" earnings calls? CEO Mark Benioff may be a cloud visionary and consummate promoter, but translating this to financial performance and maximizing shareholder wealth has not been part of the vision recently. The gist of CEO Benioff's spiel is increasing revenues, beating Oracle, promoting his DreamForce conferences, and a general onwards and upwards forevermore tone including ultimately $10B annual revenues! The 4 most recent quarters have been not only been unimpressive, but each quarter increases investor concern and uncertainty. The past 4 quarters net total GAAP EPS has been +$0.02 on GAAP net losses of -$6.81 million. In addition, the GAAP operating losses have been -$29.10 million!
SalesForce.com (CRM) Summary QE October 2011 (GAAP) GAAP financial performance continues deteriorating. Revenues continue increasing as return on assets continue decreasing to the current dismal, and negative, -0.21%. A 2nd consecutive quarterly GAAP net loss and 4 consecutive quarterly GAAP operating losses have been reported. Cash flow per share is a positive for CRM, a 2-quarter high of $0.95. Financial position overall remains adequate, but unless financial performance can be improved will deteriorate further. The stock is priced for a stellar future performance that does not appear to be on the horizon. Of even more concern is CEO Marc Benioff typically not commenting on poor financial performance but instead pumping the annual DreamForce meeting and wanting us all to be there. Further, there is The Mystery of the Unknown Customers Headcount. There were 104,000 customers the prior quarter but this quarterly data was not included in the press release this quarter. Presumably this means the customer count decreased and omitted. Also of concern is the decrease in both accounts receivable and deferred revenues while deferred commissions increased, which is indicative of flattening sales and increased revenue acquisition costs..
SalesForce.com (CRM) Income Statement QE October 2011 (GAAP) SalesForce.com (CRM) reported total revenues of $584.26M, a net operating loss of -$10.16M, and a loss per share of -$0.03. From the prior QE July 2012, total revenues were up +7.01%, net income down -426.71%, and loss per share was flat at 0.00%. From the prior year QE October 2011, these were up +36.16%, down -162.34%, and down -120.00%, respectively. Gross margin was flat at 78.00% but continues below the historical average. Operating and net margins were down, and negative, to -1.74% and -2.39%, respectively. Cash flow from operations was up QoQ and YoY to $0.95 per share. The operating expense ratio (operating expenses divided by total revenues) of 79.73% is extremely high.
SalesForce.com (CRM) Summary QE October 2011 (GAAP) GAAP financial performance continues deteriorating. Revenues continue increasing as return on assets continue decreasing to the current dismal, and negative, -0.21%. A 2nd consecutive quarterly GAAP net loss and 4 consecutive quarterly GAAP operating losses have been reported. Cash flow per share is a positive for CRM, a 2-quarter high of $0.95. Financial position overall remains adequate, but unless financial performance can be improved will deteriorate further. The stock is priced for a stellar future performance that does not appear to be on the horizon. Of even more concern is CEO Marc Benioff typically not commenting on poor financial performance but instead pumping the annual DreamForce meeting and wanting us all to be there. Further, there is The Mystery of the Unknown Customers Headcount. There were 104,000 customers the prior quarter but this quarterly data was not included in the press release this quarter. Presumably this means the customer count decreased and omitted. Also of concern is the decrease in both accounts receivable and deferred revenues while deferred commissions increased, which is indicative of flattening sales and increased revenue acquisition costs..
SalesForce.com (CRM) Income Statement QE October 2011 (GAAP) SalesForce.com (CRM) reported total revenues of $584.26M, a net operating loss of -$10.16M, and a loss per share of -$0.03. From the prior QE July 2012, total revenues were up +7.01%, net income down -426.71%, and loss per share was flat at 0.00%. From the prior year QE October 2011, these were up +36.16%, down -162.34%, and down -120.00%, respectively. Gross margin was flat at 78.00% but continues below the historical average. Operating and net margins were down, and negative, to -1.74% and -2.39%, respectively. Cash flow from operations was up QoQ and YoY to $0.95 per share. The operating expense ratio (operating expenses divided by total revenues) of 79.73% is extremely high.
SalesForce.com (CRM) Balance Sheet QE October 2011 (GAAP) SalesForce.com's (CRM) total assets increased +2.6% QoQ to a record $3.51B from the prior quarter of $3.42B. The capital to assets ratio (total stockholders' equity divided by total assets) is a reasonable 42.67%, exclusive of "temporary equity" of $84.77M. The current ratio (current assets divided by total assets) is a fairly liquid 32.70% and does not include $651M in noncurrent marketable securities. SalesForce.com (CRM) is liquid with reasonable capital. The return on assets peaked in QE October 2009 at 5.13% and has declined for 8 consecutive quarters the current, dismal -0.21%. The $1.29B+ in cash, cash equivalents, and marketable securities (current and noncurrent), which are 36.93% of the total assets of $3.51B, is decreasing as a percentage of total assets as operating losses and net losses continue.
SalesForce.com (CRM) Financial Performance by the Quarters (Charts)
SalesForce.com (CRM) GAAP Earnings Per Share Below is a chart of quarterly earnings per share. Current Loss per Share of -$0.03 is the same QoQ, down -120% YoY, and a multi-year low. This is the 3rd consecutive quarter EPS has been at or below $0.00. The EPS chart average is +$0.09.
SalesForce.com (CRM) GAAP Cash Flow per Share Below is a chart of cash flow from operations per share which exhibits a pronounced pattern of increase and is a positive for SalesForce.com. Current Cash Flow per Share of $0.95 is above the historical average and a 2-quarter high. The CFS chart average is $0.64.
SalesForce.com (CRM) Total Revenues, Operating Income, and Net Income Below is a chart of quarterly total revenues, operating income, and net income. Current Total Revenues of $584.26M are yet another record and have consistently grown. SalesForce.com guidance indicates even higher total revenues in the future. The current Operating Loss of -$10.6M is the 4th consecutive GAAP operating loss reported, 4th consecutive decrease, and is preceded by -$15.75M in QE July 2011, -$2.80M for QE April 2011 and -$391K for QE January 2011. These operating losses were after the QE October 2010 record operating income of $35.16M. Current Net Loss of -$13.94M is a multi-year low, the 2nd consecutive net loss, and the 4th consecutive decrease. This follows a -$4.27M net loss last quarter. These follow the QE October 2010 record net income of $22.37M, the all-time high. The TR, OI, and NI chart averages are $429.24M, $15.39M, and $11.77M, respectively.
SalesForce.com (CRM) Total Revenues, Operating Income, and Net Income Below is a chart of quarterly total revenues, operating income, and net income. Current Total Revenues of $584.26M are yet another record and have consistently grown. SalesForce.com guidance indicates even higher total revenues in the future. The current Operating Loss of -$10.6M is the 4th consecutive GAAP operating loss reported, 4th consecutive decrease, and is preceded by -$15.75M in QE July 2011, -$2.80M for QE April 2011 and -$391K for QE January 2011. These operating losses were after the QE October 2010 record operating income of $35.16M. Current Net Loss of -$13.94M is a multi-year low, the 2nd consecutive net loss, and the 4th consecutive decrease. This follows a -$4.27M net loss last quarter. These follow the QE October 2010 record net income of $22.37M, the all-time high. The TR, OI, and NI chart averages are $429.24M, $15.39M, and $11.77M, respectively.
SalesForce.com (CRM) Gross Margin, Operating Margin, and Net Margin Below is a chart of quarterly gross margin, operating margin, and net margin. Current Gross Margin of 78.00% is stable QoQ, lower YoY, and below the historical average. Current Operating Margin of -1.74% has been negative for 4 consecutive quarters, is well below the historical average, and is below the peaks of 9%+ in 2009. Current Net Margin of -2.39% is a multi-year low, been negative 2 consecutive quarters, is well below the historical average, and well below the peaks of 2009. The GM, OM, and NM chart averages are 79.85%, 4.49%, and 3.37%, respectively.
SalesForce.com (CRM) Return on Assets Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. SalesForce.com has a historically low ROA for a technology company and doesn't have an effective deployment of assets. The ROA peaked in QE October 2009 at 5.13% and has declined each quarter since, for 8 consecutive quarters, to the current Return on Assets of a dismal, and negative, -0.21%. The $1.29B+ in cash, cash equivalents, and marketable securities, which are 37.6% of the total assets of $3.42B is pulling down the ROA. The excess liquidity now decreasing due to net losses. The ROA chart average is 3.40%.
SalesForce.com (CRM) Growth Rates Below is a chart of the annual (YoY, Y/Y, annual change) growth rates for revenues and earnings per share. Total Revenues Growth of +36.16% YoY continues an extraordinary run and uptrend. Total revenues have increased every quarter on the chart, ranging from +19.55% to +43.40%. Earnings per Share Growth of -120.00% YoY is the opposite story and has deteriorated into a significant downtrend decreasing for 7 consecutive quarters. The TRG and EPSG chart averages are +29.05% and +2.82%, respectively.
SalesForce.com (CRM) Revenue Sources Below is a chart of quarterly revenue sources, as a percentage of total revenues. Subscription and Support continues as the primary source of revenues and is currently 94.00% of total revenues, which is greater than the chart average of 93.36%. Professional Services and Other is currently at 6.00%, which is less than the chart average of 6.64%.
SalesForce.com (CRM) Geographic Revenues Below is a chart of quarterly geographic revenues, as a percentage of total revenues. For the current quarter, Americas revenues were $397M and 68% of total revenues. Europe was $104M and 18%, and Asia Pacific was $83M and 14%. The overall trend had been a decrease in Americas, Europe mostly flat, and an increase in Asia Pacific. This changed in the most recent quarter to an increase in Americas, decrease in Europe, and Asia Pacific flat.
SalesForce.com (CRM) Announces Fiscal Third Quarter Results
- Record Quarterly Revenue of $584 Million, up 36% Year-Over-Year
- Deferred Revenue of $918 Million, up 32% Year-Over-Year
- Operating Cash Flow of $129 Million, up 74% Year-Over-Year
- Non-GAAP Diluted EPS of $0.34, up 6% Year-Over-Year
- Raises FY12 Revenue Guidance to $2.255 - $2.259 Billion
- Initiates FY13 Revenue Guidance of $2.880 - $2.920 Billion
Full Year FY12 Guidance: The company is raising its full fiscal year 2012 revenue guidance to be in the range of approximately $2.255 billion to approximately $2.259 billion. For the full fiscal year 2012, the company expects to report a GAAP net loss per share of approximately ($0.12) to ($0.11), while diluted non-GAAP EPS is expected to be approximately $1.32 to $1.33. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $238 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $67 million, and net non-cash interest expense related to the convertible senior notes, expected to be approximately $11 million. EPS estimates assume a GAAP tax rate of 62%, and a non-GAAP tax rate of 31%. For the purpose of the EPS calculation, the company assumed an average basic share count of approximately 136 million shares, and an average diluted share count of approximately 143 million shares.
Full Year FY13 Guidance: The company is initiating revenue guidance for fiscal year 2013 with projected revenue in the range of approximately $2.880 billion to approximately $2.920 billion. This guidance includes projected revenue for the company's recently announced acquisition of Model Metrics, which the company expects to close during its fiscal fourth quarter. The company will provide its expectations for FY13 GAAP and non-GAAP EPS, when it announces its fourth quarter, fiscal year 2012 results in February, 2012.
Management's Reporting on Non-GAAP Operating Results
Management believes that the provision of supplemental non-GAAP information will enable a more complete comparison of the company's relative performance. Specifically, management is excluding the following items from its non-GAAP EPS for Q3 and its non-GAAP estimates for Q4 and FY12:
● Stock-Based Expenses: The company's compensation strategy includes the use of stock-based compensation to attract and retain employees and executives. It is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.
● Amortization of Purchased Intangibles: The company views amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company's research and development efforts, trade names, customer lists and customer relationships, as items arising from pre-acquisition activities determined at the time of an acquisition. While it is continually viewed for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
● Amortization of Debt Discount: Under GAAP, certain convertible debt instruments that may be settled in cash (or other assets) on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. Accordingly, for GAAP purposes we are required to recognize imputed interest expense on the company's $575 million of convertible subordinated notes that were issued in a private placement in January 2010. The imputed interest rate is approximately 5.9%, while the coupon interest rate is 0.75%. The difference between the imputed interest expense and the coupon interest expense, net of the interest amount capitalized, is excluded from management's assessment of the company's operating performance because management believes that this non-cash expense is not indicative of ongoing operating performance. Management believes that the exclusion of the non-cash interest expense provides investors an enhanced view of the company's operational performance.
● Income Tax Effects: The company's estimated non-GAAP effective tax rate is lower than the estimated GAAP effective tax rate due to the exclusion of the expense items described above.
SalesForce.com (CRM) Geographic Revenues Below is a chart of quarterly geographic revenues, as a percentage of total revenues. For the current quarter, Americas revenues were $397M and 68% of total revenues. Europe was $104M and 18%, and Asia Pacific was $83M and 14%. The overall trend had been a decrease in Americas, Europe mostly flat, and an increase in Asia Pacific. This changed in the most recent quarter to an increase in Americas, decrease in Europe, and Asia Pacific flat.
SalesForce.com (CRM) Operating Expense Ratio Below is a chart of quarterly operating expense ratio, which is operating expenses divided by total revenues. The current Operating Expense Ratio of 79.73% is just below the prior quarter company record high of 80.74% - and way too high - and continues a 4-quarter trend near 80%. This indicates a decreased efficiency plus a lower proportion of revenues is reaching the bottom line, net income, and ultimately earnings per share. The OER chart average is 74.78%.
SalesForce.com (CRM) Announces Fiscal Third Quarter Results
SAN FRANCISCO, Nov. 17, 2011 /PRNewswire via COMTEX/ -- Salesforce.com (NYSE: CRM), the enterprise cloud computing (http://www.salesforce.com/cloudcomputing/) company, today announced results for its fiscal third quarter ended October 31, 2011. ""Salesforce.com is the first enterprise cloud computing company to exceed a $2.3 billion annual revenue run rate," said Marc Benioff, Chairman and CEO, salesforce.com. "And today, we're excited to announce that we expect to reach a $3.0 billion annual revenue run rate during our fiscal year 2013."
- Deferred Revenue of $918 Million, up 32% Year-Over-Year
- Operating Cash Flow of $129 Million, up 74% Year-Over-Year
- Non-GAAP Diluted EPS of $0.34, up 6% Year-Over-Year
- Raises FY12 Revenue Guidance to $2.255 - $2.259 Billion
- Initiates FY13 Revenue Guidance of $2.880 - $2.920 Billion
SalesForce.com (CRM) Guidance
Q4 FY12 Guidance: Revenue for the company's fourth fiscal quarter is projected to be in the range of approximately $620 million to approximately $624 million. For the fourth fiscal quarter, the company expects to report a GAAP net loss per share of approximately ($0.06) to ($0.05), while diluted non-GAAP EPS is expected to be approximately $0.39 to $0.40. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $79 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $19 million, and net non-cash interest expense related to the company's convertible senior notes, expected to be approximately $3 million. EPS estimates assume a GAAP tax rate of 46%, and a non-GAAP tax rate of 32%. For the purpose of the EPS calculation, the company assumed an average basic share count of approximately 138 million shares, and an average diluted share count of approximately 144 million shares.
Q4 FY12 Guidance: Revenue for the company's fourth fiscal quarter is projected to be in the range of approximately $620 million to approximately $624 million. For the fourth fiscal quarter, the company expects to report a GAAP net loss per share of approximately ($0.06) to ($0.05), while diluted non-GAAP EPS is expected to be approximately $0.39 to $0.40. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $79 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $19 million, and net non-cash interest expense related to the company's convertible senior notes, expected to be approximately $3 million. EPS estimates assume a GAAP tax rate of 46%, and a non-GAAP tax rate of 32%. For the purpose of the EPS calculation, the company assumed an average basic share count of approximately 138 million shares, and an average diluted share count of approximately 144 million shares.
Full Year FY12 Guidance: The company is raising its full fiscal year 2012 revenue guidance to be in the range of approximately $2.255 billion to approximately $2.259 billion. For the full fiscal year 2012, the company expects to report a GAAP net loss per share of approximately ($0.12) to ($0.11), while diluted non-GAAP EPS is expected to be approximately $1.32 to $1.33. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $238 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $67 million, and net non-cash interest expense related to the convertible senior notes, expected to be approximately $11 million. EPS estimates assume a GAAP tax rate of 62%, and a non-GAAP tax rate of 31%. For the purpose of the EPS calculation, the company assumed an average basic share count of approximately 136 million shares, and an average diluted share count of approximately 143 million shares.
Full Year FY13 Guidance: The company is initiating revenue guidance for fiscal year 2013 with projected revenue in the range of approximately $2.880 billion to approximately $2.920 billion. This guidance includes projected revenue for the company's recently announced acquisition of Model Metrics, which the company expects to close during its fiscal fourth quarter. The company will provide its expectations for FY13 GAAP and non-GAAP EPS, when it announces its fourth quarter, fiscal year 2012 results in February, 2012.
Management's Reporting on Non-GAAP Operating Results
Management believes that the provision of supplemental non-GAAP information will enable a more complete comparison of the company's relative performance. Specifically, management is excluding the following items from its non-GAAP EPS for Q3 and its non-GAAP estimates for Q4 and FY12:
● Stock-Based Expenses: The company's compensation strategy includes the use of stock-based compensation to attract and retain employees and executives. It is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.
● Amortization of Purchased Intangibles: The company views amortization of acquisition-related intangible assets, such as the amortization of the cost associated with an acquired company's research and development efforts, trade names, customer lists and customer relationships, as items arising from pre-acquisition activities determined at the time of an acquisition. While it is continually viewed for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
● Amortization of Debt Discount: Under GAAP, certain convertible debt instruments that may be settled in cash (or other assets) on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. Accordingly, for GAAP purposes we are required to recognize imputed interest expense on the company's $575 million of convertible subordinated notes that were issued in a private placement in January 2010. The imputed interest rate is approximately 5.9%, while the coupon interest rate is 0.75%. The difference between the imputed interest expense and the coupon interest expense, net of the interest amount capitalized, is excluded from management's assessment of the company's operating performance because management believes that this non-cash expense is not indicative of ongoing operating performance. Management believes that the exclusion of the non-cash interest expense provides investors an enhanced view of the company's operational performance.
● Income Tax Effects: The company's estimated non-GAAP effective tax rate is lower than the estimated GAAP effective tax rate due to the exclusion of the expense items described above.
About SalesForce.com (CRM)
With more than 100,000 customers, Salesforce.com is the enterprise cloud computing company that is leading the shift to the social enterprise. Social enterprises leverage social, mobile and open cloud technologies to put customers at the heart of their business. Based on salesforce.com's real-time, multitenant architecture, the company's platform and application services include:
* Salesforce Chatter, a secure, private social network for your business
* Salesforce Sales Cloud, for sales force automation and contact management
* Salesforce Service Cloud, for customer service and support solutions
* Salesforce Radian6, for social media monitoring and engagement
* Salesforce Radian6, for social media monitoring and engagement
* Salesforce Data.com, the most complete source of accurate business data
* AppExchange, the leading marketplace for enterprise cloud computing applications
* Force.com, for custom application development
* Heroku, for building social and mobile apps in Ruby
* Database.com, the world's first enterprise cloud database
* Database.com, the world's first enterprise cloud database
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