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Salesforce Announces Record Third Quarter Revenue, Raises Full Year Fiscal 2018 Revenue Guidance

Nov 21, 2017

- Third Quarter Revenue of $2.68 Billion, up 25% Year-Over-Year, 23% in Constant Currency
- Deferred Revenue of $4.39 Billion, up 26% Year-Over-Year, 24% in Constant Currency
- Unbilled Deferred Revenue of Approximately $11.5 Billion, up 34% Year-Over-Year
- Initiates Fourth Quarter Revenue Guidance of $2.801 Billion to $2.811 Billion
- Raises Full Year Fiscal 2018 Revenue Guidance to $10.43 Billion to $10.44 Billion
- Reconfirms Full Year Fiscal 2019 Revenue Guidance of $12.45 Billion to $12.50 Billion

SAN FRANCISCO, Nov. 21, 2017 /PRNewswire/ -- Salesforce (NYSE: CRM), the global leader in CRM, today announced results for its fiscal third quarter ended October 31, 2017.

Salesforce (PRNewsFoto/salesforce.com)

"Salesforce delivered a record third quarter, and we're on a path to exceed $20 billion faster than any enterprise software company in history," said Marc Benioff, chairman and CEO, Salesforce. "With this phenomenal growth, we are building a company for the ages, creating value for our Trailblazers – our customers, employees, investors and communities – while helping make the world a better place for decades to come."

Salesforce delivered the following results for its fiscal third quarter 2018:

Revenue: Total third quarter revenue was $2.68 billion, an increase of 25% year-over-year, and 23% in constant currency. Subscription and support revenues were $2.49 billion, an increase of 25% year-over-year. Professional services and other revenues were $194 million, an increase of 20% year-over-year.

Earnings per Share: Third quarter GAAP diluted earnings per share was $0.07, and non-GAAP diluted earnings per share was $0.39.

Cash: Cash generated from operations for the third quarter was $126 million, a decrease of 18% year-over-year. Total cash, cash equivalents and marketable securities finished the quarter at $3.63 billion.

Deferred Revenue: Deferred revenue on the balance sheet as of October 31, 2017 was $4.39 billion, an increase of 26% year-over-year, and 24% in constant currency. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the third quarter at approximately $11.5 billion, up 34% year-over-year.

As of November 21, 2017, the company is initiating revenue, earnings per share, and deferred revenue guidance for its fourth quarter of fiscal year 2018. In addition, the company is raising its full fiscal year 2018 revenue and earnings per share guidance, and maintaining its operating cash flow guidance, previously provided on August 22, 2017. The company is also confirming its full fiscal year 2019 revenue guidance, previously provided on November 6, 2017.

Q4 FY18 Guidance: Revenue is projected to be $2.801 billion to $2.811 billion, an increase of 22% to 23% year-over-year.

GAAP diluted earnings per share is projected to be $0.03 to $0.04, while non-GAAP diluted earnings per share is projected to be $0.32 to $0.33.

On balance sheet deferred revenue growth is projected to be 19% to 20% year-over-year.

Full Year FY18 Guidance: Revenue is projected to be $10.43 billion to $10.44 billion, an increase of 24% year-over-year.

GAAP diluted earnings per share is projected to be $0.12 to $0.13, while non-GAAP diluted earnings per share is projected to be $1.32 to $1.33.

Operating cash flow growth is projected to be 20% to 21% year-over-year.

Full Year FY19 Guidance: Revenue is projected to be $12.45 billion to $12.50 billion, an increase of 19% to 20% year-over-year. The company plans on providing its expectations for FY19 GAAP EPS, non-GAAP EPS, and operating cash flow when it announces its fourth quarter and full fiscal year 2018 results in February 2018.

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 the full year:


Fiscal 2018


Q4

FY2018




GAAP diluted EPS range* 

 $0.03 - $0.04 

 $0.12 - $0.13 

Plus



Amortization of purchased intangibles

$           0.09

$           0.39

Stock-based expense

$           0.31

$           1.35

Amortization of debt discount, net

$           0.01

$           0.04

Less



Income tax effects and adjustments**

$          (0.12)

$          (0.58)

Non-GAAP diluted EPS

 $0.32 - $0.33 

 $1.32 - $1.33 




Shares used in computing basic net income per share (millions)

725

715

Shares used in computing diluted net income per share (millions)

748

734


* The Company's GAAP tax provision is expected to be 46% and 47% for the three and twelve months ended January 31st, 2018, respectively.

** The Company's non-GAAP tax provision uses a long-term projected tax rate of 34.5%. 

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 9689558.  A replay will be available at (800) 585-8367 or (855) 859-2056 until midnight (ET) Dec. 21, 2017.

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 our financial 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, 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 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; domestic and international regulatory developments, including the adoption of new privacy laws; the financial and other impact of any previous and future acquisitions; the nature of the company's business model, including risks related to government contracts; the company's ability to continue to release, gain customer acceptance of and provide support for 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, including the compliance with United States export control laws, 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; litigation and any related claims, negotiations and settlements, including with respect to intellectual property matters or industry-specific regulations; unanticipated changes in the company's effective tax rate; factors affecting the company's outstanding convertible notes, term loan, 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, credit markets and the impact of current and future accounting pronouncements and other financial reporting standards.

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.

© 2017 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.

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 revenue and constant currency deferred revenue 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, amortization of acquired leases, the net amortization of debt discount on the company's convertible senior notes, gains/losses on conversions of the company's convertible senior notes, gains/losses on sales of land and building improvements, gains/losses on company-initiated acquisitions of entities in which the company held an equity investment, and termination of office leases, 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 FY18 financial statements and for its non-GAAP estimates for Q4 and FY18:

  • Stock-Based Expenses: The company's compensation strategy includes the use of stock-based compensation to attract and retain employees and executives. It is principally aimed at aligning their interests with those of our stockholders and at long-term employee retention, rather than to motivate or reward operational performance for any particular period. Thus, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.
  • Amortization of Purchased Intangibles and Acquired Leases: The company views amortization of acquisition- and building-related intangible assets, such as the amortization of the cost associated with an acquired company's research and development efforts, trade names, customer lists and customer relationships, and acquired lease intangibles, as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are continually evaluated for impairment, amortization of the cost of purchased intangibles is a static expense, one that is not typically affected by operations during any particular period.
  • Amortization of Debt Discount: Under GAAP, certain convertible debt instruments that may be settled in cash (or other assets) on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. Accordingly, for GAAP purposes we are required to recognize imputed interest expense on the company's $1.15 billion of convertible senior notes due 2018 that were issued in a private placement in March 2013. The imputed interest rate was approximately 2.5% for the convertible notes due 2018, while the actual coupon interest rate of the notes is 0.25%. The difference between the imputed interest expense and the coupon interest expense, net of the interest amount capitalized, is excluded from management's assessment of the company's operating performance because management believes that this non-cash expense is not indicative of ongoing operating performance.
  • Gains on Acquisitions 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.
  • 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 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 2018 is 34.5 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.

 

salesforce.com, inc.

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)



Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Revenues:








Subscription and support

$

2,486,131



$

1,983,981



$

7,055,538



$

5,645,554


Professional services and other

193,710



160,794



573,471



452,442


Total revenues

2,679,841



2,144,775



7,629,009



6,097,996


Cost of revenues (1)(2):








Subscription and support

528,182



426,487



1,484,982



1,154,044


Professional services and other

186,326



159,035



550,748



454,038


Total cost of revenues

714,508



585,522



2,035,730



1,608,082


Gross profit

1,965,333



1,559,253



5,593,279



4,489,914


Operating expenses (1)(2):








Research and development

393,998



311,459



1,156,526



863,935


Marketing and sales

1,184,733



997,993



3,464,986



2,828,784


General and administrative

270,614



246,765



813,868



709,622


Total operating expenses

1,849,345



1,556,217



5,435,380



4,402,341


Income from operations

115,988



3,036



157,899



87,573


Investment income

10,049



3,709



24,069



23,747


Interest expense

(21,557)



(21,946)



(65,382)



(64,665)


Other income (expense) (1)

1,921



1,782



(2,695)



(11,500)


Gains from acquisitions of strategic investments

0



833



0



13,697


Income (loss) before benefit from (provision for) income taxes

106,401



(12,586)



113,891



48,852


Benefit from (provision for) income taxes

(55,007)



(24,723)



(53,968)



182,220


Net income (loss)

$

51,394



$

(37,309)



$

59,923



$

231,072


Basic net income (loss) per share

$

0.07



$

(0.05)



$

0.08



$

0.34


Diluted net income (loss) per share

$

0.07



$

(0.05)



$

0.08



$

0.33


Shares used in computing basic net income (loss) per share

717,445



690,468



711,884



683,075


Shares used in computing diluted net income (loss) per share

738,106



690,468



730,212



696,257















(1)

Amounts include amortization of purchased intangibles from business combinations, as follows:





Three Months Ended October 31,


Nine Months Ended October 31,



2017


2016


2017


2016


Cost of revenues

$

39,610



$

36,703



$

126,679



$

84,462



Marketing and sales

30,067



28,064



91,274



66,601



Other non-operating expense

367



579



1,118



1,927




(2)

Amounts include stock-based expense, as follows:





Three Months Ended October 31,


Nine Months Ended October 31,



2017


2016


2017


2016


Cost of revenues

$

33,494



$

26,783



$

97,206



$

76,912



Research and development

66,626



50,372



197,185



124,164



Marketing and sales

116,992



93,718



356,538



275,515



General and administrative

34,165



33,878



108,402



99,389


 

salesforce.com, inc.

Consolidated Statements of Operations

(As a percentage of total revenues)

(Unaudited)



Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Revenues:








Subscription and support

93%



93%



92%



93%


Professional services and other

7



7



8



7


Total revenues

100



100



100



100


Cost of revenues (1)(2):








Subscription and support

20



20



20



19


Professional services and other

7



7



7



7


Total cost of revenues

27



27



27



26


Gross profit

73



73



73



74


Operating expenses (1)(2):








Research and development

15



15



15



14


Marketing and sales

44



47



45



46


General and administrative

10



11



11



12


Total operating expenses

69



73



71



72


Income from operations

4



0



2



2


Investment income

1



0



0



0


Interest expense

(1)



(1)



(1)



(1)


Other income (expense) (1)

0



0



0



0


Gains from acquisitions of strategic investments

0



0



0



0


Income (loss) before benefit from (provision for) income taxes

4



(1)



1



1


Benefit from (provision for) income taxes

(2)



(1)



0



3


Net income (loss)

2%



(2)%



1%



4%















(1)

Amortization of purchased intangibles from business combinations as a percentage of total revenues, as follows:





Three Months Ended October 31,


Nine Months Ended October 31,



2017


2016


2017


2016


Cost of revenues


1%



2%



2%



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 October 31,


Nine Months Ended October 31,



2017


2016


2017


2016


Cost of revenues


1%



1%



1%



1%


Research and development


2



2



3



2


Marketing and sales


4



4



5



5


General and administrative


1



2



1



2

 

salesforce.com, inc.

Consolidated Balance Sheets

(in thousands)



October 31,
 2017


January 31,
 2017


(unaudited)



Assets




Current assets:




Cash and cash equivalents

$

2,071,837



$

1,606,549


Marketable securities

1,556,828



602,338


Accounts receivable, net

1,519,916



3,196,643


Deferred commissions

327,643



311,770


Prepaid expenses and other current assets

469,946



279,527


Total current assets

5,946,170



5,996,827


Property and equipment, net

1,864,891



1,787,534


Deferred commissions, noncurrent

253,004



227,849


Capitalized software, net

140,768



141,671


Strategic investments

670,406



566,953


Goodwill

7,294,141



7,263,846


Intangible assets acquired through business combinations, net

895,768



1,113,374


Other assets, net

424,888



486,869


Total assets

$

17,490,036



$

17,584,923


Liabilities, temporary equity and stockholders' equity




Current liabilities:




Accounts payable, accrued expenses and other liabilities

$

1,686,408



$

1,752,664


Deferred revenue

4,392,082



5,542,802


Convertible 0.25% senior notes, net

1,137,954



0


Total current liabilities

7,216,444



7,295,466


Convertible 0.25% senior notes, net

0



1,116,360


Term loan

498,084



497,221


Loan assumed on 50 Fremont

198,471



198,268


Revolving credit facility

0



196,542


Other noncurrent liabilities

736,870



780,939


Total liabilities

8,649,869



10,084,796


Temporary equity:




Convertible 0.25% senior notes

10,797



0


Stockholders' equity:




Common stock

722



708


Additional paid-in capital

9,230,081



8,040,170


Accumulated other comprehensive income (loss)

3,554



(75,841)


Accumulated deficit

(404,987)



(464,910)


Total stockholders' equity

8,829,370



7,500,127


Total liabilities, temporary equity and stockholders' equity

$

17,490,036



$

17,584,923


 

salesforce.com, inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)



Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Operating activities:








Net income (loss)

$

51,394



$

(37,309)



$

59,923



$

231,072


Adjustments to reconcile net income (loss) to net cash provided by operating activities:








Depreciation and amortization

187,546



169,346



564,911



451,479


Amortization of debt discount and issuance costs

7,795



7,281



23,265



21,334


Gains from acquisitions of strategic investments

0



(833)



0



(13,697)


Amortization of deferred commissions

117,677



93,230



331,687



270,527


Expenses related to employee stock plans

251,277



204,751



759,331



575,980


Changes in assets and liabilities, net of business combinations:








Accounts receivable, net

49,406



42,653



1,677,466



1,276,798


Deferred commissions

(171,562)



(92,803)



(372,714)



(226,965)


Prepaid expenses and other current assets and other assets

(15,669)



40,676



(166,784)



(25,723)


Accounts payable, accrued expenses and other liabilities

74,480



57,836



(39,720)



(275,058)


Deferred revenue

(426,552)



(330,516)



(1,150,720)



(829,695)


Net cash provided by operating activities

125,792



154,312



1,686,645



1,456,052


Investing activities:








Business combinations, net of cash acquired

0



(32,117)



(19,781)



(2,832,110)


Purchases of strategic investments

(54,585)



(28,660)



(113,088)



(65,834)


Sales of strategic investments

40,811



11,783



55,898



26,506


Purchases of marketable securities

(233,824)



(111,731)



(1,433,718)



(986,862)


Sales of marketable securities

193,783



93,391



437,248



1,927,049


Maturities of marketable securities

29,819



14,203



43,089



64,741


Capital expenditures

(111,278)



(140,653)



(396,268)



(319,984)


Net cash used in investing activities

(135,274)



(193,784)



(1,426,620)



(2,186,494)


Financing activities:








Proceeds from term loan, net

0



0



0



495,550


Proceeds from employee stock plans

141,970



92,846



484,786



315,865


Principal payments on capital lease obligations

(7,716)



(10,997)



(82,890)



(73,760)


Payments on revolving credit facility

0



0



(200,000)



0


Net cash provided by financing activities

134,254



81,849



201,896



737,655


Effect of exchange rate changes

(2,045)



(11,867)



3,367



(19,840)


Net increase (decrease) in cash and cash equivalents

122,727



30,510



465,288



(12,627)


Cash and cash equivalents, beginning of period

1,949,110



1,115,226



1,606,549



1,158,363


Cash and cash equivalents, end of period

$

2,071,837



$

1,145,736



$

2,071,837



$

1,145,736


 

salesforce.com, inc.

Additional Metrics

(Unaudited)



Oct 31,
2017


Jul 31,
2017


Apr 30,
2017


Jan 31,
2017


Oct 31,
2016


Jul 31,
2016

Full Time Equivalent Headcount

28,527



27,155



26,213



25,178



23,939



23,247


Financial data (in thousands):












Cash, cash equivalents and marketable securities

$

3,628,665



$

3,501,245



$

3,219,550



$

2,208,887



$

1,751,130



$

1,719,946


Strategic investments

$

670,406



$

657,687



$

639,191



$

566,953



$

555,968



$

548,258


Deferred revenue

$

4,392,082



$

4,818,634



$

5,042,652



$

5,542,802



$

3,495,133



$

3,823,561


Unbilled deferred revenue, a non-GAAP measure (1)

$

11,500,000



$

10,400,000



$

9,600,000



$

9,000,000



$

8,600,000



$

8,000,000


Principal due on our outstanding debt obligations

$

1,850,000



$

1,850,000



$

1,850,000



$

2,050,000



$

1,850,000



$

1,850,000




(1)

Unbilled deferred revenue represents future billings under our non-cancelable subscription agreements that have not been invoiced and, accordingly, are not recorded in deferred revenue.

 

Selected Balance Sheet Accounts (in thousands):



October 31,
 2017


July 31,
 2017


January 31,
 2017

Prepaid Expenses and Other Current Assets






Prepaid income taxes

$

43,301



$

75,031



$

26,932


Other taxes receivable

33,099



36,634



34,177


Prepaid expenses and other current assets

393,546



326,581



218,418



$

469,946



$

438,246



$

279,527


Property and Equipment, net






Land

$

183,888



$

183,888



$

183,888


Buildings and building improvements

626,168



623,411



621,377


Computers, equipment and software

1,600,783



1,555,572



1,440,986


Furniture and fixtures

132,374



125,858



112,564


Leasehold improvements

776,396



741,466



627,069



3,319,609



3,230,195



2,985,884


Less accumulated depreciation and amortization

(1,454,718)



(1,363,619)



(1,198,350)



$

1,864,891



$

1,866,576



$

1,787,534


Intangible Assets Acquired Through Business Combinations, net






Acquired developed technology

$

388,346



$

427,870



$

514,232


Customer relationships

501,500



531,065



589,579


Trade names and trademarks

3,071



3,581



4,601


Territory rights and other

2,534



2,690



3,530


50 Fremont lease intangibles

317



681



1,432



$

895,768



$

965,887



$

1,113,374


Other Assets, net






Deferred income taxes, noncurrent, net

$

31,596



$

29,926



$

28,939


Long-term deposits

23,979



24,305



23,597


Domain names and patents, net

26,811



30,662



39,213


Customer contract assets

201,357



229,597



281,733


Other

141,145



143,506



113,387



$

424,888



$

457,996



$

486,869


Accounts Payable, Accrued Expenses and Other Liabilities






Accounts payable

$

120,019



$

148,279



$

115,257


Accrued compensation

622,419



517,433



730,390


Non-cash equity liability

49,435



55,394



68,355


Accrued other liabilities

488,071



452,398



419,299


Accrued income and other taxes payable

193,693



196,670



239,699


Accrued professional costs

44,757



46,579



38,254


Accrued rent

33,968



21,384



19,710


Capital lease obligation, current

114,147



118,888



102,106


Financing obligation - leased facility, current

19,899



19,797



19,594



$

1,686,408



$

1,576,822



$

1,752,664


Other Noncurrent Liabilities






Deferred income taxes and income taxes payable

$

117,193



$

111,404



$

99,378


Financing obligation - leased facility

198,903



199,539



200,711


Long-term lease liabilities and other

420,774



416,939



480,850



$

736,870



$

727,882



$

780,939



 

Supplemental Revenue Analysis


Subscription and support revenue by cloud service offering (in millions):

Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Sales Cloud

$

906.5



$

776.2



$

2,622.5



$

2,255.7


Service Cloud

738.1



589.9



2,087.8



1,705.4


Salesforce Platform and Other

495.3



370.7



1,392.9



1,050.0


Marketing and Commerce Cloud

346.2



247.2



952.3



634.5



$

2,486.1



$

1,984.0



$

7,055.5



$

5,645.6




Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Total revenues by geography (in thousands):








Americas

$

1,927,405



$

1,598,344



$

5,536,932



$

4,506,774


Europe

493,732



337,497



1,367,718



1,012,671


Asia Pacific

258,704



208,934



724,359



578,551



$

2,679,841



$

2,144,775



$

7,629,009



$

6,097,996










Total revenues by geography as a percentage of total revenues:

Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017



2016


Americas

72%



74%



73%



74%


Europe

18



16



18



17


Asia Pacific

10



10



9



9



100%



100%



100%



100%


 

Revenue constant currency growth rates (as compared to the comparable prior periods)

Three Months Ended
October 31, 2017
compared to Three
Months 
Ended October 31, 2016


Three Months Ended
July 31, 2017
compared to Three
Months 
Ended July 31, 2016


Three Months Ended
October 31, 2016
compared to Three
Months
Ended October 31, 2015

Americas

21%


24%


27%

Europe

33%


31%


27%

Asia Pacific

27%


27%


29%

Total growth

23%


25%


27%

 

We present constant currency information to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the weighted average exchange rate for the quarter being compared to for growth rate calculations presented, rather than the actual exchange rates in effect during that period.



Deferred revenue constant currency growth rates (as compared to the comparable prior periods)

October 31, 2017
compared to
October 31, 2016


July 31, 2017
compared to
July 31, 2016


October 31, 2016
compared to
October 31, 2015

Total growth

24%


25%


25%

 

We present constant currency information for deferred revenue 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 GAAP and Non-GAAP Diluted Share Count Information

(share data in thousands)



Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Weighted-average shares outstanding for basic earnings per share

717,445



690,468



711,884



683,075


Effect of dilutive securities:








Convertible senior notes

5,162



2,059



4,571



1,994


Employee stock awards

14,717



12,177



13,235



11,188


Warrants

782



0



522



0


Adjusted weighted-average shares outstanding and assumed conversions for GAAP and Non-GAAP diluted earnings per share

738,106



704,704



730,212



696,257


 

Supplemental Cash Flow Information

Free cash flow analysis, a non-GAAP measure

(in thousands)



Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Operating cash flow








GAAP net cash provided by operating activities

$

125,792



$

154,312



$

1,686,645



$

1,456,052


Less:








Capital expenditures

(111,278)



(140,653)



(396,268)



(319,984)


Free cash flow

$

14,514



$

13,659



$

1,290,377



$

1,136,068


 

Comprehensive Income (Loss)

(in thousands)

(Unaudited)



Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Net income (loss)

$

51,394



$

(37,309)



$

59,923



$

231,072


Other comprehensive income (loss), before tax and net of reclassification adjustments:








Foreign currency translation and other gains (losses)

(2,218)



(28,372)



28,190



(28,523)


Unrealized gains (losses) on marketable securities and strategic investments

(11,763)



(16,019)



51,205



20,961


Other comprehensive income (loss), before tax

(13,981)



(44,391)



79,395



(7,562)


Tax effect

0



(7,337)



0



(5,464)


Other comprehensive income (loss), net of tax

(13,981)



(51,728)



79,395



(13,026)


Comprehensive income (loss)

$

37,413



$

(89,037)



$

139,318



$

218,046



 

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 October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Non-GAAP gross profit








GAAP gross profit

$

1,965,333



$

1,559,253



$

5,593,279



$

4,489,914


Plus:








Amortization of purchased intangibles (a)

39,610



36,703



126,679



84,462


Stock-based expense (b)

33,494



26,783



97,206



76,912


Non-GAAP gross profit

$

2,038,437



$

1,622,739



$

5,817,164



$

4,651,288


Non-GAAP operating expenses








GAAP operating expenses

$

1,849,345



$

1,556,217



$

5,435,380



$

4,402,341


Less:








Amortization of purchased intangibles (a)

(30,067)



(28,064)



(91,274)



(66,601)


Stock-based expense (b)

(217,783)



(177,968)



(662,125)



(499,068)


Non-GAAP operating expenses

$

1,601,495



$

1,350,185



$

4,681,981



$

3,836,672


Non-GAAP income from operations








GAAP income from operations

$

115,988



$

3,036



$

157,899



$

87,573


Plus:








Amortization of purchased intangibles (a)

69,677



64,767



217,953



151,063


Stock-based expense (b)

251,277



204,751



759,331



575,980


Non-GAAP income from operations

$

436,942



$

272,554



$

1,135,183



$

814,616


Non-GAAP non-operating loss (c)








GAAP non-operating loss

$

(9,587)



$

(15,622)



$

(44,008)



$

(38,721)


Plus:








Amortization of debt discount, net

6,463



6,304



19,269



18,794


Amortization of acquired lease intangible

367



579



1,118



1,927


Less:








Gains from acquisitions of strategic investments

0



(833)



0



(13,697)


Non-GAAP non-operating loss

$

(2,757)



$

(9,572)



$

(23,621)



$

(31,697)


Non-GAAP net income








GAAP net income (loss)

$

51,394



$

(37,309)



$

59,923



$

231,072


Plus:








Amortization of purchased intangibles (a)

69,677



64,767



217,953



151,063


Amortization of acquired lease intangible

367



579



1,118



1,927


Stock-based expense (b)

251,277



204,751



759,331



575,980


Amortization of debt discount, net

6,463



6,304



19,269



18,794


Less:








Gains from acquisitions of strategic investments

0



(833)



0



(13,697)


Income tax effects and adjustments

(94,787)



(67,320)



(329,521)



(456,241)


Non-GAAP net income

$

284,391



$

170,939



$

728,073



$

508,898




Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Non-GAAP diluted earnings per share








GAAP diluted net income (loss) per share

$

0.07



$

(0.05)



$

0.08



$

0.33


Plus:








Amortization of purchased intangibles

0.10



0.09



0.30



0.22


Amortization of acquired lease intangible

0.00



0.00



0.00



0.00


Stock-based expense

0.34



0.29



1.04



0.83


Amortization of debt discount, net

0.01



0.01



0.03



0.03


Less:








Gains from acquisitions of strategic investments

0.00



0.00



0.00



(0.02)


Income tax effects and adjustments

(0.13)



(0.10)



(0.45)



(0.66)


Non-GAAP diluted earnings per share

$

0.39



$

0.24



$

1.00



$

0.73


Shares used in computing Non-GAAP diluted net income per share

738,106



704,704



730,212



696,257




a)

Amortization of purchased intangibles were as follows:





Three Months Ended October 31,


Nine Months Ended October 31,



2017


2016


2017


2016


Cost of revenues

$

39,610



$

36,703



$

126,679



$

84,462



Marketing and sales

30,067



28,064



91,274



66,601




$

69,677



$

64,767



$

217,953



$

151,063




b)

Stock-based expense was as follows:





Three Months Ended October 31,


Nine Months Ended October 31,



2017


2016


2017


2016


Cost of revenues

$

33,494



$

26,783



$

97,206



$

76,912



Research and development

66,626



50,372



197,185



124,164



Marketing and sales

116,992



93,718



356,538



275,515



General and administrative

34,165



33,878



108,402



99,389




$

251,277



$

204,751



$

759,331



$

575,980




c)

GAAP non-operating loss consists of investment income, interest expense, other income (expense) and gains from acquisitions of strategic investments.

 

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 October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

GAAP Basic Net Income (Loss) Per Share








Net income (loss)

$

51,394



$

(37,309)



$

59,923



$

231,072


Basic net income (loss) per share

$

0.07



$

(0.05)



$

0.08



$

0.34


Shares used in computing basic net income (loss) per share

717,445



690,468



711,884



683,075











Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Non-GAAP Basic Net Income Per Share








Non-GAAP net income

$

284,391



$

170,939



$

728,073



$

508,898


Basic Non-GAAP net income per share

$

0.40



$

0.25



$

1.02



$

0.75


Shares used in computing basic Non-GAAP net income per share

717,445



690,468



711,884



683,075











Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

GAAP Diluted Net Income (Loss) Per Share








Net income (loss)

$

51,394



$

(37,309)



$

59,923



$

231,072


Diluted net income (loss) per share

$

0.07



$

(0.05)



$

0.08



$

0.33


Shares used in computing diluted net income (loss) per share

738,106



690,468



730,212



696,257











Three Months Ended October 31,


Nine Months Ended October 31,


2017


2016


2017


2016

Non-GAAP Diluted Net Income Per Share








Non-GAAP net income

$

284,391



$

170,939



$

728,073



$

508,898


Diluted Non-GAAP net income per share

$

0.39



$

0.24



$

1.00



$

0.73


Shares used in computing diluted Non-GAAP net income per share

738,106



704,704



730,212



696,257


 

 

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SOURCE Salesforce

John Cummings, Salesforce, Investor Relations, 415-778-4188, jcummings@salesforce.com or Gina Sheibley, Salesforce, Public Relations, 917-297-8988, gsheibley@salesforce.com

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Suite 300 San Francisco, CA 94105
Tel: +1-415-536-6250
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