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Salesforce Announces Record Fourth Quarter and Full Year Fiscal 2019 Results

March 04, 2019
- Fourth Quarter Revenue of $3.60 Billion, up 26% Year-Over-Year, 27% in Constant Currency
- Full Year Revenue of $13.28 Billion, up 26% Year-Over-Year, 26% in Constant Currency
- Unearned Revenue of $8.56 Billion, up 22% Year-Over-Year, 24% in Constant Currency
- Remaining Performance Obligation of Approximately $25.7 Billion, up 25% Year-Over-Year
- Fourth Quarter Operating Cash Flow of $1.33 Billion, up 27% Year-Over-Year
- Full Year Operating Cash Flow of $3.40 Billion, up 24% Year-Over-Year

SAN FRANCISCO, March 4, 2019 /PRNewswire/ -- Salesforce (NYSE: CRM), the global leader in CRM, today announced results for its fiscal fourth quarter and full fiscal year ended January 31, 2019.

Salesforce (PRNewsFoto/salesforce.com) (PRNewsfoto/Salesforce)

"We had another year of outstanding revenue growth, surpassing $13 billion in revenue faster than any other enterprise software company in history," said Marc Benioff, chairman and co-CEO, Salesforce. "As companies of all sizes turn to Salesforce, we're enabling them to put the customer at the center of their digital transformation through our intelligent Customer 360 platform. I've never been more excited about the opportunity ahead."

"Our relentless focus on delivering innovation and customer success has fueled our growth and solidified our leadership in the enterprise," said Keith Block, co-CEO, Salesforce. "This is just the beginning, which is why we're now targeting $26 to $28 billion in revenue by FY23 – organically doubling our revenue again in the next four years."

Salesforce delivered the following results for its fiscal fourth quarter and full fiscal year 2019:

Revenue: Total fourth quarter revenue was $3.60 billion, an increase of 26% year-over-year, and 27% in constant currency. Subscription and support revenues were $3.38 billion, an increase of 26% year-over-year. Professional services and other revenues were $228 million, an increase of 16% year-over-year.

Full fiscal year 2019 revenue was $13.28 billion, an increase of 26% year-over-year, and 26% in constant currency. Subscription and support revenues were $12.41 billion, an increase of 27% year-over-year. Professional services and other revenues were $869 million, an increase of 12% year-over-year.

Earnings per Share: Fourth quarter GAAP diluted earnings per share was $0.46, and non-GAAP diluted earnings per share was $0.70. GAAP diluted earnings per share benefited by $0.17 related to the net benefit of tax adjustments. Mark-to-market accounting of the company's strategic investments, required by ASU 2016-01, benefited GAAP diluted earnings per share by $0.12 based on the US tax rate of 25% and non-GAAP diluted earnings per share by $0.12 based on our non-GAAP tax rate of 21.5%.

For fiscal year 2019, GAAP diluted earnings per share was $1.43, and non-GAAP diluted earnings per share was $2.75. Mark-to-market accounting of the company's strategic investments, required by ASU 2016-01, benefited GAAP diluted earnings per share by $0.52 based on the US tax rate of 25% and non-GAAP diluted earnings per share by $0.55 based on our non-GAAP tax rate of 21.5%.

Cash: Cash generated from operations for the fourth quarter was $1.33 billion, an increase of 27% year-over-year. Cash generated from operations for the full fiscal year 2019 was $3.40 billion, an increase of 24% year-over-year. Total cash, cash equivalents and marketable securities ended the fourth quarter at $4.34 billion.

Remaining Performance Obligation: Remaining performance obligation, representing future revenues that are under contract but have not yet been recognized, ended the fourth quarter at approximately $25.7 billion, an increase of 25% year-over-year. This includes approximately $450 million related to the remaining performance obligation from MuleSoft. Current remaining performance obligation, which represents the future revenues under contract expected to be recognized over the next 12 months, ended the fourth quarter at approximately $11.9 billion, an increase of 24% year-over-year.

Unearned Revenue: Unearned revenue on the balance sheet as of January 31, 2019 was $8.56 billion, an increase of 22% year-over-year, and 24% in constant currency.

As of March 4, 2019, the company is initiating revenue, earnings per share and current remaining performance obligation growth guidance for its first quarter of fiscal year 2020. For the full fiscal year 2020, the company is raising its revenue guidance previously provided November 27, 2018, and is initiating earnings per share guidance and operating cash flow growth guidance. The guidance below 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 our investment portfolio has had a positive impact on our financial results, that may not be true for future periods, particularly in periods of significant market fluctuations that affect the publicly traded companies within our strategic investment portfolio. The impact of future gains or losses from our strategic portfolio could be material. In addition, the guidance below is based on estimated GAAP tax rates that reflect the company's currently available information, and exclude 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.


Q1 FY20

Guidance


Full Year FY20

Guidance

Revenue

$3.67 - $3.68 billion


$15.95 - $16.05 billion

Y/Y Growth

22%


20% - 21%

GAAP EPS

$0.10 - $0.11


$0.66 - $0.68

Non-GAAP EPS

$0.60 - $0.61


$2.74 - $2.76

Operating Cash Flow Growth (Y/Y)

N/A


20% - 21%

Current Remaining Performance Obligation Growth (Y/Y)

~24%


N/A

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 2020


Q1


FY2020

GAAP EPS range*

$0.10 - $0.11


$0.66 - $0.68

Plus




Amortization of purchased intangibles

$

0.16



$

0.58


Stock-based expense

$

0.43



$

1.84


Less




Income tax effects and adjustments**

$

(0.09)



$

(0.34)


Non-GAAP diluted EPS***

$0.60 - $0.61


$2.74 - $2.76





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

773



784


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

797



809



* The company's GAAP tax provision is expected to be approximately 40% for the three months ended April 30, 2019 and approximately 40% for the year ended January 31, 2020. The GAAP tax rates may fluctuate due to discrete items, future acquisitions or other transactions. The company's projected GAAP basic and diluted EPS 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.

** 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.

*** The company's projected non-GAAP basic and diluted EPS 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.

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 9678599.  A replay will be available at (800) 585-8367 or (855) 859-2056 until midnight (ET) April 3, 2019.

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, expected revenue growth, 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 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 competitive nature of the market in which we participate; our international expansion strategy; our service performance and security, including the resources and costs required to prevent, detect and remediate potential security breaches; the expenses associated with new 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; 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; 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; the impact of future gains or losses from our strategic investment portfolio, including gains or losses from overall market conditions which may affect the publicly traded companies within our strategic investment portfolio; 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 capital 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 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.

© 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 January 31,


Fiscal Year Ended January 31,


2019


2018

(as adjusted)*


2019


2018
(as adjusted)*

Revenues:








Subscription and support

$

3,375



$

2,668



$

12,413



$

9,766


Professional services and other

228



197



869



774


Total revenues

3,603



2,865



13,282



10,540


Cost of revenues (1)(2):








Subscription and support

717



548



2,604



2,033


Professional services and other

229



190



847



740


Total cost of revenues

946



738



3,451



2,773


Gross profit

2,657



2,127



9,831



7,767


Operating expenses (1)(2):








Research and development

518



396



1,886



1,553


Marketing and sales

1,643



1,245



6,064



4,671


General and administrative

359



275



1,346



1,089


Total operating expenses

2,520



1,916



9,296



7,313


Income from operations

137



211



535



454


Investment income

16



12



57



36


Interest expense

(41)



(22)



(154)



(87)


Gains on strategic investments, net

125



23



542



19


Other income (expense)

2



(3)



3



(2)


Income before benefit from (provision for) income taxes

239



221



983



420


Benefit from (provision for) income taxes (3)

123



(15)



127



(60)


Net income

$

362



$

206



$

1,110



$

360


Basic net income per share

$

0.47



$

0.28



$

1.48



$

0.50


Diluted net income per share

$

0.46



$

0.28



$

1.43



$

0.49


Shares used in computing basic net income per share

766



724



751



715


Shares used in computing diluted net income per share

786



749



775



735



(1)  Amounts include amortization of intangible assets acquired through business combinations, as follows:



Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018


2019


2018

 Cost of revenues

$

62



$

39



$

215



$

166


 Marketing and sales

68



30



232



121



(2)  Amounts include stock-based expense, as follows:



Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018


2019


2018

 Cost of revenues

$

42



$

33



$

161



$

130


 Research and development

79



63



307



260


 Marketing and sales

169



112



643



469


 General and administrative

39



30



172



138



(3)  Amounts include a benefit related to the partial release of the valuation allowance of $612 million and $2 million for fiscal 2019 and 2018, respectively.


* Prior period information has been adjusted for the adoption of Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers (Topic 606)", which the Company adopted on February 1, 2018.

 

salesforce.com, inc.

Consolidated Statements of Operations

(As a percentage of total revenues)

(Unaudited)



Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018
(as adjusted)*


2019


2018
(as adjusted)*

Revenues:








Subscription and support

94

%


93

%


93

%


93

%

Professional services and other

6



7



7



7


Total revenues

100



100



100



100


Cost of revenues (1)(2):








Subscription and support

20



19



20



19


Professional services and other

6



7



6



7


Total cost of revenues

26



26



26



26


Gross profit

74



74



74



74


Operating expenses (1)(2):








Research and development

14



14



14



15


Marketing and sales

46



43



46



44


General and administrative

10



10



10



10


Total operating expenses

70



67



70



69


Income from operations

4



7



4



5


Investment income

0



0



0



0


Interest expense

(1)



0



(1)



(1)


Gains on strategic investments, net

4



1



4



0


Other income (expense)

0



0



0



0


Income before benefit from (provision for) income taxes

7



8



7



4


Benefit from (provision for) income taxes

3



(1)



1



(1)


Net income

10

%


7

%


8

%


3

%


(1)  Amounts include amortization of intangible assets acquired through business combinations as a percentage of total revenues, as follows:



Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018


2019


2018

 Cost of revenues

2

%


1

%


2

%


2

%

 Marketing and sales

2



1



2



1



(2)  Stock-based expense as a percentage of total revenues, as follows:



Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018


2019


2018

 Cost of revenues

1

%


1

%


1

%


1

%

 Research and development

2



2



2



2


 Marketing and sales

5



4



5



5


 General and administrative

1



1



1



1



* Prior period information has been adjusted for the adoption of Topic 606.

 

salesforce.com, inc.

Consolidated Balance Sheets

(in millions)

(Unaudited)



January 31, 2019


January 31, 2018
(as adjusted)*

Assets




Current assets:




Cash and cash equivalents

$

2,669



$

2,543


Marketable securities

1,673



1,978


Accounts receivable, net

4,924



3,921


Costs capitalized to obtain revenue contracts, net

788



671


Prepaid expenses and other current assets

629



471


Total current assets

10,683



9,584


Property and equipment, net

2,051



1,947


Costs capitalized to obtain revenue contracts, noncurrent, net

1,232



1,105


Capitalized software, net

152



146


Strategic investments

1,302



677


Goodwill

12,851



7,314


Intangible assets acquired through business combinations, net

1,923



827


Other assets, net

543



384


Total assets

$

30,737



$

21,984


Liabilities and stockholders' equity




Current liabilities:




Accounts payable

$

165



$

76


Accrued compensation

1,167



1,001


Accrued expenses and other liabilities

1,356



970


Unearned revenue

8,564



6,995


Current portion of debt

3



1,025


Total current liabilities

11,255



10,067


Noncurrent debt

3,173



695


Other noncurrent liabilities

704



846


Total liabilities

15,132



11,608


Stockholders' equity:




Common stock

1



1


Additional paid-in capital

13,927



9,752


Accumulated other comprehensive loss

(58)



(12)


Retained earnings

1,735



635


Total stockholders' equity

15,605



10,376


Total liabilities and stockholders' equity

$

30,737



$

21,984



* Prior period information has been adjusted for the adoption of Topic 606.

 

salesforce.com, inc.

Consolidated Statements of Cash Flows

(in millions)

(Unaudited)



Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018
(as adjusted)*


2019


2018
(as adjusted)*

Operating activities:








Net income

$

362



$

206



$

1,110



$

360


Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation and amortization

273



188



962



753


Amortization of debt discount and issuance costs

2



8



20



31


Amortization of costs capitalized to obtain revenue contracts, net

176



141



737



592


Expenses related to employee stock plans

329



238



1,283



997


Gains on strategic investments, net

(125)



(23)



(542)



(19)


Changes in assets and liabilities, net of business combinations:








Accounts receivable, net

(2,888)



(2,399)



(923)



(719)


Costs capitalized to obtain revenue contracts, net

(531)



(600)



(981)



(1,156)


Prepaid expenses and other current assets and other assets

(54)



230



(58)



18


Accounts payable

(5)



(43)



74



(39)


Accrued expenses and other liabilities

603



423



213



392


Unearned revenue

3,189



2,683



1,503



1,528


Net cash provided by operating activities

1,331



1,052



3,398



2,738


Investing activities:








Business combinations, net of cash acquired

0



(5)



(5,115)



(25)


Purchases of strategic investments

(70)



(103)



(362)



(216)


Sales of strategic investments

171



75



260



131


Purchases of marketable securities

(434)



(569)



(1,068)



(2,003)


Sales of marketable securities

74



121



1,426



558


Maturities of marketable securities

48



35



146



78


Capital expenditures

(167)



(138)



(595)



(534)


Net cash used in investing activities

(378)



(584)



(5,308)



(2,011)


Financing activities:








Proceeds from issuance of debt, net

0



0



2,966



0


Proceeds from employee stock plans

136



165



704



650


Principal payments on capital lease obligations

(21)



(23)



(131)



(106)


Repayments of debt

(501)



(123)



(1,529)



(323)


Net cash provided by (used in) financing activities

(386)



19



2,010



221


Effect of exchange rate changes

(3)



(16)



26



(12)


Net increase in cash and cash equivalents

564



471



126



936


Cash and cash equivalents, beginning of period

2,105



2,072



2,543



1,607


Cash and cash equivalents, end of period

$

2,669



$

2,543



$

2,669



$

2,543



* Prior period information has been adjusted for the adoption of Topic 606. Total net cash provided by operating activities, net cash used in investing activities and net cash provided by (used in) financing activities for the three months and year ended January 31, 2018, as adjusted, did not change.

 

salesforce.com, inc.

Additional Metrics

(Unaudited)



Jan 31,

2019


Oct 31,

2018


Jul 31,
2018


Apr 30,
2018


Jan 31,

2018


Oct 31,
2017

Full Time Equivalent Headcount (1)

35,995



34,391



32,717



30,149



29,401



28,527


Financial data (in millions):












Cash, cash equivalents and marketable securities (2)

$

4,342



$

3,450



$

3,427



$

7,159



$

4,521



$

3,629


Strategic investments (3)

$

1,302



$

1,251



$

1,202



$

1,024



$

677



$

670


Unearned revenue (4)

$

8,564



$

5,376



$

5,883



$

6,201



$

6,995



$

4,312


Principal due on the Company's outstanding debt obligations (2)

$

3,198



$

3,699



$

3,700



$

3,200



$

1,727



$

1,850


Net cash provided by operating activities

$

1,331



$

143



$

458



$

1,466



$

1,052



$

125


Capital expenditures

$

167



$

136



$

170



$

122



$

138



$

111



(1) Full time equivalent headcount includes 1,267 from the May 2018 acquisition of MuleSoft, Inc.


(2) The Company raised $2.5 billion in a public offering of unsecured debt in April 2018 in connection with the acquisition of MuleSoft, Inc. which closed in May 2018.  Total cash paid in May 2018 in connection with the acquisition was approximately $4.9 billion. The Company's 0.25% Convertible Senior Notes matured in April 2018 and the Company paid the principal amount due at that time. The Company repaid the $500 million 2019 Term Loan in full in January 2019.


(3) The strategic investments balance as of January 31, 2019, October 31, 2018, July 31, 2018 and April 30, 2018 includes the fair value adjustments of the Company's publicly traded and privately held equity investments as the Company adopted Accounting Standards Update No. 2016-01, "Financial Instruments-Overall (Subtopic 825-10)" on February 1, 2018. See discussion below for further details on the fair value adjustments.


(4) January 31, 2018 and October 31, 2017 information has been adjusted for the adoption of Topic 606, which the Company adopted on February 1, 2018. Topic 606 introduced unearned revenue, which is substantially similar to deferred revenue under previous accounting guidance, except for the removal of the limitation on contingent revenue.


Supplemental Revenue Analysis

Remaining Performance Obligation (Formerly "Remaining Transaction Price")

Topic 606 introduced remaining transaction price, which is different than unbilled deferred revenue under previous accounting guidance. 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.

As with unbilled deferred revenue under previous accounting guidance, 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 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


 

Disaggregation of Revenue


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

Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018
(as adjusted)*


2019


2018
(as adjusted)*

Sales Cloud

$

1,051



$

946



$

4,040



$

3,588


Service Cloud

964



789



3,621



2,883


Salesforce Platform and Other

825



535



2,854



1,913


Marketing and Commerce Cloud

535



398



1,898



1,382



$

3,375



$

2,668



$

12,413



$

9,766










Total revenues by geography (in millions):

Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018
(as adjusted)*


2019


2018
(as adjusted)*

Americas

$

2,581



$

2,046



$

9,445



$

7,621


Europe

677



542



2,553



1,916


Asia Pacific

345



277



1,284



1,003



$

3,603



$

2,865



$

13,282



$

10,540










Total revenues by geography as a percentage of total revenues:

Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018
(as adjusted)*


2019


2018
(as adjusted)*

Americas

72

%


71

%


71

%


72

%

Europe

19



19



19



18


Asia Pacific

9



10



10



10



100

%


100

%


100

%


100

%


* Prior period information has been adjusted for the adoption of Topic 606.

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 (as compared to the comparable prior periods as adjusted for Topic 606) were as follows:


Three Months Ended
January 31, 2019
compared to Three Months
Ended January 31, 2018


Three Months Ended
October 31, 2018
compared
to Three Months Ended
October 31, 2017


Three Months Ended
January 31, 2018
compared to Three Months
Ended January 31, 2017

Americas

26%


25%


18%

Europe

31%


31%


30%

Asia Pacific

26%


26%


27%

Total growth

27%


26%


21%

The Company presents constant currency information for unearned revenue 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 unearned revenue balances in local currencies in previous comparable periods using the United States dollar currency exchange rate as of the most recent balance sheet date.

Unearned revenue constant currency growth rates (as compared to the comparable prior periods as adjusted for Topic 606) were as follows:


January 31, 2019
compared to
January 31, 2018


October 31, 2018
compared to
October 31, 2017


January 31, 2018
compared to
January 31, 2017

Total growth

24%


26%


25%


 

Supplemental Strategic Investment Information

Gains on strategic investments, net


Upon the prospective adoption of ASU 2016-01 in the first fiscal quarter of 2019, the Company is now required to record all fair value adjustments of the Company's publicly traded and privately held equity investments through the statement of operations.  As such, 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 January 31,


Fiscal Year Ended January 31,


2019


2018


2019


2018

Net gains recognized on publicly traded securities

$

83



$

0



$

345



$

0


Net gains recognized on privately held securities

34



23



133



19


Net gains recognized on sales of equity securities

6



0



74



0


Net gains (losses) recognized on debt securities

2



0



(10)



0


Gains on strategic investments, net

$

125



$

23



$

542



$

19


 

Supplemental Debt Information


The carrying values of the Company's borrowings were as follows (in millions):


Instrument


Date of issuance


Maturity date


January 31, 2019


January 31, 2018

2021 Term Loan


May 2018


May 2021


$

499



$

0


2023 Senior Notes


April 2018


April 2023


993



0


2028 Senior Notes


April 2018


April 2028


1,488



0


2019 Term Loan


July 2016


July 2019 (1)


0



498


Loan assumed on 50 Fremont


February 2015


June 2023


196



199


0.25% Convertible Senior Notes


March 2013


April 2018


0



1,023


Total carrying value of debt






3,176



1,720


Less current portion of debt






(3)



(1,025)


Total noncurrent debt






$

3,173



$

695



(1) The Company repaid the 2019 Term Loan in full in January 2019.

 

Supplemental Diluted Share Count Information

(share data in millions)



Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018


2019


2018

Weighted-average shares outstanding for basic earnings per share

766



724



751



715


Effect of dilutive securities:








Convertible senior notes

0



6



1



5


Employee stock awards

20



17



21



14


Warrants

0



2



2



1


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

786



749



775



735


 

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 January 31,


Fiscal Year Ended January 31,


2019


2018

(as adjusted)*


2019


2018

(as adjusted)*

Non-GAAP gross profit








GAAP gross profit

$

2,657



$

2,127



$

9,831



$

7,767


Plus:








Amortization of purchased intangibles (a)

62



39



215



166


Stock-based expense (b)

42



33



161



130


Non-GAAP gross profit

$

2,761



$

2,199



$

10,207



$

8,063


Non-GAAP operating expenses








GAAP operating expenses

$

2,520



$

1,916



$

9,296



$

7,313


Less:








Amortization of purchased intangibles (a)

68



30



232



121


Stock-based expense (b)

287



205



1,122



867


Non-GAAP operating expenses

$

2,165



$

1,681



$

7,942



$

6,325


Non-GAAP income from operations








GAAP income from operations

$

137



$

211



$

535



$

454


Plus:








Amortization of purchased intangibles (a)

130



69



447



287


Stock-based expense (b)

329



238



1,283



997


Non-GAAP income from operations

$

596



$

518



$

2,265



$

1,738


Non-GAAP non-operating income (loss) (c)








GAAP non-operating income (loss)

$

102



$

10



$

448



$

(34)


Plus:








Amortization of debt discount, net

0



7



4



26


Non-GAAP non-operating income (loss)

$

102



$

17



$

452



$

(8)


Non-GAAP net income








GAAP net income

$

362



$

206



$

1,110



$

360


Plus:








Amortization of purchased intangibles (a)

130



69



447



287


Stock-based expense (b)

329



238



1,283



997


Amortization of debt discount, net

0



7



4



26


Less:








Income tax effects and adjustments

(273)



(170)



(711)



(537)


Non-GAAP net income

$

548



$

350



$

2,133



$

1,133



* Prior period information has been adjusted for the adoption of Topic 606.



Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018

(as adjusted)*


2019


2018
(as adjusted)*

Non-GAAP diluted earnings per share








GAAP diluted net income per share

$

0.46



$

0.28



$

1.43



$

0.49


Plus:








Amortization of purchased intangibles

0.17



0.09



0.58



0.39


Stock-based expense

0.42



0.32



1.66



1.36


Amortization of debt discount, net

0.00



0.01



0.00



0.04


Less:








Income tax effects and adjustments

(0.35)



(0.23)



(0.92)



(0.74)


Non-GAAP diluted earnings per share

$

0.70



$

0.47



$

2.75



$

1.54


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

786



749



775



735



* Prior period information has been adjusted for the adoption of Topic 606.


a)  Amortization of purchased intangibles were as follows:



Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018


2019


2018

 Cost of revenues

$

62



$

39



$

215



$

166


 Marketing and sales

68



30



232



121



$

130



$

69



$

447



$

287



b)  Stock-based expense was as follows:



Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018


2019


2018

 Cost of revenues

$

42



$

33



$

161



$

130


 Research and development

79



63



307



260


 Marketing and sales

169



112



643



469


 General and administrative

39



30



172



138



$

329



$

238



$

1,283



$

997



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

 

salesforce.com, inc.

Computation of Basic and Diluted GAAP and non-GAAP Net Income Per Share

(in millions, except per share data)

(Unaudited)



Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018

(as adjusted)*


2019


2018
(as adjusted)*

GAAP Basic Net Income Per Share








Net income

$

362



$

206



$

1,110



$

360


Basic net income per share

$

0.47



$

0.28



$

1.48



$

0.50


Shares used in computing basic net income per share

766



724



751



715











Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018
(as adjusted)*


2019


2018
(as adjusted)*

Non-GAAP Basic Net Income Per Share








Non-GAAP net income

$

548



$

350



$

2,133



$

1,133


Basic Non-GAAP net income per share

$

0.72



$

0.48



$

2.84



$

1.58


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

766



724



751



715











Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018
(as adjusted)*


2019


2018
(as adjusted)*

GAAP Diluted Net Income Per Share








Net income

$

362



$

206



$

1,110



$

360


Diluted net income per share

$

0.46



$

0.28



$

1.43



$

0.49


Shares used in computing diluted net income per share

786



749



775



735











Three Months Ended January 31,


Fiscal Year Ended January 31,


2019


2018
(as adjusted)*


2019


2018
(as adjusted)*

Non-GAAP Diluted Net Income Per Share








Non-GAAP net income

$

548



$

350



$

2,133



$

1,133


Diluted Non-GAAP net income per share

$

0.70



$

0.47



$

2.75



$

1.54


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

786



749



775



735



* Prior period information has been adjusted for the adoption of Topic 606.

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 unearned 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, 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 Q4 FY19 financial statements and for its non-GAAP estimates for Q1 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, one that is not typically affected by operations during any particular period.
  • 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, amortization of purchased intangibles, and previously the amortization of debt discount. 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 2019, the company used a projected non-GAAP tax rate of 21.5 percent. For fiscal 2020, the company uses a projected non-GAAP tax rate of 22.5 percent, 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 including 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

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