Salesforce.com Q1 2011: Revenue Up 34% - EPS Beats By Penny - Guides Up

May 20, 2011

Salesforce.com reported results for its fiscal first quarter ended April 30, 2011.

Revenue: Total Q1 revenue was $504 million, an increase of 34% on a year-over-year basis. Subscription and support revenues were $474 million, an increase of 35% on a year-over-year basis. Professional services and other revenues were $31 million, an increase of 18% on a year-over-year basis.

Earnings Per Share: Q1 GAAP diluted earnings per share were breakeven, and non-GAAP diluted earnings per share decreased 7% year-over-year to $0.28. The company’s non-GAAP results exclude the effects of approximately $48 million in stock-based compensation expense, approximately $10 million in amortization of purchased intangibles, and approximately $3 million in non-cash interest expense related to the company’s convertible senior notes. All EPS calculations are based on 141 million diluted shares outstanding during the quarter. The company’s Q1 diluted shares outstanding include approximately 3 million shares associated with the convertible senior notes and warrants.

Wall Street was looking for earns of 27 cents a share on sales of $483 million.

“Salesforce.com has become the first enterprise cloud computing company to reach a $2.0 billion annual revenue run rate,” said Marc Benioff, Chairman and CEO. “We are delighted to see our revenue growth rate continue to accelerate.”

Customers: Net paying customers rose approximately 5,400 during the quarter to finish at approximately 97,700. Since April 30, 2010, the company added 20,400 net paying customers, an increase of 26% on a year-over-year basis.

Cash: Cash generated from operations for the fiscal first quarter was $140 million, a decrease of 3% on a year-over-year basis. Total cash, cash equivalents and marketable securities finished the year at approximately $1.5 billion, a decrease of approximately $379 million from the prior year.

Deferred Revenue: Deferred revenue on the balance sheet as of April 30, 2011 was $915 million, an increase of 38% on a year-over-year basis.

As of May 19, 2011, salesforce.com is initiating guidance for its second quarter of fiscal year 2012. In addition, the company is raising its prior full fiscal year 2012 revenue and non-GAAP EPS guidance provided on March 30, 2011, and updating its projected full fiscal year 2012 GAAP EPS guidance previously provided on February 24, 2011.

Q1 FY12 Guidance: Revenue for the company’s second fiscal quarter is projected to be in the range of approximately $526 million to approximately $528 million.

For the second fiscal quarter, the company expects to report a GAAP net loss per share of approximately ($0.01) to breakeven, while diluted non-GAAP EPS is expected to be approximately $0.29 to $0.30. All EPS estimates include a one-time tax benefit of $0.02, associated with the acquisition of Radian6. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $54 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $17 million, and 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 113%, and a non-GAAP tax rate of 30%. For the purpose of the EPS calculation, assume an average basic share count of approximately 136 million shares, and an average diluted share count of approximately 144 million shares. Salesforce.com completed its previously announced acquisition of Radian6 on May 2, 2011, and these estimates include the forecasted operating results for Radian6 from that date forward. Radian6 estimates incorporate a preliminary purchase price allocation, and are therefore subject to change.

Wall Street is looking for 26 cents a share in earnings.

Full Year FY12 Guidance: Revenue for the company’s full fiscal year 2012 is projected to be in the range of approximately $2.15 billion to approximately $2.17 billion.

For the full fiscal year 2012, the company expects to report a GAAP net loss per share of approximately ($0.03) to ($0.01), while diluted non-GAAP EPS is expected to be approximately $1.30 to $1.32. All EPS estimates include a one-time tax benefit of $0.04, associated with the acquisition of Radian6. 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 $60 million, and non-cash interest expense related to the convertible senior notes, expected to be approximately $11 million. EPS estimates assume a GAAP tax rate of 113%, and a non-GAAP tax rate of 33%. For the purpose of the EPS calculation, assume an average basic share count of approximately 136 million shares, and an average diluted share count of approximately 145 million shares. Salesforce.com completed its previously announced acquisition of Radian6 on May 2, 2011, and these estimates include the forecasted operating results for Radian6 from that date forward. Radian6 estimates incorporate a preliminary purchase price allocation, and are therefore subject to change.