Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Salesforce Slips: Results Beat Street, but Guidance Falls Short

Apparently, landing the biggest deal in its corporate history hasn’t helped Salesforce.com, at least insofar as its investors are concerned.

Shares of Salesforce are falling and falling big in after-hours trading as the cloud-software concern reported quarterly results that beat all the forecasts of Wall Street analysts, but which included an outlook for the quarter and year ahead that fell short of expectations.

Soon after markets closed, Salesforce shares took a 5 percent haircut, falling by $8.31 to $138.46. That drop comes on top of a drop of more than 1 percent during the regular session, when the shares finished at $146.77.

Earnings for the quarter were 42 cents per share, beating the consensus of 39 cents. Revenue was $732 million versus the consensus of $728.3 million. So far so good.

Then came the outlook: Salesforce said it expects revenue to come in at between $773 million and $777 million, soundly beating the expectation of $771 million and change. Still good.

The problem was with the EPS expectation, which one must remember is a non-GAAP profit to begin with. Salesforce says it will be 31 cents to 32 cents a share, versus a consensus of 34 cents. (On a GAAP basis, which no one pays attention to, Salesforce still expects to report losses in the range of 26 cents to 27 cents, and of 72 cents to 75 cents for the full year.)

Okay, everyone freak out. More as I go through the numbers.

Here’s the Salesforce announcement.

Salesforce.com Announces Fiscal 2013 Second Quarter Results
- Quarterly Revenue of $732 Million, up 34% Year-Over-Year
- Quarterly Operating Cash Flow of $136 Million, up 64% Year-Over-Year
- Deferred Revenue of $1.34 Billion, up 43% Year-Over-Year
- Unbilled Deferred Revenue Increases to Approximately $2.8 Billion
- Raises FY13 Revenue Guidance to $3.025 – $3.035 Billion

SAN FRANCISCO, Aug. 23, 2012 /PRNewswire/ — Salesforce.com (CRM), the enterprise cloud computing (http://www.salesforce.com/cloudcomputing/) company, today announced results for its fiscal second quarter ended July 31, 2012.

“Our second quarter revenue growth was outstanding at 34% in dollars and 37% in constant currency,” said Marc Benioff, Chairman and CEO, salesforce.com. “Salesforce.com’s social enterprise strategy is enabling companies to connect with customers, partners, and employees in completely new ways – and it’s creating new opportunities for their growth and ours.”

Salesforce.com delivered the following results for its fiscal second quarter:

Revenue: Total Q2 revenue was $732 million, an increase of 34% on a year-over-year basis. Subscription and support revenues were $687 million, an increase of 35% on a year-over-year basis. Professional services and other revenues were $44 million, an increase of 20% on a year-over-year basis.

Earnings per Share: Q2 GAAP net loss per share was ($0.07), and non-GAAP diluted earnings per share was $0.42. The company’s non-GAAP results exclude the effects of $85 million in stock-based compensation expense, $20 million in amortization of purchased intangibles, and $6 million in net non-cash interest expense related to the company’s convertible senior notes. Non-GAAP EPS calculations are based on approximately 146 million diluted shares outstanding during the quarter, including approximately 3 million shares associated with the company’s convertible senior notes. GAAP EPS calculations are based on a basic share count of approximately 139 million shares.

Cash: Cash generated from operations for the fiscal second quarter was $136 million, an increase of 64% on a year-over-year basis. Total cash, cash equivalents and marketable securities finished the quarter at $1.8 billion.

Deferred Revenue: Deferred revenue on the balance sheet as of July 31, 2012 was $1.34 billion, an increase of 43% on a year-over-year basis. Current deferred revenue increased by 38% year-over-year to $1.27 billion, benefited in part by longer invoice durations. Non-current deferred revenue increased by 293% year-over-year to $69 million. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the second quarter at approximately $2.8 billion, up from approximately $2.7 billion at the end of the fiscal first quarter.

As of August 23, 2012, salesforce.com is initiating revenue, GAAP EPS and non-GAAP EPS guidance for its fiscal third quarter of fiscal year 2013. In addition, for the full fiscal year 2013, the company is raising its revenue and non-GAAP EPS guidance previously provided on June 4, 2012, and initiating GAAP EPS guidance.

Q3 FY13 Guidance: Revenue for the company’s third fiscal quarter is projected to be in the range of $773 million to $777 million, an increase of 32% to 33% year-over-year.

GAAP net loss per share is expected to be in the range of ($0.27) to ($0.26), while diluted non-GAAP EPS is expected to be in the range of $0.31 to $0.32. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $99 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $27 million, and net non-cash interest expense related to the convertible senior notes, expected to be approximately $6 million. EPS estimates assume a GAAP tax rate of approximately 37%, and a non-GAAP tax rate of approximately 35%. The GAAP EPS calculation assumes an average basic share count of approximately 142 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 151 million shares.

Full Year FY13 Guidance: Revenue for the company’s full fiscal year 2013 is projected to be in the range of $3.025 billion to $3.035 billion, an increase of 33% to 34% year-over-year.

For the company’s full fiscal year 2013, GAAP net loss per share is expected to be in the range of ($0.75) to ($0.72) while diluted non-GAAP EPS is expected to be in the range of $1.48 to $1.51. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $382 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $95 million, and net non-cash interest expense related to the convertible senior notes, expected to be approximately $24 million. EPS estimates assume a GAAP tax rate of approximately 30%, and a non-GAAP tax rate of approximately 37%. The GAAP EPS calculation assumes an average basic share count of approximately 141 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 150 million shares.


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