Salesforce Announces Record First Quarter Fiscal 2021 Results
SAN FRANCISCO, May 28, 2020 /PRNewswire/ -- Salesforce (NYSE: CRM), the global leader in CRM, today announced results for its fiscal first quarter ended April 30, 2020.
"Our results, amidst this global crisis, demonstrated our ability to execute at speed, innovate at scale and the strength of our business model," said Marc Benioff, Chair & CEO, Salesforce. "We made long-term investments in keeping our employees safe, supporting our customers, delivering crucial innovation like Work.com, and helping our communities with PPE, grants, and technology. The pandemic showed us that digital is an imperative for every company, and we're confident Salesforce will continue to accelerate as we bring our customers into the new normal."
In response to COVID-19, Salesforce took the following actions in its fiscal first quarter to invest in its customers, employees and community during this unprecedented time, and to prepare for the future:
-- Launched Salesforce Care, a set of free rapid response solutions to help
companies stay connected to their employees, customers and partners
during the COVID-19 crisis
-- Created the Tableau Data Hub, a free resource to help companies and
governments around the world see and understand data about the pandemic
-- Developed an online leadership program called Leading Through Change.
The program highlights the work Salesforce customers have been doing
during the crisis and has over 75 million views to date
-- Provided customers most affected by the COVID-19 pandemic temporary
financial flexibility
-- Gave certainty to its sales team with a one-time guaranteed commission
for the first quarter
-- Directed its global workforce to work from home and cancelled all
business travel by employees for the foreseeable future
-- Committed to no significant layoffs for the first 90 days of the crisis
-- Launched B-Well Together for employees, a series focused on aligning the
mind and body with leading well-being experts. Based on global demand,
the company opened it to the public
-- Shifted customer, industry, and employee events to virtual-only
experiences for the remainder of 2020
-- Donated more than $7.5M in grants to organizations on the front lines of
the crisis in the San Francisco Bay Area, New York, Israel, Italy,
Spain, France and Germany
-- Sourced more than 50 million units of PPE, such as masks, gowns, suits,
and face shields for hospitals in the US, U.K., India and France
Salesforce continues to invest in its stakeholders. In the second fiscal quarter, the company introduced Work.com, new technology solutions and resources to help business and community leaders around the world reopen safely, re-skill employees and respond efficiently on the heels of the COVID-19 pandemic. Work.com has generated enormous interest from businesses and governments and deepened partnerships with the world's top system integrators and technology partners. For example, Workday recently announced that it will integrate its employee data directly into Work.com to make it easier for employers to centralize critical data and get their businesses up and running again.
Salesforce delivered the following results for its fiscal first quarter:
Revenue:
Total first quarter revenue was $4.87 billion, an increase of 30% year-over-year, and 31% in constant currency. Subscription and support revenues for the quarter were $4.58 billion, an increase of 31% year-over-year. Professional services and other revenues for the quarter were $290 million, an increase of 20% year-over-year.
Earnings per Share:
First quarter GAAP earnings per share was $0.11, and non-GAAP diluted earnings per share was $0.70. Mark-to-market accounting of the company's strategic investments, required by ASU 2016-01, benefited GAAP earnings per share by $0.16 based on a U.S. tax rate of 25% and non-GAAP diluted earnings per share by $0.16 based on a non-GAAP tax rate of 22%.
Cash: Cash generated from operations for the first quarter was $1.86 billion, a decrease of 5% year-over-year. Total cash, cash equivalents and marketable securities ended the first quarter at $9.80 billion.
Remaining Performance Obligation: Remaining performance obligation ended the first quarter at approximately $29.3 billion, an increase of 18% year-over-year. Current remaining performance obligation ended the first quarter at approximately $14.5 billion, an increase of 23% year-over-year, 24% in constant currency.
As of May 28, 2020, the company is initiating its revenue guidance, GAAP earnings per share guidance, non-GAAP earnings per share guidance, and current remaining performance obligation growth guidance for the its second quarter of fiscal year 2021. As a result of the first quarter financial impacts of COVID-19 discussed above, and the company's current assumptions related to the extent to which the pandemic will affect the business going forward, the company is lowering its revenue guidance, GAAP earnings per share guidance, non-GAAP earnings per share guidance, and operating cash flow guidance previously provided on February 25, 2020 for its full fiscal year 2021. Management will provide further commentary around these guidance assumptions on its earnings call, which is expected to occur on May 28, 2020 at 2:00 PM Pacific Time.
Our guidance assumes no change to the value of the company's strategic investment portfolio resulting from ASU 2016-01 as it is not possible to forecast future gains and losses. In addition, the guidance below is based on estimated GAAP tax rates that reflect the company's currently available information, and excludes forecasted 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.
Q2 FY21 Full Year FY21
Guidance Guidance
Revenue
$4.89 - $4.90 billion ~$20.0 billion
Y/Y Growth 22% - 23% ~17%
GAAP earnings per ($0.02) - ($0.06) -
share ($0.01) ($0.04)
Non-GAAP
earnings per
share
$0.66 - $0.67
$2.93 - $2.95
Operating Cash
Flow Growth (Y/
Y) N/A ~10% - 11%
Current Remaining
Performance
Obligation
Growth (Y/Y) ~16% - 17% N/A
The following is a per share reconciliation of GAAP diluted loss per share to non-GAAP diluted
earnings per share guidance for the next quarter and the full year:
Fiscal 2021
Q2 FY21
GAAP loss per
share ($0.01) ($0.04)
range(1)(2) ($0.02) - ($0.06) -
Plus
Amortization of
purchased
intangibles $
0.31 $
1.21
Stock-based
expense $
0.62 $
2.36
Income tax
effects and
adjustments(3) $
(0.25) $
(0.58)
Non-GAAP diluted
earnings per
share(2)
$0.66 - $0.67
$2.93 - $2.95
Shares used in
computing basic
GAAP net loss
per share
(millions) 903 906
Shares used in
computing
diluted Non-
GAAP net income
per share
(millions) 924 927
((1) )The Company's GAAP tax provision is expected to be approximately 81% for the three months ended July 31, 2020, and approximately 104% for the year ended January 31, 2021. The GAAP tax rates may fluctuate due to discrete tax items and related effects in conjunction with certain provisions in the Tax Cuts and Jobs Act, future acquisitions or other transactions.
((2) )The Company's projected GAAP and Non-GAAP basic and diluted earnings per share 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 the company's strategic investment portfolio has had a positive impact on the company's financial results, that may not be true for future periods, particularly in periods of significant market fluctuations that affect the publicly traded companies within the company's strategic investment portfolio. The impact of future gains or losses from the company's strategic investment portfolio could be material.
((3) )The Company's Non-GAAP tax provision uses a long-term projected tax rate of 22.0%, which reflects currently available information and could be subject to change.
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) to discuss its financial results with the investment community. A live webcast 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 (833) 579-0905 and internationally at (778) 560-2800, Conference ID 6520138. A replay will be available at (800) 585-8367 or (416) 621-4642 until midnight (ET) June 11, 2020.
About Salesforce
Salesforce is the global leader in Customer Relationship Management (CRM), bringing companies closer to their customers in the digital age. Founded in 1999, Salesforce enables companies of every size and industry to take advantage of powerful technologies--cloud, mobile, social, internet of things, artificial intelligence, voice and blockchain--to create a 360-degree view of their customers. For more information about Salesforce (NYSE: CRM), visit: www.salesforce.com.
"Safe harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements about the company's financial and operating results, which may include expected GAAP and non-GAAP financial and other operating and non-operating results, including revenue, net income, earnings per share, operating cash flow growth, operating margin improvement, expected revenue growth, expected current remaining performance obligation growth, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles, shares outstanding, market growth, environmental, social and governance goals, expected capital allocation, including mergers and acquisitions, capital expenditures and other investments, expectations regarding closing contemplated acquisitions and contributions from acquired companies. 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 it makes.
The risks and uncertainties referred to above include -- but are not limited to -- risks associated with the effect of the impact of the COVID-19 pandemic, related public health measures and resulting economic downturn and market volatility; our ability to maintain service performance and security levels meeting the expectations of our customers, and the resources and costs required to avoid unanticipated downtime and prevent, detect and remediate performance degradation and security breaches; the expenses associated with our data centers and third-party infrastructure providers; our ability to secure and costs related to additional data center capacity; our reliance on third-party hardware, software and platform providers; 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; current and potential litigation involving us or our industry, including litigation involving acquired entities such as Tableau, and the resolution or settlement thereof; regulatory developments and regulatory investigations involving us or affecting our industry; our ability to successfully introduce new services and product features, including any efforts to expand our services beyond the CRM market; the success of our strategy of acquiring or making investments in complementary businesses, joint ventures, services, technologies and intellectual property rights; 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 compete in the market in which we participate; the success of 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; our ability to execute our business plans; our ability to continue to grow unearned revenue and remaining performance obligation; the pace of change and innovation in enterprise cloud computing services; the seasonal nature of our sales cycles; our ability to limit customer attrition and costs related to those efforts; the success of our international expansion strategy; the demands on our personnel and infrastructure resulting from significant growth in our customer base and operations, including as a result of acquisitions; our dependency on the development and maintenance of the infrastructure of the Internet; our real estate and office facilities strategy and related costs and uncertainties; fluctuations in, and our ability to predict, our operating results and cash flows; the variability in our results arising from the accounting for term license revenue products; the performance and fair value of our investments in complementary businesses through our strategic investment portfolio; the impact of future gains or losses from our strategic investment portfolio including gains or losses from overall market conditions that may affect the publicly traded companies within our strategic investment portfolio; our ability to protect our intellectual property rights; our ability to develop our brands; the impact of foreign currency exchange rate and interest rate fluctuations on our results; 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; uncertainties regarding our tax obligations in connection with potential jurisdictional transfers of intellectual property, including the tax rate, the timing of the transfer and the value of such transferred intellectual property; uncertainties regarding the effect of general economic and market conditions; the impact of geopolitical events; uncertainties regarding the impact of expensing stock options and other equity awards; the sufficiency of our capital resources; risks related to our 2023 and 2028 senior notes, revolving credit facility and loan associated with 50 Fremont; our ability to comply with our debt covenants and lease obligations; and the impact of climate change, natural disasters and actual or threatened public health emergencies, including the ongoing COVID-19 pandemic.
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 it makes 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.
© 2020 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 April 30,
2020 2019
Revenues:
Subscription and support $
4,575 $
3,496
Professional services and other 290 241
Total revenues 4,865 3,737
Cost of revenues (1)(2):
Subscription and support 966 678
Professional services and other 288 236
Total cost of revenues 1,254 914
Gross profit 3,611 2,823
Operating expenses (1)(2):
Research and development 859 554
Marketing and sales 2,390 1,697
General and administrative 502 362
Total operating expenses 3,751 2,613
Income (loss) from operations (140) 210
Gains on strategic investments,
net 192 281
Other expense (5) (9)
Income before benefit from
(provision for) income taxes 47 482
Benefit from (provision for)
income taxes 52 (90)
Net income $
99 $
392
Basic net income per share $
0.11 $
0.51
Diluted net income per share $
0.11 $
0.49
Shares used in computing basic
net income per share 896 771
Shares used in computing
diluted net income per share 913 793
(1) Amounts include amortization of intangible assets acquired through business combinations, as follows:
Three Months Ended April 30,
2020 2019
Cost of revenues $
159 $
61
Marketing and sales 112 68
(2) Amounts include stock-based expense, as follows:
Three Months Ended April 30,
2020 2019
Cost of revenues $
52 $
43
Research and development 166 81
Marketing and sales 223 177
General and administrative 63 42
salesforce.com, inc.
Consolidated Statements of Operations
(As a percentage of total revenues)
(Unaudited)
Three Months Ended April 30,
2020 2019
Revenues:
Subscription and support 94 94
% %
Professional services and other 6 6
Total revenues 100 100
Cost of revenues (1)(2):
Subscription and support 20 18
Professional services and other 6 6
Total cost of revenues 26 24
Gross profit 74 76
Operating expenses (1)(2):
Research and development 18 15
Marketing and sales 49 45
General and administrative 10 10
Total operating expenses 77 70
Income (loss) from operations (3) 6
Gains on strategic investments,
net 4 7
Other expense 0 0
Income before benefit from
(provision for) income taxes 1 13
Benefit from (provision for)
income taxes 1 (3)
Net income 2 10
% %
===
(1) Amounts include amortization of intangible assets acquired through business combinations as a
percentage of total revenues, as follows:
Three Months Ended April 30,
2020 2019
Cost of revenues 3 2
% %
Marketing and sales 2 2
(2) Amounts include stock-based expense as a percentage of total revenues, as follows:
Three Months Ended April 30,
2020 2019
Cost of revenues 1 1
% %
Research and development 3 2
Marketing and sales 5 5
General and administrative 1 1
salesforce.com, inc.
Consolidated Balance Sheets
(in millions
)
(Unaudited)
April 30, 2020 January 31, 2020
Assets
Current assets:
Cash and cash equivalents $
5,772 $
4,145
Marketable securities 4,030 3,802
Accounts receivable, net 3,076 6,174
Costs capitalized to obtain revenue
contracts, net 881 926
Prepaid expenses and other current assets 954 916
Total current assets 14,713 15,963
Property and equipment, net 2,518 2,375
Operating lease right-of-use assets, net 2,983 3,040
Noncurrent costs capitalized to obtain
revenue contracts, net 1,171 1,348
Strategic investments 1,902 1,963
Goodwill 25,266 25,134
Intangible assets acquired through
business combinations, net 4,488 4,724
Capitalized software and other assets, net 582 579
Total assets $
53,623 $
55,126
Liabilities and stockholders' equity
Current liabilities:
Accounts payable, accrued expenses and
other liabilities $
2,989 $
3,433
Operating lease liabilities, current 742 750
Unearned revenue 9,112 10,662
Total current liabilities 12,843 14,845
Noncurrent debt 2,673 2,673
Noncurrent operating lease liabilities 2,422 2,445
Other noncurrent liabilities 1,120 1,278
Total liabilities 19,058 21,241
Stockholders' equity:
Common stock 1 1
Additional paid-in capital 32,739 32,116
Accumulated other comprehensive loss (135) (93)
Retained earnings 1,960 1,861
Total stockholders' equity 34,565 33,885
Total liabilities and stockholders' equity $
53,623 $
55,126
salesforce.com, inc.
Consolidated Statements of Cash Flows
(in millions)
(Unaudited)
Three Months Ended April 30,
2020 2019
Operating activities:
Net income $
99 $
392
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 658 437
Amortization of costs capitalized
to obtain revenue contracts, net 247 209
Expenses related to employee
stock plans 504 343
Gains on strategic investments,
net (192) (281)
Changes in assets and liabilities, net of
business combinations:
Accounts receivable, net 3,094 2,774
Costs capitalized to obtain
revenue contracts, net (25) (124)
Prepaid expenses and other
current assets and other assets (11) (97)
Accounts payable 147 15
Accrued expenses and other
liabilities (904) (560)
Operating lease liabilities (203) (164)
Unearned revenue (1,555) (979)
Net cash provided by operating
activities 1,859 1,965
Investing activities:
Business combinations, net of
cash acquired (103) (10)
Purchases of strategic
investments (342) (159)
Sales of strategic investments 601 194
Purchases of marketable
securities (834) (734)
Sales of marketable securities 337 86
Maturities of marketable
securities 227 56
Capital expenditures (323) (159)
Net cash used in investing
activities (437) (726)
Financing activities:
Proceeds from employee stock
plans 258 219
Principal payments on financing
obligations (48) (11)
Repayments of debt (1) (1)
Net cash provided by financing
activities 209 207
Effect of exchange rate changes (4) (5)
Net increase in cash and cash
equivalents 1,627 1,441
Cash and cash equivalents,
beginning of period 4,145 2,669
Cash and cash equivalents, end of
period $
5,772 $
4,110
salesforce.com, inc.
Additional Metrics
(Unaudited)
April 30, January 31, October 31, July 31, April 30, January 31,
2020 2020 2019 2019 2019 2019
Full time equivalent
headcount (1) 51,613 49,703 47,677 40,571 37,485 35,995
Financial data (in millions):
Cash, cash equivalents and
marketable securities $
9,802 $
7,947 $
6,529 $
6,042 $
6,379 $
4,342
Strategic investments 1,902 1,963 1,760 1,614 1,548 1,302
Operating lease liabilities
(2) 3,164 3,195 3,270 3,047 3,058 NA
Principal due on the
Company's outstanding debt
obligations (3) 2,693 2,694 2,845 2,996 3,197 3,198
Net cash provided by
operating activities 1,859 1,632 298 436 1,965 1,331
Capital expenditures 323 136 170 178 159 167
(1) Full time equivalent headcount
includes 5,231 from third quarter
fiscal 2020 acquisitions.
(2) Effective February 1, 2019, the
Company adopted Topic 842 using
the modified retrospective
method. Accordingly, the results
for prior periods were not
adjusted to conform to the
current period measurement or
recognition of results.
(3) The Company repaid $200 million,
$150 million and $150 million of
the 2021 Term Loan in June 2019,
October 2019 and November 2019,
respectively.
Supplemental Revenue Analysis
Remaining Performance Obligation
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.
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
April
30,
2020
(1) $
14.5 $
14.8 $
29.3
As of
January
31,
2020
(2) 15.0 15.8 30.8
As of
April
30,
2019 11.8 13.1 24.9
Includes approximately $450 million
and $700 million of remaining
performance obligation related to
the Salesforce.org business
combination in June 2019 and the
Tableau acquisition in August 2019,
(1) respectively.
Includes approximately $450 million
and $650 million of remaining
performance obligation related to
the Salesforce.org business
combination in June 2019 and the
Tableau acquisition in August 2019,
(2) respectively.
Unearned Revenue
Unearned revenue represents amounts that have been invoiced in advance of revenue recognition and is recognized as revenue when transfer of control to customers has occurred or services have been provided. The change in unearned revenue was as follows (in millions):
Three Months Ended April 30,
2020 2019
Unearned
revenue,
beginning of
period $
10,662 $
8,564
Billings and
other (1) 3,305 2,714
Contribution
from contract
asset 5 44
Revenue
recognized
ratably over
time (4,453) (3,488)
Revenue
recognized
over time as
delivered (191) (172)
Revenue
recognized at
a point in
time (221) (77)
Unearned
revenue from
business
combinations 5 0
Unearned
revenue, end
of period $
9,112 $
7,585
(1) Other includes, for example,
the impact of foreign
currency translation.
Disaggregation of Revenue
Subscription and Support Revenue by the Company's service offerings
Subscription and support revenues consisted of the following (in millions):
Three Months Ended April 30,
2020 2019
Sales Cloud $
1,245 $
1,073
Service Cloud 1,252 1,020
Salesforce Platform
and Other (1) 1,364 842
Marketing and
Commerce Cloud 714 561
$
4,575 $
3,496
(1) Includes approximately $273
million of revenue for the three
months ended April 30, 2020
contributed from the August 2019
acquisition of Tableau.
Total Revenue by Geographic Locations
Revenues by geographical region consisted of the following (in millions):
Three Months Ended April 30,
2020 2019
Americas $
3,370 $
2,617
Europe 1,034 755
Asia Pacific 461 365
$
4,865 $
3,737
Three Months Ended April 30,
2020 2019
Americas 69 70
% %
Europe 21 20
Asia Pacific 10 10
100 100
% %
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 were as follows:
Three Months Ended
Three Months Ended
Three Months Ended
April 30, 2020
January 31, 2020
April 30, 2019
compared to Three Months
compared to Three Months
compared to Three Months
Ended April 30, 2019
Ended January 31, 2019
Ended April 30, 2018
Americas 29% 32% 25%
Europe 41% 47% 32%
Asia
Pacific 28% 28% 27%
Total
growth 31% 34% 26%
The Company presents constant currency information for current remaining performance obligation 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 current remaining performance obligation balances in local currencies in previous comparable periods using the United States dollar currency exchange rate as of the most recent balance sheet date.
Current remaining performance obligation constant currency growth rates were as follows:
April 30, 2020
January 31, 2020 April 30, 2019
compared to
compared to
compared to
April 30, 2019
January 31, 2019
April 30, 2018
Total
growth 24% 27% 24%
Supplemental Cash Flow Information
Free cash flow analysis, a non-GAAP measure
(in millions)
Three Months Ended April 30,
2020 2019
GAAP
net
cash
provided
by
operating
activities $
1,859 $
1,965
Capital
expenditures
(1) (323) (159)
Free
cash
flow $
1,536 $
1,806
(1) Capital expenditures for the three
months ended April 30, 2020
includes the Company's purchase of
the property located at 450
Mission St. in San Francisco ("450
Mission") for approximately $150
million.
Supplemental Strategic Investment Information
Gains on strategic investments, net
All fair value adjustments of the Company's publicly traded and privately held equity investments are recorded through the statements of operations. Therefore, 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 April 30,
2020 2019
Unrealized gains
recognized on
publicly traded
equity securities,
net $
0 $
150
Unrealized gains
(losses) recognized
on privately held
equity securities,
net (38) 122
Realized gains on
sales of equity
securities, net 239 19
Losses on debt
securities, net (9) (10)
Gains on strategic
investments, net $
192 $
281
The Company recorded approximately $77 million of impairments on its privately held equity and debt securities during the three months ended April 30, 2020, which is reflected in the table above.
Supplemental Debt Information
The carrying values of the Company's borrowings were as follows (in millions):
Instrument Date of issuance Maturity date April 30, 2020 January 31,
2020
2023 Senior
Notes
April 2018
April 2023 $
995 $
995
2028 Senior
Notes
April 2018
April 2028 1,490 1,489
Loan assumed on
50 Fremont
February 2015
June 2023 192 193
Total carrying
value of debt 2,677 2,677
Less current
portion of
debt (4) (4)
Total
noncurrent
debt $
2,673 $
2,673
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 April 30,
2020 2019
Non-GAAP gross profit
---
GAAP gross profit $
3,611 $
2,823
Plus:
Amortization of
purchased
intangibles (1) 159 61
Stock-based
expense (2) 52 43
Non-GAAP gross
profit $
3,822 $
2,927
Non-GAAP operating expenses
---
GAAP operating
expenses $
3,751 $
2,613
Less:
Amortization of
purchased
intangibles (1) 112 68
Stock-based
expense (2) 452 300
Non-GAAP
operating
expenses $
3,187 $
2,245
Non-GAAP income from operations
---
GAAP income
(loss) from
operations $
(140) $
210
Plus:
Amortization of
purchased
intangibles (1) 271 129
Stock-based
expense (2) 504 343
Non-GAAP income
from operations $
635 $
682
Non-GAAP net income
---
GAAP net income $
99 $
392
Plus:
Amortization of
purchased
intangibles (1) 271 129
Stock-based
expense (2) 504 343
Income tax
effects and
adjustments (233) (125)
Non-GAAP net
income $
641 $
739
Three Months Ended April 30,
2020 2019
Non-GAAP diluted net income per
share
---
GAAP diluted net
income per share $
0.11 $
0.49
Plus:
Amortization of
purchased
intangibles 0.30 0.16
Stock-based
expense 0.55 0.43
Income tax
effects and
adjustments (0.26) (0.15)
Non-GAAP diluted
net income per
share $
0.70 $
0.93
Shares used in
computing Non-
GAAP diluted net
income per share 913 793
1) Amortization of purchased intangibles was as follows:
Three Months Ended April 30,
2020 2019
Cost of revenues $
159 $
61
Marketing and
sales 112 68
$
271 $
129
2) Stock-based expense was as follows:
Three Months Ended April 30,
2020 2019
Cost of revenues $
52 $
43
Research and
development 166 81
Marketing and
sales 223 177
General and
administrative 63 42
$
504 $
343
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 April 30,
2020 2019
GAAP Basic Net
Income Per
Share
Net
income $
99 $
392
Basic
net
income
per
share $
0.11 $
0.51
Shares
used
in
computing
basic
net
income
per
share 896 771
Three Months Ended April 30,
2020 2019
Non-GAAP
Basic Net
Income Per
Share
Non-
GAAP
net
income $
641 $
739
Non-
GAAP
basic
net
income
per
share $
0.72 $
0.96
Shares
used
in
computing
Non-
GAAP
basic
net
income
per
share 896 771
Three Months Ended April 30,
2020 2019
GAAP Diluted
Net Income
Per Share
Net
income $
99 $
392
Diluted
net
income
per
share $
0.11 $
0.49
Shares
used
in
computing
diluted
net
income
per
share 913 793
Three Months Ended April 30,
2020 2019
Non-GAAP
Diluted Net
Income Per
Share
Non-
GAAP
net
income $
641 $
739
Non-
GAAP
diluted
net
income
per
share $
0.70 $
0.93
Shares
used
in
computing
Non-
GAAP
diluted
net
income
per
share 913 793
Non-GAAP Financial Measures: This press release includes information about non-GAAP diluted earnings per share, non-GAAP tax rates, free cash flow and constant currency revenue and constant currency current remaining performance obligation 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 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 Q1 FY21 financial statements and for its non-GAAP estimates for Q2 and FY21:
-- 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,
which is not typically affected by operations during any particular
period. Although we exclude the amortization of purchased intangibles
from these non-GAAP measures, management believes that it is important
for investors to understand that such intangible assets were recorded as
part of purchase accounting and contribute to revenue generation.
-- 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 and the
amortization of purchased intangibles. 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 2020, the company
used a projected non-GAAP tax rate of 22.5%. For fiscal 2021, the
company uses a projected non-GAAP tax rate of 22.0%, 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 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 the rate as appropriate.
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 includes the cash consideration related to the purchase of 450 Mission, but does not include our strategic investments.
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SOURCE Salesforce
