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Salesforce Announces Strong Second Quarter Fiscal 2021 Results

- Second Quarter Revenue of $5.15 Billion , up 29% Year-Over-Year, 29% in Constant Currency

- Current Remaining Performance Obligation of Approximately $15.2 Billion , up 26% Year-Over-Year, 24% in Constant Currency

- Raises FY21 Revenue Guidance to Approximately $20.7 Billion to $20.8 Billion , up Approximately 21% to 22% Year-Over-Year

- Initiates Q3 FY21 Revenue Guidance of $5.24 Billion to $5.25 Billion , up Approximately 16% Year-Over-Year

SAN FRANCISCO , Aug. 25, 2020 /PRNewswire/ -- Salesforce (NYSE: CRM), the global leader in CRM, today announced results for its fiscal second quarter ended July 31, 2020 .

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

"It's humbling to have had one of the best quarters in Salesforce's history against the backdrop of multiple crises seriously affecting our communities around the world," said Marc Benioff , Chair and CEO of Salesforce. "Salesforce was founded on our belief in stakeholder capitalism and our core values of trust, customer success, innovation and equality. Our success in the quarter brought all of this together with the power of our Customer 360 platform, the resilience of our business model, putting our customers first and doing our part to take care of all of our stakeholders. We know that together we have an opportunity to emerge from these times even stronger."

Salesforce delivered the following results for its fiscal second quarter:

Revenue : Total second quarter revenue was $5.15 billion , an increase of 29% year-over-year, and 29% in constant currency. Subscription and support revenues for the quarter were $4.84 billion , an increase of 29% year-over-year. Professional services and other revenues for the quarter were $0.31 billion , an increase of 23% year-over-year.

Earnings per Share : Second quarter GAAP diluted earnings per share was $2.85 , and non-GAAP diluted earnings per share was $1.44 . Mark-to-market accounting of the company's strategic investments, required by ASU 2016-01, benefited GAAP diluted earnings per share by $0.55 based on a U.S. tax rate of 25% and non-GAAP diluted earnings per share by $0.58 based on a non-GAAP tax rate of 22%. GAAP diluted earnings per share was also benefited by $2.17 as the company changed its international corporate structure, which included the consolidation of intangible property, resulting in a $2 billion net tax benefit related to foreign deferred tax assets.  Please note that this had no impact on Non-GAAP diluted earnings per share, as the company utilizes a fixed long-term projected non-GAAP tax rate, which generally excludes effects for discrete events.

Cash : Cash generated from operations for the second quarter was $0.43 billion , a decrease of 2% year-over-year. Total cash, cash equivalents and marketable securities ended the second quarter at $9.28 billion .

Remaining Performance Obligation : Remaining performance obligation ended the second quarter at approximately $30.6 billion , an increase of 21% year-over-year. Current remaining performance obligation ended the second quarter at approximately $15.2 billion , an increase of 26% year-over-year, 24% in constant currency.

As of August 25, 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 its third quarter of fiscal year 2021. As of August 25, 2020 , the company is raising its revenue guidance, GAAP earnings per share guidance, non-GAAP earnings per share guidance, and operating cash flow guidance previously provided on May 28, 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 August 25, 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.


Q3 FY21
Guidance


Full Year FY21
Guidance

Revenue

$5.24 - $5.25 Billion


$20.7 - $20.8 Billion

Y/Y Growth

16%


21% - 22%

GAAP earnings per share

$0.03 - $0.04


$3.12 - $3.14

Non-GAAP earnings per share

$0.73 - $0.74


$3.72 - $3.74

Operating Cash Flow Growth (Y/Y)

N/A


~12% - 13%

Current Remaining Performance Obligation Growth (Y/Y)

~19%


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 2021


Q3


FY21

GAAP earnings per share range (1)(2)

$0.03 - $0.04


$3.12 - $3.14

Plus




Amortization of purchased intangibles

$

0.30



$

1.21


Stock-based expense

$

0.61



$

2.35


Less




Income tax effects and adjustments (3)

$

(0.21)



$

(2.96)


Non-GAAP diluted earnings per share (2)

$0.73 - $0.74


$3.72 - $3.74

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

911



907


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

937



929



(1) The company's GAAP tax provision is expected to be approximately (20%) for the three months ended October 31, 2020, and approximately (146%) 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. The company changed its international corporate structure, which included the consolidation of intangible property, resulting in a $2 billion net tax benefit related to foreign deferred tax assets in the second quarter, and is reflected in the full year GAAP EPS guidance.  This change had no impact on Non-GAAP earnings per share, as the company utilizes a fixed long-term projected Non-GAAP tax rate which generally excludes effects for discrete events. 

(2) The company's projected GAAP and Non-GAAP 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 publicity 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 and replay details of the event will be available on the Salesforce Investor Relations website at www.salesforce.com/investor .

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 technologiescloud, mobile, social, internet of things, artificial intelligence, voice and blockchainto 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 impact of, and actions we may take in response to, 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 a 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 July 31,


Six Months Ended July 31,


2020


2019


2020


2019

Revenues:








Subscription and support

$

4,840



$

3,745



$

9,415



$

7,241


Professional services and other

311



252



601



493


Total revenues

5,151



3,997



10,016



7,734


Cost of revenues (1)(2):








Subscription and support

1,013



727



1,979



1,405


Professional services and other

298



240



586



476


Total cost of revenues

1,311



967



2,565



1,881


Gross profit

3,840



3,030



7,451



5,853


Operating expenses (1)(2):








Research and development

898



607



1,757



1,161


Marketing and sales

2,275



1,824



4,665



3,521


General and administrative

489



375



991



737


Loss on settlement of Salesforce.org reseller agreement

0



166



0



166


Total operating expenses

3,662



2,972



7,413



5,585


Income from operations

178



58



38



268


Gains on strategic investments, net

682



109



874



390


Other expense

(21)



(3)



(26)



(12)


Income before benefit from (provision for) income taxes

839



164



886



646


Benefit from (provision for) income taxes (3)

1,786



(73)



1,838



(163)


Net income

$

2,625



$

91



$

2,724



$

483


Basic net income per share

$

2.90



$

0.12



$

3.02



$

0.62


Diluted net income per share

$

2.85



$

0.11



$

2.96



$

0.61


Shares used in computing basic net income per share

904



776



901



774


Shares used in computing diluted net income per share

922



795



919



795



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



Three Months Ended July 31,


Six Months Ended July 31,


2020


2019


2020


2019

Cost of revenues

$

166



$

62



$

325



$

123


Marketing and sales

118



65



230



133



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



Three Months Ended July 31,


Six Months Ended July 31,


2020


2019


2020


2019

Cost of revenues 

$

63



$

46



$

115



$

89


Research and development 

184



98



350



179


Marketing and sales 

253



199



476



376


General and administrative 

78



45



141



87




(3)

During the three months ended July 31, 2020 the Company recorded approximately $2.0 billion of benefit from income taxes due to a one-time discrete tax item from the recognition of deferred tax assets related to an intra-entity transfer of intangible property.

 

salesforce.com, inc.

Consolidated Statements of Operations

(As a percentage of total revenues)

(Unaudited)



Three Months Ended July 31,


Six Months Ended July 31,


2020


2019


2020


2019

Revenues:








Subscription and support

94

%


94

%


94

%


94

%

Professional services and other

6



6



6



6


Total revenues

100



100



100



100


Cost of revenues (1)(2):








Subscription and support

19



18



20



18


Professional services and other

6



6



6



6


Total cost of revenues

25



24



26



24


Gross profit

75



76



74



76


Operating expenses (1)(2):








Research and development

18



15



17



15


Marketing and sales

44



46



47



45


General and administrative

10



9



10



10


Loss on settlement of Salesforce.org reseller agreement

0



4



0



2


Total operating expenses

72



74



74



72


Income from operations

3



2



0



4


Gains on strategic investments, net

13



2



9



5


Other expense

0



0



0



(1)


Income before benefit from (provision for) income taxes

16



4



9



8


Benefit from (provision for) income taxes

35



(2)



18



(2)


Net income

51