Salesforce (NYSE: CRM), the #1 AI CRM, today announced results
for its third quarter fiscal 2024 ended October 31, 2023.
- Third Quarter Revenue of $8.72 Billion, up 11%
Year-Over-Year ("Y/Y"), up 10% in Constant Currency ("CC")
- Third Quarter GAAP Operating Margin of 17.2% and non-GAAP
Operating Margin of 31.2%
- Current Remaining Performance Obligation of $23.9 Billion,
up 14% Y/Y, 13% CC
- Third Quarter GAAP Diluted Earnings per Share ("EPS") of
$1.25 and non-GAAP Diluted EPS of $2.11
- Returned $1.9 Billion to Stockholders in the Third Quarter
in the Form of Share Repurchases
- Initiates Fourth Quarter FY24 Revenue Guidance of $9.18
Billion to $9.23 Billion, up 10% Y/Y
- Narrows Full Year FY24 Revenue Guidance to $34.75 Billion to
$34.8 Billion, up 11% Y/Y
- Raises Full Year FY24 GAAP Operating Margin Guidance to
14.5% and non-GAAP Operating Margin Guidance to 30.5%
- Raises Full Year FY24 Operating Cash Flow Growth Guidance to
30% to 33% Y/Y
“We had another strong quarter of executing on our profitable
growth plan we set in motion last year, delivering $8.7 billion in
revenue and again raising our operating margin guidance for this
fiscal year,” said Marc Benioff, Chair and CEO, Salesforce. “We're
now the third largest enterprise software company by revenue, the
number one AI CRM and the number one enterprise apps company. Most
importantly, we're bringing CRM, data, AI and trust together in a
single, integrated platform, leading our customers into a new era
of incredible productivity and growth.”
“Over the last year we have transformed the company, enabling us
to deliver another quarter of strong profitable growth with GAAP
operating margin of 17.2% and non-GAAP operating margin of 31.2%,”
said Amy Weaver, President and CFO of Salesforce. “We remain
focused on driving shareholder value as we deliver innovation to
our customers as the #1 AI CRM.”
Salesforce delivered the following results for its fiscal third
quarter:
Revenue: Total third quarter revenue
was $8.72 billion, an increase of 11% Y/Y and 10% CC. Subscription
and support revenues were $8.14 billion, an increase of 13% Y/Y.
Professional services and other revenues were $0.58 billion, a
decrease of (4)% Y/Y.
Operating Margin: Third quarter GAAP
operating margin was 17.2%. Third quarter non-GAAP operating margin
was 31.2%. Restructuring negatively impacted third quarter GAAP
operating margin by (60) bps.
Earnings per Share: Third quarter GAAP
diluted EPS was $1.25, and non-GAAP diluted EPS was $2.11. Losses
on the Company’s strategic investments negatively impacted GAAP
diluted EPS by $(0.06) based on a U.S. tax rate of 25% and non-GAAP
diluted EPS by $(0.06) based on a non-GAAP tax rate of 23.5%.
Restructuring negatively impacted third quarter GAAP diluted EPS by
$(0.06).
Cash Flow: Cash generated from
operations for the third quarter was $1.53 billion, an increase of
389% Y/Y. Free cash flow was $1.37 billion, an increase of 1088%
Y/Y. Restructuring negatively impacted third quarter operating cash
flow growth by (3,600) bps.
Remaining Performance Obligation:
Remaining performance obligation ended the third quarter at $48.3
billion, an increase of 21% Y/Y. Current remaining performance
obligation ended at $23.9 billion, an increase of 14% Y/Y, and 13%
CC.
Forward Looking Guidance
As of November 29, 2023, the Company is initiating its fourth
quarter GAAP and non-GAAP diluted EPS guidance, current remaining
performance obligation growth guidance, and revenue guidance. The
Company is updating its full year FY24 revenue guidance and raising
its GAAP and non-GAAP diluted EPS guidance, GAAP and non-GAAP
operating margin guidance, and operating cash flow growth
guidance.
Our guidance assumes no change to the value of the Company's
strategic investment portfolio 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 discrete tax items and related
effects in conjunction with certain provisions in the Tax Cuts and
Jobs Act, future acquisitions or other transactions.
Q4 FY24
Guidance
Full Year FY24
Guidance
Revenue
$9.18 - $9.23 Billion
$34.75 - $34.8 Billion
Y/Y Growth
10%
11%
FX Impact(1)
No impact
($50M) Y/Y FX
GAAP Operating Margin
N/A
14.5%
Non-GAAP Operating Margin(2)
N/A
30.5%
GAAP Diluted Earnings per Share(2)
$1.26 - $1.27
$3.99 - $4.00
Non-GAAP Diluted Earnings per Share(2)
$2.25 - $2.26
$8.18 - $8.19
Operating Cash Flow Growth (Y/Y)(3)
N/A
30% - 33%
Current Remaining Performance Obligation
Growth (Y/Y)
10%
N/A
FX Impact(4)
(~1 pt)
N/A
(1) Revenue FX impact is calculated by
taking the current period rates compared to the prior period
average rates.
(2) Non-GAAP operating margin and non-GAAP
EPS are non-GAAP financial measures. See below for an explanation
of non-GAAP financial measures. The Company's shares used in
computing GAAP Diluted EPS guidance and non-GAAP Diluted EPS
guidance excludes any impact to share count from potential Q4 FY24
repurchase activity under our share repurchase program.
(3) Operating Cash Flow Growth guidance
includes an estimated 14% - 16% headwind from charges associated
with our restructuring plan announced on January 4, 2023 (the
"Restructuring Plan").
(4) Current Remaining Performance
Obligation FX impact is calculated by taking the current period
rates compared to the prior period ending rates.
The following is a reconciliation of GAAP operating margin
guidance to non-GAAP operating margin guidance for the full
year:
Full Year FY24
Guidance
GAAP operating margin(1)
~14.5%
Plus
Amortization of purchased
intangibles(2)
5.4%
Stock-based compensation expense(2)(3)
8.0%
Restructuring(2)(3)
2.6%
Non-GAAP operating margin(1)
~30.5%
(1) GAAP operating margin is the
proportion of GAAP income from operations as a percentage of GAAP
revenue. Non-GAAP operating margin is the proportion of non-GAAP
income from operations as a percentage of GAAP revenue.
(2) The percentages shown above have been
calculated based on the midpoint of the low and high ends of the
revenue guidance for full year FY24.
(3) The percentages shown in the
restructuring line have been calculated based on charges associated
with the Restructuring Plan. Stock-based compensation expense
included in the full year FY24 guidance GAAP to non-GAAP
reconciliation table excludes stock-based compensation expense
related to the Restructuring Plan, which is included in the
restructuring line.
The following is a per share reconciliation of GAAP diluted EPS
to non-GAAP diluted EPS guidance for the next quarter and the full
year:
Fiscal 2024
Q4
FY24
GAAP diluted earnings per share
range(1)(2)
$1.26 - $1.27
$3.99 - $4.00
Plus
Amortization of purchased intangibles
$
0.47
$
1.90
Stock-based compensation expense
$
0.69
$
2.82
Restructuring(3)
$
0.09
$
0.91
Less
Income tax effects and adjustments(4)
$
(0.26
)
$
(1.44
)
Non-GAAP diluted earnings per share(2)
$2.25 - $2.26
$8.18 - $8.19
Shares used in computing basic net income
per share (millions)(5)
973
975
Shares used in computing diluted net
income per share (millions)(5)
984
985
(1) The Company's GAAP tax provision is
expected to be approximately 26% for the three months ended January
31, 2024, and approximately 21% for the year ended January 31,
2024. 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 diluted EPS assumes no change to the value of our
strategic investment portfolio as it is not possible to forecast
future gains and losses. The impact of future gains or losses from
the Company’s strategic investment portfolio could be material.
(3) The estimated impact to GAAP diluted
EPS is in connection with the Restructuring Plan.
(4) The Company’s non-GAAP tax provision
uses a long-term projected tax rate of 23.5%, which reflects
currently available information and could be subject to change.
(5) The Company's shares used in computing
GAAP EPS guidance and non-GAAP EPS guidance excludes any impact to
share count from Q4 FY24 repurchase activity under our share
repurchase program.
For additional information regarding non-GAAP financial measures
see the reconciliation of results and related explanations
below.
Management will provide further commentary around these guidance
assumptions on its earnings call.
Product Releases and Enhancements
Three times a year Salesforce delivers new product releases,
services, or enhancements to current products and services. These
releases are a result of significant research and development
investments made over multiple years, designed to help customers
drive cost savings, boost efficiency, and build trust.
To view our major product releases and other highlights as part
of the Winter 2024 Product Release, visit:
www.salesforce.com/products/innovation/winter-24-release.
Quarterly Conference Call
Salesforce plans to 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 empowers companies of every size and industry to
connect with their customers through the power of AI + data + CRM.
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 and
guidance, which include, but are not limited to, 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, expected revenue growth, expected
foreign currency exchange rate impact, expected current remaining
performance obligation growth, expected tax rates or provisions,
stock-based compensation expenses, amortization of purchased
intangibles, shares outstanding, market growth, strategic
investments, expected restructuring expense or charges, and
expected timing of product releases and enhancements. 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 or
outcomes could differ materially from those 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: our ability to maintain
security levels and service performance that meet 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 additional data center capacity;
our reliance on third-party hardware, software and platform
providers; uncertainties regarding AI technologies and its
integration into our product offerings; 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,
cybersecurity, cross-border data transfers and import and export
controls; current and potential litigation involving us or our
industry, including litigation involving acquired entities, 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; the success
of our strategy of acquiring or making investments in complementary
businesses, joint ventures, services, technologies and intellectual
property rights; our ability to complete, on a timely basis or at
all, announced transactions; our ability to realize the benefits
from acquisitions, strategic partnerships, joint ventures and
investments, and successfully integrate acquired businesses and
technologies; our ability to compete in the markets 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 ability to preserve our workplace culture,
including as a result of our decisions regarding our current and
future office environments or remote work policies; 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 maintain and enhance
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 transfers and the value of
such transferred intellectual property; uncertainties regarding the
effect of general economic, business and market conditions,
including inflationary pressures, general economic downturn or
recession, market volatility, increasing interest rates, changes in
monetary policy and the prospect of a shutdown of the U.S. federal
government; the potential impact of financial institution
instability; the impact of geopolitical events, including the war
in Ukraine and the Israel-Hamas war; uncertainties regarding the
impact of expensing stock options and other equity awards; the
sufficiency of our capital resources; our ability to execute our
share repurchase program; our ability to comply with our debt
covenants and lease obligations; the impact of climate change,
natural disasters and actual or threatened public health
emergencies; expected benefits of and timing of completion of the
restructuring plan and the expected costs and charges of the
restructuring plan, including, among other things, the risk that
the restructuring costs and charges may be greater than we
anticipate, our restructuring efforts may adversely affect our
internal programs and ability to recruit and retain skilled and
motivated personnel, our restructuring efforts may be distracting
to employees and management, our restructuring efforts may
negatively impact our business operations and reputation with or
ability to serve customers, and our restructuring efforts may not
generate their intended benefits to the extent or as quickly as
anticipated; and our ability to achieve our aspirations, goals and
projections related to our environmental, social and governance
(“ESG”) initiatives, including our ability to comply with evolving
legal standards and federal and state regulations concerning ESG
matters.
Further information on these and other factors that could affect
the Company’s actual results or outcomes 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
Financials section of the Company’s website at
http://investor.salesforce.com/financials/.
Salesforce, Inc. assumes no obligation and does not intend to
update these forward-looking statements, except as required by
law.
© 2023 Salesforce, Inc. All rights reserved. Salesforce and
other marks are trademarks of Salesforce, Inc. Other brands
featured herein may be trademarks of their respective owners.
Salesforce, Inc.
Condensed Consolidated Statements of
Operations
(in millions, except per share
data)
(Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Revenues:
Subscription and support
$
8,141
$
7,233
$
23,789
$
21,232
Professional services and other
579
604
1,781
1,736
Total revenues
8,720
7,837
25,570
22,968
Cost of revenues (1)(2):
Subscription and support
1,571
1,451
4,596
4,381
Professional services and other
584
637
1,797
1,879
Total cost of revenues
2,155
2,088
6,393
6,260
Gross profit
6,565
5,749
19,177
16,708
Operating expenses (1)(2):
Research and development
1,204
1,280
3,631
3,927
Marketing and sales
3,173
3,345
9,440
10,141
General and administrative
632
664
1,902
1,967
Restructuring (3)
55
0
815
0
Total operating expenses
5,064
5,289
15,788
16,035
Income from operations
1,501
460
3,389
673
Gains (losses) on strategic investments,
net
(72
)
23
(242
)
75
Other income (expense)
58
(8
)
158
(121
)
Income before provision for income
taxes
1,487
475
3,305
627
Provision for income taxes
(263
)
(265
)
(615
)
(321
)
Net income
$
1,224
$
210
$
2,690
$
306
Basic net income per share
$
1.26
$
0.21
$
2.76
$
0.31
Diluted net income per share
$
1.25
$
0.21
$
2.73
$
0.31
Shares used in computing basic net income
per share
972
997
976
995
Shares used in computing diluted net
income per share
981
1,000
985
1,001
(1) Amounts include amortization of
intangible assets acquired through business combinations, as
follows:
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Cost of revenues
$
245
$
250
$
743
$
785
Marketing and sales
223
224
668
693
(2) Amounts include stock-based
compensation expense, as follows:
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Cost of revenues
$
109
$
130
$
324
$
372
Research and development
238
287
735
863
Marketing and sales
275
330
815
947
General and administrative
71
96
223
288
Restructuring
0
0
16
0
(3) In January 2023, the Company announced
a restructuring plan (the "Restructuring Plan”) intended to reduce
operating costs, improve operating margins, and continue advancing
the Company's ongoing commitment to profitable growth. The
Restructuring Plan includes a reduction of the Company's workforce
and select real estate exits and office space reductions within
certain markets.
Salesforce, Inc.
Condensed Consolidated Statements of
Operations
(As a percentage of total
revenues)
(Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Revenues:
Subscription and support
93
%
92
%
93
%
92
%
Professional services and other
7
8
7
8
Total revenues
100
100
100
100
Cost of revenues (1)(2):
Subscription and support
18
19
18
19
Professional services and other
7
8
7
8
Total cost of revenues
25
27
25
27
Gross profit
75
73
75
73
Operating expenses (1)(2):
Research and development
14
16
14
17
Marketing and sales
36
43
37
44
General and administrative
7
8
8
9
Restructuring
1
0
3
0
Total operating expenses
58
67
62
70
Income from operations
17
6
13
3
Gains (losses) on strategic investments,
net
(1
)
0
(1
)
0
Other income (expense)
1
0
1
0
Income before provision for income
taxes
17
6
13
3
Provision for income taxes
(3
)
(3
)
(2
)
(2
)
Net income
14
%
3
%
11
%
1
%
(1) Amounts include amortization of
intangible assets acquired through business combinations as a
percentage of total revenues, as follows:
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Cost of revenues
3
%
3
%
3
%
3
%
Marketing and sales
2
3
3
3
(2) Amounts include stock-based compensation expense as a
percentage of total revenues, as follows:
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Cost of revenues
1
%
2
%
1
%
2
%
Research and development
3
4
3
4
Marketing and sales
3
4
3
4
General and administrative
1
1
1
1
Restructuring
0
0
0
0
Salesforce, Inc.
Condensed Consolidated Balance
Sheets
(in millions)
October 31, 2023
January 31, 2023
Assets
(unaudited)
Current assets:
Cash and cash equivalents
$
6,453
$
7,016
Marketable securities
5,410
5,492
Accounts receivable, net
4,850
10,755
Costs capitalized to obtain revenue
contracts, net
1,757
1,776
Prepaid expenses and other current
assets
1,732
1,356
Total current assets
20,202
26,395
Property and equipment, net
3,807
3,702
Operating lease right-of-use assets,
net
2,518
2,890
Noncurrent costs capitalized to obtain
revenue contracts, net
2,194
2,697
Strategic investments
4,774
4,672
Goodwill
48,614
48,568
Intangible assets acquired through
business combinations, net
5,737
7,125
Deferred tax assets and other assets,
net
3,176
2,800
Total assets
$
91,022
$
98,849
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable, accrued expenses and
other liabilities
$
5,308
$
6,743
Operating lease liabilities, current
523
590
Unearned revenue
12,564
17,376
Debt, current
999
1,182
Total current liabilities
19,394
25,891
Noncurrent debt
8,426
9,419
Noncurrent operating lease liabilities
2,764
2,897
Other noncurrent liabilities
2,348
2,283
Total liabilities
32,932
40,490
Stockholders’ equity:
Common stock
1
1
Treasury stock, at cost
(10,004
)
(4,000
)
Additional paid-in capital
58,149
55,047
Accumulated other comprehensive loss
(331
)
(274
)
Retained earnings
10,275
7,585
Total stockholders’ equity
58,090
58,359
Total liabilities and stockholders’
equity
$
91,022
$
98,849
Salesforce, Inc.
Condensed Consolidated Statements of
Cash Flows
(in millions)
(Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Operating activities:
Net income
$
1,224
$
210
$
2,690
$
306
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization (1)
862
941
3,006
2,754
Amortization of costs capitalized to
obtain revenue contracts, net
482
423
1,428
1,225
Stock-based compensation expense
693
843
2,113
2,470
(Gains) losses on strategic investments,
net
72
(23
)
242
(75
)
Changes in assets and liabilities, net of
business combinations:
Accounts receivable, net
550
471
5,905
5,486
Costs capitalized to obtain revenue
contracts, net
(300
)
(375
)
(906
)
(1,279
)
Prepaid expenses and other current assets
and other assets
(407
)
(63
)
(750
)
(359
)
Accounts payable and accrued expenses and
other liabilities
172
(309
)
(1,607
)
(1,205
)
Operating lease liabilities
(139
)
(173
)
(474
)
(561
)
Unearned revenue
(1,677
)
(1,632
)
(4,816
)
(4,439
)
Net cash provided by operating
activities
1,532
313
6,831
4,323
Investing activities:
Business combinations, net of cash
acquired
(82
)
0
(82
)
(439
)
Purchases of strategic investments
(103
)
(44
)
(390
)
(475
)
Sales of strategic investments
80
98
102
181
Purchases of marketable securities
(661
)
(408
)
(2,827
)
(4,132
)
Sales of marketable securities
315
500
1,117
1,392
Maturities of marketable securities
563
585
1,810
1,752
Capital expenditures
(166
)
(198
)
(589
)
(580
)
Net cash provided by (used in) investing
activities
(54
)
533
(859
)
(2,301
)
Financing activities:
Repurchases of common stock
(1,925
)
(1,677
)
(5,928
)
(1,677
)
Proceeds from employee stock plans
274
233
1,085
688
Principal payments on financing
obligations
(114
)
(233
)
(506
)
(349
)
Repayments of debt
0
(1
)
(1,182
)
(3
)
Net cash used in financing activities
(1,765
)
(1,678
)
(6,531
)
(1,341
)
Effect of exchange rate changes
(32
)
(23
)
(4
)
(69
)
Net increase (decrease) in cash and
cash equivalents
(319
)
(855
)
(563
)
612
Cash and cash equivalents, beginning of
period
6,772
6,931
7,016
5,464
Cash and cash equivalents, end of
period
$
6,453
$
6,076
$
6,453
$
6,076
(1) Includes amortization of intangible
assets acquired through business combinations, depreciation of
fixed assets and amortization and impairment of right-of-use
assets.
Salesforce, Inc.
Additional Metrics
(Unaudited)
October 31, 2023
July 31, 2023
April 30, 2023
January 31, 2023
October 31, 2022
Full time equivalent headcount
70,843
70,456
72,970
79,390
79,824
Supplemental Revenue Analysis
Remaining Performance Obligation
Remaining performance obligation ("RPO") 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. RPO is influenced by several factors, including
seasonality, the timing of renewals, the timing of software license
deliveries, average contract terms and foreign currency exchange
rates. Remaining performance obligation is also impacted by
acquisitions. Unbilled portions of RPO denominated in foreign
currencies are revalued each period based on the period end
exchange rates. The portion of RPO that is unbilled is not recorded
on the consolidated balance sheets.
RPO consisted of the following (in billions):
Current
Noncurrent
Total
As of October 31, 2023
$
23.9
$
24.4
$
48.3
As of July 31, 2023
24.1
22.5
46.6
As of April 30, 2023
24.1
22.6
46.7
As of January 31, 2023
24.6
24.0
48.6
As of October 31, 2022
20.9
19.1
40.0
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 October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Unearned revenue, beginning of period
$
14,237
$
12,825
$
17,376
$
15,628
Billings and other (1)
6,876
6,142
20,536
18,354
Contribution from contract asset
167
63
218
175
Revenue recognized over time
(8,249
)
(7,473
)
(24,264
)
(21,865
)
Revenue recognized at a point in time
(471
)
(364
)
(1,306
)
(1,103
)
Unearned revenue from business
combinations
4
0
4
4
Unearned revenue, end of period
$
12,564
$
11,193
$
12,564
$
11,193
(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 October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Sales
$
1,906
$
1,717
$
5,611
$
5,044
Service
2,074
1,856
6,087
5,445
Platform and Other
1,686
1,513
4,891
4,410
Marketing and Commerce
1,230
1,129
3,638
3,339
Data (1)
1,245
1,018
3,562
2,994
$
8,141
$
7,233
$
23,789
$
21,232
(1) Data is comprised of revenue from
Analytics, which includes Tableau, and Integration, which includes
Mulesoft.
Total Revenue by Geographic Locations
Revenues by geographical region consisted of the following (in
millions):
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Americas
$
5,862
$
5,361
$
17,113
$
15,593
Europe
1,998
1,745
5,923
5,228
Asia Pacific
860
731
2,534
2,147
$
8,720
$
7,837
$
25,570
$
22,968
Constant Currency Growth Rates
Subscription and support revenues constant currency growth rates
by the Company's service offerings were as follows:
Three Months Ended
October 31, 2023
Compared to Three
Months
Ended October 31, 2022
Three Months Ended
July 31, 2023
Compared to Three
Months
Ended July 31, 2022
Three Months Ended
October 31, 2022
Compared to Three
Months
Ended October 31, 2021
Sales
10%
12%
17%
Service
11%
12%
16%
Platform and Other
11%
11%
22%
Marketing and Commerce
8%
10%
18%
Data (1)
22%
16%
16%
(1) Data is comprised of revenue from
Analytics, which includes Tableau, and Integration, which includes
Mulesoft.
Revenue constant currency growth rates by geographical region
were as follows:
Three Months Ended
October 31, 2023
Compared to Three
Months
Ended October 31, 2022
Three Months Ended
July 31, 2023
Compared to Three
Months
Ended July 31, 2022
Three Months Ended
October 31, 2022
Compared to Three
Months
Ended October 31, 2021
Americas
9%
10%
16%
Europe
10%
11%
23%
Asia Pacific
21%
24%
30%
Total growth
10%
11%
19%
Current remaining performance obligation constant currency
growth rates were as follows:
October 31, 2023
Compared to
October 31, 2022
July 31, 2023
Compared to
July 31, 2022
October 31, 2022
Compared to
October 31, 2021
Total growth
13%
11%
15%
Salesforce, Inc.
GAAP Results Reconciled to non-GAAP
Results
The following tables reflect selected GAAP
results reconciled to non-GAAP results.
(in millions, except per share data)
(Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Non-GAAP income
from operations
GAAP income from operations
$
1,501
$
460
$
3,389
$
673
Plus:
Amortization of purchased intangibles
(1)
468
474
1,411
1,478
Stock-based compensation expense
(2)(3)
693
843
2,097
2,470
Restructuring
55
0
815
0
Non-GAAP income from operations
$
2,717
$
1,777
$
7,712
$
4,621
Non-GAAP
operating margin as a percentage of revenues
Total revenues
$
8,720
$
7,837
$
25,570
$
22,968
GAAP operating margin (4)
17.2
%
5.9
%
13.3
%
2.9
%
Non-GAAP operating margin (4)
31.2
%
22.7
%
30.2
%
20.1
%
Non-GAAP net
income
GAAP net income
$
1,224
$
210
$
2,690
$
306
Plus:
Amortization of purchased intangibles
(1)
468
474
1,411
1,478
Stock-based compensation expense
(2)(3)
693
843
2,097
2,470
Restructuring
55
0
815
0
Income tax effects and adjustments
(372
)
(129
)
(1,177
)
(686
)
Non-GAAP net income
$
2,068
$
1,398
$
5,836
$
3,568
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Non-GAAP diluted
net income per share
GAAP diluted net income per share
$
1.25
$
0.21
$
2.73
$
0.31
Plus:
Amortization of purchased intangibles
0.48
0.47
1.43
1.48
Stock-based compensation expense
0.71
0.84
2.13
2.47
Restructuring
0.06
0.00
0.83
0.00
Income tax effects and adjustments
(0.39
)
(0.12
)
(1.19
)
(0.70
)
Non-GAAP diluted net income per share
$
2.11
$
1.40
$
5.93
$
3.56
Shares used in computing Non-GAAP diluted
net income per share
981
1,000
985
1,001
(1) Amortization of purchased intangibles
was as follows:
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Cost of revenues
$
245
$
250
$
743
$
785
Marketing and sales
223
224
668
693
$
468
$
474
$
1,411
$
1,478
(2) Stock-based compensation expense,
excluding stock-based compensation expense related to
restructuring, was as follows:
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Cost of revenues
$
109
$
130
$
324
$
372
Research and development
238
287
735
863
Marketing and sales
275
330
815
947
General and administrative
71
96
223
288
$
693
$
843
$
2,097
$
2,470
(3) Stock-based compensation expense
included in the GAAP to non-GAAP reconciliation tables above for
the nine months ended October 31, 2023 excludes stock-based
compensation expense related to the Restructuring Plan of $16
million, which is included in the Restructuring line.
(4) GAAP operating margin is the
proportion of GAAP income from operations as a percentage of GAAP
revenue. Non-GAAP operating margin is the proportion of non-GAAP
income from operations as a percentage of GAAP revenue. Non-GAAP
income from operations excludes the impact of the amortization of
purchased intangibles, stock-based compensation expense and charges
related to the Restructuring Plan.
Salesforce, Inc.
Computation of Basic and Diluted GAAP
and non-GAAP Net Income Per Share
(in millions, except per share data)
(Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
GAAP Basic Net Income Per Share
Net income
$
1,224
$
210
$
2,690
$
306
Basic net income per share
$
1.26
$
0.21
$
2.76
$
0.31
Shares used in computing basic net income
per share
972
997
976
995
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Non-GAAP Basic Net Income Per
Share
Non-GAAP net income
$
2,068
$
1,398
$
5,836
$
3,568
Non-GAAP basic net income per share
$
2.13
$
1.40
$
5.98
$
3.59
Shares used in computing Non-GAAP basic
net income per share
972
997
976
995
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
GAAP Diluted Net Income Per
Share
Net income
$
1,224
$
210
$
2,690
$
306
Diluted net income per share
$
1.25
$
0.21
$
2.73
$
0.31
Shares used in computing diluted net
income per share
981
1,000
985
1,001
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
Non-GAAP Diluted Net Income Per
Share
Non-GAAP net income
$
2,068
$
1,398
$
5,836
$
3,568
Non-GAAP diluted net income per share
$
2.11
$
1.40
$
5.92
$
3.56
Shares used in computing Non-GAAP diluted
net income per share
981
1,000
985
1,001
Supplemental Cash Flow
Information
Computation of Free Cash Flow, a
Non-GAAP Measure
(in millions)
(Unaudited)
Three Months Ended October
31,
Nine Months Ended October
31,
2023
2022
2023
2022
GAAP net cash provided by operating
activities
$
1,532
$
313
$
6,831
$
4,323
Capital expenditures
(166
)
(198
)
(589
)
(580
)
Free cash flow
$
1,366
$
115
$
6,242
$
3,743
Non-GAAP Financial Measures: This press release includes
information about non-GAAP operating margin, non-GAAP earnings per
share, non-GAAP tax rates, free cash flow, 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 Operating Margin is the proportion of non-GAAP income
from operations as a percentage of GAAP revenue. Non-GAAP income
from operations excludes the impact of the following items:
stock-based compensation expense, amortization of
acquisition-related intangibles, and charges related to the
Restructuring Plan. Non-GAAP operating margin for Q1 FY25 reflects
our operating priorities, not specific guidance. A reconciliation
of non-GAAP operating margin for Q1 FY25 is not available without
unreasonable efforts and has been omitted in accordance with SEC
rules. Non-GAAP earnings per share excludes, to the extent
applicable, the impact of the following items: stock-based
compensation expense, amortization of purchased intangibles,
charges related to the Restructuring Plan, 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.
As described above, the Company excludes or adjusts for the
following in its non-GAAP results and guidance:
- Stock-Based Compensation Expense: The Company’s compensation
strategy includes the use of stock-based compensation expense 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 the Company excludes 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.
- Restructuring: Restructuring charges are costs associated with
a formal restructuring plan and may include employee notice period
costs and severance payments, lease or contract termination costs,
asset impairments, accelerated depreciation and amortization, and
other related expenses. The Company excludes these restructuring
charges because they are distinct from ongoing operational costs
and it does not believe they are reflective of current and expected
future business performance and operating results.
- Gains on Strategic Investments, net: The Company records 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,
including its guidance. Gains on Strategic Investments, net, are
included in its GAAP financial statements.
- 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 considers 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 2023, the Company used a
projected non-GAAP tax rate 22.0%. For fiscal 2024, the Company
uses a projected non-GAAP tax rate of 23.5%, 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 appropriate.
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 constant currency revenue growth rates,
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 rather than the actual exchange rates in
effect during that period. To present current remaining performance
obligation growth rates on a constant currency basis, current
remaining performance obligation balances in local currencies in
previous comparable periods are converted using the United States
dollar currency exchange rate as of the most recent balance sheet
date.
The Company defines the non-GAAP measure free cash flow as GAAP
net cash provided by operating activities, less capital
expenditures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231129201951/en/
Mike Spencer Salesforce Investor Relations 415-536-6250
investor@salesforce.com
Carolyn Guss Salesforce Public Relations 415-536-4966
pr@salesforce.com
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