Salesforce.com Announces Record Fiscal Second Quarter Results

Crossing the Threshold of Half-Million Subscribers

  • Record Revenue of $118M, up 64% year-over-year
  • Company Raises Full Year Fiscal 2007 Guidance
  • Net Paying Subscribers rise a record 57,000 to 501,000
  • Net Customers rise 2,100 to 24,800, up 47% year-over-year
  • GAAP EPS approximately break-even
  • Fully Diluted Non-GAAP EPS of $0.06
  • Operating cash rises to $30M, up 133% year-over-year

SAN FRANCISCO, Calif. — August 16, 2006 — Salesforce.com [NYSE: CRM], the market and technology leader in on-demand business services, today announced results for its fiscal second quarter ended July 31, 2006.

"As we soar past the half-million paying subscriber mark, we stand on the cusp of another remarkable achievement: a half-billion dollar annual run rate. These are historic milestones for salesforce.com and the industry that we are leading," said Marc Benioff, chairman and CEO of salesforce.com. "Few software companies achieve this scale and momentum. As we head towards one million subscribers and one billion dollars in revenue, I want to thank our 24,800 customers, partners, and our 1,625 employees for creating this amazing community of success on the Business Web."
Salesforce.com delivered the following results for the second quarter of fiscal year 2007:

    Revenue: Total revenue was $118 million, an increase of 64% on a year-over-year basis and an increase of 13% on a quarter-to-quarter basis. Subscription and support revenues were $106.7 million, an increase of 63% on a year-over-year basis and an increase of 13% on a quarter-to-quarter basis. Professional services and other revenues were $11.5 million, an increase of 82% on a year-over-year basis and an increase of 13% on a quarter-to-quarter basis.

    Earnings per Share: GAAP earnings per share were approximately break-even. Non-GAAP earnings per diluted share, excluding the effects of stock based compensation and amortization of purchased intangibles related to acquisitions, were $0.06. For the basis of non-GAAP EPS calculations, a diluted share count of 119 million shares was used.

    Customers and Paying Subscribers: Net paying subscribers rose approximately 57,000 during Q2 to exit the quarter at approximately 501,000 total subscribers. This ending total represents an increase of 63% from Q2 of the prior year, and an increase of 13% from the prior quarter. Customers rose approximately 2,100 during the quarter and totaled approximately 24,800, an increase of 47% from Q2 of the prior year, and an increase of 9% from the prior quarter.

    Cash: Cash from operations for the fiscal second quarter was approximately $30 million, an increase of 133% year-over-year.

    Deferred Revenue: Deferred revenue on the balance sheet as of July 31, 2006 was $202.8 million, an increase of 73% on a year-over-year basis and 11% on a quarter-to-quarter basis.

Based on information as of August 16, 2006, salesforce.com is initiating guidance for its third quarter fiscal 2007 ending October 31, 2006, and updating guidance for its full fiscal year 2007 ending January 31, 2007.
    Q3 FY07: Revenue for the company's third fiscal quarter is projected to be in the range of approximately $126 million to approximately $128 million. Non-GAAP diluted EPS is expected to be in the range of approximately $0.04 to $0.05, and GAAP EPS is expected to be in the range of approximately breakeven to a loss of $0.02 for the third quarter. Non-GAAP EPS estimates exclude the effects of stock based compensation, which is now expected to be approximately $0.05 to $0.06 per share, and the amortization of purchased intangibles which are now expected to be a small fraction of $0.01 per share. Non-GAAP estimates further assume an estimated average of 121 million diluted shares outstanding and an estimated non-GAAP effective tax rate of 45%.

    Full Year FY07: The company today is raising its revenue outlook for its fiscal year 2007, and now expects full year revenue of approximately $488 million to approximately $493 million. The company is also raising it's earnings outlook for the full year, and now expects non-GAAP diluted EPS to be in the range of approximately $0.19 to $0.21, with GAAP EPS expected to be in the range of approximately breakeven to a loss of $0.04. Non-GAAP EPS estimates exclude the effects of stock based compensation, which is now expected to be approximately $0.20 to $0.22 per share, and the amortization of purchased intangibles which are now expected to be approximately $0.01 per share. Non-GAAP estimates further assume an estimated average of 121 million diluted shares outstanding and an estimated non-GAAP effective tax rate of 45%.

Quarterly Conference Call
Salesforce.com will host a conference call to discuss its second quarter fiscal 2007 results at 2:00 p.m. Pacific Daylight Time today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations Web site at http://www.salesforce.com/investor. In addition, an archive of the webcast can be accessed through the same link. Participants who choose to call into the conference call can do so by dialing 866-901-SFDC or 866-901-7332. International participants may dial 706-758-3772. A replay will be available until midnight Eastern Daylight Time on September 1, 2006 and can be accessed by dialing, (800) 642-1687 or (706) 645-9291, passcode 3911289.

About Salesforce.com

Salesforce.com is the world’s largest provider of customer relationship management (CRM) software. For more information about salesforce.com (NYSE: CRM), visit: www.salesforce.com/au/.

Any unreleased services or features referenced in this or other press releases or public statements are not currently available and may not be delivered on time or at all. Customers who purchase salesforce.com applications should make their purchase decisions based upon features that are currently available. Salesforce.com has headquarters in San Francisco, with offices in Europe and Asia, and trades on the New York Stock Exchange under the ticker symbol “CRM.” For more information please visit http://salesforce.com/au/, or call 1800 667 638 (Australia) or 0800 450 064 (New Zealand).