Salesforce.com Announces Record Fiscal First Quarter Results

First Software-as-a-Service Company to Exceed $600M Annual Revenue Run-rate

  • Company Raises Full Fiscal Year '08 Revenue Guidance
  • Record Revenue of $162M, up 55% year-over-year, surpassing company guidance
  • Record Q1 Operating Cash Flow of $37M, up 197% year-over-year
  • GAAP EPS of $0.01, at the high end of company guidance
  • Record Deferred Revenue of $296M, up 62% year-over-year
  • Total Cash and Marketable Securities increase to $448M, up $150M year over year

SAN FRANCISCO, Calif. - May 16, 2007 - Salesforce.com (NYSE: CRM), the market and technology leader in on-demand business services, today announced results for its fiscal first quarter ended April 30, 2007.

"The momentum for our industry-leading on-demand applications and platform was truly global in our fiscal first quarter, as large enterprises around the world entrusted their futures to Salesforce," said Marc Benioff, chairman and CEO, salesforce.com.  "Just two quarters ago, we were the first on-demand company to cross the significant threshold of a $500 million annual revenue run rate.  Now, we have surpassed the $600 million run rate -- another step closer to our $1 billion goal.  We believe that this makes salesforce.com the fastest growing software company of our size today."

Salesforce.com delivered the following results for the first fiscal quarter 2008:

GAAP EPS Policy:  When comparing reported company EPS results with Thomson Financial First Call estimates, it should be noted that salesforce.com presents EPS results in GAAP terms only.  Thomson estimates for salesforce.com are currently reported in non-GAAP terms, which exclude certain recurring items, such as stock based compensation and amortization of purchased intangibles.

Revenue: Total Q1 revenue was $162.4 million, an increase of 55% on a year-over-year basis and an increase of 13% on a quarter-over-quarter basis.  Subscription and support revenues were $147.7 million, an increase of 56% on a year-over-year basis and an increase of 12% on a quarter-over-quarter basis.  Professional services and other revenues were $14.7 million, an increase of 44% on a year-over-year basis and an increase of 21% on a quarter-over-quarter basis.  

Earnings per Share:  Q1 GAAP earnings per share were $0.01.  This result reflects approximately $12.0 million in stock based compensation and approximately $1.0 million in amortization of purchased intangibles related to previously announced acquisitions.  Q1 diluted GAAP EPS calculations are based on an average of 121 million diluted shares outstanding during the quarter.

Customers: Net paying customers rose approximately 2,500 during the quarter to approximately 32,300, an increase of 42% or 9,600 from Q1 of the prior year, and an increase of 8% from the prior quarter.  

Cash: Cash from operations for the fiscal first quarter was approximately $37 million, an increase of 197% year-over-year.  Total cash, cash equivalents and marketable securities finished the quarter at approximately $448 million, an increase of approximately $150 million year-over-year.

Deferred Revenue: Deferred revenue on the balance sheet as of April 30, 2007 was $296 million, an increase of 62% on a year-over-year basis and 4% on a quarter-over-quarter basis.

Based on information as of May 16, 2007, salesforce.com is initiating guidance for its second quarter, fiscal year 2008, and raising its revenue guidance for the full fiscal year 2008.

Q2 FY08:  Revenue for the company's second fiscal quarter is projected to be in the range of approximately $171 million to $173 million. GAAP diluted EPS is expected to be in the range of approximately breakeven to $0.01.  GAAP EPS estimates include the effects of stock based compensation and the amortization of purchased intangibles.  For the second fiscal quarter FY08, stock based compensation expense is expected to be approximately $13 million to $15 million, and the expense associated with the amortization of purchased intangibles is now expected to be approximately $1.5 million.  For the purposes of Q2 GAAP EPS calculation, the company is expecting an average diluted shares count of 122 million shares, and a GAAP tax rate of 70%.

Full Year FY08: The company today is raising the revenue outlook provided on February 21, 2007, with revenue now expected to be approximately $722 million to approximately $728 million.  The company is also reiterating earnings outlook for the full year, expecting GAAP diluted EPS to be in the range of approximately $0.07 to $0.09.  GAAP EPS estimates include the effects of stock based compensation and the amortization of purchased intangibles.  For the full fiscal year 2008, stock based compensation expense is expected to be approximately $60 million to $70 million, and the expense associated with the amortization of purchased intangibles is currently expected to be approximately $5.0 million.  For the purposes of the full fiscal year 2008 GAAP EPS calculation, the company is expecting an average diluted shares count of 124 million shares, and a GAAP tax rate of 65%.
 
Quarterly Conference Call
Salesforce.com will host a conference call to discuss its first quarter fiscal 2008 results at 2:00 p.m. (PDT) 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 domestically 866-901-SFDC or 866-901-7332 and internationally 706-758-3772.  A replay will be available at (800) 642-1687 or (706) 645-9291, passcode 7943492, until midnight (EDT) May 25, 2007.

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements including but not limited to statements regarding our expected future revenue, GAAP diluted earnings per share, expected tax rate, anticipated shares outstanding, further adoption of our on-demand business services by enterprises, and the potential market for our existing service offerings. All of our forward looking statements involve risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions proves incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.

The risks and uncertainties referred to above include - but are not limited to - risks associated with possible fluctuations in our operating results and cash flows, rate of growth and anticipated revenue run rate, errors, interruptions or delays in our service or our Web hosting, our new business model, our history of operating losses, the possibility that we will not remain profitable, breach of our security measures, the emerging market in which we operate, our relatively limited operating history, our ability to hire, retain and motivate our employees and manage our growth, competition, our ability to
continue to release and gain customer acceptance of new and improved versions of our service, customer and partner acceptance of the AppExchange, successful customer deployment and utilization of our services, unanticipated changes in our effective tax rate, fluctuations in the number of shares outstanding, the price of such shares, foreign currency exchange rates and interest rates.

Further information on these and other factors that could affect our financial results is contained in our SEC filings, including our most recent reports on Form 10-K and 10-Q, particularly under the heading "Risk Factors." These documents are available in the SEC Filings portion of the Investor Information section of our 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.

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements including but not limited to statements regarding our expected future revenue, GAAP diluted earnings per share, expected tax rate, anticipated shares outstanding, further adoption of our on-demand business services by enterprises, and the potential market for our existing service offerings. All of our forward looking statements involve risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions proves incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.

The risks and uncertainties referred to above include - but are not limited to - risks associated with possible fluctuations in our operating results and cash flows, rate of growth and anticipated revenue run rate, errors, interruptions or delays in our service or our Web hosting, our new business model, our history of operating losses, the possibility that we will not remain profitable, breach of our security measures, the emerging market in which we operate, our relatively limited operating history, our ability to hire, retain and motivate our employees and manage our growth, competition, our ability to
continue to release and gain customer acceptance of new and improved versions of our service, customer and partner acceptance of the AppExchange, successful customer deployment and utilization of our services, unanticipated changes in our effective tax rate, fluctuations in the number of shares outstanding, the price of such shares, foreign currency exchange rates and interest rates.

Further information on these and other factors that could affect our financial results is contained in our SEC filings, including our most recent reports on Form 10-K and 10-Q, particularly under the heading "Risk Factors." These documents are available in the SEC Filings portion of the Investor Information section of our 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.