Press Release dated November 20, 2008

EX-99.1 2 dex991.htm PRESS RELEASE DATED NOVEMBER 20, 2008 Press Release dated November 20, 2008

Exhibit 99.1

David Havlek

salesforce.com

Investor Relations

415-536-2171

dhavlek@salesforce.com

Jane Hynes

salesforce.com

Public Relations

415-901-5079

jhynes@salesforce.com

Salesforce.com Announces Record Fiscal Third Quarter Results

First Enterprise Cloud Computing Company to Exceed $1.1 Billion Annual Revenue Run Rate

•

Record Revenue of $276 Million, up 43% Year-Over-Year

•

GAAP EPS of $0.08, up 60% Year-Over-Year

•

4,100 New Customer Additions

•

Total Customers at 51,800, up 36% Year-Over-Year

•

GAAP Operating Margin Nearly Doubles Year-over-Year to 6%

•

Company Issues FY10 Revenue Guidance of $1.350 - $1.360 Billion

SAN FRANCISCO, Calif. – November 20, 2008 – Salesforce.com (NYSE: CRM), the enterprise cloud computing company, today announced results for its fiscal third quarter ended October 31, 2008.

“In times like these, our value proposition of low start up cost, low risk, and fast results is resonating like never before,” said Marc Benioff, chairman and CEO, salesforce.com. “In the third quarter, we continued to add customers at the same record level we did last quarter, at a time when the traditional enterprise software world was retrenching.”

Salesforce.com delivered the following results for its third quarter fiscal year 2009:

Revenue: Total Q3 revenue was $276.5 million, an increase of 43% on a year-over-year basis and an increase of 5% on a quarter-over-quarter basis. Subscription and support revenues were $253.4 million, an increase of 44% on a year-over-year basis and an increase of 6% on a quarter-over-quarter basis. Professional services and other revenues were $23.1 million, an increase of 41% on a year-over-year basis and a decrease of 1% on a quarter-over-quarter basis.

Earnings per Share: Q3 GAAP diluted earnings per share were approximately $0.08, including approximately $19 million in stock based compensation and approximately $2.5 million in amortization of purchased intangibles related to previously announced acquisitions. For the purpose of this Q3 GAAP EPS calculation, there was an average of approximately 125 million diluted shares outstanding during the quarter.

Deferred Revenue: Deferred revenue was approximately $470 million as of October 31, 2008, an increase of 38% on a year-over-year basis and down approximately 2% on a quarter-over-quarter basis. Excluding a negative foreign currency impact of approximately $14M during the quarter, deferred revenue grew by approximately $4 million in constant currency terms from Q2.

Cash: Cash from operations for the fiscal third quarter was approximately $17 million, compared to $52 million in the year-ago period and $53 million in Q2. Total cash, cash equivalents and marketable securities finished the quarter at approximately $805 million, a decrease of approximately $19 million from Q2 and up approximately $234 million from October 31, 2007. The

sequential decrease in cash and marketable securities was primarily due to the company’s previously announced acquisition of InStranet and to the purchase of shares in salesforce.com’s Japanese majority-owned joint venture. Together these items reduced cash by approximately $44 million during the quarter.

Customer Additions: During the quarter net paying customers rose approximately 4,100, and total customer count stands at approximately 51,800. Compared with the year ago quarter, net paying customers have grown by approximately 13,700.

Guidance: As of November 20, 2008, salesforce.com is initiating guidance for its fourth quarter, fiscal year 2009. In addition, the company is initiating revenue guidance for its full fiscal year 2010.

Q4 FY09: Revenue for the company’s fourth fiscal quarter is projected to be in the range of approximately $284 million to approximately $285 million. The company expects fully diluted GAAP EPS to be in the range of $0.06 to $0.07. The GAAP EPS estimate includes the effects of stock based compensation and the amortization of purchased intangibles. For the fourth fiscal quarter, stock based compensation expense is expected to be approximately $22 million, and the expense associated with amortization of purchased intangibles, including that associated with the acquisition of InStranet, is expected to be approximately $4.2 million. For purposes of the Q4 GAAP fully diluted EPS calculation, the company is expecting an average diluted shares count of approximately 127 million shares, and a GAAP tax rate of 48%.

Fiscal FY10: The company is initiating revenue guidance for its full fiscal year 2010 with projected revenue in the range of $1.350 billion to $1.360 billion. The company expects to update this guidance, as well as provide its expectations for FY10 GAAP EPS when it announces its fourth quarter, fiscal year 2009 results planned for February, 2009.

Quarterly Conference Call

Salesforce.com will host a conference call to discuss its third quarter fiscal 2009 results today at 2:00 p.m. Pacific Time. 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 in to the conference call can do so by dialing domestically (866)-901-SFDC or (866)-901-7332 and internationally (706)-902-1764, passcode salesforce.com or 72989815. A replay will be available at (800) 642-1687 or (706) 645-9291, passcode 72989815, until midnight Eastern Time December 5, 2008.

About salesforce.com

Salesforce.com is the enterprise cloud computing company. The company’s portfolio of SaaS applications, including its award-winning CRM, available at http://www.salesforce.com/products/, has revolutionized the ways that customers manage and share business information over the Internet. The company’s Force.com PaaS enables customers, developers and partners to build powerful on-demand applications that deliver the benefits of multi-tenancy across the enterprise. Applications built on the Force.com platform, available at http://www.force.com/, can be easily shared, exchanged and installed with a few simple clicks via salesforce.com’s Force.com AppExchange marketplace available at http://www.salesforce.com/appexchange/.

As of October 31, 2008, salesforce.com manages customer information for approximately 51,800 customers including ABN AMRO, Dow Jones Newswires, Japan Post, Kaiser Permanente, KONE, Sprint Nextel, and SunTrust Banks. 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://www.salesforce.com, or call 1-800-NO-SOFTWARE.

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“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements about expected revenue and GAAP earnings per share for the fourth fiscal quarter of 2009 and revenue for the full fiscal year 2010, and our expected tax rate, stock based compensation expense, amortization rate, and shares outstanding, the achievement of which involve risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove 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 financial and operating results, rate of growth and anticipated revenue run rate; errors, interruptions or delays in our service or our Web hosting; breaches of our security measures; the financial impact the acquisition of InStranet and any future acquisitions; the nature of our business model; our ability to continue to release, and gain customer acceptance of, new and improved versions of our service; successful customer deployment and utilization of our existing and future services; competition; various financial aspects of our subscription model; the emerging market in which we operate; our ability to hire, retain and motivate our employees and manage our growth; changes in our customer base; technological developments; regulatory developments; unanticipated changes in our effective tax rate; and fluctuations in the number of shares we have outstanding, the price of such shares, foreign currency exchange rates, interest rates, and general developments in the economy, financial markets, and credit markets.

Further information on these and other factors that could affect our financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-Q that will be filed for the quarter ended October 31, 2008 and our Form 10-K for the fiscal year ended January 31, 2008. These documents are or will be available on the SEC Filings section 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.

Copyright (c) 2008 salesforce.com, inc. All rights reserved. Salesforce and the “no software” logo are registered trademarks of salesforce.com, inc., and salesforce.com owns other registered and unregistered trademarks. Other names used herein may be trademarks of their respective owners.

salesforce.com, inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)


	Three Months Ended October 31,						Nine Months Ended October 31,
	2008			2007			2008			2007
Revenues:
Subscription and support	$	253,403		$	176,376		$	718,464		$	484,064
Professional services and other		23,084			16,427			68,722			47,730

Total revenues		276,487			192,803			787,186			531,794
Cost of revenues (1):
Subscription and support		32,424			23,887			91,802			66,446
Professional services and other		23,924			20,394			69,935			58,414

Total cost of revenues		56,348			44,281			161,737			124,860
Gross profit		220,139			148,522			625,449			406,934
Operating expenses (1):
Research and development		26,270			16,892			70,070			46,109
Marketing and sales		136,452			96,216			389,930			270,357
General and administrative		41,284			29,296			117,797			80,889

Total operating expenses		204,006			142,404			577,797			397,355
Income from operations		16,133			6,118			47,652			9,579
Interest, net		3,840			6,556			17,270			17,178
Gain on sale of investment		0			1,272			0			1,272
Other income (expense)		534			285			(1,069	)		734

Income before provision for income taxes and minority interest		20,507			14,231			63,853			28,763
Provision for income taxes		(8,824	)		(6,594	)		(29,693	)		(15,089	)

Income before minority interest		11,683			7,637			34,160			13,674
Minority interest in consolidated joint venture		(1,559	)		(1,125	)		(4,485	)		(2,697	)

Net income	$	10,124		$	6,512		$	29,675		$	10,977

Basic net income per share	$	0.08		$	0.06		$	0.25		$	0.09

Diluted net income per share	$	0.08		$	0.05		$	0.24		$	0.09
Shares used in computing basic net income per share		121,635			117,361			120,759			116,208
Shares used in computing diluted net income per share		125,133			122,169			125,173			121,429

(1) Amounts include stock-based expenses, as follows:
Cost of revenues	$	2,817		$	2,014		$	8,149		$	5,753
Research and development		2,494			1,685			6,852			4,472
Marketing and sales		9,235			6,313			26,105			18,197
General and administrative		4,730			4,166			15,119			11,199

Total stock-based expenses	$	19,276		$	14,178		$	56,225		$	39,621

salesforce.com, inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2008		2007		2008		2007
Revenues:
Subscription and support	91	%	91	%	91	%	91	%
Professional services and other	9		9		9		9

Total revenues	100		100		100		100
Cost of revenues:
Subscription and support	12		12		12		12
Professional services and other	8		11		9		11

Total cost of revenues	20		23		21		23
Gross profit	80		77		79		77
Operating expenses:
Research and development	10		9		9		9
Marketing and sales	49		50		49		51
General and administrative	15		15		15		15

Total operating expenses	74		74		73		75
Income from operations	6		3		6		2
Interest, net	1		3		2		3
Gain on sale of investment	0		1		0		0
Other income (expense)	0		0		0		0

Income before provision for income taxes and minority interest	7		7		8		5
Provision for income taxes	(3	)	(3	)	(4	)	(3	)

Income before minority interest	4		4		4		2
Minority interest in consolidated joint venture	0		(1	)	0		0

Net income	4	%	3	%	4	%	2	%


Stock-based expenses as a percentage of total revenues, as follows:
Cost of revenues	1	%	1	%	1	%	1	%
Research and development	1		1		1		1
Marketing and sales	3		3		3		3
General and administrative	2		2		2		2

Total stock-based expenses	7	%	7	%	7	%	7	%

salesforce.com, inc.

Condensed Consolidated Balance Sheets

(in thousands)


	October 31, 2008			January 31, 2008
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	382,314		$	279,095
Short-term marketable securities		219,144			171,748
Accounts receivable, net		157,680			220,061
Deferred commissions		35,355			35,679
Deferred income taxes		14,319			7,173
Prepaid expenses and other current assets		39,747			27,055

Total current assets		848,559			740,811
Marketable securities, noncurrent		203,148			218,957
Fixed assets, net		66,833			41,380
Deferred commissions, noncurrent		13,909			16,435
Deferred income taxes, noncurrent		36,258			26,512
Capitalized software, net		31,950			23,061
Goodwill		27,699			8,556
Other assets, net		47,375			13,881

Total assets	$	1,275,731		$	1,089,593

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	20,875		$	7,478
Accrued expenses and other current liabilities		134,600			125,996
Income taxes payable		1,923			3,622
Deferred revenue		458,044			468,821

Total current liabilities		615,442			605,917
Income taxes payable, noncurrent		10,834			8,465
Long-term lease abandonment liability and other		6,150			2,136
Deferred revenue, noncurrent		11,490			12,073
Minority interest		13,428			8,943

Total liabilities		657,344			637,534
Stockholders’ equity:
Common stock		122			119
Additional paid-in capital		613,768			471,802
Accumulated other comprehensive loss		(7,592	)		(2,276	)
Retained earnings (deficit)		12,089			(17,586	)

Total stockholders’ equity		618,387			452,059

Total liabilities and stockholders’ equity	$	1,275,731		$	1,089,593

salesforce.com, inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Three Months Ended October 31,						Nine Months Ended October 31,
	2008			2007			2008			2007
Operating activities:
Net income	$	10,124		$	6,512		$	29,675		$	10,977
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of investment		0			(1,272	)		0			(1,272	)
Loss on securities		2,052			0			2,052			0
Minority interest		1,559			1,125			4,485			2,697
Depreciation and amortization		7,910			6,758			24,938			17,651
Amortization of deferred commissions		14,784			11,044			43,414			29,727
Expenses related to stock-based awards		19,276			14,178			56,225			39,621
Excess tax benefits from employee stock plans		(17,706	)		(9,298	)		(42,247	)		(24,504	)
Changes in assets and liabilities		(20,878	)		22,951			35,486			48,585

Net cash provided by operating activities		17,121			51,998			154,028			123,482

Investing activities:
Purchase of subsidiary stock		(16,693	)		0			(16,693	)		0
Business combination, net of cash acquired		(27,344	)		0			(27,344	)		0
Changes in marketable securities		(30,263	)		(35,140	)		(38,841	)		(83,087	)
Capital expenditures		(11,614	)		(9,122	)		(48,827	)		(35,183	)
Proceeds from sale of investment		0			1,659			0			1,659

Net cash used in investing activities		(85,914	)		(42,603	)		(131,705	)		(116,611	)

Financing activities:
Proceeds from the exercise of stock options		6,595			20,586			40,605			44,290
Excess tax benefits from employee stock plans		17,706			9,298			42,247			24,504
Principal payments on capital lease obligations		(286	)		(6	)		(291	)		(169	)

Net cash provided by financing activities		24,015			29,878			82,561			68,625

Effect of exchange rate changes		49			(1,461	)		(1,665	)		(1,343	)

Net (decrease) increase in cash and cash equivalents		(44,729	)		37,812			103,219			74,153
Cash and cash equivalents, beginning of period		427,043			122,949			279,095			86,608

Cash and cash equivalents, end of period	$	382,314		$	160,761		$	382,314		$	160,761

salesforce.com, inc.

Additional Metrics

(Unaudited)


	Oct 31, 2008			July 31, 2008			April 30, 2008			Jan 31, 2008			Oct 31, 2007		Jul 31, 2007
Full Time Equivalent Headcount		3,318			3,046			2,864			2,606			2,461		2,302

Financial data (in thousands):
Cash, cash equivalents and marketable securities	$	804,606		$	823,417		$	750,633		$	669,800		$	571,003	$	497,191
Deferred revenue, current and non-current	$	469,534		$	479,546		$	470,297		$	480,894		$	340,808	$	321,852

	Three Months Ended October 31,						Nine Months Ended October 31,
	2008			2007			2008			2007
Revenues by geography (in thousands):
Americas	$	200,143		$	141,682		$	567,076		$	399,477
Europe		48,076			33,880			142,597			88,614
Asia Pacific		28,268			17,241			77,513			43,703

	$	276,487		$	192,803		$	787,186		$	531,794

As a percentage of total revenues:

Revenues by geography:
Americas		72	%		73	%		72	%		75	%
Europe		17			18			18			17
Asia Pacific		11			9			10			8

		100	%		100	%		100	%		100	%