Salesforce.com

  • Salesforce, the maker of customer service,   analytics and relationship management software, reported second quarter   results which beat analyst estimates on the top and bottom lines.

  • Revenue grew 29% to $5.15 billion, following 30% growth in the   previous quarter. The Core Cloud Sales division, which is software that   allows managers and salespeople to keep track of business, grew 13% to $1.18   billion. The Service Cloud product for customer support grew 20% to $1.30   billion. And the Platform and Other category division, which now includes the   data visualization software, Tableau, it acquired last year for $14.8   billion, grew revenues 66% to $1.51 billion. Gross margins were an impressive   74.5%, up 30 basis points on the previous quarter.

  • The current remaining performance obligation, a measurement of   potential future revenue from contracts that Salesforce believes will be recognized   as revenue over the next 12 months, grew 26% year-on-year to $15.20 billion.

  • EBIT came in at $178 million in Q2, down 10% from the same period a   year ago. Earnings came in at an adjusted $1.44 per share, double what   analysts had forecast. The adjusted earnings were positively impacted by an   unrealized mark-to-market accounting gain of $617 million on the company’s   stake in nCino, a cloud-based software provider for banks which listed in   July. Salesforce also makes revenue from nCino’s use of its services.

  • The company introduced a Work.com tools application to help   organizations return to work post-covid-19 and also provided guidance which   was lower than expected. Total debt increased marginally to $5.85 billion.   Cash generated from operations fell 2% year-on-year to $430 million, whilst   total cash, cash equivalents and marketable securities totaled $9.28 billion   at the end of the quarter. Salesforce CEO Marc Benioff played down any   suggestion of M&A activity in the current environment.

  • Whilst it has invested heavily back into the business and does generate good revenues and free cash flows, we would like to see operating and net margins stabilize and improve before considering this company for portfolios. Much of its growth in the past has been via acquisitions. The market has rewarded its sales growth despite the company not being profitable, similar to Amazon and other software-as-a-service firms. Shares of Salesforce are up over 65% this year. The company has a market cap of nearly $250 billion, and was recently added to the Dow Jones Industrial Average Index, which measures the stock performance of 30 large companies listed in the US.


Salesforce.com