Salesforce

  • Customer relationship management software   provider Salesforce reported third quarter results which beat Wall Street   expectations on the top and bottom lines. However, the performance was   overshadowed by softer fourth quarter guidance which saw its share price come   under pressure.

  • Total third quarter   revenue was $6.86 billion, an increase of 27% year-over-year, and 26% in   constant currency.

  • Subscription and support revenues for the   quarter brought in $6.38 billion, an increase of 25% year-over-year. Professional   services and other revenues made up the difference of $0.48 billion, an   increase of 45% year-over-year.

  • A breakdown of   subscription and support services saw Sales Cloud, the company’s core product   that salespeople use to track leads and opportunities, increase sales 17% to   $1.54 billion from last year. Service Cloud sales rose over 20% from last   year to $1.66 billion. And The Platform and Other unit reported $1.27 billion   in sales during the quarter, up 51% year over year. Workplace communication   app Slack, which Salesforce paid $27 billion for, contributed $276 million in   sales to the Platform unit. Salesforce says the number of customers on Slack   that spent over $100,000 is up 44% year over year. Lastly, Workforce   re-classified sales from its Tableau and Mulesoft acquisitions into its Data   unit, which reported $900 million in sales, up 20% year over year.

  • The third quarter   non-GAAP operating margin fell slightly to 19.8% with non-GAAP diluted   earnings per share coming in at $1.27. Workforce generated cash from   operations of $0.40 billion in the third quarter, an increase of 19%   year-over-year – with its cash pile totaling $9.39 billion at the end of the   third quarter. This should improve substantially in Q4 2021 and Q1 of 2022.   New business and renewals are strongest in those quarters as a result of   annual billing, leading to increased collections and operating cash flows at   that time of the year.

  • The company expects   between $7.22 billion and $7.23 billion in revenue in its fiscal fourth   quarter, raising its previous guidance in line with analyst forecasts.   However, earnings per share for the December quarter will fall between 72 and   73 cents, which is lower than analysts were expecting.

  • The company also   announced Bret Taylor as a co-CEO, alongside Marc Benioff who co-founded the   company in 1999. Taylor helped create Google Maps, productivity startup Quip   (which was bought by Salesforce), and he sold social networking start-up   FriendFeed to Facebook. He also spent 3 years as Facebook's technology chief.   This looks like a smart addition to Workforces leadership roster.

  • Salesforce did warn that   increased costs could appear in various ways, including in travel and   expenses which would put pressure on operating margins going forward. The   company had received massive tailwinds from the lockdowns which buoyed this   capital-light business through the pandemic. The share price has been weaker   following this set of results, as well as from the recent risk-off sentiment   thanks to the Omicron variant of COVID-19 surfacing. This may present an   opportunity to investors looking to add this stock to their portfolios.

Salesforce