Salesforce Q4 Earnings Beat Expectations
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Salesforce.com bucked the trend of revenue and income declines that have been seen in the tech sector this earnings season, posting net income that surpassed analyst expectations in this trying quarter. However, the company said the outlook for 2009 is not as rosy as this past year.
For the fourth fiscal quarter ended January 31, 2009, Salesforce.com (NYSE: CRM) reported net income of $13.7 million, or 11 cents a share, up from $7.4 million, or 6 cents a share, a year earlier. That exceeded analyst projections of 7 cents a share, according to Reuters Estimates.
Revenue grew by 34 percent over the fourth quarter in 2007 to $289.6 million amid subscription and support-revenue growth. In November, the company provided guidance estimating earnings of 6 cents to 7 cents a share on revenue of about $284 million to $285 million.
However, it has warned that things might not be quite as rosy next year. Graham Smith, executive vice president and chief financial officer of Salesforce, said the company expects a higher attrition rate among customers for FY 2010 because of the recession. Currency fluctuations will also impact revenues, he warned during the company's earnings call today.
While cash from operations grew from $17 million in the third quarter to $76 million in Q4, it is down seven percent YoY. However, operating cash flow totaled $230 million for the full year, up 12 percent YoY.
As promised during its third quarter earnings call in November, Salesforce amended revenue and EPS guidance. Revenue for the first quarter of 2010 is projected to be between $304 million and $305 million. GAAP-diluted EPS is expected to be between 10 and 11 cents for the first quarter.
Salesforce also updated full-year FY 2010 revenue guidance. During its third quarter earnings call, Salesforce had projected Q1 revenue at between $1.35 billion and $1.36 billion. The company now pegs revenue for FY 2010 at between $1.3 billion and $1.31 billion, with GAAP-diluted EPS to be between 54 and 55 cents for the year.
"While we closed a number of large transactions in the last quarter, we've seen some deals downsized and others delayed," Smith said. "Current market uncertainty makes forecasting the scale and frequency of large transactions difficult."
Slapping the competition
No Salesforce conference call would be complete without Chairman and CEO Marc Benioff crowing about the company's achievements, especially in relation to the competition. "In face-offs with Microsoft (NASDAQ: MSFT), Oracle (NASDAQ: ORCL) and SAP (NYSE: SAP), customers moved off to the cloud in record numbers in [fiscal year] 2009," he said.
He stuck it to Oracle repeatedly, pointing out that Salesforce beat out the database giant's Siebel customer relationship management (CRM) application at several companies, including Canon and DeVry University. "Highlighting the quarter was an enterprise agreement with EMC (NYSE: EMC) for about 17,000 subscribers, replacing the maintenance fee it was paying Oracle for its Siebel structure," Benioff said.
"We saw the same kind of success against SAP," he said. Wins against Microsoft include McGraw Hill and the Academy of Art University in San Francisco, Benioff said.
Benioff also gave thanks to Steve Cakebread, Salesforce's company president and chief strategy officer, who was previously its chief financial officer. Cakebread was one of three senior Salesforce executives who left the company February 1.
"At the end of our fiscal year 09, he decided to return to the world of CFO and took a role as CFO of Xactly, a partner of ours on the AppExchange," Benioff said. "We wish Steve all the best at Xactly."
Salesforce shares closed at $28.10, up 63 cents, or 2.29 percent.