Salesforce Announces Record Third Quarter Fiscal 2019 Results

Initiates FY20 revenue guidance of $15.9 Billion to $16.0 Billion

• Third quarter revenue of $3.39 Billion, up 26% year-over-year, 26% in constant currency
• Unearned revenue of $5.38 Billion, up 25% year-over-year, 26% in constant currency
• Remaining performance obligation of approximately $21.2 Billion, up 34% year-over-year
• Third quarter operating cash flow of $143 Million, up 14% year-over-year
• Initiates fourth quarter revenue guidance of $3.551 Billion to $3.561 Billion
• Raises FY19 revenue guidance to $13.23 Billion to $13.24 Billion

SAN FRANCISCO, Calif. — Nov. 27, 2018 — Salesforce (NYSE: CRM), the global leader in CRM, today announced results for its fiscal third quarter ended October 31, 2018.

“Given the strength of this quarter’s results and the incredible customer demand we are seeing, we are again raising our FY19 revenue guidance and initiating our full year fiscal 2020 revenue guidance at $16 billion at the high end of the range,” said Keith Block, co-CEO, Salesforce. “Companies across every industry, in every geography have a mandate to digitally transform their businesses and are turning to Salesforce as a strategic partner.”

“I’m thrilled that Salesforce will be the fastest enterprise software company in history to reach $16 billion in revenue,” said Marc Benioff, chairman and co-CEO, Salesforce. “I would like to thank all of our Ohana who make everything we do possible.”

Salesforce delivered the following results for its fiscal third quarter:

Revenue:

Total third quarter revenue was $3.39 billion, an increase of 26% year-over-year, and 26% in constant currency. Subscription and support revenues were $3.17 billion, an increase of 26% year-over-year. Professional services and other revenues were $224 million, an increase of 15% year-over-year.

Earnings per Share:

Third quarter GAAP diluted earnings per share was $0.13, and non-GAAP diluted earnings per share was $0.61. Mark-to-market accounting of the company’s strategic investments, required by ASU 2016-01, benefited GAAP diluted earnings per share by $0.07 and non-GAAP diluted earnings per share by $0.06.

Cash:

Cash generated from operations for the third quarter was $143 million, an increase of 14% year-over-year. Total cash, cash equivalents and marketable securities ended the third quarter at $3.45 billion.

Unearned Revenue:

Unearned revenue on the balance sheet as of October 31, 2018 was $5.38 billion, an increase of 25% year-over-year, and 26% in constant currency.

Remaining Performance Obligation:

Remaining performance obligation, representing future revenues that are under contract but have not yet been recognized, ended the third quarter at approximately $21.2 billion, an increase of 34% year-over-year. This includes approximately $300 million related to the remaining performance obligation from MuleSoft. Current remaining performance obligation, which represents the future revenues under contract expected to be recognized over the next 12 months, ended the third quarter at approximately $10.0 billion, an increase of 27% year-over-year.

As of November 27, 2018, the company is initiating revenue, earnings per share, and unearned revenue guidance for its fourth quarter of fiscal year 2019. The company is also raising its revenue guidance and earnings per share guidance, and maintaining its operating cash flow growth guidance for its full fiscal year 2019, previously provided on August 29, 2018. In addition, the company is initiating revenue guidance for its full fiscal year 2020. The guidance below does not reflect any potential future gains or losses on our strategic investment portfolio resulting from the impact of ASU 2016-01. While historically our investment portfolio has had a positive impact on our financial results, that may not be true for future periods, particularly in periods of significant market fluctuations that affect the publicly traded companies within our strategic investment portfolio. The guidance below is based on estimated GAAP tax rates that reflect the company’s currently available information, including the anticipated impact of the new Tax Act and interpretations thereof, as well as other factors and assumptions. The GAAP tax rates may fluctuate due to recent acquisitions.

The following is a per share reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share guidance for the next quarter and the full year:

For additional information regarding non-GAAP financial measures see the reconciliation of results and related explanations below.

* The company’s GAAP tax provision is expected to be approximately 13.0 percent for the three months ended January 31, 2019 and 1.2 percent for the year ended January 31, 2019. The GAAP tax rates may fluctuate due to recent acquisitions or other transactions. The company’s projected GAAP basic and diluted EPS excludes potential future impacts of ASU 2016-01.

** The company’s non-GAAP tax provision uses a long-term projected tax rate of 21.5 percent, which reflects currently available information and could be subject to change.

*** The company’s projected non-GAAP basic and diluted EPS excludes potential future impacts of ASU 2016-01.

For additional information regarding non-GAAP financial measures see the reconciliation of results and related explanations below.

Quarterly Conference Call

Salesforce will host a conference call at 2:00 p.m. (PT) / 5:00 p.m. (ET) today to discuss its financial results with the investment community. A live web broadcast of the event will be available on the Salesforce Investor Relations website at www.salesforce.com/investor. A live dial-in is available domestically at 866-901-SFDC or 866-901-7332 and internationally at 706-902-1764, passcode 7068467. A replay will be available at (800) 585-8367 or (855) 859-2056 until midnight (ET) December 26, 2018.

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