Salesforce.com Reports Earnings: A Solid Beat And It Has Raised Its Guidance For The Year

Salesforce.com reported its fiscal 2015 second quarter today: a solid beat on both profits and sales.

Non-GAAP earnings per share were $0.13, which beats analysts expectations by $0.01. Revenue was $1.32 billion, up 38% over the same quarter last year. That beat analysts expectations, too, of $1.29 billion.

The company also raised guidance on sales for the year (its fiscal year ends January, 2015). It expects to bring in $5.34 billion to $5.37 billion. Analysts had been projecting $5.34 billion. Salesforce expects EPS of $0.50-$0.52. Analysts were projecting $0.51.

Salesforce reported a net loss of $61.1 million, compared with a profit of $76.6 million a year ago. The company has been spending on acquisitions, building massive new buildings in San Francisco, Paris and elsewhere and hiring new employees.

Here's the press release:

Salesforce.com Announces Fiscal 2015 Second Quarter Results

- Revenue of $1.32 Billion, up 38% Year-Over-Year
- Deferred Revenue of $2.35 Billion, up 31% Year-Over-Year
- Unbilled Deferred Revenue of Approximately $5.0 Billion, up 32% Year-Over-Year
- Operating Cash Flow of $246 Million, up 34% Year-Over-Year
- Raises FY15 Revenue Guidance by $30 million to $5.34 - $5.37 Billion

Revenue: Total Q2 revenue was $1.32 billion, an increase of 38% year-over-year. Subscription and support revenues were $1.23 billion, an increase of 37% year-over-year. Professional services and other revenues were $86 million, an increase of 58% year-over-year.

Earnings per Share: Q2 diluted GAAP loss per share was ($0.10), and diluted non-GAAP earnings per share was $0.13. The company's non-GAAP results exclude the effects of $142 million in stock-based compensation expense, $36 million in amortization of purchased intangibles, $10 million in net non-cash interest expense related to the company's convertible senior notes, including the related loss on conversions of our convertible 0.75% senior notes, due 2015, and is based on a projected long-term non-GAAP tax rate of 36.5%. GAAP EPS calculations are based on a basic share count of approximately 617 million shares. Non-GAAP EPS calculations are based on approximately 648 million diluted shares outstanding during the quarter, including approximately 20 million shares associated with the company's convertible 0.75% senior notes due 2015.

Cash: Cash generated from operations for the fiscal second quarter was $246 million, an increase of 34% year-over-year. Total cash, cash equivalents and marketable securities finished the quarter at $1.67 billion.

Deferred Revenue: Deferred revenue on the balance sheet as of July 31, 2014 was $2.35 billion, an increase of 31% year-over-year. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the second quarter at approximately $5.0 billion, up 32% year-over-year.

As of August 21, 2014, salesforce.com is initiating revenue and EPS guidance for its third quarter of fiscal year 2015. In addition, the company is raising its full fiscal year 2015 revenue guidance and its EPS guidance previously provided on May 20, 2014.

Q3 FY15 Guidance: Revenue for the company's third fiscal quarter is projected to be in the range of $1.365 billion to $1.370 billion, an increase of 27% year-over-year.

GAAP loss per share is expected to be in the range of ($0.13) to ($0.12), while diluted non-GAAP EPS is expected to be in the range of $0.12 to $0.13. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $147 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $36 million, and net non-cash interest expense related to the convertible senior notes, including loss on conversions, expected to be approximately $10 million. EPS estimates assume a GAAP tax rate of approximately negative 30%, which reflects the estimated quarterly change in the tax valuation allowance, and a projected long-term non-GAAP tax rate of 36.5%. Note that the tax valuation allowance adds complexity, causing potential volatility in our forecasted GAAP tax rate. The GAAP EPS calculation assumes an average basic share count of approximately 630 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 664 million shares.

Full Year FY15 Guidance: Revenue for the company's full fiscal year 2015 is projected to be in the range of $5.340 billion to $5.370 billion, an increase of 31% to 32% year-over-year.

GAAP loss per share is expected to be in the range of ($0.48) to ($0.46) while diluted non-GAAP EPS is expected to be in the range of $0.50 to $0.52. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $580 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $151 million, and net non-cash interest expense related to the convertible senior notes, including loss on conversions, expected to be approximately $47 million. EPS estimates assume a GAAP tax rate of approximately negative 19%, which reflects the estimated annual change in the tax valuation allowance, and a projected long-term non-GAAP tax rate of 36.5%. Note that the tax valuation allowance adds complexity, causing potential volatility in our forecasted GAAP tax rate. The GAAP EPS calculation assumes an average basic share count of approximately 624 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 657 million shares.

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