We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Salesforce (CRM) Down on Q4 Earnings Miss and Soft Q1 View
Read MoreHide Full Article
Shares of salesforce.com Inc. (CRM - Free Report) slipped 3% in afterhours trade yesterday, following lower-than-expected earnings for fourth-quarter fiscal 2017. The company provided soft revenue guidance for the forthcoming quarter.
The world’s leading CRM platform provider reported adjusted earnings (including stock-based compensation but excluding all one-time items on a proportionate tax basis) of 2 cents per share, falling short of the Zacks Consensus Estimate of 4 cents. However, the figure compared favorably with the year-ago quarters’ earnings of a penny.
On a GAAP basis, Salesforce reported loss per share of 7 cents compared with loss of 4 cents in the fourth quarter of fiscal 2016. However, on a non-GAAP basis, the company posted earnings of 28 cents per share compared with 19 cents reported in the year-ago quarter. The robust year-over-year performance was mainly driven by strong top-line growth, partially offset by increased costs as well as number of outstanding shares.
Salesforce.com Inc Price, Consensus and EPS Surprise
Although Salesforce disappointed on the earnings front, it continued to witness strong growth in revenues. The company’s revenues of $2.294 billion not only increased 26.8% year over year, but also beat the Zacks Consensus Estimate of $2.272 billion. Moreover, reported revenues came above the guided range of $2.267 billion to $2.277 billion. The improvement is primarily attributable to rapid adoption of the company’s cloud-based solutions.
Also, higher demand for the Salesforce ExactTarget Marketing Cloud platform, a part of the Salesforce1 Customer Platform, drove the year-over-year upside in revenues.
Among its business segments, revenues at Subscription and Support surged about 25.4% from the year-ago quarter to $2.111 billion. Professional Services and Other revenues jumped almost 44.7% to $183.3 million.
Geographically, the company witnessed constant currency revenue growth of 29%, 26% and 30% in the Americas, Europe and Asia Pacific, respectively, on a year-over-year basis.
Salesforce’s adjusted gross profit (including stock-based compensation but excluding amortization expenses) came in at $1.711 billion, up 23.5%. However, gross margin contracted 200 basis points (bps) to 74.6%, primarily due to increased investment in infrastructure development, including the expansion of the international data center.
Adjusted operating expenses (including stock-based compensation but excluding amortization of acquisition-related intangibles) increased 25.2% from the year-ago quarter to $1.66 billion. This was primarily because of higher investments in research and development, marketing and sales, and general and administrative activities. However, as a percentage of revenues, operating expenses contracted 90 bps to 72.4%.
Salesforce posted adjusted operating income (including stock-based compensation but excluding amortization of acquisition-related intangibles) of $50.9 million compared with the year-ago figure of $59.8 million, while operating margin contracted 110 bps to 2.2%. The year-over-year contractions in adjusted operating income and margin were mainly due to higher cost of revenues, which were partially offset by efficient operating expenses management.
Balance Sheet & Cash Flow
Salesforce exited fiscal 2017 with cash and cash equivalents, and marketable securities of $2.209 billion, compared with $1.201 billion in the previous quarter. Accounts receivable were $3.197 billion compared with $1.281 million at the end of third-quarter fiscal 2017. Total deferred revenue, as of Jan 31, 2017, was $5.54 billion, up 29% on a year-over-year basis.
During the fiscal, the company generated record operating cash flow of $2.162 billion. This is the first time in the history of the company that it has generated over $2 billion of operating cash flow in a fiscal year. Moreover, Salesforce generated free cash flow of $1.698 billion in fiscal 2017.
Guidance
The company provided soft guidance for the first quarter of fiscal 2018. For the quarter, the company anticipates revenues in a range of $2.34 billion to $2.35 billion (mid-point: $2.345 billion), representing a year-over-year increase of 22% to 23%. However, the guided range is lower than the Zacks Consensus Estimate of $2.37 billion. Further, the company expects non-GAAP earnings per share in a band of 25–26 cents. On a GAAP basis, it projects loss per share in a range of 2 cents to 3 cents.
However, the company raised its revenue outlook for fiscal 2018. Revenues are now anticipated to come in a range of $10.15 billion to $10.20 billion (mid-point $10.175 billion), up from the previous projection of $10.10 billion to $10.15 billion (mid-point $10.125 billion), representing 21–22% year-over-year increase. Moreover, it was above the Zacks Consensus Estimate of $10.14 billion.
By completing this target, the company will achieve $10 billion mark in revenues faster than any other enterprise software company.
Furthermore, Salesforce projects non-GAAP earnings to come between $1.27 and $1.29, while GAAP earnings are expected to be in a range of 5 cents to 7 cents.
Our Take
Salesforce reported mixed results for the fourth quarter wherein its top-line came ahead of the Zacks Consensus Estimate but the bottom-line fell short of the same. Nonetheless, although, Salesforce disappointed on the earnings front, it will continue to witness strong growth in revenues. The robust revenues were primarily backed by growth across all its business segments and the Salesforce ExactTarget Marketing Cloud platform.
Going ahead, the company’s revenue outlook for the forthcoming quarter is somewhat disappointing. But we are encouraged by the upbeat revenue guidance for fiscal 2018. We are also encouraged by the fact that the company will achieve $10 billion in sales in fiscal 2018.
Looking at the last quarter’s mixed results and decent outlook for the forthcoming quarter and fiscal 2018, we believe the stock may remain highly volatile during today’s trading session. Notably, the stock has outperformed the Zacks categorized Computer-Software industry in the year-to-date period. Salesforce has returned 16.8% during the said period compared with the industry’s gain of 8%.
The higher number of deal wins and geographical contributions during the quarter were encouraging. We consider the rapid adoption of Salesforce1 Customer Platform to be a positive. Overall, the company’s diverse cloud offerings and considerable spending on digital marketing remain catalysts. Moreover, strategic acquisitions and the resultant synergies are expected to benefit over the long run.
In view of increasing customer adoption and satisfactory performances, market research firm Gartner acknowledged Salesforce as the leading social CRM solution provider. We believe that the rapid adoption of Salesforce’s platforms indicates solid growth opportunities in the ever-growing cloud computing segment.
Although the company is growing reasonably in the cloud market, growth prospects have been rationalized to a considerable extent due to intensifying competition from International Business Machines (IBM - Free Report) , Oracle Corp. (ORCL - Free Report) and SAP SE (SAP - Free Report) . Moreover, currency fluctuations and stepped-up investments in international expansion and data centers could impact near-term results.
Everything You Need to Know About Snapchat BEFORE It Goes Public
You may be curious about the buzz surrounding Snap Inc.'s IPO on March 2. With the company expected to be valued around $22 billion, it is expected to be the largest IPO since 2014. But should you snap up this tech stock on Day 1?
In the 2017 IPO Watch List, you'll get an inside look at Snap's exciting prospects and potential challenges. You'll also learn about 4 other exciting tech companies with
jaw-dropping growth. Each could go public in the coming months.
Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the latest scoop. Download this IPO Watch List today for free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Salesforce (CRM) Down on Q4 Earnings Miss and Soft Q1 View
Shares of salesforce.com Inc. (CRM - Free Report) slipped 3% in afterhours trade yesterday, following lower-than-expected earnings for fourth-quarter fiscal 2017. The company provided soft revenue guidance for the forthcoming quarter.
The world’s leading CRM platform provider reported adjusted earnings (including stock-based compensation but excluding all one-time items on a proportionate tax basis) of 2 cents per share, falling short of the Zacks Consensus Estimate of 4 cents. However, the figure compared favorably with the year-ago quarters’ earnings of a penny.
On a GAAP basis, Salesforce reported loss per share of 7 cents compared with loss of 4 cents in the fourth quarter of fiscal 2016. However, on a non-GAAP basis, the company posted earnings of 28 cents per share compared with 19 cents reported in the year-ago quarter. The robust year-over-year performance was mainly driven by strong top-line growth, partially offset by increased costs as well as number of outstanding shares.
Salesforce.com Inc Price, Consensus and EPS Surprise
Salesforce.com Inc Price, Consensus and EPS Surprise | Salesforce.com Inc Quote
Quarter in Detail
Although Salesforce disappointed on the earnings front, it continued to witness strong growth in revenues. The company’s revenues of $2.294 billion not only increased 26.8% year over year, but also beat the Zacks Consensus Estimate of $2.272 billion. Moreover, reported revenues came above the guided range of $2.267 billion to $2.277 billion. The improvement is primarily attributable to rapid adoption of the company’s cloud-based solutions.
Also, higher demand for the Salesforce ExactTarget Marketing Cloud platform, a part of the Salesforce1 Customer Platform, drove the year-over-year upside in revenues.
Among its business segments, revenues at Subscription and Support surged about 25.4% from the year-ago quarter to $2.111 billion. Professional Services and Other revenues jumped almost 44.7% to $183.3 million.
Geographically, the company witnessed constant currency revenue growth of 29%, 26% and 30% in the Americas, Europe and Asia Pacific, respectively, on a year-over-year basis.
Salesforce’s adjusted gross profit (including stock-based compensation but excluding amortization expenses) came in at $1.711 billion, up 23.5%. However, gross margin contracted 200 basis points (bps) to 74.6%, primarily due to increased investment in infrastructure development, including the expansion of the international data center.
Adjusted operating expenses (including stock-based compensation but excluding amortization of acquisition-related intangibles) increased 25.2% from the year-ago quarter to $1.66 billion. This was primarily because of higher investments in research and development, marketing and sales, and general and administrative activities. However, as a percentage of revenues, operating expenses contracted 90 bps to 72.4%.
Salesforce posted adjusted operating income (including stock-based compensation but excluding amortization of acquisition-related intangibles) of $50.9 million compared with the year-ago figure of $59.8 million, while operating margin contracted 110 bps to 2.2%. The year-over-year contractions in adjusted operating income and margin were mainly due to higher cost of revenues, which were partially offset by efficient operating expenses management.
Balance Sheet & Cash Flow
Salesforce exited fiscal 2017 with cash and cash equivalents, and marketable securities of $2.209 billion, compared with $1.201 billion in the previous quarter. Accounts receivable were $3.197 billion compared with $1.281 million at the end of third-quarter fiscal 2017. Total deferred revenue, as of Jan 31, 2017, was $5.54 billion, up 29% on a year-over-year basis.
During the fiscal, the company generated record operating cash flow of $2.162 billion. This is the first time in the history of the company that it has generated over $2 billion of operating cash flow in a fiscal year. Moreover, Salesforce generated free cash flow of $1.698 billion in fiscal 2017.
Guidance
The company provided soft guidance for the first quarter of fiscal 2018. For the quarter, the company anticipates revenues in a range of $2.34 billion to $2.35 billion (mid-point: $2.345 billion), representing a year-over-year increase of 22% to 23%. However, the guided range is lower than the Zacks Consensus Estimate of $2.37 billion. Further, the company expects non-GAAP earnings per share in a band of 25–26 cents. On a GAAP basis, it projects loss per share in a range of 2 cents to 3 cents.
However, the company raised its revenue outlook for fiscal 2018. Revenues are now anticipated to come in a range of $10.15 billion to $10.20 billion (mid-point $10.175 billion), up from the previous projection of $10.10 billion to $10.15 billion (mid-point $10.125 billion), representing 21–22% year-over-year increase. Moreover, it was above the Zacks Consensus Estimate of $10.14 billion.
By completing this target, the company will achieve $10 billion mark in revenues faster than any other enterprise software company.
Furthermore, Salesforce projects non-GAAP earnings to come between $1.27 and $1.29, while GAAP earnings are expected to be in a range of 5 cents to 7 cents.
Our Take
Salesforce reported mixed results for the fourth quarter wherein its top-line came ahead of the Zacks Consensus Estimate but the bottom-line fell short of the same. Nonetheless, although, Salesforce disappointed on the earnings front, it will continue to witness strong growth in revenues. The robust revenues were primarily backed by growth across all its business segments and the Salesforce ExactTarget Marketing Cloud platform.
Going ahead, the company’s revenue outlook for the forthcoming quarter is somewhat disappointing. But we are encouraged by the upbeat revenue guidance for fiscal 2018. We are also encouraged by the fact that the company will achieve $10 billion in sales in fiscal 2018.
Looking at the last quarter’s mixed results and decent outlook for the forthcoming quarter and fiscal 2018, we believe the stock may remain highly volatile during today’s trading session. Notably, the stock has outperformed the Zacks categorized Computer-Software industry in the year-to-date period. Salesforce has returned 16.8% during the said period compared with the industry’s gain of 8%.
The higher number of deal wins and geographical contributions during the quarter were encouraging. We consider the rapid adoption of Salesforce1 Customer Platform to be a positive. Overall, the company’s diverse cloud offerings and considerable spending on digital marketing remain catalysts. Moreover, strategic acquisitions and the resultant synergies are expected to benefit over the long run.
In view of increasing customer adoption and satisfactory performances, market research firm Gartner acknowledged Salesforce as the leading social CRM solution provider. We believe that the rapid adoption of Salesforce’s platforms indicates solid growth opportunities in the ever-growing cloud computing segment.
Although the company is growing reasonably in the cloud market, growth prospects have been rationalized to a considerable extent due to intensifying competition from International Business Machines (IBM - Free Report) , Oracle Corp. (ORCL - Free Report) and SAP SE (SAP - Free Report) . Moreover, currency fluctuations and stepped-up investments in international expansion and data centers could impact near-term results.
Salesforce currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Everything You Need to Know About Snapchat BEFORE It Goes Public
You may be curious about the buzz surrounding Snap Inc.'s IPO on March 2. With the company expected to be valued around $22 billion, it is expected to be the largest IPO since 2014. But should you snap up this tech stock on Day 1?
In the 2017 IPO Watch List, you'll get an inside look at Snap's exciting prospects and potential challenges. You'll also learn about 4 other exciting tech companies with
jaw-dropping growth. Each could go public in the coming months.
Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the latest scoop. Download this IPO Watch List today for free >>