SalesForce ($CRM) reports QE April 2012 financial results on Thursday, May 17, after market close.
Oh God, it’s time for CEO Mark Benioff’s quarterly dog and pony show, followed by softball pitches from his devoted analysts so Benioff can pretend it is a home run derby. Please be reminded the quarterly earnings conference call is for entertainment purposes only. If you tire of Las Vegas comedy shows, attend the annual stockholders camp meeting on June 7 in San Francisco. Chuckles and joy will abound!
SalesForce has already provided guidance for a GAAP loss per share of -$0.19 to -$0.18 to be reported. This is after 3 consecutive quarters of GAAP loss per share of -$0.03. If you utilize the Mark Benioff Financial Reporting Method and take out some hefty expenses, including his, you can get to a CRM projected non-GAAP EPS of +$0.33 to +$0.34.
The Benioff Method “excludes the effects of stock-based compensation expense, expected to be approximately $79 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $21 million, and net noncash interest expense related to the convertible senior notes, expected to be approximately $5 million”. In other words, Benioff prefers to exclude his and others stock compensation when he tells you how much money SalesForce is making. If he included those pesky costs, he’d have to tell you how much money SalesForce is losing and surely no one wants that downer news.
The Case of the Missing Customer Count: I’m still waiting for one of Benioff’s fanatic analysts to ask about this: “Your Eminence, you’ve stopped touting the number of customers and related quarterly increase therein since the quarter ended October 2011. Exactly how many customers does SalesForce have?” Maybe this time the customer count will have increased enough to be reported. Rest assured it will be if there is growth or ignored if not so good.
Perhaps you think I am too tough on our dear Mr. Benioff and his analyst disciples. As noted in previous posts, I think he is a cloud visionary and evangelist plus a consummate promoter, but translating this to financial performance to maximize shareholder wealth (ours, not his) is not really part of his divine dispensation. Shareholders, other than him and his team, are bothersome in his grander scheme. The gist of CEO Benioff’s spiel is increasing revenues, beating Oracle, promoting his tent revivals (conferences), and a general ‘onwards and upwards forevermore’ tone including ultimately $10B annual revenues. So be it. Benioff’s enthusiasm is contagious, you cheer for him and hope he can fulfill his vision – but would rather invest your money long-term elsewhere. If you do invest long-term with Benioff, consider a portion a tithe. Maybe you can get a charitable contribution tax deduction.
Estimated QE April 2012 Earnings per Share (Non-GAAP)
Yahoo Finance Estimates: $0.34 avg, $0.32 low, $0.37 high, 38 analysts
Prior Quarter: $0.43
Prior Year: $0.28
Non-GAAP Outlook: $0.33 to $0.34
GAAP Outlook: ($0.19) to ($0.18) loss
SalesForce.com (CRM) Reports 5th Consecutive Operating Loss: Loss per Share -$0.03
SalesForce.com (CRM) Prelude QE January 2012 How do you describe this dog and pony show of questionable financial performance, hyped press releases, and “locker room talk” earnings calls? CEO Mark Benioff may be a cloud visionary and evangelist plus a consummate promoter, but translating this to financial performance and maximizing shareholder wealth has not been part of the vision recently. The gist of CEO Benioff’s spiel is increasing revenues, beating Oracle, promoting his conferences, and a general onwards and upwards forevermore tone including ultimately $10B annual revenues! Benioff’s enthusiasm is contagious, you cheer for him, and hope he can fulfill his vision but would rather invest your money long-term elsewhere. The 5 most recent quarters have been not only been unimpressive and each quarter increases investor concern and uncertainty. The past 5 quarters net total GAAP EPS has been -$0.01 on GAAP net losses of -$10.89 million. In addition, the GAAP operating losses have been -$35.48 million the past 5 quarters.
SalesForce.com (CRM) Summary QE January 2012 (GAAP) GAAP financial performance continues poor, even though rebounding QoQ. The outlook for the next quarter is a drop to record operating and net losses. Revenues continue increasing as return on assets continue decreasing to the current dismal, and negative, -0.63%. A 3rd consecutive quarterly GAAP net loss and 5 consecutive quarterly GAAP operating losses have been reported. Cash flow per share is a positive for CRM, a multi-year, if not all-time, high of $1.76. Financial position overall remains adequate, but unless financial performance can be improved will deteriorate further. The stock is priced for a stellar future performance that does not appear to be on the horizon. Of even more concern is CEO Marc Benioff typically not commenting on poor financial performance but instead pumping the annual DreamForce meeting and wanting us all to be there. Further, there is The Mystery of the Unknown Customers Headcount. There were 104,000 customers in the QE July 2011 but this quarterly data has stopped being reported. Presumably this means the customer count decreased and was omitted. Accounts receivable and deferred revenue both increased $300M+ QoQ to all-time highs, which indicates more of a financing operation.
SalesForce.com (CRM) Income Statement QE January 2012 (GAAP) SalesForce.com (CRM) reported total revenues of $631.91M, a net loss of -$6.38M, and a loss per share of -$0.03. From the prior QE October 2011, these were +8.16%, +70.75%, and flat at 0.00%, respectively. From the prior year QE January 2011, these were +38.31%, -137.52%, and -137.50%, respectively. Gross margin, operating and net margin improved QoQ but deteriorated YoY to 78.42%, -1.01%, and -0.65%, respectively. Cash flow from operations was a multi-year, if not all-time, high of $1.76. The operating expense ratio of 79.43% continues extremely high. Subscriptions and Support were 94% of total revenues.
SalesForce.com (CRM) Balance Sheet QE January 2012 (GAAP) SalesForce.com’s (CRM) total assets exploded +19% QoQ to a record $4.16B. As a result, the capital to assets ratio is a multi-year low 38%, exclusive of “temporary equity” of $79M. The current ratio is a more liquid 40% and does not include $669M in noncurrent marketable securities. SalesForce.com (CRM) is liquid with reasonable capital. The return on assets peaked in QE October 2009 at 5.13% and has declined for 9 consecutive quarters the current, dismal -0.63%. The $1.45B in cash, cash equivalents, and marketable securities (current and noncurrent), are 35% of total assets of $3.51B and pulling down the ROA as net losses continue.
SalesForce.com (CRM) Outlook QE April 2012 (GAAP) Revenue for the company’s first fiscal quarter is projected to be in the range of $673 million to $678 million, an increase of 33% to 34%, year-over-year. GAAP net loss per share is expected to be in the range of ($0.19) to ($0.18), while diluted non-GAAP EPS is expected to be in the range of $0.33 to $0.34.
SalesForce.com (CRM) Financial Performance by the Quarters
SalesForce.com (CRM) GAAP Earnings (Loss) per Share Current Loss per Share of -$0.03 is the same QoQ, down -138% YoY, the 3rd consecutive quarterly loss per share, and continues the multi-year low. This is the 4th consecutive quarter EPS has been at or below $0.00. The EPS chart average is +$0.08.
SalesForce.com (CRM) GAAP Cash Flow per Share Current Cash Flow per Share of $1.76 is a multi-year, if not all-time, high. The CFS chart average is $0.72.
SalesForce.com (CRM) Total Revenues and Net Income Current Total Revenues of $631.91M are yet another record and have consistently grown. SalesForce.com guidance indicates even higher total revenues in the future. Current Net Loss of -$4.08M is a rebound from the prior quarter multi-year low of -$13.94M, the 3rd consecutive net loss, and a cumulative -$22.29M net losses in the past 3 quarters.
SalesForce.com (CRM) Gross Margin, Operating Margin, and Net Margin Current Gross Margin of 78.42% is higher QoQ, lower YoY, and below the chart average 79.72%. Current Operating Margin of -1.01% is higher QoQ, lower YoY, been negative for 5 consecutive quarters, is well below the chart average +3.99%, and is well below the peaks of 9%+ in 2009. Current Net Margin of -0.65% is higher QoQ, lower YoY, been negative 3 consecutive quarters, is well below the chart average +3.01%, and well below the peaks of 2009.
SalesForce.com (CRM) Return on Assets SalesForce.com has a historically low ROA for a technology company and doesn’t have an effective deployment of assets. The ROA peaked in QE October 2009 at 5.13% and has declined each quarter since, for 9 consecutive quarters, to the current Return on Assets of a dismal, and negative, -0.63%. Besides the ongoing net losses, the $1.45B in cash, cash equivalents, and marketable securities, which are 35% of the total assets, are pulling down the ROA. The ROA chart average is 3.12%.
SalesForce.com (CRM) Growth Rates Total Revenues Growth YoY of +38.31% continues an extraordinary uptrend and is above the chart average +29.71%. Total revenues have increased every quarter on the chart, ranging from +19.55% to +43.40%. Earnings per Share Growth YoY of -137.50% YoY is the opposite story and has deteriorated into a significant downtrend decreasing for 8 consecutive quarters. The EPSG chart average is -7.20%.
SalesForce.com (CRM) Regional Revenues For the current quarter, Americas revenues were $436M and 69% of total revenues. Europe was $108M and 17%, while Asia Pacific was $87M and 14%. The overall trend had been higher growth Americas with slower growth in Europe and Asia Pacific.