Wednesday, October 22, 2014 Last update: 9:03 PM
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Salesforce.com Announces Fiscal 2015 First Quarter Results

Companies mentioned in this article: Salesforce.com

SAN FRANCISCO, May 20, 2014 /PRNewswire/ -- Salesforce.com (NYSE: CRM), the world's #1 CRM platform (http://www.salesforce.com/), today announced results for its fiscal first quarter ended April 30, 2014.

http://photos.prnewswire.com/prnvar/20130612/SF30598LOGO

"Salesforce.com had a strong start to its fiscal year. We delivered 37% year-over-year growth in revenue, and 67% year-over-year growth in operating cash flow in the first quarter," said Marc Benioff, Chairman and CEO, salesforce.com. "Salesforce.com continues to be the #1 CRM platform, and is the fastest growing top ten software company in the world."

Salesforce.com delivered the following results for its fiscal first quarter:

Revenue: Total Q1 revenue was $1.23 billion, an increase of 37% year-over-year. Subscription and support revenues were $1.15 billion, an increase of 36% year-over-year. Professional services and other revenues were $79 million, an increase of 58% year-over-year.

Earnings per Share: Q1 diluted GAAP loss per share was ($0.16), and diluted non-GAAP earnings per share was $0.11. The company's non-GAAP results exclude the effects of $131 million in stock-based compensation expense, $44 million in amortization of purchased intangibles, $11 million in net non-cash interest expense related to the company's convertible senior notes, and $9 million related to the 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 613 million shares. Non-GAAP EPS calculations are based on approximately 648 million diluted shares outstanding during the quarter, including approximately 22 million shares associated with the company's convertible 0.75% senior notes due 2015.

Cash: Cash generated from operations for the fiscal first quarter was $473 million, an increase of 67% year-over-year. Total cash, cash equivalents and marketable securities finished the quarter at $1.53 billion.

Deferred Revenue: Deferred revenue on the balance sheet as of April 30, 2014 was $2.32 billion, an increase of 34% year-over-year. Current deferred revenue increased by 37% year-over-year to $2.29 billion. Non-current deferred revenue decreased by 38% year-over-year to $36 million. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the first quarter at approximately $4.80 billion, up 33% year-over-year.

As of May 20, 2014, salesforce.com is initiating revenue and EPS guidance for its second 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 February 27, 2014.

Q2 FY15 Guidance: Revenue for the company's second fiscal quarter is projected to be in the range of $1.285 billion to $1.290 billion, an increase of 34% to 35% 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 $0.11 to $0.12. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $139 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, expected to be approximately $10 million. EPS estimates assume a GAAP tax rate of approximately negative 36%, 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 618 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 655 million shares.

Full Year FY15 Guidance: Revenue for the company's full fiscal year 2015 is projected to be in the range of $5.30 billion to $5.34 billion, an increase of 30% to 31% year-over-year.

GAAP loss per share is expected to be in the range of ($0.49) to ($0.47) while diluted non-GAAP EPS is expected to be in the range of $0.49 to $0.51. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $578 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $149 million, net non-cash interest expense related to the convertible senior notes, expected to be approximately $38 million, and loss on conversions of the convertible senior notes, expected to be approximately $9 million. EPS estimates assume a GAAP tax rate of approximately negative 21%, 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 622 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 658 million shares.

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




                                  Fiscal 2015
                                  -----------

                                       Q2                  FY2015
                                      ---                  ------


    GAAP EPS Range*           ($0.13) - ($0.12)     ($0.49) - ($0.47)

    Plus

    Amortization of purchased
     intangibles                             $0.05                  $0.23

    Stock-based expense                      $0.21                  $0.88

    Amortization of debt
     discount, net                           $0.02                  $0.07

    Less

    Income tax effects and
     adjustments**                          $(0.04)                $(0.20)
                                            ------                 ------

    Non-GAAP diluted EPS             $0.11 - $0.12          $0.49 - $0.51


    Shares used in computing
     basic net income per
     share (millions)                          618                    622

    Shares used in computing
     diluted net income per
     share (millions)                          655                    658


    * For Q2 & FY15 GAAP EPS loss,
     basic number of shares used for
     calculation.

    ** Beginning in FY15, the company's
     non-GAAP tax provision uses a
     long-term projected tax rate of
     36.5%.

Quarterly Conference Call

Salesforce.com will host a conference call to discuss its fiscal first quarter results at 2:00 p.m. Pacific Time today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations Web site: http://www.salesforce.com/investor. In addition, an archive of the audiocast can be accessed through the same link. Participants who choose to call in to the conference call can do so by dialing domestically 866-901-SFDC or 866-901-7332 and internationally at +1 706-902-1764, passcode 35765331. A replay will be available at 800-585-8367 or +1 855-859-2056, passcode 35765331, until midnight (Eastern Time) June 27, 2014.

About salesforce.com

Salesforce.com is the world's largest provider of customer relationship management (CRM) software. For more information about salesforce.com (NYSE: CRM), visit: www.salesforce.com.

Any unreleased services or features referenced in this or other press releases or public statements are not currently available and may not be delivered on time or at all. Customers who purchase salesforce.com applications should make their purchase decisions based upon features that are currently available. Salesforce.com has headquarters in San Francisco, with offices in Europe and Asia, and trades on the New York Stock Exchange under the ticker symbol "CRM." For more information please visit http://salesforce.com or call 1-800-NO-SOFTWARE.

Non-GAAP Financial Measures: This press release includes information about non-GAAP EPS and non-GAAP tax rates (collectively the "non-GAAP financial measures"). Non-GAAP EPS estimates exclude the impact of the following non-cash items: stock-based compensation, amortization of acquisition-related intangibles, the net amortization of debt discount on the company's convertible senior notes, and gains/losses on conversions of the company's convertible senior notes, as well as income tax adjustments. The purpose of the non-GAAP tax rate is to quantify the excluded tax adjustments and the tax consequences associated with the above excluded non-cash expense items. The company reports a projected long-term tax rate to eliminate the effects of non-recurring and period specific items which can vary in size and frequency. This projected long-term non-GAAP tax rate could be subject to change in the future for a variety of reasons, for example, significant changes in the company's geographic earnings mix including acquisition activity, or fundamental tax law changes in major jurisdictions where the company operates. These non-GAAP financial measures are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles. The method used to produce non-GAAP financial measures is not computed according to GAAP and may differ from the methods used by other companies. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the company's consolidated financial statements prepared in accordance with GAAP.

The primary purpose of these non-GAAP measures is to provide supplemental information that may prove useful to investors who wish to consider the impact of certain non-cash items on the company's operating performance. Non-cash stock-based compensation, amortization of acquisition-related intangible assets, the net amortization of debt discount on the company's convertible senior notes, and gains/losses on conversions of the company's convertible senior notes, are being excluded from the company's FY15 financial results because the decisions which gave rise to these expenses were not made to increase revenue in a particular period, but were made for the company's long-term benefit over multiple periods. While strategic decisions, such as those related to the issuance of equity awards, resulting in stock-based compensation, the acquisitions of companies, or the issuance of convertible senior notes, are made to further the company's long-term strategic objectives and impact the company's statement of operations under GAAP measures, these items affect multiple periods and management is not able to change or affect these items in any particular period. As such, supplementing GAAP disclosure with non-GAAP disclosure using the non-GAAP measures provides management with an additional view of operational performance by excluding expenses that are not directly related to performance in any particular period, and management uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the company's performance.

In addition, the majority of the company's industry peers report non-GAAP operating results that exclude certain non-cash or non-recurring items, such as certain one-time charges. As significant unusual or discrete events occur, such as the changes in valuation allowance against the company's deferred tax assets, the results may be excluded in the period in which the events occur. Management believes that the provision of supplemental non-GAAP information will enable a more complete comparison of the company's relative performance.

Specifically, management is excluding the following items from its non-GAAP EPS for Q1 and its non-GAAP estimates for Q2 and FY15:

    --  Stock-Based Expenses: The company's compensation strategy includes the
        use of stock-based compensation to attract and retain employees and
        executives. It is principally aimed at aligning their interests with
        those of our stockholders and at long-term employee retention, rather
        than to motivate or reward operational performance for any particular
        period. Thus, stock-based compensation expense varies for reasons that
        are generally unrelated to operational decisions and performance in any
        particular period.
    --  Amortization of Purchased Intangibles: The company views amortization of
        acquisition-related intangible assets, such as the amortization of the
        cost associated with an acquired company's research and development
        efforts, trade names, customer lists and customer relationships, as
        items arising from pre-acquisition activities determined at the time of
        an acquisition. While these intangible assets are continually evaluated
        for impairment, amortization of the cost of purchased intangibles is a
        static expense, one that is not typically affected by operations during
        any particular period.
    --  Amortization of Debt Discount: Under GAAP, certain convertible debt
        instruments that may be settled in cash (or other assets) on conversion
        are required to be separately accounted for as liability (debt) and
        equity (conversion option) components of the instrument in a manner that
        reflects the issuer's non-convertible debt borrowing rate. Accordingly,
        for GAAP purposes we are required to recognize imputed interest expense
        on the company's $575 million of convertible senior notes due 2015 that
        were issued in a private placement in January 2010 and the company's
        $1.15 billion of convertible senior notes due 2018 that were issued in a
        private placement in March 2013. The imputed interest rates were
        approximately 5.9% for the convertible notes due 2015 and approximately
        2.5% for the convertible notes due 2018, while the actual coupon
        interest rates of the notes were 0.75% and 0.25%, respectively. The
        difference between the imputed interest expense and the coupon interest
        expense, net of the interest amount capitalized, is excluded from
        management's assessment of the company's operating performance because
        management believes that this non-cash expense is not indicative of
        ongoing operating performance. Management believes that the exclusion of
        the non-cash interest expense provides investors an enhanced view of the
        company's operational performance.
    --  Non-Cash Gains/Losses on Conversion of Debt: Upon settlement of the
        company's convertible senior notes, we attribute the fair value of the
        consideration transferred to the liability and equity components of the
        convertible senior notes. The difference between the fair value of
        consideration attributed to the liability component and the carrying
        value of the liability as of settlement date is recorded as a non-cash
        gain or loss on the statement of operations. Management believes that
        the exclusion of the non-cash gain/loss provides investors an enhanced
        view of the company's operational performance. Beginning in the second
        quarter of FY15, this will be included in the Amortization of Debt
        Discount line.
    --  Income Tax Effects and Adjustments: Beginning in the first quarter of
        FY15, the Company computes and provides a fixed long-term projected
        non-GAAP tax rate. When projecting this long-term rate, the company
        excluded the income tax effects of the non-cash items described above.
        Additionally, the company evaluated its current long-term projections,
        current tax structure and other factors such as the company's existing
        tax positions in various jurisdictions and key legislations in major
        jurisdictions where the company operates. The company intends to
        re-evaluate this long-term rate only on an annual basis. This long-term
        non-GAAP tax rate eliminates the effects of non-recurring and period
        specific items which can vary in size and frequency, and will provide
        better consistency among the interim reporting periods. Examples of the
        non-recurring and period specific items include but are not limited to
        changes in the valuation allowance related to deferred tax assets,
        effects resulting from acquisitions, and unusual or infrequently
        occurring items. This long-term rate could be subject to change for a
        variety of reasons, for example, significant changes in the geographic
        earnings mix including acquisition activity, or fundamental tax law
        changes in major jurisdictions where the company operates.

"Safe harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements about our financial results, which may include expected GAAP and non-GAAP financial and other operating results for the fiscal second quarter and the full fiscal year of 2015, including revenue, net income (loss), EPS, expected revenue run rate, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles and debt discount, non-cash interest expense and gains/losses on the conversions of debt, shares outstanding, and changes in deferred tax asset valuation allowances. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the company's results could differ materially from the results expressed or implied by the forward-looking statements we make.

The risks and uncertainties referred to above include - but are not limited to - risks associated with possible fluctuations in the company's financial and operating results; the company's rate of growth and anticipated revenue run rate, including the company's ability to convert deferred revenue and unbilled deferred revenue into revenue and, as appropriate, cash flow, and the continued growth and ability to maintain deferred revenue and unbilled deferred revenue; errors, interruptions or delays in the company's service or the company's Web hosting; breaches of the company's security measures; the financial impact of any previous and future acquisitions, including ExactTarget; the nature of the company's business model; the company's ability to continue to release, and gain customer acceptance of, new and improved versions of the company's service; successful customer deployment and utilization of the company's existing and future services; changes in the company's sales cycle; competition; various financial aspects of the company's subscription model; unexpected increases in attrition or decreases in new business; the company's ability to realize benefits from strategic partnerships; the emerging markets in which the company operates; unique aspects of entering or expanding in international markets, the company's ability to hire, retain and motivate employees and manage the company's growth; changes in the company's customer base; technological developments; regulatory developments; litigation related to intellectual property and other matters, and any related claims, negotiations and settlements; unanticipated changes in the company's effective tax rate; factors affecting the company's outstanding convertible notes and term loan; fluctuations in the number of shares we have outstanding and the price of such shares; foreign currency exchange rates; collection of receivables; interest rates; factors affecting our deferred tax assets and ability to value and utilize them, including the timing of when we once again achieve profitability on a pre-tax basis; the potential negative impact of indirect tax exposure; the risks and expenses associated with the company's real estate and office facilities space; and general developments in the economy, financial markets, and credit markets.

Further information on these and other factors that could affect the company's financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time, including the company's Form 10-Q that will be filed for the first quarter ended April 30, 2014, and our Form 10-K filed for the fiscal year ended January 31, 2014. These documents are available on the SEC Filings section of the Investor Information section of the company's website at www.salesforce.com/investor.

Salesforce.com, inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

© 2014 salesforce.com, inc. All rights reserved. Salesforce, Sales Cloud, Service Cloud, ExactTarget Marketing Cloud, AppExchange, Salesforce1, and others are trademarks of salesforce.com, inc. Other brands featured herein may be trademarks of their respective owners.










    salesforce.com, inc.

    Condensed Consolidated Statements of Operations

    (in thousands, except per share data)

    (Unaudited)


                                                                     Three Months Ended April 30,
                                                                     ----------------------------

                                                                           2014                        2013
                                                                           ----                        ----

    Revenues:

    Subscription and support                $1,147,306                                 $842,221

    Professional services and other                                      79,466                      50,412
                                                                         ------                      ------

    Total revenues                                                    1,226,772                     892,633

    Cost of revenues (1)(2):

    Subscription and support                                            208,947                     153,550

    Professional services and other                                      83,358                      55,444
                                                                         ------                      ------

    Total cost of revenues                                              292,305                     208,994

    Gross profit                                                        934,467                     683,639

    Operating expenses (1)(2):

    Research and development                                            188,358                     131,939

    Marketing and sales                                                 639,355                     466,490

    General and administrative                                          162,095                     129,750
                                                                        -------                     -------

    Total operating expenses                                            989,808                     728,179

    Loss from operations                                                (55,341)                    (44,540)

    Investment income                                                     1,778                       3,354

    Interest expense                                                    (20,359)                    (11,883)

    Other expense (3)                                                   (10,847)                       (874)
                                                                        -------                        ----

    Loss before provision for income taxes                              (84,769)                    (53,943)

    Provision for income taxes                                          (12,142)                    (13,778)
                                                                        -------                     -------

    Net loss                                  $(96,911)                                $(67,721)
                                              ========                                 ========

    Basic net loss per share                    $(0.16)                                  $(0.12)

    Diluted net loss per share                  $(0.16)                                  $(0.12)

    Shares used in computing basic net
     loss per share                                                     612,512                     588,385

    Shares used in computing diluted net
     loss per share                                                     612,512                     588,385


    (1) Amounts include amortization of purchased intangibles from business combinations, as follows:

           Cost of revenues                    $28,672                                  $21,305

           Marketing and sales                                           14,965                       2,460



    (2) Amounts include stock-based expenses, as follows:

           Cost of revenues                    $11,810                                  $10,678

           Research and development                                      27,284                      24,429

           Marketing and sales                                           67,133                      59,802

           General and administrative                                    24,865                      19,820


    (3) Amount includes approximately
     $8.5 million loss on conversions
     of our convertible 0.75% senior
     notes due January 2015
     recognized during the three
     months ended April 30, 2014.



    salesforce.com, inc.

    Condensed Consolidated Statements of Operations

    As a percentage of total revenues:

    (Unaudited)


                                                                                Three Months Ended
                                                                                    April 30,

                                                                                              2014                      2013
                                                                                              ----                      ----

    Revenues:

    Subscription and support                                                                    94%                       94%

    Professional services and other                                                              6                         6
                                                                                               ---                       ---

    Total revenues                                                                             100                       100

    Cost of revenues (1)(2):

    Subscription and support                                                                    17                        17

    Professional services and other                                                              7                         6
                                                                                               ---                       ---

    Total cost of revenues                                                                      24                        23

    Gross profit                                                                                76                        77

    Operating expenses (1)(2):

    Research and development                                                                    16                        15

    Marketing and sales                                                                         52                        52

    General and administrative                                                                  13                        15
                                                                                               ---                       ---

    Total operating expenses                                                                    81                        82

    Loss from operations                                                                        (5)                       (5)

    Investment income                                                                            0                         0

    Interest expense                                                                            (1)                       (1)

    Other expense                                                                               (1)                        0
                                                                                               ---                       ---

    Loss before provision for income taxes                                                      (7)                       (6)

    Provision for income taxes                                                                  (1)                       (2)

    Net loss                                                                                   (8)%                      (8)%
                                                                                               ===                       ===


    (1) Amortization of purchased intangibles from business combinations as a percentage of total revenues, as follows:

           Cost of revenues                                                                      2%                        2%

           Marketing and sales                                                                   1                         0


    (2) Stock-based expenses as a percentage of total revenues, as follows:

           Cost of revenues                                                                      1%                        1%

           Research and development                                                              2                         3

           Marketing and sales                                                                   5                         7

           General and administrative                                                            2                         2



    salesforce.com, inc.

    Condensed Consolidated Balance Sheets

    (in thousands)


                                          April 30,               January 31,
                                                 2014                    2014
                                                 ----                    ----

                                          (unaudited)

    Assets

    Current assets:

    Cash and
     cash
     equivalents                                         $827,891                         $781,635

    Short-term
     marketable
     securities                                51,233                            57,139

    Accounts
     receivable,
     net                                      684,155                         1,360,837

    Deferred
     commissions                              162,494                           171,461

    Prepaid
     expenses
     and other
     current
     assets
     (see
     additional
     metrics)                                 313,608                           309,180
                                              -------                           -------

    Total
     current
     assets                                 2,039,381                         2,680,252

    Marketable
     securities,
     noncurrent                               650,764                           482,243

    Property
     and
     equipment,
     net (see
     additional
     metrics)                               1,251,000                         1,240,746

    Deferred
     commissions,
     noncurrent                               143,467                           153,459

    Capitalized
     software,
     net (see
     additional
     metrics)                                 455,819                           481,917

    Goodwill                                3,500,823                         3,500,823

    Other
     assets,
     net (see
     additional
     metrics)                                 600,090                           613,490
                                              -------                           -------

    Total
     assets                                            $8,641,344                       $9,152,930
                                                       ==========                       ==========

    Liabilities, temporary
     equity and stockholders'
     equity

    Current liabilities:

    Accounts
     payable,
     accrued
     expenses
     and other
     liabilities
     (see
     additional
     metrics)                                            $766,601                         $934,324

    Deferred
     revenue                                2,288,324                         2,473,705

    Convertible
      0.75%
     senior
     notes, net                               275,029                           542,159

    Term loan,
     current                                   30,000                            30,000
                                               ------                            ------

    Total
     current
     liabilities                            3,359,954                         3,980,188

    Convertible
      0.25%
     senior
     notes, net                             1,052,815                         1,046,930

    Term loan,
     noncurrent                               247,500                           255,000

    Deferred
     revenue,
     noncurrent                                36,291                            48,410

    Other
     noncurrent
     liabilities                              802,927                           757,187
                                              -------                           -------

    Total
     liabilities                            5,499,487                         6,087,715
                                            ---------                         ---------

    Temporary
     equity                                     9,943                            26,705
                                                -----                            ------

    Stockholders' equity:

    Common
     stock                                        614                               610

    Additional
     paid-in
     capital                                3,556,070                         3,363,377

    Accumulated
     other
     comprehensive
     income                                    15,298                            17,680

    Accumulated
     deficit                                 (440,068)                        (343,157)
                                             --------                          --------

    Total
     stockholders'
     equity                                 3,131,914                         3,038,510
                                            ---------                         ---------

    Total
     liabilities,
     temporary
     equity and
     stockholders'
     equity                                            $8,641,344                       $9,152,930
                                                       ==========                       ==========



    salesforce.com, inc.

    Condensed Consolidated Statements of Cash Flows

    (in thousands)

    (Unaudited)


                                                    Three Months Ended April 30,
                                                    ----------------------------

                                                         2014                         2013
                                                         ----                         ----

    Operating activities:

    Net loss                                                    $(96,911)                     $(67,721)

    Adjustments to reconcile net loss to net cash
     provided by operating activities:

    Depreciation and amortization                     110,808                       62,297

    Amortization of debt discount and
     transaction costs                                 11,791                        9,670

    Loss on conversions of convertible
     senior notes                                       8,529                            0

    Amortization of deferred
     commissions                                       59,855                       45,667

    Expenses related to employee stock
     plans                                            131,092                      114,729

    Excess tax benefits from employee
     stock plans                                       (9,041)                      (1,866)

    Changes in assets and liabilities, net of
     business combinations:

    Accounts receivable, net                          676,682                      369,889

    Deferred commissions                              (40,896)                     (17,483)

    Prepaid expenses, current assets
     and other assets                                   4,277                       (6,350)

    Accounts payable, accrued expenses
     and other liabilities                           (185,599)                     (95,808)

    Deferred revenue                                 (197,500)                   (129,835)
                                                     --------                     --------

    Net cash provided by operating
     activities                                       473,087                      283,189
                                                      -------                      -------

    Investing activities:

    Business combinations, net of cash
     acquired                                               0                      (22,161)

    Nonrefundable deposit received for
     land                                              30,000                            0

    Strategic investments                             (16,246)                      (5,116)

    Purchases of marketable securities               (250,536)                   (264,287)

    Sales of marketable securities                     79,312                      111,740

    Maturities of marketable securities                 7,198                       14,558

    Capital expenditures                              (60,098)                     (54,010)
                                                      -------                      -------

    Net cash used in investing
     activities                                      (210,370)                   (219,276)
                                                     --------                     --------

    Financing activities:

    Proceeds from borrowings on
     convertible senior notes, net                          0                    1,132,750

    Proceeds from issuance of warrants                      0                       84,800

    Purchase of convertible note hedge                      0                    (153,800)

    Proceeds from employee stock plans                 73,795                       66,524

    Excess tax benefits from employee
     stock plans                                        9,041                        1,866

    Payments on convertible senior
     notes                                           (283,892)                           0

    Principal payments on capital lease
     obligations                                      (10,594)                      (8,499)

    Principal payments on term loan                    (7,500)                           0
                                                       ------                          ---

    Net cash provided by (used in)
     financing activities                            (219,150)                   1,123,641
                                                     --------                    ---------

    Effect of exchange rate changes                     2,689                       (6,809)
                                                        -----                       ------

    Net increase in cash and cash
     equivalents                                       46,256                    1,180,745

    Cash and cash equivalents,
     beginning of period                              781,635                      747,245
                                                      -------                      -------

    Cash and cash equivalents, end of
     period                                                     $827,891                    $1,927,990
                                                                ========                    ==========



    salesforce.com, inc.

    Additional Metrics

    (Unaudited)


                                             Apr 30,                Jan 31,                Oct 31,                       Jul 31,                       Apr 30,                   Jan 31,
                                                 2014                   2014                   2013                              2013                        2013                  2013
                                                 ----                   ----                   ----                              ----                        ----                  ----

    Full Time Equivalent
     Headcount                                 14,239                            13,312                             12,770                   12,571 (1)               10,283             9,801

    Financial data (in thousands):

    Cash, cash equivalents
     and marketable
     securities                                        $1,529,888                                    $1,321,017                          $1,085,307                 $930,008 (2)               $3,079,457 (3) $1,758,285

    Deferred revenue,
     current and
     noncurrent                                        $2,324,615                                    $2,522,115                          $1,734,619               $1,789,648                   $1,733,160     $1,862,995

    Principal due on
     convertible senior
     notes and term loan                               $1,712,472                                    $2,003,864                          $2,017,356               $2,024,890                   $1,724,890       $574,890


    (1)      Includes approximately 1,900 full time equivalents from the acquisition of ExactTarget.

    (2)      Reflects the acquisition of ExactTarget for cash in July 2013.

    (3)      Includes $1.1 billion of net proceeds from the convertible 0.25% senior note offering and hedge transactions in March 2013.



    Selected Balance Sheet Accounts (in thousands):

                                                April 30,                          January 31,
                                                      2014                                2014
                                                      ----                                ----

    Prepaid Expenses and Other Current Assets

    Deferred income taxes, net                                 $48,556                                         $49,279

    Prepaid income taxes                            22,838                              23,571

    Customer contract asset (4)                     54,360                              77,368

    Prepaid expenses and other
     current assets                                187,854                             158,962
                                                   -------                             -------

                                                              $313,608                                        $309,180
                                                              ========                                        ========

    Property and Equipment, net

    Land                                                      $248,263                                        $248,263

    Building improvements                           49,572                              49,572

    Computers, equipment and
     software                                      961,675                             931,171

    Furniture and fixtures                          65,021                              58,956

    Leasehold improvements                         313,535                             296,390

    Building in progress -
     leased facility                                52,931                              40,171
                                                    ------                              ------

                                                 1,690,997                           1,624,523

    Less accumulated
     depreciation and
     amortization                                 (439,997)                           (383,777)
                                                  --------                            --------

                                                            $1,251,000                                      $1,240,746
                                                            ==========                                      ==========

    Capitalized Software, net

    Capitalized internal-use
     software development
     costs, net of accumulated
     amortization                                              $77,169                                         $72,915

    Acquired developed
     technology, net of
     accumulated amortization                      378,650                             409,002
                                                   -------                             -------

                                                              $455,819                                        $481,917
                                                              ========                                        ========

    Other Assets, net

    Deferred income taxes,
     noncurrent, net                                            $9,738                                          $9,691

    Long-term deposits                              18,027                              17,970

    Purchased intangible
     assets, net of accumulated
     amortization                                  400,962                             416,119

    Acquired intellectual
     property, net of
     accumulated amortization                       11,967                              11,957

    Strategic investments                          102,439                              92,489

    Customer contract asset (4)                     10,989                              18,182

    Other                                           45,968                              47,082
                                                    ------                              ------

                                                              $600,090                                        $613,490
                                                              ========                                        ========


    (4) Customer contract asset reflects future billings of amounts that were contractually commited by ExactTarget's
     existing customers as of the acquisition date. As the Company bills these customers this balance will reduce and
     accounts receivable will increase.



    Accounts Payable, Accrued Expenses and
     Other Liabilities

    Accounts payable                                           $36,723                                         $64,988

    Accrued compensation                           259,517                             397,002

    Accrued other liabilities                      274,792                             235,543

    Accrued income and other
     taxes payable                                 123,292                             153,026

    Accrued professional costs                      19,309                              15,864

    Customer liability, current
     (5)                                            38,077                              53,957

    Accrued rent                                    14,891                              13,944
                                                    ------                              ------

                                                              $766,601                                        $934,324
                                                              ========                                        ========

    Other Noncurrent Liabilities

    Deferred income taxes and
     income taxes payable                                     $106,420                                        $108,760

    Customer liability,
     noncurrent (5)                                  8,897                              13,953

    Financing obligation,
     building in progress -
     leased facility                                52,931                              40,171

    Long-term lease
     liabilities and other                         634,679                             594,303
                                                   -------                             -------

                                                              $802,927                                        $757,187
                                                              ========                                        ========


    (5) Customer liability reflects the legal obligation to provide future services that were contractually committed by
     ExactTarget's existing customers but unbilled as of the acquisition date.



    Selected Off-Balance Sheet Account

                                       April 30,  2014         January 31,  2014
                                       ---------------         -----------------

    Unbilled
     Deferred
     Revenue,
     a non-
     GAAP
     measure                                           $ 4.8bn                   $ 4.5bn


    Unbilled deferred revenue represents
     future billings under our non-
     cancelable subscription agreements
     that have not been invoiced and,
     accordingly, are not recorded in
     deferred revenue.


    The balances as of April 30, 2014 and
     January 31, 2014 exclude the remaining
     amount related to the fair value of
     unbilled deferred revenue associated
     with the acquisition of ExactTarget,
     which was initially recorded as part
     of business combination accounting,
     because these amounts are reflected on
     the balance sheet under "accounts
     payable, accrued expenses and other
     liabilities" and "other noncurrent



    Supplemental Revenue Analysis

                                   Three Months Ended April 30,
                                   ----------------------------

                                     2014                          2013
                                     ----                          ----

    Revenues by geography (in
     thousands):

    Americas                                  $876,377                   $631,108

    Europe                        230,810                       162,826

    Asia Pacific                  119,585                        98,699
                                  -------                        ------

                                            $1,226,772                   $892,633
                                            ==========                   ========

    As a percentage of total
     revenues:

    Revenues by geography:

    Americas                           71%                           71%

    Europe                             19                            18

    Asia Pacific                       10                            11
                                      ---                           ---

                                      100%                          100%
                                      ===                           ===



    Revenue constant
     currency growth
     rates              Three Months Ended           Three Months Ended           Three Months Ended
                          April 30, 2014              January 31, 2014              April 30, 2013
    (as compared to
     the comparable
     prior periods)
                     compared to Three Months     compared to Three Months     compared to Three Months

                       Ended April 30, 2013        Ended January 31, 2013        Ended April 30, 2012
                       --------------------        ----------------------        --------------------

    Americas                                  39%                          41%                          30%

    Europe                                    35%                          35%                          38%

    Asia Pacific                              26%                          24%                          17%

    Total growth                              37%                          38%                          30%


    We present constant currency
     information to provide a
     framework for assessing how
     our underlying business
     performed excluding the
     effect of foreign currency
     rate fluctuations. To present
     this information, current and
     comparative prior period
     results for entities
     reporting in currencies other
     than United States dollars
     are converted into United
     States dollars at the
     weighted average exchange
     rate for the quarter being
     compared to for growth rate
     calculations presented,
     rather than the actual
     exchange rates in effect
     during that period.



                                   April 30, 2014     January 31, 2014
                                     compared to         compared to

                                   April 30, 2013     January 31, 2013
                                   --------------     ----------------

    Deferred revenue, current and
     noncurrent constant currency
     growth rates (as compared to
     the comparable prior periods)

    Total growth                                  33%                  36%



    Supplemental Diluted Share Count Information

    (in thousands)

                                           Three Months Ended April
                                                   30,
                                          ------------------------

                                              2014                         2013
                                              ----                         ----

    Weighted-
     average shares
     outstanding
     for basic
     earnings per
     share                                 612,512                      588,385

    Effect of dilutive securities (1):

    Convertible
     0.75% senior
     notes                                   8,495                       13,563

    Warrants
     associated
     with the
     convertible
     0.75% senior
     note hedges                            13,220                        8,214

    Employee stock
     awards                                 13,773                       12,515
                                            ------                       ------

    Adjusted
     weighted-
     average shares
     outstanding
     and assumed
     conversions
     for diluted
     earnings per
     share                                 648,000                      622,677
                                           =======                      =======


    (1) The effects of these dilutive securities were not included in the GAAP
     calculation of diluted net loss per share for the three months ended April
     30, 2014 and 2013 because the effect would have been anti-dilutive.



    Supplemental Cash Flow Information

    Free cash flow analysis, a non-GAAP measure

    (in thousands)


                                         Three Months Ended April 30,
                                       ----------------------------

                                            2014                         2013
                                            ----                         ----

    Operating cash flow

    GAAP net cash
     provided by
     operating
     activities                                    $473,087                    $283,189

    Less:

    Capital
     expenditures                        (60,098)                     (54,010)
                                         -------                      -------

    Free cash flow                                 $412,989                    $229,179
                                                   ========                    ========


    Our free cash flow analysis
     includes GAAP net cash provided
     by operating activities less
     capital expenditures. The capital
     expenditures balance does not
     include any costs related to the
     purchase and activities related
     to land activity, building
     improvements, building in
     progress -leased facilities, and
     strategic investments.



    Comprehensive Loss

    (in thousands)

    (Unaudited)


                                     Three Months Ended April 30,
                                   ----------------------------

                                        2014                        2013
                                        ----                        ----

    Net loss                                   $(96,911)                  $(67,721)

    Other comprehensive loss,
     before tax and net of
     reclassification adjustments:

    Foreign currency
     translation and
     other gains
     (losses)                          3,115                      (5,760)

    Unrealized gains
     (losses) on
     investments                      (5,497)                      1,721
                                      ------                       -----

    Other
     comprehensive
     loss, before tax                 (2,382)                     (4,039)

    Tax effect                             0                         628
                                         ---                         ---

    Other
     comprehensive
     loss, net of tax                 (2,382)                     (3,411)
                                      ------                      ------

    Comprehensive loss                         $(99,293)                  $(71,132)
                                               ========                   ========



    salesforce.com, inc.

    GAAP RESULTS RECONCILED TO NON-GAAP RESULTS

    The following table reflects selected salesforce.com GAAP results reconciled to non-GAAP results

    (in thousands, except per share data)

    (Unaudited)


                                        Three Months Ended April 30,
                                        ----------------------------

                                             2014                             2013
                                             ----                             ----

    Gross profit
    ------------

    GAAP gross profit                               $934,467                                     $683,639

    Plus:

    Amortization of
     purchased
     intangibles (a)                       28,672                           21,305

    Stock-based
     expenses (b)                          11,810                           10,678
                                           ------                           ------

    Non-GAAP gross
     profit                                         $974,949                                     $715,622
                                                    --------                                     --------

    Operating expenses
    ------------------

    GAAP operating
     expenses                                       $989,808                                     $728,179

    Less:

    Amortization of
     purchased
     intangibles (a)                      (14,965)                          (2,460)

    Stock-based
     expenses (b)                        (119,282)                       (104,051)
                                         --------                         --------

    Non-GAAP
     operating
     expenses                                       $855,561                                     $621,668
                                                    --------                                     --------

    Income from operations
    ----------------------

    GAAP loss from
     operations                                     $(55,341)                                    $(44,540)

    Plus:

    Amortization of
     purchased
     intangibles (a)                       43,637                           23,765

    Stock-based
     expenses (b)                         131,092                          114,729
                                          -------                          -------

    Non-GAAP income
     from operations                                $119,388                                      $93,954
                                                    --------                                      -------

    Non-operating income (loss) (c)
    ------------------------------

    GAAP non-
     operating loss                                 $(29,428)                                     $(9,403)

    Plus: Amortization
     of debt discount,
     net                                   10,984                            9,240

    Plus: Loss on
     conversion of
     debt                                   8,529                                0
                                            -----                              ---

    Non-GAAP non-
     operating income
     (loss)                                          $(9,915)                                       $(163)
                                                     -------                                        -----

    Net income
    ----------

    GAAP net loss                                   $(96,911)                                    $(67,721)

    Plus:

    Amortization of
     purchased
     intangibles (a)                       43,637                           23,765

    Stock-based
     expenses (b)                         131,092                          114,729

    Amortization of
     debt discount,
     net                                   10,984                            9,240

    Loss on conversion
     of debt                                8,529                                0

    Less:

    Income tax effects
     and adjustments                      (27,815)                         (19,049)
                                          -------                          -------

    Non-GAAP net
     income                                          $69,516                                      $60,964
                                                     =======                                      =======

    Diluted earnings per share
    --------------------------

    GAAP diluted loss
     per share (d)                                    $(0.16)                                      $(0.12)

    Plus:

    Amortization of
     purchased
     intangibles                             0.07                             0.04

    Stock-based
     expenses                                0.20                             0.19

    Amortization of
     debt discount,
     net                                     0.02                             0.01

    Loss on conversion
     of debt                                 0.01                             0.00

    Less:

    Income tax effects
     and adjustments                        (0.03)                           (0.02)
                                            -----                            -----

    Non-GAAP diluted
     earnings per
     share                                             $0.11                                        $0.10
                                                       =====                                        =====

    Shares used in
     computing diluted
     net income per
     share                                648,000                          622,677


    a) Amortization of purchased intangibles were as follows:

                                        Three Months Ended April 30,
                                        ----------------------------

                                             2014                             2013
                                             ----                             ----

         Cost of revenues                            $28,672                                      $21,305

         Marketing and
          sales                            14,965                            2,460
                                           ------                            -----

                                                     $43,637                                      $23,765
                                                     =======                                      =======


    b) Stock-based expenses were as follows:

                                        Three Months Ended April 30,
                                        ----------------------------

                                             2014                             2013
                                             ----                             ----

         Cost of revenues                            $11,810                                      $10,678

         Research and development                     27,284                                       24,429

         Marketing and sales                          67,133                                       59,802

         General and administrative                   24,865                                       19,820
                                                      ------                                       ------

                                                    $131,092                                     $114,729
                                                    ========                                     ========


    c) Non-operating income (loss) consists of investment income, interest expense and other expense.

    d) Reported GAAP loss per share was calculated using the basic share count. Non-GAAP diluted earnings
     per share was calculated using the diluted share count.



    salesforce.com, inc.

    COMPUTATION OF BASIC AND DILUTED GAAP AND NON-GAAP NET INCOME (LOSS) PER SHARE

    (in thousands, except per share data)

    (Unaudited)


                                 Three Months Ended April 30,
                                 ----------------------------

                                      2014                             2013
                                      ----                             ----

    GAAP Basic Net Loss
     Per Share

    Net
     loss                                    $(96,911)                             $(67,721)

    Basic
     net
     loss
     per
     share                                     $(0.16)                               $(0.12)

    Shares
     used
     in
     computing
     basic
     net
     loss
     per
     share                         612,512                          588,385

                                 Three Months Ended April 30,
                                 ----------------------------

                                      2014                             2013
                                      ----                             ----

    Non-GAAP Basic Net
     Income Per Share

    Non-
     GAAP
     net
     income                                   $69,516                               $60,964

    Basic
     Non-
     GAAP
     net
     income
     per
     share                                      $0.11                                 $0.10

    Shares
     used
     in
     computing
     basic
     net
     income
     per
     share                         612,512                          588,385

                                 Three Months Ended April 30,
                                 ----------------------------

                                      2014                             2013
                                      ----                             ----

    GAAP Diluted Net
     Loss Per Share

    Net
     loss                                    $(96,911)                             $(67,721)

    Diluted
     net
     loss
     per
     share                                     $(0.16)                               $(0.12)

    Shares
     used
     in
     computing
     diluted
     net
     loss
     per
     share                         612,512                          588,385

                                 Three Months Ended April 30,
                                 ----------------------------

                                      2014                             2013
                                      ----                             ----

    Non-GAAP Diluted
     Net Income Per
     Share

    Non-
     GAAP
     net
     income                                   $69,516                               $60,964

    Diluted
     Non-
     GAAP
     net
     income
     per
     share                                      $0.11                                 $0.10

    Shares
     used
     in
     computing
     diluted
     net
     income
     per
     share                         648,000                          622,677

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SOURCE salesforce.com