14-year-old Salesforce.com sells cloud computing and social enterprise solutions for businesses that range from Enterprise to
SMB. The firm’s core products include Sales Cloud (sales automation), Service Cloud (customer support applications),
Marketing Cloud (marketing tools), Force.com (a development platform) and Chatter (enterprise collaboration).
Technology — Enterprise Software — Software as a Service
AN UPSIDE QUARTER, AND MORE GOOD NEWS LIKELY ON THE WAY FROM CUSTOMER EVENTS; REITERATE BUY
Salesforce’s Q2/14 results were nicely ahead of forecasts across the board. The firm remains by a wide margin the fastest growing company of its size, and with the addition of marketing automation functionality and still nascent adoption of its platform capabilities, we believe CRM should be able to keep its impressive growth trajectory relatively intact for at least the next 6-8 quarters.
The combination of a reasonable valuation and likely favorable commentary into and following upcoming customer events – ExactTarget Connections in September and Dreamforce in November – sets the stock up for a nice run through year-end. CRM is one of our top picks and should be a core growth holding for software investors. Reiterate BUY, increasing target to $54.00.
A solid print: upside revenue, FCF, and billings. CRM reported July quarter revenues and non-GAAP EPS of $957M and $0.09, which were respectively $22M and $0.02 ahead of our estimates. Adjusting for $16M of acquired ET revenue and a $7M FX headwind, organic revenue growth was ~30%.
FCF of $80.6M in the quarter, or $0.13 per share, was nicely ahead of our $57.0M estimate. Calculated billings of $1.014B was $80M ahead of our forecast and up roughly 34% y-o-y after adjusting for ET contribution, the impact of changing billing terms and FX. CRM ended Q2 with a $5.6 billion backlog of booked business, which is up ~$1.2 billion from a year ago.
Q3 slightly better, FY estimates inch modestly higher. CRM inched higher F2014 revenue and EPS guidance by approximately $35M and a penny largely due to an earlier-than-anticipated close of ET. Our updated estimates are for F2014 revenue growth of 32%, non-GAAP operating margins of approximately 9%, and operating cash flow growth of 15%
- Bring Out the Brooms: Salesforce.com Sweeps the CRM Market Awards (blogs.salesforce.com)
- Salesforce’s Bet on Marketing Tools Starting to Pay Off – Bloomberg (bloomberg.com)
- Do Investors Need salesforce.com Earnings to Grow? (fool.com)