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Last updated on April 19, 2014 at 1:20 EDT

Salesforce.com Announces Fiscal 2014 First Quarter Results

May 23, 2013

- Revenue of $893 Million, up 28% Year-Over-Year, 30% in Constant Currency

SAN FRANCISCO, May 23, 2013 /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, 2013.

(Logo: http://photos.prnewswire.com/prnh/20050216/SFW105LOGO)

“Salesforce.com delivered another quarter of strong growth, with constant currency revenue, deferred revenue, and operating cash flow all growing 30% or more year over year,” said Marc Benioff, Chairman and CEO, salesforce.com. “Salesforce.com is now the world’s #1 CRM market share leader according to Gartner.”

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

Revenue: Total Q1 revenue was $893 million, an increase of 28% on a year-over-year basis, and 30% in constant currency. Subscription and support revenues were $842 million, an increase of 29% on a year-over-year basis. Professional services and other revenues were $50 million, an increase of 25% on a year-over-year basis.

Earnings per Share: Q1 GAAP net loss per share was ($0.12), and non-GAAP diluted earnings per share was $0.10. The company’s non-GAAP results exclude the effects of $115 million in stock-based compensation expense, $24 million in amortization of purchased intangibles, and $9 million in net non-cash interest expense related to the company’s convertible senior notes, and is based on a non-GAAP tax rate of approximately 35%. GAAP EPS calculations are based on a basic share count of approximately 588 million shares. Non-GAAP EPS calculations are based on approximately 623 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 $283 million, an increase of 33% on a year-over-year basis. Total cash, cash equivalents and marketable securities finished the quarter at $3.1 billion. During the quarter, the company raised $1.15 billion through the issuance of convertible 0.25% senior notes due 2018.

Deferred Revenue: Deferred revenue on the balance sheet as of April 30, 2013 was $1.73 billion, an increase of 30% on a year-over-year basis, and 31% in constant currency. Current deferred revenue increased by 33% year-over-year to $1.67 billion, benefited in part by longer invoice durations. Non-current deferred revenue decreased by 25% year-over-year to $58 million. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the first quarter at approximately $3.6 billion, up 33% on a year-over-year basis.

As of April 30, 2013, salesforce.com is initiating revenue and EPS guidance for its second quarter of fiscal year 2014. In addition, the company is raising its full fiscal year 2014 revenue guidance previously provided on February 28, 2013.

Q2 FY14 Guidance: Revenue for the company’s second fiscal quarter is projected to be in the range of $931 million to $936 million, an increase of 27% to 28% year-over-year.

GAAP net loss per share is expected to be in the range of ($0.07) to ($0.06), 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 $119 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $22 million, and net non-cash interest expense related to the convertible senior notes, expected to be approximately $12 million. EPS estimates assume a GAAP tax rate of approximately negative 21%, which reflects the estimated quarterly change in the tax valuation allowance, and a non-GAAP tax rate of approximately 36%. The GAAP EPS calculation assumes an average basic share count of approximately 595 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 634 million shares.

Full Year FY14 Guidance: Revenue for the company’s full fiscal year 2014 is projected to be in the range of $3.835 billion to $3.875 billion, an increase of 26% to 27% year-over-year.

GAAP net loss per share is expected to be in the range of ($0.33) to ($0.31) while diluted non-GAAP EPS is expected to be in the range of $0.47 to $0.49. The non-GAAP estimate excludes the effects of stock-based compensation expense, expected to be approximately $500 million, amortization of purchased intangibles related to acquisitions, expected to be approximately $86 million, and net non-cash interest expense related to the convertible senior notes, expected to be approximately $47 million. EPS estimates assume a GAAP tax rate of approximately negative 23%, which reflects the estimated annual change in the tax valuation allowance, and a non-GAAP tax rate of approximately 35%. 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 599 million shares, and the non-GAAP EPS calculation assumes an average fully diluted share count of approximately 638 million shares.

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


                                      Fiscal 2014
                                      -----------

                                          Q2               FY2014
                                          ---              ------

    GAAP EPS Range*                       ($0.07) -
                                             ($0.06)  ($0.33) -($0.31)

    Plus

    Amortization of purchased
     intangibles                              $0.03              $0.14

    Stock-based expense                       $0.19              $0.78

    Amortization of debt
     discount, net                            $0.02              $0.07

    Less

    Income tax effects and
     adjustments**                           $(0.06)            $(0.19)
                                             ------             ------

    Non-GAAP diluted EPS              $0.11 - $0.12      $0.47 - $0.49

    Shares used in computing
     basic net income per share
     (millions)                                 595                599

    Shares used in computing
     diluted net income per share
     (millions)                                 634                638

    * For Q2 & FY14 GAAP EPS loss, basic number
     of shares used for calculation

    ** The company's non-GAAP tax provision excludes the tax
     effects of expense items described above and certain tax
     items not directly related to the current fiscal year
     ordinary operating results.  Examples of such tax items
     include, but are not limited to, changes in the valuation
     allowance related to deferred tax assets, certain
     acquisition-related costs and unusual or infrequently
     occurring items.

Quarterly Conference Call

Salesforce.com will host a conference call to discuss its 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 at 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 44414082. A replay will be available at 800-585-8367 or +1 855-859-2056, passcode 44414082, until midnight (Eastern Time) June 21, 2013.

About salesforce.com

Founded in 1999, salesforce.com is the world’s #1 CRM platform. Our unique, multi-tenant cloud architecture provides a highly customizable, low cost, easy-to-use platform that empowers companies to sell, service, market and innovate more effectively:

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, non-GAAP tax rates, and constant currency growth 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, and the net amortization of debt discount on 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. 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, and the net amortization of debt discount on the company’s convertible senior notes are being excluded from the company’s FY14 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 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 FY14:

  • 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.
  • Income Tax Effects and Adjustments: The company’s non-GAAP tax provision excludes the tax effects of expense items described above and certain tax items not directly related to the current fiscal year’s ordinary operating results. Examples of such tax items include, but are not limited to, changes in the valuation allowance related to deferred tax assets, certain acquisition-related costs and unusual or infrequently occurring items. Management believes the exclusion of these income tax adjustments provides investors with useful supplemental information about the company’s operational performance.

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements about expected GAAP and non-GAAP financial results for the second fiscal quarter and the full fiscal year of 2014, including revenue, net loss, EPS, expected revenue run rate, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles and debt discount, non-cash interest expense, shares outstanding, and 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; 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 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; 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 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, 2013, and our Form 10-K filed for the fiscal year ended January 31, 2013. 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.

© 2013 salesforce.com, inc. All rights reserved. Salesforce, Sales Cloud, Service Cloud, Marketing Cloud, AppExchange, Salesforce Platform, 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,
                                                                                                              -------------

                                                                                                          2013                2012
                                                                                                          ----                ----

    Revenues:

                                                            Subscription
                                                            and support                               $842,221            $655,220

                                                            Professional
                                                            services and
                                                            other                   50,412              40,247
                                                           -------

                                                            Total
                                                            revenues                                   892,633             695,467

    Cost of revenues (1)(2):

                                                            Subscription
                                                            and support                                153,550             108,744

                                                            Professional
                                                            services and
                                                            other                   55,444              42,807
                                                           -------

                                                            Total cost
                                                            of
                                                            revenues                                   208,994             151,551

    Gross profit                                                                                       683,639             543,916

    Operating expenses (1)(2):

                                                            Research and
                                                            development                                131,939              94,776

                                                            Marketing and
                                                            sales                                      466,490             369,789

                                                            General and
                                                            administrative                             129,750             101,600

                                                            Total
                                                            operating
                                                            expenses                                   728,179             566,165

    Loss from operations                                                                               (44,540)            (22,249)

    Investment income                                                                                    3,354               4,461

    Interest expense                                                                                   (11,883)             (6,370)

    Other expense                                                                                         (874)               (710)
                                                                                                          ----                ----

    Loss before benefit from (provision for) income
     taxes                                                                                             (53,943)            (24,868)

    Benefit from (provision for) income taxes                                                          (13,778)              5,393
                                                                                                       -------               -----

    Net loss                                                                      $(67,721)           $(19,475)
                                                                                  ========            ========

    Basic net loss per share (3)                                    $(0.12)                  $(0.04)

    Diluted net loss per share (3)                                  $(0.12)                  $(0.04)

    Shares used in computing basic net loss per
     share (3)                                                                                         588,385             552,600

    Shares used in computing diluted net loss per
     share (3)                                                                                         588,385             552,600

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

                                                            Cost of
                                                            revenues                        $21,305             $17,448

                                                            Marketing
                                                            and sales                                    2,460               3,427

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

                                                            Cost of
                                                            revenues                        $10,678              $7,253

                                                            Research
                                                            and
                                                            development                                 24,429              15,667

                                                            Marketing
                                                            and sales                                   59,802              41,987

                                                            General and
                                                            administrative                              19,820              16,359

    (3) Prior period results have been adjusted to reflect the four for one stock split
     through a stock dividend which occurred in April 2013 (See Supplemental Diluted
     Share Count Information for additional details)

    salesforce.com, inc.

    Condensed Consolidated Statements of Operations

    As a percentage of total revenues:

    (Unaudited)

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

                                                                                            2013     2012
                                                                                            ----     ----

    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       16

                                                      Professional
                                                      services and
                                                      other                                    6        6

                                                      Total cost
                                                      of
                                                      revenues                                23       22

    Gross profit                                                                              77       78

    Operating expenses (1)(2):

                                                      Research and
                                                      development                             15       14

                                                      Marketing and
                                                      sales                                   52       53

                                                      General and
                                                      administrative                          15       14

                                                      Total
                                                      operating
                                                      expenses                                82       81

    Loss from operations                                                                      (5)      (3)

    Investment income                                                                          0        0

    Interest expense                                                                          (1)      (1)

    Other expense                                                                              0        0
                                                                                             ---      ---

    Loss before benefit from (provision for) income
     taxes                                                                                    (6)      (4)

    Benefit from (provision for) income taxes                                                 (2)       1
                                                                                             ---      ---

    Net loss                                                                                 (8)%     (3)%
                                                                                             ===      ===

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

                                                      Cost of
                                                      revenues                                 2%       3%

                                                      Marketing
                                                      and sales                                0        0

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

                                                      Cost of
                                                      revenues                                 1%       1%

                                                      Research
                                                      and
                                                      development                              3        2

                                                      Marketing
                                                      and sales                                7        6

                                                      General and
                                                      administrative                           2        2

    salesforce.com, inc.

    Condensed Consolidated Balance Sheets

    (in thousands)

                                                                                                         April 30,                                January 31,

                                                                                                                       2013                                     2013
                                                                                                                       ----                                     ----

                                                                                                        (unaudited)

    Assets

    Current assets:

                                                        Cash and cash
                                                        equivalents                                              $1,927,990                                 $747,245

                                                        Short-term
                                                        marketable
                                                        securities                     171,827                                    120,376

                                                        Accounts
                                                        receivable,
                                                        net                            502,609                                    872,634

                                                        Deferred
                                                        commissions                    119,499                                    142,311

                                                        Prepaid
                                                        expenses and
                                                        other current
                                                        assets (see
                                                        additional
                                                        metrics)                       154,114                                    133,314

    Total current assets                                                                                          2,876,039                                2,015,880

    Marketable securities, noncurrent                                                  979,640                                    890,664

    Property and equipment, net (see additional metrics)                               623,684                                    604,669

    Deferred commissions, noncurrent                                                   106,710                                    112,082

    Capitalized software, net (see additional metrics)                                 192,429                                    207,323

    Goodwill                                                                                                      1,544,584                                1,529,378

    Other assets, net (see additional metrics)                                         190,623                                    168,960
                                                                                       -------                                    -------

    Total assets                                                                                                 $6,513,709                               $5,528,956
                                                                                                                 ==========                               ==========

    Liabilities, temporary equity and stockholders' equity

    Current liabilities:

                                                        Accounts
                                                        payable,
                                                        accrued
                                                        expenses and
                                                        other
                                                        liabilities
                                                        (see
                                                        additional
                                                        metrics)                      $527,080                                                              $597,706

                                                        Deferred
                                                        revenue                                                   1,674,797                                1,798,640

                                                        Convertible
                                                        0.75% senior
                                                        notes, net                     527,810                                    521,278

    Total current liabilities                                                                                     2,729,687                                2,917,624

    Convertible 0.25% senior notes, net                                              1,029,495                                          0

    Income taxes payable, noncurrent                                                    49,239                                     49,074

    Long-term lease liabilities and other                                              137,049                                    126,658

    Deferred revenue, noncurrent                                                        58,363                                     64,355
                                                                                        ------                                     ------

    Total liabilities                                                                                             4,003,833                                3,157,711
                                                                                                                  ---------                                ---------

    Temporary equity                                                                                                 47,080                                   53,612
                                                                                                                     ------                                   ------

    Stockholders' equity:

                                                        Common
                                                        stock (1)                                                       590                                      586

                                                        Additional
                                                        paid-in
                                                        capital (1)                  2,627,183                                  2,410,892

                                                        Accumulated
                                                        other
                                                        comprehensive
                                                        income                          13,726                                     17,137

                                                        Accumulated
                                                        deficit                                                    (178,703)                                (110,982)

    Total stockholders' equity                                                                                    2,462,796                                2,317,633
                                                                                                                  ---------                                ---------

    Total liabilities, temporary equity and stockholders' equity                                                 $6,513,709                               $5,528,956
                                                                                                                 ==========                               ==========

    (1)                                                 Prior period results have been
                                                        adjusted to reflect the four for
                                                        one stock split through a stock
                                                        dividend which occurred in April
                                                        2013 (See Supplemental Diluted
                                                        Share Count Information for
                                                        additional details)

    salesforce.com, inc.

    Condensed Consolidated Statements of Cash Flows

    (in thousands)

    (Unaudited)

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

                                                                                                         2013                  2012
                                                                                                         ----                  ----

    Operating activities:

    Net loss                                                                             $(67,721)              $(19,475)

    Adjustments to reconcile net loss to net

    cash provided by operating activities:

                                                      Depreciation
                                                      and
                                                      amortization                                     62,297                49,441

                                                      Amortization of
                                                      debt discount
                                                      and
                                                      transaction
                                                      costs                                             9,670                 4,669

                                                      Amortization of
                                                      deferred
                                                      commissions                                      45,667                36,246

                                                      Expenses
                                                      related to
                                                      employee stock
                                                      plans                                           114,729                81,266

                                                      Excess tax
                                                      benefits from
                                                      employee stock
                                                      plans                                            (1,866)              (11,043)

                                                      Changes in
                                                      assets and
                                                      liabilities,
                                                      net of
                                                      business
                                                      combinations:

                                                      Accounts
                                                      receivable,
                                                      net                                             369,889               312,660

                                                      Deferred
                                                      commissions                                     (17,483)              (32,118)

                                                      Prepaid
                                                      expenses
                                                      and
                                                      other
                                                      current
                                                      assets                                           (7,872)              (20,349)

                                                      Other
                                                      assets                                            1,522                 1,755

                                                      Accounts
                                                      payable,
                                                      accrued
                                                      expenses,
                                                      and
                                                      other
                                                      liabilities                                     (95,808)            (144,260)

                                                      Deferred
                                                      revenue                                        (129,835)              (45,580)
                                                                                                     --------               -------

                                                      Net cash
                                                      provided
                                                      by
                                                      operating
                                                      activities                                      283,189               213,212
                                                                                                      -------               -------

    Investing activities:

    Business combinations, net of cash acquired                                                       (22,161)              (48,913)

    Land activity and building improvements                                                                 0                (4,106)

    Strategic investments                                                                              (5,116)               (2,665)

    Changes in marketable securities                                                                 (137,989)            (374,582)

    Capital expenditures                                                                              (54,010)              (44,721)
                                                                                                      -------               -------

                                                      Net cash
                                                      used in
                                                      investing
                                                      activities                                     (219,276)            (474,987)
                                                                                                     --------              --------

    Financing activities:

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

    Proceeds from issuance of warrants                                                                 84,800                     0

    Purchase of convertible note hedge                                                               (153,800)                    0

    Proceeds from employee stock plans                                                                 66,524                93,567

    Excess tax benefits from employee stock plans                                                       1,866                11,043

    Principal payments on capital lease obligations                                                    (8,499)               (7,574)
                                                                                                       ------                ------

                                                      Net cash
                                                      provided
                                                      by
                                                      financing
                                                      activities                                    1,123,641                97,036
                                                                                                    ---------                ------

    Effect of exchange rate changes                                                                    (6,809)               (1,760)
                                                                                                       ------                ------

    Net increase (decrease) in cash and cash equivalents                                            1,180,745             (166,499)

    Cash and cash equivalents, beginning of period                                                    747,245               607,284
                                                                                                      -------               -------

    Cash and cash equivalents, end of period                                                       $1,927,990              $440,785
                                                                                                   ==========              ========
    salesforce.com, inc.

    Additional Metrics

    (Unaudited)

                                                 Apr 30,                 Jan 31,             Oct 31,            Jul 31,            Apr 30,            Jan 31,

                                                                   2013                 2013               2012               2012               2012               2012
                                                                   ----                 ----               ----               ----               ----               ----

    Full Time
     Equivalent
     Headcount                                                   10,283                9,801              9,319              8,765              8,335              7,785

    Financial
     data (in
     thousands):

                         Cash, cash equivalents
                         and marketable
                         securities                       $3,079,457(1)           $1,758,285         $1,416,050         $1,804,265         $1,657,089         $1,447,174

                         Deferred revenue,
                         current and
                         noncurrent                          $1,733,160           $1,862,995         $1,291,703         $1,337,184         $1,334,716         $1,380,295

                     (1) 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):

                                                      Apr 30,                   Jan 31,

                                                                2013                     2013
                                                                ----                     ----

      Prepaid Expenses and Other
       Current Assets

           Deferred professional services
            costs                                             $2,110                   $3,522

           Deferred income taxes, net                          6,794                    7,321

           Prepaid income taxes                               25,785                   21,180

           Prepaid expenses and other
            current assets                                   119,425                  101,291

                                                            $154,114                 $133,314
                                                            ========                 ========

      Property and Equipment, net

           Land                                             $248,263                 $248,263

           Building improvements                              49,572                   49,572

           Computers, equipment and
            software                                         346,280                  328,318

           Furniture and fixtures                             42,225                   38,275

           Leasehold improvements                            216,686                  193,181
                                                             -------                  -------

                                                             903,026                  857,609

           Less accumulated depreciation
            and amortization                                (279,342)                (252,940)
                                                            --------                 --------

                                                            $623,684                 $604,669
                                                            ========                 ========

      Capitalized Software, net

           Capitalized internal-use
            software development costs, net
            of accumulated amortization                      $62,666                  $59,647

           Acquired developed technology,
            net of accumulated amortization                  129,763                  147,676
                                                             -------                  -------

                                                            $192,429                 $207,323
                                                            ========                 ========

      Other Assets, net

           Deferred professional services
            costs, noncurrent portion                           $824                   $1,077

           Deferred income taxes,
            noncurrent, net                                   19,358                   19,212

           Long-term deposits                                 12,730                   13,422

           Purchased intangible assets, net
            of accumulated amortization                       50,494                   49,354

           Acquired intellectual property,
            net of accumulated amortization                   13,854                   13,872

           Strategic investments                              56,207                   51,685

           Other                                              37,156                   20,338

                                                            $190,623                 $168,960
                                                            ========                 ========

      Accounts Payable, Accrued
       Expenses and Other Current
       Liabilities

           Accounts payable                                  $31,522                  $14,535

           Accrued compensation                              205,922                  311,595

           Accrued other liabilities                         167,533                  138,165

           Accrued income and other taxes
            payable                                           98,524                  120,341

           Accrued professional costs                         11,908                   10,064

           Accrued rent                                       11,671                    3,006

                                                            $527,080                 $597,706
                                                            ========                 ========

    Selected Off-Balance Sheet
     Accounts

      Unbilled Deferred Revenue, a
       non-GAAP measure

      Unbilled deferred revenue was
       approximately $3.6 billion               recorded in deferred
       as of April 30, 2013 and                 revenue.
       $3.5 billion as of January
       31, 2013. Unbilled deferred
       revenue represents future
       billings under our non-
       cancelable subscription
       agreements that have not
       been invoiced and,
       accordingly, are not

    Supplemental Revenue Analysis

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

                                                                2013                     2012
                                                                ----                     ----

    Revenues by geography (in
     thousands):

      Americas                                              $631,108                 $484,953

      Europe                                                 162,826                  118,294

      Asia Pacific                                            98,699                   92,220
                                                              ------                   ------

                                                            $892,633                 $695,467
                                                            ========                 ========

    As a percentage of total
     revenues:

    Revenues by geography:

      Americas                                                    71%                      70%

      Europe                                                      18                       17

      Asia Pacific                                                11                       13
                                                                 ---                      ---

                                                                 100%                     100%
                                                                 ===                      ===
    Three Months
    Ended
    Three Months
    Ended                         Three Months
    Ended

                                                                        April 30, 2013              January 31, 2013                             April 30, 2012

                                                                          compared to                  compared to                                 compared to

                                                                         Three Months                 Three Months                                Three Months

                                                                     Ended April 30, 2012        Ended January 31, 2012                          Ended April 30,
                                                                                                                                                      2011
                                                                        --------------------     ----------------------                         ----------------

    Revenue constant
     currency growth rates
     (as compared to the
     comparable prior
     periods)

                            Americas                                                     30%                        34%                                        43%

                            Europe                                                       38%                        39%                                        33%

                            Asia Pacific                                                 17%                        22%                                        30%

                            Total growth                                                 30%                        33%                                        39%

    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, 2013             January 31, 2013

                                                                       compared to                 compared to

                                                                     April 30, 2012             January 31, 2012
                                                                     --------------             ----------------

    Deferred revenue,
     current and
     noncurrent constant
     currency growth rates

     (as compared to the
      comparable prior
      periods)

        Total growth                                                                     31%                        34%

    We present constant currency information to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations.

    Supplemental Diluted
     Share Count
     Information (1)

    (in thousands)

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

                                                                        2013           2012
                                                                        ----           ----

                             Weighted-average shares
                             outstanding for basic earnings
                             per share                               588,385        552,600

                             Effect of dilutive securities
                             (2):

                            Convertible senior notes                  13,563         11,148

                             Warrants associated with the
                             convertible senior note hedges            8,214          4,832

                            Employee stock awards                     12,515         15,624

                             Adjusted weighted-average
                             shares outstanding and assumed
                             conversions for diluted
                             earnings per share                      622,677        584,204

                       (1)   Following the stockholders' approval, the Company amended its certificate
                             of incorporation on March 20, 2013, to increase the number of authorized
                             shares of common stock from 400.0 million to 1.6 billion and effect a
                             four-for-one stock split of the common stock through a stock dividend.
                             Accordingly, all share and per share data presented herein reflect the
                             impact of the increase in authorized shares and the stock split.

                       (2)   The effects of these dilutive securities were not included in the GAAP
                             calculation of diluted net loss per share 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,
                                                                    -------------------

                                                                        2013           2012
                                                                        ----           ----

                             Operating cash flow

                             GAAP net cash provided by
                              operating activities                  $283,189       $213,212

                             Less:

                             Capital expenditures                    (54,010)       (44,721)

                             Free cash flow                         $229,179       $168,491

    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 and strategic investments.

    Comprehensive Loss

    (in thousands)                                                 Three Months Ended
                                                                        April 30,
                                                                  -------------------

                                                                        2013           2012
                                                                        ----           ----

                             Net loss                               $(67,721)      $(19,475)

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

                             Foreign currency translation and
                              other losses                            (5,760)        (3,188)

                             Unrealized gains on investments           1,721          1,120

                             Other comprehensive loss, before
                              tax                                     (4,039)        (2,068)

                             Tax effect                                  628           (418)

                             Other comprehensive loss,  net
                              of tax                                  (3,411)        (2,486)

                             Comprehensive loss                     $(71,132)      $(21,961)

    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,

                                                               2013         2012
                                                               ----         ----

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

           GAAP gross profit                               $683,639     $543,916

           Plus:

            Amortization of purchased
            intangibles (a)                                  21,305       17,448

           Stock-based expenses (b)                          10,678        7,253

           Non-GAAP gross profit                           $715,622     $568,617

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

           GAAP operating expenses                         $728,179     $566,165

           Less:

            Amortization of purchased
            intangibles (a)                                  (2,460)      (3,427)

           Stock-based expenses (b)                        (104,051)     (74,013)

           Non-GAAP operating expenses                     $621,668     $488,725

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

           GAAP loss from operations                       $(44,540)    $(22,249)

           Plus:

            Amortization of purchased
            intangibles (a)                                  23,765       20,875

           Stock-based expenses (b)                         114,729       81,266

           Non-GAAP income from operations                  $93,954      $79,892

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

           GAAP non-operating loss                          $(9,403)     $(2,619)

            Plus: Amortization of debt
            discount, net                                     9,240        4,883

            Non-GAAP non-operating income
            (loss)                                            $(163)      $2,264

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

           GAAP net loss                                   $(67,721)    $(19,475)

           Plus:

            Amortization of purchased
            intangibles (a)                                  23,765       20,875

           Stock-based expenses (b)                         114,729       81,266

            Amortization of debt discount,
            net                                               9,240        4,883

           Less:

            Income tax effects and
            adjustments                                     (19,049)     (33,095)

           Non-GAAP net income                              $60,964      $54,454

           Diluted earnings per share (e)
           -----------------------------

           GAAP diluted loss per share (d)                   $(0.12)      $(0.04)

           Plus:

            Amortization of purchased
            intangibles                                        0.04         0.04

           Stock-based expenses                                0.19         0.14

            Amortization of debt discount,
            net                                                0.01         0.01

           Less:                                                      .

            Income tax effects and
            adjustments                                       (0.02)       (0.06)

            Non-GAAP diluted earnings per
            share                                             $0.10        $0.09

            Shares used in computing
            diluted net income per share
            (e)                                             622,677      584,204

    a)      Amortization of purchased
            intangibles were as follows:

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

                                                               2013         2012
                                                               ----         ----

           Cost of revenues                                 $21,305      $17,448

           Marketing and sales                                2,460        3,427

                                                            $23,765      $20,875
                                                            =======      =======

    b)      Stock-based expenses were as
             follows:

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

                                                               2013         2012
                                                               ----         ----

           Cost of revenues                                 $10,678       $7,253

           Research and development                          24,429       15,667

           Marketing and sales                               59,802       41,987

           General and administrative                        19,820       16,359

                                                           $114,729      $81,266
                                                           ========      =======

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

    e)      Prior period results have
            been adjusted to reflect
            the four for one stock
            split through a stock
            dividend which occurred in
            April 2013 (See
            Supplemental Diluted Share
            Count Information for
            additional details)

    salesforce.com, inc.

    COMPUTATION OF BASIC AND DILUTED GAAP AND NON-GAAP NET INCOME
     (LOSS) PER SHARE (1)

    (in thousands, except per share data)

    (Unaudited)

                                          Three Months
                                             Ended

                                           April 30,

                                                     2013             2012
                                                     ----             ----

            GAAP Basic Net Loss
            Per Share

           Net loss                              $(67,721)        $(19,475)

            Basic net loss per
            share                                  $(0.12)          $(0.04)

            Shares used in
            computing basic net
            loss per share                        588,385          552,600

                                          Three Months
                                             Ended

                                           April 30,

                                                     2013             2012
                                                     ----             ----

            Non-GAAP Basic Net
            Income Per Share

           Non-GAAP net income                    $60,964          $54,454

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

            Shares used in
            computing basic net
            income per share                      588,385          552,600

                                          Three Months
                                             Ended

                                           April 30,

                                                     2013             2012
                                                     ----             ----

            GAAP Diluted Net
            Loss Per Share

           Net loss                              $(67,721)        $(19,475)

            Diluted net loss per
            share                                  $(0.12)          $(0.04)

            Shares used in
            computing diluted
            net loss per share                    588,385          552,600

                                          Three Months
                                             Ended

                                           April 30,

                                                     2013             2012
                                                     ----             ----

            Non-GAAP Diluted
            Net Income Per
            Share

           Non-GAAP net income                    $60,964          $54,454

            Diluted Non-GAAP
            net income per
            share                                   $0.10            $0.09

            Shares used in
            computing diluted
            net income per
            share                                 622,677          584,204

      (1)   Prior period results
            have been adjusted to
            reflect the four for
            one stock split through
            a stock dividend which
            occurred in April 2013
            (See Supplemental
            Diluted Share Count
            Information for
            additional details)

SOURCE salesforce.com


Source: PR Newswire