SAN FRANCISCO--(BUSINESS WIRE)--Salesforce (NYSE: CRM), the #1 AI CRM, today announced results for its second quarter fiscal 2025 ended July 31, 2024.
Second Quarter Highlights
- Second Quarter Revenue of $9.33 Billion, up 8% Year-Over-Year (“Y/Y”), up 9% in Constant Currency (“CC”), inclusive of Subscription & Support Revenue of $8.76 Billion, up 9% Y/Y, up 10% Y/Y in CC
- Second Quarter GAAP Operating Margin of 19.1% and non-GAAP Operating Margin of 33.7%
- Current Remaining Performance Obligation of $26.5 Billion, up 10% Y/Y, up 11% Y/Y in CC
- Second Quarter Operating Cash Flow of $0.89 Billion, up 10% Y/Y, and Free Cash Flow of $0.76 Billion, up 20% Y/Y
- Returned $4.3 Billion in the Form of Share Repurchases and $0.4 Billion in Dividend Payments to Stockholders
- Initiates Third Quarter FY25 Revenue Guidance of $9.31 Billion to $9.36 Billion, up 7% Y/Y
- Maintains Full Year FY25 Revenue Guidance of $37.7 Billion to $38.0 Billion, up 8% - 9% Y/Y and Maintains Full Year FY25 Subscription & Support Revenue Growth Guidance of Slightly Below 10% Y/Y & Approximately 10% in CC
- Updates Full Year FY25 GAAP Operating Margin Guidance to 19.7% and Updates non-GAAP Operating Margin Guidance to 32.8%
- Raises Full Year FY25 Operating Cash Flow Growth Guidance to 23% to 25% Y/Y
“We continue to deliver disciplined profitable growth and this quarter, operating margins closed at record highs with GAAP operating margin of 19.1%, up 190 basis points year-over-year, and Non-GAAP operating margin of 33.7%, up 210 basis points year-over year,” said Amy Weaver, President and CFO of Salesforce. “Our capital return program remains a priority and we now expect to more than fully offset our dilution from FY25 stock based compensation.”
Guidance
Our guidance includes GAAP and non-GAAP financial measures.
Q3 FY25
Guidance
Full Year FY25
Guidance
Total Revenue
$9.31 - $9.36 Billion
$37.7 - $38.0 Billion
Y/Y Growth
7%
8 - 9%
FX Impact(1)
None
($100M) Y/Y FX
Subscription & Support Revenue Growth (Y/Y)(2)(3)
N/A
Slightly below 10%, Approx 10% CC
GAAP Operating Margin
N/A
19.7%
Non-GAAP Operating Margin(3)
N/A
32.8%
GAAP Diluted Earnings per Share(3)
$1.41 - $1.43
$6.05 - $6.13
Non-GAAP Diluted Earnings per Share(3)
$2.42 - $2.44
$10.03 - $10.11
Operating Cash Flow Growth (Y/Y)
N/A
23% - 25%
Current Remaining Performance Obligation Growth (Y/Y)
9%
N/A
FX Impact(4)
$100M Y/Y FX
N/A
(1) Revenue FX impact is calculated by taking the current period rates compared to the prior period average rates.
(2) Subscription & Support revenue excludes professional services revenue.
(3) Non-GAAP CC revenue growth, non-GAAP operating margin and non-GAAP Diluted EPS are non-GAAP financial measures. See below for an explanation of non-GAAP financial measures. The Company's shares used in computing GAAP Diluted EPS guidance and non-GAAP Diluted EPS guidance excludes any impact to share count from potential Q3 - Q4 FY25 repurchase activity under our share repurchase program.
(4) Current Remaining Performance Obligation FX impact is calculated by taking the current period rates compared to the prior period ending rates.
The following is a reconciliation of GAAP operating margin guidance to non-GAAP operating margin guidance for the full year:
Full Year FY25
Guidance
GAAP operating margin(1)
19.7%
Plus
Amortization of purchased intangibles(2)
4.3%
Stock-based compensation expense(2)(3)
8.4%
Restructuring(2)(3)
0.4%
Non-GAAP operating margin(1)
32.8%
(1) GAAP operating margin is the proportion of GAAP income from operations as a percentage of GAAP revenue. Non-GAAP operating margin is the proportion of non-GAAP income from operations as a percentage of GAAP revenue.
(2) The percentages shown above have been calculated based on the midpoint of the low and high ends of the revenue guidance for full year FY25.
(3) The percentages shown in the restructuring line have been calculated based on charges associated with the Company's restructuring initiatives. Stock-based compensation expense excludes stock-based compensation expense related to the Company's restructuring initiatives, which is included in the restructuring line.
The following is a per share reconciliation of GAAP diluted EPS to non-GAAP diluted EPS guidance for the next quarter and the full year:
Fiscal 2025
Q3
FY25
GAAP diluted earnings per share range(1)(2)
$1.41 - $1.43
$6.05 - $6.13
Plus
Amortization of purchased intangibles
$
0.36
$
1.66
Stock-based compensation expense
$
0.85
$
3.26
Restructuring(3)
$
0.03
$
0.17
Less
Income tax effects and adjustments(4)
$
(0.23
)
$
(1.11
)
Non-GAAP diluted earnings per share(2)
$2.42 - $2.44
$10.03 - $10.11
Shares used in computing basic net income per share (millions)(5)
960
964
Shares used in computing diluted net income per share (millions)(5)
972
977
(1) The Company's GAAP tax provision is expected to be approximately 24% for the three months ended October 31, 2024, and approximately 22.0% for the year ended January 31, 2025. The GAAP tax rates may fluctuate due to discrete tax items and related effects in conjunction with certain provisions in the Tax Cuts and Jobs Act, future acquisitions or other transactions.
(2) The Company's projected GAAP and non-GAAP diluted EPS assumes no change to the value of our strategic investment portfolio as it is not possible to forecast future gains and losses. The impact of future gains or losses from the Company’s strategic investment portfolio could be material.
(3) The estimated impact to GAAP diluted EPS is in connection with the Company's restructuring initiatives.
(4) The Company’s non-GAAP tax provision uses a long-term projected tax rate of 22.0%, which reflects currently available information and could be subject to change.
(5) The Company's shares used in computing GAAP earnings per share guidance and non-GAAP earnings per share guidance excludes any impact to share count from potential Q3 - Q4 FY25 repurchase activity under our share repurchase program.
For additional information regarding non-GAAP financial measures see the reconciliation of results and related explanations below.
Management will provide further commentary around these guidance assumptions on its earnings call.
Chief Financial Officer Transition
Amy Weaver has made the decision to step down from her role as President and Chief Financial Officer at Salesforce. She will remain CFO until a successor is appointed. After that time, Amy will be an advisor to the company.
“Amy has been an incredible executive at Salesforce, leading many of the company’s most important strategic and operational initiatives over the last decade. And, she has been an amazing partner to me personally,” said Benioff. “Among her many contributions, Amy oversaw our successful financial transformation over the past several years – which has resulted in unprecedented margin expansion, increased operational excellence, and financial discipline across our organization. We are grateful that Amy’s transition period will allow us to conduct a thoughtful search for our next CFO, and we expect this to be a seamless transition.”
“My time at Salesforce has been an amazing journey, and it’s been a privilege to work alongside such a talented, dedicated and compassionate team,” said Weaver. “I’m especially proud of our work to drive increased profitability and productivity and introduce an enhanced capital return program, all while keeping our customers and our values as our north star. I am confident that Salesforce is well-positioned to accelerate its success in this next chapter.”
Product Releases and Enhancements
Three times a year Salesforce delivers new product releases, services, or enhancements to current products and services. These releases are a result of significant research and development investments made over multiple years, designed to help customers drive cost savings, boost efficiency, and build trust.
To view our major product releases and other highlights as part of the Summer 2024 Product Release, visit: www.salesforce.com/products/summer-24-release.
Environmental, Social, and Governance (ESG) Strategy
To learn more about our latest initiatives and priorities, review our Stakeholder Impact Report: https://salesforce.com/stakeholder-impact-report.
Quarterly Conference Call
Salesforce plans to host a conference call at 2:00 p.m. (PT) / 5:00 p.m. (ET) to discuss its financial results with the investment community. A live webcast and replay details of the event will be available on the Salesforce Investor Relations website at www.salesforce.com/investor.
About Salesforce
Salesforce is the #1 AI CRM, empowering companies to connect with their customers in a whole new way through the power of CRM + AI + Data + Trust on one unified platform: Einstein 1. For more information visit: www.salesforce.com (NYSE: CRM).
“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements about the Company's financial and operating results and guidance, which include, but are not limited to, expected GAAP and non-GAAP financial and other operating and non-operating results, including revenue, net income, earnings per share, operating cash flow growth, operating margin, expected revenue growth, expected foreign currency exchange rate impact, expected current remaining performance obligation growth, expected tax rates or provisions, stock-based compensation expenses, amortization of purchased intangibles, shares outstanding, market growth, strategic investments, expected restructuring expense or charges and expected timing of product releases and enhancements. 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 or outcomes could differ materially and adversely from those expressed or implied by our forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements.
The risks and uncertainties referred to above include -- but are not limited to -- risks associated with:
- our ability to maintain sufficient security levels and service performance, avoid downtime and prevent, detect and remediate performance degradation and security breaches;
- our ability to secure sufficient data center capacity;
- our reliance on third-party infrastructure providers, including hardware, software and platform providers and the organizations responsible for the development and maintenance of the infrastructure of the Internet;
- uncertainties regarding AI technologies and their integration into our product offerings;
- our ability to achieve our aspirations, goals and projections related to our environmental, social and governance (“ESG”) initiatives;
- the effect of evolving government regulations, including those related to our industry and providing services on or accessing the Internet, and those addressing ESG matters, data privacy, cybersecurity, cross-border data transfers, government contracting and procurement, and import and export controls;
- current and potential litigation and regulatory investigations involving us or our industry;
- our ability to successfully expand or introduce new services and product features, including related to AI and Agentforce;
- our ability to successfully complete, integrate and realize the benefits from acquisitions or other strategic transactions;
- uncertainties regarding the pace of change and innovation and our ability to compete in the markets in which we participate;
- our ability to successfully execute our business strategy and our business plans, including efforts to expand internationally and related risks;
- our ability to predict and meet expectations regarding our operating results and cash flows, including revenue and remaining performance obligation, including as a result of the seasonal nature of our sales cycle and the variability in our results arising from the accounting for term license revenue products and some complex transactions;
- our ability to predict and limit customer attrition and costs related to those efforts;
- the demands on our personnel and infrastructure resulting from significant growth in our customer base and operations, including as a result of acquisitions;
- our real estate and office facilities strategy and related costs and uncertainties;
- the performance of our strategic investment portfolio, including fluctuations in the fair value of our investments;
- our ability to protect our intellectual property rights;
- our ability to maintain and enhance our brands;
- uncertainties regarding the valuation and potential availability of certain tax assets;
- the impact of new accounting pronouncements and tax laws;
- uncertainties affecting our ability to estimate our tax rate, including our tax obligations in connection with potential jurisdictional transfer of intellectual property;
- uncertainties regarding the effect of geopolitical events, inflationary pressures, market and macroeconomic volatility, financial institution instability, changes in monetary policy, foreign currency exchange rate and interest rate fluctuations, a potential shutdown of the U.S. federal government and climate change, natural disasters and actual or threatened public health emergencies on our workforce, business, and operating results;
- uncertainties regarding the impact of expensing stock options and other equity awards;
- the sufficiency of our capital resources, including our ability to execute our share repurchase program and declare future cash dividends;
- our ability to comply with our debt covenants and lease obligations; and
- uncertainties regarding impacts to our workforce and workplace culture, such as those arising from our current and future office environments or remote work policies or our ability to realize the expected benefits of the restructuring plan.
Salesforce, Inc. assumes no obligation and does not intend to revise or update publicly any forward-looking statements for any reason, except as required by law.
© 2024 Salesforce, Inc. All rights reserved. Salesforce and other marks are trademarks of Salesforce, Inc. Other brands featured herein may be trademarks of their respective owners.
Salesforce, Inc.
Condensed Consolidated Statements of Operations
(in millions, except per share data)
(Unaudited)
Three Months Ended July 31,
Six Months Ended July 31,
2024
2023
2024
2023
Revenues:
Subscription and support
$
8,764
$
8,006
$
17,349
$
15,648
Professional services and other
561
597
1,109
1,202
Total revenues
9,325
8,603
18,458
16,850
Cost of revenues (1)(2):
Subscription and support
1,556
1,515
3,116
3,025
Professional services and other
603
598
1,205
1,213
Total cost of revenues
2,159
2,113
4,321
4,238
Gross profit
7,166
6,490
14,137
12,612
Operating expenses (1)(2):
Research and development
1,349
1,220
2,717
2,427
Sales and marketing
3,224
3,113
6,463
6,267
General and administrative
711
632
1,358
1,270
Restructuring
99
49
107
760
Total operating expenses
5,383
5,014
10,645
10,724
Income from operations
1,783
1,476
3,492
1,888
Losses on strategic investments, net
(37
)
(29
)
0
(170
)
Other income
91
45
212
100
Income before provision for income taxes
1,837
1,492
3,704
1,818
Provision for income taxes
(408
)
(225
)
(742
)
(352
)
Net income
$
1,429
$
1,267
$
2,962
$
1,466
Basic net income per share
$
1.48
$
1.30
$
3.06
$
1.50
Diluted net income per share (3)
$
1.47
$
1.28
$
3.03
$
1.49
Shares used in computing basic net income per share
964
975
967
977
Shares used in computing diluted net income per share
973
986
979
987
(1) Amounts include amortization of intangible assets acquired through business combinations, as follows:
Three Months Ended July 31,
Six Months Ended July 31,
2024
2023
2024
2023
Cost of revenues
$
231
$
250
$
469
$
498
Sales and marketing
223
222
446
445
(2) Amounts include stock-based compensation expense, as follows:
Three Months Ended July 31,
Six Months Ended July 31,
2024
2023
2024
2023
Cost of revenues
$
132
$
112
$
251
$
215
Research and development
276
256
536
497
Sales and marketing
309
277
599
540
General and administrative
91
79
172
152
Restructuring
2
0
2
16
(3) During the three months ended July 31, 2024 and 2023, losses on strategic investments impacted GAAP diluted EPS by $(0.03) and $(0.02) based on a U.S. tax rate of 24.5% and non-GAAP diluted EPS by $(0.03) and $(0.02) based on a non-GAAP tax rate of 22.0% and 23.5%, respectively. During the six months ended July 31, 2024 and 2023, losses on strategic investments impacted GAAP diluted EPS by $0.00 and $(0.13) based on a U.S. tax rate of 24.5% and non-GAAP diluted EPS by $0.00 and $(0.13) based on a non-GAAP tax rate of 22.0% and 23.5%, respectively.
Salesforce, Inc.
Condensed Consolidated Statements of Operations
(As a percentage of total revenues)
(Unaudited)
Three Months Ended July 31,
Six Months Ended July 31,
2024
2023
2024
2023
Revenues:
Subscription and support
94
%
93
%
94
%
93
%
Professional services and other
6
7
6
7
Total revenues
100
100
100
100
Cost of revenues (1)(2):
Subscription and support
17
18
17
18
Professional services and other
6
7
6
7
Total cost of revenues
23
25
23
25
Gross profit
77
75
77
75
Operating expenses (1)(2):
Research and development
14
14
15
14
Sales and marketing
35
36
35
37
General and administrative
8
7
7
8
Restructuring
1
1
1
5
Total operating expenses
58
58
58
64
Income from operations
19
17
19
11
Losses on strategic investments, net
0
0
0
(1
)
Other income
1
0
1
1
Income before provision for income taxes
20
17
20
11
Provision for income taxes
(5
)
(2
)
(4
)
(2
)
Net income
15
%
15
%
16
%
9
%
(1) Amounts include amortization of intangible assets acquired through business combinations as a percentage of total revenues, as follows:
Three Months Ended July 31,
Six Months Ended July 31,
2024
2023
2024
2023
Cost of revenues
3
%
3
%
3
%
3
%
Sales and marketing
2
2
2
3
(2) Amounts include stock-based compensation expense as a percentage of total revenues, as follows:
Three Months Ended July 31,
Six Months Ended July 31,
2024
2023
2024
2023
Cost of revenues
2
%
1
%
1
%
1
%
Research and development
3
3
3
3
Sales and marketing
3
3
3
3
General and administrative
1
1
1
1
Restructuring
0
0
0
0
Salesforce, Inc.
Condensed Consolidated Balance Sheets
(in millions)
July 31, 2024
January 31, 2024
Assets
(unaudited)
Current assets:
Cash and cash equivalents
$
7,682
$
8,472
Marketable securities
4,954
5,722
Accounts receivable, net
5,391
11,414
Costs capitalized to obtain revenue contracts, net
1,851
1,905
Prepaid expenses and other current assets
1,984
1,561
Total current assets
21,862
29,074
Property and equipment, net
3,580
3,689
Operating lease right-of-use assets, net
2,130
2,366
Noncurrent costs capitalized to obtain revenue contracts, net
2,201
2,515
Strategic investments
5,017
4,848
Goodwill
48,941
48,620
Intangible assets acquired through business combinations, net
4,415
5,278
Deferred tax assets and other assets, net
4,034
3,433
Total assets
$
92,180
$
99,823
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other liabilities
$
5,220
$
6,111
Operating lease liabilities, current
559
518
Unearned revenue
15,222
19,003
Debt, current
0
999
Total current liabilities
21,001
26,631
Noncurrent debt
8,430
8,427
Noncurrent operating lease liabilities
2,404
2,644
Other noncurrent liabilities
2,712
2,475
Total liabilities
34,547
40,177
Stockholders’ equity:
Common stock
1
1
Treasury stock, at cost
(18,182
)
(11,692
)
Additional paid-in capital
62,143
59,841
Accumulated other comprehensive loss
(236
)
(225
)
Retained earnings
13,907
11,721
Total stockholders’ equity
57,633
59,646
Total liabilities and stockholders’ equity
$
92,180
$
99,823
Salesforce, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(Unaudited)
Three Months Ended July 31,
Six Months Ended July 31,
2024
2023
2024
2023
Operating activities:
Net income
$
1,429
$
1,267
$
2,962
$
1,466
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (1)
907
890
1,786
2,144
Amortization of costs capitalized to obtain revenue contracts, net
526
476
1,043
946
Stock-based compensation expense
810
724
1,560
1,420
Losses on strategic investments, net
37
29
0
170
Changes in assets and liabilities, net of business combinations:
Accounts receivable, net
(1,136
)
(768
)
6,026
5,355
Costs capitalized to obtain revenue contracts, net
(427
)
(331
)
(675
)
(606
)
Prepaid expenses and other current assets and other assets
(477
)
(52
)
(991
)
(343
)
Accounts payable and accrued expenses and other liabilities
220
(376
)
(535
)
(1,779
)
Operating lease liabilities
(158
)
(167
)
(243
)
(335
)
Unearned revenue
(839
)
(884
)
(3,794
)
(3,139
)
Net cash provided by operating activities
892
808
7,139
5,299
Investing activities:
Business combinations, net of cash acquired
0
0
(338
)
0
Purchases of strategic investments
(104
)
(182
)
(307
)
(287
)
Sales of strategic investments
52
13
105
22
Purchases of marketable securities
(550
)
(1,798
)
(3,802
)
(2,166
)
Sales of marketable securities
2,482
533
3,098
802
Maturities of marketable securities
898
462
1,534
1,247
Capital expenditures
(137
)
(180
)
(300
)
(423
)
Net cash provided by (used in) investing activities
2,641
(1,152
)
(10
)
(805
)
Financing activities:
Repurchases of common stock
(4,335
)
(1,949
)
(6,468
)
(4,003
)
Proceeds from employee stock plans
202
362
735
811
Principal payments on financing obligations
(285
)
(282
)
(405
)
(392
)
Repayments of debt
(1,000
)
(181
)
(1,000
)
(1,182
)
Payments of dividends
(384
)
0
(772
)
0
Net cash used in financing activities
(5,802
)
(2,050
)
(7,910
)
(4,766
)
Effect of exchange rate changes
(7
)
11
(9
)
28
Net decrease in cash and cash equivalents
(2,276
)
(2,383
)
(790
)
(244
)
Cash and cash equivalents, beginning of period
9,958
9,155
8,472
7,016
Cash and cash equivalents, end of period
$
7,682
$
6,772
$
7,682
$
6,772
Contacts
Mike Spencer Salesforce Investor Relations [email protected]
Carolyn Guss Salesforce Public Relations 415-536-4966 [email protected]
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