Salesforce (CRM) Up On Q1 Earnings Beat And Upbeat Guidance
Zacks Investment Research | May 18, 2017 09:18PM ET
Shares of salesforce.com Inc. (NYSE:CRM) went up in the after-hours trade yesterday following better-than-expected results for first-quarter fiscal 2018. Moreover, an upbeat guidance for fiscal 2018 boosted investors’ confidence over the stock.
The world’s leading CRM platform provider reported adjusted earnings (including stock-based compensation but excluding all one-time items on a proportionate tax basis) of 6 cents per share, a penny ahead of the Zacks Consensus Estimate. However, the figure compared unfavorably with the year-ago quarter’s earnings of 8 cents, mainly due to elevated operating expenses and outstanding number of shares which more than offset benefit from strong top-line growth.
On a GAAP basis, Salesforce reported loss per share of a penny, while in the year-ago quarter it reported earnings of 6 cents. However, on a non-GAAP basis, the company posted earnings of 28 cents per share compared with 24 cents reported in the prior-year quarter.
Looking at the last quarter’s strong results and encouraging outlook for the forthcoming quarter and fiscal 2018, we believe that the stock may see upside movement during today’s trading session. Notably, the stock has outperformed the Zacks categorized Computer-Software industry in the year-to-date period. Salesforce has returned 28.9% during the said period compared with the industry’s gain of 14%.
Quarter in Detail
Although Salesforce disappointed on the earnings front, it continued to witness solid growth in revenues. The company’s revenues of $2.388 billion not only jumped 24.6% year over year, but also beat the Zacks Consensus Estimate of $2.351 billion. Moreover, reported revenues came above the guided range of $2.34–$2.35 billion. The improvement is primarily attributable to rapid adoption of the company’s cloud-based solutions.
Also, higher demand for the Salesforce ExactTarget Marketing Cloud platform, part of the Salesforce1 Customer Platform, drove the year-over-year upside in revenues.
Among its business segments, revenues at Subscription and Support climbed about 24% from the year-ago quarter to $2.201 billion. Professional Services and Other revenues surged almost 32.3% to $186.7 million.
Geographically, the company witnessed constant currency revenue growth of 24%, 29% and 36% in the Americas, Europe and Asia Pacific, respectively, on a year-over-year basis.
Salesforce’s adjusted gross profit (including stock-based compensation but excluding amortization expenses) came in at $1.781 billion, up 23.5%. However, gross margin contracted 60 basis points (bps) to 74.6%, primarily due to increased investment in infrastructure development, including the expansion of the international data center.
Adjusted operating expenses (including stock-based compensation but excluding amortization of acquisition-related intangibles) increased 26.8% from the prior-year quarter to $1.715 billion. This was primarily because of higher investments in research and development, marketing and sales, and general and administrative activities. However, as a percentage of revenues, operating expenses contracted 120 bps to 71.8%.
Salesforce posted adjusted operating income (including stock-based compensation but excluding amortization of acquisition-related intangibles) of $65.3 million compared with the year-ago figure of $89.6 million, while operating margin contracted 200 bps to 2.7%. The year-over-year contractions in adjusted operating income and margin were mainly due to higher costs.
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