Salesforce (NYSE: CRM), the global leader in CRM, today announced results for its second quarter fiscal 2023 ended July 31, 2022.
- Revenue of $7.72 Billion, up 22% Y/Y, 26% Constant Currency (“CC”)
- GAAP Earnings per Share (“EPS”) of $0.07 and Non-GAAP EPS of $1.19
- Current Remaining Performance Obligation of $21.5 Billion, up 15% Y/Y, 19% CC
- Third Quarter FY23 Revenue Guidance of $7.82 Billion to $7.83 Billion, up ~14% Y/Y, 18% CC
- Full Year FY23 Revenue Guidance of $30.9 Billion to $31.0 Billion, up ~17% Y/Y, 20% in CC
- Full Year FY23 GAAP Operating Margin Guidance of ~3.6% and Non-GAAP Operating Margin Guidance of ~20.4%
- Full Year FY23 Operating Cash Flow Guidance of ~16-17% Y/Y
- Announces share repurchase program authorized by Board of Directors to repurchase up to $10.0 Billion
“We had another strong quarter, with revenue of $7.7B growing 22% year-over-year and 26% in constant currency, showing yet again the durability of our business model,” said Marc Benioff, Salesforce Chair and Co-CEO. “And, we’re thrilled to initiate our first-ever share repurchase program to continue to deliver incredible value to our shareholders on our path to $50 billion in revenue in FY26.”
“Our results demonstrate the strength and diversity of our product portfolio across regions, industries and segments,” said Bret Taylor, Co-CEO, Salesforce. “In this more measured buying environment, our Customer 360 portfolio is even more strategic and relevant as our customers focus on productivity, efficiency and time to value.”
“We continue to deliver disciplined, profitable growth at scale, and have a capital allocation strategy that will make us an even better positioned company for the long term,” said Amy Weaver, President and CFO, Salesforce.
Salesforce delivered the following results for its fiscal second quarter:
Revenue: Total second quarter revenue was $7.72 billion, an increase of 22% Y/Y, and 26% CC. Subscription and support revenues were $7.14 billion, an increase of 21% Y/Y. Professional services and other revenues were $0.58 billion, an increase of 35% Y/Y.
Operating Margin: Second quarter GAAP operating margin was 2.5%. Second quarter non-GAAP operating margin was 19.9%.
Earnings per Share: Second quarter GAAP diluted EPS was $0.07, and non-GAAP diluted EPS was $1.19. Mark-to-market accounting of the company’s strategic investments benefited GAAP diluted EPS by $0.03 based on a U.S. tax rate of 25% and non-GAAP diluted EPS by $0.04 based on a non-GAAP tax rate of 22%.
Cash Flow: Operating cash flow for the second quarter was $0.33 billion, a decrease of (13)% Y/Y. Free cash flow was $0.13 billion, a decrease of (24)% Y/Y.
Remaining Performance Obligation: Remaining performance obligation ended the second quarter at $41.6 billion, an increase of 15% Y/Y. Current remaining performance obligation ended at $21.5 billion, an increase of 15% Y/Y, 19% CC.
Forward Looking Guidance
As of August 24, 2022, the company is initiating its third quarter GAAP and non-GAAP EPS guidance, current remaining performance obligation growth guidance, and revenue guidance. The company is updating its full year FY23 revenue guidance, GAAP and non-GAAP EPS guidance, GAAP and non-GAAP operating margin guidance, and operating cash flow guidance.
Our guidance assumes no change to the value of the company’s strategic investment portfolio as it is not possible to forecast future gains and losses. In addition, the guidance below is based on estimated GAAP tax rates that reflect the company’s currently available information, and excludes forecasted discrete tax items such as excess tax benefits from stock-based compensation. The GAAP tax rates may fluctuate due to future acquisitions or other transactions.
|
Q3 FY23 Guidance |
|
Full Year FY23 Guidance |
|
|
Revenue(1) |
$7.82 – $7.83 Billion |
|
$30.9 – $31.0 Billion |
|
Y/Y Growth |
~14% |
|
~17% |
|
FX Impact(2) |
~($250M) y/y FX |
|
~($800M) y/y FX |
|
GAAP operating margin |
N/A |
|
~3.6% |
|
Non-GAAP operating margin(3) |
N/A |
|
~20.4% |
|
GAAP earnings per share(3) |
$0.09 – $0.10 |
|
$0.38 – $0.40 |
|
Non-GAAP earnings per share(3) |
$1.20 – $1.21 |
|
$4.71 – $4.73 |
|
Operating Cash Flow Growth (Y/Y) |
N/A |
|
~16% – 17% |
|
Current Remaining Performance Obligation Growth (Y/Y) |
~12% |
|
N/A |
|
FX Impact(4) |
~(3 pts) |
|
N/A |
|
(1) Full Year fiscal 2023 revenue guidance includes contributions from Slack Technologies, Inc. of approximately $1.5 billion, net of purchase accounting. |
|||
|
(2) Revenue FX impact is calculated by taking the current period rates compared to the prior period average rates. |
|||
|
(3) Non-GAAP operating margin and non-GAAP earnings per share are non-GAAP financial measures. Refer to the Appendix for an explanation of non-GAAP financial measures. The Company’s Shares used in computing GAAP earnings per share and Non-GAAP earnings per share assumes no change in share count based on 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 FY23 Guidance |
|
GAAP operating margin(1) |
|
~3.6% |
|
Plus |
|
|
|
Amortization of purchased intangibles(2) |
|
6.3% |
|
Stock-based compensation expense(2) |
|
10.5% |
|
Non-GAAP operating margin(1) |
|
~20.4% |
|
(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 FY23. |
||
The following is a per share reconciliation of GAAP diluted earnings per share to non-GAAP diluted earnings per share guidance for the next quarter and the full year:
|
|
Fiscal 2023 |
||||||
|
|
Q3 |
|
FY23 |
||||
|
GAAP earnings per share range(1)(2) |
$0.09 – $0.10 |
|
|
$0.38 – $0.40 |
|
||
|
Plus |
|
|
|
||||
|
Amortization of purchased intangibles |
$ |
0.46 |
|
|
$ |
1.93 |
|
|
Stock-based compensation expense |
$ |
0.81 |
|
|
$ |
3.23 |
|
|
Less |
|
|
|
||||
|
Income tax effects and adjustments(3) |
$ |
(0.16 |
) |
|
$ |
(0.83 |
) |
|
Non-GAAP diluted earnings per share(2) |
$1.20 – $1.21 |
|
|
$4.71 – $4.73 |
|
||
|
Shares used in computing basic net (loss) per share (millions)(4) |
|
1,004 |
|
|
|
1,001 |
|
|
Shares used in computing diluted net income per share (millions)(4) |
|
1,018 |
|
|
|
1,011 |
|
|
(1) The Company’s GAAP tax provision is expected to be approximately 60% for the three months ended October 31, 2022, and approximately 54% for the year ended January 31, 2023. 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 earnings per share 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 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. |
|||||||
|
(4) The Company’s Shares used in computing GAAP earnings per share and Non-GAAP earnings per share assumes no change in share count based on 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.
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.
Tune in to Martech Cube Podcast for visionary Martech Trends, Martech News, and quick updates by business experts and leaders!