Salesforce Reports Record Q2 with 22 Percent Increase in Revenue

Company raises guidance for fiscal year 2020.

Salesforce Reports Record Q2 with 22 Percent Increase in Revenue

Source: Salesforce

Last week, leading CRM provider Salesforce (NYSE: CRM) reported record revenue for the second quarter of its fiscal year 2020. For the quarter ended July 31, 2019, Salesforce reported revenue of $4.0 billion, a 22% increase year-over-year, exceeding estimates. Subscription and support revenues comprised the majority of total revenue at $3.75 billion, also a 22% increase year-over-year, driven by Sales Cloud revenue of $1.13 billion and Service Cloud revenue of $1.09 billion. Professional services and other revenue made up the remaining $252 million, a 14% increase year-over-year.

Following an outstanding quarter, we’re raising our FY20 revenue guidance to $16.9 billion at the high-end of the range, said Marc Benioff, chairman and co-CEO of Salesforce in an August 22 news release. With our Customer 360 vision, Einstein AI and the millions of Trailblazers innovating on our platform, Salesforce has never been better positioned for the future.

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Co-CEO Keith Block also commented on the companys strong Q2 results.

An enormous wave of digital transformation is sweeping across every industry, and major brands, like FedEx, AXA and Unicredit, turned to Salesforce in the quarter to propel their growth. The trust our customers have in us to drive their digital transformations is reflected in our strong quarterly results across our clouds and regions, said Block.

In the earnings call, Block mentioned other key customers – Union Pacific Railroad who is using the CRM platform to deliver better service, Airbnb who is using the Marketing Cloud for global messaging and Marriott who uses Salesforce to better anticipate their guests unique travel needs.

Other highlights for the quarter include:

  • Remaining performance obligation at the end of the second quarter was $25.3 billion, a 20% increase year-over-year, including $350 million from the combination with Salesforce.org.
  • Current remaining performance obligation is $12.1 billion, a 23% increase year-over-year.
  • Net income was $91 million.
  • GAAP diluted earnings per share were $0.11. Non-GAAP diluted earnings per share were $0.66.
  • Cash from operations was $436 million, a 5% decrease year-over-year.
  • Total cash, cash equivalents and marketable securities on July 31, 2019 was $6.04 billion.

As a result of the second quarters record results, the company is adjusting its guidance. Guidance for the third quarter and the full fiscal year 2020 are as follows:

Q3 FY20 Guidance

Full Year 2020 Guidance

Revenue

$4.44-$4.45 billion

$16.75-$16.9 billion

Year-over-year growth

31%

26%-27%

GAAP loss per share

($0.21)-($0.20)

$0.28-$0.30

Non-GAAP earnings per share

$0.65-$0.66

$2.82-$2.84

Operating cash flow (Y/Y)

N/A

21%-22%

Current remaining performance obligation growth (Y/)

24% to 25%

N/A

As Benioff mentioned in the news release, Salesforce is raising its guidance for the next quarter. That is due, in part, to the acquisitions of Tableau, Salesforce.org and ClickSoftware.

Since the August 22, 2019 earnings report, Salesforce stock has risen from $148.24 per share to $155.14 per share, as of 7:59 p.m. EDT yesterday.

Salesforce Reports Record Q2 with 22 Percent Increase in Revenue

Source: Google

Insider Take:

In addition to growth through acquisitions, Salesforce continues on its upward trajectory, adding new clients to its portfolio and expanding on its popular cloud-based products. With customer service and analytics at the very core of what they do, Salesforce is practicing what it preaches and doing so very well. They are well positioned to achieve their increased guidance for the third quarter and fiscal year 2020 goals.