Salesforce.com Inc. (CRM, Financial) recently reported a 26% year-over-year growth to $1.44 billion in its fourth-quarter revenues and a 32% year-over-year growth to $5.37 billion in annual revenue for FY2015, in line with consensus estimates. The company attributed the positive results to more businesses opting for Cloud software services that are easier to manage and cost less. With the company logging in diluted non-GAAP earnings of $0.14 per share and $0.52 respectively for the last quarter and full-year 2015, shares of the company jumped 9.51% or $5.98 in after-hours trading following the report.
Growth across segments narrows net loss
While Salesforce.com, Inc. raked in $1.44 billion in revenues in Q4 2015, the company narrowed its net loss to $65.8 million or 10 cents a share compared to the prior-year quarter’s loss of $116.6 million or 19 cents a share. Excluding items such as stock-based compensation and amortization and real estate expenses, the company earned 14 cents a share.
Concurrently, for the full-year 2015, Salesforce’s GAAP earnings stood at $0.42 per share, losing around half a billion dollars in stock-based compensation, $47 million in non-cash interest expenses and $155 million in amortization expenses. While the company reported a 22% improvement to $332 million in operating cash flow for the fourth quarter, it also logged a 34% improvement to $1.17 billion in its operating cash flow for the full fiscal year ended January 31, 2015.
Segmentwise, Salesforce saw a 25% year-over-year growth to $1.35 billion in revenues in the fourth quarter from its Subscription and Support division, which accounts for around 93 percent of the company’s overall revenue. At the same time, revenue from its Professional Services and other divisions grew 41% year-over-year to $99 million. For the full-fiscal 2015, revenue from Subscription and Support grew 31% to $5.01 billion compared to 2014 figures, while Professional Services and other revenues grew 46% to $360 million.
Salesforce announced that it had closed almost 550 deals in the 7- and 8-figure range in FY2015, the most in the company’s history in a single fiscal, with the average size of deals also seeing a significant increase. The company also revealed that its newly launched analytics Cloud venture took off faster than any other product in its portfolio.
At the same time, market rival Workday Inc (NYSE: WDAY) reported a better-than-expected 60 percent jump in quarterly revenue on the back of robust subscription growth for its web-based software for the human resources segment.
Currency headwinds hurt 2016 guidance
Following robust Q4 and full-year results for fiscal 2015, Salesforce revealed its guidance for the forthcoming fiscal 2016. The company set guidance in the $1.485-$1.505 billion range, translating to a 21%-23% year-over-year growth, with non-GAAP earnings projected to be 13-14 cents a share for Q1 2016. For the full fiscal 2016, Salesforce foresees a 20% growth in revenues, with the figure resting in the $6.475-$6.52 billion range and a cash flow growth of 22% to 23%. Non-GAAP earnings are expected to lay in the 67-69 cents a share range.
The company, which majorly competes with likes of Oracle Corp (ORCL, Financial) and Europe's biggest software group SAP SE (SAP, Financial), generates around 30% of its total revenue from business across the globe other than U.S. Consequently, Salesforce attributed the lower-than-expected figures to an anticipated loss of around $200 million owing to foreign exchange headwinds. The dollar, which has grown 9% in the last quarter ending on January 31, is expected to continue its strong stride upwards through 2015.
Salesforce, which expects strong demand for its web-based sales and marketing software and services in the upcoming fiscal, intends to continue working on growth strategies such as expansion of its cloud ecosystem, industry messaging and solutions and international operations.
Final thoughts
Salesforce.com, Inc. witnessed a good run in fiscal 2015, with the company delivering estimate-matching growth of over 30% in revenue and earnings as well as deferred revenue and operating cash flow. The company, which touched the $5 billion annual revenue mark faster than all other enterprise software businesses, also exceeded its own guidance in improving its non-GAAP operating margin. While some sceptics remain bearish on the Salesforce stock on the back of a toned down outlook, the expert consensus estimate pegs the stock as a ‘buy’ for the mid to long-term, expecting an annual average growth of 25.87% over the next five years.
