Source: Seeking Alpha
salesforce.com, inc. (NYSE:CRM)
Q2 2015 Earnings Conference Call
August 21, 2014 05:00 PM ET
John Cummings – Head, IR
Marc Benioff – CEO
Keith Block – President
Graham Smith – EVP
Mark Hawkins – CFO
Heather Bellini – Goldman Sachs
Matt Hedberg – RBC Capital Markets
Karl Keirstead – Deutsche Bank
Jason Maynard – Wells Fargo
Brent Thill – UBS
Ed Maguire – CLSA
Kirk Materne – Evercore
Good evening. My name is Jason, and I will be your conference operator today. At this time, I would like to welcome everyone to the Salesforce Fiscal Second Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.
I would now like to turn the call over to John Cummings, Head of Investor Relations. Sir, you may begin your conference.
John Cummings – Head, IR
Thanks so much, Jason and good afternoon everyone and thanks for joining us for our fiscal second quarter 2015 results conference call. Our second quarter results press release, SEC filings and a replay of today’s call can be found on our new IR website, www.salesforce.com/investor. We’ll also post the highlights of today’s call on Twitter at the handle @salesforce_IR.
With me on the call today, are Marc Benioff, Chief Executive Officer, Keith Block, President and Vice Chairman, Graham Smith, Executive Vice President and Mark Hawkins, Chief Financial Officer. The team will share a few prepared remarks and then we’ll turn the call over for questions. As a reminder our commentary today will primarily be in the non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings release issued about an hour ago.
During today’s call, we may offer additional metrics to provide further insight into our business or results. This detail may or may not be provided in the future. We may also reference certain unreleased services or features not yet available. We cannot guarantee the timing or availability of these services or features. So we recommend customers listening today make purchase decisions based on services and features currently available.
The purpose of the call today is to provide you with information regarding our fiscal second quarter results. Some of our comments may contain forward-looking statements, which are subject to risks, uncertainties and assumptions and should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, actual Company results could differ materially from these forward-looking statements.
A description of risks, uncertainties, and assumptions and other factors that could affect our financial results are included in our SEC filings, including our most recent report on Form 10-Q, particularly under the heading, Risk Factors.
So with that, let me turn the call over to Marc.
Marc Benioff – CEO
Okay, hey thanks so much John, I really appreciate it. And first, let me tell you I am so pleased to welcome Mark Hawkins, our new CFO to our team and he is on the call with us today. And once again, our enduring thanks to Graham Smith for a phenomenal six years as CFO and as you know Graham is still with us as a full time advisor to me and Mark and he is doing that until the end of March and Graham is also participating on the call today; as well as Keith Block our Vice Chairman and President and we’re really excited to tell you all the amazing things going on at salesforce.com.
First I want to tell you. I spent almost a third of the quarter leaving in Europe and it was an amazing experience. I know many of you followed my trails on social media. I was — we did very, very large customer programs in Paris, thousands of our customers there, as well as in Munich. We opened our new Paris Headquarters. We opened our new Salesforce tower in London and it was just an incredible time. We profiled our work with amazing companies in Europe, including a huge deal that we launch with Philips, where they are beginning a software company and building their next generation health applications right on the Salesforce platform and I was thrilled to have incredible press conference with the Philips CEO while I was in Paris. And then we profiled some amazing work that we’re doing for Louis Vuitton where we’ve rolled out a global clienteling net really profiling one of France’s most important companies, LVMH, and our incredible work for them.
And then moved on to Germany and we did the same thing. It was an incredible announcement and launch of what we’re doing with Roche and you may have seen some incredible demonstrations of technology at Roche’s next generation equipment built right onto our Service Cloud. It was just awesome. And again a multi thousand person program that we executed in Munich as well. It was really incredible.
Look first of all let me just thank all of our European customers and partners and employees that gave me unbelievable support while I was there and I really want to thank everybody for that. And now I just want to you know that Salesforce has become the absolute number CRM platform in the Europe and of course worldwide and also the fastest growing top 10 software company in the world. As you saw, we’ve got accelerating revenue growth to 38% growth in the quarter.
We’ve exceeded the $5 billion revenue run rate, the first enterprise cloud company to do that. Pretty incredible and I don’t think there’s ever been — I don’t think there’s ever been a software company that has grown at 38% at the $5 billion revenue line and we are thrilled to be that company and we’ve got a huge top line strategy. We also had just phenomenal execution of our ExactTarget acquisition. You probably saw that we bought ExactTarget a year ago. We’ve deeply integrated that into our enterprise and it is just incredible what has happened with them.
We’re also honored that Forbes yesterday named Salesforce the world’s most innovative company for the fourth year in row and that is just a testament to our relentless focus on customer success, delivering a truly innovative customer platform and honestly we’re just in shock on that recognition. We couldn’t believe it when we were the Forbes most innovative company in the world and now we’re the fourth. We’ve done it four years in a row. That’s just awesome and of course that Fortune has named us one of best places to work, top 10 recognition and we’re going for number one on that as well.
Look, our exceptional second record financial results just speak for themselves. Revenue growth accelerated 38% from a year ago to more than 1.3 billion. Less than a year after we surpassed our $4 billion revenue run rate, we’re now more than $5 billion. Deferred revenue grew by 31%. That really exceeded what we thought we could do and we’ve got dollar value of booked business on and off the balance sheet, grew 32% from last year at $7.4 billion, awesome. And now you can really see that clear trajectory, the $10 billion in revenue which has been our dream and when we start to get a look at our revenue, as well as our deferred business, you can start to connect the dots and see exactly how we’re going to get there and the speed and rate and growth and we’re super excited about our next big goal now after $5 billion which is going to be get to $10 billion.
Operating cash flow rose to $246 million, an increase of 34% year-over-year. That cash flow has been awesome this year, more than $719 million for the year so far and we are now guiding to more than 1.1 billion in operating cash flow for this year, which is really an incredible achievement for our Company and really I think speaks to the power and quality of the business model that we have put together. Not only we’ve got this awesome top line growth but we have phenomenal cash flow as well.
And while we delivered world class growth, we also our grew our operating margin, something we’re deeply committed to and we’re able to deliver non-GAAP EPS of $0.13, which also exceeded our guidance and we’re going to continue to grow and exceed and deliver these awesome EPS results as we head towards that $10 billion number.