There aren't many $100 billion companies that are growing revenue at 20% per year. Yet Salesforce.com (CRM +2.36%) is doing that and more, as can be seen in its strong fiscal 2019 third-quarter results, which were reported this week.
Salesforce.com results: The raw numbers
|
Metric |
Q3 2019 |
Q3 2018 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$3.392 billion |
$2.701 billion |
26% |
|
Operating cash flow |
$143 million |
$125 million |
14% |
|
Adjusted EPS |
$0.61 |
$0.42 |
45% |
Data source: Salesforce.com Q3 2019 earnings release.
Image source: Getty Images.
What happened with Salesforce.com this quarter?
Salesforce is enjoying broad-based growth. Revenue in its sales, service, marketing, and platform businesses rose 11%, 24%, 37%, and 51%, respectively.
Moreover, unearned revenue -- essentially business that's been booked but not yet fulfilled -- increased 25% to $5.4 billion. And remaining performance obligation, which represents future revenue that's under contract but not yet recognized, climbed 34% to $21.2 billion.
Salesforce is benefiting from the global shift toward digitally delivered services. "Companies across every industry, in every geography have a mandate to digitally transform their businesses and are turning to Salesforce as a strategic partner," co-CEO Keith Block said in a press release.
One of Salesforce's recent acquisitions -- MuleSoft -- is helping the company capture a larger share of this immense opportunity. The application platform is enjoying strong demand for its data integration solutions.
"Integration has become a strategic imperative for all of our customers," Block said during a conference call with analysts. "It has captured the attention of C-level executives in virtually every conversation I have."
However, Salesforce's investments in MuleSoft and other growth initiatives did weigh on its profit margins in the third quarter. Non-GAAP operating margin decreased by 76 basis points year over year to 16.9%.
All told, non-GAAP operating income -- which excludes stock-based compensation expense -- rose 20% to $572 million. Operating cash flow, meanwhile, increased 14% to $143 million.
Looking forward
These strong results prompted Salesforce to boost its full-year guidance. The company now expects:
- Revenue of $13.23 billion to $13.24 billion -- up from a prior estimate of $13.125 billion to $13.175 billion -- representing year-over-year growth of 26%.
- Non-GAAP EPS of $2.60 to $2.61, up from $2.50 to $2.52.
Salesforce also issued revenue guidance for fiscal 2020. Management expects revenue to increase as much as 21%, to $16 billion.
"I'm thrilled that Salesforce will be the fastest enterprise software company in history to reach $16 billion in revenue," Chairman and Co-CEO Marc Benioff said.
