salesforce(CRM) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Salesforce, Inc. as of April 30, 2024, and for the three months then ended, including Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows, along with accompanying notes Condensed Consolidated Balance Sheets The balance sheet shows total assets of $96.18 billion as of April 30, 2024, a decrease from $99.82 billion as of January 31, 2024, primarily due to reductions in accounts receivable and unearned revenue, while cash and marketable securities increased to $17.67 billion from $14.19 billion Condensed Consolidated Balance Sheet (in millions) | Account | April 30, 2024 | January 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $25,604 | $29,074 | | Goodwill | $48,940 | $48,620 | | Total Assets | $96,180 | $99,823 | | Total Current Liabilities | $23,149 | $26,631 | | Unearned Revenue | $16,061 | $19,003 | | Total Debt (Current & Noncurrent) | $9,429 | $9,426 | | Total Liabilities | $36,497 | $40,177 | | Total Stockholders' Equity | $59,683 | $59,646 | Condensed Consolidated Statements of Operations For the three months ended April 30, 2024, total revenues increased 11% year-over-year to $9.13 billion, with net income substantially increasing to $1.53 billion from $199 million in the prior-year period, resulting in diluted EPS of $1.56 up from $0.20 Statement of Operations Highlights (in millions, except per share data) | Metric | Q1 FY2025 (ended Apr 30, 2024) | Q1 FY2024 (ended Apr 30, 2023) | | :--- | :--- | :--- | | Total Revenues | $9,133 | $8,247 | | Gross Profit | $6,971 | $6,122 | | Income from Operations | $1,709 | $412 | | Net Income | $1,533 | $199 | | Diluted Net Income per Share | $1.56 | $0.20 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities for the three months ended April 30, 2024, was $6.25 billion, a 39% increase from $4.49 billion in the prior year, with major cash uses including $2.65 billion for investing activities and $2.11 billion for financing activities Cash Flow Summary (in millions) | Activity | Three Months Ended April 30, 2024 | Three Months Ended April 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,247 | $4,491 | | Net cash provided by (used in) investing activities | $(2,651) | $347 | | Net cash used in financing activities | $(2,108) | $(2,716) | | Net increase in cash and cash equivalents | $1,486 | $2,139 | Notes to Condensed Consolidated Financial Statements The notes provide detailed information on significant accounting policies, revenue disaggregation, investments, business combinations, debt, and restructuring activities, highlighting the acquisition of Spiff, Inc., ongoing restructuring efforts, the initiation of a cash dividend, and an expanded share repurchase program - The company operates as a single operating segment, as the Chief Operating Decision Maker (CODM) evaluates financial information on a consolidated basis[29] - In February 2024, the company acquired Spiff, Inc., an incentive compensation management platform, for a fair value of $419 million, resulting in $323 million of goodwill[85] - The company initiated a restructuring plan in January 2023 to reduce costs, which is substantially complete for employee actions and ongoing for real estate exits, with a new workforce reduction initiative beginning in Q1 FY25[94] - In February 2024, the company announced its first-ever cash dividend of $0.40 per share, which was paid in April 2024[102] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's Q1 FY25 financial performance, highlighting 11% year-over-year revenue growth to $9.1 billion and a significant increase in operating margin to 19%, driven by AI investment, multi-cloud adoption, and operational efficiency, while noting macroeconomic impacts Q1 FY2025 Financial Highlights | Metric | Q1 FY2025 | Change (YoY) | | :--- | :--- | :--- | | Revenue | $9.1 billion | +11% | | Operating Margin | 19% | +14 p.p. | | Diluted EPS | $1.56 | +$1.36 | | Operating Cash Flow | $6.2 billion | +39% | | Remaining Performance Obligation | $53.9 billion | +15% | - The company is focused on driving profitable growth through cost reduction and operational efficiencies, including a restructuring plan initiated in January 2023 and a targeted workforce reduction in Q1 FY2025[114] - Macroeconomic pressures continue to affect the business, leading to elongated sales cycles, additional deal approval layers, and deal compression[116] - The Board of Directors authorized an additional $10.0 billion for the Share Repurchase Program in February 2024, bringing the total authorization to $30.0 billion, with the company repurchasing $2.2 billion of stock in Q1 FY25[101][116] Results of Operations Total revenue for Q1 FY25 grew 11% to $9.13 billion, primarily driven by a 12% increase in Subscription and Support revenue, while Professional Services revenue declined 9%, and operating expenses as a percentage of revenue decreased from 69% to 57% due to lower restructuring costs Subscription and Support Revenue by Service Offering (in millions) | Service Offering | Q1 FY2025 Revenue | Growth Rate (YoY) | | :--- | :--- | :--- | | Sales | $1,998 | 10% | | Service | $2,182 | 11% | | Platform and Other | $1,718 | 10% | | Marketing and Commerce | $1,282 | 10% | | Integration and Analytics | $1,405 | 24% | | Total | $8,585 | 12% | Total Revenue by Geography (in millions) | Geography | Q1 FY2025 Revenue | Growth Rate (YoY) | | :--- | :--- | :--- | | Americas | $6,062 | 11% | | Europe | $2,145 | 10% | | Asia Pacific | $926 | 14% | | Total | $9,133 | 11% | - The decrease in operating expenses was largely driven by restructuring charges of only $8 million in Q1 FY25, compared to $711 million in Q1 FY24[138] Liquidity and Capital Resources As of April 30, 2024, Salesforce held $17.7 billion in cash, cash equivalents, and marketable securities, generated $6.2 billion in operating cash flow, and used cash for $2.2 billion in share repurchases, $388 million for its first dividend, and $338 million for the Spiff acquisition, with $9.4 billion in outstanding senior debt and an undrawn $3.0 billion revolving credit facility Key Liquidity and Capital Metrics (as of April 30, 2024) | Metric | Value (in billions) | | :--- | :--- | | Cash, Cash Equivalents & Marketable Securities | $17.7 | | Accounts Receivable | $4.3 | | Total Debt (Carrying Value) | $9.4 | | Revolving Credit Facility (undrawn) | $3.0 | - The company repurchased 7 million shares for approximately $2.2 billion in Q1 FY25 and has $16.2 billion remaining under its total $30.0 billion share repurchase authorization[150] - The company paid its first-ever cash dividend in April 2024, totaling approximately $388 million[152] Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to financial market risks, including foreign currency exchange risk, interest rate sensitivity, and risks associated with its strategic investment portfolio, noting the use of forward contracts to mitigate exchange rate volatility and potential impacts on market value from interest rate changes - The company is exposed to foreign currency fluctuations, primarily in the Euro, British Pound, Japanese Yen, Canadian Dollar, Australian Dollar, and Brazilian Real, and uses forward contracts to minimize this risk[158][159] - The fixed-income portfolio is subject to interest rate risk, where an immediate 100 basis point change in interest rates could result in an $80 million change in the portfolio's market value[161] - The strategic investment portfolio totaled $5.0 billion as of April 30, 2024, with investments in over 400 companies, and is subject to volatility and risk of capital loss[165] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of April 30, 2024, and confirmed no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures are effective to provide reasonable assurance that required information is recorded, processed, and reported in a timely manner[169] - No material changes to the company's internal control over financial reporting occurred during the quarter ended April 30, 2024[170] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings, including an ongoing securities class action litigation against its subsidiary Slack related to its 2019 direct listing, which was remanded by the U.S. Supreme Court for further proceedings, though management does not expect a material adverse impact on financial statements - The company is subject to ongoing securities class action litigation related to its subsidiary, Slack, concerning its 2019 registration statement, with the case remanded by the U.S. Supreme Court for further proceedings[110] - Management makes provisions for legal liabilities when probable and reasonably estimable, but believes the resolution of current matters will not have a material adverse impact on the company's financial statements[108][109] Risk Factors This section outlines significant operational, strategic, legal, financial, stock ownership, and general risks, including security breaches, service disruptions, intense competition, acquisition integration challenges, evolving data privacy and AI regulations, macroeconomic volatility, customer retention, and stock price fluctuations - Operational Risks: Major risks include security breaches, defects or disruptions in services, reliance on third-party infrastructure, and challenges in integrating acquisitions[176] - Strategic & Industry Risks: Key risks involve intense competition, the need to innovate and keep pace with technology (especially AI), maintaining brand reputation, and managing social and ethical issues related to AI[177] - Legal & Regulatory Risks: Significant risks stem from evolving data privacy laws (like GDPR and CCPA), cross-border data transfer restrictions, industry-specific regulations, and potential lawsuits for intellectual property infringement[178] - Financial Risks: The company faces risks from fluctuations in growth and tax rates, currency exchange volatility, and the impact of its subscription-based revenue model, where business downturns may not be immediately reflected in results[179] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity, including the repurchase of 7 million shares for approximately $2.2 billion during the three months ended April 30, 2024, and the issuance of 45,845 unregistered shares of common stock to former Spiff stockholders as part of the acquisition Share Repurchases (Q1 FY2025) | Month | Total Shares Purchased (millions) | Average Price Paid Per Share | | :--- | :--- | :--- | | February 2024 | 1 | $289.94 | | March 2024 | 3 | $305.32 | | April 2024 | 3 | $283.41 | | Total | 7 | N/A | - As of April 30, 2024, approximately $16.2 billion remained available for repurchase under the company's total $30.0 billion authorization[101][224] - On February 1, 2024, the company issued 45,845 unregistered shares of common stock to certain former stockholders of Spiff, Inc. as part of the acquisition[225]