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Salesforce Q2 Earnings Top Forecasts

August 26, 2020

Salesforce reported results for its fiscal second quarter ended July 31, 2020.

"It's humbling to have had one of the best quarters in Salesforce's history against the backdrop of multiple crises seriously affecting our communities around the world," said Marc Benioff, Chair and CEO of Salesforce. "Salesforce was founded on our belief in stakeholder capitalism and our core values of trust, customer success, innovation and equality. Our success in the quarter brought all of this together with the power of our Customer 360 platform, the resilience of our business model, putting our customers first and doing our part to take care of all of our stakeholders. We know that together we have an opportunity to emerge from these times even stronger."

Salesforce delivered the following results for its fiscal second quarter:

Revenue: Total second quarter revenue was $5.15 billion, an increase of 29% year-over-year, and 29% in constant currency. Subscription and support revenues for the quarter were $4.84 billion, an increase of 29% year-over-year. Professional services and other revenues for the quarter were $0.31 billion, an increase of 23% year-over-year.

Wall Street only expected $4.90 billion in revenue.

Earnings per Share: Second quarter GAAP diluted earnings per share was $2.85, and non-GAAP diluted earnings per share was $1.44. Mark-to-market accounting of the company's strategic investments, required by ASU 2016-01, benefited GAAP diluted earnings per share by $0.55 based on a U.S. tax rate of 25% and non-GAAP diluted earnings per share by $0.58 based on a non-GAAP tax rate of 22%. GAAP diluted earnings per share was also benefited by $2.17 as the company changed its international corporate structure, which included the consolidation of intangible property, resulting in a $2 billion net tax benefit related to foreign deferred tax assets. Please note that this had no impact on Non-GAAP diluted earnings per share, as the company utilizes a fixed long-term projected non-GAAP tax rate, which generally excludes effects for discrete events.

The firm's earnings of $1.44 per share, adjusted was well above the 67 cents per share which was expected.

The cloud company guided at 73 cents to 74 cents in adjusted earnings per share on $5.24 billion to $5.25 billion in revenue for Q3. Investors were looking for guidance of 77 cents in adjusted earnings per share on $5.01 billion in revenue.

For 2021, Salesforce set expectations at $3.72 to $3.74 in adjusted earnings per share and $20.70 billion to $20.80 billion in revenue. Wall Street was only looking for $2.96 in adjusted earnings per share and $20.07 billion in revenue for that period.

Cash: Cash generated from operations for the second quarter was $0.43 billion, a decrease of 2% year-over-year. Total cash, cash equivalents and marketable securities ended the second quarter at $9.28 billion.

Remaining Performance Obligation: Remaining performance obligation ended the second quarter at approximately $30.6 billion, an increase of 21% year-over-year. Current remaining performance obligation ended the second quarter at approximately $15.2 billion, an increase of 26% year-over-year, 24% in constant currency.

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