Salesforce.com Inc EBITDA jumped on 42% and EBITDA Margin increased slightly on 1.4 pp from 10.1% to 11.5%
02/28/2018 • About Salesforce.com Inc (
$CRM) • By InTwits
Salesforce.com Inc reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Salesforce.com Inc is a fast growth stock: FY2018 revenue growth was 24.9%, 5 year revenue CAGR was 28.1% at FY2018 ROIC 4.2%
- EBITDA Margin is expanding: 11.5% in FY2018 vs. 10.1% in FY2017 vs. 2.0% in FY2014
- EBITDA Margin is quite volatile: 11.5% in FY2018, 10.1% in FY2017, 9.6% in FY2016, 5.6% in FY2015, 2.0% in FY2014
- Salesforce.com Inc spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 is 9.9%. Average EBITDA Margin for the same period was 8.8%
- Salesforce.com Inc has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.8%. At the same time it's in pair with industry average of 3.1%
- CAPEX is quite volatile: $534m in FY2018, $464m in FY2017, $710m in FY2016, $290m in FY2015, $299m in FY2014
- The company has potentially unprofitable business model: ROIC is 4.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Salesforce.com Inc's Revenue jumped on 24.9%. Revenue growth showed small slowdown in FY18Q4 - it was 22.5% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 1.4 pp from 10.1% to 11.5% in FY2018. EBITDA Margin stuck to a growing trend at 2.3 pp per annum in the last 5 years.
Gross Margin showed almost no change in FY2018. Gross Margin followed a declining trend at -0.75 pp per annum in FY2014-FY2018. SG&A as a % of Revenue decreased slightly on 2.0 pp from 56.6% to 54.6% in FY2018. SG&A as a % of Revenue followed a declining trend at -3.4 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018.
Net Income margin showed almost no change in FY2018. Net Income margin grew at 2.7 pp per annum in FY2014-FY2018. The efficient tax rate was 14.3% in FY2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 5.1% in FY2018. CAPEX/Revenue showed almost no change from FY2015 to FY2018. Average CAPEX/Revenue for the last three years was 7.1%.
Accounts receivable as a % of Revenue decreased slightly on 0.69 pp from 37.9% to 37.2% in FY2018.
Salesforce.com Inc has spent
$25m on M&A in FY2018 which accounts for 0.24% of revenue.
Return on investment
The company operates at low ROIC (4.2%) and ROE (4.0%). ROIC increased slightly on 1.4 pp from 2.8% to 4.2% in FY2018. ROE decreased slightly on 1.1 pp from 5.2% to 4.0% in FY2018. ROIC grew at 2.8 pp per annum in FY2014-FY2018. ROE grew at 3.8 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is -0.7x Net Debt / EBITDA and 1.4x Debt / EBITDA. Debt dropped on 14.4% while cash jumped on 58.3%.
Salesforce.com Inc has good short term financial stability: Interest coverage ratio (ICR) is 5.2x. Salesforce.com Inc has no short term refinancing risk: cash is higher than short term debt (248.1%).
Average interest expence paid by the company was 5.1% in FY2018.
Valuation and dividends
The company's trades at EV/EBITDA 74.3x and P/E 251.4x.
Management team
CEO total compensation was
$4,653,362 in FY2018 which included
$1,550,000 salary. Mark J Hawkins is a the company's CFO. Mark J Hawkins has spent 2 years at the company.
The company has 4.5% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 29,401 employees. The number of employees surged on 17.6%. Average revenue per employee in FY2018 was
$358,491 and it increased on 6.2%.
Financial and operational results
FY ended 01/31/2018
Salesforce.com Inc ($CRM) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 4,071 | 5,374 | 6,667 | 8,437 | 10,540 | 24.9% |
| Gross Profit | 3,103 | 4,084 | 5,013 | 6,203 | 7,767 | 25.2% |
| SG&A | 2,765 | 3,437 | 3,988 | 4,777 | 5,760 | 20.6% |
| EBITDA | 83 | 303 | 641 | 850 | 1,207 | 42.0% |
| EBIT | -286 | -146 | 115 | 218 | 454 | 108.3% |
| Interest expence | 77 | 73 | 72 | 89 | 87 | -2.2% |
| Tax | -126 | 50 | 112 | -144 | 60 | |
| Net Income | -232 | -263 | -47 | 323 | 360 | 11.5% |
| Stock Based Compensation | 495 | 565 | 594 | 820 | 997 | 21.6% |
Balance Sheet
|
|---|
| Cash | 782 | 908 | 1,158 | 1,607 | 2,543 | 58.3% |
| Accounts Receivable | 1,361 | 1,906 | 2,496 | 3,197 | 3,921 | 22.7% |
| Accounts Payable | | | | | 76 | |
| Short Term Debt | 572 | 0 | 0 | 0 | 1,025 | |
| Long Term Debt | 1,302 | 1,371 | 1,286 | 2,008 | 695 | -65.4% |
Cash flow
|
|---|
| Capex | 299 | 290 | 710 | 464 | 534 | 15.1% |
| Acquisitions | | -38 | 59 | 3,193 | 25 | -99.2% |
Ratios
|
|---|
| Revenue growth | 33.5% | 32.0% | 24.1% | 26.5% | 24.9% | |
| EBITDA growth | -21.4% | 263.1% | 111.7% | 32.7% | 42.0% | |
|
|---|
| Gross Margin | 76.2% | 76.0% | 75.2% | 73.5% | 73.7% | 0.2% |
| EBITDA Margin | 2.0% | 5.6% | 9.6% | 10.1% | 11.5% | 1.4% |
| EBIT Margin | -7.0% | -2.7% | 1.7% | 2.6% | 4.3% | 1.7% |
| SG&A, % of revenue | 67.9% | 64.0% | 59.8% | 56.6% | 54.6% | -2.0% |
| SBC, % of revenue | 12.2% | 10.5% | 8.9% | 9.7% | 9.5% | -0.3% |
| Net Income Margin | -5.7% | -4.9% | -0.7% | 3.8% | 3.4% | -0.4% |
| CAPEX, % of revenue | 7.3% | 5.4% | 10.6% | 5.5% | 5.1% | -0.4% |
|
|---|
| ROIC | -7.2% | -2.8% | 2.0% | 2.8% | 4.2% | 1.4% |
| ROE | -8.5% | -7.5% | -1.1% | 5.2% | 4.0% | -1.1% |
| Net Debt/EBITDA | 13.1x | 1.5x | 0.2x | 0.5x | -0.7x | -1.2x |
| Interest coverage ratio (ICR) | | | 1.6x | 2.4x | 5.2x | 2.8x |
| Interest expence / Average debt | 4.1% | 4.5% | 5.5% | 5.4% | 5.1% | -0.3% |
People
|
|---|
| Insider ownership | 4.5% | 4.5% | 4.5% | 4.5% | 4.5% | 0.0% |
| Employees | | 16,000 | 19,742 | 25,000 | 29,401 | 17.6% |
| Revenue/Employee, th. $ | | 336 | 338 | 337 | 358 | 6.2% |
Salesforce.com Inc ($CRM) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 2,397 | 2,577 | 2,701 | 2,865 | | 25.1% | 26.5% | 25.9% | 22.5% |
| EBITDA | 189 | 276 | 343 | 399 | | 2.3% | 51.7% | 99.0% | 28.3% |
| Net Income | 1 | 46 | 107 | 206 | | -97.4% | -80.0% | | 124.1% |
Balance Sheet
|
|---|
| Cash | 2,025 | 1,949 | 2,072 | 2,543 | | 12.6% | 74.8% | 80.8% | 58.3% |
| Short Term Debt | 1,124 | 1,131 | 1,138 | 1,025 | | | | | |
| Long Term Debt | 696 | 696 | 707 | 695 | | -46.2% | -61.3% | -60.8% | -65.4% |
Ratios
|
|---|
| Gross Margin | 72.8% | 74.0% | 73.6% | 74.2% | | -1.2% | -0.2% | 0.9% | 1.0% |
| EBITDA Margin | 7.9% | 10.7% | 12.7% | 13.9% | | -1.8% | 1.8% | 4.7% | 0.6% |
| Net Income Margin | 0.0% | 1.8% | 4.0% | 7.2% | | -2.0% | -9.5% | 5.7% | 3.3% |
Peers in Application Software
Below you can find Salesforce.com Inc benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 13.5% | 13.6% | 14.8% | 15.2% |
|---|
| Salesforce.com Inc ($CRM) | | 32.0% | 24.1% | 26.5% | 24.9% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (149 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.3% |
|---|
| Salesforce.com Inc ($CRM) | 76.2% | 76.0% | 75.2% | 73.5% | 73.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (151 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| Salesforce.com Inc ($CRM) | 2.0% | 5.6% | 9.6% | 10.1% | 11.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 2.9% | 2.3% | 2.4% |
|---|
| Salesforce.com Inc ($CRM) | 7.3% | 5.4% | 10.6% | 5.5% | 5.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (178 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -9.8% |
|---|
| Salesforce.com Inc ($CRM) | -7.2% | -2.8% | 2.0% | 2.8% | 4.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.4x | -1.0x | -0.9x | -0.9x | -0.6x |
|---|
| Salesforce.com Inc ($CRM) | 13.1x | 1.5x | 0.2x | 0.5x | -0.7x |
