Salesforce.com Inc Net Income dropped on 88.6% while Revenue surged on 28.7%
02/25/2020 • About Salesforce.com Inc (
$CRM) • By InTwits
Salesforce.com Inc reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- Salesforce.com Inc is a fast growth stock: FY2020 revenue growth was 28.7%, 5 year revenue CAGR was 26.0% at FY2020 ROIC 1.2%
- EBITDA Margin is expanding: 19.6% in FY2020 vs. 14.2% in FY2019 vs. 9.6% in FY2016
- Salesforce.com Inc motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2016-FY2020 was 4.3% while average EBITDA Margin was 14.1% for the sames years
- Salesforce.com Inc has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.9%. At the same time it's in pair with industry average of 3.2%
- CAPEX is quite volatile: $8m in 2020, $4m in 2019, $3m in 2018, $3m in 2017, $2m in 2016
- The company has potentially unprofitable business model: ROIC is 1.2%
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 28.7%. Revenue growth showed acceleration in FY20Q4 - it increased 34.6% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 5.4 pp from 14.2% to 19.6% in FY2020. EBITDA Margin stuck to a growing trend at 2.4 pp per annum in FY2016-FY2020.
Gross Margin increased slightly on 1.2 pp from 74.0% to 75.2% in FY2020. During the last 5 years Gross Margin bottomed in FY2017 at 73.5% and was growing since that time. SG&A as a % of Revenue increased slightly on 0.56 pp from 55.8% to 56.3% in FY2020. During FY2016-FY2020 SG&A as a % of Revenue bottomed in FY2018 at 54.6% and was growing since that time.
Net Income margin decreased on 7.6 pp from 8.4% to 0.74% in FY2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 3.8% in FY2020. The company showed small CAPEX/Revenue decline of 1.7 pp from 5.5% in FY2017 to 3.8% in FY2020. Average CAPEX/Revenue for the last three years was 4.4%. CAPEX as a % of Revenue pursued a declining trend in FY2016-FY2020.
Return on investment
The company operates at low ROIC (1.2%) and ROE (0.5%). ROIC decreased on 2.3 pp from 3.4% to 1.2% in FY2020. ROE decreased on 8.0 pp from 8.5% to 0.51% in FY2020. During the last 5 years ROIC topped in FY2018 at 4.2% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.6x and Debt / EBITDA is 1.9x. Net Debt / EBITDA jumped on 0.3x from 0.4x to 0.6x in FY2020. Debt surged on 85.9% while cash surged on 55.3%.
Salesforce.com Inc has no short term refinancing risk: cash is higher than short term debt (513.6%).
Valuation and dividends
Salesforce.com Inc's trades at EV/EBITDA 45.5x and P/E 1,192.3x.
Management team
The company's CEO Marc R Benioff has spent 2 years with the company.
Financial and operational results
FY ended 01/31/2020
Salesforce.com Inc ($CRM) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 6,667 | 8,437 | 10,540 | 13,282 | 17,098 | 28.7% |
| Gross Profit | 5,013 | 6,203 | 7,767 | 9,831 | 12,863 | 30.8% |
| SG&A | 3,988 | 4,777 | 5,760 | 7,410 | 9,634 | 30.0% |
| EBITDA | 641 | 850 | 1,207 | 1,882 | 3,345 | 77.7% |
| EBIT | 115 | 218 | 454 | | | |
| Interest expence | 72 | 89 | 87 | | | |
| Tax | 112 | -144 | 60 | | | |
| Net Income | -47 | 323 | 360 | 1,110 | 126 | -88.6% |
| Stock Based Compensation | 594 | 820 | 997 | | | |
Balance Sheet
|
|---|
| Cash | 1,158 | 1,607 | 2,543 | 2,669 | 4,145 | 55.3% |
| Accounts Receivable | 2,496 | 3,197 | 3,921 | | | |
| Accounts Payable | | | 76 | | | |
| Short Term Debt | 0 | 0 | 1,025 | 3 | 807 | 26,800.0% |
| Long Term Debt | 1,286 | 2,008 | 695 | 3,361 | 5,446 | 62.0% |
Cash flow
|
|---|
| Capex | 710 | 464 | 534 | 595 | 643 | 8.1% |
| Acquisitions | 59 | 3,193 | 25 | | | |
Ratios
|
|---|
| Revenue growth | 24.1% | 26.5% | 24.9% | 26.0% | 28.7% | |
| EBITDA growth | 111.7% | 32.7% | 42.0% | 55.9% | 77.7% | |
|
|---|
| Gross Margin | 75.2% | 73.5% | 73.7% | 74.0% | 75.2% | 1.2% |
| EBITDA Margin | 9.6% | 10.1% | 11.5% | 14.2% | 19.6% | 5.4% |
| EBIT Margin | 1.7% | 2.6% | 4.3% | | |
| SG&A, % of revenue | 59.8% | 56.6% | 54.6% | 55.8% | 56.3% | 0.6% |
| SBC, % of revenue | 8.9% | 9.7% | 9.5% | | |
| Net Income Margin | -0.7% | 3.8% | 3.4% | 8.4% | 0.7% | -7.6% |
| CAPEX, % of revenue | 10.6% | 5.5% | 5.1% | 4.5% | 3.8% | -0.7% |
|
|---|
| ROIC | 2.0% | 2.8% | 4.2% | 3.4% | 1.2% | -2.3% |
| ROE | -1.1% | 5.2% | 4.0% | 8.5% | 0.5% | -8.0% |
| Net Debt/EBITDA | 0.2x | 0.5x | -0.7x | 0.4x | 0.6x | 0.3x |
| Interest coverage ratio (ICR) | 1.6x | 2.4x | 5.2x | | |
| Interest expence / Average debt | 5.6% | 5.4% | 4.7% | | | |
People
|
|---|
| Insider ownership | 4.5% | 4.5% | 4.5% | | | |
| Employees | 19,742 | 25,000 | 29,401 | | | |
| Revenue/Employee, th. $ | 338 | 337 | 358 | | | |
Salesforce.com Inc ($CRM) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 3,737 | 3,997 | 4,513 | 4,851 | | 24.3% | 21.8% | 33.0% | 34.6% |
| EBITDA | 853 | 732 | 903 | 857 | | 129.3% | 98.9% | 158.7% | 109.0% |
| Net Income | 392 | 91 | -109 | -248 | | 14.0% | -69.6% | -203.8% | -168.5% |
Balance Sheet
|
|---|
| Cash | 4,110 | 3,510 | 3,868 | 4,145 | | -30.6% | 51.4% | 83.8% | 55.3% |
| Short Term Debt | 857 | 786 | 803 | 807 | | 28,466.7% | 56.3% | 59.6% | 26,800.0% |
| Long Term Debt | 5,911 | 5,646 | 5,690 | 5,446 | | 86.3% | 77.9% | 79.3% | 62.0% |
Ratios
|
|---|
| Gross Margin | 75.5% | 75.8% | 74.9% | 74.9% | | 1.1% | 1.7% | 1.1% | 1.1% |
| EBITDA Margin | 22.8% | 18.3% | 20.0% | 17.7% | | 10.5% | 7.1% | 9.7% | 6.3% |
| Net Income Margin | 10.5% | 2.3% | -2.4% | -5.1% | | -1.0% | -6.8% | -5.5% | -15.2% |
Peers in Application Software
Below we provide Salesforce.com Inc benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 14.8% | 15.1% | 19.4% | 14.5% |
|---|
| Salesforce.com Inc ($CRM) | - | 26.5% | 24.9% | 26.0% | 28.7% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
| |
|---|
| Median (89 companies) | 63.8% | 64.4% | 65.3% | 67.9% | 69.4% |
|---|
| Salesforce.com Inc ($CRM) | 75.2% | 73.5% | 73.7% | 74.0% | 75.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| |
|---|
| Median (89 companies) | -5.3% | -4.2% | -3.3% | 2.7% | 6.8% |
|---|
| Salesforce.com Inc ($CRM) | 9.6% | 10.1% | 11.5% | 14.2% | 19.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 2.9% | 2.3% | 2.4% | 2.9% | 2.5% |
|---|
| Salesforce.com Inc ($CRM) | 10.6% | 5.5% | 5.1% | 4.5% | 3.8% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
| |
|---|
| Median (92 companies) | -9.8% | -11.8% | -10.6% | -4.5% | -2.2% |
|---|
| Salesforce.com Inc ($CRM) | 2.0% | 2.8% | 4.2% | 3.4% | 1.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (53 companies) | -0.9x | -0.9x | -0.6x | 0.4x | 0.0x |
|---|
| Salesforce.com Inc ($CRM) | 0.2x | 0.5x | -0.7x | 0.4x | 0.6x |
