On Monday, Salesforce.com (CRM), one of the largest firms in enterprise cloud computing, reported excellent fiscal 2014 third quarter results. Revenue surged 36% year-over-year, while deferred revenue expansion largely kept pace (up 34% year-over-year). Unbilled deferred revenue, or business that is contracted but unbilled and off balance sheet, was $4.2 billion, up 40% from the same period a year-ago. Though non-GAAP earnings per share came in at a meager $0.09 during the period, the firm posted operating cash flow of $138 million, which was up 30% on a year-over-year basis. Capital expenditures jumped to $74 million from $51 million in the year-ago period, resulting in free cash flow of $64 million (or about 6% of sales). Salesforce.com ended the quarter with $1.09 billion in total cash and marketable securities.
Looking ahead, the firm raised its full fiscal 2014 top-line guidance $30 million to the range of $4.05-$4.055 billion (an increase of 33% year-over-year) and narrowed its diluted non-GAAP earnings per share target to the range of $0.33-$0.34 (was $0.32-$0.34). Our top-line forecast is slightly better than the updated range, while our fiscal non-GAAP 2014 bottom-line estimate remains $0.34 per share (as presented in our 16-page report). Salesforce.com issued full-year 2015 guidance in the range of $5.15-$5.2 billion, up more than 28% at the high end of both respective annual ranges. The 2015 target was slightly lower than our forecast of $5.23 billion for the fiscal year, but we wouldn’t be surprised if Salesforce.com raises its fiscal 2015 guidance to our number in coming periods. In any case, Salesforce.com was very proud to note that it is going to be the first enterprise cloud company to deliver more than $5 billion in revenue next year.
Valuentum’s Take
Salesforce.com is trading at nosebleed multiples on a non-GAAP earnings basis, but the company continues to generate solid operating cash flow. We continue to be encouraged by the pace of the firm’s top-line expansion and its implications on the health of enterprise spending, particularly for cloud services. We’ll be monitoring the company closely in coming periods, but we’re not rushing to add shares to our Best Ideas portfolio; they continue to trade within (at the time of this writing).