Ticker Symbol: CRM
Salesforce shares are down 6% in morning trading after the company lowered its annual profit and revenue guidance in its second quarter earnings release. Salesforce is the largest cloud-based provider of customer management software, and co-Chief Executive Officer Marc Benioff said that the demand environment for the company’s products has tempered from earlier in the year. Shares are off by more than 30% on a year-to-date basis.
The company expects adjusted full-year earnings to be between $4.71 to $4.73 per share, lower than the Wall Street estimate of $4.75 per share. Management previously saw an adjusted EPS of $4.74 to $4.76 per share. Revenue for the year should be around $31 billon lower than the previous guidance of $31.7 billion. Analysts were expecting revenue to come in at around $31.75 billion. The company provided commentary that the lowered revenue forecast was due purely because of the foreign exchange issues arising from weaker demand, and a stronger U.S. dollar.
For the fiscal second quarter, the company reported an adjusted earnings per share of $1.19 versus the average analyst estimate of $1.03. Revenue was up 22% year over year, to $7.72 billion, against the $7.68 billion expected. Subscription and support sales, the main revenue driver at the company, came in a bit weak at $7.14 billion, up 21% year over year, versus analysts view of $7.19 billion. Subscription revenue specifically, came in at $1.48 billion, growing at a rapid 34% rate thanks in part to Salesforce’s acquisition of Slack.
Professional services beat handily, posting revenue of $577 million against an estimate of $541 million. The company said that on a constant currency basis, sales were up 26%, higher than the 22% foreign exchange adjusted figure and the 24% expected by analysts. Remaining performance obligations, also considered the revenue pipeline for the company, totaled $41.6 billion, missing the estimate of $41.9 billion. A lower RPO is generally viewed as an indicator of slower growth ahead.
Operating margin of 19.9% was well ahead of the consensus 18.6% as the company was more measured and deliberate in hiring practices. The firm also announced a $10 billion share buyback program. Chief Financial Officer Amy Weaver said she expects margins to remain strong throughout the course of the year. Operating margin for the first quarter was 17.6%. She expects full-year operating cash flow margin of between 16% to 17%. Lastly, the company said that Slack, its blockbuster acquisition from last year, continues to outperform internal expectations.
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