Salesforce.com's Profit Jumps

The company boosts full-year guidance.
By Ivy Lessner ,

SAN FRANCISCO - Salesforce.com (CRM) - Get Report raised full-year guidance Wednesday on the strength of continuing fast-paced revenue growth in its first quarter.

The San Francisco on-demand software leader said first-quarter revenue grew 52% year over year to $247.6 million, from $162.4 million for the same quarter of last year. Analysts were expecting $235.8 million, according to Thomson Reuters.

Salesforce's top line grew 50.4% in the preceding fourth quarter.

"We're larger than a lot of software-as-a-service companies. But we're growing faster than they are," said Chairman and CEO Marc Benioff. The increasing growth trend -- even as annual revenue approaches $1 billion -- is due to the openness of the company's software platform, in addition to strong international growth, he explained.

The open platform allows clients to write their own add-on applications, which in turn brings on board more subscribers per client. Benioff said. "We become stickier, more deeply entrenched inside existing customers," resulting in growth faster than 50% during the last two quarters, he added.

First-quarter profit grew to $9.6 million, or 8 cents a share, from $730,000, or 1 cent a share, in the year-ago period. Analysts were expecting EPS of 7 cents.

The stock was down 66 cents, or 1.1%, to $62 in after-hours trading.

Revenue grew 43% in the Americas to $178.4 million, 80% in Europe to $45.2 million, and 94% in Asia to $24.1 million. Large-customer wins in the quarter included

Areva

in France and

NTT

(NTT)

in Japan, Benioff said. In the U.S., Salesforce added 4,000 subscribers at new client

Thomson Reuters

.

On-balance-sheet deferred revenue rose 59% to $470 million at the end of the quarter. Off-balance-sheet deferred revenue, including backlog, is over $1 billion, CFO Graham Smith said on the conference call.

Gross margin rose 3 percentage points year over year, to 79%. The biggest driver to margin improvement was in the professional services business, where gross margin is nearing break-even, Smith said. Revenue in the business line rose 51% to $22.3 million. "It may be a while before our professional services business is consistently profitable," Smith added.

Operating cash flow grew to $83.8 million for the quarter from $36.8 million a year ago. The company has generated $200 million in free cash flow over the past four quarters, Benioff said.

A weak dollar contributed to year-over-year growth, Smith said.

For the second quarter, Salesforce projected revenue of $258 million to $259 million and EPS of 7 cents or 8 cents. The consensus estimate of analysts was for revenue of $250.8 million and EPS of 8 cents.

The company raised full-year guidance for revenue ranging from $1.06 billion to $1.065 billion, from a previous projection of $1 billion to $1.02 billion. EPS will be 33 cents or 34 cents. Analysts were expecting a top line of $1.045 billion and EPS of 34 cents.

During the first quarter, the company picked up a net 2,600 new customers, bringing the total to 43,600.

Benioff said the company would soon open a third data center, in Singapore, the first to be outside the U.S. "We're now spending $100 million annually on infrastructure, so customers won't have to."

Salesforce's hosted customer relationship management software seeks to take market share from both

SAP

(SAP) - Get Report

and

Oracle

(ORCL) - Get Report

. More recently,

Microsoft

(MSFT) - Get Report

has entered its space with on-demand CRM software sold by subscription.

Loading ...