SALESFORCE COM INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 31, 2004

¨	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-32224

salesforce.com, inc.

(Exact name of registrant as specified in its charter)

Delaware

94-3320693

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

The Landmark @ One Market, Suite 300

San Francisco, California 94105

(Address of principal executive offices)

Telephone Number (415) 901-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ¨ No x

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ No x

As of July 31, 2004, there were approximately 102.9 million shares of the Registrant’s Common Stock outstanding.

salesforce.com, inc.

INDEX


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements:

	Condensed Consolidated Balance Sheets July 31, 2004 and January 31, 2004	3

	Condensed Consolidated Statements of Operations Three and six months ended July 31, 2004 and 2003	4

	Condensed Consolidated Statements of Cash Flows Three and six months ended July 31, 2004 and 2003	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	46

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults upon Senior Securities	48

Item 4.	Submission of Matters to a Vote of Securities Holders	48

Item 5.	Other Information	48

Item 6.	Exhibits and Reports on Form 8-K	48

	Signatures	49

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

salesforce.com, inc.

Condensed Consolidated Balance Sheets

(in thousands)


	July 31, 2004			January 31, 2004
	(unaudited)			(audited)
Assets
Current assets:
Cash and cash equivalents	$	61,093		$	10,463
Short-term marketable securities		55,057			25,349
Accounts receivable		29,944			26,536
Deferred commissions		7,374			8,266
Prepaid expenses and other current assets		3,500			3,532

Total current assets		156,968			74,146

Marketable securities, noncurrent		56,477			—
Restricted cash		3,158			3,912
Fixed assets, net		5,986			5,069
Deferred commissions, noncurrent		2,127			2,890
Other assets		1,797			1,494

Total assets	$	226,513		$	87,511

Liabilities, convertible preferred stock and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	1,947		$	2,035
Accrued expenses and other current liabilities		25,078			17,682
Income taxes payable		540			534
Deferred revenue		61,557			49,677
Current portion of capital lease obligation		558			78

Total current liabilities		89,680			70,006

Capital lease obligations, net of current portion		1,004			—
Long-term lease abandonment liability and other		1,689			1,830
Minority interest		953			775

Total liabilities		93,326			72,611

Commitments and contingencies

Convertible preferred stock		—			61,137
Stockholders’ equity (deficit):
Common stock		103			32
Additional paid-in capital		213,321			35,580
Deferred stock-based compensation		(8,087	)		(8,251	)
Notes receivables from stockholders		(1,723	)		(1,674	)
Accumulated other comprehensive (loss) income		(100	)		10
Accumulated deficit		(70,327	)		(71,934	)

Total stockholders’ equity (deficit)		133,187			(46,237	)

Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	226,513		$	87,511

See accompanying Notes to Condensed Consolidated Financial Statements.

salesforce.com, inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


	Three months ended July 31,						Six months ended July 31,
	2004			2003			2004			2003
Revenues:
Subscription and support	$	36,017		$	19,592		$	67,133		$	36,514
Professional services and other		4,564			2,031			8,287			4,022

Total revenues		40,581			21,623			75,420			40,536

Cost of revenues (1):
Subscription and support		2,699			1,819			4,981			3,416
Professional services and other		5,483			2,009			9,564			3,767

Total cost of revenues		8,182			3,828			14,545			7,183

Gross profit		32,399			17,795			60,875			33,353
Operating expenses (1):
Research and development		2,074			1,685			4,201			2,925
Marketing and sales		22,525			12,205			42,940			22,861
General and administrative		6,635			3,771			12,208			7,416

Total operating expenses		31,234			17,661			59,349			33,202

Income from operations		1,165			134			1,526			151

Interest income		353			91			497			169
Interest expense		(5	)		(6	)		(6	)		(15	)
Other income (expense)		5			(70	)		25			245

Income before provision for income taxes and minority interest		1,518			149			2,042			550
Provision for income taxes		202			22			272			71

Income before minority interest		1,316			127			1,770			479
Minority interest in consolidated joint venture		(146	)		(5	)		(163	)		11

Net income	$	1,170		$	122		$	1,607		$	490

Basic net income per share	$	0.02		$	0.00		$	0.03		$	0.02
Diluted net income per share		0.01			0.00			0.02			0.01

Weighted-average number of shares used in per share amounts:
Basic		64,524			29,236			48,106			28,948
Diluted		107,749			91,973			104,079			91,785

(1) Amounts include stock-based expenses, as follows:


	Three months ended July 31,				Six months ended July 31,
	2004		2003		2004		2003
Cost of revenues	$	187	$	153	$	357	$	313
Research and development		80		124		169		244
Marketing and sales		408		521		822		1,035
General and administrative		425		246		629		536

	$	1,100	$	1,044	$	1,977	$	2,128

See accompanying Notes to Condensed Consolidated Financial Statements.

salesforce.com, inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three months ended July 31,				Six months ended July 31,
	2004		2003		2004		2003
Operating activities
Net income	$	1,170	$	122	$	1,607	$	490
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest in consolidated joint venture		146		5		163		(11	)
Depreciation and amortization		679		707		1,427		1,325
Amortization of deferred commissions		3,875		1,799		7,468		3,251
Expense related to stock-based awards		1,100

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