CRM platform provider salesforce.com, Inc. (CRM – Analyst Report) reported better-than-expected third-quarter fiscal 2015 results wherein both the top and bottom-line figures surpassed the Zacks Consensus Estimate and improved year over year. The improvement in earnings was primarily driven by strong revenue growth and lower operating expenses.
Revenues
Salesforce’s revenues of $1.38 billion not only increased 28.6% from the year-ago quarter but also beat the Zacks Consensus Estimate of $1.37 billion. Reported revenues also beat management’s guided range of $1.365 to $1.370 billion. The year-over-year improvement was primarily attributed to rapid adoption of the company’s cloud-based solutions and the ExactTarget acquisition.
Also, higher demand for Salesforce ExactTarget Marketing Cloud platform, part of the Salesforce1 Customer Platform, contributed to the year-over-year revenue jump.
During the quarter, the company’s cloud-based solutions were selected by a number of companies including EMC Corporation, Verizon Communications Inc. and General Electric Company.
Among its business segments, revenues from Subscription and Support increased 28.3% from the year-ago quarter to $1.29 billion. Professional Services and Other revenues increased 33% on a year-over-year basis to $95.1 million.
Geographically, the company witnessed revenue growth of 29.4% in the Americas, while revenues from Europe and Asia increased 29.8% and 21.2%, respectively, on a year-over-year basis.
Operating Results
Salesforce’s adjusted gross profit (including stock-based compensation but excluding amortization expenses) came in at $1.07 billion, up 27.2% from the year-ago quarter. However, gross margin contracted 83 basis points (bps) to 77.4% from the year-ago quarter, primarily due to increased investment in infrastructure development which also include expansion of international data center.
Adjusted operating expenses (including stock-based compensation but excluding amortization of acquisition-related intangibles) increased 18.7% from the year-ago quarter to $1.06 billion, primarily due to higher investments in research and development, marketing and sales and general and administrative activities. However, as a percentage of revenues, operating expenses contracted 634 bps from the year-ago quarter to 76.4%.
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