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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended July 31, 2020
OR
☐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)
 

Delaware94-3320693
(State or other jurisdiction of
incorporation or organization)		(IRS Employer
Identification No.)
Salesforce Tower
415 Mission Street, 3rd Fl
San Francisco, California 94105
(Address of principal executive offices)
Telephone Number (415) 901-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareCRMNew York Stock Exchange
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 (the “Exchange Act”) 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  x   No  ¨
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes  x   No  ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐   No  x
As of August 25, 2020, there were approximately 910 million shares of the Registrant’s Common Stock outstanding.

1
Table of Contents
INDEX
 
  Page No.
  
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2
Table of Contents
PART I.
ITEM 1. FINANCIAL STATEMENTS
salesforce.com, inc.
Condensed Consolidated Balance Sheets
(in millions)
July 31, 2020January 31, 2020
(unaudited)
Assets
Current assets:
Cash and cash equivalents$4,052 $4,145 
Marketable securities5,231 3,802 
Accounts receivable, net 3,445 6,174 
Costs capitalized to obtain revenue contracts, net 948 926 
Prepaid expenses and other current assets1,170 916 
Total current assets14,846 15,963 
Property and equipment, net2,528 2,375 
Operating lease right-of-use assets, net 2,985 3,040 
Noncurrent costs capitalized to obtain revenue contracts, net 1,309 1,348 
Strategic investments2,555 1,963 
Goodwill26,301 25,134 
Intangible assets acquired through business combinations, net4,676 4,724 
Deferred tax assets and other assets, net 2,580 579 
Total assets$57,780 $55,126 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other liabilities
$3,485 $3,433 
Operating lease liabilities, current
767 750 
Unearned revenue
8,711 10,662 
Total current liabilities12,963 14,845 
Noncurrent debt2,673 2,673 
Noncurrent operating lease liabilities2,407 2,445 
Other noncurrent liabilities 1,297 1,278 
Total liabilities19,340 21,241 
Stockholders’ equity:
Common stock1 1 
Additional paid-in capital33,922 32,116 
Accumulated other comprehensive loss(68)(93)
Retained earnings4,585 1,861 
Total stockholders’ equity38,440 33,885 
Total liabilities and stockholders’ equity$57,780 $55,126 










See accompanying Notes.
3
Table of Contents
salesforce.com, inc.
Condensed Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
2Three Months Ended July 31,Six Months Ended July 31,
 2020201920202019
Revenues:
Subscription and support$4,840 $3,745 $9,415 $7,241 
Professional services and other311 252 601 493 
Total revenues5,151 3,997 10,016 7,734 
Cost of revenues (1)(2):
Subscription and support 1,013 727 1,979 1,405 
Professional services and other 298 240 586 476 
Total cost of revenues1,311 967 2,565 1,881 
Gross profit3,840 3,030 7,451 5,853 
Operating expenses (1)(2):
Research and development898 607 1,757 1,161 
Marketing and sales2,275 1,824 4,665 3,521 
General and administrative489 375 991 737 
Loss on settlement of Salesforce.org reseller agreement 0 166 0 166 
Total operating expenses3,662 2,972 7,413 5,585 
Income from operations178 58 38 268 
Gains on strategic investments, net682 109 874 390 
Other expense(21)(3)(26)(12)
Income before benefit from (provision for) income taxes839 164 886 646 
Benefit from (provision for) income taxes (3)1,786 (73)1,838 (163)
Net income$2,625 $91 $2,724 $483 
Basic net income per share$2.90 $0.12 $3.02 $0.62 
Diluted net income per share$2.85 $0.11 $2.96 $0.61 
Shares used in computing basic net income per share904 776 901 774 
Shares used in computing diluted net income per share922 795 919 795 
_______________
(1) Amounts include amortization of intangible assets acquired through business combinations, as follows:
 Three Months Ended July 31,Six Months Ended July 31,
 2020201920202019
Cost of revenues$166 $62 $325 $123 
Marketing and sales118 65 230 133 
(2) Amounts include stock-based expense, as follows:
 Three Months Ended July 31,Six Months Ended July 31,
 2020201920202019
Cost of revenues$63 $46 $115 $89 
Research and development184 98 350 179 
Marketing and sales253 199 476 376 
General and administrative78 45 141 87 
(3) During the three months ended July 31, 2020 the Company recorded approximately $2.0 billion of benefit from income taxes due to a one-time discrete tax item from the recognition of deferred tax assets related to an intra-entity transfer of intangible property.


See accompanying Notes.
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salesforce.com, inc.
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(unaudited)
2Three Months Ended July 31,Six Months Ended July 31,
2020201920202019
Net income$2,625 $91 $2,724 $483 
Other comprehensive income (loss), net of reclassification adjustments:
Foreign currency translation and other gains (losses)28 (17)5 (30)
Unrealized gains on marketable securities and privately held debt securities49 6 24 14 
Other comprehensive income (loss), before tax77 (11)29 (16)
Tax effect(10)(1)(4)(3)
Other comprehensive income (loss), net67 (12)25 (19)
Comprehensive income$2,692 $79 $2,749 $464 
































See accompanying Notes.
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salesforce.com, inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in millions)
(unaudited)
Three and Six Months Ended July 31, 2020
Common StockAdditional
Paid-in
Capital		Accumulated Other Comprehensive LossRetained EarningsTotal
Stockholders’
Equity
SharesAmount
Balance at January 31, 2020893 $1 $32,116 $(93)$1,861 $33,885 
Common stock issued6 0 119 0 0 119 
Stock-based expenses0 0 504 0 0 504 
Other comprehensive loss, net of tax0 0 0 (42)0 (42)
Net income0 0 0 0 99 99 
Balance at April 30, 2020899 1 32,739 (135)1,960 34,565 
Common stock issued9 0 605 0 0 605 
Stock-based expenses0 0 578 0 0 578 
Other comprehensive income, net of tax0 0 0 67 0 67 
Net income0 0 0 0 2,625 2,625 
Balance at July 31, 2020908$1 $33,922 $(68)$4,585 $38,440 
Three and Six Months Ended July 31, 2019
 Common StockAdditional
Paid-in
Capital		Accumulated Other Comprehensive LossRetained EarningsTotal
Stockholders’
Equity
 SharesAmount
Balance at January 31, 2019770 $1 $13,927 $(58)$1,735 $15,605 
Common stock issued5 0 113 0 0 113 
Stock-based expenses 0 0 343 0 0 343 
Other comprehensive loss, net of tax 0 0 0 (7)0 (7)
Net income0 0 0 0 392 392 
Balance at April 30, 2019775 1 14,383 (65)2,127 16,446 
Common stock issued5 0 253 0 0 253 
Stock-based expenses0 0 388 0 0 388 
Other comprehensive loss, net of tax0 0 0 (12)0 (12)
Net income0 0 0 0 91 91 
Balance at July 31, 2019780$1 $15,024 $(77)$2,218 $17,166 
















See accompanying Notes.
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salesforce.com, inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
2Three Months Ended July 31,Six Months Ended July 31,
2020201920202019
Operating activities:
Net income$2,625 $91 $2,724 $483 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization649 457 1,307 894 
Amortization of costs capitalized to obtain revenue contracts, net250 217 497 426 
Expenses related to employee stock plans578 388 1,082 731 
Loss on settlement of Salesforce.org reseller agreement 0 166 0 166 
Gains on strategic investments, net(682)(109)(874)(390)
Tax benefit from intra-entity transfer of intangible property(2,003)0 (2,003)0 
Changes in assets and liabilities, net of business combinations:
Accounts receivable, net(349)(146)2,745 2,628 
Costs capitalized to obtain revenue contracts, net(455)(173)(480)(297)
Prepaid expenses and other current assets and other assets(203)28 (214)(69)
Accounts payable and accrued expenses and other liabilities 693 293 (64)(252)
Operating lease liabilities(209)(182)(412)(346)
Unearned revenue(465)(594)(2,020)(1,573)
Net cash provided by operating activities429 436 2,288 2,401 
Investing activities:
Business combinations, net of cash acquired(1,154)(423)(1,257)(433)
Purchases of strategic investments(232)(62)(574)(221)
Sales of strategic investments51 71 652 265 
Purchases of marketable securities(1,681)(772)(2,515)(1,506)
Sales of marketable securities207 375 544 461 
Maturities of marketable securities330 137 557 193 
Capital expenditures(114)(178)(437)(337)
Net cash used in investing activities(2,593)(852)(3,030)(1,578)
Financing activities:
Proceeds from employee stock plans466 152 724 371 
Principal payments on financing obligations (24)(134)(72)(145)
Repayments of debt(1)(201)(2)(202)
Net cash provided by (used in) financing activities441 (183)650 24 
Effect of exchange rate changes3 (1)(1)(6)
Net increase (decrease) in cash and cash equivalents(1,720)(600)(93)841 
Cash and cash equivalents, beginning of period5,772 4,110 4,145 2,669 
Cash and cash equivalents, end of period$4,052 $3,510 $4,052 $3,510 



See accompanying Notes.
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salesforce.com, inc.
Condensed Consolidated Statements of Cash Flows
Supplemental Cash Flow Disclosure
(in millions)
(unaudited)
 Three Months Ended July 31,Six Months Ended July 31,
 2020201920202019
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest$2 $6 $48 $56 
Income taxes, net of tax refunds$66 $37 $124 $55 
Non-cash investing and financing activities:
Fair value of equity awards assumed$6 $0 $6 $0 










































See accompanying Notes.
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salesforce.com, inc.
Notes to Condensed Consolidated Financial Statements
1. Summary of Business and Significant Accounting Policies
Description of Business
Salesforce.com, inc. (the “Company”) is a leading provider of enterprise software, delivered through the cloud, with a focus on customer relationship management, or CRM. The Company introduced its first CRM solution in 2000, and has since expanded its service offerings into new areas and industries with new editions, features and platform capabilities.
The Company's core mission is to empower its customers to connect with their customers in entirely new ways through cloud, mobile, social, blockchain, voice, advanced analytics and artificial intelligence (“AI”) technologies. Salesforce’s Customer 360 is an integrated platform that unites sales, service, marketing, commerce, integration, analytics and more to give companies a single, shared view of their customers.
Fiscal Year
The Company’s fiscal year ends on January 31. References to fiscal 2021, for example, refer to the fiscal year ending January 31, 2021.
Basis of Presentation
The accompanying condensed consolidated balance sheet as of July 31, 2020 and the condensed consolidated statements of operations, condensed consolidated statements of comprehensive income, condensed consolidated statements of stockholders' equity and condensed consolidated statements of cash flows for the three and six months ended July 31, 2020 and 2019 are unaudited.
These financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s balance sheet as of July 31, 2020, and its results of operations, including its comprehensive income, stockholders' equity and its cash flows for the three and six months ended July 31, 2020 and 2019. All adjustments are of a normal recurring nature. The results for the three and six months ended July 31, 2020 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending January 31, 2021.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on March 5, 2020.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in the Company’s condensed consolidated financial statements and notes thereto.
Significant estimates and assumptions made by management include the determination of:
•the fair value of assets acquired and liabilities assumed for business combinations;
•the standalone selling price (“SSP”) of performance obligations for revenue contracts with multiple performance obligations;
•the valuation of privately-held strategic investments, including impairments;
•the recognition, measurement and valuation of current and deferred income taxes and uncertain tax positions;
•the average period of benefit associated with costs capitalized to obtain revenue contracts;
•the useful lives of intangible assets; and
•the fair value of certain stock awards issued.
Actual results could differ materially from those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the result of which forms the basis for making judgments about the carrying values of assets and liabilities.
In December 2019, the novel coronavirus and resulting disease (“COVID-19”) was reported and in March 2020 the World Health Organization declared it a pandemic. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration of the outbreak, impact on the Company’s
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customers and its sales and renewal cycles, and impact on the Company’s employees, as discussed in more detail in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These estimates may change, as new events occur and additional information is obtained, and such changes will be recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from these estimates and any such differences may be material to the Company’s financial statements.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Segments
The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and assess performance. Over the past few years, the Company has completed a number of acquisitions. These acquisitions have allowed the Company to expand its offerings, presence and reach in various market segments of the enterprise cloud computing market.
While the Company has offerings in multiple enterprise cloud computing market segments, including as a result of the Company's acquisitions, and operates in multiple countries, the Company’s business operates in one operating segment because most of the Company's offerings operate on its single Customer 360 Platform and most of the Company's products are deployed in a nearly identical way, and the Company’s CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis.
Concentrations of Credit Risk, Significant Customers and Investments
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable. Collateral is not required for accounts receivable. The Company maintains an allowance for its doubtful accounts receivable due to estimated credit losses. This allowance is based upon historical loss patterns, the number of days that billings are past due, an evaluation of the potential risk of loss associated with delinquent accounts and current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss patterns. The Company records the allowance against bad debt expense through the condensed consolidated statement of operations up to the amount of revenues recognized to date. Any incremental allowance is recorded as an offset to unearned revenue on the condensed consolidated balance sheet. Receivables are written-off and charged against the recorded allowance when the Company has exhausted collection efforts without success.
No single customer accounted for more than five percent of accounts receivable at July 31, 2020 and January 31, 2020. No single customer accounted for five percent or more of total revenue during the six months ended July 31, 2020 and 2019. As of July 31, 2020 and January 31, 2020, assets located outside the Americas were 15 percent and 12 percent of total assets, respectively. As of July 31, 2020 and January 31, 2020, assets located in the United States were 83 percent and 87 percent of total assets, respectively.
The Company is also exposed to concentrations of risk in its strategic investment portfolio. As of July 31, 2020, the Company held one publicly traded investment with a carrying value greater than 30 percent of its total strategic investments. In addition, the Company held three investments with carrying values that were individually greater than five