Salesforce.com continues to soar on rising revenues and larger deal sizes despite the drag of a net loss in Q1 2013. Although a loss of $19.5m on revenue up 38% to $695m is minor in overall revenue terms, it is a reminder that consistent profitability remains an issue for pure SaaS providers. Salesforce.com also reported a loss at the end of last year (see here). Q1 2012 saw a profit of $530,000.
Despite that red mark, the company benefitted from more large deals (including a $100m+ contract with an insurance company that was signed in Q1), and has more in the pipeline. Its expanding portfolio is boosting sales sizes as businesses take on more of its offerings. That also means it needs to keep up the fast rate of flow of new offerings, which points to further acquisitions and continued pressure on the profitability front. With a run rate heading for $2.8bn in the current year there is nothing to worry about but this is a metric worth watching particularly now that SAP is regrouping around SaaS (see here).
Subscription and support revenues came in at $655m, a yoy increase of 38% but it was interesting to see professional services rise 30%, albeit it to just $40m. This could be a nice and profitable revenue stream in time. At $213m for the quarter, up 53%, cash generation is going the right way and it ended the quarter with cash, cash equivalents and marketable securities of $1.7bn.
Growth across all regions demonstrates that cloud-delivered applications are universally popular. Revenue in Europe was $118m, up 25% (33% in constant currency). The UK is a major country for Salesforce.com so it was good to see some of the bigger deals coming from here, including a contract with the Post Office to take its 400 Crown branches digital by creating a social enterprise for its team of financial service advisors.
Revenue from the Americas grew 43% to $485m, while Asia came in at $92m million, an increase of 32% (30% in constant currency). Uncertain macro economic conditions should help rather than hinder progress and the decision to raise 2013 guidance shows Salesforce.com’s level of confidence and little to show it is misplaced.
Overall, it is a strong start to what looks to be another year of strong growth – just the profitability consistency issue to get under control.