BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate HOLD HOLD RATING SINCE 11/19/2015 BUSINESS DESCRIPTION Salesforce.com, inc. develops enterprise cloud computing solutions with a focus on customer relationship management. Sector: Technology Sub-Industry: Application Software Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years 110 100 STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 9.38 46.13 23.70 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 24.94 25.49 25.05 Net Income 237.75-95.88 26.56 EPS 240.00-96.67 26.40 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 0.09 6.90 13.41 Q3 2016 3.02 14.41 11.79 Q3 2015-1.84 11.95 12.91 P/E COMPARISON Rating History HOLD Volume in Millions 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History 90 80 70 60 50 100 50 0 10,424 EPS ALYSIS¹ ($) 554.04 Ind Avg 25.50 S&P 500 RECOMMENDATION We rate () a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing nesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find nesses including disappointing return on equity and operating cash flow. HIGHLIGHTS The revenue growth came in higher than the industry average of 9.5%. Since the same quarter one year prior, revenues rose by 24.9%. Growth in the company's revenue appears to have helped boost the earnings per share. Q1 0.01 Q2 0.00 Q3-0.04 Q4-0.04 Q1 0.06 Q2 0.33 Q3-0.05 Q4-0.07 Q1-0.01 Q2 0.02 Q3 0.07 reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, turned its bottom line around by earning $0.27 versus -$0.07 in the prior year. This year, the market expects an improvement in earnings ($1.33 versus $0.27). 2015 2016 = not available NM = not meaningful 2017 1 Compustat fiscal year convention is used for all fundamental data items. 's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a debt-to-equity ratio, its quick ratio of 0.72 is somewhat and could be cause for future problems. Net operating cash flow has decreased to $125.79 million or 18.48% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower. The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor ness in the organization. Compared to other companies in the Software industry and the overall market on the basis of return on equity, underperformed against that of the industry average and is significantly less than that of the S&P 500. PAGE 1
PEER GROUP ALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -10% 40% SPLK UNFAVORABLE ADSK -20% WDAY INTU EBITDA Margin (TTM) SNPS CDNS FAVORABLE CTXS ADBE SAP ANSS 50% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $11.5 Billion and $139.8 Billion. Companies with or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -10% 40% SPLK UNFAVORABLE ADSK -3% WDAY Earnings Yield (TTM) SNPS CDNS FAVORABLE ADBE INTU ANSS SAP CTXS Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -9.9% and 37%. Companies with or NM values do not appear. 4% INDUSTRY ALYSIS The US software industry is characterized by growth, innovation and technological advancements. The business remains knowledge intensive and market structure is influenced by ownership of intellectual property. Technology and product innovation shape business models in a rapidly changing environment. The industry can be divided into three main categories: systems software, programming software, and application software. The industry landscape has seen radical change in recent years due to the growth of mass markets for packaged software. Software development has witnessed rapid evolution over the past few decades with projects increasing in size and complexity as the available computer hardware has dramatically improved in both processing speed and storage size. The number of patents being issued across the industry has recently surged. Ownership of intellectual property is a key driver of growth and the patent system plays a vital role in the development of the industry. However, piracy remains a pressing issue as copyright infringement and illegal reproduction and transfer of licensed software is widespread. The software industry is not immune to the global economy. The return to positive slow growth will positively impact all industries and enhance new investments, which could bolster demand for services and add to sales growth in the upcoming quarters. The need to lower costs has triggered global capabilities to evolve in China and India. India, for instance, has emerged as the number two software talent pool worldwide, capturing more than a quarter of the global outsourcing market. The industry is currently positioned favorably going forward. PEER GROUP: Software Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 104.24 75,293 10,424.00 9,923.00 8.48 ADBE ADOBE SYSTEMS INC 175.00 86,265 51.62 7,301.51 1,693.95 INTU INTUIT INC 156.19 39,930 41.43 5,285.00 984.00 ADSK AUTODESK INC 106.25 23,403 NM 1,981.60-566.80 SAP SAP SE 113.80 139,804 33.87 25,717.59 4,032.84 WDAY WORKDAY INC 103.35 13,849 NM 1,997.24-337.69 CTXS CITRIX SYSTEMS INC 87.05 13,116 27.03 2,955.19 463.02 SNPS SYNOPSYS INC 87.98 13,084 103.51 2,724.88 136.56 ANSS ANSYS INC 144.51 12,263 45.44 1,063.54 276.65 CDNS CADENCE DESIGN SYSTEMS INC 43.19 12,195 46.44 1,910.29 257.02 SPLK SPLUNK INC 81.19 11,485 NM 1,157.53-308.24 The peer group comparison is based on Major Application Software companies of comparable size. PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION Salesforce.com, inc. develops enterprise cloud computing solutions with a focus on customer relationship management. The company offers Sales Cloud to store data, monitor leads and progress, forecast opportunities, gain insights through relationship intelligence, and collaborate around sales on desktop and mobile devices, as well as solutions for partner relationship management. It also provides Service Cloud, which enables companies to deliver personalized customer service and support, as well as connects their service agents with customers on various devices; and Marketing Cloud to plan, personalize, and optimize one-to-one customer interactions. In addition, the company offers Commerce Cloud to deliver a digital commerce experience; Community Cloud to create and manage branded digital destinations for customers, partners, and employees; Internet of Things Cloud that provides insights to companies enabling them to sell, service, and market to their customers in personalized ways, as well as engage with them in real time; and Analytics Cloud that enables employees across an organization to explore business data, uncover new insights, make decisions, and take action from various devices. Further, it provides Salesforce Quip, a next-generation productivity solution for teams with a mobile-first strategy to collaborate without email; and Salesforce Platform for building enterprise apps. Additionally, the company offers professional cloud services, such as consulting, deployment, training, user-centric design, and integration to facilitate the adoption of its solutions; and architects and innovation program teams, as well as various education services comprising introductory online courses and advanced architecture certifications. Salesforce.com, inc. offers its services through direct sales; and through consulting firms, systems integrators, and other partners. The company was founded in 1999 and is headquartered in San Francisco, California. The Landmark @ One Market San Francisco, CA 94105 USA Phone: 415-901-7000 Fax: 415-901-7040 http://www.salesforce.com Employees: 25000 STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 2.5 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 40% of the stocks we rate. Total Return 4.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 80% of the companies we cover. Efficiency 1.5 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 20% of the companies we review. Price volatility 4.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 80% of the stocks we monitor. Solvency 4.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 80% of the companies we analyze. Income 0.5 out of 5 stars Measures dividend yield and payouts to shareholders. This company pays no dividends. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.33 Q4 FY18 1.33 E 2018(E) 1.72 E 2019(E) INCOME STATEMENT Net Sales ($mil) 2,679.84 2,144.78 EBITDA ($mil) 303.17 171.80 EBIT ($mil) 115.62 2.46 Net Income ($mil) 51.39-37.31 FINCIAL ALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. Sales and net income have grown, and although the growth in revenues has outpaced the average competitor within the industry, the net income growth has not. has liquidity. Currently, the Quick Ratio is 0.72 which shows a lack of ability to cover short-term cash needs. The company's liquidity has increased from the same period last year. At the same time, stockholders' equity ("net worth") has greatly increased by 29.72% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 3,628.67 1,200.81 Total Assets ($mil) 17,490.04 14,387.67 Total Debt ($mil) 2,178.26 2,025.15 Equity ($mil) 8,829.37 6,806.04 PROFITABILITY Gross Profit Margin 79.20% 79.26% EBITDA Margin 11.31% 8.01% Operating Margin 4.31% 0.11% Sales Turnover 0.57 0.55 Return on Assets 0.04% 1.42% Return on Equity 0.09% 3.02% DEBT Current Ratio 0.82 0.60 Debt/Capital 0.20 0.23 Interest Expense 21.56 21.95 Interest Coverage 5.36 0.11 SHARE DATA Shares outstanding (mil) 722 697 Div / share 0.00 0.00 EPS 0.07-0.05 Book value / share 12.22 9.77 Institutional Own % Avg Daily Volume 4,342,433 3,996,575 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for has not changed since 11/19/2015. As of 12/14/2017, the stock was trading at a price of which is 4.5% below its 52-week high of $109.19 and 52.8% above its 52-week low of $68.23. 2 Year Chart HOLD: $76.99 2016 $125 $100 $75 MOST RECENT RATINGS CHANGES Date Price Action From To 12/14/15 $76.99 No Change Hold Hold Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 12/14/2017) 44.62% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.32% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 25.06% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION HOLD. 's P/E ratio indicates a significant premium compared to an average of 554.04 for the Software industry and a significant premium compared to the S&P 500 average of 25.50. To use another comparison, its price-to-book ratio of 8.53 indicates a significant premium versus the S&P 500 average of 3.24 and a significant discount versus the industry average of 11.23. The current price-to-sales ratio is well above the S&P 500 average and above the industry average, indicating a premium. The valuation analysis reveals that, seems to be trading at a premium to investment alternatives within the industry. Price/Earnings 10424.00 Peers 554.04 Premium. A higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations. Price/Projected Earnings 60.60 Peers 34.16 Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations. Price/Book 8.53 Peers 11.23 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a discount to its peers. Price/Sales 7.59 Peers 7.15 Average. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a valuation on par with its industry on this measurement. DISCLAIMER: Price/CashFlow 31.57 Peers 21.66 Premium. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. Price to Earnings/Growth 25.33 Peers 2.18 Premium. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant premium to its peers. Earnings Growth lower higher -96.67 Peers 22.65 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 25.49 Peers 16.11 Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share. has a sales growth rate that significantly exceeds its peers. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5