Transcript
Salesforce.com
STUDENT MANAGED INVESTMENT FUND
Table of ContentsI II III IV V VI VII
Tech Sector OutlookCompany InformationIndustry OutlookCompany DriversCompany AnalysisValuation AnalysisSummary
Technology Sector Outlook
.
Sector Performance
U.S. Economic Data
GDP Quarter Growth 2.1% Inflation Rate 0.2%Unemployment Rate 5.00% Fed Funds Rate 2015 0.25
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Telecommunication Services
Utilities
12.69%
2.22%
-15.39%
-0.89%
4.95%
-1.85%
6.70%
-6.37%
-3.72%
-10.21%
YTD
Market Data
52–week high52-week lowPrevious CloseMarket CapOutstanding SharesBetaTTM EPSProjected EPSTrailing P/E RatioForward P/E
$82.90$53.44
53,100.1 M664.0 M
1.25(0.21)
0.73
107.78
[Ticker: CRM]Salesforce.com provides software on demand. The company supplies a customer relationship management service to businesses worldwide providing a technology platform for customers and developers to build and run business applications. Clients use Salesforce.com to manage their customer, sales and operational data.
About Salesforce.com
November-14
December-1
4
January-15
Febru
ary-15
March-15
April-15
May-15
June-15
July-15
August-15
September-15
October-1
5
November-15
-20
-10
0
10
20
30
40
CRM vs. S&P 500 Technology Index LTM
CRM US Equity SPX Index
The Product Mix
Sales Cloud Service Cloud Marketing Cloud
AppsAnalyticsCommunity Cloud
• Grow sales with the CRM platform• Salesforce IQ – The smart, simple
CRM to grow your business• Data.com – B2B prospecting and
data cleaning
• Fully customizable support and help desk
• Desk.com - All in one customer support for small businesses
• Digital Marketing Platform• Pardot - B2B Marketing automation
• Connect customers, partners and employees
• Chatter – Enterprise Social Network
• Wave Analytics – Business analytics on any data, any device
• Wave apps – Apps that drive sales, insight, and customer delight
• App Cloud – #1 platform as a service• Force.com – Lightning apps for
everyone• Heroku Enterprise – Scalable apps
for developers
CRM Industry Outlook
Salesforce is the CRM Software leader Market Share growth opportunity Larger cross selling opportunities
Salesforce.com16%
Oracle11%
SAP8%
Microsoft3%IBM
3%
other59%
CRM Market Share
Salesforce.com Oracle SAPMicrosoft IBM other
Salesforce.com
Oracle
SAP
Microsoft
IBM
$3,963
$2,686
$2,091
$731
$728
Top CRM Software Vendors
2014 Revenue (Millions)
2014 2015 F2016 F2017 F20180
5
10
15
20
25
0
5
10
15
20
25
SaaS vs. On-Premise CRM Software Spending
CRM Total SaaS On PremiseSource: IDC
SaaS (Software as a Service) Operated and managed remotely Reduced overhead No upfront license costs Up to date software updates Work anywhere
SaaS Vs. On-Premise CRM
On-Premise× High startup costs× Increased set up times× Limited software update
capability× Restricted Access
Company Drivers
Supply Chain Analysis – Hedged against China and Emerging Economies
USA & Canada:72%
Europe:18%
Asia Pacific:10%
Salesforce.com Customers
USA & Canada: Europe: Asia Pacific:
Customers Country of Domicile Relationship Value % of Salesforce Revenue
Japan Post Holdings Co Ltd Japan 47.30M 3.59%Bank of America Corp USA 36.99M 2.81%IBM USA 18.91M 1.43%Verizon Communications Inc USA 17.26M 1.31%Comcast Corp USA 16.51M 1.25%Cap Gemini SA France 15.74M 1.19%HP Inc USA 14.69M 1.11%Siemens AG Denmark 14.46M 1.10%Nestle SA Switzerland 13.90M 1.05%Home Depot Inc USA 13.43M 1.02%United Continental Holdings USA 13.36M 1.01%Mitsubishi Japan 12.79M 0.97%
80.26% of sales are to U.S domiciled companies Chinese Companies account for 1.05% of total sales
S.W.O.T. AnalysisStrengths Weaknesses
Opportunities Threats
Leadership in OnDemand Cloud Hosted CRM
Strong and Fast Growing Customer Base
Analytics to Drive Future Growth
Corporate Social Responsibility
Maturing Sales Cloud Could Potentially Slow Growth
Young High Growth Company Syndrome
Cloud Applications Outgrowing On-Premise
Strategic Acquisitions to Broaden Cloud
Growing OnDemand Market for CRM
Data Privacy and Hacking IssuesInterruptions or Delays From Third-Party Facilities
Strong Growing Competition
Salesforce Acquisitions Heroku (Announced on December 8,2010) for US$212 million- Heroku is a cloud platform that lets companies build, deliver, monitor and scale apps- Heroku is the leading Ruby application platform-as-a-service- Salesforce bought Heroku as a form of developer marketing
ExactTarget (Announced on June ,2013) for US$2.5 billion- ExactTarget makes tech for email and mobile marketing campaigns - ExactTarget now known as Salesforce Marketing Cloud - Acquired ExactTarget as a form of combining its leading digital marketing capabilities with salesforce leading sales, service and social marketing solutions
RelateIQ (Announced on July 10,2014) for US$390 million- RelateIQ uses large-scale data-mining technologies to automate relationship tracking in the enterprise and CRM world- RelateIQ now known as SalesforceIQ - Acquisition of RelateIQ will extend the value of Salesforce #1 CRM apps and platform with a new level of intelligence across sales, service and marketing
Making the World a Better Place – Salesforce.com’s 1/1/1 Model
1% Time
- Salesforce.com employees are awarded 6 paid days of volunteer time to use over the course of a year- To date, 178,000 hours of volunteer time has been donated by employees
1% Product
- The Salesforce.com Foundation facilitates the donation and discount of Salesforce CRM licenses to nonprofits- 8,000 nonprofits in 70 countries are benefiting from these licenses today
1% Equity
- Using 1% of founding stock to offer grants focused on technology innovation and youth development programs- Salesforce.com has given nearly $20 million in grants to qualified nonprofits
Awards & Recognition
San Francisco Business Times
Community Commitment Award 2011
100 Best Companies to
Work For 2012, 2013, 2014 -
FORTUNE
World’s Most Innovative Company
2011, 2012, 2013, 2014 -
FORBES
Company Analysis
FY2011 FY2012 FY2013 FY2014 FY2015 *FY2016 $-
$1,000.00
$2,000.00
$3,000.00
$4,000.00
$5,000.00
$6,000.00
$7,000.00
Sales Revenue
FY2013 FY2014 FY2015 *FY2016 *FY2017 *FY20180
20
40
60
80
100
120
140
160EV / EBITDA
Solid sales growth Broke into positive net income Decreasing EV/EBITDA ratio
Growth Outlook
FY2013 FY2014 FY2015 LTM *FY2016 *FY2017Net Income (Loss)
$(400.00)
$(200.00)
$-
$200.00
$400.00
$600.00
$800.00
$(96.40) $(232.60) $(262.60)
$(87.70)
$494.70
$666.80
Net Income
Comparable Companies AnalysisManagement Effectiveness CRM Comps Ranked by
Market ShareNarrow Industry
CompetitorsIndustry
ROA -0.86% 6.97% -6.66% 3.48%
ROE -2.05% 33.97% -16.78% 5.61%
ROC -8.76% 10.12% -14.31% 4.50%
Financial Strength CRM Comps Ranked by Market Share
Narrow Industry Competitors
Industry
Quick Ratio 0.61 1.93% 2.04 1.70
Current Ratio 0.74 2.12 2.19 1.97
Total Debt to Total Equity 27.11% 115.00% 32.13% 42.89%
Profitability Ratios CRM Comps Ranked by Market Share
Narrow Industry Competitors
Industry
EBITDA Margin 10.38% 26.98% -2.56% 16.53%
Gross Margin 75.25% 66.73% 76.28% 76.10%
Operating Margin 2.54% 20.03% -10.23% 8.87%
Pre-Tax Margin 2.53% 18.93% -11.37% 7.94%
Comps Ranked by Market Share
1. IBM2. Microsoft3. SAP4. Oracle
Narrow Industry Competitors
1. Netsuite 2. Workday3. Qlik Technologies4. Tableau Software
When compared to Narrow Industry Comps, Salesforce is favorable
Fundamental Analysis FY 2012 FY 2013 FY 2014 FY 2015 LTM
Profitability
Gross Margin 78.43% 77.59% 76.21% 76.01% 76.11%
EBITDA Margin 10.12% 8.55% 6.83% 10.43% 12.66%
Operating Margin -1.55% -3.63% -7.03% -2.71% 3.4%
Pretax Margin -1.47% -4.19% -8.79% -3.97% 2.06%
Net Profit Margin -0.51% -8.87% -5.70% -4.89% -1.45%
Management Effectiveness
Return on Equity -0.79% -13.40% -8.54% -7.46% -2.05%
Return on Assets -0.32% -5.58% -3.16% -2.65% -0.86%
Return on Capital -0.03% -9.90% -4.65% -4.18% -4.04%
Debt
Total Debt/Equity 29.78% 21.98% 61.14% 34.48% 28.82%
Young high growth company syndrome
Significant Improvement in LTM metrics
Decreasing use of debt
Valuation
DCF AssumptionsWACC 10.6%
Perpetuity Growth Rate 3.5%
Exit EV/EBITDA Multiple 42.0x
Average
Comps P/B
Comps P/CF
EV / EBITDA Comps
DCF EBITDA Exit Multiple
DCF Perpetuity Method
$70.0 $80.0 $90.0 $100.0 $110.0 $120.0 $130.0 $140.0
Salesforce.com Valuation Method's Analysis
Current Price: $79.96
Target Price:
$104.75
Upside: 31%
BUY
Analyst Recommendations
Dece
mbe
r 201
3
Janu
ary
2014
Febr
uary
201
4
Mar
ch 2
014
April
201
4
May
201
4
June
201
4
July
201
4
Augu
st 2
014
Sept
embe
r 201
4
Oct
ober
201
4
Nov
embe
r 201
4
Dece
mbe
r 201
4
Janu
ary
2015
Febr
uary
201
5
Mar
ch 2
015
April
201
5
May
201
5
June
201
5
July
201
5
Augu
st 2
015
Sept
embe
r 201
5
Oct
ober
201
5
Nov
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r 201
510
20
30
40
50
60
70
80
90
100
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Buy and Sell Recommendations vs. Price and Target Price
Buys Holds Sells Tgt Price Price
Measure CRM US Comp AvgConsensus Rating 4.58 3.89
Buys 87.5% 51.96%
Holds 6.25% 41.56%
Sells 6.25% 6.48%
Firm RecommendationJ.P. Morgan OverweightUBS BuyBarclays OverweightGoldman Sachs BuyRBC Capital Markets BuyCredit Suisse OutperformRaymond James Strong Buy
BUYCurrent Price: $79.96Target Price: $104.75
Upside: 31%
Summary
“It doesn’t take a data science degree, it takes 5 buttons”
-Salesforce.com
Strong Growth Outlook Increased Industry Demand Hedged Global Supply Chain
Diversified Product Mix
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