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Analyzing Salesforce’s Cash and Cash Flow in Fiscal 2017

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Salesforce’s cash, debt, and cash flow in fiscal 2017

Previously in this series, we discussed how growth in Salesforce’s (CRM) deferred and unbilled deferred revenue strengthened its sales pipeline. Fiscal 4Q17 marked eleven straight quarters in which Salesforce managed to expand its non-GAAP (generally accepted accounting principles) operating margins. Let’s look at the company’s cash, debt, and cash flow in fiscal 4Q16.

As of January 31, 2017, Salesforce had cash, cash equivalents, and marketable securities worth $2.2 billion. Its total debt is $1.8 billion. Salesforce doesn’t have any short-term debt. The expansion of Salesforce’s non-GAAP operating margin by 78 basis points in fiscal 2017 helped the company record operating cash flow of $2.1 billion—an increase of 29% YoY (year-over-year). This rise is the first time Salesforce’s cash flow has crossed the $2 billion milestone. Unlike cloud space peers Microsoft (MSFT), Oracle (ORCL), and IBM (IBM), Salesforce doesn’t pay a dividend.
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Salesforce’s cash flow growth surpassed its revenue growth

Salesforce’s operating cash flow grew 29%, and its revenue grew 26% in fiscal 2017. Salesforce’s revenue growth exceeded analysts’ expectation of 23%. Its free cash flow grew 28% to ~$1.7 billion. In fiscal 1Q18, Salesforce expects revenue and EPS (earnings per share) of $2.34 billion–$2.35 billion and $0.25–$0.26, respectively.

Salesforce’s stock and its investors could benefit if the company can maintain this pace in fiscal 2018. Considering the company’s improved guidance for fiscal 2018, it’s likely that the company is on its way to attaining the revenue milestone of $10 billion by fiscal 2018.

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