Salesforce cash and cash flows
Earlier in this series, we discussed some of the metrics used in the SaaS space in relation to Salesforce (CRM). Let’s have a look at how Salesforce fares in terms of margins and cash flow, which provides a better view of the company’s profitability.
Salesforce has cash, cash equivalents, and marketable securities of ~$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[1. generally accepted accounting principles] 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).
Despite huge growth, profits are elusive in the SaaS space
The chart above shows the relationship between the growth and price-to-revenue ratios of public SaaS companies. Despite the huge growth in the SaaS space, the majority of SaaS companies, including LinkedIn, NetSuite, Salesforce, and Workday (WDAY), are unprofitable and have negative cash flows. LinkedIn and NetSuite have been acquired by Microsoft (MSFT) and Oracle (ORCL), respectively, to fuel their ambitions in the CRM space.
In the SaaS universe, Salesforce is still not making a profit and has the highest positive cash flow among its peers. With each passing quarter, Salesforce has managed to improve its margins. Fiscal 4Q17 marked 11 straight quarters in which Salesforce expanded its non-GAAP operating margins.