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Dec. 1, 2021, 8:26 a.m. EST

Salesforce earnings beat in first full quarter with Slack, but forecast slaps stock

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By Jeremy C. Owens

Salesforce.com Inc. produced a big earnings beat in its first full quarter with Slack Technologies Inc. on board, but projections for the end of the year slammed the stock in after-hours trading Tuesday.

Salesforce /zigman2/quotes/200515854/composite CRM -2.06% reported a fiscal third-quarter profit of $468 million, or 47 cents a share, on sales of $6.86 billion, up from $5.42 billion a year ago. After accounting for stock-based compensation and other effects, the cloud-software company reported earnings of $1.27 a share, a decline from adjusted earnings of $1.72 a share in the year-ago quarter but well ahead of estimates. Analysts on average expected adjusted earnings of 92 cents a share on sales of $6.8 billion, according to FactSet.

For the fiscal fourth quarter, Salesforce projected adjusted earnings of 72 cents to 73 cents a share on sales of $7.22 billion to $7.23 billion. Analysts on average were expecting earnings of 82 cents a share on sales of $7.24 billion, according to FactSet.

In a conference call Tuesday afternoon, Chief Financial officer Amy Weaver noted that the company’s merger activity would lead to a 49-cent “headwind” to adjusted earnings, and outlined reasons that costs would rise in the fourth quarter and cut into profit.

“Our guidance continues to incorporate expense seasonality that is weighted to Q4, including investments in both our workforce and growth opportunities, and [travel and expense] expectations.”

Salesforce raised its full-year expectations, just as it did in its first-quarter and second-quarter reports; management now expects full-year revenue of $26.39 billion to $26.4 billion and adjusted earnings of $4.68 to $4.69 a share, after projecting earnings of $4.36 to $4.38 a share on sales of $26.25 billion to $26.35 billion three months prior.

Salesforce shares fell more than 6% in after-hours trading following release of the results, after closing with a 3.9% decline at $285.25.

Salesforce closed on its big-money acquisition of workplace-communications software Slack in late July, just before the third quarter began in August. The customer-relationship-management software company then made Slack the focus at its annual Dreamforce conference in September, showing off how it plans to integrate Slack with other large acquisitions, such as MuleSoft and Tableau , as well as its different verticals focused on specific industries.

For more: Salesforce’s deal for Slack creates a bigger threat to Microsoft

“Salesforce foresees a significant land-and-expand runway ahead for Slack, while the young platform now has the added benefit of an ‘army’ at its disposal to sell the product,” Monness, Crespi, Hardt & Co. analyst Brian J. White wrote in an earnings preview, while maintaining a buy rating and $328 price target.

Salesforce executive Bret Taylor was heavily involved in the acquisition of Slack, and Salesforce separately announced Tuesday that he has been promoted to co-chief executive of the company, sharing the position with founder Marc Benioff. Taylor was previously president and chief operating officer of the company, and was announced as the new board chairman of Twitter Inc. on Monday, part of the departure of that company’s CEO, Jack Dorsey .

“I’m grateful that Marc and our board have put their faith in me to help lead Salesforce through our next chapter,” said Taylor, who will also service as vice chair of the Salesforce board, in a statement.

In 2018, Salesforce promoted former Oracle Corp. /zigman2/quotes/202180826/composite ORCL +0.27% executive Keith Block to the co-CEO position with Benioff, but he left the company less than two years later .

In a conference call Tuesday, Taylor disclosed that Slack recorded $280 million in revenue during the quarter, which he said was $30 million higher than guidance.

“Slack outperformed our expectations in the first full quarter as a part of the Salesforce family,” Taylor said. “The number of customers on Slack who spent over $100,000 was up 44% year-over-year, and adoption of Slack Connect was up an astonishing 176% year-over-year.”

Salesforce also announced that Williams-Sonoma Inc. /zigman2/quotes/202067350/composite WSM -2.14% CEO Laura Alber and former United Airlines Holdings Inc. /zigman2/quotes/205037281/composite UAL -2.27% CEO Oscar Munoz will join the company’s board. Alber’s appointment took effect immediately, while Munoz is expected to take his seat at the beginning of 2022.

Salesforce shares received a boost around Dreamforce time, but have fallen back in recent weeks after hitting record highs in early November. The stock suffered a six-session losing streak — its longest in nearly two years — that pulled prices down 7.7% before breaking that run Monday .

See also: For Salesforce investors, Slack must start supercharging growth — and the stock price

Overall, Salesforce shares have gained 28.4% so far this year, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.04% has increased 23.9%.

$ 171.04
-3.60 -2.06%
Volume: 6.48M
Feb. 3, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$174.64 billion
Rev. per Employee
$ 89.62
+0.24 +0.27%
Volume: 5.67M
Feb. 3, 2023 4:02p
P/E Ratio
Dividend Yield
Market Cap
$240.99 billion
Rev. per Employee
$ 140.49
-3.07 -2.14%
Volume: 861,213
Feb. 3, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$9.56 billion
Rev. per Employee
US : U.S.: Nasdaq
$ 51.12
-1.19 -2.27%
Volume: 6.96M
Feb. 3, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$17.10 billion
Rev. per Employee
-43.28 -1.04%
Volume: 0.00
Feb. 3, 2023 4:54p

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