Salesforce.com 2012 Annual Report Download - page 40

Seasonal Nature of Deferred Revenue and Accounts Receivable
Deferred revenue primarily consists of billings to customers for our subscription service. Over 90 percent of
the value of our billings to customers is for our subscription and support service. We generally invoice our
customers in either quarterly or annual cycles. There is a disproportionate weighting towards annual billings in
the fourth quarter, primarily as a result of large enterprise account buying patterns. Currently, there is greater
operational discipline around annual invoicing, for both new business and renewals. Occasionally, we bill
customers for their multi-year contract on a single invoice which results in an increase in noncurrent deferred
revenue. Our fourth quarter has historically been our strongest quarter for new business and renewals. The year
on year compounding effect of this seasonality in both billing patterns and overall new and renewal business
causes the value of invoices that we generate in the fourth quarter for both new business and renewals to increase
as a proportion of our total annual billings.
Accordingly, the sequential quarterly changes in accounts receivable and the related deferred revenue during
the first three quarters of our fiscal year are not necessarily indicative of the billing activity that occurs in the
fourth quarter as displayed below:
(in thousands)
April 30,
2011
July 31,
2011
October 31,
2011
January 31,
2012
Fiscal 2012
Accounts receivable, net ............................... $270,816 $342,397 $312,331 $ 683,745
Deferred revenue, current and noncurrent .................. 915,133 935,266 917,821 1,380,295
(in thousands)
April 30,
2010
July 31,
2010
October 31,
2010
January 31,
2011
Fiscal 2011
Accounts receivable, net ............................... $183,612 $228,550 $258,764 $ 426,943
Deferred revenue, current and noncurrent .................. 664,529 683,019 694,557 934,941
(in thousands)
April 30,
2009
July 31,
2009
October 31,
2009
January 31,
2010
Fiscal 2010
Accounts receivable, net ............................... $145,869 $168,842 $191,297 $ 320,956
Deferred revenue, current and noncurrent .................. 549,373 549,010 545,435 704,348
Unbilled Deferred Revenue
The deferred revenue balance on our consolidated balance sheet does not represent the total contract value
of annual or multi-year, non-cancelable subscription agreements. Unbilled deferred revenue was over $2.2 billion
as of January 31, 2012 and over $1.5 billion as of January 31, 2011. Unbilled deferred revenue represents future
billings under our subscription agreements that have not been invoiced and, accordingly, are not recorded in
deferred revenue. We expect that the amount of unbilled deferred revenue will change from quarter to quarter for
several reasons, including the specific timing and duration of large customer subscription agreements, varying
billing cycles of subscription agreements, the specific timing of customer renewals, foreign currency fluctuations,
the timing of when unbilled deferred revenue is to be recognized as revenue, and changes in customer financial
circumstances. For multi-year subscription agreements billed annually, the associated unbilled deferred revenue
is typically high at the beginning of the contract period, zero just prior to renewal, and increases if the agreement
is renewed. Low unbilled deferred revenue attributable to a particular subscription agreement is often associated
with an impending renewal and may not be an indicator of the likelihood of renewal or future revenue from such
customer. Accordingly, we expect that the amount of aggregate unbilled deferred revenue will change from
year-to-year depending in part upon the number and dollar amount of subscription agreements at particular stages
in their renewal cycle. Such fluctuations are not a reliable indicator of future revenues.
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