Analysis Of Salesforce’s LevelJump Acquisition

I’m publishing this series to discuss a topic that I follow closely - cloud stocks, trends, strategy, acquisitions, and more. Please subscribe to my Cloud Stock Analysis series and never miss an article. I like fundamentals-focused business building, and outline the principles of fundamentals-focused business building in my free?Bootstrapping course.

Salesforce (NYSE: CRM) recently announced its third-quarter results that continued to surpass market expectations. The company is banking on acquisitions and partnerships to continue to drive its stellar growth.

Salesforce’s Financials

Salesforce’s revenues for the third quarter grew 27% to $6.86 billion, above analyst estimates of $6.79 billion. Adjusted earnings of $1.27 per share were also better than the market’s forecast of $0.92 per share.

By segment, Subscription and support revenues grew 25% to $6.38 billion. Professional services and other revenues grew 45% to $480 million.

Slack’s contribution to revenues grew to $280 million compared with the earlier guidance of $250 million. The significant increase was driven by enterprise customers with customers spending more than $100K growing 44% over the quarter. Sales Cloud joined Service Cloud and became a $6 billion run rate business, reporting a growth of 17% over the year. Service Cloud continued to grow at over 20% growth rate as it benefited from broader portfolio adoption and increased customer stickiness.

But where Slack showed significant growth, its other acquisition of Mulesoft has put a dampener on the results. Mulesoft’s growth decelerated to 16%, compared with 39% growth a quarter ago. The deceleration was driven by a re-organization within Mulesoft aimed at positioning the business to scale longer-term. Analysts believe this to be a short-term impact that should self-correct in the coming quarters.

For the fourth quarter, Salesforce forecast revenues of $7.224-$7.234 billion with an EPS of $0.72-$0.73. The market was looking for $7.21 billion with an EPS of $0.79. Salesforce expects to end the current fiscal with revenues of $26.39-$26.4 billion and an EPS of $4.68-$4.69. The market was looking for revenues of $26.3 billion for the year with an EPS of $4.40. Salesforce expects to end the next fiscal with revenues of $31.7-$31.8 billion, with the first quarter revenues at $7.215-$7.25 billion.

Salesforce’s LevelJump Acquisition

Recently, Salesforce announced the acquisition of Canada-based LevelJump. Founded in 2014 by David Bloom, LevelJump is a sales onboarding and training software for high-growth SaaS companies. It helps customers with building consistent and scalable onboarding programs, as well as aligning training to sales outcomes and reducing the ramp time of new sales hires.

The acquisition integrates LevelJump’s modern, outcome-based enablement and coaching through the Sales Cloud interface, guiding and facilitating better engagement and measurable impact on the sales process. According to recent reports, the number of open sales roles has grown this year by 65% to over 700,000 open positions around the United States. By integrating LevelJump, Salesforce will help upskill the future sales workforce and make it easier to build high-performing sales teams. Terms of the acquisition were not disclosed. Prior to the acquisition, LevelJump had raised an undisclosed amount in Pre Seed and Seed Funding rounds from investors including Fastbreak Ventures, NEXT Canada, DMZ, and L-SPARK.

Besides acquisitions, Salesforce is also expanding through partnerships. It recently announced a partnership with Rocket Mortgage to help expand its mortgage vertical-focused offerings. The partnership will make its mortgage orientation technology available to banks, credit unions, and other financial institutions through Salesforce Financial Services Cloud.

Additionally, it announced an expansion of its partnership with DocuSign to create joint solutions, making it easier for customers to accelerate the facilitation of agreements internationally. The contract process will be automated through AI-based, smart solutions, improving the customer experience of preparing, signing, and managing agreements, as well as driving faster ROI, and increasing collaboration throughout organizations with Slack functionality.

Salesforce’s stock is trading at $255.78 with a market capitalization of $251.54 billion. It hit a 52-week high of $311.75 in November and a 52-week low of $201.51 in March.

Disclosure:?All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

Looking For Some Hands-On Advice?

For entrepreneurs who want to discuss their specific businesses with me, I’m very happy to assess your situation during my free online?1Mby1M Roundtables, held almost every week. You can also check out our free?Bootstrapping Course, our?Udemy courses,?YouTube channel,?podcast interviews?with VCs and Founders, and, to?follow my writings, click Follow from?here.

Photo credit:?Jo Bruni/Flickr.com