When it comes to leaders in the cloud computing industry, you probably think of Amazon, Microsoft, and Google. But in the segmented application of cloud computing in CRM, these giants stand on the sidelines, and there is only one market leader, salesforce.

According to IDC, in 2023, Seifu's share of the CRM market reached 21.7%, ranking first for 11 consecutive years. In the top five in the industry, the other four add up to less than it.

So, what about its performance for a giant of a division track such as Seifu? We can focus on three points: revenue growth, profitability, and cash flow and shareholder returns.

1. Revenue growth

Seifu's core products include Sales Cloud, which helps customers expand sales channels, Service Cloud for customer communication management services, Marketing and Commerce that helps customers conduct data analytics, and Platforms that help customers develop applications.

Despite the wide variety of products, the revenue patterns are similar, mainly generated through customer subscriptions, and more than 90% of Sefu's revenue comes from subscriptions and support services.

THE CLOUD COMPUTING INDUSTRY WAS A FAST-GROWING INDUSTRY IN THE EARLY YEARS. WHEN SEFU WAS THE LEADER OF THE CRM SEGMENT, PERFORMANCE GROWTH WAS NOT BAD. Before fiscal 2022, Seifu's annual revenue growth rate was more than 20%, and it was a well-established growth company.

On a quarterly basis, however, as of Q3 2023, Seifu's performance growth has fallen to below 20%, and the latest Q4 2024 revenue growth is only 10.8%, setting a multi-year low.

So we can mainly look at the expectations for future earnings growth at Safeway from three perspectives.

First of all, from the logic of its revenue growth, Seifu's revenue source is primarily subscriptions to SaaS services for its CRM business, which are paid mainly on a monthly or yearly basis. Revenue growth for software subscription services is driven on the one hand by increased customer numbers and on the other hand driven by price increases. In terms of the number of customers, you need to look at the loss of existing customers and the situation of new expansion customers.

SEFU DID NOT DISCLOSE THE NUMBER OF CUSTOMERS AND SERVICE PRICE INFORMATION IN ITS RESULTS, BUT THE LOSS OF CUSTOMERS IS MENTIONED. The lower the customer turnover rate, the higher the customer engagement. Seifu's customer loss rate in Q4 2024 was around 8%, consistent with most of the time before, and then we can see if its customer loss rate will continue to remain stable and, if higher, it may be detrimental to revenue growth.

At the same time, we can also observe another indicator, namely the amount of the remaining performance obligation, that is, the amount of the contract that has already been concluded with the client, but has not yet been executed and confirmed income.

We see Cefu's outstanding performance obligations in Q4 2024 at approximately $569 billion, growing by approximately 17.8% for seasonal reasons, consistent with past growth, and we can continue to observe changes in this indicator.

Finally, we also need to focus on the earnings guidance for future financial quarters in the performance of the current financial year. In the FY2024 Q4 quarterly report, management guidance for Q1 2025 was approximately $91.2-91.7 billion, up 11% year-on-year, basically in line with analysts' expectations, but management's guidance for FY2025 revenue guidance of $377-380 billion increased by about 9% year-on-year, falling more than double digits, well below analysts Expected. This is also a major reason why the stock price fell short after the release of its results.

2. PROFITABILITY

Following a slowdown in revenue growth, the focus of Sefu's operations also shifted to improving profitability, in what is known as “downsizing”. Seifu's reduction of 10% in the 2024 fiscal year, as well as the move to reduce office space, is essentially to increase the company's profitability potential.

Before fiscal 2022, Seifu's operating profit margin was basically no more than 10%, and even below 5% for most fiscal years. However, this situation showed a marked improvement from FY2023, with Seifu's operating profit margin rising from 0.3% in Q1 2023 to 19.3% in Q4 2024, while adjusted operating profit excluding equity incentive expenses such as equity incentives reached 31.4%. Its operating profit also increased from less than $1 billion to about $18 billion.

In general, a public profitability can improve significantly, whether the gross margin is performing well or the expense rate is well controlled. And from the financial data of Safi, the two are the same.

In terms of gross profit margin, Sefu rose from 72.4% in Q1 2023 to 76.9% in Q4 2024, up 4.5 percentage points in less than two years.

In terms of cost control, Safeway has been even more efficient, with its sales expense rate reduced from 45.5% in Q1 2023 to 37%, its same-time management fee rate decreased from 8.9% to 6.8%, R&D expenses decreased from 17.8% to 13.7%, and cumulative triple expenses decreased from 72.1% to 57.5%. The decline in the period reached 14.6 percentage points.

Along with the increase in the level of gross profit, as well as a sharp decrease in the level of expenses, the increase in profitability at the time of Sefu has also reached the water table. For future results, we can continue to see if profitability at CFU continues to maintain an upward trend until it stabilizes at a relatively high profit margin level. After all, when revenue growth falters, it is only through profit growth.

3. Cash flow and shareholder return

Over the past many years, Safi's net profit can be said to have been very volatile, but the free cash flow has been very stable and has been growing rapidly for most of the years. For example, as of FY2012, Cofu's cumulative net profit was about $106 billion, but cumulative free cash flow of $390 billion is nearly four times the net profit for the same period and has been growing every year during the period, reaching nearly a billion in free cash flow in FY 2024.

Abundant cash flow also enables Seifu to deliver shareholder returns. And this is a common practice for many companies with stagnant growth. In U.S. stocks, many companies, after a growth bottleneck, can't meet the goal of accelerating growth, even if the money they make is used to increase their investments. They may consider increasing shareholder returns and returning profits to shareholders. Ways to give back to shareholders mainly include dividends and buybacks.

Dividends are the most direct way to give back to shareholders, while buybacks can increase a company's net asset return and earnings per share, and inject additional liquidity into the market, which can be said to be a lot of achievement and is very popular with shareholders. And the approach that Safi took at the time was mainly repurchasing.

Starting in Q3 2023, Sefuxi began continuing stock repurchases with a cumulative repurchase amount of approximately $116.2 billion for the 6 quarters, essentially consistent with cumulative free cash flow during the same period. In the Q4 results of FY2024, Cefu announced a new buyback program totaling up to $100 billion.

At the same time, the company announced a dividend on the first day of its history, with a cash dividend of $0.4 per share, although a small amount corresponding to a dividend yield of less than 1%, it is also a good start.

Writing here, you may have some new appreciation for how to read the results of Sefu. It's worth mentioning that every time many star companies post results, it can mean a tough trading opportunity for different types of investors.

For example, if an investor feels that a company's recent performance will release some positive signals and favor short-term stock prices by interpreting past performance and incorporating recent progress, investors may consider doing more, and doing more could be to consider buying positive stocks, or consider buying bullish options, etc.

Conversely, if investors feel that the latest performance of a company will be less than optimistic and put pressure on short-term stock prices, investors may consider going blank, or consider buying bearish options, etc.

Of course, if investors feel that the direction of a company's performance is not very clear, but the stock price may fluctuate significantly upwards or downwards after the results are released, then investors may consider doing more of its share price volatility and consider buying both bullish and bearish cross strategies to gain a foothold In Opportunity.

Finally, to summarize,

For Seifu's performance, we can focus on three points: revenue growth, profitability improvement, and cash flow and shareholder returns.

For Cefu's revenue growth, we can keep an eye on its customer losses, remaining performance obligations, and management guidelines.

With regard to the profitability of Cefu, we can focus on the continued improvement of its gross margin, the optimization of the cost rate, and whether the level of profitability in the future will remain stable at a higher position.

For Sefu's cash flow and shareholder returns, we can focus on whether its free cash flow can maintain a sustained growth stance, as well as the execution of its repurchase program and the continuity of its dividend.

Each time a company publishes results, it may bring potential trading opportunities. Investors can consider the right types of trades based on their individual risk tolerance.

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