Salesforce, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Salesforce Q1 Fiscal Year Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will host a question-answer session, and our instructions will be given at that time. If during your conference day you require operator assistance, press star then zero, and an operator will be happy to assist you. As a reminder, this conference call is being recorded for replay purposes. It is now my pleasure to hand the conference over to Mr. John Cummings, Senior Vice President, Investor Relations. Sir, you may begin.

Thanks so much, Brian. Good afternoon, everyone, and thanks for joining us for our fiscal first quarter 20 results conference call. Our results, press release, SEC filings, and a replay of today's call can be found on our IR website at www.salesforce.com slash investor. With me on the call today is Mark Benioff, Chairman and Co-CEO, Keith Block, Co-CEO, Mark Hawkins, President and CFO, and Brett Taylor, President and Chief Product Officer. As a reminder, our commentary today will primarily be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings press release. Some of our comments today may contain forward-looking statements which are subject to risks, uncertainties, and assumptions. Should any of these materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. Description of these risks, uncertainties, and assumptions, and other factors that could affect our financial results are included in our SEC filings including our most recent report on Form 10Q. With that, we hand it over to you, Mark. Okay. Hey, thanks so much, John, and thank you, everyone, for being on the call today. I am sorry I'm a little bit late here. I was working on Kramer, and that will be on in 45 minutes. So let me just say, first of all, we are just happy to share that revenue in the quarter rose to more than $3.7 billion, up 24%. in dollars and 26% in constant currency. And in Q1, we delivered nearly $2 billion in operating cash flow, up 34% year over year. And I just want to congratulate our entire team for these cash flow numbers because they are just phenomenal. For fiscal year 2020, we're guiding to $16.25 billion at the high end of the range, representing 22% projected growth year-over-year, and that's up $200 million from 90 days ago when we had our Q4 earnings call. No other enterprise software company of our size and scale is growing at this rate. Just last month, IDC, Worldwide Software Tracker, ranked Salesforce the number one CRM for the sixth year in a row. And I'll tell you, that is more important than ever, especially so many of our customers are going through these tremendous digital transformations. And we all know every digital transformation begins and ends with the customer. And, you know, when I'm with these CEOs all over the world, this is really front and center in their mind. It's probably, you know, as exciting to them and as important to them as it was to CIOs who are buying for Y2K, you know, which is almost 20 years ago. You know, I think the digital transformation remains just a huge growth opportunity for our entire industry. And it's not only that. In 2018, Salesforce gained more CRM market share than the other top vendors combined. Oh, 15 top vendors combined. That's amazing. We're number one in sales. We're number one in service. And we're leading in so many other areas. We're number one in model-driven application platforms, driven by our amazing community of 6 million developers. We're also leader in marketing and commerce and continue to gain share, and with MuleSoft, we also have this number one integration platform. It's incredible. We have an amazing opportunity ahead of us, and we're taking advantage of that through our relentless focus on innovation, which is why Forbes has ranked Salesforce as one of the most innovative companies for eight years in a row. We have a powerful vision for the future with intelligent customer 360, giving our B2B and our B2C customers a unified 360-degree view of their customers across every touchpoint, sales, service, marketing, commerce, community, some more. And I'll tell you, this vision that has been so well articulated now by our product organization that we call Customer 360, this is really driving tremendous opportunity at the highest levels in these customers. And we'll talk about that. But every company needs to have this Customer 360 capability. It doesn't really matter what industry you are, even the federal government. It's just a tremendous driving force. And Customer 360 will continue to be a major growth engine for Salesforce going forward. At its core is our core Salesforce platform, which is the most powerful and easy way for companies to build modern, intelligent applications. In Q1, we announced our new Einstein platform services that enable everybody, regardless of their technical skill, to build custom AI-powered apps with just a few clicks. And that has been so important for our customers because just as we've infused these Einstein AI capabilities across our entire product line and made Einstein Voice and also Einstein Vision capabilities available to every Salesforce app, we're now doing this exact same thing with another critical technology for our customers, which is blockchain. So when you look at our platform, you see this incredible capability of not just AI, not just blockchain, not just mobile. I mean, there's so many things that are in the platform, and the ability for our customers to easily build these state-of-the-art applications is pretty awesome, or just simply extend our CRM apps. Last week at TrailerDX, our sold-out developer conference in San Francisco, we introduced Salesforce blockchain. It is a breakthrough. Every customer app can have blockchain capabilities. It's the world's first declared a blockchain service solution. And it's built in deeply now into all of our apps. It's built in deeply into our platform. It's built natively on our platform, enabling customers to easily create blockchain applications with simple drag and drop as they can with every other Salesforce app. And I'll tell you, I was in Minneapolis on Friday demonstrating that to one of our very large customers. and showing how they can use it for their supply chain. And it's just incredible what it's going to do for so many of our customers in every industry. Also, our ecosystem is developing a huge economy around Salesforce, one that is going to create more than 3 million jobs and more than $850 billion in GDP by 2022. And that is why we're so excited about Trailhead. which is our online learning platform and our online re-skilling platform that empowers everyone. Now we have more than 1.4 million learners changing their careers and their lives on Trailhead. And I'm sure so many of you have met these inspiring people and their incredible stories of how they transformed themselves using Trailhead. And in the quarter, our new MyTrailhead product became generally available. And now any of our customers can actually create their own branded service just like what we have done and reskill all their employees, customers, and partners too. So it will be a huge driver of workforce development, which is why we were so excited that two weeks ago we were with Ivanka Trump at our first ever Tradeoff Laser Day in Indianapolis in our headquarters in Indiana where we signed the White House pledge to America's workers and we plan to get more than a million Americans the skills they need to earn these Salesforce credentials and badges and do everything necessary to make them successful and to get top jobs in our ecosystem over the next five years. Finally, at Salesforce, our vision has always been to change the way the world does business and at the same time improve the state of the world. And that's why I'm extremely excited today that Salesforce.org is reunified officially as part of Salesforce. providing an even better experience for all of our nonprofit education and philanthropy customers and empowering them to fulfill their missions and tightly unifying our .org employees with our company. They already sit in our buildings and they're already here with us, but now they're fully part of our structure as well, and it's a tremendous opportunity to accelerate our work in this incredible nonprofit world. And now, as you're going to hear from Keith, we're well positioned to continue on our path to organically double our revenue again in the next four years, achieving a revenue target of $26 to $28 billion for fiscal year 2023. And now, over to Keith. Hey, thanks, Mark. Thanks, everybody, for joining us on the call today. As Mark said, we have never been positioned for the future better than we are right now. We delivered strong revenue growth in the quarter, And we're seeing great momentum across all of our clouds and all of our industries. In fact, for the first time ever, Service Cloud exceeded $1 billion in revenue for the quarter, becoming our second cloud. That is pretty awesome, right? That is unbelievably awesome. A billion-dollar quarter for Service Cloud. You know, a lot of these other cloud companies that we read about all the time, they're not even doing billion-dollar quarters. And here, bam, Service Cloud. Congratulations. No, it's pretty amazing. So it is becoming our second cloud. as Mark said, to surpass an annual revenue run rate of $4 billion, which is pretty incredible. It is pretty awesome. And MuleSauce, by the way, also had an outstanding Q1, capping off a record first year and celebrating its anniversary here as part of Salesforce. Now, we are well prepared, as Mark said, to deliver on our FY20 goal and also our goal of $26 to $28 billion in revenue this year in 2023. So we're all excited about that. Quarter after quarter, we continue to take share and outpace the competition. I think that's pretty clear. As Mark alluded to, we have been meeting with CEOs around the world, and the common theme that we're hearing is the importance of transforming their customer experience and the value of providing a 360-degree view of the customer. And that's something that Salesforce does better than anybody. And that's why we continue to see massive demand for our solutions from both new customers and existing customers, across the world, every industry, every market segment. And as you can see this, it's in our results, 25% year-over-year revenue growth in the Americas, 27% in the APAC, and 32% in EMEA in constant currency. We're very, very proud of those results. A great example of a customer who understands the importance of transformation in the customer is Dell, who's really done a fantastic job in their transformation around customer experience. Dell is a a long-time customer, their strategic partner, and in the quarter, they expanded with us to deliver more automated and intelligent customer service experiences with on-site bots and predictions and next best action. Very, very important. Excuse me. In Q1, we also built and strengthened relationships with some of the leading companies around the world, including Tokyo Marine Holdings, one of Japan's largest insurance providers. They're standardizing sales and service and marketing on Salesforce, which is very, very cool. And they also were deploying financial services cloud to a million agents in over 50,000 agencies. We also expanded with Hera Group, an Italian utility company. I just came back from Italy last week. This is a company that is serving over 4.4 million citizens. And we also formed a new relationship with People's Choice Credit Union, one of the largest credit unions in Australia. You can see this is an ongoing phenomenon globally. Again, very, very excited about what's happening. We continue to deepen our relationship with the U.S. federal government. The Department of Education recently selected Salesforce as its platform to modernize and streamline the experience for millions of citizens with federal student loans. Excuse me. Are you okay? I am good. All right. Southwest Airlines, which has won awards. What are you drinking? I'm drinking coffee. Are you drinking anything? I'm fine. Well, maybe I should switch. Anyway, Southwest Airlines, Mark, which has won awards for their world-class customer service, is creating an entirely new employee experience with a centralized knowledge center built on Salesforce. Using service-bounding communities, Southwest is transforming the delivery of their HR services with new self-service chat and mobile capabilities for more than 60,000 employees. It's also about our partner ecosystem. We all know the importance of our partners, and they continue to play a critical role in our customers' transformation. And not only were partners involved in 63% of our new business in Q1, but they were some of our leading adopters as well. Accenture selected MyTrailhead. This is very important. To scale their culture of continuous learning and provide top talent for their clients, this is their business. And leveraging custom content, they're reskilling their employees on topics like artificial intelligence, networking, and leadership development. Again, think about the business that Accenture and these other providers are in. It's all about talent and bringing value to the table. We're also seeing strong momentum beyond the United States. Australia's Telstra was another great MyTrailhead win from the quarter. I was recently with our CEO and board discussing the strategic importance of re-skilling the workforces. It's a common theme and is top of mind, as Mark alluded to, for every CEO in the world. It comes up in every single conversation. Our vertical solutions continue to drive success and value for our customers, and Q1 belongs to Einstein Analytics for Financial Services. It's the first complete intelligence platform for wealth and banking, and in the quarter, we had incredible financial services pod wins with Zions and CIBC. We also released new health capabilities to provide a complete view of the factors that contribute to a patient's health. Again, very, very important, enabling providers to deliver better care and improve outcomes. In Q1, Cerner, a leading provider of health care information and EHR technologies, chose to replace their current CRM in Salesforce to continue transforming how they engage with their consumers and their providers. Finally, as I mentioned, it's been a year since we acquired MuleSoft, and we are absolutely thrilled with the combined success. April Mulesoft was named the leader in the Gartner Magic Quadrant for Enterprise Integration Platform as a service. And that makes us the only company, the only company to be recognized as a leader in both this and Gartner's most recent Magic Quadrant for full-wide cycle API management. So to close, I want to thank our customers, our partners, our employees for our strong results this quarter. And with that, I'll turn it all over to Mark Hawkins. Well, thanks, Keith. And as you've heard from Mark and Keith, we're pleased with our first quarter results. delivering strong revenue growth across each of our clouds and geographies, year-over-year operating margin improvement, and a record quarter of operating cash flow. Let me take you through some of the details for G1. First quarter revenue grew 24% in dollars and 26% in constant currency. As you can see, we experienced FX headwinds in G1, which on a dollar basis represented $61 million, or two full points of growth year-over-year. Our industry-leading product portfolio continued to deliver strong subscription and support revenue growth in U.S. dollars year-over-year. Sales cloud grew 11% in U.S. dollars. Service cloud grew 20%, and this quarter, as noted, eclipsed the $4 billion annual run rate. Marketing and commerce grew 33%. Platform and other grew 46%, including approximately $140 million in subscription and support revenue for MuleSoft, of which 55% is treated annually. as term license. Keep in mind the FX headwind for total revenue affected each of the clouds on a similar proportional basis. Diving into MuleSoft a bit more, we continue to execute well with MuleSoft contributing $170 million to total revenue in the first quarter. While this is our final quarter of discrete revenue reporting from MuleSoft, we intend to provide additional color on MuleSoft going forward as appropriate. Our renewal rate remained healthy in Q1, and dollar attrition continues to remain below 10%. In fact, our attrition rate continued to improve modestly in the first quarter year-over-year, similar to the year-over-year improvement in attrition that we saw last quarter in Q4-19. Q1 GAAP EPS was 49 cents, and non-GAAP EPS was 93 cents. Required mark-to-market adjustments of our strategic investments benefited both GAAP and non-GAAP in the first quarter by approximately 27 cents. Turning to cash flow, I was very pleased with our strong cash collections in the first quarter, which drove the operating cash flow of $1.97 billion of 34% year over year. In fact, in Q1, we generated more operating cash flow than we did in our entire fiscal year 2016. CapEx for the quarter was $159 million, leading to free cash flow as defined as operating cash flow less CapEx of $1.81 billion of 34% over Q1 of last year. Our remaining performance obligation representing all future revenues under contract ended the first quarter at approximately $24.9 billion of 22% over last year. Current RPO balance or CRPO which is business that is both billed and unbilled and is expected to be recognized as revenue in the next 12 months was approximately $11.8 billion of 23% year over year. On a constant currency basis, CRPO was up 24% year-over-year after considering an FX headwind of more than $100 million. While we made changes to our sales organization as we do every Q1, we did not see a material impact or CRPO, as you can see in these results. Before I turn to guidance, let me touch on the FX environment and the combination of Salesforce.org and the related impact of Q2 and FY20 guidance. First, regarding FX. As is evident in our results, we've seen a substantial decline in our FX rates since our Q4 call. The Great British Pound, for example, decreased approximately 5% since our fiscal fourth quarter 2019 earnings call, and our zero declined by approximately 2% over the same period. Second, regarding Salesforce.org, with the recently announced closing, we continue to expect Salesforce.org to contribute approximately $150 to $200 million in revenue in FY20, with approximately 40 to 50 million of this revenue recognized in Q2. And as previously discussed, we will incur a one-time non-cash accounting charge of approximately 200 million in the second quarter related to our settlement of the reseller agreement with Salesforce.org, which impacts our Q2 GAAP and non-GAAP EPS guide by approximately 20 cents. We expect the combination of Salesforce.org to be additive to our long-term revenue targets and will provide more detail during our annual analyst day in the fall. Now turning to Q2 and FY20 guidance. We are now expecting north of $200 million in FX headwinds to the year, and given this context, we are pleased to be able to absorb these headwinds and still furnish FY20 revenue guidance of $16.1 billion to $16.25 billion for 21% to 22% growth year-over-year, and with the dollar strengthening relative to the GDP and the euro, We're not only experiencing headwind to revenue, but also have an increasing pressure on operating margins as well. In that context, along with the integration and transaction expenses associated with the combination of Salesforce.org, we are also pleased to be able to maintain our plan of delivering flat to 25 basis points of non-GAAP operating margin improvement year over year. As a result, we are raising our FY20 GAAP diluted EPS to 78 to 80 cents, And our non-GAAP diluted EPS to $2.88 to $2.90. And as a reminder, our EPS guidance assumes no future contributions from mark-to-market accounting as required by ASU 2016-01. For operating cash flow, we maintain FY20 operating cash flow guidance of 20% to 21%. For Q2, we expect revenues in the range of $3.94 billion to $3.95 billion. GAAP diluted loss per share of $0.08 to $0.07 and non-GAAP diluted earnings per share of $0.46 to $0.47. We also expect CRPO growth of approximately 20% to 21% year-over-year in the second quarter. To close, we had another quarter of strong results and we maintain to be on track for FY20 revenue and profitability goals and achieve our long-term organic target of $26 to $28 billion in FY23. I'd like to thank our employees, customers, partners, and shareholders for their continued support. And with that, I'd like to open up the call for questions.

Thank you, sir. Ladies and gentlemen, at this time, if you would like to ask a question over the phone, please press star and then 1 on your telephone keypad. If your questions have an answer, you should move yourself in the queue. Simply press the bound key. And our first question will come from the line of Heather Bellini with Goldman Sachs. Your line is now open.

Great. Thank you so much for taking the question. I had a couple. Mark, I was wondering if we could spend a little bit more time on MuleSoft and if you could just share with us some examples of how it's helping you expand your reach within your existing customers and any success you might be able to share about how it's brought new customers into the Salesforce fold. And then I just had a quick follow-up for Mark Hawkins. Just, you mentioned the CRPO that you, the headwind in the quarter from FX. Were you expecting, could you share with us, were you expecting an FX headwind in the quarter for CRPO? Because that's what we're getting pinged as well. So thank you.

Well, thanks. Let me just take on that just briefly. And I'll tell you right now, you know, we've really pivoted our entire company into something that we call Customer 360. It's a pretty hard pivot for our company and we're so excited about this opportunity and a lot of it is because of the tremendous momentum that we've seen over the last year with MuleSoft. This idea that what our customers want us to do is to be able to take everything they're doing in regards to their customers. That is their sales, their service, their marketing and their journeys, their commerce and their customer engagement systems, apps they're building, APIs that they're building for developers to integrate with those customers, all the analytics, the custom applications by industry, the communities, the learning and reskilling systems that I mentioned, and the employee experience as well. And to bring it all together, using all these amazing technologies that, you know, are becoming so important to us, like blockchain and AI, whether it's vision or voice, you know, is incredible what has happened just in the last two years or three years. Put it all on a phone. Deliver it all as a programmatic capability. Make it secure. And then wrap it all together, put a bow on it, and call it Customer 360. And we're the only ones who are really trying to do this. It's kind of interesting because as I meet with customers all over the world, and this quarter I've been basically nonstop on the road. I've been in Japan. I've been throughout the United States. I've been through Europe. And Keith as well, you know. And when we basically come back and go, wow, this is what all these customers are trying to do. And this is really our vision. And what has accelerated it for us? and our ability to execute it, and yet it's a hard pivot for us, is MuleSoft. Because MuleSoft has given us the ability to come into the customers and say, and we're going to bring in everything you have into that 360. We're not going to be a silo. We're not going to be all about this application that we're building. Our platform is giving you the ability to connect all of your systems together into one. You know, so many exciting customer stories around that that I could touch on. But, Brett, do you want to just kind of go a little deeper into that vision?

Yeah. I mean, it's actually great timing because we just had our Trail MDX Developer Conference in San Francisco last week. And MuleSoft was really highlighted. One of the stories that was on stage during the keynote was ASICs. It really captures that vision of Customer 360 that Mark was talking about. In that story we were just talking about it, ASICs is building their mobile app and their e-commerce experience. And as Mark said, to create that customer 360 so that every ASICs customer has a personalized one-to-one experience, it wasn't just about our technologies. It was about the order management system, the on-prem systems, the legacy systems, and all that data is trapped. And if you talk to the CEOs who are trying to do these digital transformations, they're trying to create those next-generation customer experiences to integrate with smartwatches and smart speakers and smart TVs and smart thermostats, their barrier is these legacy systems and that data trapped in legacy systems. And MuleSoft has been such an accelerator for that vision technologically, which is why if you walked around the floor of Trailhead DX last week, MuleSoft was on everyone's mind. We launched this product called MuleSoft Community Manager, which enables companies to create ecosystems around their APIs. APIs are becoming the lingua franca of how companies communicate with each other. And you can see, really, the convergence of our technologies and our community cloud and the API orientation of MuleSoft, I think, really transformed the way companies are thinking about their data and thinking about integration strategically.

Yeah, you know, the thing that really comes across when we're talking about that, Brett, is, you know, this vision of building a customer 360. And it reminds me of a story that happened just last week. where I was with a customer at lunch and we're talking about everything you just said, but, you know, they're concerned because maybe they're going to make a decision about what their social implementation is. Maybe they're making the decision about their customer service call center over here. Maybe they're making the decision around their marketing systems or their sales force or their apps. They want to bring them all together, you know. They need to be able to have a unified customer view. So is that a daunting challenge for these companies, or how are you going to make that easy for them? You know, it is.

Just let's take e-commerce as an example, just because we were just talking about ASICs. If you are a modern retailer, it's not just about making a storefront anymore. You have to integrate with Pinterest and Instagram. You have to be able to show up where your customers are. And that's involving day by day, week by week, month by month. And, you know, the MuleSoft team will tell you MuleSoft isn't just a technology. It increases the clock speed of digital transformation. And I think what I hear from the most strategic chief digital officers and CEOs is their focus isn't just deploying a solution. It's making sure that the pace of innovation at the company increases. And I think fundamentally that's what MuleSoft enables.

Okay, and unfortunately, he's just in a coughing fit. But, Mark, do you want to just set you in a little bit and give us some fill-in on this MuleSoft color and how important this has been to the company? Well, for sure. I mean, MuleSoft has been just a great offering for us. It's been a great customer response. We've been super happy with it, that's for sure. It's been great to talk to customers and have them really talk about our entire customer success platform and how this is even helping us more enable that. So that's been very positive, Mark. The other thing that I thought I might touch on is the second question that Heather asked regarding the RPO, CRPO in particular, and we did incur this $100 million FX headwind. This is clearly significantly incremental to anything we would have expected. And the other thing that I'd like to call out, and we've talked a lot about as a management team, we're looking today at $209 at a revenue level for an FX headwind at this very moment. So this is clearly something different that's happening. What I'm pleased with is we're able to absorb this and still deliver our fiscal year high-end guide number of 16, 250, or 22% growth at scale. You know, you touched on this a little bit in your script with foreign exchange, but We've gone through these foreign exchange environments and they can be very heavy for us, right? And like how much foreign exchange headwind do you have so far already for the years? Well, for example, in the first quarter, we took a $61 million headwind in revenue alone, for example. We have $200 million that we're looking at as a headwind for this year thus far. And, you know, I think the good news is we've got that covered with a plan and the dates that we can deliver what we're delivering with that. And it's amazing. You're going to deliver $16,250 for the year, but you're still picking up all this on a standard. The thing that I appreciate is our predictive business model is really something that we've talked a lot with our investors about, and that really helps us. What is a wild card are things like foreign exchanges. I think our investors understand. You can't predict foreign exchange very well. Is that your point? It's hard for the market to do that, and I would second that as well. All right. Very good. He's back in the room now, so hopefully we'll keep him together. Yes. Thank you. I don't know what pop-ups you're taking. Don't tell us. He's not working. I'm not taking them off. Okay. Okay.

Thank you. And our next question will come from Carl Kirsten with Deutsche Bank. Your line is now open.

Oh, thank you. Mark Benioff, I wanted to ask you, I think everybody on this call realizes that there's a little bit more macro uncertainty out there, but I wanted to ask whether, you know, as you and Keith and Mark Hawkins sat down to set the guide for 2Q in the full year, whether you're assuming any broader spending environment change for Salesforce. Thanks very much for any comments.

I think that's a really good question. I mean, I'll just give you my – I mean, I'm not an economist. Everyone on the call knows that. I am just out in the field talking to customers like all of you are. And, you know, I've been all over the world the last 90 days, and I have talked to hundreds and hundreds of customers face-to-face. And, you know, I would say that, you know, this is a, you know, we're still in a very strong economy. Maybe this is not a 2018 economy, but it's a 2017 economy. I think last year, of course, we had that radical, crazy acceleration because of the tax cuts. But there's still a strong buying emotion by all these CEOs. But I will say that, you know, I think that they do all have some anxiety around what's going on with this trade situation. And even in the customer that I was with as early as last week, you know, they, you know, I think are not very happy with how that could potentially impact them. But I don't see it, you know, coming in on the economy right now. Now, we don't do business really in China, you know, so we're not a good company to talk about that kind of trade situation if these trade things don't affect us. You know, we're mostly free of that, but when we look into the customer's eyes, we're always, like, saying to ourselves, are they buying? Are they investing? And the thing that hits me, and this is where I am, and I'll let Keith talk about this if he can, which is that I am just really impressed with how every CEO and really C-suite that I'm talking to is actually quite obsessed with digital transformation. And I think they all see the tremendous revenue growth opportunities now from these new technologies. Maybe they didn't understand what blockchain was. Maybe they didn't understand AI. Maybe they didn't understand some of the subtleties of mobility and all the opportunities. But something has kind of changed in the last, I would say, 18 to 24 months. And sitting at the very table that we're at right now, we've had the CEO of a very large healthcare company here. I guess maybe about two weeks ago, doing a demonstration showing them, you know, talking to the computer, you know, through artificial intelligence to be able to understand what we're saying and talking back to us, which was amazing. And then also the ability then to use the camera, you know, to have a direct artificial intelligence analysis of what was going on in a retail shelf, which was so cool. And we've demonstrated that before. And then how we integrated it into blockchain, where you could see the whole transparency of the supply chain was amazing. And, of course, we did it on a mobile phone. It was secure. And then, bam, we had customer 360. And, you know what? The CEO was not shocked. They're kind of following along. And we're not losing at that level. I think that CEOs have very much become chief information officers or chief digital officers themselves. And we're now rolling into that level of executive. And because of that, I think they really have the ability to transform their companies because in many cases, those visions are not coming from, you know, the middle managers who are obviously deeply involved, but from the chief executives themselves. And Keith, do you want to try to make that, if you can?

Yeah.

Let me do it with my . You're the right person to talk about blockchain, by the way. Yeah, that was my uncle blockchain. So many, many points here. None of us are economists. Mark Hawkins is probably the closest that we have to anybody being an economist. But that being said, I do think we're in an enviable position as a company because of what's going on with digital transformation around the world. And I recently returned from from EMEA and I was with CEOs from financial services institutions in the UK and France and Italy and they're all talking about digital transformation of the customer experience and the importance of providing that customer experience and customer loyalty and providing higher levels of service with our technology. I was also with the CEOs of a few retail companies in the UK and France and before I left in the United States and obviously retail is a challenged market and these companies are reinventing themselves and the experience they have. I was with the CEO of one of the largest farmers in the world, and he's talking about a direct relationship directly with the patient, with the drugs that they're bringing to market. And, you know, these are things that we couldn't think about, you know, two years ago, three years ago, four years ago. Or, you know, the consumer packaged goods company has begun, one of the largest CPG companies in the world. I was sitting down talking about how that CPG company gets closer to their end consumer and how they can optimize around retail execution. There are so many possibilities here. And, you know, Mark nailed it. I mean, the CEO, the modern CEO has become the chief digital officer, the chief transformation officer, and that's why these companies keep coming to Salesforce, because we really are the only company that can provide this capability and this 360-degree view of the customer. This is the holy grail. Mark and I have been in this industry quite a while. This is the holy grail for customers, and we're in a great position now. Tom, you know, when you look at customers at building back and deploying these types of technologies, you know, where are they? Are they at this point able to really receive this technology and then deploy it? Are you seeing that transformation or is there still, you know, technology transfer issue? Well, there's many, many companies I think are in very early days. In fact, if you talk to one of our largest consulting partners, they'll tell you that you know, less than 20% of their classic, most strategic customers have engaged in the digital transformation. So there's a lot of room to run in the marketplace. Going back to the first question about MuleSoft, who would have thought that a CEO would be thinking about integration and the importance of data being strategic to their transformation? And that is the value and the beauty of what MuleSoft brings to the table. So we have an opportunity here, again, around these digital transformations and One of the beauties of a product like Trailhead and MyTrailhead is helping these companies through their transformation and skill them up with modern technology because the modern worker has to have modern skills, and that's what Trailhead and MyTrailhead really provide to these customers. So we really are coming out with some amazing innovation at the right time to satisfy the needs of these customers, and it's really working out very nicely for us and the customers.

Thank you. And our next question will come from Derek Luke with Cowan & Company. Your line is now open.

Great. Thanks. I guess for Keith, headcount ads in the quarter were quite strong for Q1 and, you know, up 24% on a year-over-year basis is almost the highest in two years. So are there any areas you would highlight your accelerated investments, whether it's certain function, geography, or product area? And I guess, you know, as a follow-up, since you're getting so large and almost, you know, 40,000 employees, can you just touch on how you ensure you, you know, continue to manage onboarding and attrition and maybe, you know, how attrition is tracking these days? Thanks.

Yeah, so thanks for the call. Look, I think you know that we've got a very, very strong international strategy, so we've invested significantly globally but certainly outside the United States as we continue to take share. We've obviously made a commitment to our industry strategy so you continue to see us verticalize whether it's in our products or whether it's our customers and our partners and our headcount as well. MuleSoft, of course, is certainly a growth area for us as our core cloud. So there's a lot of opportunity for us to make these investments. But at the end of the day, all the investments that we make rotate around making sure that we're driving success for our customers. And when we think about onboarding and as we bring in all these new people, one of the advantages that we have in the marketplace is that we have this amazing technology called Trailhead. And all of our employees get up skilled using Trailhead. And it allows us to get these people hitting the ground running a lot faster than you would say through traditional learning systems. So we will continue to invest internationally. And we'll continue to invest internationally in our key markets, in our international geographies, of course, in the United States. We'll continue to invest in our customer success because at the end of the day, the customer success is what it's all about. In fact, we've gone through this amazing transformation under Brian Miller in our customer success organization. And we'll continue to leverage Trailhead, which I think has been very, very important to us. In fact, I would encourage all of you to go ahead and go to our website and try Trailhead and see how it can change the life of that.

Thank you. And our next question will come from live with Evercore ISI. Your line is now open.

Yeah, thanks very much. Keith, I actually want to follow up on your comments around MyTrailhead, especially as it relates to the comment you had on Accenture. Can my Trailhead become a force multiplier for you from a go-to-market perspective, especially in places like Europe and Asia where you might not have had the reach historically? It seems to me that that could be a potential way for you guys to accelerate even faster in those markets where you have the demand but maybe not the people on the ground to go capture the demand. So we'd love just kind of your thoughts on that.

Thanks.

Yeah, let me answer this, and then I'm going to pivot and ask Brett to comment on it from a product perspective. As Mark and I go around the world, every CEO has something that is top of mind besides their digital transformation, and that is around their workforce development and their reskilling. And that's why my trial hit is so powerful. When you think about the digital transformations that these CEOs are going through, whether it's in the United States, quite frankly, or whether it's internationally, you know, responsible CEOs are thinking about how do they absorb this amazing technology, how do they reskill their workers, as they think about digital transformation. How do they act responsibly from a social perspective? Because if you think about it, these CEOs, they're in charge of tens of thousands, hundreds of thousands of people. And they care about their people. And that's where MyTrailNet is an excellent example and an excellent solution, not just how they can skill their people up on these modern technologies, but also to prepare them for this modern world. And we see this, again, everywhere in the world. We have special programs. with companies all over the world to talk about how they re-scale their workforce. I mentioned in the opening comments the meeting I had with the CEO of Telstra and his executive team and how concerned they were about the modern workforce and what they wanted to do about re-scaling their workforce. Mark and I had the same conversation with CEOs all over the world. So my trial is a force multiplier. It is so important on so many levels when you think about modern skills. And we're very, very excited about it. I mean, Fred, do you want to comment more from a product perspective?

Yeah, I mean, I'll bring up this trail at the X Conference again because I think the themes Keith are talking about truly came out strong at that event. One of the women that we highlighted this time was a woman named Angela Mahoney who runs this organization called Rad Women, which is an organization to train women to become experts on the Salesforce technology in just ten weeks and get them into the Salesforce ecosystem. This is entirely done by an independent organization who are just trying to help people with this big problem of workforce development and empower people to get into this technology ecosystem. And what's incredible about it, you know, at the end of this conference, we said we were going to bring into, I think, 100-something cities. But that wasn't us. What we did is we put all this content in a box, and our ecosystem, our community is going to put on these events. because they want to spread the word about the opportunities of this technology and the opportunities of trail hunting. And it's exactly the theme that you mentioned in your question, which is our community is spreading the word on our behalf because there's so much opportunity on the other side. It all comes from the simplicity of these views. We really think of Trailhead as one of the most significant differentiators of our platform. Our community is helping teach other people about these amazing technologies. It's obviously helping us financially, but it's also helping, I think, a lot more members of our society benefit from the economic opportunities of technology, which is an incredible opportunity for the world.

Thank you. And our next question will come from Tom Rodrick with Stifel. Your line is now open.

Hi, guys. Good afternoon. Thanks for taking my question. So I know you've been getting a lot of questions this quarter just around not just the general environment but also some of the strategies related to the install base and how you're handling renewals. I'd love to hear beyond just the, you know, what is happening and what are you doing with renewals, but what is the broader strategy as you go to market? And this is probably a good question for Keith. As you think about the role of renewals and customer success, with respect to the broader portfolio? How do you approach that customer, and is that philosophy changing at all? Thank you.

Yeah, so thank you for the question. I think you know from our business model the importance that we're doing, and that's why customer success is one of our most important values. We have an entire organization, the customer success team, that is focused on success, but it goes beyond the customer success group. It really is a cultural thing. a belief amongst 40,000 employees who wake up every day and they focus on customer success. So, you know, renewals, which are very, very strong, our attrition is excellent. I mean, it's unprecedented, particularly for a company of our size and scale. That is obviously an indication with our customer satisfaction. Now, we have doubled down in this transformation around making sure that our customer experience is second to none. And what's interesting about that is as companies become more large companies that are size, they forget their focus on the customer. This is a company, Salesforce, that since day one was dedicated to driving success for the customers. And a lot of companies along the way, they just lose their focus on the customer. And we have doubled down and renewed our focus on the customer. And, again, part of that is renewals. But it really is about providing an incredible experience, a seamless experience at every single touch point, that a customer has. And that's why Gartner recently recognized Salesforce as an incredibly strong company as it relates to customer experience. They're giving us that recognition. They know what's going on in the marketplace. And it's because it's part of our culture. We're dedicating ourselves to it. And we're not going to lose who we are, whereas other companies have made that strategic mistake along the way.

Thank you. And our next question will come from Alex Zuko with Piper Jaffrey. Your line is now open.

Hey, guys. Thanks for taking my question. Two really quick ones. Maybe first for Mark, you mentioned some Salesforce reorganization and the fact that it didn't have any impact on current RPO this quarter. Could you maybe touch on what kind of reorgs or what are you doing this year from a strategic go-to-market perspective around the sales team that's a little different from last year? And then maybe just, you know, given the continuous mention around trailhead and talent as being important strategic differentiators, Have you given any thought to expanding your role in the talent kind of market from an organic or inorganic manner?

Hey, Alex, this is Keith. Why don't I take the question? So look, at the beginning of the fiscal year, we make some adjustments. As you know, we periodically do that, and we do it to take advantage of the market opportunities and to support the long-term growth plans that we have. That's why we make adjustments. You know, when you think about the end game here, these decisions are really about getting close to our customers, right? And that is about driving the highest level of our customer success. Any of these adjustments that we make, they are essential and important and strategic in our long-term growth, which has been exceptional, as we know, at this size and scale. And we are very optimistic about where we are at Y20 and the demand that we're seeing in the marketplace. And we're excited about where we're going with these adjustments. So, We feel strongly about where we are.

Thank you. And our next question. Oh, go ahead.

I just wanted to touch a little bit on the part about employee experience. I just think, and I think Brett should probably touch on this too, which is, you know, how this has really become, I think, a critical part of Customer 360 is that, you know, the employees inside of our customers are they need to have a good experience and have access to all of this customer information as well. And probably a great example this quarter was Southwest Airlines, who's actually a long-term customer of ours and who has been using our service cloud to deliver amazing customer service experience, and we've really enjoyed working with them. But now Southwest is really turning to this employee experience. And they use our communities product, and they use service cloud, and they use, a centralized HR help desk for 60,000 employees to check their benefits, manage vacation time and questions via chat, and all from their mobile device. I don't want you to think in any way that we're going into, you know, HRMS or anything like that. This is really, you know, something that's very much enhancing the customer experience in regards to employee experience and the intersection between employees and customers. You know, there's many areas where this has touched down for us. It can be our employee portals that we've provided for our customers. It can be providing these HR help desks. It can be the integration of the customer information into the employee collaboration system. And it's one of the key reasons we acquired Quip, which has continued to be a tremendous success here at Salesforce. And Quip, you know, is all about getting employee productivity and productivity up and collaboration. And Brett, do you want to handle, you know, your vision here on employee experience and all the things that you're doing in our product to enhance the employee's experience with Customer 360?

Yeah, whether you're in the airline industry or the hotel industry or the retail industry, the most important thing is you're empowering your employees for, you know, really touching the customer, communicating the customer to provide that Customer 360. And really, the word that I hear time and time again from CEOs, is around enablement. How do I help my employees through this transformation, this digital transformation of technology? And it's not just about the technology. It's about the human beings going through that change. So that's why we have things like MyTrailhead, which takes a learning platform that Keith and Mark talked about and enables companies to use it for their own transformation. That's why we have Quip for Salesforce, which is embedding productivity and collaboration into every single one of our products. And we think it's so important to really focus on these trailblazing employees and not just the technology and have enablement be a key strategic capability of our platform.

Yeah, I would just add that I think one of the key things is, and I'd love your take on this, Brad, is that, you know, when we're talking to our customers and when we're talking to specifically the team and positioning ourselves, You know, one of the things that I always say specifically is, look, you need to understand we only have really one word in our company, and that's customer. We're just here to do that for you. We're not going to do the HR piece. We're not doing the financial piece. We're not doing all these other things because inevitably they come and they say, well, we do this and we do that. But one of the things after 20 years have been focused on this word customer, you know, and it has morphed and it has changed and it has evolved. And when you look at the customer 360, you know, approach that's very different than, of course, where we were even just, you know, ten years ago or, you know, five years ago. So how do you see that intersection between employee and customer and where do you see that transformation going?

Well, Mark, I think the main word I think of is stakeholder. When you think about what it means to provide a customer 360, it's now surrounding everyone who engages with their customer with the right information. It might be a pharmacist. It might be a doctor. It might be a gate agent. It might be someone, a customer service agent, talking on the phone with your customer. And we really need to make sure we're serving every stakeholder that makes up that customer 360, which is why the employee is a key constituency in providing that But to me, it doesn't really deter from that focus on the customer, whether it's helping you unlock your data for the customer through MuleSoft or enabling your employees with Quip and Trailhead. It's all about enabling this digital transformation that starts and ends with the customer.

Well, Amy is sitting at the table, and I thought I'd really be remiss if I didn't say that one of the key players on our team is here. And what Amy has really given us is a light on privacy and security of our data and making sure that our customers have that privacy because when you take all this customer 360 and you put a light on that, you know, Amy, how do you see that evolving over the last quarter or two in regards to, you know, privacy, which has been a major shift going on, I think, worldwide. Certainly, you know, we've gone through the GDPR shift. Where are we going with that?

Sure. Well, thanks, Mark. GDPR, as you mentioned, just celebrated its first birthday. So we are through the first year and happy to have that going on. I think the really next big step in the United States is pushing for federal law. California, as you know, passed the CCPA, and that's an important first step. But we really believe that all Americans, regardless of their zip code or which state they're in, deserve strong privacy protections. And that's what we've been advocating at a certain time in D.C., advocating for a comprehensive federal privacy law.

So this would be like a national privacy law, so the states don't go state by state, so California's the first, isn't it? Like a domino effect, we want to have the federal government... step up and really deliver a national privacy law.

That was one of the real benefits of GDPR. We went from a patchwork of privacy laws all over Europe to one law that companies can work with as well as all of the citizens know what to expect wherever they are in Europe. That's what we need in the U.S. And we need something which really requires companies to be transparent about their privacy practices for individuals to have more control of their personal data than they do currently. and also, frankly, for companies to be held accountable for their actions.

Well, I think that's just an awesome vision. I don't think anything would accelerate our Customer 360 vision more than having that in the United States as well. So thank you for that.

Thank you. And our next question will come from Terry Tillman with SunTrust Bank. Your line is now open.

Yeah, thank you for fitting me in, gentlemen. My question just relates to as we progress through the rest of the fiscal year in Customer 360, which the last couple of questions and the answers have been focused on that, How do we help investors in terms of looking at metrics and barometers of success? Is it seven, eight-figure deals, or are certain cloud products more likely to be pulled through or attached because of a customer 360 conversation? Just wanted to learn some more perspective on that. Thank you.

Well, let me address that. So if you go back to where we are in this modern age with this amazing technology, where there is incredible disruption, which really should bring opportunity. And we're really in a growth era. You know, when you think about what's important to a CEO besides taking care of their employees, they're thinking about growth. We're not in the age of cut your way to prosperity anymore. That's a 20-year-old phenomenon. This is really about growth. And the most important thing about growth is to put the customer in the center of your world. And that means customer 360. So when we're out there talking with our customers who are looking for a solution, who are looking for a platform for growth, they want to think about this customer 360. So, you know, the way I would think about it is that every CEO has a strategic mission and an obligation to all their stakeholders around growth and success. And it is all about putting that customer in the center of the world. So that will... That just means that when we're out talking solutions, we will become more strategic, have a deeper relationship with these CDOs and C-suites because we're solving their number one problem. Their number one problem is about growth and putting that customer in the center of the world. So that is the way that I would be thinking about this, is that this brings Salesforce to its own position in terms of its relationships and deep meaning and strategic strategy with its customers. Keith, you also have this amazing motion going on in your organization. You've got new logos that you keep adding, you know, new logos to the organization. But then sometimes those new logos come in maybe on a single one of our clouds, if you will, you know, the sales cloud or the service cloud or the commerce cloud or integration cloud like Brett was talking about or whatever it is. And then once you have that new logo, then you have this kind of, you know, transaction and throughput where you go, to work to make them a multi-cloud customer or a vertical customer or taking on the vertical applications. How do you see that balance between new logos and existing customers and continuing to build market share? Well, we do have a new logo motion as well as an install-based motion. They're both very, very healthy and they all continue to be a focus area for us. But at the end of the day, we're here to solve these customer solutions and drive success for them. or maybe you have a big transformation at the pace and still which they can digest it. And that is why a new logo motion or what we call land expand or seed and grow has been successful for this company. And it's also because more recently we were able to do this enterprise transformation. And, you know, we've referenced some amazing customers on this call, some of which were net new logos for the first time with, you know, one or more clouds, and some which are in the deep transformation like Dell. And that will continue to be a successful motion for us as we march on to our goals in 2023.

Thank you. Ladies and gentlemen, thank you for your participation on today's conference call. This does conclude our program, and we may all disconnect. Everybody have a wonderful day.