Salesforce, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Salesforce Q2 Fiscal Year 20 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 follow at that time. If during the conference today 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. Now, it is my pleasure to hand the conference over to Mr. John Cummings, Senior Vice President, Investor Relations. Sir, you may begin.

Thank you so much, Brian. Good afternoon, everyone, and thanks for joining us for our fiscal 2022 quarter 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 investors. With me on the call today is Mark Benioff, Chairman and Co-CEO, Keith Block, Co-CEO, Mark Hawkins, President and CFO, Brett Taylor, President and Chief Product Officer, and Amy Weaver. president, legal, and corporate affairs. 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. And should any of these materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. The 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 10-Q. Before I turn the call over to Mark, let me provide a brief comment regarding Tableau. We're incredibly excited about our acquisition of Tableau Software, which closed on August 1st, and have provided revenue guidance for Tableau for Q3 and FY20. As previously disclosed in our 8-K, The United Kingdom Competition and Market Authority, or CMA, is reviewing the transaction and has imposed a full separate order pending completion of its review. Due to the whole separate order, our ability to discuss Tableau today on this call is limited. We're happy to be working constructively with the CMA to conduct its review. And with that, let me turn the call over to Mark Benioff.

All right. Hey, thanks so much, John. I really appreciate it. Hello, everybody. I'm actually in Geneva, Switzerland, and the team is in San Francisco. I'm in Geneva at the World Economic Forum headquarters where I'm attending our annual Board of Trustees meeting and also our International Business Committee of our top 200 CEOs in the world. And it's been a fascinating meeting, but I'll tell you one thing that everyone is really excited about here is what happened in the United States, which is that business roundtable one of the top two business groups in the U.S., published an incredible statement this week on the purpose of a corporation and talked about how the purpose of a corporation is to serve all stakeholders. Why that's exciting here is many of the words that they were using, almost the exact phrases, were written by Klaus Schwab, the founder of the World Economic Forum, over 50 years ago when he was at UC Berkeley. It's great to see the BRT take this incredibly progressive stance, and I'm just very grateful to them because, of course, at Salesforce, we do believe that business is the greatest platform for change. Well, I want to just thank you, John, for introducing that, and also thank you, everybody, for being on the call today. As you can see, we had a... Just incredible quarter here. Revenue in the quarter rose to $4 billion, up 22% in dollars and 23% in constant currency. And we ended the quarter with more than $25 billion in total remaining performance obligation. That was up 20% versus last year. It's really amazing what's happening at Salesforce. With our organic growth and our acquisitions of Tableau, Salesforce.org, ClickSoftware, we are raising our fiscal year 20 revenue guidance. to $16.9 billion at the high end of our range, representing about 27% growth year over year. Now, we have really been very strategic in building out our Customer 360 platform. This is our vision that really is at the heart of what's happening at the Fourth Industrial Revolution. Everybody knows the Fourth Industrial Revolution is underway. Everyone and everything is getting connected. But behind all of those things is the customer, And certainly all the customers that I'm working with here in Geneva and all the customers that we work with around the world, well, they realize that behind all that Fourth Industrial Revolution is their customer and that they need to build that customer 360 platform. And that's what we're doing. We're doing everything we can to be able to deliver this incredible vision, and we couldn't be more excited to build out our customer 360 platform organically as well as through the acquisition of some phenomenal companies and some phenomenal talent. Now, with Customer 360, we've just never really been better positioned for the future. In fact, we're at the beginning of an enormous wave of digital transformation. I'm certainly seeing that here in Geneva. IDC forecast global spending on digital transformation to reach $1.18 trillion in 2019. That's an increase of nearly 18% over last year. It's really quite amazing. And Salesforce is is at the center of this massive shift because every digital transformation of every single one of these companies that we're talking to begins and ends with the customer. In fact, IDC also forecasts global spending on customer experience alone to reach $641 billion by 2022. Every company needs an intelligent 360-degree view of their customers. They need to personalize every customer experience They need to predict customer behavior and anticipate their customer needs, and they need to build modern mobile apps quickly and deliver the right services at the right time on any device. Well, that is Customer 360, our vision for bringing companies and their customers together, and it will be a huge growth engine for us over the next decade. And for our customers, it's their aspirational goal. They're all trying to create a Customer 360. They want a Customer 360 to see what's happening with their customers in this incredible time of change, and they want to understand their customers and connect with them like never before. Salesforce is the number one CRM, and our Customer 360 platform is a leader in sales, in service, marketing, commerce, communities, integration, app dev, and more. You know, Customer 360 includes amazing platform services such as absolutely leading artificial intelligence and breakthroughs in vision and voice in mobility and security. And because they're all built into the foundation of that platform, they're available to every one of our customers, to every app, and to everyone. We're operating at tremendous scale. Just look at some of the daily milestones our customers have helped us achieve with our Customer 360 platform. 4 million sales opportunities and 4.3 million leads generated today, 77 million service case interactions logged, 4.1 billion messages and emails sent, 4.2 million orders processed, 53 million reports and dashboards created every day, and 700 million commerce page views. You know, we're delivering world-class AI with Einstein, Salesforce Einstein, in Customer 360. It's actually generating now, and I know many of you have been following this, and it's been incredible for me to see this, but we actually do now 8.6 billion Einstein predictions a day using our market-leading artificial intelligence platform. We've also made Einstein Voice and Einstein Vision available to every Salesforce app, and these AI-powered capabilities are the future of the customer experience. We're also extending the power of Customer 360 with new services like Salesforce Blockchain, Salesforce Maps. And as you've seen this quarter specifically, Salesforce Blockchain is the world's first declarative blockchain solution for CRM, built natively on our platform. And with this new Salesforce Maps, well, we're adding intelligent location-based services that improve productivity for sales and service employees to the field. We're really building out that Customer 360 vision and our team has just done an incredible job getting this in the hand of customers. At the heart of Customer 360 is our incredible community of our trailblazers. They're using Trailhead, our free online digital learning platform, to get the skills they need for the jobs in the digital economy. We're more focused on this digital education than ever and we realize To achieve this vision of a new economy that we all want, we have to deliver this next generation vision of education as well. We now have 1.5 million learners changing their careers and changing their lives on Trailhead. It's a 50% increase over the last year. And really cool, just last week, we announced a partnership with Southern New Hampshire University, one of the fastest growing universities in the U.S., so that Trailblazers can now earn college credit for free on Trailhead. That's just an incredible leap forward for Trailhead. Well, Salesforce skills are in high demand. For those of you who watched what happened, I think just now about a week ago, we saw that the Salesforce developer was ranked as the second, number two, on Glassdoor's list of jobs with the best career opportunities. That was amazing for us. A huge economy is developing around Salesforce, one that will create more than 3 million jobs and more than 860 billion in GDP impact worldwide by 2022. And we'll continue to create opportunities for everyone to participate. With our customer 360 vision, with amazing Einstein innovations, the millions of trailblazers innovating on our platform, Salesforce is incredibly well positioned to help companies transform their customers. And you'll see all of this at all this amazing innovation and all this amazing customer success at Dreamforce, which this year will be November 19th in San Francisco. You probably know it's almost sold out, so you better register now. We are really right down to our last few seats, and we'll be bringing together the thought leaders, industry pioneers, amazing innovators, incredible customers, and, of course, all of our trailblazers for four days of customer success, trust, innovation, equality, and learning. Dreamforce is an expression of our core values, our commitment to giving back, which have been the key to our success as a business over the last two decades. For those of you who know, we also have something about to come out, which is our new book, Trailblazer, The Power of Business is the Greatest Platform for Change, including many of the concepts pioneered by Klaus Schwab here at the World Economic Forum in Geneva. It comes out on October 15th. So you can preorder your book now, and I hope you'll get a chance to read it. And let me know what you think of Dreamforce. And until then, I will look forward to seeing all of you in November. And now over to Keith.

Hey, thanks, Mark. And thanks, everybody, for joining us on the call today. As Mark said, we have an incredible opportunity ahead as more and more companies invest in their digital transformation. Across every industry, every geography, they are turning to Salesforce as their trusted advisor and to our Customer 360 platform as the foundation and catalyst for their growth. That's clearly reflected in our Q2 numbers as we continue to see great results across our clouds, our industry solutions, and our region. The hundreds of customers that Mark and I meet with every quarter are looking for a vision, and they're looking for a strategy that will help them propel their growth and to get closer to their customers. They're asking us about the future of their industries. They are asking us about their peers, their competitors, and how are they transforming. They're asking us about best practices from other industries, and they're asking us, most importantly, about how to innovate. But it's not just about technology. They also want to learn about Salesforce culture and our values and how we can help them drive success for their customers, their partners, and their employees. Throughout the quarter, we continued to build and strengthen our relationships with leading brands around the world. FedEx selected Salesforce in the quarter as the platform for their customer service transformation. FedEx will use Service Cloud Einstein and their call centers to drive agent productivity with AI-powered recommendations and Einstein analytics to get a deeper understanding of their customers' needs across their business. The Union Pacific Railroad System, one of the world's largest transportation companies, chose Salesforce as it's unified the CRM platform to deliver faster, more proactive service. Now, that includes automated shipping notifications and tracking updates, so customers can plan better and improve their shipping experience. Very important. Airbnb turned to Salesforce to power its global messaging program. Airbnb expanded with marketing clouds and continued to deliver meaningful, hyper-personalized communications with its community of guests, hosts, and travelers, engaging with all Airbnb users across the globe on a single platform. And we continue to expand our relationship with Marriott, one of the world's great companies, which is using Salesforce to better anticipate each guest's travel needs and display relevant offers during that stay and provide a more personalized customer experience. Now, in May, we announced Einstein Analytics for Financial Services, giving wealth advisors, managers, and retail bankers the AI-powered insights they need to better serve customers and grow their book of business. Our momentum in financial services continues. We expanded our relationship with HSBC and formed a new relationship with Unicredit in Italy in the quarter. In the public sector, the U.S. federal government increased its Salesforce investment, including the Bureau of Land Management, the USDA, and the U.S. Department of Housing and Urban Development. A critical part of customer service for many of our customers is also field service. It is incredibly strategic to their operations and differentiates them, and that's why, as of Q2, Field Service Lightning is growing at nearly 100% year-over-year. Now in the quarter, Fox Sports chose Field Service Lightning to manage production workflows, employees, equipment, facilities, rentals, and more for its live broadcast. And with our recent agreement to acquire Qlik software, we'll be able to deliver even greater field service innovation to our customers. So that's very, very exciting. Our international revenue growth continued in the quarter. Super strong, with EMEA growing at 30%, APAC growing at 27% year-over-year, both in cost and currency. AXA, one of the largest insurance companies in the world, is on a journey to a global 360-degree view of every customer. And in the quarter, they made a number of strategic investments across several regions and divisions, including deploying Service Cloud to give their insurance agents a complete view of every customer, enabling them to have smarter, more personalized conversations. In EMEA, we formed new relationships with HDM in Germany, the largest global manufacturer of offset printing presses, and fashion retail organization Esprit, both choosing Commerce Cloud in the quarter. In Australia, we expanded with ANZ-Bate and formed new relationships with Ramsey Healthcare and the Australian Department of the Environment and Energy. In Japan, we expanded with Hitachi and Mitsui Suitomo Insurance. Our partners very critical to our strategy, continue to help us deliver customer success. In Q2, partners were engaged in 68% of our new business, and these partners continue to invest in their Salesforce practices. Global partner certifications are up 40% year over year. That just keeps going and going and going. All seven of our top consulting partners run their practices on Salesforce, and Salesforce is their fastest growing enterprise practice. Strategic partnerships are absolutely critical to our future, and that's why we're thrilled about our new relationship with Alibaba. As a global company, it is important for us to support our multinational customers wherever they do business. And finally, we closed our acquisition of Salesforce.org in the quarter, and we continue to see incredible demand in the nonprofit and education verticals. We work with more than 44,000 nonprofit and higher education customers, and our employees have given more than 4.3 million volunteer hours, and we've delivered nearly $300 million in grants, which is pretty amazing. Last quarter, I mentioned making investments to fuel the next chapter of our growth around the world. Now, part of that investment is bringing incredible talent into the company, and we've been very fortunate to add two extraordinary executives at EMEA and APAC to our international leadership team. Later this fall, Jane Angadio will become CEO for Salesforce UK in Ireland, and Pip Marlowe will be joining us as CEO for Salesforce Australia in New Zealand. And we're very excited to have them both on board. They're both great executives. Now, in closing, I'd like to thank our employees. our partners, and our customers around the world for their support. And, of course, our company has great execution, so thanks to everybody. And now I'll hand this off to Mark Hawkins. Well, thanks, Keith.

And as you've heard, we delivered strong results in the second quarter, including generating durable organic revenue growth and organic operating margin expansion year over year. Here are a few highlights. Total revenue grew 22% in dollars and 23% in constant currency. Excluding Salesforce.org, total revenue grew 20% in dollars, and 21% in constant currency. CRPO grew 23% in dollars and 25% in constant currency, and we continue to put up solid organic revenue growth across each of our clouds and in our geographies. There are a few moving parts here for Q2 results, so let me take you through some of the additional details, starting with revenue. Total revenue for the second quarter was $3.997 billion, including $54 million of acquisition of Salesforce.org. Just as we saw in Q1, we continued to experience FX headwinds to revenue in the second quarter of approximately $34 million year over year and approximately $20 million sequentially. Looking at the drivers of growth by cloud, we continue to see strong subscription and support revenue growth year over year with sales cloud growth of 13%, service cloud growth of 22%, marketing and commerce cloud growth at 36%, and platform and other 28%, which, by the way, includes $159 million of MuleSoft. Approximately 54% of MuleSoft's subscription and support revenue is treated as term license. Let me call out a few other items related to the various cloud growth rates in the quarter. First, the FX headwind for total revenue that I mentioned earlier represents approximately one percentage point of growth year over year, and that affected each of our clouds on a similar proportional basis. Second, Our acquisition of Salesforce.org represented approximately one to two percentage points of growth year over year across each of our clouds. Third, this was the first quarter of a normalized year over year compared with MuleSoft. So with MuleSoft now in the base period, the rate of growth of platform and other moderated in Q1 to Q2 as expected. Adjusting for these items, we were very pleased to deliver robust, organic, constant currency revenue growth across each of our clouds in Q2. Attrition also remained healthy in Q2, as we have seen over the past several quarters, with dollar attrition continuing to decline modestly year over year, remaining below 10%. Turning to operating margin, Q2 non-GAAP operating margin was 14.3%, down 349 basis points year over year. As a reminder, our Q2 operating margin and EPS results were affected by the settlement of our reseller agreement with Salesforce.org. This one-time non-cash accounting charge of $166 million is reported as a discrete line item on the statement of income, and was slightly lower than we anticipated. We continue with our efforts to improve our operating efficiencies, and we're pleased to deliver Q2 non-GAAP Operating margin improvement excluding the Salesforce.org non-cash accounting charge of approximately 66 basis points year-over-year. Q2 GAAP EPS was $0.11, and non-GAAP EPS was $0.66. And Q2 below-the-line mark-to-market adjustments benefited GAAP EPS in the second quarter by approximately $0.10, and non-GAAP EPS by approximately $0.11. Business outperformance in the quarter along with the lower-than-anticipated Salesforce.org settlement charge, benefited GAAP and 9GAAP EPS by approximately $0.08. Turning to cash flow, second quarter operating cash flow was $436 million, down 5% year-over-year. Operating cash flow in the quarter was impacted by our recent M&A activity, as well as continued FX headwind. On a trailing 12-month basis, we were pleased to deliver operating cash flow of 25%. CapEx for the quarter was $178 million, leading to free cash flow defined as operating cash flow less CapEx of $258 million, down 10% over last year. On a trailing 12-month basis, we're pleased to deliver free cash flow growth of 26%. Remaining performance obligation ended the second quarter at approximately $25.3 billion, up 20% versus last year. Current RPO, which is approximately $12.1 billion, was up 23% year-over-year and on a constant currency basis was up 25%. Salesforce.org contributed approximately $200 million to this amount. Now turning to Q3 and FY20 guidance. We're pleased to be raising our full-year FY20 revenue to $16.75 billion to $16.90 billion for a full-year growth of approximately 26% to 27%. This guidance includes approximately $550 to $600 million in revenue from our acquisition of Tableau, approximately $200 million in revenue from the acquisition of Salesforce.org, and approximately $25 million in revenue from Qlik Software. Excluding these acquired businesses, we expect top-line revenue growth of 20% to 21% year over year. This outlook reflects approximately $200 million in FX headwind for the full year. Turning to our outlook for operating margins, we now expect FY20 non-GAAP operating margins to be down approximately 50 basis points year over year. Our FY20 non-GAAP operating margin guide is the result of several factors. First is the one-time non-cash settlement charge of $166 million related to Salesforce.org reseller agreement. Second is the blended margin profile of the recently acquired businesses, namely Salesforce.org and Tableau. which we anticipate at roughly break-even non-GAAP margins for FY20 inclusive of the purchase accounting, and click software, which is modestly diluted along with the associated transaction costs. In fact, excluding the impact of these acquisitions this year, we expect our FY20 non-GAAP operating margin improvement year-over-year to be more than 150 basis points, which is higher than the improvement we initially laid out at the beginning of the year. For EPS, we're updating our FY20 GAAP diluted EPS of 28 to 30 cents, and our non-GAAP diluted EPS of $2.82 to $2.84. For operating cash flow, we're pleased to be maintaining our FY20 operating cash flow guidance of 21 to 22 percent, despite the increased expenses from recent M&A and the cash impact of FX headwinds. For Q3, We expect revenue in the range of 4.44 billion to 4.45 billion or 31% growth year over year. This guidance assumes revenue of approximately 300 million from Tableau and approximately 75 million from Salesforce.org. We also expect Q3 GAAP diluted loss per share of 21 cents to 20 cents and non-GAAP diluted EPS of 65 cents to 66 cents. We expect CRPO growth of approximately 24% to 25% year-over-year in the third quarter. This guidance assumes around two points of growth from Salesforce.org and two to three points of growth from Tableau. Quick software does not have a material impact on our CRPO growth. And excluding this acquired CRPO, we anticipate that our CRPO growth would be approximately 20% year-over-year. Lastly, regarding our long-term FY23 revenue target, we continue to be on track for this and to achieve our long-term revenue goals on an organic basis. And as previously discussed, we plan to update these targets, factoring in recent acquisitions during our annual analyst day at Dreamforce in November. To close, we delivered another strong quarter of durable revenue growth and organic margin expansion. We continue to invest to foolproof, future-proof our technology and scale of our business globally And I'd like to thank our employees, our customers, our partners, and our shareholders for your 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. We kindly ask everybody who is participating in today's Q&A session, please film yourself to one question and a follow-up. If your questions have an answer, you wish to move yourself from the queue, simply press the pound key. And our first question will come from Mark Murphy with JP Morgan. Your line is now open.

Yes, thank you very much. Congrats on a superb quarter. Mark, I wanted to ask you, we're witnessing such a bifurcation in the retailers' results this year. We've seen companies like Target and Walmart and Home Depot doing well. And at the same time, it seems like Amazon is hurting some of the others, whether it be Sears or Barneys or Nordstrom or The Gap or others. I'm wondering if you're finding the retailers that adopted demand-ware are actually competing better. And just is this retail apocalypse kind of causing companies in other industries to want to adopt Salesforce a little faster so that they don't get Amazoned or Uberized?

Well, thanks so much for that question. I'll tell you that I think that we are – rapidly heading towards this fourth industrial revolution and that this digital transformation is hitting every industry and retail certainly is one of the major industries that is really being taken to stand and deliver and you are seeing a bifurcation between those organizations who are ready for this transformation and those who aren't. It includes not just the ability to have a strong digital presence, but also being able to understand what your strength is in regards to your physical presence and making those two work together in a synergistic way. Well, that is where the magic is for many of the organizations that you mentioned. I work with a lot of those CEOs personally, and I can tell you that they've done a tremendous job. You mentioned Target. I mean, you just have to go in and see, you know, what they've done online is matched as well as what they've done in the physical store. I think that that's kind of an indication of where the future is going. You can see, of course, Amazon moving into the physical world as well. We've seen tremendous success with our own e-commerce platform. We're very excited with Demandware and some of the customers that we've seen on that platform have really just trounced their competitors. Of course, You know, there's a lot of good examples. Adidas is one, but there's so many others. And every one of these companies needs a strong platform like Demandware, but I'll tell you it's more than that. It means that they have a real customer 360 because once that customer actually gets to the store, you want to know everything about them in terms of a 360 experience. And we have a a number of luxury retailers, some that I can mention by name, but honestly, a lot of them who I just cannot by their own request, who have done a tremendous job of integrating their digital experience and their physical experience. And when you walk into one of their stores, they say to you, oh, hey, did you know we have this new capability or that new capability? You've already purchased something in this product line, and it's made a big impact. difference for them. So you're 100% right that transformation in retail is underway, and we're excited to offer that customer 360 vision to the top retailers so that they can offer, whether it's in sales or service or, as you mentioned, e-commerce or marketing or app development or so many other things, the ability to be competitive. Thanks for the question.

Thank you. And our next question will come from Heather Bellini with Goldman Sachs. Your line is now open.

Great. Thank you so much. I mean, Mark, you've been one of the most strategic visionaries in the software market over the last two decades. And obviously, you've built one of the biggest cloud companies to date through a combination of internal R&D and M&A. And I guess that's where my questions would lie. Can you share with us your vision for M&A as you look ahead and how you think, especially now that you've kind of gotten into the on-premise market as well, how you think about the marriage of the cloud footprint and the on-premise footprint. And I guess the other question that we get asked a lot about, and I'm sure others do on the line, is how do you think about the margin tradeoffs that come with that bigger TAM? And given Mark Hawkins talked about it on the call, the fiscal 23 targets, Are there any thoughts of maybe ever adding a margin target to the revenue target if it's an organic number? So I guess that's where my focus is. Thank you very much for taking the questions.

Well, thanks, Heather. And I'll let Mark directly address the issues of guidance. But I'll tell you that, you know, the way we look at it is innovation is happening everywhere. And we have tremendous innovation happening in the Salesforce and and that's been so important for us over the last 21 years. But we're also in awe of a lot of other innovation that's happening outside of our company, and we've been fortunate to have a big enough view of innovation that it's motivated us to be one of the most innovative companies in the world because we have the hardest both organic and inorganic innovation, I think, in a really positive way. And I have to also thank our customers because a lot of the ideas that that we've created, whether it's software we've built or companies we've bought, it's really been driven by those customers. I mean, a great example, just tying back to the last call, is Demandware. One of those luxury retailers is based in Paris. You know, I was having a meeting with them, and they took me aside and they said, you know, the company that you should acquire is Demandware, and here's why. They had already moved to Salesforce and other services, but they had a gap in their customer 360 and they wanted our ability to be able to connect Demandware into what we were doing so that they could be more competitive themselves. That has turned out to be really great for them and augmented our vision of what CRM is and also being able to execute our customer 360 vision. I think that, you know, when I look out and I just was thinking about, you know, conversations that I had today, you know, we're really at a moment in time where these top CEOs in the world all realize not only do their digital transformation has to be underway, their customer experience has to be first. And I'll let Mark answer the rest of the questions.

Sure. Thank you, Mark, and thank you, Heather, for the question. We certainly highly prize the operating margin expansion. It's something that's very important to us over time. As you can see, over the last several years, we've been expanding that. We do make tradeoffs between Our organic growth and margin, the tradeoffs, are something that we always look at when we look at this opportunity to serve the customer. We have been making considerable progress over the years, but we know there's more work to be done. And that's something that we're always thinking about and trying to focus on constantly improving. We're certainly going to be talking about that in February when we give out our operating margin targets. And I hear your point about exploring beyond one year, but certainly we'll be talking about the operating margin in February.

Thank you. And our next questions will come from the line of Kash Rangan with Bank of America. Your line is now open.

Hi, thank you very much. I'd like to first applaud the company for the tremendous amount of clarity and the straightforwardness of how you report your financials, such as the organic versus the acquired, the currency impact. You go through excruciating detail to make it... abundantly clear how your core business is doing, particularly the fact that margins are projected to grow, excluding the acquisitions, more than you anticipated. So I just want to give you a round of applause on the clarity and straightforwardness of the disclosure. Now, the question for you, Mark, as you move ahead, you're targeting a $28-plus billion revenue company with with the diversity of end markets that we've just simply not seen in software. The prior analogs in the on-prem world, whether it's SAP or Oracle, just didn't quite have the diversity of end markets that Salesforce.com is pursuing. So as you plan to roughly double revenues, how does the go-to-market nature of how you're going, how does the go-to-market strategy evolve as you attack a breadth and complexity of markets that the world has simply just not seen? And there's no recipe to follow.

Well, let me fill in some of it, but then also let me ask Keith really to fill in the rest. I think you said it really well, which is that we've worked really hard to build this customer 360 platform. It's taken us 21 years, and it turns out this is exactly what customers want and really need to be competitive in today's world. And as we go to now execute and deliver that, we are, you know, focused on how do we do that by region, by country, or we're really looking at how we're doing that by segment. It's extremely important. And I think that, you know, for us, certainly, you know, we started just with Salesforce Automation. That was our kind of sole app, if you will. But, you know, it was clear, you know, from the focused with customers that if we're going to continue to be able to serve them, we had to get to customer 360. So, Brett, maybe you also want to add to that, and then Keith, I think maybe it would be great if you filled in on the go-to-market as well.

Yeah, I think Mike put it well, which is, you know, as we think about our value proposition, it spans a lot of different markets, but it's all under this umbrella of digital transformation. And I think the defining characteristic of companies in the fourth industrial revolution is the things driving their digital investment is customer experience. Customers are demanding that they interact with these companies in new ways, and that does span the entire portfolio. The question that came up earlier about demandware and commerce, it's a lot more than that. When you think about what defines your retail experience, it's about customer service. It's about buying online and picking up in stores. It's about merging the physical and the digital It's about how you get recommendations and marketing after you've purchased something. And so when I look at our portfolio, it spans a wide breadth of functionality. But when I talk to the CEOs of all the major companies in the world, that's what they need to transform is all of the above. And when they fragment their customer experience by thinking of them as separate categories or silos, they can't actually achieve the vision of the digital native companies that you mentioned before. I think our breadth is an asset when we go into these conversations with our customers because I think we can provide a more complete vision for their digital transformation than any other company.

Yeah, and listen, on the go-to-market side, you know, we made a conscious decision over the last few years to really focus on three things. One is how do you take an international company and turn it into a global company? And there is a large difference between being an international company and being a global company. A lot of that is around culture, behavior, and how you solve customer problems. The second was really a movement towards selling solutions and speaking the language of the customer and understanding an industry. And just to give you an example of that, in two weeks I have to go to New York which I'm very, very happy about to address the board of one of the, I would say, the most prestigious retailers in North America and talk about the future of retail. A couple weeks ago, I had dinner with the CEO of a different company, although same industry, but it's one of the largest retailers in the world, and they want to talk about how our Customer 360 platform can help them drive growth and optimize customer experience. Being able to understand the industry and enabling our field organizations and our entire company on understanding an industry and being able to solve a customer problem is a huge part of it. The third piece of this is moving from a partner ecosystem to a strategic ecosystem. A partner ecosystem is really encompassing with... you know, our classic firms that we do business with, like the Accentures and the PWCs and the Deloittes of the world, who are just world-class SIs. But how do we extend that community to drive success for our customers everywhere in the world? And that's why we form partnerships with companies like Alibaba, because we have to service companies all over the world, and we have global operations. Again, I mentioned the word global. It also means that we continue to invest in this trailblazer community, where we want millions of people who evangelize and architect solutions that drive success for our customers. And then the final component, which I mentioned on the call, is talent. We are fortunate enough, because of our culture and the type of company and our values, to be a destination company for talent, and we have attracted some amazing people whose careers we continue to grow, who are very focused on customer success, as well as these other folks, like we talked about, with a Jane Ann Gaudia, for example, who's going to be running the UKI for us. And having those executives, having that talent in place, who are passionate about customer success and driving solutions, really makes this, I think, a very, very unique company. And that's why you see the success, and that's why we're optimistic about the future.

Thank you. And our next question will come from Walter Pritchard with Citigroup. Your line is now open.

Hi, thanks. Question for Mark Hawkins or for Keith Block. I think it's been a couple years back you gave a framework around cost-to-book, cost-to-serve at Dreamforce Analyst Day, and I'm wondering, you are talking about seeing really good underlying margin progression in the business X acquisition. Could you update us on, along the lines of those two drivers, where you're seeing the margin improvement, which areas? It's getting a little bit harder for us to tell, given the acquisition influence, you know, on each of the OPEX and OPEX. cost of revenue line items. That'd be helpful.

Sure. Well, first of all, thank you, Walter, and happy to do that. I think the thing that we are making progress on right now is in the area of gross margin. You'll take note we've been investing for quite some time to get more scale and capability there, and we're pleased to see some progress on that. We're getting also progress in our G&A areas as we look to make G&A more efficient as we scale up the company. That's certainly an area that we're making progress as well. We have a great initiative. I think our team driving even customer success there in it to really help deliver an even better performance while also scaling. And I think these are some of the areas in the cost of surgery in particular that we're doing. And Walter, I would add just one additional point that in the area of cost of book, that's always a choice. It's always a trade-off. And we just had a great market opportunity in front of us to serve our customer. And we're obviously investing there, but always looking for progress as well. But those other areas are the key areas that we're focused on.

Okay.

Thank you. You're welcome.

Thank you. And our next question will come from live Keith Weiss with Morgan Stanley. Your line is now open.

Hey, guys. Thank you for taking the question and a very nice quarter. I wanted to get Keith Block's opinion on or perspective on potential synergies from the recent acquisitions, particularly Tableau. Given the success you guys have seen with MuleSoft over the past year, where should we expect sort of the biggest synergies? What are you most excited about in terms of adding Tableau? And maybe we could put Click Software into there as well into the portfolio as we look over the next year. And then one for Mark Hawkins. Can you repeat the Tableau guidance again? in terms of what the full year contribution is and what the Q3 contribution is? Because it seems like it implies like a smaller Q4 than a Q3. I want to make sure I have those numbers right.

Let me address the first part of this, and then I'll ask Mark Hawkins to comment as well. So, look, we're incredibly excited about Tableau. It's a great company, a set of great products. It's got an incredible development community. It's got a great executive team, and customers love their product. As far as Qlik Software, and I'll let Mark talk about Tableau in a second, but as far as Qlik Software, we're very, very excited about the Qlik Software acquisition. As you may know, field service is incredibly strategic to a number of industries, such as utilities, telecommunications, equipment manufacturers. And we have a very strong product in field service lightning. And the combination of field service lightning, which grew 100%, by the way, year over year in the quarter, and Qlik software is very, very compelling. So that's a great example of marrying innovation organically and inorganically. So we're super excited about that. And Mark, I know you have some comments specifically on the Tableau.

Yeah, I do, in fact. And let me take the numbers first, and we'll talk about the Synergy secondly. First of all, Keith, I just want to call out for the year As it relates to Tableau, we're anticipating a $550 million to $600 million contribution for the year, and of course that's net of the DR write-down, number one. Number two, for the quarter for Tableau, I just want to reiterate that we're looking at $300 million and the Q3 time period, again, net of the DR write-down. That's the first part of your question. The second part of your question has to do with synergies, and I just would call out and say that Look, we're incredibly excited, but as discussed at the beginning of the call, we're running the companies separately right now and operating independently right now. It's an incredible company with a fantastic product and leadership team. We're so pleased about that and so excited about that. But let me take a step back and address the spirit of your question. We have a tremendous history with acquisitions of complementing organic innovation products and being able to make progress in that way. And when we do M&A, we're always looking for opportunities to make these companies even better and have even greater success for our customers, which is what it's all about at the end of the day. So I've never been more excited about our ability to create more success for our customers than with this strategy. That's what I would say.

Thank you. And our next question will come from Lav Kirk-Matrine with Evercore ISI. Your line is now open.

Thanks very much, and congratulations on the quarter. My question might be for either Keith or Mark Benioff. I was wondering if you all could just talk about Europe a little bit. It's obviously been a real source of strength for you over the last few quarters. Just where is the market, I think, broadly, just in terms of adoption and thinking about things like Customer 360? It seems like it's hitting a little bit of an inflection point and would just love your thoughts on that. Thanks.

Yeah, so... Mark and I have actually been flying around the world quite a bit. I spent about a four-week trip where I was in Japan, I was in the United States, I was in Canada, I was in the UK and Switzerland and France and Italy and meeting with CEOs from various industries in those geographies. You can see from the results EMEA continues to be very, very strong for us with 30% growth in the quarter. And just go back to the Unicredit situation that I mentioned in the earnings call. This is a very strong bank in Italy. I think we're all aware of the situation that's going on in Italy from a macro perspective, from a government perspective. But the CEO of Unicredit is really betting the future of Unicredit around the Customer 360 initiative and the experience for his customers that he wants and how he wants to transform that bank. And that is the same conversation that is going on in every industry. I was in Paris meeting with one of the largest bank CEOs in the world. You know the Barclays story that we have in the UK. We have industrial manufacturers in Germany, automotive manufacturers who are trying to improve the customer experience and driving 360 degree. So the one thing that is very, very clear to me is that whatever is going on around the world, You know, we see a buying environment. We see CEOs investing. And top of mind for them is digital transformation, which begins and ends with the customer. And that's why they're talking to us, and that's why you're seeing these results.

Thank you. And our next question will come from the line of Richard Davis with Canaccord. Your line is now open.

Okay, thanks. So maybe a technology question. So I saw that you guys – Gartner ranked you guys, Salesforce, as a leader in low code. And in addition, you're doing really well in decision support with Einstein. And then the other third area that's really hot these days is this whole robotic process automation. So the question I have, maybe for Mark, because you think about these things, is how do you see Salesforce participating in each of those three markets? Because it sure seems to me that those three technologies are are going to have to work closer with each other over time because I just feel like they're going to intersect. And so, you know, how does Salesforce position itself for that kind of next wave of those three things kind of connecting with each other? Thanks.

Well, I'm going to actually ask Brett to answer the question. I mean, I think it's perfectly set up for him to deliver. So, Brett, do you want to hit it?

Yeah, absolutely. This is really our vision for the Customer 360 platform, which is a platform that works together with all these technologies that's accessible to all of our trailblazers. And when we talk a lot about Trailhead and we talk about this vision of low code, that's what we mean. Those 1.5 million people earning 15 million badges are learning how to apply these advanced technologies. And the technologies you mentioned in the first half of this year alone, the capabilities we've added to this platform are incredible. We added the Salesforce blockchain. We added Salesforce Maps. We added Einstein Translation, Einstein Voice, Einstein Vision. We've added all these capabilities and they're accessible to everyone on our platform in a low-code way. And what that means for our customers is it's easy for them to leverage these technologies to improve their customer experience. And all those technologies you mentioned, The challenge that we hear in the market is these customers are excited about these new technologies and what they can do for their customer experience, but it's often cost prohibitive or too complex to do so. And that's the value they see in our customer 360 platform. That's why, as Mark mentioned, Salesforce is the number two most appealing job according to Glassdoor. In the first half of this year alone, over 72,000 new job postings for Salesforce jobs were posted on just the top two job sites. You're seeing the draw of this platform, and you're seeing how empowering it is. I think anyone in the world can become a Salesforce developer. You could if you go on Trailhead after this call.

Thank you. And our next question will come from Brad Zelnick with Credit Suisse. Your line is now open.

Thanks so much, and congrats again on a fantastic quarter. I'll throw this question out up for grabs, and it's really just to dig in a little bit deeper on Service Cloud with the reacceleration this quarter. Just wondering if you could help unpack that a little bit. You called out field service lightning strength in your prepared remarks, but I'd love to hear any additional color in terms of competition, win rates, and also how you see the products coming together with Qlik software coming into the fold. Thanks.

Why don't I take that, and then I think Brett will want to weigh in as well from the product strategy perspective. This wave of digital transformation is really fueled by so many things. The foundation of it is the 360-degree view of the customer. And each of the elements of that 360-degree view of the customer are important, whether it's relative to the use case and the problem that you're trying to solve, whether it's sales or service or marketing or commerce. And service is just very powerful. If you look at companies in a variety of industries, they like to differentiate themselves. by service, and customer experience is a big component of that, and field service is a big component of that. So as we talk to these executives about the future of growth, you can't have growth without a great customer experience, and that starts with service. So, Brett, I'm sure you want to add to that as well.

Yeah, I just want to add that I do think that our customers are driving us here because service defines their brands. But I also think it shows the power of this Customer 360 platform because all of these fundamental technology innovations that we're investing in really I think benefit service in a unique way. Obviously with Einstein bots which enable customers to provide frontline support using AI, this past quarter we added Einstein case routing so we can route support cases to people who have the best skills to provide the best customer experience at the right time. You saw the growth in field service which we're really proud of. It really shows how our investment in maps and geolocation and mobility are all sort of converging to enable these customers to provide the right support to the right customers wherever they happen to be. And so I really wanted to say that this is really what I view as the power of the platform. We're getting so much leverage from our technology investments to enable the experiences that Keith talked about.

Thank you. And our last question will come from the line of Jennifer Lowe with UBS. Your line is now open.

Great. Thank you. I wanted to circle back on some of the discussion earlier about going from an international company to a global company and the addition of CEOs in a couple of particularly strategic markets. And I'm curious, as you add that role, what's sort of the mandate there? What do you view as sort of core competencies that need to be set by global leadership versus providing regional leadership with the flexibility to make the changes or run the business in a way that they see as most appropriate on the ground in that market?

Well, Jennifer, one of the important things of being a global company is to be able to think globally and think strategically and act locally. And we want to empower our leaders in the field so that they can make decisions on behalf of the customers in front of the customers. You know, there's an expression that says the best decisions are not made in the office, they're made out in the field. And by hiring these senior executives and cultivating and growing our other executives inside the company so that they're empowered to make these decisions, we think this is a perfect way to scale the company. With respect to being a global company versus an international company, kind of the key tenet of being a global company is that you act the same, you behave the same, you execute the same no matter where you are all over the world, whether it's with one customer or many customers. And as we bring in these senior executives We're augmenting and enhancing an already incredible management team. So we're super excited about these ads, and talent is an important strategy for the future.

Thank you. Ladies and gentlemen, this concludes our question and answer session for today. I will now hand the call back over to the company for any closing comments or remarks.

I want to thank everybody for participating in the call today. and I especially want to thank all of our Ohana who just did a fantastic job this quarter, and we couldn't be more pleased with the outcome. And John?

Yeah, thanks so much. Thanks so much, Mark, and thanks, everyone, for joining us today. As Mark reminded everyone, go ahead and register for Dreamforce. We'll look forward to seeing many of you there on Annual Analyst Day, and we'll look forward to giving you an update on our results in Q3. Thank you so much.

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