Q4 2020 Earnings Call
[music].
For fiscal 2024th quarter results Conference call at this time all participants are you know that's an old demos.
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Steve Senior Vice President Investor Relations, Sir you may begin.
Thanks, Good afternoon, everyone and thanks for joining us for our fiscal 2024th quarter results Conference call of Engulfing Senior Vice President of Investor Relations.
Results press release atrophy violence, and a replay of todays call can be found on our IR website www dot salesforce dot com Flushing muster with me on the call today, our Marc Benioff Keith block.
Parker Harris co founder and CEO, Mark Hawkins, our CFO, Bret Taylor, our COO and Amy lever, our Chief legal officer, as a reminder, or commentary today will primarily be a non-GAAP terms.
Conciliations between our GAAP to non-GAAP results Im gardens can be found in our earnings press release.
Some of our comments today may contain forward looking statements, which are subject to risks uncertainties assumptions.
So the Navy's materials.
At our assumptions prove incorrect actual company results could differ materially from these forward looking statement.
A description of these risks uncertainties assumptions and other factors that could affect our financial results are included in our FCC filings, including our most recent reports on form 10-K with that let me hand, the call Tomorrow.
All right well, thank you I've been and congratulations on your promotional before thrilled.
Thank you and I. Thank you everybody for being on the call today as you can see from our results. We had an incredible fourth quarter capping off another record year for salesforce, rather than in the quarter rose to nearly 4.9 billion up 34% constant currency.
Truly amazing for a company of our size and for the full year, we delivered 17.1 billion in revenue up 29% in constant currency now based on our exceptional fiscal year 20 results were raising.
Our fiscal year 21 revenue guidance to 21.1 billion at the high end of our range representing about 23% projected growth you are real and no other.
Company of our size is growing up this rate were also reiterating our long term revenue target for fiscal year 24 of 34 to 35 billion.
And that's doubling our revenue again.
In four years, making us the fastest enterprise software company to reach this milestone.
Yeah, as we continue to deliver record revenue you're in and you're out we're committed to balancing this growth with very strong cash flow and incremental operating margin improvement now before I continue I want to say a few words.
How about Keith.
Now as you read by now you stepping down as co CEO.
Keith as an incredible leader and close friends.
Who has helped position us as a global leader and people we strengthened our.
Our company.
Surely going to Miss Keith around here keep joined almost seven years ago and together, we have grown salesforce into a company that is the M. B.
The industry.
I am especially grateful.
Two keys for his service to Salesforce and I'm absolutely delighted.
That he will be staying on as an advisor to me.
Now as we continue to build on our fourth quarter in our year.
Our time together has been amazing I'm his biggest border.
I am here is.
Gross rent I'm here to help them on his journey and as he begins this new journey, we are all with you Keith.
And we're all very excited for you now Keith I know this goes without saying, but you will always be part of our Uh huh.
I also want to express my gratitude to our entire on huh.
People ask me all the time, how is it possible to achieve our rate of growth and success and to me. It's quite simple, it's our core values of trust with customer success.
The innovation of a quality.
And I'd like to thank all of our customers from around the world for their incredible commitment.
So our company and their belief.
And our vision for customer Threesixty I'd also like to recognize an incredible executive in Oklahoma Gavin Patterson.
Our friendship with Gavin has spent more than a decade during his time, leading BT, where he served as their chief Executive officer, and I'm delighted to announce that cabin.
Has accepted the position Oh, President and CEO of Salesforce International based in London.
I haven't is an incredible global leader.
A member.
Oh.
Many groups that we have been associated with for many years, including the World Economic Forum very close friend and I could not be more pleased to welcome.
GAAP into sales.
We're in the midst of a huge waiver digital transformation and it's only getting bigger and every one of these digital transformation.
Begins and ends with the customer every CEO, we made around the world is deeply committed to transform their business around their customer and the relying on salesforce is their trusted digital advisor, where the number one zero provider. We're the leader in sales and service and marketing and commerce platform and analytics and integration. So many more.
Our clouds are the key building block so customer threesixty, along with the powerful platform services, including security and mobility, and AI and voice walk to anymore.
What makes customer 360, so powerful.
It was that it unifies and manages all the data.
Not just within Salesforce, what drove from almost any data source to deliver a complete 360 degree view of your customer.
As a single source of truth that results in one to one journeys for customers across retail stores and commerce sites.
Email and messaging call centers field service in fact across every.
Customer interaction and every industry and customer Threesixty is the only platform delivering this unique capabilities, enabling the single source of truth.
And with our recent acquisition of tableau, returning customer threesixty data into actionable insights the rebelde every user helping them to move from data decisions.
I'm, especially excited by the success of tableau and how well we're doing together Adam Selipsky, either Tablo CEO and his team are doing an incredible job and it's clear that customers recognize tableau is value to see an understand all the data.
In customer 60, m. throughout the whole enterprise.
Emil soft has continued to perform beyond expectations.
Become incredibly strategic to so many of our customers and were so thrilled with the progress.
Of their team.
We've been leading innovation around CRM for more than two decades, we started the company as a system of record.
We've evolved into a system of engagement.
And then a system intelligence and now we're pursuing a system.
But as a single source of truth.
In fact, what do you look at some of these incredible accomplishments like Einstein well.
Oh I'm sorry in Q4, it powered more than 11 billion predictions per day.
6 billion from just a year ago.
No other company is delivering.
This level.
Of intelligence and it's absolutely critical for us as we head to our own Holy Grail. The single source of truth for all of our customers.
The knowledge of their customers connecting with their customers and all the way.
I'm also thrilled to share the news today that we signed a definitive agreement to acquire velocity.
Well I said he has been a phenomenal partner for last six years delivering industry specific clouds and mobile solutions for the world's top companies all built natively on the Salesforce platform and velocity and Salesforce have been closely connected with our values. The company is committed to customer success and giving back.
Through pledged 1% right from the very beginning.
The work we've already done together with our customers has been extraordinary.
And with this acquisition will be easier than ever for us to deliver powerful industry was powerful industry solutions to our customers by every vertical.
And I'm, absolutely looking forward a welcome in my old friend.
M a C O velocity David Meyer.
The entire velocity team Doro Honda later this year.
I'm proud of what oral Honda has accomplished in fiscal year 20, and over the last 21 years.
Salesforce is living proof that stakeholder capitalism works when we value all stakeholders.
Yes, we've delivered phenomena returns for shareholders.
More than 4000% since we went public in 2004.
Well, we've also delivered fantastic returns for our.
Stakeholders.
330 million in grants to worthy causes our employees have delivered 4.9 million hours of volunteerism.
46000, nonprofits and then to use our salt for free and where the number one contributor to our local San Francisco and Oakland public schools as well as to.
The homeless this crisis right here in our native San Francisco.
We've achieved net zero gas emissions globally.
Weve delivered a carbon neutral cloud to our customers.
And we're committing to reach 100% renewable energy for global operations by 2022.
Because the planet.
He is a stakeholder.
This is how we've grown from a pioneering idea to accompany headed towards 35 billion in fiscal 2004, known for our culture and committed to giving back at scale.
And executing on stakeholder capitalism.
And it's why so strongly believes that when we serve all stakeholders businesses the greatest platform for change.
Our commitment to all stakeholders as one of the reasons that fortune is rack salesforce as one of its 100 companies.
Hundred best companies to work for for the 12 year in a row.
Also vary quite proud the fortune has named Salesforce.
One of the Tom Top 10, most admired companies in the world and one of the best workplaces for giving back.
And just this week Ethisphere name Salesforce.
One of the most ethical companies.
For the 11th year.
That's why together with our partners and customers.
We're creating millions of salesforce related jobs around the world.
And I do you see the Salesforce economy will add 4.2 million new jobs by 2025 impacting global GDP by over 1.2 trillion dollars.
And this is what we might mean, when we say that business is the greatest platform for change and that's why I've never been more excited about or opportunity ahead for salesforce to deliver success to all of are still stakeholders, including our shareholders.
And I'm sitting here with Parker Harris, My co founder and CTO.
And on March eight which is just two weeks from now Salesforce will celebrate its.
21st first day is that right Parker, that's correct Mark when we first showed up at 14 49 Telegraph fill boulevard or was it Montgomery Street.
Summaries brief summary on Telegraph Hill.
And started Salesforce and we're excited Parker to have you have to call. Today. Thank you for have me Mark and what that will turn it over to keep.
Thanks, Mark and thank you very much for those kind words.
It's been my greatest honor to be part of Salesforce over the last seven years.
When I first joined the company in 2013, we're generating 4 billion in revenue amazingly about the same amount that we just delivered in this last quarter and now we're a global enterprise company guiding to more than 21 billion and that's why 21 with a focus on industries and speaking the language of the customer.
I mean, the market's leading enterprise software ecosystem and we are now the trusted advisor for digital transformation for Ceos all over the world.
It's a tremendous accomplishment.
Hi, I'm ready to start a new chapter.
I'm very grateful to our employees our customers our partners.
And certainly this community our investors and working side by side would you Mark.
As well the rest of this great management team has been one of the most fulfilling experiences on my career Thatll be forever grateful for our friendship. So I appreciate that and I'm very proud of incredible growth trajectory. The company is on.
I'm excited that I'm going to be working together with Mark in my role as an advisor so I'm grateful for that as well.
This quarter and year has really been a capstone to my time at Salesforce and now I'd like to share some of the impressive highlights from the quarter.
In Q4, we grew 32% in the Americas, 28% and APAC and 47% in EMEA in constant currency that includes a recent acquisitions.
At the close enough why 20, the number of Salesforce customers spending 20 million annually grew 34%.
Let me share a few key examples of the strategic relationships that we've been building with our customers in these markets and how we've become a trusted digital advisor across industries geographies and segments Volkswagen group. The number one manufacturer of cars in the world is partnering with Salesforce to transform how they deliver personalized experiences to their dealers employees and can.
Tumors.
Leveraging salesforce Volkswagen will have a 360 degree view across their 12 brands, it's pretty incredible a single source of truth for customer engagement.
Transformation has also want to three EMS top strategic business priorities and over the last several years, we've been partnering to transform how they serve their customers.
Part of that strategy, three m. significantly investing in our customer 360 solutions in the fourth quarter, two increase productivity drive business growth and enhance the customer experience.
Thanks, James place you Kase largest wealth manager also expand its relationship with Salesforce significantly SJP is going wall to wall with Salesforce, leveraging financial services cloud Einstein analytics meal soft and more all to transform how their advisors engage with clients and many of our existing relationships in Europe deepened.
Well, including with and now and Adidas.
Now a pack.
We had an outstanding quarter, driven by remarkable growth in Japan, where we deepened our relationships with Toyota and Mizuho financial group and we continue to strengthen our relationship with Telstra Australia's largest telco.
And the fourth quarter.
Our industry vertical solutions continued to deliver tremendous value to customers and as Mark said velocity will be an incredible addition for building out the inside the industry solutions I think we're all very very excited about that.
In health care Cerner chose health cloud to power their client Threesixty project.
There are also partnering with us to sell Salesforce to their health care clients.
Financial services also showed strong momentum in the quarter longtime customer farmers insurance added financial services cloud and Einstein analytics to empower their agents to deliver even more responsive and personalized experiences to their 15 million policyholders across the United States.
We began to new relationship with Canadian Imperial Bank of Commerce, see IVC and expanded with many of the top banks in the U.S. and around the world, including Goldman Sachs, Banco Bradesco, Banco Santander and onset back.
So lux went wall to wall with Salesforce to improve customer insight.
Ignite innovation and drive toward its goal of selling all products and services to all customers.
Alex is also partnering with Salesforce to offer Salesforce essentially the world's number one CRM product purpose built for small businesses to its approximately 4.5 million customers.
As we continue to highlight our partners play a critical role in our customers transformations and are investing more in salesforce to drive their own growth.
In Q4, Deloittes expanded their use of service cloud and sales cloud to made new investments in CWIP analytics Einstein and my trailhead.
And our partner ecosystem continues to thrive in Q4, the number of new partners with absent the Salesforce App exchange increased 45% year over year, and App installs exceeded 7.5 million.
As you know in Q3, we concluded the largest acquisition in our history with tableau as Mark said, we're pleased with how well tableau has performed over the year and certainly in Q4.
Tableau had significant wins, including three of the worlds biggest brands in the internet and retail spaces to it which are at the top of the fortune 100.
And Toyota and they'll and Volkswagen all chose meals off by the way in the quarter to unlock data and accelerate their digital transformations.
So in closing it's been an incredible privilege to work with an amazing group of people here at Salesforce.
It's a it's an extraordinary inspirational company that truly truly lives it's values.
More important in this world today than I think ever and I have no doubt that mark and this amazing Salesforce team will continue to deliver customer success and serve as a beacon of light and a leader in the industry. So again I want to thank our employees our customers our partners.
And certainly our investors.
For your support so with that I'll turn the call remark.
Great. Thank you Keith and Keith I cant. Thank you enough for your partnership your leadership your friendship and your support since I joined the company.
Fiscal 20 was another important and busy year for Salesforce relaunched one of the most significant product initiatives in the company's history with customer Threesixty required tableau, the largest acquisition in our history, which enables our customers to see and understand data, we welcome Salesforce Dot org expanding.
Our vertical strategy.
We unveiled and expanded several strategic partnerships, including ADW S, Microsoft and Alibaba to better serve our customer.
And we accomplished all this while sustaining organic topline growth and producing another year of strong financial performance driven by our values, our discipline and our focus.
Here are few of the financial highlights for Q4 in fiscal 2000 in Q4 revenue grew 35% in dollars and 34% in constant currency, excluding the impact of tableau and Salesforce dot or Q4 revenue grew 22%.
For all of fiscal 2000, <unk> revenue grew 29% in dollars and 29% in constant currency, excluding the impact of tableau and Salesforce dot or fiscal 20 revenue grew 23%.
Q4, CR P.O. grew 26% in dollars and 27% in constant currency and again, excluding the impact of tableau Indoor Q4, CR P.O. grew 20%.
Our portfolio of industry, leading products continues to deliver strong year over year subscription and support revenue growth in Q4.
Sales cloud grew 17% for approximately 14% excluding the contribution from Salesforce Dot Org. This compares to a year over year growth rate of 11% in Q4 last year.
Service cloud grew 26% or approximately 22%, excluding the contributions from click software and Salesforce dot or and this compares to a year over year growth rate of 22% in Q4 of last year.
Platform, another grew 74% or approximately 30%, excluding the contribution from tableau and Salesforce Dot Org and this compares to a year over year growth rate of 50%, 54% in Q4.
Keep in mind last year's results included revenue from the acquisition of meal soft.
And marketing and Commerce cloud grew 28% or approximately 24% excluding the contributions from Salesforce dot or this compares to a year over year growth rate of 34% in Q4 again keep in mind, the marketing cloud revenue benefited from the acquisition of data Roma.
So while M&A benefited the growth rates for each of the cloud two year over year, our organic growth rate by cloud remains very strong and have even accelerated year over year in some cases.
Lower revenue attrition also continued to support our growth in Q4 and for the full fiscal year with dollar attrition continuing the downward trend we've seen for the last several quarters and I'm very pleased to share that the revenue attrition for the year is now currently below 9%. This is a historic low for Salesforce. This.
Permit reflects the ongoing shift of our business mix to enterprise and international markets, which inherently have longer contractual relationships and lower attrition rates.
Turning to operating margin Q4, non-GAAP operating margin was 15.4% down 110 basis points year over year as discussed last year. Our Q4 non-GAAP operating margin reflects the timing of Dreamforce in Q4 versus Q3 last year as well as the timing of integration and other investments and tableau.
For the full year were delivered non-GAAP operating margin of 16.8% down 24 basis points year over year, but coming in higher than our expectation largely due to the overall revenue outperformance excluding the impact from M&A.
Our organic non-GAAP operating margin is consistent with our initial guide from last year of approximately 125 to 150 basis points.
Q4, GAAP loss per share was 28 cents and this loss was on favorable compared to our expectation due to the incremental tax cost associated with the integration of acquired operations and assets.
Q4, non-GAAP earnings per share was 66 cents.
Turning to cash flow, we had a very strong cash collections in Q4, which drove operating cash flow of 1.6 billion up 23% year over year for fiscal 2000, we delivered $4.3 billion of operating cash flow up 27% over last year.
Capex for this year was 643 million, we continue to see scale benefits from Capex with Capex as a percent of revenue now approximately 4% and that's down from 4.5% of revenue last year.
Free cash flow defined as operating cash flow less Capex was 1.5 billion in Q4 up 29% over last year and for fiscal year 20 free cash flow grew 32% year over year to $3.7 billion.
Remaining performance obligation, representing all future revenues under contract into Q4 at 30.8 billion up 20% year over year current RPL, which is our business that is billed and unbilled and expected to be recognized as revenue and the next 12 months was 15 billion up 26% year over year with tab.
Well in Salesforce Dot org contributing approximately six points of growth to this amount.
Before I move on to guidance as Mark described we're excited to be expanding our industry offering with the acquisition of velocity.
We are acquiring velocity for approximately one to 1.33 billion and cash net of Salesforce is ownership and the company.
The transaction is expected to close during the fiscal second quarter, and we expect approximately 50 million and revenue contribution during fiscal 2001 additional details on the transaction can be found in our recently filed 8-K.
Now turning to guidance as a result of our Q4 performance. We're pleased to raise our Q1 revenue guidance by 50 million.
To 4.875 billion to 4.85 billion or 30% to 31% growth year over year.
We're also raising our fiscal 21 revenue guidance by $200 million to 21 billion to 21.1 billion or approximately 23% growth year over year.
The advantage of our predictable and recurring revenue model, along with our expanding product portfolio and the increasing traction in enterprise and in our geographies as Mark mentioned, we remain on track to deliver 34 to 35 billion in revenue in fiscal 2000 for.
This long term target represents a four year CAGR of approximately 20% at the high end of the range and is consistent with the durable growth we've been delivering year after year.
For Q1, our fiscal 2001, we expect to see see RPL growth of approximately 23% to 24% year over year, we expect to deliver fiscal 2001, non-GAAP operating margin of 18.1%, which represents approximately 125 basis points of expansion year over year.
Driven by continued improvements in organic operating leverage which was partially offset by the margin headwinds and tailwinds related to recent M&A.
We expect fiscal 21 operating cash flow growth of approximately 20% or better than $5.1 billion, which reflects continued strong cash generation, partially offset by the cash headwinds from the acquisition of tableau.
For fiscal 2001, we anticipate capex to remain at approximately 4% of revenue.
We expect fiscal 21, GAAP diluted EPS of 12 to 14 cents and non-GAAP diluted EPS of $3.16 to $3, an 18 cents.
Now our gap in our non-GAAP EPS assumes that Hawaii is a net expense of approximately $5 million for fiscal 2001, and our non-GAAP tax rate of 22%, which is down approximately 50 basis points, primarily due to higher projected research and development credits.
Please recall that our Hawaii and EPS guidance assumes no contribution from Mark to Mark accounting as required by asked you 2016 or one.
And lastly, as a reminder, the full financial impact of velocity acquisition is factored into our guidance today.
To close we've delivered another year of strong financial performance highlighted by organic durable topline growth and excellent cash flow generation further in a year, where we closed the largest acquisition in our history and further expanded our products and Andrew industry offerings. We are pleased with our ability to deliver a.
Consistently reported non-GAAP operating margin percent.
This level of sustain and balanced growth at our scale is unprecedented and enterprise software industry.
Closing I'd like to thank our employees our customers our partners in our community and our shareholders for their continued support and with that let's open up the call for questions.
As a reminder, if he would like to ask a question press star one on your telephone.
First question is from Phil Winslow from Wells Fargo.
Hi, Thanks, guys, you're taking my question retina, great close viewing hi, Keith I really enjoyed working here going forward to see where you're Pat. Thanks you.
Just wanted focusing on the on the sales cloud I mean, you mentioned the acceleration in several classes and that's the one that really jumped out to understand the past couple of quarters. He a 17%. This quarter can you double click on whats really really driving out I mean, that's the highest growth rate we've seen sales cloud for four quarters. Not also maybe talk about velocity will figure into that Tim. Thanks.
Yeah sure a couple of things that you know in terms of the sales cloud the thing that I could tell you one is that of course.
The acquisition of Dodd or added a few growth points I think we said for growth points, but if you think about 13% growth without that as a strong growth rate. We're very pleased about that I think one of the things that you see is the balance of our offering the continued innovation CPQ.
Hi, I think a number of factors of just made this a very very welcome and competitive product I know Brett if you want to add some comments, yes. I also think it's really important understand well sales cloud at the product Parker and Mark created 21 years go we haven't stopped innovative.
So at Dreamforce, we announced a major new capabilities like Einstein call coaching which is leveraging the power of Einstein to enable a inside sales teams to coach people to be as effective as the most effective account executives on the team. We've also continue to study a steady stream of new add ons.
Customers itself out things like Salesforce maps, which enables field sales CPQ, which enables quote to cash PRM, which enables you to extend your sales process to your ecosystem of partners and I would say, perhaps most importantly, salesforce essential which is really packaging all of this up and bringing it into really.
Digest easy to deploy solution for small businesses as well. So I think that we're really focused on innovation and making sure. We have a steady new stream of innovation to bring to our customers in our flagship and namesake product.
The next question is from Heather Bellini from Goldman Sachs.
Great.
Thank you very much for the question.
I was wondering keep that's best wishes and your and your next endeavors, but I was wondering mark if you could share with us a little bit of the initial feedback on tableau from customers has there been anything that surprised you in terms of.
How customers are leveraging.
I'm also wondering to the extent you are seeing people who were obviously wanting it on premise to the extent you're starting to hear customers talk about being able to leverage that data that's on premise and bring it in.
There are various cloud offerings. Thank you.
Well thanks, Heather for that you know I think there's probably three things that have really been the big surprises with tableau.
The first is just I think I've mentioned this before on public Dot Tablo Dot com. If you haven't seen that cider then on there to see the incredible level of innovation of in size.
And scale of their community that has been continues to be in a surprise.
It's inspiring.
For us certainly when we built our own App exchange and our own community of Trailblazers.
I think they kind of got to beat a little bit in terms of what they've been able to do now they haven't they I think theres another opportunity for them to monetize that in a more aggressive way.
To build I as these there I think maybe we have that part figured out so I've been encouraging them there to take that next step.
I just was up there.
Mazin Amazing company too.
The CEO is.
Awesome and we're thrilled to have.
As part of the team.
And he has fit right in kind of like our lost a cousin from the northwest that we have now reassembled into the families. So that's very exciting add to have him and a three I would say that from a customer perspective.
I have never had so many customers come to the on an acquisition and immediately tell me that they want to go enterprise wide with it.
This was slowed down a little bit last year, because as you know the integration.
Was a little bumpy, but as we now get into our new fiscal year. The way that we have architected, our distribution organizations and compensation plans is to give as much throughput.
And.
And Doug and I was going to say velocity, but I have to pick in other words, [laughter] and as much acceleration as possible because.
I think every customer.
Already loves Tableau, we just had our company kick off here.
Last week, two weeks ago, and we had a customer come from a large financial services firms to speak to our employees to inspire them and the customer spoke about how they've always love salesforce, but they secretly never told us. They also loved tableau so much and.
That was very cool and something that we've heard a lot. So I hope that I hope that kind of informs you. How excited we are about tableau.
The next question is from Keith Weiss from Morgan Stanley.
Excellent. Thank you guys for taking the question Keith is been a pleasure working with you and definitely leaving I note. After this Q4, which definitely seen very strong.
Two questions one in terms of kind of the strength in the overall business given kind of what we've been seeing over the past couple of days in the stock market and with the Corona virus any indication that that's impacting demand at all for for Salesforce heading into your debt by 21 and then the second question maybe for right on this or Benioff.
With Keith leaving is there any changes you have to make too on the leadership structure or anything you have to do in terms of bringing in new management to fill in for the functionality that keep bringing in the role.
So Keith Thanks for the kind words I'll address the first part and obviously mark and talking about the second one look I think the numbers kind of speak for themselves.
And.
I would say that the set up the Companys is clearly executing.
And set up for success and scaling and at a great pace. So I think the future is very very bright as they say in Washington, DC. The state of the Union is strong.
So I think we all feel very confident about that with respect to the current a virus I'm sure Mark will have some comments on that but it's not affecting US right now certainly we're concerned we're watching to see what happens here.
And our we're empathetic to those who it is affecting.
But.
Overall I.
I think where we are the companies in a terrific spot and I think Raul proud of the results are.
Well number one I think all of our Hearts go out to all of the families around the world who have been impacted by the.
Current virus and certainly the world governments in there.
Pack to contain what is possibly going to be a serious pandemic.
So we.
You know have been listening and paying attention closely to what's been happening.
Around the world.
Certainly we've had a number of customers come to us.
Just in our normal course of business.
And talk to us about how their businesses have been impacted those have been mostly limited to airlines.
And.
Hospitality companies companies, who have their operations, primarily in China, or who have significant supply chains based in China.
I think that when we've looked at Architecting salesforce over the last 21 years and as we've looked at navigating.
The economic crises that we've been through before.
We've been through too serious recessions.
Now as we look at navigating a biological crisis.
When we started Salesforce Parker and I really built a business model.
That was designed to transcend these situations. So that we would have durable growth overtime, regardless of the crises I think that really played out.
In a surprising way with a level of strength in 2910 11.
On the financial crisis that if you look at our revenue curves it looks like it never happened because whether our bookings are up or down one quarter or the next.
The strength of our revenue model and the resulting cash flow and.
Commitment we've had to incremental operating margin over 21 years has really paid out to have a level of durable capability for the company that I think is man unprecedented in the technology industry and given our investors.
The returns that had been so strong for with four of them.
And something that we're very committed to continuing to do.
More than I think Mark will know, 93%, 92% that's right what is it it's 93% 93% of our revenue is deferred so that just gives us tremendous yeah.
His ability.
Into the future and this is a key architecture of our accounting.
And of our company Corporation, how and our relationships with our customers, especially our deep contractual multi year relationships with our customers.
I think I mentioned how.
Grateful I am to Keith.
How delighted I am.
In his decision to move.
On and.
To a new chapter and I will deeply partner with him and.
Making that successful for salesforce and for him and.
And when I look around this management table here in this room I'll tell you that I'm also very inspired by our team.
Of course Parker who's been by my side for 21 years could not have done and this without him.
We also have our chief operating officer, Bret Taylor, who many of you know.
With his tremendous lineage.
At.
Including Facebook and Google and his own private companies.
Our chief legal officer, Amy lever is probably one of the finest executives, who I've had the opportunity to work with.
And.
Our CFO Mark Hawkins you just hit me on that.
I am I correct I forget about it affects all right so dimension.
That there's two people who around that management table, who are public companies Ceos as well who aren't currently with us because they're traveling one is Adam Selipsky. He is the the sea of tableau.
Who is an incredible part of our management team and has provided unbelievable value in the short time has been here and the New addition, who's been with us as our chairman of Europe, but who.
Has.
You know.
Now become our president and CEO of international could not be more excited to welcome Gavin Patterson.
Who was the Chief Executive Officer.
BT.
In London, and when you look at our total management team that Keith and I have built together that you have to be awfully proud of this group and I think it is the finest management team in the software technology industry, maybe any industry, but also.
Our board of directors as part of that I'll tell you. They are phenomenal and our management team that doesn't include the people that I've mentioned, we have so many amazing executives I could go on and on.
And they would love me too by the way [laughter], So [laughter] I hope that answers.
A question and I also want to just say, who we hope to Keith.
Which in Hawaii, we say two good France.
Because we know we will see them soon.
The next question is from Ryan moments Chow from Barclays.
Hey, Keith all the best for me as well.
I wanted to double click on the vertical and progress you've made this year velocities, obviously, helping and maybe you can double click on that.
On a little bit as well, but like can you speak to what you saw into verticals. This quarter. Thank you.
Well I think you know, it's always been a passion of mining and certainly of marks that we had a huge focus on speaking language the customer and the importance of industries approximately three years ago.
We launched a some incredible innovation with financial services cloud.
As well as our health cloud and we had some amazing wins in the quarter.
Associated with both of those now when you think about the capability of velocity and would velocity brings to the table I mean this is.
An organization of people who have been in the industry for long time, Mark mentioned, David Meyer, they have deep deep deep industry and domain expertise.
So this this will really strengthen and accelerates and broaden.
The the capabilities that Salesforce has in the verticals and when you really think about speaking the language the customers and the importance of these verticals. This is where you start getting into running the mission critical processes of accompany.
In in as great as our strategic relationships have been this will further deepen them. So I think it's an incredible acquisition I think it's going to be a huge add to the company.
There's no question that our joint customers pre acquisition.
View. This is very very close partner, so I'm very very optimistic about the impact that velocity will have on the company.
Yeah, Let me I'll, just double down on that by I don't double click because they use a phone. So I don't know what to say exactly or how tell what I'm supposed to touch or double Patrick but.
I think Keith is really inspired us to.
Be much more committed to verticals.
And the vertical solutions than ever before it's going to be a huge part of the legacy.
Here and of course, you know about our.
Financial services cloud and our health care cloud are focused on the government.
Our vertical solutions team, which has also based in Seattle near our Tablo headquarters.
Uh huh.
And now with velocity well many of these executives we have worked with and work together with.
For maybe 30 years or more we know them extremely well we were done.
With us to create this company.
I am, especially excited that David Smyre is a coming into Salesforce is one of the finest executives who I've worked with.
And.
I.
Couldn't be more excited about.
Amplifying the.
Vertical strategy with them and I'm sure. We'll have many more things that will be ready to announce that honestly been inspired by keys tremendous vision and passion towards taking.
Our incredible platform, but delivering it by industry and also as Keith said, so well in the language of our customers, which is something he has just done a beautiful job executing in the company.
The next question is from tax credits from Bank of America.
Hi, Thank you very much congratulations on a tremendous chapter in your journey at Salesforce.
A couple of question for you.
This is obviously get really.
Next step and given that keeps been running some critical functions with the company go to market and I'm sure keeps working on some 10, plus main daughter, 100, plus medidata deals and I'm curious to get your thoughts Mark on how you're going to be managing the transition risk with the quarterly execution going forward at the next a couple of quarters granted the keep staying on enterprise.
The capacity, but oney lattus changed the last four years since he took over that that critical function and I would assume that you would be bringing on board somebody.
And doing that part of that job yourself into interrupt, but please help me out with those assumptions.
Much appreciate your response, thank you so much.
Well I think that.
Keith would be the first to say that he has built a world class distribution team.
That goes across the world.
When we promoted Keith.
Two cosio one of the things that.
He said to me as he wanted to get out of the business of running the Salesforce.
That's been something that we work to do.
Through that we have felt an incredible distribution management team.
With some of the best executives.
In the World who are go to market.
And I don't think you're going to find a better team.
Who can execute on that the same way that we have a great.
Technology team the other half of any software company as the distribution team I would give both of US both teams a plus.
And I couldn't be more excited about their capability.
Two.
Go forward and execute our.
Business plan.
Yeah, Mark I would just add cash the.
You know, we all work hard here, but we all work hard is an executive team and a management team in sitting around this table in order to things that.
I think everybody would say is that we all care about our customers and everybody sells its not just one person.
And I've been around a lot of go to market teams as you know and there's no question. This is the finest one of the industry. It's certainly the finest when I've ever seen so.
I think what would I believe is that we've got a team that is.
Clearly executing in in Q4 and ready to execute in Q1 and beyond.
And it's enormously talented and motivated so.
This is not about one person. This is about a machine in a culture that was launched by Mark and Parker nearly 21 years ago.
And I'm very confident in their ability to continue this going well.
The next question is from Brad Zelnick from Credit Suisse.
Great. Thank you so much and Keith Congrats on another phenomenal Ron I truly wish you the best in the next chapter and we look forward to learning more when you're ready to share that with us.
But but my question is for Marc Benioff, It's a bigger picture question.
Mark I believe Salesforce is 21 years old this month, if I've got my math right and to the notion that people overestimate what can be accomplished in the near term and underestimate. The long term what are your greatest surprises relative to what you set out to do 21 years ago and as you look forward. What do you think salesforce can accomplish in the next 20 years.
Yes.
Form for change or near.
Yeah.
I, just gonna say as a platform for change what's the greatest impact you can hope to achieve in the next couple of decades.
Well I'm going to turn that over to Parker Harris My co founder because he's been a huge influence on our leadership and I don't think he's been on earnings call before and it's excited that he's in the room and I feel like I need to.
Asking Parker what does the future hold.
Well I think one other questions was let the biggest surprise I think one of the biggest surprises when mark and I started sales force. There was one definition of CRM 21 years ago.
And that definition has evolved over the past two plus decades.
And it's been driven by the fourth industrial Revolution in terms of all these new technologies and we continue to strive to stay ahead of that trend both with our organic innovation as well as with incredible acquisitions that we've done to create the cuts were 360 in a single source of true.
Our mission our entire career, so far and we will continue on going forward.
I'll pass it back to Mark in terms of impacted sales force is a comedy can have on change in the world I'm. So proud of Mark personally you know that dream for at Davos, This year and watching.
The story of the Trillium tree is.
Project and the impact that we can have on the globe and what a huge vision that isn't it.
A lot of that is banks to my co founder Mark.
Well Parker I couldn't be more grateful to you.
You've been a great co founder and have been there every step of the way.
I think that probably for both of US we had three visions when we started the company one was a new.
Technology model, which.
[noise] cloud that has become mainstream.
One was new business model, which was selling software as a subscription.
And the third was a new philanthropic model, which was our 111 model, which has evolved into our deep believes in stakeholder capitalism.
Our core values of trust and.
Customer success in innovation in the quality.
Our.
Dream that the work that we do at Salesforce is repeated.
In values and ethics and other companies that we buy or other companies also to improve the state of the world.
Those are all very important parts of Salesforce, you mentioned visions like a trillion trees, where we hope to sequester 208 gig tons of carbon over the next decade, where we've partnered with several governments, including the European governments the U.S. government.
Chinese government.
In government and others. These things are extremely important to us we are.
Interplanetary emergency.
We need to be taking care of our environment, we all need to be focused on.
Becoming net zero as companies and organizations, which Salesforce is we all need to focus on.
Sequestering, the 280 gig tons of carbon that have been emitted.
End of the atmosphere. Some 17 50, we need to.
Get all the plastic out of the ocean between.
Before 2050, where it'll be more plastic than fish. These are important visions for the environment, we need to show El companies can.
Unleash there good.
Like we talked about in the script.
Whether its volunteerism more grants or working with schools.
Or whether its gender equality, where we're deeply acquitted deeply committed to pain men and women equally for equal work.
That we believe in.
The quality of every human bean and that we can be an example of a company at scale on how to bring our values to the world.
And we can work with governments of all types, we can work with companies and that's the mission that we have as as a management team as an executive team that we want to build to be a company that builds great products would Parker has done.
But also.
The ethical and our behavior.
And realize the power that has given us as a company is great.
We need to do that.
I think that we have the opportunity to work with now so many chief executives all over the world.
Keith mentioned.
Deal that we did this quarter Volkswagen.
And Brad and I met with Dr. do uses the CEO of Volkswagen as we're getting ready to close the deal at the World Economic Forum in Davos.
These are important.
Partnerships that we have to influence other companies not just.
Volkswagen, but the one hundreds of other companies that we met for example in Davos sort of that will.
Meet this quarter.
All over the world, we hope to inspire them and influence them.
In these areas. This is an important part of Salesforce and what we're doing.
So.
I would say that if I was has the greatest surprise it was that those revisions all came true.
That we're at 21 billion in revenue.
This year, but for sure we have a dream that is much greater than that we've given guidance of 35 billion.
The company can be bigger, but just building a comforted company to do more revenue is not what we are about more isn't what we've ever been about in this company.
The deals are important the revenues very important and proving the mark operating margin is very important the cash flow is extremely important the business metrics are important because it shows that you can do good AMD do well at the same time that this is an important part of who we are as a company.
That said our at our very core that's what stakeholder capitalism is that we can serve our shareholders.
And our stakeholders.
I think that that will become amplified in a world where.
Where things seems increasingly crazy.
We all see what's going on in the World There's no mystery.
Add salesforce is an incredible company to take that forward. So we want to deliver outstanding business performance and shareholder return and the same time.
We want to deliver world class stakeholder return to inspire companies to do all of those things.
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Your last question is from though from you'd be S.
Great. Thank you and I'll add to the course of best wishes for keeping your next endeavors.
I had two questions that they're related one just a quick one for Mark Hawkins you gave us the revenue impact for velocity, but I'd be curious what the margin impact from that transaction was and then more broadly. The second part is at analyst day three months ago. There was discussion around taking time to did you digest between deals.
Tableau officially officially close or three months ago. We got to go ahead to integrate now we're seeing another acquisition, it's not as big as tableau, but it's certainly not a small and either I just curious to get an update on on where the mindset is on M&A going forward from here. Thanks.
Well I think I really like to address that.
Because I think we so strongly believe that we actually do need an acquisition pause after debt below.
It was by far the biggest deal we've ever done significant.
And far more exciting than we could have ever imagined.
The partnership has been incredible.
And I don't think we anticipated.
Doing even a small deal like because velocity is relatively small transaction, but in our relationship with velocity and the way that we originally invested in the company it created a situation for acquisition.
We needed to take advantage of.
And which is why we have acquired it had a very attractive.
Rise because we have been partners with them from the very beginning.
And this was a moment in time.
I think that we don't.
See some huge opportunity to do a lot more acquisitions right now it's not something that we're working on we're very much working right now and the execution of our business and.
The execution of our fiscal year 21 business plan, we have written what we call or between mom, which is our business plan for the year.
We have two weeks ago broader executive management team together or top 600 officers.
We have presented to them and they we have instructed them to execute it.
And.
We feel very good about that plan.
And we feel very good about where we are we don't anticipate any major acquisitions in the short term and maybe mark you'd like to fill in some details sure. Yeah I think until degree with those comments I think also Jennifer in terms of the margin impact on velocity without getting specific.
It's obviously dilutive or when you do purchase accounting in the write downs in such a you should think about it.
And that way for sure, but we haven't elected to go specific on that one.
Great. Thank you for joining us on the call today, you have any follow up questions. Please email us at investor at Salesforce Dot Com look forward to speaking with you on our Q1 results call in May.
[laughter].
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation and have a wonderful day.
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