Q2 2021 Salesforce.Com Inc Earnings Call
[music] history.
Welcome to Salesforce fiscal 2021 second quarter results conference call.
My name is Josh and I will be your operator today.
At this time, all participants are in listen only mode.
After the speaker's remarks, there will be a question answer session if you'd like to ask a question. During the session. Please press star one on your telephone keypad.
Acquire any further assistance please press star zero I.
I would now like to hand, the conference over to your Speaker Mr., Evan Goldstein Senior Vice President of Investor Relations, Sir you may begin.
Thanks, Josh Hello, everyone and thanks for joining us for fiscal 21 second quarter results Conference call All live in Golsen Senior Vice President of Investor Relations.
Our results press release.
A replay of todays call can be found on our IR website at www Dot Salesforce dot com plus investor.
And on the call today, it's Marc Benioff, Chairman and CEO, Mark Hawkins, President and CFO, Bret Taylor, President and COO, Gavin Patterson, President and Chief revenue Officer, and any Weaver, President and Chief legal officer.
As a reminder.
Commentary today will primarily be a non-GAAP terms reconciliations between 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 that are subject to risks uncertainties assumptions.
Circular our expectations around to get picked up the coordination pandemic on our business results of operations and financial condition and all of our customers and partners are uncertain subject to change.
And then maybe as much relaunch or should our assumptions prove to be incorrect.
Actual company results could differ materially from these forward looking statements.
A description of these risks uncertainties assumptions and other factors that could affect our financial results is included <unk> SEC filings.
Including our most recent report on form 10-K, without let me hand, the call over to Mark.
Okay. Thanks, so much Evan and are.
We're thrilled to be on the call with you today and.
You know this has been such a challenging time, you know our hearts of breast had broken will encourage somebody stories of Ah.
Staying in distress across the world and.
You know Oh.
For us this really this moment is actually quite humbly quite quite bitter sweet.
You know it reminds us that.
I tell sports businesses the grade the platform for Kane.
Yeah, we're really here.
To be a great example of stakeholder capitalism, it's a really show how.
We're able to deliver a phenomenal return for our shareholders as well as for our stakeholders.
And in many ways. This quarter really is a victory for stakeholder got was it it's been not only about our core values, but also about our core products.
It's about showing our customer threesixty, that's been a platform for chain for so many of our customers and I'm a talk about that briefly before I turn it over to Mark.
But also our company has been a platform for change to the communities of needed as most.
And I'm thrilled to deliver such a great return to our shareholders and also to our stakeholders.
Certainly when we look at this quarter with more than 5.15 billion revenue in our highest operating margin Albert over 20%.
Or when we look at you know.
Simple.
Specs of our operational excellence like the 63% increase in seven figure deal for a year ago.
Well really indicates to us one thing, which is that values really bring value.
Yeah, Mike.
Right through the story that we really started last quarter was 18 tea.
No you can't use an amazing company leader in the communications industry.
And they have a tremendous visionary with Jeff Mechel shoe as the CEO of agency wireless.
And I'll tell you the thing that's interesting about 80 and see.
As we have a huge vision and that vision is that every single customer touch point, whether it's going to store.
Whether it's their E commerce their apps.
Whether its.
Getting a message from them well need to single customer touch point, they want to know you with the customers one of the single source a true.
Yeah, that's a deal that we signed obviously in February.
And I was thrilled that this quarter we've deployed now.
Hundreds of stores in the first 35000 users.
I'll tell you at this moment in time Theres never been.
There's never been a time when we've had to go faster.
How did deliberate customer success faster and we've had to be there for our customers.
And I'm absolutely thrilled.
Deliver that success rate TNT.
I also look at.
Another incredible when in the quarter with pay Pal.
This is a tremendous organization that's really.
If the right time at the right place because we really need contact with payments, we all know that.
So to see them have such great success, with our sales cloud and our third cloud see their CEO, Dan Schulman embrace that so deeply in our vision, we're happy to one on one relationship journey.
So powerful.
You know another incredible victory in the quarter, it's really been.
Work Dot com, there's a product that.
I don't think there is a product that we've ever built faster, but never been more successful more rapidly.
And you look at so many success stories.
Public sector organizations and enterprises today.
The middle of this pandemic, everyone needs contact tracing that you shift scheduling.
Everybody needs.
Oh workforce Command center.
To bring everyone back safely.
Well.
Dot com is delivering that just look at the results at the University of Kentucky. For example, it's a difficult situation for University. The bring all these students back and we're thrilled to partner with them with work Dot com.
I look at so many other customers in so many other success stories during the quarter weather was pwc or VF Corporation.
<unk> public sector.
Like the Veterans' administration or the state of Rhode Island.
We look internationally a tremendous victories like Banco Bradesco, just had a great conversation with her CLL, maybe able to lose already.
Tremendous vision for the future financial services and how.
Customers.
Are the most important thing today to go faster.
Further back.
And ultimately I guess, the most proud I was during the entire corridor.
Was when we delivered an additional $20 million through our San Francisco and open public schools.
Bringing our total contributions to $118 million to our local public school, but one thing that's so important right now is.
There need to be able to enter into distance learning so.
It's that idea that we've been able to two well empty. Good at the same time, but this has really been a victory for stakeholder capitalism.
Show that.
We can build the great company, but we not only have great core values, we upgrade core product.
So I just want to give my sincere. Thanks.
Attitude, everyone, who had such a great success during the quarter.
Our customers.
Our employees our partners.
All of our key stakeholders.
And without I'd like to turn it over to Mark.
Well, great. Thanks, Mark and I hope, everyone continues to be safe and well during this historic in challenging times.
It's Mark described this was an exceptional quarter for Salesforce, both the company and our customers navigated the crisis better than our guidance assumed.
Our performance in Q2 leaves us optimistic about the future. It's important to note that we remain mindful of other pandemic may continue to impact our customers at our community.
Let me take you through some of the results for Q2 and I'll begin with the topline commentary.
Revenue was 5.15 billion, representing 29% year over year growth.
Richard was the first time, which the company surpassed $5 billion in a single quarter.
Our revenue performance by <unk> continued to demonstrate strength across the portfolio.
Sales progress 13%.
Service cloud grew 20% platform and other grew 66% with tableau contributed 41 point of that growth and marketing a commerce grew 21%.
Additionally, we had a strong year over year performance by region in constant currency Amerigroup, 28% with tableau contributing 10 points of that growth.
EMEA grew 38% with tableau contributing 13 points of that growth in Asia Pac or 23%.
Before I detailed the quarter's performance. Please note that the forward should be compared against the guidance assumptions. We provided on the Q1 earnings call specifically the outperformance on the quarter was driven by five factors, one better new business generation, notably we saw future business consistent with historical.
Right.
To higher license revenue driven by new business performance, three modestly better revenue attrition than expected and for achieved certain performance obligations with him last quarter's large telecom transaction and five favorable foreign exchange our remaining performance obligation representing all.
Future revenue under contract ended Q2 at approximately $30.6 billion up 21% year over year. As a reminder, this metric includes both new business and renewal contracts.
Current remaining performance obligation or CRP, though which is all the future revenues under contract, but is expected to be recognized as revenue in the next 12 months.
With approximately 15.2 billion.
Up 26%.
Year over year, So Europe, you benefited from new business, our performance favorable foreign exchange strong renewal performance and the inclusion of last quarter's large telecom transaction.
Q2, GAAP, yes was $2, an 85 cents and non-GAAP adjustments of dollar 40 for the outperformance in the quarter was driven by higher revenue.
As well as realized and unrealized gains on our strategic investment portfolio, notably due to the Encino IPO.
These mark to market adjustments benefited GAAP EPS by approximately 55 cents and non-GAAP EPS by approximately 58 cents.
Property. POS was also benefited by $2 in 17 cents as the company changed its international corporate structure, which included the consolidation of certain intangible properties, resulting in a $2 billion net tax benefit related to foreign deferred taxes.
Please note that this has no impact on non-GAAP, yes, as a company utilizes a fixed long term projected non-GAAP tax rate, which generally excludes the effects of discrete events.
Turning to cash flow, our operating cash flow was 429 million in Q2 down 2% year over year.
Capex for the quarter was 114 million, leading to a free cash flow defined as operating cash flow less capex, a 315 million up 22% year over year now turning to guidance for Q3 fiscal 21 coming off of a strong future results. We're pleased to be raising our full year fiscal 21.
Revenue guidance to 20.7 billion to 20.8 billion, representing approximately 21% to 22% growth.
This guidance includes approximately 100 million of revenue from our acquisition of velocity.
For Q3, we expect revenue to be 5.24 billion to 5.25 billion, representing approximately 16% growth.
As a reminder, Q3 represents capital's first quarter at the company and therefore, the year on your growth rate will be normalized.
Well the demand trends were strong in Q2, we remain mindful and how the pandemic may continue to impact our customers and community. Therefore, our guidance assumes that the revenue attrition remains consistent with Q twos actual performance and assumes that we deliver modest new business growth during the second half of fiscal 21 Nortech.
During this quarter by quarter as a pandemic is not over and we are only halfway through the fiscal year.
And that mine.
From my perspective, we will continue to evolve and Reimagine, our business to enhance our relevance and deliver the highest level of customer success in innovation as we look out over the next 12 to 24 months, we realize it's important for us to make a strategic shift and investments today to better position our company for continued.
Growth and customer success, and that's all digital work from anywhere environment.
As part of this will be allocating resources to prepare the company for growth and strategic areas. This means we'll be redirecting some of our resources to fuel growth in areas that are no longer is aligned with the business priority will be out de emphasized. Furthermore, we intend to accelerate spend and go to market and product originally planned for now.
Next year and pulled out into the second half of this year. These investments in growth our planned and they will increase our expenses in the second half without being said after incorporating these and updating our revenue guidance. We're pleased to be able to raise our fiscal 2001, non-GAAP operating margin guidance to a year over year improvement of 75 basis points.
As a result, we're updating our fiscal 2001 GAAP diluted EPS to be $3.12 to $3 in 14 cents, while non-GAAP diluted EPS will be $3.72 to $3.74 fourth Q3, GAAP diluted EPS is expected to be three to four cents, while non-GAAP diluted.
EPS will be 73 to 74 cents as a reminder, our EPS guidance assumes no future contribution for Mark to market accounting as required by ask you twice 16 or one.
For operating cash flow, we're raising the fiscal 2001 guidance to 12% to 13% year over year growth. We continue to expect capex to be approximately 3% of revenue in fiscal 2001, resulting in a free cash flow growth rate of approximately 15% to 16% for the fiscal year.
Operating cash flow is expected to be impacted by these incremental growth investments.
We expect CRP out to grow approximately 19% year over year in the third quarter and as a reminder, Q3 represents capital's first quarter at the company and therefore the year on year growth rate is now normalized to close we delivered a landmark Q2 in the face of adversity, and if set ourselves up for a strong second half.
Our fiscal 21 and beyond we're proud of our ability to successfully lead through change and above all to continue to serve our stakeholders around the world.
I'd like to thank our employees our customers our partners our community and our shareholders for their continued support I, which you should view your families in your from safety and wellness and with Apple open up the call for questions.
At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press the punky.
And your first question comes from Heather Bellini with Goldman Sachs. Please go ahead.
Great. Thank you so much gentlemen for taking my question I appreciate it.
I was just wondering Monaco remark.
You can share with us a little bit called the progression of the quarter unfolded and just kind of what you're hearing from customers. Now obviously, you did much better than what your guidance expected but.
If you would have put all those from the Einstein what it probably that shape up versus what you were versus what you've thought again, just thinking about how the slope for the quarter might have progressed. Thank you.
Well thanks, Heather for that question you know we started this quarter.
54000 remote employees working at home.
We knew that we.
Had to make a number of changes we knew that it was going to be critical for us.
To reshape our company.
That this was a moment in time that you basically had to make a decision are you going to keep things. The way. They were are you going to change are you going to shift.
And we made a decision that we were going to change and we're going to shift we shifted our operational values very aggressively.
And as Weve changed those operational values, we started to see momentum built.
We called that out.
The beginning of the.
Call.
After Q1, we saw pipeline starting increase for the second quarter and the third quarter.
And it really was that as we.
Hi, all did and doubled down.
On these core operational values, we got much closer to our customers. We understood that if we were going to succeed at the moment like that.
We're going to have to be closer to our customer than ever before.
That we're going to have to change a lot of aspects of the fund the company and as we made those.
As it made those adjustments.
We saw the speed increase.
Right up to the ended the quarter.
And now it's just really powerful I mean, as I said this moment as both humbling and bitter sweet.
This has been such a challenging time for us for our families.
And then to see these amazing results. It's just you know incredible I mean honestly I just can't believe.
Everything from.
The delivery of all of our teams the technology teams just did a fantastic job.
Engineering team.
Looking what happened with work Dotcom I mean, that's incredible and it's been so.
Certain.
So many businesses to get back to work safely, but now that we brought it to schools to help schools get back to work safely as well we're doing that.
You know in a paid paid fashion, we're doing that and then nonprofit fashion.
So this is this is really a moment, where I think values bring value.
This is about us really paying attention as I said to our core products and our core values.
And those that's really the accelerator and when I looked at some of the success stories that I went through.
And then there's so many but one that did very powerful for our whole company is watching what general Mando Hes done at the state of Rhode Island cheese, even address the entire company.
No it's amazing Governor of this incredible state.
She came to US said, we're going to make our state safe.
There's things that we're gonna have to do course, everybody's going to ask the where math.
What we're gonna have to increase our testing, we're going to happen to be doing tracing we're going after removing the shift scheduling I need a command center I need to do all these things and that our teams are able to deliver.
And helper at 35 other states.
So many others that very very powerful for us because.
We we all want to get back to how things work, but the reality is that's never going to happen. We're in the new world weren't all digital world.
With the work.
Digitally living digitally were educated digitally.
And.
That means we're gonna have to make these adjustments and the Brett do you want to just talk about that and how the engineering organization has kind of responded.
Yeah, Mark them and attention you talked a lot about transformation restricted our company, we're just seeing that across our entire customer base and you're seeing it and how our technologies are being acquired gives me an incredible numbers make one that's very illustrative.
Last six months the use of messaging channel, what tax and Whatsapp and Apple chat has gone up 600%.
We saw an 89% in Europe your growth in our commerce cloud.
Hi, Great example of Great customer story I think that's really illustrates this is sonus. This is like a customer. So no. So you get to play music at my house like so many developers of product. They had to go direct to consumer they deployed our marketing cloud and our commerce cloud and they saw an almost 300% nerve or your increase in direct to consumer Robin.
As a consequence.
I think that.
Spend an incredible trying time for all of our employees all of our communities and all of our customers, but as you implied there is also just incredible sustainable enduring shifts in consumer behavior like you.
Digital Commerce and this move to go direct to consumer and so it's a great privileged to go to help our customers navigate this crisis.
You said one of the key values were trying to represent as a company has got agility took listen deeply to our customers like governor Mondo like Sun. It. So I noticed in making sure that were in power and all of them with a customer through 60 survey themselves can navigate this crisis successfully.
Gavin we just had a tremendous meeting.
Banco Bradesco with Octavia, though is already we've also met with so many other customers I met with one of your customers late last night and.
And and France It was.
It was money for them.
CPG company I mean, we're seeing so much transformation look the customers and.
No desire for seed and also.
There are all paid attention to that Jesus well and aligning.
From a position lets stakeholder capitalism Gavin can you give us some illumination about what you're seeing from a customer base.
Well I'd call out a couple of things mall.
One is.
And we did touch on this in the last in the last call. We saw confidence sales week after week as we went through the quarter.
And the shock.
Yeah, and closing down to moving business said that it would be managed remotely one the first couple of weeks.
Had been passed we still companies begin to realize that.
Digital transformation.
With an imperative.
I just couldn't afford to put off any longer so I think what we saw a sales leader is.
And the products to threaten the team put together floors was we were relevant.
That was the key word I would say we were able to pivot very quickly.
Very agile.
It's fun to the company and we would that help our customers through these difficult periods, where they have to.
Decisions that typically.
Take weeks and months sometimes in days.
I think it demonstrates what a powerful that proposition we have to customers.
That we can spin things up quickly like they'll call.
We can deploy.
The cool clouds, very quickly and they deliver quickly for customers.
That means to actually a relevant now is publicly.
Hi, hi than its as a feat and.
I.
We had a great courses no question about that's I think tinge with the aside sensitive.
The context in which has been achieved in.
But.
Hi, this real I'd say real confidence in the business, we're not getting carried away.
No question about that is still a lot of consistency as we look into the second half the year, but undoubtedly what we all saw.
Something that.
Increasingly customers really one.
Well, thank you gathering and welcomed by the way to the team officially I know you've been with us for about a year, but now you're officially in the road running and as our Chief revenue officer, we couldn't be more thrilled and.
Were to absolutely delighted to have you as part of the team Amy.
Also saw a lot of action in public sector I mentioned, a few of them.
But there are so many more stories could you highlight a little bit about what we saw in public sector during the quarter.
You are on mute Amy.
Would that be a call if I do not forget myself off.
Yeah, I think public sector has been a great success, and Doug first quarter, and the second quarter and if that type of trust and collaboration but just keep building as you get a real that you Dave.
And that's a tough after his entire team and I think that could ask me when that you spread island that releasing the team otherwise.
Statements, we would have a reach out.
When you do what they were struggling and within our as Dave When you talk together a team of professionals from across the Oxley sad. Despite the situation yeah. They said that.
We know how to do this we know how to deploy team quickly and we can get in there and partner with annually.
And I thought it really.
Just the values of Salesforce.
Okay.
Operating and partnering with governments around the block.
Very good alright. Thank you so much of.
Your next question comes from Alex Zukin RBC. Please go ahead.
Hey, guys. Thank you for taking my questions.
Safe and well and congratulations on an absolute spending quarter.
Mark I guess when a lot of questions. We get these days around the improvements in kind of week by week that Kevin just referenced around the confidence and the relevance is what what can you tell us about your pipeline.
And your confidence in converting that pipeline, particularly in selling in this new digital world.
Where with maybe a virtual dreamforce or were some yeah. How do you think about that and then how does that sets. The stage. If you think about the 2008 recession, you guys accelerated pretty meaningfully coming out of it.
Based on that pipeline question, it's their scenario in 2021, given that increased relevance.
I want to see a meaningfully year of acceleration or we just still too far from the end of this crisis.
Well this is such a great question My I really appreciate it I guess, just the third major crisis or may be for that I've been through as the CEO salesforce.
And.
Crisis things are different.
But one thing that isn't different is that each one has been an accelerator in the future that each crisis tends to bring us to the future faster.
And that appears to be what's happening here look I'm speaking to you from my home you took my executives are in their home I'm looking at a screen that looks like the Brady bunch with.
Little video images of all of them you know Galveston in London, and Amy you know.
San Francisco and so forth and.
It's quite complicated a note that.
Where we see these continual advancements and accelerations, but you have to.
Joe take a moment and ask yourself.
How are you going to change I kind of alluded to that and I think that your question about dreamforce is so important because.
I can't tell you how many people I got on the phone with well was Dreamforce, where we're ready for Dreamforce, but there is no Dreamworks and 2020, we know that were not all heading to San Francisco next month.
Sure Metallica is not plane you know are not all going to be go in the keynote room.
Yeah, we're creating that.
Theres agreed.
There's a sadness that were not altogether, we love being together as one I'll Honda our employees our customers are investors with Big Investor Day, you know, we're all in a big room at the same Regis Hotel and Mark Hawkins is holding court with everyone. There is no such thing. This year you know so it's itself.
And at what we all get back together again, I hope so am I right here.
Really no I mean this is my first kept them I mean, we're in a global pandemic, where we're dealing with day a virus that is has a lot of unusual characteristics. So we've made changes of the salesforce that we now are advising our clients to make how to get there are poised to participate we.
54000 employees for us to achieve these resulting everybody has to be on the field and playing the game.
We have to also give them the incentive to play to train them to keep the motivated.
I think I've mentioned this to you before but every week since the pandemic has started we've had an all hands call where we have.
All 54000 people lot of telephone call our assume.
And we're talking them around the world and giving them like a play by play for the week.
That hasn't happened since we were like a 10 person company 100 brick and company, that's what little startups do but that's not what companies who are entering the tower do that this is like.
Well this is like a moment. So we're re imagining our business also we've had to reimagine are relevant.
That's why we build works dot com.
First we realize that our customers.
So up to be relevant to them. That's why we built salesforce anywhere because we realize our customers have to sell in service.
And market anywhere that's why we built the lead to Chase program. You may have noticed we've put over 200 million people, leading to James far bigger than anything we've ever done with reports I just watched the one that just happened it was amazing.
And many other things that you know it's another level of enablement. For example, like do you know that third of our employees are reporting mental health challenges I'm sure a number of people on this call our heavy mental health issues or no people, who are out in the mental health issues in the fed them.
That's why every day, we've been doing a b well together call. If you go to you to you'll find mental health resources.
We had to publish mental health resources before at this velocity and this scale it's amazing.
Ill or I think I mentioned, you like we bought 60 million pieces, a personal protective equipment. We didn't know what personal protective equipment was amazing. We also have retrained everyone with trail that did become a ranger and we're doubling down on that making sure that every employee.
Train.
That tablet, which by the way we mentioned that.
I mean, such a genius CEO, Adam Solecki runs that and Oh.
I think it's going to be the best acquisition ever dynamism. This through the software most successful certainly.
And you know they built this incredible data hub. If you haven't seen that you should go to Tablo data hub, which you can find on public got Tablo Dot com, which has amazing visualizations of everything that.
And I just mentioned the into that eyes.
You know just did a major.
Management team presentation.
Digitally.
In Europe by I mean, we're constantly talking to our customers in new ways at builds we could never have imagined.
So it's also gives us the ability of accountability with our distribution organization, which is.
Gail we're not a sub scale organization, we are a scaled enterprise software company, we're able to compete effectively as evidenced by these numbers with any enterprise software company that's on the field today.
And we're able to manage our distribution organization to go to market in ways that have a level of acuity that we would not have before I mean, it's powerful.
When you add it all up participation in the naval minted relevance in the tactical plays.
And then the values that we apply our core values well were different company. This has changed.
The pandemic has changed us we're not the same that we were these aren't even the same players on the Paul that we're talking deal at the beginning of all this.
So that's really amazing and I think that these results are evidence that where we'll be a quarter from now two quarters from now a year from our two years now we don't know, but our intention is.
Same which is we're helping our customers to connect with their customers new ways. We wanted to the number one CRM. We're the number one and analytics, where tightly focused we're not all over the feels like a lot of our competitors by the way part of our competitors are everywhere you know there in every market.
Some of that weren't enterprise and.
They're not just the CRM learn CRM, there and ERP their public cloud I mean, we're not we're singularly focus so that would pick up a call. For example, like we mentioned like from a damn sure Paypal and he says.
Sales cloud I need service cloud I need to integrate everything together, we're going to do that for him or if we look at our success with CBS. This quarter, we looked at that tremendous their leadership team has incredible you know just amazing executives and there.
How they've come together.
So powerful but the return ready product and then the integration of work Dot Com, that's an imagination I've never had and the vision of John Roberts and now he's been able to show how this pharmacy can actually be a key player the pandemic, they're doing a 100000 tests a day.
This is awesome, but they have to have each one of those tests isn't onramp.
For customer success.
So we have to be there with the vision.
How to help that happen.
And.
I guess another one that really is on my mind to be up Corp, I mean, I love bands.
They are the north face almost everyday those jackets leases cold, where I am and I I'll tell you.
I think it's our largest harbors cloud deal ever maybe not customer because we tend to talk about deals and then we forget about how big these other customers are getting but it's a great company and they're doing amazing Biggs I also was especially impressed with how you know under armour, what's on our commerce cloud and left off the old technology.
This quarter that was really powerful I mean.
We have to act with a level of speed capability with our customers. We've never been called on before so look it's continuing to unfold. We all know that we're doing the best that we can.
Our hearts are with those who are going to serious challenges the very but this is a moment that is very much humbly them bitter sweet.
And we just continue to focus on businesses the greatest platform for change our products have to be that platform change our values need to do the platform for change we know what role we play in our industry.
We know that we are.
Hey.
A light and that we have to continue to be that light, especially during these difficult times.
Your next question comes from Kayla Mckinnis with Deutsche Bank. Please go ahead.
Hi, Thanks for taking my question and congrats on the awesome quarter.
The reason the full year operating margin improvement got at 75 basis points I thought was really solid considering one that you guys are pulling forward some expenses to fuel growth and I need to revenue growth in the mid teens in the back half. So curious if you're able to break down the components driving that guide like how much is coming from key anything perhaps you saw on.
Q or expect to see further down the line and wondering if you're able to quantify the pull forward of expenses.
Yes. Thank you tailored for the question I appreciate that we were very pleased to be making the raised with 75 basis points in the midst of everything, especially in the fact that were further investing to really for perpetuate this long term success for a customer.
And serving all our stakeholders so I think.
We're not prepared in or quantify the specifics or that but I think you've got it right. We're investing in growth areas pick up our product pick of our go to market in particular in terms of the a further acceleration in the investment I think as a good way to frame that of course, we're getting some teeny benefit as well, but again our profit level is a choice.
And that's an amazing thing about our business model, we're making a choice in terms of where we want to strategically invest we've shown in Q2 or we can deliver what we deliver which was a record operating margin, but we're also trying to balance growth and profit over the long for a long place. So that's our that's our approach I think you nailed it in terms of some of the things and we're.
Really pleased to be able to raise and make investments.
Absolutely.
Your next question comes from Phil Winslow with Wells Fargo. Please go ahead.
Hey, Thanks, that's very micro water and getting congrats on a real on really strong results I really want to drill drill down into some of the specific Lazio specifically.
Service cloud that continues to deliver just really robust growth.
Your last quarter became the biggest individual cloud and that continues to stretch that gap can you talk about some of it a dynamics that you're seeing there and service cloud and how do you think about the sustainability of this on a go forward basis.
Well sure let me just touch on some of that very high level and then let me ask right to come as well, but you're right service cloud had a record Q2.
It continues to grow at a.
20% I don't know the numbers are huge revenues are you to the growth rate as you.
Now larger than sales cloud continues to grow on all fronts, including.
Year over year revenue growth you saw that new innovations.
The engineering team has done a fantastic job the products.
Amazing velocity has added a lot to service cloud they have built a lot of service cloud is another layer of value on on service cloud add in the last six months the use of messaging channels on the platform grew more than 600% I think that Brett really illuminated that and the powerful way you know this idea of box grow.
And at a 176% cases log per day, 33% quarter over quarter conversations hit nearly 19 million per day during the quarter.
You know, it's a key part of every deal we do because when you're building customer 360.
And you're building a single source of true for your customer.
Service cloud has to be part of that Theres plenty of companies that have customer service or help desk or service desk or whatever.
Misspoke isolated solution.
But that's not our vision our vision is to be able to bring together a customer three six because look like rate.
The sales person on the store needs to be able to work with the field service professional at home passed the work with the service professional in the call Center, It's all interrelated and that's why pay Pal for example is able to get done because its sales and service together by the way combined with marketing Biden with all their others.
System through mill, South combined with the analytics with tableau.
So anyway right would you like engineering like ILLUMENATE your vision around that.
Yeah, Mark I think you characterize it well I mean fundamentally our customers are coming to us to build the customer grew six that single source of truth for their customers. So that in the face of unprecedented change for their customers. They can transform their business that can go digital Vic and integrate sales and service, it's really about single source of true.
It's the anchor tenant of the customer through 60, and I think that's where the momentum is coming from.
When you looked at some of the deals Mark talked about like Paypal you know it is really the anchor tenant of the value proposition of that customer grew six to.
Another good example that Gavin mentioned in her last earnings call Standard Bank.
It's again, a complete solution for the largest bank in Africa, and one other things that I think there's really powerful about that store is probably the most impactful calls I've done with job ended this past quarter was we were talking to their executive team.
And the executive team all the way are down is actually become in Rangers on trailhead, they're using the service cloud and the customer through 60 as an opportunity there not just transform their technology, but transform their culture to become customer centric and really become platform.
The rolling out Trella golf 50000 employees with the goal of achieving 20000 Rangers and.
And I really do you think that this really illustrates the power of these stores are a digital transformation of the power of customer service really being the centerpiece of that customer through 60 transformation.
Your next question comes from Walter Pritchard with Citi. Please go ahead.
Hi, Thanks, I'm wondering to what question in that being on a on commerce cloud I know customers paid to some degree on on Dnbi and they have come back and.
Re up as volumes go up can you help us understand how commerce cloud just the impacts commerce cloud in the quarter and how that's driving.
Sort of a holistic sale across the across the portfolio.
Brett can you can you take that for us.
Yeah, Mirka, we saw over 100%.
Year over year, Jim do you growth this past quarter and I think it really reflects the broad digitization of commerce and I think when I looked at you know our commerce cloud and our differentiated value proposition. That's two things one to redo book B to C corners, and due to be commerce, and I think that when I talk.
Dr customers, it's really about all of their channels, it's a direct to consumer channels that's their.
Warehousing, it's their partnerships and we're really the one platform that can do though the second thing is the integration of our Congress part with the rest of customer through 60, I think everyone on the call have experience.
Bottom line curbside pickup right, we probably all experienced by many of US for the first time when you think about the technology that facilitates that that's the integration of our Congress club or order management solution service cloud and really that end to end customer experience.
So you're right that GMT is a good indicator of growth as the commerce cloud, but I also want to be clear that our Congress spotted really a part of a broad solution that were provided to customers to really digitize their congress experience all the way from making that order through the end of that customer experience, whether you're picking that up on the kerber excluding delivered.
Doorstep and those transformations have never been more important than this all digital work from anywhere world.
Your next question comes from Kash Rangan Bank of America. Please go ahead.
Hi, Thank you very much it's absolutely sell bounding to see binding to see organic growth rate the solid margin expansion et cetera, and the leading indicators rpos. So my question pay Mark you sounded really et cetera, but probably made it very profound statement that it could end up being the most to in fact lack of mission.
Certainly salesforce, maybe in the softer industry as you look at visit approximation customer 360 help us paint the picture of what tableau can do for customer to 60 and digital transformation for the industry looking into 2021 and claims and thank you so much.
Well I really appreciate that question because I'll tell you that so we're so fortunate to be able to acquired cap low last year. It is one of the world's leading enterprise software company is.
Probably one of the most loved brands the ability to see and understand data.
Ability to build these compelling visualizations like you see in the public domain like at public Dot tableau Dot com.
But I think the parts that you don't really know or that when we talk to so many companies.
They've gone wall to wall with.
And doing those types of deals that's very exciting because.
Tableau is analytics for the rest of us.
We were always in the analytics business of course, you either through.
Sales cloud would dashboards and reports, which were great, but very much you know about kind of.
Okay.
Reporting that sales cloud or.
I signed analytics, which is incredible but it's super advance they are highly programmatic it very enterprise class.
This is up.
This is a capability that.
Means that three companies can deploy analytics.
Easily it's a simple easy to use and easy to understand product I'm sure. A lot is you use it plus you can build these amazing visualizations plus it out this incredible culture. This breakdown this community they call themselves the data for them.
It's it's awesome and they are incredible group.
And they also delivered a great quarter, which impacts the market talked about how that impacts us.
But let me tell you how it impacts meat.
When I talk to somebody like Bob Red Seal, Pwc, which was one of our largest deals of the quarter, but it's also would pwc says that's going to be our new.
Analytics platform.
And.
So many conversations with so many companies who have made the decision.
Now that.
Rob Lowe with BARDA Salesforce. They see how this is become part of our customer 30, 60, and there's a lot of new innovation a lot of the exciting stuff coming for Tablo.
And you'll see that you know what their incredible.
Incredible announcements that our company, but mark can you just fill and how does it impact that's on a financial basis.
Mark I'm happy to do so and I also share the excitement about tableau, it's just such a great company to serve our customers one of the things where it was nice this quarter's tableau overperformed.
With there.
With their offering and their particular term license offering they had a number of really nice deals where the various customers who wanted to go even beyond one year.
We call it multiyear and when that happens that.
Further helps us in the sense of.
The revenue recognition.
And but all in all its all driven by people like in the product wanting to invest now and just a year, but in a couple of years in it and the more years out Mark the more we we see that benefit and the topline but.
But what also is exciting for us is how it integrates into the digital transformation. So it's been very positive there was a very nice performance for sure congrats to the tablet tableau team was listening in today.
And I'll also just say well and I think Mark I'll come in here for second me also.
For two years and bill sorry.
Well, here's another and this has been a game changer for us because.
Heart and soul of customer Threesixty.
Ability to say the customers with authenticity, we're going to integrate everything for you and bringing all your legacy system and put the eyes on top of them and give you this tremendous capability.
These two companies together.
This is a huge accelerator on our business that they're both working so well Mark can you do extend that thought.
Yes definitely Mark in fact again Neusoft also was a contributor to our over performance.
Again people love the product Mark I like the dialogue you mentioned with the VF Corporation, where they are buying multiple products, including the LSA too to get that that Threesixty progress. If you will have the customer and for mill soft again, nice overperformance or all of our meals soft team members congrats to you as well.
And your contribution to this resulted in Q2.
And when there again, sorry more term licenses.
Again has a favorable effect on us and ER and most importantly helps us solve problems that customers really need help with and Mark if I'm right decide whether its meal softer tableau or even our core products one of the things that we certainly here more and more is this whole notion I haven't talked about digital.
Impairment imperative. It is very clear that our products are becoming more and more mission critical real soft markets, adding to that Neil Soffe is adding to that 360 solution. We are becoming more mission critical.
And one of the effects marked with that hot in this quarter as our attrition rate was better than we had expected and and that's in part because we are becoming more mission critical with meal saw the integration of these 360 products and just to show over performance and real soft and tableau contributing to our results.
Your next question comes from Raimo Lenschow with Barclays. Please go ahead.
Thanks for squeezing me in congrats from me as well question for Mark and Kevin I'm in this new environment that we're living in can you talk a little bit about what you're seeing in terms of customer engagement in terms of deals science that you kind of kind of maybe talk anything but then also like we talked earlier about dreamforce being kind of.
More online like you know what Dreamforce always was a big event for lead generation et cetera, like how you're shifting that then that maybe kind of.
Bring in a little bit off the comments about the go to market investments. Thank you.
Brent would you like to take that.
Yeah sure so.
One thing about that Mark talked a lot about is we're really focused on having to beginners mind with our business. So as Mark mentioned this is all of our first pandemic and the way we're getting business is completely transform all of our on sales engagements happened.
Rather than being in person and you know what I I talked a lot of customers about their own digital transformation I was trying to guide them don't translate your analog behaviors into digital media, that's not a digital transformation, but the digital translation and when we think of things like Dreamforce as Mark said.
More than anyone else I'm totally bummed out we're not going to in San Francisco in October November because it's one of my favorite time of year, but we really feel like what we've demonstrated over this past quarter, our ability to reimagine. The way, we engage with our customers completely new ways I did Parker made a comment last earnings call that stuck with me where he said.
I want him were all staring up the screen is going to feel so in personal on the other hand on staring into all of my colleague and customers live Interims and its oddly more personal at the same time, so broadly what I'd say is our ambitions to transform our customers with the success of our technologies our customer success teams our distribution teams Uh huh.
Got changed and in fact, I think there's a broader imperative for digital transformation than there ever has been the way we're going to change. It gives our customers have completely transformed and I think a company. We really think we've developed over the past Pos.
Quarter that mindset of a constant we transformed in reshaping ourselves to be able to meet our customers where they need to be about and I think we have the ability to continue executing on that would humility that predicting the future right. Now is really hard we're in the midst of an unprecedented environment, but I think we've developed a lot of confidence internally at our ability to transform or so.
Yes.
Your next question comes from Sarah Hindlian download with Macquarie. Please go ahead.
Great. Thank you so much for taking the question I'm squeeze in marketing.
All about M&A today, and all the systems imports going on around tick tock.
M&A appetites are picking up or just the IPO market.
I'm more specific question on corridor looks the Brazilian.
Yes process within budget delivery and I understand the balance of growth in investment into the commentary made but.
Better margins be a bit of a new normal given work from home and then just last one I wanted to see that it's a really nice to see the generous tier employees Gold award your other stakeholders, namely shareholders.
Well. Thanks, I mean, certainly we're seeing an very interesting environment in the markets and M&A and I see though I think that for a company like Salesforce.
We don't really see.
In M&A environment.
These are not.
We're not in a moment I honestly feel like we're very lucky that we were able to pick that mill soft and tablet when we did.
Because they were both public companies.
Today.
You can do the math.
We would not have been able to buy them.
There's no way know how it wouldn't have worked for us financially.
So.
We're not in a good M&A environment I, just don't see it maybe things could change the court things always are changing but I think you know this isn't part of our plan right now we don't see that you really see.
Focusing on our business focusing on these operational values.
Executing our business look we always maintain a beginners mind you know that.
But the reality is.
Right now is about our own execution. We've made these two major plays to them that complement our our customer 360, and that's what we're focused on.
Let me take a second part of that question Mark.
The growth in investment and could be margins be the new normal. Thank you for the question.
Sure. We always are mindful of we want you know obviously growth number one we want to continue to expand our operating margins and delivered cash flow. We know how critical it was three are financially speaking and we're always trying to balance that we always making choices, where the opportunities in front of us and we.
We are always reassessing that at the at the executive suite. So we are pleased to be raising.
We were always trying to be better we're always trying to keep an eye on that and going forward, but we think we have the right violence for this year are given the opportunity given the total addressable market that we're you know.
So well positioned for to serve our customer and the rest of our stakeholders. So we think it's the right balance today I take your point and we're always assessing and we're always trying to be better.
That is all the time, we have to questions I'll turn the call back to Adam Goldstein for closing remarks.
Thank you for joining us on the call today, given your follow up questions. Please email us at Investor at Salesforce Dot Com and look forward to speaking with you on our Q3 results. Thank you.
This concludes today's conference call. Thanks for participating you may now disconnect.
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