Q2 2022 Salesforce.Com Inc Earnings Call
Geneva very much the world has opened for business here and it's great to be meeting with our customers face to face and in person in discussing our business with.
With them and talking about their businesses and how their businesses are doing in this new normal and we're learning quite a bit about how different the U S is from Europe right now and also how much has really changed which is quite a bit so I'm absolutely.
Excited to be here, but im also extremely excited.
If there are phenomenal.
Second quarter results with you you can really see we had a phenomenal second quarter, where we just had a phenomenal.
Second half Youre about to hear we're about to have a phenomenal first half as well and we're also going to have a good chat about what we're doing with slack.
Larry.
<unk> acquisition that is now closed and you are going to hear about number one CRM just got better and.
It's <unk>.
Credible what's going on.
With with slack and looking forward to addressing all of that would be us.
In the script with you. So look we are in.
New World There is no doubt about that I'm sure that all of us realize that and we are delivering success from anywhere as well for Salesforce, we've gone through a tremendous transformation and we are now delivering this new world for our stakeholders and from a business perspective well.
I'd say, it's been an absolutely extraordinary 18 months.
Cyber Salesforce I know for all of you and certainly for all the Ceos I met with today. We're navigating this global pandemic, we have been guided by our core values of trust of customer success of innovation of quality, but through all of this and through our perseverance and through our.
I think dedication to.
Customers, we have been able to deliver record financial results and with these results. We have now can say and looking over this we've now had five outstanding quarters in a row really delivering the successor of <unk> vision pretty awesome.
So let's take a look now at the second quarter because the numbers are in.
Incredible and you can see we delivered our first <unk>.
$6 billion quarter about $6.3 billion and continue to maintain our very strong growth rate, our profitability or cash flow or margin.
Continuing to execute our new operating margin model and you can see right now revenue growth.
Quarter.
<unk> you can see $6.34 billion up 23% year over year pretty awesome and above where we thought we were going to be considerably above and.
I guess I'm as excited as I am about the revenue I'm also very excited that as we're executing this new operating margin model, we can see the margin.
In the quarter was also a very healthy 24% up 20 basis points year over year, and also delivered $386 million in operating cash flow for fiscal year 'twenty. Two we are raising again, our guide to $26.3 billion, which is now at the high end of our range. It's.
The raise of $300 million and it's going to represent about 24% projected growth year over year, just really reflects I think how.
How well the company is doing in its core not just.
Through the slack acquisition, but you can see organically, especially when you look at the numbers over the last five quarters and we are raising our <unk>.
Margin to 18, 5% up 80 basis points year over year again based on just the outstanding performance of the company, we're able to do some amazing things here with the operating margin.
I don't think Salesforce has really ever been had better execution better management team greater momentum and as I have spoke.
Poke into so many customers today I don't think we've ever been more well positioned for them and I will say that in two areas. One is in our core products.
Our focus on customer success, the customer 360 now.
Now with the slack user interface and everything being slack first but also our core values. So many of our customer.
Or is are attracted to us because in many cases, they're going through an amazing values transformation and in the areas of.
We've pioneered.
And now, especially in regards to sustainability, which we'll talk about because as you know salesforce has been a net zero company, but now are fully renewable as well.
And as we start to head towards the Fortune 100, I think that a lot of the companies that.
Met with today, we're mostly fortune 100, Ceos, they crave to have that same net zero and renewable profile, which is very exciting to see the world.
In this kind of sustainability.
Focus so I'm, absolutely thrilled to see how the core business grew in the first half of the year.
I am excited about the outlook I am excited about our positioning with our customers and I'll tell you I'm very excited that five out of the last five quarters that we've had that 20% or greater revenue growth and the three of the last five quarters rather.
Greater than 20% operating margin I don't think we could have said either of those things five quarters ago. So my hat is really off to the management team and to the employees.
For making this happen and we are raising our guidance for the fourth time in a row as we see increased opportunities.
Additional revenue growth and additional operating.
<unk> margin capability this year and look one of the fastest growing enterprise software company ever you know that you are tracking as you see where the numbers are going you can see what the trajectory is the velocity of the company both in revenue and margin and now you can also see that no other software company of our size.
<unk> scale.
<unk> is really performing at this level.
So we are really.
Quite confident and remain on our path to generate 50 billion in revenue by fiscal year, 'twenty, six which doesn't seem very far away from right now and.
When we first gave that number it didn't seem as.
It didn't it seems like it was so far away now at Siebel Wow. This is going to happen.
Excuse me the line of Mr. Martha just got disconnected, we're trying to disconnect the line.
Thank you.
Again, we are trying to reconnect the line for Mr. Michael.
Well I think we had a few technical difficulties with Merck Bayer This is Bret Taylor.
Continue with the script.
Thanks, Mark for that Amazing introduction, and just a reflection on the momentum in the company right now it really was just an incredible quarter, our products are more relevant than ever and I have never seen this kind of momentum.
Business and honestly, that's because CRM is more strategic now that it's ever been.
Every digital transformation begins and ends with the customer and Thats why around the world more and more companies are putting their trust in salesforce to help them get back to growth. That's the agenda on every Ceos minds.
Switzerland.
And it's on the mind of every board around the world.
See just released their April 2021, SaaS Paas vendor radiant the survey of more than 2000 companies worldwide and Salesforce is rated number one in trust number one in product number one in industry specialization and number one in value for the price.
And that is just amazing it is a true measure of just how mission critical we are to our customers and you can just see it in the incredibly strong performance of all of our clouds this quarter.
Sales cloud has been number one in its category for more than a decade and this year, we've re imagined the product to be the growth platform for digital sales teams we.
We're already seeing the results of sales cloud accelerated to 15% growth year over year.
Our service cloud as Ultrathin amazing momentum.
All aspects of customer service has gone digital from the contact center to field service to self service and to boss. The scale of service cloud is just incredible this is a 6 billion.
Our business, whose growth has accelerated to 23% year over year.
Our marketing and Commerce cloud also grew 28% year over year as every organization in the world is investing in direct trusted relationship with their customers.
And every one of these digital transformation is also a data transformation.
<unk>, which is driving the unprecedented success, we're seeing in tableau and Youll soft tableau within nine of our top 10 deals this quarter and Neil softer was in eight of our top 10 deals.
After the real power of Salesforce platform is bringing all these capabilities together into a customer 360 <unk>.
<unk> source of truth for your.
First our industry strategy is enabling our customers to get started with an end to end customer 360 faster than ever before tailored to the specific needs of every industry our industry cloud saw 58% year over year growth in annual recurring revenue, we had especially strong performance in the public sector and our.
Cost of our business and financial services in fact, four of our top 10 deals in the second quarter came from the public sector.
Our core organic business has never been stronger just like Mark said and now with slack, we're bringing a whole new dimension to salesforce, there cannot be a more relevant product at a more relevant.
Time for every single one of our customers. If you talk to any CEO read the headline of any paper or even look around the home office. Most of you are sitting in right. Now you can see the depth of the transformation work has gone through this year.
Sales meetings have moved from conference rooms to slack and zoom contact centers used to be buildings and now they exist.
Health clearly in the cloud my commute is moved from the highway primarily my hallway slack.
Slack is at the center of this slack is how organizations all around the world are finding success in this all digital work in your World Kitchen digital HQ.
Your employees your partners your customers on a single platform.
And Tyler on that people love to use.
And the slack first customer 360 makes every salesforce product more powerful and more effective for our customers.
Our engineering teams have really hit the ground running on this integration just last week, we announced our slack for sales service marketing analytics at our launch event.
Plus a ton of slack innovation Covenant Dream Force Ibm's, one of my favorite examples of a slack first customer 360 company.
Christian is a close friend of mine and talking to them you talked about how he believes that premium sales force since last together is key for IBM to become even more connected even more productive and more innovative.
IBM has built their entire customer 360 on salesforce.
Over 530000 customers 380000 employees and 50000 partners using our platform and all of these employees are working slack. They have connected their workflows across sales cloud across service cloud and enables them to connect and take action.
So we've got to work.
That comes up in every single one of my customer conversations and I could not be more thrilled with momentum in the business slack revenue accelerated to 39% growth year over year on a standalone basis, and we had great customer wins at target Lowe's Con dynast UNICEF Norton healthcare.
So it's.
It's really fun about this is looking at the growth of slack connect we've talked a lot about this slack connected the capability to enable you to connect not just with your fellow employees, but to connect with your partners with your vendors and your customers' slack connected 200% year over year. This really illustrates the power of not just slack for employee engagement, but the slack first customer.
Mm 360.
Slack is a once in a generation company that is transforming the way we work and it's transforming the vision we have for our company over the next decade.
I'm, so grateful to be able to work with Stuart and the slack team every day and I'm really excited to bring this vision of the slack first customer 362, all of our customers.
And if the technology gods will allow I loved to transfer it over to Gavin to talk about some of our customer wins for the quarter Gavin or you're on.
Hi, Matt Hi, Brett.
Can you hear me.
It sounds great Gavin go ahead, Greg.
Thanks, Brett.
And we're seeing that.
Business and you can see that really reflected in some of the remarkable customer wins, we saw not just in the U S, but around the world in the last quarter, but.
But starting in the U S.
We saw our largest ever deal.
Based on <unk> and.
Annual recurring revenue, which which ended in the public sector.
And in that sector.
Sector has been fantastic for us in the second quarter.
Other examples we expanded relationships with great companies like Paypal and coinbase.
Well in EMEA, we have significant weightings behind.
With that Ron.
Things like states.
And also cross Freshfields.
Dyson noticed iron in our crushing business Kenyan bicycles, which is there any grade case study.
And then APAC, we continue to deepen our relationships with many business.
He has been asked to pay.
At WD, Thailand.
We're seeing strength internationally as well as in the U S.
Okay.
Examples I want to get into more detail on it.
A win with mill I know you might not be the Morris having Miller.
Testing example of a company.
With a great digital customer experience.
No.
After the start of the pandemic melanomas are a huge spike in demand telephony surprisingly costly.
The salesforce to transform that.
Thomas experienced in the quarter and are already seeing significant improvement in.
And conversion rates on the back of that.
Since then.
They have been providing an even better experience tailored product recommendations streamline checkout experience and next generation video chat and on top of that.
Is a net zero company and they are now using salesforce to sustainability.
<unk> cloud.
And that carbon footprint and other climate related initiatives. So you can see it's a great example of how we're building partnerships building multi cloud solutions around the customer 368, and we go from strength to strength.
Yes.
I wanted to talk obviously well.
Wealth management.
Great win in the quarter, they're using the customer 360 to streamline processes integrate data from over 26 different systems to create the unified wealth management platform that provides advisors with a 360 degree view of every client.
And I think thats something that really brings the customer.
60 to life.
More than 2100 RBC financial advisors.
I think this example today I think is very powerful that been using salesforce workflow automation.
So on the client Onboarding process, which was.
Several weeks more than 100 pages of physical documents.
Now digital task it takes just 24 minutes.
Quite remarkable I think.
We had a great win in the quarter Nathan.
Nathan of introduction of cost per case.
Go ahead Kevin.
It is the second largest auto insurer in the U S.
And that really leaning into the power of the 360, the customer 360 <unk>.
Single view of their customers across the entire business.
Now more than 25000 agents are going to be.
Putting that trust and that customer 360.
Which is now providing AI powered analytics to improve those customer relationships.
And three a M.
Now this is one we've talked about in the past you've heard Mark talk about how they've been using the customer 360 across 83 countries. After that relationship continues to expand.
Now.
<unk> using trailhead to.
To train thousands.
Facing employees as they joined the company successful snacks is now being used.
As part of their composition tableau CRM is giving actual.
Intelligence to better manage operations engage with customers.
These productivity and then in Q2 three am selected ill answer b crowd to help empower nearly a 100000 employees to give back to their communities with the goal of achieving 2 million employee volunteer hours over the next five years I think that's it.
Really really powerful.
<unk>.
Sample.
And then one more.
Just before I hand over to Amy.
Ikea.
Ikea fantastic business over here in Europe, and another Great example of the customer 360.
We're already helping them with marketing that you're getting a great ROI.
Mid market cloud across over 30 markets now as home improvements are soaring in the pandemic.
And our sense was to use <unk> service to help schedule and I am planning visits installations.
Service across the U S. So another example of how we're building our relationships.
Ships, adding clouds to existing customers getting increasingly into partnership type relationships. So I think these are a few examples there are many more.
I think examples of how we're helping customers deliver success from wherever they are from anywhere.
So.
Net net.
My conversations with customers I think it gives me great confidence.
Not just in the demand for our products and services.
And our ability to execute in the second half of the year.
And then in execution, so I continue to see.
Being maintained on fluids is really strong demand environment.
Across sales force in the second half and I think slack is really going to enhance that Joe just before I hand over to Amy.
Say a quick thank you.
So it may be.
The sales teams around the world.
Sure.
Adapt to a different language in your normal.
Doing so we've been able to continue to.
To support our customers.
I'd like to thank them for that.
Okay.
Great. Thank you Gavin and good afternoon, everyone Q2 was another quarter of remarkable.
Top and bottom line performance.
Stated, our topline expectations achieving record levels of Q2 new business.
We saw strong demand across all of our products regions and customer sizes, and we were able to execute with discipline to drive higher operating income.
We also.
Completed the acquisition of Slack technologies on July 21st, bringing yet another best in class asset into our customer <unk>. We believe that slack will play a critical role in the digital transformation of our customers as they re imagine the future of work and thank you about first work from anywhere environment.
On.
And that process is already underway with slack business accelerating into the Clearers tobacco.
In Q2 <unk>.
Revenue grew 39% year over year on a standalone basis.
Ladies any impact of participation.
<unk> also saw strong performance in customer acquisition, especially.
In the enterprise the number of paid customers spending greater than $100000 annually accelerated during the quarter up 41%.
For the short period between the close of the deal and the end of our fiscal Q2 slack operating results were immaterial to our non-GAAP results and they are included.
And below the line in Hawaii.
<unk> Consequently excluded from our reported revenue and non-GAAP operating income.
Where appropriate we will call out slack slack specific impact on our Q2 results and our guidance.
As part of the acquisition this quarter, we issued $8 billion.
Senior notes with a weighted average interest rate of 225% and weighted average maturity of 20 years. We were very pleased by the terms we received on what we view as an inexpensive source of capital in.
In particular, I'd like to call attention to the strong reception of our $1 billion sustainability.
Or is it still bond, which was our most oversubscribed note in the offering.
And not only did we raise funds on favorable term that concurrent with our debt rating S&P upgraded our credit rating to AA plus.
Now let me walk you through some of the results for Q2 fiscal 2010, starting with topline.
<unk> Terry.
Total revenue for the second quarter was $6, three 4 billion up 23% year over year or 21% in constant currency.
The strong new business pipeline that we've discussed the last few quarters enabled us to deliver these results as new business momentum continued.
<unk> to exceed our expectations.
A few key highlights we saw acceleration in sales cloud with Q2 revenue of $1.5 billion or 15% year over year growth.
Tableau tableau and <unk> continued their momentum in enterprise deals as both saw their share of the companys.
Align content deals increase as Bret noted tableau within nine of the top 10 and your thoughts on eight of the top 10 deals. This quarter. This is an incredible accomplishment and evidence of how strategic these acquisitions have become for our customers.
Public sector continues to be an area of strength accounting.
For four of the top 10 deals this quarter.
And again this quarter, our seven figure deals on average included more than four and a half cloud.
A number of seven figure deals, including fiber more cloud grew by 29% year over year, showing continued momentum in our enterprise deals.
And we continue to see strength in our international businesses, which accelerated sequentially. Although we will note that EMEA and APAC growth benefited modestly from the integration of applications into our billing practices.
We remain pleased with the progress on attrition with revenue attrition in Q2 between eight and.
<unk> percent an improvement from last COVID-19, 9%.
Attrition has continued to perform better than anticipated as a reminder, our attrition rate is calculated based on trailing 12 months performance and we've now lapped the second quarter fiscal 'twenty, one which was impacted.
But by the early days of the pandemic.
Our remaining performance obligation representing all future revenue under contract ended Q2 with approximately $36.2 billion up 18% year over year.
Current remaining performance obligation or CRP L, which represents all future.
We are under contract that is expected to be recognized as revenue in the next 12 months was approximately $18.7 billion up 23% both year over year and in constant currency.
Slide represents four points of growth ahead of ahead of the three points, we guided to last.
<unk> revenue due primarily to changes in our assumptions around purchase accounting.
Turning to operating margin Q2, non-GAAP operating margin was 24% benefiting from revenue outperformance efficiencies from a work from anywhere world and a focus on disciplined spending.
Salesforce recorded 40.
CT X million dollars of transaction related costs due to closing the slack acquisition during the quarter.
Q2, GAAP EPS was <unk> 56 cents and non-GAAP EPS was $1.48.
The outperformance in the quarter was primarily due to higher revenue and expense efficiencies as well as realized.
And unrealized gains on our strategic investments portfolio.
These mark to market adjustments benefited GAAP EPS by approximately <unk> 42 and.
And non-GAAP EPS by approximately <unk> 43.
Turning to cash flow operating cash flow in the second quarter was $386 million down.
The 10% year over year.
On a cash basis, salesforce paid $43 million of transaction fees related to the slack acquisition.
Capex for the quarter was $213 million, leading to free cash flow of $173 million down 45% year over year and as.
As a reminder, we continue to expect cash flow seasonality to skew higher Q1 and Q4.
<unk> operating results had no impact to Q2 operating cash flow or capex.
Now turning to guidance, we expect Q3 revenue of $6 seven to eight to $6.79.
$9 billion or approximately 25% growth year over year.
This guidance assumes a $250 million contribution from slack.
For Q3, we expect to deliver CRP or growth of approximately 22%. This includes four points of growth from slack.
We expect Q3, GAAP EPS of negative <unk> to negative five cents and non-GAAP EPS of <unk> 91 to 92.
Now moving to fiscal 'twenty two guidance updates.
As a result of our year to date performance and strong execution in the current demand environment, we are raising our fiscal.
22 revenue guidance by $300 billion to $26.2 billion to $26.3 billion.
Or approximately 24% growth year over year.
This guidance incorporates an expected revenue contribution of $530 million from slack in the second half of fiscal 'twenty two.
An increase of $30 million over our previous guide.
This guidance also includes $200 million from acumen and increase of $10 million from our previous guide.
Net of the revised slack and acumen contributions this represents a $260 million raise on our core.
Yes.
Our ability to execute in the demand environment both remained strong.
We are also raising our fiscal non 22, non-GAAP operating margin to 18, 5%, representing an expansion of 80 basis points year over year.
This now includes an expected.
Core <unk> of 150 basis points headwind from slack and acumen or 10 basis points left headwind compared to our previous guidance.
Excluding this 10 basis point adjustment, our operating margin guidance represents a 40 basis point raise compared to our previous guidance.
We are also.
<unk> one is in fiscal 'twenty, two GAAP diluted EPS to <unk> 81 to 83.
And raising our non-GAAP diluted EPS to $4.36 to $4.38.
We expect recent M&A will be an approximately 51% headwind to non-GAAP diluted EPS. Please.
Please recall that.
Also <unk> E and EPS guidance assume no further contribution from mark to market accounting as required by ASU 2016 O. One.
We are raising our fiscal 'twenty, two operating cash flow guidance by two points now expecting 14% to 15% growth year over year.
<unk> <unk> increase from our previous guide is primarily driven by revenue performance and lower headwind from M&A.
The dilutive cash flow impact of slack and acumen now represents a headwind to our year over year growth of approximately seven points.
Excluding the anticipated impact of M&A operating cash flow growth.
The 21% to 22%.
We continue to expect Capex to be approximately 3% of revenue in fiscal 'twenty, two resulting in a free cash flow growth rate of approximately 15% to 16% for the fiscal year.
Excluding the anticipated impact of M&A as previously noted this rate will be 20.
<unk> would be 93%.
To close we remain excited by the strength, we see in the demand environment and we're seeing record levels of revenue and operating margin our flagship product in sales cloud saw acceleration this quarter, we closed our largest deal in customer history.
We had an impressive first.
<unk> for fiscal 'twenty tail, and we're excited to continue slacks momentum with the power of our two companies now together.
And the increased revenue guidance reflects the confidence we have in the fundamentals of our business and we remain well on our way to achieving our goal of $50 billion in fiscal 2006.
We are committed to being disciplined along.
Hi, while challenging ourselves to find additional areas of operational improvement.
I want to say, thank you to all of our employees for being able to focus on disciplined efficient growth during the quarter and we're looking forward to further strengthening the durability of our operating model going forward and finally, I look forward to engaging with many of you at our upcoming investor.
Along the way on September 20 <unk>.
I'll now turn the call back to Mark for some final comments.
Alright, well, thanks, Jamie hopefully it back here you are.
And actually now talking to me.
Speaker phone.
And San Francisco.
Turning to off the shelf.
Yesterday volunteers.
So anyway, thank you Amy.
Great job on earnings.
Congratulations on another great quarter.
Everything Youre doing.
We're excited about the strength of our core.
Our business our revenue growth our margin.
Great.
The addition of slack now sure Steve.
Medical arms, if you will.
That's absolutely true the best CRM, just got better.
Mark.
And listen to what Brad has to say about the integration of incredible things like slack demand. These are becoming extensions to our CRM capabilities.
It's a very exciting moment.
Our entire product line.
Apologies.
And I think that.
With that our leadership team has really shown through this amazing perseverance and execution over the last several quarters is amazing results that we're going to have our digital resources coming up in San Francisco in less than a month September 21.
Through September 23rd.
Tens of millions of customers from all over the world.
Tuning in with Us and we will have hundreds of customers with us.
<unk> and San Francisco as well, so it's going be extremely exciting we want you all to have a front row seat and please talk to FMC.
Connect.
Program.
<unk>.
We will also be redeploying, our <unk> program as well.
Reinforce capability for all of our.
Customers.
Youre all going to join us okay.
Amy.
I mentioned, we're also looking forward to Audi.
<unk>.
Due to the extra day that will also be amazing and we're expecting some.
Awesome conversations with all of you so with that I will open it up to questions.
Everybody is online right now and we can take take all your questions. So go ahead of it.
Go ahead and open the call for questions.
Thank you and as a reminder to ask a question you will need to press star one on your telephone keypad again that'll be star one on the telephone keypad to ask a question and to withdraw your question press. The pound key please standby will be compile the Q&A roster.
The first question comes from the line of cute.
Albert Tony of Evercore. Your line is now open you may ask your question.
Hi, Thanks, very much Brett maybe I wanted to ask you one about slack.
Particularly now that the deal is closed and I know Youre very excited about no team is what are you measuring to sort of judge success.
Slack, maybe beyond just sort of revenue growth or in terms of.
Number of customers number of multi cloud deals that include slack I guess, what should we be looking for to see that the deal is progressing as planned and it is that sort of one plus one equals seven combination that you guys are.
Waiting on.
Yes, thanks Kurt.
I think.
First and foremost we're excited about this vision for the slack first customer 360, and Thats really build in not only in integrated division between slack and our customer 360 platform, but also integrating our products and actually I think we've made.
Our best start integrating our technologies than any acquisition in our history. We did an event last week on this idea of a digital HQ, where we announced slack for sales things like deal rooms inside of slack connect integrator with sales cloud slack for service, which are things like cases swarming.
Four.
Faster drill customer service teams slack first marketing and slack first analytics so.
Those capabilities are going to be in the hands of our customers soon and we have a lot more innovation coming that dream force as well and with that let me ask what we're measuring it.
As you said, it's going to show up in things like multi cloud deals that include slack. It's also going to show up.
More departments at a lot more companies, who are perhaps using these new digital collaboration technologies for the first time in the context of doing their job and the context of customer service in the context of sales in the context of marketing and really realizing this vision of the digital HQ.
I think mark.
And a lot of <unk> talked a lot about how we're in this new pandemic world.
This isn't going away, we've opened half of our offices, but as you can imagine.
As many people are signing up as we had hoped to at this point because of this pandemic.
I've started to companies and it all started by plenty of my office space and now have you started the company you start by plenty of digitally.
And that's really what we want to bring to every company in the world help them build the digital infrastructure will help them succeed in this new normal.
One thing that I think we're really excited about the Mark also mentioned as slack connect which is really bringing these digital tools outside of the walls of our customers built ins and bringing them to partners.
As it relates to <unk> as well and you've seen that in a lot of the product integrations, we announced.
Thank you and next question comes from the line of Mark Murphy of Jpmorgan. Your line is now open you may ask your question.
Yes. Thank you very much congrats on a fantastic quarter.
Gavin we have heard that.
And kind of youre selling slack by actually using it with customers in the selling process itself was wondering if you could help us visualize that and is that something thats transforming the buying experience.
Pretty profound way and then just a quick one for Amy it's fantastic to see the operating margin.
At 20% plus again.
Consecutive quarters, where are you identifying new efficiencies to try to create this trajectory on margins because it seems like it goes beyond the temporary COVID-19 savings.
Great question.
Thank you chip.
Brett.
Amy is excited about the potential.
So that could bring to.
The customer 360.
Since we announced the deal.
So you got nine months to get.
Obviously, we've been having conversations with customers about.
Hi.
What we are planning to do.
Good.
Yes.
<unk>.
Yes.
Okay.
I'll have to that Randy.
That hasnt yet.
Got it.
Customer advocacy.
Factors.
<unk>.
It really is quite remarkable.
I think huge interest out there amongst customers.
Many of our customers.
So those customers are now <unk> customers. So there is good overlap between the two and they can see that it can see the synergy.
I have sort of a product.
Expectation.
We are beginning to see.
So through slack.
The most powerful presentation.
<unk>.
The sales force on sales tools.
And so slack.
On slack is it Barry.
A very compelling way.
To explain how we use the product.
So we are beginning to more and more of that and where we are closing deals.
Leaning into closed deals through did.
Could you closing the deal itself on slack, creating channels and between us and the customer.
Everybody is working on the deal can have real time access.
In those channels.
Meaning that it means the deals.
Close much more quickly.
The slack deal itself, which closed on slack.
Finishing SaaS in the snack on slack.
I think Shannon.
Great. Thanks, Devin and Youre right, we use slack to negotiate to do.
We conducted our due diligence or negotiation and integration for slack. So I do think that that's the Ultimate example.
Terrific sale, all conducted with Flatiron slack Mac.
Turning.
A question about operating margin, so where we have really seen that growing this year first we are getting the benefit of very strong business performance in Q1, and Q2 and that does a wireless brand provide profitability and thats, all still investing in growth and absorbing the impact of M&A.
Second we are continuing to build on what.
Tier I think during the pandemic that how we can work effectively and all digital first to help Britain Xyrem and <unk>.
Samples of Barrick virtual go to market motions sales enable alliance, which is largely first of all at this point and also a renewed emphasis on site financial automation, which I believe.
We learn payoff in the long run and then finally, it's simply an approach a disciplined decision, making and when we say net investment opportunities. We're taking a very hard look we are challenging ourselves and we're finding ways to shift to our operating model where necessary.
Thank you we have the next question comes from the lineup.
The label had sales of Bank of America Securities. Your line is now open you may ask your question.
Hello, Great. Thanks, Thanks for taking my question and congratulations on a real nice Q2 results here.
I wanted to ask another one on slack, but more focused on slack plus tableau with the combined offerings, you really have a powerful solution to not only see.
The data that act on the data you highlighted this last week at the marketing event, where you launched.
A number of these scenarios and activated notifications and watch list were included so I'm just curious about that concept of kind of slack plus tableau combined what are you hearing from customers and the reception there and could that actually accelerate these kind of cross cloud customer.
Rafi deals thank you.
Yes. Thanks for the question, we're really excited about the combination of slack and tableau and it sounds like you watch the event, but for other folks on the call it didn't.
We showed I think a really wonderful integration between tableau and slack. So your data can talk to you automated notification.
306 of it when you need to take action on data, they're getting notified and slack you can collaborate with their colleagues to diagnose a business issue just an incredible combination Brian.
I think it really shows just our philosophy on our M&A and why I think we've had really unproductive.
<unk> success in the marketplace and integrating our acquisitions successfully.
We really tried to integrate our platform.
With tableau with north soft with slack. This all amplifies our vision for customer 360 <unk> at.
At the center of all of these digital transformations are our customers are going through is data.
Profit integrate that data with Neil soft do you need to see and understand it with tableau and you need to act on that and that's all going to happen with slack, which is the system of engagement.
For the customer 360, but also the system of engagement for every application of your company.
It is an incredibly powerful combination.
You need to and I actually think slack has the potential to really accelerate every single product and the customer 360, tableau included and tableau, especially but youre really I think it has potential across the board.
It goes to just the fundamental shift in the workplace, we're all experiencing.
All of you are probably working from home right now or most of you are.
<unk>.
Thank you and next question comes from the line of Kash Rangan with Goldman Sachs. Your line is now open you may ask your question.
Cash on the new congratulations Doug My question is of Amy and maybe a little bit from Gavin at the same time driving operating efficiencies.
And Kevin maybe you could shed some color on that as it pertains to the distribution side of it.
<unk>, how are you able to accomplish growth and efficiencies in terms of.
The margin. Thank you so much and congratulations on a fantastic quarter.
Great. Thanks Kash.
And operating.
Operating margin like I said, I think we have to be able to drive growth and increase in profitability at the same time as I mentioned anywhere and then as well through disciplined and Mark talked about a new operating model I actually like to think of it more than new operating mindset.
And it's a real focus on it.
Nato's accompany that not just only gets.
With a strong durable company, when we get there and positions us to sail through that.
So these are these are multiple changes around the company.
Jumping and this has been really an effort from the entire executive leadership team.
Got it.
Yes.
Thanks, Ed.
Second question that cash so.
We've just.
Come off.
Half year review.
Marriage, Hawaii, where we dropped our top 100 executives together in person.
Reviewing velocity.
Okay.
And looking ahead into the future.
I wish I was really happy.
Sure two fantastic causes you saw that yet.
And really strong demand really strong execution.
Looking to the second half the year.
I see.
Continuing the pipeline is really strong.
Invitations were having with customers.
Accelerating if anything.
And so we chose to make the decision three months ago, because we could see demand in the marketplace. We chose to increase our investments in.
Direct.
That sales force to get at.
Coverage with customers.
And that is a sign of our confidence in the business. So I feel.
I feel very confident that we can continue to grow top line.
No.
Delivering on expectations around operating margin.
The tradeoff.
No.
I think.
The balance that we can get between the two.
Thank you should we see the opportunities in the marketplace, we're able to serve that demand we can see from customers.
Multi cloud deals that I was talking about earlier.
But at the same time, ensuring that we benefit.
Trim.
Benefits from scale, and we see that in the operating margin and.
And can you also out.
What are you seeing in the selling motion versus the United States versus here in Europe.
Well I think.
Comment Mark is.
There is.
This is a conversation that's happening we've been CEO now.
So digital customer transformation is no longer something that is delegated down the organization. It's a conversation that's going on in the boardroom CEO priority.
And that means we're getting.
Okay.
I think to get deals.
More multi cloud deals multi year deals.
And it's increasingly a conversation about the customer 360.
And the real focus is on trying to value.
Which is good for us we want as much.
We.
We want our customers to be able to standard products as much as possible configuring gas.
Devisee not so much because there's so much innovation coming through and it's easier to do.
Staying on the standard.
Just kind of a path.
So it's you know the.
In the U S or in Europe.
We are seeing.
Our business grow across the board.
In terms of.
Small customers are one and the S&P market all the way up to multinationals we're seeing.
Increasingly bigger deals.
Highlights at our biggest effort.
Deal.
In terms of recurring revenue.
In this quarter and the public sector deal.
But we're seeing more and more.
Not just millions.
Deals with 10 of these deals coming through the business.
And <unk>.
Scientists.
I think the increasing importance.
The salesforce offer and what it means to the business.
Thank you.
Your next question comes from the line of Keith Weiss of Morgan Stanley. Your line is now open you may ask your question.
Excellent. Thank you guys for.
And a question.
Really nice quarter in a really nice first half of the year and.
I think this echoes comments from both Marc and Amy I don't recall seeing this type of a raise to the full year guide in terms of topline revenues are definitely not type of race to the operating margin guide historically.
Especially in the first half of the year.
Maybe.
Gavin Mark you could talk to you what are you guys seeing in the pipeline that gives you the confidence to increase guidance in the first half of the year for the second half of the year already and mainly to Amy.
When we see that the operating margin expansion is durable if you will on.
Or basis and in particular should we be I'm thinking about <unk> expenses or some of the kind of reflation of that Opex line that might be being pushed out because of delta variant or sort of a slower reopening pace into the.
Future years or is this margin expansion going to be more durable. Thank you.
On a go.
Yeah.
Okay.
A swing of that.
So many of the conversations that we're having.
Let me emphasize the ones that have it in Europe.
Number one because of the green new deal that's happening here in Europe.
Yeah.
Every CEO.
It is focused on their net zero transformation, they realize that for them to continue to be successful.
This environment in this economy.
They are having to make and that sort of a transformation.
It's been very important to ask Mary made that transformation and now we're fully renewable as well.
As I mentioned.
Second thing is I think every CEO that I mentioned.
Up to today and yesterday.
And conversations that I've had in the last several months going through.
What types of supply chain challenges.
Challenges Im sure Youre hearing that in your own checks with your clients.
But.
That's been very surprising to me and I would say that's the second priority.
And then I'd say the third priority is.
Exactly what we've been talking about here, which is success from anywhere in this new world. They realize their employees are not coming back exactly as they wanted.
I have some stories about when we first started talking about success from anywhere in that employees between office.
<unk>.
May be working in an environment like we had last week in Hawaii with our <unk> program.
Sure.
We are building this new ranch.
Two Ceos of call me and say Mark you didn't understand everybody's coming back everything's going back the way. It is and then it's over and I think now those calls have stopped and people realize things have really changed.
This pandemic has changed things and work has changed and when we talked about digital HQ, we might've been talking about digital HQ before the pandemic, but after the pandemic. It means something very different and I think that what Brad said kind of on the fly there which was very powerful that is obviously.
Ben.
On an incredible entrepreneur as well as an operating executive.
Several companies, but just illustrated a new company.
Is not planning as physical office places planning digital displays.
Running this call.
Now on a cellphone and on June.
<unk>.
And.
It's a very much an example of success from anywhere.
But every company has to make this transformation.
And that is what is driving our success going forward. This is not a small transformation. This is not a small change. This is why we would.
$27 billion for slack, we believe so strongly that the world has changed that the past is gone that we are in a new world and yes. We may I don't think the delta variance will be material to our business.
If anything it only accelerates it and delta is not the last.
Hey, Tom.
The last one of these things that we're going to see we're seeing a cause.
Constant now parade of these variance going by we started with Alpha and I don't know how many letters there aren't the Greek alphabet, but delta is not the last letter. So we know that in fact here in Europe, if you haven't read.
What happened with Lambda two weeks ago, you, probably should but in all of those things.
We're looking into.
Life has to go on and it is.
Here with me today.
Say, well, there's probably some risk to what's going on there probably is but I'm vaccinated Gavin.
Vaccinated and.
We were running our business and that is that is really the power of that is the future.
What's going on and I think that.
This is what we all have to kind of get our head around and I think in San Francisco, it's very different than how it is right here in Geneva, Switzerland.
About it's very very different I was in office buildings today.
There's nobody in my office building right now.
And also people are not worrying national office buildings here, everybody is supposed to wear a mask legally in San Francisco right now so things are different.
This is what is amplifying us.
So we're in a tremendous new world and Salesforce has never been more positioned or well I would say salesforce has never been better positioned for an economy and for our world. The first thing that I heard from Gavin was we're open for business and this is where we're going do you want to add diverse.
I tell you.
Wanted to talk a little bit about the pipe.
Mark.
Our confidence in it.
We've put a lot more focus on.
Execution.
Excellent.
Great.
The operating metrics.
The plan going forward.
I have great confidence in what I can see.
Spent we spent a lot of time looking at how everybody in the sales organization is contributing through participation and through enablement through productivity.
And really driving performance across each of the <unk>.
Round, we flatten the structure so that we can move a more agile manner and give more accountable accountability to operating unit.
Yeah.
And to that focus on.
Second and third order metrics around the sales operation that means that I can and can have a competent.
As I look forwarded into what we're going to deliver over the next.
Two quarters, probably into next fiscal as well.
And it's a balanced pike, so strength across the board you can see it in.
The numbers that we've released today.
See that going forwards all clouds are contributing.
There isn't any any weakness across SMB using this net debt and I think it also speaks to what Brett said as well in terms of we've had a real focus with our acquisitions to make sure. They are integrated that we're selling a platform.
Don't use the word suite of sales partners that hasnt been part of our nomenclature.
We have a very.
Very nice integrated platform and we will have a lot of very relevant products in today's world, It's kind of amazing.
Yeah.
Geographically and just to finish with gain strength across the board.
<unk> consistently growing 20% plus in revenue.
EMEA.
32% this quarter APAC, 26%.
No.
<unk>.
Across the board.
Growth internationally is not coming at the expense of growth in the U S and Thats why we are.
Posting these.
These really strong numbers.
<unk> strengthened.
The core business.
<unk> cloud.
Something that we've really been able to and I think he gave me hit this point pressure as well, but this new operating margin model that were executing.
But I think several of the.
Several of our friends, who have been asking questions picked.
Picked up on that we are operating at a different.
<unk> type of model here, we've had now three out of last five quarters greater than 20% and we have a lot of swagger when it comes to our operating margin.
Eric let us.
Kind of have a beginner's mind in regards to our entire business.
And we made strategic decisions, we made tactical decision.
<unk>, but we also made decisions at our core way that we're operating in our business and you can see that with these operating margin result, and also im sure. It will settle to everybody, but after doing one of the biggest acquisitions in our.
Our history, we also.
Just raised our operating margin.
Again.
And our guidance so that is very exciting.
Amy do you want to just add to that.
Keith to follow up kind of the end of your question.
Mark we are yes.
Very powerful this is in your world, we are not going back to the pre pandemic wave.
Working.
And we learned a lot during this period, we learn how we can work effectively from any warehousing selling virtually and when you look at our.
Durable I would think this department is terrible and we need to apply this to the plan going forward and just show you quarter after quarter that we come up again.
And I would just say that we switched to several very powerful values operated values. When the pandemic started the management team understands very well at Salesforce, but we wanted to make sure that we are relevant to our customers and that they understood. Our relevance I don't think we've ever been more relevant.
We also.
We have a lot of people who are really scared during the pandemic and that we need to get them to be confident in that they could participate in.
Think thats.
Definitely happened.
You need to make sure that we were able to execute execute tactically and strategically and to fully enable what you can see is an extremely.
Real and workforce.
Heading heading towards the 100000 people, we need to make sure those people are enabled enrolling and focused and.
We've done that.
I think in all of those things.
Management team has executed I am very grateful to the management team and how well they've done.
We've also gone through a lot of management transformation I'm sitting here looking also at Mark Hawkins, who is R. R.
Our CFO and Mary tests, Mark. Thank you for everything you've done for the company as well and he is on the.
The call here, helping us approaching us through and Evan.
I look out.
At all of our audit and all of our employees for everything.
Everyone has been through we have a lot of it.
This amazing moment.
This is not our last amazing moment, there are some more amazing moments company.
And then very excited about the future.
So with that I will turn it back over to you Evan.
Thank you very much we appreciate everyone joining us on the call today.
Sure.
Yes.
Yes.
Sure.
Sure.
Very true.
Brad.
Okay.
Okay.
Perfect.
No challenges.
Yes.
So sort of the call today.
We have any questions you can contact us at investor at Salesforce Dot Com and we look forward Dream force in an Investor day.
Okay. Thank you very much.
Thank you.
That does.
Conference call. Thank you all for participating you may now disconnect.
[music].
Uh huh.
[music].