Q4 2022 Salesforce.Com Inc Earnings Call
[music].
Please standby, we're about to begin.
Good afternoon, ladies and gentlemen, and welcome to Salesforce's fiscal 2022 fourth quarter and full-year results conference call. Just a reminder, today's call is being recorded. At the end of today's prepared remarks, there will be a question and answer session. To ask a question please press star one. And we do ask that you please limit yourself to one question.
Now I'd like to hand the conference over to your Speaker, Mr. Evan Goldstein Senior Vice President of Investor Relations. Please go ahead, sir.
Thank you, Bob. Hello, everyone and thanks for joining us for our fiscal 2022 fourth quarter and full-year results conference call.
I am Evan Goldstein Senior Vice President of Investor Relations. Our press release, SEC filings and a replay of today's call can be found on our IR website at www.Salesforce.com/investor. With me on the call today is Marc Benioff Chair and co CEO, Bret Taylor, Vice-Chair and co CEO.
Amy Weaver, Chief Financial Officer, and Gavin Patterson, Chief Revenue Officer. As a reminder, our commentary today will primarily be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings press release.
Some of our comments today may contain forward-looking statements that are subject to risks uncertainties and assumptions. In particular, our expectation around the impact of COVID-19 pandemic on our business acquisition results of operation and financial condition.
And that of our customers and partners are uncertain and subject to change. Should any of these materialize or should our assumptions prove to be incorrect, actual company results could differ materially from the forward looking statements.
A description of these risks uncertainties and assumptions and other factors that could affect our financial results is included in our SEC filings, including our most recent report on Form 10-K. With that, let me hand the call to Marc.
Well thanks, Evan. This is probably one of those calls.
The most difficult type of call, but we can do and the reason why it is the most difficult call that we can do is.
All of the grim things that are happening in the world and of course all of us are witnesses two tragedies that we cannot believe our eyes.
Cannot believe our eyes.
At the same time, we're here on the call to tell you that sales force had perhaps the best quarter, it's ever had in its history.
And we are trying to measure our response.
And this is actually very personal for me. I'm sure many of you know that my great grandfather actually immigrated from Kyiv.
This is actually very personal for me Im sure. Many of you know that my great grandfather actually.
Immigrated from key from.
Growing up it was Kyiv in our household and but my great grandfather, Isaac [inaudible] came to the United States.
From Kyiv.
And my grandfather was born here in the United States, and then came to San Francisco.
And met my grandmother who was a second-generation San Francisco.
Grandmother, who was a second generation San Francisco.
And that's why I am here now. I'm a fourth-generation, San Franciscan, but looking back and looking at my family now.
Thats.
Why.
I am here now I'm, a fourth generation, San Franciscan, but looking back and looking at my family now.
In the Ukraine. My heart is really breaking for them and the senseless pain, the suffering.
It's just unbelievably difficult to see what is going on in the world.
And while we really don't have employees or do business in the Ukraine or Russia.
Of any consequence, I would say that.
We do have employees.
And families like mine and with loved ones, there and deep connections to the region. In this part of the world and our heart is continuing to break.
And we have provided ways that we provide humanitarian care.
I provided some response through world Central kitchen, which I highly endorsed Jose Andreas.
Some response through world Central kitchen, which I highly endorsed Jose Andreas.
Someone who I've worked with for many years.
And as we find more ways to provide humanitarian care, we will. This is very important to us and who we are and our core values at Salesforce.
So as I said, this is a difficult moment for us.
Because we are not blind to what's happening in the world and yet we did have probably.
Are not blind to what's happening in the world and yet we did have probably.
I would say the best quarter we've ever had in the history of the company and I am here.
On the 61st floor of Salesforce tower. We've got significant numbers of our employees back here in the office. I was just with them.
Of Salesforce tower.
We've got.
Significant numbers of our employees back here in the office I was just with them.
<unk>.
And I was also just been a tremendous amount of time and survey in the city and how things are coming back to life here kind of in our post-pandemic reality that we're now entering and it's powerful this energy around here is amazing, we're really turning a corner and our battle with the virus and I believe in many ways.
COVID is behind us.
Certainly, I know that omicron and BA.2 are very serious viruses, but we are in a very different position in the world today.
<unk> are very serious viruses, but we are in a very different position in the world today.
Fighting these things than we were a couple of years ago and I want to thank everyone who has done so much.
For getting us through the last two years.
It really became very clear to us a couple of weeks ago.
We had our fiscal year kickoff in New York City. We had 5,000 employees attending in person at the Javits Center. It was amazing to be with 5,000 employees again.
We had 75,000 employees now in the company, 35,000 of our 75,000 employees have started since the pandemic. So there we've had quite a bit of growth here at Salesforce.
So we have 75000 employees now in the company 35000 of our 75000 employees have started since the pandemic. So there we've had quite a bit of growth here at salesforce.
And I would also say that when we asked we are in the room and how many of you have not attended a Salesforce kickoff standup it'd be welcomed. I would say 75% of the room stood up and Brad and I are conducting this kickoff together as a team and I think we are both in shock.
When you said that was.
[inaudible] It was, right? Being in person again after so long. Being back at the Javits Center with 5,000 employees doing a kickoff.
And with tens and tens of thousands of employees online.
And I'll tell you is that we were able to get together safely thanks to our safety cloud, we're interconnected with a number of COVID tests that we're dynamically updating how we were doing and trying to keep the virus barely there is still some virus there, but not a lot.
And we did our best to have a very safe program and we've been doing this now we've had two dream forces with this program with our safety cloud. We've had the kick offs.
We had all kinds of events and programs all over the world using this technology and it's very powerful, Mayor Deblasio came.
And he was talking about how we had built the contact tracing system for New York, which we did in the vaccine management system for New York, which we did in many apps and talking about how we landed at 787.
During the height of the pandemic in New York, which we did.
Providing millions of pieces of PPE, and so forth, but the emotional part for me and I don't know Bret, you were but what he said everywhere where our employees were sitting was a FEMA field hospital.
Just a short time ago.
And we were sitting in a hospital.
And having a kickoff and we realize wow, we have somehow gotten through this.
And was not a moment. Yes, you could feel the impact just appointments at the moment as ever looked at what their seats and tried to imagine a [cart.]
And really captured just as hard and as long as it's been how far we've come. I'll tell you I added up how many CEOs I've been with.
In the last 90 days and it's been about 46%. And as I've talked to all these CEOs all over the world.
Traveled and so forth.
It's been a powerful couple of years and difficult.
I mean, I am grateful for what all of our [inaudible] have done and all of our employees have done and also our customers and first responders.
And scientists and everybody to get through this because it does feel like and I think as evidenced by what we've just went through New York, we're kind of coming to the end of this. And it's not that this isn't still raging. I just read some horrible articles about what's going on right now in Hong Kong with BA.2.
But we are kind of coming to another stage here and I hope that we're about to get back to a more normal world.
And we're doing that and unfortunately, a war and pandemic. This is not an uncommon story and very sad.
To see what's going on here.
So with that, I have to tell you, though that.
I am speaking out to our investors and analysts directly and I'm speaking directly about the performance of the company. We had a phenomenal quarter, we capped off which was just a phenomenal fiscal year '22 with just incredible numbers and we continue to see just tremendous tremendous demand.
From customers across every industry, every geography and every product category and I think that like many of the portfolio managers, who are on the call and will ask questions later, we're managing a full portfolio, we see that with products geographies and industries.
Across the whole portfolio I would say there is some remarkable strength.
And every company.
That I speak to, the CEOs that I'm speaking, they're all going through a major digital transformation and those customers.
They all are beginning and ending with the customer. And our job remains to help these companies grow and achieve this transformation and that's why we've had such an incredible year and I am confident that that will continue.
And you can see that in these incredible numbers, but also our very deep commitment to this kind of very disciplined very profitable and very cash-flow positive as you can see the $6 billion number in the $7 billion number is scheduled for next year.
These incredible numbers, but also our very deep commitment to this kind of very disciplined very profitable and very cash flow positive as you can see the $6 billion number in the $7 billion number is scheduled for next year.
And going up in the years to come that for the fourth quarter revenue rose to more than 7.3 billion up 26% year over year. That's pretty awesome for a company of our size that we did a 26% growth quarter at $7.3 billion. I don't think there were too many $7.3 billion quarters at 26% growth.
Going up in the years to come that for the fourth quarter revenue rose to more than seven 3 billion up 26% year over year, that's pretty awesome for a company of our size that we did a 26% growth quarter at $7 $3 billion. I don't think there were too many seven $3 billion quarters at <unk>.
6% growth.
In the world.
This year and for the full fiscal '22, revenue was $26.5 billion. Again up 25% year over year. Again at $26 billion company growing 30%, 25% and of course, that's why we're coming in on this $32.1 billion a year.
So we're continuing to be the fastest-growing top-five enterprise software company in history.
Salesforce is on track to becoming the world's number one enterprise cloud software applications company. This operating margin for the quarter was 15% and for the full year 18.7%.
And we've just continued to deliver this disciplined approach to margin expansion and you can see that in the forecast for the quarter now at over 20% operating margin with the $32.1 billion a year. So with our unique business model. We continue to grow revenue at scale drive operating margin expansion leading to strong.
Cash generation. I mean, you can see that in all three aspects of this quarter and we closed fiscal year '22.
With really incredible cash flow, reaching a milestone of $6 billion in the year and that's really up 25%.
Year over year. That's really amazing and I would say far exceeded our goals.
I will tell you that based on our strong fiscal year '22 results. We're excited to raise our fiscal year '23 revenue guidance to $32.1 billion.
Something I've been excited to talk about at the high end of the range representing 21% growth year over year.
And I hope that that is just the beginning of the revenue for the year and we are committed to delivering our fiscal year '23 operating margin of 20%.
And customer success is just continuing to just drive this financial success and our product innovation is providing customers with the resilience they need to navigate these.
I would say Graham in uncertain times and that's why Salesforce has been ranked by IDC as the number one CRM for eight years in a row. We have a tremendous focus here. We have the number one CRM our entire Customer 360 portfolio that is the sales cloud and the service cloud the marketing cloud and Commerce cloud.
And Slack and Tableau and meals up and by the way other great clouds to that aren't even listed when we talk about these things like our financial services cloud or our safety cloud our sustainability cloud. Putting them all together for our customers well becomes the single source of truth virtually.
The entire Fortune 500.
And all of this customer success is being led by an incredible management team, which I think everyone on the call will agree and I certainly believe.
Never has been stronger or more aligned.
Now I want to talk about a couple of customers real quickly and then wrap this up.
Forward, well you're going to hear more from Bret and Gavin, we're helping major companies like this around the world transform their business.
I love this company and I think it's one of the great companies, very transformational tremendous new CEO, Jim Farley has got a great vision for the world.
You've seen the, you haven't been inside this [lightning 150].
Truck, it's going to be the electric vehicle for everyone.
it's the E-Transit van it's amazing and I have two of these Mach-Es, a yellow on a white one. And if you haven't tried it, you should go to the Ford dealer because it's just worth it to test drive the car because it drives very different than other electric cars and I've had probably every single one because I love these things.
And a few weeks ago I was with Jim Farley and we launched the Ford Pro business unit and they're doing a B2B business unit at Ford.
To complement their B2C unit not so unlike a lot of our other customers like Home Depot.
But I will tell you that Ford pro that they are really looking at targeting professionals targeting productivity.
They are really looking at given the motivation for the professional.
Given the.
The motivation for the professional and I'll tell you I live in a rural area and I even have a Ford 550 truck, which is configured as a fire truck because when things go wrong.
I have to be ready for that.
They have telematics, but I am excited to be able to build all these Customer 360 services around this $45 50 truck because I'm trying to turn that 45 50 into 43 60.
Im trying to turn that four to five.
$45 50, and a $43 60.
That's how I look at this world and I'll tell you that Jim Farley and [inaudible] not so far away from here a few weeks ago.
<unk>.
And it's awesome to see their product line, but also how their customers and their partners are all really connecting with this these new products are incredible new ways.
And when you look at Ford in kind of their driven towards sustainability.
I find it to be very much aligned with what's happening in the world because we all know we're in a climate emergency. We need everyone to get to net zero as fast as possible.
Salesforce now coming into the Fortune 100 this year.
We are a net-zero company already fully renewable across our entire value chain, we've achieved 100% renewable energy for our global operations, we're reducing emissions further we're very sensitive to what we're doing with all of our products.
With sustainability and we know we can't stop. There is no finish line on sustainability, it's really one of our very core values now and were operationalized and sustainability in every part of our business. The scenario I've spent a lot of time on in the last I would say six months, even looking at new investments Bret and I just looked at a very cool company together.
When you say, we were surprised at the type of companies that we're looking at in carbon relationship management that before we were not as the new CRM carbon relationship management.
There's a lot we can do in analytics and information management and in helping our customers get the carbon that they need to be successful.
And every business can be a platform for addressing climate change. The first step is for each one of us to commit to be net-zero ourselves. I have a lot of friends who are venture capitalists who are saying they're going to move into the sustainability world and I say to them. The first thing they need to do on their portfolios get their portfolios to be net-zero.
All of our work around sustainability might be the most important and rewarding work of our lives.
Well, it's one of the things we celebrate.
Salesforce is going to be 23 years old. Amazing.
On March 8th, just a few days from now quarter versus century, it's getting there. Just Parker's not with us today. He is traveling so I wanted to say happy birthday to Parker and thank you for starting this great company with me.
So many years ago, and we look at all the evolutions of the company and the management team and the products and its employees in all of our ohanas.
All of our stakeholders. Thank you when we started this in 1999, I never dreamed, we would have become this amazing company and enter the Fortune 100 in 2022.
All of our stakeholders. Thank you when we started this in 1999, I never dreamed, we would have become this amazing company and enter the Fortune 100 in 2022.
So this is awesome and our values have created so much value. When we look at a $5 billion of grants now to our communities $6.7 million and employee volunteer hours, more than $100 million here to our San Francisco and Oakland public schools is so badly needed, especially right now.
Two so this is awesome and our values have created so much value. When we look at a $5 billion of grants now to our communities $6 $7 million and employee volunteer hours more than $100 million here to our San Francisco and Oakland public schools, who are so badly need it especially right now.
Running 55,000 nonprofits and NGOs on our product for free and so many other things that we've been able to do here. The children's hospitals here in San Francisco or so many other things around the world. So thank you to all of you for making that happen and we're also delighted.
Thank you to our trailblazers, especially who believes so much in our products. They have lifted us up.
And again, Parker and I are just so very grateful. And now over to you Brett.
Thank you, Marc. I really appreciate it.
As Mark said, we had a phenomenal quarter to finish another phenomenal year of innovation and customer success and you can see it in our performance our operating model and our disciplined are generating profitable growth incredible scale.
I have had the privilege of meeting hundreds of customers over the past few months.
And the thing I come away with after those conversations is that Salesforce is more strategic to their success than ever before.
Every company is going through a digital transformation and that transformation starts and ends with their customers.
That's what drove our incredible performance in every region this quarter, 23% in the Americas, 38% in EMEA and 20% in APAC.
We continue to see tremendous demand from our customers across the entire Customer 360 portfolio companies.
Companies like KPMG and Scotiabank are using sales cloud to build digitally native sales teams with brand new products like revenue intelligence that our new slack integrations.
Sales cloud growth accelerated again, this quarter, 17% year over year, and it's now a $6 billion revenue business.
Companies like State farm and US Bank expanded their use of sales service cloud this quarter, helping it grow at 18% year over year to nearly $6.5 billion in revenue.
These sales and service businesses are just incredible. Independently, each is larger than any other cloud software as a service company and there are more relevant to more customers than they've ever been and our 23-year history.
Our marketing cloud also continued to show strong growth with customers like Humana and Sunrun. Marketing cloud delivered over 40 billion messages and cyber week alone and delivered 4.1 billion messages per day throughout Q4 up 37% year over year.
Just need takeaway, which Gavin and I recently visited in Amsterdam is a great marketing cloud success story from the quarter. Just needed a leading online food delivery marketplace. Unlike all digitally native companies, we have adopted Slack as their digital headquarters with 11000 monthly active users. This quarter, they expanded with marketing cloud to engage with their customers, the restaurant partners and their delivery partners.
<unk> and their delivery quarters.
We also saw commerce cloud wins at Ralph Lauren, [inaudible] continuing this trend towards digital commerce that accelerated so rapidly in the pandemic.
Together with marketing commerce grew 20% year over year in the quarter.
Both Tableau and [MuleSoft] continue to be the data foundation for a multi-cloud customer 360 deployments.
Tableau had strong wins in the quarter with southwest Airlines IBM and Sunrun. MuleSoft is also part of some of our largest deals in the quarter, including those Deloitte and Ford.
Together, our Tableau and MuleSoft data business accelerated to 23.5% year over year growth in the quarter.
And I'm happy to say that Slack continues to exceed our expectations in every way.
As every company in the world builds a digital headquarters for this next generation of work that Mark was just talking about.
With key wins at companies like Carvana and Netflix, the number of customers spending $100,000 annually with Slack increased by 46% year over year.
Mark and I could not be more pleased with how the Slack integration is going and that remains our top priority as a management team. That's why as we said at our Investor Day. We don't have any plans for material M&A in the near term slack is our focus.
It's been so great to hear slack come up in almost every one of those hundreds of customer conversations I had this quarter.
PayPal is a great example from the quarter.
We've had a long relationship with Dan Schulman and the Paypal team, who used Customer 360 across both their B2B and B2C businesses.
This quarter Paypal expanded their use of Slack using new capabilities like Slack huddles for thousands of real time audio calls every week and Slack chat bots to respond to employee questions, log IT tickets and more.
This digital transformation acceleration is happening in every industry. And you can see it in the momentum of our industry clouds. These are purpose-built solutions for financial services health care consumer goods energy and eight other industries. We saw unprecedented growth across our industry solutions at our most strategic multi-cloud deals were driven by our industry-specific products.
By our industry specific products.
GEICO is a great example.
GEICO is the second-largest auto insurer in the US with over 25000 agents led by an incredible CEO and Todd Combs. Our professional services team is working with GEICO to deliver a digital-first customer experience with our financial services cloud.
And it is improving their customer experience and saving the company millions of costs at the same time.
We saw strong growth in all segments, including meaningful acceleration in our largest transformational deals as well as our lower end transactional deals and Slack self-service business.
These transactional businesses are the closest thing we have to have real-time economic barometer. But right now all the indicators are positive.
And perhaps most importantly, this quarter, we saw the lowest customer attrition in our company's history. Despite all the disruption in the economy.
Overall, it was an extraordinary quarter and we're seeing incredible momentum in the business. As Mark said, as a leadership team we've never been more aligned and we're executing better than we've ever had. I'm enormously proud of our entire team I'm grateful for the support of our customers our partners and all of our stakeholders as we continue to deliver incredible growth at scale quarter over quarter.
And year over year. And over to you, Gavin.
Thanks, Brett.
I would echo March and Bret on just how many remarkable customer success stories we saw in the quarter across all our full portfolio of products, industries and geographies. The dynamics we're seeing in customer engagement absolutely fantastic.
Just over the past few months, I've done more than 75 meetings with C suite executives.
And the accessibility, a sense of urgency and interest from the highest levels of the company is incredible and shows no signs of slowing down.
What's clear is there is a tremendous appetite for digital transformation and we fully expect that to continue.
In the Americas, we grew relationships with Accenture bankruptcy six Scotiabank Statefarm state of Michigan's Department of Health and Human Services, US Bank team and so many more.
In EMEA, we continue to deepen our relationships with our bus cloud factory output sites.
In APAC, we had significant wins with incredible organizations.
Like Bank of Philippines, Panasonic Corporation and Hitachi.
Health care also stood out wins like Humana.
[inaudible] health and Teladoc health.
Moderna is another one in that category.
They are intent on becoming the first fully digital biotech company embedding analytics, AI and automation across every step of their value chain.
They are intent on becoming the first fully digital biotech company embedding analytics, AI and automation across every step of their value chain.
Fully digital biotech company embedding analytics, AI and automation across our value chain.
We are a key partner on that journey.
With [health cloud] and Moderna will gain a more complete view of its customers and with Einstein and Tableau CRM, they will be able to analyze data across all departments and use predictive analytics to make better decisions.
And we continue to build our relationship with Sanofi where the CEO, Paul Hudson and his team are already using health cloud and service cloud.
In Q4, they added consumer goods cloud.
[Having] CRM and Salesforce B2B commerce, which will let them better engage with health care providers patients and pharmacies around the world.
Salesforce to be comments, which will let them better engage with health care providers patients and pharmacies around the world.
This is another great example of a complete Customer 360 portfolio at work.
We also through our partnership with Mercedes Benz in the quarter.
They are using Salesforce to transform the way they engage with their customers.
And as the [sales] become even more sustainable and re-imagined our fleet for the electric future, they're relying on Customer 360 to unit their sales, service and marketing teams around a single shared view of each customer.
Ralph Lauren is another great expansion and I'm not just saying that because the CEO, Patrice Louvet, was my former boss at PNG.
King.
We're helping Ralph Lauren deepen its connection with its customers in both digital and physical settings.
Particularly as they expand into new regions.
In fact, commerce cloud [helped them grow] their North American online sales by 40% in the December quarter. And throughout the pandemic, Ralph Lauren has relied on Slack to keep that geographically distributed teams working together seamlessly from anywhere.
The North American online sales by 40% in the December quarter and throughout the pandemic Ralph Lauren has relied on flat to keep that geographically distributed teams working together seamlessly from anywhere.
18 months ago Australian State of Victoria departments of health selected Salesforce to deploy a COVID-19 contact tracing system.
In Q4, Victoria tapped Salesforce to provide a technology foundation for managing States' COVIDĀ response efforts. For example, Victoria is using MuleSoft to integrate information various systems detecting COVID-19 cases as the virus moves between outright and steady state limits.
At the state level.
And also deploying marketing cloud to enhance communications with citizens affected by the pandemic.
These are just some of the highlights from an amazing quarter of customer success from anyone.
We are proud to support the teams and so many other companies and are grateful to all our customers for their continued trust.
And as Mark said, our customer success drives our financial success.
I'm really grateful to be part of this management team, which I think has never been stronger or more aligned.
Or even more committed to generating disciplined profitable growth at scale.
Also I want to thank our team.
Standing execution, we're continuing to do such a great job and the mix the massive global change.
Hey, Mike over to you to share the financial details of our quarter.
Thank you Gavin and Hello to everyone on the line fiscal 'twenty two with a remarkable year for third fourth our focus on disciplined and profitable growth drove record levels of revenue margin and cash flow.
So let me take you through some of the results for Q4 and full year fiscal 'twenty, beginning with the top line commentary.
Total revenue for the fourth quarter was 733 billion, which includes $312 million from slack. This is up 26% year over year or 27% in constant currency.
Continuing to execute upon the robust demand environment that we highlighted throughout fiscal 2010.
For the full year total revenue was $26 5 billion, which is that.
25% year over year or 24% in constant currency.
<unk> revenue increased five.
592 million two quarters absent black.
Portfolio of relevant products, serving a broad set of customers and customer needs continue to drive that business performance.
Few key highlights from the quarter as you've heard from Marc and Bret and gap on our core business continued to perform very very well.
Sales cloud and service cloud at that $6 billion business does and then Q4, I think for 17 and 18% year over year, respectively.
Okay.
Our progress in the enterprise continues with our largest deals getting even larger.
Number of seven figure deal signed in Q4 increased 34% year over year.
And in Q4, the number of eight figure deals more than doubled.
Our industry products also continued to perform very well in fact, our largest deal ever as measured by incremental IRR with a financial services that we signed during the quarter.
Eight of our top 10 deals.
Industrial product.
I also want to provide an update on your side, which grew 24% year over year. During Q4, we continued to realize the benefits of the global market organizational changes we implemented last year.
Happy with the progress however, we do not anticipate seeing the full benefit of these changes until the back half of fiscal 'twenty.
Last quarter during Q3, we drove attrition our attrition rate to below 8% for the first time in company history now for the second quarter in a row. Our attrition is again at an all time low.
And then Q4 revenue attrition was between 7% to 70%.
Our remaining performance obligation representing all future revenue under contract ended Q4 at approximately $43 7 billion up 21% year after year.
Current remaining performance obligation or CRP L, which represents our future revenue under contract that is expected to be recognized as revenue in the next 12 months was approximately 22 billion up 22% year over year and 24% in constant currency.
The outperformance was driven by new business outperformance and strong ran off.
Slack represents approximately four points of CRP or slightly.
Slightly ahead of the four point provided during last quarter's guidance.
Turning to operating margin for the full year non-GAAP operating margin was 18, 7%, which represents approximately 100 basis points of improvement year after year.
As a reminder, this includes 140 basis points of headwind from MLR and.
I'm very proud that our team drove strong margin expansion, while also absorbing our largest acquisition ever.
Q4, GAAP EPS was negative <unk> <unk> and non-GAAP EPS was <unk> 84.
Realized and unrealized gains in our strategic investment portfolio benefited both GAAP and non-GAAP EPS by approximately <unk>.
For the full fiscal year, GAAP EPS was $1 48 and.
Our non-GAAP EPS was $4 78.
Realized and unrealized gains on our strategic investment portfolio benefited GAAP EPS by approximately 93.
And non-GAAP EPS by approximately 98 cents.
Turning to cash flow I was particularly pleased with how we close the year.
Conflating, a milestone year at cash generation.
For the full fiscal year operating cash flow with fixed Dalian.
Up 25% year over year, Capex was $717 million, resulting in free cash flow of $5 3 billion up 29% year after year.
We think M&A represented a two point headwind to both our operating and free cash flows.
Excluding the impact of M&A on a full year operating cash flow growth rate with 27% and our free cash flow credit rate was 31%.
Now onto guidance.
We are raising our Q1 revenue guidance by $130 million to 737 to 738 billion or approximately 24% growth year over year and that is coming off of historically strong Q1 last year.
This guidance assumes a $330 million contribution from slack.
For the full year, we are raising our fiscal 'twenty three revenue guidance by 300, million% to 32% to $32 1 billion or approximately 21% clarity over here.
Our guidance assumes a one 5 billion dollar contribution from Slack. In addition last week, we announced our acquisition of traction on demand a professional services business. Our revenue guidance assumes a $75 million contribution from traction on demand, which we anticipate will close by the.
And if this fiscal quarter. Please note that the deals remain subject to customary closing condition.
Foreign currency has continued to be highly highly volatile.
I'll give you a sense of the impact on our business our fiscal 'twenty three revenue guidance reflects the year over year headwind.
<unk> $300 million from FX.
For Q1, we expect to deliver CRP outgrowth of approximately 21%. This included roughly five points of growth from slack.
We expect Q1, GAAP EPS at negative five to negative <unk> <unk> and.
non-GAAP EPS of <unk> 93 to 94 for the full year, we expect GAAP EPS of <unk> 46 to 48 cents.
non-GAAP EPS guidance of $4.62.
To $4.64.
As a reminder, please keep in mind that our other income and expense or <unk> guidance.
The impact from that raised pretty slack.
Also recall that on.
On EPS guidance assumes no contribution from mark to market.
We are also reiterating our fiscal 'twenty three non-GAAP operating margin guidance of 20% representing expansion of 130 basis points year over year, we expect 100 to 125 basis points of headwind from M&A.
This disciplined approach will drive another year of strong cash flow generation.
We are initiating fiscal 'twenty, three operating cash flow guidance of approximately 21% to 22% year over year would.
We do not expect an mcf headwind from slack for the full year.
In addition, our guidance currently assumes a three point headwind from cash taxes associated with tax law changes requiring the capitalization of certain R&D cost.
As we continue to scale our operations I am, particularly pleased with our Capex guide for this year, we expect capex to be approximately 2% of revenue in fiscal 'twenty, three which is an all time low for the business. This results in anticipated free cash flow growth of approximately 25% to 26% for the fiscal year.
Yes.
To close we believe that our portfolio of differentiated and relevant technology is well positioned in a large and rapidly growing market.
22, with an extraordinary year for the company as we drove record levels of revenue and operating margin and cash flow.
This demonstrates that we can achieve profitable growth at scale.
I am very thankful for the opportunity here for my first year to meet so many members of our shareholder community both in person and virtually and I look forward to meeting many more of you over the coming years.
Now Evan shall we open up the call for questions and though you can go ahead and open up the line. Thank you.
Thank you very much Mr. Peter ladies and gentlemen at this time any comments or questions. Please press star one again, we do ask that you. Please limit yourself to one question I'll go first this afternoon to Alex Zukin at Wolfe Research.
Hey, guys. Thanks for taking the question and congratulations on a great quarter and also really heartfelt.
Mark.
Maybe just to start if you.
About the environment that you're in right now you had a bigger beat on <unk> guidance.
Even better than people I think anticipated for Q1, you raised the full year by more are you seeing or can you comment there were some reports of pull forwards.
Demand for front office applications can you just set the stage and maybe just give a sense.
Context around what you saw in Q4.
You can come out of this.
Strength in pipeline, the demand environment and your ability to execute on that.
I really appreciate the question and it's a question that I've heard quite a bit in the last.
Especially because the numbers that we're putting up a really unprecedented in many cases I've never seen I've been in the software industry.
For 40 years I have never seen numbers like this put up like this at rates like this and.
And I think because of that these questions are actually quite reasonable, but the reality is over the last two years. We have seen has been incredible demand and really that demand is really linked to the digital transformations that our clients are going through our customers.
It doesn't really matter by geography or by industry are very deeply committed to their digital transformations of their businesses I think that if the pandemic.
Put a light on anything for them. It was that their businesses, we're not going to have a future. If they did not go through a digital transformation and that these digital transformations as I said in my comments.
We're going to begin and end with the customer I mean, I think that the Ralph Lauren story is a great story.
Because it's a digital transformation like we've seen with many retailers okay.
But of course, they have to go through this and not just stop what they've done.
We're just at the beginning with that client and with so many clients and our product line has not become more narrow it's become more broad and I think our acquisition strategy that has been executed I believe really well in the past few years really has expanded our total addressable market so significantly that.
When you look into these clients these chief information officers and really the chief Executive officers, who are primarily work with everyday they see is so strategic to the future of their fundamental businesses.
That is why our relationships with them have become just Paramount for our company you can't compare it to where we worked 10 years ago or 15 years ago of course, when we started but today.
This relationship is that these Ceos are very much the transformational digital transformation officers Im not telling you anything you don't know this is the.
The most important thing that they can do every day and this is really very much to the core of who we have become in our company that we can show up with our products and services.
And say to a great company and we've told the stories this year of the At&t's for example, or the <unk>.
We're talking about on this call so many amazing customers.
But without us they would not have the growth rates that they have had in the our growth rates are just a reflection on there but by no means in any of these customers have we completed our work in many cases were in the 10 or 20 or 30%.
<unk>.
Sure.
Growth areas, where we're just at the beginning of what we can do with these customers. So that's what I am very excited about and we've really crack the code on building.
Our relationship and emotion with them and I'd really like Brett to come in because I think especially with the extension with slack again tableau also really transformed I was with a recently I was actually in the White house with.
A fortune 100, Seo and turned to me and said I start every day with slack and this is not a customer that we have even a big sales force footprint and I just said to myself.
These acquisitions, they've just opened so many doors for us and transformed who we are and the conversation that we can have alright, Brad can you just continuous narrative.
As Mark said I think what really characterize this quarter, particularly in Q4 as you know, it's our largest quarter a lot of really big transformational deals we call that multi cloud deals that's exactly as mark characterizes it's a real trusted digital adviser relationship where we're helping solve the problems most fundamental to the executive team.
<unk> of our customers and it's not something that's related to the pandemic as it related to the systemic digitization of the economy and that's something that we think is a secular trend and.
Absolutely are enduring and we see it in the demand environment.
<unk> said <unk> continues to exceed our expectations that I think is benefiting not only from the trend towards this new way of working that we're all figuring out right here in Salesforce tower. It's also benefit in being a part of our customer 360 portfolio.
You heard it in the customer story than its why Fox you for <unk>.
Revenue was $312 million well ahead of our guidance of $285 million, we're really seeing the synergies both in our value proposition from a product, but also our distribution environment as well and to answer one of your other questions. We're seeing strong pipeline going into Q1, and we feel that as I mentioned across both our transactional business.
Large deal pipelines remain very strong and we don't see any demand pull forward and this quarter, especially we were really shocked with adjusted kept accelerating through the quarter and I really think we don't talk about create and close but this idea that we're creating in closing these opportunities in the quarter themselves very much as a momentum as.
Back to the total market I mean, how do you see.
The current rate of growth in the market itself is reflected by our total product and geographic or vertical portfolio.
I think the thing Thats been the most I will say pleasant surprise was despite inflation the credits of the supply chain the conflict in Europe .
Our customers. This is the problems that we solve for our customers are as urgent as ever and as you mentioned, our customer 360 portfolio, which since you're in Parker started this company 23 years ago. It's not just sales opportunity management anymore. It's really every aspect of the customer experience and it means that we're starting conversations in every department.
Of every single one of our customers and have the opportunity to expand to really digitize theyre not going to grow exactly how to implement these products are not going to grow.
I think that also had a debate with so many of the Ceos as well everybody is coming back now they're not well everything is going back to the way it was no it's not.
And I think now you are in some of those.
We took these really hard positions, okay, we're going to have a flexible work environment and slack is obviously.
Right there in the middle of that motion and it's in the middle of it for every single one of our customer conversations which is why I think one of the most exciting acquisitions, we've ever done and it was critical that we did that at that time, because its kind of setting up for the future of work combined with the number one CRM absolutely. Okay alright. Thank you for the question.
Thank you. We'll go next now to key flights at Morgan Stanley .
Yeah.
Excellent. Thank you for taking the question guys and congratulations on a really nice end to FY 'twenty, two and really.
Given us a lot of confidence on the durability of that growth would that FY 'twenty three guide I had a question for Amy on the margin side of the equation.
Great talk to us about the near term pause on M&A as you guys focus on integrating slack, but at some point.
Salesforce is going to come back to doing larger M&A as you should it should be a strategic tool that you guys use on a go forward basis.
With slack, you've guys have been able to still grow operating margins. Despite digesting a big acquisition is there something you think you could do going forward. When you do additional large M&A at Salesforce now with the scale and you guys have the efficiency muscle toned enough to be able to do large M&A and still get this 100 2500.
60 basis point margin expansion year after year.
Great. Thanks for the questions I'm sure for you so.
I appreciate the questions and focus on operating margin I'm really proud of what the company has done over last year and looking into this year you might see that last year, we were able to expand 100 basis points, even in the face of what was.
Secondly by by significant measure our largest acquisition and this year, we intend to raise another 130 basis points, while continuing to have some headwind in terms of the future as Bret said.
And large strategic M&A is just something we are not focused on in the near term. We are really focused on slack and making flat as successful as possible for all of our shareholders and for this company in terms of what we can do in the future.
Certainly think we have learned a lot about how we integrate companies. We can do in terms of the op margin pressures.
And certainly with vehicle to borrowing to get us to the point, where we would not have to take on any sort of degradation of our online and through M&A.
Thank you we take our next question now from Phil Winslow at Credit Suisse.
Hey, Thanks for taking my question and congrats on a great into the year.
Brad you said that sales is becoming more strategic to the C suite with a broadening footprint. So my question is.
Mark to uneven Gavin when you talk to customers what are they saying to you about call. It not only the breadth of the CRM portfolio, but also now the depth of the vertical tech stack.
Choosing salesforce versus let's say point to point vendors, especially considering the upside we saw in our select this quarter. Thanks.
Well I'll start and maybe pass it over to you Gavin to talk through some of your conversations youre, having with customers fundamentally we talked about our strategy of customer 360, and Thats really the end to end customer experience across sales customer service digital marketing and digital commerce.
The foundations and the platforms, you need to power that and Youll soft and tableau and slack and I think when we talk to the C suite.
I think when we talk about customer wins, like Florida, and Geico, and Mercedes Benz and Paypal, they're really trying to solve for their end to end digital customer experience and point solutions don't get them. Their point solutions mean, essentially variety department become software development shops, what they want is to digitize their customer experience they want to do it quickly.
And then wanted to do it fast time to value and high return on investment and I think because of the completeness of our portfolio. We're really the only software company that can provide that experience to our customers and I think that that's really our differentiation is that we come with the complete customer 360 portfolio rather than just a point solution and I think thats led to not only.
Our ability to compete in new accounts, which was a meaningful part of our growth. This past year, but also as Mark mentioned as we are expanding our relationships with our customers.
No that they can trust us to really truly build a single source of truth and actually achieved the business objectives and the growth formula that you need in this new economy, Gavin you want to provide some color on that.
Probably two or three points.
I mean first and foremost.
Digital transformation has become a CEO priority then and this is one of the changes in the last two to three years, it's no longer dedicated into the it department.
Top three priorities as CEO .
Because they realize.
That is already in the call without the digital strategy that didn't have a strategy at all.
So they have to own it.
So it is a conversation.
We find that is at the top of the house.
I think when it comes to the customer 360 and building on Greg's comment.
We often find is what they like about customer 360.
Maybe with sales cloud.
And then at service.
Add analytics and commerce and so that building is as they go along so they might not necessarily buy all of it to start with but they know we've got a solution for them.
As they expand and once you get more of a complete view of their customers.
The example, I gave of Santa Fe.
This example, basically started with health cloud and service cloud and then added consumer goods cloud.
<unk> CRM.
E Commerce sales out there.
Cloud as they went through the last 12 to 18 months.
And then I think the final thing I'd say is industries and the virtualization of our businesses.
That's been growing over the last few years.
Started a few years ago now.
I think we started with financial services, we got it help cloud.
Consumer goods and as I mentioned earlier retail.
The list goes on.
Why did customers in light of <unk> slightly as well.
They buy a product that has a lot of the standard functionality that you need within an industry already built in and what that means is they.
They pay us more for that just a little bit more expensive, but in return they get a product.
The fastest time to value and that is the key thing that she is looking for how do I get it we said quickly I want to retain in months not years and Thats, what many of our industry cloud provider.
Out of the box.
Thank you and ladies and gentlemen, we have time for one final question. This afternoon will take that question now from Tyler Radke Citi.
Hey, Thanks for squeezing me in Mark I wanted to get your take on that.
Valuation out there in the market, obviously come in quite a bit since the last call.
How are you thinking about that as you approach M&A.
Obviously with valuations having come down so much does that change kind of your philosophy or a framework on how you're approaching M&A given.
Higher.
And kind of the math thank you.
Well, we certainly see in the software industry contract and I think it's probably best reflected by that ETF I watch it very closely.
Yes.
And I think that when you look at it overall kind of that precipitous fall, which we've seen.
<unk> happen over many times in last 2000.
20, or 30 years.
It's not unprecedented but it does happen and Thats, where we are right now in regards to the change in the M&A environment for us.
We continue to look at tactical M&A, but really since we made a major decision now more than a year ago to acquire slack. It became our most strategic initiative in the company and its going to take us quite a quite a long time to be able to digest. This acquisition. We also obviously still.
Have other parts of our portfolio that we have our eye on and that are requiring a lot of our focus in and making sure that our entire portfolio is working for our investors. So I don't really see us doing any kind of strategic acquisition for some time until we can get our hands fully around slack and say that we've done a great job.
Brett what is your perspective on that and I think particularly well mark.
Right now we our focus was on integrating slack and executing with the portfolio that we have in.
I don't see any material M&A in the near term I think that they are really the key point for us and how we're looking at managing our business and providing value back to you. Our investors as we are delivering to our portfolio of product. We're not an ETF by any means but we are a selection of some of the most important products in the software industry, even our service.
<unk> if you look at it as an absolute business is probably the largest service product in the industry.
It has a tremendous growth rate it has a tremendous leadership position analysts ranking and look at it uniquely we pay a lot of attention to it so as we manage our portfolio here at Salesforce. We look at services are part of that and we're focused on making sure that that is the most innovative highest level of customer success that can have and.
Also its transform many times since we've introduced it not not so unlike our sales product not unlike what we've done with our commerce product, where we've completely written aetna's now operates as a platform is that kind of we call. It headless commerce or an API architecture slack now as part of our portfolio.
Tableau is part of our portfolio.
All soft as part of our portfolio and many of these exciting new vertical opportunities. We saw a lot of excitement and interest around sustainability cloud this quarter a lot of customers. Realizing they need to go net zero now and they are going to have to do carbon accounting and theyre going to have to do.
They are kind of carbon.
Our reporting and certification and we're looking at net zero cloud or safe to cloud as well as growth capabilities.
For us and each one of these components in our portfolio, Brett and I go through piece by piece to make sure. It's working and of course the geographies. Each geography is an important part of the portfolio I'll tell you kind of a part of an aside one of the areas where I have spent a lot of time and making sure were highly competitive and successful is Japan.
But I haven't been able to go to Japan, and a couple of years, so now with the kind of the.
Pandemic is kind of coming to a close I'm looking forward to getting back over there. It's very important to me to get over there haven't really been able to work on many parts of the Japanese our Japanese business are over there has done a fantastic job quite Hassan as amazing as a brand new office.
My close friend Yoshiaki was at our office is very jealous I havent, even been through our new office, which is on the grounds of the Imperial Palace and <unk>.
Japan, the largest office building there given too.
American software company, we're very proud of that fact.
I don't know Brad how do you look at this.
As part of our business today, I think it's a great way to wrap up the call Mark I think the strength of the portfolio is really the theme.
I think one of the things that stood out to me.
Performance was the strength of our core businesses as you said, our core sales and service business I think it's appropriate coming up on our 2000 <unk> third birthday that sales cloud 23 years later continues to grow at 17% and over $6 billion of kind of amazing its really it's unprecedented in the software industry that you'd see something after two decades deliver such.
Kind of a growth rate.
There's a few analysts on the call has been covering you and this company ever since and I doubt any of them imagine you've got the Tam wrong.
Got it.
I Couldnt I can't believe it.
It's doing it's $6 billion on its way to I don't know 10, what I have no idea, what it's going to it's unbelievable.
I think the strength of our portfolio of the reason why we are committed to this path, where we're not pursuing material M&A in the near term Ed and I think it really reflects the execution of galvin's team really the whole company, but we have such a rich and deep portfolio in Germany that clarity is I agree amine anything you want to say before we wrap this up.
It was terrific again, what I was most pleased about about last year and where we're driving this year is just top performance on top line bottom line and cash flow.
And being able to show that we can do all three and continue with the discipline.
So for the rest of the year Gavin anything you'd like to comment on before we wrap the call up today.
Just to say look it was an outstanding year, and we kept it off with an outstanding quarter.
There is no sign of slowing down as we entered this fiscal we're very confident for the year ahead. The pipeline is really strong.
Across all geographies across all products.
Thats why we are raising our guidance.
Entering this year.
Very high degree of conviction.
Well I think that Thats, well said and I will tell you.
We spent a lot of time with our investors I know that I do and I know we spent a lot of it's a lot of them are portfolio managers that are running a full portfolio, which is how they are trying to get a return on their investment in and the more time I've spent with them I think they are influenced me and how I run our business here and I think we're very much at that same perspective, and we want to deliver now.
Standing returned to our investors as well. Thank you so much for everything win and our and our Hearts and.
Our thoughts and prayers are with all those right now who are going through these <unk>.
Troubled times.
Okay.
Thank you, ladies and gentlemen that will conclude todays salesforce as fiscal 2020, Q4 th quarter and full year results conference call. Thank you all for joining us and wish you all a great remainder today.
Goodbye.
Okay.
[music].