Q4 2023 Salesforce Inc Earnings Call
Yeah.
[music].
Welcome to sales force fiscal 'twenty, 'twenty, three fourth quarter and full year results conference call.
All lines have been placed on mute.
After the Speakers' remarks, there'll be a question and answer session.
If you'd like to ask a question press star followed by the number one on your telephone keypad.
You'd like to withdraw your question again press the star one.
We asked today that you limit yourself to one question.
I would like to hand over to the conference to your Speaker, Mike Spencer Executive Vice President of Investor Relations. Sir you may begin good afternoon, and thanks for joining us today on our fiscal 2023 fourth quarter results Conference call. Our press release SEC filings and a replay of today's call can be found on our website.
With me on the call today is Marc Benioff, Chairman and CEO , Amy Weaver, President and Chief Financial Officer.
Ryan Miller, President and Chief operating Officer.
As a reminder, our commentary today will include non-GAAP measures.
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 and are subject to risks uncertainties and assumptions, which could change.
Are there any of these risks materialize or should our assumptions prove to be incorrect actual company results could differ materially from these forward looking statements a description of these risks uncertainties and assumptions and other factors that could affect our financial results.
As included in our SEC filings, including.
Including our most recent report on forms 10-K, 10-Q, and any other SEC filings, except as required by law, we do not undertake any responsibility to update these forward looking statements and with that let me hand, the call to Mark.
Thanks, Mike.
Thanks to all of you for joining the call as you can see from our results. We had another strong quarter improving profitability is our highest priority and that really showed up this quarter. Our goal is to make salesforce the largest and most profitable software company in the world and that is what we are doing six months ago and Sept.
<unk> and our Dream Force Investor Day, we shared with you our comprehensive transformation plan, the new date for profitable growth, but things have changed as we entered our fourth quarter. We recognized that we needed to radically accelerate the transformation plan timeframe, we needed repressed by hyperspace button and bringing the two year goals.
Ford quickly and exceed them now we immediately put into place and accelerated transformation plan in four areas short term and long term restructuring of the company.
Improving profitability and productivity prioritizing, our core innovations and a deeper and even stronger relationship with our shareholders you and.
That's where we started the very first thing we did when I became CEO three months ago was Amy and I promoted Mike Spencer our head of IR to our leadership team. So we are all in much more communication with all of you.
We're now moving aggressively across all forefront of our transformation first were reigniting, our performance culture and doubling down on our accountable management of our sales organization.
As you are about to hear from Brian as you know beginning in January we also initiated a head count reduction and we're significantly consolidating our real estate footprint.
Second we're more closely scrutinizing every dollar of investment in resource and very focused on driving operational excellence and automation across the business.
Third our amazing engineering team is focused on integrating our acquisitions and prioritizing our core innovations that are driving customer success and finally.
As we said in motion longer term structural improvements we are working with theme on a comprehensive operating and go to market review.
To ensure a high degree of Accountability. Our board has formed a new business transformation Committee, which I have joined and we are fully disbanded our M&A committee as well to reflect our new focus.
We also dramatically stepped up our communication feedback loop with our investment community and I Hope you all are feeling that.
For the past several months solid visit Salesforce, including meet all of our board members, including our lead independent director Robin, Washington, and our senior management team has spent a lot of time listening to and working with all of our investors.
As I said, we've hit that hyperspace button since we last talked to you a quarter ago and Im thrilled with the progress we've made changes that used to take months or happened in weeks changes that used to take weeks are happening in days and changes that used to take days are happening in hours.
Powered by this transformation, we delivered another strong quarter, our team really delivered on both the top and bottom line exceeding our expectations.
As I said, improving our profitability as our highest priority and in Q4, we accelerated operating margin to a new record high.
non-GAAP operating margin for fiscal 'twenty, three was 22, 5% significantly above our forecast and improvement of almost four points year over year.
Revenue was 838 billion up 14% year over year or 17% in constant currency, which is above what we forecast to deliver for the quarter.
And for the full year, we delivered $31 4 billion in revenue up 18% year over year or 22% in constant currency. It's one of the best performances of any enterprise software company, our size and it's amazing that sales force is now over $30 billion in revenue.
We closed fiscal year 'twenty, three with operating cash flow, reaching seven 1 billion up 19% year over year, the highest cash flow in our company's history and one of the highest cash flows of any enterprise software company our size ever I also want to call out the great progress we have made with <unk>.
Pablo.
As you know we've been focused over the past few quarters on reigniting meal soft sales growth and this quarter was evidence that those efforts are paying off beautifully.
<unk> was included in seven of our top 10 deals in the quarter.
And tableau was included in every one of our top 10 deals.
These acquired products are integral to our customer 360, and enabling our customers to use our data product line to achieve a new level of excellence in managing their customer relationships and it's critical data.
In short our transformation has been radically accelerated as you can see our performance is significantly up already our productivity is also up our profitability is up and we are not done now we're putting into place. The next phase of our transformation to profitable growth. We just rolled out our new business plan, which we call the <unk>.
In partnership with our employees worldwide everyone. In the company is now aligned around our highest priorities and our aspirations I'm excited to announce that looking forward to fiscal year 'twenty four we.
We expect our non-GAAP operating margin of approximately 27%.
And additional acceleration of four five points year over year and for fiscal year 'twenty for revenue, we're guiding to $34 7 billion at the high end of the range over 10% projected year over year growth, but that's not all.
We're also looking at our overall share count and as we focus on reducing dilution. We've already returned $4 billion of the original $10 billion authorization and our share repurchase plan that we announced in August .
And our board has now approved a substantial increase in that share repurchase plan from $10 billion to $20 billion.
This will allow us to fully offset dilution from stock based compensation.
We're also thrilled to welcome three new members to our board makes it more fit the CEO and Chief investment officer of value add capital Arnold Donald the former President and Chief Executive Officer of Carnival Corporation, and <unk> Mehra, the Chief Financial Officer of Mastercard, three amazing executives, who have already made their mark on <unk>.
And I'm looking forward to them, making their mark on Salesforce.
We're incredibly happy that these phenomenal executives are joining us to help guide our next level of profitable growth.
That makes five new board members, we have brought on in just the past 16 months another important of our accelerated transformation.
Also wanted to say how grateful we are.
Our two outgoing board members Sandy Robertson and Alan Hassenfeld, both of whom many of you know.
And who for the last two decades have given sales force in our industry incredible leadership guidance and service. Thank you so much Alan and Sandy.
We know that we have the right team the right strategy and the right products to compete and complete this transformation and we're continuing to build our future.
I've never been more inspired by our engineering teams and it's no wonder that we're ranked number one CRM by IDC for the ninth year in a row, we're delivering tremendous customer success and continued to gain market share in CRM.
Our customer revenue attrition is at its lowest level in our 24 year history. This is a critical metric of all of our customer success and we know every digital transformation begins and ends with the customer.
We have an incredible vision for the future of CRM, a fully integrated suite built on our new Genie data cloud in our next generation platform powered by real time.
<unk> scaled data AI and automation.
Our new data cloud is the most exciting innovation that we've developed since the original Salesforce clouds and our metadata platform.
Which we viewed as our first horizon and our second horizon for our technology.
Clear our third horizon is our data cloud.
And this new AI World that we are all now entering nothing is more important for our customers than our new data cloud, which is rapidly becoming the intelligence part of their customer engagement.
David Cloud becomes our most important cloud augmenting every salesforce cloud and making every part of our customer 360, more automated more intelligent and more real time.
We just launched tableau plus data cloud natively integrated in tableau with data cloud. So every customer can easily visualize automate explore and act on their data in real time.
During the quarter I was inspired by partnering with Jim Farley, the CEO of Ford and forward deployment of data cloud.
Jim and Ford, while Theyre, leveraging data cloud to unify their customer data and deliver personalized real time customer engagement and dealer focus.
Starting with their amazing new marquee electric Mustang, an amazing car Ford proactively updates customers.
Vehicle delivery through both email and SMS with our marketing cloud I love getting my tax to actually it was amazing.
<unk> delivers dealers now with leads intelligent insights to drive faster sales with our sales cloud and their technicians well, they're receiving the next best action and technical insights through our service cloud all of this all of it it's driven by our data cloud delivering intelligent real time.
And automated customer engagement from within the Salesforce platform.
I've also been very inspired by our work with Boston scientific and their amazing CEO , Michael Mahoney, our teams were able to use our data cloud to create a unified view of their customers in just five months they.
They were able to bring data from the front office and back office and all of their systems together, Boston Scientific's ability to create customer segments using our marketing cloud went from three to six months to nearly real time.
And they could deliver next best action insights to their sales teams and the flow of work and sales cloud.
And used our marketing cloud to deliver personalized product recommendations on their website and real time.
And fast and scientific as a regulated company well with data cloud Theyre able to easily specified data retention policies for compliant now as a longtime customer I'll tell Ya, Boston scientific and Michael well, they've humbled me personally I'm really humbled all visit salesforce with their incredible innovations, they're amazing leadership.
And especially their use of our data cloud.
This is only the beginning of what's possible as we build more native automation intelligence and real time integration deeper into our data cloud and apps and we're rebalancing our resources to be data cloud first inside our company.
And next week at our Trailhead Dx conference in San Francisco on March seven and eight Youll see how we're bringing even more innovation to our platform with our new Einstein GPT technology, the world's first generative AI for CRM.
A tremendous complement to our data cloud and core Einstein AI platform Einstein.
Einstein GPT will be integrated into all of our clouds as well as tableau Youll soften slack and then there is another way we're opening the door to use AI for our future and for all of our customers as we have begun working with the rapidly expanding AI ecosystem in our industry I've been really impressed with her.
Companies like Anthropic, a leading provider of generative AI are using slack as their user interface regenerative AI assistance, the relevance of slack as an incredible enterprise productivity platform user interface and critical data set for these new AI systems, well, it's inspiring all kinds of new <unk>.
Cases, I couldnt be more excited about the future to wrap it up our transformation is happening now, we're making salesforce one of the most profitable software companies in the world with one of the highest cash flows.
And one of the very largest as well you can see from our numbers by this quarter why im so motivated so inspired and so confident that we can do even more faster than anyone realized now I'm happy to hand, this over to Brian Our Chief operating officer, and with Amy or my closest partner and accelerating.
The transformation many of you know, Brian and have worked closely with him and his many global executive roles at Salesforce. Bryan has now been with us for more than 23 years and as employee number Lucky six number of 15 actually it's Lucky 13, Brian Thats you No. One has had more customer success than you at Salesforce.
And I couldnt be more thrilled to have you as our COO I'm really grateful for your leadership and the success that you're having with your team and Wow, what a great quarter you delivered Brian . Thank you for everything in closing I want to thank all of our own Hana our employees our customers our partners and all of our shareholders for another strong quarter.
And now Brian .
Over to you.
Thank you Mark as Mark said, the accelerated transformation of profitable growth. We have underway is already having a positive impact is reflected in our strong results in the fourth quarter I am pleased with how we're improving our execution and delivering customer success and the ongoing measured buying environment.
As part of our short term and long term restructuring we've been re architects how we go to market in a more efficient productive and profitable way.
Just the size of the sales success organization by 10% and are planning further improvements through the work we're doing with vein.
We're also laser focused on performance productivity and accountability of all of our teams we are better aligning incentives with margins removing layers and increasing spans of control to unleash even higher performance.
We're inspecting every part of our business to find opportunities to drive efficiencies and reduce cost of sales marketing and G&A.
We've learned that we needed to rebuild our entire sales process to ensure faster onboarding with reps able to better understand our entire product portfolio and speak the language of our customers in weeks not months.
During the pandemic, we saw productivity drop them on our account executives who are working exclusively from home I believe when our people are together they are better learners collaborators and networkers.
It also reinforces our performance culture.
That's why our sales success in service.
Office are in front of our customers a minimum of four days a week.
The other in person is accelerating enablement in driving our performance and productivity I'm confident these changes will drive the outcomes that we're all looking for.
Now before I hand, it off to Amy I'll briefly share some customer highlights from the quarter.
We had great customer wins across all products industry segments and geographies, we deepened our relationships with Walmart State farm IBM Siemens the state of New York, Volkswagen Group, Hitachi and many more leading companies.
I'm very proud of our teams that we recorded record low attrition and once again this quarter, which is a testament to how our customer 360 platform is providing the cost savings efficiency and productivity gains our customers need today.
As customers are looking to consolidate platforms and reduce complexity were seeing many multi cloud expansions a key growth strategy for us our top 10 wins in the quarter included five or more of our clouds and our top five customer wins included seven or more of our cloud. This is an example of our customer 360 strategy working.
We also continue to see strong momentum from our vertical solutions, which deepened our customer relationships across industries and geographies, while accelerating time to value.
In the quarter eight of our 13 industry cloud grew above 50%.
Just unbelievable results there.
Verticals are key driver of our growth strategy and it's why we've amplified them aggressively initiatives be two months.
Tableau and meal soften side continue to be highly relevant for our customers and as Mark noted in his comments. They are part of our largest and most strategic deals in the quarter and we're very proud of the progress we're seeing under the new leadership.
Deeply integrate these acquired companies into our core sales and service motions.
Mark also mentioned data cloud, it's going to be an incredible driver of organic growth going forward. As these new capabilities are built on the platform and seamlessly integrate into some of our largest cloud sales cloud service cloud marketing cloud and commerce cloud.
We will see many more companies use data cloud like Formula One American family Insurance PGA Tour superstore.
This amazing technology to deliver intelligent automated and real time customer engagement. It is a huge opportunity.
In closing I'm immensely grateful to our customers, our employees and partners and our shareholders for their continued support.
Unwavering in our commitment to deliver customer success and in our transformation to profitable growth now over to Amy.
Thank you for home it is great to be here today to talk about our financial results and the transformation underway.
As we laid out at Investor Day in September and Anthony will go for sales force.
As Mike called out we are focusing on four key areas.
And long term expense restructuring.
Productivity product innovation and of particular importance.
To build on our relationships with our shareholders.
Near and long term restructuring is absolutely necessary.
Chuckles.
Over the past very intense language at all since our last earnings call Mark Brian .
With all of this together and without leadership.
To ensure our cost restructuring actions to accelerate our profitable credit costs.
We have already taken action on decreasing our workforce and we I can tell it all on our real estate footprint.
I wanted to emphasize that these are just the first stop.
We drive longer term structural improvement and look forward to working closely across the company from comprehensive operating and go to market.
Since I took on the CFO more than 10 years ago I truly enjoyed spending currently and hearing feedback from our shareholders.
Just this past quarter I think April with shareholders extensively.
Virtually and in person in San Francisco, and New York and across Europe .
The feedback has been a long sleep barnwell burn, helping us shape, our transformation and.
And based on actual bump.
Our comparable offer and our profitable growth framework disciplined capital allocation and opportunity to trial shareholder barrier.
Now turning to our results for Q4 fiscal year 'twenty, three beginning with top running commentary.
For the fourth quarter revenue was 838 billion up 14% year over year or 17% in constant currency.
With the beat primarily threatening Brian look now.
And tableau and slight improvement in foreign exchange rates.
For the full fiscal year revenue was $31 4 billion up 18% or 22% in constant currency.
Total foreign exchange headwind for the year was approximately 869.
Geographically, we saw strong new business growth I mean, other kingdom, France and Switzerland.
The United States.
<unk> remains well sorry.
In Q4, the Americas revenue grew 15%.
Increased 13% or 20% in constant currency, and APAC grew 18% or 30% in constant currency.
Industry perspective.
Our strong growth in public sector, and travel transportation and hospitality.
Financial services and high Tech bucket Gary showed weakness.
And from a product perspective, as mentioned Youre talking <unk> outperformed our expectations.
We continue to see customer spending pressure in commerce and marketing.
Okay.
For revenue attrition, we remain at record levels, ending the quarter below supplemental behind 5%, reflecting the final rules that our services are providing our customers and our customer success.
non-GAAP operating margin finished stronger than expected in Q4 at 29, 2% and 22, 5% for the full fiscal year.
You are then expected performance does include some one time benefits I want to call out.
Yes.
First there is a restructuring benefit of approximately one five points for Q4.
Additionally, in Q4 were approximately four and a half point of temporary benefit from license based revenue performance annual compensation rational range for both performance as well as other one time efficiencies and savings.
Even when normalizing for these benefits still represents our highest ever quarterly and annual non-GAAP margin performance.
Q4, operating cash flow was $2 8 billion up 41% year over year Q4 free cash flow with $2 6 billion up 42% year over year.
For fiscal year 'twenty, three operating cash flow was $7 1 billion up 19% year over year.
As a reminder, this includes a four point headwind from cash taxes associated with tax law changes that required the capitalization of certain R&D costs.
Free cash flow finished at $6 3 billion up 19% year over year, driven by strong collections during the final quarter of the year.
Turning to remaining performance obligations or RPM, which represents our future revenue under contract.
Q4, 48, 6 billion up 11% year over year.
Current remaining performance obligation or CRP al.
Ended at $24 6 billion up 12% year over year and 13% in constant currency.
The outperformance was driven by strong go to market execution, particularly on early bringing loans and your soft and some recovery in foreign exchange rates.
Finally, we continued to deliver on our commitment to returning cash to shareholders.
We returned $2 3 billion during the quarter for a total of $4 billion since announcing our first ever share repurchase program in August .
This represents more than 60% of free cash flow.
'twenty three.
Before moving shrank.
To briefly discuss the current market environment in.
In Q4, we continued to see the measured environment, we've called on over the past two quarters.
This resulted again in elongated sales cycles additional via our principal Larry NPL compression.
Our guidance assumes these trends persist with no material improvement or deterioration.
Now to our guidance, let's start with fiscal year 'twenty for ethylene.
As we've discussed over the last year Salesforce is deeply committed to structure our margin expansion and we are accelerating on our new day for profitable growth framework.
At <unk>, we guided to 25% plus margin by FY 'twenty, six and we emphasized our ambition to grow margins.
Sure.
Now for fiscal year 'twenty four we are pleased to share that we expect non-GAAP operating margin of 27%.
Representing a four five point improvement year over year and exceeding our goal.
And we are just getting started.
One item of dynamic our guidance includes slightly under one five points of benefits due to a depreciation change to the useful life of certain equipment by one year.
As of February 1st.
For our infrastructure related equipment. This change is to align with that.
Four to five years.
And for ITM fully equipment, that's changed from approximately three to four years.
And as a general reminder, because our regional revenue and expenses are typically in the same currencies there tends to be a natural FX hedge in our operating margin.
On revenue, we are expecting $34 five to $34 7 billion, representing over 10% growth year over year and the same in constant currency.
On attrition starting in FY, 'twenty, we are including Norfolk and capital Io in the metric as a result attrition is expected to be slightly above seven 5%.
Next we are planning for stock based compensation as a percent of revenue to begin trending lower this year to below 9% in fiscal year 'twenty for.
This is primarily a result of the decreasing impact from prior M&A as well as adjustments being made through our equity program.
We expect fiscal year 'twenty for GAAP EPS of $2 59 to $2 61.
Including estimated charges for the January restructuring of 85.
non-GAAP EPS is expected to be $7 <unk> to $7 and 14.
We expect our fiscal year 'twenty for operating cash flow growth to be approximately 15% to 16%.
Important to note. This includes an estimated 14 point headwind related to the restructuring.
As a reminder, we will see an increase in our cash taxes in fiscal 'twenty four as we draw down our remaining net operating losses.
Capex for the fiscal year is expected to be slightly below two 5% of revenue.
This results in free cash flow growth of approximately 16% to 17% for the fiscal year inclusive of the restructuring charge mentioned above.
Now to guidance for Q1.
On revenue, we expect 816 to 818 billion growth of approximately 10% or 12% in constant currency. This reflects a 115 million FX headwind.
For Q1, we expect GAAP EPS of 24 to 25 cents and non-GAAP EPS of $1 60 to $1 61.
<unk> growth for Q1 is expected to be approximately 11% year over year and the same in constant currency.
Our guidance continues to incorporate the persistent measured customer buying behavior.
On long term targets I'd like to provide a few updates.
First with the acceleration on our profitability framework in FY 'twenty four I am very pleased to announce that we now expect to achieve non-GAAP operating margin of at least 30% in Q1 of fiscal year 'twenty five.
And I want to emphasize that 30% represents a milestone but not the destination.
Not putting a ceiling on our margin aspirations.
We are thrilled that we are exceeding our FY 'twenty six profitability goals years in advance.
Note that we are not reiterating our fiscal year 2006 revenue target of $50 billion at this time due to the uncertain macro and currency environments that we have discussed.
We anticipate having further updates to our long term plans at our next Investor day.
Next as we continue to focus on shareholder return and disciplined capital allocation I'd like to share a few additional updates I'm.
I am pleased that the board has approved an increase to our share repurchase authorization from $10 billion to $20 billion at.
As a result, we now expect to fully offset our stock based compensation dilution through our share repurchases in fiscal year 'twenty four.
On M&A, we are confident in our current portfolio.
And are focused on continued integration of current assets reflective of that you have already heard from Mark, but the board has decided to disband or M&A.
In closing I would like to share deep gratitude for our shareholders, our customers and especially our employees.
Our relentless focus on execution and our proactive management in the current environment allowed us to close out a strong quarter.
Sets us up for a transformational fiscal year 'twenty four.
It is a new day at sales force and as we look ahead I'm excited for the opportunity in front of US as we continue to drive profitable growth and shareholder value.
Now Mike shall we open the call up for questions.
Thank you Jamie operator, let's go to questions. Please.
Okay.
Thank you if you would like to ask a question.
Plus star followed by the number one on your telephone keypad again in a matter of time, we do ask that you limit yourself to one question.
Your first question comes from the line of Keith Weiss with Morgan Stanley Your.
Your line is now open.
Excellent. Thank you guys for taking the question and congratulations on a really strong.
A strong end to the fiscal year.
This might actually be a question for Brian because I wanted to dig in on the growth side of the equation.
Both in terms of like how you guys exceeded expectation so well in Q4, but so on a go forward basis. It sounds like Theres a lot of changes taking place.
Within the sales force a lot of restructuring in terms of how you guys are going to market.
How do you garner confidence that that's not going to impact your ability to grow on a go forward basis, and you are not going to see.
Additional headwinds to growth as you go through this restructuring or you don't like to sharply and then maybe to bring Amy enter into the equation. When you guided for FY 2004 did you assume any any negative impact from this restructuring did you take down any of your expectations in terms of productivity to account for any execution challenges.
Sort of execution risk around these sales restructurings. Thank you.
Yes.
Keith first of all thanks for the question.
Really appreciate it.
And I agree we had very strong performance in our Q4 very happy with that.
We made enabling our salespeople to talk differently about the value of our customers get.
Trying to value is really critical to our customers automation and digital transformation.
Efficiencies and cost reductions in their organizations and we did a beautiful job in the fourth quarter to drive that message to our customers to see better than expected performance.
On your question about next year and some of the changes we're seeing in our organization.
We feel very good about the work that we're doing.
As we mentioned in the commentary the organic innovation Thats coming out of our product organization is phenomenal we have an incredible portfolio to go sell and the customer 360, new product that we can go sell and data cloud.
And as you know the CLO market continues to grow very fast in double digit and we think we should be taking market share in that and that market environment.
I also would like to say I think we have an opportunity to drive higher productivity amongst our salespeople.
We've got an opportunity to bundle products together.
And to show up differently in front of our customers to consolidate organizations that have been standalone sales organizations in the past bundling products together driving higher ASP per salesperson.
It's really what we want to go into next year, and we don't think that the impact.
Some of them changes that we're making the re architecture of the organization is going to have an impact on our growth next year Amy over to you great. Thanks, Brian Hi, Keith So a couple of things first just going back to your question on growth and the beat for Q4 I did want to point out that that was primarily from Neil soft and tableau that license revenue came in very strong.
Wrong in Q4, and as you know the way that we account for license revenue gives it more of a boost in quarter than our subscription. Although we did see a slight improvement on foreign exchange beyond what we were expecting so all of that led to a very strong Q4 on the revenue side in terms of the FY 'twenty four guide we feel very good about the guy.
Coming in a little above 10% for this year, we've taken into account.
The factors that we're talking about including macro on macro what we're assuming is really no near term change when it comes to the selling environment. So not expecting again upside youre expecting a material deterioration I think Brian really already hit on the restructuring.
Your next question comes from the line of Kirk <unk> with Evercore. Your line is now open.
Yes, thanks, very much and congrats on the quarter and thank you for the very comprehensive outlook going into next year Mark the questions for you I think this is obviously a new chapter for Salesforce.
Back as sole CEO I think I get a lot of questions from folks asking how youre going to be prioritizing your time now.
How your tie how youre going to spend your time, given these new sort of parameters that execution, you're setting out for the company. So it's hard for you to just comment on that a little bit. Thanks.
Okay.
Thanks, so much for that question I really appreciate it and really appreciate everyones support during the quarter I don't think we could have had this quarter without everyone who's on the call.
We really are very grateful to the support we had especially from the analysts.
And the shareholders because really through their guidance and Enlightenment, we were able to execute a different plan I think when we look back.
And I think we have to look backwards to go look forwards.
Obviously, the 2021 calendar year is like something that none of us have ever experienced in the technology business. It was incredible.
You can see that throughout the whole industry.
Then as we entered 2022 it was not 2021 and I think we all understand that currencies.
Measured by an environment macro conditions inflation the stock market. So when we planned 2022 out of 2021 I'm talking calendar years now.
That's where I think we had a little incongruent and then we had to adjust and shift and pivot and that's really what happened.
Right around Dream Force, we really started to see it we have that great Investor day with you all.
We put out their profitability framework, we put together our fiscal year 'twenty six targets and.
90 days ago.
Everything happened what happened we don't have to go through it again doesn't matter behind us.
But you all said Hey, you guys can hit the hyperspace pattern, just like I said.
We did we hit the hyperspace button and we said we can hit these targets now we don't have to wait two years and that's why I'm, putting my time my energy my effort.
I'm very proud of the team for delivering this Q4 operating margin of 29, 2% because that really has become like our Northstar as Amy just said.
We look to next year, even in Q1 and so forth.
We're saying that this 30% plus world. This is we should be living in that we have onboard of the entire management team worldwide to that fact, it's a core part of our <unk> to one of the name of our methods that we are guiding 30% plus.
That's our direction and at the same time, we had a great quarter. Just like you just heard Q4 revenue at 838 billion.
Theater expectations for many reasons, some currency, but really what was execution and execution in the corner from two great product lines with our tableau in millsap team extremely impressive execution and.
Also just call out what an unbelievable performance for the year.
31 four.
This is just a huge incredible software company that has got great margins and great cash flow in a great position in the market. So that's where my head is at.
There is basically two motions here one is just like we just heard Brian has to continue to deliver the ACB.
That's why we are keeping a lot of stability in our sales organization right now maintaining the productivity deliver the year an ACD. This is really critical for US that's motion number one motion number two is also at the same time.
Our profitability profitability is are truly our number one strategy and that's my number one strategy. That's what I've been focused on with the management team that is the number one thing we talked about at the start of every meeting we have in this company and that is why we are able to deliver that in 90 days you. All know that we've never had an <unk>.
<unk> focus in the company before because we've had 24.
Incredible years of where we've had to just grow grow grow there have been moments, where we've had to pull back a one or two bad recession with the pullback <unk> nine we had to pull back.
And reassess we're kind of looking at this moment as hey, we can reassess. This is a incredible moment, we can deliver great results you saw we're delivering more than 10% growth revenue growth, but we want to deliver this more than 27% margin growth for the year.
Not growth, but Turk Margaret a margin target and we're going to obviously the growth rate is actually much higher I mean, I think that that is amazing that we've delivered more than four points last year.
Basis points four points in Florida as points this year and that's my that's my main focus.
I've gotten a lot of great.
Paging I'll just.
Huge callout to my mentor, Larry Ellison, who has.
<unk> spent a lot of time with me, giving me the Oracle playbook and I am very grateful to him. He was the first person who texted me. After the earnings came out today and as I tell you. It's good to have friends in the world when things happen and he has been a great friend and we're executing that playbook to increase our margins. They obviously have best in class margins. So it's great.
To have someone on your side like that.
Great to have all of you on our side as well because you know without without all of you we would not be able to deliver this quarter. So thank you so much for everything.
Thanks, Kirk for the question and we will go to the next one.
Your next question comes from the line of Brad Sills with Bofa Securities. Your line is now open.
Mr ourselves with Bofa Securities. Your line is now open.
Under full thank you so much for taking the question and congratulations on a nice finish to the year in margin and outlook I wanted to ask about how important the <unk>.
Sept of CDP and vertical solutions are as you pivot towards this ongoing sales productivity and asking reps to sell more of the solution of all the great components in the Salesforce stack, how important are those solutions and really pulling in more of those components over time. Thank you.
Well I just think Thats a great question, Brent and thank you so much and also thanks to you for the quarter.
Your support I want to say.
That of course, we have a lot of great products.
Sales cloud service cloud our platform marketing cloud Commerce cloud verticals like you know, but.
There's been an evolution of our CDP I think it kind of started in marketing and it has become so much more we are entering this new world of AI.
And.
We've always been influenced by the world of AI, and Iot and see and our customers try to add in all of their.
Intelligent devices onto our platform. So they can have better relationships with their customers who are connected to them and these incredible new ways and you may remember we were going to have vendor of the Iot cloud that was kind of a version one idea of the CDP and it didnt exactly.
Work out the main reason why is customers really wanted it integrated deeply inside sales force with our metadata platform and they wanted it to be a data lake inside Salesforce and we had built it outside so we realized let's build it back inside the platform, which is what we've done and this data cloud.
You can see it now deployed in customers and I'll give you a couple of great. Examples one is Ford amazing what they have done with the data cloud of course, they are using sales cloud and service cloud and marketing cloud, but it's all integrated with the data cloud and they deployed their first product this quarter, which is the marquee. So if you have a marquee I have one they are amazing.
And youre getting text messages from forward or email messages youre getting them from our data cloud and that is.
Incredible to see that Boston scientific another amazing story that I mentioned.
This idea that they were able to use data cloud to unify their front office and back office systems together in this really incredible integrated way.
Formula One I just reviewed last night, how they can only 1% of formula fan Formula one fans F. One fans that they are the only they come to the races. The other 99% they have to connect with electronically, but they need an intelligent AI based system with data cloud you can bring your own.
AI model, we adjust it and then our system auto magically is connecting with your customer and as they're interfacing and all of our different clouds. The AI based data cloud is doing this incredible heavy lifting so it's going to be an amazing organic driver for us I mean, it's it's probably our fastest growing cloud in the quarter.
Order and I can't be more excited to show more and more of what we're doing there you've seen some of it a dream force you saw some of it where we have now a deeply integrated tableau into it. So tableau has a server now finally, but tableau also has an incredible window under all of the Salesforce data through the data cloud really neat work.
And our engineering team a huge call out to them for this great success.
And Brad just another comment quickly on the industry play.
A big part of our success in the quarter and what was the big bet for us in the coming years as we.
As we invest heavily in our industry cloud I think you heard in the commentary eight of 13 of our industry cloud grew above 50% and <unk> in the quarter.
Really a great payoff and the investment we've made in the technology there and.
And really having our sales teams show up and speaking of customer.
Language of our customers to drive the growth of this business.
Couple that with that with the strategies around driving international growth International expansion of all of our products along with multi cloud selling great opportunity for us going forward to industry, a big part of our strategy.
Thanks, Brad Let's go to next question.
Your next question comes from the line of Raimo <unk> with Barclays.
Your line is now open.
Thank you.
Congrats on the tough decisions this quarter on the great quarter.
Thank you all your price for that and the hard work you've done.
Question from me multiple Brian .
There are obviously, where there were comments out from you guys around sales productivity.
We kind of went through to January .
About the excavators, peaking now where do you see that sales productivity that you are.
Poland and what do you think.
Exiting salesforce setup that you have here. Thank you.
I'm not exactly sure youre cutting out a little bit there. So I'll try to deduce what's your question was around productivity.
<unk> is a big component of our growth strategy going forward, how do we get our account executives to sell more each and every month, each and every quarter to our customers.
Got some real some great strategy around that enablement is a big component of that you heard in my commentary earlier that we're very focused on ensuring that we're enabling our entire sales teams around our entire product portfolio.
And bringing people back to the office to drive that productivity that learning that is so important for us as we think about the growth going forward. I also mentioned an opportunity we have to bring our products together around a buyer how do we put some bundles together to drive higher asps for all of our sellers and solve more problems for our customers with a single selling motion.
Versus today maybe.
Several selling motions to go win those deals and so productivity a big driver of our growth strategy going forward and effort frankly that.
We've always kept productivity flat and hired more aes to drive our growth, we're going to invest that equation going forward.
Think about productivity as our driver going forward. So really appreciate the question and hope I got it because your line was breaking up.
Yes.
Thanks, Karl and then let's go to the next one.
Our next question comes from the line of Kash Rangan with Goldman Sachs. Your line is now open.
Oh, Wow, what an amazing end to the fiscal year congratulations to the team.
Much much much much much better than expected brighter days ahead, a question for Mark and maybe Brian you can chime in here. So it's mark we went through the 2008 2009 recession with Hudson tends to rebound.
The company as a smaller company, but you still were able to get profitability up we went through a bit of a downturn we came out of it.
So are their parents to be drawn in this cycle.
There is certainly uncertainty about recession and whatnot, that's damping spending bill.
Take that as a fact.
The growth rate that you guided to should that be the aspirational long term growth rate of the company or do you think if and when the recession fears that there should be a rebound in spending.
We understand that all the go to market rationalization that you and Brian and you're all working on should allow you to gain share. So help us think about the recovery curve off Salesforce. The next economic cycle. Thank you so much.
To understand what we're going through I really did go back and looked at all the numbers in a 102 in <unk> and what you said cash is quite enlightened in that.
Of course, we saw in <unk> fall off dramatically and of course, we hit the brakes on spending and we accelerated margin I think six points during that time I don't know the exact numbers, but.
It was a moment where you see.
Sales and marketing company as marketing spend.
When these things happen and Ceos, they stop hiring salespeople they stop spending on marketing right everybody knows the mythology of what how <unk> behave in a recession as soon as the stock market Implodes Ceos.
They hit the brakes, so I think that that's what we saw in <unk> nine I think we really started to see that in the middle of 'twenty two.
Maybe August September October November .
As we've exited Dream force we were like.
That we can execute our playbook, we have a recession playbook, we know how to.
Transformed the company while you just saw in the last 90 days, where the things we're doing are launching on our <unk>.
Launched our profitable growth strategy. This is a key part of what we're doing are really making sure that every executive in this company knows that profitability is our highest priority and making sure that we keep in the very forefront of our mind that salesforce is not just one of the largest in.
Our fastest growing you can see that I think that we gain we probably at we probably add.
Added or created more ACB than all the other SaaS companies like our easy levers Acu numbers are massive.
But also the most profitable software company in the world. The most highest cash flow that that's what's on our mind and to do that we are really focusing on making sure. We have the expertise in the company in <unk>.
I will tell you Dream Force you are also in the audience you know Mason more if it was there sitting next to his founder Jeff oven and.
We had been working with Mason.
<unk>.
He started bringing us these incredible ideas our distribution on pricing on efficiency. It was these incredible strategic decks I had never seen the level of quality of work from anyone outside the company before I was just so inspired with what Mason came.
Came up with that I'd like you know what we should put him on the board and he has added just incredible value.
Robley a lot from the Microsoft experience, obviously being on the Microsoft Board was awesome.
For him and the expertise that we're getting as a board member is incredible I think he starts today, but he has really been working with US now and it's been really cool.
Dan.
And a huge callout to Jeff too because just been a friend for many years.
Great thoughts I'll tell you.
And all of these guys I'll tell you there's a lot of them. We all know that Ive learned from everybody I really appreciate all of their feedback has been fantastic.
And we're also adding two more great board members today, I've mentioned already but are you planning on those fashion the CFO of Mastercard incredible financial expertise and also Arnold Donald who I've known for so many years is probably one of the greatest Fortune 100, Ceos of our time incredible executive looking forward, everyone getting to know them and.
And again, a huge thank you to sandy and Alan all of you I know many of you work for Sandy and your careers and.
It's hard to see Sandy leave the board because we love him, but it's been 20 years. So it's probably the right moment, we're having dinner next week.
It's going to be a lot of gratitude, there and I think that those points combined with by the way we're going to repurchase so much stock $20 billion I think it's the right time, we've already did $4 billion and that's obviously critical for us and we've been created this new business transformation Committee. So the board can.
Keep their eye on these key kpis that we're talking about but yes performance productivity.
The fundamental profitability of the company the prioritization of our products.
Leading with growth like with our new data cloud with our verticals that was very enlightened that question and our services organization as well we have a lot of growth things. So when you look at.
The buying environment gets back online and some huge way and it doesn't become measured.
I think we are very well positioned for the future and we have these great customer relationships.
I don't think theres any other evidence of that.
So we've just hit a record low on customer attrition.
Your next question comes from the line of Brent Thill with Jefferies. Your.
Your line is now open.
Amy given Mark's number one profit goal is profitability can you outline where this big jump is coming from can you give us just a sense of the.
The big areas that you feel that you can really cut and I guess back to Mark. It seems like you can keep growing at a pretty good range, even with higher margins. So this doesn't really feel like it's really sacrificing growth when you're when you're guiding to a still a double digit number.
Okay.
Thanks for the question. So we've got great plans for this year as you know we guided to 27%.
For fiscal year, 'twenty, 'twenty, four and we plan to hit 30% early in the following year.
Very excited about what we're doing this is that journey that we've been on it for quite some time here just in the last two years, we have increased our operating margin almost 500 basis points and this was while fully absorbing slack.
We announced at Investor Day, we are going to keep going and set out a goal of 20.
25% or more by FY 'twenty six we really hit the gas pedal on that over the last 90 days accelerating to the 27 and 30 that I mentioned to you again.
As I said, even at 30, I don't view as a ceiling thats really.
Just getting started on this front now in terms of how this is going on there has been a lot we've been doing leading up to that just with discipline across the company looking for savings. We took two major steps in January one was the real estate.
We announced that we are going to be shrinking our global real estate considerably over the upcoming years, yes, there was the head counts and on the job eliminations.
Do you want to pause for a moment on that.
A call like this it's easy to talk about that very clinically as it head count just represents dollars and not <unk>.
We fully realize that theres employees, whose lives and careers and families for deeply impacted by these decisions and I just wanted to make sure our employees that we never lose sight of that.
But these actions weren't our first steps and they are going to be plenty more actions that we take to increase our operating margin going forward. We have a number of initiatives underway, Brian talked about quite a few in the sales and marketing area.
And G&A are really two of our greatest opportunities. Although we have started a comprehensive operating and go to market <unk> going across all of our business. This has led.
Just kind of want to get us into work with us.
To go through with US I think that we've got great initiatives underway. The other thing I would say finally in terms of my confidence and it really comes back to the passion and the skills of our employees.
When we focused on sales we became the fastest growing enterprise software company ever when we focus on product, we create an unmatched customer 360, and now we're asking all of these incredibly talented and passionate employees to bring that same focus to productivity and efficiency and with all of them.
And then behind US I have no doubt that we're going to be world class for profitability.
Thanks, Brett.
Go to the next question.
Your next question comes from the line of Karl Keirstead with UBS.
Great open yes. Thank you Amy just continuing on that margin conversation you hinted in your comments about <unk>.
A desire to close the.
The GAAP between GAAP and non-GAAP earnings. So I'm just wondering if you could talk a little bit about what key levers you're using to do that you hinted at adjustments to the equity program it might be interesting to hear a little bit more and over what timeframe do you think that bridge might close thanks, so much.
Great. Thanks for the question Karl Yes, there is certainly an increasing focus on GAAP margins and in particular on adding back stock based compensation in two of our non-GAAP operating margin.
Spent quite a bit of time in Europe meeting with investors in January and in Europe that is the first thing that everyone does so very much top of mind, alright stock based compensation for last year was just over 10% we plan to drive that below 9%. This year and we're getting there are two key.
A key lever is there one is that we're actually burning through a lot of feedstock that came with some of the M&A. We've done in recent years. So that is rolling through our system in a way that's going to help drive the numbers down the others are specific changes that our compensation committee has been making very thoughtful as to how we grant equity and.
The form of equity that we grant so we will have more coming up on that as we get into proxy season, but.
It is going well over the next few years.
Thanks Carl.
Well go to our last question now.
Your last question comes from the line of Sarah <unk> bowler with Macquarie Capital. Your line is now open.
Thank you so much for squeezing me in again I really appreciate it and congratulations to the entire team on an Oscar worthy quarter.
Karl really did a great job of asking the stock based compensation question I was going to ask so I'd like to take it a little bit back.
It may be getting your understanding.
The macro environment that helped you build your outlook guidance.
Brian maybe this is a question for you in terms of getting a sense for sort of where you saw.
Points of stickiness.
Point of disruption or otherwise within your various vertical categories.
Yes. Thank you Sir I appreciate the question.
And yes, we are in a measured buying environment, there's no doubt about it and the impact of that are things like elongated sales cycles and multiple layers of approvals that we're facing.
And maybe even some shrinking deal sizes.
One of the nice things we've done though is to make sure we're training our people to navigate those.
Those headwinds that we've got in the market to go execute better we saw that happen in the key in Q4, and we'll see that happen in fiscal year 'twenty four.
On the industry side.
And then maybe even the segment side in our SMB market.
Economic headwinds tend to hit that a little bit harder and so we saw some headwinds in our SMB market.
Some of the self serve.
Our strategies and motions that we have for slack or impacted.
By the economic headwinds and then from a.
From an industry perspective.
We actually saw a lot of strength in industries around public sector manufacturing engineering, excuse me energy and travel hospitality was a strength for us in the quarter.
Some areas that we continue to see headwinds in technology is probably not a surprise to anybody and also financial services were a bit of a headwind for us in the quarter, but have a lot of belief that we can turn that around in FY 'twenty four so Sarah. Thank you. So much for the question appreciate it.
Okay. Thanks, Erin and thanks, everyone for joining us today, we appreciate everyone, taking the time and look forward to seeing everyone over the coming several weeks.
Thanks Al Hello.
Okay.
This concludes today's conference call. Thank you for attending you may now disconnect.
Yes.
Okay.