Q2 2020 Earnings Call - Acquisition of Tableau by Salesforce
Thank you so much Brian good afternoon, everyone. Thanks for joining us for our fiscal 2022nd quarter results Conference call. Our results press release, SEC filings and a replay of today's call can be found on our IR website at www Dot Salesforce dot com slashing faster.
With me on the call today, as Marc Benioff, Chairman and co CEO , Keith Block co CEO , Mark Hawkins, President and CFO .
Taylor, President and Chief product Officer, and Amy Weaver, President legal and corporate affairs.
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, which are subject to risks uncertainties and assumptions.
And should any of these materialize or should our assumptions prove incorrect.
Actual company results could differ materially from these forward looking statements.
And description of these risks uncertainties and assumptions or other factors that could affect our financial results are included in our 60 filings, including our most recent report on Form 10-Q .
Before I turn the call over to Mark Let me provide a brief comment regarding tableau.
Incredibly excited about our acquisition of Tableau software, which closed on August 1st and have provided revenue guidance for tableau for Q3 and 420.
As previously disclosed in our 8-K, United Kingdom competition and markets authority or CMH is reviewing the transaction and has been posted on separate water pending completion of its review.
Due to the whole separate order or building discussed tableau today on this call because women.
Happy to be working constructively with CMS conducts its review and with that let me turn the call over to Marc Benioff.
Alright, thanks, so much John I really appreciate it and.
Hello, everybody I'm actually in Geneva, Switzerland, and the team is in San Francisco I'm in Geneva at the World Economic Forum headquarters, where I'm, a 10 day in our annual board of Trustees meeting and also.
Our international business Committee of our top 200 Ceos in the world.
And it's been a fascinating meeting, but I'll tell you one thing that everyone is really excited about here is what happened in the United States, which has got a business round table.
One of the top two business groups in the U.S.
Published an incredible statement. This week on the purpose of a corporation and talked about how the purpose of the corporation is to serve all stakeholders and why that's exciting here is many of the words that they were using an almost the exact phrase phrases were written by Klaus Schwab the founder of the World Economic Forum over 50 years ago openings that you see Berkeley, and it's great to see the B R. T. I take this as incredibly progressive stamps and I'm, just very grateful to them because of course its sales force. We do believe that business is the greatest platform for change.
Well I want to just thank you John for introducing that and also thank you everybody for being on the call today as you can see we had a.
Just incredible a quarter here revenue a quarter rose to $4 billion up 22% in dollars and 23% in constant currency and we ended the quarter with more than 25 billion. In total remaining performance obligation that was up 20% versus last year, it's really amazing what's happening at Salesforce.
Oh with organic growth in our acquisitions of tableau, Salesforce dot or Qlik software, we are raising our fiscal year 20 revenue guidance to 16.9 billion at the high end of our range representing about 27% growth year over year now we have really been very strategic and building out our customer 360 platform. This is our vision that really is at the heart of what's happening at the fourth industrial Revolution, everybody knows the fourth industrial Revolution is under way, everyone and everything is getting connected but behind all of those things is the customer and certainly all the customers that I'm working with here in Geneva, and all the customers that we work with around the world well they realize that behind all that fourth industrial revolution is their customer and that they need to build that customer threesixty platform.
And that's what we're doing we're doing everything we can to build to deliver this incredible vision and we couldn't be more excited to build out our customer 360 platform organically as well as through the acquisition of some phenomenal companies and some phenomenal talent now with customer 360, we've just never really been better positioned for the future. In fact, we're at the beginning of enormous wave of digital transformation I'm certainly seem that Peter in Geneva, ITC forecast global spending on digital transformation to reach 1.18 trillion in 2019, and that's an increase of nearly 18% over last year, it's really quite amazing that Salesforce is at the center of this massive shift because every digital transformation of every single one of these companies that we're talking to begins and ends with the customer in fact, I'd see also forecast global spending on customer experience alone.
To reach 641 billion by 2022.
Every company needs a intelligent 360 degree view of their customers they need to personalize every customer experience they need to predict customer behavior and anticipate their customer needs and they need to build modern mobile apps quickly and deliver the right services at the right time on any device well got his customer threesixty, our vision for bringing companies and their customers together and it will be a huge growth engine for us over the next decade and for our customers. It's their aspiration goal, they're all trying to create a customer threesixty. They want a customer 360 to see what's happening with their customers. In this incredible time of change and they want to understand their customers and connect with them like never before Salesforce is not number one CRM add on to our customer Threesixty platform is a leader in sales and service marketing Commerce committee's integration after seven more.
You know customer Threesixty includes amazing platform services, such as absolutely, leading artificial intelligence and breakthroughs in vision and voice.
In mobility and security and because they are all built into the foundation of that platform. They're available to every one of our customers to every up and to everyone. We're operating at tremendous scale just look at some of the daily daily milestones our customers have helped us achieve with our customer Threesixty platform.
4 million sales opportunities and 4.3 million leads generated today 77 million service case interactions log 4.1 billion messages and email sent 4.2 million orders processed by 53 million reports and dashboards.
Okay. So then commerce page views.
You know, we're delivering world class <unk>, what Einstein Salesforce Einstein.
In customer Threesixty, it's actually generating now and I know many of you have been following this that's been troubled for me to see this but we actually do not 8.6 billion.
I am Stein protections that day, using our market leading artificial intelligence platform. We've also made I'm sorry.
It's an Einstein vision available to every salesforce out.
These AI powered capabilities for the future.
The customer experience, we're also extending the power of customer Threesixty with new services like Salesforce box same sales force maps and and as you've seen this quarter, specifically salesforce watching is the world's first declared a block chain solution for CRM built natively on our platform and with this new sales force maps, well, we're adding intelligent location based services.
Thank you for calling the conferencing Center a conference operator will be with you momentarily.
Customer Threesixty vision and our team has just done an incredible job getting this in the hand of customers at the heart of the customer 360 is our incredible community of our trailblazers, reducing trailhead, our free online digital learning platform to get the skills they need for the jobs in the digital economy. We're more focused on this digital education than ever and we realize to achieve this vision of a new economy that we all want we have to deliver this next generation vision of education as well, we now have 1.5 million learners changing their careers and changing their lives on trailhead, it's a 50% increase over last year and really cool just last week, we announced a partnership with southern New Hampshire University, one of the fastest growing universe is in the U.S. So that trailblazers can now earn college credit for free on trailhead Thats, just an incredible leap forward for trail as well.
Salesforce skills are in high demand for those of you who watched what happened.
I think just now about a week ago.
We saw that the Salesforce developer was ranked as the second number two on glass doors lists of jobs with the best career opportunities that was amazing for us a huge economy is developing around salesforce, one that will create more than 3 million jobs in.
More than $860 billion GDP impact worldwide by 2022, and we will continue to create opportunities for everyone to participate with our customer 360 vision with amazing Einstein innovations to millions of trail Blazers and innovating on our platform Salesforce is incredibly well positioned to help companies transform their customers and you'll see all of this.
At our all this amazing innovation and all this amazing customer success at Dreamforce, which this year will be November 19th in San Francisco, you probably know it's almost sold out so you'd better Register now we are really right down to our last few seats and we will be bringing together to the thought leaders industry pioneers amazed interpreters.
Incredible customers and of course, all of our Trailblazers for four days of customer success Trust innovation and quality and learning Dreamforce is an expression of our core values, our commitment to giving back which have been the key to our success as a business over the last two decades.
For those of you know, we also something about to come out which is our new book Trailblazer. The power business is the greatest platform for change clearly many of the concepts pioneered by Klaus Schwab here at the World Economic Forum in Geneva. It comes out on October 15th. So you can preorder your book now and I hope, you'll get a chance to read it and though and let me know you think at Dreamforce and until then I will look, forcing you all of you in November and now over to Keith.
Thanks, Mark and thanks, everybody for joining us on the call today.
As Mark said, we have incredible opportunity ahead, as more and more companies invest in their digital transformation.
Across every industry every geography, they are turning to salesforce as their trusted advisor and to our customer Threesixty platform on these new catalyst for growth.
Clearly reflected in our Q2 numbers as we continue to see great results across our clouds, our industry solutions and our region.
One hundreds of customers that mark and I meet with every quarter or looking for revision, they're looking for a strategy that will help and propelled our growth and to get closer to their customers are asking about the future their industries, you're asking us about their peers competitors are then transform are asking best practices from other industries and they're asking us most importantly about how to innovate.
It's not just about technology, we also want to learn about salesforce.
The conference operator will be with you momentarily.
Let them drive success with their customers their partners and their employees.
Throughout the quarter, we continued to build and strengthen our relationships with leading brands around the world.
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Today, our AI powered recommendations and eisai analytics to get a deeper understanding of their customers needs.
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Railroad system, one of the world's largest transportation companies chose salesforce.
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Unify the CRM platform to deliver faster more proactive service now that includes automated shipping notifications and tracking updates.
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Customers can plan better and improve.
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Your VNB.
And the Salesforce to power its mobile messaging program.
Our BMD expanded with marketing cloud to continue to deliver meaningful.
Hyper personalized communications with the community of guest.
Travelers.
Engaging with all air Bnb users across the globe on a single platform.
And we continue to expand our relationship with Marriott and one of the world's great companies.
He's using salesforce to better anticipate.
Each guest travel need.
Eight relevant offers during that.
To provide a more personalized customer.
Yes.
In May we.
Einstein analytics for financial services, giving wealth advisors managers and retail bankers the AI powered insight.
Certain customers.
And grow their book of business.
Momentum in financial services continues.
It's we expanded our relationship with HSBC.
And formed a new relationship with Unicredit in Italy in the quarter.
In the public sector.
US federal government increases.
Force investment.
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Putting the bureau of land management.
Sta and the US department of housing and urban development.
A critical part of customer service for many of our customers is also field service.
Yeah.
It's incredibly strategic to their operations.
Differentiates.
That's why as of Q2.
Service Lightning is growing.
Nearly.
100%.
In the quarter.
As Joe steels or is likely to mass production workflows employees.
These rentals.
And more.
With like Roger.
Yes.
Our recent agreement to acquire Qlik software will be able to deliver even greater field service innovation to our customer.
That's very very exciting.
Our international revenue growth continued in the quarter.
Super strong with EMEA growing it.
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APAC growing at 27% year over year.
Open constant currency.
Axa.
We're the largest insurance companies in the World is on a journey to a global 360 degree view every customer.
In the quarter, they made a number of strategic investments across several regions and divisions.
Flying service cloud to give their insurance agents, a complete view of every customer enabling them to have.
Personalized conversation.
And EMEA.
Form new relationships with HCM in Germany, the largest global manufacturer of offset printing presses.
And fashion retail.
Organization as.
Accusing Cup commerce cloud in the quarter.
In Australia, we expanded with hands rebate.
And formed new relationships with Ramsey health care, and the Australian Department of the environment and energy.
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In Japan.
We expanded with Hitachi.
And Mitsui.
With tomo insurance.
Yes.
Our partners.
Very critical to our strategy continue to help us deliver customer success.
Q2 and partners we're engaged in.
XT, 8%.
New business.
These partners continuing to invest in their salesforce practices global partnership vacations are up.
48% year over year that just.
On and going and grow it.
All seven of our top consulting partners run their practice.
On Salesforce and Salesforce as their fastest.
Enterprise Brad.
Yes.
DG partnerships are absolutely critical to our future and Thats why were thrilled.
About our new relationship with Ali Baba.
The global company it is important for us to sort of support.
Our multinational customers wherever they do business.
And finally, we closed our acquisition of Salesforce Dot order in the quarter and we continue to see incredible demand in the nonprofit.
Education vertical.
Calls.
With more than 44.
On profit and higher education customers.
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Our employees have given more.
Point $3 million volunteer hours, and we delivered nearly.
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Sure.
Last quarter, I mentioned, making investments to fuel the next chapter of our growth around the world.
Part of that investment is bringing incredible talent into the company and we've been very fortunate to add.
Extraordinary executives in EMEA and APAC to our international leadership team.
Later, this fall Jane and Guardian will become CEO for Salesforce, UK, and Ireland and Pip Marlow.
Will be joining us as CEO for Salesforce, Australia, New Zealand.
We're very excited to have met both onboard they're both great executives on closing I'd like to thank our employees.
Our partners and our customers around the world for their.
And of course, our company's great execution, so thanks to everybody.
Now I'll hand, this off the Mark Hawkins.
[noise].
Thanks, Keith and as you've heard we delivered strong results in the second quarter.
Including generating durable organic revenue growth.
Organic operating margin expansion year over year.
Here are a few highlights.
Total revenue grew 22% in dollars and 23% in constant currency.
Excluding salesforce dot or total revenue grew 20% in dollars.
The 21% in constant.
She she RPL grew 23% in dollars.
In 25% in constant currency.
We continue to put up solid organic revenue growth across.
Of our clouds.
And in our geography.
A few moving parts here for Q2 results. So let me take you through some of the additional details.
Starting with revenue.
Total revenue for the second quarter was 3.997 billion.
Including $54 million of acquisition of Salesforce dot or.
Just as we saw in Q1, and we continue to experience FX headwinds.
Revenue in the second quarter of approximately 34 million.
Year over year, and approximately $20 million sequentially.
Looking at the drivers.
Growth by cloud.
We continue to see strong subscription and support revenue growth.
Year over year with sales cloud growth.
Okay.
10%.
Service cloud growth of 22%.
Marketing and commerce.
Cloud growth.
86%.
Platform and other.
28%, which by the way includes $159 million of Neil soft.
Approximately 54% of ULE saw subscription and support revenue.
Is treated as term license.
Since.
Let me call out a few other items related to the various cloud growth rates.
In the quarter.
The FX headwind of a total for total revenue.
As I mentioned earlier.
Represents approximately one percentage point of growth year over year.
That affected each of our clouds on a similar proportional basis.
Yeah.
Our acquisition of Salesforce dot.
Ore represented approximately.
One to two percentage points of growth year over year.
Across each of our clouds third this was the first quarter of a normalized year over year compare with meals off.
So a meal soffe now in the base period.
The rate of growth.
Platform and other moderated in Q1 to Q2.
As expected.
Adjusted for these items, we were very pleased to deliver.
Bust.
Organic.
On a strict currency revenue growth across.
Two of our clouds.
You too.
Yeah.
Attrition also remained healthy in Q2 as we have seen over the past several quarters.
With dollar attrition and continuing to decline modestly.
Year over year.
Remaining below 10%.
[noise].
Turning to operating margin Q2, non-GAAP operating margin was 14.3%.
349 basis points year over year.
As a reminder.
Our Q2 operating margin and EPS results were affected by the settlement of our reseller agreement.
Salesforce dot or.
This one time.
Non cash accounting charge of 166 million.
As reported as a discrete line item.
On the statement of income.
They were slightly lower than we anticipated.
[noise].
We continue with our efforts to improve our operating efficiencies and we're pleased to deliver Q2 non-GAAP .
Operating margin improvement excluding.
Salesforce dot or noncash accounting charge of approximately 66 basis.
Just a year over year.
Q2, GAAP EPS was 11.
non-GAAP EPS was 66 cents.
In Q2 below the line mark to market adjustments.
For the GAAP EPS in the second quarter by approximately 10 cents.
Yeah.
Our non-GAAP EPS by approximately 11 cents business outperformance in the quarter.
Along with the lower than anticipated Salesforce Dot org settlement charge.
So the GAAP and non-GAAP EPS by approximately eight cents.
Yes.
Turning to cash flow.
Second quarter operating cash flow was 436 million.
On 5% year over year.
[noise].
Operating cash flow in the quarter was impacted by our recent M&A activity.
As well as continued FX headwinds.
On a trailing 12 month basis, we are pleased to deliver operating cash flow.
25%.
Thanks for the quarter was 178 million.
Turning to free cash flow defined as operating cash flow less capex.
Of 258 million.
On 10% over last year.
On a trailing 12 month basis were pleased to deliver free cash flow growth.
26.
Remaining performance obligation ended the second quarter to approximately 25.3 billion.
20%.
Versus last year.
RPL, which is approximately 12.1 billion.
Was up 23% year over year.
And on a constant currency basis was up 20.
<unk> percent.
Salesforce dot or contributed approximately 200 million.
To sum up.
[noise].
I will turn into Q3 and a half why 20 guide.
Yeah.
We're pleased to be raising our full year F Y 20 revenue.
$16.75 billion of 16.90 billion.
Our full year growth.
Of approximately 26 to 27.
This guidance includes approximately 550.
The $600 million of revenue from our acquisition of tableau.
Approximately 200 million in revenue from the acquisition of Salesforce dot or.
At approximately 25 million.
Revenue from Clark software.
[noise].
Excluding these acquired businesses, we expect top line revenue growth of 20%, 21% year over year.
This outlook reflects approximately 200 million.
An FX headwind.
On a full year.
Turning to our outlook for operating margins, we now expect Fytwenty non-GAAP operating margins.
Down approximately 50 basis.
Year over year.
Our 420 non-GAAP operating margin.
Guide is the result of several factors.
First is the one time non cash settlement charge of $166 million related to sales.
Or.
Reseller agreement.
Second is the blended margin profile.
The recently acquired businesses.
English Salesforce Dot, Oregon tableau.
Which we anticipate at roughly breakeven.
non-GAAP margins Fytwenty, Inc.
The purchase accounting.
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And quick software, which is modestly dilutive along with the associated transaction.
Yes.
Excluding the impact of these acquisitions. This year, we expect our F Y 20, non-GAAP operating margin.
Improvement year over year to be more than 150 basis.
Which is higher.
Any improvement we are rich initially laid out.
At the beginning of year.
Our EPS were updating our F Y 20, and GAAP diluted EPS.
28 to 30 cents.
In our non-GAAP diluted EPS of $2 and.
You too.
That's the $2.84.
[noise].
Operating cash flow, we're pleased to be maintaining our F Y 20 operating cash flow guidance.
21.
22%.
Despite.
Increased expenses from recent M&A.
And the cash impact.
FX headwinds.
For Q3.
We expect revenue in the range of.
Our $4 billion.
5 billion.
With 31% growth year over year.
This guidance assumes revenue approximately $300 million from top low.
Approximately $75 million from Salesforce Dot org.
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Also we expect.
Three GAAP diluted loss per share of 21 cents to 20 cents.
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non-GAAP diluted EPS of 65 cents.
66 cents.
We expect to see RPL growth of approximately 24.
25% year over year in the third quarter.
This guidance assumes around two points of growth from Salesforce dot or.
In two to three points of growth from tableau.
Oh.
Software does not have a material impact on our share of future growth.
Excluding this.
Acquired CRP.
We.
Just to pay that RCR feel growth.
Would be approximately.
10% year over year.
Lastly, regarding our long term a flight 23 revenue target.
We continue to be on track for this.
To achieve our long term revenue goals.
On an organic basis.
As previously discussed we plan to update these targets.
Factoring in recent acquisitions.
During our annual analyst day at Dreamforce in November .
[noise].
To close we delivered another strong quarter.
Ruble revenue growth.
Organic margin expansion.
We continue to invest.
Proof.
To improve.
Technology and scale of our business globally.
And I'd like to thank our employees, our customers our partners and our shareholders for your continued support.
With that I'd like to open up the call for questions.
Thank you Sir.
Ladies and gentlemen at this.
If he would like to ask a question over the phone.
Star.
And then one on your.
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Kindly ask everybody who is.
Today's session.
Yourself.
And I'll follow up.
If your question.
I've answered it with somebody yourself from the queue.
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And our first question will come from Mark Murphy with JP Morgan.
Ben.
Thank you very much congrats on a superb quarter Mark I wanted to ask you were witnessing such a bifurcation in the retailers.
Results. This year, we have seen companies like target and Walmart and home depot doing well.
At the same time it seems like Amazon is hurting some of the others, whether it be seers or barneys or nordstrom or the gap or others I'm wondering if you're finding the.
Retailers that adopted Demandware.
Our actually competing better.
And then and just is this retail apocalypse kind of causing companies in other industries to want to adopt sales source a little faster so that they don't get Amazon rubberized.
Well. Thanks, so much for that question I'll tell you that I think that we are.
Rapidly.
Heading towards this fourth industrial revolution in that.
This digital transformation a city in every industry in retail certainly is one of the.
Major industries that is.
Really you know have been.
Being taken to stand and deliver it and you are seeing a bifurcation between.
Those organizations, who are ready for this transformation and those who aren't.
It includes.
Not just the ability.
Have a strong digital presence, but also being able to.
Understand what your strength is.
In regards to your physical presence in making those to work together.
The synergistic way will that is where the magic is for many of the organizations that you mentioned.
I work with a lot of those Ceos personally and I can tell you.
That they've done a tremendous job.
You mentioned target I mean, you just have to go in and see you know.
What they've done online is matched as well as what they've done in the physical.
Store I think that that's kind of an indication of where the.
Future is going nude and see of course, Amazon moving into the physical.
A world as well.
We've seen tremendous success with our own ecommerce platform were very excited.
With the Demandware and some of the customers.
We've seen on that platform and really just trounced their competitors of course.
There's a lot of good examples Adidas is one but there is so many others.
And every every one of these companies.
Needs a strong platform.
Like Demandware, but I'll tell you it's more than that it means.
But they have a real customer 360 because.
Once that customer actually gets to the store.
You want to know everything about them in terms of.
360.
And we have a.
A number of luxury retailer some that I can mention by name, but honestly a lot of them do I just cannot buy their own request.
Who have done a tremendous job of integrating their digital experience in their physical experience.
And when you walk into one of their stores they scenario.
It is you know we have this new capability or that new capability very purchase something.
In this product line and it's made a big.
Difference for them so.
Your 100% right the transformation and retails underway and.
We're excited to offer that customer 360 vision to the top retailers.
So that they can offer whether it's in sales or service or as you mentioned e-commerce or marketing.
Or app development or so many other things.
The ability to be competitive.
Thanks for the question.
And our next question will come from the line of Heather Bellini with.
Open.
Great. Thank you so much.
I mean, mark you've been one of the Bose.
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Visionaries and the software market over the last.
Decades, and obviously.
So one of the biggest cloud companies.
To Rick combination of internal R&D, and M&A and I guess, that's where.
My question.
Share with us.
Your vision for M&A as you look ahead, and how you think especially now that you are.
Latin into the on premise market as well how do you think about the marriage of the.
The club footprint in the on premise.
Print and.
I guess the other question that we get asked a lot about and I'm sure others do on the wind is how do you think about the margin.
Thanks, Tom.
With that bigger town.
And given Mark Hawkins.
Let it on the call.
The fiscal 2000.
Targets.
<unk> are there any thoughts of maybe ever adding a margin target.
Yeah.
Organic.
Yes.
I guess that that's where my.
From my focus is thank you very much for taking the questions.
Well, thanks, Heather a nominal I'll, let mark directly address the issues of.
Guidance, but all ill tell you that.
The way, we look at it as innovation is happening everywhere.
And.
We have tremendous innovation happening that salesforce soon.
And that's been.
So important for us over the last 21 years.
We are also an awful lot of other innovation.
That's happening outside of our company and we've been fortunate to have a big enough view of innovation.
That is.
Motivated us to be one of the most innovative companies in the world because we have the artist.
Both organic and inorganic innovation I think in a really positive way.
And.
I have to also thank our customers because a lot of the ideas.
That weve created whether its software weve.
Software, we've built our companies we bought it's really been driven by those.
Customers I mean, a great example, just tying back to the last call.
As Demandware one of those luxury retailers.
In Paris.
I was having a meeting with them and they took me aside and they said you know the company.
You should acquire is demandware and here's why.
They had already moved to Salesforce and.
Other services and.
But they had a gap in their customer 360, and they wanted our.
Ability to be able to.
Connect demandware into what we were doing so that they could have.
More competitive themselves.
And that has turned out to be.
Really great for them and augmenting our vision of what CRM is.
And also being able to execute our customer.
Re 60 vision.
I think that.
When I look out and I just was thinking about.
Conversations that I had today.
We're really.
In a moment in time, where these.
See top Ceos in the world all realized.
Not only to their digital transformation has to be.
Under way their customer experience has to be.
First and I'll, let mark answer the rest of the question.
[noise].
Thank you Mark and thank you Heather for the question we certainly.
Yes.
Highly prized.
Operating margin expansion is something thats very important to us over time as you can see over the last.
Several years, we've been expanding that.
We do make trade offs between.
Our organic growth and margin the trade offs are something that we always look at when we look at this opportunity to serve the customer.
We have been making.
Considerable progress over the years, but we know there is more work to be done.
And that's something that we're always thinking about and trying to focus on constantly.
We are certainly going to be talking about that and.
Everywhere it won't give out our operating.
Margin targets.
I hear your point about.
Exploring beyond one year, but certainly.
We'll be talking about the operating margin.
In February .
And our next question.
I'm from line of Kash Rangan with Bank of America.
The line is now open.
<unk>.
Hi, Thank you very much.
Like to first a plot the company for the tremendous amount of clarity and.
Straightforwardness of how you report your financials, such as the organic versus the acquired the currency impact you go through excruciating detail to make it abundantly clear how your core business is doing particularly the fact that margins are projected to grow excluding the acquisitions more than you anticipated. So I just want to give you a round of applause clarity and.
Straightforwardness of the disclosure.
Question for you Mark as you move ahead, new you are targeting a 28 plus billion dollar revenue company with.
The diversity of end markets that we've just simply not seen in software the prior and logs in the on premise shared with us safety or Oracle just didn't quite have the diversity of end markets that that salesforce dot com is pursuing so as you plan to roughly double revenues, how does that go to market.
Nature of how you're going.
What is the go to market strategy evolved as you attack the breadth and complexity of Mark is that the word to simply just not seen.
This new recipe to follow.
Okay.
Well, let me.
The fill in some of that but then also let me ask Keith really to fill in the rest.
I think you said, it really well which is that.
We worked really hard to build this customer 360 platform.
It's taken US 21 years.
And it turns out this is exactly what.
Customers want and really need to be competitive.
Into in todays world and.
As we go to now execute and deliver that.
We are.
No.
Okay, just on how do we do that by region by country.
We're we're really looking at how to already doing that by segment. It's.
It's extremely it's extremely.
Important and I think that.
You know for US certainly you know we started just with Salesforce automation that was our.
That was our kind of soul app.
If you will.
But you know.
Was it was clear you know from the.
Okay us to cut with customers said, if we're going to continue to build to serve them.
We had to get to.
Customer.
The customer 360.
So Brett maybe you also want to add to that and then and then Keith I think maybe it would be great.
Well done on the go to market as well.
Yeah.
Yes, Mark very well, which as you know as we think about our value proposition.
It spans.
Lot of different market, but it's all under the umbrella of digital transformation and I think.
Defining characteristic of companies in the fourth industrial Revolution is.
The things driving the digital investment as customers.
It's.
Our summers or are demanding.
They interact with these companies and new ways.
And that does span the entire portfolio.
The question that came up earlier about Demandware and commerce.
Lot more than that when you figure out what it defines your retail Ics.
It's about.
Our summer service.
About buying online and picking up and.
It's about.
Urging the physical and the digital.
It's about how you get recommendations and marketing after you've purchased something and so when I look at our portfolio its.
And.
A wide breadth of functionality.
When I talk to Ceos of all the major companies in the world.
That's what they need to transform its all the above I mean, when they fragment their customer experience by thinking of them as separate categories are silos.
It can actually achieve the vision of the digital native companies that you mentioned before so.
I think our breast as an asset when we go into these conversations with our customers because.
I think we can provide a more.
Vision for their digital transformation that any other company.
Yes.
Listen on the go to market side.
We made a conscious decision.
Over the last few years.
We really focus on three things.
It is how do you take an international company.
It into a global company.
And there is a large difference between being an international company and being a global company a lot of that is around culture.
For behavior.
And how you solve customer problems.
The second was.
<unk>.
Really a movement towards.
Selling solutions and speaking the language of the customer and understanding of the industry.
Just to.
Give me an example of that.
In two weeks I have to go to New York.
Which I'm very very happy about to address the board of one of the I would say the most.
As retailers in North America.
I talk about the future of retail.
A couple of weeks ago I had dinner with.
You all have a different company, although same industry, but it's a little more of the largest retailers in the world.
And they want to talk about how our customer 360 platform.
To help them drive growth.
And optimized customer experience.
Yes.
Able to understand the industry and enabling our field organizations and our entire company on understanding and industry and being able to solve the customer problem.
Is a huge.
The third piece of this is moving from a partner ecosystem to us.
The strategic ecosystem.
And partner ecosystem is really encompassing with.
Our classic firms that we do business.
As like the Accentures and the PW season, the Deloitte so.
World who were.
The class size.
<unk>.
But how do we.
In that community to drive success for our customers.
Where in the world.
And that's why we formed partnerships with companies like Ali Baba because we have to service companies all over the world We have global operation.
As I mentioned to workload.
It also means that we continue to invest in this.
Trailblazer community.
We are.
Want millions of people, who evangelize and architect solutions that drive success for our customers.
And then the final component, which I mentioned on the call is.
We are fortunate enough because of our culture and the type of company and our values.
<unk>.
A destination company for talent and we have attracted some amazing people.
His career as we continue to grow.
We're very focused on customer success.
As well as these other folks like we talked about.
With the Janeane Gaudio for example, who is going to be running.
UK I for us.
And having those executives having that talent in place who are passionate about customer success and driving solutions.
Really makes us I think a very very unique company and that's why you see this.
And that's why we're optimistic about the future.
Sure.
Thank you.
And our next.
Civil Counsel I have Walter Prichard.
Open.
Hi, Thanks question for Mark Hawkins or.
I think it's been a couple of years.
Framework around cost.
At Dreamforce sandals.
And I'm wondering you are talking about seeing.
In the in the business.
<unk>.
Would you update us on.
Along the lines of those.
Drivers.
You are seeing the margin.
I'm curious to get a little bit harder for us.
Acquisition influence.
<unk>.
In each of the Opex.
On items would be helpful.
Sure.
First of all thank you Walter and happy to do that.
I think the thing that we are making progress on right now is in the area of gross margin.
Ill take note, we've been investing for quite some time too.
I get more scale and capability, there and were pleased to see some progress on that.
We're getting also progress NRG in areas as we look to make DNA.
On more efficient as we scale of the company.
Thats certainly an area.
We're making progress as well.
We have a great initiative.
I think our team driving.
Even customer success there.
On to really help.
Deliver an even better performance, while also scaling and I think these are some of the areas.
And the cost of surgery in particular.
That we're doing.
And Walter I would add just one additional point that in the area of cost.
Well, that's always a choice it's always a trade off and we just had a.
Great.
Our market opportunity in front of us to serve our customer.
And we're obviously investing there but always looking.
And for progress.
Well, but those other areas of the key areas that were.
Restart.
<unk>.
Our next question will come for life.
With Morgan.
No.
<unk>.
Hey, guys. Thank you for taking the question.
Very nice quarter I wanted to.
Its opinion on or.
Effective on.
<unk>.
Actual synergies from the recent acquisitions.
Finally tablo.
The success you guys it seems.
Soft over the past.
Yeah, I wish weeks.
Sort of that.
The biggest synergies what are you most excited about in terms of adding tablo and maybe.
Looks like soft furniture, there as well into the ports.
Leo as as as we look over the next.
Then once.
Mark Hawkins.
You repeat.
The.
The tablo.
I didn't say again.
In terms of what.
Your contribution is and what the Q3 contribution is I'll give it seems like it is.
All are Q4 than Q.
I want to make sure I have those numbers right.
[noise].
Let me address the hockey.
Let me address the first part of this and then I'll ask Mark Hawkins too to comment as well so.
Look we're incredibly excited about tableau is a it's a great company.
Instead of great products, it's got an incredible development community.
It's got a great executive team and customers Love.
As far as quick software.
Then I'll, let mark talk about tableau in a second but historically software we're very very excited about the Clicksoftware acquisition.
As you May know field service is incredibly strategic to a number of industries.
Such as utilities.
Communications.
<unk>.
Equipment manufacturers.
And we have a very strong product.
In field service Lightning.
And the combination of field service Lightning.
Which grew a 100% by the way year over year in the quarter.
And click software is very very compelling so thats a great example of marrying innovation.
Organically and Inorganically.
So we're super excited about that and Mark I know you have some comments specifically on the tableau, Yes, I do in fact, let me take that.
Offers first and we'll talk about the synergy secondly.
First of all keep.
I just want to call out for the year.
As it relates to tableau, we're anticipating a $550 million to 600 million.
Contribution for the year.
Of course Thats net of the.
The DRA down.
Number one number two for the quarter.
For tableau I just want to reiterate.
There were looking at 300 million.
The.
Three time period again this year right now.
The first part of your.
<unk>.
The second part of your question has to do with synergies and I just would.
All out and say that.
Look we're incredibly excited but as discussed at the beginning of the call.
We're running the Companys separately right now as operating independently.
Right now.
It's an incredible company with a fantastic product and leadership team. We're so pleased about that and so excited about that.
Well, let me take a step back.
And dress the spirit of your question.
We have.
A tremendous.
History with acquisitions.
Complementing our organic innovation.
And being able to make progress in that way.
Well, we do M&A work.
Always looking.
Our opportunities to make these companies.
Even better and have even greater success for our customers which is.
It's all about.
At the end of the day.
I've never been more excited about our ability.
To create more success for our customers.
With that strategy.
It's what I would say.
Okay.
And our next.
Civil comes a lot of course.
My Dream.
Evercore ISI.
[noise].
Thanks, very much and congratulations on the quarter.
My question might be for either Keith or Mark.
I was wondering if you all could you just talk about.
Europe , a little bit.
Our sleep and <unk>.
Source of strength for you over the last.
Quarters.
Where's the market.
Oddly just in terms of adoption and.
Thinking about things like cost.
Summer Threesix.
It's.
It's like it's hitting a little bit of minutes.
Should point and would just love your.
Your thoughts on that.
Sue.
[noise].
Mark and I have easily been flying around the world quite a bit.
I spent about a four week.
Where I was in Japan. It was in the United States. It was in Canada.
It was in the UK, and Switzerland, and France, and Italy, and meeting with Ceos from very.
Various industries.
In this geography as you can see from the results.
EMEA continues to be very very strong for us.
With 30% growth in that.
And just go back to the unit credits.
Situation that I mentioned.
In the earnings call you know this is a.
Very strong bank.
Italy, I think we're all aware of the situation is.
Non and Italy from a macro perspective from a government.
The CEO of Unicredit is really betting.
Sure of Unicredit.
The customer 360 initiative and the Ics.
<unk>.
For his customers that he wants.
How he wants to trans.
Matt Bank.
<unk>.
And that is the same conversation that is going on in every industry I was in Paris meeting with one of the largest.
Bank Ceos in the World.
You know the Barclay story that we have in the UK.
We have industrial manufacturers in Germany, automotive manufacturers, who are trying to improve the customer.
Instant driving 360 degree.
The one thing that is very very clear to me.
Is that whatever is going on around the world.
Yeah, we see a buying environment, we see.
Those investing.
And.
Off of mine for them is digital transformation, which begins and ends with the customer and Thats why they are talking to us and that's why you're seeing these results.
Thank you.
And our next.
Couple comes the line of Richard Davis.
<unk>.
Hey, thanks.
So maybe it.
Technology.
[noise].
I saw that you guys.
Gartner ranked you guys.
Sales forces.
A leader in low code.
[laughter].
In addition, you are doing really well.
Decisions.
With Einstein.
And then the other third area that's really how these days is this whole.
Robotics.
Assess automation.
The question I have.
<unk>.
Maybe for Mark is because you are.
You think about these things is.
<unk>.
How do you see salesforce participating.
To those three markets because it sure seems to me that.
Those three technologies.
<unk>.
We are going to have to work.
Also with each other over time because they.
I, just feel like they're going to intersect and so.
How does salesforce position itself for that kind of next wave of those.
Thanks kind of connecting with each other.
<unk>.
I'm going to actually ask Brett to answer the question I mean.
I think it's.
Perfectly set up for him to.
To deliver so Brett you want to.
Want to hit it.
Absolutely. This is really our vision for the customer Threesixty platform, which is.
It platform that works together with all these technologies the six.
Football.
All of our trailblazers.
And when we talk a lot about trail how do we talk about this vision of low code.
That's what we mean.
1.5 billion people, earning 15 million badges.
Our learning.
How to apply these advanced technologies.
And the technologies you mentioned in the first half of this year alone the capabilities. We've added this platform are incredible.
Got it the Salesforce block chain.
Salesforce maps.
We added Einstein translation Einstein boys.
Inside vision.
We've had to all these capabilities and theyre accessible to everyone on our platform to low could way.
What that means for our customers is.
It's easier for them to leverage these technologies to improve their customer mix.
All those technologies you mentioned.
The challenge that we hear in the market as these customers are excited about these new technologies and what they can do for their customers.
It's often cost prohibitive or too complex.
About the value that we see in our customer threesix.
Forms that's why as Martin mentioned Salesforce the number two.
Most acutely in job of growing the glass door.
In the first half of this year alone over 72000, new job postings for Salesforce jobs for.
With that I'll, just the top to job sites you are seeing the draw of this.
Form and you're seeing how empowering it is for I think anyone in the world can become a salesforce developer you could if you go on fill at after this call.
[noise].
And our next question will come Flatbread Zelnick with credit Suisse.
<unk>.
Thanks, so much and congrats again on a.
On a fantastic quarter.
I'll throw this question out up for grabs and it's.
Really just to.
Dig in a little bit deeper on service cloud.
Re acceleration this quarter.
Just wondering if you could help unpack that a little.
Little bit you called out.
Service Lightning strength in Europe .
Remarks.
But I'd love to hear any additional color in terms of.
Petition win rates.
Also how you see the products coming together with Qlik software coming into the fold.
Yeah.
Why don't I take that and then.
I think Brett will want to weigh in as well from the product strategy perspective, like I said.
This wave of digital transformation is really fueled by so many things.
Is the foundation of it is the 360 degree view of the customer in each of the.
Elements of that 360 degree view of the customer.
Whether it's.
It's relative to the use case and the problem that you're trying to solve whether it's sales or service or marketing or commerce.
And.
Service is just very powerful if you look at companies in a variety of industries, they like to differentiate them.
Service and customers.
It is a big component of that and field service is a big.
As we talk to these executives about the future of growth.
You can have growth without a great customer experience.
That starts with service.
Im sure you want to.
It's all that I do think that our customers are driving us here because service to find their brands.
But help us think it showed the power of this customer threesixty platform because all of these fundamental technology innovations we're investing in.
Really I think benefit service and unique way.
Obviously with Einstein bots, which enable customers.
The front lines.
Using AI.
This past quarter, we added Einstein case rowdies.
We can route.
Important cases to people who have the best.
To provide the best customers.
It's at the right time.
You saw the growth in field service, which we're really proud of it really shows how our investment in maps and geolocation and mobility.
All sort of converging to enable these customers to provide the right support the right customers wherever they happen to be.
And so I really want to say that.
This is really what I would use the power of the platform, we're getting so much leverage from our technology investments.
Enable the experiences that Keith talked about.
[noise].
Civil come for a lot of Jennifer Lowe with you yes.
And.
Thank you I want to circle back on some of the discussion earlier about.
From.
An international company to a global company and.
Addition of.
Goes in in a couple of particularly strategic markets and I'm curious.
As you add that.
Oh, what sort of.
Mandate there what do you view as.
Core competencies that need to be set by global leadership versus.
Providing regional leadership with.
Next ability to.
<unk>.
The changes or run the business in a way that.
They see as most appropriate on the ground.
In that market.
[noise].
Well, Jennifer one of the important things of being a global company is.
With that.
Globally and things strategically at act locally.
And we want to empower our leaders in the field so that they can make.
Decisions on behalf of the customers.
In front of the customers there is it.
And that says the best decisions.
Not made in the office, they're made out in the field.
And by hiring the senior executives and cultivating and growing our other executives inside the company. So that they are empowered to make these.
We think this is a perfectly to scale the company.
With respect to being a global company versus an international company.
The key tenant on being a global company.
Is that accurate.
If you behave the same.
You execute this.
No matter, where you are all over the world.
Whether it's with one customer where many cost.
As we bring in these.
Senior executives.
We're augmenting.
And enhancing.
It already incredible management team. So we're super excited about these ads.
And talent is an important strategy for the future.
Sure.
Thank you.
Ladies and gentlemen, this concludes our question and answer session.
I'll hand, the call back over to the company.
Some comments or remarks.
[noise].
[noise].
Thank you everybody for participating in the call today.
And I, especially want to thank.
All of our Honda, who just did a fantastic job this quarter and we couldn't be.
I am more pleased.
With the outcome and John .
[noise].
Thanks, so much thanks, so much mark and thanks, everyone for joining us today.
As Mark reminded everyone go adding register for Dreamforce, we'll look forward to seeing many of you there our annual analyst day.
Until we look forward to giving you an update.
On our results.
In.
Then.
In Q3.
In summary.
Okay.
Ladies and gentlemen.
You for your participation.
Our friends.
<unk> program and we May all.
Do you have a wonderful day.