Salesforce (CRM) 22 Aug 192020 Q2 Earnings call transcript

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Salesforce Q2 Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following management’s prepared remarks, we will host a question-and-answer session and our instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes.

pleasure the my Mr. over is it to conference hand to Now, Cummings, Relations. Investor Vice John President, Senior Sir, begin. you may

Thanks so quarter much, for joining Brian. Good afternoon, for fiscal everyone, our XXXX second results call. us conference and thanks

press can found call results, of at IR be release, a on and Our replay filings today's website our www.salesforce.com/investor. SEC

Amy co-CEO; Legal and the and CFO; President Corporate call on Benioff, Chief me Hawkins, Officer is Marc of Chairman Taylor, Mark President Weaver, and Affairs. With today co-CEO; & Product and Keith President Block, Bret

As a today be release. commentary and and our non-GAAP press terms. will can in reminder, non-GAAP primarily Reconciliations found guidance GAAP earnings be in our between our results

Some incorrect, these forward-looking to should could materialize of which or from may and actual statements, differ assumptions materially of forward-looking are risks, to prove company these our our subject results be comments assumptions. today statements. contain uncertainties Should any

SEC our recent could A are included description factors other of that our including these and risks, financial XX-Q. results assumptions on Form and filings, our affect uncertainties in report most

have Tableau Before over FY which comment about revenue to brief me a incredibly provide I'm Xst Tableau. for and regarding acquisition call turn August and in with guidance Tableau our the closed for Marc, software QX let I provided XXXX. excited

the disclosed is order whole conducts CMA on working limited. today order previously pending the of as to and is our completion call has with to Competition in a review. ability to or As separate separate whole We're X-K review. discuss be reviewing Authority this its and it Market Kingdom United constructively imposed the transaction our its happy Tableau CMA Due

Benioff. the turn me let that, over to with Marc And

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representing at With year-over-year. our our revenue XXXX organic growth fiscal to range Tableau, raising guidance in of we about year the our our growth high-end XX% acquisitions Salesforce.org, billion ClickSoftware, of are $XX.X

connected. is of everything at underway. the in really that getting heart really Everyone is out have been Industrial what's Customer our we platform. the our Now, very the Fourth is and Industrial Fourth at Everybody is happening building Revolution. This XXX knows vision strategic Revolution

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everyone built the customers, they're scale. and We're our foundation they're every app, everyone. to because operating a that of tremendous available into to platform And all

daily some platform. at with the achieve of helped XXX us Customer Just our customers look milestones have our

day leads messages XXX processed interactions X every case X.X billion email and created reports million sales commerce X.X and million and dashboards generated pages. today, bot, sent, million million million XX X.X log, opportunities and million service orders XX

actually Einstein, many know and I XXX. been with see of in AI now following to generating world-class incredible for you've been and delivering it's We're this. Salesforce this It's Customer Einstein me

using a market-leading available customer platform. Voice are every AI-powered X.X day experience. these But capabilities the also Einstein the we to Vision intelligence actually and Einstein our do Einstein of future Salesforce made and app now predictions artificial billion We've

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building we're just this vision location-based Maps Salesforce and the new getting our employees in job that Customer productivity sales this improve the really an of with and incredible to hands intelligent services that built for adding field out XXX was has done customers. team service And

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economy continue X for Salesforce XXXX to to billion A create opportunities XXX is million everyone and participate. one that huge we'll developing GDP will create more more around jobs and than worldwide by impact than

XXX incredibly transform on Einstein platform, of with With the innovations, vision customers. Customer companies Trailblazers millions well-positioned our is to our Salesforce their amazing innovating help

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And now, over to Keith.

Thanks thanks for Marc today. the everybody us joining call on and

As more incredible and growth. industry, Customer advisor of Across trust catalyst geography, every they foundation as Salesforce their we invest as Marc more turning have into opportunity are every companies an XXX their and their ahead said, digital the transformation. in our platform to as

will we Marc in help they're numbers looking with propel them region. quarter industry The to a and are our their That's and and QX clouds, of meet vision great customers customers. to and as for I reflected to across solution strategy get that continue our our hundreds their see our that looking clearly growth every result closer for

They're of are They're asking most competitors and innovate. asking transforming. they their about best other peers, how asking asking importantly how from about industries. industries. their future the practices are us about They're to their They about us us us

learn drive and their They it's their can with technology. also partners how about culture just But our and help their employees. about Salesforce values we them and to customers, want success not

customer continue in quarter Now, transformation. FedEx strengthen brands to world. for and selected relationships the leading throughout the platforms Salesforce quarter, around is the we with service their our build the

to needs FedEx understanding drive across their in Cloud Einstein Service will agent deeper their centers customers business. a get their in with Einstein call recommendations AI-powered to of productivity analytics use

companies Railroad more as world's proactive service. its deliver The Union to faster, CRM largest Pacific unified system, of the transportation Salesforce one platform chose

that customers shipping includes plan better can Now so very their tracking important. automated updates, and improve notifications shipping experience, and

and with its Cloud users deliver travelers all hosts Marketing to Airbnb continue Salesforce meaningful community across program. turned platform. expanded engaging of messaging Airbnb with on single power global the that with communications a to Airbnb guests, hyper personalized its globe to

anticipate of world's provide great continue which and using to Marriott, our expand with and during we the better needs relevant stay experience. more And a is offers Salesforce personalized customer relationship one that travel to each guest companies display

and serve better customers wealth to they May and Einstein financial retail in need their bankers announced that of advisors, managers giving for Analytics grow we business. Now, services AI-powered insights book have

the of form the public and financial services in and U.S. relationship Bureau of in quarter. new expanded our including momentum relationship HSBC federal In Our Salesforce We investment Housing USDA sector, the U.S. its Management, increased Department Land the in Urban with continues. and Development. the Unicredit with the Italy government

A and differentiates service. operations critical incredibly XXX% our customer Lightning of customers of Service them, QX, and growing as service for year-over-year. many It of strategic at Field is is also why is their nearly field to part that's

the innovation employees, quarter and workflows, production very Field Sports service that's to acquire broadcast. recent our greater in FOX Now chose Service its to rentals equipment, deliver field we'll Software exciting. our manage so to Click more be And very, live able customer, with for facilities, agreement to even Lightning

at investments XX% growing deploying and AXA a XXX they across insurance the every every one degree have quarter give the or a of revenue EMEA view growth of them customer the at to to enabling on several in currency, agents largest smarter both including quarter, their growing conversation. constant companies service in ,APAC personalized Our strategic super a global insurance continued international is world , made XX% with year-over-year divisions complete view of customer filed of to in the in journey number strong the

both HDM fashion the EMEA, new Cloud we form of choosing offset and in organization retail with In press Esprit, Germany, the manufacturer in quarter. Commerce relationships printing largest global

Care and new Japan, form relationships Environment Sumitomo Energy. expanded of and Australia Ramsay Insurance. Bank Hitachi and Department Mitsui In Health expanded with we with with ANZ and the In we Australian [ph]

success. customer of partners Our to were in partners their us QX in practices. new engaged to XX% critical invest our And continue partners continue these Salesforce deliver very strategy to help our business. In

run their just Global going going. top of Salesforce, are That fastest and All growing and partner going XX% year-over-year. our enterprise and partners on up practice. is their seven certifications consulting keeps practices Salesforce

support company are it Alibaba, partnerships they our and to Strategic us multinational future global do thrilled critical new we're that's is absolutely about for our customers why to business. a important relationship as our with wherever

and demand than we Salesforce.org close our higher pretty quarter We continue given and we the verticals. hours million is employees finally, of seek with XX,XXX work X.X and And our than have million to education and education which $XXX non-profit the amazing. more and non-profit in incredible delivered we in nearly customers acquisition volunteer in grants more

Last next growth quarter, the fill chapter I mentioned of making world. investments around to the our

bringing company we've executives at and our Now part and is extraordinary been talents of to two that into investment at very team. fortunate APAC leadership international the incredible EMEA

great us Later Jayne-Anne CEO very Zealand Australia Ireland CEO both both Marlow Pip executives. for excited this Gadhia be on and to will board. Salesforce become have as and fall, Salesforce joining U.K. for and and are New will They we're

the around company's everybody. execution, support like closing, world our I'd thank and to thanks and their our course for on employees, And so our customers great partners of our to

I'll now, off hand to this Mark Hawkins. And

Keith. thanks, Well,

As quarter, organic including growth year-over-year. operating the revenue results durable you've generating heard and we margin second in organic delivered expansion strong

revenue few in in and highlights. constant are Here currency. Total dollars XX% grew XX%

total dollars Salesforce.org revenue Excluding constant currency. in grew XX% and XX% in

XX% organic There growth revenue are cRPO and starting across results, in few each some we through in grew take details in dollars of XX% me currency our additional clouds our here up moving continue constant the and revenue. QX parts put let geographies. to so for with solid of you and

the million was of of billion for second revenue Total including quarter Salesforce.org. acquisition $XX $X.XXX

million year-over-year as the we saw approximately of $XX to QX, in million revenue $XX headwinds quarter experience to we sequentially. and continue in approximately Just second FX

subscription term of cloud, XX%, and is and revenue XX% drivers with XX% of strong of other year-over-year service million we XX%, XX%, support approximately and probably sales revenue cloud treated which license. commerce cloud and subscription the see growth to growth MuleSoft growth at Looking of by MuleSoft, as of cloud platform includes continue of marketing growth support $XXX and growth

in other out me items quarter. the call Let a rates to various the related few cloud growth

each -- total First, proportional that headwind mentioned year-over-year, FX affected I of of point our on the clouds of earlier, growth one similar basis. revenue represents approximately a for a that total percentage and

across one acquisition two approximately of our points Second, growth represented of clouds. of percentage each our to Salesforce.org year-over-year

of normalized year-over-year the MuleSoft. Third, first a this was quarter compelling

the So where moderated of as MuleSoft growth now of period, on the other platform QX expected. base QX in rate to and

organic the QX each also remain past Adjusted with our remaining constant for these below revenue items, growth deliver over QX. across seen we XX%. clouds currency to are several have in very robust we Attrition continuing dollar of quarters, in to as pleased year-over-year healthy attrition decline modestly

margin points Turning was operating to QX basis margin, operating XX.X%, down year-over-year. non-GAAP XXX

EPS a As settlement of reseller the operating our Salesforce.org. by reminder agreement with our QX affected margin results were

a anticipated. the non-cash of This income lower accounting line was is reported and item discrete $XXX one of we as than million on statement charge slightly time

non-cash year-over-year. non-GAAP our We continue pleased improve the operating to excluding of with improvement we're efficiencies efforts basis Salesforce.org deliver our QX to and accounting points XX margin operating approximately charge

adjustments and In QX EPS salesforce.org was a and $X.XX. non-GAAP QX non-GAAP non-GAAP in settlement the ,along in by benefited $X.XX below quarter GAAP GAAP business and the benefited approximately EPS by $X.XX. second the EPS outperformance $X.XX, with than quarter was lower approximately anticipated $X.XX GAAP charge EPS approximately by line mark-to-market

Turning to cash flow.

a recent quarter in cash the a continued flow FX cash XX%. trailing operating down Operating operating basis, headwind. we're quarter by $XXX deliver On of well month Second impacted year-over-year. as was activity to as was flow pleased cash M&A X% flow million, XX

free On growth the deliver million over cash of flow defined leading $XXX pleased a last $XXX quarter of we're flow down basis XX% XX%. as trailing flow million, for cash less operating free CapEx year. to was to XX-month cash CapEx

$XX.X XX% billion approximately approximately RPO is obligation up million billion, $XXX Current amount. $XX.X up performance a second last year. contributed which ended versus XX%. and on Remaining to Salesforce.org up year-over-year was was XX% this constant basis the approximately quarter currency

billion billion Now XX%. for guidance. to million to revenue Tableau. turning approximately $XX.XX $XXX raising our pleased to from and acquisition guidance $XX.XX revenue growth of FY approximately to FY year We're This to XXXX of XXXX million $XXX year in XX% includes QX full to full be our

of growth in to these year. for million of expect million headwind This year-over-year. XX% approximately revenue Click from the top million businesses acquired we excluding in from $XXX the reflects XX% $XXX outlook and approximately Software, revenue in revenue $XX Approximately acquisition Salesforce.org FX full line

for to now margins operating we approximately outlook year-over-year. margins XX our Turning non-GAAP FY expect basis operating be down points XXXX to

Our FY XXXX non-GAAP the is operating margin result several factors. of guide

agreement. related Salesforce.org non-cash time million First, $XXX charge reseller is settlement to the one of

Second, of which is And which along with the profile the at is acquired accounting. inclusive of diluted cost. Click associated the and break roughly even non-cash Salesforce.org FY the we'd margin purchase modestly businesses for recently blended margins XXXX anticipate transaction Software namely Tableau,

In FY the more than year-over-year out the we've XXX we year, this impact XXXX to points, which our non-GAAP than of fact, at basis excluding improvement year. is of expect improvement acquisitions higher laid margin beginning be the operating these the initially

$X.XX EPS For $X.XX $X.XX our EPS GAAP non-GAAP to and diluted diluted FY our to updating $X.XX. EPS we're of XXXX of

cash operating flow XX% For of maintaining pleased impact FX the to increased expenses cash guidance our be flow, the we're operating XX% from recent to headwinds. XXXX M&A cash of despite FY and

billion XX% the approximately For of QX, $XX $X.XX million approximately billion and in from $XXX or growth million we guidance year-over-year. assumes from expect Tableau $X.XX revenue of revenue range This Salesforce.org. to

per of $X.XX loss We diluted also to of $X.XX and non-GAAP expect QX $X.XX $X.XX. share GAAP diluted to EPS

we growth three anticipate from have assumes of Salesforce.org XX% Software cRPO points be on growth and acquired impact XX% approximately guidance and around cRPO growth cRPO, the We not this to Click third expect of year-over-year that XX% cRPO does would growth the in material growth points two Tableau. two excluding year-over-year. a from to approximately quarter. our This of

for goals revenue on term to as achieve And revenue acquisitions long Dreamforce XXXX Day update previously FY continue at recent long this plan basis. our we our during Analyst annual Lastly, on to to and we target, factoring these our term an November. targets in discussed track organic regarding in be

To margin another strong quarter close, and organic of delivered durable expansion. we growth revenue

our globally. our shareholders -- to support. proof to And thank continue technology our of our business We our your for continued like and future invest employees, and scale partners customers, foolproof I'd to our

like I'd questions. with And up for the call that, to open

Instructions] come Mark Thank JPMorgan. you, from will sir. line first Murphy of question Our from [Operator the

Your line is open. now

to Salesforce We've wanted such doing same Marc, and or actually or or would And retailer's like the Yes. this a industries kind witnessing And competing Home Target is very get whether apocalypse you, like are companies and be that companies seems is seen Barneys on a Amazon hurting little bifurcation then, year. this superb -- the if Wal-Mart retail Nordstrom Sears Thank you adopted and faster the the results Congrats to wondering in others. just you're it much. we're adopt Demandware don't the they I quarter. the that others ask or at I'm finding some in of of uberized? or GAP well. so retailers QX a other Amazon causing time better. Depot it

making that retail seeing of Well digital question. Revolution are tell organizations bifurcating to for many this organizations synergistic and just is Fourth regards a where and is transformation your aren't. magic we able and hitting the stand Industrial that thanks I'll ready certainly you have ability a presence mentioned. what this a heading presence is in understand those between that digital industries every so that major to industry, strength strong Well, are your also But the the those is one think really work and physical are transformation much you been being includes you deliver, in the this but who not together taken is towards rapidly for for of the and that I way. is that to that and it to those who

and I done I tremendous work that with a they've personally job. lot you of CEOs a tell those can

as mean have and you see to just the is what they've You done what in physical mentioned store. go well in matched as I done Target, they've online

future is indication I an where kind going. think that of that's the of

as well. e-commerce our with We're own You We've very didn't seen into Demandware. moving excited success of course see tremendous physical Amazon the with world platform.

that And just have some customers trounced we've of competitors. the on their really seen that platform

good is a there's [ph] there's one, others. examples; many Adidas course lot so of Of but

tremendous means we strong a a I And you lot one their you physical know platform have of that made say, that, them, that or walk who integrating hey digital and gets retailers customer experience. a want it's it's and to XXX store experience. mention that capability their every companies them. line number Customer cannot a where have and of a by terms capability you experience a because to of by for everything in purchase in stores have luxury when the of I tell they so them once name, just these request XXX they job into like did more about that own one a actually done real Demandware, And And something this honestly their but I'll their can you of we of new needs some this but have than new know product big difference you it

so whether app or and it's be or service that Thanks many or that or retail you're XXX% offer the can the competitive. development So the in mentioned things transformation or so top offer retailers, e-commerce underway question. we're ability vision sales they marketing as to Customer XXX excited that other to is right to you in for

line our you. of Thank next Heather Bellini Goldman come from question will And Sachs. with

Your line open. is now

about on-premise and and now the lie. you gotten share your vision look that footprint? of the with internal especially decades. strategic how M&A footprint I where for kind think you would that's ahead guess you been marriage to-date mean, you've as one two you Marc biggest obviously and of cloud so think last us the software built of one the How Thank you R&D on-premise combination cloud you Can into most visionaries Great. through questions over the my the M&A as market and And of much. of in I well? a companies you've market the the

are the that and others the tradeoff about the is, think other guess asked TAM? Mark Hawkins with about sure a get talked I on line lot that And question And bigger margin the number? come you [Indiscernible] do margin target the I the we a do target I'm that's inorganic XXXX much that about given how maybe my there very it there on focus any to for is. you call, So thoughts adding fiscal guess the -- of where taking questions. ever Thank

-- directly guidance. the way Heather innovation Well, both addressed we I'll we've our us tremendous the thanks think of over happening I look have because been I'll let it's we most the a motivated in But and last the world other innovative big Salesforce, and that's us way. of issues also everywhere the But enough innovation and in Mark in company of important hardest view XX been at to outside of we in all tell years. of companies innovation that's were really happen innovation the innovation be you happening that and a is and organic fortunate that, the is one it a for lot of so inorganic to we're been positive have

really meeting retailers took to lot them, Demandware into by we've mean or is have, and what I based they had Customer here's said to to software and me software connect is and competitive in the company was And those they tying those last and were their back example customers but luxury we've Demandware ability Demandware, they having why. a our acquire just it's a thank you moved our because companies -- driven that a of with ideas gap in they we've it's more and other of I that services able Paris. wanted bought they we is also could the XXX already They so we've created customers. doing great one aside to and be be had call themselves. the Salesforce built that I to a whether been have – should

execute out turned has what to augment that XXX for really our great able being And and our be vision and vision. CRM them to Customer also is of

out conversations has not at do world question. think let I of under rest be the all thinking their top these look way, Marc transformation be was had a their I customer just only time first. we're moment I where the CEOs today, really to digital when about I'll experience that I realize answer to the and And that has in to in

margin. thank as Heather Sure. the the over Marc, Over expansion. important certainly and you, make serve growth we've can the are customer. this been years expanding tradeoffs at We look you time question. do between that. that we Thank organic It's look several our very last when tradeoffs at something for that's us. operating see and We The highly you to something prize always we the margin to opportunity

that and constantly to there's focus We and improving. have been know about thinking trying more on making we be something always considerable done progress we're over but that's the years, work to

that operating be but point going I about in operating be about certainly February exploring hear margin the about talking give we'll year, February. to out talking we your margin targets. our in And one We're when beyond certainly

next Rangan our Bank with of Kash will a America. come of And question from line you. Thank

now line Your is open.

the very and to you the for Thank Hi. amount company first you the impact. report much. the financials like organic as of I'd the acquired such tremendous clarity your straightforwardness how currency applaud versus of

it to abundantly fact the more that to anticipated. you make how doing grow go acquisitions margins your excruciating through core excluding particularly than clear detail the is You are projected business

on of you the and to of straightforwardness want the applause clarity just a I round So disclosure. give

Now in prior seen diversity software, of or markets Marc Oracle. the move not question million ahead as you and company the the end SAP that for you're with we've you this targeting with the just on-prem a revenue $XX plus simply analogs

is didn't have of that quite diversity end markets Just pursuing. the Salesforce.com

you're doubled to breadth no not How how So the there's roughly market strategy does attacked world as going. does to to follow? recipe how evolved of go of simply seen, go-to-market as a you you just that nature the and plan has complexity revenues, that and markets

Keith ask in it, fill me to let let of me really the but rest. some Well, also fill in then

think in platform. hard do segment, really what this today's Customer on which region, country we're to how where XX you really that, execute customers and It's build at as extremely it focused by this important. years exactly doing worked it go by that we've to well want is that we I really do world. we're really that And by looking deliver taken we turns out, now XXX us and need is are said how to it's we competitive and be

That that soul Salesforce will. if to think we're a for we was app customers had to focus was XXX. it them from But continue with to we of I Customer our build kind And – was going get to us if that certainly automation. just customer started you to serve it with clear

Bret filled add maybe and great think well. also to it'd if I to you you Keith as maybe be the in that So, then want on go-to-market

Yes.

in new it their Industrial of put digital companies entire does the I companies Fourth Marc, of demanding the we is in well, experience. markets, span transformation. I think And the our the lot are a as characteristic customer digital is ways. think umbrella with which is you investment interact this Revolution the driving these that that things And it's proposition, under think defining spans it different value all about of Customers portfolio. but

question buying merging that. online digital. it's came about the It's recommendations after service, marketing and the and When defines Demandware retail how something. physical it's your up about that in-store, purchased get you experience, its than its about what you've it picking more lot and commerce, think about up about you and The earlier customer about a

above. the can't companies when the of transform portfolio, the experience And of world CEOs of they they in that's functionality. by But fragment that before. it them of so the customer vision their to major categories breadth of as spans talk companies you need they all our I all or separate when digital mentioned look is what native achieve And at I when wide thinking silos the the actually to

transformation can when than go a we So, complete customers our with I think into asset breath other any vision an our I because conversations think is for their we provide these more company. digital

international do and global side, go-to-market solve on large decision is things. their being difference made problems. on a One how culture it and last you is turn really an that company. a few is the we Yes. take conscious three behavior international and around years a a global company, to focus over And company you listen, how lot company into between And being of customer there an a

board the The example of the North second very, to -- which I speaking the would about most the retail. very in an that, movement New of have retailers two selling of one an about you And of and just York happy was language go really solutions industry. in weeks, prestigious and to to I towards to address the give I customer the America. understanding say of a I'm talk future

and growth although dinner them help of and weeks it's the the XXX had couple world CEO drive our of one retailers a ago they the I to same with talk platform different customer A but can about want company, optimize industry, Customer experience. in largest how

to field is a the huge the able understand being company being enabling an industry and of to and customer able organizations solve it. problem part understanding on and industry entire our our So

partnerships everywhere our is customers just of world The do And part why all to ecosystem. to this the third formed are the do success Accentures, who community, invest we the Trailblazer in the solutions I world, from partner have strategic want continue the a is but and again we that well world. because also operations, our that extend who that And we over ecosystem service and mentioned of for companies drive global with Alibaba we moving to Deloitte PWCs our evangelize to where in with with customers. classic companies the millions processed, community for we word ecosystem people architect we business It global. how have the the firms piece success that's really of drive that means we like our encompassing like this a and

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the as changes a Great. the of going ground that from that discussion a back some flexibility the leadership CEOs to I as see strategic they on view curious And sort Thank versus or What international to that wanted appropriate core leadership mandate to you company most in global as company that in couple run need what particularly a regional circle the of role markets? of I'm about you in on do global add and with to of you. addition start there? of competencies sort the the earlier way business by providing market? the make

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hand you. answer today. remarks. Ladies this comments Thank call question or any I'll now the and the session company our over gentlemen, for closing and for back concludes

participating today. all our John. and Ohana did call pleased be everybody fantastic to the and for Thanks more couldn't outcome, And a quarter specially who the job with of I we just in thank want this

Yes. everyone much. Thanks joining Thanks so Marc. And for thanks so for much today. us

look Day. Analyst Thank our for we'll ahead an and many As Annual forward on Dreamforce. so Marc to at And to reminded giving seeing look you everyone, go of our We much. register results forward you QX. update in there you

have Thank conference. and for a today's Everybody you we you. program thank day. wonderful disconnect. Ladies and conclude participation our on gentlemen, your may all does This