17-Nov-2016 salesforce.com, inc.s1.q4cdn.com/.../CRM-Q317-Earnings-Transcript-2016-11-17.pdf ·...

Corrected Transcript

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17-Nov-2016

salesforce.com, inc. (CRM)

Q3 2017 Earnings Call

salesforce.com, inc. (CRM) Q3 2017 Earnings Call

Corrected Transcript 17-Nov-2016


2 Copyright © 2001-2016 FactSet CallStreet, LLC

CORPORATE PARTICIPANTS

John Cummings Vice President-Investor Relations, salesforce.com, inc.

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc.

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc.

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc.

Amy E. Weaver Executive Vice President & General Counsel, salesforce.com, inc.

................................................................................................................................................................................................................................

OTHER PARTICIPANTS

Brent Thill Analyst, UBS Securities LLC

Raimo Lenschow Analyst, Barclays Capital, Inc.

Kash Rangan Analyst, Bank of America - Merrill Lynch

Walter H. Pritchard Analyst, Citigroup Global Markets, Inc. (Broker)

Keith Eric Weiss Analyst, Morgan Stanley & Co. LLC

Heather Bellini Analyst, Goldman Sachs & Co.

Tom Roderick Analyst, Stifel, Nicolaus & Co., Inc.

Karl E. Keirstead Analyst, Deutsche Bank Securities, Inc.

Abhey Lamba Analyst, Mizuho Securities USA, Inc.

Kirk Materne Analyst, Evercore Group LLC





MANAGEMENT DISCUSSION SECTION

Operator: Good afternoon. My name is Doris, and I will be your conference operator today. At this time, I would

like to welcome everyone to the Salesforce Q3 earnings conference call. All lines have been placed on mute to

prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

[Operator Instructions]

Thank you. I will now turn the call over to our host, Mr. John Cummings, SVP of Investor Relations. Sir, please go

ahead. ................................................................................................................................................................................................................................

John Cummings Vice President-Investor Relations, salesforce.com, inc.

Thanks so much, Doris. Good afternoon, everyone, and thanks for joining us for our fiscal third quarter 2017

results conference call. Our third quarter results press release, SEC filings, and a replay of today's call can be

found on our IR website at www.salesforce.com/investor.

With me on the call today is Marc Benioff, Chairman and CEO; Keith Block, Vice Chairman, President and COO;

and Mark Hawkins, CFO.

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. Also, some of our comments

today may contain forward-looking statements which are subject to risks, uncertainties and assumptions.

Should any of these 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 are included in our SEC filings, including our

most recent report on Form 10-Q.

So with that, let me turn the call over to Marc. ................................................................................................................................................................................................................................


Hey. Thanks, John, and thanks to everybody for joining us on the call today. We're coming live to you from New

Jersey, where we have the whole team and we spent the whole week here in New York and having a great time.

And it's been great to be here. We just opened our new Salesforce Tower, which is the former MetLife building at

Bryant Park; really cool, great new space for customers, partners, employees. I'd love to invite all of you there to

see what we're going to do with this incredible new building in New York.

And Salesforce Tower New York is open, and all the signage is going to be going up over the next six months.

We're really thrilled. And we're in the first floor. So really I couldn't be more excited to be here. Hey, we're looking

forward to having you all visit us there.

And, okay, let's get right to it. You can see from our results, we had an exceptional third quarter. Revenue rose to

more than $2.1 billion, up 27% in constant currency from a year ago. You know already, there is no other top 10

software company delivering that 27% number.





And what I'm really excited about is we expect to deliver, well, more than $10 billion in revenue in fiscal 2018. I

think we initiated guidance at $10.15 billion, at the high end of our range. And now, we're setting our sights on our

next goal, $20 billion. Look, no other software company, no enterprise software company is delivering this kind of

growth at this scale, size; and we're already off to a great start.

Deferred revenue in third quarter grew to $3.5 billion, up 25% in constant currency from a year ago. Dollar value

of book business on/off the balance sheet more than $12 billion, up 27% year-over-year. That's a great predicator

for next year and why we're so aggressive about giving this incredible $10.1 billion to $10.15 billion number now,

because we have that $12 billion on the balance sheet that's in the deferred.

So let's talk about this. We're really well-positioned for the future. Everyone at Dreamforce saw that. We are

having an incredible year. We're growing in this mid to high-20%s range. And we've scaled from $4 billion three

years ago to $8 billion this year. We see tremendous opportunity ahead.

Now, today, we're trusted by a global community of a billion customers, consumers, citizens, partners, and

employees; and that's a huge responsibility on our shoulders. What we're excited about is serving all these

incredible people all over the world with our services.

And just look at our new Commerce Cloud supporting 300 million unique shoppers a month. And you saw Adidas,

and I love this story, 10,000 pairs of Yeezy shoes – Kanye West, you did a great job on the shoe – in a single

hour through the Salesforce Commerce Cloud. Thank you, Kanye. Thank you, Adidas. That's amazing.

And our Marketing Cloud processing 600 million social posts and more than 1 billion messages a day; really,

really exciting. And 400 million consumers using that service. So you just look at customer-facing apps built with

Salesforce Heroku, companies like Macy's, Toyota. We're operating at an incredible scale, and now an incredible

level of momentum as well.

Over the past several months I've been spending a lot of time on the road with our customers. I love being with

our customers. And this week, of course, was no exception. I'll tell you what I continue to see is this incredible

community that surrounds us; and it's been awesome to experience that. I just went through that.

I just did the Dreamforce keynote again yesterday here in New York. And just having all of these customers so

excited about our future, understanding this amazing platform that we've built, the future of B2B and B2C CRM.

And you saw this come to life at our sold-out Dreamforce Conference at September, which was way beyond our

expectations.

I know a lot of the conferences this year have not delivered their results, but Dreamforce did. That was awesome.

And you saw not just the 170,000 people registered, and everyone was there and you saw it was packed, but

more than 15 million people joining online. That was a huge surprise for us. And at Dreamforce, you also saw how

we're continuing to innovate with Lightning, with Einstein. It's been really, really, really awesome.

Of course, probably the most exciting announcement at Dreamforce for a lot of our customers has been

Salesforce Einstein. We've extended our Salesforce platform, not just with this incredible UI with Lightning, not

just with this incredible BI layer with Wave, but now we've extended our Salesforce platform once again with an AI

layer with Einstein.





And it's really the world's easiest, easiest AI. That is, all of these partners, all of these customers were able to

easily inherit all of the most state-of-the-art artificial intelligence, whether it's machine learning, machine

intelligence, deep learning, right inside the Salesforce platform through Einstein. And we're extending that

Salesforce platform with amazing new capabilities, with new technologies, new talent, new platform functionality.

And you saw that again this quarter where we have acquired this incredible DMP Krux extending our Marketing

Cloud.

And, of course, everybody knows, if you've been around me at all, you see how our whole company now has

20,000 users on Quip. And, of course, Facebook has thousands of users on Quip. And other incredible

companies like Electronic Arts and many others have thousands of users now on Quip.

And if you don't have Quip on your phone yet and you haven't experienced Quip, you should just go to the App

Store right now and download Quip, q-u-i-p. It'll change your life, I'll tell you. You can really experience next-

generation productivity with live collaborate documents and spreadsheets on our platform, integrated media. It is

really cool.

And Bret Taylor, former CTO of Facebook, is now with Salesforce. Of course, the former legendary Product

Manager at Google, who did Google Maps, he and Kevin Gibbs, who is his cofounder, did just a beautiful job on

that.

Anyway, I could go on and on and on about our products and technology and how exciting this quarter was. But

let me turn it over to Keith. And, Keith, thanks for coming down from Boston and being here for the call. ................................................................................................................................................................................................................................


Thanks, Marc. Thanks, everybody, for joining the call.

Listen, Q3 was an outstanding quarter. We had excellent execution from the entire team in all of our key

geographies and industries. We're really, really thrilled with the results. We also delivered very strong

performance in large deals this quarter. Not only did we close a record number of seven-figure-plus transactions

in Q3, but the value of those transactions grew significantly. We continue to spend a lot of time with CEOs.

And at Dreamforce, our CEO Summit brought together some amazing thought leaders; and they're all looking to

drive a new level of innovation in their industries around customer engagement. And they recognize that they

need an intelligent customer engagement platform that will help them stay ahead of rapidly c hanging customer

expectations.

Now this level of dialogue and engagement with these CEOs of some of the most incredible companies in the

world, they have put their trust in us, and that has been reflected in our results. So for example, this quarter we

saw huge strength in financial services, where we signed strategic agreements with seven of the premier financial

services institutions in the United States, including Citi and PNC Bank.

And we're very, very excited about these stories, so let me tell you a little bit about PNC. This is a new

relationship for Salesforce. And we're helping them streamline operations across all their primary lines of

business, so that they can reimagine the banking experience for nearly 11 million customers. All their retail c all

centers and branches will now be powered by Salesforce, and that will help them respond to customers faster.

And they'll also use Salesforce to mobilize their corporate and institutional banking team, giving them access to

customer information on the go.





Salesforce also signed a strategic agreement with Citi in the quarter, and this is Citi's global consumer bank that

will utilize Salesforce for all client-facing personnel in their U.S. retail bank, enabling Citi to better serve clients

while lowering costs and improving analytics and efficiency. It really is an incredible vision to transform their global

consumer bank with a very highly differentiated customer experience.

We had a landmark win with one of the world's largest consumer packaged goods companies who needed a

complete CRM and e-commerce platform to help them transform from B2B to a B2C business. Now I am having a

lot of conversations with customers about this particular type of transformation. And this relationship was the

result of excellent collaboration between Salesforce and the Commerce Cloud, which grew its comparable

customer gross merchandise value by 22% in constant currency from a year ago. This is an early sign of the

power of our combined businesses, and it is creating unmatched value.

Other e-commerce wins in the quarter included GNC and Shiseido. Now, Amazon is a great win in the quarter as

well. We formed a strategic relationship in Q1, as you all know. And in Q3, that relationship has expanded, and

they added even more services throughout the company.

International continues to be an important cornerstone of our growth strategy. In Europe, we had a great win with

KONE, one of the world's largest elevator companies. And just last week I spoke with KONE CEO Henrik

Ehrnrooth and his team about our partnership to transform the multibillion dollar field service industry together,

very exciting. Their vision is excellent, and they're using Salesforce to mobilize more than 20,000 service

technicians. With real-time customer information and service data from connected equipment, they will be able to

provide more proactive service and respond to service requests faster than ever.

Telecom Argentina, also new to the Salesforce family, they selected Salesforce to power all of their call c enters

and upgrade the in-store and online experience for more than 25 million customers.

We partnered very closely with Vlocity to show them an integrated solution in their industry. And it is the testimony

of the power of our industry strategy coupled with Salesforce's ecosystem and our ability to work effectively with

our partners. It is also proof positive that our ecosystem is absolutely blossoming.

So it's pretty clear that our enterprise strategy coupled with our continued operational focus is work ing. Our

investments in key industries, our partner ecosystem, and our top international regions are paying off, and we are

very well-positioned for the remainder of the fiscal 2017.

So at this point, I'd like to hand the call over to Mark Hawkins, and he can share some more detail around the

financial highlights for the quarter. Mark? ................................................................................................................................................................................................................................


Thanks, Keith.

I'm very pleased with our financial results for the third quarter. Let me just say that. Total revenue for the quarter

was up 25% in dollars and 27% in constant currency excluding a year-over-year FX headwind of $32 million.

The Commerce Cloud is off to a great start and had an excellent quarter, contributing $49 million to total revenue

after adjusting for purchasing accounting. Our dollar attrition for the third quarter, which excludes Marketing Cloud

and other acquired businesses, remained below 9%.





Looking at revenue by cloud, Sales Cloud grew 13% year over year. Service Cloud grew 26%. App Cloud and

Other grew 38%. Marketing Cloud grew 46%. But then if you exclude approximately $42 million of subscription

and support revenue related to Demandware, Marketing Cloud grew 21%.

In our region, we delivered another strong quarter of year-over-year constant currency revenue growth in EMEA

by growing 27% and Asia-Pac by growing 29%.

Now before I move on to cash flow and deferred revenue, I want to remind you that invoicing seasonality is

affecting both of these metrics. As we discussed at the last two Analyst Days, we continue to see an increase in

the seasonality of invoicing, primarily as a result of compounding and to a lesser extent contract co-terming and a

shift toward annual invoicing in Q4. In that context, third quarter cash flow was $154 million, down 5% over last

year.

Deferred revenue ended the quarter at $3.5 billion, up 23%. Deferred revenue includes approximately $30 million

related to our acquisition of Demandware, up from $23 million in Q2. On a constant currency basis, deferred

revenue was up 25% when excluding a year-over-year FX headwind of about $49 million. On a sequential basis,

deferred revenue had an FX headwind of $33 million.

In the quarter, approximately 80% of all subscription and support-related invoices were issued with annual terms

excluding Demandware. The Q3 benefit to deferred revenue from the change in billing frequency was less than 1

percentage point of growth.

Now, moving on to guidance, I'm pleased to be raising our full-year revenue guidance to $8.365 billion to $8.375

billion, despite absorbing approximately $100 million to $150 million of FX headwind this year. This implies year-

over-year growth for FY 2017 of approximately 25%. We expect Demandware and other acquired ass ets to

contribute about 1% to 2 percentage points of growth year over year.

We're also raising our full-year non-GAAP diluted EPS guidance by $0.03, to $0.97 to $0.98. This raise includes

1% (sic) [$0.01] from operational outperformance and $0.01 from an investment gain in Q3 and $0.01 from an

anticipated investment gain in Q4. This guide continues to imply approximately 70 basis points of full -year non-

GAAP operating margin improvement. We continue to anticipate full-year operating cash flow growth of 20% to

21% year over year.

For Q4, we're initiating revenue guidance of $2.267 billion to $2.277 billion, non-GAAP diluted EPS of $0.24 to

$0.25, and year-over-year deferred revenue growth of 22% to 23%. And as you heard from Marc, we're excited to

deliver our first $10 billion revenue milestone next year, as we're initiating fiscal 2018 revenue guidance of $10.1

billion to $10.15 billion. This implies year-over-year growth of approximately 21%. We plan to provide additional

details about our outlook for FY 2018 on our fourth quarter call in February.

To close, we had a strong third quarter and we are well-positioned for a great finish to FY 2017, and this sets us

up for another strong 20%-plus growth year in FY 2018.

At this time, I'd like to thank all of our nearly 24,000 employees for their dedication to customer success and

driving these outstanding results.

And with that, we'll open up the call for questions. Operator?





QUESTION AND ANSWER SECTION

Operator: [Operator Instructions] Our first question is from the line of Brent Thill with UBS. ................................................................................................................................................................................................................................

Brent Thill Analyst, UBS Securities LLC Q Hi, good afternoon. In Q2, you noted some U.S. weakness. It looks like in Q3 that came back. I was curious if you

could just talk about the performance in the U.S. And then, Keith, you were clear that these deals were delayed,

not lost the day they come back in, in the quarter? ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A Hi, glad to have to answer that question. So we did discuss in the last call that at the very end of Q2 we did have

some weakness in the United States, and that was attributed to execution issues. And as I said on the last call,

we did a very detailed and very disciplined operational review. We made some minor adjustments to our playbook

and some changes down the ranks. And I'm very, very pleased with the results. This is a high-performing team.

And it's been a very high-performing team for a number of years, and they responded in kind.

As far as deals, in any given quarter, deals, there's an ebb and flow. Some come in, some come out. But I'm very,

very pleased with the execution in the quarter, particularly around these large seven-figure-plus transactions.

Again, these brands are absolutely fantastic. You talk about a company like a PNC Bank or Citigroup, even

Amazon in the quarter, KONE, Telecom Argentina, many of these brands are world-class brands. And our

performance was strong globally across all theaters, all markets, all segments, all industries. So, again, I think it is

a quarter of execution and we're very, very proud of how the team responded. ................................................................................................................................................................................................................................

Operator: Our next question is from the line of Raimo Lenschow with Barclays. ................................................................................................................................................................................................................................

Raimo Lenschow Analyst, Barclays Capital, Inc. Q Thanks for taking my question and congrats on a great quarter. Can you – I wanted to dig in a little bit into the

different clouds. Can you speak a little bit how you saw the performance? Obviously, platform was strong and the

Service Cloud continue to be better with the higher value SKUs that you introduced. Still the Service Cloud

moderated a little bit. Can you just kind of frame it how you see it? And maybe, Keith, a question for you here. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A So again, we are very fortunate based on the vision of our CEO, who's sitting right here, to have an incredible

product and a set of clouds that is second to none. Obviously, we're the market leader in virtually every one of

these clouds; and super excited about the vision that we put forth for our customers. And obviously based on

these results, our customers are super excited as well. And they serve as the inspiration and motivation for a lot

of the vision, along with, of course, what Marc and the rest of the team comes up with here.

But I will tell you that we're very pleased with our Sales Cloud execution. We're very pleased with our Service

Cloud execution. And proof positive on Service Cloud is that example I gave on KONE. This is a best -in-class





service-oriented company, even though they're an industrial manufacturer. And they look to us to help them

transform their business around field service, because this is a way for them to differentiate their product. Service

is very strategic to their future, and it's just one example of how companies are looking at Service Cloud.

Our platform continues. Our ISV strategy is very, very strong. Our execution around ISVs has been very strong,

which speaks to how strong the platform is. We look at Marketing Cloud as a very strong product. We look at

some of these acquisitions that we've made of the Commerce Cloud. We had a large global CPG company, a

very, very recognizable brand. And that deal happened because Commerce Cloud onto itself was very

compelling, but when combined with our core products made us even more compelling to paint a vision for that

particular company.

So we love our product strategy. We love our vision. Our customers obviously love our vision. This is only

reinforced at Dreamforce, which was just an incredible event this year. We say that every year, but it was just an

incredible event. And then when you start adding things like Einstein into the mix, which really is about the future,

it just becomes more and more compelling. So we definitely have the wind at our back and in our sails, and we're

super excited about the execution and our vision for our customers. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A And, Keith, I just want to add to that – and I'm sure everybody realizes, especially people who were at Dreamforce

– this is a balanced portfolio and we have really a balanced portfolio. And what's great about that is that, of

course, we've talked about having a balanced portfolio geographically. We have a balanced portfolio in regard to

our small and medium business, as well as our enterprise business. We also have a balanced portfolio when it

comes to our products; and you can see that in the numbers.

Of course, Sales Cloud is one of the largest products in our industry, not just CRM, but in the software industry.

And to see it growing at 13%, I mean, I just think that is incredible to see that re-acceleration. And it's pretty

awesome, and I'm really excited about that.

Again, we saw Service at 29%, we saw App Cloud and Other at 43%, Marketing 28%. But what I really focus on is

that we have a balanced portfolio of offerings. Because as the Salesforce kind of gets different levels of comfort,

and by geography, and by market segment, we see that shift quarter to quarter. But like a portfolio manager in a

big institution, this big financial institution, and they're keeping a balanced portfolio, so are we. And through that

balanced portfolio, that's how we're achieving these high performance results. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A Yes. In fact, Marc, I just would like to add onto that. I really see that. When you look at the entire balanced

portfolio, Marc, and you look at the growth rate that we're putting up, which nobody is doing in our industry at this

size and scale, what it translates in is this whole market share thing, Marc, where we gain market share. We

gained 150 basis points at last report and we just continue to watch our competitors fall behind in this respect.

And then lastly, Marc, to your point on portfolio, 27% growth in the Americas. 27% growth in constant currency in

Europe, and 29% in constant currency in Asia-Pac. Marc, I think that underscores the portfolio point. ................................................................................................................................................................................................................................

Operator: Our next question is from the line of Kash Rangan with Bank of America Merrill Lynch. ................................................................................................................................................................................................................................





Kash Rangan Analyst, Bank of America - Merrill Lynch Q Hi, thank you very much, one question for both Marc and Mark. Marc Benioff, with respect to Einstein, when is the

product going to be in GA and how are you as a company going to be gearing the sales organization go-to market

strategy around Einstein? And then, one for Mark Hawkins. I want to actually finish up the first question before the

second one. Thank you. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A Do you want to go? I mean I think when you look at things like Einstein, you look at kind of these incredible

directions, these shifts that are going on in technology from a customer perspective, okay. And we had an

opportunity to meet with all the largest banks here in New York this week. The customer service, sales,

marketing, it's going to have an incredible shift; and that is really what is just surprising to me. I don't think – when

you look back, we started this company 17 – 18 years ago; and where we are now, I mean this was unexpected.

And from a technical perspective – and I went through some of those things, but whether it's our UI – the demos

that I did with customers today were entirely on my phone. I'm giving CEOs of Fortune 100 companies, hey, I run

my whole business on my phone. That surprises a lot of people. And to see the amount of information and

insights that you can get from that is just incredible. And not just the UI, but business intelligence as well. I have

Wave running on my phone. Mark Hawkins has Wave running on his – we both gave a Fortune 10 CEO a demo

on our phones, and they just couldn't believe that.

And then I'll tell you that it's now – AI, artificial intelligence, where everything's getting just smarter and it's helping

all these users to actually point the direction of success. They know where to go. That is what is so cool. And, of

course, we're complementing that with the speed of our platform, with this unbelievable mobility , with this

productivity from Quip. I think I talked about that earlier, but that's a huge game-changer for our customers.

This is really awesome. And then to see it as this integrated platform that our customers can execute against is

very motivating for them, and I think that that's really cool. And, of course, Einstein is a huge part of it and you're

going see Einstein, of course, deeply integrated in everything that we do.

And customers get that Einstein is different than other AI solutions. I've met with all the tech CEOs, of course, the

cloud CEOs, and they all have AI. It's table stakes. AI is table stakes. You all know that. Everybody has got it

programmatically. We've got the best AI, no we've got the best AI, we've got – okay, fine.

But we have it declaratively, okay, through our platform because we need to bring it to millions of people, not just

a few – there's only 15 million programmers in the world. We're much bigger than that. We have to bring this to

people who don't code, or low coders, or citizen developers need to have the power of artificial intelligence. They

need the power of mobility. That's why Salesforce platform is so exciting and that our core clouds like Sales and

Service are built on it. That is a huge differentiator for us, and you can see it just in our win rates, and also our

competitive position has never been stronger. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A And, Kash, you had a second question that you wanted to add in. Okay, so Kash was disconnected. But, Marc, so

we'll just pause. Maybe he will call back on the second question he had for me. ................................................................................................................................................................................................................................





Operator: Our next question is from the line of Walter Pritchard with Citi. ................................................................................................................................................................................................................................

Walter H. Pritchard Analyst, Citigroup Global Markets, Inc. (Broker) Q Hi, thanks. Mark Hawkins, I guess I'm wondering if you could talk a bit about the synergies that you're starting to

see or if you're starting to see synergies out of Demandware, principally from a revenue perspective. And I'm

curious in your Q4 guidance if you've embedded anything additional to what you were maybe thinking three to six

months ago. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A Sure. Walter, let me just jump on that and then anybody else can add in if they'd like. We are so pleased with

Demandware. We are so pleased to have this asset. It rounds us out. It's a unique asset. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A That was just good fortune. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A Oh my gosh, Marc. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A I mean, Keith, you agree, don't you? I mean. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A I absolutely agree. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A We can't believe it. First of all, Keith loves having a company in Boston, so. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A I'll second that. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A But we also got haywire, too, so now we have two. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A He's got a big smile on his face. But, Walter, I appreciate the question because, look, we...





Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A Are you wearing the Yeezy shoes today, Keith? ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A I'm going to go get them right now, Marc. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A How about the vineyard vine? ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A Okay, let's just keep going here. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A Okay, I'll go with my numbers. But, Walter, I think what's interesting about this is we've put out in a stub period

announcement $49 million in revenue. And of course, you know that was haircut by about a third. We snapped

this in and we talk about execution. Everybody has been on it. We have a great team that's been joining us.

They're working with our broader company, and we're starting to see the momentum pick up. And Marc alluded to

that and some of the activities, but we see lots and lots of opportunity.

And from a synergy standpoint, we have a plan. We can't go into great detail on all that about where we're going

to take this long term, including, as you would expect, Walter, lifting the company and its synergies and really

leveraging some of the best practices of Salesforce and some of the best practices of Demandware. So watch

this frame to come, but the overall performance, I love what I see. ................................................................................................................................................................................................................................

Operator: Our next question is from the line of Keith Weiss with Morgan Stanley. ................................................................................................................................................................................................................................

Keith Eric Weiss Analyst, Morgan Stanley & Co. LLC Q Thank you, guys, for taking the question, and I'm echoing the comments on a really nice quarter. One of the areas

that we've seen really nice acceleration in over the past couple quarters has been the application platform.

Anything in particular that's kicking in gear there? Is it the SI building? Are you hoping to build applications on it?

Is Wave starting to be a more material contributor? Can you give us any incremental color on what's really

working there?

And then maybe on the flip side, one area that has been decelerating has been Marketing Cloud. One of the

things we're hearing a lot about in the marketplace is increasing competition potentially from the alignment of

Microsoft and Adobe. Is that having any of an impact on Marketing Cloud and giving any pressure on that

business and causing the slowdown there? ................................................................................................................................................................................................................................





Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A I think number one, when you look at Microsoft, we sold more CRM software this quarter than Microsoft has sold

in the last decade. It's just empirical. And that is what is really awesome about our performance against Microsoft.

And I'll tell you also when you look at Marketing Cloud, I really look at that against – we have so many

unbelievable products. Keith knows I feel this way. I'm going to ask Keith to come in. I really feel we're distribution

constrained.

We have so much product. We are in so many amazing markets, whether it's sales, service, marketing,

communities, analytics, application development, like you're talking, App Cloud, whether it's Commerce, whether

it's IoT, whether it's productivity with Quip. And Salesforce is going have that full portfolio of products, and they

are going to move back and forth against those. And we've seen that. Look at our results over the last five years

and you're going to see that constant up and down of those clouds based on that distribution organization

performance. But, Keith, you're the absolute leader of the distribution organization, and you probably have a

unique perspective on this. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A Look, I think the bottom line is that we have an abundance of riches, particularly as it relates to our product

portfolio. And if I look at our field organization and the value proposition and the solutions that they can put in front

of a customer, whether it's a line of business executive, or whether it's from an industry perspective, it is incredibly

compelling, and that is really manifesting itself in these results. So I would echo Marc's sentiment about what

people have to carry in their bag and what they can put in front of customers.

I also want to go back to part of the question around the platform and why we're seeing such great results in the

platform. There's a bunch of reasons for this. And let me start with the systems integrator. I think as everybody

knows, we have really emphasized the importance of having an incredible partner ecosystem, particularly over

the last 3.5 years. And that has just paid dividends, whether you're talking about the largest SIs or the boutiques.

And we still have work to do there, but the team has really done a fantastic job there. But those SIs are really

recognizing the value of the platform and what it can bring to their clients. So that's one point I would raise.

The second point that I would raise is that initially when we sell or position a product to a customer, like Sales

Cloud or Service Cloud, customers are overwhelmed by how incredible it is. But then they realize the power of the

platform extending sales and extending service, and that just lends itself to more usage and adoption and

utilization of the platform product.

And then finally, back to my partner comment, we've had a huge emphasis on ISVs and the growth of the ISVs

and making sure that we reinvigorate our AppExchange. But particularly around our industry ISVs, we've seen

tremendous success. And why is that? Number one, they love our platform. They see all the capabilities, they see

all the potential, and they want to build mission-critical applications on top of that platform. So we do have a lot of

great products in the portfolio that our sales teams can deliver, and our service teams can provide service to, and

our partners can deploy. But we also have an incredible platform, and that is a lot of the secret sauce that we

have in the company. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A





Keith, I love your comment of abundance of product, abundance of riches. In that way, just adding on, I mean,

Heroku. Even on the B2C side, and it's been a nice adder to all the things that you had talked about. And then

one of the things I see with customers is this whole notion of using Force.com and they would like t o self-brand

and they add on using Force.com, which is really neat that they can do that. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A Keith, I think you also have to really hit on some of the specific relationships. You have the world's top SIs who've

built phenomenal practices, heading toward billion-dollar practices, which is incredible for them with these

unbelievable service organizations. And you and I had meetings with CEOs of these top SIs who were at other

user conferences this quarter. We're not going mention any names because the CEOs are very sensitive in this

industry.

But these big SIs go into these other conferences and they say, where's the vibe, where's the energy, where's the

momentum, where's the growth, where's the innovation. And they pivoting everything back to us. And that's

exciting to us because we can bring a large systems integrator. And by the way, they're standardized on us

internally. Companies like Accenture, with Deloitte and so many others, who are building these incredible fast-

growing practices; and customers are paying attention to that as well. Is that right? ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A Yes. Look, these SIs – a critical part of our strategy is these SIs are in the boardroom along with us, and they are

key influencers. In fact, Marc, you and I have presented to a quite a few of their boards. Now, I don't believe that

Microsoft or SAP or Oracle are being asked to present in the boards of these incredible SIs. So it's a big part of

our strategy. If you look at growth of their practices, I mean they are exploding, and they can't get enough talent.

So they're cannibalizing the legacy practices of the companies that I mentioned earlier. So... ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A But why is that, Keith? Why do we have so much CEO and board level attention compared to like when we sold at

Oracle I never made a call on a CEO or a board, and I don't know how many of those you made. You were there

far longer than I was, but just put it in perspective. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A Well, I think it's very simple. These companies, these CEOs have an agenda of growth. Our story is about growth.

Their imperative is about growth. And we are uniquely qualified as a company with this product portfolio; and,

quite frankly, our culture is an example of how to grow... ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A Right. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A ...to drive that...





Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A Because we are a double-digit grower, and all these other software companies are just single-digit growers and

they can't break out of that. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A Yes. It's really... ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A And this is what these customers want. They want to be double-digit growers. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A That's exactly right. And we have the product portfolio and the vision to help them do that. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A I'm smiling, Marc. I was looking at Keith. We were in Davos. I won't mention the name, but one of the biggest SIs

that you've talked about in the world talking about standardizing on Salesforce. And, Keith, you remember that

discussion? ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A I do. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A And just that all came to be, and it's great to see them not only partnering with us, but using. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A Yes. And just to that point, and both of you guys have mentioned this. It's one thing to build a practice, but when

you also bet on your business because you're running Salesforce to run your business, I think that speaks

volumes. And all the major players do. ................................................................................................................................................................................................................................

Operator: Our next question is from the line of Heather Bellini with Goldman Sachs. ................................................................................................................................................................................................................................

Heather Bellini Analyst, Goldman Sachs & Co. Q Thank you. This question is for Marc Benioff. Marc, it wasn't long ago that you set a $10 billion target, and

obviously you're going to achieve that next year based on your guidance. It does seem like you have a very good

crystal ball versus others. And I guess I'm just wondering, if you were to fast forward to Salesforce hitting your

new goal of $20 billion, what do you think would've been the biggest drivers if you were to look back? Which





products do you think would be giving you or driving the most incremental revenue, if you had to guess? And how

would you think about the margin trajectory of the company as you surpassed that feat? ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A I really appreciate that, Heather, and I'll tell you that I really think that in my core, I think that I'll get back to my

comment about that balanced portfolio in our platform. What's unique, Heather, about our capability, and you

know this, is that we have an integrated platform. And this integrated platform is exciting because not only is it the

number one sales cloud in the world, not only is it the number one service cloud in the world, not only is it the

number one declarative platform, okay, but it has all these other capabilities: mobility, and AI, and analytics, and

so forth.

And so I think that when I look at the most incredible things that our customers have done, they weave these

things together in really smart and creative ways. They build these apps, they deploy these things internally, and

they look for speed. They're looking for speed. Of course, they want productivity, of course they want intelligence,

of course they want mobility. They want that core platform. And that – because I think we built it right.

Now, of course, we've also bought some great things that are outside of our core that we're integrating into our

core, like our Marketing Cloud, like our Commerce Cloud, like Quip, okay. But with Lightning, that's an incredible

UI layer that no one has ever seen anything like this componentized application development UI layer. It's almost

like a visual ETL. That is, these customers are now integrating this stuff together at the UI layer and, of course, at

the data layer, but that is what I think is going to really drive us forward.

I think it's going be our platform. And I think that when you look out – and obviously we have short-term goals

around that $20 billion number. I mean, Heather, I'm sure you have your own model of when you think we're

going to hit it. But I think that for us, look, I mean we want to make sure that -I don't know exactly when we're

going to double the company by, but my dream certainly is to double this. I would just tell you, my dream is to

double this company within the next three to four years, for sure. That's really important to me. Amy Weaver here,

who works directly for me, is my General Counsel and she doesn't want me to go any – Amy, do you want to

comment on that? ................................................................................................................................................................................................................................

Amy E. Weaver Executive Vice President & General Counsel, salesforce.com, inc. A Not at all, Marc. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A Anything you want to say? ................................................................................................................................................................................................................................

Amy E. Weaver Executive Vice President & General Counsel, salesforce.com, inc. A No. I think you've said it. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A I think so. Obviously, we're performance oriented and we've got a great team. We have a great culture. You know

that. We have a great brand reputation with our customers. We also have a level of transparency with you, the





financial analysts and media that cover us. When you come to Dreamforce, you're untethered. We want you to go

and talk to and be with our customers. And you can feel the vibe, and you know.

And you can come to all of our events and I'm going to be back – in three weeks I'm going to be in Tokyo. So

please come and see. For those of you who still have not come to Japan, you really should come and see

something incredible in Tokyo that we have in three weeks. And then for those of you who don't want to go to

Tokyo, in three weeks we're going to be back here in New York for a multi-thousand-person event, which is our

World Tour. So that's so exciting. The World Tour at Tokyo and San Francisco are on the same day for all intents

and purposes. So you're going to see a lot of market momentum this quarter as well as, Keith, you've got the

fourth quarter coming up. Are you ready? ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A I'm ready, Marc. Don't worry. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A Are you working out? And are you making... ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A I couldn't be in better shape. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A He's looking strong. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A I'm looking good. It's all good. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A All right. ................................................................................................................................................................................................................................

Operator: Our next question is from the line of Tom Roderick of Stifel. ................................................................................................................................................................................................................................

Tom Roderick Analyst, Stifel, Nicolaus & Co., Inc. Q Hey, guys. Thanks for taking my question. Keith, a question for you. You made a comment that your big CPG win

was driven by a customer whose desire was, I think, to shift from B2B more to B2C. So can you talk a little bit

more about that deal in particular and are you seeing other customers trying to make that shift?

Also, with your portfolio now with Demandware and ExactTarget fully integrated, is that something they're coming

to you and asking particularly for your help? Just talk a little bit more about that transition with your customer set

out there? Thanks.





Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A I love this question. So, listen, we live in a world where – and Marc talked about this – where speed, and mobility,

and productivity, and innovation, and intelligence are paramount, okay. This has become table stakes if you want

to part of the next wave of great companies. And if you think about kind of the classic business problem that any

consumer packaged goods company has right now is they have to have a connection with that end consumer.

Many times they go through a retailer, or a distributor.

Whether it's a classic industrial company or whether it's a consumer packaged goods company like a Unilever,

they want that direct connection to the consumer. So moving that shift, keeping the B2B relationships, but also

establishing a new model of B2C is very critical to their future. I mean think about – we live in this world, we call it

the age of the customer. And think about cloud, mobile, social, data science, IoT, analytics, and artificial

intelligence all coming together, new companies are born overnight. Barriers to entry into markets are being

brought down. And if you're not thinking about the future and how you're going to engage with your customer,

whether you're a B2B company or a B2C customer, you're going be in trouble.

So this is becoming a regular dialogue and even more meaningful for us at Salesforce because of the Commerce

Cloud. So this is just another part of our portfolio that really helps to complete the package around these

transformations. So it is becoming a regular part of the conversation. And that particular win that I mentioned

earlier, this is one of the world's greatest CPG companies in many regards; and it's exactly about moving from

B2B to B2C. ................................................................................................................................................................................................................................

Operator: Our next question is from the line of Karl Keirstead with Deutsche Bank. ................................................................................................................................................................................................................................

Karl E. Keirstead Analyst, Deutsche Bank Securities, Inc. Q Thank you. This question is for Marc Benioff or Keith Block. I know forecasting deal timing is awfully tough, but

you've been generally pretty bullish about the fourth quarter. And I'm curious if you've got any different confidence

level about those deals in the pipeline dropping in the fourth quarter? And I know it's very early, but based on your

recent customer conversations, I'm just wondering if the business uncertainty stemming from recent political

events might have any bearing, good or bad, on the timing of large enterprise deals closing this quarter? Thank

you. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A Okay. Look, I think Keith and I both want to talk about that. I think there's a couple of things going on that are very

important, and I want to make a few different comments. Number one, you all know that in the second quarter we

experienced a bifurcated headwind which was not just in foreign exchange, which came out of Brexit and the

great British pound which we've continued to kind of suffer all year. That is, our numbers would be even more

incredible if we didn't. Right, Mark? ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A Yes. ................................................................................................................................................................................................................................





Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A And what if we suffered here from foreign exchange this year? ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A Yes. For FY 2017, Marc, we've had to absorb between $100 million and $150 million headwind. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A Yes. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A So it would be that much higher to your point, Marc. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A So number one, in that second quarter we have the Brexit and the great British pound situation. And then at the

very tail end of the second quarter, as we discussed, we saw a little bit of weakness. And to Keith's credit and he

said this, but I think it's very subtle. So I think it's worth amplifying. He made a number of changes. We made a

number of changes, I think, that really let us perform well in the third quarter because we did see the market shift

a little bit in the second quarter. We told everybody that. And it's not the first time that we've seen that in our

careers. Keith and I've been through – have been to this rodeo before and the selling motion had to change.

I think in companies that you've seen report in the last month or so, who kind of saw or seeing that kind of market

shift, they also will change in the coming quarters their selling motion because the selling motion has had to

change in fiscal year 2017. We've changed. You can see the results, incredible, even with this foreign exchange

headwind. So that's number one.

Number two, in regards specifically to our fourth quarter, we don't talk about this specifically. But one of the

reasons that we do have confidence around the fourth quarter is a certain percentage of that revenue is contracts

we've already signed. That is, we know we're going to get bookings in the fourth quarter because we have signed

these agreements. And so that is coming in, and so that gives us a leg up.

And then Keith has an incredible focus through the sales organization which is, as you know, essentially half our

company is in sales, customer-facing. And that customer-facing organization, which is I think the best in the world,

all wants to have a great fourth quarter, and they're focused and we have made these cool adjustments.

So do you want to just amplify any of that or augment or highlight any of that? Because I actually think there's a

lot to learn. And you and I have been coaching CEOs on how to survive some of these ebb and flow, because I

think that we both have a lot of confidence that we're going see a lot of exciting things happen. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A





I think there's a number of things going on here. We all know the story of the second quarter. I don't think we need

to talk about that. But at the last earnings call, we said that we had a high degree of confidence in our Q3. And

obviously, we delivered the goods. And we said that we also had a high degree of confidence in Q4, and we did

make those adjustments.

I do think that we – I'll echo Marc's comments. I think that we do have the best distribution organization in the

world and certainly in this industry. But it also allows us to talk to our customers about the things that they can do

and adjust the way that they think about their customers and how they can sell to their customers and service

their customers, and market to their customers and... ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A We're not abstracted from our customers. We are with these people every moment. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A We are and this is what we do. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A We're living with them. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A We live with them and this is what we do. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A And I'll tell you the other thing is – and in regards to the election, I think this is really important. Look, several of us

may not have had the outcome that we want. Some of us had the outcome we did want. In my view, it's in the

past. We're moving forward. And we have at Salesforce an open heart. We have an open mind, and we also

expect the best. We're positive.

And we talk about that in everything we do. We've talked about how we cultivate a beginner's mind. You've heard

us talk about it's not just in regards to writing our business. But even when there's an election, things have – yes,

everything is changing. But we have a beginner's mind and we have a sense of optimism for the future. And we're

going to cultivate that optimism and we're going to manifest it into our business because that is how we operate

here. We are positive people and we are moving forward.

And I've talked to now a number of customers this week, and I have met with CEOs of some of the largest

companies in the world this week. And in each and every case, all of them are moving forward. And that is, we

know what we have to do and we need now to execute. So I hope, as I said, that 2008 is behind us.

Okay, I've said this before. I've been optimistic about 2017 on growth. I've been counter to a lot of the global

economists, and I'm going to continue to feel positive about growth in the coming years because I really hope t hat

this 2008 tale, that we're finally through it. And now that this election is also behind us, and I hope absolutely for





the best now for everything going forward. This is what I want. And Mark and Keith are here with us in the room

here, and you guys should weigh in here on this. ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A Marc, thank you. I'd love to add in on that. Because when we talk about that, Marc, exactly that looking forward

and the view and the tale that you talked about; and Keith has something really key building on his confidence in

Q4, Keith, that you had talked about. One of the things that we've chatted about that I think is good to share on

the call is, when we exit, Keith, with Q4, we're going to exit with a $9 billion rough run rate in terms of revenue run

rate, Marc. So we're not only achieving our plan, but we're actually going to exit with a run rate of $9 billion. It's

going to position us and the guidance you heard for next year is going to be $10.15 billion at the high end. So

that's another really big milestone.

But, Marc, this guidance for the year with the confidence that you had talked about also implies two other

milestones we have never hit in the history of the company. One is in this FY 2017, our guidance implies $1

billion-plus operating margin non-GAAP milestone. This is something we've aspired to, and that's going to achieve

with this particular guidance for this year, Marc. And the last thing we're going to achieve is another milestone

we've never ever done, which is $2 billion-plus on the operating cash flow. So these are things, Marc, that I think

quantitatively are milestones that support this idea. And, Keith, I don't know if you want to comment on that. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A Yes. Look, I think the results speak for themselves. There's a lot of dialogue out there. Marc mentioned it, about

the tale from 2008 and the Presidential election and... ................................................................................................................................................................................................................................

Mark J. Hawkins Chief Financial Officer & Executive Vice President, salesforce.com, inc. A Yes. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A ...look, at the end of the day, at Salesforce, our story is about growth. Our message is about growth. Our products

and vision inspire growth. What CEO does not want growth? And I think that says it all. So I think we are well -

positioned. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A Because we want what's the best for our employees... ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A Absolutely. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A





...for our customers, for our partners, for shareholders, and for our community and all these organizations that we

support. We want that. We want the best for everybody. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A You bet. ................................................................................................................................................................................................................................

Operator: Our next question is from the line of Abhey Lamba with Mizuho Securities. ................................................................................................................................................................................................................................

Abhey Lamba Analyst, Mizuho Securities USA, Inc. Q Thank you. Keith, can you please discuss deal dynamics? Because you have seen very strong growth in annual

contract value from existing customers. Is it coming from greater penetration of various clouds, more feet, some

pricing, or any color on if you're seeing accelerated pace of adoption of multiple clouds? Thanks. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A Thank you for the question. So go back to what Marc said about a balanced portfolio. That is really what this is all

about. Each of our individual clouds are best-in-class. And together it's even more powerful, and it is a balanced

portfolio. And we're out there selling solutions to real business problems and opportunities for these customers.

So it's a very balanced portfolio. It's install base selling, it's net new customers. I mentioned a few of these who

are new customers to us. A company like PNC is a brand new logo and it's a pretty good brand new logo, so

we're super excited about it. So it's just great execution with an excellent platform for our customers, whether it's

install base selling or net new logos and positioning the right solutions for growth. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A Doris? ................................................................................................................................................................................................................................

Operator: Yes. Our last question is from the line of Kirk Materne with Evercore ISI. ................................................................................................................................................................................................................................

Kirk Materne Analyst, Evercore Group LLC Q Thanks very much for fitting me in. Keith, you mentioned a couple times in the presentation just the breadth of

your portfolio now. But you not only have a broad portfolio, but you guys have been verticalizing your go-to market

motion at the same time. So can you just talk to us about how differentiated it is to be able to not only t ake a

broad product portfolio, but also shape it in a way that you can talk about how customer service transformation

differs in, say, the financial services industry versus the telecommunications industry? To me that seems like a

massive moat that's very difficult to get over. And I know you guys have been working on it for a couple of years.

And to me that seems to be one of the reasons maybe these bigger deals are happening at a faster cadence

today versus, say, one to two years ago? Thanks. ................................................................................................................................................................................................................................

Keith G. Block Vice Chairman, President & COO, salesforce.com, inc. A Yes. As you know, this is one of our core strategies that we've tried to put in place over the last three-and-a-half

years is really to speak the language of the customer, and go to market by industry and make sure our





messaging, and our products, and our entire portfolio is really in many ways taking this incredible platform of

products and portfolio of products and reorient them to solve the specific customer problem.

In this particular quarter, we're seeing something in Q3 around financial services where, again, seven of these

premier financial services institutions decided to go with Salesforce as they think about their transformation.

One of these deals was with a premier wealth management company, and they are going wall to wall with our

Financial Services Cloud, which is one of our first vertical products that we've ever had in the company. And it's

only been GA since March, but this firm is going wall to wall; and that's because we are targeting a specific

problem area in a specific industry. I mean you think about the Telecom Argentina solution that we partnered as

part of our ecosystem with this company like Vlocity. And this is transformational for the telecommunications

industry. It's a huge win for both of us.

And this is probably not the same sort of outcome that we would have gone, if we had not had something that was

industry-specific. So whether it's the PNC story or the Citigroup story or the wealth management story that I

referenced or Telecom Argentina, we are in very early days here, whether it's organically with our products, with

Financial Services Cloud or in Health Cloud, or whether it's with our partner ecosystem. But this is really a hand-

in-glove strategy with our partners, our SIs, our ISVs, the way that we've organized our field teams around going

to market. And at the end of the day, it all comes back to the platform because everything is built on that platform

and leverages the strength of that platform.

So, again, I think that is the secret sauce. But this vertical and industry strategy is certainly playing off in terms of

the level that we call on in the accounts. These are all very much CEO-level sales. The mind share and market

share and wallet share that we're getting is the result of speaking the language of the customer. So we've got

some momentum here, and we're excited by it. ................................................................................................................................................................................................................................

Marc Russell Benioff Chairman & Chief Executive Officer, salesforce.com, inc. A We are excited and we're going to tell you some more details about our strategy and our plans for the future,

because we're right here in New Jersey at CNBC headquarters and we're about to walk into the studio with Jim

Cramer. So if you turn on CNBC, you're going to see us come in and talk to Jim. ................................................................................................................................................................................................................................

Kirk Materne Analyst, Evercore Group LLC Q Great, thanks so much. ................................................................................................................................................................................................................................


Thanks very much. ................................................................................................................................................................................................................................


Thanks, everybody. ................................................................................................................................................................................................................................






Bye-bye, now. ................................................................................................................................................................................................................................

Operator: Ladies and gentlemen, this does conclude today's conference call. You may now disconnect.

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