Welcome to Salesforce Fiscal 2021 Third Quarter Results Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand over the conference to your speaker Mr.

Evan Goldstein, Senior Vice President of Investor Relations. Sir, you may begin..

Thanks, [indiscernible]. Hello everyone, and thanks for joining us for our fiscal 2021 third quarter results conference call. I'm Evan Goldstein, Senior Vice President of Investor Relations. Our 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, Chair and CEO; Mark Hawkins, President and CFO; Bret Taylor, President and COO; Gavin Patterson, President and Chief Revenue Officer; and Amy Weaver, President and Chief Legal Officer. As a reminder, our commentary today will primarily be in non-GAAP terms.

Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings press release. Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties, and assumptions.

In particular, our expectations are on the impact of the COVID-19 pandemic on our business, results of operations, and financial condition, and that of our customers and partners are uncertain and subject to change.

Should any of these materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements.

A description of these risks, uncertainties, and assumptions and other factors that could affect our financial results is included in our SEC filings, including our most recent report on Form 10-K. With that, let me hand the call to Marc..

Alright. Well thank you so much Evan and just thanks to everyone for being on the call today. I hope you and your families and colleagues are all safe and healthy and preparing for the holiday season. It’s nice and crisp and cold here in San Francisco, and we can feel Christmas approaching.

It’s all in the air and as the season approaches, I wish the very best to you. It’s been such an unbelievable year in so many ways for so many of us, and you know we’ve really had to re-imagine every part of our business and our lives and also work with so many of our customers, and really even our families to do the very same thing.

The past has really gone, and we can all feel that. And the future is coming.

We can see there’s certainly a light at the end of the tunnel, especially with these incredible vaccine announcements, but here we are in this present moment, and wow there’s so many things happening and so many exciting things to talk to you about on this call today, and we're reimagining our entire business, we're reimagining our industry, and we're even reimagining Dreamforce.

So many of you have emailed me and called me and talked to me about your ideas for Dreamforce. But I'll tell you, when it really comes right down to it, Dreamforce is different this year, just is, you know, it's not the Dreamforce that we wanted, it's the Dreamforce that we got. The Dreamforce that we wanted is the Dreamforce with all of you.

You know all of our trailblazers and all of our Ohana and all of our friends from all over the world, the best part of Dreamforce is being together in person. And there was a little bit like Thanksgiving all by ourselves last week, and here we are again, it's kind of Dreamforce by ourselves. So we've re-imagined Dreamforce.

And the first thing we did is, we said, “well, you know what, we're going to have Dreamforce for each and every customer,” and we've already reached out to thousands and thousands of our customers. We're creating custom Dreamforces exactly for them.

We've already done almost 5,000 of those Dreamforces, which has been our prototype, and we hope to do over 100,000 Dreamforces before we're done, and these are unique presentations exactly for our most important customers in the world.

And then we have a huge conference coming in a couple weeks which is our Dreamforce Trailblazer Conference, which gives ability for all our Trailblazers to come together; and then tomorrow, we've got a phenomenal event with myself, with many of our executives, Bret who’s going to join me on stage as well, it’s going to be live from San Francisco.

It's going to be cold. We're going to be doing it outside. I think Bret's holding the camera for a while and I'm holding the camera for a while. It's basically, you know, we're following all these protocols, and we're trying to stay as safe as we can, you know, we've all been tested, and we're ready to go.

And it's going to be very excited and we're going to have some very, very special guests tomorrow, some great customers and some really outstanding music, you're not going to want to miss that presentation.

And by the way, if you'd like to have Dreamforce to you, please contact our Salesforce executives, and we will arrange Dreamforce for your company. You'll be shocked at the depth and incredible custom presentation that we're able to bring for you, and we've re-imagined how to do a conference. We're not doing it like everybody else.

We have our own unique approach, of course, you would expect nothing less of Salesforce. And one thing that's really cool is how well Dreamforce to you is going. I want to thank my entire Dreamforce team. I've definitely got them working much harder than they should be working, especially during this holiday season.

Well, look, we're going to have some exciting announcements, surprises, you're not going to want to miss it. All of you need to tune into that, but the keynote again is just one part of an amazing month of Dreamforce 2020, it's Dreamforce to you.

We’re powering every account executive in our company to do this, it's going to be amazing, and you're going to love it. Let's get right into it. Let's get into the numbers and get out of this opening. This was an unbelievable year, and that was an unbelievable quarter. Q3, wow, it was our strongest Q3 ever.

You know, record revenues and margins and just deals and just unbelievable. And it follows the strongest Q2 in our history, and Salesforce has never been stronger. Look at our core organic growth. It's just incredible what the numbers say. Revenue has risen to 5.42 billion, up 19% year-over-year in constant currency.

By the way, if you look at that sequential growth from the second quarter at 5.15 billion to 5.42 billion, incredible. And, you know, this is 19% year-over-year in constant currency, and we're raising our full year fiscal 2021 guidance. Now, as you remember in the first quarter, the pandemic was hitting and we didn't know what was going on.

We were hiding like everyone else under our desks, then we realized, wait a minute, we can succeed through this. And here's our guidance. And Mark, I think it's our guidance is now higher than our original guidance for the year where we're actually delivering guidance at 21.11 billion at the high-end of the range representing 23% growth.

So, not only did we come back, we came back stronger, and no other enterprise software company is growing at this rate, especially in our core and organically. We expect our revenue to continue expanding, growing from 21.1 billion this year, to now over 25.5 billion.

And for those of you who are watching the enterprise software industry over the last, I don't know, four or five decades, I don't think there's been an enterprise software company in history that's gone from 21 billion, or 21.1 billion to 25.5 billion, and we're all modeling I'm sure right now, what the fiscal year 2023 number is, right.

So, when you look at those numbers, wow, you just can't, you just can't find any other company like that. And with the strength of our core products across sales, across service, across marketing, commerce, we’re growing year-over-year the size of entire companies.

So, we have a lot of great companies in cloud computing, but you can see how we're kind of just stacked one of those right on top of us here. So, Salesforce has never been more relevant, more strategic to our customers.

An example of this is what we've already seen this past week with the incredible scale, the reliability, the strength of our customer 360 platform this weekend. We were up all weekend running Cyber Week. It was incredible. From Black Friday and Cyber Monday, we processed more than 31 million orders.

It was up 62% year-over-year, but not, you know, just thank you to our engineering team. Just absolutely world-class performance and execution by them. Huge, [high fives] Commerce Cloud, Marketing Cloud, well, you know that those were started as acquisitions. And now we've turned it into a multi-billion dollar business.

And now with Tableau, well, our customers were able to leverage all the data coming in spotting the trends. It's been a phenomenal weekend with these holiday insights. You probably watch that online.

You've probably seen some of our incredible Tableau dashboards we put together and on any given day now you can see our customers are delivering an average of 2.6 billion marketing messages, [4 million lease, logging] 19.7 customer service conversation.

Einstein delivered more than 80 billion AI powered predictions every day across Customer 360, incredible. And Salesforce then takes all of that in sales and service, in marketing, in platform, in analytics, in conversation, in channels, in collaboration, and we lock it into a single source of truth for our customers.

Connecting customer data across systems, apps, and devices, and for our customers who have now seen this next generation architecture, and you're going to see our next generation platform tomorrow, but I don't want to give away too much of what Brett Taylor has built, but it's incredible, but let me say that that idea of the single source of truth, well no one else has ever tried to do such a thing.

And it's why for the seventh year in a row we've now been ranked the world's number one CRM by IDC. That's why companies of every size and every industry are building amazing digital experiences for their customers with our scalable, flexible Customer 360 technology.

And you look at this quarter, great customers, great customers like Prudential, Accenture, NBC Universal, Telefonica, Zoom, Data California, I mean, American Family Insurance, [Timok]. I mean, so many great companies; so many great customers and it’s why 43 states of the United States are working with us on the response now to the COVID-19 pandemic.

You probably saw us, we have even helped or fully eradicate COVID in some places in the world, including great State of Victoria in Australia, where they had a terrible situation and used Work.com and they have now announced that they’ve eradicated the virus, and I wish that we could work more closely with more governments, more deeply to do exactly the same thing, because the combination of mask wearing and social distancing and religious contact tracing well, boom, you can eradicate the virus.

Well very excited to see them and congratulations to the State of Victoria, I also this quarter was in Singapore visiting our 1,100 Ohana there, and I’ll tell you, they’ve eradicated the virus there, you can see the chart, unbelievable.

Now our customers are benefiting from the fast time-to-value we deliver with Customer 360, which has been critical during this pandemic and it’s going to remain so going forward.

And with MuleSoft and Tableau every company can easily unlock any data from any source and see and understand in ways that are leading these faster, smarter decisions, and the customer reactions when they see these Customer 360s. The eyes are lighting up, because they’ve never seen their business quite like this.

All right, well, now let me just tell you what I’m really excited about. Slack, I couldn’t be more excited about what Bret and Stuart have put together. Wow, I mean, when they came to me and brought me this idea that Salesforce and Slack to come together, my eyes lit up. I said this is the next generation of the Customer 360.

This is our ultimate vision of having this incredible user interface on top of all of these services with all these channels and all the collaboration running on all of these devices and integration, interactions, and the ecosystem, and the industry that has been created around it and all the applications amazing.

And let me just say also, I’ve watched Stewart and Slack grow up over the last six years, it’s been amazing, it’s reminded me of another great company Salesforce.

I have to be honest, and I get to look right out my window do you know what I see, Slack, Slack logo, because Slack building is right next to my building and I’m looking into their building all the time. Stewart is waving at me, now I’m waiving at him. Now, we’re giving each other big hugs when the pandemic is over.

With that idea that these two great companies are right next to each other in Salesforce Park is amazing.

And Stewart and his team have built one of the most beloved platforms and brands, okay, and technologies in the software industry and it’s a perfect match for both of us that’s going to extend our companies, make us both stronger and look, we’ve spent more than a decade focusing on this vision that we’ve had for social enterprise, everyone probably remembers [indiscernible].

All of the social enterprise presentations that I’ve delivered in my career, this makes it all real, this makes it all true, this brings the best of both worlds.

The integration, it’s a marriage made in heaven, it’s amazing and we spent more than, God, I can’t even think about how many conversations Parker and I have had on the vision and then to see Stewart come in with Bret and make it all real, well, that’s just awesome.

And we see in Slack a once-in-a-generation company and platform, it’s the central nervous system of so many companies on this call and our company and so many of our great customers connecting everyone and everything and now we could go even bigger, better, more exciting and it brings all the companies, people, the data, the tools together and you can see all the CRM information, the sales, customer interactions, you probably saw Slack Connect, which extends the benefit of Slack’s employees can securely work collaboratively with partners, suppliers, but especially important for us, customers.

Wow, that’s the game changer. And when I’ve seen this incredible story line that what Bret and Stewart have put together, it is like, wow. This is bigger than I’ve ever thought it could be.

And when I looked at the companies from around the world we’re implementing Slack from the fastest growing start-ups to Fortune 500 companies and Starbucks and Target and HP and what they’re doing and then when we integrate that with the single source of truth, oh boy, it’s a super charger.

So, we already know more than 90% of Slack, enterprise customers are also Salesforce customers, but we also see how much farther they can go, because we just use ourselves as an example.

Yes, we’re a great Slack customer, but we could be doing so much more, but when it’s integrated to a Salesforce, it’s like wow, and that’s what I plan to bring that message to all my friends, all these CEOs that I work with all over the world to help them transform their business and grow their businesses and helping them to survive and succeed during this pandemic.

Well, we’re going to make sure that they just have this incredible single source of truth experience as well.

Look, we’ve already shown with ExactTarget, with Demandware, with Mulesoft, with Tableau, how we acquired, how we can integrate, how we extend acquisitions, how we transform our own product line, how we can develop compelling models for our customers to get value and we’ll expand Slack as well in the enterprise, not just among Salesforce customers, not just by lighting up our tens of thousands of salespeople that’s not what this is all about.

What this is all about is the value of the social enterprise and creating this incredible idea that you have this amazing hub of productivity of collaboration and integration and applications that now leverage all of this amazing data.

And I mean you probably saw, if you watch the Tableau Conference-ish this year, the vision they’ve had for Tableau integrated with Slack, you look at what Salesforce has done, I mean, it’s absolutely incredible and by the way look at what Zoom is doing with Slack is absolutely incredible and you look at that product.

I mean, i.e., you’re talking about my productivity environment every day, Zoom and Slack and Tableau, oh yeah, and Salesforce and all the applications and dashboards and everything I use to run my business is all Salesforce now. Everything on my desktop here. I’ve got my computer in front of me right now and everything is Salesforce.

And I’m like, wow, this is just absolutely incredible. So, congratulations Stewart, Bret, I just want to give you a huge call out, because awesome what you have done and I never thought it was even possible, never wasn’t even in my consciousness that it could be possible and you did it.

Now, before I turn this over to Mark Hawkins, I’m sure you’ve now already seen that absolutely one of our very best CFOs we have ever had is retiring and it’s just sad to see Mark go. I’m going to try to keep him around in the company as long as I can.

I think, I’m going to have some good success, because let me just tell you, he is absolutely – I really think Mark you’re absolutely – I mean, I don’t want to – we have especially Steve and Graham out there such great close friends of all of ours with mine and yours as well Mark, but Mark, wow, you’ve really outdone yourself.

What a career you had at Salesforce.

And I’m just so grateful for everything that you have done for the company and I am so grateful Mark for everything that you’ve done for the industry and also your relationships with all the CFOs, when I look at your incredible CFO conference that you run at Dallas, when I look at your work that you have done as well with Prince Charles, with sustainable accounting.

When I see the value that you’ve added for the whole world not just at Salesforce, not just in the industry, but in the world what these new sustainable accounting standards, Mark, I am deeply grateful to you.

So, I want to tell you that Mark is going to remain our CFO through the end of our fiscal year, which is going to end January 31 and then Mark I believe you’re going to stay on and as an advisor hopefully for quite some time.

And then at that point, I am absolutely delighted to announce our new Chief Financial Officer, who has been on a few of our calls here, you all know her, she is an amazing person, a core part of our executive team, a core part of our entire company, core with our Board of Directors, my core [indiscernible], Amy Weaver.

So Amy congratulations as our new Chief Financial Officer. I couldn’t be happier for you and I know that Mark also joins me in sending you congratulations, we’ll hear from him in a second. And Amy will become our President and our Chief Financial Officer effective February 1 next year.

So congratulations Amy, you are now going to become our fifth CFO at Salesforce. So then probably the five best CFOs in the world.

I can’t imagine you’re joining this incredible group and you – Amy to have you as our fifth CFO, I mean, unbelievable and Mark, thank you again, because I will always be so grateful for your tenure and I’m sure we’re going to have a smooth transition of power and looking forward to hearing your announcement of your new cabinet.

Mark, when I look at how you have been such an important part of our success over the last six years with revenue growing five-times over 20 billion, actually 21.1 billion this year Mark.

And our market cap reaching more than 200 billion, employees growing over 54,000 a day, and Mark you set the foundation and you know this is just the beginning and you’re lighting up my $50 billion dream, so aggressively and we all know it takes a great CFO to help scale a company that, well, you know, I’m very grateful for this.

And Amy, you you’ve been that trusted advisor, I mean, it’s all one family, so I know this is going to be a seamless transition. But my heart is really filled with gratitude. And now let me turn this over to our Chief Financial Officer, Mark Hawkins..

sales grew 12%; service grew 21%; marketing and commerce grew 25%; platform and other grew 24%. I’d say also that revenue attrition in Q3 remained between the 9% and 10% range and continues to remain modestly better than we were guiding during our Q1 earnings call.

Our remaining performance obligation representing all future revenues under contract ended Q3 at approximately 30.3 billion, up 17% year-over-year. And as a reminder, this metric includes both new business and renewal contracts.

Current remaining performance obligation or CRPO is all the future revenue under contract that is expected to be recognized as revenue in the next 12 months and it was approximately 15.3 billion, up 19% in constant currency. Our Q3, GAAP EPS was $1.15 and our non-GAAP EPS was $1.74.

The outperformance in the quarter was driven primarily by higher revenue, as well as realized and unrealized gains on the strategic investment portfolio notably, due to Snowflake and the IPO there. These mark-to-market adjustments benefited GAAP EPS by approximately $0.83 and non-GAAP by approximately $0.86. Turning to cash flow.

Operating cash flow was $339 million, up 14% year-over-year. CapEx for the quarter was a $124 million, leading to a free cash flow defined as operating cash flow less CapEx of 215 million, up 68% year-over-year. Now turning to guidance for Q4 and fiscal 2021.

Coming off a strong Q3 result, we are pleased to be raising our full-year fiscal 2021 revenue guidance to 21.1 billion to 21.11 billion, representing approximately 23% year-over-year growth. This guidance includes approximately 120 million of revenue from Velocity and 20 million, an increase from Velocity in the prior announcement.

For Q4, we expect revenue to be 5.665 billion to 5.675 billion, representing approximately 17% growth. We are proud to be raising our revenue guide back to our pre-pandemic expectations, and Marc is absolutely right at the high end, it’s slightly higher than we started the year with.

We’re thankful to all of our customers and our partners for the success. And now as we enter Q4, which is our largest quarter of the year we are going to build on the momentum for Q2 and Q3. The pandemic has also empowered us to re-imagine how we operate in this work from anywhere digital world.

Earlier in the year, we shared with you our pandemic strategy of investing in our customers, our community and our employees. This included PPE donations, bonuses to our sales org, pivoting away from physical events, scaling our organization, while pulling forward growth hiring into this year. And in Q3, we continue to re-imagine our operations.

After analyzing our global lease commitments, we now plan to consolidate in sublease select locations. While this acceleration of our personal digital transformation in the post pandemic world is happening, we do expect this to result in a one-time Q4 charge of approximately 80 million to 100 million.

Please note that these charges represent an immaterial amount of our global portfolio and do not include our headquarter locations. After incorporating these and our updated revenue guidance, we are maintaining our fiscal our 2021 non-GAAP operating margin guidance of 17.6%, which is year-over-year improvement of 75 basis points.

As you can see, this year’s performance, margin is a choice. When we net these pandemic driven investments against T&E savings that the pandemic produced the result of slight operating margin headwind of approximately 50 basis points for the year.

However, in these times of crisis, it’s more important than ever to invest and support our stakeholders, our customers, our community and our employees. Therefore, our fiscal 2021 GAAP EPS will be $4.14 to $4.15, while non-GAAP diluted EPS will be $4.62 to $4.63.

For Q4 GAAP diluted EPS is expected to be $0.05 to $0.06, while non-GAAP diluted EPS will be $0.73 to $0.74. And as a reminder, our EPS guidance assumes no future contribution for mark-to-market accounting as required by ASU 2016/01.

For operating cash flow, we’re maintaining our fiscal 2021 guidance of 12% to 13% year-over-year and we continue to expect our CapEx to be approximately 3% in fiscal 2021 resulting in a free cash flow growth rate of approximately 15% to 16% for the fiscal year.

We expect operating cash flow to continue to be impacted by the growth and investments that we described last quarter. We expect CRPO to grow approximately 16% year-over-year in Q4, which is consistent with our initial revenue projections for next year after excluding the acquisitions of Slack and Acumen Solutions.

Additionally, the pandemic continues to result and modestly higher revenue attrition than our pre-COVID expectations assumed and therefore will be a very slight headwind to near-term growth. Regarding our fiscal 2022 revenue guidance, we project it to be 25.45 billion to 25.55 billion, representing 21% growth.

This includes the contribution from Slack of 600 million net of purchase accounting and assumes a closing date in late Q2. Acumen Solutions, the assumption is 150 million net of purchase accounting, which assumes a closing date within Q2.

Both of these acquisitions will be fantastic additions to our Ohana as they will greatly benefit our strategic priorities of Customer 360 and industries. I’d also like to provide some additional insight into our revenue guidance for Q1 of fiscal 2022, which we expect to be 5.68 billion to 5.715 billion, up approximately 17% year-over-year.

As a reminder, we’re providing this guidance given that our term license revenue business that is MuleSoft and Tableau have a more seasonal revenue profile in the first quarter. To close, we delivered a strong Q3 despite the pandemic.

We are proud of our ability to successfully partner with our customers through this adversity, while continuing to serve all of our stakeholders around the world. Additionally, I’d like to encourage all of you and your firms to join us on December 8 for our Annual Investor Day. And now for some personal comments.

As Marc mentioned, I made a decision to retire as an Operating Officer and from Salesforce. I’m amazingly humbled, grateful, and proud of having the opportunity to be 40-years in technology. I’m excited to begin my next journey, you know, spending time with my family; doing some voluntary and doing some incremental board work.

But first, of course, there is a really important matter of Q4 and then also really strongly supporting this transition. But I just want to say that I am excited about the future for Salesforce and I’m excited also about the next leg of the journey for myself.

I really deeply believe we are in a great position of strength and we are getting stronger as a company with so many indicators to evidence that. I will be the company’s strongest advocate once we go through this nearly year of a transition, which I’m excited to be a part of.

And I get to work hand-in-hand with a dear friend Amy Weaver, who I have the utmost respect for as an executive, as a partner and who is going to be an amazing CFO.

Before I conclude my personal our remarks, I do want to say a special thank you to all the Salesforce Ohana, a special thank you to my boss Marc Benioff, who is a great friend and somebody I will always treasure the relationship with and who has been incredibly kind to me and to my team and to the broader company, and I want to thank our investors for all your support over a long period of time as a public CFO and some of the others to thank the ELT and the board, but I’ll stop at that.

And let me turn it over to Amy. Amy, I can’t wait, I’m just going to tell you the same, I can’t wait to really begin this next leg of the journey with you and I’ll give you a virtual hug if I can, but we’re going to – it’s going to be an exciting year ahead. So, Amy over to you..

Thanks Mark. It has been an absolute joy to partner with you over the last [6 years] and I have to say that one of the best part of taking the role of the CFO is that I get to work even more closely with you throughout this transition.

This week I’ve been thinking back to when I joined Salesforce seven years ago, we had just under 13,000 employees and had not yet crossed $4 billion in revenue. Today, we now have more than 54,000 employees and guiding over $21 billion and what’s attracting the most is that we still got so much growth ahead of us.

My focus will be to support that momentum as we continue to grow, as well as the scale of the business efficiently. And I’m very much looking forward to continuing to work closely with our entire executive team and our Board of Directors, as well as going to partner with our shareholders in the coming months.

I am just incredibly grateful for this opportunity and the faith in me and taking an incredibly excited about the future of the company. And with that Evan, shall we open up the call for questions..

[Operator Instructions] Our first question comes from David Hynes with Canaccord Genuity. Your line is open..

Hey, thanks very much for taking the questions and Mark Hawkins congrats on the well deserved retirement. You're certainly going out with a bang here. Maybe this question is for Marc Benioff.

It sounds like maybe Bret, given, he was kind of the architect of the Slack deal, I'm curious, looks Slack’s going to give you access to huge amounts of, you know rich conversational customer data.

How do you see that kind of advancing your efforts around AI? And I guess maybe just related to that, I think we all know what Slack is today, but what’s your vision for what it could be with Salesforce in, you know, three to five years from now?.

Well, let me give you two minutes, and then or a minute, and let me have Bret come in next to fill in the details.

You know, when I look back at the dreams that we've had of what the social enterprise means over the last couple decades, it's a very rich user interface that kind of front ends all of our services and kind of in the way graphical user interfaces were a major moment in our computer industry.

I think these collaborative interfaces and video-based interfaces are the next major moment in our industry. But underneath those services and you've kind of teed it up by asking the question this way, you have so many rich services, applications, integrations, artificial intelligence, and fundamentally big, you know, big data lakes.

And the idea is, how can you take all of that and bring it to the user, to the power professional, to the worker, to the knowledge user, or even to the CEO and turn it into a powerful experience? And now this combination of Slack and Salesforce, exactly as I mentioned, you know, my whole world is on this platform, and we call it Customer 360, but the idea that gee, number one, there's never been a more important time for sales and B2B sales.

I see that with our customers every day, I look at our salesforce, obviously, it's enormous, but our ability to call at every level, our ability to call into the CEO level easily, our ability to have much higher levels of productivity with our sales organization, how we had to move our call centers and customer service organizations on a moment's notice into their homes.

Our ability to deliver record levels of marketing and marketing interactions like we did this weekend. The analytics that are needed, and you probably saw the analytics that we published around the holiday. Well, now all of that completely coupled with this incredible collaborative interface. And that is the magic. And that is what it's so exciting.

That's been our dream. Now, it's our reality. And I want to introduce you to the person who put all of these things together, and that's Bret Taylor.

So Bret, do you want to take this to another level?.

Yeah, thanks, Mark. I mean, I think you really contextualized it well. I mean, fundamentally, we really see the world as fundamentally having shifted this year.

We're entering into this all-digital work anywhere world, and every executive that I talked to, and every industry is doing this not as something temporary, but really a moment that accelerated the digitization of the economy. Consumer goods have gone from, you know, retailers to direct consumer.

Medical care has gone from doctor’s offices to Telehealth. Retail has gone from brick-and-mortar to curbside pickup. Marketing, as Marc mentioned, this last weekend is a perfect indication of this. We saw mobile push mode notifications go up 131%. We saw SMS grow 171%.

Behind all of this is fundamental shifts in the way we work, fundamental consumer behaviors and fundamental changes in behaviors and every interaction. And I think we really view Slack as really the system of engagement for every employee, for every partner, and for every customer interaction.

And I think in this all-digital work anywhere world, when you think what does it mean to be successful in sales, what does it mean to be successful in customer service and marketing, e-commerce, it really is about facilitating this all-digital, work-from-anywhere world to enable team selling, to enable people in a contact center to swarm on a case digitally whether or not you're in the same building, to enable marketers to plan a campaign, to enable merchandisers to plan what goes on the front page of a commerce app or a commerce website.

. And, you know, we've been using this phrase, really, this is the operating system for the new way to work.

And you know, our customers are coming to us now recognizing that because the economy has shifted so dramatically so quickly, they're pivoting from saying, “how do we respond to the crisis, how do we grow, and how do we thrive in this new normal?” And we fundamentally think this combination is that operating system for growth for every company in the world..

Our next question comes from Derrick Wood with Cowen and Company. Your line is open..

Thanks. I wanted to touch on the operational plans for on-boarding Slack. Maybe, you know, could you compare and contrast the strategy to integrate Slack versus what you've done with Tableau or MuleSoft? And then Mark Hawkins, you know, thanks for the EPS guidance, but I know there's a lot of below the operating income line factors.

So, can you give us any goalposts around how to think about how Slack impacts operating margins, and how to think about margins next year?.

I'm happy to take the operating margin discussion, and perhaps Bret, you may want to talk about the operating plan integration. I'm happy to chip in there as well, if that’s helpful. Derrick, first of all thank you for the question.

We are going to be factoring in Slack’s business profile into our overall business for next year for the operating margin. We'll give the operating margin and the cash flow growth for the entire company for normal tradition in Q4 call, for sure. You can see because it's a public company, it’s profile is different than Salesforce.

It'll be dilutive to our operating margin in aggregate. And there'll be the purchase accounting side of it, but we’ll give you very specifics in Q4 there Derrick. Not only on the operating margin, but the cash flow, and then even the latest on the revenue growth in Q4.

On the integration plan, Bret, I don't know if you want to touch on that?.

Yeah, I'm happy to take this Mark as you said.

You know, I think our philosophy is very similar to our philosophy with MuleSoft and Tableau, which is number one, starting with our mutual customers and starting for, how can we, you know, help every one of our customers benefit from the combination of these two technologies, without really recognizing that Slack, you know, fundamentally, if you look at the happiest customers who use Slack, it is really the central nervous system for their company.

And that's really connecting every single application at their company, not just applications from Salesforce.

So that really means bounce in making sure you know, Slack has an independent brand and continues to serve every single company and integrates with every single system as your company, while also making sure that it really achieves the vision that Mark talked about, which is, it really becomes sort of the user interface to the Customer 360.

It helps all of our customers be successful as they try to create a single source of truth for the customer data. I'm really happy with this strategy. It's really been effective with our integration with companies like MuleSoft and Tableau that have continued to thrive.

And, you know, continue to be technology agnostic, while also becoming really integrated part of our value proposition to our customers..

Our next question comes from Heather Bellini with Goldman Sachs. Your line is open..

Great, thank you so much for taking the question and congratulations, Mark Hawkins. It's been great working with you over the years.

And for Marc Benioff, I mean, Salesforce and Slack together, it seems like this is going to become the hub that connects all of the different Salesforce applications together and offers even more value for your customers.

How do you see – in the context of the 90% customer overlap you mentioned, how do you see this evolving the digital transformation messages to customers that you're already sharing? And I guess the other piece is, when you think about the pieces of the Salesforce puzzle, if you will, would you say despite your efforts with chatter that this was one of the biggest remaining pieces you were missing? Thanks so much..

Well, I mean, I'll start with the end, which is, there's no doubt that Slack just has an incredible approach to collaboration in a way that we really could never have imagined, especially in regards to the integrations and applications in the ecosystem that are built on top of it.

Certainly, like chatter to have the collaborative interface and we’ll benefit from that because we've done such deep work in our own architecture around our Chatter API and some of the other key parts of our core system.

But when you look at what happens when you put Slack and Salesforce together, you know the fundamental experience for the customer, it just changes. Of course, you're already doing wall-to-wall in the enterprise, which is very exciting for Salesforce is beyond just sales or service or marketing. It's into every department.

We've already seen a lot of that with Tableau and the ability for Tableau to go wall-to-wall and you know Tableau is another product that users just love Tableau, users just love Slack, when we start to bring our Customer 360 into that, our ability to build applications with lightning, our ability to light up our own workflow, and build workflows to our customers and expose those through these channels, well that's where the fundamental expression of Salesforce and how it looks, whether it's on a phone or an iPad, or on your desktop, it's, you know, deeply modernizes it.

And Brett, would you like to fill that in?.

Yeah, you know, you know, Marc, when I think about the opportunity for our customers, I just – every single customer engagement I've been involved with could benefit from this capability.

You know this past quarter, one of the customers I had the privilege of working with is Ferguson, which is the largest wholesale distributor of commercial and residential plumbing suppliers.

And this is a classic Customer 360 relationship where their CEO, Kevin Murphy and their CIO, Mike Sajor were really trying to connect everything from B2B and B2C commerce to customer service to their platform.

And when I think about the vision of that, you know that company and I think about the opportunity to come into these, you know, these companies going through this digital transformation and trying to really say, how do we build the perfect digitally augmented experience and customers, this is the ultimate system of engagement.

This is the ultimate way you can connect every employee, the ultimate way you can work with your B2B partners most of that way that you can transform your teams working on, you know B2C customer engagement. And, you know, I think that's when we look at the opportunity for our customers. So, we look at the opportunity for Slack customers.

We really think that bringing these things together gives us such a complete value proposition. I think it's really exciting..

Our next question comes from Brent Thill with Jefferies. Your line is open..

Thanks.

For Mark Hawkins, just on the billion for the quarter, there were some question marks just as it relates to the deceleration, and I'm curious if there was anything behind the scenes that we should be aware of? We know, you had a difficult comp and you're coming into a seasonally strong quarter, anything to call out there on the billings number? Thank you.

.

Sure, Brent, first of all, thank you for the question. And, you know, nothing, you know, first of all, we don't really – billings is not a metric that we focus a lot on. We think CRPO helps us a bit more in terms of actually managing the business and that’s a metric that we track carefully.

We feel like this just makes sense, it’s consistent with the revenue guidance for next year. And obviously in prior quarter, we lapped Tableau, but where we feel really good about this number, we feel great about the demand environment.

Obviously, that’s why we raised again the revenue for the year and we initiated a — I think, a really appropriate guide for next year’s revenue. Not very many companies do five quarters in advance, so we feel good about the demand environment, but we just think this is consistent with all of that and look forward to executing on that..

Thanks Mark..

You bet, Brent..

Our next question comes from Keith Weiss with Morgan Stanley. Your line is open..

Excellent. Thank you guys for taking the question. And Mark Hawkins it’s been a pleasure working with you. Congratulations on the retirement. I wanted to ask on the Slack acquisition, really a two-part question.

On the front end, maybe for Bret, can you talk to us about what you guys can do with Slack by owning it versus partnering? Because I think one of the things that has Slack differentiates which is – they’re open integration is the fact that they integrate with everybody.

So why is it necessary to own the asset? And then on the back side, I wanted to ask just about the price tag. On the last conference call, Mr. Benioff, you talked about it being a tough environment for M&A for stuff being expensive and you’re making hard to make these acquisitions financially work out for you guys.

What is it about this one, like how do you garner the confidence at this $28 billion price tag? Is the right price tag and financially this is going to make sense for our Salesforce over time?.

Yes, thank you for your question. I’ll start on the – just talking a little bit about why it’s important and why it’s valuable for our customers for this to be a part of our portfolio.

The journey that we’ve been on over the past decade is really going from a company with a single value proposition around sales automation, so really – it’s vision for Customer 360. They can connect sales, service, marketing, e-commerce, analytics platform.

And when you look at all of our largest deals, our happiest customers, our healthiest customers with lowest attrition, they’re not just using one of our products, they are really using this entire platform to get the single source of truth for their customers.

And we see this incredible vision as Marc said, it’s been something we’ve been working at and thinking about for a long time, well before I even joined this company about how do you connect all of these experiences? How do you actually create a seamless customer experience team, customer service and marketing, which every single retailer in the world was worried about this past weekend? How [do B2B] companies? So, I’m really focused on not just selling, but customer success, which is really connecting the entire Customer 360.

And when we talked about Slack really becoming and the user interface for the Customer 360, this is what we mean.

I really think this is a way of delivering that vision to our customers and for them to deliver – our customers to deliver a vision to their partners and their customers through technologies like Slack Connect is really, really meaningful and really, really unique.

And I think it captures candidly the new way that most of our customers think about their customer relationships. It’s not siloed by department anymore.

It’s really end-to-end journey and to really achieve that we think that Slack is a tool that facilitates that in a really unique way and really help accelerate our customers, who are going through this transformation. And Marc I’m not sure if you want to comment a bit on your comments from last earnings call just to offer my perspective.

We’ve been clear consistently that when we look at our M&A strategy and our inorganic acquisition strategy, it’s fundamentally, we have to be opportunistic. We have to make sure that we respond to unique conditions from our customers in the market.

And this year, if anything else, it’s been hard to predict and this is an opportunity that we saw as we’ve talked a lot about this shift in the economy, the relevance of Slack to our customer base that has obviously dramatically increased over the course of the year.

So, I do think that we – the market is very unusual this year, but we have to make sure that we as a company a beginner’s mind about where innovation can come from and recognize that we have to take timing what is available to us as we evaluate these inorganic opportunities..

Yes, I would like to address that which is that, I think what’s very exciting is, this vision that Stuart and Bret have put together.

And I think that when I look back in the [indiscernible], I don’t think I could have ever imagine any acquisitions happening this year or in this pandemic or in this all digital environment, we are just, kind of, grout forcing it right through where we’re making as many sales calls as we can and we’re collaborating very deeply as a company and all of a sudden Bret and Stuart coming together and say, yes, we can do this.

And when we look at the result in vision, it’s a wow. It’s like something that we could have never imagined. And when we look at acquisitions today, we do have a little bit of a swagger, of course we’ve done probably over 60 deals, small, medium, and very large. On the whole, our transactions have been extremely successful.

And when we look at our very large transactions especially ExactTarget, Tableau we look at how or what we’ve learned our ability to integrate companies to make one plus one equals three. We look at this and we say, wow, this is a game changer and we know how to pull it off. And we have a lot of our former executives for example at Slack already.

So, we know a lot of those players. We work so deeply with the company both in a business development perspective, but just because they are our neighbor and we’re like, oh boy, the value that we can bring to customers is much stronger as one company than is two.

And when you look at the difference in partnering versus owning it really means that we’re able to do things with our technology that we just could not do as partners and that’s the demos, the visions that Bret and Stuart had put together and look, when they presented this to me, I was sold and I am sold and I can’t wait to get out on the road and present it to customers because I know that they are going to be absolutely blown away about what this looks like for them..

Our next question comes from Alex Zukin with RBC Capital Markets. Your line is open..

Hey guys, thanks for taking the question. And mine, maybe just for Marc and for Gavin. I want to ask about the demand environment, particularly how it looks from a pipeline perspective for the fourth quarter. And Marc and Gavin, how are you seeing the priorities change through this pandemic.

How do you think about that for next year as you look at the opportunity to solve these pain points.

And Marc, I guess the other follow-up to Keith’s question is why now on Slack, why not before and why not next year?.

Well, it’s a good question. And let me kind of – I’ll tell you in two stories, but the first story is, we started out this year. I think everyone remembers we went through a very dramatic transformation in our management team.

Keith decided to retire, which I fully supported and we knew that we were going to go through a big shift in distribution strategy. Our team members themselves and what we didn’t have written in the back was the global pandemic.

So, all of a sudden in the first quarter, what was happening at Salesforce was distribution transformation and global pandemic and that shook our confidence. You might remember that, I also said pipelines appear to be really strong.

So, even though in the middle of the quarter we went into global lock down in March and April, we think we’re going to come out pretty strong and we were very fortunate starting in the second quarter with number one, on-boarding a fantastic new CRO, Gavin Patterson, former Chief Executive Officer, VP, who was working with us, who I’ve known for so many years and coming in as our CRO and our President, taking his position, which he was doing so much with us already, but then really leading our global distribution operation and then we rebuilt our entire distribution management team as part of that, and we delivered the second quarter, which was our record quarter, we had phenomenal bookings, margins, revenues, cash flow across the board.

And then the second quarter turned to third quarter, we are happy to talk about an unbelievable quarter. I mean, it was just remarkable, the performance of the company. I would never have imagined it – us in February and March when this started.

Now, I’m like, wow, it gave me a lot more confidence in where we’re going, Now when we look at the fourth quarter, which pipelines, we have tremendous outlooks and we feel very good about our ability to succeed, you know, with [indiscernible] architect with Dreamforce.

That’s going incredibly well and we look at next year and we’re like wow we’ve never been more competitive. We’ve never been able to succeed more aggressively with our customers. We have solutions that are not only horizontal, but vertical.

We’re strong in every one of our key categories from sales to service, to marketing, to commerce, to platform, to analytics, to integration, we’re able to deliver tremendous value. When I look at what we’ve done with key customers and I mentioned AT&T in the last call.

So, when I look at what we’ve done with their management team, with their competitiveness, with the results that they’re getting, it just gives us a lot of, I would say, a gratitude in our ability to transform a company like that or any company and world – and we do it worldwide.

And then when we bring in Slack, well, you know with these acquisitions, you never know exactly when they’re going to happen and we couldn’t – didn’t know when Tableau was going to happen.

Of course, we always loved Adam and Christian before that, we didn’t know when ExactTarget was going to happen, we always loved Scott and we didn’t know when Stewart and Slack would happen, and when the moment – and the opportunity arises you have to look and ask yourself, are you strong? Can you do something like this or are you weak, or is it a moment where you just don’t have the swagger? And let’s face it, look at these numbers, so we just delivered Salesforce has never been stronger, never been more capable, it’s never had a more competitive position, it’s never been able to execute more acuity.

Look at the IDC numbers, I don’t have to go through them in sales and service and marketing across the board.

They’re very, very impressive and when we’ve gone up against tough competitors we have done just fine, and I think that we bring a lot of value to Slack right now at their size, as you know they’re going basically entering from the $1 billion to $2 billion phase, which I know extremely well and this is a moment where we can offer a lot of value.

We’ve been there, we’ve lived that life, and we’re going to come in and we’re going to help them not just be successful doing it, we’re going to help them to just redefine the entire industry.

And that dream and that vision that Bret and Stuart have is really unlike anything I’ve ever seen of any company or any product anywhere and when you see it all laid out you will just be blown away. I mean, I was and I have a lot of confidence that you will be as well..

And perhaps I should just add some comments as well, Marc..

Please do Gavin..

Yes, what we saw in Q3 was a continuation of the strong demand that we saw in Q2 and it’s a very well-rounded performance across all the clouds and both in the U.S. and internationally we’ve seen strong demand around the world. And as we look into Q4 beyond, the pipeline continues to be very encouraging.

So, I guess what I’m saying and you’ve heard it from Bret and Marc, as well is that I think the core of what we offer to be the trusted advisor for digital transformation. This is an imperative to every company and every organization in the U.S. and around the world and that conversation has become more urgent.

And we’re finding that we’re getting very, very good access probably at least twice the access to decision makers, who want to have that conversation and want to get on and make that transformation and users in their departments. So the businesses I think are in really good shape. We’re confident going into next year.

And as Marc says, I think Slack really rounds out that proposition. And I think it’s going to – and we feel very encouraged and very optimistic about maintaining this performance going forward..

Gavin, I want to ask you a question, because I think it’s appropriate.

Look you’ve been running this business now – so well now for several quarters, but just give us one more level of insight, what has been your greatest surprise, look you are – we’ve been friends a long time, you are a customer, you’ve been a partner, you’ve known a lot of our executives, now you’re deep inside the machine, what has been your biggest surprise working inside Salesforce and now working with our customers and doing these huge transactions that you’ve been doing?.

Well. As you said, I’ve been a customer and I sure tell you what Salesforce could do for my business, and I thought we were reasonably excited about it, but it hasn’t been until I came into the company.

It wasn’t until I came into the company and I realized that actually there’s so much more you can get if you align your complete business behind the Salesforce CRM system and the wider set of clouds. That’s probably the single most important thing I’ve learnt.

The share potential of getting to a single source of truth, operating the Customer 360 and I see so much more potential in customers, who really embrace that vision and some guess get it today and we’ve got some great case studies demonstrate that, but others still have that opportunity. I think going forward.

So, there’s plenty of potential left in the business on all the clouds. And I’d say the second thing I’d call out is, actually how great very big company, how agile the business is, and how we’ve been able to maintain the agility and grip of a small company, while managing to cut it to $24 billion or $21-plus billion in sales and 25% CAGR a year.

It is quite remarkable. The decisions can be taken quickly.

We can respond to changing customer needs and that is being critical, because I think if I look back over these last six months, making sure that we remain relevant to our customers, and so that we can help them through these difficult times, make sure that we’re there to guide them and help types of transformation, but demonstrate we’re able to listen and respond in terms of the propositions we offer.

I mean, it’s been I think quite remarkable. So, it has been quite a ride and certainly been a privilege to be a part of it and I think there’s a long way still to go and another few chapters for the next book in it..

Well, I think that we can say now with delivering this guidance of [21.1] and looking at next year as well, Gavin, I just want to thank you, because I don’t think there is a more successful sales executive in enterprise software certainly at the size and scale that we’re operating in than you are and your leverage, your experience as a Chief Executive Officer is a very large 100,000 person company [BT].

I mean, you’ve done a phenomenal job. So, thank you..

Thank you..

Ladies and gentlemen, we have reached the end of the allotted time for questions. I will turn the call back over to Evan for closing remarks..

Thank you for joining us on the call today. If you have any follow-up question, please email us at investor@salesforce.com and we look forward to speaking with you next week at our Investor Day. Thank you..

This concludes today's conference call. You may now disconnect..