Salesforce Inc (CRM) — Q3 2018 Earnings Call Transcript

Thanks so much, Doris. Good afternoon, everyone, and thanks for joining us for our fiscal third quarter 2018 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 is Marc Benioff, Chairman and CEO; Keith Block, Vice Chairman, President and COO; Mark Hawkins, President and CFO. And also joining us today is Bret Taylor, President and Chief Product 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. 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 Benioff.

Thank you, John, and thank you to everyone attending today's earnings call. As we gather here during Thanksgiving week, I want to express our gratitude on behalf of everyone at Salesforce. We understand our responsibility to help others, which was particularly evident during Dreamforce. Our thoughts are with the victims of Hurricanes Harvey, Irma, and Maria, as well as the 6,000 families in the Bay Area affected by the recent wildfires. This is especially challenging as we approach the holidays. With support from 80 companies, Salesforce is doing its part. Recently, we held the Band Together concert in San Francisco during Dreamforce, which raised $17 million for the fire victims, with all funds going directly to the affected families. Thank you to everyone who contributed. After Thanksgiving, we will announce another exciting program, and I hope to have your support in raising more funds for these families. Moving on, I want to emphasize that we’ve performed well in our business while assisting those in need. Now, let’s discuss our record third-quarter results. Revenue reached nearly $2.7 billion, up 25%. We are now consistently adding revenue comparable to many other cloud companies annually. We have nearly $15.9 billion in booked business, up 31% from last year, with over $3.8 billion added to this balance since last year. Due to these strong results, we are increasing our full-year revenue guidance by $40 million to $10.44 billion at the high end, which reflects a 24% growth this year, positioning us well for future success. Looking ahead, we project revenue of $12.5 billion for next year. I am proud that Fortune Magazine has ranked Salesforce #1 on its inaugural Future 50 list of companies poised for breakout growth. As the fastest growing enterprise software company to reach $10 billion, we aim to organically grow to over $20 billion by fiscal year '22, also as the fastest company to achieve this milestone. To support this growth, we are investing in a new generation of leaders at Salesforce. I am thrilled to announce that Bret Taylor is taking on the role of President and Chief Product Officer, while Alex Dayon has been promoted to President and Chief Strategy Officer. Both executives are crucial to our management team and will focus on product vision, strategy, and customer collaboration. In closing, I want to thank you for all your hard work and commitment to Salesforce's success. We appreciate your participation in Dreamforce and extend our best wishes for a happy Thanksgiving to you and your families. Now, I’ll turn it over to Keith.

Thanks, Marc, and thanks again for joining us during Thanksgiving week. We appreciate that very much. It was great to be with so many of you at our Investor Day just a few weeks ago at Dreamforce. Those of you who were there saw firsthand the power of the platform to connect companies and their customers, the energy of our Trailblazers, and our deep commitment to giving back to our communities as Marc has talked about. As Marc said, we are clearly building a company for the ages. Our Q3 results were outstanding, and that's because, every day, Salesforce is helping more and more companies transform and connect with their customers in a whole new way. Our customers want to deliver next-generation experiences for their customers who are always on, always connected. And to do this, they need a unified CRM platform, and that's what Salesforce is all about. They want industry-leading products in sales, service, marketing, commerce, and more, and that's what we've delivered. We've also delivered innovations like Einstein, Lightning, and Trailhead that elevate the entire platform. No other enterprise technology company in the world is delivering innovation at this scale, and that's why so many companies, including Hilton, DuPont, and MasterCard, are turning to Salesforce as their trusted partner in digital transformation. In addition to delivering these innovative solutions, we continue to fuel our growth through international expansion, speaking the language of our customers and growing our partner ecosystem. Now as we discussed at Investor Day, we are increasing our investment in our international go-to-market resources, our operations, our infrastructure to deliver the highest quality service to our customers around the world. We've increased our international headcount nearly 30% annually since FY '14, and year-to-date, nearly 40% of new hires have been made outside the Americas. In the quarter, Salesforce also went live on AWS in Sydney, Australia, where we recently were named the #1 CRM provider by Gartner. Amazon continues to be a key partner in our international expansion and a very large customer. Now speaking of Australia, I'm very excited that, in Q3, we expanded our relationship with National Australia Bank, one of the country's largest financial services institutions. And as you may recall, we closed a significant deal with AMP last quarter, so clearly, we've got great momentum in financial services in Australia and our broader APAC region. We had another very strong quarter in Japan, deepening our relationships with Hitachi, Seven & i, EBARA, and Mitsui Sumitomo Insurance. APAC continues to be one of our fastest-growing regions with 27% growth in constant currency in Q3. In EMEA, we grew 33% in constant currency. In the quarter, we expanded relationships with marquee brands, including BP and Groupe PSA, the second largest automotive group in Europe. We also formed a new relationship with another leading car manufacturer in Europe, and they're going wall to wall with Salesforce to manage every aspect of the customer journey from marketing to sales to service. In Q3, we significantly expanded our relationship with a leading global telecommunications company also headquartered in Europe and is leveraging the Salesforce Platform to attract new business, simplify payment to vendors and get a 360-degree view of their customers. So it's pretty clear that our international investments are paying off. Now around the world, speaking the language of our customers is giving us incredible momentum. In fact, 57% of customers who buy our industry products are brand new to Salesforce. In Q3, we launched the Financial Services Cloud for retail banking to enable banks to deliver highly personalized, intelligent, and connected banking experiences for their consumers. We also deepened relationships with PNC, KeyBanc, and ING, one of the largest financial institutions in the world. ING is expanding with Salesforce globally to meet their goal of becoming a one platform bank. In fact, today, 17 of the top 20 U.S. and European banks rely on Salesforce. So we continue to see momentum in other areas, including health and life sciences. Last quarter, I mentioned that 15 of the world's 20 largest pharmaceutical companies rely on Salesforce, and this quarter, we added another marquee customer to that list. Incredibly, we deepened our relationships with 13 of those firms. We also expanded our relationship with Anthem, one of the largest health insurers in the United States. In Q3, we closed one of our largest public sector deals to date with the Department of Homeland Security. This follows a large transaction with the VA last quarter. With respect to retail, the holiday season is the most important time of the year as we all know, and three years from now Black Friday is expected to be the busiest digital shopping day in U.S. history. With the addition of Commerce Cloud and Salesforce DMP to our portfolio, we now have an incredible B2C platform that enables our customers to deliver brand experiences that are seamless, connected, and personalized. That's why international cosmetics retailer L'OCCITANE has chosen Commerce Cloud to replace their homegrown e-commerce solution to accelerate their global growth. Finally, as you may have seen at Dreamforce, adidas deepened their relationship with Salesforce in Q3 to drive their global expansion, delivering a hyper-personalized experience that today's customers all expect. Our partner ecosystem continues to expand, as more than half of the new business today has generated from new partners. Salesforce is the highest growth practice for the top systems integrators. This was not the case just a few years ago, and we continue to build deeper, more strategic relationships with our partners. At Dreamforce, we announced a new strategic partnership with Google, which connects Google Apps and Analytics with Salesforce, making our customers even smarter and more productive. We also selected Google Cloud Platform as a preferred public cloud provider, and Google, of course, runs their business on Salesforce. So in closing, I want to express my gratitude to our customers, our partners, our employees for their continued trust in us. I want to wish those of you in the United States a very, very happy Thanksgiving. So I'd like to turn the call over to Mark Hawkins, who will outline our financial execution in Q3. Mark?

Great. Thanks, Keith. As you've heard from Marc and Keith and as you've seen in our Q3 results, we delivered another quarter of outstanding growth. At Salesforce, we deliver customer success and help our customers grow. In turn, Salesforce grows as well, and that's what we saw in the third quarter. Revenue grew 25% in dollars and 23% in constant currency, excluding a year-over-year FX tailwind of $39 million. We also saw a sequential FX tailwind to revenue of $12 million. We delivered a strong year-over-year subscription and support revenue growth across each of our clouds in the third quarter. Sales Cloud continued its strong growth at 17%. Service Cloud reaccelerated in the quarter to 25%. Platform and other also accelerated to 34%. Marketing Cloud, including Commerce Cloud, grew 40%, and keep in mind, this growth is organic, as it's the first full quarter comparison with Commerce Cloud in the base period. Commerce Cloud contributed $64 million in subscription and support revenue. Dollar attrition for the third quarter, which now includes Marketing Cloud, was approximately 10%, which is flat year-on-year. We expanded our third quarter non-GAAP operating margin by 360 basis points year-over-year, driven by improvements in sales, marketing, and G&A. Non-GAAP EPS was $0.39, up 63% over last year. Operating cash flow was $126 million, down 18% year-over-year. Our third quarter operating cash flow result was impacted by continued invoice seasonality and the timing of Dreamforce, and given the strength of the quarter, higher commission payouts. Deferred revenue ended the quarter at $4.39 billion, up 26% in dollars and 24% in constant currency, excluding an FX tailwind of $60 million. On a sequential basis, deferred revenue benefited from an FX tailwind of $4 million. The strong Q3 result was driven by deals closing earlier than we had anticipated. Before moving on to guidance, I'd like to update you on the status of the adoption of the new and revised accounting standards, including ASC 606, ASC 340, and ASU 2016-01, all of which will be adopted on February 1, 2018. Regarding ASC 606, the new revenue recognition standard, we expect the impact of the opening balance sheet as of February 1, 2016, due to the recast of revenues to be immaterial. We are still working to determine the impact on revenue after the opening balance sheet. For ASC 340, the commission accounting standard, the new standard will require us to capitalize more costs, such as payroll tax, and amortize them over a longer period than we do today. For new business, we expect to amortize the commissions over a 4-year period rather than over the contract term. ASU 2016-01, which addresses the fair market value accounting for venture fund investments may result in greater variability in the OIE line of our P&L due to changes in market prices and the timing of additional rounds of financing for our privately held investments. It's important to know that these standards will not impact our operating cash flow. Moving on to guidance. We are raising our full-year 2018 revenue guidance to $10.43 billion to $10.44 billion, reflecting 24% year-over-year growth. We're also raising our FY '18 GAAP diluted EPS guidance to $0.12 to $0.13 and non-GAAP diluted EPS guidance to $1.32 to $1.33. We remain on track to deliver the 125 to 150 basis points of non-GAAP operating margin improvement in FY '18. We're also maintaining our full-year operating cash flow guidance of 20% to 21% year-over-year. For Q4, we're expecting revenue of $2.801 billion to $2.811 billion, GAAP diluted EPS of $0.03 to $0.04, and non-GAAP diluted EPS of $0.32 to $0.33, with year-over-year deferred revenue growth of 19% to 20%. Please note, as part of the adoption of ASC 606, we will be providing a roll-forward schedule of billed deferred revenue along with additional disclosures for unbilled deferred revenue. In that context, we do not expect to provide deferred revenue guidance going forward. And as you heard at Dreamforce, we initiated revenue guidance for fiscal 2019 of $12.45 billion to $12.5 billion based on the current accounting standard. As a reminder, we will provide operating cash flow, EPS, and non-GAAP operating margin guidance for FY '19 when we release our Q4 results in February. To close, we delivered a very strong financial result in Q3, and I'd like to thank all of our Trailblazers, our employees, our customers, our investors, and the community that we serve for their continued support and wish all of you an enjoyable holiday season. And with that, I'd like to open up the call for questions. Operator?

I was wondering if you could provide some insight into the trends in your Marketing Cloud business. What do you consider to be the key factors driving the recent acceleration? Additionally, you mentioned that your attrition rate now includes Marketing Cloud at 10%. Should we view that as a normalized figure moving forward?

Let me address the first part of your question and then pass it on to Mark Hawkins to discuss the attrition rate and his calculations. The insights we gained at Dreamforce are quite relevant to this topic, and I attempted to highlight this in my opening remarks there. I've had numerous remarkable interactions with customers, particularly over the past six months. As we examine the transformations our customers are undergoing, it's evident that they aim to engage with their customers in innovative ways. For many, this necessitates their own transformation, which we refer to as digital transformation. For a lot of these customers, digital transformation starts with the customer themselves. Take Ducati, for example, which we showcased at Salesforce and Dreamforce—it's a tremendous product with a strong community that can engage directly through their offerings. This is a pivotal change for Ducati. That's why they attended Dreamforce, with their CEO present and their motorcycles on display, highlighting not just their bikes but also their Connected Motorcycles powered by the Marketing Cloud. This promotes a direct relationship between Ducati and its consumers, fostering direct messaging and interactions. Every company is evolving—whether B2B or B2C—into a B2B2C model, propelling this trend forward. The significant innovations we observed at Dreamforce, particularly in the Marketing Cloud with Journey Builder and other features, are a testament to this growth. Now, let me introduce Bret Taylor, our new Chief Product Officer, who is here with us. Bret, we were just discussing the exciting innovations on the horizon for the Marketing Cloud that are contributing to this impressive growth. Could you elaborate on that?

Yes, sure. The trend we're seeing with so many customers, as Marc mentioned, is not just being a B2B company or a B2C company but sometimes both, whether it's Ducati connecting with their customers or customers that sell directly and sell to distributors. What I really think is so powerful about the Salesforce Platform is we're the one CRM platform that can do both, whether you're a B2B company, which is where we started, or you're a B2C company doing traditional marketing through our Marketing Cloud or you're a company that's a hybrid. The reason our vendors, the reason our partners are choosing us as their vendor is because we offer a platform that can do both now and also grow them in the future. It's a real strategic advantage for our product line and the area that we're investing in primarily.

If I may just add to that question, Heather. Marketing Cloud has been fully addressed. Regarding the attrition rate, we have been reporting core attrition. We also included Marketing Cloud and Pardot as we continue to integrate various acquisitions, and that trend has remained flat year-on-year. Overall, when we combine our core with Marketing Cloud and Pardot, the total rate is 10%, and it has remained stable year-on-year.

My question is for Marc Benioff. Most of your CRM competitors are still relying on the older on-premise technologies or hybrid technologies, and you had said recently that AI is going to be the future. Do you think those on-premise technologies could suffer a bit just from an inability to handle AI if they can't kind of tap into the reservoir of data in the scalable compute capacity to power those algorithms in the way that Salesforce can? And I also wanted to ask, Keith, you mentioned closing one of your largest public sector deals with Homeland Security. Do you think the federal government has finally reached the tipping point where its adoption of cloud and Salesforce is going to begin to move faster?

I'm going to tip that question actually to Bret if that's all right with you because I think he could address specifically this kind of what's happening with AI. Obviously, we've had a tremendous year with Salesforce with AI since releasing Einstein a year ago, and now just releasing My Einstein at Dreamforce. We have seen incredible advancements in artificial intelligence use at our customers. As well, I think you saw the example I gave in my keynote of a Coca-Cola cooler and the dramatic advances that we can make with technology like that using Einstein Vision, what it means. The speed that we are delivering and onboarding our customers with artificial intelligence, especially using our declarative model, has demonstrated many of the advantages of going to the cloud. But let me tip it to Bret for his perspective.

Yes, your question was insightful. Artificial intelligence and the features we're introducing with Einstein effectively demonstrate the benefits of the cloud. Our customers don't have to purchase new hardware; with each release, they receive these new capabilities automatically. This is the essence of the cloud. We continually redesign our systems to integrate the newest technologies that our customers can use to elevate their businesses. Since it's cloud-based, it's as easy as turning them on. As Marc pointed out, it's not only about cloud and on-premise solutions, but also how we package them. At Dreamforce, we discussed Trailblazers, and our vision is to expand the range of individuals who can implement these new technologies within their organizations, not just computer programmers and data scientists, but anyone with expertise in their field. The combination of the declarative platform that Marc referred to, the focus on clicks over code, and the advantages of cloud release capabilities is truly distinctive to Salesforce in the CRM space.

Mark, this is Keith. Just to follow up on the second part of that question regarding the public sector, I do believe we are reaching a tipping point. This is an initiative, certainly in this country, where the modernization of technology within the governments has been discussed. I would argue that it was launched under the Obama administration, and in fact, one of our former employees was the CIO of the federal government who was one of the leaders in the effort of cloud first, which is very important. But now we're seeing increased momentum around this digital transformation. The deal that we signed with the Department of Homeland Security is certainly an indication of the modernization of the government. This follows a large transaction with the VA last quarter. Some agencies are ahead of others; however, I think Homeland Security is ahead. Thankfully, it is the beginning of the public sector catching up to where the private sector has been for quite a few years now. It's pretty exciting around the transformation.

A question for Keith and a follow-up for Mr. Hawkins. Keith, you used a phrase wall-to-wall deals describing one of the deals that you guys signed this quarter. How prevalent has that become in what you guys are selling today and what's in your pipeline? How often are you guys going for across-the-board the entire suite? Then for Mark Hawkins, this was a really strong quarter ahead of the seasonality that we've seen in prior years, and these big deals have been pushing more and more business into Q4. Was Q3 anomalous in terms of going against that seasonality? Or are we seeing just more back half business overall, perhaps not all in Q4?

Let me take the first part of that, and obviously, Mark can respond to it. What wall-to-wall really means is a multi-cloud deal. It's a solution that includes Sales, Service, Marketing, Community, Analytics, Einstein, et cetera. Typically, our selling motion is to initially establish a beachhead with Sales Cloud, which is typically a leading indicator of new logos. We paint a vision of transformation, and the customer will start with the deployment of Sales Cloud. Then we expand out to the right, which typically includes Service Cloud, Marketing Cloud, et cetera, to the Platform. More customers are deepening their relationships with us, and it's becoming more and more strategic around embracing this notion of digital transformation, which means more multi-cloud solutions. The relationships we expanded this quarter or established as new are an indication of satisfying that requirement and painting a vision for those customers and driving tangible business benefits. Mark, I don't know if you want to add?

Sure. Yes, let me jump into the seasonality. I think the evolving seasonality is a persistent trend as you're touching on, and it's informed in any given period by what happened in that quarter. We had a very strong quarter, as we talked about. It's evidenced by our total DR growing 31% in aggregate, and you can see the delta even to what our prediction was earlier. So, very strong Q3 '18. Now juxtaposing that to last year's Q4, which we expect will be very tough to compare, that adds context — we feel great about the 20% growth forecast for Q4. That is the biggest new business renewal quarter of the year, and we think the guidance is appropriate.

One question for Benioff, one for Hawkins. First, for you, Marc Benioff, as the company becomes larger and larger, you've seen historically in tech core businesses at larger companies get more emphasis. In your case, you've got three products that are multi-billion-dollar products that you've nurtured organically. When you look at the emerging opportunities in business intelligence/analytics and products like Quip, how do you, as CEO, make sure that these are nurtured and achieve their full potential, which I personally believe that Quip is an exciting product and we saw it at Dreamforce? How can these products be nurtured to be potentially multi-billion-dollar businesses in the future? And one for Hawkins. When I do a calculation of your margins, if you reported margins like a perpetual license software company that is taking your bookings and billings, I get about 40-plus percent operating margin adjusted for the fact that you had been doing business like a perpetual license company. Help us reconcile the margin performance. As it is, it's extremely strong. At $20 billion in revenue, which is your long-term target, what could your reported operating margins look like?

Thank you for that question, Kash. It's something I think about all the time, which is that we have a rich portfolio of products, and it is constantly getting enhanced and extended and also integrated as we build out our vision of a single CRM platform. Collaboration is part of that with Quip, and you can see the incredible capabilities. Salesforce's product line in marketing, commerce, service, collaboration, industries, and across all of these core capabilities we have is enhanced by each of those capabilities. Each customer is ready to accept those capabilities at a slightly different time frame, but this allows us to listen deeply to the customer, to understand their evolution and offer different solutions based on their needs. If they're not ready for Sales, we'll show them Service. If they're not ready for Service, we'll move to Commerce, and so on. We've got a full set of cards to play here.

Consumers are looking for solutions. When we manage the business and our portfolio, we are big believers in specialization. We organize around specialization in industry or product lines so we can bring the best experience and content to the customer. Customers buy technology to solve business problems, and our job is to paint the vision for the future in their respective industry or customer size. We need to show how our technology capabilities can solve that problem.

In terms of your assessment of unit economics, we believe mid-30s operating margins long term are certainly viable, which is what we’re experiencing. We are seeing strong operating margins expanding 360 basis points, good scaling in sales and marketing and G&A as planned. As we said at Dreamforce, we expect continued improvements in operating margins.

When you're talking to customers about digital transformation of their customer interactions, what percent of the talks nowadays are with customers that want to discuss their overall digital transformation strategy right at the beginning and go wall-to-wall, as Keith described earlier, versus customers that are still only seeking a point product sale? How has that trend been going over the last couple of quarters?

The good news is that we have a very, very balanced portfolio. There is an accelerated increase in CEO-level dialogue about digital transformation. In some cases, they have a position on the particular topic, but in many cases, they're asking us for our point of view. That is becoming more frequent, but typically, it is rare to digest a full wall-to-wall digital transformation from the first interaction with a CEO. Generally, they love the vision, get the future and want to start incrementally and prove the value before going wall-to-wall. However, the level of dialogue is rising significantly. Just last week, I met over 50 CEOs, and the topic was all about digital transformation.

My question is for Keith. Thanks for the data point earlier in terms of more than half of new business coming from partners, and that's up dramatically. Is that an area of leverage you can actually get in your sales and marketing going forward? Can you just give us an update on how productivity is with your Enterprise Salesforce?

Our whole ecosystem focus on partners is one of our three growth levers, along with industry specialization and international expansion. When you think about the SIs, they have incredible reach. They’re able to paint a vision alongside us in the boardroom. But just as important is our ability to drive customer success, and we need these close relationships with the SIs. It is a huge leverage point for us to drive these transformations.

I had two questions about the strong revenue, and congrats on that and a terrific Dreamforce. First, Keith, I guess, for you. It sounds like you continue to see good new customer adds out of the vertical business. I was wondering if you could talk about the dynamics of those new customers, either in terms of how big the deals are from a C count perspective and/or the attach rate to some of the other products. Then, I guess, my second question would be for Marc Benioff. We heard a lot of activity around Lightning, Lightning upgrades, and Lightning adoption at Dreamforce. I wanted to get your sense of the importance of this for your customer base and any comments about the financial impact that this Lightning migration would bring.

Generally speaking, when we sell a vertical solution like Financial Services Cloud, those deals are more likely to be larger. Each time we sell one of these vertical solutions, it drags other components of our customer success platform. So it drives more of a transformation and brings along other products with it.

Salesforce has delivered a massive transformation in how we actually interact with our users. That's moving from our traditional, classic user interface, which we called Aloha, to our amazing new user interface, which we call Lightning. The power of Lightning is that it's not just a new user interface. It's an incredible platform. It's an experience built on an amazing componentized architecture. Our customers love it, and at Dreamforce, I think every single demonstration I saw on the floor was on Lightning. Very few companies have gone through this transformation successfully. It has impacted our customers dramatically.

The power of Lightning is more than just an interface. It’s a declarative platform. This means that people with business expertise, not necessarily computer programming knowledge, can create meaningful business applications that transform their companies and customer relationships. Helping companies with their change management as they transform into Lightning is our focus, and we launched My Trailhead to enable customized learning platforms at Dreamforce. This feeds into our strategy to move to the new platform and allows broader participation in our developer ecosystem.

Congrats, Bret, for the promotion. So continuing on the theme that you're talking about, Bret, can you talk about two to three big product initiatives that you think should be at the top of your list as you're starting out in your new role?

I would say, the first is Trailhead. Our differentiator is the community of people built around it. Many mid-career transitions into technology are a result of Salesforce and Trailhead's power. The second is artificial intelligence. We're just at the beginning stages of intelligence's impact on all businesses and customers. Our vision is to help customers apply these complex technologies simply. Lastly, our platform. Businesses use our products because they’re customizable and extensible. This applies to our solutions, and this is essential for our growth.

I think questions for Marc Benioff. I am curious about geographic expansion with cloud. With the successful adoption of Amazon in Australia, I wonder how you're thinking about potentially more aggressively expanding into new countries. Although this may be part of the calculus, should we expect more aggressive growth outside of the limited countries you've targeted over the last decade?

Thanks for that question. At Dreamforce, we dramatically expanded our relationships and alliances across the globe. You mentioned Amazon, which is a strategic alliance for us. We've turned on our Canada and Australia data centers and have announced a strategic relationship with Google. We also have key partnerships with IBM, Dell, and Cisco that can help us deploy infrastructure flexibly and transparently for our customers. Our focus remains on reliability, availability, security, and trust that they expect from us. This process is evolving, and we're excited to explore new regions in upcoming years.

We're really excited about partnering with different vendors to apply the best infrastructure strategy for the region and customer that we're deploying in. This flexibility I consider a strategic advantage.

Bret, congratulations on your promotion. I’d like to ask about both Bret and Alex stepping into C-level positions. Should we interpret this as a change in your approach to investing in product or product management? How should we view their roles in relation to what Parker Harris will be doing?

We continue to make significant investments in our innovation. Sales has been recognized as the most innovative company in the world by both Forbes and Fortune this year. We continue to drive organic innovation, as you saw with Bret, who represents that in his role. Alex is focusing on our strategy to grow to 20 billion in our long-term future. Parker continues as our CTO, responsible for all aspects of technology and engineering. We won't lose our innovative edge as we progress.

I wanted to touch on Service Cloud. You’ve had leadership changes and product focuses, but you just reported a nice reacceleration in growth. Could you update us on the priorities to drive growth in Service Cloud and what you've done to strengthen it?

Service Cloud remains an incredibly exciting opportunity. I expect the acceleration numbers you saw this quarter to continue for the next couple of quarters. Service Cloud has had a huge year for us with amazing developments in customer service, including bots and Einstein bots. We're moving beyond the traditional call center environment. We're working to maintain our position as the #1 customer service solution in the world, both by revenue and by Gartner ratings.

Innovation around Service Cloud has been fantastic. One way companies differentiate themselves is through service, which has helped our growth. Field Service Lightning has been particularly successful, as exemplified by KONE, who is co-innovating with us.

Thank you very much. In closing, I want to appreciate all of you who have joined us during Thanksgiving week. I wish all of you and your families the very best for this holiday weekend, and I hope that you all have a healthy and safe Thanksgiving. At Salesforce, we believe in doing well and doing good. We're committed to our core values of trust, growth, innovation, and the equality of every human being. It's important to reflect on our values as we celebrate Thanksgiving. This year, we had 171,000 people register for Dreamforce, enjoying a remarkable experience together. We aspire to build a company for the ages and a brand and culture that will make the world a better place for decades to come. Thanks again for attending the call, and happy Thanksgiving.