Salesforce Inc (CRM) — Q3 2020 Earnings Call Transcript

Thanks so much, Ian. Good afternoon, everyone, and thanks for joining us for our fiscal 2020 third quarter results conference call. Our results, press release, SEC filings and a replay of today's call can be found on our IR website at salesforce.com/investor. With me on the call today is Marc Benioff, Chairman and Co-CEO; Keith Block, Co-CEO; Mark Hawkins, President and CFO; Bret Taylor, President and Chief Product Officer and Amy Weaver, President of Legal & Corporate Affairs. As a reminder, our commentary today will primarily be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings press release. Some of our comments today may contain forward-looking statements, which are subject to risks, uncertainties and assumptions. 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. And with that, let me turn the call over to Marc Benioff.

Very good, thanks everyone, and good afternoon and thank you for joining us for our fiscal 2020 third quarter results conference call. I am delighted to be with you, and thanks John. John is with Keith Block and they are in Phoenix, and we are here in San Francisco at the top of Salesforce Tower. It's been just two weeks since I saw most of you at Dreamforce, and I hope you have all had an amazing time. I'm thrilled to share that our Q3 results were outstanding, revenue rose to $4.5 billion, up 34% in constant currency. We ended the quarter with more than $25.9 billion in total remaining performance obligation, up 22% versus last year. As we announced a couple of weeks ago, we've raised our full year fiscal year revenue guidance to $17 billion, at the high end of the range. That represents 28% growth for the year. We also initiated fiscal year 2021 revenue guidance of $20.9 billion at the high end of the range or approximately 23% growth for the year. What's more significant and extremely exciting to me is that we also intend to double the company by fiscal year 2024, with a revenue target of $34 billion to $35 billion, making us the fastest enterprise software company to reach that milestone. It's really incredible, and it's really exciting for all of our Ohana. And as we continue to deliver record revenue year in and year out, we continue to commit to balancing this growth with incremental operating margin. This growth is driven by the success of our incredible customers. Companies are coming to Salesforce for transformation because every digital transformation starts and ends with the customer. That's why for the sixth year in a row, Salesforce is the number one CRM provider by market share according to the latest IDC worldwide semi-annual software tracker. We're the leading trusted solution in sales, service, marketing, and model-driven application platforms. At MuleSoft and Tableau, we have the leading solutions in data integration and now analytics, two extremely valuable components of every digital transformation and two very valuable components of every one of our customers’ strategic information technology architecture. Every company needs an intelligent 360-degree view of their customer and that's the power of Customer 360. Our vision for bringing companies and their customers together—you saw this at Dreamforce with companies like State Farm and Louis Vuitton. Now they can personalize every customer experience, they can predict customer behavior and anticipate their needs. They can build modern mobile apps fast on any device. The magic in Customer 360 is now Customer 360 Truth, which we unveiled at Dreamforce. It connects all the data from across sales, service, marketing, commerce, our entire Customer 360 to build an integrated, single source of truth. We're giving companies a complete view of every customer, making it possible to deliver highly personalized, highly intelligent, and highly connected experiences across every customer touch point, and it's built right into the Salesforce platform. This is what our customers have been asking for and we're making it available to every one of them. No other company could do this. And by bringing all of this data together at Salesforce, we can apply our powerful analytics solutions, Tableau, Einstein, Datorama and others that allow anyone inside a company to see and understand their data to make smarter decisions. We know this data is not just in Salesforce, we know our customers have many platforms. That's why we're open and why we work with all of our strategic partners: IBM, Amazon, Google, Microsoft, Apple, HP, Dell, and many others. Because it's critical for us to work with these strategic partners to deliver an incredible solution for our customers. That’s what our customers want. These partnerships continue to deliver incredible innovation and success. We're doing all of this at tremendous scale. Just look at how Customer 360 fueled our customers’ growth during Cyber Week. Commerce Cloud processed more than 30 million orders, up 27% year-over-year, amazing. It also powered more than 614 million retail site visits, up 17% year-over-year, also incredible. Digital sales on Commerce Cloud were up 13%, Marketing Cloud delivered more than 24 billion emails during Cyber Week, up 18%, and Service Cloud processed more than 428 million agent interactions during this critical time for our customers. We also saw 9% of digital orders during Cyber Week driven by our Einstein product recommendations; that is incredible to see the velocity of Einstein. With the new Einstein voice skills, any company can build their custom voice-powered Salesforce apps giving employees a personalized CRM guide. At Dreamforce, we showcased an Einstein speaker demonstrating how Einstein can work on any smart speaker, and now you can ask your speaker, 'Hey Einstein, what's my forecast?' and Einstein will tell you whether or not you're going to make your numbers for the quarter. At the heart of the Customer 360 is our incredible community of trailblazers. We now have 1.8 million learners changing their careers and lives on Trailhead, our free online learning platform. That's because the Salesforce ecosystem will contribute 4.2 million jobs and $1.2 trillion in new business revenues worldwide from 2019 through 2024. We continue to invest in Trailhead to enable more people to participate in the digital economy. Before handing off to Keith, I want to take a moment to remember our loving friend and Board member Bernard Tyson. We dedicated Dreamforce to Bernard’s memory. Bernard did so much for others and for the world. He was one of the greatest CEOs, but he was a very close friend of mine, and it's very sad to see him leave us. We have incredible gratitude for Bernard's contributions to the Salesforce Board, as well as to the World Economic Forum, to the healthcare industry, and to Kaiser. We will miss him dearly. Now over to Keith.

Thanks, Mark. Hello, everybody. I want to echo Mark's comments on Bernard. He was an incredible CEO, a great community leader, and as Mark said, a close friend of many of us at Salesforce. So we're all going to miss him and our hearts certainly go out to his family. Now, as you just heard from Mark, we had another great quarter and really amazing Dreamforce last month, which was just a few short weeks ago. You saw that we continued to innovate harnessing the power of cloud, social, mobile, AI, voice, and other amazing technologies to fuel customer growth and success. During the quarter at Dreamforce Mark and I met with hundreds of CEOs, and they clearly understand that the speed of innovation is increasing and that digital transformation is absolutely imperative. All companies want to become more customer-centric; they want to deliver experiences that exceed expectations. That's why more and more companies across every industry and geography are making major sustainable investments in Salesforce. But they're turning to Salesforce for more than just our technology; they're also coming to us as their trusted advisor. Together, we are absolutely reorienting their businesses around the customer. We're working with them on all three pillars of digital transformation: technology, business model, and culture. We're helping them break down silos, liberate their data, and remove legacy obstacles. These three pillars are absolutely essential to achieving a 360-degree view of each customer, every customer, and that is the holy grail of digital transformation. As you saw this quarter, we continued to build and expand relationships with leading brands across industries and geographies. We expanded with Nationwide. Historically, most touch points with Nationwide customers and wealth managers happen on the phone. Now, they're expanding with Salesforce to take advantage of digital channels to provide a more consistent, personalized experience for customers. CarMax, the largest dealer of pre-owned vehicles in the United States, expanded with us in the quarter as well, with Salesforce reps having a 360-degree view of the customer, whether they're shopping online or in dealerships, to ensure a seamless buying experience. Excel Energy now powers millions of homes and businesses across the United States. They expanded their use of Salesforce to deliver a unified experience for customers across all channels. And then there’s Corteva, a global agriculture company focused on seed and crop production. They also expanded with us in the quarter to modernize their business and better serve the farming community. As we discussed during our Analysts Day at Dreamforce, international expansion is one of our key growth levers, and we continue to make investments across the world and see great results. In Q3, we grew 33% in the Americas, 28% in APAC, and 42% in EMEA, all in constant currency. Of course, this is with our recent acquisition of Tableau benefiting year-over-year growth in the Americas and EMEA. In EMEA, we expanded with Algie, a global provider of low carbon energy and services headquartered in France, delivering a 360-degree view of customers' energy consumption to provide personalized recommendations to reduce carbon footprints. Siemens, one of the world's great brands and one of the largest industrial manufacturing companies in Europe, also expanded with Salesforce in the quarter; we have been a strategic partner to Siemens as the 170-year-old company addresses the digital revolution transformation in its industry. We also expanded with British Airways and food services company Sodexo, and in APAC, there was ANZ Bank, funding some super retail group, who also chose Salesforce in the quarter. We have wins with a life solutions company, Panasonic Corporation, and EON in Japan. Finally, in Latin America, we had a win with Cera in Columbia, a leading insurance company. The language of our customers continues to propel our industry momentum and our success. In the quarter, we introduced two new industry clouds; we're very proud of that innovation: manufacturing cloud and the consumer goods cloud. We also rolled out new insurance capabilities for our financial services cloud, one of our most extensible clouds. Significant strategic wins around industries in Q3 include Ameriprise Financial, which manages more than $875 billion worth of assets, expanding with FSC, our financial services cloud. We formed a new relationship with Farm Credit Services of America, which also chose financial services cloud. In healthcare, Children's Health, one of the largest pediatric providers in the nation, chose Salesforce, including health cloud, to help them reach more patients and provide better care experiences. We continue to see significant opportunity in the public sector. In fact, two of our largest customers are U.S. government agencies. In the quarter, we expanded our relationship with the United States Department of Veterans Affairs, enabling the agency to provide the highest level of service to 20 million veterans for various programs. This isn't just a business opportunity; it's a moral obligation to better serve those who have served us. At Dreamforce, we heard incredible and powerful and inspirational stories from our veterans transitioning from serving their nation to new careers in the Salesforce ecosystem. I truly believe that all of us should focus on hiring veterans. We also expanded our relationship with the state of Colorado, implementing MuleSoft to integrate seven health and human services agencies to give county workers a single view into key aspects of all these agencies to better engage and serve citizens. Our partners also continue to help drive our growth; we have 20% more partner certified individuals year-over-year, and our ISV consulting partners have contributed more than 5,000 listings to the app exchange, with a 20% increase year-over-year in customer installs. Turning to integration, MuleSoft has been an incredibly successful acquisition, allowing our customers to unlock and unify data across their enterprises. This is strategic to every conversation we've been having and adoption continues to accelerate. I see a very similar opportunity with Tableau. I spent some time with Adam, who is excellent, his management team is excellent, and the entire team at Tableau during the conference in Dreamforce last month, and I will tell you, I could see the tremendous impact Tableau is having on customers like Nissan, Morgan Stanley, Home Depot, and many, many others. We are just beginning this integration process, but we have clear synergies from distribution, product development, and cultural standpoints, and our customers are very, very excited, and so are we. So in closing, I want to thank our customers, our partners, and our employees for their trust and continued support. And with that, I'll turn the call over to Mark.

Well, thanks, Keith. We delivered another great quarter in Q3 with strong top-line revenue growth on both the reported and organic basis, as well as strong operating cash flow growth. Here are a few highlights: Total revenue grew 33% in dollars and 34% in constant currency. Total revenue grew 21% in dollars and 22% in constant currency, excluding acquired revenue from Tableau and Salesforce.org. CRPO grew over 28% in dollars and 28% in constant currency. CRPO grew over 22% in dollars and 22% in constant currency, excluding the impact of acquired CRPO from Tableau and Salesforce.org. Let me take you through some of the details in the quarter starting with revenue: Total revenue for the third quarter was $4.513 billion, including approximately $327 million from Tableau, and $80 million from Salesforce.org. Just as we saw in Q1 and Q2, we continue to experience FX headwinds in revenue in the third quarter of approximately $29 million year-over-year, and approximately $19 million sequentially. Looking at the drivers of growth by cloud, we continue to see strong subscription and support revenue growth, with year-over-year growth for sales cloud of 15%. Service cloud growth of 24%, marketing cloud growth of 32%, and platform and other at 73%. As a reminder, our acquisition of Tableau added approximately $308 million to platform and other, while MuleSoft grew 77% year-over-year, contributing approximately $185 million to platforms and other. Lower attrition continues to support our growth in the third quarter with dollar attrition down modestly year-over-year, remaining below 10% and continuing the downward trend we have seen in the last several quarters. Turning to operating margins, Q3 non-GAAP operating margin was 19.4%, up 250 basis points year-over-year. Our Q3 non-GAAP operating margin reflects the timing of Dreamforce in Q3 last year versus Q4 this year, as well as the variations in the timing of sales and marketing investments in the quarter. Q3 GAAP loss per share was $0.12, and non-GAAP diluted EPS was $0.75. In Q3, below-the-line mark-to-market adjustments benefited the GAAP loss per share and the non-GAAP diluted EPS by approximately $0.01. In addition, business performance in the quarter, including better than anticipated results from Tableau, as well as better than expected shares outstanding, benefited GAAP loss per share and non-GAAP diluted EPS by approximately $0.08. Now turning to cash flow, third quarter operating cash flow was $298 million, up 108% year-over-year. Operating cash flow in the quarter was driven by the timing of collections due to a number of renewals which occurred earlier than planned and cash contributions from Tableau in terms of operating cash flow. On a trailing 12-month basis, we were pleased to deliver operating cash flow growth of approximately 30%. CapEx for the quarter was $170 million, leading to free cash flow, defined as operating cash flow less CapEx of $128 million. On a trailing 12-month basis, we were pleased to deliver free cash flow growth of approximately 31%. Remaining performance obligation ended the third quarter at approximately $25.9 billion, up 22% versus last year. Current RPO was approximately $12.8 billion, up 28% year-over-year. On a constant currency basis, CRPO growth was up 28% year-over-year; Tableau and Salesforce.org contributed approximately $600 million to this amount. Now turning to guidance, as we discussed at our Analyst Day on November 20th, we're pleased to be raising our full-year FY20 revenue guidance to $16.99 billion to $17 billion for full-year revenue growth of approximately 28%, excluding top-line revenue contributions from Tableau of approximately $650 million and Salesforce.org of approximately $220 million. We expect top-line growth of approximately 21% year-over-year. This outlook reflects approximately $160 million in FX headwinds for the full year. Turning to our outlook for operating margins, we continue to expect non-GAAP operating margins to be approximately 16.6%, down roughly 50 basis points year-over-year. Excluding the impact of acquisitions this year, we continue to expect our FY20 non-GAAP operating margin improvement year-over-year to be more than 150 basis points. For EPS, we're updating our FY20 GAAP diluted EPS to $0.44 to $0.45, and our non-GAAP diluted EPS to $2.89 to $2.90. For operating cash flow, we are pleased to be raising our FY20 operating cash flow growth guidance to 22% to 23% year-over-year. For Q4, we expect revenue in the range of $4.743 billion to $4.753 billion or 32% growth year-over-year. This guidance assumes approximately $320 million from Tableau and approximately $80 million from Salesforce.org. We also expect a Q4 GAAP loss per share of $0.04 to $0.03 and non-GAAP diluted EPS of $0.54 to $0.55. We expect CRPO growth of approximately 21% year-over-year in the fourth quarter. This guidance assumes approximately five points of growth from recent acquisitions. Before I close, I’d like to provide some additional insight into our guidance for FY21. As you have seen in our press release, we are also providing revenue guidance for Q1 of FY21 of $4.800 billion to $4.835 billion, up 28% to 29% year-over-year. We are providing this one-time guidance for Q1 of FY21 given the newly acquired businesses especially Tableau, which have more seasonal revenue profiles in the first quarter. To wrap up, we delivered another quarter of strong top-line organic and reported revenue growth, with continued organic margin progression and strong cash flow growth. I’d like to thank our employees, customers, partners, and shareholders for your continued support, and wish you a wonderful holiday season and a Happy New Year. And with that, we will open the call for questions.

Great, and thank you for taking my question. I guess the first one here, you're coming out of hundreds of customer conversations at Dreamforce. I was hoping you could just maybe rank order the top two or three Salesforce products where the customer appetite seems to be the highest to invest next year. Any color you could provide us on where customers are most excited from a product perspective would be very helpful. Thanks.

Sure, I'm happy to take that, and then I’d love to pass that on to Bret also. So, number one, I would say that, for me, Dreamforce is an amazing process. It's not the event that is the most impactful for me; I'm sure that is for everybody else, it's the conference that's extremely impactful. For me, it's the process coming up to it. Before Dreamforce, I had the opportunity to get on the road with my team. And we take the keynote out, and we meet with hundreds of customers. In my case, I personally had the opportunity to have one-on-one conversations; and in this case, I had conversations with almost 100 customers directly about Salesforce, their experience, what they're using in technology, where they're going with their business over and over again. This is the most important thing I do every single year is this deep work. I have many of my key executives with me. What I was most focused on this year was, of course, being able to present these incredible strategic changes we've made to our business, especially MuleSoft, especially Tableau, but also to be able to communicate what our core strategy is in terms of Customer 360. What I took away from this was that customers today view us at Salesforce as their trusted digital advisors and look to us to help them have a clear vision of connecting with their customers. That's what Customer 360 is all about. It's really bifurcated. They're looking for a trusted advisor relationship, in many cases, as Keith mentioned, at the CEO level, but it's also at other parts of the organization, where there has been so much change in the industry they’re looking for companies that they can rely on and bet on. On the second side, it was really Customer 360 that was so amazing to me, that customers are really implementing Customer 360, but every customer can start at a different place. Sales, service, marketing, you probably noticed that one of the things we focused on is the new Salesforce 360 Truth profile. This is the Holy Grail for me in computing the single source of truth. When customers saw this, the comments were, I'll paraphrase what a large financial service company in New York said to me. This is for us the single most important thing in our company. We need a single source of truth of our customer information that all of these apps can come together in a powerful way and deliver that single source of truth. Customers were amazed by this. I have to take my hat off to my engineering team, because I didn't think it was really possible to see it all come together. Some of these products are organic, some of them are inorganic, but now that they are integrated and have a clear architecture and that they have the ability for the customer to have extreme value, that was incredible. I have to add to that, and I think Keith touched on this. I definitely agree Tableau far exceeded my expectations from a customer reception; so many of our customers have Tableau, I could not believe it. In many cases, because Tableau has been a much smaller company than we are, for example, they don't have a direct relationship with Tableau. They don't have an executive relationship. The number of CEOs and CIOs who have directly come to me and my management team and asked us to go wall-to-wall with Tableau has far exceeded any expectation that we could have had. That combination of those three things; one, our trusted relationship with the customer; two, Customer 360 resolving in the Truth profile; and three, Tableau as a huge catalyst for growth. That, to me, is what I tried to then get on stage and present in the keynote. After talking to these hundreds of customers, both before and after Dreamforce, creates a highly differentiated position in the industry. No one else is working on this. Nobody has this vision. No one else is trying to help these customers solve this problem. We are in a very unique position with a highly stratified position of customers globally and by industry. So that's really my takeaway. I hope I answered it for you. It's been a very powerful several weeks for me, and it's also been an extremely emotional moment because, I'm sure you know, the day before the keynote, I was at my, one of my very closest friends' memorial. I came into that keynote and I just felt all of those customers there and I went, 'Wow, this is just incredible what was happening.' I really opened myself up to express what I had heard over those preceding few weeks that we are just in an unprecedented moment in Salesforce’s ability to execute for our customers' needs. And Bret, do you want to fill in the details? I'd love for you to talk about how you practice.

As Marc said, it's really about transitioning from being about clouds to being around this Customer 360, the single source of truth. It's really about not just selling a product to our customers, but really helping them digitally transform their business around their customers. The single source of truth means that it’s easier than ever for our customers to go from being a sales customer to being in sales and service or being a service customer to being in service and commerce and marketing. You’re seeing this particularly in the Cyber Monday statistics, which we’re really proud of. I also want to highlight our main differentiator, which is Einstein. Our AI capabilities are coming through stronger than ever. I heard that from every single customer that Marc and I talked to and Keith and I talked to on that road show before Dreamforce. There were 24 billion messages we sent over Cyber Week, there were 32 million orders. They're all being personalized. As Marc mentioned, over 10% of those orders are being driven by Einstein recommendations. We're doing over 10 billion predictions per day to personalize every single one of those email engagements that are personal to the receiving person. In the innovation we highlighted in the keynote, Einstein came through strongly across this Customer 360 in a really differentiated way. With our Sales Cloud, we introduced Einstein Call Coaching to help telesales teams through the power of Einstein automatically coach every sales representative to become like the best sales representative. In marketing, we introduced interactive email, bringing one of the most tried and true digital marketing mechanisms into the next century with some amazing new capabilities. Even in our industry's portfolio, that consumer goods cloud that Keith talked about—I'm really proud of that, Einstein Vision is a key part of it enabling every consumer goods company in retail to use Einstein Vision to ensure their products are placed in the right places on the shelves with all the retail partners. I really want to highlight that we have transitioned Einstein from being this vision to every customer adopting it, really being a key differentiated part of this Customer 360 vision.

Now Bret, before your narrative, I just have to ask you the same question that I got asked, which was before Dreamforce you were also on the road with me and I think you did even additional two or three major focus groups. So you've been in front of hundreds of customers as well. What was your biggest surprise talking to them and rolling all of this technology and vision out and demonstration over the last month?

I think the biggest surprise for me was how much this Customer 360 single source of truth resonated. In fact, that phrase 'single source of truth' came from our customers. They were describing their challenges and their digital transformation as breaking down the silos of their company. Their silos come in the form of technology; their data is siloed across a number of different systems. They're also organizational silos. Different departments that previously operated with autonomy now need to come together to produce this single, seamless customer experience. It's why I think our strategy is really focused on that singular vision. We want to bring all that data together technically, with the power of MuleSoft; we want to enable people to see and understand that data with Tableau; and we want to enable people to personalize every aspect of their customers' experience with the Customer 360. We really feel that all these components are coming together to match the appetite from our customers.

Bret, I haven't seen you work harder than you have in the last month. So I want to thank you for everything that you're doing.

Thanks for Mr. Hawkins. The renewals you mentioned came in earlier than planned. Can you just talk to how given that anomaly was and to stay intact for that pull forward?

Yes, for sure. Thank you, Brent. Basically what happened is when we have an early renewal from a customer, that's a really good event, as you can imagine, but they were ahead of plan. You can see that when they happen because our CRPO in Q3 was even higher, and so it has an effect. It's kind of a timing effect between Q3 and Q4 for CRPO, but we really like what happened. It's a good customer sign when people come in and do early renewals, and that affects our cash flow and shows up in CRPO in one quarter and in a little bit of time in between the two quarters. But, yes, that's how it works out there, Brent. Thank you for the question.

Hi. Mark, why don't I just pick up on that question a little bit more? So, relative to the 22% organic CRPO performance you put up in 3Q, which was terrific. The 16% guidance for 4Q feels a little light. You just touched on perhaps one explanation. Is it possible to quantify how big that impact was and if there were other factors driving your guidance for that 16% number, maybe being a little extra careful given macro or maybe there were some contract duration changes? Thank you.

Yes, sure. Let me just address a couple of things here, Karl, for sure, glad to do it. I think the first thing I would say is the early renewals impacted the growth rate by approximately a point or so, and that type of measurement in terms of quantification is number one. Number two, I want to call out that this is the first time we've actually ever guided CRPO for Q4; it's kind of a new event for us. We're doing it for the first time by adding in Tableau, so our business composition is evolving. When we looked at that, and we looked at what happened in Q3 and the guidance in Q4, it works out. You can see the timing issue; we feel like it's good and reasonably conservative given that this is the biggest quarter for both new business and renewals. We look forward to putting up the result and discussing the actuals in Q4, but we think that's appropriate.

Okay, thank you. One question for Marc B., Marc, we've noticed over the past 18 months or so, maybe a little longer, a growing importance of customers’ first-party data versus third-party data, which may have been purchased to augment gaps from platforms that are increasingly being regulated or commoditized. We believe customers are putting their most valuable data into CRM, and we'd like to know how you're going to help customers realize the value of their own first-party data. Are we going to be able to track this with multi-cloud adoption or Customer 360? And just sort of a little follow-up: do you feel you currently have the right data mosaic in place today to help customers realize that value?

All right, this is a great question and I'm going to address part of it, but I'm also going to have Bret, who is right here, address part of it, and also Amy Weaver, who is our President and our Chief Legal Officer, because she's involved with many customer conversations exactly like this. You're right; companies have more customer information than ever before. It's a critical part of their trusted relationship with their customers. Every company is building a one-on-one relationship with their consumers, it has moved from being anonymous to known. This is critical for them to build a journey that allows them to understand their products or to purchase those products or receive their service from those products, upgrade those products. This could even include renewing the customer, retaining the customer, or even getting the customer back. All of this will be driven much more effectively, efficiently, and dynamically using a Customer 360 platform like Salesforce. This is why we built Customer 360 Truth. At that moment, customers must be able to rely on a single source of truth to maximize their relationship with their customers, regardless of where the customer touch point is. This phenomenon has occurred over the last, I would say, five years, and Salesforce is really the company that companies are coming to and saying, 'Help us provide that unique Customer 360.' So Bret, give us your take on exactly where we are in terms of the move from third-party to first-party data, how customers are implementing this platform. I didn't address the Tableau component of her question; I think that's important. Then I think we'll have Amy address the components we’ve seen here in California, with the California Privacy Act and GDPR as well; these are all related to the importance of having authenticated data that customers are authorized to use.

Yes, it's a wonderful question. I really agree with the trend that you mentioned. Salesforce started as a system of record for sales, but every aspect of CRM has not been served equally to handle this first-party customer data. With Customer 360, we really feel like we can bring it to every aspect of this Customer 360—from sales to service to commerce to marketing. For example, with Customer 360 audiences, which we announced at Dreamforce, we're bringing a single source of truth to marketers as well. Those customer data platforms that many marketers are clamoring for recognize that every one of our constituents in every department of every company needs a single source of truth to do their jobs. We feel that the power is unlocked when that known customer data is accessible across all those departments, creating a seamless experience instead of a fragmented experience. What I'm hearing from our customers is that’s really what differentiates Salesforce. We're not just doing this for one department; we're doing it for the entire company. You can have a single view of all of your known customer data. One of the interesting things about this is, by bringing this together, we're enabling our customers to navigate this incredibly complex regulatory landscape, Amy will speak more about that. The first step to complying with CCPA and GDPR is having a map of where your customer data lives. We feel privileged to partner with our customers to help them navigate this landscape, and we believe one of the best ways to comply with the changing landscape of consumer privacy legislation is to be on the Salesforce Customer 360. We think that's one of the value propositions of our platform. I'll pass it over to Amy to speak more about it.

Great, thanks, Bret. Thanks, Marc. I think it’s a really interesting question; we're looking forward to all of this personalization because consumers’ expectations about privacy and how their data is used are at an all-time high. But at the same time, consumers have high expectations about personalization. They don't want to see information not relevant to them, and they want their experiences with trustworthy companies to be seamless. The key is we believe that personalization and building and maintaining trust are not mutually exclusive; in fact, they're part of the same virtuous cycle. The customer success platform is a good example; it's designed to help our customers build trusted and personalized relationships with their customers and consumers. For example, it has built-in robust features that help our customers determine how they want their data used, and we'll help partner with our customers on their compliance journey as well. Now, Marc briefly mentioned the CCPA, which is the California Consumer Privacy Act, and that's going into effect on January 1st; that's a really important step forward in the U.S. privacy landscape. But as I said before, we think that all Americans—not just those in California—deserve strong privacy protections, and that is why we are continuing to advocate for comprehensive federal privacy laws.

Yes, to add to Amy that's also why I've called for a U.S. national privacy law. We do not want a patchwork of what we've seen in California. Personally, I think it's extremely important. What has happened in California, I have worked with the team to get that done, as did Amy, but we don't want a patchwork across the United States. We badly need a national privacy law. That's why it's great that we have GDPR; it gives us the ability to help our customers comply. Thank you, Amy, for your leadership. I really appreciate it.

Excellent. Thank you for taking the question. I wanted to touch a little bit on the European business. EMEA up 43% was a really impressive result, given the kind of macro uncertainty. You guys are closing the quarter in October, which had a lot of Brexit uncertainty. Is it just a better environment than we're thinking about over in Europe? Or is the priority from the CIO just overtaking any uncertainty people have about that spending environment?

I think you have to look at it in a couple of different ways. For all customers, we believe that digital transformation is the last thing they would stop investing in. I mean, I look at all your own companies; look at our company, digital transformation is number one on everybody's list. Everybody wants a trusted digital advisor at the beginning and end of every digital transformation, which is the customer. That's why we're especially well positioned and you're seeing these strong results. On the macro side, I said this also at the Analyst Day: we look strong with the macro environment. The OECD that global growth is dropping from 4% to 3% this year, which is a 25% reduction year-over-year; of course, that's going to impact different geographic environments differently. Our job is to manage a full portfolio of countries across the world. We are in the major technology buying centers, whether it's in the United States or in Asia or Japan. We also implemented a new structure in Europe. We had our own Brexit, if you will; you know that we have hired Jayne-Anne Gadhia to be the Chief Executive Officer of Salesforce, UK and Ireland, which is critical. We continue to invest aggressively in Europe and in the UK and Ireland through their own transition and transformation, so we can align with our customers because they all need to invest to take advantage of what’s happening in the European environment. Let me turn it over to Mark; he is going to have more detail.

Thank you, Marc. I agree with your comment that digital transformation is mission one, and people are asking more and more from us. Marc, as described by you and Bret, but I was really pleased to see the 42% growth rate in aggregate. Even if you back out...

And did that surprise you? When you look at these numbers, I mean some of them are just incredible.

That number was a really big number, Marc. It caught my attention, and I wanted to share with people even if you back out all the Tableau effect, it's up 31%. So that's the number that really hit me—that we’re hitting strong across the different geos in the world, in Asia Pac and Americas, and in Europe, with or without Tableau. Our growth, it's worth noting that our Sales Cloud grew 15%. This is material for me; it catches my eye that our foundational cloud is growing at that level. I was glad to see that.

Incredible growth, especially by cloud; I just went through all the numbers. But let me ask you what is your biggest surprise; A, of the quarter, but also from Dreamforce. We've heard that question a couple of times, and I think you should have the ability to turn it on?

I get a chance, as you know, to spend a lot of time with customers in addition to investors. The thing that I like is just the constant focus on digital transformation. They ask us to do more; that's probably the biggest thing that surprised me—that when they see progress, they want more progress. I think Bret, your point on single source of truth resonates with people; they pick up on that. I think we do more is the thing that really caught my attention. In terms of the quarter, what I liked was the balance across clouds and across geos the most.

Thank you.

Congratulations yet again on a spectacular Dreamforce team. One for Benioff and one for Keith. Marc, when you look at Customer 360 the industry has tried to execute this concept for 20 years or so. How do we think of 360? Does that allow Salesforce to participate in bigger opportunities that can be executed faster, or just allow you to stay in the game because it's something that customers sort of expect Salesforce to be proactive versus reactive? That's the spectrum I hope you can fill in for me. And for Keith, congratulations on MuleSoft, I mean, it's been accelerating in its growth under Salesforce. How would you apply this model to Tableau, and what's the right way to think about how Tableau could end up being as successful or maybe even more successful of an acquisition as MuleSoft? Thank you so much.

So Mark, why don’t you take the first part of that?

You’re 100% right; for Customer 360, we really entered a unique position with our customers. Customers today are looking to us as their provider of that platform, a critical and unique position. You mentioned Siebel; there have been many companies in the CRM market, maybe in service, maybe in sales. I don't think there has ever been a vendor who has tried to execute this vision before and tie it all together with a single source of truth for their customers. I was going to ask Keith to take this next, but you mentioned MuleSoft and Tableau; this is critical for our customers to move forward. We needed MuleSoft as the next step to help us bring all of this together. Tableau is critical as our customers want to understand all of this data. That has shifted our position with our customers, and I’d love for Keith to talk about his experience as well.

Thank you, Marc. A couple of things to add to Marc’s comments and I'll try to address the other question. Throughout my entire career, the industry has been yearning for the 360-degree view of the customer. As time has passed, companies have recognized the importance and power of it. A few weeks back, I was with a CEO of a large insurance company, and we were discussing how that company has grown up in silos, as Bret alluded to earlier. There are organizational silos, process silos, business model silos, and data silos. Companies grew up with a product-to-market view instead of a customer-to-market view; every company has to go through that huge digital transformation. To make that journey work, they have to embrace the platform, the promise of the 360-degree view of the customer. That is an imperative. People have been talking about this; it hasn't become a reality. We’re excited that for the first time in this industry, a company like Salesforce has provided the technology to give the customers what they've been looking for for so long. It's very, very exciting. When you think about how these companies have data everywhere with inconsistency and no single source of truth, they just want the truth—like we all want the truth. Our customers expect the truth; their customers expect the truth. It's a very powerful thing we can provide.

As for Tableau, we're super excited to have Tableau as part of the Salesforce family. If you think about the evolution of technology, the systems of record are nothing without data, and the systems of engagement are nothing without data, and the systems of intelligence are nothing without data. The power of visualization with analytics and intelligence presents an incredibly unique opportunity. We have run a playbook in all of our acquisitions which have been very successful. Certainly, MuleSoft has been our most successful run so far; customers look for this holistic view. They are looking for solutions, not piece parts. If you can bring together the best-of-breed solutions in an integrated way, that’s what customers want. We will run the same playbook with Tableau. I would echo both Marc and Bret's earlier comments; the enthusiasm for Tableau alone is significant. It was a great company, is a great company, great management, and community. When you combine that with all of the promise of the 360-degree view of the customer and being able to serve it up in an intelligent and visual way, it creates a compelling offering. The combination of Salesforce and Tableau will be very, very successful.

Thank you, Keith. I want to thank you for that and I completely agree. You could see it really in the lines at Dreamforce around the Tableau Booze and on analytics calls and other parts of Dreamforce. I know it surprised many of us and many of you to see the huge activity was not a surprise to me, because of what was happening in the focus groups before Dreamforce. While we wrap up the call now, I just want to thank all of you for coming to Dreamforce. Today is Giving Tuesday; we're approaching the holiday season. I want to especially thank all of our Ohana. Thank all of you for your support, and for everything that you do for us every single day. I also want to thank our .org at this time of the year, who has run over 45,000 non-profit and higher education customers for free. We've provided over 4.5 million hours of volunteerism into our local communities and given away more than $310 million in direct grants. Thank you to all of you. Thank you to our Ohana, and we look forward to seeing you on the 19th in the New York City World Tour in New York. Thank you very much.