Slide 1: Salesforce
Slide 2: Safe Harbor
Safe Harbor Safe harbor statement under the Private Securities Litigation Reform Act of 1995: This presentation contains forward-looking statements about our financial and operational results. The achievement or success of the matters covered by such forward-looking statements involves risks, unce
Slide 3: Agenda Tuesday, October 4
` Agenda Tuesday, October 4 Mark Hawkins David Havlek Alex Dayon Mike Rosenbaum Bob Stutz Stephanie Buscemi Adam Seligman John Wookey Keith Block Tyler Prince 10:00a Business Review & Q&A 11:30a Lunch 1:00p Product Q&A 2:45p Go-to- Market Q&A Parker Harris 4:15p Technology Q&A St. Regis Foyer 5:00p
Slide 4: Agenda Wednesday, October 5
` Agenda Wednesday, October 5 Mark Hawkins David Havlek Keith Block Tyler Prince 10:00a Business Review & Q&A 11:30a Lunch 2:45p Go-to- Market Q&A Parker Harris 4:15p Technology Q&A St. Regis Foyer 5:00p Reception St. Regis Terrace Wed. 10/5 3:30p CEO Q&A Marc Benioff Alex Dayon Mike Rosenbaum Bob S
Slide 5: IoT Scaling to $20B and Beyond
IoT Scaling to $20B and Beyond Salesforce Investor Day October 4, 2016
Slide 6: Competitive Advantage with Strong Core
Competitive Advantage with Strong Core MARK HAWKINS CFO
Slide 7: Growth/Margin Framework is Our Compass
` 1All references to operating margin refer to non-GAAP operating margin. Non-GAAP operating margin excludes the effects of stock-based compensation, amortization of purchased intangibles, lease termination resulting from purchase of office building, and the potential impact of FX and M&A. A complet
Slide 8: …and We're on the Right Path
…and We’re on the Right Path Strong core performance Note: FY17 estimates represent guidance ranges provided August 31, 2016. Non-GAAP operating margin excludes the effects of stock-based compensation, amortization of purchased intangibles, and lease termination resulting from purchase of office bu
Slide 9: Positioned for $20 Billion and Beyond
Positioned for $20 Billion and Beyond Fourth largest enterprise software company Note: Salesforce consensus based on FY17 and FY18 analyst estimates per FactSet. All other consensus estimates represent annualized CY2016 and CY2017 per FactSet. Welcome to Base Camp MT. REVENUE Rank Company FY17 Conse
Slide 10: Massive and growing TAM
$7B $8B $9B $10B $11B $12B $13B $15B $17B $19B $26B $28B $30B $32B $34B $7B $8B $10B $12B $14B $14B $15B $17B $18B $19B $5B $6B $6B $7B $8B $70B $78B $86B $95B $105B 2016 2017 2018 2019 2020 Total Market 11% 19% CAGR % CY16-20 15% 8% 8% 13% 12% Current Products Support $20 Billion Objective Massive
Slide 11: Consistent Share Gain
Consistent Share Gain Extending our #1 CRM market share position Source: Industry analysts, market research and Salesforce estimates. CRM market includes sales, customer service and support, and marketing software. 5.7% 4.3% 12.6% 7.8% 14.3% 10.2% 10.6% 19.7% FY11 FY12 FY13 FY14 FY15 FY16
Slide 12: Competitive Advantage
` Competitive Advantage Product Strength and Innovation Large, Loyal Installed Base World-Class Team and Culture Cloud Mobile Social IoT AI
Slide 13: Years of Unmatched Customer Innovation
17 Years of Unmatched Customer Innovation Leader in capitalizing on key technology shifts Multi-tenant Cloud Thunder IoT Cloud AppExchange 2005 Force.com 2007 Chatter 2009 Salesforce1 2013 Lightning Platform 2014 Salesforce IQ 2015 1999 Wave Analytics Cloud Cloud Socia l Mobile IoT AI 2016 Salesfor
Slide 14: Undisputed CRM Product Leader
Undisputed CRM Product Leader Community Cloud App Cloud Service Cloud Sales Cloud Marketing Cloud CommerceC loud Industry-Leading Products Sources: Industry analyst reports. Innovator of the Decade MT. PRODUCT
Slide 15: Strategy Focused on the Front Office
Strategy Focused on the Front Office Everything we do is about the customer Assisted Service Smart Apps Connected Products Intelligent Communities Actionable Analytics Guided Sales Unified Commerce Predictive Marketing
Slide 16: M&A Strategy is Two-Fold
M&A Strategy is Two-Fold Augments existing clouds or accelerates new product initiatives Minhash Sales Service Marketing Community Analytics Platform & Apps Commerce
Slide 17: The World's Smartest CRM Platform
Einstei n Lightning force.com Heroku AppExchange Thunder Sale s Service Marketing Community Analytics Apps Commerce IoT Predictive Analytics Machine & Deep Learning Natural Language Processing & Generation Platform Applications Email, Calendar & Social Data CRM Data IoT Events Quip The World’s Smart
Slide 18: We Own The Top Three Pure-Play Clouds
` Rank Company Annual Revenue Run Rate1 Growth Rate YoY 1 Sales Cloud $3,020 M 13% 2 Service Cloud $2,302 M 29% 3 App Cloud & Other $1,414 M 43% 4 Workday $1,225 M 37% 5 ServiceNow $1,163 M 45% 6 Marketing Cloud $810 M 28% 7 NetSuite $721 M 28% 8 Ultimate Software $634 M 27% 9 Veeva $421 M 40% 10 Me
Slide 19: Unparalleled Cloud Ecosystem
` ` 1Represents percentage of new business in which partners were involved during H117. 2Represents the increase in certified consultants during FY16 Unparalleled Cloud Ecosystem Partners accelerate our value and opportunity 49% Partner involvement in new business +30% Number of certified consultan
Slide 20: Competitive Advantage
` Competitive Advantage Cloud Mobile Social IoT AI World-Class Team and Culture Large, Loyal Installed Base Product Strength and Innovation
Slide 21: Trailhead Creates Customer Advocacy
1M Completed Badges Trailhead Creates Customer Advocacy Trailhead makes it fun and easy to learn Salesforce TRAILS 32
Slide 22: Customer Loyalty Drives Declining Attrition
` Note: Chart of dollar attrition as a percentage of revenue when compared to the year-ago period for Sales Cloud, Service Cloud and the Force.com Platform. Numbers represent the second quarter for each respective year. $500 million run-rate savings is calculated by applying the difference in attrit
Slide 23: Installed Base is an Important Growth Asset
Installed Base is an Important Growth Asset 150K+ customers and growing Note: Ratios are based on annual revenue contribution for the four fiscal quarters ending Q217. 40% 60% 70% 30% ADD-ONS & UPGRADES NEW PRODUCTS
Slide 24: Core Strength Reflected in Top Accounts…
Core Strength Reflected in Top Accounts… Customer count and value continue to increase 11 20 39 57 84 Q213 Q214 Q215 Q216 Q217 Note: Amounts represent annual revenue contribution, or expected annual revenue for FY17, as of Q2 for the respective fiscal year. Customer Count ~500 ~700 ~800 ~1,000 ~1,3
Slide 25: …and is Matched by Strength in SMB
…and is Matched by Strength in SMB Revenue from SMB customers has grown >30% annually Note: Amounts represent annual revenue contribution, or expected annual revenue for FY17, as of Q2 for the respective fiscal year. Q217 SMB annual revenue contribution more than three times larger than Q213 SMB an
Slide 26: Portfolio Fuels Customer Success and Growth
` ` Portfolio Fuels Customer Success and Growth More customers are using more clouds Q2’13 Top 40 customers 13% using 4+ clouds Q2’16 Top 100 customers 20% using 4+ clouds Q2’17 Top 200 customers 75% using 4+ clouds 3+ clouds: 46% 2+ clouds: 76% 3+ clouds: 75% 2+ clouds: 97% 3+ clouds: 95% 2+ cloud
Slide 27: Competitive Advantage
` Competitive Advantage Product Strength and Innovation World-Class Team and Culture Large, Loyal Installed Base Cloud Mobile Social IoT AI
Slide 28: Salesforce Core Values
` Salesforce Core Values Our culture is a competitive advantage Salesforce has its customers in its DNA. The laser focus on customer value is unrelenting. I love it. SAIDEEP RAJ MANAGING DIRECTOR, ACCENTURE “ ” “ We wouldn’t be able to serve this many communities if it weren’t for Salesforce. JAY B
Slide 29: Unique Investments in Our Culture…
Unique Investments in Our Culture… Creates customer and employee advocacy Equality for All Women’s Leadership Environment Women in tech Equa l pay Net-Zero by 2020 98% more carbon efficient Tony Prophet as new Chief Equality Officer $3M salary adjustment for equal pay 1% Time 1% Equity 1% Product
Slide 30: …Make us a Destination Employer
4K 6K 9K 13K 15K 18K 23K Q211 Q212 Q213 Q214 Q215 Q216 Q217 …Make us a Destination Employer… San Francisco’s largest technology employer Full-Time Headcount
Slide 31: … and a Magnet for Proven and Visionary Leaders
… and a Magnet for Proven and Visionary Leaders Neelie Kroes Former VP of the European Commission, Board Member Bob Stutz CEO, Marketing Cloud & Chief Analytics Office Tony Prophet Chief Equality Officer Bret Taylor CEO, Quip Richard Socher Chief Scientist
Slide 32: Scaling to $20B and Beyond
Scaling to $20B and Beyond $100B TAM Large, Loyal Installed Base Customer Focused Culture Track Record of Innovation Industry Leading Products
Slide 33: Benefits of Scale with Strong Economics
Benefits of Scale with Strong Economics DAVID HAVLEK EVP, Finance
Slide 34: Benefits of Scale
Benefits of Scale P&L Balance Sheet & Cash Flow Long-term Economics
Slide 35: Growth/Margin Framework is Our Compass
` 1All references to operating margin refer to non-GAAP operating margin. Non-GAAP operating margin excludes the effects of stock-based compensation, amortization of purchased intangibles, lease termination resulting from purchase of office building, and the potential impact of FX and M&A. A complet
Slide 36: Sustained Growth at Scale
` Note: FY17 estimate represents revenue guidance range provided August 31, 2016. *The FY17 constant currency growth rate represents the constant currency growth rate for the first half of fiscal 2017. Non-GAAP revenue constant currency growth rates as compared to the comparable prior period. We pre
Slide 37: Scale Benefits Margin Improvement
Scale Benefits Margin Improvement Absorbing M&A and investing in growth Note: Non-GAAP operating margin excludes the effects of stock-based compensation, amortization of purchased intangibles, and lease termination resulting from purchase of office building. A complete reconciliation of GAAP to non
Slide 38: Scale Helps Navigate Through Variability
` Scale Helps Navigate Through Variability Managing through FX volatility USD / JPY EUR / USD GBP / USD
Slide 39: International Growth Outpacing Americas
International Growth Outpacing Americas Increasing investment in datacenters and headcount Note: Revenue growth rates represent constant currency revenue growth. Non-GAAP revenue constant currency growth rates as compared to the comparable prior period. We present constant currency information for
Slide 40: Foreign Currency Landscape
Foreign Currency Landscape 4 Regional Hubs USD CAD GBP EUR AUD JPY USD 3 Functional Currencies Multiple Billing Currencies USD
Slide 41: FX Impacts to Growth and Margin
FX Impacts to Growth and Margin Example of a European contract TRANSLATIONAL FX TRANSLATIONAL FX TRANSACTIONAL FX Billing Currency Functional Currency Consolidated Currency DR and Revenue Expenses
Slide 42: Benefits of Scale
Benefits of Scale P&L Balance Sheet & Cash Flow Long-term Economics
Slide 43: Subscription Model Strength
Subscription Model Strength Creates revenue visibility and predictability $3.8B $1.3B $11.8B Q210 Q211 Q212 Q213 Q214 Q215 Q216 Q217 Total Billed Deferred Revenue Total Unbilled Deferred Revenue annual revenue under contract at start of the year ~80%
Slide 44: Multiple Factors Impact Deferred Revenue
Multiple Factors Impact Deferred Revenue Creates growing invoicing seasonality as we scale Co-terming (Seasonality) Compounding (Seasonality) Amortization (Consistent)
Slide 45: Scale Impacts Deferred Revenue Seasonality: Q1
Scale Impacts Deferred Revenue Seasonality Q1 seasonality evolving -10% -5% 0% 5% 10% 15% 20% Q105 Q106 Q107 Q108 Q109 Q110 Q111 Q112 Q113 Q114 Q115 Q116 Q117 Seq u e n ti a l g rowt h
Slide 46: Scale Impacts Deferred Revenue Seasonality: Q2
Scale Impacts Deferred Revenue Seasonality Q2 seasonality evolving -10% -5% 0% 5% 10% 15% 20% Q205 Q206 Q207 Q208 Q209 Q210 Q211 Q212 Q213 Q214 Q215 Q216 Q217 Seq u e n ti a l g rowt h
Slide 47: Scale Impacts Deferred Revenue Seasonality: Q3
Scale Impacts Deferred Revenue Seasonality Q3 seasonality evolving 1Q3’17 deferred revenue guidance as of August 31st, 2016. -10% -5% 0% 5% 10% 15% 20% Q305 Q306 Q307 Q308 Q309 Q310 Q311 Q312 Q313 Q314 Q315 Q316 Q317 Seq u e n ti a l g rowt h Guide1
Slide 48: Scale Impacts Deferred Revenue Seasonality: Q4
Scale Impacts Deferred Revenue Seasonality Q4 seasonality evolving $0M $1,000M $2,000M $3,000M $4,000M 0% 15% 30% 45% 60% Q405 Q406 Q407 Q408 Q409 Q410 Q411 Q412 Q413 Q414 Q415 Q416 Seq u e n ti a l g rowt h $4.3B Annual invoicing* Impact of 1% change in sequential DR ~$1M ~$7M ~$28M Sequential Cha
Slide 49: Deferred Revenue Seasonality Continues to Deepen
` Deferred Revenue Seasonality Continues to Deepen Result of invoice compounding and amortization of larger and larger base -20% -10% 0% 10% 20% 30% 40% 50% 60% Q1 Q2 Q3 Q4 Q1 FY06 FY11 FY15 FY16 Seq u e n ti a l g rowt h
Slide 50: Cash Flow Seasonality Also Evolving
` Q405 Q406 Q407 Q408 Q409 Q410 Q411 Q412 Q413 Q414 Q415 Q416 Operating Cash Flow Indexed Sequential Growth Note: chart represents indexed sequential growth since Q105. Cash Flow Seasonality Also Evolving Result of collections compounding and quarterly cash expenses on larger base In d e x e d Se q
Slide 51: Benefits of Scale
Benefits of Scale P&L Balance Sheet & Cash Flow Long-term Economics
Slide 52: Prof. Havlek Office hours
Prof. Havlek Office hours: M-W-F, 8:00am- 10:00 Am
Slide 53: Lifetime Unit Economics
Lifetime Unit Economics 301 Subscription economics applied to the business lifecycle 2014: Lifetime Unit Economics Lifetime Revenue (LTR): Cumulative value of $1 annuity over expected life (Value = $1 / attrition) Cost to Book (CTB): Cost to acquire $1 annuity Cost to Serve (CTS): Cost to serve $1 a
Slide 54: Lifecycle Stage Impacts Growth and Margin
Lifecycle Stage Impacts Growth and Margin At maturity, companies approach their life-time margin potential G r o w t h Start-Up Growth Mature Choice enables top- and Bottom-line Growth time
Slide 55: Example: Acme Cloud Company
High Low T 0 G r o w t h r a t e Example: Acme Cloud Company time
Slide 56: Example: Acme Cloud Company
High Low T 0 Revenue New business G r o w t h r a t e Example: Acme Cloud Company T 1 time Velocity = b r /R r where b r = new business rate and R r = Revenue rate
Slide 57: Example: Acme Cloud Company
High Low T 0 Revenue G r o w t h r a t e Example: Acme Cloud Company T 1 time T 1 Velocity = b r /R r where b r = new business rate and R r = Revenue rate New business
Slide 58: Example: Acme Cloud Company
Low T 0 Example: Acme Cloud Company T 1 G r o w t h r a t e time High Revenue If CTB is flat, S&M expense grows at the same rate as new business T 1 New business
Slide 59: Example: Acme Cloud Company
High Low T 0 Example: Acme Cloud Company S&M Expense (CTB FLAT) time G r o w t h r a t e Revenue T 1 T 1
Slide 60: Example: Acme Cloud Company
High Low T 0 Example: Acme Cloud Company T 1 CTB Margin Pressure time G r o w t h r a t e S&M Expense (CTB FLAT) Revenue T 1
Slide 61: Example: Acme Cloud Company
High Low T 0 Example: Acme Cloud Company T 1 CTB Margin leverage time G r o w t h r a t e S&M Expense (CTB FLAT) Revenue T 1
Slide 62: Example: Acme Cloud Company
High Low T 0 Example: Acme Cloud Company CTB margin leverage G r o w t h r a t e time CTS creates incremental leverage S&M Expense (CTB FLAT) Revenue T 1 T 1
Slide 63: Margin Leverage Reinvestment Sustains Growth
Margin Leverage Reinvestment Sustains Growth time New Clouds New Geos New Verticals New Innovation Reinvestment is critical to sustaining growth
Slide 64: Scale Benefits Near- and Long-Term Performance
Scale Benefits Near- and Long-Term Performance Fueling top and bottom line performance time PRIORITY REV. GROWTH NON-GAAP OP. MARGIN OCF GROWTH Top Line 30 0/0 Flat to Up Revenue Growth Bottom Line 20 0/0 +200-400 bps Revenue Growth HIGH GROWTH LOW GROWTH Growth Top & Bottom Line 20 0/0 – 30 0/0 +10
Slide 65: Thank you
thank y u
Slide 66: Appendix
Appendi x
Slide 67: GAAP to Non GAAP Reconciliation
GAAP to Non GAAP Reconciliation (in 000's) Non-GAAP income from operations 1H FY17 FY16 FY15 FY14 FY13 FY12 GAAP income (loss) from operations 84,537$ 114,923$ (145,633)$ (286,074)$ (110,710)$ (35,085)$ Plus: Amortization of purchased intangibles 86,296 158,070 154,973 146,535 88,171 67,319 Stock-ba
Slide 68: Finance Q&A
` Finance Q&A Mark Hawkins CFO David Havlek EVP, Finance
Slide 69: Salesforce Analyst Day will return at 1:30 p.m. PT
` Salesforce Analyst Day will return at 1:30 p.m. PT
Slide 70: Product Q&A
` Product Q&A Alex Dayon President, Products Mike Rosenbaum Sales Cloud & Service Cloud Bob Stutz Marketing Cloud Stephanie Buscemi Analytics Cloud Adam Seligman Platform Cloud John Wookey Vertical Clouds
Slide 71: Go-to-Market Q&A
` Go-to- Market Q&A Keith Block Vice Chairman, President, COO Tyler Prince EVP, WW Alliances
Slide 72: Technology Q&A
` Technolog y Q&A Parker Harris Co-Founder and CTO