Salesforce, Inc. · NYSE:CRM
Salesforce — Salesforce COM — Investor Day (November 2017)
57 slides from Salesforce's investor day presentation, Nov 7, 2017
Slide 1: Salesforce
salesforce
Slide 2: Forward-Looking Statements
Forward-Looking Statements Safe harbor statement under the Private Securities Litigation Reform Act of 1995: This presentation contains forward-looking statements about our financial results, which may include expected GAAP and non-GAAP financial and other operating and non-operating results, includ
Slide 3: Durable Growth on the Trail to $20 Billion
Durable Growth on the Trail to $20 Billion 4 November 7, 2017
Slide 4: Durable Growth
President & CFO Mark Hawkins Durable Growth 5
Slide 5: Our Financial Priorities
Our Financial Priorities Managing for the long-term, delivering improvement yearly Durable Growth Execution Durable Growth Leverage Durable Growth Economics 6
Slide 6: Where We've Been…
Where We’ve Been… $5.4B FY15 $4.1B FY14$3.1B FY13 $6.7B FY16 $2.3B FY12 $8.4B FY17 FY22FY14 FY18 TAM: $37B Employees: 13K TAM: $72B2 Employees: 30K 1$10.4B based on the high-end of the guidance provided August 22nd, 2017. $12.5B based on the guidance provided November 6, 2017. Represents the high en
Slide 7: …and Where We're Going…
$5.4B FY15 $4.1B FY14$3.1B FY13 $6.7B FY16 $2.3B FY12 $10.4B FY18 guidance1$8.4B FY17 FY22FY14 FY18 TAM: $37B Employees: 13K TAM: $72B2 Employees: 30K $12.5B FY19 guidance1 1$10.4B based on the high-end of the guidance provided August 22nd, 2017. $12.5B based on the guidance provided November 6, 201
Slide 8: …Consistent Organic Growth to $20 Billion Plus
$5.4B FY15 $4.1B FY14$3.1B FY13 $6.7B FY16 $2.3B FY12 $10.4B FY18 guidance1$8.4B FY17 $20B-$22B FY22 target FY22FY14 FY18 TAM: $37B Employees: 13K TAM: $72B2 Employees: 30K TAM: $120B2 Employees: >45K $12.5B FY19 guidance1 1$10.4B based on the high-end of the guidance provided August 22nd, 2017. $12
Slide 9: Multiple Opportunities for Durable Growth
Multiple Opportunities for Durable Growth APAC EMEA Americas Enterprise Commercial Sales Cloud Service Cloud Salesforce Platform Small Business Industries & Other JAPAN Marketing & Commerce 8 Who CUSTOMERS Where GEOGRAPHIES What PRODUCTS
Slide 10: What We Sell
What We Sell 9
Slide 11: The Only Complete Cloud CRM Platform
COMMUNITIES COLLABORATION MARKETING SERVICE SALES INDUSTRIES COMMERCE SALESFORCE PLATFORM EINSTEINTRAILHEAD LIGHTNING ANALYTICS APPEXCHANGEHEROKUIoT Single View of the Customer The Only Complete Cloud CRM Platform 10 No other company is better positioned to drive digital transformation
Slide 12: $72 Billion Market Opportunity Today…
$72 Billion Market Opportunity Today… Sales Service Marketing Commerce Platform & Other Analytics $14B $26B $5B $7B $12B $8B CY16 TAM3 11 Calculations performed by Salesforce and graphics created by Salesforce based on Gartner research. 1Source: Sales, Service, Marketing, and Commerce per Gartner, M
Slide 13: …Growing to $120 Billion in 2021
…Growing to $120 Billion in 2021 Sales Service Marketing Commerce Platform & Other Analytics $21B $37B $9B $17B $22B $13B Salesforce Revenue Growth (Q2’18)4 17% 21% 36% 32% 5 32% NOT DISCLOSED Market Growth (CAGR 16-21)3 11% 13% 18% 15% 7% 8% 11 Calculations performed by Salesforce and graphics crea
Slide 14: Extending our CRM Market Leadership
Source: Industry analysts. Extending our CRM Market Leadership Taking share in the most important enterprise software market 2009 2010 2011 2012 2013 2014 2015 2016 7.2% 9.4% 18.1% 1.4% 6.3% 8.7% 11.0% 1.2% 12
Slide 15: Land and Expand
Land and Expand Benefitting from a broader product portfolio FY18 42% 58% 77% 23% New logos Installed base 45% 55% 75% 25% FY17 40% 60% 74% 26% FY16 Note: Proportions based on sales during the trailing twelve months ended July 31 (fiscal Q2) as of the fiscal years noted. New products into installed b
Slide 16: Our Product Suite is Growing
Our Product Suite is Growing Add-on products provide incremental new business opportunity SERVICE SALES COMMERCE PLATFORM MARKETING COMMUNITIES ANALYTICS CPQ LIVEMESSAGE SHIELD HEALTH CLOUD FINANCIAL SERVICES CLOUD PARDOT DMP $0.69 CORE PRODUCTS $0.31 ADD-ONS $1 New Business FIELD SERVICE Note: Prop
Slide 17: Salesforce Platform is a Full Portfolio
Salesforce Platform is a Full Portfolio Ecosystem sustains growth and expands reach Other 10% ISV 17% Heroku 10% Sandbox & Storage 18% Salesforce Platform 45% ~$190M revenue run-rate ~$340M revenue run-rate ~$310M revenue run-rate Platform & Other Revenue1 1Platform & Other revenue proportions and r
Slide 18: Where We Sell
16 Where We Sell
Slide 19: Gaining Share Internationally…
Gaining Share Internationally… International markets add to our long-term growth opportunity Americas EMEA JAPAC $10B $20B $43B CY16 TAM2 13% 7% 7%CY16 Market Share1 Calculations performed by Salesforce and graphics created by Salesforce based on Gartner research. 1Market share source: Gartner, Mark
Slide 20: …and Growing Faster Than the Market
…and Growing Faster Than the Market International markets add to our long-term growth opportunity Americas EMEA JAPAC $18B $32B $69B Salesforce Revenue Growth (Q2’18)3 24% 31% 27% Market Growth (CAGR 16-21)2 10% 10% 13% CY21 TAM2 Calculations performed by Salesforce and graphics created by Salesforc
Slide 21: Top Nine Countries are 80% of our Global TAM
Top Nine Countries are 80% of our Global TAM Expanding market coverage in top cities around the world Rank Metro Rank Metro 1 New York 14 Philadelphia 2 London 15 Melbourne 3 Paris 16 Atlanta 4 San Francisco 17 Seattle 5 Los Angeles 18 Amsterdam 6 Tokyo 19 Munich 7 Chicago 20 Miami 8 Boston 21 Minne
Slide 22: Closer to Customer: Evolving Our Coverage Model
Closer to Customer Evolving Our Coverage Model Local empowerment makes us fast and agile Centralized Regional Cities Empowered Specialized Fast & Agile 19 International Headcount 29% CAGR FY14 to FY18 Regions ProServ Investments International Datacenter LocationsEMEA APAC JAPAN Note: International h
Slide 23: Who We Sell To
20 Who We Sell To
Slide 24: Portfolio Provides Solutions for All Customers
Portfolio Provides Solutions for All Customers Enterprise and commercial represent ~80% of the market opportunity Enterprise Commercial SMB PubSec $10B $5B $32B $25B CY16 TAM Source: Salesforce estimates based on internal research and industry analysts. 21 17% 7% 25% 2% CY16 Market Share
Slide 25: Portfolio Provides Solutions for All Customers (CY21)
Portfolio Provides Solutions for All Customers Enterprise and commercial represent ~80% of the market opportunity Enterprise Commercial SMB PubSec $16B $10B $53B $40B Source: Salesforce estimates based on internal research and industry analysts. CY21 TAM 21 Market Growth (CAGR 16-21) 10% 11% 15% 9%
Slide 26: Multi-Cloud Remains a Large Opportunity
Multi-Cloud Remains a Large Opportunity Our portfolio of products addresses all key markets ENTERPRISE CUSTOMERS COMMERCIAL & SMB CUSTOMERS Note: Proportions as of Q2 for the fiscal years noted. “Multi-cloud” defined as customers who are using two or more clouds. 49% multi-cloud FY14 14% multi-cloud
Slide 27: We've Become Mission Critical
We’ve Become Mission Critical Approximately 1,600 customers pay us more than $1 million annually $20M+ 24 3 8x $10M+ ~100 ~20 5x $5M+ ~260 ~70 4x $1M+ ~1,600 ~700 2x Note: Customer count as of Q2 for the fiscal years noted. FY14 FY18 CUSTOMER COUNT BY ANNUAL REVENUE 23
Slide 28: Expanding With Our Top Customers
Expanding With Our Top Customers Increasing our relationships and reach across multiple industries Represents new customers since FY14 Entry bar has more than doubled B A AB GFinServe Technology G D E F C H I J Technology FinServe C Technology Technology H D K L M N Technology Technology Technology
Slide 29: Industries Strategy Drives TAM Penetration
Industries Strategy Drives TAM Penetration Top six industries represent ~80% of the market opportunity FinServe Mfg Media & Comms HLS Public Sector Retail $4B $10B $8B $10B $13B$14B CY16 TAM Source: Salesforce estimates based on internal research and industry analysts. 9% 10% 9% 10% CY16 Market Shar
Slide 30: Industries Strategy Drives TAM Penetration (CY21)
Market Growth (CAGR 16-21) 11% 10% 12% 11% 9% 10% Industries Strategy Drives TAM Penetration Top six industries represent ~80% of the market opportunity FinServe Mfg Media & Comms HLS Public Sector Retail $6B $16B $13B $17B $20B $24B Source: Salesforce estimates based on internal research and indust
Slide 31: Traction in Target Industries
Traction in Target Industries 40% of account executives are aligned by industry 1Represents top 10 U.S. banks and top 10 European banks. 2Vertical products include Financial Services Wealth Management, Financial Services Retail Banking, and Health Cloud. Financial Services 17 OF 20 Top U.S. & Europe
Slide 32: Top SIs are Investing in Salesforce
Top SIs are Investing in Salesforce Salesforce is the highest growth practice for top system integrators 27 EVERY TOP SI RUNS ON SALESFORCE CERTIFIED PROFESSIONAL GROWTH (FY14-FY18)1 20x 6x 12x 225x 7x 1Change in certified professionals as of Q2 FY14 through Q2 FY18. 2Based on new business over the
Slide 33: The Foundation of Durable Growth
The Foundation of Durable Growth APAC EMEA Americas Enterprise Commercial Sales Cloud Service Cloud Salesforce Platform Small Business Industries & Other JAPAN Marketing & Commerce 28 Who CUSTOMERS Where What PRODUCTS GEOGRAPHIES Expanded TAM from $700M in 1999 to $120B in 2021
Slide 34: Drivers for Durable Growth
Drivers for Durable Growth $10.4B FY18 guidance1 $20B-$22B FY22 target $12.5B FY19 guidance1 1$10.4B based on the high-end of the guidance provided August 22nd, 2017. $12.5B based on the guidance provided November 6, 2017 and based on current US GAAP under ASC 605. 2Refer to slide 12 for TAM source.
Slide 35: Durable Growth Leverage & Economics
EVP, Deputy CFO David Havlek Durable Growth Leverage & Economics 30
Slide 36: The SaaS Model: A Simple Formula
The SaaS Model: A Simple Formula The foundation for understanding growth and leverage A B C D- + = Beginning ARR Ending ARR 31 Net-New ARR ARR Attrition New ARR
Slide 37: Two Types of Leverage in a Subscription Model
Two Types of Leverage in a Subscription Model 32 Model leverage Occurs when revenue growth is faster than New ARR growth at constant CTB, CTS, and attrition G rowth R at e Margin
Slide 38: Two Types of Leverage in a Subscription Model
Two Types of Leverage in a Subscription Model 32 Model leverage Occurs when revenue growth is faster than New ARR growth at constant CTB, CTS, and attrition G rowth R at e Margin
Slide 39: Two Types of Leverage in a Subscription Model
Two Types of Leverage in a Subscription Model 32 Operating leverage Occurs when CTB, CTS or attrition improve Model leverage Occurs when revenue growth is faster than New ARR growth at constant CTB, CTS, and attrition G rowth R at e Margin
Slide 40: Meet Three Companies
Meet Three Companies Company’s growth strategy defines the leverage opportunity 33 The Camper New ARR: Constant Dollar Adds The Explorer Net-New ARR: Constant Dollar Adds The Trailblazer Net-New ARR: Constant Growth Rate (net of attrition) (net of attrition)
Slide 41: Camper: Constant New ARR Dollars
Camper: Constant New ARR Dollars Model leverage high: revenue growth far exceeds new ARR growth 34 Beginning ARR ARR Attrition New ARR Ending ARR Ending ARR Ending ARR Ending ARR $169 $18 $16 $15 $20 $100 $30 $30 $30 $30 $120 $138 $154 $230 revenue in 10 years +20% +15% +12% 14% Revenue CAGR (10%) N
Slide 42: Explorer: Constant Net-New ARR Dollars
Explorer: Constant Net-New ARR Dollars Model leverage moderate: revenue growth exceeds new ARR growth Beginning ARR ARR Attrition New ARR Ending ARR Ending ARR Ending ARR Ending ARR $20 $20 $20 $20 35 $180$100 $120 $140 $160 $300 revenue in 10 years 16% Revenue CAGR 0% Net ARR CAGR 6% New ARR CAGR 1
Slide 43: Trailblazer: Constant Net-New ARR Growth Rate
Trailblazer: Constant Net-New ARR Growth Rate No model leverage: revenue growth equal to new ARR growth Beginning ARR ARR Attrition New ARR Ending ARR Ending ARR Ending ARR Ending ARR $24 $29 $35 $20 36 $208$100 $120 $144 $173 $620 revenue in 10 years 20% Revenue CAGR 20% Net ARR CAGR 20% New ARR CA
Slide 44: Growth Strategy Impacts Leverage Opportunity
Growth Strategy Impacts Leverage Opportunity CAMPER EXPLORER TRAILBLAZER GROWTH STRATEGY New ARR: Constant Dollar Addition Net-New ARR: Constant Dollar Addition Net-New ARR: Constant Growth Rate REVENUE GROWTH Decelerate until 0% Decelerating to approach 0% Flat growth in perpetuity SUSTAINABILITY O
Slide 45: Decelerating Growth Drives Model Leverage
Decelerating Growth Drives Model Leverage 0% 70% 140% FY13 FY14 FY15 FY16 FY17 SaaS A SaaS B SaaS C SaaS D 38Note: Data represents subscription and support revenue for each company as of their most recently completed fiscal years. Market capitalization as of November 3, 2017. Re ve nue G ro wth Ra t
Slide 46: Proven Durable Growth
Proven Durable Growth FY14 FY15 FY16 FY17 FY18E 25%27%27% 33%34% $10,400M $8,392M $6,667M $5,374M $4,071M Q214 Q215 Q216 Q217 Q218 26%26%29% 31%34% $4,819M $3,824M $3,035M $2,353M $1,790M Revenue Deferred Revenue Annual Revenue Deferred Revenue C/C Revenue Growth1 1FY18 constant currency growth rate
Slide 47: Delivering Consistent Margin Improvement
Delivering Consistent Margin Improvement Profitability driven by both operating leverage and model leverage FY14 FY15 FY16 FY17 FY18E 14.7%13.2%12.4%10.7%8.9% $10,400M $8,392M $6,667M $5,374M $4,071M Investment Areas Infrastructure (+240bps) R&D (flat) Leverage Areas G&A (-420bps) S&M (-410bps) Reven
Slide 48: Historical Growth-Margin Framework
Historical Growth-Margin Framework We are a different company today than in FY12 Priority Rev. Growth Non-GAAP Op. Margin OCF Growth Growth Top & Bottom Line 20-30% +100-300 bps ~Revenue Growth 1Represents the high-end of Salesforce's FY18 revenue guidance provided August 22, 2017. FY12 FY18 FY22 Rev
Slide 49: Durable Growth Economics
42 Durable Growth Economics
Slide 50: Balancing Near- and Long-Term Goals
Balancing Near- and Long-Term Goals Subscription economics guide our execution 43 Where Who What One P&L Enables speed and agility at scale Optimization Model: Near-term: Durable growth with leverage Long-term: Strong unit economics and lifetime value Key inputs: Operating margin Hiring capacity Sub
Slide 51: Subscription Economics Vary by Cloud
Subscription Economics Vary by Cloud Sales Cloud Service Cloud Salesforce Platform Marketing & Commerce 44 SALES CLOUD ~30% ESTIMATED ECONOMIC MARGIN TODAY1 Sales Cloud delivering mature margin today 1Economic margin calculations based on assumptions regarding unit lifetime revenue and subscription
Slide 52: Subscription Economics Vary by Region
Subscription Economics Vary by Region AMERICAS’ COST TO BOOK 15%-30% LOWER THAN OTHER REGIONS1 45 International scale creates opportunity 1Cost to book calculations based on assumptions regarding unit lifetime revenue and subscription economics, including cost to book, cost to serve, and attrition d
Slide 53: Subscription Economics Vary by Market
Subscription Economics Vary by Market Investing in long-term enterprise opportunity ENTERPRISE ~40% 46 1Economic margin calculations based on assumptions regarding unit lifetime revenue and subscription economics, including cost to book, cost to serve, and attrition dynamics. Economic margin is not
Slide 54: Subscription Economics Guide Our Path
Subscription Economics Guide Our Path 47 0% 60% 0% 40% Subscription Economics >35% ESTIMATED ECONOMIC MARGIN LONG-TERM G rowth R at e Margin Lifetime Revenue Cost to Book Cost to Serve $1/ Attrition S&M / Est. New ARR (Subs. COGS + R&D + G&A) / Subs. Rev Less Margin at Maturity 1Economic margin calc
Slide 55: Thank You
THANK Y#U
Slide 56: Appendix
49 Appendix
Slide 57: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation 50 (in 000's) Non-GAAP income from operations 1H FY18 FY17 FY16 FY15 FY14 GAAP income (loss) from operations $41,911 $64,228 $114,923 ($145,633) ($286,074) Plus: Amortization of purchased intangibles 148,276 225,277 158,070 154,973 146,535 Stock-based expenses 508,054