Salesforce, Inc. · NYSE:CRM
Salesforce — Salesforce COM — Investor Day (September 2015)
45 slides from Salesforce's investor day presentation, Sep 15, 2015
Slide 1: This Way Up: A Blueprint for Sustaining Growth and Increasing Profitability
This Way Up: A Blueprint for Sustaining Growth and Increasing Profitability Salesforce Investor Day September 15, 2015 St. Regis Hotel San Francisco, California
Slide 2: Safe Harbor
Safe Harbor Safe harbor statement under the Private Securities Litigation Reform Act of 1995: This presentation contains forward-looking statements that involve risks, uncertainties, and assumptions. If any such uncertainties materialize or if any of the assumptions proves incorrect, the results of
Slide 3: Mark Hawkins, CFO: Financial Review
Mark Hawkins CFO Financial Review
Slide 4: Growth/Margin Framework
Growth/Margin Framework We are committed to balancing growth with improving profitability 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, amortization of acquire
Slide 5: Secular Shifts Create Value
Secular Shifts Create Value And value transfers from last generation to next Source: Matrix Capital Management analysis, Bloomberg, CapitalIQ, Compustat. Note: 1987 and 2004 data has been inflated at CPI to 2014 dollars $301 $45 $80 $1,321 1987 2004 Market Cap in Billions Mainframe Client Server $1,
Slide 6: Large and Fast Growing Markets
New products grow TAM Large and Fast Growing Markets… Source: Gartner, Inc., Market Share: All Software Markets, Worldwide, 2014; Platform & Other defined as combination of the Other Application Development, Testing, Security Testing (DAST and SAST), Application Platforms, Business Process Managemen
Slide 7: Foundation for Sustained Growth
Foundation for sustained growth …With Headroom for Organic Growth Source: Gartner, Inc., Market Share: All Software Markets, Worldwide, 2014; Platform & Other defined as combination of the Other Application Development, Testing, Security Testing (DAST and SAST), Application Platforms, Business Proce
Slide 8: Consistently Taking Share
Consistently Taking Share Extending our #1 CRM market share position Source: Industry analysts, market research and Salesforce estimates. 5.7% 6.2% 12.6% 9.1% 14.3% 12.1% 10.6% 18.4% FY11 FY12 FY13 FY14 FY15
Slide 9: Blueprint for Sustained Growth
Blueprint for Sustained Growth Installed base expansion and new customers fuel growth Note: Business model simplified for illustration purposes. $0.00 $0.25 $0.50 $0.75 $1.00 $1.25 ~9% Attrition Rate Sales into Installed Base >2x Attrition 60 : 40 ratio of sales to installed base to new customers Be
Slide 10: Installed Base Success
Installed Base Success
Slide 11: Customer Success Drives Lower Attrition
Customer Success Drives Lower Attrition Attrition rate at lowest level in company history 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 through Q216. 1Salesforce.com Customer Relationship Surv
Slide 12: Top Accounts Growing in Quantity and Value
Top Accounts Growing in Quantity and Value Million dollar customers are up 25% year-over-year ~700 ~800 ~1,000 Q214 Q215 Q216 Number of customers paying >$1M annually 40% Y/Y increase in value of all contracts over $1 million
Slide 13: Our Multi-Cloud Strategy is Working
Our Multi-Cloud Strategy is Working… New clouds drive growth within installed base 97% top 100 customers using more than 1 cloud 3+ clouds: 75% 4+ clouds: 20% Multi-cloud customers Q216 3+ clouds: 46% 4+ clouds: 13% Multi-cloud customers Q213 76% top 40 customers using more than 1 cloud
Slide 14: Cross-Selling Success
…Also Shown by Cross-Selling Success Additional products double revenue run-rate in top 100 customers Note: Cross-sales into top 100 Sales Cloud customers, based on annual revenue as of July 31, 2015. $0.70 $0.15 $0.28 $1.00 platform and other
Slide 15: Land and Expand Drives Growth
FY10 FY11 FY12 FY13 FY14 FY15 FY16 Land and Expand Drives Growth Revenue from top 100 customers has grown 34% annually Note: Amounts represent expected annual revenue contribution as of June 30 for the respective fiscal year. ~6x in 6 years $201M $1,161M
Slide 16: New Logo Success
New Logo Success
Slide 17: Success in the Fortune 500
Success in the Fortune 500 Huge opportunity to expand relationships Note: Dollar penetration of addressable opportunity based on Salesforce estimates. 81% account penetration 6% dollar penetration
Slide 18: Traction Across All Market Segments
Traction Across All Market Segments Mid-market success supercharges future enterprise success Note: Revenue split as of Q216. Enterprise is generally defined as companies with more than 3,500 employees. Market opportunity based on industry analysts, market research and Salesforce analysis. 1Growth a
Slide 19: Industry Focus Opens New Doors
Industry Focus Opens New Doors Vertical expertise, products and partnerships make us more strategic Consumer Goods Healthcare Media Financial Services Manufacturing Retail Expertise Products Partners
Slide 20: Partner Ecosystem Expands Our Reach
Partner Ecosystem Expands Our Reach Increasing traction with SIs and ISVs 1This represents deals that had partner influence (joint, sourced, resell, or ISV) in the first half of FY16. SIs 59% y/y 1H16 ISV revenue increase ISVs 46% participation in new business1
Slide 21: Global Opportunity Largely Untapped
Global Opportunity Largely Untapped Nine country strategy addresses 77% of the worldwide TAM Note: Salesforce estimates based on industry analysis, rounded to the nearest whole percentage. 13% Americas market share 6% EMEA market share 6% APAC market share 47% 3% 2% 7% 3% 5% 2% 5% 3% % Total TAM Spe
Slide 22: Innovation Fuels Growth
Innovation Fuels Growth New products attract new logos and increase adoption within installed base 2013 2014 2015
Slide 23: Drivers to Sustain 20%-30% Growth
Drivers to Sustain 20%-30% Growth Supercharged by the secular shift to the cloud Installed base: Lower attrition and customer expansion sustains growth Large and growing TAM with headroom to continue to take share New customers: Ecosystem, new products, and geographies fuel growth
Slide 24: David Havlek, EVP Finance: Financial Review
David Havlek EVP, Finance Financial Review
Slide 25: Growth/Margin Framework
Growth/Margin Framework We are committed to balancing growth with improving profitability 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, amortization of acquire
Slide 26: Predictable Revenue
Predictable Revenue Subscription model creates unique visibility Note: Data includes Sales Cloud, Service Cloud and Platform subscription and support. This assumes an attrition rate, FX rates, and contract provisioning occur as forecasted. ~80% annual revenue under contract at start of the year ~95%
Slide 27: Cloud Delivers Consistent Performance
Cloud Delivers Consistent Performance Cloud companies beat the consensus revenue estimate by ~2% on average. Source: Factset. Note: On-premises cohort includes SAP, Microsoft, Oracle and IBM. Cloud cohort includes Salesforce, Workday, Netsuite and ServiceNow. -5% -3% -1% 1% 3% 5% Current fiscal Quar
Slide 28: On-Premises Software Model is Highly Volatile
On-Premises Software Model is Highly Volatile On-premises software companies missed the consensus revenue estimate by ~1% on average. Cloud companies beat the consensus revenue estimate by ~2% on average. Source: Factset. Note: On-premises cohort includes SAP, Microsoft, Oracle and IBM. Cloud cohort
Slide 29: Balancing Growth and Profitability
Balancing Growth and Profitability Investment choices are made within growth/margin framework Balance Top and Bottom Line Growth Investment Choices
Slide 30: Margin Performance Reflects Choices
Margin Performance Reflects Choices Operating margin is up ~575bps over six quarters Note: The above non-GAAP measures exclude the effects of stock-based compensation, amortization of purchased intangibles, amortization of acquired lease intangibles, net non-cash interest expense, and a gain on leas
Slide 31: Industry Leading Gross Margin
Gross margin reflects critical growth investments Industry Leading Gross Margin Note: The above non-GAAP measures exclude the effects of stock-based compensation, amortization of purchased intangibles, amortization of acquired lease intangibles, net non-cash interest expense, and a gain on lease ter
Slide 32: Improving Operating Margin
Five consecutive quarters of Y/Y non-GAAP op margin improvement with room for more Improving Operating Margin Q414 Q115 Q215 Q315 Q415 Q116 Q216 Non-GAAP Gross Margin Non-GAAP Operating Margin Note: The above non-GAAP measures exclude the effects of stock-based compensation, amortization of purchase
Slide 33: Margin Improvement Fuels Strong Cash Flow
28% 26% 24% 22% 22% 33% FY11 FY12 FY13 FY14 FY15 FY16 YTD OCF OCF Yield Margin Improvement Fuels Strong Cash Flow Consistent with growth/margin framework 1Full-year operating cash flow guidance provided August 20, 2015. $459M $1,035M 24%-25% y/y growth1 5%-7% capex as a percentage of revenue
Slide 34: Deferred Revenue Seasonality Evolving
Deferred Revenue Seasonality Evolving Result of billings compounding and amortization of larger and larger base -20% -10% 0% 10% 20% 30% 40% 50% 60% Q1 Q2 Q3 Q4 Q1 2005 2010 2015 Seq u e n ti a l g rowt h
Slide 35: Deferred Revenue Seasonality Evolving
Deferred Revenue Seasonality Evolving Result of billings compounding and amortization of larger and larger base 0% 2000% 4000% 6000% 8000% 10000% 12000% Q405 Q406 Q407 Q408 Q409 Q410 Q411 Q412 Q413 Q414 Q415 Billed Deferred Revenue In d e x e d Se q u e nt ia l Growt h
Slide 36: Cash Flow Seasonality Evolving
Cash Flow Seasonality Evolving Result of collections compounding and quarterly cash expenses on larger base 0% 2000% 4000% 6000% 8000% 10000% 12000% Q405 Q406 Q407 Q408 Q409 Q410 Q411 Q412 Q413 Q414 Q415 Operating Cash Flow In d e x e d Se q u e nt ia l Growt h
Slide 37: Welcome back to school! Lifetime Unit Economics
Welcome back to school! Lifetime Unit Economics 201
Slide 38: Lifetime Unit Economics
Lifetime Unit Economics 201 Cost to Book, Cost to Serve, and Attrition drive long-term economic value Fall 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 (CT
Slide 39: Lifetime Unit Margins Inform Decision Making
Lifetime Revenue CTB CTS Unit Income Lifetime Unit Margin Lifetime Unit Margins Inform Decision Making Optimizing long-term unit margins may impact near-term profitability Attrition: 25% Cost to Book: $0.50 Cost to Serve: 75% Option 1: Service investment Attrition: 20% Cost to Book: $0.50 Cost to Se
Slide 40: Growth and Operating Margin are Linked
Acme Growth Priority Beginning Revenue $1,000 Less Attrition ($250) Plus New Business $850 = Ending Revenue $1,600 Less CTB ($425) Less CTS ($1,200) = Operating Profit ($25) Current Op. Margin (1.6%) Growth 60% Lifetime Unit Margin 12.5% Growth and Operating Margin are Linked Companies prioritize fo
Slide 41: Focused on Growth
Focused on Growth Delivering improved near-term margin and long-term economics Growth is #1 priority Committed to balancing top and bottom line Key metric seasonality evolution Managing for the long term, leveraging subscription economics Mid-30s long-term op. margin at maturity
Slide 42: This Way Up
This Way Up 1Based on analyst consensus revenue for FY17. Sixth largest software company in the world this year… …fourth largest software company next year1.
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Slide 44: Appendix
Appendix
Slide 45: GAAP to Non GAAP Reconciliation
GAAP to Non GAAP Reconciliation (in 000's) FY16 (YTD) FY15 FY14 FY13 FY12 FY11 Non-GAAP gross profit GAAP gross profit 2,358,665$ 4,084,316$ 3,102,575$ 2,366,616$ 1,777,653$ 1,333,326$ Plus: Amortization of purchased intangibles 40,529 90,300 109,356 77,249 60,069 15,459 Stock-based expenses 31,721