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Salesforce.com Inc (NYSE:CRM)
Q1 2020 Earnings Call
Jun 4, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Salesforce Q1 Fiscal Year Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will host a question/answer session, and our instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded for replay purposes.

It is now my pleasure to hand the conference over to Mr. John Cummings, Senior Vice President, Investor Relations. Sir, you may begin.

John Cummings -- Senior Vice President, Investor Relations

Thanks so much, Brian. Good afternoon, everyone, and thank you for joining us for our fiscal first quarter 2020 results conference call. Our 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 today are Marc Benioff, Chairman and Co-CEO; Keith Block, Co-CEO; Mark Hawkins, President and CFO; and 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 contained in the 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.

With that, let me hand it over to you, Marc.

Marc Benioff -- Chairman and Co-Chief Executive Officer

Okay. Hey. Thanks so much, John, and thank you everyone for being on the call today. I am sorry, I am a little bit late here. I was working on Kramer and that will be on in 45 minutes. So let me just say, first of all, we are just happy to share that revenue in the quarter rose to more than $3.7 billion, up 24% in dollars and 26% in constant currency. And, in Q1, we delivered nearly $2 billion in operating cash flow, up 34% year-over-year. I just want to congratulate our entire team for these cash flow numbers, because they are just phenomenal.

For fiscal year 2020, we're guiding to $16.25 billion at the high-end of the range, representing 22% projected growth year-over-year and that's up $200 million from 90 days ago, when we had our Q4 earnings call. No other enterprise software company of our size and scale is growing at this rate.

Just last month, IDC worldwide software tracker ranked Salesforce the number one CRM for the sixth year in a row and I'll tell you that is more important than ever, especially so many of our customers are going through these tremendous digital transformations and we all know every digital transformation begins and ends with the customer.

And when I'm looking at CEOs all over the world, this is really front and center in their mind, it's probably is exciting to them and is important to them as it was to CIOs who are buying for Y2K, which is almost 20 years ago, I think the digital transformation remains just a huge growth opportunity for our entire industry.

And it's not only that, in 2018, Salesforce gain more CRM market share than the other top, top vendors combined, 15 top vendors combined. That's amazing. We're number one in sales, we're number one in service, and we're leading so many other areas, we're number one in model-driven application platforms driven by our amazing community of 6 million developers, also a leader in marketing and commerce and continue to gain share and with MuleSoft, we also have this number one integration platform. It's incredible.

We have amazing opportunity ahead of us and we're taking advantage of that and focus on innovation, which is why Forbes has ranked Salesforce as one of the most innovative companies for eight years in a row. With a powerful vision for the future, with intelligent Customer 360, giving our B2B and our B2C customers a unified 360 degree view of their customers across every touch point, sales, service, marketing, commerce, communities and more, I'll tell you this vision that has been so well articulated now by our product organization, that we call Customer 360, this is really driving tremendous opportunity at the highest level, highest levels in these customers and we'll talk about that. But every company needs to have this Customer 360 capability, it doesn't really matter what industry you're, even the federal government, it's just a tremendous driving force.

And Customer 360 will continue to be a major growth engine for Salesforce going forward. At its core, it's our core Salesforce platform, which is the most powerful and easy way for companies to build modern intelligent applications.

In Q1, we announced our new Einstein platform services that enable everybody regardless of their technical skill to build custom AI powered apps with just a few clicks and that has been so important for our customers, because just as we've been used in the Einstein AI capabilities across our entire product line and made Einstein Voice and also Einstein Vision capabilities available to every Salesforce app. We're now doing this exact same thing with another critical technology for our customers, which is watching.

So when you look at our platform, you see this incredible capability of not just AI, not just blocking, not just mobile. I mean there's so many things that are in the platform and the ability for our customers to easily build these state-of-the-art applications, it's pretty awesome, or just simply extend our CRM apps.

Last week, TRAILHEADX sold out developer conference in San Francisco. We interviewed Salesforce Blockchain. It is a breakthrough. Every customer app can have blockchain capabilities, it's the world's first declared blockchain service solution. And it's built in deeply now into all of our apps, it's built in deeply into our platform, it's built natively on our platform enabling customers to easily create blockchain applications with simple drag and drop, as they can with every other Salesforce app and I'll say I was in Minneapolis on Friday demonstrating them to one of our very large customers and showing how they can use it for their supply chain and it's just incredible what it's going to do for so many of our customers in every industry.

Also, our ecosystem is developing a huge economy around Salesforce, one that is going to create more than 3 million jobs and more than $850 billion in GDP by 2022. And that is why we're so excited about Trailhead, which is our online learning platform and our online reskilling platform that empowers everyone. Now we have more than 1.4 million learners changing their careers and their lives on Trailhead. And I'm sure so many of you have met these inspiring people and their incredible stories of how they transformed themselves using Trailhead.

And in the quarter, our new mind Trailhead product became generally available and now any of our customers can actually create their own branded service just like what we have done and reskill all their employees, customers and partners too. So it'll be a huge driver of workforce development, which is why we are so excited that two weeks ago, we were Ivanka Trump, and our first ever Trailblazer Day in Indianapolis, in our headquarters in Indiana where where we signed the White House pledge for America's workers. And we plan to get more than a million Americans the skills they need and earn these Salesforce credentials and badges and do everything necessary to make them successful and to get top jobs in our ecosystem over the next five years.

Finally, at Salesforce, our vision has always been to change the way the world does business and at the same time improve the state of the world. And that's why I'm extremely excited that Salesforce.org is reunified officially as part of Salesforce providing an even better experience for all of our nonprofit, education, philanthropy customers, empowering them to fulfil their missions and tightly unifying our .org employees with our company. They already sit in our buildings and already here with us, but now they're fully part of our structure as well and it's a tremendous opportunity to accelerate our work in this incredible non-profit world. And now as you're going to hear from Keith, we're well positioned to continue on our path to organically double our revenue again in the next four years achieving a revenue target of $26 billion to $28 billion for fiscal year 2023, and now over to you.

Keith Block -- Co-Chief Executive Officer

Okay. Thanks, Marc. Thanks everybody for joining us on the call today. As Marc said, we have never been positioned for the future better than we are right now. We delivered strong revenue growth in the quarter and we're seeing a great momentum across all of our prongs and all of our industries. In fact for the first time, Service Cloud exceeded $1 billion in revenue for the quarter, becoming our second cloud.

Marc Benioff -- Chairman and Co-Chief Executive Officer

That is pretty awesome right. That is, I mean, $1 billion quarter for service cloud. You know a lot of these other cloud companies that we read about all the time, they're not even doing $1 billion quarters and here, bam, Service Cloud, congratulations.

Keith Block -- Co-Chief Executive Officer

No, it's pretty amazing. So it is becoming our second cloud, as Marc said, to surpass an annual revenue run rate of $4 billion, which is pretty incredible.

Marc Benioff -- Chairman and Co-Chief Executive Officer

It is pretty awesome.

Keith Block -- Co-Chief Executive Officer

And MuleSoft, by the way, also had an outstanding Q1 capping off a record first year and celebrating its anniversary here as part of Salesforce. Now, we are well prepared, as Marc said, to deliver on our FY20 goal and also our goal of $26 billion to $28 billion in revenue for fiscal year 2020. So we're all excited about. Quarter-after-quarter, we continue to take share and outpace the competition. I think that's pretty clear and the market alluded to -- we have been meeting with CEOs around the world and the common theme that we're here with the importance of transforming their customer experience and the value of providing a 360 degree view of customer and that's something that Salesforce does better than anybody.

And that's why we continue to see massive demand for our solutions from both new customers, existing customers, across the world, every industry, every market segment. And as you can see this, it's in our results 25% year-over-year revenue growth in the Americas, 27% in APAC, and 32% in EMEA in constant currency, very, very proud of those results.

A great example of a customer who understands the importance of transformation in the customer is Dell. It's really done a fantastic job in their transformation around customer experience. Dell was a longtime customer and they are a strategic partner and in the quarter they expanded with us to deliver more automated and intelligent customer service experiences with Einstein Voice, predictions and next best action, very, very important.

In Q1, we also know the strengthen relationships with some of the leading companies around the world, including Tokio Marine Holdings, one of the Japan's largest insurance providers. They're standardizing field of service and marketing on Salesforce, which is very, very cool. And they also were deploying financial services cloud to a million agents in over 50,000 agencies.

We also expanded with Heroku, an Italian utility company. I just came back from Italy, last week. This is the company that is serving over 4.4 million citizens and we also formed a new relationship with People's Choice Credit Union with the largest credit unions in Australia. You can see this is an ongoing phenomenon globally. Again, very, very excited about what's happening. We continue to deepen our relationship with the US federal government, the Department of Education recently selected Salesforce as its platform to modernize and streamline the experience for millions of citizens with federal state.

Marc Benioff -- Chairman and Co-Chief Executive Officer

Are you OK?

Keith Block -- Co-Chief Executive Officer

I'm good. All right, all right. Southwest Airlines, which has one --

Marc Benioff -- Chairman and Co-Chief Executive Officer

What are you drinking.

Keith Block -- Co-Chief Executive Officer

I'm drinking coffee. (multiple speakers) Anyhow, Southwest Airlines market, which which has won awards for their world class customer service is creating an entirely new employee experience with a centralized knowledge center built on Salesforce using service dial-in communities, Southwest is transforming the delivery of their HR services with MuleSoft service chat and more capabilities from more than 16,000 employees. It's also about our (technical difficulty) importance of our partners and they continue to play a critical role in our customer's transformation and not only were partners involved in 63% of our new business in Q1, but they were some of our leading adopters as well. Accenture selected myTrailhead, this is very important skill, their culture of continuous learning and providing top talent for their clients, this is their business and leveraging custom content and reskilling their employees on topics like artificial intelligence, networking and leadership development. Again, think about the business that Accenture and these other providers are in, it's all about talent and bringing value to the table.

We're also seeing strong momentum beyond the United States, Australia's Telstra was another great myTrailhead win from the quarter. I was speaking with their CEO and Board discussing the strategic importance of reskilling the workforce is the common theme and is top of mind is market unity for every CEO in the world. It comes up in every single conversation.

Our vertical solutions continue to drive success and value for our customers and (inaudible) like Einstein Analytics for financial services is the first complete intelligence platform for wealth in banking in the quarter. We had incredible financial services spot wins with Zions, CIBC. We also released new health capabilities to provide a complete view of factors that contribute to a patient's health, again very, very important, enabling providers to deliver better care and improve outcomes.

In Q1, Cerner, a leading provider of healthcare information and EHR technologies chose to replace their current CRM with Salesforce to continue transforming how they engage with their consumers and their providers.

Finally, as I mentioned, it's been a year since we acquired MuleSoft and we are absolutely thrilled with the combined success. In April, MuleSoft was the leader in the Gartner Magic Quadrant for enterprise integration platform as a service and that makes us the only company, the only company to be recognized as a leader in both this environment and most recent Magic Quadrant for full life cycle API management.

So, to close, I want to thank our customers, our partners, our employees, our strong results this quarter and with that I'll turn the call all over to Mark Hawkins.

Mark Hawkins -- President and Chief Financial Officer

Well, thanks, Keith. And as you've heard from Marc and Keith, we're pleased with our first quarter results, delivering strong revenue growth across each of our cloud and geographies, year-over-year operating margin improvement and a record quarter of operating cash flow.

Let me take you through some of the details for Q1. First quarter revenue grew 24% in dollars and 26% in constant currency. As you can see, we experienced FX headwinds in Q1, which on a dollar basis represented $61 million or two full points of growth year-over-year. Our industry-leading product portfolio continues to deliver strong subscription and support revenue growth in US dollars year-over-year.

Sales Cloud grew 11% in the US dollars, Service Cloud grew 20%, and this quarter, as noted, eclipsed the $4 billion annual run rate. Marketing and commerce group grew 33%; platform and other 46%, including approximately $140 million in subscription and support revenue from MuleSoft, of which 55% is treated as term license. Keep in mind, the FX headwind for a total revenue affected each of the clouds on a similar proportional basis.

Diving into MuleSoft a bit more. We continue to execute well with MuleSoft contributing a $170 million to total revenue in the first quarter. While this is our final quarter of discrete revenue reporting for MuleSoft, we intend to provide additional color on MuleSoft going forward as appropriate.

Our renewal rate remain healthy in Q1 and dollar attrition continues to remain below 10%. In fact, our attrition rate continued to improve modestly in the first quarter year-over-year, similar to the year-over-year improvement in attrition that we saw last quarter in Q4 '19.

Q1 GAAP EPS was $0.49 and non-GAAP was $0.93. Required mark-to-market adjustments of our strategic investments benefited both GAAP and non-GAAP in the first quarter by approximately $0.27.

Turning to cash flow. I was very pleased with our strong cash collections in the first quarter, which drove the operating cash flow of $1.97 billion, up 34% year-over-year. In fact, in Q1 we generated more operating cash flow than we did in our entire fiscal year 2016. CapEx for the quarter was $159 million, leading to free cash flow as defined as operating cash flow less CapEx of $1.81 billion, up 34% over Q1 of last year. Our remaining performance obligation representing all future revenues under contract entered the first quarter at approximately $24.9 billion, up 22% over the last year.

Current RPO balance, or CRPO, which is business that is both build and unveiled and is expected to be recognized as revenue in the next 12 months was approximately $11.8 billion, up 23% year-over-year. On a constant currency basis, CRPO was up 24% year-over-year after considering an FX headwind of more than $100 million. While we make changes to our sales organization as we deleverage Q1, we did not see a material impact for CRPO as you can see in these results.

Before I turn to guidance, let me turn -- touch on the FX environment and the combination of Salesforce.org and the related impact of Q2 and FY20 guidance. First, regarding FX. As is evident in our results, we are seeing a substantial decline in our FX rates as such our Q4 column. The Great British pound, for example, decreased approximately 5% since our fiscal fourth quarter 2019 earnings call and our euro declined by approximately 2% over the same period.

Second regarding Salesforce.org, with the recently announced closing, we continue to expect Salesforce.org to contribute approximately $150 million to $200 million in revenue in FY '20 with approximately $40 million to $50 million of this revenue recognized in Q2. And as previously discussed, we will incur a one-time non-cash accounting charge of approximately $200 million in the second quarter related to our settlement of the reseller agreement with Salesforce.org, which impacts our Q2 GAAP/Non-GAAP EPS guide by approximately $0.20. We expect the combination of Salesforce.org to be additive to our long-term revenue targets and will provide more detail during our Annual Analyst Day in the fall.

Now, turning to Q2 and FY20 guidance. We are now expecting north of $200 million in FX headwinds to the year and given this context we are pleased to be able to absorb each headwinds and still furnish FY20 revenue guidance of $16.1 billion to $16.25 billion or 21% to 22% growth year-over-year and with the dollar strengthening relative to the GBP and the euro, we're not only experiencing headwind to revenue but also having increasing pressure on operating margins as well in that context along with the integration and transaction expenses associated with the combination of Salesforce.org. We are also pleased to be able to maintain our plan of delivering flat to 25 basis points of non-GAAP operating margin improving year-over-year.

As a result we are raising our FY20 GAAP diluted EPS to $0.78 to $0.80 and our non-GAAP diluted EPS to $2.88 to $2.90. And, as a reminder, our EPS guidance assumes no future contribution for mark-to-market accounting as reported by ASC 2016-01.

For operating cash flow, we maintain our FY20 operating cash flow guidance of 20% to 21%. For Q2, we expect revenues in the range of $3.94 billion to $3.95 billion. GAAP diluted loss per share of $0.08 to $0.07 and non-GAAP diluted earnings per share of $0.40 to $0.47. We also expect CRPO growth of approximately 20% to 21% year-over-year in the second quarter.

In close, we had another quarter of strong results and we maintain to be on track for FY20 revenue and profitability goals and achieve our long-term organic target of $26 billion to $28 billion in FY23.

I'd like to thank our employees, customers, partners and shareholders for their continued support. With that, I'd like to open up the call for questions.

Questions and Answers:

Operator

Thank you, sir. (Operator Instructions) And our first question will come from the line of Heather Bellini with Goldman Sachs. Your line is now open.

Heather Bellini -- Goldman Sachs & Co. -- Analyst

Good morning. Thank you so much for taking the question. I had a couple. Marc, I was wondering if we could spend a little bit more time on MuleSoft and if you could just share with us some examples of how it's helping you expand your reach within your existing customers? And any success you might be able to share about how it's brought new customers into the Salesforce fold?

And then I just had a quick follow up for Mark Hawkins. Just you mentioned the CRPO that you -- the headwind in the quarter from FX, where you expecting -- could you share with us -- were you expecting an FX headwind in the quarter for CRPO, because that's where we're getting pinged as well? So, thank you.

Marc Benioff -- Chairman and Co-Chief Executive Officer

Well, thanks. Let me just check on that just briefly and I'll tell you right now, we really pivoted our entire company into something that we call Customer 360. It's a pretty hard pivot for our company and we're so excited about this opportunity and a lot of this is because of the tremendous momentum that we've seen over the last year with MuleSoft and this idea that what our customers want us to do is to be able to take everything they're doing in regards to their customers. So that is their sales, their service, their marketing and their journeys, their commerce and their customer engagement systems, apps they're building, API that they're building for developers to integrate with those customers, all the analytics, custom applications by industry, the communities, the learning and reskilling systems that I mentioned and the employee experience as well.

And to bring it all together, using all these amazing technologies that are becoming so important to us like blockchain and AI, whether it's vision or voice is incredible what hsa happened just in the last two years and three years, put it all on a phone, deliver it all as a programmatic capability, make it secure and then wrap it all together put a bow on it and call it Customer 360 and we're the only ones who really try to do is, It's kind of interesting, because as I meet with customers all over the world and this quarter I've been basically nonstop on the road, I've been in Japan, I've been throughout the United States, I've been through Europe and Keith as well. And when we've basically come back and go, wow, this is what all these customers are trying to do. And this is really our vision and what has accelerated it for us and our ability to execute it and yet it's a hard pivot for us is MuleSoft, because MuleSoft have given us the ability to come into the customers, say, and we're going to bring in everything you have into that 360. We're not going to be a silo, we're not going to be all about this application that we're building that our platform is giving you the ability to connect to all of your systems together into one. And so, you know, so many exciting customer stories around that that I could touch on, but Bret do you want to just kind of go a little deeper into that vision?

Bret Taylor -- President and Chief Product Officer

Yeah. I mean it's actually a great time to just tell our tail in the EX Developer Conference in San Francisco last week and MuleSoft was really highlighted. One of the story that was on the stage and the keynote was ASICs that really captures that vision of Customer 360 that Marc was talking about. In that story, we're just talking about it, ASICs was building their mobile app and their e-commerce experience and I've asked to educate that customer 360 to every ASICs customer as a personalized one-to-one experience, it wasn't just about our technology, it was about the order management system, the on-premise systems, the legacy systems and all that data is trapped. And if you talk to the CEOs who are trying to do this digital transformation, they're trying to create those next generation customer experience to integrate with smart watches and smart speakers and smart TVs and smart thermostats, their barrier is the legacy systems that are data trapped in legacy systems and MuleSoft have been such an accelerator for that vision technologically, which is why as you walked around the far trail and act roughly, MuleSoft was on everyone's mind.

We launched this product called the MuleSoft Community Manager, which enables companies to create ecosystems around their APIs. API are becoming the regular brand of how companies communicate with each other and you can see really the convergence of our technologies and our community cloud and the API orientation from MuleSoft I think really transform the way companies are thinking about their data and thinking about integration strategically.

Marc Benioff -- Chairman and Co-Chief Executive Officer

Yes. Another thing that literally comes across when we're talking about that brand is, this vision of building a Customer 360 and much of a story that happened just last week where I was with a customer at lunch and we're talking about everything you just said, but they're concerned because maybe they're going to make a decision about what their social implementation is, where maybe they're making a decision about their customer service call center over here, maybe they're making the decision around their marketing systems or their Salesforce or their apps, they want to bring them all together, they need to have -- they need to be able to have a unified customer vehicle. So it's a daunting challenge for these companies or how are you going to make that easy for them?

Bret Taylor -- President and Chief Product Officer

Yes, it is. This was the biggest e-commerce as an example. We're just talking about ASICs. If you are a modern retailer, it's not just about making a store front anymore. You have to integrate with Pinterest and Instagram just to be able to show up where the customers are and that's evolving day by day, week by week, month by month, and the MuleSoft team will you, MuleSoft isn't just a technology that increases the clock speed of digital transformation. And I think what I hear from the most strategic Chief Digital Officers and CEOs is, the focus isn't just deploying the solution is making sure that the (inaudible) innovation at our -- of the company increases and I think fundamentally that will be more profitable.

Marc Benioff -- Chairman and Co-Chief Executive Officer

Okay. And unfortunately Heather just left, I presume, but Mark do you want to just catch in a little bit and give us some fill in on MuleSoft power and how Board was spending?

Mark Hawkins -- President and Chief Financial Officer

For sure. I mean, Mulesoft has been just a great offering for us. It's a great customer response. We've been super happy with it. That's for sure. It's been great to talk to customers and have them really talk about our entire customer success platform and help (technical difficulty). So that's very positive. The other thing that I probably might touch on is the second question that Heather asked regarding the RPO, CRPO in particular. And we did incur this $100 million FX headwind. This is clearly -- significantly incremental to anything we would have expected for sure. And the other thing that I'd like to call out and we've talked a lot about as a management team we're looking today a 100 -- $200 million at a revenue level for an FX headwind historic moments. This is clearly something different that's happening and what I'm pleased with is we're able to absorb this and still deliver our fiscal year guide number of $16 million to $15 million or 22% growth as we go.

Heather Bellini -- Goldman Sachs & Co. -- Analyst

You touched on this a little bit in your script (technical difficulty), but at this point you've gone through the foreign exchange environment and they can be very happy for us, like how much foreign exchange headwind do you have already for the year?

Marc Benioff -- Chairman and Co-Chief Executive Officer

Well, for example, in the first quarter we took a $61 million headwind in revenue alone, for example. We have $200 million and we looking at earnings headwind for this year thus far. And I think the good news is we've got that coupled within our plan and we basically delivered what we're working with that.

Mark Hawkins -- President and Chief Financial Officer

We're going to deliver 60 to 50 for the year, but we're still picking up all this standard. The thing I appreciate is our predictive business model, it's really something that we've talked a lot with our investors about and that really helps us what is a wild card things for foreign exchange as I think our investors.

Marc Benioff -- Chairman and Co-Chief Executive Officer

We can't predict foreign exchange very well at this point. It's hard to the market to do that and I would second that as well (technical difficulty)

Heather Bellini -- Goldman Sachs & Co. -- Analyst

Got it. Okay.

Operator

Thank you. And our next question will come from the line of Karl Keirstead with Deutsche Bank. Your line is now open.

Karl Keirstead -- Deutsche Bank Securities, Inc. -- Analyst

Thank you. Marc Benioff, I wanted to ask you I think everybody on this call realizes that there's a little bit more macro uncertainty out there. But I wanted to ask whether as you and Keith and Mark Hawkins sat down to set the guide for 2Q and the full year, whether you're assuming any broader spending environment change for Salesforce. Thanks very much for any comments.

Marc Benioff -- Chairman and Co-Chief Executive Officer

I think that's a really good question. I'll just give you my -- I mean, I'm not an economist. Everyone on the call knows that. I am just out in the field talking to customers like all of you are. And I've been all over the world the last 90 days and I have talked to hundreds and hundreds of customers face to face and I would say that this is it. We're still in a very strong economy. Maybe this is not a 2018 economy, but it's a 2017 economy. I think last year of course we had that radical crazy acceleration because of the tax cuts, but there's still strong buying most (inaudible).

But I will say that I think that they do all have certainly anxiety around what's going on with this trade situation. And even in the customer that I was with as early as last week, they you know I think are not very happy with how that could potentially impact them. But I don't see it coming in on the economy right now. Now, we don't do business really in China. So we are not a good company to talk about that kind of trade situation as trade things are going to affect us. We're mostly free of that, but when we look into the customers' eyes, we're always like to saying to ourselves, are they buying, are they investing?

And the thing that hits me and this is where I am and I'm going to -- I'll let Keith talk about this if he can, which is that I am just really impressed with how every (inaudible) you know and really (inaudible) that I am talking to is actually quite obsessed with digital transformation. And I think they all see the tremendous revenue growth opportunities now from these new technologies. Maybe they didn't understand what (inaudible) was, maybe they didn't understand AI, maybe they didn't understand some of the subtleties of mobility and all the opportunity, but something that's kind of changed in the last I would say 18 to 24 months and sitting at the very table that we're at right now we've had a CEO of very large healthcare company here, I guess said, maybe two weeks ago, was doing a demonstration, showing them, you know talking to the computer through artificial intelligence to be understand what we're saying and talking back to us, it was amazing and then also the ability of them to use the camera to have a direct artificial intelligence analysis of what was going on in a retail shop, which was so cool and we've demonstrated that before and that is how we integrated it in the blockchain. What you can see in the whole transparency of the supply chain was amazing. Of course, to get it on mobile phone, it was secure, and then bam we have had Customer 360. And the CEO was not shocked. They're kind of following along and we got woozy at that level I think that CEOs have very much become Chief Information Officers or Chief Digital Officer themselves and we're now rolling into that level of executive and because of that I think they really have the ability to transform their companies, because in many cases those visions are not coming from middle managers, who are obviously deeply involved but from the Chief Executives or CEOs themselves. And if you want to try to make that, you can. (multiple speakers) you're the right person to talk about blockchain by the way.

Mark Hawkins -- President and Chief Financial Officer

Yeah.That was my uncle blockchain.

Marc Benioff -- Chairman and Co-Chief Executive Officer

So many, many points here. None of us are economists, Mark Hawkins is probably the closest that we have if anybody being an economist. But that being said, I do think we're in an enviable position as a company, because of what's going on with digital transformation around the world. And I recently returned from EMEA and I was with CEOs from financial services institutions in the UK and France and Italy and they're all talking about digital transformation and the customer experience and the importance of providing that customer experience and customer loyalty and providing higher levels of service with our technology. I was also with the CEOs of a few retail companies in the UK and France and before I left in the United States and obviously retail the channels market and these companies are reinventing themselves and the experience they have was with the CEO of one of the largest pharmacy in the world and he's talking about a direct relationship directly with the patient, with the drugs that they're bringing to market. And these are things that we couldn't think about two years ago, three years ago, four years ago. We're talking about consumer packaged goods company has begun. We're the largest CPG companies in the world.

I was sitting down talking about how that CPG company gets closer to their end consumer and how they can optimize around retail execution there are so many possibilities here. And you know Mark nailed it. I mean the CEO, the modern CEO has become the Chief Digital Officer with a Chief Information Officer and that's why these companies keep coming to Salesforce. We are the only company that can provide this capability and this 360 degree view of the customer. This is the holy grail. The market I've been in this industry is quite a while. This is the holy grail for customers. And we're in a great position.

Karl Keirstead -- Deutsche Bank Securities, Inc. -- Analyst

When you look at customers ability to deploy these types of technologies, where are they? Are they at this point able to really see this technology and then deploy it, are you seeing that transformation or is there still a technology transfer issue?

Marc Benioff -- Chairman and Co-Chief Executive Officer

Well, there's many, many companies I think are in very early days. In fact if you talk to one of our largest consulting partners, they'll tell you that less than 20% of their classic most strategic customers have engaged in the digital transformation. So, there's a lot of room to run in the marketplace. Going back to the first question about MuleSoft, who would have thought that a CEO would be thinking about integration and the importance of data being strategic to their transformation. And that is the value of the beauty of what most operates at the table.

So, we have an opportunity here again around these digital transformations and one of the beauties of a product like Trailhead and my Trailhead is helping these companies through their transformation and skill them up with modern technology because the modern worker has to have modern skills and that's what my Trailhead really provides customers. So, we really are coming out with an amazing innovation at the right time to satisfy the needs of these customers and that's really (inaudible).

Karl Keirstead -- Deutsche Bank Securities, Inc. -- Analyst

Great.

Operator

Thank you. And our next question will come from the line of Derrick Wood with Cowen and Company. Your line is now open.

Derrick Wood -- Cowen and Company -- Analyst

Great. Thanks. I guess for Keith, headcount adds in the quarter were quite strong for Q1. And you know up 24% on a year-over-year basis is almost the highest in two years. So, are there any areas you would highlight your accelerated investments whether at certain function, geography or product area. And I guess as a follow-up since you're getting so large and almost 40,000 employees, can you just touch on how you ensure you continue to manage onboarding and attrition and maybe how attrition is tracking these days. Thanks.

Keith Block -- Co-Chief Executive Officer

Yes. So, thanks for the call. Look we, I think you know that we've got a very very strong international strategy. So, we've invested significantly globally, but certainly outside the United States as we continue to take share. We've obviously made a commitment to our industry strategy so you continue to see those vertical eyes whether it's in our products or whether it's our customers and our partners and our headcount as well.

MuleSoft, of course it's certainly a growth area for us as our core cloud. So there's a lot of opportunity for us to make these investments. But at the end of the day all the technology investments that we make rotate around making sure that we're driving success for our customers. And when we think about onboarding and as we bring in all these new people, you know one of the advantages that we have in the marketplace is that we have this amazing technology called Trailhead. And we -- all of our employees get up skilled using Trailhead and it allows us to get these people hitting the ground running a lot faster than you would say through traditional learning systems. So we will continue to invest internationally and we'll continue to invest internationally in our key markets, in our international geographies, of course in the United States. We'll continue to invest in our customer success, because at the end of the day the customer success is what it's all about. In fact we've gone through this amazing transformation under Brian Mel in our customer success organization and we'll continue to love to tell him, which I think has been very, very important to us. In fact, I would encourage all of you to go ahead and go to our website and find Trailhead and see how it can change the life of that.

Operator

Thank you. And our next question will come from the line of Kirk Materne with Evercore ISI. Your line is now open.

Kirk Materne -- Evercore ISI -- Analyst

Yeah. Thanks very much. Keith, I actually want to follow up on your comments around myTrailhead, especially as it relates to the company head on Accenture. Can myTrailhead become a force multiplier for you from a go-to-market perspective, especially in places like Europe and Asia where you might not have the reach historically? It seems to me that could be a potential way for you guys to accelerate even faster in those markets where you have the demand but maybe not the people on the ground to go capture the demand. So we'll love just kind of your thoughts on that. Thanks.

Keith Block -- Co-Chief Executive Officer

Yeah. Let me answer this and then I'm going to pivot and spread the comments on it from a broader perspective. Look, as Marc and I go around the world, every CEO has something that is top of mind besides their digital transformation and that is around their workforce development and their reskilling. And that's why myTrailhead is so powerful. When you think about the digital transformation that these videos are going through, whether it's in the United States quite frankly or whether it's internationally, responsible CEOs are thinking about how do they absorb this amazing technology? How do they reskill their workers as they think about digital transformation? How do they act responsibly from a social perspective?

Because if you think about it, these CEOs they are charging tens of thousands, hundreds of thousands in people and they care about their people and that's where myTrailhead is an excellent example and an excellent solution, not just how they can skill their people up on these modern technologies, but also to prepare them for this modern world. And we see this again everywhere in the world. We said we have set a special programs with companies all over the world to talk about how did we skill the workforce I mentioned in the opening comments, the meeting I had with the CEO of Telstra. The executive team and how concerned they were about the modern workforce and what they wanted to do about reskilling their workforce. Marc and I had the same conversation with CEOs all over the world. So mark myTrailhead is a force multiplier. It is so important on so many levels when you think about modern skills and we're very, very excited about it. Bret, do you want to comment more from a product perspective.

Bret Taylor -- President and Chief Product Officer

Yeah. I mean, bringing up this TrailheaDX conference, again because I think the theme Keith was talking about is really came out strong at that event. One of the women that we highlighted that was a woman named Angela Mahoney who runs this organization called RAD women, which is an organization to train women to become experts on the Salesforce technology in just 10 weeks and get them into Salesforce ecosystem.

This is entirely done by independent organizations who are just trying to help people with this big problem of workforce development and empower people to get into the technology ecosystem. And what's incredible about it, you know, at the end of this conference, we said we're gonna bring into I think 100 something cities. But that wasn't us, what we did is, we put all this content into the box and our (inaudible) is going to put on these events, because they want to spread the word about the opportunities of this technology and the opportunities in front of us.

That's exactly the theme you mentioned in your question which is our community is spreading the word on our behalf because there's so much opportunity on the other side. It all comes from the simplicity the users view. So, when I think of Trailhead as one of the most significant differentiators of our platform, our community is helping teach other people about these amazing technologies, it's obviously helping us financially, but it's also helping I think a lot more members of our society benefit from the economic opportunities of technology which is an incredible opportunity for the world.

Operator

Thank you. And our next question will come from Tom Roderick with Stifel. Your line is now open.

Tom Roderick -- Stifel -- Analyst

Hi guys. Good afternoon. Thanks for taking my question. So, I know you've been getting a lot of questions this quarter just around not just the general environment, but also some of the strategies related to the install base and how you're handling renewals. I'd love to hear beyond just the you know what is happening and what are you doing with the renewals, but what is the broader strategy as you go to market, and this probably a good question for Keith, as you think about the role of renewals and customer success with respect to the broader portfolio, how do you approach that customer and is that philosophy changing at all. Thank you.

Keith Block -- Co-Chief Executive Officer

Yes. So thank you for the question. I think you know from our business model the importance of renewal and that's why customer success is one of our most important values. We have an entire organization, the customer success team that is focused on the success. But it goes beyond the customer success group, it really is a cultural thing, a belief among the 40,000 employees who wake up every day and they focus on customer success.

So, renewals which are very very strong, our attrition is excellent. I mean it's unprecedented, particularly for a company of our size and scale, that is obviously an indication with our customer satisfaction. Now we have doubled down in this transformation from making sure that our customer experience is second to none. And what's interesting about that is as companies become a large company that are five. They forget their focus on the customer. This is a company Salesforce that since day one it was dedicated to driving successfully customers and a lot of companies along the way, they just lose their focus on the customer. And we have double down and we need our focus on the customer and again part of that is renewals. But it really is about providing an incredible experience, a seamless experience in every single touchpoint that a customer has. And that's why Gartner recently recognized Salesforce as incredibly strong company as it relates to customer experience, they are giving us their recognition. They know what's going on in the marketplace and it's because it's a part of our culture, dedicating ourselves to it and we're not going to lose who we are. Whereas other companies have made that strategic mistake along the way.

Operator

Thank you. And our next question will come from Alex Zukin with Piper Jaffray. Your line is now open.

Alex Zukin -- Piper Jaffray -- Analyst

Hey, guys. Thanks for taking my question. Two really quick ones. Maybe the first for Marc. You mentioned some Salesforce reorganization and the fact that it didn't have any impact on current RPO this quarter. Could you maybe touch on what kind of reorgs or what are you doing this year from a strategic go-to-market perspective around the sales team that's a little different from last year? And then maybe just -- given the continuous mention around Trailhead and Talent as being important strategic differentiators, have you given any thought to expanding your role in the talent kind of market from organic or inorganic manner?

Keith Block -- Co-Chief Executive Officer

Hi, Alex, this is Keith. Let me take the question. So looking at the beginning of the fiscal year we made some adjustments. We periodically do that and we do it to take advantage of the market opportunity to support the long-term growth plans that we have. That's why we made adjustments. When you think about the end game here, these decisions are really about getting close to our customers, right. And that is about driving the highest level of our customer success. Any of these adjustments that we make, they are essential and pull strategically in our long term growth, which has been exceptional as we know at this size and scale and we are very optimistic about where we are at FY20 and the demand that we're seeing in the marketplace and we're excited about where we're going with these adjustments. So we feel strongly about where we are.

Operator

Thank you. And our next question. Go ahead.

Alex Zukin -- Piper Jaffray -- Analyst

All right. I just wanted to touch a little bit on the part of the employee sprint. I just think and I think Bret should probably touch on this too, which is how this has really become I think a critical part of Customer 360 is that the employees inside of our customers, they need to have a good experience and have access to all of this customer information as well and probably a great example this quarter with Southwest Airlines is actually a long-term customer orders and it has been using our Service Cloud to deliver amazing customer service experience and we've really enjoyed working with them. But now Southwest has really turned into this employee experience and they use our communities' products and they use Service Cloud and they use a centralized HR help desk for 60,000 employees to check their benefits, manage vacation time and questions via chat and all from their mobile device. I don't think in any way that we're going into HR mess or anything like that. This is really something that's very much enhancing the customer experience in regards to employee experience and the intersection between employees and customers. And there's many areas where this has touched down for us. It can be our employee quarterly service provided for our customers. It can be providing these HR health desk, it can be the integration of the customer information and to the employee collaboration system. And it's one of the key reasons we acquired Quip, which has been continued to be a tremendous success here at Salesforce. And Quip is all about getting employee productivity and productivity up and collaboration. And Bret, do you want to handle your vision here on employee experience and all the things that you're doing in our product to enhance the employee experience with Customer 360.

Bret Taylor -- President and Chief Product Officer

Yeah, whether you're in the airline industry or the hotel industry or the retail industry the most important thing is you're empowering the employees for really touching the customer community and the customer to provide their Customer 360 and really the word that I hear time and time again from CEOs is around the table. How do I help my employees through this transformation, the digital transformation of technology, and it's not just about the technology it's about giving data going through that change. So far, we have things like myTrailhead, which takes one platform and keep myTrailhead, enable companies to use it for their own transformation.

That's the way of growth for Salesforce, which is embedded in productivity and collaboration into every single one of our products. And we think it's so important to really focus on these trailblazing employees and not just the technology and have enablement to strategic capability of our platform.

Marc Benioff -- Chairman and Co-Chief Executive Officer

I would just add that I think one of the key things is, love your take on this Bret is that, we -- when we're talking to our customers and when we're talking to specifically the positioning ourselves, one of the things that I always say specifically is look really interesting and really not really one word in our company and that's customer. We're just here to do that for you. We're not going to do the HR fees, we're not doing the financial fees, we're not doing all these other things, because we never (inaudible). The one of the things after 20 years have been focused on this word customer and it has morphed and it has changed and it has evolved and when you look at the Customer 360 approach, it's very different of course where we were even just 10 years ago or 5 years ago. So how do you see that intersection between employee and customer, and where do you see that transformation going.

Keith Block -- Co-Chief Executive Officer

Well, Marc, I think -- what I think of it stakeholder, when you think about what a news about Customer 360 is now surrounded, everyone who engages with their customer provide us information. It might be a pharmacist, it might be a doctor, it might be a gate agent, it might be someone, a customer service agent talking on the phone with their customer and we really need to make sure we're serving every stakeholder that makes up their Customer 360, which is why the employee is a key constituency in providing that. But to me it doesn't really deter from the focus on the customer, whether it's helping you unlock their data for the Customer 360 or enabling your employees with Quip and Trailhead. It's all about enabling this digital transformation that starts and ends with the customer.

Marc Benioff -- Chairman and Co-Chief Executive Officer

Any (inaudible) I'd really be remiss if I didn't say. One of the key players on our team is here and what he's really giving us is a light on privacy and the security for data and making sure that our customers have that privacy, because when you take all this Customer 360, put a while on that and how do you see that evolving over the last quarter or two in regards to privacy, which has been a major shift going on worldwide and certainly you've gone through the GDP shift, where we go into that?

Unidentified Speaker

Sure. Thanks, Marc. GDPR as you mentioned just celebrated its first birthday. We are through the first year and I happy to have that going on. I think it really is the next big step in the United States pushing for a federal law. California, as you know, has the CTPA and that's an important first step. But we really believe to all Americans regardless of Z code or which state they are in deserve strong privacy protections and that's where we've been advocating (inaudible) comprehensive setup price involved.

Marc Benioff -- Chairman and Co-Chief Executive Officer

So this will be like the national privacy laws of the state from state by state in California, suburb, like a domino effect. We want to have the federal government step up and really deliver a national purpose to us.

Keith Block -- Co-Chief Executive Officer

That was one of the real benefits of GDPR. We went from a patchwork of privacy laws all over Europe to one law that companies can work, cannot work with as far as all of the (inaudible). What to expect wherever they are in Europe, that's what we need to do and we need something, which really requires companies to be transparent about their privacy practices for individuals who has more control over their personal data than they do currently. And also, frankly, if a company is to be held to accountable for their actions.

Marc Benioff -- Chairman and Co-Chief Executive Officer

Well I think that's just an awesome vision. I don't think anything would accelerate our Customer 360 vision more than having (technical difficulty). Thank you for that.

Operator

Thank you. And our next question will come from the line of Terry Tillman with SunTrust Bank. Your line is now open.

Terry Tillman -- SunTrust Robinson Humphrey -- Analyst

Yes. Thank you for fitting me in gentlemen. My question just relates to as we've progressed to the rest of the fiscal year in Customer 360, which your last couple of questions and the answers been focused on that. How do we help investors in terms of looking at metrics and barometers of success? Is it seven, eight figure deals or a certain cloud products more likely to be pulled through our catch, because of a Customer 360 conversation. Just wanting to learn some more perspective on that? Thank you.

Keith Block -- Co-Chief Executive Officer

Well, let me add it to it. So if you go back to where we are in this modern age with this amazing technology where there is incredible disruption, which is really should bring opportunity and we're really in a growth era. Think about what's important to a CEO besides taking care of their employees, they're thinking about growth. We're under the age of cut your rate of prosperity, that's a 20-year-old phenomenon. This is really about growth and the most important thing about growth is with the customer in the center of the world. And that means Customer 360. So when we're out there talking with our customers, who are looking for a solution, who are looking for a platform to grow, they want to think about this Customer 360. So the way I would think about it is that every CEO has a specific mission and an obligation to all their stakeholders around growth and success.

And it is all about putting their customer in the single world. So that will -- that just means that we're out talking solutions -- more strategic, have a deeper relationship with these CEOs and these leads, because we're solving their number one problem. The number one problem is about growth and putting their customer in the center of the world. So that is the way that I would be thinking about this, is that this brings Salesforce to all (technical difficulty) digital relationships and deep meaning into the future -- strategy with the customers.

We also have this amazing motion going on in your organization. (technical difficulty) organization, but then sometimes those moments coming may be on a single one of our clouds, if you will, the sail cloud, the surface cloud, the Congress cloud (inaudible). And then once you have that, then you have this kind of transaction and throughput where you go to work and make them a multi-cloud customer or a vertical customer or taking on the vertical applications. How do you see that balance between new logos and existing customers and continuing to build market share. Well, we do have a new logo motion as well as install base motion, they're both very, very healthy and the opportunity to be a focus area for us. But at the end of the day, we're here to solve these customer solutions that drive success for them and that means that we position the right solution at the right time, which may be a particular product or maybe a full transformation. At the pace and still that need to be (inaudible) nothing and that is why a new logo making or a what we call the end expand or seeding growth has been successful for this company and it's also more recently we're able to do the enterprise transformation and we've referenced many of customers on this call, some of which were maybe logos for the first time with one or more clouds and some are in the detransformation like bill and that will continue to be a successful notion for us as we pass on to our goals in 2023.

Operator

Thank you. Ladies and gentlemen, thank you for your participation on today's conference call. This does conclude our program, and we may all disconnect. Everybody, have a wonderful day.

Duration: 59 minutes

Call participants:

John Cummings -- Senior Vice President, Investor Relations

Marc Benioff -- Chairman and Co-Chief Executive Officer

Keith Block -- Co-Chief Executive Officer

Mark Hawkins -- President and Chief Financial Officer

Bret Taylor -- President and Chief Product Officer

Unidentified Speaker

Heather Bellini -- Goldman Sachs & Co. -- Analyst

Karl Keirstead -- Deutsche Bank Securities, Inc. -- Analyst

Derrick Wood -- Cowen and Company -- Analyst

Kirk Materne -- Evercore ISI -- Analyst

Tom Roderick -- Stifel -- Analyst

Alex Zukin -- Piper Jaffray -- Analyst

Terry Tillman -- SunTrust Robinson Humphrey -- Analyst

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