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Salesforce.com (NYSE:CRM)
Q3 2021 Earnings Call
Dec 01, 2020, 5:00 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Welcome to Salesforce fiscal 2021 third-quarter results conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would like to hand over the conference to your speaker, Mr. Evan Goldstein, senior vice president, investor relations.

Sir, you may begin.

Evan Goldstein -- Senior Vice President, Investor Relations

Thanks, Chantel. Hello, everyone, and thanks for joining us for our fiscal '21 third-quarter results conference call. I'm Evan Goldstein, senior vice president of investor relations. 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 is Marc Benioff, chair and CEO; Mark Hawkins, president and CFO; Bret Taylor, president and COO; Gavin Patterson, president and chief revenue officer; and Amy Weaver, president and chief legal officer. As a reminder, our commentary today will be primarily be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings press release. Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties and assumptions, in particular, our expectations around the impact of COVID-19 pandemic on our business, results of operations and financial condition and that of our customers and partners are uncertain and subject to change.

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 can affect our financial results is included in our SEC filings, including our most recent report on Form 10-K. With that, let me hand the call to Marc.

Marc Benioff -- Chairman and Chief Executive Officer

All right. Well, thank you so much, Evan, and just thanks, everyone, for being on the call today. I hope you and your families and colleagues are all safe and healthy and preparing for the holiday season. It's nice and crisp and cold here in San Francisco, and we can feel Christmas approaching.

It's all in the air. And as the season approaches, I wish the very best to you. It's been such an unbelievable year in so many ways for so many of us. And we've really had to reimagine every part of our business and our lives and also work with so many of our customers and really even our families to do the very same thing.

The past has really gone, and we can all feel that. And the future is coming. We can see there's certainly a light at the end of the tunnel, especially with these incredible vaccine announcements. But here we are in this present moment, and wow, there are so many things happening and so many exciting things to talk to you about on this call today.

And we're reimagining our entire business. We're reimagining our industry, and we're even reimagining Dreamforce. So many of you have emailed me and called me and talked to me about your ideas for Dreamforce. But I'll tell you, when it really comes right down to it, Dreamforce is different this year.

It just is. It's not the Dreamforce that we wanted. It's the Dreamforce that we got. The Dreamforce that we wanted is the Dreamforce with all of you.

All of our Trailblazers and all of our Ohana and all of our friends from all the world, the best part of Dreamforce is being together in person. And there was a little bit like Thanksgiving all by ourselves last week. And here we are again, it's kind of Dreamforce by ourselves. So we've reimagined Dreamforce.

And the first thing we did is we said, "Well, you know what, we're going to have Dreamforce for each and every customer." And we've already reached out to thousands and thousands of our customers. We're creating custom Dreamforces exactly for them. We've already done almost 5,000 of those Dreamforces, which has been our prototype, and we hope to do over 100,000 Dreamforces before we're done. And these are unique presentations exactly for our most important customers in the world.

And then, we have a huge conference coming in a couple of weeks which is our Dreamforce Trailblazer conference, which gives ability for all our Trailblazers to come together. And then, tomorrow, we've got a phenomenal event with myself, with many of our executives. Bret is going to join me on stage as well. It's going to be live from San Francisco.

It's going to be cold. We're going to be doing it outside. I think Bret's holding the camera for a while, and I'm holding the camera for a while. It's basically -- we're following all these protocols, and we're trying to stay as safe as we can.

We've all been tested, and we're ready to go, and it's going to be very exciting. And we're going to have some very, very special guests tomorrow, some great customers and some really outstanding music. You're not going to want to miss that presentation. And by the way, if you'd like to have Dreamforce to you, please contact our Salesforce executives, and we will arrange Dreamforce for your company.

You'll be shocked at the depth and incredible custom presentation that we're able to bring for you. And we've reimagined how to do a conference. We're not doing it like everybody else. We have our own unique approach.

Of course, you would expect nothing less of Salesforce. And one thing that's really cool is the -- how well Dreamforce to you is going. I want to thank my entire Dreamforce team. I've definitely got them working much harder than they should be working, especially during this holiday season.

Well, look, we're going to have some exciting announcements, surprises. You're not going to want to miss it. All of you need to tune into that. But the keynote, again, is just one part of an amazing month of Dreamforce 2020.

It's Dreamforce to You. We're empowering every account exec in our company to do this. It's going to be amazing, and you're going to love it. Look, let's get right into it.

Let's get into these numbers and get out of this opening. This was an unbelievable year, and that was an unbelievable quarter. Q3, wow, it was our strongest Q3 ever, record revenues and margins and just deals and just unbelievable. And it follows the strongest Q2 in our history.

And Salesforce just has never been stronger. Look at our core organic growth. It's just incredible what the numbers say. Revenue has risen to 5.42 billion, up 19% year-over-year in constant currency.

By the way, if you look at that sequential growth from the second quarter, it's 5.15 billion to 5.42 billion. Incredible. And this is up 19% year over year in constant currency. And we're raising our full-year fiscal '21 guidance.

Now, as you remember, the first quarter, the pandemic was hitting, and we didn't know what was going on. We were hiding, and we were like everyone else, under our desk. Then we realized, wait a minute, we can succeed through this. And here's our guidance.

And Mark, I think it's -- our guidance is now higher than our original guidance for the year. We're actually delivering guidance at 21.11 billion, at the high end of the range, representing 23% growth. So not only do we come back, we came back stronger, and no other enterprise software company is growing at this rate, especially in our core and organically. We expect our revenue to continue expanding, growing from 21.1 billion this year to now over 25.5 billion.

And for those of you who are watching the enterprise software industry over the last, I don't know, four or five decades, I don't think there's been an enterprise software company in history that's gone from 21 billion -- or 21.1 billion to 25.5 billion. And we're all modeling, I'm sure, right now what the fiscal year '23 number is, right? So when you look at those numbers, wow, you just can't find any other company like that. And with the strength of our core products across sales, across service, across marketing, commerce, we're growing year over year the size of entire companies. So we have a lot of great companies in cloud computing, but you can see how we're kind of just stacked one of those right on top of us here.

So Salesforce has never been more relevant, more strategic to our customers. An example of this is what we've already seen this past week with the incredible scale, the reliability, the strength of our Customer 360 platform this weekend. We were up all weekend running Cyber Week. It was incredible from Black Friday to Cyber Monday.

We processed more than 31 million orders. It was up 62% year-over-year. But not -- just thank you to our engineering team. Just absolutely world-class performance and execution by them, huge high fives, Commerce Cloud, Marketing Cloud.

Well, you know that those were started as acquisitions, and now we've turned it into a multibillion-dollar business. And now, with Tableau, well, our customers are able to leverage all the data coming in, spotting the trends. It's been a phenomenal, phenomenal weekend with these holiday insights. You probably watched that online.

You've probably seen some of our incredible Tableau dashboards we put together. And on any given day now, you can see our customers are delivering an average of 2.6 billion marketing messages, 4 million sales leads, logging 19.7 customer service conversations, Einstein delivered more than 80 billion AI-powered predictions every day across Customer 360, incredible. And Salesforce then takes all of that in sales, in service, in marketing, in platform, in analytics, in conversations, in channels and collaboration, and we lock it into a single source of truth for our customers. Connecting customer data across systems, apps and devices and for our customers who have now seen this next-generation architecture, you're going to see our next-generation platform tomorrow, but I don't want to give away too much of what Bret Taylor has built, but it's incredible.

But let me say that that idea of the single source of truth where no one else has ever tried to do such a thing. And it's why, for the seventh year in a row, we've now been ranked the world's No. 1 CRM by IDC. That's why companies of every size and every industry are building amazing digital experiences for their customers with our scalable flexible Customer 360 technology.

And you look at this quarter, great customers, great customers like Prudential, Accenture, NBCUniversal, Telefonica, Zoom, State of California, I mean -- American Family Insurance. I mean so many great companies, so many great customers. And it's why 43 states in the United States are working with us on their response now to the COVID-19 pandemic. You probably saw, we've even helped, fully eradicate COVID in some places in the world, including the great State of Victoria in Australia, where they had a terrible situation and used Work.com, and they have now announced that they've eradicated the virus, and I wish that we could work more closely with more governments more deeply to do exactly the same thing because the combination of mask wearing and social distancing and religious contact tracing, well, boom, you can eradicate the virus.

Well, very exciting to see them and congratulations to the State of Victoria. I also, this quarter, was in Singapore, visiting our 1,100 Ohana there. And I'll tell you, they've eradicated the virus there. You can see the chart.

Unbelievable. Now, our customers are benefiting from the fast time to value we deliver with Customer 360, which has been critical during this pandemic, and it's going to remain so going forward. And with MuleSoft and Tableau, every company can easily unlock any data from any source and see and understand in ways that they're leading these faster, smarter decisions, and the customer reactions, when they see these Customer 360s, their eyes are lighting up because they've never seen their business quite like this. All right.

Well, now let me just tell you what I'm really excited about. Slack. I couldn't be more excited about what Bret and Stewart put together, wow. I mean when they came to me and brought me this idea, that Salesforce and Slack should come together, my eyes lit up.

I said this is the next generation of the Customer 360. This is our ultimate vision of having this incredible user interface on top of all of these services with all these channels and all the collaboration running on all these devices and integration, interactions. And the ecosystem and the industry that has been created around it and all the applications, amazing. And let me just tell you also, I've watched Stewart and Slack grow over the last six years.

It's been amazing. It's reminded me of another great company, Salesforce. I have to be honest. And I get to look right out my window.

And do you know what I see? Slack, Slack logo, because Slack building is right next to my building, and I'm looking into their building all the time. Stewart is waving at me, now I'm waving at him. Now, we're giving each other big hugs when the pandemic is over. But that idea that these two great companies are right next to each other in Salesforce Park is amazing.

And Stewart and his team have built one of the most beloved platforms and brands, and technologies in the software industry. And it's a perfect match for both of us. It's going to extend our companies, make us both stronger. And look, we spend more than a decade focusing on this vision that we've had for social enterprise.

Everyone probably remembers ad nauseam, all of the social enterprise presentations that I've delivered in my career, this makes it all real. This makes it all true. This brings the best of both worlds, the integration. It's a marriage made in heaven.

It's amazing. And we spent more than -- god, I can't even think about how many conversations Parker and I have had on the vision and then to see Stewart come in with Bret and make it all real, well, that's just awesome. And we see in Slack a once-in-a-generation company and platform. It's the central nervous system of so many companies on this call and our company and so many of our great customers, connecting everyone and everything, and now we could go even bigger, better, more exciting.

And it brings all the companies, people, the data, the tools together. And you can see all the CRM information, the sales, the customer interactions. You probably saw Slack Connect, which extends the benefit of Slack so employees can securely work, collaborating with partners, suppliers, but especially important for us, customers. Wow, that's a game changer.

And when I've seen this incredible story line that what Bret and Stewart had put together, it is like, wow, this is bigger than I've ever thought it could be. And when I looked at the companies from around the world who are implementing Slack, from the fastest-growing start-ups, the Fortune 500 companies and Starbucks and Target and HP and what they're doing, and then when we integrate that with a single source of truth, oh, boy, it's a supercharger. So we already know more than 90% of Slack's enterprise customers are also Salesforce customers, but we also see how much further they can go because we just use ourself as an example. Yes, we're a great Slack customer, but we could be doing so much more.

But when it's integrated to a Salesforce, it's like, wow. And that's what I plan to bring that message to all my friends, all these CEOs that I work with all over the world, to help them transform their business and grow their businesses and helping them to survive and succeed during this pandemic. Well, we're going to make sure that they just have this incredible single source of truth experience as well. Look, we've already shown with ExactTarget, with Demandware, with MuleSoft, with Tableau how we acquire, how we can integrate, how we extend acquisitions, how we transform our own product line, how we can develop compelling models for our customers to get value.

And we'll expand Slack as well in the enterprise, not just among Salesforce customers, not just by lighting up our tens of thousands of salespeople. That's not what this is all about. What this is all about is the value of the social enterprise and creating this incredible idea that you have this amazing hub of productivity, of collaboration and integration and applications that now leverage all this amazing data. And I mean, you had -- you probably saw, if you watched the Tableau conference-ish this year, the vision they've had for Tableau integrated with Slack.

You look at what Salesforce has done, I mean, it's absolutely incredible. And by the way, look at what Zoom is doing with Slack. It's absolutely incredible, and you look at that product. I mean I use that -- you're talking about my productivity environment every day, Zoom and Slack and Tableau.

Oh yes, and Salesforce and all the applications and dashboards and everything I use to run my business is all Salesforce now. Everything on my desktop here. I've got my computer in front of me right now, and everything is Salesforce. And I'm like, whoa, this is just absolutely incredible.

So congratulations, Stewart, Bret. I just want to give you a huge call-out because it's awesome, what you have done. And I never thought it was even possible. It wasn't even in my consciousness that it could be possible, and you did it.

Now, before I turn this over to Mark Hawkins, I'm sure you've now already seen that absolutely one of our very best CFOs we have ever had is retiring. And it's just sad to see Mark go. I'm going to try to keep him around in the company as long as I can. I think I'm going to have some good success because let me just tell you, he is absolutely -- I really think, Mark, you're -- I mean, I don't want to -- we have -- especially Steve and Graham out there are such great, close friends of all of ours, mine and yours as well, Mark.

But Mark, wow, you've really outdone yourself. What a career you had at Salesforce. And I'm just so grateful for everything that you have done for the company. And I am so grateful, Mark, for everything that you've done for the industry and also your relationships with all the CFOs.

When I look at your incredible CFO conference that you ran in Davos, when I look at your work that you have done as well with Prince Charles with sustainable accounting; when I see the value that you've added to the whole world, not just at Salesforce, not just in the industry, but in the world with these new sustainable accounting standards, Mark, I am deeply grateful to you. So I want to tell you that Mark is going to remain our CFO through the end of our fiscal year, which is going to end January 31. And then, Mark, I believe you're going to stay on as an advisor hopefully for quite some time. And then, at that point, I am absolutely delighted to announce our new chief financial officer, who has been on a few of our calls here.

You all know her. She is an amazing person, a core part of our executive team, a core part of our entire company, core with our board of directors, my core consiglieri, Amy Weaver. So Amy, congratulations as our new chief financial officer. I couldn't be happier for you.

And I know that Mark also joins me in sending you congratulations. We'll hear from him in a second. And then, Amy will become our president and our chief financial officer effective February 1 next year. So congratulations, Amy, you are now going to become our fifth CFO at Salesforce.

So it's been probably the five best CFOs in the world. I can't imagine. You're joining this incredible group, and you -- Amy, to have you as our fifth CFO, I mean, unbelievable. And Mark, thank you again because I will always be so grateful for your tenure.

And I'm sure we're going to have a smooth transition of power and looking forward to hearing your announcement of your new cabinet. And Mark, when I look at how you have been such an important part of our success over the last six years, with revenue growing five times to over 20 billion; actually 21.1 billion this year, Mark, and a market cap reaching more than 200 billion, employees growing to over 54,000 today. And Mark, you set the foundation, and you know this is just the beginning. And you're lighting up my 50 billion dream so aggressively.

And we all know it takes a great CFO to help scale a company that well. I'm very grateful for this. And Amy, you've been that trusted advisor. I mean it's all one family.

So I know this is going to be a seamless transition, but my heart is really filled with gratitude. And now, let me turn this over to our chief financial officer, Mark Hawkins.

Mark Hawkins -- President and Chief Financial Officer

Well, Marc, first of all, I can't thank you enough, and I'm going to come back to those comments at the end. But to say there's gratitude is a huge understatement to me to say that to you personally. You've been amazing and for the entire Salesforce team. And I'll talk a little bit more at the end.

And I couldn't be more excited to be working with Amy, who's I'm going to talk more about as well, just an amazing executive, an amazing friend and partner. So I'm going to come back to that. But I just have to say that Marc, real time, I'm incredibly grateful deeply. I'm going to come back to that.

I want to say that I hope everyone had a safe and enjoyable Thanksgiving despite these challenging times. And as Marc described, we delivered another record quarter in Q3 with durable top line revenue growth as well as strong operating margin performance. And let me take you through some of the results for Q3, and I'll begin with top line commentary. Total revenue for the third quarter was 5.42 billion, up 20% year over year and up 19% in constant currency.

Looking at the drivers of growth, we had strength across geographies and across clouds. Our subscription and support revenue growth by cloud was as follows: Sales grew 12%, service grew 21%, marketing and commerce grew 25%, platform and other grew 24%. I'd say also that revenue attrition in Q3 remained between the 9 and 10% range and continues to remain modestly better than we were guiding during our Q1's earnings call. Our remaining performance obligation representing all future revenues under contract ended Q3 at approximately 30.3 billion, up 17% year-over-year.

And as a reminder, this metric includes both new business and renewal contracts. Current remaining performance obligation, or CRPO, is all the future revenue under contract that is expected to be recognized as revenue in the next 12 months, and it was approximately 15.3 billion, up 19% in constant currency. Our Q3 GAAP EPS was $1.15, and our non-GAAP EPS was $1.74. The outperformance in the quarter was driven primarily by higher revenue as well as realized and unrealized gains on the strategic investment portfolio, notably due to Snowflake and the IPO there.

These mark-to-market adjustments benefited GAAP EPS by approximately $0.83 and non-GAAP by approximately $0.86. Turning to cash flow. Operating cash flow was 339 million, up 14% year-over-year. Capex for the quarter was 124 million, leading to a free cash flow, defined as operating cash flow less capex, of $215 million, up 68% year-over-year.

Now, turning to guidance for Q4 and fiscal '21. Coming off a strong Q3 result, we are pleased to be raising our fullyear fiscal '21 revenue guidance to $21.1 billion to 21.11 billion, representing approximately 23% year over year growth. This guidance includes approximately $120 million of revenue from Vlocity and $20 million, an increase from Vlocity in the prior announcement. For Q4, we expect revenue to be 5.665 billion to 5.675 billion, representing approximately 17% growth.

We are proud to be raising our revenue guide back to our pre-pandemic expectations. And Marc is absolutely right, at the high end, it's slightly higher than we started the year with. We're thankful to all of our customers and our partners for the success. And now, as we enter Q4, which is our largest quarter of the year, we're going to build on the momentum from Q2 and Q3.

The pandemic has also empowered us to reimagine how we operate in this work-from-anywhere digital world. Earlier in the year, we shared with you our pandemic strategy of investing in our customers, our community and our employees. This included PPE donations, bonuses to our sales org, pivoting away from physical events, scaling our organization while pulling forward growth hiring into this year. In Q3, we continue to reimagine our operations after analyzing our global lease commitments, we now plan to consolidate and sublease select locations.

While this acceleration of our personal digital transformation in the post pandemic world is happening, we do expect this to result in a onetime Q4 charge of approximately 80 million to 100 million. Please note that these charges represent an immaterial amount of our global portfolio and do not include our headquarter locations. After incorporating these with our updated revenue guidance, we are maintaining our fiscal '21 non-GAAP operating margin guidance of 17.6%, which is year over year improvement of 75 basis points. As you can see, this year's performance, margin is a choice.

When we net these pandemic-driven investments against T&E savings that the pandemic produced, it results to a slight operating margin headwind of approximately 50 basis points for the year. However, in these times of crisis, it's more important than ever to invest and support our stakeholders, our customers, our community and our employees. Therefore, our fiscal '21 GAAP EPS will be $4.14 to $4.15, while non-GAAP diluted EPS will be $4.62 to $4.63. For Q4, GAAP diluted EPS is expected to be $0.05 to $0.06 while non-GAAP diluted EPS will be $0.73 to $0.74.

And as a reminder, our EPS guidance assumes no future contribution for mark-to-market accounting as required by ASU 2016-01. For operating cash flow, we're maintaining our fiscal '21 guidance of 12 to 13% year-over-year, and we continue to expect our capex to be approximately 3% in fiscal '21, resulting in a free cash flow growth rate of approximately 15 to 16% for the fiscal year. We expect operating cash flow to continue to be impacted by the growth in investments that we described last quarter. We expect CRPO to grow approximately 16% year-over-year in Q4, which is consistent with our initial revenue projections for next year after excluding the acquisitions of Slack and Acumen Solutions.

Additionally, the pandemic continues to result in modestly higher revenue attrition than our pre-COVID expectations assume and therefore will be a very slight headwind to near-term growth. Regarding our fiscal '22 revenue guidance, we projected to be 25.45 billion to 25.55 billion, representing 21% growth. This includes a contribution from Slack of 600 million net of purchase accounting, and it assumes a closing date in late Q2. Acumen Solutions, the assumption is $150 million, net of purchase accounting, which assumes a closing date within Q2.

Both of these acquisitions will be fantastic additions to our Ohana as they will greatly benefit our strategic priorities of Customer 360 in industries. I'd also like to provide some additional insight into our revenue guidance for Q1 of fiscal '22, which we expect to be 5.68 billion to 5.715 billion, up approximately 17% year-over-year. As a reminder, we're providing this guidance given that our term license revenue business that is MuleSoft and Tableau have a more seasonal revenue profile in the first quarter. To close, we delivered a strong Q3 despite the pandemic.

We are proud of our ability to successfully partner with our customers through this adversity while continuing to serve all of our stakeholders around the world. Additionally, I'd like to encourage all of you and your firms to join us on December 8 for our Annual Investor Day. And now, for some personal comments. As Marc mentioned, I made a decision to retire as an operating officer and from Salesforce.

I'm amazingly humbled, grateful and proud of having the opportunity to be 40 years in technology. I'm excited to begin my next journey, spending time with my family, doing some volunteering, doing some incremental board work. But first, of course, there is a really important matter of Q4 and then also really strongly supporting this transition. But I just want to say that I am excited about the future for Salesforce, and I'm excited also about the next leg of the journey for myself.

I really deeply believe we are in a great position of strength, and we are getting stronger as a company with so many indicators to evidence that. I will be the company's strongest advocate once we go through this nearly a year of a transition, which I'm excited to be a part of. And I get to work hand-in-hand with a dear friend, Amy Weaver, who I have the utmost respect for as an executive, as a partner and who's going to be an amazing CFO. Before I conclude my personal remarks, I do want to say a special thank you to all the Salesforce Ohana.

A special thank you to my boss, Marc Benioff, who is a great friend and somebody I will always treasure the relationship with and who has been incredibly kind to me and to my team and to the broader company. And I want to thank our investors for all your support over a long period of time as a public CFO and so many others to thank, the ELT and the board. But I'll stop at that, and let me turn it over to Amy. Amy, I can't wait -- I'm just going to tell you the same.

I can't wait to really begin this next leg of the journey with you. And I give you -- I'll give you a virtual hug if I can. But we're going to -- it's going to be an exciting year ahead here. So Amy, over to you.

Amy Weaver -- President and Chief Legal Officer

Thanks, Mark. It has been an absolute joy to partner with you over the last six years. And I have to say that one of the best parts of taking the role of the CFO is that I get to work even more closely with you throughout this transition. This week, I've been thinking back to when I joined Salesforce seven years ago.

We had just under 13,000 employees and had not yet crossed 4 billion in revenue. Today, we're now at more than 54,000 employees and guiding over 21 billion. And what strikes me the most is that we still got so much growth ahead of us. My focus will be to support that momentum as we continue to grow as well as to scale the business efficiently.

And I'm very much looking forward to continuing to work closely with our entire executive team and our board of directors as well as getting to partner with our shareholders in the coming months. I am just incredibly grateful for this opportunity and their faith in me in taking that and incredibly excited about the future of the company. And with that, Evan, shall we open up the call for questions?

Questions & Answers:


[Operator instructions] Our first question comes from David Hynes with Canaccord Genuity. Your line is open.

David Hynes -- Canaccord Genuity -- Analyst

Hey, thanks very much for taking the questions. And Mark Hawkins, congrats on the well-deserved retirement. You're certainly going out with a bang here. Maybe this question is for Marc Benioff.

It sounds like maybe Bret, given he's kind of the architect of the Slack deal, I'm curious, look, Slack's going to give you access to huge amounts of rich conversational customer data. How do you see that kind of advancing your efforts around AI? And I guess maybe just related to that, I think we all know what Slack is today, but what's your vision for what it could be with Salesforce in three to five years from now?

Marc Benioff -- Chairman and Chief Executive Officer

Well, let me give you two minutes and then -- or a minute, and let me have Bret come in next, fill in the details. When I look back at the dreams that we've had of what the social enterprise means over the last couple of decades, it's a very rich user interface that kind of front ends all of our services. And kind of in the way graphical user interfaces were a major moment in our computer industry, I think these collaborative interfaces and video-based interfaces are the next major moment in our industry. But underneath those services, and you kind of teed it up by asking the question this way, you have so many rich services, application, integrations, artificial intelligence and fundamentally big data lakes.

And the idea is how can you take all of that and bring it to the user, to the power professional, to the worker, to the knowledge user or even to me, the CEO, and turn it into a powerful experience. And now, this combination of Slack and Salesforce, exactly as I mentioned, my whole world is on this platform. And we call it Customer 360, but the idea that, gee, No. 1, there's never been a more important time for sales and B2B sales.

I see that with our customers every day. I look at our Salesforce, obviously, it's enormous. But our ability to call at every level, our ability to call into the CEO level easily, our ability to have much higher levels of productivity with our sales organization, how we had to move our call centers and customer service organizations on a moment's notice into their homes. Our ability to deliver record levels of marketing and marketing interactions like we did this weekend, the analytics that are needed, and you probably saw the analytics that we published around the holiday.

Well, now all of that, completely coupled with this incredible, collaborative interfaces. And that is the magic. And that is what is so exciting. That's been our dream.

Now, it's our reality. And I want to introduce you to the person who put all of these things together, and that's Bret Taylor. So Bret, do you want to take this to another level?

Bret Taylor -- President and Chief Operating Officer

Yes. Thanks, Marc. I mean I think you really contextualized it well. I mean, fundamentally, we really see the world as fundamentally having shifted this year.

We're entering into this all-digital, work-anywhere world. And every executive that I talked to in every industry is doing this not as something temporary but really a moment that accelerated the digitization of the economy. Consumer goods have gone from retailers to direct-to-consumer. Medical care has gone from doctors' offices to telehealth.

Retailer has gone from brick-and-mortar to curbside pickup. Marketing, as Marc mentioned, this last weekend is a perfect indication of this. We saw mobile push notifications go up 131%. We saw SMS grow 171%.

Behind all of this is fundamental shifts in the way we work, fundamental consumer behaviors and fundamental changes in behaviors in every interaction. And I think we really view Slack as really the system of engagement for every employee, for every partner and for every customer interaction. And I think in this all-digital, work-anywhere world, when you think what does it mean to be successful in sales, what does it mean to be successful in customer service and marketing and e-commerce, it really is about this facilitating this all-digital, work-from-anywhere world to enable team selling; to enable people in a contact center to swarm on a case digitally, whether or not you're in the same building; to enable marketers to plan their campaigns; to enable merchandisers to plan what goes on the front page of a commerce app or a commerce website. And we've been using this phrase, really, this is the operating system for the new way to work.

And our customers are coming to us now, recognizing that because the economy has shifted so dramatically, so quickly, they're pivoting from saying, "How do we respond to the crisis?" to "How do we grow, and how do we thrive in this new normal?" And we fundamentally think this combination is that operating system for growth for every company in the world.


Our next question comes from Derrick Wood with Cowen & Company. Your line is now open.

Derrick Wood -- Cowen and Company -- Analyst

Thanks. I wanted to touch on the operational plans for onboarding Slack. Maybe could you compare and contrast the strategy to integrate Slack versus what you've done with Tableau or MuleSoft. And then, Mark Hawkins, thanks for the EPS guidance.

But I know there's a lot of below the operating income line factors. So can you give us any goalposts around how to think about how Slack impacts operating margins and how to think about margins next year?

Mark Hawkins -- President and Chief Financial Officer

I'm happy to take the operating margin discussion. And perhaps, Bret, you may want to talk about the operating plan integration. I'm happy to chip in there as well if that's helpful. Derrick, first of all, thank you for the question.

We are going to be factoring in Slack's business profile into our overall business for next year for the operating margin, we'll give the operating margin and the cash flow growth for the entire company for normal tradition in the Q4 call for sure. You can see, because it's a public company, its profile is different than Salesforce. It will be dilutive to our operating margin in aggregate. And there'll be the purchase accounting side of it, but we'll give you very specifics in Q4 there, Derrick, not only on the operating margin but the cash flow and then even the latest on the revenue growth in Q4.

On the integration plan, Bret, I don't know if you want to touch on that? Or --

Bret Taylor -- President and Chief Operating Officer

Yes. I'm happy to take this, Mark, as you stated. I think our philosophy is very similar to our philosophy with MuleSoft and Tableau, which is, No. 1, starting with our mutual customers and starting with how can we help every one of our customers benefit from the combination of these two technologies.

But with that, really recognizing that Slack -- fundamentally, if you look at the happiest customers who use Slack, it is really that central nervous system for their company. And that's really connecting every single application at their company, not just applications from Salesforce. So that really means balancing making sure Slack, as an independent brand, continues to serve every single company and integrates with every single system at the -- at your company while also making sure that it really achieves that vision that Marc talked about, which is it really becomes sort of the user interface for the Customer 360. It helps all of our customers be successful as they try to create a single source of truth for their customer data.

We're really happy with this strategy. It's really been effective with our integration with companies like MuleSoft and Tableau that have continued to thrive and continue to be technology agnostic while also becoming a really integrated part of our value proposition to our customers.


Our next question comes from Heather Bellini with Goldman Sachs. Your line is open.

Heather Bellini -- Goldman Sachs -- Analyst

Great. And congratulations, Mark Hawkins. It's been great working with you over the years. And for Marc Benioff, I mean, Salesforce and Slack together, it seems like this is going to become the hub that connects all of the different Salesforce applications together and offers even more value for your customers.

How do you see -- in the context of the 90% customer overlap you mentioned, how do you see this evolving the digital transformation messages to customers that you're already sharing? And I guess the other piece is when you think about the pieces of the Salesforce puzzle, if you will, would you say, despite your efforts with Chatter, that this was one of the biggest remaining pieces you were missing?

Marc Benioff -- Chairman and Chief Executive Officer

Well, I mean, I'll start with the end, which is there's no doubt that Slack just has an incredible approach to collaboration in a way that we really could never have imagined, especially in regards to the integrations and applications and ecosystem that are built on top of it. Certainly, like Chatter, it had the collaborative interface, and we'll benefit from that because we've done such deep work in our own architecture around our Chatter API and so many other key parts of our core system. But when you look at what happens when you put Slack and Salesforce together, the fundamental experience for the customer, it just changes. Of course, you're already doing wall to wall in the enterprise, which is very exciting for Salesforce beyond just sales or service or marketing into every department.

We've already seen a lot of that with Tableau and the ability for Tableau to go wall to wall. And Tableau is another product that -- users just love Tableau. Users just love Slack. When we start to bring our Customer 360 into that, our ability to build applications with Lightning, our ability to light up our own workflow and build workflows to our customers and expose those through these channels, well, that's where the fundamental expression of Salesforce, how it looks whether it's on a phone or an iPad or on your desktop, it deeply modernizes it.

And Bret, would you like to fill that in?

Bret Taylor -- President and Chief Operating Officer

Yes. Marc, when I think about the opportunity for our customers, I just -- every single customer engagement I've been involved with could benefit from this capability. In the past quarter, one of the customers I had the privilege of working with is Ferguson, which is the largest wholesale distributor of commercial and residential plumbing supplies. And this is a classic Customer 360 relationship, where their CEO, Kevin Murphy and their CIO, Mike Sajor, were really trying to connect everything from B2B and B2C commerce to customer service to their platform.

When I think about the vision of that company and I think about the opportunity to come into these companies going through this digital transformation and trying to really say, "How do we build the perfect digitally augmented experience with customers?" This is the ultimate system of engagement. This is the ultimate way you can connect every employee. So, ultimately, you can work with their B2B partners. It's the ultimate way that you can transform your teams working on B2C customer engagement.

And I think that's when we're -- when we look at the opportunity for our customers and we look at the opportunity for Slack customers, we really think that bringing these things together gives us such a complete value proposition. And I think that's really exciting.


Our next question comes from Brent Thill with Jefferies. Your line is open.

Brent Thill -- Jefferies -- Analyst

Thanks. For Mark Hawkins, just on the billings for the quarter, there were some question marks just as it relates to the deceleration. And I'm curious if there was anything behind the scenes that we should be aware of. We know you had a difficult comp and you're coming into a seasonally strong quarter.

Anything to call out there on the billings number?

Mark Hawkins -- President and Chief Financial Officer

Sure. Brent, first of all, thank you for the question. And first of all, we don't really -- billings is not a metric that we focus a lot on. We think CRPO helps us a bit more in terms of actually managing the business, and that's a metric that we track carefully.

We feel like this just makes sense. It's consistent with the revenue guidance for next year. And obviously, in the prior quarter, we lapped Tableau, but we're -- we feel really good about this number. We feel great about the demand environment obviously, that's why we raised again the revenue for the year, and we initiated a -- I think, a really appropriate guide for next year's revenue.

Not very many companies do 5 quarters in advance. So we feel good about the demand environment. But we just think this is consistent with all that and look forward to executing on that.


Our next question comes from Keith Weiss with Morgan Stanley. Your line is now open.

Keith Weiss -- Morgan Stanley -- Analyst

Excellent. Thank you guys for taking the question. And Mark Hawkins, it's been a pleasure working with you. Congratulations on the retirement.

I wanted to ask on the Slack acquisition, it's really a two-part question. On the front end, maybe for Bret, can you talk to us about what you guys can do with Slack by owning it versus partnering? Because one of the things that has -- Slack differentiates with is their open integration, the fact that they integrate with everybody. So why is it necessary to own the asset? And then on the back side, I wanted to ask just about the price tag. On the last conference call, Mr.

Benioff, you talked about it being a tough environment for M&A, for stuff being expensive and making it hard to make these acquisitions financially work out for you guys. What is it about this one? Like how do you garner the confidence that this 28 billion price tag is the right price tag and financially this is going to make sense for Salesforce over time?

Bret Taylor -- President and Chief Operating Officer

Yes. Thank you for your question. I'll start on the -- just talking a little bit about why it's important and why it's valuable for our customers for this to be a part of our portfolio. The journey that we've been on over the past decade is really going from a company with a single value proposition around sales automation to really this vision for Customer 360.

They connect sales, service, marketing, e-commerce, analytics, platform. And when you look at all of our largest deals, our happiest customers, our healthiest customers, with lowest attrition, they're not just using one of our products. They're really using this entire platform to get the single source of truth for their customers. And we see this incredible vision.

As Marc said, it's been something we've been working at and thinking about for a long time, well before I even joined this company, about how do you connect all of these experiences? How do you actually create a seamless customer experience, bringing customer experience -- customer service and marketing, which every single retailer in the world was worried about this past weekend? How do B2B companies really focused on not just selling but customer success, which is really connecting the entire Customer 360? And when we talk about Slack really becoming the user interface with the Customer 360, this is what we mean. We really think this is a way of delivering that vision to our customers. And for them to deliver -- our customers to deliver a vision to their partners and their customers through technologies like Slack Connect is really, really meaningful and really, really unique. And I think it captures candidly the new way that most of our customers think about their customer relationships.

It's not siloed by department anymore. It's really an end-to-end journey. And to really achieve that, we think that Slack is a tool that facilitates that in a really unique way and can really help accelerate our customers who are going through this transformation. And Marc, I don't know if you want to comment a bit on your comments on the last earnings call.

Just to offer my perspective, we've been clear consistently that when we look at our M&A strategy and our inorganic acquisition strategy, it's fundamentally we have to be opportunistic. We have to make sure that we respond to unique conditions from our customers in the market. And this year, if anything else, it's been hard to predict. And this is an opportunity that we saw.

We've talked a lot about this shift in the economy, the relevance of Slack to our customer base that has obviously dramatically increased over the course of the year. So I do think that we -- the market is very unusual this year, but we have to make sure that we as a company have a beginner's mind about where innovation can come from and recognize that we have to take timing when it's available to us as we evaluate these inorganic opportunities.

Marc Benioff -- Chairman and Chief Executive Officer

Yes. I would like to address that, which is that I think what's very exciting is this vision that Stewart and Bret have put together. And I think that when I look back, I don't think I could have ever imagined any acquisitions happening this year. We're in this pandemic.

We're in the solid digital environment. We are just kind of brute forcing it right through, making as many sales calls as we can. And we're collaborating very deeply as a company. And all of a sudden, Bret and Stewart come together and say, yes, we can do this.

And when we look at the resulting vision, it's a wow. It's like something that we could have never imagined. And when we look at acquisitions today, we do have a little bit of a swagger. Of course, we've done probably over 60 deals, small, medium and very large.

On the whole, our transactions have been extremely successful. And when we look at our very large transactions, especially ExactTarget, Tableau, we look at how -- what we've learned, our ability to integrate companies, to make one plus one equal three. We look at this, and we say, wow, this is a game changer, and we know how to pull it off. And we have a lot of our former executives, for example, at Slack already.

So we know a lot of those players. We work so deeply with the company, both in a business development perspective just because they're our neighbor. And we're like, oh, boy, the value that we can bring to customers is much stronger as one company than as two. And when you look at the difference between partnering versus owning, it really means that we're able to do things with our technology that we just could not do as partners.

And that's the demos, the visions that Bret and Stewart have put together. And look, when they presented this to me, I was sold. And I am sold, and I can't wait to get out on the road and present it to customers because I know that they are going to be absolutely blown away about what this looks like for them.


Our next question comes from Alex Zukin with RBC Capital Markets. Your line is open.

Alex Zukin -- RBC Capital Markets -- Analyst

Hey guys. Thanks for taking the question. And mine, maybe just for Marc and for Gavin. I want to ask about the demand environment, particularly how it looks from a pipeline perspective for the fourth quarter.

And Marc and Gavin, how are you seeing the priorities change through this pandemic? How do you think about that for next year as you look at the opportunity to solve these pain points? And Marc, I guess the other follow-up to Keith's question is why now on Slack? Why not before? And why not next year?

Marc Benioff -- Chairman and Chief Executive Officer

Well, it's a good question, and let me kind of -- I'll tell you in two stories. But the first story is we started out this year, I think everyone remembers, we went through a very dramatic transformation in our management team. Keith decided to retire, which I fully supported. And we knew that we were going to go through a big shift in distribution strategy, our team members themselves.

And what we didn't have written into that was the global pandemic. So all of a sudden in the first quarter, what was happening at Salesforce was distribution transformation and global pandemic. And that shook our confidence. You might remember that I also said pipelines appear to be really strong.

So even though in the middle of the quarter, we went into global lockdown in March and April, we think we're going to come out pretty strong. And we were very fortunate starting in the second quarter with, No. 1, onboarding a fantastic new CRO, Gavin Patterson, former chief executive officer of BT, who is working with us, who I've known for so many years and coming in as our CRO and our president, taking his position, which he was doing so much with us already, but then really leading our global distribution operation. And then, we rebuilt our entire distribution management team as part of that.

And we delivered the second quarter, which was a record quarter. We had phenomenal bookings, margins, revenues, cash flow across the board. And then, the second, third -- second quarter turned to the third quarter, we have now -- we're happy to talk about an unbelievable quarter. I mean it was just remarkable, the performance of the company.

I would never have imagined it in February and March when it started. Now, I'm like, wow, gave me a lot more -- a lot of confidence in where we're going. Now, when we look at the fourth quarter, rich pipelines. We have tremendous outlooks.

We feel very good about our ability to succeed. We've rearchitected Dreamforce. That's going incredibly well. And we look at next year, and we're like, wow, we've never been more competitive.

We've never been able to succeed more aggressively with our customers. We have solutions that are not only horizontal but vertical. We're strong in every one of our key categories, from sales to service to marketing, to commerce, to platform, to analytics, integration, we're able to deliver tremendous value. When I look at what we've done with key customers -- and I mentioned AT&T on the last call.

But when I look at what we've done with their management team, with their competitiveness, with the results that they're getting, it just gives us a lot of, I would say, gratitude in our ability to transform a company like that, any company in the world -- and do it worldwide. And then, when we bring in Slack, well, with these acquisitions, you never know exactly when they're going to happen. And we couldn't -- didn't know when Tableau was going to happen. Of course, we always loved Adam and Christian before that.

We didn't know when ExactTarget was going to happen. We always loved Scott. And we didn't know when Stewart and Slack would happen. And when the moment and the opportunity arises, you have to look and ask yourself, are you strong? Can you do something like this? Or are you weak? Or is it a moment where you just don't have the swagger? And let's face it, look at these numbers that we just delivered.

Salesforce has never been stronger, never been more capable. It's never had a more competitive position. It's never been able to execute with more acuity. Look at the IDC numbers.

I don't have to go through them, in sales, in service, in marketing, across the board. They're very, very impressive. And when we've gone up against tough competitors, we have done just fine. And I think that we bring a lot of value to Slack right now at their size.

As you know, they're going -- basically entering from the 1 billion to $2 billion phase, which I know extremely well. And this is a moment where we can offer a lot of value. We've been there. We've lived that life.

And we're going to come in, and we're going to help them not just be successful during it, we're going to help them to just redefine the entire industry. And that dream and that vision that Bret and Stewart have is really unlike anything I have ever seen of any company or any product anywhere. And when you see it all laid out, you will just be blown away. I mean I was, and I have a lot of confidence that you will be as well.

Gavin Patterson -- Chief Executive Officer, BT

And perhaps, I should just add some comments as well, Marc.

Marc Benioff -- Chairman and Chief Executive Officer

Yes, please do, Gavin.

Gavin Patterson -- Chief Executive Officer, BT

What we saw in Q3 -- yes, what we saw in Q3 was a continuation of the strong demand that we saw in Q2. And it's a very well-rounded performance across all the clouds, and both in the U.S. and internationally, we've seen strong demand around the world. And as we look into Q4 and beyond, the pipeline continues to be very encouraging.

So I guess what I'm seeing -- and you've heard it from Bret and Marc as well, is that I think the core of what we offer, to be the trusted advisor for digital transformation. This is an imperative for every company and every organization in the U.S. and around the world. And that conversation has become more urgent.

And we're finding that we're getting very, very good access, probably at least twice the access to decision-makers who want to have that conversation and want to get on and make that transformation and use us as their partners. So the business is, I think, in really good shape. We're confident going into next year. And as Marc says, I think Slack really rounds out that proposition.

And I think it's going to -- we feel very encouraged and very optimistic about maintaining its performance going forward.

Marc Benioff -- Chairman and Chief Executive Officer

Gavin, I want to ask you a question because I think it's appropriate. Look, you've been running this business now, so well now for several quarters, but just give us one more level of insight. What has been your greatest surprise? Look, you were -- we've been friends a long time. You are a customer.

You've been a partner. You've known a lot of our executives. Now, you're deep inside the machine. What has been your biggest surprise working inside Salesforce and now working with our customers and doing these huge transactions that you've been doing?

Gavin Patterson -- Chief Executive Officer, BT

Well, as you said, I've been a customer, and I thought I knew what Salesforce could do for my business, and I thought we were reasonably effective at it. But it hasn't been until I came into the company -- it was only until I came into the company that I realized that actually there is so much more you can get if you align your complete business behind the Salesforce CRM system and the wider set of cloud. That's probably the single most important thing I've learned. The sheer potential of getting to a single source of truth, operating the Customer 360.

And I see so much more potential in customers who really embrace that vision. And some get it today, and we've got some great case studies to demonstrate that. But others still have that opportunity, I think, going forward. So there's plenty of potential left in the business on all the clouds.

And I'd say the second thing I'd call out is actually how, for a very big company, how agile the business is and how we've been able to maintain the agility and grip of a small company while managing to cut it to 24 -- or 21 plus billion in sales and at 25% CAGR a year. It is quite remarkable that decisions can be taken quickly. We can respond to changing customer needs. And that is being critical, which is I think, if I look back over these last 6 months, making sure that we remain relevant to our customers so that we can help them through these difficult times, make sure that we're there to guide them and help drive the transformation but demonstrate we're able to listen and respond in terms of the propositions we offer.

I mean it's been, I think, quite remarkable. So it's been quite a ride and certainly been a privilege to be a part of it. And I think there's a long way still to go and another few chapters for the next book in it.

Marc Benioff -- Chairman and Chief Executive Officer

Well, I think that we can say now with delivering this guidance at $21.1 billion and looking at next year as well, Gavin, I just want to thank you because I don't think there is a more successful sales executive in enterprise software, certainly at the size and scale that we're operating in, than you are. And your leverage, your experience as a chief executive officer of a very large 100,000-person company, BT, I mean, you've done a phenomenal job. So thank you.

Gavin Patterson -- Chief Executive Officer, BT

Thank you.


Ladies and gentlemen, we have reached the end of the allotted time for questions. I'll turn the call back over to Evan for closing remarks.

Evan Goldstein -- Senior Vice President, Investor Relations

Thank you for joining us on the call today. If you have any follow-up questions, please email us at investor@salesforce.com, and we look forward to speaking with you next week at our Investor Day. Thank you.


[Operator signoff]

Duration: 66 minutes

Call participants:

Evan Goldstein -- Senior Vice President, Investor Relations

Marc Benioff -- Chairman and Chief Executive Officer

Mark Hawkins -- President and Chief Financial Officer

Amy Weaver -- President and Chief Legal Officer

David Hynes -- Canaccord Genuity -- Analyst

Bret Taylor -- President and Chief Operating Officer

Derrick Wood -- Cowen and Company -- Analyst

Heather Bellini -- Goldman Sachs -- Analyst

Brent Thill -- Jefferies -- Analyst

Keith Weiss -- Morgan Stanley -- Analyst

Alex Zukin -- RBC Capital Markets -- Analyst

Gavin Patterson -- Chief Executive Officer, BT

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