Salesforce.com's (CRM 3.45%) recent investor day covered how it sees its role in the transformation of businesses into digital-first workplaces, from the integration of recent acquisition Slack to how the tech giant plans to grow its international footprint.
In this episode of "Beat & Raise" on Motley Fool Live, recorded on Sept. 27, Fool.com contributors Brian Withers and Clay Bruning and Millionacres editor Deidre Woollard discuss what stood out the most for each of them from the company's analyst calls.
Brian Withers: One of the things that I'll just reiterate and some of the other things we talked about already was just one of the analysts asked Amy Weaver the CFO. "Wow, it looks like 250-300 basis points of core margin expansion going into fiscal '23, so they upped the guidance." They said, "You get a new CFO, and all of a sudden, the margins improve, what's your secret sauce?" Basically, she talked about a number of different things that Clay mentioned. But the revenue expansion during the coronavirus, when we talk about digital transformation, all that kind of stuff, they saw a significant increase. Rather than just hoping that they try and capture it, they invested into it, and invested in more sales teams and more marketing teams to go after that demand. They said it's really, really paid off for them. Clay, you had Brett Stephen Taylor's interview. What was your favorite highlight there?
Clay Bruning: Yeah, there were a lot of questions just in general about the operating margin, the leverage, and the revenue. One of the things that stood out to me was a question about where is the next level growth coming and whatnot. They specifically talked about the international opportunity. They don't want to just be a U.S. company with satellite offices across the world, they want to be an international company that trailblazes in whether it's a developed country, an emerging market, whatever it is. They said, I think one of the slides you showed earlier, they have 36 percent of their annual recurring revenue or ARR coming from international countries, yet they still said that the international opportunity to acquire new customers, land and expand, or just up-sell on some existing customers is one of their greatest opportunity still. It will be very interesting to see how that international percentage of ARR, which, again, is around 36 percent grows. If it does, maybe get to 40 or even higher in the next five, 10 years, whatever it is because I feel like Salesforce is ingrained in the majority probably of enterprises in the US. I don't see why that would be different internationally in some developed and emerging markets as well.
Brian Withers: I had the section where they had Stewart Butterfield, the CEO of Slack, as well as Slack's Chief Product Officer, and a couple of pieces here I thought were really cool. They talked about the digital headquarters in the beginning and really how there's been a tremendous amount of work that's gone into designing physical headquarter buildings with lighting and places where people meet and all that kind of stuff, and that all blew up during the coronavirus. Stewart Butterfield said he was going to spend a significantly more time focused on what that digital headquarters looks like. There's two key tools, I think, that makes that really helpful. One is the Slack Connect piece where you can connect outside your four walls, certainly great for a customer service organization, as well as Slack Huddle, which is something I've seen in our new Slack, and I almost ended up using it the other day and I'll certainly report back if we do. But if you're on a group chat and everybody seems to be online and chatting at the same time, which happens sometimes, you can hit this huddle button, and then people who opt-in can be basically on a voice conference call and you can still continue to type in the direct message group as well. It's that meeting in the hallway that just happenstance, it's the virtual equivalent of that. There's going to be more tools like that that are coming. Then the last thing I wanted to mention was Tamar talked a lot about Slack is a platform, you have to remember, it's not just a communication and messaging tool. The biggest customers that use Slack have hundreds of integrations where they've integrated Slack into their day-to-day business, their business processes, their enterprise software tools. They had some statistics that talked about, we've disclosed this before, 98.8 percent of our $100,000 plus customers are users of custom integrations, and the average is over 100 per customer. But for the one million-plus customers, Slack's largest customers, it's 100 percent uptake and the average is over 500 custom integrations. If you think about Slack now being part of this massive Salesforce engine with a number of different verticals that it has and the amped-up integrations that can happen and makes Slack/Salesforce even more integrated into the organization, I can see why Salesforce was so excited about Slack. Deidre, you had the next section.
Deidre Woollard: I did have the next section. I also wanted to key in on something that Clay had said earlier, which was one of the quotes from Marc Benioff at the end about the digital headquarters being more important than the physical headquarters and the virtual spaces being more important. Because I think that connects with what you were just talking about, this idea that Slack really is where company culture comes from now. That's one of the things that they talked about. Usually, if you're starting at Salesforce, there's all this swag that they give you, and your manager takes you out, you get a little tour, they have their Ohana Floor, which is the floor at the top of the tower where it's a beautiful space where people can meditate and all of that stuff. When all of that stuff goes away, you have to try to find ways to replicate that culture. Going back to that idea of Salesforce always using itself as the lab, I think applies to Slack, is that as they're integrating Slack into how they onboard employees, how they do sales calls, all of that stuff, they then take what they're learning, and then they're going to keep teaching everybody else what they're learning, and then showing their customers basically how they did it. One of the things that Marc talked about was that ability to go into, he mentioned Bank of America or Mercedes, or go into different places and talk to CEOs, talk about how to have a new vision for the company. Because really, when they're talking about this digital transformation thing, they're looking at it as we are fundamentally transforming the economy into a digital-first workplace and putting Slack and the different Clouds within Salesforce really at the head of that. It sounds like really massive and visionary when you think about it that way. I think it's one of the reasons that all three of us got so excited to do this presentation, is because it's not just about they had a great quarter or they bought a company, it's about they are working with their customers, which are Fortune 100 all the way through, so many different companies to really transform customer experiences. They talked about some of the customers that had good quarters like Crocs or like Sonos, they talked about MillerKnoll, which is an office furniture company, and how they're showing that all of those companies how to reconnect with their customers directly. Part of that too is also the idea that direct-to-consumer is becoming more important, there's less of the middleman. That's another component of all of this, which connects to what Clay talked about earlier and how big Service Cloud is, and how big Service Cloud could really get.
