John Cummings - SVP, IR Keith Block - Co-CEO Marc Benioff - Chairman and Co-CEO Mark Hawkins - President and CFO Bret Taylor - President and Chief Product Officer

Karl Keirstead - Deutsche Bank Phil Winslow - Wells Fargo Derrick Wood - Cowen and Company Kash Rangan - Bank of America Merrill Lynch Pat Walravens - JMP Securities Alex Zukin - Piper Jaffray Tom Roderick - Stifel Jennifer Lowe - UBS

Good day, ladies and gentlemen and thank you for standing by. Welcome to the CRM Q3 Fiscal Year ‘19 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, we will host a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded for reply purposes. It is now my pleasure to turn the conference over to John Cummings, Senior Vice President of Investor Relations. Sir, you may begin.

Thanks so much, Brian. Good afternoon, everyone, and thanks for joining us for our fiscal third quarter 2019 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 is Keith Block, Co-CEO; Marc Benioff, Chairman and 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 and guidance can be found in our 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-K. With that, let me hand the call over to you, Keith.

Thank you, John, and thanks everyone for joining us today. As you can see from our results, we had another great quarter as we continue to deliver strong growth, customer success and execution at scale. Revenue in Q3 was up 26%. And given the strength of the quarter and our outlook for Q4, we are raising our FY19 full year revenue guidance to $13.24 billion at the high-end of the range. This represents 26% growth this year. Obviously, we are very, very proud of the quarter and momentum in our business and our leadership position in the market. We’re also initiating revenue guidance for FY20 at $16 billion, at the high end of the range, representing 21% growth for year and demonstrating the incredible demand for the solutions only Salesforce can deliver. We are clearly executing on our vision of transformation and success for our customers, and we are doing it at scale. Every company in the world has a mandate to digitally transform its business. We continue to see this in Q3 with strong performances across every industry, every market segment and every geography. We grew 25% in the Americas, 26% in APAC and 31% in EMEA in constant currency. Now, since Dreamforce at the end of September, I've traveled around the world meeting with more than a 100 CEOs and world leaders. The conversation is consistent everywhere I go. It's about digital transformation, it's about leveraging our technology, it’s about our culture, and it's about our values. This sea level engagement is translating into more strategic relationships than ever. In fact, in Q3, the number of deals generating more than $1 was up 46% over last year and the number of $20 million plus relationships we have continues to grow significantly. In fact, in the quarter, we renewed and expanded a nine-figure relationship with one of the largest financial services institutions in the world, very, very excited about this. As you know, an overwhelming majority of our revenue is multi-cloud. Customers like DuPont, Citi, Uber, many others are all driving more meaningful relationships with our customers across sales, service, marketing, commerce, integration and more. I was recently in Australia where I met with dozens of government officials and CEOs across several industries, many are being challenged by disruption and all agree that being closer to their customers and citizens is critical to their growth and their success. And this is not unique to Australia. Digital transformation is a global phenomenon. Now, we had a great quarter in EMEA where we strengthened our relationships with Deutsche Telekom, NG, Dyson, Galois [ph]. In APAC, we expanded with [indiscernible] and Bajaj Finserv and formed a new relationship with MLC Life Insurance. In Japan, we expanded with heavy industrial manufacturer IHI as one of the world's leading manufacturers -- auto manufacturers. Our industry strategy, which is all about speaking the language of the customer, continues to drive exceptional growth. Our strong momentum with Financial Services Cloud continued in Q3. And as I mentioned before, one of the largest financial services institutions in the world selected Financial Services Cloud as well as Einstein. Mutual of America Life Insurance also selected Financial Services Cloud and they're leveraging Salesforce Einstein to improve their go-to-market strategy and customer engagement. Heading on, Federal Credit Union, with nearly 2 million members is also going all the way with Financial Services Cloud as well as Community Cloud, Einstein and MuleSoft to deliver a best in class member experience. And the Salesforce platform now powers mission critical applications across the Department of Veterans Affairs while Service Cloud helps ensure veterans can reach a life support agent 24 hours a day, 365 days a year, very, very important for those folks. We also expanded with a branch of the United States Armed Forces to transform how they engage with the service members from recruitment to retirement. And with Health Cloud, we formed a new relationship with WorkSafe Victoria in Australia and we expanded our existing relationship with Alcon, one of the world’s leading eye care and medical device companies. Now partners, which is so critical to our growth, they continue to expand our ecosystem, which extends the power of our core offerings. At Dreamforce, we added Apple to our roster of strategic partners, which we're very excited about. And that roster includes Amazon, Google, IBM and others. In this quarter, our SI partners were engaged in 64% of our new business globally and continue to invest in their Salesforce practices. Global partner certifications are up 26% year-over-year. That's the 19th consecutive quarter that our partner certifications have grown by double digits. Now finally, we continue to execute again and again with our proven integration model. As a result, we're already seeing great returns from our acquisitions of MuleSoft and Datorama and CloudCraze. And speaking of MuleSoft, integration has become a strategic imperative for all of our customers, it has captured the attention of C level executives in virtually every conversation I have. And in the quarter, companies like Ahold Delhaize, WeWork, Michael Kors [ph] and contingents just love MuleSoft because MuleSoft is able to unlock data from legacy systems and accelerate their digital transformation. In closing, we’re thrilled with our results and our strong momentum heading into Q4 and FY20. It's been an outstanding year-to-date and we're well on our way to achieving our goal of $21 billion to $23 billion in revenue in FY22, faster than any enterprise software company in history. I want to thank our customers, our partners and employees for their trust and continued support. I also want to take a moment to thank the firefighters and first responders who courageously battled wildfires here in California. Our thoughts remain with them and all of those who have been affected by these terrible events. With that, I will turn the call over to Marc.

All right. Well, thank you so much, Keith. And, before I start, I do want just come back to that and thank all of the first responders and everyone who’s worked so hard over the last two weeks. We've had terrible tragedy here in Northern California and also one in Southern California and certainly here during the holidays, 14,000 families that lost their home, 500 businesses, half of all first responders lost their home in the fires and it's been a terrible disaster here to serve. Obviously, we had a terrible fire last year; this one is even worse, worse ever in Northern California. And all of our hearts are with the victims and their families. And also, all of our gratitude is with first responders. We had a city here filled with smoke for a couple weeks and that smoke just reminded us how connected we are, not only to each other here in San Francisco but all the way up to Butte County. And our hearts remain with them during the season. And we really want to thank our -- not only our employees but also customers, many of whom came to our lobbies here where we filled supplies up and brought them up to Butte County and distributed gift cards. Many of our customers who are retailers helped us prepare gift cards for first responders as well as for the families in Butte County, I want to thank them. And we're going to continue to work on that. It is still in our mind. And we're also giving $2 million initially to these relief efforts. And all of us at Salesforce are going to continue to stand with our neighbors and communities across California as we're rebuilding. Thank you for letting me just talk about that for just a moment, because it's been something that we've all gone through here over the last two weeks, several weeks. Okay. Now, with respect to the numbers. Keith said it, this was absolutely a fabulous third quarter. It was incredible. Obviously, we’ve given guidance for an incredible fourth quarter coming. And I'm hoping that Keith is going to improve on that even though the fourth quarter guidance is incredible. And here we are $16 billion for next year and only two years from our goal of $22 billion to $23 billion, which is amazing that in fiscal year ‘22 we have this vision. So, thank you to our team and our ohana, who are delivering these incredible results. It’s just amazing and incredible moment in history. We are all in this midst [ph] here. And I just was talking to Jim Cramer, and he was like what is happening? [Ph] This is all about the Fourth Industrial Revolution. This is about the cloud, it’s about artificial intelligence, machine learning, deep learning. I mean, there’s so many technologies that are happening. I mean, I read this morning in the newspaper about CRISPR being used to genetic editing of twins in China. I mean, we are in a lot of uncharted territory here. And we’re going to continue to see incredible expansion. But, when it gets right down to a digital transformations, well, every digital transformation starts and ends for all of our customers with their customer. And CRM has never been more strategic. You could see that in the growth rates for the CRM marketplace. [Ph] It remains the fastest growing market segment in enterprise software. That’s a big change from when Keith and I started in the enterprise software industry, started [ph] in 1986. And it was all about other types of technologies that have been downplayed. Now, it’s all about the customer, it’s about CRM. And this is a big and exciting market. We’re obviously largest player, we have these incredible growth rates that we’re putting up. When we look at other companies in the CRM marketplace, a lot of companies are doing very well, because this is what it’s all about; it’s all about the customer. And Salesforce remains this global CRM leader. We’re the number one CRM. We continue to take share and outpace the market. You can see that in our results as we’re moving to $16 billion. This is because we’re the only company that is dedicated 100% to CRM at this size and scale. And we’re the only company with a complete Customer Success Platform for both these B2B customers and their B2C companies as well. For those of you who joined us at Dreamforce, I always look at that as the ultimate manifestation of our Company and how we’re doing. You saw the huge turnout, especially compared to some of our competitors. I’m not going to name any names, because they’re very sensitive, they get upset. But some of our competitors also had conferences recently, they didn’t have a big, huge turnout like this, 171,000 registered attendees, 10 million watched us online, largest Dreamforce ever. Probably everyone at the call was at Dreamforce, it was incredible. And we saw these amazing companies where Marriott, and Brunello Cucinelli was here from Italy and Unilever was here from the United Kingdom. And everyone connected with their customers in a whole new way. We also saw -- my friends that are right [ph] here did incredible new product. Bret Taylor launched his Customer 360, customers blow away, [ph] connecting all of our clouds together, giving our customers a single 360 degree view of their customers across every touch-point, across sales, across service marketing commerce, but really thinking now special of MuleSoft, how do we give those customers that 360 degree view they so badly want. And that’s why this is one of the biggest [indiscernible] we’ve ever made, and Bret will talk about it later on the call. And of course, you can see the acceleration in our business, and also in our positioning, our relationship with our customers, the MuleSoft, the number one integration cloud, giving customers extraordinary power of integration, bringing together vast amounts of data across all kinds of systems in this incredible API architecture. I always loved this company and I love it more now as part of Salesforce. They’re right here with us now in Salesforce Tower. Greg and Steve just did incredible job. And we saw that not just at Dreamforce but through the whole quarter. And I think both companies are just hugely surprised that how well it’s come together but also their execution dynamite. And then, you also saw the release again Bret came up with this with Parker, Einstein Voice, amazing. And you saw these amazing demonstrations of the voice, not just interactive voice response, but now Salesforce can actually parse the data and actually inset it correctly in the customer database automatically. So, anyone can talk to Salesforce, makes every employee and customer more productive, amazing. And Einstein, talking to Siri. Einstein and Siri are now friends. Hopefully they become friends, because we had Apple for the first time, strategic relationship, something we've always wanted, at Dreamforce, amazing to have this great relationship with Tim Cook, probably the best executive in our whole industry. Thank you Tim for your leadership and what you've done, the relationship with Salesforce, very grateful to you. And as we roll out these new mobile apps, our customers are expecting more innovation to come. Now, you also saw that we're strengthening our relationships with amazing companies in the cloud world including Amazon, and Google, IBM delivering these incredible innovations. And our customers are just loving what the amount of innovation that's happening in our industry, especially as the cloud becomes mainstream. And at Dreamforce, we were thrilled to announce on these strategic partnership, again expanding that capability and giving that -- giving us that that capability to have it not only with Amazon and Google but Apple as well and other companies. Okay. Let's talk about Einstein for a second. I told you Einstein was delivering 3 billion predictions and insights everyday in the last quarter. Well, now, few months later, we are doing 4 billion Einstein predictions every single day, exceeding our expectation. The transformation of all of our products, artificial intelligence, all of our products getting smarter, all of our products having Einstein built in that Einstein is at heart of the Customer Success Platform, making it more powerful, more capable every day. They look at the many layers of our Customer Success Platform. The center is the customer, then of course everything is going in and out of Einstein with Einstein making the customer smarter. Being our partner every day, I know I used that that's incredibly important to me, surrounded by this whole range of capabilities, whether it's sales or service or marketing or commerce or a platform, or integration or a community or enablement or engagement, I mean all levels of the Customer Success Platform has been made better by Einstein and then wrapped by this amazing trailblazer community, so awesome. Now, we really saw this weekend, I'll tell you during Black Friday and Cyber Monday of course our customers have deployed this Customer Success Platform. So, you're like wondering what's going on; I discussed it’s amazing, report I can't talk about it because it's a public company and working very closely who had this massive success over the weekend. And they are retail industry. But, I look at all these companies and we are powering more than $20 million orders on the Customer Success Platform, double digit growth, amazing. But one thing that really stood out for us was 50% of the orders are placed on the phone, wow! Mobile traffic to retail sites reaches 67%. So obviously that's a huge transformation that we've gone through with our customers, especially retail customers are going through that. I’d just like to touch base briefly now on our trailblazers. The outer ring of our platform. Our ohana is so important but especially our trailblazers, and we've got a million of these trailblazers who are empowered and enabled with all of this capability, and they're doing that on Trailhead. For those of you who’ve not been on trailhead.com. Please get on trailhead.com. This is our free online marketing platform. It's letting everybody go through the workforce development they need to get into the Fourth Industrial Revolution to have their place in the digital economy. This is center to our strategy. And you can see that because a quarter of these customers are on trailhead, it’s self reported that they have changed jobs because of skills they have gotten on the platform and the jobs they're getting are these phenomenal six-figure jobs and so excited for all of our trailblazers and our goals are to get to millions and millions of these trailblazers. So, we are really excited. We also saw that we have received -- continue to get some great recognition. And of course paramount to Salesforce as our culture, Keith and I work on that the end every day. That's reflected in our core values of trust and customer success and innovation and of equality. But, our culture is very important for those of you’ve been to any of our towers around the world, whether it’s in San Francisco or Indianapolis, or London, or Tokyo, or New York. I can tell you, you can feel it when you walk in, the culture is so important to us and we're trying to cultivate a great culture. But thank you Fortune magazine ranking Salesforce, again the number one best place to work in the world and that is not just true globally but in so many of the cities also that we have -- do business and we've been called out by Fortune magazine. So thank you for that, that’s so important to us. And also I also want to thank Harvard Business Review called out Salesforce, and obviously top CEOs but really calling to us number six top company in the world Harvard Business Review and number one American company for best performance for 2018. So, thank you Harvard Business Review, we're very, very grateful as well to you. We saw this quarter how the two parts of our vision at Salesforce changing the way the world does business and improving the state of the world go hand-in-hand. At the Global Climate summit in San Francisco, many of you were with us. Salesforce united with 21 other tech companies in the Step Up Declaration decarbonize [ph] companies. We realized it’s more important. World Economic Forum says that by 2015 we're going to have more plastic in the ocean than fish. Who wants a plastic ocean? I don't. We're deforestation, losing 1 acre of forest every single second. Who wants a planet without forests? I don't. We need the forests right now more than ever, and this was evangelized by Jane Goodall at the conference because of the carbon situation. So, we've got to improve our situation with our climate. So, we've continued to focus with others in our industry to decarbonize and to improve our relationship with the climate. Onward to public education. With the end of the Fourth Industrial Evolution, we've got to bring the kids with us. That's why we've now put more than $50 million in our local San Francisco and Oakland public schools. This is halfway to our short term target of $100 million. And everyone knows that we are thrilled that San Francisco passed Proposition C, amazing and record turnout, incredible turnout. San Francisco is coming to the polls realizing that we could do something together, which is passing Proposition C. Spoke to the Mayor this morning, and we are very excited moving forward with Proposition C, the city will begin collecting the tax January 1st and looking forward to getting that into the hands of amazing NGOs that we have here in San Francisco, like Hamilton families, like Larkin Street, like Glide, like Catholic Charities, so many people hero helping our terrible, horrible, homeless situation, and we experience it every day being here. I know many people who live in cities in the United States are experiencing that homelessness and there's so many things that we can do. We learned so much during Prop C, and saw so many great insights. But the number one thing that every homeless person needs is a home. And at this time of the year during the holidays, all those homeless people are on our minds more than ever. And thank you for your strong support here in San Francisco. And the largest and most successful businesses are coming out for the good of the homeless. And thank you to Twilio now for giving $1 million and thank you to Airbnb for giving $5 million to homelessness since Prop C. Others are now able to -- coming in to support the homeless situation and we plan for another major announcement this week regarding the homeless. So, be on the lookout for that. It's another reminder, business does not exist in a bubble, we’re part of the city, we’re part of the community, we’re part of the ohana, we’re part of the planet, and we realize we're all connected, we're all one that our companies are only as strong as these connections and our communities, and that's something Keith and I are talking about all the time how Salesforce can be a light unto the nations and be a beacon for others and show what's possible when business becomes one of the greatest platforms for change. And with that let me turn it over to Chief Financial Officer to talk about how the company did during the quarter. Mark?

Thank you very much, Marc. As you’ve heard, we delivered strong third quarter results as we continue to execute at scale. Third quarter revenue was 26% in dollars and in constant currency, despite experiencing a year-over-year FX headwind to revenue of $15 million and a sequential FX headwind to revenue of $19 million. And MuleSoft contributed $128 million to total revenue net of purchase accounting adjustments. Looking at the year-over-year subscription and support revenue by cloud. Sales Cloud grew 11%, Service Cloud grew 24%, Platform and Other grew 51%, including approximately $105 million in MuleSoft, and Marketing and Commerce grew 37%. Our attrition exited the quarter below 10%. Operating cash flow was $143 million, up 14% over last year. Third quarter OCF included our first bond coupon payment of approximately $44 million on the MuleSoft acquisition debt. Unearned revenue ended the quarter at nearly $5.4 billion, up 25% in dollars and 26% in constant currency with MuleSoft contributing approximately $103 million. Unearned revenue was impacted by year-over-year FX headwind of $34 million and a sequential headwind of $39 million in the third quarter. We've already said that unearned revenue can be lumpy due to invoice timing or renewal timing, duration changes, et cetera. And we saw that in the third quarter, where unearned revenue came in a bit better than our guidance, just had the effect of reducing the quarter-on-quarter sequential decline in unearned revenue from Q2 to Q3 we have historically seen. This also has an impact on the sequential change from Q3 to Q4, which I’ll discuss in a moment. Total remaining performance obligation, which represents all future revenues under contract, ended Q3 at $21.2 billion, up 34% over last year. MuleSoft contributed approximately $300 million to the balance in the quarter, the current portion of the remaining performance obligation, business that’s both billed and unbilled expected to be recognized as revenue in the next 12 months was $10 billion, up 27% year-over-year. Moving on to guidance, we came off a strong third quarter results. We are now once again raising our full fiscal year 2019 revenue guidance to $13.23 billion to $13.24 billion or 26% year-over-year growth. This guidance includes approximately $375 million from MuleSoft. We expect to deliver non-GAAP operating margin improvements of approximately 50 basis points at the high-end of our prior guidance range, even while the demand environment gives us the confidence to continue investing in MuleSoft and other growth initiatives. We are raising our FY19 GAAP diluted EPS guidance to $1.06 to $1.07, our non-GAAP diluted EPS guidance to $2.60 to $2.61. And keep in mind, this guidance does not take into account the possible future impact related to ASU 2016-01. We are maintaining our full year fiscal 2019 operating cash flow growth guidance of 15% to 16% year-over-year. And as we discussed previously, this guidance includes a headwind of approximately $150 million related to our acquisition of MuleSoft. For Q4, we’re expecting revenue of $3.551 billion to $3.561 million; GAAP diluted EPS of $0.89; and non-GAAP diluted EPS of $0.54 to $0.55. Turning to unearned revenue. We expect fourth quarter year-over-year unearned revenue growth of approximately 17%. This implies a sequential growth rate of approximately 52%. And let me take a moment to provide some additional context to this UR guidance. First, the FX environment has changed significantly over last year. And we now anticipate a year-over-year FX headwind to UR of approximately $200 million in Q4 versus an FX tailwind of approximately $130 million in Q4 of last year for $330 million FX swing year-over-year. Now, that represents about 5 percentage points of growth. Secondly, as you may recall, in Q4 of last year, we had an extremely strong renewal quarter, including some of the largest renewals in history. This drove outsized growth in our billed and unbilled deferred revenue in Q4 of last year. And thirdly and finally, as we discussed at the most recent Investor Day, the timing of invoices and renewals can impact the UR balance in any given quarter. Third quarter UR came in ahead of our guidance. And as a result of this dynamic, which has a direct impact on UR balance of successive quarters, and the related sequential changes. As a reminder, this is the last quarter we’ll provide unearned revenue guidance. That’s said, when we report our fourth quarter results, you will have two full years of data on the current remaining performance obligation, which we think is a more complete metric because it’s contract based versus invoice based. Now moving on to FY20 guidance. As you’ve heard from Keith, our demand environment remains very strong. And as a result, we’re initiating fiscal 2020 revenue guidance of $15.9 billion to $16 billion for year-over-year growth of 20% to 21%, keeping us on track to deliver our target of $21 billion to $23 billion in revenue in FY22, now only little bit more than two years away. We will provide our cash flow, EPS and Non-GAAP operating margin guidance for FY20 when we report our fourth quarter and full year results in February 2019. To close, we delivered another strong quarter of results and we have great momentum as we look to close out the year. I want to thank our employees, our customers our partners and our shareholders for your continued support. And I wish you all a wonderful holiday season. And with that let's open up the call for questions.

Thank you, sir. [Operator Instructions] Our first question will come from the line of Karl Keirstead with Deutsche Bank. Your line is now open.

Thank you very much. Maybe a question for Keith and Marc. Keith, you did mention you've been in front of a lot of customers of late. I'm just wondering, whether the tone of those conversations have changed much in the last few months, just not so much in terms of the Salesforce projected spend; that sounds like it's very strong, but just your broader view of the economy and the macro. I don’t want to force you into being an economic forecaster, but just wondering if the tone has shifted at all. And then maybe a follow-up for Mark Hawkins. Mark, given that the performance on operating cash flow through the first nine months, you only need about 5% operating cash flow growth in 4Q to hit your 16% growth target. You were obviously much higher than that last fourth quarter. I know it's hard to predict and it's based on timing in of invoice payments. But just curious if there is anything you’d provide for us. Thanks so much.

Yes. Hi, Carl; it's Keith. So, I have been on the road quite a bit actually in the quarter. So, I had the opportunity to spend a lot of time on the front lines with the troops and our customers. And here is the message I'm hearing. It is all about digital transformation. I am not going to make any comment about the macro environment; from what we see, it's all good. And this is a CEO level agenda; this transformation is important. The scent [ph] I get regardless of any speculation around the economy is that this has really become a mandate. And this wave of innovation, this wave of technology that is sweeping the globe is an imperative for these CEOs to be those Chief Transformation Officers. And that's what's going on in the market, that's why you see the results with us.

And let me just add to that that I think -- I said this a little bit already at Dreamforce as well, which is and I said this recently on TV. When I speak to CEOs and that happens probably every single day, especially some of these tax cuts that have happened, CEOs have been investing aggressively and the economy has really been ripping. I think that a lot of the forecast that I've seen in the 4% level in the United States, we felt that before that happened and we were talking about the economy was ripping before those aggressive growth estimates. When we look out for next year, I'm not sure I can see it going faster than it is now because I'm not sure that we -- where we would get all the people to hire that we need to hire. This is amazing what's happening and not just for us but for all -- for everybody. But maybe there is a modest -- a modest production [ph] growth, if it's 2% to 3% next year of the GDP, I wouldn't be hugely surprised, but I don't see some huge sea change in the economy, I consider to see strong growth because the strong growth because I've seen so much investment this year, it's going to pay out for these companies going forward. So, I see still several years ahead of good solid growth for the economy. And where that gets tampered, I think I've mentioned this before is when I talk to European CEOs, they tend to be more conservative. And some of those CEOs, they maybe specifically in their region are not as optimistic potentially as I would say American or Asian or CEOs based in Asia. So, that's how I still look at it that we are still in the economy right now and look at these numbers that are ripping and we still see very much a huge investment focus going on.

Yes. Let me just jump on to second part of the question, Karl, thank you for that. Yes. We are obviously pleased with our operating cash flow performance year-to-date as you've called out. We're very much tracking the fiscal year number that we have been driving toward ever since we acquired MuleSoft, which we -- as we called $150 million impact that would be negative in the first year of the acquisition, mainly due to debt expense and some lost interest income. But, when you -- the other factor to look at that besides the fact that we're absolutely tracking our fiscal year, it’s Q4 is one of the biggest quarters of the year for us. And obviously, we'll know more as we get to the end of that. We feel that this is appropriate to stay with the fiscal number, especially in light of the fact that Q4 there is clearly an FX headwind if you just look at the FX rates year-on-year that's another factor to be considered. We're staying on track for the year. We'll know more at the end of the quarter. But given the FX headwind, I think this is totally appropriate.

Thank you. And our next question will come from the line of Phil Winslow with Wells Fargo. Your line is now open.

Thanks guys for taking my question and congrats on a great quarter. I just really want to focus on the concept of front office suite. Obviously, you guys have talked about that for several years now and we're obviously believers. If you think about this year, we've seen probably north of $15 billion of M&A from some of your competitors trying to build out the different pillars of a suite. What are you hearing from your customers in terms of the competitive landscape, especially sort of post this M&A and even beyond the M&A some of the data sharing initiatives out there between frenemies, what are you hearing from customers, how do you think about how the landscape changed?

Well, I think that we should ask our President of Products, Bret Taylor to share kind of his vision of where we're going with our Customer Success Platform.

Yes. I think our strategy as it relates to competition is really reflected in our Dreamforce announcements, particularly Customer 360. When you talk to our customers, they're not looking to buy a piece of technology looking to transform their business. Our strategic advantage is that we’re the number one in sales, the number one in service, the number one in platform, and the number one in marketing. As you look at Black Friday, I think you can really see where our customers are using every single one of those technologies to transform their customer experience. You might send out a promotion for your Black Friday sales, via a text message or via email in our marketing product. You transact in our Commerce Cloud, you provide service via our Service Cloud. We're the only company that can provide all the solutions in a integrated way. And now with Customer 360, you have a single view of your customer through all the touch points. And so, our strategic advantage relative to competitors trying to catch up by acquiring the second place product in each of the spaces is that we are an integrated solution. And keep an eye and I have talked a lot about this. Our customers are looking for an integrated solution to their business problems, not just pieces of technologies and that’s our strategic advantage in our product portfolio.

So, Bret, you've done a great job. I mean when we look at that product portfolio, we look at you've built out with the Customer Success Platform, you've got, of course, sales; you've got service and field service; you've got marketing; you've got B2C and B2B e-commerce; you've got engagement with Heroku, which still remains on its air; you've got platform and this incredible ecosystem; you've got integration, matches with Customer 360, this work with MuleSoft; you've got advanced analytics, the word in industries; you saw what Financial Services Cloud did this quarter, got partners and communities enablement collaboration, and on top of all of that you have that whole trailblazer community. I don't think there's any company that has built out a comprehensive Customer Success Platform like that. Now, when you've got to Dreamforce and saw it tied together with Customer 360, what was your biggest surprise?

My biggest takeaway was the importance of Trailhead and that trailblazer community. In addition, when one of our customers decides to deploy our technology, we're not the only person there helping them. Our partner ecosystem is there with them. And then partner ecosystem is fueled by trailhead. One of the things that you mentioned Marc in your opening, I think it’s really powerful, there's over 1 million people learning for free on Trailhead and one in four have gotten a new job on the other side of that, because they're developing new skills. And ways to think about it from our customers’ perspective and the thing you see in the Dreamforce is, when someone use -- decides to deploy Salesforce, they have the best ecosystem of support of partners around them. That's really what’s driving the success of our customers with the technology which is the thing that we are exclusively focused on.

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

Great. Thanks. Keith, one of the things that we commonly heard at Dreamforce is that partners are finding it harder to hire and build up Salesforce, certified resources to meet the demand, which is I guess, especially saying that demand is outstripping supply from a consulting and implementation standpoint. Do you hear this as a trend in the field from your partners? And do you ever see it weighing on pipeline conversion cycles? And then, you were just talking about Trailhead. I know it’s been in the market for a little bit. How effective do you view Trailhead in helping to virally cultivate resources? And can it help maybe populate talent in a quicker fashion that you’ve historically seen?

Thanks for the question. So, as you know, the relationship that we have with our partners is very strategic to our business. You've heard me talk about in the call that they're involved in about 64% of our go-to-market efforts. And the certifications, 19 consecutive quarters of double-digit certification growth. I mean, there -- you have got talk to any of these firms, whether it's PwC or Deloitte or Accenture or IBM, and ask them what their fastest growing practices and scale Salesforce. And this is great news for our customers, because we wake up every day, as you know as a Company and we think about what's important for our customers. And the partner ecosystem is certainly a big part of that. We are very, very focused on our partners, and we have plans with them to not only increase their capacity, but also to enhance their capabilities. And the centerpiece for that is Trailhead. And offering and extending Trailhead for them to make sure that they get the right skills at the right time so that they can convert and cannibalize their practices from their legacy providers. And that's been a part of their strategy. We also encourage the growth of boutiques but it’s not just the enterprise based business; it's also in the mid market and the SMB. And we invest as part of our funds with Salesforce ventures to provide startup the opportunity to build and cultivate these practices to help with the SMB. So we’ve got a pretty comprehensive strategy to build out these SMB, SMB boutique consulting firms, these Accentures of the world et cetera. And in my entire career, I’ve never seen a closer relationship with the SI ecosystem like the one that we have in Salesforce. We do a lot of joint planning, there is a lot of collaboration, they’re very integrated and everything that we do inside the company. And again, they are a big part of our future and we’re very optimistic that they will continue to expand and convert the resources they need to drive success for our customers.

So, Keith, let me ask you a question. Let’s say, there’s entrepreneurs listening on the call today and they’re hearing what you’re saying. Are you saying that, if I’m an entrepreneur, I want to starting a new company, starting a company providing these kind of boutique services in the Salesforce ecosystem, that’s a good business opportunity and is Salesforce investing in those companies, so you’re going to invest?

That is a fantastic business opportunity. That’s why we’ve got the consulting firms setup in Salesforce ventures around the world.

And then, we’ve seen so many of those boutiques get acquired by the mainstream SIs motivate to grow their practices….

Absolutely. And the important thing for us to continue to do is to keep cultivating and growing those practices into new marketplace.

I mean, you look at some of these companies that we that were strong independent companies like Google is a great example or some of the other. But, they’ve been acquired now by this very largest and most important systems integrator. And so, this remains a great opportunity for everybody.

Absolutely

Terrific. Thank you.

And our next question will come from the line of Kash Rangan with Bank of America Merrill Lynch. Your line is open.

Congratulations to the Salesforce team. I have a bit of a philosophical question. You’re sitting on some markets, massive TAM, 145 billion. But only one of your cloud is really dominant in terms of market share and it’s industry which is Sales Cloud. I’m curious at what point, like some of the commanding technology companies, the SGAs, that’s Oracle and database market or Microsoft, the operating system market, where they’ve defined the market. So, at what point are we -- how close are we to a tipping point where service, marketing, commerce, platform all these markets start to tip in your way that it’s not really so much of outbound -- of course, there’s always going to be outbound selling motion. But the market really starts to come to you, you start to get these dominant shares and the other markets, so you can start to realize you TAM 144 billion TYAM in a more significant way. That’s it for me. Thank you and happy holidays in advance.

Kash, I think you normally see this in the growth rate that we’re reporting on all the clouds. So, this is not anything that we’re trying to keep from you. You can see in the numbers that we are --it’s an abundance of riches in Salesforce. And yes, we have a great product for Sales Cloud, it’s doing just fine, but we also have a phenomenal service business, field service business and service add-on business that’s also growing extremely well. We also have an amazing marketing cloud business, that’s growing extremely well and an commerce. And I’ve mentioned Heroku, it doesn’t get reported, but it’s part of our platform obviously, very important part of our platform integrated, which is also great business. And now, we have an integration business which is also -- it’s an unbelievable business. And we have an analytics cloud that’s an unbelievable business. And we have industries that Keith has cooked up with financial services and health cloud, which is also an unbelievable business. And by the way, we acquired Bret Taylor’s company Quip, which is an unbelievable business. And that just has a huge deal with Citibank for the quarter. I mean that was awesome to see what the Citi with Quip, enabling all of their employees around the world. Congratulations to Bret and Kevin helping city work together faster in this incredible productivity environment. It's a product I use every day. If you haven’t downloaded, it's worth, it’s what Amazon uses, it's what Apple uses, the Citibank uses to manage their productivity and you saw it at Dreamforce we announce Quip Slides which is incredible. But it’s abundance of riches. And key organizing principle though for us is customer. So, yes, we're in all these areas, but there is other companies in service and there is other companies in marketing, there is other companies in a lot of these areas but our organizing principle is that we're here to tie it all together to give you 360 view of your customer and that's what unique for Salesforce. Every company has organizing principle has its own organizing principle as you know, because you cover all these companies. And you know what ours is and you know what our answer is going to be that everything begins and ends with customer. Bret, do you want to add to that?

Yes. I think Marc put it exactly right. And the backdrop that I’m really excited about and the reason why I think you see a such amazing growth and Service Cloud for our marketing cloud and continued growth in our Sales Cloud is. , these product aren’t staying still. The Fourth Industrial Revolution is transforming each of these markets. Take Service Cloud, which is just an amazing product with amazing growth rate. Right now, artificial intelligence is completely transforming our industry and it's driving every CEO to Salesforce to say hey, how can you help me transform my customer service experience, which is really the tip of the spear that relates to customer experience. And that's why Service Cloud is growing 24% year-over-year, one of our largest and fastest growing businesses. We assume that's in every single cloud. So, as a technologist here, what's exciting for me is not just really TAM but also just seeing the motion of change in each of these businesses and how we can help our customers navigate these technology changes happening around them.

Thank you. And our next question will come from the line of Pat Walravens from JMP Securities. Your line is now open.

Great. Thank you. And let me add my congratulations. So, MuleSoft is clearly proving to been a great decision for you. What sorts of things might make sense for Salesforce to buy next? And then, Marc, I'd love to hear your thoughts if it fits in there on SAP's acquisition of Qualtrics.

Well, I can just tell you that there is a lot of things that Salesforce can do, because customer opportunity is much bigger and more exciting I think than anybody really ever realized. But for MuleSoft, it’s the company that I loved for years, it's the company that I helped lead our early investing in and then helped go public and so forth. And while I wanted to buy them for years, unfortunately I have a very strong and sovereign management team that's sitting around the table and they're not that easy to deal with. And they make it hard for me to do what I want to do, but I did get that one over the line. So thanks a lot for that. But, there is a lot of others that I love to see that I think that our customers would love to have more tightly integrated, more part of our product, really important. And what other companies -- I don't know if you’ve seen the front of the Wall Street Journal lately, but with sort of market share graph, CRM on the cover of the Wall Street Journal, have you seen it? I think we also put it in our slide deck here for you, hopefully we did. Because it's our number one marketing graphic. And not everyone is doing as well as we are in CRM. So, not everyone is doing as well as we are in cloud. And you know that. So, every year, I've got some new thing, whatever and I can't follow them all because they're also difficult and they buy companies I've never heard of. So, I can't really comment on them. But, God bless them. And I hope that they're successful in CRM because it's good for us.

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

Hey, guys. Let me add my congratulations for the quarter. I want to ask the question about verticals maybe for Keith, you talked about the amazing success in financial services. The big deal with the financial institution with the success being driven by Financial Service Cloud, which we also picked up in our field work. I guess, I wanted to understand could you talk about what is the incremental kind of value prop and features that are available to customers that go from generic Service Cloud to Financial Service Cloud and any commentary on the financial uplift that Salesforce sees through those migrations would be appreciated.

Hi, Alex. I'm happy to do a feature function conversation with you if you like. But here's the way I’d think of our Financial Services Cloud. So, first in the beginning of time there was the Service Cloud. Right. And then, on the seventh day, God created something else and said it was Financial Services Cloud and then Financial Services Cloud started on a wealth management and then it went from wealth management to retail banking, then it went to consumer banking and then it would go to commercial banking, and the list will go on and on. By the way, Financial Services Cloud has made great integration points with partners like Guardwire and Velocity as well. So, those are compelling solutions for our customers. At the end of the day, this is a capability that customers want to buy off the shelf software. They don't want to be customizing and building their own capabilities, because in a sense, it’s just repainting [indiscernible] you're just doing in tech refresh but really you're not retiring your legacy debt. And that's why customers want these capabilities embedded in our technology and that's exactly what we're doing. We're responding to our customers in these industries by providing very rich functionality that is specific to what those customers are looking for. And that's been the strategy. Now, we can do that two ways. One is that we can enhance our product so that these customers get the commercially available off the shelf software or we can go partner with an ISV, like an [indiscernible]. So that has been our strategy. You can see the results. If you think about the pace of Financial Services Cloud, arguably it's the most successful cloud that we've ever launched. It has established very deep and meaningful relationships with our customers. The roster of financial services companies that we're doing business with now, they all want Financial Services Cloud and we just continue to win and win and win, and that's faith. So, it's very, very exciting for us.

And for the previous question where there was a question about how we're doing with our competitors, I put on my Twitter feed for you the market share information. So, you just get that directly.

I do want to make a comment about the competitors because listening to Marc and Bret talk about this, just a lot of these companies have been in the business for a very, very long time. They've been in the legacy business. They have not been in the cloud business. They claim that they could be cloud companies because maybe they have an architecture that’s suggested for the cloud but it's not just about the architecture, it's also about the business model. Most importantly, it's about the culture of the company and the focus on customer. And since the day this Company was started, everything that we do is focus on the customer. If you look at some of these legacy companies that are trying to get in the game in the front office and say that they're now CRM companies, it's not in their DNA. So, as Marc said, we wish them luck. And, we'll see you in the marketplace. But please don't underestimate the importance of having the customer is part of the culture.

And I have really had to start to curtail my comments. And I'd love to talk about specific companies and other CEOs, every time I do, I get a phone call, they’re very sensitive. And I don't want to heart anybody’s feeling during the holidays. So, I'm really holding back on the call. So, I'm just going to do that once at least.

Thank you. Our next question is coming from the line of Tom Roderick with Stifel. Your line is now open.

Hey, gentlemen. Thank you for taking my questions. So, question for Marc Benioff. Marc, you're constantly in touch with global tech leaders, partners. And going back to Dreamforce, you certainly had some nice updates relative to Google as a partner, some of the things you're working on there. They of course had some changes at the leadership at the top. I'd love to hear a little bit more if you could talk about how that partnership has progressed? And now that they are sort of going through some new leadership changes at the top, what sort of opportunities exist to further extend that partnership? AWS has been fantastic. This one has a nice so start off the ground with the analytic side where can you take it from here?

Well, you just mentioned two great companies, Amazon and Google. They both have phenomenal cloud offerings, they both have very strong CEOs. Jeff is amazing and also Sundar is amazing. And they're both doing extremely well in our customer base. We see lots of action with both of those customers and partners. And specific to Google, I mean Bret obviously is the creator of Google Maps and worked at Google for while. So, So, I don’t know if you want to touch, how do you -- unique perspective and all of those.

Yes. I just had such a great privilege to have such amazing partners. And we really worked at customer success and what our customers need to be successful. And I look at Amazon Web Services, Apple, Google, we’re really saying who are companies that our customers want to partner with, and who do they want us to partner with, to drive success. And when I look at Google, every single one of our marketing cloud customers, Commerce Cloud customers has a deep relationship with Google, because of the providence of Google Search, their ad network marketing analytics. And so, I really view this is an amazing opportunity to bring the best of both companies to bear when we're trying to provide the solutions to our customers. And our customer response has just been fantastic. And we -- I hope to deepen that relationship in the future and just make sure that when we provide these to our customers, the products work together across, the companies work together and our customers have an amazing experience.

Thank you. And our next question will come from the Jennifer Lowe with UBS. Your line is now open.

Great. Thank you. As you start to talk with CEOs and senior decision makers about these big strategic digital transformation projects, and you mentioned many of them are multiyear in scope, it strikes me that these touch a lot of systems, a lot of processes, and it's a challenge to sort of figure out what comes first. But, as you sort of start through that prioritization process, how often are you going in and creating a new application that didn't exist before, versus replacing legacy off the shelf software versus custom app development or replacing legacy custom applications? And how has that evolved as you increased your strategic value to those customers?

Hi. This is Keith. So, that's a great question. The way I would think about this is that the whole environment is just right for innovation, okay. The innovation could be something that's custom developed with our technology or it could be something that's just using our standard product. Obviously, customers like to take advantage of flexibility that our products provide. And they want to model their processes aligned to our technology, rather than building custom apps themselves, comma. The power of the technology is such n nowadays that you can do amazing things that you couldn’t have done before. So, it’s kind of hard to give you an apples-to-apples comparison, but it’s really an interesting phenomenon, because the wave of innovation is just so impressive in what we’re seeing in the marketplace. And that innovation is supported by our platform, it’s supported by our Service Cloud or host and Customer Success Platform. So, it’s hard to give you the exact number. But, it’s all about innovation and creating.

All right. Well, as we bring our call to a close, I want to thank everybody for participating on today’s call. As I opened the call, I also mentioned our hearts remain everyone, who suffered during the horrible fires. And I’d like to bring your attention to our local organization who is doing so much and has done so much support already, which is our North Valley Community Foundation, which is providing tremendous support for the campfire relief. And if you could support them, we would appreciate it. It’s nvcf.org as Nanacy, Victor, Charlie, Frank.org, North Valley Community Foundation and our hearts or looking entire community of Paradise and the surrounding areas affected by the campfire. We love for you to please consider a tax deductible donation to the campfire relief fund. And to assist to the many community organizations who are serving evacuees, and especially our tremendous first responders. So, thank you, everybody, and we look forward to talking again next quarter.

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