The $10 Billion Playbook
Graham Smith, CFO David Havlek, SVP, Finance
November 19, 2013
Safe Harbor
Safe harbor statement under the Private Securities Litigation Reform Act of 1995: This presentation may contain forward-looking statements that involve risks, uncertainties, and assumptions. If any such uncertainties materialize or if any of the assumptions proves incorrect, the results of salesforce.com, inc. could differ materially from the results expressed or implied by the forward-looking statements we make. All statements other than statements of historical fact could be deemed forward-looking, including any projections of product or service availability, subscriber growth, earnings, revenues, or other financial items and any statements regarding strategies or plans of management for future operations, statements of belief, any statements concerning new, planned, or upgraded services or technology developments and customer contracts or use of our services. The risks and uncertainties referred to above include – but are not limited to – risks associated with developing and delivering new functionality for our service, new products and services, our new business model, our past operating losses, possible fluctuations in our operating results and rate of growth, interruptions or delays in our Web hosting, breach of our security measures, the outcome of any litigation, risks associated with completed and any possible mergers and acquisitions, the immature market in which we operate, our relatively limited operating history, our ability to expand, retain, and motivate our employees and manage our growth, new releases of our service and successful customer deployment, our limited history reselling non-salesforce.com products, and utilization and selling to larger enterprise customers. Further information on potential factors that could affect the financial results of salesforce.com, inc. is included in our annual report on Form 10-K for the most recent fiscal year and in our quarterly report on Form 10-Q for the most recent fiscal quarter. These documents and others containing important disclosures are available on the SEC Filings section of the Investor Information section of our Web site. Any unreleased services or features referenced in this or other presentations, press releases or public statements are not currently available and may not be delivered on time or at all. Customers who purchase our services should make the purchase decisions based upon features that are currently available. Salesforce.com, inc. assumes no obligation and does not intend to update these forward-looking statements.
The Internet of Customers
ConnectedCustomers
ConnectedPartners
ConnectedProducts Connected
Devices
cloudsocial mobile
ConnectedEmployees
The Age of the Customer
1900 1960 1990 2010
Age of manufacturing Age of distribution Age of information Age of the customer
Mass manufacturing makes industrial powerhouses successful
Global connections and transportation systems make distribution key
Connected PCs and supply chains mean those that control Information dominate
Empowered buyers demand a new level of customer obsession
Source: Forrester Research, Inc.; Competitive Strategy in The Age Of The Customer, October 10, 2013
David Havlek SVP, Finance
Financial Update
The First Cloud Computing Company to Deliver a $1 Billion Quarter. . .
Q113 Q213 Q313 Q413 Q114 Q214 Q314
$695 $732
$788 $835
$893
$957
$1,076
$ millions
36% Q3’14
growth y/y
37% Q3’14 CC
growth y/y
$81M Q3’14 contribution
from ET
Americas Remains the Dominant Geography
Note: Percentages represent FY’14 YTD constant currency revenue growth. Dollars represent FY’14 YTD revenue by region.
EMEA +37% $531M
APAC +18%
$315M
Americas +35% $2.1B
Transactions Growth Outpaces Revenue Growth
47% Q3’14 growth
y/y
99.9% average availability
in Q3’14
>40% of transactions are
from API calls Q411 Q412 Q413 Q314
100
0
Transaction volume in billions
Greater Customization Leads to Greater Usage
FY09 FY10 FY11 FY12 FY13 FY14 YTD
Standard Objects Custom Objects
1/4
2/3 Proportion of custom objects to total objects 64%
total object count growth y/y
Our Innovation
Our Customers’ Innovation
Note: Chart reflects dollar attrition as a percentage of revenue when compared to the year-ago period for Sales Cloud, Service Cloud and the Force.com Platform.
Q411 Q412 Q413 Q314
Usage and Customization Drive Declining Attrition
17 straight quarters
of decline
<1/2 Enterprise attrition
compared to Commercial attrition
20%
10%
0%
-$1
$0
$1
$2
$3
FY11 FY12 FY13 YTD FY14
Customer Base Supports Continued Revenue Growth
Ratio of Average Annual Attrition to Add-On/Upgrade Sales
Note: Excludes Renewal Business.
For every $1 of attrition, we add
more than $2 of new business from our existing customers
$1 of Attrition
Strong Growth in Deferred Revenue Continues. . .
$ millions
Q113 Q213 Q313 Q413 Q114 Q214 Q314
$1,335 $1,337 $1,292
$1,863 $1,733
$1,746 $1,670
$44 $65
$1,790
34% Q3’14
growth y/y
34% Q3’14 CC
growth y/y
ExactTarget deferred revenue
$1,735
…and Shift to Annual Invoicing Continues
Note: Annual invoicing dollars as a percent of total invoicing dollars, excluding Heroku and ExactTarget Marketing Cloud.
Q112 Q113 Q114 Q212 Q213 Q214 Q312 Q313 Q314
57% 63%
68%
56%
64% 69%
57%
65% 72%
7 point improvement
Q3’14 y/y
Off-Balance Sheet Backlog Evidence of Increasing Strategic Role
Note: Backlog represents approximate balance of business that is contracted but not invoiced, rounded down to nearest $100M. 1. Represents total booked business on- and off-balance sheet.
Q113 Q213 Q313 Q413 Q114 Q214 Q314
$2.7 $2.8 $3.0
$3.5 $3.6
$3.8 $4.2
$ billions
~40% Q3’14
growth y/y
>24mo avg. contract
length
~$6B Q3’14
booked business1
Non-GAAP Margins Reflect Growth Investment Choices
75%
80%
85%
90%
FY10 FY11 FY12 FY13 FY14 YTD
0%
5%
10%
15%
FY10 FY11 FY12 FY13 FY14 YTD
• M&A • Oracle Agreement • Services Mix
• Hiring • M&A • Events
CRM Total
Sub & Support
Note: Non-GAAP measures exclude the effects of stock-based compensation, amortization of purchased intangibles, and net non-cash interest expense. A complete reconciliation of GAAP to non-GAAP measures can be found at www.salesforce.com/investor.
80.0% FY’14 YTD gross
margin
9.7% FY’14 YTD
operating margin Gross Margin Operating Margin
Employee Base has Doubled Since FY11
FY10 FY11 FY12 FY13 Q314
3,969
5,306
7,785
9,801
12,770 37% Q3’14
y/y growth
~2,100 from acquisitions
YTD
Full-time employee headcount
Real Estate Remains Largest Single CapEx Category
$45
$ millions
$29
$51 $51 $54
$103
$73
1. Includes data centers, hardware, internally developed software, ExactTarget, IP licensing and other capital expenditures.
CapEx Drivers •Real estate •Cap. software •Datacenters
Q113 Q213 Q313 Q413 Q114 Q214 Q314
Real Estate Other 1
Strong Operating Cash Flow Growth with Consistent Yield
1. Estimated FY’14 impact to operating cash flow from the acquisition of ExactTarget as of June 4, 2013.
FY10 FY11 FY12 FY13 YTD FY14
YTD OCF Q3 YTD CapEx % of Revenue $ millions
Q3 YTD OCF Yield
$271
$459
$592 $604
$737 33% growth ytd
y/y
19% 24% 21% 21% 21%
5% 5% 7% 6%
8%
Q4 OCF
Low-teens percentage growth
FY’14 OCF guide
~$80M FY’14 OCF impact from ExactTarget1
Operating Model Framework
Revenue Growth is Our Priority
1. Op. Margin is non-GAAP. Non-GAAP measures exclude the effects of stock-based compensation, amortization of purchased intangibles, and net non-cash interest expense.
Note: Framework does not take into consideration the impact from potential future acquisitions.
High Growth
Top Line
Priority
>30%
Revenue Growth
Flat to Up Slightly
Op. Margin1
OCF Growth < Revenue Growth
Growth
Top & Bottom Line
Priority
20%-30%
Revenue Growth
+100-300bps
Op. Margin1
OCF Growth ~ Revenue Growth
Low Growth
Bottom Line
Priority
<20%
Revenue Growth
+200-400bps
Op. Margin1
OCF Growth > Revenue Growth
Mid-30% op margin at maturity
Fastest Growing Enterprise Software Company
Growth has always been our top priority
. . .and it shows
Note: Represents Top 20 largest enterprise software companies by revenue. Growth rates based on analyst consensus.
Now the Eighth Largest Enterprise Software Company
But we have much larger ambitions,
and scale matters
Note: Represents Top 20 largest enterprise software companies by revenue. Revenue estimates based on analyst consensus.
We Are Defining an Industry
Largest enterprise software companies
characterized by:
Platform standard Best-in-class apps Broad ecosystem
Note: Represents Top 20 largest enterprise software companies by revenue. Revenue estimates based on analyst consensus.
Graham Smith CFO
The $10 Billion Playbook
Investing For Continued Growth
Technology Markets Distribution
ERP: $36.8B CRM: $22.1B
The Enterprise Software Landscape in 2013
BI: $22.7B
HCM
$2.9B 6.9%
IT Helpdsk
$1.5B 6.2%
Finance Mgmt
$10.7B 7.2%
SCM
$9.2B 10.4%
HRMS
$4.3B 6.9%
Travel Exp Mgmt
$0.7B 6.9%
Asset Mgmt
$1.5B 6.7%
Manufg / Ops
$6.0B 7.6%
Analytic Apps
$5.1B 8.7%
BI Tools
$9.0B 6.5%
Sales
$5.5B 14.2%
Service
$7.5B 12.8%
Marketing
$4.4B 21.0%
E-comm
$3.5B 13.2%
Collaboration: $8.5B
Platform: $21.1B
Web Conferencing $2.3B 10.4%
Enterprise Content Mgmt $5.0B 10.5%
App Development / Deployment $17.0B 7.8%
Account & Contact Data $1.2B / 4.9%
Data Integration & Quality $4.1B 10.5%
DBMS – Relational
$8.6B 7.2%
Current TAM Emerging TAM TAM (2013) $xxB Not Addressed CAGR (’13-’17) xx%
Team Collaboration $1.2B 14.7%
Market Market or Submarket
Source: Gartner, Inc., Enterprise Software Markets, Worldwide 2010-2017, 3Q13 Update 9.16.13.
Our TAM Continues to Grow
Source: TAM includes Sales, Service, Marketing, Platform, Chatter, Data.com and Work.com. Market size data is sourced from Gartner, Inc., Enterprise Software Markets, Worldwide, 2010-2017, 3Q13 Update 9.16.13.
$58B 2017 estimate in
2013
$40B 2017 estimate
in 2012
14% #1 CRM market share in 2012 2013 2014 2015 2016 2017
$30 $32
$34 $37
$40 $37
$41
$46
$52
$58
2012 TAM 2013 TAM
Salesforce.com Total Addressable Market
Marketing Automation
ExactTarget Expands Salesforce TAM. . .
ERP: $36.8B
HCM
$2.9B 6.9%
IT Hlpdsk
$1.5B 6.2%
Finance Mgmt
$10.7B 7.2%
SCM
$9.2B 10.4%
HRMS
$4.3B 6.9%
Travel Exp Mgmt
$0.7B 6.9%
Asset Mgmt
$1.5B 6.7%
Manufg / Ops
$6.0B 7.6%
Collaboration: $8.5B
Platform: $21.1B
Web Conferencing $2.3B 10.4%
Enterprise Content Mgmt $5.0B 10.5%
App Development / Deployment $17.0B 7.8%
Data Integration & Quality $4.1B 10.5%
Team Collaboration $1.2B 14.7%
BI: $22.7B
BI Tools
$9.0B 6.5%
DBMS – Relational
$8.6B 7.2%
Analytic Apps
$5.1B 8.7%
CRM: $22.1B
Sales
$5.5B 14.2%
Service
$7.5B 12.8%
Mktg
$4.4B 21.0%
E-comm
$3.5B 13.2%
Account & Contact Data $1.2B / 4.9%
. . .and Marketing Automation is the Fastest Growing Segment
20% of 2013 CRM
market
>2x market size
by 2017
2013 2014 2015 2016 2017
$3.4 $3.8
$4.2 $4.7
$5.2
$4.4
$5.3
$6.5
$7.8
$9.5
2012 TAM 2013 TAM
Salesforce ExactTarget Marketing Cloud Total Addressable Market
Source: Gartner, Inc., Enterprise Software Markets, Worldwide, 2010-2017, 3Q13 Update 9.16.13.
Every Consumer is Now a Customer. . .
Connected
Customers
Connected
Employees
Web Stadium Store Community
Connected
Partners
Email Social Mobile Product
Connected
Experiences
5 Billion Smartphones by 2017
Your Bank
. . .and They Are Always Connected
ExactTarget: Early Success Leveraging Salesforce Distribution
>60% of total opportunities from lead pass are
net-new
>50 deals closed from lead pass to date
Net-New ExactTarget Customer
Net-New Salesforce & ExactTarget Customer
Net-New ExactTarget Customer
Pardot: Early Success Leveraging Sales Cloud and Distribution
~60% of total opportunities from lead pass are
net-new
>80 deals closed from lead pass to date
Net-New Pardot customers since acquisition
Every App Needs to be Connected
1. Source: 2013 State of the CIO Survey; CIO Magazine, January 2013
Complexity Dev. Costs Security Maintainence
65% 65% 63%
48%
CIOs’ Mobility Challenges2
#1 priority of mobility
in CIO survey1
2. Vanson Bourne for Mobile Helix: Survey of 300 UK and US CIOs at firms over 1001 employees; August 2013. Source: eWeek, Mobile Application Deployment Hampered by Cost, Security Concerns; Nathan Eddy, 08.01.2013
Best in class apps connected through APIs
Sales Service Marketing AppExchange
Cloud . Social . Mobile . Connected
1 Platform for connecting the next
generation of devices, apps, and customers
Introducing the Salesforce1 Platform
We Built Salesforce1 With an API First Approach
Metadata & UI APIs Organize Salesforce data, UI & layouts
Data APIs Query core CRM object data
APIs Data in / Data out
10X increase in API
functionality
230+ calls, services and methods
+100 core developers
to build S1
Salesforce1 is THE Next Generation Customer Platform
Build Apps, Connect Devices New Salesforce1 APIs
Unify Your Salesforce Experience New Salesforce1 App
Connect Every Customer 1:1 New Customer Engagement Engine
10%
12%
14%
Q113 Q213 Q313 Q413 Q114 Q214 Q314
Salesforce1 and ExactTarget Drive R&D Investment
35% R&D headcount
growth y/y
Note: Non-GAAP measures exclude the effects of stock-based compensation, amortization of purchased intangibles, and net non-cash interest expense. A complete reconciliation of GAAP to non-GAAP measures can be found as www.salesforce.com/investor.
Non-GAAP R&D Expense as a % of Revenue
Proven Enterprise Success with Large Untapped Opportunity
1.Based on Fortune Magazine’s annual ranking of the top 500 corporations worldwide, measured by revenue.
~50% Global 5001 pay us
$0 a year
<700 Customers pay us >$1 million a year
Proven Distribution Leadership
President and Vice Chairman
President, Global Enterprise Sales
EVP, Worldwide Alliances & Channels
EVP, Industries
Keith Block
Tony Fernicola Tyler Prince EVP, Commercial Sales
Brian Millham Vivek Kundra
Industry Strategy: Speak Our Customers’ Language
Public Sector
Rapid Response 311
Mobile Communities
Financial Services
Capital Markets
Retail Banking
Healthcare
Healthcare Providers
Medical Devices
Automotive Retail Communication/Media
Connected Cars
Dealer Communities
Customer Networks
Clienteling Applications
Agent Console
Ad Management
SIs Accelerate Vertical Penetration
“This year, salesforce.com will overtake Oracle Siebel
as the most deployed CRM application by large
consultants and SIs.“ – Gartner2
5x increase in certifications
over 3 years
~200%-400% y/y growth in bookings, pipeline and
trained resources for SI partners
~$5.2B IT service market for SIs related to
salesforce.com solutions1
1. Gartner Competitive Landscape 2. Gartner: CRM Applications Deployed by Consultancies
ISVs Extend Vertical Solutions
Healthcare & Life Sciences
+80%1
Mfg & Supply Chain
+228%1
Public Sector
+122%1
Financial Services
+109%1
900 ISVs >2,000 Apps
>2,000,000 Installs
1. Percentages represent growth in number of apps during FY13.
ISVs Extend Horizontal Reach
900 ISVs >2,000 Apps
>2,000,000 Installs
ISVs Building Revenue Momentum
>125 ISVs paying >$100k annually 15
2 yrs Time from launch to $100K 3 yrs
>15 ISVs paying >$1M annually 1
900 Signed ISV partners 200
>20K Net-new deals closed by ISVs 7K
FY12 FY14 YTD
$1 Billion Quarter on Way to $10 Billion Decade
Q405 Q406 Q407 Q408 Q409 Q410 Q411 Q412 Q413 Q314
Quarterly Revenue
$35m
$1.08b
Investing for Continued Growth
Innovation
Secures our future
Speeds up innovation
Depth
Focus on solutions
Enterprise penetration
Breadth
Expands opportunity
Increases customer value