Salesforce, Inc. (NYSE:CRM) Q3 2023 Earnings Call Transcript

Salesforce, Inc. (NYSE:CRM) Q3 2023 Earnings Call Transcript November 30, 2022

Salesforce, Inc. beats earnings expectations. Reported EPS is $1.4, expectations were $1.22.

Operator: Good afternoon, ladies and gentlemen, and welcome to Salesforce’s Fiscal 2023 Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speaker’s prepared remarks, there will be a question-and-answer session. And now at this time, I’ll turn the call over to your speaker, Mr. Mike Spencer, Executive Vice President, Investor Relations. Please go ahead.

Mike Spencer: Thank you, Bo. Good afternoon, and thanks for joining us today on our fiscal 2023 third quarter results conference call. Our press release, SEC filings and a replay of today’s call can be found on our website. With me on the call today is Marc Benioff, Chair and Co-CEO; Bret Taylor, Vice Chair and Co-CEO; Amy Weaver, Chief Financial Officer; and Brian Millham, President and Chief Operating Officer. As a reminder, our commentary today will include non-GAAP measures. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings and press release. Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties and assumptions, which could change.

Should any of these risks 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 could affect — that could affect our financial results is included in our SEC filings, including in our most recent report on Forms 10-K, 10-Q and other SEC filings. Except as required by law, we do not undertake any responsibility to update these forward-looking statements. And with that, let me hand the call over to Marc.

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Marc Benioff: Okay. Well, thank you so much, Mike, and thank you, everyone, for being on the call. I just want to come back to how great it was to see so many of you at Dreamforce in September. It was really a wonderful experience for me personally. It was our most successful, but I really think it was our most important Dreamforce ever, because we were able to come together for what we called our great reunion. And being with you all of you, especially at our IR day, that was a joy for me. Now let’s get on to the quarter results. We delivered solid revenue growth and profitability in an increasingly challenging environment. You’ve seen how we’re driving customer success, the strength of our organic innovation and this incredible Trailblazer community and how it manifested at the Dreamforce.

And everywhere we turn, we saw customers learning how to connect with their customers in entirely new ways and the depth of our Customer 360 platform. We’re also thrilled to introduce Genie, which is our Customer Data Cloud, and it’s one of the most transformational technologies we have ever delivered. And when you hear some of the metrics already coming out of customer adoption with Genie, I think that you’ll be incredibly impressed, and I can’t wait for Bret to talk about that. The best part of Dreamforce was being together. That was what it was all about for me, and I’m sure it was for you as well, and the 40,000 folks that all came to San Francisco to have this incredible experience and all the additional folks that joined us online. Now let’s get to our results.

Revenue in the quarter, well, it was $7.84 billion. That’s up 14% year-over-year. I think that’s a record for us. And also, it was 19% in constant currency. And we’re going to talk about that foreign exchange situation in just a second. We closed some amazing deals in the quarter with great companies like Bank of America, RBC Wealth Management and Dell and other great stories, and I’m also going to get that into a moment as well. And even with purchase decisions receiving greater scrutiny, we continue to gain market share and close marquee transactions. IDC recently ranked Salesforce as the number one in CRM. And now we’ve done that for nine years in a row. And I’m proud that we’ve delivered revenue growth in this environment, but especially proud of the team for our continued focus on delivering record operating margins.

And here, you can see now, up 22.7% non-GAAP operating margin we delivered for the quarter. And I think when I look back at various financial crisis, as we think back even, I think, to 2008, 2009, I think it was like somewhere down to 10%. So we’ve come a long way in a short period of time. So this quarter has been further proof of our commitment to profitable growth, continuing our operating margin growth, continued focus on our revenue growth, continued focus on our market share growth. And a great evidence of that is our remaining performance obligation. Our RPO is now an incredible $40 billion. Now, as I’ve said in the last few quarters, the dollar had a strong quarter, maybe even a stronger quarter than we had. I think that when we first said that, in the second quarter, folks didn’t really understand what we were talking about, or maybe it wasn’t the first quarter we said that.

I remember, it was a trip to Japan when I called Amy, and I was asking her what the expectations were for revenue. But when I told her what my guidance was for what and how I was looking at revenue, including foreign exchange, I don’t think either one of us could believe what was really happening, and now we’ve really seen that start to play out. We continue to see the impact of foreign currency fluctuations. And of course, that is our biggest surprise of the year. In the quarter, we saw $300 million year-over-year headwinds to revenue, and we’ve expected a total of $900 million for the full year. Now that is something we just could not have expected a year ago, and that is when we initiated our revenue guidance. At Dreamforce and in my travels around the world, our customers have been asking how to best navigate this economic situation with the high level of market volatility and uncertainty.

A lot of CEOs have never been through these types of crisis before. They haven’t seen these kind of variations in the market or in foreign exchange or even in market demand. Well, we’ve got a lot to say about that, because this is not our first financial crisis. And I’m seeing a lot of buying behavior that really reflects a lot of what we’ve seen during other crisis, whether it’s 2008, 2009 or even 2001. And obviously, the current economic situation is nowhere near as severe as what happened beginning in 2008, but there are some patterns that we’ve seen repeat themselves. And in early 2008, we saw customers who are reluctant to expand distribution capacity, they weren’t adding service people, they froze their hiring, they initiated headcount reductions.

We saw those occur in that year. We saw that in (ph) as well. I think that, maybe when things start to get a little tough or when the stock market shifts that’s when CEOs say, hold on, should we be expanding distribution capacity right now? Should we be expanding service capacity? What do we stop — let’s stop our advertising, let’s stop our marketing spend, things that they can immediately take actions on. Well, you couple that with foreign exchange headwinds have become an issue and everyone was shifting their focus to finding efficiencies, reducing their costs, increasing productivity, and again, we’re feeling all of this once again. And that led us to the shift of the company. It took us a lot to how we operate and where we are investing our dollars.

We’ve actually developed our own playbook. We really wrote it all down. We talked about what was happening we knew would happen again. And we had to dust off some of those plans and numbers from 12, 13 years ago from 22 years ago. And we’ve turned that playbook in gaining market share and focusing on operational discipline and operational excellence, especially in the face of economic headwinds. And as the economy has started to recover, whether it’s in 2010, or even in 2002, we were able to radically accelerate our growth. I have to tell you, when we went back as a team and we looked at the numbers, even I was really shocked to see kind of how things change some of the decisions that we made, but then how we all of a sudden were able to navigate so well, and use that as an opportunity to adjust the company in all — in a number of really critical and strategic areas.

Now I’ve always believed since that point, especially, that an economic crisis creates these opportunities, and we’re squarely in that moment, and we’ve acted. Starting in July of this year, the buying environment became more measured and foreign exchange headwinds were becoming increasingly complex. We told you then we didn’t believe this challenging macro environment was going to be a short-term problem. And you know we’re not economists. You know that we don’t know exactly what is happening or when the recovery will happen, et cetera, but we do see a lot, and I think we understand a lot about what’s going on, because we have such strong global data. And we’re not assuming that this economy gets any better anytime soon. We’re just reporting what we see with our customers, the kind of changes they make, when they start to feel these headwinds.

We’re following our playbook to make sure we’re well positioned to gain market share, to increase our profitability, to focus on our operating margin, to focus on the growth of our revenue and be able to continue to invest, especially when the economy recovers. Now for this fiscal year, we’re maintaining our revenue guidance of $30.9 billion to $31 billion, up 17% year-over-year or 20% in constant currency. And you saw that, that also included that incremental foreign exchange headwind, and it’s even an expected incremental $100 million of foreign exchange headwind just since last quarter. We’re raising our fiscal year 2023 non-GAAP operating margin guidance from 20.4% to 20.7%, an expansion of 200 basis points year-over-year, and I expect a lot more, especially with this increased focus we have on expanding our operating margin.

Salesforce is mission-critical to nearly every Fortune 1000 company, because every company is becoming a customer company. And everyone knows that this is the time during a crisis like this that you need to focus on your customers. If you need to do one thing, if there’s one critical thing that every company has to do to get through this, is to make sure they maintain their relationships with their customers. It’s a critical part of navigating through this time, and you’re not going to be successful if you don’t stay connected with your customers. We’re signing transformational deals with major brands, as every industry continues to digitally transform and that continues to be perhaps the most important initiative of every company, regardless of the economic situation.

When you look at this by industry, it’s slightly different for each industry. In telecom, we’re working with almost every major players. They transform how they connect with their customers. All telcos must deliver faster, better service to customers, keeping their costs down, focusing on their NPS score, becoming more competitive. We all know that. It’s a highly competitive industry. We all understand the dynamics well. It’s one of the reasons why we’ve done so well in all these global telecom companies. But I really want to talk to you about a great example, and this deal that we signed with T-Mobile in the quarter. Now we’ve done a lot of work with Mike and with T-Mobile over the years, and that’s been very exciting to see how they built their company and especially how they’ve executed the merger and now they have a treeing amazing transformational opportunity on how they work with businesses, and we’re working with them to develop a vision for the next-generation user experience for T-Mobile for Business and our professional services team is leading that charge.

Financial Services, well, that’s another industry that’s been going through one of the most incredible digital transformations, but it’s an incredible moment for them actually. It’s why we’re working with all the major financial service companies to drive stronger client relationships and to unite their teams to be more effective, especially in this environment. It’s a golden time for financial services in many ways. A great example is Bank of America, who I think has been a customer for more than 20 years, and we’ve been with them through many different financial crisis. But in a short amount of time, they’ve increased productivity and reduce their technical debt. They’re saving time and money, they’re connecting with their customers in new base.

It’s a tremendous relationship with BofA to become their CRM standard. We’re delighted to have such great success with them over many decades and to expand this relationship to the business bank, to the corporate bank and the investment bank, it’s really an expansion. And I just want to thank Brian for his tremendous loyalty, but also his partnership over so many decades, and it’s just a great organization to work with every single day. Well, before I go on, first of all, I want to give you an invitation. I hope that, you’ll all plan to join us in New York City next week, where we’re going to host our Salesforce world tour on December 8. Join us in person or online, where we’re going to announce some new innovations. And you’re going to hear from our incredible customers and so much more.

Now before I end, I have to say something, and it’s something that I did not want to say ever, and I’m extremely sad to tell you that, Bret Taylor is going to be leaving the company. Bret and I are like brothers. I love him very deeply. He’s an incredible person. And one of the great joys of my company has been having him here. And I’ll tell you, for me, this has been a feeling of tremendous loss. I’m experiencing that right now. You can probably hear it in my voice. It makes me think of all the great people that we have actually lost in the company over the time as well, so many great leaders of our industry, but especially now with Bret. This is just really hard for me, and I’m extremely sad to see him go. I know he has created two great companies.

I know he wants to go create a third great company. And you can’t keep a wild tiger in a cage. And we got to let them be free and let him go, and I understand, but I don’t like it. And Bret, you know that you’re always going to be our brother. You know that you — we love you very deeply, that you have a home here. We’re going to try to get you back somehow. So don’t think that you’re going to somehow get out of this alive, because you’re not. And you’re always going to be part of our Ohana. And we are really upset about this, and it’s going to be a difficult moment for us. But I know that you’re going to be with us through the end of the year, and I know you’re going to continue to work with us even after this point. But Bret, we love you, and we’re so sorry to see you leave the company at the end of this year.

Bret Taylor: Thank you, Marc. It’s hard to follow that and trying to keep my composure as well. I just want to start, Marc, by just expressing how deeply grateful I am to you. And just as importantly, the entire Salesforce team. For the past six-plus years, I just couldn’t have imagined it when I joined the company, I could not be more proud of the trust, innovation and customer success we’ve delivered in my time here, particularly over the past few years, I think this amazing community has helped every organization in the world to remain connected to their customers amidst a public health crisis, the economic turmoil, this global pandemic. It’s just incredible, and I’m incredibly grateful. And Marc, you personally, you’ve been my mentor long before I joined this company.

And in the past six years, your relationship has definitely become the most significant in my professional career. I would not be the leader, I am today without you, and I cannot thank you enough for our friendship and our partnership. The past few years have been tumultuous for all of us, and I’ve recently been reflecting what’s been truly important to me. And while there is absolutely no easy time for a transition like this, I really do feel that now is the right time for me to return to my entrepreneurial roots, particularly given the technology landscape and the economy going through such tectonic shifts. Salesforce has never been stronger, and I’ve never been more confident in the future of the company. And as Marc said, I will remain as co-CEO through the end of the fiscal year, not only to ensure a smooth transition, but most importantly, to ensure that we have a strong close to the quarter and a strong close to the fiscal year.

And as Marc said, even after this transition, I will always, always be a part of this company and always be a part of this community. As Marc said, we had a solid quarter, top — double-digit top and bottom line performance, demonstrating the strength of our business model and our commitment to operating with discipline and delivering profitable growth at scale. We continue to deliver on organic innovation, and our product portfolio is strategically positioned, mission-critical and highly differentiated. Our ecosystem and our app exchange marketplace are unparalleled in the industry. And as Marc mentioned, as you saw at Dreamforce, our innovation engine is an overdrive, with Genie, Slack canvas, Net Zero Marketplace and more, building on our position as a leader in nearly every CRM category.

Genie, in particular, makes every part of our Customer 360 platform more automated, intelligent and real-time, driving faster time to value for our customers. And the adoption of Genie by our customers, particularly this past Cyber week, has exceeded all of our expectations. The Genie Customer Data Cloud is already processing literally over 100 billion customer records on average every single day. During Cyber Week alone, Genie ingested an astonishing 1.1 trillion records and enabled 43 billion consumer engagements for our customers. Inter, a leading digital banking service company in Brazil, is a great example of Genie’s power. Inter was able to consolidate six data systems into one, and they are converting 35 times more customers with Genie.

Like Marc, I met with hundreds of CEOs across every industry over the last few months. In this buying environment, our customers are increasingly focused on three things. First is time to value. Our customers need to quickly get the benefits of their technology investments. Second is ensuring these digital transformation projects drive cost savings in addition to customer satisfaction and top line growth. And third, we know our customers need to consolidate their platforms and vendor relationships to reduce complexity and risk and to drive efficiency. We are delivering on all three at scale today for our customers. Our customers are seeing on average an estimated 25% in savings in their IT costs and 26% increase in employee productivity using Salesforce according to a recent survey of more than 3,500 of our customers.

RBC Wealth Management is a great example. RBC is onboarding new customers in minutes instead of days, and they’ve consolidated over 26 technology systems into one using our Customer 360 platform, decreasing their maintenance costs by 50%. Despite the economic headwinds that Marc mentioned, we had record low revenue attrition again this quarter, which is a testament to just how mission-critical Salesforce is to our customers, especially in this environment. We also launched new product bundles for sales, service, marketing and analytics. These product bundles are enabling our customers to consolidate their tools on Salesforce, driving efficient growth. We’re also closing transformational deals and multi-cloud expansions. This quarter, seven of our top 10 deals included five or more of our clouds.

Now let’s turn to the cloud performance. Sales Cloud, our flagship, continues to drive sales productivity for the world’s most important brands. Sales Cloud grew 12% year-over-year, a healthy 17% in constant currency, including great customer wins at companies like Bolt, Snowflake and Thermo Fisher. Service Cloud continues to help our customers deliver exceptional customer service experiences and reduce their customer service costs. Service Cloud grew 12% year-over-year or 16% in constant currency, approaching $2 billion in revenue for the quarter, with wins at Carl Zeiss, Dell and Fujitsu. Our Marketing and Commerce Clouds power the digital customer experiences for the world’s greatest retailers and browns around the world, and together grew 12% year-over-year or 18% in constant currency, thanks to wins at companies like Banco Bradesco, Hugo Boss and Slack.

We just passed Black Friday and Cyber Monday, and I want to express my gratitude to our engineering teams. Our engineering teams again delivered unparalleled mission-critical reliability and scale to retailers around the world. Even lapping the pandemic, the sales process for our Commerce Cloud in Cyber Week increased 11% year-over-year. And our Marketing Cloud delivered nearly 49 billion messages in Cyber Week alone, up 21% year-over-year. We’ve now sent 1.4 trillion messages from our Marketing Cloud so far this year, just incredible. Our platform business, which includes Slack, grew 18% or 22% in constant currency, highlighted by wins at Japan Airlines, WorkSafe, Victoria and Zoom. Einstein Artificial Intelligence platform is now generating 194 billion predictions every single day across the Salesforce Customer 360 platform, up 57% year-over-year.

And Slack, which now powers collaboration and workflows across the entire Customer 360, grew 46% year-over-year. Slack is now handling more than 2.6 billion actions every single day and had great wins this quarter with companies like Rivian and Verizon. Data, which includes MuleSoft and Tableau, continues to be core to every digital transformation at every single one of our customers. Data grew 13% year-over-year or 16% in constant currency. We’re seeing strong demand from MuleSoft, which reaccelerated in the quarter to 19% year-over-year growth or 23% in constant currency, with wins at brands like Western Union, SmileDirectClub and Kona. Integration transactions on the MuleSoft platform grew to $6.7 billion per day, up 33% year-over-year. Tableau grew at 8% year-over-year or 9% in constant currency, with wins in the quarter at Inter and McLaren Racing.

As a reminder, due to the way we recognize revenue in MuleSoft and Tableau, when the macro environment is difficult, we typically see the effects earlier and more pronounced in these businesses. We’re confident in the opportunity ahead for Tableau, and we recently made changes to reaccelerate Tableau growth. This includes new leadership, and as importantly, new product integrations like revenue intelligence, a deep integration between Sales Cloud and Tableau that has become one of our fastest-growing add-on products. And finally, as we mentioned every quarter, our industry solutions continue to be a strength in our portfolio, with out-of-the-box processes that enable our customers to achieve faster time to value and lower implementation costs.

Even with the many successes in the quarter, we expect this increasingly challenging buying environment to continue next year. I’m confident that, Salesforce has never been more mission critical to our customers in this environment. And to wrap, I’m so grateful for our employees, our 80 million Trailblazers, and all of our customers and partners for helping lead the way with innovation, agility and resilience to navigate in these times. And before I pass it to you, Amy, I just want to express my personal gratitude to you. As I became the first-time CEO and you became a first-time CFO navigating the company and navigating our customers through these crisis, I’m so grateful for our relationship and for everything this company has done for me.

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Amy Weaver: Great. Bret, thank you. And let me just start by saying you, it has truly been a joy to work with you for the last six years. I am going to miss you carefully, but I’m also equally excited for you on your next steps, and I know they will be incredible success again. So taking that left turn to our results here. I am pleased to report another quarter of double-digit top and bottom line growth. Despite increasing macro pressure, revenue grew nearly 20% in constant currency. And as we discussed at our Investor Day in September, it’s a new day for profitability. I’m very proud of our Salesforce team and all of our employees for generating record operating margin during Q3. Reiterating Marc’s comments, profitable growth is a major focus as we lean in on best-in-class operational excellence across all aspects of our business.

As customers focus on optimizing time to value, driving cost savings and consolidating platforms and vendor relationships, we remain well positioned to support them through the current economic environment. Now to our results for Q3 fiscal year 2023, I’ll begin with top line commentary. Total revenue for the third quarter was $7.84 billion, up 14% year-over-year, or 19% in constant currency. Foreign exchange continued to be a headwind to our results, as the dollar further strengthened throughout the quarter. For Q3, the total FX impact was $300 million, approximately $50 million more than we had forecast. A few highlights from the quarter. Again, as we outlined at Investor Day, we have three balanced growth pillars: Customer 360 Advantage, industry solutions and geographical expansion.

All of these continue to reflect the growing adoption of our portfolio across our customer base. First, multi-cloud adoption by our customer base continues. Customers with five or more clouds increased ARR by over 20%. Second, our industry solution continues to be a strong tailwind to our revenue growth. Seven of our 13 industry clouds grew ARR above 50% this quarter. In some of the highest performing industries, clouds in the quarter included energy and utilities, manufacturing and our recently announced Automotive Cloud. Finally, from a geographical perspective, Americas grew 16% year-over-year, EMEA grew 10%, 23% in constant currency, and APAC grew 14%, which is 30% in constant currency. And as you have heard, revenue attrition in Q3 was again below 7.5%, reflecting the value that our services are providing to the customer base in this tough operating environment.

Q3 non-GAAP operating margin was a strong 22.7%, driven by our ongoing focus on disciplined execution, our hiring slowdown and resource prioritization. Q3 GAAP EPS was $0.21 and non-GAAP EPS was $1.40. Mark-to-market accounting of the company’s strategic investments increased GAAP and non-GAAP EPS by $0.02. Operating cash flow was $313 million in Q3, down 23% year-over-year. CapEx $198 million, resulting in free cash flow of $115 million, down 52% year-over-year, both driven by lower billings. Turning to remaining performance obligation, which represents all future revenue under contract. RPO ended Q3 at approximately $40 billion, up 10% year-over-year. Current remaining performance obligation, or CRPO, was approximately $20.9 billion, up 11% year-over-year and 15% in constant currency.

This includes one point of incremental FX headwinds beyond our Q3 guidance. And finally, Q3 was a milestone corridor for Salesforce. After announcing our first ever share repurchase program on the last earnings call, I am pleased to share that we returned $1.7 billion to shareholders during Q3. Before moving to our guidance, I’d like to comment on the current economic environment. You recall that last quarter we noted measured customer buying behavior really beginning in July. This led to elongated sales cycles, additional deal approval layers and deal compression, particularly in enterprise. As Q3 progressed, we saw an even more challenging buying environment, driving intense customer scrutiny on every investment dollar to ensure the highest return possible.

During Q3, this behavior was most pronounced in our US and major European markets, while Japan remains more resilient. From an industry perspective, the most impacted was retail, consumer goods and communications and media, while the more resilient for travel and hospitality, manufacturing, automotive and energy. And from a product perspective, we continue to see customer spending pressure in commerce and marketing. Now to our guidance. First, on revenue, we are pleased to maintain our fiscal year 2023 revenue guidance of $30.9 billion to $31 billion representing 17% growth year-over-year or 20% in constant currency despite an incremental $100 million FX headwind since our last call. This raises the total year-over-year FX headwind to $900 million.

In addition, our guidance includes flat at slightly above $1.5 billion. As you’ve already heard, we are deeply committed to expanding our profitability over the long term. I am proud that, we are raising our fiscal 2023 non-GAAP operating margin guidance to 20.7%, an increase of 200 basis points year-over-year. And this guidance also includes approximately 75 basis points of headwind from Slack. As a reminder, because our regional revenue and expenses are generally in the same currencies, there tends to be a natural FX hedge in our operating margin. For Q4, we expect GAAP EPS of $0.23 to $0.25 and non-GAAP EPS of $1.35 to $1.37. For the full year, we expect GAAP EPS of $0.55 to $0.57 and non-GAAP EPS of $4.92 to $4.94. CRPO growth for Q4 is expected to be approximately 7% year-over-year or 10% in constant currency.

This guidance continues to incorporate the more challenging trends in our customer behavior, as previously discussed. We now expect our fiscal 2023 operating cash flow guidance to be approximately 16%, which is at the lower end of our previous guidance, driven by lower billings. This includes a three-point headwind from cash taxes associated with tax law changes, requiring the capitalization certain R&D costs. We now expect CapEx to be approximately 2.5% of revenue for the fiscal year. This results in free cash flow growth of approximately 17% for the fiscal year. Before I close, I’d like to share a few thoughts on fiscal year 2024. As discussed, we are experiencing a very unpredictable macro environment as our customers are looking to ensure their businesses are also healthy for the long term.

Compounding that dynamic is an unprecedented foreign currency market. Therefore, at this time, we believe it will be pretty sure to provide revenue guidance for the next fiscal year. Now in terms of operating margin, we are driving operating discipline and following our playbook that Marc discussed to ensure that we are consistently expanding our operating margin in the face of top line headwinds. And as the leadership team, we’re continuing to take a hard look at our cost structure. This is all part of our playbook, and we will continue to take steps that drive profitable growth. Of note, we intend to provide full FY 2024 guidance on our fourth quarter earnings call. So to close, we are helping our customers navigate the current macro environment by bringing much needed efficiencies to their digital strategy with a compelling value case.

Our commitment to disciplined decision-making is unwavering, and we are marching towards our fiscal 2026 target of at least 25% non-GAAP operating margin, inclusive of any capital allocation decision. And as our business grows, we will continue to target returning on average 30% to 40% of free cash flow annually to our shareholders. Now, Mike, should we open up the call for questions.

Mike Spencer: That’s good. Thank you, Amy. Bo, we’ll go to Q&A and we’ll take the first question.

Operator: Thank you, Mr. Spencer. We take our first question this afternoon of Keith Weiss of Morgan Stanley.

Keith Weiss: Excellent. Thank you guys for taking my questions. Maybe one for Marc and one for Amy. Marc, on the leadership change or Bret leaving, we’re also very sorry to see Bret leaving. He is a great addition to the team. I guess the good news is there’s already a CEO and you set to go. But should we expect a replacement for Bret on a going-forward basis? Are you going to look to go back to that kind of co-CEO dynamic or replace kind of what he was doing on a day-to-day basis with some other executive on a go-forward basis? And then I guess for Amy, at the Analyst Day, you talked about a more back-end loaded operating margin trajectory towards that 25%. Any change in that dynamic given kind of what’s going on in the macro environment and seeing kind of the degradation on the top line? Does that push operating margin? Does that sort of push operating margin expansion to the kind of the forefront in any way?

Marc Benioff: Well, thanks, Keith. And I think it’s a great question. And obviously, we’re still in a little bit of shock and extremely sad and feeling a lot of loss for losing Bret. Again, I don’t have to tell you, one of the best people ever to have worked with in my life and also just a great person. And I have to also tell you that we have a lot of fantastic people in the company, and Bret’s management team, what we call the ELT here at Salesforce, includes some incredible people who have been with us in some cases for decades. And they’re some of our most capable and incredible people, and I think you know a lot of them, Keith, very well on a personal level as well. And I couldn’t — I have to tell you, I couldn’t be more proud of Bret and everything he has done in the last seven years.

But while we have a huge light on Bret, I think it would be unfair to not also put a huge light on these other managers and leaders in the company who have done such a great job, whether it’s our product leaders or operational leaders, geographic leaders, many of them who you know and have met over the years, whether it was at Dreamforce’s or World Tours or at Investor Days, whether it is people who do our impact work or philanthropy work or human resources, our incredible marketing leaders, many of whom we have such deep personal relationships with because we’ve done such unbelievable marketing in the company now for so long. Folks who have joined us after acquiring their companies, and we have many of those folks as well, and which is also how we ended up with Bret when we bought this company, and people who are doing work in core work in our areas like the quality and sustainability, as well as operational leaders, where we’ve brought in some great new folks recently from organizations who are bringing us a new level of operational excellence.

I don’t have to tell you, I think we have the finest engineering team in the world, the leaders in engineering and some of them are what we call boomerangs, people left and didn’t find greener pastures, and came back to reclaim their leadership positions and the company are probably the greatest. They don’t have to call out my co-founder, who you know very well, Parker Harris, who happens to be in Tokyo today and not on the call because he’s running a world tour with our phenomenal team there, delivered what I expect to be shortly the second largest software company in Japan, and on and on and on. But I do want to bring it back to Bret, because this is his moment, and I think it’s very important that we really send him the appropriate gratitude and also a call out.

And until he walks out the door, don’t worry, I’m going to be keeping – trying to keep recruiting him back and I am a good salesman Keith, as you know me very well. And it’s not — the deal is not over until it’s over, but we do have to tell you that he has decided to leave. But I tell people all the time, we lose deals all the time, Keith. And for me, I never lose. I keep going back until, I win, Brian, how long have you been in the company now?