Salesforce, Inc. (CRM) Earnings Call Transcript & Summary

Excellent. Thank you so much for joining us. I'm very pleased to have with us from Salesforce, Amy Weaver, the new CFO. I think this is your first time at our conference, definitely first time as CFO. Unfortunately, before we get started, I got to read some disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So with that out of the way, Amy, thank you so much for joining us. So you've been CFO for just over a year now. Previously, you served as the Chief Legal Officer. And with you coming on board, it seems like there's been some market change in sort of the operating philosophy of Salesforce on a go-forward basis. Can you talk to us a little bit about sort of the changes that you've been putting into place since taking on the CFO role? And what are you still looking to enhance on a go-forward basis?

So first, it's great to be here, and having come over from the Chief Legal Officer role, I appreciate a good disclaimer. So a very appropriate way to start this. So it has been about a year, February 1 was 1 year. I was announced a little bit before that. It was great to get to the 1-year mark. And it's been an interesting journey. I've been at the company for 8.5 years. And that [indiscernible], I was working with Marc, I was working with Bret for years. But it was a little bit like being at the table and then standing up, walking 3 seats down, sitting down and then having a completely different view of the realm. You see your customers differently, you see the company differently. And you see the opportunities differently. And I think 2 of the real opportunities I saw. First is around growth. I mean, it's just incredible to have a company. We just closed out our last year $26 billion growing at the rate that we're growing. And to really start to be able to dive in, look at the TAM, see the opportunity in front of us has been exciting. But the other area I saw and I talked about a lot is I found that there was an opportunity to bring a lot of discipline to this growth. And to get to a point where we can deliver consistent operating margin and grow that this didn't need to be an either-or. And that's been my big focus for the past year.

Outstanding. I want to start on the demand side of the equation and maybe a little bit more on the growth side of the equation. As we lap the initial kind of pandemic recovery of 2021, and we start to get more into sort of the steady-state demand. What are you hearing from your customers in terms of IT budgets? Where are we in the digital transformation? How durable do you expect these kind of demand drivers to be as we head into calendar '22 and beyond?

Okay. So I would describe this as the great demand pull forward debate of 2022. And there's certainly been a huge topic in the news with analysts, with questions. I think it differs for companies, but I can tell you what we're seeing, and that's we're not seeing that. We're just coming off a very, very strong Q4, 26% growth year-on-year, very strong new business, strong really across all sizes of customers, which is exciting. For Q1, we just raised our guidance by $130 million. For the full year, we raised it by another $225 million, $300 million if you count our latest acquisition. So I think that shows you the optimism and it shows you what we're seeing on the ground right now.

Right. I mean, from my perspective, we always do checks into...

Of course.

Like any given quarter. And going into a Salesforce Q4, you're not surprised to hear about a good budget push. You're not surprised to hear about a good fiscal year-end because you guys tend to have a very good Q4. Typically, what you're worried about is that the company turning the pipeline into Q1 and into Q2. It was different this time. The pipelines feel really robust for the first half of the year. Does that kind of match what you guys see in your fiscal?

Well, I think that's the problem with this discussion about whether there's been a pull forward. Certainly, there are areas of all software businesses that accelerated during the pandemic or it surged for particular pandemic needs. But a pull forward seems to imply you've drained the pipe as opposed to you've actually created a need for more software. Companies that do these huge projects, especially those projects that are tens of millions of dollars a year, if not $100 million those aren't single-year projects. When a customer comes to you, you're expecting they're going to be with you on that journey for many, many years. And that's what we're seeing. I think that there's continuing excitement about digital transformation and just what we can do that -- with that in this kind of economy.

Right. And does that exist across kind of the customer base spectrum? I mean, Salesforce has a huge sort of array of customers from small businesses up to the largest enterprises. Does that same kind of multiyear initiatives, is that both in the large enterprise and also the mid-market? Or is that more of a large enterprise economy?

Yes, I think certainly for the large enterprise, those are the bigger deals they're going to take much, much longer. But we're really seeing strength across all of our customer sizes. When I look at the enterprise in Q4, we doubled the number of 8-figure deals that we did a year ago. We also had our largest deal on an incremental ARR base that we've ever had in customer history. And we're seeing this from companies that you might not necessarily think of as digital companies. I mean one is Ford Motor Company. And by definition, they sell trucks. And yet, they came to us and wanted to partner with Salesforce on kind of their new vision that is not just a truck, it's connected truck. They want to be able to connect to their customers, and their customers, they want to connect their trucks back to their businesses through field services and other projects. So it's exciting to see companies that you would not necessarily have thought about when you think about digital transformation. And even those companies are jumping in right now and moving forward.

Outstanding. The long-term view, at the Analyst Day, you guys talked about nearly doubling revenue by FY '26, targeting $50 billion based on the current portfolio. What gives you confidence in this level of sustained growth at this type of scale?

I have incredible confidence in it. And it starts with the markets that we play in. It sounds more fun maybe than day-to-day work, but it is great, and I am excited about this. We're in some of the biggest markets in the software area. But what's more important is all of these are expanding. And at Investor Day, I showed that -- the Gartner chart that showed our market shows where they were expanding. But what was most interesting to me about that is we showed this chart about 6 months earlier. And during that 6-month period, Gartner had increased the numbers by $50 billion. Now that wasn't because we had new products. It wasn't because we had acquired into a new area or gone into new regions. It was what Gartner was staying in terms of the confidence of the market and how important this idea of digital transformation is. And when I look at that and I look what Salesforce is positioned, it gives me incredible confidence about what we're going to be able to do over the next few years.

Right. It is a very interesting point that you make on sort of the expansion of the market. I think we've underestimated kind of the size of these markets as they move into cloud, as they move into the kind of faster innovation cycles that you see with SaaS. And as it becomes more collaborative, the traditional user of Salesforce has expanded greatly over time. Who would have thought that like health care cloud that cover nurses, and that would be a customer for Salesforce.com, and it all expands the market in a really big way. When you look across the portfolio, maybe an unfair question, pick your favorite children, but any particular parts of the portfolio or parts of the segment you're particularly excited about and driving outsized growth over the next couple of years?

So you're right, that's like picking children. I love all the products equally. I think 3 that I'm really excited about going forward. First is Slack, and I'm sure you're not surprised that I would say that, but Slack has been an incredible acquisition. And what's surprising is, they've only been part of Salesforce for 2 full quarters waited very long time between announcing the deal and actually closing. So we've only had 2 quarters. But during those 2 quarters, they have outperformed our expectation on almost every metric that we can think of. And they're off to a great start on sales, on distribution and on innovation of their products. So really excited about where we're going with that. The next one I would probably have to say is Industries, and this is cheating a little bit because we have 12 different industry products. The industry products are a more specialized version of Salesforce. That is aimed at a particular industry, whether it's financial services or retail, 12 different products at this point. They are more aligned and they help a customer, basically, as Bret likes to say, start on third base. So faster time to value. And what I love about them also as the CFO is these have some of our highest average selling prices and some of the lowest attrition. So it's really a win for our customers and getting off to a fast start, and a win for us on the financial side. And then probably the third I would point to is our CDP product. We launched it just a year ago, it's already one of our fastest selling products at the company. And this focus on first party data, I think, is really important. I think that the market has shifted. I think that we are moving away from a reliance on third-party data and really want to work with customers and help them to get to know everything they can about their customers, how they can serve them better, how they can market to them better, and how they can sell to them better. And I'm really excited to see where we're going on that.

Got it. The other side of the equation, I want to dig into those areas. But first, a couple of more kind of high-level questions. On the Q4 call, you reiterated the 20% operating margin target for FY '23. I think from an investor perspective, it's probably more impressive than people imagine.

Thank you.

So you're doing that with headwinds from Slack. You talked about an additional 120 basis points headwinds from Slack. Currency as well. Because when you first gave that target back at Analyst Day, it was a much different sort of position the U.S. dollar is in. And by my calculation, I think it's about a 300 basis point swing, which does flow through into the bottom line. So given these kind of incremental headwinds, what helped you kind of sustain that confidence in that 20% operating margin target?

So first thing, I think it took you 4 questions to get to operating margin, which is actually a record for anyone I've spoken to. So this is -- I feel like some sort of achievement here. I'm really excited about the 20% operating margin. So we came into last year guiding to 17.7%, which was really just holding flat over the year before. We announced the acquisition of Slack, very important that we didn't move backwards, but that was not winning any awards with holding flat. We managed to finish last year absorbing the Slack headwinds and actually increasing our operating margin by 100 basis points. This year guiding to another 130 up to 20. But you're right, there are a lot of headwinds. We have continuing headwinds from Slack because we'll have it for the full year. We also are looking at foreign currency. It's interesting, as of last week, and it may be different now, we were looking at about a $300 million headwind just on the revenue side, which obviously translates as well. There's a lot going into that. People are also going back to the office more, and you have kind of headwinds of a return to work. So all of these -- we also have plenty of levers to go to. And it's the levers that give me confidence and it's also the fact that a lot of op margin is just making disciplined decisions. And we're committed to that as a management team, and that goes for everyone on the team.

Got it. Another component that we didn't mention in that, that a lot of investors are worried about is the potential for wage inflation. It's a tight labor market out there for everybody. But tech in particular, and software, in particular, is very tight. How is the hiring been going with Salesforce? How do you guys continue to kind of hit your targets in terms of hiring people? And is that something we should be worried about, wage inflation in excess of kind of what's already priced in?

So first, in terms of the market, it is competitive. I think this is the most competitive market for talent that I've seen in my career. That said, Salesforce was able to increase our headcount by 30% last year and just 5% of that was from Slack. So if you look at just that 25% increase on their headcount, clearly, we are able to get employees, bring them in. And I think Salesforce really remains a destination employer. I think a lot of that is the excitement of working for a company that's growing so quickly, and it's a company that really leads with its values. And I think that, that attracts employees, and I think it helps you keep them. Now in terms of wage inflation, something I follow, obviously, very, very carefully, and we've baked that into our guidance for this year. So it's well in there.

Got it. And I think Salesforce also as that destination, I think it's -- you guys have been on the forefront of a couple of initiatives. I think ESG has been one of them, and more of a focal point on doing business in the right way and sort of doing good when you're doing business, attract employees. The training side of the equation in terms of the Trailblazers program, which is both internal and external. I think that's often overlooked at how sort of good a recruiting tool and how that makes your customers better customers by getting them better. You guys are building a ranch.

We're building a ranch, that is right.

Can you talk to us a little bit more about Trailblazers because I think that's a part of the story that's underappreciated of how important it is to ensure that your customers and your employees, but your customers can use the software well.

So I think it's a very underappreciated and a really exciting area of our business. And when we talk about Trailblazers, what I'm talking about are members of the community who do not work at Salesforce, but they might be a Salesforce admin. So they work in a different company, they're using Salesforce every day. It's very important for us to develop loyalty in that group to bring them together. Dreamforce is probably overflowing with Trailblazers from this group. And it's an incredible group in terms of the energy, and it's also a group that we train. But I was really struck one time I was traveling with Marc, and we went back to a major company in the Midwest. And we're meeting with the CEO and the CFO. And we walked out of the room, and there were probably 12 employees wearing Trailblazer hoodies, with Salesforce all over it. And the CEO has said to us, "Did you -- why did you bring all these people?" And Marc said, "Those aren't our people. Those are your people." And they were the very loyal people who use Salesforce and they worked at that company, and they were still excited that Marc was there and wanted to show up. And when you have that type of loyalty to your product, it's incredibly powerful. And so we never want to forget about that group. And Trailblazers -- and we've been able to do that through training, through education, through bringing them together.

Right. Got it. Another element of -- again sort of looking at the expense profile into FY '23 that we've been thinking about is the reflation of T&E expense. Marc talked about how excited is to get back to in-person interactions. I think 88 of your 110 global offices are now open for employees. As an analyst, when I think about you guys getting back on planes, that's added expense, right? So how much of a headwind is that for Salesforce on a go-forward basis of T&E coming back and office expenses coming back that just weren't in the P&L for the past 18 months?

Well, I mean, in 2020, companies really saw T&E drop to literally 0. I mean just a completely different landscape. We started seeing it come back this past year. We did have to reinforce. It was small. It was 1,000 people, not 160,000 people. But we thought it was important to bring people back in. We did the world tour in New York. So we've seen this ticking up over the last year. This year, we do expect a lot more normalized version. But the key thing is we don't expect it to be anywhere where it was prior to the pandemic. I mean what we learned during the pandemic is that we can sell effectively, we can support our customers effectively, we can communicate effectively without being on planes every day. And in a lot of ways it has a lot of advantages. It's faster. You can connect with a potential customer instantly that day. You can get higher into the company we also found and do that more easily. So there's a lot of advantages to operating digitally that we really relied on doing that. Now it's not going to work for every customer. There's some customers who want you there and want you showing up. But what we need to do this year is figure out that right balance, and that right balance needs to be a lot more towards the digital side and a lot less being on planes.

Got it. Got it. On the Q4 conference call, I think one of the sort of upside surprises from an investor perspective was CapEx coming down to 2% of revenue. I don't think we've seen that -- those levels in quite some time. Can you talk to us about sort of what enables that to come down? And interestingly, on the same day, you talked about opening new offices in Tokyo, Dublin, Sydney, Chicago. So it's not without investment. It's a balance between investment, but you're still finding increased efficiencies within there.

So a couple of things on that. First on the CapEx, I'm glad you noticed that. That's probably the number I was most excited about on the call because we guided to 2%, which is the lowest in the company's history. Now that came a lot from scale. And a lot from different kind of disciplined decisions in many, many different areas. It wasn't one factor. On the real estate side, we have announced that we will have towers in Dublin. I think Dublin, Sydney, Chicago and Tokyo. Those were all underway well before the pandemic. These are not new towers that we just decided to buy next week or last week, so I should be very clear on that. Those are long build-outs, and they're starting to come online this year and next year. When I look at real estate going forward, I think it's clear that offices are going to play a role. I mean, people want to get back and they want to get together. But it's in a very different way from how people did 2 years ago. I don't know a lot of people who want to be back 5 days a week, 9 to 5, sitting in a cubicle. And they certainly don't want to do that just to get on a Zoom call with someone else. So people are using offices more for meeting spaces, for how do you collaborate, how do you innovate. So we're having to look at that. We have shrunk our real estate over the last few years. There have been a few write-offs where necessary. We've taken advantages of leases coming up, at the areas where we could contract. Real estate savings, it takes a while for those to build out, but we're starting to see an immediate or we're starting to see an impact this year. The last thing I would say on that is, ultimately, it's really a digital headquarters. We might -- over at Salesforce Tower this morning. It's starting to be bubbling up again. But where I start my day and where I'll end my day is going to be in Slack. And that is where I think of as our real headquarters.

Got it. That's interesting. So probably even more remarkable than taking 4 questions to get to operating margins is taking 8 questions to get to M&A because this is definitely...

Okay. Another record here.

Exactly. This is very top of mind for investors. So for the past 2 quarters, at least, maybe 3 quarters, you guys have talked about a pause in M&A. Focus point right now is digesting Slack and making sure that, that acquisition goes correctly. But M&A should be a part of the strategic toolset for Salesforce on a go-forward basis. How should investors think about the kind of longer-term M&A strategy and how Salesforce can do M&A in a way that's perhaps more shareholder-friendly?

So we've had an incredible history with M&A. We've acquired nearly 80 companies over our 23 years. By the way, 23 years today is actually Salesforce's anniversary. So our birthday for Salesforce. So 23 years today.

Happy birthday.

About 80 companies during that year -- that period. And they have been terrific acquisitions. They have brought new technologies in. They brought incredible employees and engineers to the company. I'm really pleased with that. And you're right, that should continue to be our cadence going forward. What we have paused is really the very significant large-scale M&A right now. We will continue to be doing the tuck-ins, the smaller companies. We just announced last week or the week before last, Traction on Demand, which is a professional services company, a pure-play Salesforce company out of Vancouver, British Columbia. You'll continue to see that during this time period. It's just really these larger companies. Now in terms of absorbing them going forward, scale health we are a much larger company. Companies we're likely to buy are going to be easier to absorb than they were in the past. And we're very mindful of what this does to operating margin, what this can do to dilution. We spent a lot of time talking to our shareholders, getting a lot of feedback, some very direct on this point. So I think that, that will really influence our decisions going forward.

Got it. Got it. So just digging in a little bit on that topic, because I think a lot of these proof points are already kind of in existence like the scale comments, right? A big concern on M&A is that it's either margins or M&A, and you can't do both. But you've shown the ability to do both with Slack, and Slack was a very large acquisition.

Our biggest acquisition and we were able to do it, and increase our margins during that time.

Right. Excellent. And that's going to continue on a go-forward, that doesn't change, right? And then the other point that investors worry about is that sort of valuations are coming down, that makes potential M&A kind of more attractive. But the pause in M&A wasn't due to sort of valuations. The pause in M&A is due to digesting Slack.

Well, it's 2 things. I think it's digesting Slack. I mean, it's a large acquisition. We're incredibly excited. We see amazing opportunity. We want to get it right. But it's also because of the environment that we see organically. I mean our organic products are doing very, very well, incredible demand environment. As I said, Q1, our guidance for this year, very optimistic about this. We want to make sure we're really focused on organic growth during this time as well.

Got it. Excellent. I think the larger kind of concern on M&A is also sort of being good stewards of capital and how Salesforce looks at capital. With the prospect of perhaps returning capital to shareholders or share repurchase, would that -- is there any prospect of that coming into the purview for Salesforce in the near term?

Look, we evaluate our -- the allocation of capital constantly. Salesforce has not traditionally done share backs or dividends. But it is something we discuss as a management team frequently. We discussed this with our Board of Directors. Right now, we're really focused on strengthening our balance sheet.

Got it. Got it. And then on sort of the flip side of the equation, it's kind of like a more perspective. Like you said, the acquisitions that you guys have done has been very successful. When I look at sort of Tableau and what Tableau is doing today versus what our model looked for Tableau to do over a 3- to 5-year period, you've well exceeded those expectations. We talked about Slack getting off to a good start, MuleSoft similarly. What has Salesforce learned about how to do large strategic acquisitions well and how to make sure that those companies don't -- traditional old-school sort of tech M&A, just get crushed within a larger organization, but to keep the innovation going, to keep the momentum going, and actually improve upon that?

Well, it's interesting on this. You mentioned Tableau, you mentioned Slack. One of my favorite acquisitions was ExactTarget. We closed that in 2013. We paid $2.5 billion, which was kind of a shocking 9x revenue that year. I think people were aghast. They now have a run rate of around $2.3 billion every year. So we're essentially generating as much money every single year as we paid for it that one time. So we've had similar home runs in this area. In terms of what we've learned, we have a very sophisticated playbook and a terrific integrations team. We don't get everything right, but we learn from everyone that we do. A couple of things. Slack has really taught us that we can bring in very large-scale companies without necessarily moving backwards with our operating margin and continuing to expand. I think that's a really good lesson for us. It sets different assumptions. Another lesson I would say are things that we're learning from these companies. I think there's kind of this feeling that you go in and you acquire a company, and you're the big company, you're going to teach them. You're going to show them what you've got. We've learned an incredible amount from the employees in the companies and 2 examples I could give you. First, with Slack, they have a phenomenal self-serve business. And I think companies that come up in the tech world in recent years. They almost view it is if you need salespeople to sell, it must not be a great product, people should be able to come and just buy your software. And Slack is really best-in-class at doing that. And so we're spending a lot of time talking to them about how do we increase our self-serve capabilities. And another lesson I would point to going back to ExactTarget. ExactTarget had a very strong culture, and a lot of it was focused really on Indianapolis. And there's incredible loyalty to that area, incredible pride. And we really learned from them the importance of going in for these larger acquisitions, in particular, kind of respecting the culture that they have, seeing what they're proud about, really diving into Indianapolis. And for us, that's wind up being one of our largest hubs in the world.

Got it. I want to shift gears a little bit to MuleSoft. And particularly, what happened with MuleSoft in Q3. Can you just sort of dive in a little bit in terms of the kind of the sales reorganization that you guys put into place? Why that had more of a sort of an outsized impact than you were expecting? And how should investors think about sort of the time line for that correcting itself?

Sure. So you're -- as you mentioned with products you're not supposed to have a favorite product, but MuleSoft may be one of my favorite acquisitions. I think it is an incredible company, and it brought a really key piece of technical functionality to us with its integration. So about a year ago, we made a number of decisions that involve territory alignment. And the idea was to bring the territories much more closely aligned to traditional Salesforce territories. I think these were good decisions. I think they were absolutely the right thing for the long term. What they turned out to be was a lot more disruptive. When you make decisions that impact people on the ground, they can have effects and sometimes you don't see them for a number of quarters. This really hit for us in Q3. And you saw the revenue drop off at that time. Now one of the reasons it takes longer with a product like MuleSoft, both to recognize issues and also, frankly, to turn them around, is it's our most technical product. So there's a longest enablement period to really get a new salesperson up and running and kind of fully vetted. It also has the longest sales cycle. So you drop some of the new territory, that's going to be a longer sales period for that person. At this point, I feel like we've identified what we need to do. I think we're making good progress. You saw their numbers were much better for Q4. They've got a tough compare in Q1, but I think we're doing the right things, and I think that we're going to see really positive growth in the second half of this year.

Got it. Some of the work that we've been doing externally, and correct me if I'm wrong on this, but when I talk to partners, they talked to me about FY '22 from Salesforce as a year where you've really tried to align all of your go-to-market initiatives around that Customer 360 vision. So is that part and parcel of that same kind of territorial adjustment in sort of market realignment that...

Yes, I think it was less on that. I think we have our Customer 360 data with -- by data, we have all of our products and the customer is always right there in the center. What we are seeing is additional multi-cloud adoption. And we're seeing that more and more, which I think really goes to the success of joint selling efforts.

Okay. Got it. Got it. In picking your 3 favorite children, you mentioned Slack...

By the way, I do have 3 children. They are all my favorite.

So no one's getting left out. That's good.

No one's getting left out.

Slack, 2 quarters out of the gate. Can you talk to us about where they've been exceeding expectations and how you guys have been seeing kind of better success for Slack? What's enabled that out of the gate?

So they're doing very well, both on their enterprise, which they define as about $100,000 in sales and up and on their self-serve business. I was very happy in particular in Q4 on seeing their self-serve. We look at that a little bit as an economic barometer of the leading edge. These are smaller customers, they could be individuals. And when you're really willing to put your money where your mouth is at a time, it shows your confidence in the economy, which we like to say. I think we are still early days with Slack, and I think we have incredible opportunity on the product side going forward. So you have Slack, which is a stand-alone product is amazing. I mean, it's completely reshaped, I think, how people work. So I think the real key is combining it with Salesforce. And this summer, we actually have 5 Slack-first products that are going to be generally available, including Slack for Sales Cloud, Slack for Service Cloud. And by the end of the year, we expect 12 products to be out.

Got it. So can you explain to me what that means, that Slack-first product?

Slack will be embedded into our products in that. And Slack is exciting. I have to say when we were looking to acquire Slack, I was very excited about the acquisition. I saw their TAM, I saw how they were doing, I saw their trajectory. What I wasn't necessarily all that excited about was using Slack. I think part of it may be coming from a legal background, I like my e-mail, I like -- I still mourn the loss of WordPerfect. I'm very traditional on this. What I discovered once I dove in on Slack is just how powerful that is, as a communication and kind of a broader channel. You look at how enterprises are innovating today, you look at how people are collaborating, and it's no longer kind of one-to-one knowledge workers communicating over e-mail. You want to get people into a channel. And you want to get the right people in, and then they have the outside people and maybe customers, and maybe other partners. And you want them to have the ability to have all of their apps within that channel. You want to have the quick DocuSign. You want to have Excel, you want to have Google Files all right in there. It really shifts how people work. And I think with this move back into offices, to a certain part and people being remote is exactly the right time for it.

Right. From my perspective, one of the things I always thought that was really interesting in the combination of Slack and Salesforce, Slack, since I first started looking at Slack, great technology and very innovative technology. But their go-to-market was very technology-led, right? It was really here's why our technology is better than Microsoft Teams, right? Salesforce on the other side of the equation, I think, is the preeminent solution selling company, being able to show people not what the technology is, but what you can do with the technology. And bringing together those 2 domains, I thought could be really interesting and really get Slack into places that they hadn't gotten before. Where are you in sort of getting that synergy of getting Slack into the hands of the traditional sales force Salesforce? It's hard to say.

The sales force Salesforce, yes.

The sales force Salesforce to enable more of that solution selling motion. And have you seen any early success with that?

Well, first, I think you're exactly right. I think really the power with Salesforce and Slack together, Salesforce knows how to sell into the enterprise. And we know how to move companies up into the enterprise. Slack, as I said, best-of-class when it comes to self-service and these type of direct sales. Combining the 2 of us, and it's not just moving Slack up, it is the opportunity to learn from Slack as well in this area. I think it's early days. We already were seeing Slack in multiple of our top 10 deals. But I think once we get this integration and we have an amazing sales team, I put incredible faith in our go-to-market training or enablement, and you give them Slack, they're going to sell it.

Right. Outstanding. The part of the, I think, negative perception of Slack in the marketplace from investors was it's just a very onerous competitive environment versus Microsoft Teams. There is a perception that Teams comes for free with a broader kind of Microsoft portfolio. Slack is always going to be expensive for customers versus kind of a solution that's free. What could Salesforce do to -- either through kind of pricing, bundling or sort of functionality, help sort of push back against that perception and improve kind of that value proposition versus what we perceive to be very hard to compete against free?

I think these -- for one thing, I think these are increasingly differentiated use cases. I think Salesforce and Slack, it's a broader use case. And it is serving much more as kind of the center of a company. It really is that digital headquarters that I talked about. We've added things like Huddles for voice, you have Click videos. It is allowing people to really interact in a way, often asynchronous way, that is very, very powerful. In terms of pricing, we price for value. And we've done that with Slack, and we've done that for Salesforce and we'll continue to do that.

Got it. That's perfect. So you talked a little bit about Traction on Demand. It was also sort of the Acumen acquisition. So kind of bolstering the capabilities on the professional services side of the equation. I think that's another thing that software investors tend to be allergic to is professional services exposure and rising professional service exposure. Why is that so? Why is that important for Salesforce? Obviously, you guys are investing behind these capabilities internally, externally, the Accentures, the Deloittes, the PwCs are making massive investments behind Salesforce as well. Why is it important for you guys to have that capability? Why not just let Accenture do it all?

Right. So we've made some great investments in professional services. But I agree with you. I'd like the op margin that comes from our subscription business. What we're really finding in our professional services is this incredible way to get closer to our customers. When customers are spending tens of millions of dollars with you, hundreds of millions of dollars, they want Salesforce, and they want you from the day you came up with the vision until they are actually getting the value. And they don't want an intermediary. And so we're jumping in on that. Now we don't have -- this is for one purpose only, and it's to make our customers successful. We have no dreams of being the next Accenture or Deloitte. It's really to serve our customers and to serve them better. And we feel that it pays back. We believe that we're getting larger deals when they're attached to these professional services. And we suspect that there will be lower attrition in these cases.

Got it. Is there -- the second favorite child that you mentioned was the Industry Solutions, right? And when I think about the Industry Solutions, the value of software comes from how deeply you solve the problem with your customer. Industry Solutions almost definitionally you're solving a deeper, more domain-specific problem. And I would imagine there's a need to have a better understanding of that end customer, and to be able to get in there deeper. Did these go hand-in-hand in order to have that domain expertise understand that customer problem to create those industry solutions, you have to be able to get in on the ground?

We always say you have to be able to speak the language of your customer. You've got to know that. So we hire people who are very deep specialists in those areas, and it's really paid off. And we'll tell you a lot of our specialization in this area came from another great acquisition, which is Vlocity. We were talking about doing -- we were talking about industries for years. Vlocity really made it real and really brought us multiple different areas to specialize in.

Right. Got it. The last kind of product topic I want to talk about is your third favorite child, the CDP. So you, I, and Bret were talking last week, and Bret's only sort of the CDP is probably one of the most foundational kind of new enhancements and new solutions that, that Salesforce has brought out for a long time. And it comes from kind of holding the data, right? Especially around these B2C engagements. Salesforce, I think, what's been so interesting is that you have the customer data and a lot of the customer data pertaining to B2B engagement. And now you have -- and it comes from having the workflows of sales, having the workflows of customer service and sort of marketing it to those customers. You have the ability to sort of do that complete cycle on B2C and now you have a data repository around it. So 2 questions on that. One, can you give us some indications in terms of the early traction with CDP? How your customers have been receiving it? But broadly, more broadly, the opportunity being B2B and B2C. I think Salesforce grew up as a B2B-focused company. What's the B2C opportunity?

Well, let's start with that. We've always been B2B, and increasingly B2C. But there's almost a blur of the lines at this point. It was all B2B2C, you're always getting to that ultimate customer, which I think is really, really, really the key here. On CDP, like I said, taking off like wildfire. Very, very excited about it. I think a lot of this also has to do with just different views about privacy. Our customers' data is their data. They own that. But their ability to really look across the Salesforce areas and whether they're getting information because of their Service Cloud, whether they're getting it from Commerce Cloud, if someone left things in their cart, being able to bring all of this together in a powerful way really gives them an incredible tool when it comes to sales.

Got it. Got it. So if I'm going to kind of summarize our conversation that we've had thus far, you feel very confident in sort of the TAM that's been expanding, Gartner is sort of adding another $50 billion to that TAM, and the capability of your current solutions to organically get to that $50 billion target. You guided FY '23 to 21% topline growth. A lot of room for operating margin expansion within that and further efficiencies, 130 basis points this year to 20%. But that's not the end result. The end result is continued sort of operating margin expansion on a go-forward basis. M&A is going to come back at some point. But to be more responsible, you're going to be thinking about sort of -- you have the scale to be able to do it and still improve operating margins. Dilution is part of the focus point in sort of how you're improving these. And at least in FY '23, that's yielding -- you guided to 26% free cash flow growth. It's pretty good overall return for...

Not too bad.

It sounds like a pretty good package. Any big components of the story that you think we're missing here?

No, I think I come back to something I was talking to employees out at our company kickoff. Salesforce is growing 20%, 21% a year at a remarkable scale. I think sometimes I have to step back and we throw around these numbers, the 20% growth, $26 billion, guiding to over $31 billion. And remember just how big these numbers are and how we're doing this at scale, and that we're continuing to do this year after year after year. That's what I want to continue doing, and that's what I'm really excited about.

Outstanding. Amy, thank you so much for joining us. This has been a great conversation.

Great to be here, Keith. Thank you.