The operator welcomes listeners to the Salesforce Fiscal 2025 First Quarter Results Conference Call and introduces the speakers. The speakers include Mike Spencer, Marc Benioff, Amy Weaver, and Brian Millham. The call will include non-GAAP measures and may contain forward-looking statements. Marc Benioff is excited to discuss two topics on the call.

Salesforce has had a successful financial quarter with $9.13 billion in revenue and a 12% increase in subscription and support revenue. They are also ranked as the number one CRM provider worldwide and are managing a large amount of data for their customers. The company is committed to profitable growth and expects a 10% increase in subscription and support revenue for fiscal year '25. They also anticipate a 32.5% non-GAAP operating margin and are focused on delivering world-class financial results and leading in artificial intelligence transformations with their customers.

The use of AI is transforming companies across all industries, with the power of AI lying in customer data and metadata. Salesforce manages a large amount of this data and is seeing success with their Data Cloud, which allows for a single source of truth and the ability to power AI insights and actions. This is a crucial step towards becoming an AI enterprise.

In the last quarter, Data Cloud was included in 25% of $1 million plus deals and added over 1,000 new customers. The Data Cloud ingested 8 trillion records and processed 2 quadrillion records, showing significant growth compared to last year. This growth in data and transactions is preparing customers for the next generation of AI. Salesforce has also created a Zero Copy Partner Network with major partners to allow customers to access live data without copying or moving it. Salesforce's AI technology, Einstein, is generating hundreds of billions of predictions per day and they are now working with thousands of customers to power generative AI use cases. Saks, a leader in luxury fashion, recently became an all-in Salesforce customer.

Salesforce CEO Marc Metrick is using AI to create personalized experiences for customers at every touchpoint. Companies like FedEx are also utilizing AI and the Salesforce platform to unify and activate customer data, leading to increased efficiency and revenue. With features like Journey Builder and Customer 360, businesses can deliver hyper-personalization and integrate customer experiences across service, sales, and marketing. This use of AI is driving the company forward and unlocking commercial potential.

The article discusses the success of Air India in utilizing data and AI to transform their operations and provide a more efficient and personalized experience for their customers. This transformation has also resulted in significant financial growth for the company. The team at Salesforce is excited about the potential of AI and their position as the number one AI CRM. They are seeing a strong demand for AI technology from CEOs and CIOs who recognize its value in transforming businesses.

In the paragraph, the speaker discusses the company's focus on various growth levers, such as multi-cloud deals, international expansion, and data and AI innovations. They also mention the current buying environment, which has seen elongated deal cycles and high budget scrutiny. The company made some changes to their go-to-market organization in order to drive productivity and improve customer experiences. Despite this, they have seen strong momentum in areas like Data Cloud and industries. The speaker provides an example of a customer, CrowdStrike, who has added multiple Salesforce clouds to their front office, including Data Cloud and MuleSoft, resulting in improved project delivery and decreased maintenance costs.

Salesforce is a crucial component of CrowdStrike's operations, reducing their reliance on third-party applications. Data Cloud and Einstein AI are driving impressive growth, with 25% of deals over $1 million including Data Cloud. Siemens worked with Salesforce to develop an AI-powered marketplace, and Salesforce is also using AI internally to improve employee productivity and efficiency. Slack, which was included in nearly half of the top 50 deals in the quarter, is also contributing to Salesforce's momentum.

Salesforce has launched Slack AI, a feature that provides summaries and personalized search within Slack. This has seen great traction with customers, with over 28 million messages summarized since its launch. Rocket Mortgage has also implemented this feature to save time and close loans faster. The company has also seen international success, with wins in LATAM, EMEA, and APAC regions. Industries have been a growth lever for Salesforce, with half of their top 10 deals including an industry cloud. One example is Paychex, who is using Financial Service Cloud and Data Cloud to unify their data and improve customer insights. The City of Los Angeles has also chosen Salesforce to modernize their city services system.

In the first quarter, the city plans to use government cloud and Salesforce solutions to integrate AI assistance into MyLA311 and improve constituent services. The partnership with Amazon is expected to drive growth in the coming months. Revenue for the quarter was $9.13 billion, up 11% from last year, with subscription and support revenue growing by 12%. The Americas, EMEA, and APAC regions all saw growth, with Japan, India, and Canada performing particularly well. However, the US, parts of LATAM, and EMEA were constrained.

In Q1, public sector and financial services industries performed well, while high tech and retail and consumer goods were more limited. The company's new offerings for small and medium businesses, Starter and Pro Suite, are gaining momentum with over 2,300 new logos added. Revenue attrition was in line with recent quarters and non-GAAP operating margin was strong. Cash flow generation was up significantly from the previous year, with operating cash flow at $6.25 billion and free cash flow at $6.1 billion. The remaining performance obligation (RPO) ended at $53.9 billion, up 15% year-over-year, and current remaining performance obligation (CRPO) was at $26.4 billion, up 10% year-over-year. The company paid out its first quarterly dividend of $0.40 per share, totaling $388 million, and returned over $2.5 billion through share repurchases and dividends.

Salesforce has returned over $14 billion in cash to shareholders since starting their capital return program. They plan to continue with capital return and expect to declare their quarterly dividend next month. For the full fiscal year of 2025, they anticipate similar market conditions as in Q1 and a $100 million FX headwind. Despite challenges in their professional services business, they expect revenue to grow 8-9% year-over-year, with subscription and support revenue growing at 10% in constant currency. They also anticipate a 32.5% non-GAAP operating margin and stock-based compensation at just above 8% of revenue.

The company has increased its guidance for fiscal year '25 due to lower employee attrition in Q1. They expect a GAAP operating margin of 20% and GAAP diluted EPS of $6.04 to $6.12. Non-GAAP diluted EPS is expected to be $9.86 to $9.94. They also expect strong cash flow and free cash flow growth for the fiscal year. For Q2, they expect revenue of $9.2 billion to $9.25 billion, with 7-8% year-over-year growth. There will be ongoing headwinds from professional services. The company is committed to strategic investments and productivity gains. The call is now open for questions.

Keith Weiss asks about the lower-than-expected CRPO growth in the quarter and why the company is not adjusting their full year revenue guidance. Amy Weaver explains that there are many factors to consider in their guidance and they believe they will still be within the range they originally guided. The company is seeing a consistent buying behavior and pressure on PROserve, but this is balanced by strong demand for their products. They are also seeing benefits from pricing and packaging changes and healthy adoption of industry projects. Overall, they feel confident that they will meet their guidance range due to customer reliance on Salesforce.

Marc Benioff discusses the transformation happening with Salesforce's financials and customers, particularly in regards to AI and the use of customer data. He mentions the McKinsey report stating that 75% of the value of Gen AI use cases is in the front office, where Salesforce is a leader. He also highlights the success of the Data Cloud, which is already included in 25% of million dollar-plus deals and has over 1,000 customers in the second quarter.

In the first quarter, Salesforce saw huge growth in a new product, which will continue to drive growth. The Data Cloud is connected to all of their clouds and is improving their services. They have also ingested a large amount of records and created a partner network with major companies. The company is focused on financial transformation and preparing for the future of artificial intelligence. There may also be some impact from changes in their go-to-market strategy.

In paragraph 17, Brian Millham discusses the changes that were made in the first quarter and how they are intended to drive productivity in the future. These changes were made to align with the company's go-to-market strategy and support their multi-cloud strategy. While there was some short-term impact in Q1, the changes are expected to bring productivity gains in the future. Millham also mentions that Europe and the Americas were weaker in the quarter due to the measured buying environment, but other regions such as Canada and Japan had strong performance.

In the transactional business, such as SMB, headwinds are expected due to the measured buying environment. Salesforce has doubled in size over the past four years, but the post-pandemic reality has caused companies to rationalize and integrate the software they acquired during the pandemic, leading to a slower buying environment. This may be due to uncertainty around AI and the next platform shift. Marc Benioff and Brian will provide more details on the current state of the buying environment.

The speaker discusses the importance of AI as a growth driver for companies and the success of implementing it in various industries. They highlight the financial benefits and improved capabilities for customers, and emphasize the significance of rebuilding data delivery methods for clients.

Salesforce has restructured all of its apps and capabilities to support the Data Cloud, which will help customers with growth, profitability, and productivity. The company believes that the use of artificial intelligence will be key for future success, and not every company is well positioned for this due to lacking data. The data is the most important aspect for delivering capabilities and is referred to as "gold" for customers. The company is seeing strong demand for its Data Cloud as customers focus on organizing their data before implementing AI capabilities.

Marc Benioff discusses Salesforce's history of both organic and inorganic innovation and their commitment to continuing to look at potential acquisitions. They prioritize ensuring that any large scale acquisition will not be dilutive to their customers and will have the right metrics.

The company has a strict framework for making acquisitions and will only pursue opportunities that align with their confidence and trust. They recently acquired a company called Spiff, which has enhanced their Salesforce automation platform with artificial intelligence and compensation capabilities. They will continue to pursue opportunities within their framework, but will be cautious with any acquisitions outside of it. The company has a successful track record with M&A and aims to maintain their strong financial metrics.

The company's free cash flow and margin numbers are higher than those of major consumer companies like Coke and Starbucks. To maintain this level of performance, the company will focus on its M&A framework and prioritize shareholder value. The company's capital allocation strategy is to expand free cash flow margin, invest in innovation, and return cash to shareholders through share repurchases and dividends. M&A will be considered opportunistically, but must fit within the company's principles and goals. Overall, the company is confident in its long-term free cash flow per share and capital allocation strategy.

The question is whether the challenging sales environment is due to the economy or internal changes. Brian Millham responds that it is difficult to determine, but the economy is similar to the first half of last year. However, there were some changes in transactions and deals that impacted bookings in the first quarter. Marc Benioff adds that there is ongoing discussion within the company about the situation.

The company is facing a challenging environment and needs to continue delivering strong financial metrics and customer success. To do this, they must start each quarter with higher pipelines and evaluate them more aggressively. Leaders are being urged to start with a 3 times pipeline and focus on higher levels of enablement.

The speaker discusses the importance of training and enablement in the rapidly growing field of artificial intelligence and data. They also mention the need for stability in sales organizations, as too much disruption can lead to volatility in results.

The speaker discusses the four attributes that are crucial for managing in the current environment in the enterprise software industry. They emphasize the importance of using their products to achieve success. The next question from an analyst brings up the possibility of a structural change in the industry due to generative AI and asks what the company is doing to prepare for it. The speaker responds by mentioning their past success in driving architectural changes and expresses confidence in their ability to adapt to any changes. They also mention the importance of being prepared for potential transitions in the industry.

The speaker discusses their experience using OpenAI and praises the company's engineering efforts and their use of data from various sources. They also mention the emergence of similar models from other companies and the importance of data in the enterprise world. The speaker believes that the ability to compile and normalize large data sets is where the true magic of AI lies in the enterprise world.

The speaker discusses the importance of data for companies looking to deploy generative AI internally. They emphasize the need for a strong architecture and highly normalized and federated data sources. They also mention the success they have had with companies like State Farm, who now see them as their fundamental data architecture.

In this paragraph, the speaker discusses the importance of data management and scalability in driving the growth of their company. They also mention the transformation of how people interact with software and how this may cause a temporary pause for customers as they adjust to new innovations and pricing models. The speaker mentions their Data Cloud product, which uses consumption pricing, and other core products that use per user pricing. They also mention a new product called UE+ that was recently introduced.

The introduction of UE+ as a hybrid pricing model by Salesforce is exciting because it offers competitive pricing and the ability to deploy various architectures. Salesforce is also focusing on customer success, partnerships, and maintaining their culture. Many companies are claiming to offer AI capabilities, but Salesforce emphasizes the importance of building reliable data sources and putting in the hard work to make AI happen.

The speaker is excited about the potential of Salesforce's AI capabilities being integrated into their existing products, such as Sales Cloud and Service Cloud, which have a large user base. They believe this will lead to innovative new technology and business models. They also emphasize the importance of being a trusted partner to customers in delivering AI at scale.

This summary was generated with AI and may contain some inaccuracies.