Salesforce, Inc. (CRM) UBS 50th Annual Global TMT Conference (Transcript)

Salesforce, Inc. (NYSE:CRM) UBS 50th Annual Global TMT Conference Call December 6, 2022 9:10 AM ET

Company Participants

Amy Weaver - Chief Financial Officer

Conference Call Participants

Karl Keirstead - UBS

Karl Keirstead

Yes, get started. We are thrilled to have Amy Weaver, the CFO of Salesforce here. Amy just joked with me that she is taking the sofa. And after a tough year in tech, you might just like lie down and have a conversation with me and relax. You are welcome to do that.

Amy Weaver

Anytime.

Karl Keirstead

Thanks for coming. As many of you know, we did have Bret Taylor schedule to keynote. But given that change, Amy was gracious enough to come in for Bret. And when Mike Spencer told me that Amy was willing to do it, that’s a fantastic trade I would take any day of the week. So thanks for bending your schedule to accommodate our conference, Amy.

Amy Weaver

Thanks, Karl. I am really glad to be here and it’s a great to see people.

Question-and-Answer Session

Q - Karl Keirstead

Yes, good. Well, there is a few things on people’s minds these days with Salesforce. So I think we are going to have a good 30, 40-minute conversation. But let’s hit one that I think is on the top of everybody’s mind and that’s Bret’s departure. But I think there is a slightly broader context where we have seen a few others. We have seen Stewart announced yesterday, he is going to leave the CEO of Tableau. So is there a broader context? Or is this a series of individual decisions that just happened to coincide at the same time? Maybe you could address that right off of that?

Amy Weaver

Sure. I certainly expect that Bret’s departure would be the top question as certainly was at our earnings call last week. So as everyone heard, Bret announced on the earnings call last Wednesday that he is going to step down. A few things about this, he is working through Q4. He is deeply involved in all of our largest customer deals and as Bret has said he is going to be running through the finished case on January 31. So glad to still have him aboard. As he said, it’s been a tumultuous few years. And I think when you go through tumultuous times, you do a lot of deep thinking about what’s important to you, what is going to bring you joy where your passion is and he decided that it’s really going back to its more entrepreneurial roots. He has founded two companies very successfully in the past and I am certainly excited to see what he does next.

Now yesterday, we announced that Stewart Butterfield is going to be leaving. And as people know, Stewart is the Co-Founder and CEO of Slack. And I want to be clear right upfront. I know people love to try to connect the dots. I know there is all these areas. These are either completely unrelated events. The timing turned out to be very close within a week, which is unfortunate, but there is absolutely no relation between the two of those events.

Now with Stewart, when he was talking about leaving, Stewart actually joked in his flat post to the company that he has absolutely no desire to return to his entrepreneurial roots. So he is going to -- he has a very young and growing family. He wants to spend a lot of time with them. He said only roots were going to be carving. So he will be leaving sometime we think in the next month, I am not sure of the exact date.

But that actually does open up a really exciting door for us and that is with the Annie Jones. And some of you may have met her in the past. We want to get her out on the road and meeting all of you as soon as possible. Letting Annie as an Executive Vice President at Salesforce, she has been with us three, four years now. She came from running product at Sonos. And before that, she has a decade of Microsoft, absolutely top-notch executive. Not only am I excited what she is going to do with Slack from a product perspective, from a leadership perspective, but I love the even deeper connection with Salesforce and having her right in there. So, great opportunity for us going forward.

Karl Keirstead

Okay. We may take some questions later on, Bret, but let’s move on maybe to the results last week. So Amy, I have got a ton of questions to ask you about the numbers. But just given that it was last week, you, Mike and the team, I am sure have been on a lot of calls with investors, analysts. Did you just want to give a couple of minutes to frame the results, the highlights to you and to the extent that there were a number of common questions, maybe address them, and then we will dig a little bit deeper.

Amy Weaver

Sure. I’d appreciate that. With all of the focus, last week on Bret, I think we -- it was easy to overlook some very solid results in Q3. So, let me run through a few things of where we ended the quarter. So for the quarter on revenue, it did well guide beat our consensus. We did that both on a nominal and a constant currency basis. And this was in the face of some challenging economic times. I think it really speaks to the durability of our revenue model. Some great wins during the quarter, including the one and I have three things and they were so excited that we do business with Rivian, which they think is about the coolest company out there.

Radiant bought in Slack to -- they’ve got 14,000 employees in their corporate offices and on their plant floors. They brought it in, they are going to be end-to-end, all of their onboarding, all of their training. They are using Slack in addition to the Swarm IoT issues so that they can keep their production running seamlessly, a great win during the quarter.

Op margin. This is the time I am very excited to talk about operating margin. Operating margin came in at 22.7%, our highest operating margin in company’s history. And I think there is a lot of things going into that. We have really slowed down our hiring earlier in the year, which has paid off. We have really refocused our T&E. So, it is close to purely customer-facing. And we are seeing benefits from real estate decisions that we have made in the past. And all that is coming together to really strengthen our operating margin position and you really saw that play out during the quarter.

And then finally, on therapy, we met our CRPO guide on a constant currency basis. But next op margin, what I was most excited about this quarter was actually capital allocation. So back in August, I announced our first ever stock buyback authorization from our board. Our board authorized $10 billion, 23 years as a company, this is the first time we have done that, thrilled to announce that and we jumped right in. And we put $1.7 billion towards that in the third quarter, buying back around 11 million shares. So, I think there were some really solid things that came out of the quarter and thanks for giving me a chance to address it where it kind of flew under the radar last way.

Karl Keirstead

You got it. Well, let’s -- maybe let’s talk a little bit about the fourth quarter guidance. So it’s rough out there. Every software company is seeing some deceleration. So, Salesforce is not immune obviously. But the slowdown on the revenue line to 12%, 13% constant currency and CRPO to 10% feels like a more rapid decel than we have seen in previous quarters. So maybe you could talk a little bit about the assumptions that you use to embed in that fourth quarter guidance. I think what everybody would love to have a sense of is how are you assuming about the macro environment January quarter through October quarter, similar, assuming it gets a little worse, maybe you could take that one?

Amy Weaver

Sure. So let’s go back a bit. Let’s go back to last summer. So in July, we saw a marked shift in customer buying patterns. Now, I talked to a number of sales executives, in fact, who said that they wouldn’t wait for the long weekend on July 4, they came back and they felt like they were walking into a new world in terms of how the customers were buying. Now I should say within our quarters, we are very backweighted to the third quarter of the month. So I don’t know if something magically changed around the July weekend or whether this was changing and it really hit us in the face in July, because that’s when we have the most sales.

But what we noticed is that customers who typically saw on a very steady, very predictable manner were shifting. And what was happening is sales cycles were elongating. There were additional layers of approval. As everyone was having to go get their CFO to sign-off on the deal, which frankly, I could appreciate. But other deals we are having to do to Boards of Directors at the last minute for amounts that were lower than we would typically see.

We also started to see some deal compression and this we are really in the larger enterprise deals. And these deals that would be expected to come in at $20 million, you are right at the end that they are compressing to $15 million to $16 million. So we started to see that in July, we got to August and needed to guide for the rest of the year. And that’s when we really needed to make a decision. Was July an anomaly or is this the new normal in the trend? And we decided that this was likely to be the next trend and you saw that in our guidance and we cut our guidance pretty significantly in August. We were right, it was the trend. And we have seen these trends continue throughout the year. In fact, if anything, I would say that they have become incrementally more challenging throughout the third quarter and it’s what I am anticipating as I am going into Q4.

Now on the revenue side, we affirmed our guidance. So this is the guidance that we gave in August. We have confirmed that we are going to do that for the full year. This is in the face of $100 million of foreign currency pressure. So, you could actually think about this as raising our guidance by about $100 million. So I feel comfortable with what we did. I think it’s the appropriate guidance. But those are some other things going on in the background. And some of those are the factors that we are going through all of our minds we were coming out with the guidance.

Oh, sorry, before this, I am not going to miss an opportunity again to talk about operating margin. We have raised our operating margin for the year. We have taken it up to 22.7%. Again, that will be a record for the company. And I really want to point out the comment to that in the face of revenue being lower than we had expected at the beginning of the year. We are leaning in and we are not turning back from that.

Karl Keirstead

I know you want to talk margins, but I’ve got a few more on the top line.

Amy Weaver

I am going to work that back in as many times. So -- but yes, go ahead on top line.

Karl Keirstead

So on the -- let’s unpack the 4Q a little bit, because I think where some investors struggling is that Salesforce is so big. It’s so heavily weighted to ratable subscription growth and it’s almost -- it almost feels inconceivable that the growth rate could go from 19% in October to 12%, 13%. So, how does that happen? So to me, it must be a combination of a number of things. Your CRPO guide suggests that bookings will slow, no surprise given this tough environment. Maybe it also means that bookings are a little bit more back-end weighted, so you don’t get that revenue contribution in 4Q. It could also be -- maybe sort of add-on business intra-quarter sort of light, maybe some of the upfront rev/rec parts of MuleSoft, Tableau, also would see it. Am I hitting on all the key points that helped the bridge?

Amy Weaver

You are doing very, very well, Karl.

Karl Keirstead

Okay. I will finish and I will let you elaborate a little bit.

Amy Weaver

Okay. So I think you’ve hit most of the key points on that. Also in terms of deceleration with the subscription model, of course, this is a wonderful time to have a subscription model. Subscription models keep you at very even pace. But you do start to see this over time. And like I said, we started seeing this sharp difference in buying behavior in Q2 that builds up and you are going to see that playing out in revenue. It is -- that increases currently over time, which I think is part of what you are seeing on Q4.

Now going into some of the areas that you mentioned, one of the areas that we have seen a significant decline on is what we call create and close. So create and close and other transactional areas that create and close is how we would refer to the business that comes in within the quarter, arises the opportunity within the quarter and closes within the quarter. So this is really outside of your typical pipeline where you are generating things over months or years. This is typically from expansion of the current installed base. So these are enterprise customers who have hired another 10 salespeople. They are calling up and they want another 10 seats. That has sharply declined.

And when that happens, it tends to happen when customers are not adding headcount or even going down the other way. So we saw it in that the other type of transactional business that we see on a quarterly basis is small and medium business. Clearly, these are deals that are shorter. They come up quickly and small and medium business in times of the economic uncertainties pullback. And then finally, sorry, I am getting spam calls, we are right in the middle of the -- I’ll decline that one.

And finally, the third area is Slack self-serve. So these are the projects that people can come in individually sign up online for Slack do it themselves within the quarter. All three of these areas can lead to a lot of variability within a quarter. And again, when you are seeing different buying behaviors and when you are seeing economic uncertainty, that’s where you see the hit.

Karl Keirstead

Okay. Amy, is it also true that you do have some parts of the portfolio that are not durable subscription-based, for instance, maybe the Marketing and Commerce Cloud business, is a little bit more usage based? Is that also potential factor?

Amy Weaver

Yes, there is a slight usage. I would point more our businesses where I thought you were going with MuleSoft and Tableau, they have a different revenue recognition. So our core businesses is they are beautifully smooth subscription models that you see you have Tableau are different. Both of them have a license component. So typically, when you are looking at a deal that comes in from MuleSoft and Tableau, you’re looking at the total contract value. So it could be a three-year contract, you’re going to take half of that recognize it immediately in the quarter. And then the rest will be treated like a subscription contract. What that means is if there is a hit in those businesses, you’re going to see it earlier, and it’s going to be more significant. That data line that we break out in our revenue is always in the best of times to worst of times is always going to be lumpier than the rest and you’re going to see it earlier.

Karl Keirstead

Okay. And on that trade and close business or maybe more broadly on the seat-based business, I think a lot of investors listening in and here in the audience are watching layoffs in the tech space and they are worried about the potential for headcount growth seat growth to through minimum. So I don’t know whether you want to get into too much detail, but on a typical seat-based contract, I presume there are minimums where maybe you can toggle up and down to that level. But if you’ve got a client that’s cutting 25% of their heads, presumably there is a bit [Technical Difficulty]

Amy Weaver

When people start hiring go through the roof.

Karl Keirstead

Okay. When we think about next year, you decided not to give next year guidance on this call. So is it as simple as the environment just very fluid right now, and you just felt it prudent you and Mike to get through the fourth quarter and then give it. But any thoughts you could give us on next year at all, maybe what the underlying assumptions that you and Marc and the team are thinking about when we might see some stabilization in IT spending growth or does that require too much of the economists have right now?

Amy Weaver

Okay, the two things in there. First, looking at the guide that we gave for Q4, which we did give what I am assuming is continuing challenging times. I am not seeing a change in -- I’m not seeing improvement, I will say, in customer behavior in the short-term. And if anything, I would view it as something that could be incrementally worse than the trends that we’ve seen recently. So looking into next year and the decision not to guide, we have traditionally given revenue only at this time. It’s an early look into next year. As we’re looking at it at this time, we are looking at three factors: first, increasingly unpredictable customer behavior. Our sales team is a machine. They can tell you when a deal is going to close down to just about the minute.

Similarly with the elongating cycles, the additional approval, the deal compression, that has become much harder to pinpoint, especially on where it’s going to hit on the quarter. So we’re looking at that, we are looking at questionable economic situation, and we’re looking at foreign currency. That is extremely volatile. When you put all of that together, given revenue guidance right now did not see -- was not our choice and we will do that in February. February also has the advantage that you’re giving full guidance. Given revenue without giving your cash flow, your op margin, getting you a real view of how we see the company operating, I think is more powerful, and I look forward to doing that after Q4.

Karl Keirstead

Amy, I know you’re bursting to talk about margins. So let’s talk about that subject now. So obviously, revenues are critical, if not the most important input to margins. But I guess the notable positive thing from the sales force quarter is that despite the revenue pressures, given the macro, you still put up a very good operating margin performance for 3Q, you raised your guidance for the full year, and you still reiterated your guidance next year for margins to be up. So there is a good story going on below the revenue line around OpEx control. So I think everybody could benefit from perhaps attacking that a little bit and talking Amy, about what perhaps are two of the three main margin drivers that you and the team are leaning into?

Amy Weaver

So going back a bit on margins is we’re really starting to see decisions that we have made over the last few years paying off. It takes a while to get things into the system to start benefiting from the new efficiencies and the discipline. But I go back two years ago, we had announced Slack, I just become CFO giving a first guidance. Slack -- wonderful acquisition, so excited about it. But I also know this one, it could be highly do to our operating margin. And it was very important to me from the very first earnings call to say we would not move backwards. We were going to fully absorb the Slack acquisition. I think it’s important for acquisitions that we were able to do that. So we came out with that -- since that time and by the end of the year, we will improve our operating margins by 300 basis points in the face of 75 basis points of dilution from Slack. So I’m really proud to say we’ve done that.

In terms of what is driving that, if there is not one silver bullet. What I believe truly is it’s a change in approach by the company. It is a focus on discipline, it’s a focus on execution and it’s a decision. The op margin at the end of the day is the one number you control is a decision you’re making as a company. And this is across the entire leadership payment starts with Mark that involves every one of us deciding that this is important to us, we know it’s important to our shareholders and needing to get that discipline and as I mentioned briefly earlier, earlier this year, what we did is we started a much more measured buying -- you don’t buy employees, hiring experience with employees, so dramatically turned down the number of employees we were bringing into the company starting around April. We’ve continued that through today, which has really paid off.

I mentioned on real estate. So real estate you’ve seen some of our bigger write-offs that we’ve done over the last few years as we’ve announced this in earnings and in our filings. But a lot happens behind the scenes. There are the less we don’t renew. There is the opportunity to walk away without cost from other buildings to negotiate different terms. We’re really starting to see those the benefits come in. But overall, I just think it is simply a focus on discipline. It is processes, it is a system and it’s a commitment

Karl Keirstead

And Amy, on the media speculation recently about a fairly modest headcount, I think Salesforce confirmed that said it was relatively small. Can you elaborate is it so small that, that in and of itself is unlikely to really have a big margin impact near-term? And what was it about? Was it around perhaps eliminating some lower performers or maybe you could unpack what the nature of that headcount trim was as modest as it was?

Amy Weaver

That was modest. I do not see that as having any sort impact on our operating margin. It is entirely within sales small. Headline can run very quickly as people love stories. That was relatively modest at the beginning of November I am not expecting difference from that. If we look at headcount and we can really look at the changes we put into our higher end to earlier in the year.

Karl Keirstead

And Amy, can we look at the 25% guidance that you offered for fiscal ‘26 as I know you’re not going to raise the guidance so soon afterward. But is that a starting point? Is there any structural reason why Salesforce’s margins can ultimately be higher than that?

Amy Weaver

Well, I want to be clear. We said we would be at least 25%. There was a plus sign, and that was very carefully put on there. We are leaning in, it will be above -- or it will be 25-plus and we are fully committed.

Karl Keirstead

Okay. One of the potential margin impacts that I’ve been thinking about a little bit recently, I’d love your comments. Is that I think Bret and some of his team, Steve Fisher and others are working aggressively on a replatforming project, where a lot of or most of Salesforce’s acquisitions might still be running at least partially on a separate tech stack that and team want to sort of graft onto a common sales force platform. Can you talk a little bit about that -- how big is that project and at some point in time, might it have a margin impact that’s positive.

Amy Weaver

So this is something really excited about. This is really a project of a few people, Steve Fisher, primarily David Schmaier, Srinivas Tallapragada and our Co-Founder, Parker Harris. And let me pause just for a second on Steve Fisher because he is a really important addition to the team. Steve was very early on with Salesforce -- joined, I think, around 2004 to 2014. A might be wrong on this, but I think he goes back to high school arena. I think they were coding together when they were 16. It stays instrumental to building out our initial architecture for the company. He looked at eBay in 2014 and just rejoined us last year. And what’s really important about this is we’re bringing back this person who was so instrumental in our architecture, knows the company can announce. He’s able to come in with fresh eyes and immediately jumped in and said, we need to be uniting everything.

We need to be bringing together all of your acquisitions. And we need to be doing this in a way that is seamless and ideally invisible to the customer. What this is going to do is it allows in a faster innovation. It seems like Genie, which we announced at Dreamforce is really a very, very advanced version of CDP, bringing together all of the customer data into a customer data lake where they can access that and use that for better views into their customers. Steve and Srini in particular have also been really instrumental in Hyperforce. So Hyperforce is our initiative to allow Salesforce to run on any hyperscaler or public cloud anywhere in the world. We have launched this already in India and in Germany, and we will have 10 more locations by the end of the year. And this is really providing a number of benefits.

First, internationally, allows us to expand very quickly, very seamlessly. And if you’re building out your own first-party data center, this can take six quarters. We can get up and running on the public cloud in well under a quarter, a matter of weeks, really. It also very important, it allows our customers to choose where their data is going to be relevant. And as we know, the sensitivity around data is only increasing. And there is parts of the world where that’s really just becoming a stake. We want to be at the table and you want to be able to do that. It gives consistency and it is compliance. And all of the replatforming all of this attempting to the details, it allows us to move faster in a helpful stat and visibly to our customers.

Karl Keirstead

Maybe a little bit of a margin improvement…

Amy Weaver

Yes. And I will come back to you on that, but I would love to see that.

Karl Keirstead

Okay. Perfect. Amy, another lever that a number of companies, your peers are using to both improve the revenue growth outlook and the margins is priced. So Microsoft is clearly doing it. Adobe is very overtly doing at Oracle, the list goes on. When you think about that lever to drive growth and margin protection next year, what’s your framework? And maybe to put it another way, to what extent are you and Marc and the team leaning into price as a growth and margin lever?

Amy Weaver

So on pricing, we are always reviewing and tweaking pricing. But one thing that we have done this recently is pulling together suite of products and selling them together.

Karl Keirstead

It’s just like that bundle comment you made at the Analyst Day?

Amy Weaver

Well, I am going correct you there, though. I think it was David Schmaier, who did that comment. I came up in the Q&A with David and Parker.

Karl Keirstead

You are right.

Amy Weaver

But on that point, when we look at our customers and what our customers are graveling with, they are being able -- and I am sure maybe you can relate to this, they are able -- they being asked to do more with what their ask being asked by their CFOs to spend less. They are being asked by the CEOs to operate at a higher level of efficiency. And we need to look at how do we help our customers, how do we pull together certain groups of our products, put them together and help them achieve both efficiency and time-to-value. So, we did this in five areas. We pulled together is we in sales, in service, in marketing, in analytics and in automation. So, for example, in automation, it is MuleSoft Composer, it is RPA. And it is -- I am forgetting the third one…

Karl Keirstead

You are going to get people on your watch…

Amy Weaver

Any point platform has anything that I got in mind. Any point platform. All of this is making them very, very easy for our customers to solve specific needs and we price those differently. Now, this is early days, but I am excited by what I am seeing so far. And we will continue to innovate for our customers.

Karl Keirstead

Interesting. Amy, one of the other metrics we are all looking at, even though Salesforce and a lot of other large SaaS companies have discouraged us from focusing too much on old school deferred revenue and billings metric for…?

Amy Weaver

And I think you said discouraged, I know you implied billings.

Karl Keirstead

Yes. One thing I am noticing is that the DR growth at Salesforce and the CRPO growth were tracking pretty closely together for a while. But in the last couple of quarters, well, CRPO growth has hung in there relatively well on the macro. The DR growth in billings has become a little bit disaggregated. So, it feels from the outside that there is a change in invoicing terms. Do you mind addressing that what’s happening?

Amy Weaver

Yes, sure. Let me -- so, there is a few things in that. Let me start with just cash flow in general.

Karl Keirstead

Yes.

Amy Weaver

So, for the year, took down -- moderated our expectations. We -- in August, we had guided 16% to 17% operating cash flow for the year. On the earnings call, I said it’s probably going to be more at the 16% level for the year. So, on that impact. That impact is from lower balance, maybe a little bit of FX in there as well. But primarily lower billings. We have not changed how we are doing it, and we have not changed the terms. So, I want to be very, very clear on that. And as the side, it’s already talked about billings without talking about collection.

One thing I watch like a hawk is our collection area. I want to know any trends, what people are seeing are things that they are for people prepaying they not. We are not seeing any differences. And I think that’s good for Salesforce. It’s also economic indicator that companies are paying their bills and they are paying their regular schedule. But coming more to your question of why is there a divergence. Now, in general, those are going to track in the same way. But there are differences. And I will give you an example. One of it has to do with end of quarter timing.

As I mentioned earlier, Salesforce, I think it’s very natural. The sales come in at the end of the quarter. In fact, it’s really the last few days of the quarter that you see a significant, significant portion. You closed that deal on a Thursday or Friday, you get the credit for the CRPO, the bill goes out Monday morning. That bill point to show up in next quarter.

Timing of renewal, invoice timing -- timing of renewal will follow that. ProServ is another area. We will show 12 months for the CRPO. But if you are building on a milestone basis, it’s going to be lumpier. It’s going to be triggered at a different time. So, well, directionally, they should go together, there is a lot of reasons that you are just going to see a separation. We have seen a lot [Technical Difficulty].

Karl Keirstead

The product roadmap and acquisitions. Before I do, everybody, you have got a QR code in front of you. If you did want to submit a question to me, I have got an iPad in front of me. You can scan the QR code, type in your question and if it’s a good one, I will ask. So, feel free to do that. I will give you five minutes.

Amy Weaver

Just to let you know, margin questions are good. And when we save those are incurred.

Karl Keirstead

Okay. Amy, on the product roadmap, when you think about where that massive group of engineers are leaning into the Salesforce where there is an exciting growth opportunity two years, three years, five years out that inorganically -- I am sorry, organically, you want Salesforce to invest in. What are a couple of those exciting areas that the engineering team are leaning into?

Amy Weaver

I would probably go back to our biggest revenue opportunities, which I think tracks very well with our product areas. So, at Dreamforce Investor Day, I talked about three areas of revenue -- three revenue pillars, where I see great opportunities in the next few years. These were the Customer 360 industries and international expansion. So, if you start with -- or you start with Customer 360, this is really the multi-cloud opportunity. And this is continuing to build out opportunities to connect the cloud. Do I look at Genie, I look at the data lakes, I look at how we can attract our customers to continue to invest all the way around the circle. There is lower attrition. There are higher sales. It’s really a terrific opportunity for us. And that’s what you are seeing with this platform as well.

The second area is really industry. So, we now have 13 industries up by one since Investor Day with automotive cloud. Industries are performing very, very well. In fact, in the third quarter, session of our 13 industries had an ARR above 50%. So, IC industry has a huge opportunity for us and recently talking to Jujhar Singh, who is the phenomenal leader of industries who joined us from Microsoft several years ago. He has wonderful opportunities about how do we dive in, how do we continue to build out each one of these clouds for the future, and the third is really international expansion. So, in the third quarter, the U.S. grew at about 16%.

Now, if I am talking about constant currency, EMEA was 23%, APAC was 30%. We have terrific opportunities there and that where Hyperforce really comes in. And as our engineers continue to lead in and they continue to expand our opportunities and roll this out around the world, I think those three pillars line up fee the fly with both product roadmap and our revenue pillars.

Karl Keirstead

Great. Let me ask you one more, and then I will go to some of the audience questions.

Amy Weaver

Sure.

Karl Keirstead

So, on the inorganic side can you -- I think everybody in the room understands that acquisitions have been an important super successful part of the Salesforce, can you articulate what the acquisition strategy is? I think you have done a good job offering a framework on more shareholder-friendly acquisitions. But what exactly does that mean? And is it possible, Amy, that just given the fluidity in the environment these days, but maybe there is predilection to sort of slow down that acquisition strategy, just let the environment settle first before you think about doing a deal -- you don’t mind addressing that.

Amy Weaver

Sure. Let me try to hit all three of those, if I miss something, remind me. So, we are very happy with our current product portfolio. I think we have the terrific with the products and I don’t see gauging hole that needs to be fit. M&A has been a very important part of our past, and I think it will be part of our future as well. We have acquired -- I think on the earnings call, I said 60 to 70 companies, I think it’s more like 80 companies. Most of these are small. They are mostly tuck-ins. They might be for a couple of million dollars up to a couple of hundred million dollars. And that’s generally to fill in a particular product feature or bring in particular talent. And we have had a steady drumbeat of those. We have had five public company acquisitions that get more attention. I am looking forward. We have learned a lot from all of these.

And there are three areas that we need to evaluate every acquisition for. I think the first is strategic fit. The second is what is really the opportunity and surges financial alignment. So, for strategic fit, is that we start with our customers in mind, do our customers need that is it a best-in-class asset with an absolutely unmatched ecosystem. It has to start there. Then what is the opportunity, is there something that Salesforce is bringing to the table, can we drive further growth, can we monetize the product. And then the third is the financial alignment, and this is where I am laser-focused. And it’s several things. What is the timeline to value accretion, is that player, how quickly is that going to be helping us. Second, can we prioritize the use of cash and debt for consideration.

Can we stay away from having to use equity. And then the third is what is the valuation and are we getting this right. And I think looking forward and you heard this from Marc on the earnings call as well, clearly, we always want it on everything. But we know we can only do acquisitions in a responsible way, and we can’t do it at the expense of our Op margin.

Karl Keirstead

Okay. Amy, we have got two questions from the audience. One is sort of related to margins and that is to what extent is Salesforce trying to essentially flat-line the share count via share buyback. What’s your intention there? I think publicly, you have said that you want to sort of moderate the dilution, but would you contemplate going so far as to offsetting it completely. And part two of that, is there any consideration to basically ratcheting down the stock-based portion of comp to actually reduce that stock-based comp dollar number.

Amy Weaver

Right. So, on this going back to the authorization to buy back stock. Again, a $10 billion authorization, we have already put in place $1.7 billion of that in the first quarter. This will not fully set off SBC at this point, but we are always looking at what we are going to be doing. I don’t expect it in the short-term to be fully offsetting. We are constantly looking at that. And as you said, you can moderate that from two directions.

Karl Keirstead

Okay. Last question before we run…

Amy Weaver

One thing on that we did call out before. As I think through how much is going to be -- how much of our free cash flow is going to be dedicated to buying back stock, you can think roughly 30% to 40%, we are early days. We have had one quarter, so it’s hard to talk about what it’s. But looking forward, on average, I think you should expect 30% to 40%.

Karl Keirstead

Got it. Let me sneak in the last one. One of, if not one of the largest, actually Force.com or platform customers, Viva announced to the investment community a few days back that they may not renew the agreement with Salesforce that comes up in 2025. So, could you comment on that? And I think what everybody would love to know is the quid pro quo from that agreement is that it would allow you to enter the pharma space with your core CRM product. Is that part of your ambitions beginning in 2025?

Amy Weaver

Let me just say at this point, Viva has been a terrific partner, it’s incredible to see their success and wish them very, very well on that journey. And I think that’s all I will say at this time.

Karl Keirstead

Okay. I think we have only got one minute. So, why don’t we leave it there. Amy, again, thanks for changing your schedule to accomplish us. It’s been an honor to have you here. And I think everybody has appreciated your comments today.

Amy Weaver

Great. Karl, thanks. Glad to be here and very excited for the future at Salesforce.

Karl Keirstead

Okay. Terrific. Thank you, Amy.

Amy Weaver

Okay. Thanks.