Corporate Speakers:

 John Cummings, salesforce.com, inc., SVP of IR

 Keith Block, salesforce.com, co-CEO

 Marc R. Benioff, salesforce.com, inc., Co-Founder, Chairman & Co-CEO

 Richard Hugh Davis, Canaccord Genuity Limited, Analyst

 Raimo Lenschow, Barclays Bank PLC, Analyst

 Keith Weiss, Morgan Stanley, Analyst

 Heather Anne Bellini, Goldman Sachs Group Inc., Analyst

 Mark Ronald Murphy, JP Morgan Chase & Co, Analyst

 Ross Stuart MacMillan, RBC Capital Markets, LLC, Analyst

 John Stephen DiFucci, Jefferies LLC, Analyst

 Terrell Frederick Tillman, SunTrust Robinson Humphrey, Inc., Analyst

Mr. John Cummings, Vice President, Investor Relations, the floor is yours.

John Cummings: Thank you so much, Jerome. Good afternoon, everyone, and thanks for

joining us for our fiscal second quarter 2019 results conference call. Our results press

release, SEC filings, and a replay of today's call can be found in our Investor Relations

Web Site at www.salesforce.com/investor.

With me on the call today is Keith Block, co-CEO; Marc Benioff, Chairman and co-

CEO; Mark Hawkins, President and CFO; and Bret Taylor, President and Chief Product

Officer.

differ materially from these forward-looking statements. A description of these risks,

uncertainties and assumptions and other factors that could affect the financial results are

included in our SEC filings, including our most recent report on Form 10-Q.

With that, let me to turn the call over to [you, Keith].

Keith Block: Thanks, John. Thanks, everybody, for joining us on the call today. It's an

exciting time in our industry, it's an exciting time for our customers, and it's an exciting

time for Salesforce. As you can see from our results, we continue to deliver incredible

growth [at scale]. You saw it at the end of FY '18, you saw it in Q1, and you see it again

CRM has never been more strategic. It is the largest and fastest-growing category in

enterprise software. Salesforce is the number one provider and after 20 years, we

continue to take share and separate from our competitors. In fact, we're growing at nearly

twice the rate of the market. This gives us tremendous confidence in our ability to reach

$23 billion in revenue by FY '22 -- faster than any enterprise software company in

history. Our vision, our execution and our relentless focus on customer success results

once again an excellent performance across all clouds, all geographies and all industries

in Q2.

Revenue for the quarter rose almost $3.3 billion, up 27 percent. Revenue under contract,

company which is undergoing a multiyear digital transformation.

We're leveraging sales cloud and marketing cloud, service cloud and Einstein to

accelerate decision-making and support customer-centric growth across their portfolio of

brands. This is a great example of an iconic industry leader stepping into the future with

Salesforce. Service Cloud grew 27 percent as more and more companies, including

National Grid and Southwest Airlines turn to Salesforce to power their next-generation

customer engagements. Southwest, which has won awards for its customer service

leadership, is extending Service Cloud and Einstein to 4,000 service representatives

nationwide enabling them to deliver smarter, more personalized customer experiences.

quarter of the world's population. We also deepened our relationship with Hulu which is

using Marketing Cloud, Service Cloud and Einstein to personalize the viewer experience

for more than 20 million subscribers. And finally, the Salesforce Platform grew 32

percent in Q2, 54 percent, including MuleSoft. Customers continue to embrace the

platform from Heroku to Lightning App Builder to Shield and make all their apps smarter

with Einstein.

Now, this is our first full quarter with MuleSoft, which is off to a fast start. The MuleSoft

Anypoint platform has become tablestakes for digital transformation. It's in every

conversation we have with senior executives and in Q2, [New York, like] the state of

and Mitsui Sumitomo Insurance. In Japan and Australia we expanded with the countries'

largest telecommunications provider, Telstra. And we formed an exciting new

relationship in the public sector with Australia and Health Practitioner Regulation

Agency.

Now turning to industries. We continue to see great momentum in this space. In health

care, we launched Health Cloud for payers to make it easier for insurance companies to

effectively and efficiently connect with members and providers. We also significantly

expanded with one of the largest private payer in the U.S. by leveraging Health Cloud

and Service Clouds to enhance of their member's experience to reduce the cost of care. In

that we had our most significant Public Sector win ever for the U.S. Department of

Agriculture last quarter; well, in Q2, the USDA significantly expanded again, in

Salesforce, rolling out Service Cloud and the Salesforce Platform across their entire

agency.

Now on the partners. Partners are absolutely critical in the Salesforce growth strategy

bringing deep industry and domain expertise as they extend our reach and help drive our

customers' digital transformation and our partners continued to strategically invest in the

Salesforce [practices]. In fact, our top 5 SIs increased their total sales certification by 50

percent in Q2. Now I've mentioned before the deep partners run their businesses on

industries and we're absolutely well positioned for the second half of the year.

And finally, as you may know, I celebrated my fifth anniversary at Salesforce in Q2. It

has been an incredible 5 years and I couldn't be more excited to leave the company with

Marc for many years to come. I want to thank our customers, our partners, our employees

and our shareholders for their continued trust in us.

And now I'd like to turn the call over to Marc.

Marc R. Benioff: All right, thanks so much, Keith, and congratulations on your

beyond is being driven by a technological revolution that's fundamentally transforming

our society, the Fourth Industrial Revolution.

In terms of its size, depth, capability and speed, this revolution is altering the human

experience in ways we've never experienced before. Our customers are going through an

amazing digital transformation. Each and every one of them is started and ended with

their customer. And as every company transforms their relationships with their customers

using amazing new technologies from artificial intelligence to the cloud itself, they're

fundamentally changing how they sell and how they service, how they market and how

they innovate.

stay ahead and drive this Fourth Industrial Revolution. And as more and more companies

connect everything and everyone, they're realizing that integration is vital to their success

and to their digital transformation and now they're turning to Salesforce MuleSoft, the

number 1 Integration Cloud to do it.

Looking more closely, one of the critical aspects of the Fourth Industrial Revolution is

artificial intelligence, the power of machine learning and especially deep learning to give

computers the ability to learn from all kinds of data, and it's giving our customers the

ability to learn about their customers and be far more personalized, efficient, effective in

their relationships. Salesforce Einstein, our own artificial intelligence platform now

customer experience, whether it's with a service agent, whether it's a sales agent or

whether a bot itself.

We demonstrated our leadership in AI by open-sourcing our automatic machine learning

library for structured data, which is the engine that helps power Salesforce Einstein. And

our Salesforce research team introduced deep learning breakthroughs that make it

possible for the first time for a single model to master 10 different natural language

processing patterns at once, significantly improving the way machines understand the

many nuances of human language. It's an incredible step forward for artificial

intelligence. With our acquisition of Datorama, also happened in the second quarter,

we're seeing amazing traction with customers that are experiencing the best of both

worlds, Salesforce and Google together.

Salesforce commerce cloud continues to be the fastest growing enterprise commerce

solution, delivering amazing results this quarter for marquee clients like Adidas and

L'Oreal. We extended our Commerce Cloud with another great acquisition, CloudCraze,

the leader in B2B commerce natively on the Salesforce platform. This means now with

the Salesforce Commerce Cloud, our customers can create the same commerce

experiences for their B2B business buyers that they do for their B2C consumers, all from

a single platform.

careers. I have to tell you, these trailblazers are an inspiration.

More than 1 million vehicles have now used our free online Trailhead platform to learn

Salesforce skills and elevate their careers and become Salesforce trailblazers. They have

earned more than 8.5 million badges certifying their skills and positioning them for jobs

in the digital economy. In fact, this Salesforce economy will now create 3.3 million new

jobs by 2022. That's amazing and yet another example of how Salesforce is powering this

Fourth Industrial Revolution. And that's why this year's Dreamforce, which is just going

to happen on September 25, is going to be even more than highlighting our incredible

technology. It's going to be a celebration of these trailblazers.

to say if you don't have your tickets, it's already sold out. Amazing. A first for

Dreamforce.

Finally, in all of our work, Salesforce is guided by our core values. Many of you know

that. You've heard us talk about that now. Our core values -- trust, customer success,

innovation and the equality of every human being. As you know, Salesforce has always

tried to use of those values as a beacon of light for our industry. This started in our

founding with our 1/1/1 model giving back and most recently has evolved with our deep

work in equality. Discussions we have had with our Ohana now over the past few weeks

have raised larger questions about not just the Fourth Industrial Revolution and what's

determined that this ethical and humane use of technology, especially within this context

of the Fourth Industrial Revolution, it must be clearly addressed -- not only by us but our

industry.

Our industry has reached an inflection point that must be supported by a strong set of

guiding values. We all know that, and you see that every single day. We know the

technology is not inherently good or bad; it's what we do with it that matters. And that's

why we're making the ethical and humane use of technology a strategic initiative at

Salesforce. We have appointed a new officer, an individual tasked with forming new

office of ethical and humane use. And we will work with all of our Ohana, including our

our industry but for humanity. We have to make sure that technology strengthens our

societies instead of weakening them. Technology needs to improve the human condition,

not undermine it. We're looking forward to working with all of our Ohana and all of you

in illuminating this important path together and continuing this incredible and critical

discussion, especially here at Salesforce and including coming up at our Dreamforce

conference.

With that, I want to turn over now to Mark Hawkins and discuss the financial details of

the second quarter.

products and our regions. Second quarter revenue grew 27 percent in dollars and constant

currency. While there was not a significant year-over-year FX impact to revenue,

sequentially, we saw a $38 million revenue headwind due to FX. MuleSoft contributed

$122 million to total revenue net of purchase accounting adjustments. This was higher

than we anticipated due to a higher mix of license revenue in the quarter.

We're very pleased with MuleSoft's performance to date. Dollar attrition exited the

second quarter of below 10 percent. Second quarter GAAP EPS was $0.39 and non-

GAAP EPS was $0.71. Mark-to-market accounted for our strategic investment portfolio

as required by ASU 2016-01, benefited the GAAP EPS by approximately $0.18 and non-

flow defined as operating cash flow less CapEx, was $288 million in the second quarter,

up 42 percent over last year. Unearned revenue ended the quarter at nearly $5.9 billion,

up 24 percent in both dollars and constant currency.

Similar to revenue, FX did not have a significant year-over-year impact on unearned

revenue, but we did see a sequential FX headwind of approximately $66 million to

unearned revenue in Q2. MuleSoft contributed approximately $77 million to unearned

revenue in the quarter. As you may recall in Q1, we started disclosing a new metric called

remaining transaction price as part of our adoption of ASC 606. To conform with the

emerging industry standard language, we have changed our terminology for the

current portion of this metric is not impacted by invoice and duration unlike unearned

revenue.

Moving on to guidance. Let me briefly touch on the FX environment. As I mentioned,

previously, we experienced a sequential FX headwind to revenues, and we continue to

see some movements in rates. In context, we are now anticipating an FX headwind to

revenue of approximately $75 million to $100 million for the remainder of the year.

Despite this FX headwind, we are raising our full year 2019 revenue guidance by $50

million to $13.125 billion to $13.175 billion or 25 percent year-over-year growth,

including MuleSoft.

under ASC 606 and as we have limited history of forecasting under this model, we are

not updating our guidance for MuleSoft contribution to revenue. We will, however,

continue to provide their quarterly revenue contribution for the remainder of fiscal 2019.

Turning to operating margin. Based on our strong performance in the quarter, we are

raising our FY '19 non-GAAP operating margin improvement range to 25 to 50 basis

points for full fiscal year non-GAAP operating margin of 16.75 percent to 17 percent. We

are raising our FY '19 GAAP diluted EPS guidance to $0.97 to $0.99 and non-GAAP

diluted EPS guidance to $2.50 to $2.52. This guidance implies non-GAAP OIE of

approximately $250 million for the full year.

approximately 5 percent. For Q3, we're expecting revenue of $3.355 billion to $3.365

billion, GAAP diluted EPS of $0.01 to $0.02, non-GAAP diluted EPS of $0.49 to $0.50.

We expect year-over-year unearned revenue growth of approximately 20 percent in Q3,

including MuleSoft. Our Q3 UR growth rate reflects significant FX headwind to

unearned revenue year-over-year in addition to the continued deepening of our quarter on

quarter seasonality of UR. As a reminder, we will only provide unearned revenue

guidance one more time on the third quarter call, at which point we intend to stop

providing this guidance as you'll have more history WITH the remaining performance

obligation metrics.

positioning ourselves very well for the back half of FY '19 as we head into Dreamforce.

We continue to execute on our strategy of delivering durable growth at scale with some

leverage and are on track for our FY '22 target of $23 billion. And speaking of

Dreamforce, I look forward to seeing many of you at our Annual Investor Day on

Wednesday, September 26. I want to say thank you to our employees, our customers, our

partners and our shareholders for your continued support.

And with that, I'd like to open up the call for questions.

John Cummings: Hey, Jerome, you can just queue up the Q&A for us.

Your first question comes from the line of Bhavan Suri of William Blair.

Bhavanmit Singh Suri: I wanted to touch on sort of a broader question here given the

Integration Cloud. Sort of starting to see a lot of this integration with ERP and into back

office systems with MuleSoft. And you sort of verticalized the front end financial cloud,

health cloud, et cetera. How are you thinking about sort of tying that back-end in? Is this

sort of an idea of the supply chain cloud or something along those lines when you when

you think about potential new verticals -- how do you sort of capture some of the value of

the data that you're integrating with the ERP? I just want to understand how you guys are

unless we unlock the data in these legacy systems, whether it's in electronic medical

records or whether it's the incredible amount of investments that the financial industry

has made in their back office systems.

So when we think about the opportunity from MuleSoft, it's really about aligning with

our overall value proposition of transforming customer experiences and upleveling the

conversation of integration from an IT tactical decision to a strategic decision about how

to transform their customer experience. And that's the opportunity that we see over and

over again when we're talking about integration with our customers. It's not just a

problem for the CIO; it's a problem for the CEO. And that's an opportunity integrating

opportunities in this space.

Marc R. Benioff: Keith, can you just tell us how the integration's going?

Keith G. Block: We're thrilled with the integration. As you know, it's just our first

quarter, and we've done many, many acquisitions here. I would say that this is probably

the smoothest integration that we've had. The integration with the field, the product

teams, the marketing organizations across the board, all the lines of businesses has really,

really been fantastic. And you can't have a conversation right now with a customer

without talking about MuleSoft. Everybody wants talk about the importance of

very, very cutting, and it goes back to the comments that both of you, both you and Bret

have made. If you think historically about what is going on in the world with the legacy

debt, the processes that have built up over a decade, the technology processes, the

business processes. Companies, now more than ever, because we are in the Fourth

Industrial Revolution and we have these amazing technologies, they have to be agile,

they have to be nimble.

They have to reinvent themselves and drive new business models and if they can't get

access to the data, if they can't leverage the strength of the data that is like an ocean of

data, then they will miss out on the opportunity, and you can think about how offensive

Marc R. Benioff: And you're going to see an incredible new reveal at Dreamforce

(inaudible). Bret has done amazing work this year.

Operator: Your next question comes from the line of Mark Murphy from JPMorgan.

Mark Ronald Murphy: Keith, congrats to you and nice performance.

Mark Hawkins, I wanted to ask you, MuleSoft contributes $200 million to the total RPO

balance, and I'm just curious if you're able to ballpark what it would have contributed to

the current RPO balance if it was anything material?

they're seeing the contract values are increasing 20 percent or 30 percent when a

customer adopts commerce and CPQ. So I just wanted to ask you, do you see the

ingredients for those products to surprise for the upside and possibly have that kind of $1

billion multiyear potential?

Mark J. Hawkins: So let me take the first one. Thank you, Mark. In terms of the RPO,

you're absolutely right, in aggregate, there was $200 million that MuleSoft added to our

total RPO, if you will. What I can share with you is the breakdown of that. We have

about $100 million of that in the current RPO, Mark, and then obviously, the other $100

million would be noncurrent. So that's a little bit of additional granularity that I can

our sales cloud, our service cloud, and our Marketing Cloud is pretty amazing. The sales

cloud's growth is now at $1 billion plus run rate, which is unprecedented in the

marketplace. We've obviously seen great success with Service Cloud and Marketing

Cloud but all of this really speaks to our culture of innovation, whether it's our organic

innovation or our hard innovation.

And I'm very, very close with the partner community and the ecosystem. I mean, it's one

of our 3 growth levers to have the largest ecosystem in the cloud, and we'd love the fact

that our partners are investing in these elements of innovation. I mean, our partner

certifications year-over-year are up 50 percent. I think that speaks volumes about their

digital transformation, multi-cloud solutions, and that's why you see the great results that

we've seen in the quarter -- what you saw in Q1, what you saw at the end of the last fiscal

year and why we're so confident about the second half of the year.

Operator: Your next question comes from the line of Ross MacMillan from RBC Capital

Markets.

Ross Stuart MacMillan: Maybe one for you, Keith, and just a follow-up for Mark

Hawkins.

Keith Block: Thanks for the comments and for the congratulations.

Einstein is an incredible product and we're at just in the beginning here. It's an incredible

piece of innovation, they put a lot of time and effort into this, we've got some amazing

talent associated with it, thought leadership and Bret's team has done an unbelievable job,

and it is part of every dialogue because customers, no matter what industry, no matter

what geography, no matter what size company you want insights and what I love about

Einstein, I mean, there's many things to love, but what I particularly love about Einstein

is its applied intelligence.

services, marketing, commerce, and it makes our conversation even more relevant and

our customers get even more value out of our existing products.

So we drive more value. There's an opportunity to grow deal sizes to extend relationships

to deepen relationships and there's a lot way to go, but, boy, the results are from a

mindshare perspective and early days on the money side and revenue side, we feel very,

very good about where we're going here.

Operator: Your next question comes from the line of John DiFucci from Jefferies.

recent corporate Activision by salesforce.com? Just curious if that's affecting that

business at all.

Keith G. Block: Thanks, John. Appreciate the kind words and comments.

Look, public sector is one of our strongest verticals. It continues to be one of our

strongest verticals. Whether it's the United States government, or the U.K. government or

any government in the world of their charter is to provide a higher level of service to their

citizens. And that comes to the modernization of their legacy systems and using new

technology like ours so that they can engage with citizens in an unprecedented way, and

Terrell Frederick Tillman: Appreciate you fitting me in, just one question. I know you

guys have the idea of durable growth over time. What I'm curious about is if you look at

the platform business, and you back out MuleSoft, the platform business has just been

chugging along well over 35 percent growth. I guess, could you talk about may be what's

been driving growth more recently in terms of is it just custom builds, extensions off of

your core cloud apps or ISV traction? Just wanting to kind of double-click more into the

strength of your platform business.

Keith G. Block: It's Keith, I'll answer this and Marc if you want to chime in, please do.

But our platform business is very strong, and you think about the capability around

see that happen.

Mark J. Hawkins: I would totally echo that. I think things like Heroku, it's really been

exciting to be able to see that group in addition to everything you called out, shield, these

are things that look really good. Even our ecosystem and what that's contributing as well

has been positive.

Mark Hawkins: And I'll just add that Dreamforce, you're going to see some amazing

extensions to the platform. We're not going to go through all of them right now, but I'm

sure you will be as blown away as I am. You saw yesterday, we also announced our lead

John Cummings: Great. Thanks so much everyone for joining us today. If you have any

further questions regarding our second quarter results, please feel free to e-mail us at

[email protected]. Otherwise, we look forward to seeing many of you at our

annual Investor Day at Dreamforce on September 26. Thank you so much.

Operator: Thank you, and that concludes today's conference. Thank you all for

participating. You may all disconnect.