Good afternoon. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to the salesforce.com Fiscal Q3 2014 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. I would now like to turn the call over to Mr. John Cummings. Sir, you may begin.

Thanks so much, Josh, and good afternoon, everyone. Thank you for joining us today to discuss our fiscal third quarter 2014 results. Our third quarter results press release, SEC filings and a webcast replay of today's call can be found on our Investor Relations website at www.salesforce.com/investor. We will also be posting the highlights of today's call on Twitter at the handle @Salesforce_IR. With me today, are Marc Benioff, Chief Executive Officer; and Graham Smith, Chief Financial Officer. Marc and Graham will open with a few prepared remarks then we will open the call for questions. As always, our commentary today will primarily be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and forward guidance can be found in our earnings press release issued about an hour ago. During the call, we may offer incremental metrics to provide additional insight into our business or quarterly results. Please be advised this detail maybe one-time in nature and may or may not be provided in the future. It's also possible we may reference certain unreleased services or features not yet available, because we cannot guarantee the future timing or availability of these services or features. We recommend customers listening today make their purchase decisions based on services and features currently available. The purpose of today's call is to provide you with information regarding our fiscal third quarter 2014 results. Some of our discussion and responses to your questions may contain forward-looking statements, which are subject to risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. All these risks, uncertainties and assumptions, as well as other information on potential risk factors that could affect our financial results, are included in our forms filed with the SEC, including our most recent report on Form 10-Q, particularly under the heading, Risk Factors. So with all that, I will turn it over to Marc.

Okay. Thanks, John, and welcome everyone to Dreamforce 2013 and we are coming to you live right here in the Moscone Center in San Francisco. Today, we are kicking off our 11th annual Dreamforce, now the world's largest software conference with an all-time high of more than 130,000 registered to attend with today's early start and we expect even more tomorrow. And I am thrilled to report just absolute monster quarter and a new all-time high in our financial results for the third quarter. Just four years after delivering our first $1 billion year, salesforce is now the first enterprise cloud computing company to report more than $1 billion in revenue in a single quarter and we are projecting more than $5 billion in revenue next year. Pretty awesome. A phenomenal milestone for salesforce and the entire new cloud industry. Congratulations to all of our customers, our partners and our employees for this amazing achievement. Now let's get to the financial results. Revenue for the third quarter rose to nearly $1.08 billion, up 36% from a year ago. There is just no other Top 10 enterprise software company that is delivering this kind of growth and we are delivering this growth while pushing through the $4 billion dollar revenue milestone and we are heading right to $5 billion. I don't know any company who has delivered a $1 billion quarter and was growing 36% in our enterprise software industry. Deferred revenue rose by more than 34% year-over-year finishing the quarter at more than $1.7 billion and operating cash flow rose to $138 million for the quarter, an increase of 30% year-over-year. The dollar value of booked business, on and off the balance sheet, is now nearly $6 billion and our momentum going into Dreamforce positions us for a strong finish…

All right. Thank you, Marc. We posted another great quarter in Q3, delivering outstanding growth in revenue, deferred revenue and operating cash flow. We saw strength across the enterprise and commercial businesses in both Americas and Europe, with the added bonus of ExactTarget delivering a fantastic first full quarter as part of salesforce. Let me take you through the highlights. Starting with revenue. Third quarter revenue was $1.076 billion. That's up 36% over Q3 last year or 37% in constant currency. ExactTarget and Pardot contributed approximately $81 million to revenue in the third quarter which was well above what we had anticipated. The sales and renewals teams executed well and in addition messaging and professional services revenue were also really strong. While on the subject of ExactTarget and Pardot, let me just take a moment to provide a quick update on integration efforts. The sales teams are working well together with lead processes yielding some great new customer wins for ExactTarget and Pardot. The engineering organizations are coordinating development plans and you will see some of the initial results as soon as tomorrow's keynote, which are integrated into the ExactTarget Marketing Cloud. We are really pleased with progress today. Looking at year-over-year growth on a regional basis, revenue in Americas grew 41% to $769 million. Revenue in Europe grew 46% in dollars and 39% in constant currency to $195 million, and revenue in Asia increased 4% in dollars and 17% in constant currency to $112 million. Dollar attrition continued its slow and steady decline in the third quarter marking more than four years of sustained improvement and remains in the very low double-digit percentage range. Turning to margins, our Q3 non-GAAP gross margin was 79.3% or about 116 basis points lower than Q3 last year. Our third quarter non-GAAP operating…

(Operator Instructions). Your first question comes from Kash Rangan with Merrill Lynch.

(inaudible) much. I think it's the 36th to 37th quarter I am following you guys as a public company. Nice to see the $1 billion mark. You have said some time that you could hit the $1 billion in revenue annual but here on a quarterly basis. So congrats on that. Marc, question for you. With respect to the platform business, it looks like we are seeing a big inflection point here, a number of developers and your optimism surrounding the ISV community seems to be ramping up. Can you talk a little bit more about what could be the impact of Salesforce1 in terms of incremental new platform opportunities that you can pursue that you couldn't before? That's it for me. Thank you.

Well, Kash, you are going to hear about it tomorrow but let me just give you some highlights. Salesforce1 is a completely new approach to our platform as well as to our sales cloud, service cloud and marketing cloud. I have been using it myself from the last six months and it's completely changed how I run salesforce.com and I think it will completely change how our customers run their company and also connect with their customers as well. And what I can tell you, is the power of Salesforce1 is all the things that our customers expect of salesforce, that is the huge ability to manage information, stored procedures, stored triggers, custom user interfaces but things that they did not think that we would feel to do we are doing. Number one, Visualforce1. You are going to see that all the huge amount of seen all huge amount of Visualforce development that our customers have made, it's going to start running immediately on phones and on tablets. That's phenomenal and you can see that already happening. All you have to do is go to the App Store or Google Play Store now and you can get the iPhone as well as the android versions of Salesforce1 to mobile app, but all that Visualforce capability coming right down to mobile devices, Visualforce is a phenomenal technology for user interfaces and you are going to see that. Number two, you will also see 10 times more APIs now available, because if you are going to actually write like we did with these mobile apps directly to Salesforce, you need a huge amount of new API coverage so that you can build super high functionality in your in your app. Number three, not only via Visualforce not only via the APIs you…

No. That was it.

Okay. All right. Very good. Thanks, Kash.

Your next question comes from Heather Bellini with Goldman Sachs.

Thank you. I had a couple of questions for Graham and one for you, Marc. I guess, one, Marc, given how successful you continue to be in the top line growth that your are posting on top of very large number, how do we think about the leverage that you can start flowing through to the model as we look out and I know that you probably don't want to give fiscal year '15 guidance on that, but if you could just share with us some qualitative thoughts. Then for you, Graham, I was wondering if you could share with us where you are in the process of migrating ExactTarget customers to annual billing terms. Thank you.

Well, here is how I look at it, which is, you know, there's a balance between growth and profitability and we want to continue to do both. We want to continue to grow and deliver these outrageous growth numbers, but honestly we also want to continue to increase our margin. We continue to want to become more profitable. Now there's times when that slows down when we buy a company or we go through a hiring surge or something like that, but for the most part, our goal is to increase our margin and we want to continue to do that in a very strong way and we also, though, want to continue to grow this company and get it over the $10 billion revenue mark. That's also a super strong goal of this company. So those two things have got to go hand-in-hand. We have learned a lot about how do that. You can see here, Heather. You were there with me in the client server world. You can look back, how many companies when they hit the $1 billion revenue line work delivering a 36% growth quarter. One of the results we are able to do it is because we have got that balance right. We have it right but we also know that there's more that we can do on profitability and that we are absolutely actually committed to that. And as I said, the only time that really ever gets slowed down in a serious way is when we acquire something or do one of these hiring surges. So, Graham?

Yes. On annual billings, Heather, we are really pleased with what we saw. I am not ready yet to give a ton of detail on all of the ExactTarget billings performance here. I think we want to see a couple of quarters but suffice to say, when we look at the new business trends versus last year, the annual billing percentage was up very significantly, more than, in fact, on new business. More than we had seen on our salesforce ship. So really very exciting on the new business side and of course, that shows up on the deferred revenue number. We had guided more or less flat on ExactTarget deferred revenue of $45 million and they came in around $65 million. So we were delighted to see that. It's clearly a function that we are shifting customers to annual billing.

And your next question comes Tom Roderick with Stifel.

Hi, guys. Good afternoon. So I noticed you spoke very highly about the ExactTarget acquisition, of course, and the numbers keep coming in better than expectation. Can you just maybe give a little more detail in terms of how the topline synergies have worked here? What is bringing the numbers ahead of expectations and relative to any potential cross sell, particularly I am thinking about service cloud opportunities in retail? Can you talk about how the cross sell of that has been going? Thanks.

Well, that is phenomenal and you know, I have to say of the reasons we see this increasing growth, one of the reasons you see this kind of accelerated revenue growth this year is, we have got a lot more focused on our core mission which allowed us to cross sell more. You probably remember that a couple years ago that we were really focused on defining the social and enterprise and that was very exciting to us. A highly collaborative enterprise built on social technologies. But what we recognize was, when we went into a customer, who is the buyer of the social enterprise, and it was a little tricky to find that buyer. Now when we go in to find the sales cloud buyer, the service cloud buyer, the marketing cloud buyer, the platform buyer, we know who they are and that has been an accelerator on our growth. We bundle that together in this approach called the customer company and that we are really the first enterprise software company to be focused on customer technologies because we know who the buyers are and our customers for customer technologies and that has really been an accelerator for us, a focuser for us. And to your point, it lets us cross sell because we have a clear point of focus with our employees that we are the customer company, we are the company that helps you to connect with your customers in the new way with the sales cloud, the service cloud, the marketing cloud and the platform built entirely on Salesforce1. And once you start to build and deploy on Salesforce1, you can have this phenomenal experience. I was just with Jeff Immelta couple of weeks ago and he took out his iPhone and he said, you know Marc, there is only two apps that use every single day to run General Electric and one of them is salesforce. And he showed me exactly how he uses what is now Salesforce1 and I will just tell you, it just completely blew me away that I can use to it run my company, he can use to run his company. When we are customer focused executives and when we get that kind of environment where a company that has a culture so focused on their customers, we know we are going to have phenomenal cross sell opportunities. When you are here at the show, make sure you talk to our customers. You are going to see a lot of them are starting to buy multiple clouds and that's a huge compensation opportunity as well for us with our own account executives.

Your next question comes from Jason Maynard with Wells Fargo.

Good afternoon, guys, and congratulations. Marc, I had a question for you. Years ago there was all these (Inaudible) of the sales force automation market and you clearly expanded tam there. As you move in and start messaging more about internet of customers, can you talk a little bit about how you guys are in solve what, I think you are hearing more in the industry that app gap, all of this sort of unautomated you know process and stuff that happens in companies that doesn't really benefit from packaged applications, maybe touch a little bit on what are you guys trying to do to, if you will, drive deeper into organizations and really close, if you will, that technology gap that so many companies have?

Well, I will tell you that that's going to be a big part of my keynote tomorrow that most companies don't know who their customers are still. I know that's hard to believe and that most companies feel that they are not ready for this social mobile cloud world and the third one is there is that app gap, which is the half of all companies who want to build and deploy mobile/tab apps or mobile apps to their employees, customers or partners, don't know how and we are going to fill that gap and that's a huge part of Salesforce1.

Your next question comes from Brad Zelnick with Macquarie.

Thank you very much and nice job, guys. Marc, with Keith Block on board, there's an expectation around visibility to drive more quarters like this one, particular by driving large enterprise deals given his background. Can you talk at all about large deals in this quarter and the large deal pipeline? Also, with all these great things that Keith should be able to deliver, how do you think about the transition risks associated with changes that he is making? Thank you.

Well, there are three things that I have been focused on this year and the three things that are critical for me are that I felt were mission-critical for fiscal year '14, one is Salesforce1, which now I can finally talk about openly and show tomorrow and get everybody on and I think it's an incredible accelerator for this company and really future proves our customers and helps them take that huge investment that they have made in our platform and they thought was kind of glued to PCs and laptops and is running now natively and perfectly in the mobile world. Number two is, ExactTarget in the Marketing Cloud, we had seen this tremendous demand for marketing technology and we are able to analyze it together and ExactTarget had this monster quarter with us and we are feeling phenomenal about that acquisition. Three is, Keith Block. We have been after this guy for a long time and the we were very, very fortunate that he became available and he has hired several dozen executives now to come along with them into re-conceptualizing and rebuild our customer facing organization. He is on our board of directors, he is our President and Vice Chairman. He is doing a phenomenal job and I couldn't be more excited about the having him as part of our Salesforce management team. I mean it's been really a joy and I think he's absolute the best the customer facing executive ever worked within our industry.

Your next question comes from Brent Thill with UBS.

Thanks. Marc, the reasons Americas and Europe are growing at twice the rate of Asia Pacific, I am just curious, if you could talk through what you are seeing in Asia Pacific? Is there some type of macro overhang or is it execution? How do you think about the gap there that you can close relative to the other geos that you just posted?

Well, for us Asia Pacific really consists of two countries Australia and Japan. Japan has been a massive country for us and so as Japan goes so does our Asia Pacific revenue. We continue to see great execution in Japan of our organization, but we also see tremendous opportunity that still needs to be fulfilled. I was just in Japan two weeks ago. I conducted one of our events there, customer company tour, we had 4,000, 5,000, 6,000, 7,000 people there, I don't know how many. It was our biggest event ever in Japan, phenomenal. What I see is, all the same things I see around the world, which is a phenomenal opportunity for companies to automate themselves in new ways and our ability to grow this Asia Pacific line is really all about our ability to grow Japan. When we look back over the last several years in Japan, it's been tough in the enterprise world there. Yet we have grown really well. It's been much easier in the SMB world, it's constant flux back and forth. It's about building a full portfolio of customers which we have done. And you are going to see it here at this conference. We have almost 500 guests who have flown from Japan to attend Dreamforce and I think that when you talk to them, we will have an opportunity to introduce them, I think you are going to see incredible demand opportunities for Japan. Our new Japan data center is now open. Our new office in Japan is also now open in JP Tower, which the government invited us into one of their buildings in the Marunouchi district, which is traditionally reserved for native Japanese companies. So they view us very much as a Japanese organization as do we ourselves and I really expect this to be an accelerator for our business there over the next several years.

And your next question comes from David Hilal with FBR..

Great. Thank you. Marc, on your comments on Keith's, can you share with us some of the plans to go up the enterprise and more solution selling. I know you guys talked about verticals, maybe timing on when we might see some specific vertical solutions and just other changes that might help you move even further up the enterprise? Thanks.

That's definitely part of the strategy. He has a comprehensive strategy developed that the board has approved that he's executing. One of the key parts of his strategy is bringing in a new management team, which he has done and that's now in place. Second part of the strategy is to put in critical new programs like a focus on verticals. And there's other key parts of the strategy as well. I don't want to go through all of it because it is somewhat, I would say, proprietary and competitive and would probably let our competitors know some things that we are going to do which may surprise them.

And your next question comes from Mark Murphy with Piper Jaffray.

Thank you, Marc. I wanted to ask about your potential opportunity to offer Big Data and analytics in the cloud. Specifically, if you look back on it, most traditional data warehouses are on premise technologies, and so as the applications move to the cloud, do you think that the analytics will follow and also move to the cloud? And if it does, do you think there's a bigger opportunity to be providing analytics for HR data or for customer data or for financial data? So, in other words, maybe the relative size of that opportunity for Workday versus salesforce versus NetSuite and other companies.

Well, number one, we are the largest provider of cloud based analytics and dashboard in the industry. You just have to look at the millions and millions of dashboards that we deliver to our customers each and every day, reports, analytics on their customer data and you are only going to see that expand and become more detailed with Salesforce1. You are also going to see phenomenal new graphics capabilities directly within Salesforce1 that will let our customers deliver those dashboards and analytics directly to their device. Now to your point, it's not a general purpose analytics and data warehousing solution, though many customers do use it in that way. Certainly one of my dreams has been to build and deliver a world-class analytics and data warehousing solution with the same type of acuity that salesforce has on CRM, and we have tried that approach quite a few times. We have done a lot of research and development in that area. We have also bought companies in that area but we have not yet created a product. When we find kind of the magic secret sauce that we somehow can put together at salesforce where the price and the technology and the ease of use is clearly in order of magnitude better than our competitors, like you are seeing with Salesforce1 today, then we will have that type of solution where we will come to you and say, well, yes, we have a world-class analytics and data warehousing solution. Today we are 100% focused on sales, service, marketing and platform. Those are the only four markets that we are addressing. And analytics is within those four, but not analytics as a fifth, if that answers your question, specifically.

Your next question comes from Kirk Materne with Evercore.

Hi. Thanks very much and congrats on the quarter. Can you guys just talk a little about Europe? You guys are clearly outperforming than most of your peers in the industry overall. Can you just talk a little bit about what is going on there and some of the efforts you have done in terms of putting in place new sales capacity? Thanks.

Europe's execution over the last several years has been phenomenal and I think perhaps some of the best execution I have ever seen in my career. We are continuing to work in that area and a lot of that is because we narrowed our focus in Europe, we realized that the key markets in Europe were the U.K., France and Germany and that we needed to double down in those markets and that we were too prevalent in smaller markets that were not material to our organization. When we made that strategic shift that was led by George Hu, our COO in an analysis that he did that basically yielded our eight country focus around the world which impacted Europe the hardest, we saw this acceleration in Europe and we continue to see great things ahead there and we have talked about that in previous calls that we continue to see world class execution in Europe. We also saw that same phenomenal execution in North America as well.

Your next question comes from Keith Weiss with Morgan Stanley.

Excellent. Thank you, guys, for taking my follow-up. Maybe just one on the overall (Inaudible). There has definitely been some mixed signals from some larger legacy vendors out there, how are you guys feeling about just the overall tone of IT spending heading into your fourth quarter, and particularly your ability to get those very largest deals done in your last quarter?

Well, I don't think we gave out the specific numbers on large deals and all that, but we will probably talk about that next quarter. We had a monster quarter, okay? And, it was a monster quarter in big deals and small deals in the enterprise and SMB in Europe and in the U.S. and a lot of it has to do with these three kinds of things coming together that I talked about. We have a phenomenal new distribution management team with a phenomenal new acquisition and we have a complete refresh of our whole products family and we are ready and we are excited. Look, the world has changed it has gone cloud, it's gone social, it's gone mobile and it's gone connected. The companies that are struggling in the market today have not gone cloud, they have not gone social, they have not gone mobile, they have not gone connected. They are still trying to sell the same old stuff. You could see it in this article that in The Wall Street Journal about Steve Ballmer over the weekend, interview that they had where he basically talks about, well it's time for him to move on because he is too representative of the past. I think for a lot of these companies that quote could be about them. I thought that he articulated it really well. That there is an old philosophy of computing and those companies that are executing that old philosophy are not growing and they are not competing and they are not succeeding and the companies that have adopted the new capability, they are going to see hundreds of those companies here at this show. They are growing and we are one of them and I expect good things ahead, because we got the right products that everybody needs right now and a lot of companies don't, so my message to them is the same as before which is the future is cloud computing. The future is social computing, its mobile computing and it's all about this new connected world or what we call the Internet of customers. The companies who are aligning with that, I expect will have tremendous success whether they are small, medium or large, but the companies who deny that the world has changed and that they can continue just to sell this old stuff and that people still want it, well, I think that those companies and those CEOs are the ones who are having the problems and they should transform and they should move forward.

Our final question comes from Rick Sherlund with Nomura.

Thanks. Marc, I am curious whether the issues with the NSA has created any concerns on part of customers or prospective customers about multi-tenants and your discussion earlier about HP. Is this to suggest that you could have a private cloud solution if customers were concerned about having data outside their own firewall or potentially outside their country?

Well, first of all, the new Salesforce HP Superpod is a Superpod right in our data center with our other pods. It's just a pod that is dedicated to a specific customer that is willing to spend a significant amount of, what we call, AOV with us or Annualized Operating Value, that is the amount of that customer has to be at a certain threshold before we even consider a Superpod and the Salesforce HP Superpod, the first customer is HP because they have exceeded that threshold. Now we have other customers who are also exceeding that threshold and this is a phenomenal opportunity for us and these very large customers to align to offer them our multi-tenant software in a dedicated instance. Okay, so this is not as other companies call it, you can't get this on your premise. There's no hybrid. There's none of this stuff that other people do. This is our same software but in a dedicated instance in our data center and just for you. And it's our same software and those organizations will still have multi-tenants. So big companies like HP or other companies that use our product, they will still have multiple orbs within one pod, but it will be a Superpod or a dedicated pod. In regards to changes in the marketplace regarding all these news reports and all this stuff, it's not our world. We haven't seen it. We don't participate in it. We don't hear about it. This isn't an area that we are knowledgeable in. We don't do communications technology or those types of things. We are doing sales forecast and opportunity management and that just isn't part of the world that you have been hearing about. So we feel very much extracted from that.

And we have no further questions. Back to you, John.

Thanks so much. Thanks, Josh, and thanks everyone for joining us today. If you have any follow-up questions, you can e-mail us at investor@salesforce.com and we look forward to seeing many of you tomorrow during our Analyst Day tomorrow morning.

And again, if you want to have a seat in my keynote, I really recommend you get here early. Also I am looking forward to seeing you all. I will be on Mad Money in about four minutes. So I will see you then. Thank you.

Thanks.

Ladies and gentlemen, thank you for your participation. You may now disconnect.