Good afternoon. My name is Dustin, and I will be your conference operator today for today’s Q3 FY15 earnings conference call. [Operator instructions.] I’ll now hand the call over to our host today, Mr. John Cummings. Sir, you may begin.

Thanks, operator. Good afternoon everyone, and thanks for joining us for our fiscal third quarter 2015 results conference call. Our third quarter results press release, SEC filings, and a replay of today's call can be found on our IR website, www.salesforce.com/investor. We’ll also post the highlights of today's call on Twitter at the handle @salesforce_IR. With me on the call today are Marc Benioff, chief executive officer; Keith Block, president and vice chairman; and Mark Hawkins, chief financial officer. Marc, Keith, and Mark Hawkins will share a few prepared remarks and then we’ll turn the call over for your questions. As a reminder, our commentary today will primarily be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and our guidance can be found in our earnings press release issued about an hour ago. During today’s call, we may offer additional metrics to provide further insight into our business or results. This detail may or may not be provided in the future. We may also reference certain unreleased services or features not yet available. We cannot guarantee the timing or availability of these services or features, so we recommend customers listening today make purchase decisions based on services and features currently available. The purpose of the call is to provide you with information regarding our fiscal third quarter results. Some of our commentary may contain forward-looking statements that are subject to risks and uncertainties. Should any of these risks or uncertainties prove to be incorrect any company results could differ materially from these forward-looking statements. A description of risks, uncertainties, and assumptions and any other factors that could affect our financial results are included in our SEC filings included in our most recent report on Form 10-Q, particularly under the heading Risk Factors. Now let me turn the call over to Marc.

Okay, thanks very much, and really appreciate it, John, and hello from San Francisco. Look, very, very excited to give you this quarter’s highlights and results and thrilled to be on the call with you, and let’s just start out with top highlights for the quarter. First of all, the San Francisco Giants have won the World Series. Congratulations. Now, in other news, it’s great to be with you today to talk about our strong quarterly financial results, our incredible Dreamforce last month, our contribution to our community, and the significant advancements in enterprise technology that Salesforce is leading. And that’s what Salesforce and our commitment to customer success is absolutely all about. Cloud computing is taking over our industry. You can see that at Dreamforce. In the four pillars of cloud computing, the cloud, the social world, the mobile, acceleration and data science are guiding us to transform our customer relationships. Look, we saw that take form at Dreamforce. We see this where every company is going to be transformed over the next decade with these amazing changes. Salesforce is leading the way, and we look forward to our first $6 billion year next year. We’ve never been more confident or excited to give guidance. It’s completely amazing to me. Here it is: Salesforce, the number one cloud computing company in the world, Salesforce the number one CRM company in the world, giving guidance of $6.5 billion in revenue next year as a top five enterprise software company. It’s a huge threshold moment for cloud computing. Now, before I begin, and I’d like to thank so many of you who joined us at Dreamforce in San Francisco, with over 150,000 registered to attend and over 7 million joined us online to hear our vision for the future of the…

Thanks, Marc, and good afternoon everybody. Great to be here, and thanks to everybody for joining the call. So as Marc mentioned, I’m here in New York today to kick off the Salesforce World Tour, and with more than 10,000 people registered to attend, and a million people watching online, which is great, you can absolutely feel the incredible energy and momentum, and all of that driving our customer success and our growth. Now, I was with some of our top customers last night, including Coca-Cola and Stanley Black & Decker, and GE Capital, and many others, and all of these customers are talking about our customer success platform and driving a more meaningful relationship with us here at Salesforce. And in fact, Marc alluded to this earlier, but GE Capital is using our analytics cloud, which just launched a few short weeks ago, which is pretty incredible, and they’ve already shortened the cycle time from learning to action, from months to minutes and seconds, and it truly is decision making at the speed of thought. And it’s pretty clear that analytics is going to be a game-changer, and based on what I’m seeing from customers, what I saw today in my conversations and today at the conference, I agree with Marc, that analytics will be the most successful product launch in the company history. There’s no question about it. And with our customer success platform, which brings together sales and service and marketing, communities, platforms, and of course analytics, customers are transforming their business models and they’re looking at Salesforce in entirely new ways. So here in New York this week, and at Dreamforce last month, certainly when I speak with customers on a daily basis, it’s pretty clear, just like last evening, they want more strategic and meaningful…

Well, thank you, Keith. I’m very pleased to be with all of you today to discuss the third quarter. Despite a challenging FX environment, we delivered another strong quarter of results. We exceeded our Q3 revenue guidance by $14 million. We exceeded our non-GAAP EPS guidance by $0.01. Deferred revenue was up 28% year over year in dollars and 31% in constant currency, compared to our guidance of 30%. And our non-GAAP operating margin was up 244 basis points year over year. The third quarter revenue was $1.38 billion, up 29% over last year. Excluding a year over year FX headwind of approximately $12 million, revenue was up 30%. On a sequential quarterly basis, we had an even larger FX headwind of $15 million. Non-GAAP EPS for the quarter was $0.14. On a year over year regional basis, revenue grew in the Americas by 29%. In EMEA, it grew 30% in dollars and 34% in constant currency, and Asia Pacific grew 21% in dollars and 25% in constant currency. Looking at the third quarter revenues by cloud, Sales Cloud was $625 million. Service Cloud was $340 million. Salesforce1 platform and other was $192 million, and Marketing Cloud was $132 million. Dollar attrition for the third quarter, excluding ExactTarget, remained between 9% and 10%. Now, turning to margins, our third quarter non-GAAP gross margin was 78.4%, down approximately 90 basis points from last year, which reflects the continued investment in our infrastructure, including international data center expansion. This continued investment is important for us to maintain the high level of trust and service delivery we are known for. We may see a slight impact on the gross margins next year as we ramp up the data center investment in Germany and France. However, we’re still very confident that we’ll be able…

[Operator instructions.] Our first question comes from the line of Kash Rangan with Merrill Lynch.

It looks like you did billings growth on a constant currency basis of 29%, which I recollect, Marc, was exactly the same percentage you grew three years back. You’re a much larger company, so the law of large numbers doesn’t seem to apply to you guys. As it relates to the analytics cloud, Marc, I’m wondering if you could give us some sense of how you expect user adoption to take place. What segments in the global markets do you see this as having a near term impact. And as you look at your fiscal 2016 guidance, typically you guys have been conservative, sort of, which is very much appreciated. Are you assuming the full thrust of the analytics cloud in your next year numbers, or do you want to just take it one step at a time, see how it goes for the next couple of quarters, and see what you do about fiscal 2016 as it relates to analytics before you guide the street on the analytics product?

I just want to say, at a high level, what I said in the script is the most important thing regarding the analytics cloud, which is that we have never seen faster uptake and faster traction when it comes to new product. And that gives us a level of incredible excitement. I’m sure if you downloaded the product or seen reviews on the app stores that you realize we had a huge breakthrough in our ability to enter a major new segment. For those of you who look at the TAMs of these different markets, and understand how we actually enter a market, what we do is we look at, number one, what is the size of the market that we’re entering into? When we look at sales, it’s obviously a multibillion dollar market service platform, especially marketing is becoming that way. But analytics is already that way. Analytics, business intelligence, is one of the biggest, most exciting markets in the whole industry. This is not a CRM story. This is analytics for the rest of us, period. And we have the best analytics and business intelligence product on the planet, and we are going to market in a huge way, and I’d just like to ask Keith now to talk about the changes that he’s making to his organization to focus on this opportunity, some of the advancements he’s seen in the pipeline regarding analytics. It’s a super-exciting moment, and Keith can also talk to you about some of the deals he’s already closed in the third quarter.

Thanks, Marc. So let me just give some color commentary on this. So obviously as I said in the opening comments, this is a product that has been around for just a few short weeks. And already we’re starting to see, with some pretty large companies, interest in the product. We’ve already signed some customers. So we’re very, very excited about the momentum, and as far as readiness for the organization, we’ve had our entire sales organization go through what we call a black belt process for training, so that they’re completely enabled and ready to engage with our customers around analytics. We also have a specialized organization that focuses every day. They wake up every day and all they think about is how to deploy analytics with our customers to make them successful. And we’re seeing some interesting characteristics, and I’ll talk about opportunities. We don’t like to talk about pipeline, but we’re actually starting to see customers who are not Salesforce customers, who are interested in analytics, because they see how robust it is. So we’re very, very excited about the opportunity. It is an early release product, but we believe that there’s a lot of momentum and we’re off to a very strong start here. So we feel very good about it.

Our next question comes from the line of Keith Weiss with Morgan Stanley.

Maybe one for Mark Hawkins. Did a really nice job on operating margins this quarter, up 244 basis points. It seems like you’re being a little bit more conservative going into Q4, where we typically see a little bit more flow through on operating margins. Maybe you can give us a little bit of color on sort of the investment profile going into Q4, why you see less of an operating margin gain in that Q4, and some insight on how you’re initially thinking about FY16?

First of all, we are pleased, absolutely, when we look at the operating margin progress just really year to date, and I think Q4 was a really nice step up here. You can see some efficiencies in G&A, and we had talked about, you know, I expect and will be planning and driving toward having G&A [indiscernible] 10% over time. We saw some nice efficiencies in other parts of the company. Don’t forget, when you go into Q4, as you get to the end of the year, you start to get to things like commissions and things of that nature that obviously have a bearing from that standpoint. We feel great about our recommitment to the 125 to 150 basis points for the year, and obviously we’re always driving to achieve and better. But that’s where we’re at on that. And then if there’s anything else, I’m happy to follow up on that. I guess also, as you look at FY16 in terms of margins, I think the thing to think about there is this is a period, as Marc teed up, we’re 15 months away from the end of FY16. We’re initiating guidance on the revenue side. We’ll be talking about margins in Q4, at the Q4 earnings call in February, so we’ll get into that for next year.

Our next question comes from the line of Brent Thill with UBS.

I had a question regarding the analytics cloud. Do you see that in terms of adoption mainly coming initially from your existing customer base, or a lot of projects from the partner community? And also, in terms of between the midmarket and enterprise, how do you see that going forward?

It’s a great question, and it’s something that’s on all of our minds, because the demand that we have is universal, and what you saw at Dreamforce is that whether it was small companies, or medium, or large, they were all extremely interested. Obviously, GE is the launch customer. We just showed them, speaking today. If you didn’t see the New York World Tour show, John Sabino, who is a marquee executive at General Electric, who’s [indiscernible] through many different GE units, spoke today on the significance of this product as it relates to General Electric. I think that that sums it up very well for enterprise. I haven’t found a customer who doesn’t want to have a significant interest in the product, and that also includes our nonprofit customers. That has surprised me. So for us it’s the staging of which ones we’re going to get on, and how fast we can do it. We have aggressive goals for the product for next year. And I would also add, and I think this gets to the other part of your question, this is not an app. This is a platform. This is a product that others will build on. Yes, it’s a great end user capability. You can get to that on your mobile device. And Alex Dayon and his team have done an unbelievable job. I’ve been personally involved in the development process, meeting with the analytics cloud team every two weeks for the last six to 12 months. And I can just tell you, it’s our absolute highest-performing team, what they’ve accomplished, I have not seen, in my career. So huge congratulations out to Alex. But there’s been three key design goals. One was the final user interface that you saw, which is obviously super sexy. The…

Yeah, listen, I will tell you again, there’s just tremendous momentum. Marc mentioned the ecosystem. We signed up nearly 50 partners in just a few short weeks, who have some pure interest. And they see the value that analytics cloud can provide their customers. While Marc was talking about platform, just a thought. I mentioned that we are seeing some opportunities, companies that are interested, in analytics cloud that are not Salesforce customers. So it would be natural to expect that we would be able to sell analytics very nicely into our installed base. But if what we’re seeing trends out, we could actually be seeing a Trojan Horse, if you will, of analytics, into the non-Salesforce installed base, dragging our customer success platform. So the potential is very strong, and again, we’re in the early days, just to temper everybody’s enthusiasm. But our customers seem to be very enthusiastic, and we’re mobilizing the entire organization around making sure that we can drive our customer success.

Our next question comes from the line of Walter Pritchard with Citi.

Question for Keith Block. On the sales side, can you give us a sense of how far through the sort of realignment and changes that you feel need to be made to get yourself to this kind of vertical organization that you want to have, and sort of what plans do you have in the new fiscal year to get yourselves there?

I appreciate the question. I will tell you that, you know, this is a great company, and the company is driven by an incredibly strong culture, and it’s a culture of innovation and continuous improvement. And I think we have to start there. And so to that point, our work is never going to be done, and we will always continue to do better and to innovate and continuously improve and experiment, and we’re not afraid to take risks here. Obviously, they’re calculated risks and we’re smart about how we do things, but listen, we have said that there are three things that are important as we go to market. One is obviously to speak the language of industry. We think that’s very important, because when you speak to a bank, you need to understand the language of the bank, what the customer challenges are, and what the opportunities are, and how you can apply the customer success platform to that business problem. The second is to build up the largest ecosystem in the world, and that takes many forms, starting with SIs and boutiques and agencies which are key influencers, obviously. It’s also about ISVs, and we’re doing some terrific work with ISVs. We kind of revamped our ISV process. And then resellers for coverage. So that’s the second area. And then the third is our international expansion, and you can see the results already starting to happen, for example, in Asia Pac and Europe. And we continue to invest across the board in our distribution capacity, adding more AEs, more reps, more selling capacity, opening our data centers and expanding our partner networks. So this is an ongoing process. We’re obviously seeing traction over the last 12 months. So again, we’ll always, always be inspecting to see what we can optimize.

Our next question comes from the line of Ross MacMillan with RBC Capital Markets.

Just on the vertical industry strategy, I guess it’s a question for Keith, aside from the actual verticalization of the sales organization, what are the sorts of things we should be looking for in terms of product enhancements or partner enhancements to the platform that could drive further penetration into particular verticals?

So I would look at this in multiple dimensions. So number one is obviously equipping and arming our sales team so that when they’re in front of the customer, they are speaking the language of the customer. So we want to make sure that they’re enabled and ready and we’re giving them the right content. Number two is in certain markets - and we already have this today - organizing geographically by vertical. So for example in the broader market today, here in the United States, we have a financial services vertical sales team that wakes up every day and they call just on financial services accounts. And we also have the same thing for healthcare and life sciences. So that’s another access that you can look at. The third is actually developing product, creating product, that Salesforce builds organically, and you know, we have some announcements that we’ll be releasing soon, so we don’t want to get into that right now, but we will be in the position where in certain industries that are very, very important to us and strategic to us, we will be building out some product. And then the last is cultivating this ISV community, our partner community, and that is super important. We signed an agreement with one ISV in the quarter that we consider to be very, very strategic, and it’s around really two industries. One is around telecommunications and the other one is around insurance. And they will continue to enhance and extend our footprint so that they have industry relevant apps on our customer success platform.

Our next question comes from the line of Tom Roderick with Stifel.

I wanted to switch gears and talk a little about the Marketing Cloud, particularly see if we can get an update on some of the technical integration that’s gone on over the last several months. And beyond just the technical integration, as you look at the interplay between Sales Cloud and Marketing Cloud, can you talk a little bit more about how Pardot is progressing in the B2B marketing automation world?

Well, I think starting with Pardot, I mean, it’s one of our heated success stories of the year. We’ve just had a phenomenal growth rate. It was the unpolished jewel inside the exact target, the ecosystem. We broke it off, and we run it separately, and we’ve invested in it very significantly. We’ve also integrated it into our core, and the leader of the unit has done just a phenomenal job. And I could not be happier with that. It’s run out of our Atlanta headquarters, and the team in Atlanta has just exceeded our expectations. I would also now kind of point to, today, just before World Tour, we had a press event and launched our new Social Studio. You saw the vision for this incredible new capabilities with all of our social products, not just our social advertising products, that you’ve seen at social.com, but the next generation of our social listening products, social publishing and social engagement platforms. The team has done a great job. Today, that product is disintermediated from our core marketing platform, and you are correct in intuiting the next step is the social studio will become an integrated part of our marketing cloud, deeply integrated into the Journey Builder itself. And when that happens, I think you’re really going to see all of these assets come together in an incredible new way, as well as deep integration into our Salesforce1 platform. We’ve now owned the ExactTarget asset just a little more than a year, and it’s been a very exciting year. We’ve obviously created the next generation of the leadership team that has performed very, very well. We’ve also delivered a next generation of a structure where the product teams are deeply integrated with our core Salesforce product teams under our president, Alex…

Our next question comes from the line of Heather Bellini with Goldman Sachs.

Marc, you’re always great with bold predictions, and given the excitement with analytics cloud and the comment that you and Keith made that you see this as being the most successful cloud you’ve ever launched, thinking about how customers can leverage this product, either existing Salesforce customers and new ones across their businesses, any predictions on how fast this could ramp to a billion in billings?

Well, I would be happy to give you that, and it’s not that I don’t have that, I certainly do, but I am not going to do that, Heather, and I’ll tell you why, which is that in these new products, you’re never really completely sure what the next step is. You talk to my team, and they know I am super optimistic about what we’ve seen, not just in what we’ve developed, but what we’re seeing with customer traction. We have a few other things we want to deliver in the next six months for this product, which will, I think, blow everyone away. And I think I can start to make those predictions by, I would say, within one or two quarters of getting fully ramped. We have a big ACB number, which is our kind of first year contract value number, for this product, for this year, and if we deliver that number, then I’ll be happy to give you the billion dollar prediction. Make no mistake, Heather, my goal is not just a billion dollars product line that we call [AOV] with the analytics cloud. It’s far beyond that. But I don’t want to get into specifics of when and how we’re going to be able to do that. Just know that I’m extremely optimistic about what is possible. And now Keith just needs to go out and sell it.

Our next question comes from the line of Jason Maynard with Wells Fargo.

I guess I have to follow up on that question with some more bold predictions, since you seem to be in a good prediction making mood. How about on the service cloud? Service cloud is probably one of the areas, if we look at at-scale, still growing, high growth, big, massive replacement opportunity potential. When does something like service cloud start to match the sales cloud, and what are you guys seeing maybe from a customer standpoint in terms of actually moving off of legacy call centers? And Keith, if you want to talk about the Verizon deal, if you can share any more color on that, that would be great.

Yeah, let me take the first part, and I’ll shoot it over to Keith. You know, number one, you’ve seen us deliver now the first $3 billion cloud with sales, and you don’t have to go very far to put together the numbers that we now report with sales cloud to see that service cloud is probably not far behind. The exact timing of when that service cloud can get to that level, you’re going to have to do the model yourself. I have my model, you’ll have your model. But there’s no doubt that service cloud has that kind of capability and more in it, and it’s pure potentiality at this point, and Keith is closing some terrific deals with service cloud, because really these other vendors have not delivered in the service area. And by the way, before I move on to Keith, if you haven’t been tracking it, it’s not just service cloud on the high end, it’s also desk.com on the low end. And if you haven’t been to www.desk.com and given yourself an account and seen the huge traction on desk.com or seen what that team has done, we have got an incredible executive running desk.com and is doing a great job at the very, very, very low end of the market. But let me have Keith talk about the mainstream, high end enterprise capability, with service cloud.

You know, service cloud, I think, it’s a whole area that I think is very, very interesting, because it certainly is an area where companies want to go and have the opportunity to take on a major transformation, because as you know, many companies are always looking for that area to differentiate themselves, and service is certainly one. And more and more companies want to differentiate from their competition by improving their service in many, many ways. And a lot of that is leveraging our customer success platform. And I could talk about Verizon, but Verizon probably doesn’t want me to get into too much detail, specifically, about how they’re leveraging the platform, because there may be some competitive advantage there. So I have to be sensitive to that. But just generally speaking, we are finding significant interest from some major corporations to work with us and collaborate with us to extend and enhance our service cloud offering, which gives you an indication of the interest that they’re looking to work with us on. So I think that’s very, very existing. We also have some companies that have gone on record. I mean, if you talk to GE, they talk about transforming into a service company, and certainly they want to do that with our assistance by leveraging, again, our customer success platforms. Suffice it to say, it is a major transformational opportunity for a lot of enterprise organizations, and the great news is that they want to talk to us, and they’re working very closely with us to make that happen.

Our next question comes from the line of Brendan Barnicle with Pacific Crest Securities.

Marc, you mentioned on the call this impressive transaction growth that you had, this over 60% transaction growth. As we were monitoring that through the quarter, we saw a particular spike in September. Can you give us any color on what might be spiking those transactions so dramatically?