Salesforce.com (CRM) Q2 2021 Earnings Call Transcript

Salesforce.com (NYSE: CRM) Q2 2021 earnings call dated Aug. 25, 2020

Corporate Participants:

Evan Goldstein — Senior Vice President, Investor Relations

Marc Benioff — Chairman and Chief Executive Officer

Mark Hawkins — President and Chief Financial Officer

Bret Taylor — President and Chief Operating Officer

Gavin Patterson — President and Chief Revenue Officer

Amy Weaver — President and Chief Legal Officer

Analysts:

Heather Bellini — Goldman Sachs & Co. — Analyst

Alex Zukin — RBC Capital Markets — Analyst

Taylor McGinnis — Deutsche Bank Securities, Inc. — Analyst

Phil Winslow — Wells Fargo Securities — Analyst

Walter Pritchard — Citigroup Global Markets, Inc. — Analyst

Kash Rangan — Bank of America Merrill Lynch — Analyst

Raimo Lenschow — Barclays Capital — Analyst

Sarah Hindlian-Bowler — Macquarie Capital — Analyst

Presentation:

Operator

Welcome to Salesforce Fiscal 2021 Second Quarter Results Conference Call. My name is Josh, and I will be your operator today. [Operator Instructions]

I would now like to hand the conference over to your speaker, Mr. Evan Goldstein, Senior Vice President of Investor Relations. Sir, you may begin.

Evan Goldstein — Senior Vice President, Investor Relations

Thanks, Josh. Hello everyone, and thanks for joining us for our fiscal ’21 second quarter results conference call. I’m Evan Goldstein, Senior Vice President of Investor Relations. Our results press release, SEC filings and a replay of today’s call can be found on our IR website at www.salesforce.com/investor. With me on the call today is Marc Benioff, Chair and CEO; Mark Hawkins, President and CFO; Bret Taylor, President and COO; Gavin Patterson, President and Chief Revenue Officer; and Amy Weaver, President and Chief Legal Officer.

Related: Highlights of Salesforce Q2 2021 earnings report

As a reminder, our commentary today will primarily be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings press release. Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties and assumptions. In particular, our expectations around the impact of the COVID-19 pandemic on our business, results of operations and financial condition and that of our customers and partners are uncertain and subject to change. Should any of these materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risks, uncertainties and assumptions and other factors that can affect our financial results is included in our SEC filings, including our most recent report on Form 10-K.

With that, let me hand the call over to Marc.

Marc Benioff — Chairman and Chief Executive Officer

Okay. Thanks so much, Evan, and we’re thrilled to be on the call with you today. And this has been such a challenging time. Our hearts have been broken. We heard so many stories of pain and distress across the world. And for us, this really — this moment is actually quite humbling, quite bittersweet. It reminds us that at Salesforce business is the greatest platform for change. That we’re really here to be a great example of stakeholder capitalism, to really show how we’re able to deliver a phenomenal return for our shareholders as well as for our stakeholders. And in many ways, this quarter really is a victory for stakeholder capitalism. It’s been not only about our core values, but also about our core products. It’s about showing how our Customer 360 has been a platform for change for so many of our customers, and I’m going to talk about that briefly before I turn it over to Mark. But also our company has been a platform for change to the communities who have needed us most. And I’m thrilled to deliver such a great return to our shareholders and also to our stakeholders.

Certainly, when we look at this quarter with more than $5.15 billion in revenue and our highest operating margin ever over 20% or when we look at simple aspects of our operational excellence like the 63% increase in seven figure deal from a year ago, well, really indicates to us one thing, which is values really bring value. And it reminds me the story that we really started last quarter with AT&T. AT&T is an amazing company, a leader in the communications industry and they have a tremendous visionary with Jeff McElfresh, who is CEO of AT&T Wireless. And I’ll tell you the thing that’s interesting about AT&T is they have a huge vision. And that vision is that every single customer touch point, whether it’s their stores, whether it’s their e-commerce, their apps, whether it’s getting the message from them well, in each and single customer touch point, they want to know you as a customer. They want a single source of truth. And that’s a deal that we signed obviously in February. And I was thrilled that this quarter we’ve deployed now hundreds of stores in the first 35,000 users because I’ll tell you, at this moment in time, there’s never been a time when we’ve had to go faster. We’ve had to deliver customer success faster and we’ve had to be there for our customers. And I’m absolutely thrilled to deliver that success for AT&T.

I also look at another incredible win in the quarter with PayPal. This is a tremendous organization that’s really at the right time, at the right place, because we really need contactless payments, we all know that. So to see them have such great success with our Sales Cloud and our Service Cloud to see their CEO, Dan Schulman embrace us so deeply and our vision, we’re having a one-on-one relationship with journey so powerful.

Another incredible victory in the quarter has really been Work.com. Here is a product that I don’t think there is a product that we’ve ever built faster, but never been more successful more rapidly. And you look at so many success stories, public sector organizations and enterprises today in the middle of this pandemic everyone needs contact tracing, they shift scheduling. Everybody needs workforce command center, try to bring everyone back safely. Well, Work.com is delivering that. Just look at the results at the University of Kentucky, for example. It’s a difficult situation for university to bring all these students back, and we’re thrilled to partner with them, with Work.com.

And I look at so many other customers and so many other success stories during the quarter, whether it was PwC or VF core or great public sector wins like the Veterans Administration or the State of Rhode Island. We look internationally at tremendous victories like Banco Bradesco. Just had a great conversation with their CEO, Octavio De Lazari. Tremendous vision for the future financial services and how customers are the most important thing today to go faster for their bank.

And ultimately, I guess, the most proud I was during the entire quarter was when we delivered an additional $20 million through our San Francisco and Oakland Public Schools, bringing our total contributions to $118 million to our local public schools. But one thing that’s so important right now is their need to be able to enter into distant learning. So if that idea that we’ve been able to do well and do good at the same time that this has really been a victory for stakeholder capitalism to show that we can build a great company, but we not only have great core values, we have great core product. So I just want to give my sincere thanks and gratitude to everyone who had such a great success during the quarter; our customers, our employees, our partners, all of our key stakeholders.

And with that, I’d like to turn it over to Mark.

Mark Hawkins — President and Chief Financial Officer

Well, great. Thanks, Marc. And I hope everyone continues to be safe and well during this historic and challenging time. As Marc described, this was an exceptional quarter for Salesforce. Both the company and our customers navigated the crisis better than our guidance assumed. While our performance in Q2 leaves us optimistic about the future, it is important to note that we remain mindful of how the pandemic may continue to impact our customers and our community.

Let me take you through some of the results for Q2, and I’ll begin with the top-line commentary. Revenue was $5.15 billion, representing 29% year-over-year growth. Q2 was the first time in which the company has surpassed $5 billion in a single quarter. Our revenue performance by cloud continue to demonstrate strength across the portfolio. Sales Cloud grew 13%. Service Cloud grew 20%. Platform and Other grew 66% with Tableau contributing 41 points of that growth. And Marketing and Commerce grew 21%. Additionally, we had a strong year-over-year performance by region in constant currency. Americas grew 28% with Tableau contributing 10 points of that growth. EMEA grew 38% with Tableau contributing 13 points of that growth. And Asia Pac grew 23%.

Before I detail the quarter’s performance, please note that the following should be compared against the guidance assumptions we provided on the Q1 earnings call. Specifically, the outperformance in the quarter was driven by five factors. One, better new business generation. Notably, we saw Q2 business consistent with historical trends. Two, higher license revenue driven by new business performance. Three, modestly better revenue attrition than expected. And four, achieved certain performance obligations within last quarter’s large telecom transaction. And five, favorable foreign exchange.

Our remaining performance obligation representing all future revenue under contract ended Q2 at approximately $30.6 billion, up 21% year-over-year. As a reminder, this metric includes both new business and renewal contracts. Current remaining performance obligation or CRPO, which is all the future revenues under contract that is expected to be recognized as revenue in the next 12 months, was approximately $15.2 billion, up 26% year-over-year. CRPO benefited from new business outperformance, favorable foreign exchange, strong renewal performance and the inclusion of last quarter’s large telecom transaction.

Q2 GAAP EPS was $2.85 and non-GAAP EPS was $1.44. The outperformance in the quarter was driven by higher revenue as well as realized and unrealized gains on our strategic investment portfolio, notably due to the nCino IPO. These mark-to-market adjustments benefited GAAP EPS by approximately $0.55 and non-GAAP EPS by approximately $0.58. GAAP EPS was also benefited by $2.17 as the company changed its international corporate structure, which included the consolidation of certain intangible properties, resulting in a $2 billion net tax benefit related to foreign deferred taxes. Please note that this had no impact on non-GAAP EPS, as the company utilizes a fixed long-term projected non-GAAP tax rate, which generally excludes the effects of discrete events.

Turning to cash flow. Our operating cash flow was $429 million in Q2, down 2% year-over-year. Capex for the quarter was $114 million, leading to a free cash flow defined as operating cash flow less capex of $315 million, up 22% year-over-year.

Now turning to guidance for Q3 and fiscal ’21. Coming off of a strong Q2 results, we are pleased to be raising our full year fiscal ’21 revenue guidance to $20.7 billion to $20.8 billion, representing approximately 21% to 22% growth. This guidance includes approximately $100 million of revenue from our acquisition of Velocity. For Q3, we expect our revenue to be $5.24 billion to $5.25 billion, representing approximately 16% growth. As a reminder, Q3 represents Tableau’s fifth quarter at the company, and therefore, the year-on-year growth rate will be normalized.

While the demand trends were strong in Q2, we remain mindful on how the pandemic may continue to impact our customers and community. Therefore, our guidance assumes that the revenue attrition remains consistent with Q2’s actual performance and assumes that we deliver modest new business growth during the second half of fiscal ’21. We are taking this quarter-by-quarter as the pandemic is not over and we are only halfway through the fiscal year.

In that mind, from that perspective, we will continue to evolve and re-imagine our business to enhance our relevance and deliver the highest level of customer success and innovation. As we look out over the next 12 months to 24 months, we realized it’s important for us to make a strategic shift and investments today to better position our company for continued growth and customer success in this new all-digital work from anywhere environment.

As part of this, we’ll be allocating resources to prepare the company for growth in strategic areas. This means we’ll be redirecting some of our resources to fuel growth in areas that are no longer is aligned with the business priority will be deemphasized. Furthermore, we intend to accelerate spend in go-to-market and product originally planned for next year and pull that into the second half of this year. These investments in growth are planned and they will increase our expenses in the second half.

With that being said, after incorporating these and updating our revenue guidance, we’re pleased to be able to raise our fiscal ’21 non-GAAP operating margin guidance to a year-over-year improvement of 75 basis points. As a result, we are updating our fiscal ’21 GAAP diluted EPS to be $3.12 to $3.14, while non-GAAP diluted EPS will be $3.72 to $3.74. For Q3, GAAP diluted EPS is expected to be $0.03 to $0.04, while non-GAAP diluted EPS will be $0.73 to $0.74. As a reminder, our EPS guidance assumes no future contribution from mark-to-market accounting as required by ASU 2016-01.

For operating cash flow, we are raising the fiscal ’21 guidance to 12% to 13% year-over-year growth. We continue to expect capex to be approximately 3% of revenue in fiscal ’21, resulting in a free cash flow growth rate of approximately 15% to 16% for the fiscal year. Operating cash flow is expected to be impacted by these incremental growth investments. We expect CRPO to grow approximately 19% year-over-year in the third quarter. And as a reminder, Q3 represents Tableau’s fifth quarter at the company, and therefore, the year-on-year growth rate is now normalized.

To close, we delivered a landmark Q2 in the face of adversity and have set ourselves up for a strong second half of fiscal ’21 and beyond. We are proud of our ability to successfully lead through change, and above all, to continue to serve our stakeholders around the world. I’d like to thank our employees, our customers, our partners, our community and our shareholders for their continued support. I wish each of you, your families and your firm safety and wellness.

And with that, we’ll open up the call for questions.

Questions and Answers:

 

Operator

[Operator Instructions] And your first question comes from Heather Bellini with Goldman Sachs. Please go ahead.

Heather Bellini — Goldman Sachs & Co. — Analyst

Great. Thank you so much, gentlemen for taking the question. I appreciate it. I was just wondering, Marc or Mark, if you could share with us a little bit how the progression of the quarter unfolded? And just kind of what you’re hearing from customers now, obviously, you did much better than what your guidance expected. But if you were to put all this into Einstein, what — how did it shape up versus what you were — versus what you thought, again, just thinking about how the slope of the quarter might have progressed? Thank you.

Marc Benioff — Chairman and Chief Executive Officer

Well, thanks, Heather for that question. We started this quarter 54,000 remote employees working at home. We knew that we had to make a number of changes. We knew that it was going to be critical for us to reshape our company, that this was a moment in time that you basically had to make a decision; are you going to keep things the way they were or are you going to change? Are you going to shift? And we made a decision that we were going to change and we are going to shift. We shifted our operational values very aggressively. And as we changed those operational values, we started to see momentum built.

We called that out on the beginning of the call after Q1 when we saw pipeline starting to increase for the second quarter and the third quarter. And it really was that as we piled in and doubled down on these core operational values, we got much closer to our customers. We understood that if we were going to succeed in the moment like this, we are going to have to be closer to our customer than ever before, that we’re going to have to change a lot of aspects of the company. As we made those adjustments, we saw the speed increased right up to the end of the quarter, and that was just really powerful. I mean, as I said, this moment is both humbling and bitter-sweet. This has been such a challenging time for us, for our families. And then to see these amazing results, it’s just incredible. I mean, honestly, I just can’t believe everything from just the delivery of all of our teams, the technology teams just did a fantastic job, the engineering team. If you look at what happened with Work.com, I mean, it’s incredible. And it’s been so important for so many businesses to get back to work safely, but now that we’ve brought it to schools to help schools get back to work safely as well, we’re doing that in a paid fashion, we’re doing that in a non-profit fashion.

So this is really a moment where values bring value. This is about us really paying attention, as I said, to our core products and our core values. And those — that’s really the accelerator. And when I look at some of the success stories that I went through, I mean, there are so many, but one that’s been very powerful for our whole company is watching what Gina Raimondo has done at the State of Rhode Island. She has even addressed the entire company. This is an amazing governor of this incredible state. And she came to us and said, you know, if we’re going to make our state safe, there’s things that we’re going to have to do. Of course, everybody is going to have to wear mask, but we’re going to have to increase our testing. We’re going to have to be doing tracing. We’re going to have to be renewing the shift scheduling. I need a command center. I need to do all these things. And that our teams are able to deliver and help her and 35 other states and so many others, that’s very, very powerful for us because we all want to get back to how things were, but the reality is that’s never going to happen. We’re in a new world. We’re in an all-digital world with the work digitally, we’re living digitally, we’re educating digitally and that means we’re going to have to make these adjustments.

And Bret, do you want to just talk about that and how the engineering organization has kind of responded?

Bret Taylor — President and Chief Operating Officer

Yeah, Marc. I mean, it’s interesting, you talked a lot about transformation and reshaping our company. We’re just seeing that across our entire customer base. And you’re seeing it in how our technologies are being acquired, just an incredible numbers. I think one that’s very illustrative, in the past six months, the use of messaging channels like text and WhatsApp and Apple Chat has gone up 600%. We saw and 89% year-over-year growth in our Commerce Cloud.

Probably a great example, a great customer story, I think this really illustrates this is Sonos. This is — and a customer, Sanosa use it to play music at my house. Like so many developers of product, they had to go direct-to-consumer. They deployed our Marketing Cloud and our Commerce Cloud and they saw an almost 300% year-over-year increase in direct-to-consumer revenue as a consequence. And I think that it’s been an incredible trying time for all of our employees, all of our communities and all of our customers. But as you implied, there’s also just incredible sustainable in terrain shifts in consumer behavior, like the digital commerce and this move to go direct-to-consumer.

And so it’s a great privilege to be able to help our customers navigate this crisis. And as you said, one of the key values we’re trying to represent as a company is that agility. I listen deeply to our customers like Governor Raimondo, like Sonos and making sure that we’re empowering all of them with the Customer 360 so they themselves can navigate this crisis successfully.

Marc Benioff — Chairman and Chief Executive Officer

Gavin, we just had a tremendous meeting with Banco Bradesco with Octavio De Lazari. We’ve also met with so many other customers. I met with one of your customers late last night in France. It was morning for them, a huge CPG company. I mean, we’re seeing so much transformation with the customers and desire for speed. And also, they’re all paying attention to their ESGs well and aligning from a position of stakeholder capitalism. Gavin, can you give us some illumination about what you’re seeing from a customer base?

Gavin Patterson — President and Chief Revenue Officer

Well, I’d call out a couple of things, Marc. One is, and we did touch on this in the last call, we saw confidence builds we have to it as we went through the quarter. And the shock of closing down, moving business so that it would be managed remotely. Once the first couple of weeks have been passed, we saw companies begin to realize the digital transformation with an imperatives, but they just couldn’t afford to put off any longer.

So I think what we saw with our sales leaders is — and the products that Bret and the team put together for us was we were relevant. That was the key word, I would say. We were able to pivot very quickly. It’s a very agile performance from the company. And we were there to help our customers through these difficult periods where they have to make decisions that would typically take weeks and months, sometimes in days, but I think it demonstrates sort of a powerful proposition we have for customers that we can spend things up quickly like Work.com. We can deploy the core clouds very quickly and they deliver quickly for customers that means they’re actually relevant now is probably as high if not higher than it’s ever been. And we had a great quarter, there is no question about that. I think it’s tinged with the site sensors, the context in which it’s been achieved in. But there’s real, I’d say real confidence in the business, we’re not getting carried away. There’s no question about that. There’s still a lot of uncertainty as we look into the second half of the year. But undoubtedly what we offer is something that increasingly our customers really want.

Marc Benioff — Chairman and Chief Executive Officer

Well, thank you, Gavin, and welcome by the way to the team officially. I know you’ve been with us for about a year, but now you’re officially in the road running as our Chief Revenue Officer and we couldn’t be more thrilled and we’re absolutely delighted to have you as part of the team. Amy, we also saw a lot of action in public sector, I mentioned a few of them, but there were so many more stories. Could you highlight a little bit about what we saw in public sector during the quarter? You’re on mute, Amy.

Amy Weaver — President and Chief Legal Officer

It would not be a call if I did not forget to take myself up at some point. I think the public sector has been a great success in both the first quarter and the second quarter, and it’s that type of trust and collaboration that just keeps building. I have to give a real shout out to Dave Ray, our [Indecipherable] and his entire team. And some of the things that stood out to me were not just for the Island, but really seeing the team mobilized in other states. We would have a reach out saying that they didn’t know what to do. They were struggling. And within hours, Dave would have told to gather a team of professionals from across Salesforce and said, despite a new situation to you, this isn’t new to us. We know how to do this. We know how to deploy a team quickly, and we can get in there and partner with you. I believe it’s terrific to say. And I thought it really showed just values of Salesforce and our focus on collaborating and partnering with governments around the world.

Marc Benioff — Chairman and Chief Executive Officer

Very good. All right, thank you so much, Heather.

Operator

Your next question comes from Alex Zukin with RBC. Please go ahead.

Alex Zukin — RBC Capital Markets — Analyst

Hey, guys. Thank you for taking my questions. Hope you’re all safe and well, and congratulations on an absolutely stunning quarter. Marc, I guess a lot of questions we get these days around the improvements in kind of week-by-week that Gavin just referenced around the confidence and the relevance is, what can you tell us about your pipeline and your confidence in converting that pipeline, particularly in selling in this new digital world where maybe a Virtual Dreamforce or some — how do you think about that? And then how does that set the stage? If you think about the 2008 recession, you guys accelerated pretty meaningfully coming out of it. And based on that pipeline question, is there a scenario in 2021 given that increased relevance? Is it possible to see a meaningful year of acceleration or are we just still too far from the end of this crisis?

Marc Benioff — Chairman and Chief Executive Officer

Well, this is such a great question. I really appreciate it. I guess just the third major crisis or maybe fourth that I’ve been through as the CEO of Salesforce. And in each crisis, things are different, but one thing that isn’t different is that each one has been an accelerator in the future, that each crisis tends to bring us to the future faster and that appears to be what’s happening here. Look, I’m speaking to you from my home, each of my executives are in their home, I’m looking at a screen that looks like the Brady Bunch with little video images of all of them, Gavin in London and Amy in San Francisco and so forth. And it’s quite complicated that where we see these continual advancements and accelerations.

But you have to, as a CEO, take a moment and ask yourself, how are you going to change? I kind of alluded to that and I think that your question about Dreamforce is so important, because I can’t tell you how many people I get on the phone with, well, when’s Dreamforce, we’re ready for Dreamforce, but there is no Dreamforce in 2020. We know that, we’re not all heading to San Francisco next month, the word Metallica is not playing, you know we’re not all going to be going — in the keynote room, and yeah, we’re grieving that — there is a grief. There is a sadness that we’re not all together, we love being together as one Ohana, our employees, our customers, our investors. We have a big Investor Day. We’re all in a big room at the St. Regis Hotel and Mark Hawkins is holding court with everyone, and there is no such thing this year, you know, so it’s sad, and will we all be back together again? I hope so. Am I sure? I don’t really know. I mean, this is my first pandemic. I mean, we’re in a global pandemic, we’re dealing with a virus that has a lot of unusual characteristics.

So we have made changes at Salesforce that we now are advising our clients to make, how to get their employees to participate. We have 54,000 employees. For us to achieve these results, everybody has to be on the field and play in the game. We have to also give them the incentive to play, to train them, to keep them motivated. I think I mentioned this to you before, but every week since the pandemic has started, we’ve had an all-hands call where we have all 54,000 people on a telephone call or Zoom and we’re talking to them around the world and giving them like a play-by-play for the week. That hasn’t happened since we were like a 10% company, a 100% company, that’s what little start-ups do. That’s not what companies who are entering the Dow will do, that’s — this is like, wow, this is like a moment.

So we’re re-imagining our business, also, we had to re-imagine our relevance, that’s why we built work.com because we realized that our customers need us to show up to be relevant to them. That’s why we built Salesforce Anywhere, because we realized our customers have to sell and service and market anywhere. That’s why we built the Leading Through Change program. You may have noticed we put over 200 million people through Leading Through Change, far bigger than anything we’ve ever done with Dreamforce. I just watched the one that just happened and it was amazing, and many other things, it’s another level of enablement, for example, like do you know that a third of our employees are reporting mental health challenges. I’m sure a number of people on this call are having mental health issues or know people who are having mental health issues in the pandemic. That’s why every day we’ve been doing a Be Well Together call. If you go to YouTube, you’ll find mental health resources. We never had to published mental health resources before at this velocity, in this scale, it’s amazing, you know, or I think I mentioned you like we bought 60 million pieces of personal protective equipment. We didn’t know what personal protective equipment was, it’s amazing.

We also have retrained everyone with Trailhead to become a ranger, and we’re doubling down on that, making sure that every employee is trained, you know that Tableau, which by the way, I don’t know if we mentioned it, I mean we’ve such a genius CEO, Adam Selipsky who runs that and I think it’s going to be the best acquisition ever done in the history of the software industry, most successful certainly. And they built this incredible Data Hub. If you haven’t seen it, you should go to Tableau Data Hub which you can find on public.tableau.com which has amazing visualizations of everything that — and I just mentioned to you that I just did a major management team’s presentation digitally in Europe — I mean, we’re constantly talking to our customers in new ways at scales, we could never have imagined. So it’s also gives us the ability to have accountability with our distribution organization which is of scale.

We’re not a sub-scale organization, we are a scaled enterprise software company. We are able to compete effectively as evidenced by these numbers with any enterprise software company that’s on the field today and we’re able to manage our distribution organization and go-to market in ways that have a level of acuity that we did not have before. I mean, it is powerful. When you add it all up, participation and enablement, and relevance and the tactical plays, and then the values that we apply– our core values, well, we’re a different company. This has changed us.

The pandemic has changed us. We’re not the same that we were. These aren’t even the same players on the call that were talking to you at the beginning of all of this. So that’s really amazing and I think that these results are evidence to that where we will be a quarter from now or two quarters from now or a year from now or two years now, we don’t know, but our intention is the same which is we’re helping our customers to connect with their customers in new ways, we want be the number one CRM, we’re the number one in analytics, we are tightly focused, we’re not all over the field, like a lot of our competitors, by the way. Lot of our competitors are everywhere, they’re in every market. Some of them are in enterprise and consumer, they are not just in CRM, they are in CRM, they’re in ERP, they are in public cloud. I mean, we’re not, we’re singularly focused, so that we can pick up a call, for example, like we mentioned, like from a Dan Schulman at PayPal and he says, I need Sales Cloud, I need Service Cloud, I need the integrator within together, we’re going to do that for him.

Or if we look at our success with CVS this quarter, we look at the tremendous — their leadership team is incredible, you know, just amazing executives and they’re — how they come together, whatever, so powerful. But the return ready product and then the integration of work.com, that’s an imagination I never had, and the vision of John Roberts and how he has been able to show, how this pharmacy can actually be a key player in the pandemic, they’re doing 100,000 tests a day. This is awesome. But they have to have each one of those tests, it is an on-ramp for customer success. So we have to be there with a vision on how to help that happen.

And I guess another one that really is on my mind has been VF Corp. I mean I love Vans, I wear the North Face almost every day, those jackets, fleeces, it’s cold where I am, and I’ll tell you, I think it’s our largest Commerce Cloud deal ever, maybe not customer because we tend to talk about deals and then we forget about how big these other customers are getting, but it’s a great company and they’re doing amazing things. I also was especially impressed with how Under Armour flipped on our Commerce Cloud and flipped off the old technology this quarter. That was really powerful. I mean we have to act with a level of speed and capability with our customers we’ve never been called on before.

So look, it’s continuing to unfold, we all know that, we’re doing the best that we can. Our hearts are with those who are going through serious challenges. This is a moment that is very much humbly than bittersweet. And we just continue to focus on business as the greatest platform for change. Our products have to be that platform for change, our values need to be the platform for change. We know what role we play in our industry. We know that we are a light and that we have to continue to be that light, especially during these difficult times.

Operator

Your next question comes from Taylor McGinnis with Deutsche Bank. Please go ahead.

Taylor McGinnis — Deutsche Bank Securities, Inc. — Analyst

Hi, thanks for taking my question and congrats on the awesome quarter. So the raise in the full-year operating margin improvement guide of 75 basis points, I thought was really solid considering one that you guys are pulling forward some expenses to fuel growth and guiding to revenue growth in the mid-teens in the back half. So curious if you’re able to break down the components driving that guide, like how much is coming from T&E savings perhaps you saw in 2Q or expect to see further down the line and I’m wondering if you’re able to quantify the pull forward of expenses?

Marc Benioff — Chairman and Chief Executive Officer

Yeah. Thank you, Taylor, for the question. I appreciate that. We were very pleased to be making the raise of 75 basis points in the midst of everything, especially in the fact that we are further investing to really perpetuate this long-term success for our customers and serving all our stakeholders. So I think we’re not prepared to quantify the specifics of that. But I think you’ve got it right. We’re investing in growth areas, think about product, think of our go-to-market in particular, in terms of the further acceleration in the investment. I think it’s a good way to frame that. Of course, we are getting some T&E benefit as well. But again, our profit level is a choice, and that’s been the amazing thing about our business model. We are making a choice in terms of where we want to strategically invest. We’ve shown in Q2 how we can deliver what we delivered which is a record operating margin. But we’re also trying to balance growth and profit over the long play. So that’s our approach. I think you nailed it in terms of some of the things, and we’re really pleased to be able to raise and make the investments. I hope that helps Taylor.

Operator

Your next question comes from Phil Winslow with Wells Fargo. Please go ahead.

Phil Winslow — Wells Fargo Securities — Analyst

Hey, thanks guys. It was a good quarter and congrats on really strong results. I really want to drill down into some of the specific clouds, specifically Service Cloud, that continues to deliver just really robust growth, obviously last quarter became the biggest individual cloud and that continues to stretch that gap. Can you talk about some of the dynamics that you’re seeing there in Service Cloud and how do you think about the sustainability of those on a go-forward basis?

Marc Benioff — Chairman and Chief Executive Officer

Well, sure, let me just touch on some of that at a very high level and then let me ask Bret to come in as well. But you’re right, Service Cloud had a record Q2, it continues to grow at a 20% — I don’t know, the numbers are huge, the revenues are huge, the growth rate is huge. It’s now larger than Sales Cloud, it continues to grow on all fronts, including year-over-year revenue growth, you saw that, new innovations, the engineering team has done a fantastic job, the products are amazing, Vlocity has out of the lots of Service Cloud. They have built a lot on Service Cloud, it’s another layer of value on Service Cloud. And in the last six months, the use of messaging channels on the platform grew more than 600%. I think that Bret really illuminated that in a powerful way this idea of box growing at 176% case of log per day 33% quarter-over-quarter, conversations hit nearly 19 million per day during the quarter. And you know it’s a key part of every deal we do because when you’re building a Customer 360 and you’re building a single source of truth for your customer, the Service Cloud has to be part of that.

There’s plenty of companies that have customer service or help desk or service desk or whatever as the spoke isolated solution, but that’s not our vision. Our vision is to be able to bring together a Customer 360 — because, look, like for AT&T, the salesperson in the store need to be able to work with the field service professional at home, has to work with the service professional in the call center, it’s all interrelated, and that’s why PayPal, for example, is able to get them because it’s sales and services together by the way, combined with marketing, combined with all their other systems through MuleSoft, combined with analytics with Tableau.

So anyway, Bret, would you like to come in here and might illuminate your vision around that?

Bret Taylor — President and Chief Operating Officer

Yeah. Marc, I think you characterized it well. I mean, fundamentally, our customers are coming to us to build the Customer 360, that single source of truth for their customers, so that in the face of unprecedented change for their customers, they can transform their business, they can go digital, they can integrate sales and service. It’s really that single source of truth. And it’s the anchor tenant of the Customer 360 and I think that’s where the momentum is coming from. And when you look at some of the deals that Marc talked about like PayPal, it is really the anchor tenant of the value proposition of that Customer 360.

Another great example of it, Gavin mentioned in our last earnings call, is Standard Bank. It’s again a complete solution for the largest bank in Africa and one of the things that I think is really powerful about that story is probably the most impactful call they’ve done with Gavin in this past quarter was we were talking to their executive team and the executive team all the way down is actually becoming rangers on Trailhead, they’re using the Service Cloud and the Customer 360 as an opportunity to not just transform their technology, but transform their culture to become customer centric and really become a platform. They’re rolling out Trailhead of 50,000 employees with the goal of achieving 20,000 rangers and I really do think that this really illustrates the power of these stories around digital transformation and the power of Customer Service really being the centerpiece of that Customer 360 transformation.

Operator

Your next question comes from Walter Pritchard with Citi. Please go ahead.

Walter Pritchard — Citigroup Global Markets, Inc. — Analyst

Hi, thanks. Wondering, similar question in that being on Commerce Cloud. I know customers paid to some degree on GMV and they have to come back and re-up as volumes go up. Can you help us understand how Commerce Cloud, just the impact to Commerce Cloud in the quarter and how that’s driving product sort of a holistic sale across the portfolio?

Marc Benioff — Chairman and Chief Executive Officer

Bret, can you take that for us?

Bret Taylor — President and Chief Operating Officer

Yeah, Marc. We saw over 100% year-over-year GMV growth this past quarter and I think it really reflects the broad digitization of Commerce and I think when I look at our Commerce Cloud and our differentiated value proposition, it’s two things. One is, we do both B2C Commerce and B2B Commerce, and I think that when I talk to customers, it’s really about all of their channels, it’s direct to consumer channels, it’s their warehousing, it’s their partnerships and we’re really the one platform that can do both.

The second thing is the integration of our Commerce Cloud with the rest of Customer 360. I think everyone on the call has experienced buy online curbside pickup, right? We’ve probably all experienced that, many of us for the first time. When you think about the technology that facilitates that, that’s the integration of our Commerce Cloud, our Order Management solution, Service Cloud and really that end-to-end customer experience. So you’re right that GMV is a good indicator of growth of the Commerce Cloud. But I also want to be clear that our Commerce Cloud is really a part of a broad solution that we’re providing the customers to really digitize their commerce experience all the way from making that order through the end of that customer experience whether you’re picking it up on the curb or it’s being delivered to your doorstep and those transformations have never been more important than in this all-digital work-from-anywhere in world.

Operator

Your next question comes from Kash Rangan with Bank of America. Please go ahead.

Kash Rangan — Bank of America Merrill Lynch — Analyst

Hi, thank you very much. It’s absolutely spellbinding to see organic growth rate, this solid margin expansion etc and the leading indicators RPO as well. My question for you, Marc, you sounded really excited about Tableau, you made a very profound statement that it could end up being the most impactful acquisition for certainly Salesforce maybe in the software industry. As you look at digital transformation, Customer 360, help us paint the picture of what a Tableau can do for Customer 360 and digital transformation for the industry looking into 2021 and 2022? Thank you so much.

Marc Benioff — Chairman and Chief Executive Officer

Well, I really appreciate that question because I’ll tell you that we’re so fortunate to be able to acquire Tableau last year. It is one of the world’s leading enterprise software companies, probably one of the most loved brands, the ability to see and understand data, the ability to build these compelling visualizations like you see in the public domain like at public.tableau.com. But I think the parts that you don’t really know or that when we talk to so many companies, they’ve gone wall to wall with Tableau. And doing those types of deals, that’s very exciting, because Tableau is analytics for the rest of us.

We are always in the analytics business, of course, either grew Sales Cloud, which had dashboards and reports, which were great, but very much, you know about kind of [Technical Issues] reporting out of Sales Cloud or we had Einstein Analytics, which is incredible, but it’s super advanced AI, highly programmatic and very enterprise class. This is a capability that means that three companies can deploy analytics easily, it’s a simple, easy to use and easy to understand product. I’m sure a lot of you use it plus you can build these amazing visualizations plus it had this incredible culture, this brand, this community, they call themselves the [Indecipherable], it’s awesome. And they are an incredible group and they also delivered a great quarter, which impacts us. Mark can talk about how that impacts us.

But let me tell you how it impacts me. It’s when I talk to somebody like Bob Moritz, the CEO of PwC, which was one of our largest deals in the quarter, but it’s also what PwC says that’s going to be our new analytics platform, and so many conversations with so many companies who have made the decision that now that Tableau as part of Salesforce, they see how this has become part of our Customer 360 and there is a lot of new innovation, a lot of exciting stuff coming for Tableau, and you’ll see that with their incredible announcements that are coming.

But Mark, can you just fill in how does it impact us on a financial basis?

Mark Hawkins — President and Chief Financial Officer

Yeah. Marc, I’m happy to do so. And I also share the excitement about Tableau. It’s just such a great company to serve our customers. One of the things that was nice this quarter is Tableau over-performed with their offering and their particular term license offering. They had a number of really nice deals with the various customers who wanted to go even beyond one year. We call it multi-year and when that happens that further helps us in the sense of the revenue recognition, but all-in-all, it’s all driven by people liking the product, wanting to invest not in just a year but in a couple of years and the more years out, Marc, the more we see that benefit in the top line, but what also is exciting for us is how it integrates into the digital transformation. So it’s been very positive and it was a very nice performance for sure. Congrats to the Tableau team who is listening in today.

Marc Benioff — Chairman and Chief Executive Officer

And I’ll also, just say, and I think, Mark, and I’ll come in here for a second. MuleSoft, you know we’re two years in the MuleSoft, here is another — this has been a game changer for us because it’s the heart and soul of Customer 360. The ability to say to customers with authenticity, we’re going to integrate everything for you and we’ll bring in all your legacy systems and put APIs on top of them, and give you this tremendous capability. These two companies together, this is a huge accelerator on our business that they are both working so well.

Mark, can you extend that thought?

Mark Hawkins — President and Chief Financial Officer

Yeah. Definitely, Marc. In fact, again, MuleSoft also was a contributor to our over-performance. Again, people love the product, Marc. I like the dialog you mentioned with VF Corporation where they’re buying multiple products including MuleSoft to get that 360 progress, if you will, of the Customer. And for MuleSoft, again, nice over-performance, so to all of our MuleSoft team members, congrats to you as well and your contribution to this result in Q2, and when they’re again selling more term licenses, this again has a favorable effect on us, and most importantly, helps us solve problems that customers really need help with.

And Marc, if I might just add, whether it’s MuleSoft or Tableau or even our core products, one of the things that we certainly hear more and more is this whole notion and Gavin talked about digital imperative, it is very clear that our products are becoming more and more mission-critical, MuleSoft, Marc, is adding to that. MuleSoft is adding to that 360 solution and we’re becoming more mission-critical, and one of the effects Marc that that had in this quarter is our attrition rate was better than we had expected and that’s in part because we’re becoming more mission-critical with MuleSoft, with the integration of these 360 products and just to sheer over-performance of MuleSoft and Tableau contributing to our results.

Operator

Your next question comes from Raimo Lenschow with Barclays. Please go ahead.

Raimo Lenschow — Barclays Capital — Analyst

Hey, thanks for squeezing me in and congrats from me as well. Question for Marc and Gavin. In this new environment that we are living in, can you talk a little bit about what you’re seeing in terms of customer engagement, in terms of deal size that you kind of maybe targeting, but then also like we talked earlier about Dreamforce being kind of more online like Dreamforce always was a big event for lead generation etc, like how are you shifting that and that maybe kind of bring in a little bit of the comments about the go-to-market investments. Thank you.

Marc Benioff — Chairman and Chief Executive Officer

Bret, would you like to take that?

Bret Taylor — President and Chief Operating Officer

Yeah, sure. So one thing I think Marc talked a lot about is, we’re really focused on having the beginner’s minds with our business. So as Marc mentioned, this is all of our first pandemic and the way we’re doing business has completely transformed. All of our sales engagements happened we assume rather than being in person. And you know, I talk to a lot of customers about their own digital transformation, I always try to guide them, don’t translate your analog behaviors into digital media, that’s not a digital transformation, that’s a digital translation.

And when we think of things like Dreamforce, as Marc said, I more than anyone else, I’m totally gone down we’re not going to be in San Francisco in October or November, because it’s one of my favorite times of the year, but we really feel like we’ve demonstrated over this past quarter our ability to re-imagine the way we engage with our customers in completely new ways. I think Parker made a comment in last earnings call that stuck with me where he said, on one hand, we’re all staring at these screens and it feels so impersonal, on the other hand, I’m staring into all of my colleagues and customers’ living rooms, and it’s oddly more personal at the same time.

So broadly what I’d say is our ambition is to transform our customers with the success of our technologies, our customer success teams, our distribution teams has not changed. And in fact, I think there is a broader imperative for digital transformation than there ever has been. The way we’re going to engage with our customers has completely transformed. And I think as a company, we really think we developed over the past quarter that mindset of a constantly transforming and reshaping ourselves to be able to meet our customers where they need to be met and I think we have the ability to continue executing on that with humility that predicting the future right now is really hard. We’re in the midst of an unprecedented environment, but I think we’ve developed a lot of confidence internally at our ability to transform ourselves.

Operator

Your next question comes from Sarah Hindlian-Bowler with Macquarie. Please go ahead.

Sarah Hindlian-Bowler — Macquarie Capital — Analyst

Great, thank you so much for taking my questions and squeezing in. Marc, how do feel about M&A today and all of this back and forth going on around TikTok? Do you think M&A appetites are picking up or just the IPO market?

And then a more specific question on the quarter. Look, the resilience here is really impressive, but still with the merger delivery, and I understand the balance of growth in investments and the commentary made. But could these better margins be a bit of a new normal given work from home?

And then just lastly, I wanted to say that it’s really nice to see you being generous to your employees, and still reward your other stakeholders, namely shareholders.

Marc Benioff — Chairman and Chief Executive Officer

Well, thanks. I mean certainly we’re seeing a very interesting environment in the markets, in M&A, in IPO. I think that for a company like Salesforce, we don’t really see an M&A environment, these are not, we’re not in a moment, I honestly feel like we’re very lucky that we were able to pick that MuleSoft and Tableau when we did, because they were both public companies. Today, you can do the math, we would not have been able to buy them. There is no way to know how wouldn’t have worked for us financially. So we’re not in a good M&A environment. I just don’t see it, maybe things could change, of course, things always are changing, but I think this is in part of our plan right now. We don’t see that, we really see focusing on our business, focusing on these operational values, executing our business. Look, we always maintain a beginner’s mind, you know that. But the reality is, right now, this is about our own execution, we’ve made these two major players to extend and complement our Customer 360 and that’s what we’re focused on.

Also read: Strategic investments become key priority for CRM

Mark Hawkins — President and Chief Financial Officer

Let me take the second part of that question, Marc, on the growth in investment and could the margins be the new normal? Thank you for the question. Sarah, we always are mindful of we want obviously growth number one, we want to continue to expand our operating margins and deliver cash flow. We know how critical those three are financially speaking and we’re always trying to balance that. We are always making choices with the opportunities in front of us and we are always reassessing that at the executive suite. So we are pleased to be raising. We’re always trying to be better. We’re always trying to keep an eye on that and going forward, but we think we have the right balance for this year, given the opportunity, given the total addressable market that we are so well positioned for to serve our customer and the rest of our stakeholders. So we think it’s the right balance today. I take your point and we’re always assessing and we’re always trying to be better.

Operator

That is all the time we have for questions, I will turn the call back to Evan Goldstein for closing remarks.

Evan Goldstein — Senior Vice President, Investor Relations

Thank you for joining us on the call today. If you have any follow-up questions, please email us at investor@salesforce.com, and look forward to speaking with you on our Q3 results. Thank you.

Operator

[Operator Closing Remarks]