Nov 13, 2018 | Techcelerate Ventures |
2017 ANNUAL RE PORT $8.4 billion FY17 Revenue, up 26% year-over-year. $5.5 billion Deferred Revenue, up 29% year-over-year. $14.5 billion Billed and Unbilled Deferred Revenue,1 up 28% year-over-year. $2.2 billion Full year Operating Cash Flow, up 29% year-over-year. 25,000+ Employees ~90% of the "Fortune 100" run at least one app from the AppExchange. 2 million+ Hours contributed to the community since inception. FY17 HIGHLIGHTS Trailblazers create experiences that put customers at the center of everything. They learn from insights, innovate constantly, build trust into every touchpoint, and predict what customers want before they even ask. Thanks to you, FY2017 was another record-breaking year for Salesforce. We look forward to blazing even more new trails together in the year to come. "Unbilled Deferred Revenue" represents business that is contracted but unbilled and off the balance sheet. Salesforce delivered another exceptional year of growth and customer success. We reached nearly $8.4 billion in annual revenue, achieving that milestone faster than any other enterprise software company. No other enterprise software company of our size and scale is growing at this pace, and we've continued to balance this top line growth with improvement in non-GAAP operating margin. For fiscal 2018, we expect to surpass $10 billion in revenue, on our path to $20 billion. When we started the company in 1999, we had a vision that businesses would move to the cloud and subscription-based services. Salesforce led the industry as the first to bring cloud, social and then mobile to CRM. Now, with our Einstein AI services, we're once again leading companies into the future. Einstein brings artificial intelligence to the world's #1 CRM and millions of Salesforce users, across sales, service, marketing, commerce and more. The Salesforce Intelligent Customer Success Platform is trusted at scale by a trailblazing community of 150,000+ customers, delivering tens of billions of secure transactions every day. We have strategic relationships with many of the largest and most successful companies in the world, including nearly 400 of the Fortune 500. These companies rely on Salesforce to drive their digital transformations and enable them to connect with their customers in whole new ways. Our continuous focus on innovating on behalf of customers has earned Salesforce recognition as the "Innovator of the Decade" by Forbes. In addition, Fortune ranked Salesforce as the 20th "Most Admired Company in the World" and 8th in its "100 Best Companies to Work For" rankings. Salesforce has also been named the #1 "Workplace for Giving Back" by Fortune. In partnership with Salesforce.org, we now have given approximately $160 million in grants, logged over 2 million employee volunteer hours throughout the world, and more than 31,000 non-profit and higher education organizations use our service offerings for free or at a discount. We've proven over our 18 years that a company can do well, while also doing good in the world. I would like to extend my gratitude to our customers, partners and stockholders for their inspiration, guidance and support, and to our more than 25,000 employees across 25 countries around world, who dedicate themselves to delivering customer success and who embody our core values -- trust, growth, innovation and equality. Mahalo, Fellow stockholders, World's #1 CRM Platform SOURCE: GARTNER, 2016 Innovator of the Decade SOURCE: FORBES, 2016 20th Most Admired Company in the World SOURCE: FORTUNE MAGAZINE, 2017 8th Best Company to Work For SOURCE: FORTUNE MAGAZINE, 2017 Your inspiration, drive, and support have made us who we are today. thank you UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended January 31, 2017 OR ' Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 001-32224 salesforce.com, inc. (Exact name of registrant as specified in its charter) Delaware 94-3320693 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) The Landmark @ One Market, Suite 300 San Francisco, California 94105 (Address of principal executive offices) Telephone Number (415) 901-7000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $0.001 per share New York Stock Exchange, Inc. Securities registered pursuant to section 12(g) of the Act: Not applicable Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No ' Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of Act. Yes ' No Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes No ' Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes No ' Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ' Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer ' Non-accelerated filer ' (Do not check if a smaller reporting company) Smaller reporting company ' Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ' No Based on the closing price of the Registrant's Common Stock on the last business day of the Registrant's most recently completed second fiscal quarter, which was July 29, 2016, the aggregate market value of its shares (based on a closing price of $81.80 per share) held by non-affiliates was approximately $38.5 billion. Shares of the Registrant's Common Stock held by each executive officer and director and by each entity or person that owned 5 percent or more of the Registrant's outstanding Common Stock were excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of January 31, 2017, there were approximately 707.5 million shares of the Registrant's Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive proxy statement for its 2017 Annual Meeting of Stockholders (the "Proxy Statement"), to be filed within 120 days of the Registrant's fiscal year ended January 31, 2017, are incorporated by reference in Parts II and III of this Report on Form 10-K. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K. salesforce.com, inc. INDEX Page No. PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Item 4A. Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . 39 Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Item 8. Consolidated Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . 120 Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 PART III Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 Item 13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . 122 Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 PART IV Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Item 16. 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Index to Exhibits 2 FORWARD-LOOKING INFORMATION This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Words such as "expects," "anticipates," "aims," "projects," "intends," "plans," "believes," "estimates," "seeks," "assumes," "may," "should," "could," "would," "foresees," "forecasts," "predicts," "targets," variations of such words and similar expressions are intended to identify such forward-looking statements, which may consist of, among other things, trend analyses and statements regarding future events, future financial performance, anticipated growth and industry prospects. These forward-looking statements are based on current expectations, estimates and forecasts, as well as the beliefs and assumptions of our management, and are subject to risks and uncertainties that are difficult to predict, including the effect of general economic and market conditions; the impact of foreign currency exchange rate and interest rate fluctuations on our results; our business strategy and our plan to build our business, including our strategy to be the leading provider of enterprise cloud computing applications and platforms; our international expansion strategy; our service performance and security; the expenses associated with new data centers and third party infrastructure providers; additional data center capacity; real estate and office facilities space; our operating results; new services and product features; our strategy of acquiring or making investments in complementary businesses, joint ventures, services, technologies and intellectual property rights; our ability to successfully integrate acquired businesses and technologies; our ability to continue to grow and maintain deferred revenue and unbilled deferred revenue; our ability to protect our intellectual property rights; our ability to develop our brands; our ability to realize the benefits from strategic partnerships and investments; our reliance on third- party hardware, software and platform providers; our dependency on the development and maintenance of the infrastructure of the Internet; the effect of evolving government regulations, including import and export controls; the valuation of our deferred tax assets; the potential availability of additional tax assets in the future; the impact of new accounting pronouncements, the impact of expensing stock options and other equity awards; the sufficiency of our capital resources; factors related to our outstanding convertible notes, revolving credit facility, term loan and loan associated with 50 Fremont; compliance with our debt covenants and capital lease obligations; and current and potential litigation involving us. These and other risks and uncertainties may cause our actual results to differ materially and adversely from those expressed in any forward-looking statements. Readers are directed to risks and uncertainties identified below under "Risk Factors" and elsewhere in this report for additional detail regarding factors that may cause actual results to be different than those expressed in our forward-looking statements. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason. PART I ITEM 1. BUSINESS Overview Salesforce is a leading provider of enterprise software, delivered through the cloud, with a focus on customer relationship management, or CRM. We introduced our first CRM solution in 2000, and we have since expanded our service offerings into new areas and industries with new editions, features and platform capabilities. Our core mission is to empower our customers to connect with their customers in entirely new ways through cloud, mobile, social, Internet of Things ("IoT") and artificial intelligence technologies. Our service offerings are intuitive and easy to use. They can be deployed rapidly, configured easily and integrated with other platforms and enterprise applications, or apps. We deliver our service offerings via major internet browsers and on leading mobile devices. We sell to businesses of all sizes and in almost every industry worldwide on a subscription basis, primarily through our direct sales efforts and also indirectly through partners. Through our platform and other developer tools, we also encourage third parties to develop additional functionality and new apps that run on our platform, which are sold separately from, or in conjunction with, our service offerings. 3 Our Customer Success Platform is a comprehensive portfolio of service offerings providing sales force automation, customer service and support, marketing automation, digital commerce, community management, analytics, application development, IoT integration, collaborative productivity tools and our professional cloud services. Salesforce also believes in giving back. We pioneered, and have inspired other companies to adopt, an integrated philanthropy model called the 1-1-1 model, which leverages 1% of a company's equity, employee time and product to help improve communities around the world. We also believe in equality for all, and have spearheaded initiatives to create a world where equal pay, equal advancement, equal opportunity and equal rights become a reality for our employees and the broader world. We were incorporated in Delaware in February 1999. Our principal executive offices are located in San Francisco, California, and our principal website address is www.salesforce.com. Our office address is The Landmark @ One Market, Suite 300, San Francisco, California 94105. The Age of the Customer At Salesforce, we believe we are living in the single most innovative era in history, as everyone and every thing becomes connected. There are now billions of mobile phones and intelligent connected devices. And behind each and every device, interaction, product and connected community is a customer. Companies have the opportunity to harness all of this information about customers in new and extraordinary ways, enabling them to intelligently connect and engage with customers across every part of the customer experience. Our Customer Success Platform provides a single view of the customer across all touchpoints. We bring together the power of cloud, mobile, social, IoT and artificial intelligence technologies, enabling our customers to harness data and deliver the connected experiences their customers are increasingly coming to expect. Our Cloud Service Offerings Our cloud service offerings empower our customers to: grow their sales faster; deliver customer service through multiple devices and channels; create one-to-one customer journeys; personalize buying experiences across all channels; build branded communities for customers, partners and employees; deliver analytics and predictive insights for every business user; turn data generated by the IoT into meaningful actions; collaborate on documents, spreadsheets and more to improve productivity, and; develop modern mobile and desktop apps quickly and easily. Our cloud service offerings are as follows: Sales Cloud. The Sales Cloud, which was our first offering and continues to be the largest contributor to total subscription and support revenues, enables companies to store data, monitor leads and progress, forecast opportunities, gain insights through relationship intelligence and collaborate around any sale on desktop and mobile devices. Our customers use the Sales Cloud to grow their sales pipelines, improve sales productivity, simplify complex business processes and close more deals. The Sales Cloud also offers solutions for partner relationship management, including channel management and partner communities, and the ability to deliver quotes, contracts and invoices to improve forecasting and collect payments faster. 4 Service Cloud. The Service Cloud, which is our second largest contributor to total subscription and support revenues, enables companies to deliver smarter, faster and more personalized customer service and support. Our customers use the Service Cloud to connect their service agents with customers anytime and anywhere, on popular devices and across multiple channelsphone, email, chat, live video, SMS, self-service web portals, social networks, online communities and directly within their own products and mobile apps. In addition, Service Cloud also offers a field service solution that enables companies to connect agents, dispatchers and mobile employees through one centralized platform, through which they can schedule and dispatch work intelligently, and track and manage jobs in real-time. Marketing Cloud. The Marketing Cloud enables companies to plan, personalize and optimize one-to-one customer interactions across email, mobile, social, web and connected products. In addition, companies can segment and target audiences to power precise digital marketing at scale. With the Marketing Cloud, customer data can also be integrated with the Sales Cloud and Service Cloud in the form of leads, contacts and customer service cases to give companies a complete view of their customers. Commerce Cloud. The Commerce Cloud empowers brands to deliver a comprehensive digital commerce experience across web, mobile, social and store. It also offers mobile-first point-of-sale and store operations capabilities that increase store personnel effectiveness, connecting the physical and digital commerce experiences. Community Cloud. The Community Cloud enables companies to quickly create and manage trusted, branded digital destinations for customers, partners and employees. This allows companies to engage and collaborate directly with groups of people by giving them access to relevant information, apps and experts. IoT Cloud. The IoT Cloud enables companies to harness the power behind billions of connected devices, products, sensors and apps to derive entirely new levels of customer insights. With those insights, companies can sell, service and market to their customers in smarter, more personalized ways, and engage proactively with them in real time. Analytics Cloud. The Analytics Cloud enables any employee across an organization to quickly and easily explore business data, uncover new insights, make smarter decisions and take action from any device. The Analytics Cloud embeds insights related to the context of the business users' roles directly into the workflows and apps they use to make analytics easier and more intuitive, collaborative and actionable. Salesforce Quip. Salesforce Quip is a next-generation productivity solution designed for teams with a mobile-first strategy, empowering everyone to collaborate more effectively, work smarter and supercharge their productivity, all without email. Salesforce Quip combines documents, spreadsheets, task lists and team chat in one seamless experience known as a "living document." Salesforce Platform. The Salesforce Platform (formerly App Cloud) is for building enterprise apps powering Salesforce's CRM apps, with thousands of partner-built apps and millions of custom apps built by customers. The Salesforce Platform offers a new continuum of tools, frameworks and services that customers and partners need to build connected apps fast. Professional Cloud Services We offer professional cloud services including consulting, deployment, training, user-centric design and integration to help customers to achieve business results faster through adoption of Salesforce solutions. We also offer architects and innovation program teams that act as advisors to plan and execute digital transformations for our customers, providing mission critical support, cloud specialists and pre-packaged accelerators that allow our customers to build on the best practices of our community. We offer several education service offerings to our customers and partners, ranging from introductory online courses to advanced architecture certifications. With the Trailhead learning platform, our customers and partners have access to free online courses that address topics such as using and administering our services and 5 developing on our platform. For more advanced education, we offer instructor-led and online courses to certify our customers and partners on architecting, administering, deploying and developing our service offerings. In addition, we make available a selection of online educational classes at no charge to customers that subscribe to our customer service plans. Business Benefits of Using Our Solution The key advantages of our solution include: Secure, private, scalable and reliable. Our service has been designed to provide our customers with privacy and high levels of performance, reliability and security. We have built, and continue to invest in, a comprehensive security infrastructure, including firewalls, intrusion detection systems, and encryption for transmissions over the Internet, which we monitor and test on a regular basis. We built and maintain a multi-tenant application architecture that has been designed to enable our service to scale securely, reliably and cost effectively. Our multi-tenant application architecture maintains the integrity and separation of customer data while still permitting all customers to use the same application functionality simultaneously. Rapid deployment and lower total cost of ownership. Our services can be deployed rapidly since our customers do not have to spend time procuring, installing or maintaining the servers, storage, networking equipment, security products or other hardware and software. We enable customers to achieve up-front savings relative to the traditional enterprise software model. Customers benefit from the predictability of their future costs since they generally pay for the service on a per subscriber basis for the term of the subscription contract. Ease of integration and configuration. Information technology ("IT") professionals are able to integrate and configure our solutions with existing applications quickly and seamlessly. We provide a set of application programming interfaces ("APIs") that enable customers and independent software developers to both integrate our solution with existing third-party, custom and legacy apps and write their own application services that integrate with our solutions. For example, many of our customers use our Salesforce Platform (formerly App Cloud) API to move customer-related data from custom-developed and packaged applications into our services on a periodic basis to provide greater visibility into their activities. High levels of user adoption. We have designed our solutions to be intuitive and easy to use. Our solutions contain many tools and features recognizable to users of popular consumer web services, so users have a more familiar user experience than typical enterprise applications. As a result, our users can often use and gain benefit from our solutions with minimal training. We have also designed our solutions to be used on popular mobile devices, making it possible for people to conduct business from their phones. Rapid development of apps and increased innovation. Our customers and third-party developers can create apps rapidly because of the ease of use and the benefits of a multi-tenant platform. We provide the capability for business users to easily configure our applications to suit their specific needs, and also support a variety of programming languages so developers can code complex apps spanning multiple business processes and deliver them via multiple mobile devices. By providing infrastructure and development environments on demand, we provide developers the opportunity to create new and innovative apps without having to invest in hardware. Developers with ideas for a new app can create, test and support their solutions on the Salesforce Platform and make the app accessible for a subscription fee to customers. Continuous innovation. We release hundreds of new features to all of our customers three times a year. Our metadata-driven, global multi-tenant cloud runs on a single code base, which enables every customer to run their business on the latest release without disruption. Because we deploy all upgrades on our 6 servers, new features and functionality automatically become part of our service on the upgrade release date and therefore benefits all of our customers immediately. Positive environmental impact. Our multi-tenant cloud computing model has a much smaller environmental footprint than traditional IT hardware and software. When organizations move business applications to Salesforce, they can significantly reduce their energy use and carbon footprint compared to traditional on-premises solutions. Our Strategy Key elements of our strategy include: Extending existing service offerings. We offer multiple editions of our service offerings at different price points to meet the needs of customers of different sizes and we have designed our solutions to easily accommodate new features and functionality. We intend to continue to extend all editions of our solutions with new features, functions and increased security through our own development, acquisitions and partnerships. Over the last year, for example, we have invested heavily in artificial intelligence capabilities to create Salesforce Einstein, which will allow users of our products to deliver more predictive customer experiences. Cross selling and upselling. We see significant opportunity to deepen our relationships with our existing customers. As our customers realize the benefits of our services, we aim to upgrade the customer to premium editions and sell more subscriptions by targeting additional functional areas and business units, ultimately becoming our customers' trusted advisors, inspiring enterprise-wide transformation and accelerating strategic engagements through direct engagement with the highest levels of our customers' executive management. Expanding into new horizontal markets. As part of our growth strategy, we are delivering innovative solutions in new categories, including analytics, commerce and IoT. We drive innovation both organically and through acquisitions, such as our July 2016 acquisition of Demandware, a digital commerce leader. Targeting vertical markets. In order to meet the needs of our customers in certain industries, we also provide solutions specifically built for certain vertical industries, such as financial services, healthcare and government. Extending go-to-market capabilities. We believe that our offerings provide significant value for businesses of any size. We will continue to pursue businesses of all sizes in top industries and major regions globally, primarily through our direct sales force. We have steadily increased and plan to continue to increase the number of direct sales professionals we employ, and we intend to develop additional distribution channels for our solutions around the globe. Reducing customer attrition. Our goal is to have all of our customers renew their subscriptions prior to the end of their contractual terms. We run customer success and other related programs in an effort to secure renewals of existing customers. Encouraging the development of third-party applications on our cloud computing platforms. The Salesforce Platform enables existing customers, independent software vendors ("ISVs") and third-party developers to create and deliver cloud-based apps. It is a platform on which apps can be created, tested, published and run. In addition, these apps can be marketed and sold on the AppExchange, our online marketplace for business apps, or sold directly by software vendors. We believe our ecosystem of developers and software vendors will address the business requirements of both current and future customers. In addition to the key elements of our business strategy described above, from time to time, we evaluate opportunities to acquire or invest in complementary businesses, services and technologies, and intellectual property rights. This evaluation resulted in our acquisition in fiscal 2017 of several companies, such as: SteelBrick, Inc., which provides us with apps to automate the quote-to-cash process, 7 MetaMind, Inc., which allows us to extend our intelligence in natural language processing and image recognition across our clouds, BeyondCore, Inc., which provides us with smart data discovery technology that automatically explores millions of variable combinations from structured data sources, Demandware, Inc., which allows us to expand our position in CRM and pursue the digital commerce market, Quip, Inc., which provides us with a next generation productivity solution, and Krux Digital, Inc., which provides us with a data management platform. Prior to this acquisition activity, our most significant acquisition was ExactTarget, Inc. in fiscal 2014. Technology, Development and Operations We deliver our Salesforce solutions as highly scalable, cloud computing application and platform services on a multi-tenant technology architecture. Multi-tenancy is an architectural approach that allows us to operate a single application instance for multiple organizations, treating all customers as separate tenants who run in virtual isolation from each other. Customers can use and customize an application as though they each have a separate instance, and their data and customizations remain secure and insulated from the activities of all other tenants. Our multi-tenant services run on a single stack of hardware and software, which is comprised of commercially available hardware and a combination of proprietary and commercially available software. As a result, we are able to spread the cost of delivering our services across our user base. In addition, because we do not have to manage thousands of distinct applications with their own business logic and database schemas, we believe that we can scale our business faster than traditional software vendors. Moreover, we can focus our resources on building new functionality to deliver to our customer base as a whole rather than on maintaining an infrastructure to support each of their distinct applications. Multi-tenancy also allows for faster bug and security fixes, automatic software updates and the ability to deploy major releases and frequent, incremental improvements to our services, benefiting the entire user community. Our services are optimized to run on specific databases and operating systems using the tools and platforms best suited to serve our customers rather than on-premise software that must be written to the different hardware, operating systems and database platforms existing within a customer's unique systems environment. Our developers build and support solutions and features on a single code base on our chosen technology platform. Our efforts are focused on improving and enhancing the features, functionality, performance, availability and security of our existing service offerings as well as developing new features, functionality and services. From time to time, we supplement our internal research and development activities with outside development resources and acquired technology. As part of our business strategy, we periodically acquire companies or technologies, and we incorporate the acquired technologies into our solutions. Performance, functional depth, security and the usability of our solutions influence our technology decisions and product direction. Our customers access our services over the Internet via all of the major Internet browsers and on most major mobile device operating systems. We provide the majority of our services to our customers from infrastructure operated by us but secured within third-party data center hosting facilities located in the United States and other countries. These third-party data center providers provide space, physical security, continuous power and cooling. The remainder of our services operate from cloud computing platform providers who offer Infrastructure as a Service, including servers, storage, databases and networking. 8 Sources of Revenue All of the cloud offerings that we offer to customers are grouped into four major core cloud service offerings: Sales Cloud, Service Cloud, Salesforce Platform and Other, and Marketing Cloud. Our subscription and support revenues are disaggregated into these four core offerings. For a more detailed discussion, see the "Revenue by Cloud Service Offering" discussion in Management's Discussion and Analysis. We derive our revenues primarily from subscription fees for our service. We also derive revenues from premier support, which provides customers with additional support beyond the standard support that is included in the basic subscription fee. We recognize subscription and support revenue ratably over the contract term, beginning on the commencement date of each contract. We enter into professional services contracts that are on a time and materials, fixed fee or subscription basis. We recognize revenue as the services are rendered for time and materials contracts, when the milestones are achieved and accepted by the customer or on a proportional performance basis for fixed price contracts and ratably over the contract term for subscription professional services. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from subscription services described above and is recognized as the revenue recognition criteria are met. Unbilled deferred revenue represents future billings under our subscription agreements that have not been invoiced and, accordingly, are not recorded in deferred revenue. We generally invoice customers in annual installments. Deferred revenue and unbilled deferred revenue are influenced by several factors, including new business seasonality within the year, the specific timing, size and duration of large customer subscription agreements, the timing and compounding effects of customer renewals, varying billing cycles of subscription agreements, invoice timing, foreign currency fluctuations and new business linearity within the quarter. Customers We sell to businesses of all sizes and in almost every industry worldwide. The number of paying subscriptions at each of our customers ranges from one to hundreds of thousands. None of our customers accounted for more than five percent of our revenues in fiscal 2017, 2016 or 2015. Sales, Marketing and Customer Support We organize our sales and marketing programs by geographic regions, such as the Americas, Europe and Asia Pacific, which includes Japan. The majority of our revenue from the Americas is attributable to customers in the United States. Approximately 26 percent of our revenue comes from customers outside of the Americas. Direct Sales We sell our services primarily through our direct sales force, which is comprised of telephone sales personnel based in regional hubs, and field sales personnel based in territories close to their customers. Both our telephone sales and field sales personnel are supported by sales representatives, who are primarily responsible for generating qualified sales leads. Referral and Indirect Sales We have a network of partners who refer sales leads to us and who then assist in selling to these prospects. This network includes global consulting firms, systems integrators and other partners. In return, we typically pay these partners a fee based on the first-year subscription revenue generated by the customers whom they refer. 9 We continue to invest in developing additional distribution channels for our subscription service. Strategic Investments Since 2009, we have been investing in early-to-late stage technology and professional cloud service companies across the globe to support our key business initiatives, which include, among other things, extending the capabilities of our platform and CRM offerings, increasing the ecosystem of enterprise cloud companies and partners, accelerating the adoption of cloud technologies and creating the next-generation of mobile applications and connected products. Our minority investments in over 180 companies as of January 31, 2017 also help us stay connected with the pace of innovation that is currently occurring within the technology industry. In some cases, we have acquired companies in which we have previously invested. Because of the inherent risk in investing in early-to-late stage technology companies, our individual investments are subject to a risk of partial or total loss of investment capital. Marketing Our marketing strategy is to promote our brand and generate demand for our offerings. We use a variety of marketing programs across traditional and social channels to target our prospective and current customers, partners and developers. We focus our marketing activities on the cities and countries with the largest market opportunity. Our primary marketing activities include: Multi-channel marketing campaigns that span email, social, web and more that align to a broader customer journey; Proprietary events of all sizes, ranging from Dreamforce to salon dinners, as well as participation in trade shows and industry events, to create customer and prospect awareness; Press and industry analyst relations to garner third-party validation and generate positive coverage for our company, offerings and value proposition; Content marketing and engagement on all of the major social channels; Search engine marketing and advertising to drive traffic to our Web properties; Partner co-marketing activities with global and regional implementation partners; Web site development to engage and educate prospects and generate interest through product information and demonstrations, case studies, white papers and marketing collateral; Customer testimonials; Tools that enable our sales organization to more effectively convert leads into customers; and Event sponsorships and primary real estate signage. Customer Service and Support Our global customer support group responds to both business and technical inquiries about the use of our products via the web, telephone, email, social networks and other channels. We provide standard customer support during regular business hours at no charge to customers who purchase any of our paying subscription editions. We also offer premier customer support that is either included in a premium offering or sold for an additional fee, which can include services such as priority access to technical resources, developer support, and system administration. In addition, we offer a mission critical support add-on that is designed to provide customers with responses for incidents from a dedicated team knowledgeable about the customer's specific enterprise architecture, and which offers instruction to optimize their usage of our products. 10 Seasonality Our fourth quarter has historically been our strongest quarter for new business and renewals, and our first quarter is our largest collections and operating cash flow quarter. For a more detailed discussion, see the "Seasonal Nature of Deferred Revenue and Accounts Receivable" discussion in Management's Discussion and Analysis. Competition The market for our service offerings is highly competitive, rapidly evolving and fragmented, and subject to changing technology, shifting customer needs and frequent introductions of new products and services. Many prospective customers have invested substantial personnel and financial resources to implement and integrate their current enterprise software into their businesses and therefore may be reluctant or unwilling to migrate away from their current solution to an enterprise cloud computing application service. Additionally, third-party developers may be reluctant to build application services on our platform since they have invested in other competing technology platforms. We compete primarily with generalized platforms and vendors of packaged business software, as well as companies offering enterprise apps, including CRM, collaboration, e-commerce and business intelligence software. We also compete with internally developed apps. We may encounter competition from established enterprise software vendors, as well as start-up and midsized companies focused on disruption, who may develop toolsets and products that allow customers to build new apps that run on the customers' current infrastructure or as hosted services. Our current competitors include: On-premises offerings from enterprise software application vendors; Cloud computing application service providers, either individually or with others; Marketing vendors, which may be specialized in advertising, targeting, messaging, or campaign automation; Software companies that provide their product or service free of charge, and only charge a premium for advanced features and functionality; Traditional platform development environment companies; Cloud computing development platform companies; Internally developed applications (by our potential customers' IT departments); IoT platforms from large companies that have existing relationships with hardware and software companies; E-commerce solutions from emerging cloud-only vendors and established on-premises vendors; and Artificial intelligence solutions from new startups and established companies. We believe that as traditional enterprise software application and platform vendors shift more of their focus to cloud computing, they may become a greater competitive threat. Intellectual Property We rely on a combination of trademark, copyright, trade secret and patent laws in the United States and other jurisdictions as well as confidentiality procedures and contractual provisions to protect our proprietary technology and our brands and maintain programs to protect and grow our rights. We also enter into confidentiality and proprietary rights agreements with our employees, consultants and other third parties and control access to software, services, documentation and other proprietary information. We believe the duration of 11 our patents is adequate relative to the expected lives of our service offerings. We also purchase or license technology that we incorporate into our products or services. At times, we make select intellectual property broadly available at no or low cost to achieve a strategic objective, such as promoting industry standards, advancing interoperability, fostering open source software or attracting and enabling our external development community. While it may be necessary in the future to seek or renew licenses relating to various aspects of our products and business methods, we believe, based upon past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms. We believe our continuing research and product development are not materially dependent on any single license or other agreement with a third party relating to the development of our products. Employees As of January 31, 2017, we had more than 25,000 employees. None of our employees in the United States are represented by a labor union, however, for certain foreign subsidiaries, workers' councils represent our employees. Available Information You can obtain copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the SEC, and all amendments to these filings, free of charge from our website at http://www.salesforce.com/company/investor/sec-filings/ as soon as reasonably practicable following our filing of any of these reports with the SEC. You can also obtain copies free of charge by contacting our Investor Relations department at our office address listed above. The public may read and copy any materials filed by the Company with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The contents of these websites are not incorporated into this filing. Further, the Company's references to the URLs for these websites are intended to be inactive textual references only. ITEM 1A. RISK FACTORS The risks and uncertainties described below are not the only ones facing us. Other events that we do not currently anticipate or that we currently deem immaterial also may affect our results of operations, cash flows and financial condition. Risks Related to Our Business and Industry If our security measures or those of our third-party data center hosting facilities, cloud computing platform providers, or third-party service partners, are breached, and unauthorized access is obtained to a customer's data, our data or our IT systems, our services may be perceived as not being secure, customers may curtail or stop using our services, and we may incur significant legal and financial exposure and liabilities. Our services involve the storage and transmission of our customers' and our customers' customers' proprietary and other sensitive data, including financial information and other personally identifiable information. Security breaches could expose us to a risk of loss of this information, litigation and possible liability. While we have security measures in place, they may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise and result in someone obtaining unauthorized access to our IT systems, our customers' data or our data, including our intellectual property and other confidential business information. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our customers' data, our data or our IT systems. Because the tec
Your Chief Investment Officer for getting ready and raising Series A
$8.4 billion FY17 Revenue, up 26% year-over-year. $5.5 billion Deferred Revenue, up 29% year-over-year. $14.5 billion Billed and Unbilled Deferred Revenue,1 up 28% year-over-year. $2.2 billion Full year Operating Cash Flow, up 29% year-over-year. 25,000+ Employees ~ 90 of the “Fortune 100” run at least % one app from the AppExchange. 2 million+ Hours contributed to the community since inception
Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
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