Salesforce Q1 2020: 30% growth, Benioff sees ‘new normal’ by 2021

Salesforce has announced first-quarter revenue of $4.87bn, an increase of 30% year on year, while anticipating a drop in sales in 2020.

To the financial markets, the company is lowering its revenue guidance to $20bn, signaling 17% projected growth. Previous guidance, before the coronavirus pandemic, had been $21bn to $21.1bn.

The bulk of the Q1 revenue, at $4.58bn, was subscription and support revenues, with professional services and other revenues coming in at $290m, an increase of 20% year on year.

The Covid-19 public health emergency has had an impact on the CRM-focused software-as-a-service supplier, and its founder, chair and CEO, Marc Benioff, was keen to emphasise the contribution it had made to combating the virus.

In the results earnings call, made available in a transcript by financial news site Seeking Alpha, Benioff said he saw a three-phase history to the Covid-19 virus as it related to the company. “The first 90-day phase has been about rapid response and investing in all of our stakeholders,” he said. “We’re now entering the second phase, reopening safely. And the third phase, which we believe we will enter next year, will be about a new normal.”

Salesforce closed 160 offices and got its 52,000 employees to work from home during the quarter. It has also cancelled its annual Dreamforce conference, due to have been held in November.

Mark Hawkins, president and chief financial officer at Salesforce, confirmed that all events cancellation amounted to $65m.

As befits a supplier known for its philanthropy, Salesforce has been active during the pandemic, with Benioff citing its provision of personal protective equipment (PPE). “Salesforce sent a 767 loaded with PPE to New York City at the very height of the crisis – masks and gloves and aprons that we acquired which were immediately delivered to the state distribution hub at Javits Center,” he said.

“And I’m deeply grateful for our relationship with Daniel Zhang, the CEO of Alibaba, who helped get this started and make sure that we got the PPE that we so badly needed here.”

Salesforce has donated 50 million units of PPE, including masks, gowns, suits and face shields, for hospitals in the US, the UK, India and France.

It also set up a “Tableau data hub”, a free resource to “help companies and governments around the world see and understand data about the pandemic”. The supplier acquired data visualisation supplier Tableau in 2019.

Regarding its customers, Benioff said: “Some of our customers most severely affected by the unprecedented impact of Covid-19, we’ve even granted them a temporary financial flexibility, but we also created free rapid response Salesforce Care products that help companies work to sell the service to market from their homes.”

During the quarter, Salesforce committed to not making significant staff layoffs for 90 days. It also announced that co-CEO Keith Block was stepping down. And on 13 May it said Gavin Patterson, president and CEO of Salesforce International and former CEO of BT Group, would become president and chief revenue officer of the company globally.

On the call, Benioff said: “We’ve been really surprised about our pipelines for the second quarter – I’ve been on more sales calls with more CEOs in the last two months than at any time my career. And there’s universal agreement among them. Digital transformation, while this isn’t a one app, it’s a must have. And many of them are accelerating their plans for a digital-first, work-from-anywhere environment.”

Salesforce also announced a service called Work.com during the quarter, which Benioff said will “help business and community leaders around the world to reopen safely, re-skill employees and respond efficiently on the heels of the Covid-19 pandemic”.

He added: “Work.com has generated enormous interest from businesses and governments and deepened partnerships with the world’s top system integrators and technology partners. For example, Workday recently announced that it will integrate its employee data directly into Work.com to make it easier for employers to centralise critical data and get their businesses up and running again.”

Commenting on Salesforce’s results, Angela Ashenden, principal analyst, workplace transformation at CCS Insight, said: “For many businesses, Covid-19 has been the catalyst for moving to the cloud and, with its brand and portfolio of solutions, Salesforce is well placed to have had a very strong quarter in terms of new clients.

“The pressure is on to help these new clients – many of which will be using free licences through the Salesforce Care initiative – to get rapid time-to-value from their products, so that they convert to full-paying Salesforce customers when the offers expire later this year.”