Salesforce.com Annual Report 2019

FY2019 Annual Report · Salesforce.com

Loading PDF…

FY2019 marks our 20th anniversary, and we’d like to open this report with a big THANK YOU
to the entire Ohana. It’s been a wild ride, and we’d never have made it this far without you.

When we started this company, we had a tiny office (that’s it at the bottom of the page) and
a huge vision: to work for more than just the bottom line, and to drive change in the world
around us. Together, we’ve worked hard to turn that vision into a reality, and, even more
importantly, we’ve encouraged others to do the same.

As you read this over, we hope you’ll take some time to reflect on the incredible company
we’ve built together, and the difference we’ve made for our customers and our communities.

Mahalo.

FY19 HIGHLIGHTS
$13.3 billion

FY19 Revenue, up 26% year over year

,
36,000

Employees

$25.7 billion

Remaining Performance Obligation,1 up 25% year over year

95%

of the Fortune 100 run at least one app
from AppExchange

$3.4 billion

Full Year Operating Cash Flow, up 24% year over year

1 “Remaining Performance Obligation” represents future revenues

that are under contract but have not yet been recognized.

3.8 million+

Hours contributed to the community since inception

Salesfesforcorcee
HeaHeadqdquarterss
19919999

Salesforce
Headquarters
2019

Fellow shareholders,

As we celebrate the 20th anniversary of Salesforce, we couldn’t be more excited
about the future. In everything we do, we remain committed to our core values —
trust, customer success, innovation, and equality. Around the world, companies
continue to make incredible investments in their customer experience — becoming
more customer-centric, more efficient, and more automated. And when they
invest in their digital transformation, they look to Salesforce, the global CRM
leader and one of the world’s most admired companies.

By upholding the trust of our customers and by focusing relentlessly on their
success, Salesforce delivered another record fiscal year in 2019, surpassing $13
billion in annual revenue and reaching this milestone faster than any enterprise
software company in history. With this strong growth, we’re now on track to
organically double our revenue in the next four years, with a new revenue target
of $26 to $28 billion in FY23.

This year, we continued to deepen our strategic relationships with companies of
every size and across every industry around the world. In fact, our $20 million-plus
relationships grew 48% over last year. We also strengthened our partnerships
with Google and AWS and formed a brand-new partnership with Apple to deliver
even more value to our customers. With our integrated and intelligent Salesforce
Customer Success Platform, no other CRM company gives businesses a unified
view of their customers across every touchpoint — sales, service, marketing,
commerce, communities, integration, and more.

At Dreamforce 2018 — our largest Dreamforce yet — we showcased how our
amazing innovations like Einstein Voice, Customer 360, and Essentials will continue
to transform the CRM experience for companies around the world. And with
Trailhead, our free online learning platform for everyone, more than 1.2 million
people have now learned the skills they need to thrive in our digital economy.

We also continue to uphold the trust of the communities where we work and live.
Over the past 20 years, together with the Salesforce Foundation and Salesforce.org,
we’ve given $260 million in grants, nearly 4 million employee volunteer hours,
and 40,000 nonprofits and education institutions use our software for free or at
a discount. We’re partnering with other companies to decarbonize the tech sector,
and at Salesforce we’re already more than halfway toward our goal of reaching
100% renewable energy by 2022.

Once again, our success has been recognized. Fortune has now named Salesforce
one of the “World’s Best Companies to Work For” for 11 years in a row, one of
the “World’s Most Admired Companies” for five years in a row, and one of the
“Change the World Companies” for three years in a row.

As always, our incredible results are only possible because of the trust and
partnership with all of our stakeholders, including you. Thank you for your
continued support. We are deeply grateful to each of you, and as we look ahead
to our third decade, we’ve never been more optimistic about our future together.

Thank you,
Marc Benioff & Keith Block

Innovation may drive our profits, but it’s our
Trailblazers that have been making this place
so special for the last 20 years. As always,
these awards belong to you.

#2 on the “100 Best Companies to Work For” List
Fortune Magazine, 2019

#9 on the “100 Best Workplaces for Women” List
Fortune Magazine, 2019

14th Most Admired Company in the World
Fortune Magazine, 2019

#11 on the “Most Sustainable Companies” List
Barron’s, 2019

Thank you.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
È Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

‘ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended January 31, 2019
OR

Commission File Number: 001-32224

salesforce.com, inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

94-3320693
(IRS Employer
Identification No.)

Salesforce Tower
415 Mission Street, 3rd Fl
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
Common Stock, par value $0.001 per share

Name of each exchange on which registered
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 È 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 È
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 È No ‘

Indicate by check mark whether the Registrant has submitted electronically, every Interactive Data File required to be submitted
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 such files). Yes È 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. È

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.
Large accelerated filer È
Non-accelerated filer ‘

‘
Accelerated filer
Smaller reporting company ‘
Emerging growth company ‘

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È
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 31, 2018, the aggregate market value of its shares (based on a closing price of $137.15 per share) held
by non-affiliates was approximately $80.0 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 February 28, 2019, there were approximately 771 million shares of the Registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement for its 2019 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed

within 120 days of the Registrant’s fiscal year ended January 31, 2019, 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.

INDEX

PART I

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4A. Executive Officers of the Registrant

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases

of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation . . .
Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8. Consolidated Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index to Exhibits
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Page No.

3
11
32
32
33
34
34

37
38
41
64
68
118
118
119

120
120

120
120
120

121
122
123
127

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 (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (“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 geopolitical events; 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; the pace of change and innovation in enterprise cloud computing services; the competitive nature of
the market in which we participate; our international expansion strategy; our service performance and security,
including the resources and costs required to prevent, detect and remediate potential security breaches; 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 and cash flows; new services and product
features; our strategy of acquiring or making investments in complementary businesses, joint ventures, services,
technologies and intellectual property rights; the performance and fair value of our investments in
complementary businesses through our strategic investment portfolio; our ability to realize the benefits from
strategic partnerships, joint ventures and investments; our ability to successfully integrate acquired businesses
and technologies; our ability to continue to grow unearned revenue and remaining performance obligation; our
ability to protect our intellectual property rights; our ability to develop our brands; 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 domestic and foreign government regulations, including those
related to the provision of services on the Internet, those related to accessing the Internet, and those addressing
data privacy, cross-border data transfers and import and export controls; the valuation of our deferred tax assets
and the release of related valuation allowances; the potential availability of additional tax assets in the future;
the impact of new accounting pronouncements and tax laws, including the U.S. Tax Cuts and Jobs Act, and
interpretations thereof; uncertainties affecting our ability to estimate our tax rate; the impact of future gains or
losses from our strategic investment portfolio, including gains or losses from overall market conditions which
may affect the publicly traded companies within our strategic investment portfolio; the impact of expensing stock
options and other equity awards; the sufficiency of our capital resources; factors related to our 2023 and 2028
senior notes, revolving credit facility, 2021 term loan and loan associated with 50 Fremont; compliance with our
debt covenants and capital lease obligations; current and potential litigation involving us; and the impact of
climate change. 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.

ITEM 1. BUSINESS

Overview

PART I.

Salesforce is a global leader in customer relationship management (“CRM”) technology that enables

companies to improve their relationships and interactions with customers. Founded in 1999, Salesforce
empowers companies of every size and industry to connect with their customers in new ways through existing

and emerging technologies, including cloud, mobile, social, Internet of Things (“IoT”) and artificial intelligence
(“AI”), to grow their business and work more productively.

The Salesforce Customer Success Platform delivers services spanning sales, service, marketing, commerce,

engagement, integration, analytics, industries, communities, enablement and collaboration, most of which
operate on a single trusted cloud platform. Our service offerings are designed to be intuitive and easy to use.
They can be deployed quickly via mobile devices and major internet browsers, configured easily, and integrated
with other platforms and enterprise applications. We sell to businesses worldwide primarily on a subscription
basis, through our direct sales efforts and also indirectly through partners. Through our platform and other
developer tools, we also enable third parties to develop additional functionality and new applications, or apps,
that run on our platform, which are sold separately from—or in conjunction with—our service offerings.

Salesforce operates based on a core set of values: trust, customer success, innovation and equality. Foremost
among these is trust, which is the foundation for everything we do. Our customers trust our technology to deliver
the highest levels of security, reliability and availability at scale. We believe our continuous innovation and the
democratization of both technology and innovation drives customer success, which in turn drives mutual growth.
In addition, we have spearheaded initiatives that foster a culture of equal pay, equal advancement, equal
opportunity and equal rights for our more than 35,000 employees as a leading example for the broader world.

We believe the business of business is improving the state of the world for all of our stakeholders, including

our stockholders, our customers, our employees, the environment and the communities in which we work and
live. Salesforce is committed to transparent environmental, social and governance disclosures and maintaining
programs that support the success of these initiatives. Refer to our “Environmental, Social and Governance”
discussion in Part II, Item 7 of this Annual Report on Form 10-K, which is incorporated herein by reference.

We were incorporated in Delaware in February 1999. Our principal executive offices are located in San

Francisco, California. Our principal address is Salesforce Tower, 415 Mission St, 3rd Floor, San Francisco,
California 94105, and our primary website address is www.salesforce.com.

Our Service Offerings

Our cloud service offerings are as follows:

Sales Cloud. Sales Cloud empowers sales teams of companies of every size and industry to sell faster,
smarter and in the way they want. Our customers use Sales Cloud to store data, monitor leads and
progress, forecast opportunities, gain insights through analytics and relationship intelligence, and deliver
quotes, contracts and invoices.

Service Cloud. Service Cloud enables companies to deliver smarter, faster and more personalized
customer service and support. Our customers use Service Cloud to connect their service agents with
customers anytime and anywhere, on popular devices and across multiple channels: phone, email,
messaging, 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 offers a field service
solution that enables companies to connect agents, dispatchers and mobile employees through one
centralized platform, on which they can schedule and dispatch work intelligently, and track and manage
jobs in real-time.

Marketing and Commerce Cloud. Marketing Cloud enables companies to plan, personalize and
optimize one-to-one customer marketing journeys, including 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 Marketing Cloud, customer data can also be integrated with Sales Cloud
and Service Cloud in the form of leads, contacts and customer service cases to give companies a complete
view of their customers. Our Commerce Cloud empowers brands to unify the customer experience across
all points of commerce, including mobile, web, social and store. With embedded AI that delivers a

personalized shopping experience and a robust partner ecosystem, Commerce Cloud helps companies
drive increased engagement, conversion, revenue and loyalty from their customers.

Salesforce Platform and Other. The Salesforce Platform includes:

Lightning Platform. Lightning Platform empowers Information Technology (“IT”), developers and
business users with the industry’s leading no-code to pro-code Platform-as-a-Service tools for building,
securing, integrating and managing the business apps that power today’s customer experiences. With the
Lightning Platform, enterprises drive digital transformation at scale by building applications for any
business need. Lightning Platform includes complete, intelligent analytics capabilities so customers can
explore their business data, uncover new insights, make smarter decisions and take action from any
device. Lightning Platform also includes Trailhead for Enablement, our free, gamified, interactive online
learning platform that allows anyone to learn in-demand Salesforce skills, including administering our
services and developing on the Salesforce Platform. Lightning Platform also includes our Heroku
Engagement Platform, which enables developers to build, run and operate applications entirely in the
cloud.

Integration. MuleSoft Anypoint Platform enables our customers to connect any system, application, data
or device, whether in the cloud or on-premises, on a unified platform using application networks instead
of inflexible custom code. By unlocking data across their enterprise, our customers can create new
revenue opportunities, increase operational efficiency and create differentiated customer experiences.

Collaboration. Quip Collaboration Platform combines documents, spreadsheets, apps, and chat with live
CRM data to deliver a central hub for teams to create, collaborate and get work done. Built mobile-first,
Quip breaks down communication barriers and silos to enable every business to collaborate online, offline
and from almost any device.

Most of our service offerings operate on a single customer success platform and are deployed in an
identical way even though we have offerings in multiple enterprise cloud computing markets, including as
a result of our acquisitions. Our core offerings are suited to meet the needs of our customers in certain
industries, such as solutions for financial services, healthcare and government. Additionally, our core
offerings enable companies to quickly create and manage trusted, branded digital destinations for
customers, partners and employees, collectively referred to as community management. This allows
companies to engage and collaborate directly with groups of people by giving them access to relevant
information, apps and experts.

Additionally, through Salesforce Customer 360, our new cross-cloud technology initiative that enhances the

integration of our Marketing, Commerce, and Service clouds, we will enable companies to connect their
customer data across the various offerings and deliver a unified customer experience. Customer 360 is designed
to help companies move beyond an app- or department-specific view of each customer by making it easier to
create a single, holistic customer profile to inform every interaction.

Business Benefits of Using Our Solution

The key advantages of our solutions include the following:

• A multi-tenant application architecture designed to enable our service offerings to scale securely,

reliably and cost effectively.

• Rapid deployment and lower total cost of ownership with multiple releases per year deployed

automatically with new features and functionality.

• Ease of integration and configuration with application programming interfaces that enable customers to
integrate our solutions with existing third-party, custom and legacy apps, as well as write their own
application services that integrate with our solutions.

•

Solutions designed to be intuitive and easy to use with minimal training.

• Rapid development of apps without having to invest in hardware by providing infrastructure and

development environments on demand.

• Continuous innovation through our Ideas Exchange, which is a forum to provide feedback and suggest

new features for future service releases.

•

Positive environmental impact with our multi-tenant cloud computing model that has a smaller
environmental footprint than traditional hardware and software.

Our Growth Strategy

We invest for future growth by focusing on the following key priorities:

Cross selling and upselling. We see significant opportunity to deepen our relationships with our existing
customers. As our customers realize the benefits of our service offerings, we aim to upgrade the customer
experience with premium editions and additional subscriptions by targeting new functional areas and
business units, with the goal of ultimately becoming our customers’ trusted advisors, inspiring enterprise-
wide digital transformation and accelerating strategic engagements through direct discussions with the
highest levels of our customers’ executive management.

Extending existing service offerings. We offer multiple editions of our cloud service offerings at
different price points to meet the needs of customers of different sizes and we have designed our solutions
to accommodate new features and functionality. We intend to continue to expand all editions of our
service offerings with new features, functions and increased security through our own development,
acquisitions and partnerships. We have invested heavily in the AI capabilities of Einstein, which allows
users of our products to deliver more predictive customer experiences, as well as innovations like
Lightning and Trailhead that improve the entire platform.

Reducing customer attrition. We strive to reduce attrition and secure renewals of existing customer
subscriptions prior to the end of their contractual terms with us through, among other things, customer
success and other related programs.

Expanding and strengthening the partner ecosystem. We continue to work with and invest in strategic
system integrators (“SIs”) and independent software vendors (“ISVs”) to accelerate our reach into new
markets and industries, offer a variety of solutions natively and through the AppExchange, our enterprise
cloud marketplace, and address the business requirements of both current and future customers.

International expansion. We continue to increase our investment in our international go-to-market
resources, operations and infrastructure to deliver the highest quality service to our customers around the
world.

Targeting vertical industries. To meet the needs of our customers in certain industries, we provide
solutions specifically built for certain vertical industries, such as financial services, healthcare and
government.

Expanding into new horizontal markets. As part of our growth strategy, which is driven both
organically and through acquisitions, we are delivering innovative solutions in new categories, including
analytics, commerce, IoT and integration, and expect to continue this type of horizontal expansion in the
future.

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.

Promoting strong customer adoption. We believe that we have the people, processes and proven
innovation to help companies transform successfully. We have free, curated resources such as Trailhead

to help companies of every size learn our systems, as well as advisory services, technical architects and
business strategists to enable and accelerate digital transformation.

Encouraging the development of third-party applications on our cloud computing platform. The
Lightning Platform enables customers, 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 or sold directly by software vendors. We believe our
ecosystem of developers and software vendors will help address the business requirements of both current
and future customers.

In addition to the key elements of our growth strategy described above, from time to time, we evaluate
opportunities to acquire or invest in complementary businesses, services, technologies and intellectual property
rights. These evaluations resulted in our acquisition of several companies in fiscal 2019, including MuleSoft, Inc.
(“MuleSoft”) and Datorama, Inc. (“Datorama”) which expanded our integration and marketing capabilities.

Technology, Development and Operations

We deliver our Salesforce solutions as highly scalable, cloud computing application and platform services

on a multi-tenant technology architecture. We also offer integration capabilities in the cloud, as well as
on-premises, to provide our customers more options to integrate their data. 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. This approach allows us to spread the cost of
delivering our services across our user base and scale our business faster than traditional software vendors while
focusing our resources on building new functionality.

We provide the majority of our services to our customers from infrastructure designed and operated by us

but secured within third-party data center facilities located in the United States, United Kingdom, Germany,
France, Japan and other countries. These third-party data center operators provide space, physical security, and
continuous power and cooling. In combination with these third-party data center facilities, we also run our
services on cloud computing platform partners who offer Infrastructure-as-a-Service, including servers, storage,
databases and networking. The use of cloud computing platform partners provides us flexibility to service
customers in new and emerging regions and those with in-country data privacy requirements, as well as to
support acquired companies.

Our technology and product 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 and integrating businesses, services and technologies from acquisitions. Performance,
functional depth, security and the usability of our solutions influence our technology decisions and product
direction.

Competition

The market for our service offerings is highly competitive, rapidly evolving and fragmented, and subject to

changing technology and low barriers to entry, shifting customer needs and frequent introductions of new
products and services.

Our current competitors include:

• Vendors of packaged business software, as well as companies offering enterprise apps delivered

through on-premises offerings from enterprise software application vendors and cloud computing
application service providers, either individually or with others;

•

Internally developed enterprise applications (by our potential customers’ IT departments);

Software companies that provide their product or service free of charge, and only charge a premium for
advanced features and functionality;

• Marketing vendors, which may be specialized in advertising, targeting, messaging, or campaign

automation;

• E-commerce solutions from established and emerging cloud-only vendors and established on-premises

vendors;

• Traditional platform development environment companies and cloud computing development platform
companies who may develop toolsets and products that allow customers to build new apps that run on
the customers’ current infrastructure or as hosted services;

•

IoT platforms from large companies that have existing relationships with hardware and software
companies; and

• AI solutions from new startups and established companies.

We believe more traditional enterprise software application and platform vendors may become a greater

competitive threat as they shift more of their focus to cloud computing.

Sources of Revenue

For revenue reporting purposes, we group all of our service offerings into four major categories: Sales

Cloud, Service Cloud, Salesforce Platform and Other, and Marketing and Commerce 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 revenues from our enterprise cloud computing services,

software licenses and support fees for our services. We also derive revenues from related professional services
via our Customer Success Group.

For our subscription and support offerings, we recognize subscription and support revenue ratably over the
contract term, beginning on the commencement date of each contract. For software license sales, which resulted
from our May 2018 acquisition of MuleSoft, revenues are generally recognized upfront when the software is
made available to the customer. We enter into professional services contracts that are on a time and materials,
fixed fee or subscription basis. We recognize revenue over time as the services are rendered for time and
materials contracts, 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 either unearned revenue or
revenue, depending on whether the revenue recognition criteria have been met. Unearned revenue primarily
consists of billings or payments received in advance of revenue recognition from subscription services and is
recognized as the revenue recognition criteria are met. Remaining performance obligations, representing future
revenues that are under contract but have not yet been recognized, are not recorded in unearned revenue. We
generally invoice customers annually. Typical payment terms provide that our customers pay us within 30 days
of invoice.

Unearned revenue and remaining performance obligation 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. Our fourth quarter has
historically been our strongest quarter for new business and renewals, and our first quarter is generally our largest
collections and operating cash flow quarter. For a more detailed discussion, see the “Seasonal Nature of
Unearned Revenue, Accounts Receivable and Operating Cash Flow” discussion in Management’s Discussion and
Analysis.

Refer to our “Liquidity and Capital Resources” discussion in Part II, Item 7 of this Annual Report on Form

10-K, which is incorporated herein by reference.

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 2019, 2018 or 2017.

Customer Service and Support

We offer professional services to help customers achieve business results faster with Salesforce solutions.
Our architects and innovation program teams act as advisors to plan and execute digital transformations for our
customers. We provide best-practices based support and adoption programs globally. In addition, we provide
more advanced education, including instructor-led and online courses to certify our customers and partners on
architecting, administering, deploying and developing our service offerings.

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.

Sales and Marketing

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.

To a lesser extent, we also 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. We continue to invest in developing additional distribution channels for our
subscription service.

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, which align to a broader

customer journey;

• Customer events of all sizes to create customer and prospect awareness, including proprietary events
such as Dreamforce and World Tours, as well as participation in trade shows and industry events;

•

Press and industry analyst relations to garner third-party validation and generate positive coverage for
our company, service 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;

• Cultivating a community of Trailblazers who embrace our Company values and evangelize our service
offerings. A Trailblazer can be anyone who leverages new technologies to transform their companies,
careers and communities;

• Tools that enable our sales organization to more effectively convert leads into customers;

• Event sponsorships; and

•

Primary real estate signage.

We organize our sales and marketing programs by geographic regions, such as the Americas, Europe and

Asia Pacific, which includes Japan.

Strategic Investments

We invest in early- to late-stage technology and professional cloud service companies across the globe to
support our business initiatives, which include, among other things, extending the capabilities of our platform
and service offerings, increasing the ecosystem of enterprise cloud companies and partners, accelerating the
adoption of cloud technologies and creating the next-generation of AI, mobile applications and connected
products. Our minority investments in over 240 companies as of January 31, 2019 also help us stay connected
with the rapid pace of innovation that is currently occurring within the technology industry. In some cases, we
have acquired companies in which we have previously invested. Due to the inherent risk in investing, our
individual investments are subject to a risk of partial or total loss of investment capital. While historically our
investment portfolio has had a positive impact on our financial results, that may not be true for future periods,
particularly in periods of significant market fluctuations that affect the market price of publicly traded companies
within our strategic investment portfolio.

Intellectual Property

We rely on a combination of trademarks, copyrights, trade secrets and patents, as well as contractual

provisions, to protect our proprietary technology and our brands. 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 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, 2019, we had more than 35,000 employees. None of our employees in the United States

are represented by a labor union. However, for certain foreign subsidiaries, works councils represent our
employees.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and
other filings with the Securities and Exchange Commission (“SEC”), and all amendments to these filings, can be
obtained free of charge from our website at http://investor.salesforce.com/about-us/investor/financials/ or by
contacting our Investor Relations department at our office address listed above following our filing of any of
these reports with the SEC. 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, stockholders’
equity, 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, or the underlying infrastructure of the internet are
breached, and unauthorized access is obtained to a customer’s data, our data or our IT systems, or authorized
access is blocked or disabled, our services may be perceived as not being secure, customers may curtail or stop
using our services, and we may incur significant reputational harm, legal exposure and liabilities, or a
negative financial impact.

Our services involve the storage and transmission of our customers’ and our customers’ customers’
proprietary and other sensitive data, including financial information and personally identifiable information.
While we have security measures in place to protect our customers and our customers’ customers’ data, our
services and underlying infrastructure may in the future be materially breached or compromised as a result of the
following:

•

third party attempts to fraudulently induce employees or customers into disclosing sensitive
information such as user names, passwords or other information to gain access to our customers’ data,
our data or our IT systems;

efforts by individuals or groups of hackers and sophisticated organizations, including state-sponsored
organizations or nation-states;

cyber-attacks on our internally built infrastructure on which many of our service offerings operate;

vulnerabilities resulting from enhancements and updates to our existing service offerings;

vulnerabilities in the products or components across the broad ecosystem that our services operate in
conjunction with and are dependent on;

vulnerabilities existing within newly acquired or integrated technologies and infrastructures;

attacks on, or vulnerabilities in, the many different underlying networks and services that power the
internet that our products depend on, most of which are not under our control or the control of our
vendors, partners, or customers; and

employee or contractor errors or intentional acts that compromise our security systems.

These risks are mitigated, to the extent possible, by our ability to maintain and improve business and data

governance policies, enhanced processes and internal security controls, including our ability to escalate and
respond to known and potential risks. Our Board of Directors, Audit Committee and executive management are

regularly briefed on our cyber-security policies and practices and ongoing efforts to improve security, as well as
periodic updates on cyber-security events. Although we have developed systems and processes designed to
protect our customers’ and our customers’ customers’ proprietary and other sensitive data, we can provide no
assurances that such measures will provide absolute security. For example, our ability to mitigate these risks may
be impacted by the following:

•

frequent changes to, and growth in complexity of, the techniques used to breach, obtain unauthorized
access to, or sabotage IT systems and infrastructure, which are generally not recognized until launched
against a target, possibly resulting in our being unable to anticipate or implement adequate measures to
prevent such techniques;

the continued evolution of our internal IT systems as we early adopt new technologies and new ways of
sharing data and communicating internally and with partners and customers, which increases the
complexity of our IT systems;

authorization by our customers to third-party technology providers to access their customer data, which
may lead to our customers’ inability to protect their data that is stored on our servers; and

our limited control over our customers or third-party technology providers, or the processing of data by
third-party technology providers, which may not allow us to maintain the integrity or security of such
transmissions or processing.

In the normal course of business, we are and have been the target of malicious cyber-attack attempts and

have experienced other security incidents. To date, such identified security events have not been material or
significant to us, including to our reputation or business operations, or had a material financial impact, but there
can be no assurance that future cyberattacks will not be material or significant.

A security breach or incident could result in unauthorized parties obtaining access to, or the denial of
authorized access to, our IT systems or data, or our customers’ systems or data, including intellectual property,
proprietary, sensitive, or other confidential information. A security breach could also result in a loss of
confidence in the security of our services, damage our reputation, negatively impact our future sales, disrupt our
business and lead to increases in insurance premiums and legal and financial exposure and liability. Finally, the
detection, prevention and remediation of known or potential security vulnerabilities, including those arising from
third-party hardware or software, may result in additional financial burdens due to additional direct and indirect
costs, such as additional infrastructure capacity spending to mitigate any system degradation and the reallocation
of resources from development activities.

Defects or disruptions in our services could diminish demand for our services and subject us to

substantial liability.

Because our services are complex and incorporate a variety of hardware, proprietary software and third-

party software, our services may have errors or defects that could result in unanticipated downtime for our
subscribers and harm to our reputation and our business. Cloud services frequently contain undetected errors
when first introduced or when new versions or enhancements are released. We have from time to time found
defects in, and experienced disruptions to, our services and new defects or disruptions may occur in the future.
Such defects could also create vulnerabilities that could inadvertently permit access to protected customer data.
In addition, our customers may use our services in unanticipated ways that may cause a disruption in services for
other customers attempting to access their data. As we acquire companies, we may encounter difficulty in
incorporating the acquired technologies into our services and in augmenting the technologies to meet the quality
standards that are consistent with our brand and reputation. Since our customers use our services for important
aspects of their business, any errors, defects, disruptions in service or other performance problems could hurt our
reputation and may damage our customers’ businesses. As a result, customers could elect to not renew our
services or delay or withhold payment to us. We could also lose future sales or customers may make warranty or
other claims against us, which could result in an increase in our allowance for doubtful accounts, an increase in
collection cycles for accounts receivable or the expense and risk of litigation.

Any interruptions or delays in services from third-parties, including data center hosting facilities, cloud
computing platform providers and other hardware and software vendors, or our inability to adequately plan
for and manage service interruptions or infrastructure capacity requirements, could impair the delivery of our
services and harm our business.

We currently serve our customers from third-party data center hosting facilities and cloud computing

platform providers located in the United States and other countries. We also rely on computer hardware
purchased or leased from, software licensed from, and cloud computing platforms provided by, third parties in
order to offer our services, including database software, hardware and data from a variety of vendors. Any
damage to, or failure of our systems generally, including the systems of our third-party platform providers, could
result in interruptions in our services. We have from time to time experienced interruptions in our services and
such interruptions may occur in the future. As we increase our reliance on these third-party systems, our
exposure to damage from service interruptions may increase. Interruptions in our services may cause us to issue
credits or pay penalties, cause customers to make warranty or other claims against us or to terminate their
subscriptions and adversely affect our attrition rates and our ability to attract new customers, all of which would
reduce our revenue. Our business would also be harmed if our customers and potential customers believe our
services are unreliable.

We use a range of disaster recovery and business continuity arrangements. For many of our offerings, our

production environment and customers’ data are replicated in near real-time in a separate facility located
elsewhere. Certain offerings, including some offerings of companies added through acquisitions, may be served
through alternate facilities or arrangements. We do not control the operation of any of these facilities, and they
may be vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications
failures and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and
similar misconduct, as well as local administrative actions, changes to legal or permitting requirements and
litigation to stop, limit or delay operation. Despite precautions taken at these facilities, such as disaster recovery
and business continuity arrangements, the occurrence of a natural disaster or an act of terrorism, a decision to
close the facilities without adequate notice or other unanticipated problems at these facilities could result in
lengthy interruptions in our services.

These hardware, software, data and cloud computing platforms may not continue to be available at

reasonable prices, on commercially reasonable terms or at all. Any loss of the right to use any of these hardware,
software or cloud computing platforms could significantly increase our expenses and otherwise result in delays in
the provisioning of our services until equivalent technology is either developed by us, or, if available, is
identified, obtained through purchase or license and integrated into our services.

If we do not accurately plan for our infrastructure capacity requirements and we experience significant
strains on our data center capacity, our customers could experience performance degradation or service outages
that may subject us to financial liabilities, result in customer losses and harm our business. As we add data
centers and capacity and continue to move to cloud computing platform providers, we may move or transfer our
data and our customers’ data. Despite precautions taken during this process, any unsuccessful data transfers may
impair the delivery of our services, which may damage our business.

Privacy concerns and laws such as the European Union’s General Data Protection Regulation, evolving

regulation of cloud computing, cross-border data transfer restrictions and other domestic or foreign
regulations may limit the use and adoption of our services and adversely affect our business.

Regulation related to the provision of services over the Internet is evolving, as federal, state and foreign
governments continue to adopt new, or modify existing, laws and regulations addressing data privacy and the
collection, processing, storage, transfer and use of data. In some cases, data privacy laws and regulations, such as
the European Union’s (“EU”) General Data Protection Regulation that took effect in May 2018, impose new
obligations directly on Salesforce as both a data controller and a data processor, as well as on many of our
customers. In addition, domestic data privacy laws, such as the California Consumer Privacy Act (“CCPA”)

which will take effect in January 2020, continue to evolve and could expose us to further regulatory burdens.
Further, laws such as the European Union’s proposed e-Privacy Regulation are increasingly aimed at the use of
personal information for marketing purposes, and the tracking of individuals’ online activities.

Although we monitor the regulatory environment and have invested in addressing these developments, such

as GDPR and CCPA readiness, these laws may require us to make additional changes to our services to enable
Salesforce or our customers to meet the new legal requirements, and may also increase our potential liability
exposure through higher potential penalties for non-compliance. These new or proposed laws and regulations are
subject to differing interpretations and may be inconsistent among jurisdictions. These and other requirements
could reduce demand for our services, require us to take on more onerous obligations in our contracts, restrict our
ability to store, transfer and process data or, in some cases, impact our ability or our customers’ ability to offer
our services in certain locations, to deploy our solutions, to reach current and prospective customers, or to derive
insights from customer data globally. For example, ongoing legal challenges in Europe to the mechanisms
allowing companies to transfer personal data from the European Economic Area to the United States could result
in further limitations on the ability to transfer data across borders, particularly if governments are unable or
unwilling to reach new or maintain existing agreements that support cross-border data transfers, such as the
EU-U.S. and Swiss-U.S. Privacy Shield framework. Additionally, certain countries have passed or are
considering passing laws requiring local data residency. The costs of compliance with, and other burdens
imposed by, privacy laws, regulations and standards may limit the use and adoption of our services, reduce
overall demand for our services, make it more difficult to meet expectations from or commitments to customers,
lead to significant fines, penalties or liabilities for noncompliance, impact our reputation, or slow the pace at
which we close sales transactions, any of which could harm our business.

In addition to government activity, privacy advocacy and other industry groups have established or may

establish new self-regulatory standards that may place additional burdens on our ability to provide our services
globally. Our customers expect us to meet voluntary certification and other standards established by third parties,
such as TRUSTe. If we are unable to maintain these certifications or meet these standards, it could adversely
affect our ability to provide our solutions to certain customers and could harm our business.

Furthermore, the uncertain and shifting regulatory environment and trust climate may cause concerns
regarding data privacy and may cause our customers or our customers’ customers to resist providing the data
necessary to allow our customers to use our services effectively. Even the perception that the privacy of personal
information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our
products or services and could limit adoption of our cloud-based solutions.

Our efforts to expand our services beyond the CRM market and to develop and integrate our existing
services in order to keep pace with technological developments may not succeed and may reduce our revenue
growth rate and harm our business.

We derive a significant portion of our revenue from subscriptions to our CRM enterprise cloud computing

application services, and we expect this will continue for the foreseeable future. Our efforts to expand our
services beyond the CRM market may not succeed and may reduce our revenue growth rate. The markets for
certain of our offerings, including our Einstein artificial intelligence and data integration offerings, remain
relatively new and it is uncertain whether our efforts, and related investments, will ever result in significant
revenue for us. In addition, we may be required to continuously enhance our artificial intelligence offerings so
that quality recommendations can be provided to our customers. Further, the introduction of significant platform
changes and upgrades, including our Lightning platform and Customer 360 platform, may not succeed and early
stage interest and adoption of such new services may not result in long term success or significant revenue for us.

Additionally, if we fail to anticipate or identify significant Internet-related and other technology trends and

developments early enough, or if we do not devote appropriate resources to adapting to such trends and
developments, our business could be harmed.

If we are unable to develop enhancements to and new features for our existing or new services that keep

pace with rapid technological developments, our business could be harmed. The success of enhancements, new
features and services depends on several factors, including the timely completion, introduction and market
acceptance of the feature, service or enhancement by customers, administrators and developers, as well as our
ability to seamlessly integrate all of our service offerings and develop adequate selling capabilities in new
markets. Failure in this regard may significantly impair our revenue growth as well as negatively impact our
operating results if the additional costs are not offset by additional revenues. In addition, because our services are
designed to operate over various network technologies and on a variety of mobile devices, operating systems and
computer hardware and software platforms using a standard browser, we will need to continuously modify and
enhance our services to keep pace with changes in Internet-related hardware, software, communication, browser,
app development platform and database technologies, as well as continue to maintain and support our services on
legacy systems. We may not be successful in either developing these modifications and enhancements or in
bringing them to market timely. Furthermore, uncertainties about the timing and nature of new network platforms
or technologies, or modifications to existing platforms or technologies, could increase our research and
development or service delivery expenses. Any failure of our services to operate effectively with future network
platforms and technologies could reduce the demand for our services, result in customer dissatisfaction and harm
our business.

As we acquire and invest in companies or technologies, we may not realize the expected business or

financial benefits and the acquisitions could prove difficult to integrate, disrupt our business, dilute
stockholder value and adversely affect our operating results and the market value of our common stock.

As part of our business strategy, we periodically make investments in, or acquisitions of, complementary

businesses, joint ventures, services and technologies and intellectual property rights, and we expect that we will
continue to make such investments and acquisitions in the future. In particular, in May 2018, we completed our
largest acquisition to date of MuleSoft, for $6.4 billion, which we are continuing to integrate. Acquisitions and
other transactions, arrangements, and investments involve numerous risks and could create unforeseen operating
difficulties and expenditures, including:

•

potential failure to achieve the expected benefits on a timely basis or at all;

difficulties in, and the cost of, integrating operations, technologies, services, platforms and personnel;

diversion of financial and managerial resources from existing operations;

the potential entry into new markets in which we have little or no experience or where competitors may
have stronger market positions;

potential write-offs of acquired assets or investments, and potential financial and credit risks associated
with acquired customers;

failure to assimilate acquired employees which may lead to retention risk of both key acquired
employees or our existing key employees or disruption to existing teams;

differences between our values and those of our acquired companies;

difficulties in re-training key employees of acquired companies and integrating them into our
organizational structure and corporate culture;

difficulties in and financial costs of addressing acquired compensation structures inconsistent with our
compensation structure;

inability to generate sufficient revenue to offset acquisition or investment costs;

inability to maintain relationships with customers and partners of the acquired business;

changes to customer relationships or customer perception of the acquired business as a result of the
acquisition;

•

challenges converting and forecasting the acquired company’s revenue recognition policies including
subscription-based revenues and revenues based on the transfer of control as well as appropriate
allocation of the customer consideration to the individual deliverables;

difficulty of transitioning the acquired technology onto our existing platforms and customer acceptance
of multiple platforms on a temporary or permanent basis;

augmenting the acquired technologies and platforms to the levels that are consistent with our brand and
reputation;

potential for acquired products to impact the profitability of existing products;

potential identified or unknown security vulnerabilities in acquired products that expose us to
additional security risks or delay our ability to integrate the product into our service offerings or
recognize the benefits of our investment;

increasing or maintaining the security standards for acquired technology consistent with our other
services;

potential unknown liabilities associated with the acquired businesses;

challenges relating to the structure of an investment, such as governance, accountability and decision-
making conflicts that may arise in the context of a joint venture or other majority ownership
investments;

unanticipated expenses related to acquired technology and its integration into our existing technology;

negative impact to our results of operations because of the depreciation and amortization of amounts
related to acquired intangible assets, fixed assets and deferred compensation;

additional stock-based compensation; the loss of acquired unearned revenue and unbilled unearned
revenue;

delays in customer purchases due to uncertainty related to any acquisition;

ineffective or inadequate controls, procedures and policies at the acquired company may negatively
impact our results of operations;

in the case of foreign acquisitions, challenges caused by integrating operations over distance, and
across different languages, cultures and political environments;

currency and regulatory risks associated with foreign countries and potential additional cybersecurity
and compliance risks resulting from entry into new markets; and

the tax effects and costs of any such acquisitions including the related integration into our tax structure
and assessment of the impact on the realizability of our future tax assets or liabilities.

Any of these risks could harm our business. In addition, to facilitate these acquisitions or investments, we
may seek additional equity or debt financing, which may not be available on terms favorable to us or at all, which
may affect our ability to complete subsequent acquisitions or investments, and which may affect the risks of
owning our common stock. For example, if we finance acquisitions by issuing equity or convertible or other debt
securities or loans, our existing stockholders may be diluted, or we could face constraints related to the terms of,
and repayment obligation related to, the incurrence of indebtedness that could affect the market price of our
common stock.

Industry-specific regulation and other requirements and standards are evolving and unfavorable

industry-specific laws, regulations, interpretive positions or standards could harm our business.

Our customers and potential customers conduct business in a variety of industries, including financial
services, the public sector, healthcare and telecommunications. Regulators in certain industries have adopted and

may in the future adopt regulations or interpretive positions regarding the use of cloud computing and other
outsourced services. The costs of compliance with, and other burdens imposed by, industry-specific laws,
regulations and interpretive positions may limit our customers’ use and adoption of our services and reduce
overall demand for our services. Compliance with these regulations may also require us to devote greater
resources to support certain customers, which may increase costs and lengthen sales cycles. For example, some
financial services regulators have imposed guidelines for use of cloud computing services that mandate specific
controls or require financial services enterprises to obtain regulatory approval prior to outsourcing certain
functions. If we are unable to comply with these guidelines or controls, or if our customers are unable to obtain
regulatory approval to use our services where required, our business may be harmed. In addition, an inability to
satisfy the standards of certain voluntary third-party certification bodies that our customers may expect, such as
an attestation of compliance with the Payment Card Industry (PCI) Data Security Standards, may have an adverse
impact on our business and results. If in the future we are unable to achieve or maintain industry-specific
certifications or other requirements or standards relevant to our customers, it may harm our business and
adversely affect our results.

Further, in some cases, industry-specific laws, regionally-specific, or product-specific laws, regulations, or

interpretive positions may also apply directly to us as a service provider. The interpretation of many of these
statutes, regulations, and rulings is evolving in the courts and administrative agencies and an inability to comply
may have an adverse impact on our business and results. Any failure or perceived failure by us to comply with
such requirements could have an adverse impact on our business. For example, there are various statutes,
regulations, and rulings relevant to the direct email marketing and text-messaging industries, including the
Telephone Consumer Protection Act (TCPA) and related Federal Communication Commission (FCC) orders,
which impose significant restrictions on the ability to utilize telephone calls and text messages to mobile
telephone numbers as a means of communication, when the prior consent of the person being contacted has not
been obtained. We have been, and may in the future be, subject to one or more class-action lawsuits, as well as
individual lawsuits, containing allegations that one of our businesses or customers violated the TCPA. A
determination that we or our customers violated the TCPA or other communications-based statutes could expose
us to significant damage awards that could, individually or in the aggregate, materially harm our business.

Supporting our existing and growing customer base could strain our personnel resources and

infrastructure, and if we are unable to scale our operations and increase productivity, we may not be able to
successfully implement our business plan.

We continue to experience significant growth in our customer base and personnel, which has placed a strain

on our management, administrative, operational and financial infrastructure. We anticipate that significant
additional investments will be required to scale our operations and increase productivity, to address the needs of
our customers, to further develop and enhance our services, to expand into new geographic areas, and to scale
with our overall growth. The additional investments we are making will increase our cost base, which will make
it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term.

We regularly upgrade or replace our various software systems. If the implementations of these new
applications are delayed, or if we encounter unforeseen problems with our new systems or in migrating away
from our existing applications and systems, our operations and our ability to manage our business could be
negatively impacted.

Our success will depend in part upon the ability of our senior management to manage our projected growth
effectively. To do so, we must continue to increase the productivity of our existing employees and to hire, train
and manage new employees as needed. To manage the expected domestic and international growth of our
operations and personnel, we will need to continue to improve our operational, financial and management
controls, our reporting systems and procedures, and our utilization of real estate. If we fail to successfully scale
our operations and increase productivity, we may be unable to execute our business plan and the fair value of our
common stock could decline.

The market in which we participate is intensely competitive, and if we do not compete effectively, our

operating results could be harmed.

The market for enterprise applications and platform services requires continuous innovation and is highly

competitive, rapidly evolving and fragmented, and subject to changing technology and low barriers to entry,
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.

Our current competitors include:

• Vendors of packaged business software, as well as companies offering enterprise apps delivered

through on-premises offerings from enterprise software application vendors and cloud computing
application service providers, either individually or with others;

•

Software companies that provide their product or service free of charge, and only charge a premium for
advanced features and functionality;

Internally developed enterprise applications (by our potential customers’ IT departments);

• Marketing vendors, which may be specialized in advertising, targeting, messaging, or campaign

automation;

• E-commerce solutions from established and emerging cloud-only vendors and established on-premises

vendors;

•

Integration software vendors, integration service providers and API management providers;

•

IoT platforms from large companies that have existing relationships with hardware and software
companies; and

• Artificial intelligence solutions from new startups and established companies.

Some of our current and potential competitors may have competitive advantages, such as greater name

recognition, longer operating histories, significant installed bases, broader geographic scope, and larger
marketing budgets, as well as substantially greater financial, technical, personnel, and other resources. In
addition, many of our current and potential competitors have established marketing relationships and access to
larger customer bases, and have major distribution agreements with consultants, system integrators and resellers.
We also experience competition from smaller, younger competitors that may be more agile in responding to
customers’ demands. These competitors may be able to respond more quickly and effectively than we can to new
or changing opportunities, technologies, standards or customer requirements or provide competitive pricing. As a
result, even if our services are more effective than the products and services that our competitors offer, potential
customers might select competitive products and services in lieu of purchasing our services. For all of these
reasons, we may not be able to compete successfully against our current and future competitors, which could
negatively impact our future sales and harm our business.

Our ability to deliver our services is dependent on the development and maintenance of the infrastructure

of the Internet by third parties.

The Internet’s infrastructure is comprised of many different networks and services that are highly
fragmented and distributed by design. This infrastructure is run by a series of independent third-party

organizations that work together to provide the infrastructure and supporting services of the Internet under the
governance of the Internet Corporation for Assigned Numbers and Names (ICANN) and the Internet Assigned
Numbers Authority (IANA), now under the stewardship of ICANN.

The Internet has experienced a variety of outages and other delays as a result of damages to portions of its

infrastructure, denial-of-service attacks or related cyber incidents, and it could face outages and delays in the
future. These outages and delays could reduce the level of Internet usage or result in fragmentation of the
Internet, resulting in multiple separate Internets. These scenarios are not under our control and could reduce the
availability of the Internet to us or our customers for delivery of our Internet-based services. Any resulting
interruptions in our services or the ability of our customers to access our services could result in a loss of
potential or existing customers and harm our business.

In addition, certain countries have implemented (or may implement) legislative and technological actions

that either do or can effectively regulate access to the Internet, including the ability of Internet Service Providers
to limit access to specific websites or content. These actions could potentially limit or interrupt access to our
services from certain countries or Internet Service Providers, impede our growth, result in the loss of potential or
existing customers and harm our business.

We are subject to risks associated with our strategic investments including partial or complete loss of
invested capital. Significant changes in the fair value of this portfolio, including changes in the market prices
of our investments in public companies and impairments, could negatively impact our financial results.

We invest in early-to-late stage companies for strategic reasons and to support key business initiatives, and
may not realize a return on our strategic investments. Many such companies generate net losses and the market
for their products, services or technologies may be slow to develop, and, therefore, are dependent on the
availability of later rounds of financing from banks or investors on favorable terms to continue their operations.
The financial success of our investment in any company is typically dependent on a liquidity event, such as a
public offering, acquisition or other favorable market event reflecting appreciation to the cost of our initial
investment. The capital markets for public offerings and acquisitions are dynamic and the likelihood of liquidity
events for the companies we have invested in could significantly worsen.

Further, valuations of privately held companies are inherently complex due to the lack of readily available

market data.

Upon adoption of ASU 2016-01 in the first quarter of fiscal 2019, we are now required to record all fair

value adjustments of our publicly traded and privately held equity investments through the consolidated
statement of operations. As a result, we may experience additional volatility to our statements of operations due
to changes in market prices of our investments in publicly held equity investments and the valuation and timing
of observable price changes or impairments of our investments in privately held securities. This volatility has
been and could continue to be material to our results in any given quarter based on market conditions and events
and may cause our stock price to decline. While historically our investment portfolio has had a positive impact
on our financial results, that may not be true for future periods, particularly in periods of significant market
fluctuations which affect our strategic investments portfolio.

All of our investments, especially our investments in privately held companies, are subject to a risk of a

partial or total loss of investment capital.

Our quarterly results are likely to fluctuate, which may cause the value of our common stock to decline

substantially.

Our quarterly results are likely to fluctuate. For example, our fiscal fourth quarter has historically been our

strongest quarter for new business and renewals. The year-over-year compounding effect of this seasonality in
billing patterns and overall new business and renewal activity causes the value of invoices that we generate in the

fourth quarter to continually increase in proportion to our billings in the other three quarters of our fiscal year. As
a result, our fiscal first quarter is our largest collections and operating cash flow quarter.

Additionally, some of the important factors that may cause our revenues, operating results and cash flows to

fluctuate from quarter to quarter include:

•

our ability to retain and increase sales to existing customers, attract new customers and satisfy our
customers’ requirements;

the attrition rates for our services;

the rate of expansion and productivity of our sales force;

the length of the sales cycle for our services;

new product and service introductions by our competitors;

our success in selling our services to large enterprises;

our ability to realize benefits from strategic partnerships, acquisitions or investments;

general economic or geopolitical conditions, which may adversely affect either our customers’ ability
or willingness to purchase additional subscriptions or upgrade their services, or delay a prospective
customer’s purchasing decision, reduce the value of new subscription contracts, or affect attrition rates;

variations in the revenue mix of our services and growth rates of our cloud subscription and support
offerings, including the timing of software license sales and sales offerings that include an on-premise
software element for which the revenue allocated to that deliverable is recognized upfront;

the seasonality of our sales cycle, including software license sales, and timing of contract execution
and the corresponding impact on revenue recognized at a point in time;

changes in our pricing policies and terms of contracts, whether initiated by us or as a result of
competition;

changes in payment terms and the timing of customer payments and payment defaults by customers;

changes in unearned revenue and the remaining performance obligation, due to seasonality, the timing
of and compounding effects of renewals, invoice duration, size and timing, new business linearity
between quarters and within a quarter, average contract term, the timing of license software revenue
recognition, or fluctuations due to foreign currency movements, all of which may impact implied
growth rates;

the seasonality of our customers’ businesses, especially Commerce Cloud customers, including
retailers and branded manufacturers;

changes in foreign currency exchange rates such as with respect to the British Pound;

the amount and timing of operating costs and capital expenditures related to the operations and
expansion of our business;

the number of new employees;

the timing of commission, bonus, and other compensation payments to employees;

the cost, timing and management effort for the introduction of new features to our services;

the costs associated with acquiring new businesses and technologies and the follow-on costs of
integration and consolidating the results of acquired businesses;

expenses related to our real estate, our office leases and our data center capacity and expansion;

•

timing of additional investments in our enterprise cloud computing application and platform services
and in our consulting services;

expenses related to significant, unusual or discrete events, which are recorded in the period in which
the events occur;

extraordinary expenses such as litigation or other dispute-related settlement payments;

income tax effects, including the impact of changes in U.S. federal and state and international tax laws
applicable to corporate multinationals;

the timing of payroll and other withholding tax expenses, which are triggered by the payment of
bonuses and when employees exercise their vested stock awards;

technical difficulties or interruptions in our services;

changes in interest rates and our mix of investments, which would impact the return on our investments
in cash and marketable securities;

conditions, particularly sudden changes, in the financial markets, which have impacted and may
continue to impact the value of and liquidity of our investment portfolio;

changes in the fair value of our strategic investments in early-to-late stage privately held and public
companies, which could negatively and materially impact our financial results, particularly in periods
of significant market fluctuations;

equity issuances, including as consideration in acquisitions;

the timing of stock awards to employees and the related adverse financial statement impact of having to
expense those stock awards on a straight-line basis over their vesting schedules;

evolving regulations of cloud computing and cross-border data transfer restrictions and similar
regulations;

regulatory compliance costs; and

the impact of new accounting pronouncements and associated system implementations, for example,
the adoption of Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”),
which includes the accounting for lease assets and lease liabilities.

Many of these factors are outside of our control, and the occurrence of one or more of them might cause our

operating results to vary widely. If we fail to meet or exceed operating results expectations or if securities
analysts and investors have estimates and forecasts of our future performance that are unrealistic or that we do
not meet, the market price of our common stock could decline. In addition, if one or more of the securities
analysts who cover us adversely change their recommendation regarding our stock, the market price of our
common stock could decline.

If we experience significant fluctuations in our rate of anticipated growth and fail to balance our

expenses with our revenue forecasts, our business could be harmed and the market price of our common stock
could decline.

Due to the pace of change and innovation in enterprise cloud computing services, the unpredictability of

future general economic and financial market conditions, the impact of foreign currency exchange rate
fluctuations, the growing complexity of our business, including the use of multiple pricing and packaging
models, and our increasing focus on enterprise cloud computing services, we may not be able to realize our
projected revenue growth plans. We plan our expense levels and investment on estimates of future revenue and
future anticipated rate of growth. We may not be able to adjust our spending appropriately if the addition of new
subscriptions or the renewals of existing subscriptions fall short of our expectations. A portion of our expenses
may also be fixed in nature for some minimum amount of time, such as with costs capitalized to obtain revenue

contracts, data center contracts or office leases, so it may not be possible to reduce costs in a timely manner, or at
all, without the payment of fees to exit certain obligations early. As a result, we expect that our revenues,
operating results and cash flows may fluctuate significantly on a quarterly basis and revenue growth rates may
not be sustainable and may decline in the future, and we may not be able to provide continued operating margin
expansion, which could harm our business and cause the market price of our common stock to decline.

Sales to customers outside the United States expose us to risks inherent in international operations.

We sell our services throughout the world and are subject to risks and challenges associated with

international business. We intend to continue to expand our international sales efforts. The risks and challenges
associated with sales to customers outside the United States or those that can affect international operations
generally, include:

•

localization of our services, including translation into foreign languages and associated expenses;

regulatory frameworks or business practices favoring local competitors;

pressure on the creditworthiness of sovereign nations, particularly in Europe, where we have customers
and a balance of our cash, cash equivalents and marketable securities;

evolving domestic and international tax environments;

liquidity issues or political actions by sovereign nations, including nations with a controlled currency
environment, which could result in decreased values of these balances or potential difficulties
protecting our foreign assets or satisfying local obligations;

foreign currency fluctuations and controls, which may make our services more expensive for
international customers and could add volatility to our operating results;

compliance with multiple, conflicting, ambiguous or evolving governmental laws and regulations,
including employment, tax, privacy, anti-corruption, import/export, antitrust, data transfer, storage and
protection, and industry-specific laws and regulations, including rules related to compliance by our
third-party resellers and our ability to identify and respond timely to compliance issues when they
occur;

vetting and monitoring our third-party resellers in new and evolving markets to confirm they maintain
standards consistent with our brand and reputation;

uncertainty regarding regulation, currency, tax, and operations resulting from the Brexit vote that could
disrupt trade, the sale of our services and commerce, and movement of our people between the United
Kingdom, European Union, and locations;

changes in the public perception of governments in the regions where we operate or plan to operate;

regional data privacy laws and other regulatory requirements that apply to outsourced service providers
and to the transmission of our customers’ data across international borders, which grow more complex
as we scale and expand into new markets;

treatment of revenue from international sources, intellectual property considerations and changes to tax
codes, including being subject to foreign tax laws and being liable for paying withholding income or
other taxes in foreign jurisdictions;

different pricing environments;

difficulties in staffing and managing foreign operations;

different or lesser protection of our intellectual property;

longer accounts receivable payment cycles and other collection difficulties;

natural disasters, acts of war, terrorism, pandemics or security breaches; and

regional economic and political conditions.

Any of these factors could negatively impact our business and results of operations. The above factors may
also negatively impact our ability to successfully expand into emerging market countries, where we have little or
no operating experience, where it can be costly and challenging to establish and maintain operations, including
hiring and managing required personnel, and difficult to promote our brand, and where we may not benefit from
any first-to-market advantage or otherwise succeed.

Because we generally recognize revenue from subscriptions for our services over the term of the

subscription, downturns or upturns in new business may not be immediately reflected in our operating results.

We generally recognize revenue from customers ratably over the terms of their subscription agreements,
which are typically 12 to 36 months. As a result, most of the revenue we report in each quarter is the result of
subscription agreements entered into during previous quarters. Consequently, a decline in new or renewed
subscriptions in any one quarter may not be reflected in our revenue results for that quarter. Any such decline,
however, will negatively impact our revenue in future quarters. Accordingly, the effect of significant downturns
in sales and market acceptance of our services, and potential changes in our attrition rate, may not be fully
reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to
rapidly increase our revenue through additional sales in any period, as revenue from new customers must be
recognized over the applicable subscription term.

If our customers do not renew their subscriptions for our services or reduce the number of paying
subscriptions at the time of renewal, our revenue could decline and our business may suffer. If we cannot
accurately predict subscription renewals or upgrade rates, we may not meet our revenue targets, which may
adversely affect the market price of our common stock.

Our customers have no obligation to renew their subscriptions for our services after the expiration of their
contractual subscription period, which is typically 12 to 36 months, and in the normal course of business, some
customers have elected not to renew. In addition, our customers may renew for fewer subscriptions, renew for
shorter contract lengths, or switch to lower cost offerings of our services. It is difficult to predict attrition rates
given our varied customer base of enterprise and small and medium size business customers and the number of
multi-year subscription contracts. Our attrition rates may increase or fluctuate as a result of a number of factors,
including customer dissatisfaction with our services, customers’ spending levels, mix of customer base, decreases
in the number of users at our customers, competition, pricing increases or changes and deteriorating general
economic conditions.

Our future success also depends in part on our ability to sell additional features and services, more
subscriptions or enhanced editions of our services to our current customers. This may also require increasingly
sophisticated and costly sales efforts that are targeted at senior management. Similarly, the rate at which our
customers purchase new or enhanced services depends on a number of factors, including general economic
conditions and that our customers do not react negatively to any price changes related to these additional features
and services.

If customers do not renew their subscriptions, do not purchase additional features or enhanced subscriptions

or if attrition rates increase, our business could be harmed.

If third-party developers and providers do not continue to embrace our technology delivery model and
enterprise cloud computing services, or if our customers seek warranties from us for third-party applications,
integrations, data and content, our business could be harmed.

Our success depends on the willingness of a growing community of third-party developers and technology

providers to build applications and provide integrations, data and content that are complementary to our services.
Without the continued development of these applications and provision of such integrations, data and content,
both current and potential customers may not find our services sufficiently attractive, which could impact future
sales. In addition, for those customers who authorize a third-party technology partner access to their data, we do

not provide any warranty related to the functionality, security and integrity of the data transmission or
processing. Despite contract provisions to protect us, customers may look to us to support and provide warranties
for the third-party applications, integrations, data and content, even though not developed or sold by us, which
may expose us to potential claims, liabilities and obligations, all of which could harm our business.

We are exposed to fluctuations in currency exchange rates that could negatively impact our financial

results and cash flows from changes in the value of the U.S. Dollar versus local currencies and the Euro
versus the Pound Sterling.

We conduct our business in the following regions: the Americas, Europe and Asia Pacific. The expanding
global scope of our business exposes us to risk of fluctuations in foreign currency markets. This exposure is the
result of selling in multiple currencies, growth in our international investments, including data center expansion,
additional headcount in foreign locations, and operating in countries where the functional currency is the local
currency. Specifically, our results of operations and cash flows are subject to fluctuations primarily in British
Pound Sterling, Euro, Japanese Yen, Canadian Dollar and Australian Dollar against the U.S. Dollar as well as the
Euro against the Pound Sterling. These exposures may change over time as business practices evolve, economic
and political conditions change and evolving tax regulations come into effect. The fluctuations of currencies in
which we conduct business can both increase and decrease our overall revenue and expenses for any given fiscal
period. Additionally, global political events, including the United Kingdom’s 2016 vote in favor of exiting the
European Union, or “Brexit,” and similar geopolitical developments, fluctuating commodity prices and trade
tariff developments, have caused global economic uncertainty and uncertainty about the interest rate
environment, which could amplify the volatility of currency fluctuations. Such volatility, even when it increases
our revenues or decreases our expenses, impacts our ability to predict our future results and earnings accurately.
Although we attempt to mitigate some of this volatility and related risks through foreign currency hedging, our
hedging activities are limited in scope and may not effectively offset the adverse financial impacts that may
result from unfavorable movements in foreign currency exchange rates, which could adversely affect our
financial condition or results of operations.

As more of our sales efforts are targeted at larger enterprise customers, our sales cycle may become more

time-consuming and expensive, we may encounter pricing pressure and implementation and configuration
challenges, and we may have to delay revenue recognition for some complex transactions, all of which could
harm our business and operating results.

As we target more of our sales efforts at larger enterprise customers, including governmental entities, we
may face greater costs, longer sales cycles, greater competition and less predictability in completing some of our
sales. In this market segment, the customer’s decision to use our services may be an enterprise-wide decision
and, if so, these types of sales would require us to provide greater levels of education regarding the use and
benefits of our services, as well as education regarding privacy and data protection laws and regulations to
prospective customers with international operations. In addition, larger customers and governmental entities may
demand more configuration, integration services and features. As a result of these factors, these sales
opportunities may require us to devote greater sales support and professional services resources to individual
customers, driving up costs and time required to complete sales and diverting our own sales and professional
services resources to a smaller number of larger transactions, while potentially requiring us to delay revenue
recognition on some of these transactions until the technical or implementation requirements have been met.

Pricing and packaging strategies for enterprise and other customers for subscriptions to our existing and
future service offerings may not be widely accepted by other new or existing customers. Our adoption of such
new pricing and packaging strategies may harm our business.

For large enterprise customers, professional services may also be performed by a third party or a

combination of our own staff and a third-party. Our strategy is to work with third parties to increase the breadth
of capability and depth of capacity for delivery of these services to our customers. If a customer is not satisfied
with the quality of work performed by us or a third-party or with the type of services or solutions delivered, then

we could incur additional costs to address the situation, the profitability of that work might be impaired, and the
customer’s dissatisfaction with our services could damage our ability to obtain additional work from that
customer. In addition, negative publicity related to our customer relationships, regardless of its accuracy, may
further damage our business by affecting our ability to compete for new business with current and prospective
customers.

We have been and may in the future be sued by third parties for various claims including alleged

infringement of proprietary rights.

We are involved in various legal matters arising from the normal course of business activities. These may
include claims, suits, government investigations and other proceedings involving alleged infringement of third-
party patents and other intellectual property rights, commercial, corporate and securities, labor and employment,
class actions, wage and hour, and other matters.

The software and Internet industries are characterized by the existence of a large number of patents,
trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of
intellectual property rights. We have received in the past and may receive in the future communications from
third parties, including practicing entities and non-practicing entities, claiming that we have infringed their
intellectual property rights.

In addition, we have been, and may in the future be, sued by third parties for alleged infringement of their
claimed proprietary rights. Our technologies may be subject to injunction if they are found to infringe the rights
of a third-party or we may be required to pay damages, or both. Further, many of our subscription agreements
require us to indemnify our customers for third-party intellectual property infringement claims, which would
increase the cost to us of an adverse ruling on such a claim.

Our exposure to risks associated with various claims, including the use of intellectual property, may be
increased as a result of acquisitions of other companies. For example, we may have a lower level of visibility into
the development process with respect to intellectual property or the care taken to safeguard against infringement
risks with respect to the acquired company or technology. In addition, third parties may make infringement and
similar or related claims after we have acquired technology that had not been asserted prior to our acquisition.

The outcome of any claims or litigation, regardless of the merits, is inherently uncertain. Any claims and
lawsuits, and the disposition of such claims and lawsuits, whether through settlement or licensing discussions, or
litigation, could be time-consuming and expensive to resolve, divert management attention from executing our
business plan, result in efforts to enjoin our activities, lead to attempts on the part of other parties to pursue
similar claims and, in the case of intellectual property claims, require us to change our technology, change our
business practices, pay monetary damages or enter into short- or long-term royalty or licensing agreements.

Any adverse determination related to intellectual property claims or other litigation could prevent us from

offering our services to others, could be material to our financial condition or cash flows, or both, or could
otherwise adversely affect our operating results. In addition, depending on the nature and timing of any such
dispute, an unfavorable resolution of a legal matter could materially affect our current or future results of
operations or cash flows in a particular quarter.

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary

technology and our brand, cause us to incur significant expenses and harm our business.

If we fail to protect our intellectual property rights adequately, our competitors may gain access to our
technology, affecting our brand, causing us to incur significant expenses and harming our business. Any of our
patents, trademarks or other intellectual property rights may be challenged by others or invalidated through
administrative process or litigation. While we have many U.S. patents and pending U.S. and international patent
applications, we may be unable to obtain patent protection for the technology covered in our patent applications

or the patent protection may not be obtained quickly enough to meet our business needs. In addition, our existing
patents and any patents issued in the future may not provide us with competitive advantages, or may be
successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability and
scope of protection of intellectual property rights are uncertain, and we also may face proposals to change the
scope of protection for some intellectual property rights in the U.S. Effective patent, trademark, copyright and
trade secret protection may not be available to us in every country in which our services are available. The laws
of some foreign countries may not be as protective of intellectual property rights as those in the U.S., and
mechanisms for enforcement of intellectual property rights may be inadequate. Also, our involvement in standard
setting activity or the need to obtain licenses from others may require us to license our intellectual property.
Accordingly, despite our efforts, we may be unable to prevent third parties from using our intellectual property.

We may be required to spend significant resources and expense to monitor and protect our intellectual
property rights. We may initiate claims or litigation against third parties for infringement of our proprietary rights
or to establish the validity of our proprietary rights. If we fail to protect our intellectual property rights, it could
impact our ability to protect our technology and brand. Furthermore, any litigation, whether or not it is resolved
in our favor, could result in significant expense to us, cause us to divert time and resources and harm our
business.

Our continued success depends on our ability to maintain and enhance our brands.

We believe that the brand identities we have developed have significantly contributed to the success of our

business. Maintaining and enhancing the Salesforce brand and our other brands are critical to expanding our base
of customers, partners and employees. Our brand strength will depend largely on our ability to remain a
technology leader and continue to provide high-quality innovative products, services, and features securely,
reliably and in a manner that enhances our customers’ success. In order to maintain and enhance our brands, we
may be required to make substantial investments that may later prove to be unsuccessful. In addition, our
services, including AI predictions, may be used by our customers for purposes inconsistent with our company
values, which may harm our brand. As with many innovations, AI presents risks and challenges that could affect
its adoption and therefore our business. Further, the development of AI presents emerging ethical issues. If we
enable or offer AI solutions that are controversial, due to their impact, or perceived impact, on human rights,
privacy, employment, or in other social contexts, we may experience brand or reputational harm, competitive
harm or legal liability.

In addition, positions we take on social issues may be unpopular with some customers or potential

customers, which may impact our ability to attract or retain such customers. Our brand is also associated with our
public commitments to sustainability and equality, and any perceived changes in our dedication to these
commitments could adversely impact our relationships with our customers. In addition, we have secured the
naming rights to facilities controlled by third parties, such as office towers and a transit center, and any negative
events or publicity arising in connection with these facilities could adversely impact our brand.

If we fail to maintain and enhance our brands, or if we incur excessive expenses in our efforts to do so, our

business, operating results and financial condition may be materially and adversely affected.

We may lose key members of our management team or development and operations personnel, and may

be unable to attract and retain employees we need to support our operations and growth.

Our success depends substantially upon the continued services of our executive officers and other key
members of management, particularly our co-chief executive officers. From time to time, there may be changes
in our executive management team resulting from the hiring or departure of executives. Such changes in our
executive management team may be disruptive to our business. We are also substantially dependent on the
continued service of our existing development and operations personnel because of the complexity of our
services and technologies. We do not have employment agreements with any of our executive officers, key
management, development or operations personnel and they could terminate their employment with us at any
time. The loss of one or more of our key employees or groups could seriously harm our business.

The technology industry is subject to substantial and continuous competition for engineers with high levels

of experience in designing, developing and managing software and Internet-related services, as well as
competition for sales executives, data scientists and operations personnel. We may not be successful in attracting
and retaining qualified personnel. We have from time to time experienced, and we expect to continue to
experience, difficulty in hiring, developing, integrating and retaining highly skilled employees with appropriate
qualifications. These difficulties may be amplified by evolving restrictions on immigration, travel, or availability
of visas for skilled technology workers. These difficulties may potentially be further amplified by the high cost of
living in the San Francisco Bay Area, where our headquarters are located. If we fail to attract new personnel or
fail to retain and motivate our current personnel, our business and future growth prospects could be severely
harmed.

In addition, we believe in the importance of our corporate culture of Ohana, which fosters dialogue,
collaboration, recognition and a sense of family. As our organization grows and expands globally, and as
employees’ workplace expectations develop, we may find it increasingly difficult to maintain the beneficial
aspects of our corporate culture. This could negatively impact our ability to attract and retain employees or our
reputation with customers and could negatively impact our future growth.

Any failure in our delivery of high-quality technical support services may adversely affect our

relationships with our customers and our financial results.

Our customers depend on our support organization to resolve technical issues relating to our applications.

We may be unable to respond quickly enough to accommodate short-term increases in customer demand for
support services. Increased customer demand for these services, without corresponding revenues, could increase
costs and adversely affect our operating results. In addition, our sales process is highly dependent on our
applications and business reputation and on positive recommendations from our existing customers. Any failure
to maintain high-quality technical support, or a market perception that we do not maintain high-quality support,
could adversely affect our reputation, our ability to sell our service offerings to existing and prospective
customers, and our business, operating results and financial position.

Periodic changes to our sales organization can be disruptive and may reduce our rate of growth.

We periodically change and make adjustments to our sales organization in response to market opportunities,

competitive threats, management changes, product introductions or enhancements, acquisitions, sales
performance, increases in sales headcount, cost levels and other internal and external considerations. Any such
future sales organization changes may result in a temporary reduction of productivity, which could negatively
impact our rate of growth. In addition, any significant change to the way we structure our compensation of our
sales organization may be disruptive and may affect our revenue growth.

Unanticipated changes in our effective tax rate and additional tax liabilities may impact our financial

results.

We are subject to income taxes in the United States and various jurisdictions outside of the United States.

Our income tax obligations are generally determined based on our business operations in these jurisdictions.
Significant judgment is often required in the determination of our worldwide provision for income taxes. Our
effective tax rate could be impacted by changes in the earnings and losses in countries with differing statutory tax
rates, changes in non-deductible expenses, changes in excess tax benefits of stock-based compensation, changes
in the valuation of deferred tax assets and liabilities and our ability to utilize them, the applicability of
withholding taxes, effects from acquisitions, changes in accounting principles and tax laws in jurisdictions where
we operate. Any changes, ambiguity, or uncertainty in taxing jurisdictions’ administrative interpretations,
decisions, policies and positions could also materially impact our income tax liabilities.

As our business continues to grow and if we become more profitable, we anticipate that our income tax
obligations could significantly increase. If our existing tax credits and net operating loss carry-forwards become

fully utilized, we may be unable to offset or otherwise mitigate our tax obligations to the same extent as in prior
years. This could have a material impact to our future cash flows or operating results.

In addition, recent global tax developments applicable to multinational businesses, including certain

approaches of addressing taxation of digital economy recently proposed or enacted by the Organization for
Economic Co-operation and Development, the European Commission or certain major jurisdictions where we
operate might have a material impact to our business and future cash flow from operating activities, or future
financial results. We are also subject to tax examinations in multiple jurisdictions. While we regularly evaluate
new information that may change our judgment resulting in recognition, derecognition or changes in
measurement of a tax position taken, there can be no assurance that the final determination of any examinations
will not have an adverse effect on our operating results and financial position. In addition, our operations may
change, which may impact our tax liabilities. As our brand becomes increasingly recognizable both domestically
and internationally, our tax planning structure and corresponding profile may be subject to increased scrutiny and
if we are perceived negatively, we may experience brand or reputational harm.

We may also be subject to additional tax liabilities and penalties due to changes in non-income based taxes
resulting from changes in federal, state or international tax laws, changes in taxing jurisdictions’ administrative
interpretations, decisions, policies, and positions, results of tax examinations, settlements or judicial decisions,
changes in accounting principles, changes to the business operations, including acquisitions, as well as the
evaluation of new information that results in a change to a tax position taken in a prior period. Any resulting
increase in our tax obligation or cash taxes paid could adversely affect our cash flows and financial results.

Our debt service obligations and operating lease commitments may adversely affect our financial

condition and cash flows from operations.

We have a substantial level of debt, including the 2023 and 2028 Senior Notes we issued in April 2018
(“Senior Notes”) due April 2023 and April 2028, the loan we assumed when we purchased an office building
located at 50 Fremont Street in San Francisco, California (“50 Fremont”) due June 2023, the $500.0 million term
loan to finance our acquisition of MuleSoft, due May 2021 (“2021 term loan”) and capital lease arrangements.
Additionally, we have significant contractual commitments, including operating lease arrangements, which are
not reflected on our consolidated balance sheets, as well as a financing obligation for a leased facility of which
we are deemed the owner for accounting purposes. In April 2018, we amended and restated our revolving credit
facility under which we can draw down up to $1.0 billion. Maintenance of our indebtedness and contractual
commitments and any additional issuances of indebtedness could:

•

impair our ability to obtain additional financing in the future for working capital, capital expenditures,
acquisitions, general corporate or other purposes;

cause us to dedicate a substantial portion of our cash flows from operations towards debt service
obligations and principal repayments; and

• make us more vulnerable to downturns in our business, our industry or the economy in general.

Our ability to meet our expenses and debt obligations will depend on our future performance, which will be

affected by financial, business, economic, regulatory and other factors. We will not be able to control many of
these factors, such as economic conditions and governmental regulations. Further, our operations may not
generate sufficient cash to enable us to service our debt or contractual obligations resulting from our leases. If we
fail to make a payment on our debt, we could be in default on such debt. If we are at any time unable to generate
sufficient cash flows from operations to service our indebtedness when payment is due, we may be required to
attempt to renegotiate the terms of the instruments relating to the indebtedness, seek to refinance all or a portion
of the indebtedness or obtain additional financing. There can be no assurance that we would be able to
successfully renegotiate such terms, that any such refinancing would be possible or that any additional financing
could be obtained on terms that are favorable or acceptable to us. Any new or refinanced debt may be subject to
substantially higher interest rates, which could adversely affect our financial condition and impact our business.

In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity

of both our debt and equity securities, as well as the potential costs associated with a refinancing of our debt.
Under certain circumstances, if our credit ratings are downgraded or other negative action is taken, the interest
rate payable by us under our revolving credit facility could increase. Downgrades in our credit ratings could also
affect the terms of any such refinancing or future financing or restrict our ability to obtain additional financing in
the future.

Our senior unsecured notes and senior unsecured credit agreements impose restrictions on us and require us
to maintain compliance with specified covenants. Our ability to comply with these covenants may be affected by
events beyond our control. A failure to comply with the covenants and other provisions of our outstanding debt
could result in events of default under such instruments, which could permit acceleration of all of our debt and
borrowings. Any required repayment of our debt or revolving credit facility as a result of a fundamental change
or other acceleration would lower our current cash on hand such that we would not have those funds available for
use in our business.

New lease accounting guidance requires that we record operating lease activity on our consolidated balance

sheet in fiscal 2020, which will result in an increase in both our assets and financing obligations. The
implementation of this guidance may impact our ability to obtain the necessary financing from financial
institutions at commercially viable rates or at all as this new guidance will result in a higher financing obligation
on our consolidated balance sheet.

Weakened global economic conditions may adversely affect our industry, business and results of

operations.

Our overall performance depends in part on worldwide economic and geopolitical conditions. The United
States and other key international economies have experienced cyclical downturns from time to time in which
economic activity was impacted by falling demand for a variety of goods and services, restricted credit, poor
liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies
and overall uncertainty with respect to the economy. These economic conditions can arise suddenly and the full
impact of such conditions can remain uncertain. In addition, geopolitical developments, such as potential trade
wars, can increase levels of political and economic unpredictability globally and increase the volatility of global
financial markets. Moreover, these conditions can affect the rate of information technology spending and could
adversely affect our customers’ ability or willingness to purchase our enterprise cloud computing services, delay
prospective customers’ purchasing decisions, reduce the value or duration of their subscription contracts, or
affect attrition rates, all of which could adversely affect our future sales and operating results.

Natural disasters and other events beyond our control could materially adversely affect us.

Natural disasters or other catastrophic events may cause damage or disruption to our operations,

international commerce and the global economy, and thus could have a strong negative effect on us. Our business
operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events
beyond our control. Although we maintain crisis management and disaster response plans, such events could
make it difficult or impossible for us to deliver our services to our customers, and could decrease demand for our
services. Our corporate headquarters, and a significant portion of our research and development activities,
information technology systems, and other critical business operations, are located near major seismic faults in
the San Francisco Bay Area. Because we do not carry earthquake insurance for direct quake-related losses, with
the exception of the building that we own in San Francisco, and significant recovery time could be required to
resume operations, our financial condition and operating results could be materially adversely affected in the
event of a major earthquake or catastrophic event.

Climate change may have a long-term impact on our business.

While we seek to mitigate our business risks associated with climate change by establishing robust

environmental programs and partnering with organizations who are also focused on mitigating their own climate

related risks, we recognize that there are inherent climate related risks wherever business is conducted. Access to
clean water and reliable energy in the communities where we conduct our business, whether for our offices, data
centers, vendors, customers or other stakeholders, is a priority. Any of our primary locations may be vulnerable
to the adverse effects of climate change. For example, our California headquarters are projected to be vulnerable
to future water scarcity due to climate change. Climate related events, including the increasing frequency of
extreme weather events and their impact on U.S. critical infrastructure, have the potential to disrupt our business,
our third party suppliers, or the business of our customers, and may cause us to experience higher attrition, losses
and additional costs to maintain or resume operations.

Current and future accounting pronouncements and other financial reporting standards, especially but

not only concerning revenue recognition, cost capitalization and lease accounting, may negatively impact our
financial results.

We regularly monitor our compliance with applicable financial reporting standards and review new

pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing
standards and changes in their interpretation, we have been required to change our accounting policies,
particularly concerning revenue recognition and the capitalized incremental costs to obtain a customer contract,
to alter our operational policies, to implement new or enhance existing systems so that they reflect new or
amended financial reporting standards, and to adjust our published financial statements. We will have similar
requirements related to future accounting pronouncements, such as lease accounting. Such changes may have an
adverse effect on our business, financial position, and operating results, or cause an adverse deviation from our
revenue and operating profit target, which may negatively impact our financial results.

We may be subject to risks related to government contracts and related procurement regulations.

Our contracts with federal, state, local, and foreign government entities are subject to various procurement

regulations and other requirements relating to their formation, administration and performance. We may be
subject to audits and investigations relating to our government contracts, and any violations could result in
various civil and criminal penalties and administrative sanctions, including termination of contract, refunding or
suspending of payments, forfeiture of profits, payment of fines, and suspension or debarment from future
government business. In addition, such contracts may provide for termination by the government at any time,
without cause. Any of these risks related to contracting with governmental entities could adversely impact our
future sales and operating results.

We are subject to governmental export and import controls that could impair our ability to compete in

international markets and subject us to liability if we are not in full compliance with applicable laws.

Our solutions are subject to export and import controls, including the Commerce Department’s Export
Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations
established by the Treasury Department’s Office of Foreign Assets Control. If we fail to comply with these U.S.
export control laws and import laws we and certain of our employees could be subject to substantial civil or
criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us
and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or
managers. Obtaining the necessary authorizations, including any required license, may be time-consuming, is not
guaranteed and may result in the delay or loss of sales opportunities. Furthermore, the U.S. export control laws
and economic sanctions laws prohibit the shipment of certain products and services to U.S. embargoed or
sanctioned countries, governments and persons. Even though we take precautions to prevent our solutions from
being provisioned or provided to U.S. sanctions targets in violation of applicable regulations, our solutions could
be provisioned to those targets or provided by our resellers despite such precautions. Any such sales could have
negative consequences, including government investigations, penalties and reputational harm. Changes in our
solutions or changes in export and import regulations may create delays in the introduction, sale and deployment
of our solutions in international markets or prevent the export or import of our solutions to certain countries,

governments or persons altogether. Any decreased use of our solutions or limitation on our ability to export or
sell our solutions would likely adversely affect our business, financial condition and results of operations.

Risks Related to Our Common Stock

The market price of our common stock is likely to be volatile and could subject us to litigation.

The trading prices of the securities of technology companies have historically been highly volatile.
Accordingly, the market price of our common stock has been and is likely to continue to be subject to wide
fluctuations. Factors affecting the market price of our common stock include:

•

variations in our operating results, earnings per share, cash flows from operating activities, unearned
revenue, remaining performance obligation, year-over-year growth rates for individual core service
offerings and other financial metrics and non-financial metrics, such as transaction usage volumes and
other usage metrics, and how those results compare to analyst expectations;

variations in, and limitations of, the various financial and other metrics and modeling used by analysts
in their research and reports about our business;

forward-looking guidance to industry and financial analysts related to, for example, future revenue,
unearned revenue, remaining performance obligation, cash flows from operating activities and earnings
per share;

changes in the estimates of our operating results or changes in recommendations by securities analysts
that elect to follow our common stock;

announcements of technological innovations, new services or service enhancements, strategic alliances
or significant agreements by us or by our competitors;

announcements by us or by our competitors of mergers or other strategic acquisitions, or rumors of
such transactions involving us or our competitors;

announcements of customer additions and customer cancellations or delays in customer purchases;

the coverage of our common stock by the financial media, including television, radio and press reports
and blogs;

recruitment or departure of key personnel;

disruptions in our service due to computer hardware, software, network or data center problems;

the economy as a whole, geopolitical conditions, market conditions in our industry and the industries of
our customers;

trading activity by a limited number of stockholders who together beneficially own a significant
portion of our outstanding common stock;

the issuance of shares of common stock by us, whether in connection with an acquisition or a capital
raising transaction; and

issuance of debt or other convertible securities.

In addition, if the market for technology stocks or the stock market in general experiences uneven investor
confidence, the market price of our common stock could decline for reasons unrelated to our business, operating
results or financial condition. The market price of our common stock might also decline in reaction to events that
affect other companies within, or outside, our industry even if these events do not directly affect us. Some
companies that have experienced volatility in the trading price of their stock have been the subject of securities
class action litigation. If we are the subject of such litigation, it could result in substantial costs and a diversion of
management’s attention and resources.

Provisions in our amended and restated certificate of incorporation and bylaws and Delaware law might

discourage, delay or prevent a change of control of our company or changes in our management and,
therefore, depress the market price of our common stock.

Our amended and restated certificate of incorporation and bylaws contain provisions that could depress the
market price of our common stock by acting to discourage, delay or prevent a change in control of our company
or changes in our management that the stockholders of our company may deem advantageous. These provisions
among other things:

•

permit the board of directors to establish the number of directors;

provide that directors may only be removed with the approval of holders of 66 2/3 percent of our
outstanding capital stock;

require super-majority voting to amend some provisions in our amended and restated certificate of
incorporation and bylaws;

authorize the issuance of “blank check” preferred stock that our board could use to implement a
stockholder rights plan (also known as a “poison pill”);

prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a
meeting of our stockholders;

provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and

establish advance notice requirements for nominations for election to our board or for proposing
matters that can be acted upon by stockholders at annual stockholder meetings.

In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a

change in control of our company. Section 203 imposes certain restrictions on merger, business combinations
and other transactions between us and holders of 15 percent or more of our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

As of January 31, 2019, our executive and principal offices for sales, marketing, professional and

administrative services and development consist of approximately 2.1 million square feet of leased and owned
property in San Francisco. Of this total, we lease and occupy approximately 1.2 million square feet and own and
occupy a majority of the approximately 820,000 square feet of total owned space at 50 Fremont Street. Of the
total leased and owned space in San Francisco, 1.9 million square feet is concentrated in our urban campus,
which includes 50 Fremont Street, 350 Mission Street, and Salesforce Tower located at 415 Mission Street
(“Salesforce Tower”), collectively defined as our “Urban Campus”. Each of the three buildings occupy one of the
four corners of a major intersection in downtown San Francisco. In addition, we lease approximately 644,000
square feet in San Francisco which is either currently sublet or scheduled for disposition in fiscal 2020. This
space is not included in the amounts above.

In November 2018, we entered into a lease agreement for approximately 324,000 rentable square feet of

office space in a building to be constructed as part of our urban campus in San Francisco, California. As of
January 31, 2019, construction has not commenced on the building and is dependent on the developer obtaining
approvals from the City and County of San Francisco. We expect to begin occupying the space in fiscal 2024.

We also lease space in various locations throughout the United States for local sales and professional

services personnel. Our foreign subsidiaries lease office space in a number of countries in Europe, North
America, Asia, South America, Africa and Australia for our international operations, primarily for local sales and
professional services personnel.

We also operate data centers in the U.S., Europe and Asia pursuant to various co-location lease

arrangements.

We believe that our existing facilities and offices are adequate to meet our current requirements. If we
require additional space, we believe that we will be able to obtain such space on acceptable, commercially
reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

In the ordinary course of business, we are or may be involved in various legal or regulatory proceedings,

claims, or purported class actions related to alleged infringement of third-party patents and other intellectual
property rights, or alleged violation of commercial, corporate and securities, labor and employment, wage and
hour, or other laws or regulations. We have been, and may in the future be put on notice and/or sued by third
parties for alleged infringement of their proprietary rights, including patent infringement.

In December 2018, we were named as a nominal defendant and certain of our current and former directors
were named as defendants in a purported shareholder derivative action in the Delaware Court of Chancery. The
complaint alleged that excessive compensation was paid to such directors for their service, included claims of
breach of fiduciary duty and unjust enrichment, and sought restitution and disgorgement of a portion of the
directors’ compensation. Subsequently, three similar shareholder derivative actions were filed in the Delaware
Court of Chancery. The cases have been consolidated under the caption In re Salesforce.com, Inc. Derivative
Litigation. We believe that the ultimate outcome of this litigation will not materially and adversely affect the
Company’s business, financial condition, results of operations or cash flows.

We evaluate all claims and lawsuits with respect to their potential merits, our potential defenses and

counterclaims, settlement or litigation potential and the expected effect on us. Our technologies may be subject to
injunction if they are found to infringe the rights of a third-party. In addition, many of our subscription
agreements require us to indemnify our customers for third-party intellectual property infringement claims,
which could increase the cost to us of an adverse ruling on such a claim.

The outcome of any claims or litigation, regardless of the merits, is inherently uncertain. Any claims and
other lawsuits, and the disposition of such claims and lawsuits, whether through settlement or litigation, could be
time-consuming and expensive to resolve, divert our attention from executing our business plan, result in efforts
to enjoin our activities, lead to attempts by third parties to seek similar claims and, in the case of intellectual
property claims, require us to change our technology, change our business practices, pay monetary damages or
enter into short- or long-term royalty or licensing agreements.

In general, the resolution of a legal matter could prevent us from offering our service to others, could be

material to our financial condition or cash flows, or both, or could otherwise adversely affect our operating
results.

We make a provision for a liability relating to legal matters when it is both probable that a liability has been
incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly
and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel
and other information and events pertaining to a particular matter. The outcomes of our legal proceedings and
other contingencies are, however, inherently unpredictable and subject to significant uncertainties. As a result,
we may not be able to reasonably estimate the amount or range of possible losses in excess of any amounts
accrued, including losses that could arise as a result of application of non-monetary remedies, with respect to any
contingencies, and our estimates may not prove to be accurate.

In our opinion, resolution of all current matters is not expected to have a material adverse impact on our
consolidated results of operations, cash flows or financial position. However, depending on the nature and timing

of a given dispute or other contingency, an unfavorable resolution could materially affect our current or future
results of operations or cash flows, or both, in a particular quarter.

See also Note 15, “Legal Proceedings and Claims” of the Notes to Consolidated Financial Statements
included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth certain information regarding our current executive officers as of March 1, 2019 (in

alphabetical order):

Name

Age

Position

Joe Allanson . . . . . . . . . . . . . . . . . . .
Marc Benioff . . . . . . . . . . . . . . . . . . .
Keith Block . . . . . . . . . . . . . . . . . . . .
Alexandre Dayon . . . . . . . . . . . . . . .
Parker Harris . . . . . . . . . . . . . . . . . . .
Mark Hawkins . . . . . . . . . . . . . . . . . .
Cindy Robbins . . . . . . . . . . . . . . . . . .
Srinivas Tallapragada . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Bret Taylor
Amy Weaver . . . . . . . . . . . . . . . . . . .

55 Chief Accounting Officer and Corporate Controller
54 Chairman of the Board and co-CEO
57 Co-CEO
51
President and Chief Strategy Officer
52 Co-Founder and Chief Technology Officer
President and Chief Financial Officer
59
President and Chief People Officer
46
President, Technology
49
President and Chief Product Officer
38
President, Legal & Corporate Affairs and General Counsel
51

Joe Allanson has served as our Chief Accounting Officer and Corporate Controller since February 2014.
Prior to that, Mr. Allanson served as our Senior Vice President, Chief Accountant and Corporate Controller since
July 2011, Senior Vice President, Corporate Controller from July 2007 to July 2011, and served in various other
management positions in finance since joining Salesforce in 2003. Prior to Salesforce, Mr. Allanson spent four
years at Autodesk, Inc. and three years at Chiron Corporation in key corporate finance positions. Previously, he
worked at Arthur Andersen LLP for 11 years in its Audit and Business Advisory Services group. Mr. Allanson
also serves on the Board of Trustees of the University of San Francisco. Mr. Allanson graduated from Santa
Clara University with a B.S. in Accounting.

Marc Benioff is Chairman, co-CEO and Co-Founder of Salesforce and a pioneer of cloud computing. Under

Mr. Benioff’s leadership, Salesforce is the fastest-growing top-five enterprise software company and the #1
provider of CRM software globally. Mr. Benioff was named “Innovator of the Decade” by Forbes and is
recognized as one of the World’s 25 Greatest Leaders by Fortune and one of the 10 Best-Performing CEOs by
Harvard Business Review. A member of the World Economic Forum Board of Trustees, Mr. Benioff serves as
the inaugural chair of WEF’s Forum Center for the Fourth Industrial Revolution in San Francisco. Mr. Benioff
also serves as chair of Salesforce.org. Mr. Benioff served as a director of Cisco Systems, Inc. from 2012 to 2014.
Mr. Benioff received a B.S. in Business Administration from the University of Southern California, where he is
on its Board of Trustees.

Keith Block is co-CEO of Salesforce and has served as a Director since June 2013. Prior to his appointment

as Co-CEO in August 2018, he served as Vice Chairman, President since joining Salesforce in June 2013, and
additionally served as our Chief Operating Officer from February 2016 to August 2018. Mr. Block was employed
at Oracle Corporation from 1986 to June 2012, where he held a number of positions, including Executive Vice
President, North America. Mr. Block currently serves on the World Economic Forum’s Information Technology
Community as a Governor, the Board of Trustees for Carnegie-Mellon University, the President’s Advisory

Council at Carnegie-Mellon University Heinz Graduate School and the Board of Trustees at the Concord
Museum. Mr. Block received both a B.S. in Information Systems and an M.S. in Management & Policy Analysis
from Carnegie-Mellon University.

Alexandre Dayon has served as our President and Chief Strategy Officer since November 2017. Prior to
that, he served as our President and Chief Product Officer since February 2016, President, Products from March
2014 to February 2016, President, Applications and Platform from December 2012 to March 2014, Executive
Vice President, Applications from September 2011 to December 2012, Executive Vice President, Product
Management from February 2010 to December 2012, and Senior Vice President, Product Management from
September 2008 to January 2010. Mr. Dayon joined Salesforce through the acquisition of InStranet, a leading
knowledge-base company, where he was a founder and served as CEO. Prior to InStranet, Mr. Dayon was a
founding member of Business Objects SA where he led the product group for more than 10 years. Mr. Dayon,
who holds several patents, is focused on creating business value out of technology disruption. Mr. Dayon holds a
masterâ´s degree in electrical engineering from Ecole Supérieure d’Electricité (SUPELEC) in France.

Parker Harris has served as a Director since August 2018 and as our Co-Founder and Chief Technology

Officer since September 2016. Mr. Harris co-founded Salesforce in February 1999 and has served in senior
technical positions since inception. From December 2004 to February 2013, Mr. Harris served as our Executive
Vice President, Technology. Prior to Salesforce, Mr. Harris was a Vice President at Left Coast Software, a Java
consulting firm he co-founded, from October 1996 to February 1999. Mr. Harris received a B.A. from
Middlebury College.

Mark Hawkins has served as our President and Chief Financial Officer and Principal Financial Officer since

August 2017. Prior to that, he served as our Chief Financial Officer, Principal Financial Officer and Executive
Vice President since August 2014. Prior to Salesforce, Mr. Hawkins served as Executive Vice President and
Chief Financial Officer and principal financial officer for Autodesk, Inc., a design software and services
company, from April 2009 to July 2014. From April 2006 to April 2009, Mr. Hawkins served as Senior Vice
President, Finance and Information Technology, and Chief Financial Officer of Logitech International S.A.
Previously, Mr. Hawkins held various finance and business-management roles with Dell Inc. and Hewlett-
Packard Company. Mr. Hawkins currently serves as a director of Plex Systems, Inc., where he is the Chairman of
the Audit Committee, and SecureWorks, Inc., where he is also a member of the Compensation Committee and
the Chairman of the Audit Committee. Mr. Hawkins holds a B.A. in Operations Management from Michigan
State University and an M.B.A. in Finance from the University of Colorado. He also completed the Advanced
Management Program at Harvard Business School.

Cindy Robbins has served as our President, Chief People Officer since August 2017. Prior to that, she served

as our Executive Vice President, Global Employee Success since July 2015, Senior Vice President, Global
Employee Success from October 2014 to June 2015 and Vice President, Global Employee Success from
November 2013 to September 2014. Prior to that, Ms. Robbins held various other positions in Executive
Recruiting, Sales and Marketing at the Company since 2006. Ms. Robbins holds a B.S. in Political Science from
Santa Clara University.

Srini Tallapragada has served as our President, Technology since June 2018. Prior to that, he served as
Executive Vice President, Engineering since March 2014 and Senior Vice President, Engineering from May 2012
to February 2014. From April 2011 to June 2012, Mr. Tallapragada served as a Senior Vice President at Oracle.
From February 2009 to April 2011 Mr. Tallapragada served as a Senior Vice President at SAP. Previously,
Mr. Tallapragada held various roles at Oracle, Infosys and Asian Paints. Mr. Tallapragada holds a masters degree
from the School of Human Resources at XLRI, Jamshedpur and a B.T. in Computer Science from the National
Institute of Technology, Warangal.

Bret Taylor has served as our President and Chief Product Officer since November 2017. Prior to that, he
served as our President, Quip since August 2016. Mr. Taylor joined Salesforce through the acquisition of Quip,

Inc., where he was a co-founder and served as CEO since September 2012. Previously, Mr. Taylor served as
Chief Technology Officer of Facebook, Inc. from August 2009 to July 2012 and Chief Executive Officer of
FriendFeed, Inc., a social network, from October 2007 to August 2009. From June 2007 to September 2007,
Mr. Taylor served as an entrepreneur-in-residence at Benchmark, a venture capital firm. Prior to June 2007,
Mr. Taylor served as Group Product Manager at Google Inc. Mr. Taylor currently serves as a director of Twitter,
Inc., where he is also a member of the Compensation Committee. He has also served on the Board of Directors of
Axon Enterprise, Inc. (formerly known as TASER International, Inc.), a protection technologies company, since
June 2014. Mr. Taylor holds a B.S. and an M.S. in Computer Science from Stanford University.

Amy Weaver has served as our President, Legal & Corporate Affairs and General Counsel since February

2017. Prior to that, she served as our Executive Vice President and General Counsel since July 2015 and our
Senior Vice President and General Counsel from October 2013 to July 2015. Prior to Salesforce, Ms. Weaver
served as Executive Vice President and General Counsel at Univar Inc. from December 2010 to June 2013.
Previously, Ms. Weaver was Senior Vice President and Deputy General Counsel at Expedia, Inc. and before that
she practiced law at Cravath, Swaine & Moore LLP and Perkins Coie LLP. Ms. Weaver also served as a clerk on
the U.S. Court of Appeals, Ninth Circuit and as a legislative assistant to a member of the Hong Kong Legislative
Council. Ms. Weaver holds a B.A. in Political Science from Wellesley College and a J.D. from Harvard Law
School.

PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information for Common Stock

Our common stock is traded on the New York Stock Exchange under the symbol “CRM.”

Dividend Policy

We have never paid any cash dividends on our common stock. Our board of directors currently intends to
retain any future earnings to support operations and to finance the growth and development of our business and
does not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination
related to our dividend policy will be made at the discretion of our board.

Stockholders

As of January 31, 2019, there were 548 registered stockholders of record of our common stock, including
The Depository Trust Company, which holds shares of Salesforce common stock on behalf of an indeterminate
number of beneficial owners.

Stock Performance Graph

The following shall not be deemed incorporated by reference into any of our other filings under the

Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended.

The graph below compares the cumulative total stockholder return on our common stock with the
cumulative total return on the Standard & Poor’s 500 Index (“S&P 500 Index”), Nasdaq Computer & Data
Processing Index (“Nasdaq Computer”) and the Nasdaq 100 Index for each of the last five fiscal years ended
January 31, 2019, assuming an initial investment of $100. Data for the S&P 500 Index, Nasdaq Computer and
Nasdaq 100 Index assume reinvestment of dividends.

The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to

forecast, future performance of our common stock.

Comparison of Cumulative Total Return of salesforce.com, inc.

S
R
A
L
L
O
D

300

250

200

150

100

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

salesforce.com

S&P 500 Index

Nasdaq Computer

Nasdaq 100 Index

salesforce.com . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nasdaq Computer . . . . . . . . . . . . . . . . . . . . . . . . .
Nasdaq 100 Index . . . . . . . . . . . . . . . . . . . . . . . . .

$100.00
100.00
100.00
100.00

$ 93.00
112.00
118.00
118.00

$112.00
109.00
124.00
122.00

$131.00
128.00
153.00
145.00

$188.00
158.00
216.00
197.00

$251.00
152.00
212.00
196.00

1/31/2014

1/31/2015

1/31/2016

1/31/2017

1/31/2018

1/31/2019

Recent Sales of Unregistered Securities

In connection with the acquisition of MetaMind, Inc. in April 2016, the Company issued 13,369 shares of
Company common stock on January 2, 2019. This issuance was made in reliance on one or more of the following
exemptions or exclusions from the registration requirements of the Securities Act of 1933, as amended (the
“Securities Act”): Section 4(a)(2) of the Securities Act, Regulation D promulgated under the Securities Act, and
Regulation S promulgated under the Securities Act.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with our audited

consolidated financial statements and related notes thereto and with Management’s Discussion and Analysis of
Financial Condition and Results of Operations, which are included elsewhere in this Form 10-K. The
consolidated statement of operations data for fiscal 2019, 2018 and 2017, and the selected consolidated balance
sheet data as of January 31, 2019 and 2018 are derived from, and are qualified by reference to, the audited
consolidated financial statements that are included in this Form 10-K. The consolidated statement of operations
data for fiscal 2016 and 2015 and the consolidated balance sheet data as of January 31, 2017, 2016 and 2015 are
derived from audited consolidated financial statements which are not included in this Form 10-K after certain
reclassifications were made to conform to the current period presentation described in Note 1 “Summary of
Business and Significant Accounting Policies” of the Notes to Consolidated Financial Statements included in
Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.

The consolidated statement of operations data for fiscal 2019, 2018 and 2017, and the selected consolidated

balance sheet data as of January 31, 2019, 2018 and 2017 reflect the retrospective adoption of Accounting
Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (“Topic 606”)”. Additionally, the
consolidated statement of operations data for fiscal 2019 and the selected consolidated balance sheet data as of
January 31, 2019 reflect the prospective adoption of ASU No. 2016-01, “Financial Instruments-Overall (Subtopic
825-10)” (“ASU 2016-01”).

(in millions, except per share data)

Consolidated Statement of Operations
Revenues:

Fiscal Year Ended January 31,

2019

2018 (as
adjusted)

2017 (as
adjusted)

2016

2015

Subscription and support
Professional services and other

. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .

$12,413
869

$ 9,766
774

$7,799
638

$6,205
462

$5,014
360

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,282

10,540

8,437

6,667

5,374

Cost of revenues (1)(2):

Subscription and support
Professional services and other

. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .

Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . .

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,604
847

3,451

9,831

2,033
740

2,773

7,767

1,617
617

2,234

6,203

1,241
413

1,654

5,013

965
325

1,290

4,084

(in millions, except per share data)

Operating expenses (1)(2):

Fiscal Year Ended January 31,

2019

2018 (as
adjusted)

2017 (as
adjusted)

2016

2015

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease termination resulting from purchase of 50

$1,886
6,064
1,346

$1,553
4,671
1,089

$1,208
3,811
966

$ 946
3,240
748

$ 793
2,757
680

Fremont . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(36)

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . .

9,296

7,313

5,985

4,898

4,230

Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) on strategic investments, net (3) . . . . . . . . . . . . . .
Other income (expense) (3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of land and building improvements . . . . . . . . . . . .

535
57
(154)
542
3
0

Income (loss) before benefit from (provision for) income

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit from (provision for) income taxes (4) . . . . . . . . . . . . . . .

983
127

454
36
(87)
19
(2)
0

420
(60)

218
27
(89)
31
(8)
0

179
144

115
15
(73)
(16)
1
22

(146)
10
(73)
(10)
(10)
16

64
(111)

(213)
(50)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,110

$ 360

$ 323

$ (47) $ (263)

Net income (loss) per share-basic and diluted:

Basic net income (loss) per share . . . . . . . . . . . . . . . . . . . . .
Diluted net income (loss) per share . . . . . . . . . . . . . . . . . . .
Shares used in computing basic net income (loss) per

share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares used in computing diluted net income (loss) per

share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(in millions)

$ 1.48
$ 1.43

$ 0.50
$ 0.49

$ 0.47
$ 0.46

$ (0.07) $ (0.42)
$ (0.07) $ (0.42)

751

775

715

735

688

700

662

624

Fiscal Year Ended January 31,

2019

2018

2017

2016

2015

(1) Amounts include amortization of purchased intangibles from business

combinations, as follows:
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Amounts include stock-based expenses, as follows:

$215
232

$166
121

$128
98

$ 81
77

$ 90
65

Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$161
307
643
172

$130
260
469
138

$107
188
389
136

$ 70
129
289
106

$ 54
121
287
103

(3) Certain reclassifications to fiscal 2018, 2017, 2016 and 2015 balances were made to conform to the current

period presentation in the consolidated statement of operations. Specifically, other income (expense) has
been separated into other income (expense) and gains (losses) on strategic investments, net.
(4) Amounts include a benefit related to the partial release of the valuation allowance of $612 million,

$2 million, $226 million, $1 million, and $0 million for fiscal 2019, 2018, 2017, 2016, and 2015,
respectively.

(in millions)

Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities (5) . . . . . .
(Negative) working capital (6) . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent debt and other noncurrent liabilities . . . . . . . . . .
Retained earnings (accumulated deficit) . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of January 31,

2019

2018 (as
adjusted)

2017 (as
adjusted)

2016

2015

$ 4,342
(572)
30,737
3,877
1,735
15,605

$ 4,521
(483)
21,984
1,541
635
10,376

$ 2,209
(1,013)
18,286
2,824
275
8,230

$ 2,725
90
12,763
2,119
(653)
5,003

$ 1,890
(15)
10,654
2,254
(606)
3,975

(5) Excludes the restricted cash balance of $115 million as of January 31, 2015.
(6) The Company considers all of its marketable debt securities to be available to support current liquidity

needs including those with maturity dates beyond one year, and therefore classifies these securities within
current assets on the consolidated balance sheets. For consistency in presentation, working capital in the
table above as of January 31, 2016 and 2015 includes amounts previously reported in Marketable securities,
noncurrent. In addition, other reclassifications were made to balances as of January 31, 2018, 2017, 2016
and 2015 to conform to the current period presentation.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion contains forward-looking statements, including, without limitation, our

expectations and statements regarding our outlook and future revenues, expenses, results of operations, liquidity,
plans, strategies and management objectives and any assumptions underlying any of the foregoing. Our actual
results may differ significantly from those projected in the forward-looking statements. Our forward-looking
statements and factors that might cause future actual results to differ materially from our recent results or those
projected in the forward-looking statements include, but are not limited to, those discussed in the section titled
“Forward-Looking Information” and “Risk Factors” of this Annual Report on Form 10-K. Except as required by
law, we assume no obligation to update the forward-looking statements or our risk factors for any reason.

Overview

We are a global leader in customer relationship management (“CRM”) technology that enables companies
to improve their relationships and interactions with customers. We introduced our first CRM solution in 2000,
and we have since expanded our service offerings with new editions, features and platform capabilities. Our core
mission is to empower our customers of every size and industry to connect with their customers in new ways
through existing and emerging technologies including cloud, mobile, social, Internet of Things (“IoT”) and
artificial intelligence (“AI”) technologies.

Our Customer Success Platform—including sales force automation, customer service and support,

marketing automation, digital commerce, community management, industry-specific solutions, analytics,
integration solutions, application development, IoT integration, collaborative productivity tools, our
AppExchange, which is our enterprise cloud marketplace, and our professional cloud services—provides the
tools customers need to succeed in a digital world. Key elements of our strategy include:

•

cross sell and upsell;

extend existing service offerings;

reduce customer attrition;

expand and strengthen the partner ecosystem;

expand internationally;

target vertical industries;

expand into new horizontal markets;

extend go-to-market capabilities;

ensure strong customer adoption; and

encourage the development of third-party applications on our cloud computing platform.

We are also committed to a sustainable, low-carbon future, advancing equality and diversity, and fostering
employee success. We try to integrate social good into everything we do. All of these goals align with our long-
term growth strategy and financial and operational priorities.

We believe the factors that will influence our ability to achieve our objectives include: our prospective
customers’ willingness to migrate to enterprise cloud computing services; our ability to maintain a balanced
portfolio of products and customers; the availability, performance and security of our service; our ability to
continue to release, and gain customer acceptance of, new and improved features; our ability to successfully
integrate acquired businesses and technologies; successful customer adoption and utilization of our service; our
ability to continue to meet new and evolving privacy laws and regulations, acceptance of our service in markets

where we have few customers; the emergence of additional competitors in our market and improved product
offerings by existing and new competitors; the location of new data centers that we operate as well as the new
locations of services provided by third-party cloud computing platform providers; third-party developers’
willingness to develop applications on our platforms; our ability to attract new personnel and retain and motivate
current personnel; and general economic conditions which could affect our customers’ ability and willingness to
purchase our services, delay the customers’ purchasing decision or affect attrition rates.

To address these factors, we will need to, among other things, continue to add substantial numbers of paying

subscriptions, upgrade our customers to fully featured versions or arrangements such as an Enterprise License
Agreement, provide high quality technical support to our customers, encourage the development of third-party
applications on our platforms, realize the benefits from our strategic partnerships and continue to focus on
retaining customers at the time of renewal. Our plans to invest for future growth include the continuation of the
expansion of our data center capacity, whether internally or through the use of third parties, the hiring of
additional personnel, particularly in direct sales, other customer-related areas and research and development, the
expansion of domestic and international selling and marketing activities, specifically in our top markets, the
continued development of our brands, the addition of distribution channels, the upgrade of our service offerings,
the continued development of services including Community Cloud and Industry Clouds, the integration of new
and acquired technologies such as Commerce Cloud, artificial intelligence technologies and Salesforce Quip, the
expansion of our Marketing Cloud, Salesforce Platform core service offerings, Integration Cloud through our
May 2018 MuleSoft, Inc. (“MuleSoft”) acquisition and the additions to our global infrastructure to support our
growth.

We also regularly evaluate acquisitions or investment opportunities in complementary businesses, joint
ventures, services and technologies and intellectual property rights in an effort to expand our service offerings.
We expect to continue to make such investments and acquisitions in the future and we plan to reinvest a
significant portion of our incremental revenue in future periods to grow our business and continue our leadership
role in the cloud computing industry. As part of our growth strategy, we are delivering innovative solutions in
new categories, including analytics, e-commerce, artificial intelligence, IoT and collaborative productivity tools.
We drive innovation organically and to a lesser extent through acquisitions, such as our acquisition of MuleSoft
and in August 2018 our acquisition of Datorama, Inc. (“Datorama”). We have a disciplined and thoughtful
acquisition process where we routinely survey the industry landscape across a wide range of companies. As a
result of our aggressive growth plans and integration of our previously acquired businesses, we have incurred
significant expenses from equity awards and amortization of purchased intangibles, which have reduced our
operating income. We remain focused on improving operating margins.

Our typical subscription contract term is 12 to 36 months, although terms range from one to 60 months, so

during any fiscal reporting period only a subset of active subscription contracts is eligible for renewal. We
calculate our attrition rate as of the end of each month. Our attrition rate, including the Marketing Cloud service
offering but excluding our Commerce Cloud service offering and integration service offering, was less than ten
percent as of January 31, 2019. While it is difficult to predict, we expect our attrition rate to remain consistent as
we continue to expand our enterprise business and invest in customer success and related programs.

We expect marketing and sales costs, which were 46 percent, 44 percent and 45 percent of total revenues for

fiscal 2019, 2018 and 2017, respectively, to continue to represent a substantial portion of total revenues in the
future as we seek to grow our customer base, sell more products to existing customers, and continue to build
greater brand awareness.

During the year, we acquired MuleSoft, an industry-leading integration platform, to provide our customers
the ability to integrate data across platforms. The financial results of MuleSoft are included in our consolidated
financial statements from the date of acquisition. The total purchase price for MuleSoft was approximately
$6.4 billion.

Also in fiscal 2019, we acquired Datorama, which provides a platform for enterprises, agencies and
publishers to integrate data across marketing channels and data sources. The financial results of Datorama are
included in our consolidated financial statements from the date of acquisition. The total purchase price for
Datorama was approximately $766 million.

Fiscal Year

Our fiscal year ends on January 31. References to fiscal 2019, for example, refer to the fiscal year ending

January 31, 2019.

Adoption of New Accounting Standards

We have adjusted our consolidated financial statements from amounts previously reported due to the
adoption of Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (“Topic
606”)”, which relates to revenue recognition and the capitalization of costs to acquire a revenue contract. The
information presented reflects the adjusted amounts as compared to those previously reported. In addition, we
have prospectively adopted Accounting Standards Update No. 2016-01, “Financial Instrument-Overall (Subtopic
825-10)” (“ASU 2016-01”) and Accounting Standards Update No. 2016-16, “Income Taxes (Topic 740): Intra-
Entity Transfers of Assets Other Than Inventory” (“ASU 2016-16”). See Note 1, “Summary of Business and
Significant Accounting Policies” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of
this Annual Report on Form 10-K, which is incorporated herein by reference.

Operating Segments

We operate as one operating segment. Operating segments are defined as components of an enterprise for

which separate financial information is evaluated regularly by our chief operating decision makers, Marc
Benioff, who is the co-chief executive officer and the chairman of the board, and Keith Block, who is the
co-chief executive officer, in deciding how to allocate resources and assess performance. Over the past few years,
we have completed a number of acquisitions, including the acquisitions of MuleSoft and Datorama in fiscal
2019. These acquisitions have allowed us to expand our offerings, presence and reach in various market
segments of the enterprise cloud computing market. While we have offerings in multiple enterprise cloud
computing market segments, including as a result of our acquisitions, our business operates in one operating
segment because most of our offerings operate on a single customer success platform and are deployed in an
identical way, and our chief operating decision makers evaluate our financial information and resources and
assess the performance of these resources on a consolidated basis. Since we operate as one operating segment, all
required financial segment information can be found in the consolidated financial statements.

In August 2018, we moved to a co-chief executive officer model with the promotion of our vice chairman

and chief operating officer, Keith Block. We determined that both co-chief executive officers also serve as chief
operating decision makers for the purposes of segment reporting. Despite the change in the chief operating
decision maker, we determined no change to segment reporting was necessary as there was no change in the
components for which separate financial information is regularly evaluated.

Sources of Revenues

We derive our revenues from two sources: (1) subscription revenues, which are comprised of subscription
fees from customers accessing our enterprise cloud computing services (collectively, “Cloud Services”), software
licenses, and from customers paying for additional support beyond the standard support that is included in the
basic subscription fees; and (2) related professional services such as process mapping, project management,
implementation services and other revenue. “Other revenue” consists primarily of training fees. Subscription and
support revenues accounted for approximately 93 percent of our total revenues for fiscal 2019. Subscription
revenues are driven primarily by the number of paying subscribers, varying service types, and the price of our

service and renewals. We define a “customer” as a separate and distinct buying entity (e.g., a company, a distinct
business unit of a large corporation, a partnership, etc.) that has entered into a contract to access our enterprise
cloud computing services.

Subscription and support revenues for Cloud Services are recognized ratably over the contract terms

beginning on the commencement dates of each contract. Subscription revenues for software licenses are
generally recognized upfront when the software is made available to the customer. The typical subscription and
support term is 12 to 36 months, although terms range from one to 60 months. Our subscription and support
contracts are non-cancelable, though customers typically have the right to terminate their contracts for cause if
we materially fail to perform.

We generally invoice our customers in advance, in annual installments, and typical payment terms provide
that our customers pay us within 30 days of invoice. Amounts that have been invoiced are recorded in accounts
receivable and in unearned revenue, or in revenue depending on whether transfer of control to customers has
occurred. In general, we collect our billings in advance of the subscription service period.

Professional services and other revenues consist of fees associated with consulting and implementation
services and training. Our consulting and implementation engagements are billed on a time and materials, fixed
fee or subscription basis. We also offer a number of training classes on implementing, using and administering
our service that are billed on a per person, per class basis. Our typical professional services payment terms
provide that our customers pay us within 30 days of invoice.

In determining whether professional services can be accounted for separately from subscription and support
revenues, we consider a number of factors, which are described in Note 1 “Summary of Business and Significant
Accounting Policies” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual
Report on Form 10-K, which is incorporated herein by reference.

Revenue by Cloud Service Offering

The information below is provided on a supplemental basis to give additional insight into the revenue
performance of our individual core service offerings. All of the cloud offerings that we offer to customers are
grouped into four major cloud service offerings. Subscription and support revenues consisted of the following (in
millions):

Fiscal Year Ended January 31,

2019

2018

2017

Variance-Percent
Fiscal 2018
and 2019

Variance-Percent
Fiscal 2017
and 2018

Sales Cloud . . . . . . . . . . . . . . . . . . . . . .
Service Cloud . . . . . . . . . . . . . . . . . . . .
Salesforce Platform and Other . . . . . . .
Marketing and Commerce Cloud . . . . .

$ 4,040
3,621
2,854
1,898

$3,588
2,883
1,913
1,382

$3,076
2,343
1,433
947

13%
26%
49%
37%

17%
23%
33%
46%

Total . . . . . . . . . . . . . . . . . . . . . . .

$12,413

$9,766

$7,799

Subscription and support revenues from the Community Cloud, Quip and our Industry Offerings were not
significant in fiscal 2019. Quip revenue is included with Salesforce Platform and Other in the table above. Our
Industry Offerings and Community Cloud revenue are included in either Sales Cloud, Service Cloud or
Salesforce Platform and Other depending on the primary service offering purchased. Revenue from our
acquisition of MuleSoft in May 2018 is included in Salesforce Platform and Other.

As required under U.S. GAAP, we recorded unearned revenue related to acquired contracts from MuleSoft

at fair value on the date of acquisition. As a result, we did not recognize certain revenues related to these
acquired contracts that MuleSoft would have otherwise recorded as an independent entity. Of the $2.9
billion subscription and support revenue for Salesforce Platform and Other for fiscal 2019, approximately $360
million was attributed to MuleSoft.

In situations where a customer purchases multiple cloud offerings, such as through an Enterprise License

Agreement, we allocate the contract value to each core service offering based on the customer’s estimated
product demand plan, the service that was provided at the inception of the contract, and standalone selling price
(“SSP”) of those products. We do not update these allocations based on actual product usage during the term of
the contract. We have allocated approximately 17 percent, 15 percent, 13 percent of our total subscription and
support revenues for fiscal 2019 , 2018 and 2017, respectively, based on customers’ estimated product demand
plans and these allocated amounts are included in the table above.

Additionally, some of our service offerings have similar features and functions. For example, customers
may use the Sales Cloud, the Service Cloud or the Salesforce Platform to record account and contact information,
which are similar features across these core service offerings. Depending on a customer’s actual and projected
business requirements, more than one core service offering may satisfy the customer’s current and future needs.
We record revenue based on the individual products ordered by a customer, not according to the customer’s
business requirements and usage. In addition, as we introduce new features and functions within each offering
and refine our allocation methodology for changes in our business, we do not expect it to be practical to adjust
historical revenue results by service offering for comparability. Accordingly, comparisons of revenue
performance by core service offering over time may not be meaningful.

Our Sales Cloud service offering is our most widely distributed service offering and has historically been
the largest contributor of subscription and support revenues. As a result, Sales Cloud has the most international
exposure and foreign exchange rate exposure relative to the other cloud service offerings. Conversely, revenue
for Marketing and Commerce Cloud is primarily derived from the Americas with little impact from foreign
exchange rate movement.

The revenue growth rates of each of our core service offerings fluctuate from quarter to quarter and over

time. While we are a market leader in each core offering, we manage the total balanced product portfolio to
deliver solutions to our customers. Accordingly, the revenue result for each cloud service offering is not
necessarily indicative of the results to be expected for any subsequent quarter.

Seasonal Nature of Unearned Revenue, Accounts Receivable and Operating Cash Flow

Unearned revenue primarily consists of billings to customers for our subscription service. Over 90 percent

of the value of our billings to customers is for our subscription and support service. We generally invoice our
customers in annual cycles. We typically issue renewal invoices in advance of the renewal service period, and
depending on timing, the initial invoice for the subscription and services contract and the subsequent renewal
invoice may occur in different quarters. This may result in an increase in unearned revenue and accounts
receivable. There is a disproportionate weighting toward annual billings in the fourth quarter, primarily as a
result of large enterprise account buying patterns. Our fourth quarter has historically been our strongest quarter
for new business and renewals. The year on year compounding effect of this seasonality in both billing patterns
and overall new and renewal business causes the value of invoices that we generate in the fourth quarter for both
new business and renewals to increase as a proportion of our total annual billings. Accordingly, because of this
billing activity, our first quarter is typically our largest collections and operating cash flow quarter.

The sequential quarterly changes in accounts receivable and the related unearned revenue and operating
cash flow during the first quarter of our fiscal year are not necessarily indicative of the billing activity that occurs
for the following quarters as displayed below (in millions):

Fiscal 2019
Accounts receivable, net
. . . . . . . . . . . . . . . . . . . . . . .
Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . .

January 31,
2019

October 31,
2018

July 31,
2018

April 30,
2018

$4,924
8,564
1,331

$2,037
5,376
143

$1,980
5,883
458

$1,763
6,201
1,466

January 31,
2018

October 31,
2017

July 31,
2017

April 30,
2017

Fiscal 2018
Accounts receivable, net
. . . . . . . . . . . . . . . . . . . . . . .
Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,921
6,995
1,052

$1,522
4,312
125

$1,572
4,749
331

$1,442
4,969
1,230

The unearned revenue balance on our consolidated balance sheets does not represent the total contract value

of annual or multi-year, non-cancelable subscription agreements. Transaction price allocated to the remaining
performance obligations (“Remaining Performance Obligation”) represents contracted revenue that has not yet
been recognized, which includes unearned revenue and unbilled amounts that will be recognized as revenue in
future periods. Remaining performance obligation is not necessarily indicative of future revenue growth and is
influenced by several factors, including seasonality, the timing of renewals, average contract terms and foreign
currency exchange rates. Unbilled portions of the remaining performance obligation denominated in foreign
currencies are revalued each period based on the period end exchange rates. For multi-year subscription
agreements billed annually, the associated unbilled balance and corresponding remaining performance obligation
is typically high at the beginning of the contract period, zero just prior to renewal, and increases if the agreement
is renewed. Low remaining performance obligations attributable to a particular subscription agreement are often
associated with an impending renewal and may not be an indicator of the likelihood of renewal or future revenue
from such customer.

Remaining performance obligation, formerly referred to as remaining transaction price, consisted of the

following (in billions):

As of January 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of October 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of July 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of April 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of January 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11.9
$10.0
$ 9.8
$ 9.6
$ 9.6

$13.8
$11.2
$11.2
$10.8
$11.0

$25.7*
$21.2
$21.0
$20.4
$20.6

Current

Noncurrent

Total

Includes $500 million of remaining performance obligation related to fiscal 2019 acquisitions, including
contracts executed subsequent to acquisition.

Cost of Revenues and Operating Expenses

Cost of Revenues

Cost of subscription and support revenues primarily consists of expenses related to delivering our service

and providing support, the costs of data center capacity, depreciation or operating lease expense associated with
computer equipment and software, allocated overhead, amortization expense associated with capitalized software
related to our services and acquired developed technologies and certain fees paid to various third parties for the

use of their technology, services and data. We allocate overhead such as IT infrastructure, rent, and occupancy
charges based on headcount. Employee benefit costs and taxes are allocated based upon a percentage of total
compensation expense. As such, general overhead expenses are reflected in each cost of revenue and operating
expense category. Cost of professional services and other revenues consists primarily of employee-related costs
associated with these services, including stock-based expenses, the cost of subcontractors, certain third-party fees
and allocated overhead. The cost of providing professional services is higher as a percentage of the related
revenue than for our enterprise cloud computing subscription service due to the direct labor costs and costs of
subcontractors.

We intend to continue to invest additional resources in our enterprise cloud computing services. For
example, we have invested in additional database software and hardware and we plan to increase the capacity
that we are able to offer globally through data centers and third-party infrastructure providers. In addition, we
intend to continue to invest additional resources in enhancing our cyber security measures. As we acquire new
businesses and technologies, the amortization expense associated with the purchase of acquired developed
technology will be included in cost of revenues. Additionally, as we enter into new contracts with third parties
for the use of their technology, services or data, or as our sales volume grows, the fees paid to use such
technology or services may increase. Finally, we expect the cost of professional services to be approximately in
line with revenues from professional services as we believe this investment in professional services facilitates the
adoption of our service offerings. The timing of these additional expenses will affect our cost of revenues, both in
terms of absolute dollars and as a percentage of revenues, in the affected periods.

Research and Development

Research and development expenses consist primarily of salaries and related expenses, including stock-
based expenses, the costs of our development and test data center and allocated overhead. We continue to focus
our research and development efforts on adding new features and services, integrating acquired technologies,
increasing the functionality and security and enhancing the ease of use of our enterprise cloud computing
services. Our proprietary, scalable and secure multi-tenant architecture enables us to provide our customers with
a service based on a single version of our application. As a result, we do not have to maintain multiple versions,
which enables us to have relatively lower research and development expenses as compared to traditional
enterprise software companies.

We expect that in the future, research and development expenses will increase in absolute dollars and may
increase as a percentage of total revenues as we invest in adding employees and building the necessary system
infrastructure required to support the development of new, and improve existing, technologies and the integration
of acquired businesses, technologies and all of our service offerings.

Marketing and Sales

Marketing and sales expenses are our largest cost and consist primarily of salaries and related expenses,
including stock-based expenses, for our sales and marketing staff, including commissions, as well as payments to
partners, marketing programs and allocated overhead. Marketing programs consist of advertising, events,
corporate communications, brand building and product marketing activities.

We plan to continue to invest in marketing and sales by expanding our domestic and international selling

and marketing activities, building brand awareness, attracting new customers, and sponsoring additional
marketing events. The timing of these marketing events, such as our annual and largest event, Dreamforce, will
affect our marketing costs in a particular quarter. In addition, as we acquire new businesses and technologies, a
component of the amortization expense associated with this activity will be included in marketing and sales. We
expect that in the future, marketing and sales expenses will increase in absolute dollars and continue to be our
largest cost. We expect marketing and sales expenses, excluding sales personnel expenses, to grow in line with or

at a slower rate than revenues and sales personnel expenses. These may increase as a percentage of total revenues
as we invest in additional sales personnel to focus on adding new customers and increasing penetration within
our existing customer base.

General and Administrative

General and administrative expenses consist of salaries and related expenses, including stock-based
expenses, for finance and accounting, legal, internal audit, human resources and management information
systems personnel, legal costs, security costs, professional fees, other corporate expenses such as transaction
costs for acquisitions and allocated overhead. We expect that in the future, general and administrative expenses
will increase in absolute dollars as we invest in our infrastructure and we incur additional employee related costs,
professional fees and insurance costs related to the growth of our business and international expansion. We
expect general and administrative costs as a percentage of total revenues to either remain flat or decrease for the
next several quarters. However, the timing of additional expenses in a particular quarter, both in terms of
absolute dollars and as a percentage of revenues, will affect our general and administrative expenses.

Stock-Based Expenses

Our cost of revenues and operating expenses include stock-based expenses related to equity plans for
employees and non-employee directors. We recognize our stock-based compensation as an expense in the
statements of operations based on their fair values and vesting periods. These charges have been significant in the
past and we expect that they will increase as our stock price increases, as we acquire more companies, as we hire
more employees and seek to retain existing employees.

Amortization of Purchased Intangible Assets Acquired Through Business Combinations

Our cost of revenues, operating expenses and other expenses include amortization of acquisition-related

intangible assets, such as the amortization of the cost associated with an acquired company’s developed
technology, trade names and trademarks, and customer relationships. We expect this expense to fluctuate as we
acquire more businesses and intangible assets become fully amortized.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally

accepted in the United States. The preparation of these consolidated financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses,
and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may
differ from these estimates under different assumptions or conditions.

We believe that of our significant accounting policies, which are described in Note 1 “Summary of Business
and Significant Accounting Policies” to our consolidated financial statements, the following accounting policies
and specific estimates involve a greater degree of judgment and complexity.

Revenue Recognition - Contracts with Multiple Performance Obligations. We enter into contracts with our

customers that may include promises to transfer multiple Cloud Services, software licenses, premium support and
professional services. A performance obligation is a promise in a contract with a customer to transfer products or
services that are distinct. Determining whether products and services are distinct performance obligations that
should be accounted for separately or combined as one unit of accounting may require significant judgment.

Cloud Services and software licenses are distinct as such offerings are often sold separately. In determining

whether professional services are distinct, we consider the following factors for each professional services
agreement: availability of the services from other vendors, the nature of the professional services, the timing of

when the professional services contract was signed in comparison to the subscription start date and the
contractual dependence of the service on the customer’s satisfaction with the professional services work. To date,
we have concluded that all of the professional services included in contracts with multiple performance
obligations are distinct.

We allocate the transaction price to each performance obligation on a relative standalone selling price

(“SSP”) basis. The SSP is the price at which we would sell a promised product or service separately to a
customer. Judgment is required to determine the SSP for each distinct performance obligation. We determine
SSP by considering our overall pricing objectives and market conditions. Significant pricing practices taken into
consideration include our discounting practices, the size and volume of our transactions, the customer
demographic, the geographic area where services are sold, price lists, our go-to-market strategy, historical sales
and contract prices. As our go-to-market strategies evolve, we may modify our pricing practices in the future,
which could result in changes to SSP.

In certain cases, we are able to establish SSP based on observable prices of products or services sold
separately in comparable circumstances to similar customers. We use a single amount to estimate SSP when it
has observable prices. If SSP is not directly observable, for example when pricing is highly variable, we use a
range of SSP. We determine the SSP range using information that may include market conditions or other
observable inputs. We typically have more than one SSP for individual products and services due to the
stratification of those products and services by customer size and geography.

Costs Capitalized to Obtain Revenue Contracts. Costs capitalized related to new revenue contracts are
amortized on a straight-line basis over four years, which, although longer than the typical initial contract period,
reflects the average period of benefit, including expected contract renewals. Significant judgment is required in
arriving at this average period of benefit. Therefore, we evaluate both qualitative and quantitative factors which
include the estimated life cycles of our offerings and our customer attrition.

Business Combinations. Accounting for business combinations requires us to make significant estimates and

assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and
liabilities assumed and pre-acquisition contingencies. We use our best estimates and assumptions to accurately
assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as
well as the useful lives of those acquired intangible assets.

Examples of critical estimates in valuing certain of the intangible assets and goodwill we have acquired

include but are not limited to:

•

future expected cash flows from subscription and support contracts, professional services contracts,
other customer contracts and acquired developed technologies and patents;

the acquired company’s trade name and existing customer relationships, as well as assumptions about
the period of time the acquired trade name will continue to be used in our offerings;

uncertain tax positions and tax related valuation allowances assumed; and

discount rates.

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such

assumptions, estimates or actual results.

Income Taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the
amounts that are more likely than not expected to be realized based on the weighting of positive and negative
evidence. Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable
income of the appropriate character, for example, ordinary income or capital gain, within the carryback or
carryforward periods available under the applicable tax law. We regularly review the deferred tax assets for

recoverability based on historical taxable income, projected future taxable income, the expected timing of the
reversals of existing temporary differences and tax planning strategies. Our judgment regarding future
profitability may change due to many factors, including future market conditions and the ability to successfully
execute our business plans and tax planning strategies. Should there be a change in the ability to recover deferred
tax assets, our income tax provision would increase or decrease in the period in which the assessment is changed.

Our tax positions are subject to income tax audits by multiple tax jurisdictions throughout the world. We

recognize the tax benefit of an uncertain tax position only if it is more likely than not that the position is
sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is
measured as the largest amount of benefit which is greater than 50 percent likely to be realized upon settlement
with the taxing authority. We recognize interest accrued and penalties related to unrecognized tax benefits in our
income tax provision.

Strategic Investments. Accounting for strategic investments in privately held debt and equity securities in

which we do not have a controlling interest or significant influence requires us to make significant estimates and
assumptions. Privately held equity securities without a readily determinable fair value are recorded at cost and
adjusted for observable price changes in a same or similar security from the same issuer and impairments.

Privately held debt and equity securities are valued using significant unobservable inputs or data in an
inactive market and the valuation requires our judgment due to the absence of market prices and inherent lack of
liquidity. The carrying value is adjusted for our privately held equity securities if there are observable price
changes in a same or similar security from the same issuer or if there are identified events or changes in
circumstances that may indicate impairment, as discussed below. The determination of whether an orderly
transaction is for a same or similar investment requires significant management judgment including the nature of
rights and obligations of the investments, the extent to which differences in those rights and obligations would
affect the fair values of those investments, and the impact of any differences based on the stage of operational
development of the investee.

We assess our privately held debt and equity securities strategic investment portfolio quarterly for

impairment. Our impairment analysis encompasses an assessment of the severity and duration of the impairment
and qualitative and quantitative analysis of other key factors including the investee’s financial metrics, the
investee’s products and technologies meeting or exceeding predefined milestones, market acceptance of the
product or technology, other competitive products or technology in the market, general market conditions,
management and governance structure of the investee, the investee’s liquidity, debt ratios and the rate at which
the investee is using its cash. If the investment is considered to be impaired, we record the investment at fair
value by recognizing an impairment through the consolidated statement of operations and establishing a new
carrying value for the investment.

Results of Operations

The following tables set forth selected data for each of the periods indicated (in millions):

Fiscal Year Ended January 31,

As a % of
Total
Revenues

2018 (as
adjusted)*

As a % of
Total
Revenues

2017 (as
adjusted)*

As a % of
Total
Revenues

2019

Revenues:

Subscription and support . . . . . . . . . . . . . .
Professional services and other . . . . . . . . .

$12,413
869

93% $ 9,766
774
7

93% $7,799
638
7

92%
8

Total revenues . . . . . . . . . . . . . . . . . .

13,282

100

10,540

100

8,437

100

Cost of revenues (1)(2):

Subscription and support . . . . . . . . . . . . . .
Professional services and other . . . . . . . . .

Total cost of revenues . . . . . . . . . . . .

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses (1)(2):

Research and development
. . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . .

Total operating expenses . . . . . . . . . .

Income from operations . . . . . . . . . . . . . . . . . .
Investment income . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . .
Gains on strategic investments, net . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Other income (expense)

Income before benefit from (provision for)

income taxes . . . . . . . . . . . . . . . . . . . . . . . . .

Benefit from (provision for) income

taxes (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,604
847

3,451

9,831

1,886
6,064
1,346

9,296

535
57
(154)
542
3

983

127

20
6

14
46
10

4
0
(1)
4
0

2,033
740

2,773

7,767

1,553
4,671
1,089

7,313

454
36
(87)
19
(2)

420

(60)

19
7

15
44
10

5
0
(1)
0
0

(1)

1,617
617

2,234

6,203

1,208
3,811
966

5,985

218
27
(89)
31
(8)

179

144

19
7

14
45
12

3
0
(1)
0
0

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,110

8% $

360

3% $ 323

(1) Amounts related to amortization of intangible assets acquired through business combinations, as follows (in

millions):

Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended January 31,

As a % of
Total
Revenues

2018

As a % of
Total
Revenues

2017

As a % of
Total
Revenues

2% $166
121
2

2% $128
98
1

2%
1

2019

$215
232

(2) Amounts related to stock-based expenses, as follows (in millions):

Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended January 31,

As a % of
Total
Revenues

2018

As a % of
Total
Revenues

2017

As a % of
Total
Revenues

1% $130
260
2
469
5
138
1

1% $107
188
2
389
5
136
1

1%
2
5
2

2019

$161
307
643
172

(3) Amount includes a benefit related to the partial release of the valuation allowance of $612 million,

$2 million and $226 million for fiscal 2019, 2018 and 2017, respectively. The fiscal 2019 benefit was
partially offset by an increase in unrecognized tax benefits.
Prior period information has been adjusted for the adoption of Topic 606.

The following table sets forth selected balance sheet and other metrics data for each of the periods indicated

(in millions, other than remaining performance obligation, which is presented in billions):

Cash, cash equivalents and marketable securities . . . . . . . . . . . . . . . . . . .
Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remaining performance obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal due on our outstanding debt obligations . . . . . . . . . . . . . . . . . .

$4,342
8,564
25.7
3,198

$4,521
6,995
20.6
1,727

Remaining performance obligation represents contracted revenue that has not yet been recognized, which

includes unearned revenue and unbilled amounts that will be recognized as revenue in future periods.

As of January 31,

2019

2018

Fiscal Year Ended January 31, 2019 and 2018

Revenues.

(in millions)

Fiscal Year Ended
January 31,

Variance

2019

2018

Dollars

Percent

Subscription and support . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional services and other . . . . . . . . . . . . . . . . . . . . . .

$12,413
869

$ 9,766
774

$2,647
95

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13,282

$10,540

$2,742

27%
12

The increase in subscription and support revenues was primarily caused by volume-driven increases from
new business, which includes new customers, upgrades and additional subscriptions from existing customers.
Our acquisition of MuleSoft in May 2018 contributed $431 million to total revenues in fiscal 2019. The increase
was also driven by approximately $227 million of revenue recognized at a point in time, which includes the
portion of software subscriptions allocated to the on-premise software element.

We continue to invest in a variety of customer programs and initiatives which, along with increasing

enterprise adoption, have helped keep our attrition rate consistent as compared to the prior year. Consistent
attrition rates play a role in our ability to maintain growth in our subscription and support revenues. Changes in
the net price per user per month have not been a significant driver of revenue growth for the periods presented.
The increase in professional services and other revenues was due primarily to the higher demand for services
from an increased number of customers.

Revenues by geography were as follows:

(in millions)

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended January 31,

As a % of
Total
Revenues

2018

As a % of
Total
Revenues

Growth
rate

71% $ 7,621
1,916
19
1,003
10

72%
18
10

100% $10,540

100%

24%
33
28

2019

$ 9,445
2,553
1,284

$13,282

Revenues by geography are determined based on the region of the Salesforce contracting entity, which may
be different than the region of the customer. Americas revenue attributed to the United States was approximately
96 percent during fiscal year 2019 and 2018.

Revenues in Europe and Asia Pacific accounted for $3.8 billion, or 29 percent of total revenues, for fiscal

2019, compared to $2.9 billion, or 28 percent of total revenues, during the same period a year ago, an increase of
$0.9 billion, or 31 percent. The increase in revenues outside of the Americas was the result of the increasing
acceptance of our services, our focus on marketing our services internationally and investment in additional
international resources. Revenues outside of the Americas increased on a total dollar basis by $39 million in
fiscal 2019 compared to fiscal 2018 due to foreign currency fluctuations primarily as a result of the strengthening
British Pound Sterling.

Cost of Revenues.

(in millions)

Fiscal Year Ended
January 31,

2019

2018

Subscription and support
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional services and other . . . . . . . . . . . . . . . . . . . . . . . .

$2,604
847

$2,033
740

Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,451

$2,773

Percent of total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26%

Variance
Dollars

571
107

678

The increase in cost of revenues was primarily due to an increase of $156 million in employee-related costs,

an increase of $31 million in stock-based expenses, an increase of $326 million in service delivery costs,
primarily due to our efforts to increase data center capacity, an increase of amortization of purchased intangible
assets of $49 million and an increase of $26 million in allocated overhead. We have increased our headcount by
16 percent since January 31, 2018 to meet the higher demand for services from our customers, of which a
component was also due to the acquisition of MuleSoft in May 2018. We intend to continue to invest additional
resources in our enterprise cloud computing services and data center capacity to allow us to scale with our
customers and continuously evolve our security measures. We also plan to add employees in our professional
services group to facilitate the adoption of our services. The timing of these expenses will affect our cost of
revenues, both in terms of absolute dollars and as a percentage of revenues, in future periods.

The cost of professional services and other revenues was $847 million during fiscal 2019 resulting in

positive gross margin of $22 million. The cost of professional services and other revenues was $740 million
during fiscal 2018 resulting in positive gross margins of $34 million. We expect the cost of professional services
to be approximately in line with revenues from professional services in future fiscal quarters. We believe that this
investment in professional services facilitates the adoption of our service offerings.

Operating Expenses.

(in millions)

Fiscal Year Ended
January 31,

2019

2018

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,886
6,064
1,346

$1,553
4,671
1,089

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$9,296

$7,313

Percent of total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70%

69%

Variance
Dollars

$ 333
1,393
257

$1,983

The increase in research and development expenses was primarily due to an increase of approximately
$216 million in employee-related costs, an increase of $47 million in stock-based expenses, an increase in our
development and test data center costs and allocated overhead. We increased our research and development
headcount by 19 percent since January 31, 2018 in order to improve and extend our service offerings, develop
new technologies, and integrate acquired companies, including our acquisition of MuleSoft in May 2018.
Additionally, a component of our increased headcount was also due to the acquisition of MuleSoft. We expect
that research and development expenses will increase in absolute dollars and may increase as a percentage of
revenues in future periods as we continue to invest in additional employees and technology to support the
development of new, and improve existing, technologies and the integration of acquired technologies.

The increase in marketing and sales expenses was primarily due to an increase of $797 million in employee-
related costs and amortization of deferred commissions, an increase of $174 million in stock-based expenses, an
increase in amortization of purchased intangible assets of $111 million, and allocated overhead. Our marketing
and sales headcount increased by 25 percent since January 31, 2018, of which a component was due to the
acquisition of MuleSoft in May 2018. The increase in headcount was primarily attributable to hiring additional
sales personnel to focus on adding new customers and increasing penetration within our existing customer base.
We expect that marketing and sales expenses will increase in absolute dollars and may increase as a percentage
of revenues in future periods as we continue to hire additional sales personnel.

The increase in general and administrative expenses was primarily due to an increase in employee-related

costs. Our general and administrative headcount increased by 27 percent since January 31, 2018 as we added
personnel to support our growth as well as an increase due to the acquisition of MuleSoft in May 2018.

Other income and expense.

(in millions)

Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains on strategic investments, net . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended
January 31,

2019

2018

$ 57
(154)
542
3

$ 36
(87)
19
(2)

Variance
Dollars

$ 21
(67)
523
5

The increase in investment income was due to higher interest income across our portfolio, which is

primarily a result of increasing interest rates.

Interest expense consists of interest on our debt, capital leases, and financing obligation related to 350
Mission. The increase in interest expense was primarily driven by interest expense on the 2023 Senior Notes and
2028 Senior Notes of approximately $71 million. We expect interest expense to increase in future years as the
2023 Senior Notes and 2028 Senior Notes will be outstanding for a full year as compared to a partial year in
fiscal 2019.

Gains on strategic investments, net consists primarily of mark-to-market adjustments related to our publicly

held equity securities, observable price adjustments related to our privately held equity securities and other
adjustments. The prospective adoption of ASU 2016-01 resulted in unrealized gains in our equity securities of
approximately $446 million during fiscal 2019, excluding gains on sales of equity securities. These gains were
primarily driven by mark-to-market adjustments to our publicly traded securities of $345 million during fiscal
2019.

Other income (expense) primarily consists of non-operating transactions such as gains and losses from

foreign exchange rate fluctuations and real estate transactions.

Benefit from (provision for) income taxes.

(in millions)

Fiscal Year Ended
January 31,

2019

2018

Variance
Dollars

Benefit from (provision for) income taxes . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$127

$(60)

$187

(13)% 14%

We recorded a tax benefit of $127 million on a pretax income of $983 million for fiscal 2019. The tax
benefit recorded was primarily related to the release of our valuation allowance related to federal and state
deferred tax assets, which was partially offset with the increase in unrecognized tax benefits. In addition, we
recorded current tax expense for profitable jurisdictions outside of the United States.

In fiscal 2018, we recorded a tax provision of $60 million on a pretax income of $420 million. The tax
provision recorded was primarily related to income taxes in profitable jurisdictions outside of the United States.

Fiscal Years Ended January 31, 2018 and 2017

Revenues.

(in millions)

Fiscal Year Ended
January 31,

Variance

2018

2017

Dollars

Percent

Subscription and support . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional services and other . . . . . . . . . . . . . . . . . . . . . . .

$ 9,766
774

$7,799
638

$1,967
136

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,540

$8,437

$2,103

25%
21

The increase in subscription and support revenues during fiscal 2018 was primarily caused by volume-
driven increases from new business, which included new customers, upgrades and additional subscriptions from
existing customers. Additionally, fiscal 2018 benefited from a full year of revenue from Demandware, which we
acquired in July 2016. This was offset by a reduction in subscription revenues of approximately $20 million as a
result of one less day in fiscal 2018 compared to fiscal 2017. We continue to invest in a variety of customer
programs and initiatives which, along with increasing enterprise adoption, have helped keep our attrition rate
consistent as compared to the prior year. Consistent attrition rates play a role in our ability to maintain growth in
our subscription and support revenues. Changes in the net price per user per month have not been a significant
driver of revenue growth for the periods presented. The increase in professional services and other revenues was
due primarily to the higher demand for services from an increased number of customers.

Revenues by geography were as follows (in millions):

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended January 31,

As a % of
Total
Revenues

2017

As a %
of Total
Revenues

Growth
rate

72% $6,259
1,383
18
795
10

74%
16%
10%

100% $8,437

100%

22%
39
26

2018

$ 7,621
1,916
1,003

$10,540

Revenues in Europe and Asia Pacific accounted for $2.9 billion, or 28 percent of total revenues, for fiscal

2018, compared to $2.2 billion, or 26 percent of total revenues, during fiscal 2017, an increase of $0.7 billion, or
34 percent. The increase in revenues outside of the Americas was the result of the increasing acceptance of our
services, our focus on marketing our services internationally and investment in additional international resources.
Revenues outside of the Americas increased on a total dollar basis by $96 million in fiscal 2018 compared to
fiscal 2017 due to foreign currency fluctuations primarily as a result of the strengthening British Pound Sterling.

Cost of Revenues.

(in millions)

Fiscal Year Ended
January 31,

2018

2017

. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subscription and support
Professional services and other . . . . . . . . . . . . . . . . . . . . . . . .

$2,033
740

$1,617
617

Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,773

$2,234

Percent of total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26%

Variance
Dollars

$416
123

$539

The increase in cost of revenues was primarily due to an increase of $192 million in employee-related costs,

an increase of $23 million in stock-based expenses, an increase of $197 million in service delivery costs,
primarily due to our efforts to increase data center capacity, an increase of amortization of purchased intangible
assets of $38 million and an increase of $23 million in allocated overhead. We increased our headcount by
11 percent during fiscal 2018 to meet the higher demand for services from our customers and as a result of our
fiscal 2017 acquisitions.

The cost of professional services and other revenues was $740 million during fiscal 2018 resulting in

positive gross margin of $34 million. The cost of professional services and other revenues was $617 million
during fiscal 2017 resulting in positive gross margins of $21 million.

Operating Expenses.

(in millions)

Fiscal Year Ended
January 31,

2018

2017

$1,553
4,671
1,089

$1,208
3,811
966

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7,313

$5,985

Percent of total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69%

71%

Variance
Dollars

$ 345
860
123

$1,328

The increase in research and development expenses was primarily due to an increase of approximately
$212 million in employee-related costs, an increase of $72 million in stock-based expenses, an increase in our
development and test data center costs and allocated overhead. We increased our research and development
headcount by 11 percent during fiscal 2018 in order to improve and extend our service offerings, develop new
technologies and integrate previously acquired companies, including our fiscal 2017 acquisitions.

The change in marketing and sales expenses was primarily due to an increase of $637 million in employee-

related costs and amortization of deferred commissions, an increase of $80 million in stock-based expenses, an
increase in amortization of purchased intangible assets of $23 million and allocated overhead. Our marketing and
sales headcount increased by 22 percent during fiscal 2018. The increase in headcount was primarily attributable
to hiring additional sales personnel to focus on adding new customers and increasing penetration within our
existing customer base.

The increase in general and administrative expenses was primarily due to an increase in employee-related

costs. Our general and administrative headcount increased by 16 percent during fiscal 2018 as we added
personnel to support our growth.

Other income and expense.

(in millions)

Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains on strategic investments, net . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended
January 31,

2018

2017

$ 36
(87)
19
(2)

$ 27
(89)
31
(8)

Variance
Dollars

$ 9
2
(12)
6

The increase in investment income was due to higher interest income across our portfolio.

Interest expense consists of interest on our convertible senior notes, capital leases, financing obligation
related to 350 Mission, the loan assumed on 50 Fremont, revolving credit facility and the $500 million term loan
that was entered into in connection with our acquisition of Demandware.

Gains on strategic investments, net represents strategic investments’ fair market value adjustments and gains

recognized related to strategic investments when we acquire an entity in which we previously held a strategic
investment. The difference between the fair value of the shares as of the date of the acquisition and the carrying
value of the strategic investment is recorded as a gain or loss. The change in gains on strategic investments, net
was primarily due to $14 million of gains resulting from our acquisition of companies in which we held strategic
investments in fiscal 2017.

Other income (expense) primarily consists of non-operating transactions such as gains and losses from

foreign exchange rate fluctuations and real estate transactions.

Benefit from (provision for) income taxes.

(in millions)

Fiscal Year Ended
January 31,

2018

2017

Variance
Dollars

Benefit from (provision for) income taxes . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(60)

$144

$(204)

14% (80)%

We recognized a tax provision of $60 million on a pretax income of $420 million for fiscal 2018. The tax

provision recorded was primarily related to income taxes in profitable jurisdictions outside of the United States.

In fiscal 2017, we recorded a tax benefit of $144 million on a pretax income of $179 million for fiscal 2017.

The most significant component of this tax amount was the discrete tax benefit of $210 million from a partial
release of the valuation allowance in connection with the acquisition of Demandware. The net deferred tax
liability from the acquisition of Demandware provided a source of additional income to support the realizability
of our pre-existing deferred tax assets and, as a result, we released a portion of our valuation allowance. The tax
benefit associated with the release of the valuation allowance was partially offset by income taxes in profitable
jurisdictions outside of the United States.

Liquidity and Capital Resources

At January 31, 2019, our principal sources of liquidity were cash, cash equivalents and marketable securities
totaling $4.3 billion and accounts receivable of $4.9 billion. Our cash, cash equivalents and marketable securities
are comprised primarily of corporate notes and obligations, U.S. treasury securities, asset backed securities,
foreign government obligations, mortgage backed obligations, time deposits, money market mutual funds and
municipal securities.

As of January 31, 2019, our remaining performance obligation was $25.7 billion. Our remaining

performance obligation represents contracted revenue that has not yet been recognized and includes unearned
revenue, which has been invoiced and is recorded on the balance sheet, and unbilled amounts that are not
recorded on the balance sheet, that will be recognized as revenue in future periods.

We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities

and, if necessary, our borrowing capacity under our Credit Facility and unbilled amounts related to contracted
non-cancelable subscription agreements, which is not reflected on the balance sheet, will be sufficient to meet
our working capital, capital expenditure and debt repayment needs over the next 12 months.

In the future, we may enter into arrangements to acquire or invest in complementary businesses, services
and technologies, and intellectual property rights. To facilitate these acquisitions or investments, we may seek
additional equity or debt financing, which may not be available on terms favorable to us or at all, which may
affect our ability to complete subsequent acquisitions or investments.

Cash Flows

For fiscal 2019, 2018 and 2017, our cash flows were as follows (in millions):

Net cash provided by operating activities . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . .

$ 3,398
(5,308)
2,010

$ 2,738
(2,011)
221

$ 2,162
(2,684)
998

Fiscal Year Ended January 31,

2019

2018

2017

Cash provided by operating activities has historically been affected by the amount of net income adjusted
for non-cash expense items such as depreciation and amortization; amortization of purchased intangibles from
business combinations; the expense associated with stock-based awards; net gains on strategic investments; the
timing of employee related costs including commissions and bonus payments; the timing of payments against
accounts payable, accrued expenses and other current liabilities; the timing of our semi-annual interest payments
related to our senior notes; the timing of collections from our customers, which is our largest source of operating
cash flows; the timing of business combination activity and the related integration and transaction costs; and
changes in working capital accounts. Net cash provided by operating activities was also impacted by payments
made during fiscal 2019 for the transaction fees related to the acquisition of MuleSoft.

Our working capital accounts consist of accounts receivable, costs capitalized to obtain revenue contracts,

prepaid assets and other current assets. Claims against working capital include accounts payable, accrued
expenses, unearned revenue, and other current liabilities and payments related to our debt obligations. Our
working capital may be impacted by factors in future periods such as billings to customers for subscriptions and
support services, and the subsequent collection of those billings, certain amounts and timing of which are
seasonal. Our working capital in some quarters may be impacted by adverse foreign currency exchange rate
movements and this impact may increase as our working capital balances increase in our foreign subsidiaries.
Our billings are also influenced by new business linearity within the quarters and across the quarters.

As described above in “Seasonal Nature of Unearned Revenue, Accounts Receivable and Operating Cash

Flow,” our fourth quarter has historically been our strongest quarter for new business and renewals and,
correspondingly, the first quarter has historically been the strongest for cash collections. The year on year
compounding effect of this seasonality in both billing patterns and overall business causes both the value of
invoices that we generate in the fourth quarter and cash collections in the first quarter to increase as a proportion
of our total annual billings.

We generally invoice our customers for our subscription and services contracts in advance in annual
installments. We typically issue renewal invoices in advance of the renewal service period, and depending on
timing, the initial invoice for the subscription and services contract and the subsequent renewal invoice may
occur in different quarters. Such invoice amounts are initially reflected in accounts receivable and unearned
revenue, which is reflected on the balance sheets, and as the next billing cycle approaches, the corresponding
unearned revenue decreases to zero. The operating cash flow benefit of increased billing activity generally occurs
in the subsequent quarter when we collect from our customers. As such, our first quarter is our largest collections
and operating cash flow quarter.

The net cash used in investing activities during fiscal 2019 primarily related to the acquisitions of MuleSoft,

Datorama and CloudCraze, net of cash acquired for a total of $5.1 billion. Net cash used in investing activities also
included purchases of marketable securities of $1.1 billion, purchases of strategic investments of $362 million and
new office build outs and capital investments of $595 million, offset by sales of marketable securities of
$1.4 billion. The net cash used in investing activities during fiscal 2018 primarily related to purchases of
marketable securities of $2.0 billion, new office build-outs and capital investments of $534 million, which were
offset by the cash inflows for the period from sales and maturities of marketable securities of $636 million. The
net cash used in investing activities during fiscal 2017 primarily related to business combinations with the largest
being the acquisition of Demandware in July 2016 and purchases of marketable securities, which were offset by
the cash inflows for the period from sales and maturities of marketable securities.

Net cash provided by financing activities during fiscal 2019 consisted primarily of $3.0 billion from proceeds
from issuance of debt which were used in the acquisition of MuleSoft, and $704 million from proceeds from equity
plans, offset by $1.5 billion of repayments of debt including principal payments on the maturity of the 0.25% Senior
Notes and the early repayment and termination of the 2019 Term Loan. Net cash provided by financing activities
during fiscal 2018 consisted primarily of $650 million from proceeds from equity plans offset by $323 million in
repayments of debt. Net cash provided by financing activities during fiscal 2017 consisted primarily of proceeds
from issuance of debt, which were used to partially fund acquisitions, offset by repayments of debt.

Debt

The carrying values of our borrowings were as follows (in millions):

Instrument

Date of issuance Maturity date

Effective interest rate
for fiscal 2019

January 31, 2019 January 31, 2018

2021 Term Loan . . . . . . . . . . . . . . . May 2018 May 2021
2023 Senior Notes . . . . . . . . . . . . . April 2018 April 2023
2028 Senior Notes . . . . . . . . . . . . . April 2018 April 2028
July 2019
2019 Term Loan . . . . . . . . . . . . . . .
Loan assumed on 50 Fremont . . . . . February 2015 June 2023
0.25% Convertible Senior Notes . . March 2013 April 2018

July 2016

3.05%
3.26%
3.70%
2.96%
3.75%
2.53%

Total carrying value of debt . . . . . .
Less current portion of debt . . . . . .

Total noncurrent debt . . . . . . . . . . .

$ 499
993
1,488
0
196
0

3,176
(3)

0
0
0
498
199
1,023

1,720
(1,025)

$3,173

695

As of January 31, 2019, we have senior unsecured debt outstanding due in 2021, 2023 and 2028 with a total

carrying value of $3.0 billion. In addition, we have senior secured notes outstanding related to our loan on 50
Fremont due in 2023 with a total carrying value of $196 million. We were in compliance with all debt covenants
as of January 31, 2019.

We maintain a revolving loan credit agreement that provides for $1.0 billion unsecured financing (“Credit

Facility”) that matures in April 2023. We may use the proceeds of future borrowings under the Credit Facility for
refinancing other indebtedness, working capital, capital expenditures and other general corporate purposes,
including permitted acquisitions. There were no outstanding borrowings under the Credit Facility as of
January 31, 2019.

As of January 31, 2019, we have a total of $92 million in letters of credit outstanding in favor of certain

landlords for office space. To date, no amounts have been drawn against the letters of credit, which renew
annually and expire at various dates through December 2030.

We do not have any special purpose entities, and other than operating leases for office space and computer

equipment, we do not engage in off-balance sheet financing arrangements.

Contractual Obligations

Our principal commitments consist of obligations under leases for office space, co-location data center
facilities and our development and test data center, as well as leases for computer equipment, software, furniture
and fixtures, excluding all secured and unsecured debt. At January 31, 2019, the future non-cancelable minimum
payments under these commitments were as follows (in millions):

Capital lease obligations, including interest . . . . . . . . . . . . .
Operating lease obligations:

Facilities space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer equipment and furniture and

fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing obligation—leased facility . . . . . . . . . . . . . . . . . .
Lease obligation—buildings to be constructed . . . . . . . . . .
2021 Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan assumed on 50 Fremont . . . . . . . . . . . . . . . . . . . . . . . .
Contractual commitments . . . . . . . . . . . . . . . . . . . . . . . . . . .

Payments Due by Period

Total

Less than
1 Year

1-3 Years

3-5 Years

More than
5 Years

200

$ 200

3,473

722
279
955
500
1,000
1,500
198
1,867

405

373
22
0
0
0
0
3
278

775

349
46
0
500
0
0
8
722

683

1,610

0
48
0
0
1,000
0
187
779

0
163
955
0
0
1,500
0
88

$10,694

$1,281

$2,400

$2,697

$4,316

The majority of our operating lease agreements provide us with the option to renew. Our future operating
lease obligations would change if we exercised these options and if we entered into additional operating lease
agreements as we expand our operations.

The financing obligation—leased facility above represents the total obligation for our lease of

approximately 445,000 rentable square feet of office space at 350 Mission St. (“350 Mission”) in San Francisco,
California. As of January 31, 2019, $215 million of the total obligation noted above was recorded to Financing
obligation—leased facility, of which the current portion is included in “Accrued expenses and other liabilities”
and the noncurrent portion is included in “Other noncurrent liabilities” on the consolidated balance sheets.

The lease obligation—buildings to be constructed above represents the total obligation for two separate
agreements for office facilities we entered into during fiscal 2019. The first agreement is for approximately
324,000 rentable square feet of office space in a building to be constructed as part of our urban campus in San
Francisco, California. We expect to begin occupying the space in fiscal 2024 and the total non-cancelable
minimum payments under this agreement are approximately $480 million over 16 years. Construction has not
commenced on the building and is dependent on the developer obtaining approvals from the City and County of
San Francisco. The second agreement is for approximately 603,000 rentable square feet of office space in a
building to be constructed in Chicago, Illinois. We expect to begin occupying the space in fiscal 2022 and the
total non-cancelable minimum payments under this agreement are approximately $475 million over 17 years. As
of January 31, 2019 construction has not commenced on either of these buildings and the timing of completion of
construction is unknown. Due to this uncertainty, the entire commitment for these two obligations is reflected as
payments due in more than five years in the table above.

We have entered into various contractual commitments with infrastructure service providers for a total
commitment of $2.0 billion, which are reflected in the table above under “contractual commitments.” As of
January 31, 2019, the total remaining commitment is approximately $1.8 billion and $264 million is due in the
next fiscal year.

Purchase orders are not included in the table above. Our purchase orders represent authorizations to

purchase rather than binding agreements. The contractual commitment amounts in the table above are associated
with agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or
minimum services to be used; fixed, minimum or variable price provisions; and the approximate timing of the
transaction. Obligations under contracts that we can cancel without a significant penalty are not included in the
table above.

During fiscal 2019 and in future fiscal years, we have made and expect to continue to make additional

investments in our infrastructure to scale our operations, increase productivity and enhance our security
measures. We plan to upgrade or replace various internal systems to scale with our overall growth. Additionally,
we expect capital expenditures to be higher in absolute dollars and remain consistent as a percentage of total
revenues in future periods as a result of continued office build-outs, other leasehold improvements and data
center investments.

Utilization of tax carryforwards and credits

As we continue our trend in profitability, we expect to utilize our net operating loss carryforward and
various tax credits to reduce our cash tax payments. For example, our Federal net operating loss carryforwards
are $2.1 billion as of January 31, 2019 as compared to $2.7 billion as of January 31, 2018. We expect our cash
tax payments for the next 12 months, primarily from profitable jurisdictions outside of the U.S, to be consistent
with those paid in prior years.

New Accounting Pronouncements

See Note 1 “Summary of Business and Significant Accounting Policies” to the consolidated financial

statements for our discussion about new accounting pronouncements adopted and those pending.

Environmental, Social and Governance

We believe the business of business is improving the state of the world for all of our stakeholders, including

our stockholders, customers, partners, employees, community, environment and society. We are committed to
creating a sustainable, low-carbon future by delivering a carbon neutral cloud, operating as a net-zero greenhouse
gas emissions company and by working to achieve our goal of 100 percent renewable energy for our global
operations by fiscal 2022. We also believe consistent, comparable and reliable disclosures around climate-related

risks and opportunities are important. To this end, we are working to align with the recommendations of the
Financial Stability Board’s (“FSB”) Task Force on Climate-related Financial Disclosures (“TCFD”) and of the
Sustainability Accounting Standards Board (“SASB”). In addition, we have spearheaded human capital
management initiatives to drive equality in four key areas: equal rights, equal pay, equal education and equal
opportunity. We also pioneered and have inspired other companies to adopt our 1-1-1 integrated philanthropy
model, which leverages one percent of a company’s equity, employee time and product to help improve
communities around the world. We publish an annual stakeholder impact report on our website detailing our
overall strategy relating to environmental, social and governance (“ESG”) programs as well as our efforts in
these areas.

Below are some of the key highlights of our ongoing ESG efforts:

•

In fiscal 2019, we remained a net-zero greenhouse gas emissions company, continued delivering a
carbon neutral cloud for all customers and procured electricity from renewable energy resources
equivalent to 55 percent of what we used globally. To support our commitment to renewable energy,
we have signed four virtual power purchase agreements (“VPPAs”). This includes two agreements
which were signed in fiscal 2019: our largest VPPA to date with a new wind energy project in Illinois
that is expected to be operational in fiscal year 2020, and our first-ever renewable energy aggregation
deal with a new solar energy project in North Carolina which is expected to be operational in fiscal
2021. In addition, the three buildings at our corporate headquarters in San Francisco sourced
100 percent renewable energy in fiscal 2019.

• We are active in and support organizations that move the United States and the world toward a more

sustainable, low-carbon future. In fiscal 2019, we partnered with Mission 2020 to establish the Step Up
Declaration, a new alliance committed to harnessing the power of emerging technologies to help reduce
emissions across all economic sectors. As part of the declaration we committed to expand our carbon
offset program to include business travel and employee commuting, and to continue to expand our
sustainable real estate commitments. We also committed to setting our own science-based targets,
including working with our suppliers to set their own climate targets. In addition, we were a founding
member of the Business Renewables Center, signed the Corporate Renewable Energy Buyers’
Principles, helped to launch the Corporate Colocation and Cloud Buyers’ Principles, disclosed our
annual carbon emissions to the Carbon Disclosure Project and signed on to initiatives such as We Mean
Business and the American Business Act on Climate.

• As part of our ongoing work to promote equality, we review the salaries and bonuses of our global
workforce on an annual basis to ensure everyone is paid equally for equal work and close any
unexplained gaps. To date, we have spent $8.7 million to ensure equal pay for equal work. We also
review differences in pay for not only gender, but also race and ethnicity in the United States.

• Our employees are engaged in and actively support our commitment to equality and enhancing our

Ohana culture. We support ten employee-led and founded “Ohana Groups,” which provide a
community for underrepresented groups and their allies, offer professional development and mentoring
opportunities, and empower employees to be responsive equality leaders in their community. This has
resulted in nearly half of our employees engaging in Ohana Groups in fiscal 2019.

• Together with the Salesforce Foundation, a 501(c)(3) nonprofit organization, and Salesforce.org, a

nonprofit social enterprise, which are not included in our consolidated financial statements, to date we
have given approximately $260 million to charitable organizations, logged more than 3.8 million
employee volunteer hours around the world and provided more than 40,000 nonprofit and higher
education organizations with the use of our service offerings for free or at a discount.

• We have significantly increased the diversity of our Board over the past five years, including with

respect to gender and race.

We leverage a number of communications channels and strategic content to better serve and engage our

many stakeholders. Our sustainability website, www.salesforce.com/company/sustainability, provides
information regarding our environmental and other sustainability efforts, including our annual impact reports and
our environmental policy. At our equality portal, www.salesforce.com/company/equality, our stakeholders can
gain insights on our approach to equality, see our company profile by gender, and review our most recent
Employer Information Report, which provides a snapshot in time of our U.S. demographics based on categories
prescribed by the federal government. In addition, stakeholders can learn about equality through one of our
many free Trailheads. Our annual proxy statement, available on the Investor Relations website,
www.investor.salesforce.com, or www.sec.gov, provides additional details on our corporate governance
practices, including our board composition.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

We primarily conduct our business in the following locations: the United States, Europe, Canada, Asia
Pacific and Japan. The expanding global scope of our business exposes us to risk of fluctuations in foreign
currency markets. This exposure is the result of selling in multiple currencies, growth in our international
investments, including data center expansion, additional headcount in foreign countries and operating in
countries where the functional currency is the local currency. Specifically, our results of operations and cash
flows are subject to fluctuations in the following currencies: the Euro, British Pound Sterling, Canadian Dollar,
Australian Dollar and Japanese Yen against the United States Dollar (“USD”). These exposures may change over
time as business practices evolve and economic conditions change. Changes in foreign currency exchange rates
could have an adverse impact on our financial results and cash flows.

Our European revenue, operating expenses and significant balance sheet accounts denominated in currencies

other than the USD primarily flow through our United Kingdom (“UK”) subsidiary, which has a functional
currency of the British Pound. This results in a two-step currency exchange process wherein the currencies in
Europe other than the British Pound are first converted into the British Pound and then British Pounds are
translated into USD for our Consolidated Financial Statements. As an example, costs incurred in France are
translated from the Euro to the British Pound and then into the USD. Our statements of operations and balance
sheet accounts are also impacted by the re-measurement of non-functional currency transactions such as USD
denominated intercompany loans, cash accounts held by our overseas subsidiaries, accounts receivable
denominated in foreign currencies and unearned revenue and accounts payable denominated in foreign
currencies.

In fiscal 2020, we will begin transitioning away from this UK-centralized European structure and enable

some of our local subsidiaries within Europe to invoice customers directly and thereby recognize revenues,
operating expenses and corresponding balance sheet accounts in local currencies. With the change to local
invoicing in some markets, we expect better alignment between our revenue and expenses in the local currency
thereby reducing our foreign currency exposure.

The U.K. held a referendum in June 2016 in which a majority of voters approved an exit from the European
Union (“EU”) (“Brexit”). In March 2017, the UK government gave formal notice of its intention to leave the EU
and started the process of negotiating the future terms of the UK’s relationship with the EU. Brexit could
adversely affect UK, regional (including European) and worldwide economic and market conditions and could
contribute to instability in global financial and foreign exchange markets, including volatility in the value of the
British Pound and Euro. We have evaluated and started to implement initiatives, such as the commitment to
invest resources in Dublin, Ireland, that could partially mitigate the impact Brexit could have on our operations.
In fiscal 2019, 2018 and 2017, total revenues generated in Europe were approximately 19 percent, 18
percent and 16 percent of total revenues, respectively, of which substantially all were recorded in our UK
subsidiary. Revenues in Europe increased on a total dollar basis by $35 million and $104 million in fiscal 2019
compared to fiscal 2018 and fiscal 2018 compared to fiscal 2017, respectively, as a result of the strengthening
British Pound Sterling. We recognize that there are still significant uncertainties surrounding the ultimate
resolution of Brexit negotiations, and we will continue to monitor any changes that may arise and assess their
potential impact on our business.

Foreign Currency Transaction Risk

Our foreign currency exposures typically arise from selling annual and multi-year subscriptions in multiple

currencies, customer accounts receivable, intercompany transfer pricing arrangements and other intercompany
transactions. Our foreign currency management objective is to minimize the effect of fluctuations in foreign
exchange rates on selected assets or liabilities without exposing us to additional risk associated with transactions
that could be regarded as speculative.

We pursue our objective by utilizing foreign currency forward contracts to offset foreign exchange risk. Our

foreign currency forward contracts are generally short-term in duration. We neither use these foreign currency
forward contracts for trading purposes nor do we currently designate these forward contracts as hedging
instruments pursuant to Accounting Standards Codification 815 (“ASC 815”), Derivatives and Hedging.
Accordingly, we record the fair values of these contracts as of the end of our reporting period to our consolidated
balance sheets with changes in fair values recorded to our consolidated statements of operations. Given the short
duration of the forward contracts, the amount recorded is not significant. Our ultimate realized gain or loss with
respect to foreign currency exposures will generally depend on the size and type of cross-currency transactions
that we enter into, the currency exchange rates associated with these exposures and changes in those rates, the net
realized gain or loss on our foreign currency forward contracts and other factors.

Foreign Currency Translation Risk

Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenues, operating expenses

and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into USD.
Although the USD fluctuated against certain international currencies over the past several months, the amounts
of revenue and unearned revenue that we reported in USD for foreign subsidiaries that transact in international
currencies were similar to what we would have reported during the three months using a constant currency rate.

Interest Rate Sensitivity

We had cash, cash equivalents and marketable securities totaling $4.3 billion at January 31, 2019. This

amount was invested primarily in money market funds, time deposits, corporate notes and bonds, government
securities and other debt securities with credit ratings of at least BBB or better. The cash, cash equivalents and
marketable securities are held for general corporate purposes, including acquisitions of, or investments in,
complementary businesses, services or technologies, working capital and capital expenditures. Our investments
are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes.

Our cash equivalents and our portfolio of marketable securities are subject to market risk due to changes in
interest rates. Fixed rate securities may have their market value adversely impacted due to a rise in interest rates,
while floating rate securities may produce less income than expected if interest rates fall. Due in part to these
factors, our future investment income may fall short of expectation due to changes in interest rates or we may
suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest
rates. However, because we classify our debt securities as “available for sale,” no gains or losses are recognized
due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are
determined to be other-than-temporary.

An immediate increase or decrease in interest rates of 100-basis points at January 31, 2019 could result in a
$21 million market value reduction or increase of the same amount. This estimate is based on a sensitivity model
that measures market value changes when changes in interest rates occur. Fluctuations in the value of our
investment securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in
other comprehensive income, and are realized only if we sell the underlying securities.

At January 31, 2018, we had cash, cash equivalents and marketable securities totaling $4.5 billion. The
fixed-income portfolio was also subject to interest rate risk. Changes in interest rates of 100-basis points would
have resulted in market value changes of $34 million.

Market Risk and Market Interest Risk

We deposit our cash with multiple financial institutions.

In addition, we maintain debt obligations that are subject to market interest risk, as follows (in millions):

Instrument

Maturity date

Principal
Outstanding as of
January 31, 2019

Interest
Terms

Effective interest rate
for fiscal 2019

2021 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . May 2021
2023 Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . April 2023
2028 Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . April 2028
June 2023
Loan assumed on 50 Fremont . . . . . . . . . . . . . . . .
Revolving credit facility . . . . . . . . . . . . . . . . . . . . April 2023

$ 500
1,000
1,500
198
0

Floating
Fixed
Fixed
Fixed
Floating

3.05%
3.26%
3.70%
3.75%
N/A

The 2021 Term Loan bears interest, at our option, at either a base rate plus a spread of 0.00% to 0.25% or an

adjusted LIBOR rate plus a spread of 0.625% to 1.25%, in each case, with such spread being determined based
on our credit rating. By entering into the 2021 Term Loan, we have assumed risks associated with variable
interest rates based upon a variable base rate or LIBOR. Changes in the overall level of interest rates affect the
interest expense that we recognize in our statements of operations. The 2021 Term Loan was signed in April
2018 and funds were received in May 2018.

The borrowings under the Revolving Credit Facility bear interest, at our option, at a base rate plus a spread
of 0.00% to 0.375% or an adjusted LIBOR rate plus a spread of 0.75% to 1.375%, in each case with such spread
being determined based on our credit rating. Regardless of what amounts, if any, are outstanding under the
revolving credit facility, we are also obligated to pay an ongoing commitment fee on undrawn amounts at a rate
of 0.05% to 0.175%, with such rate being based on our public debt rating, payable in arrears quarterly. As of
January 31, 2019, there was no outstanding borrowing amount under the Revolving Credit Facility.

The bank counterparties to our derivative contracts potentially expose us to credit-related losses in the event

of their nonperformance. To mitigate that risk, we only contract with counterparties who meet the minimum
requirements under our counterparty risk assessment process. We monitor ratings, credit spreads and potential
downgrades on at least a quarterly basis. Based on our on-going assessment of counterparty risk, we adjust our
exposure to various counterparties. We generally enter into master netting arrangements, which reduce credit risk
by permitting net settlement of transactions with the same counterparty. However, we do not have any master
netting arrangements in place with collateral features.

We have an investment portfolio that includes strategic investments in public and privately held companies,

which range from early-stage companies to more mature companies with established revenue streams and
business models. As of January 31, 2019, our portfolio, which consists of investments in over 235 privately held
companies and six public companies, is primarily comprised of independent software vendors and system
integrators. Our investments in these companies range from $0.1 million to approximately $105 million, with 21
investments individually equal to or in excess of approximately $10 million as of January 31, 2019.

We invest in early-to-late stage enterprise cloud companies for strategic reasons and to support key business
initiatives to grow our ecosystem of partners and accelerate the adoption of cloud technologies. We invest in both
domestic and international companies and currently hold investments in all of our regions: the Americas, Europe,
and Asia Pacific. We plan to continue to invest in these types of strategic investments, including in companies
representing targeted geographies and targeted business and technological initiatives, as opportunities arise that
we find attractive.

The primary purpose of our investments is to create an ecosystem of enterprise cloud companies, accelerate

the growth of technology startups and system integrators and create the next generation of AI, mobile
applications and connected products. Therefore, we continually evaluate our investments in privately held and
publicly traded companies. In certain cases, our ability to sell these investments may be impacted by contractual
obligations to hold the securities for a set period of time after a public offering. Currently, three of our six
publicly held investments are subject to such a contractual obligation, which expire in the first quarter of fiscal
2020.

Upon adoption of ASU 2016-01 in the first quarter of fiscal 2019, we are now required to record all fair

value adjustments of our publicly traded and privately held equity investments through the statement of
operations. As such we anticipate additional volatility to our statements of operations in future periods, due to
changes in market prices of our investments in publicly held equity investments and the valuation and timing of
observable price changes and impairments of our investments in privately held securities. These changes could
be material based on market conditions and events. While historically our investment portfolio has had a positive
impact on our financial results, that may not be true for future periods, particularly in periods of significant
market fluctuations that affect our strategic investments portfolio.

In addition, the financial success of our investment in any company is typically dependent on a liquidity
event, such as a public offering, acquisition or other favorable market event reflecting appreciation to the cost of
our initial investment. All of our investments, particularly those in privately held companies, are therefore subject
to a risk of partial or total loss of investment capital.

ITEM 8. FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The following financial statements are filed as part of this Annual Report on Form 10-K:

Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page No.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of salesforce.com, inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of salesforce.com, inc. (the Company) as of

January 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income,
stockholders’ equity and cash flows for each of the three years in the period ended January 31, 2019, and the
related notes and financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company at January 31, 2019 and 2018, and the results of its
operations and its cash flows for each of the three years in the period ended January 31, 2019, in conformity with
U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2019, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) and our report dated March 8, 2019 expressed an
unqualified opinion thereon.

Adoption of New Accounting Standards

As discussed in Note 1 to the consolidated financial statements, the Company changed its method for

recognizing revenue from contracts with customers and recognizing costs related to obtaining a contract
retrospectively in the period ended January 31, 2019. Additionally, as discussed in Note 1 to the consolidated
financial statements, the Company changed its method of accounting on a prospective basis for privately held
equity securities and on a modified retrospective basis for publicly held equity investments, in the period ended
January 31, 2019.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to

express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we

plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002

Redwood City, California
March 8, 2019

Report of Independent Registered Public Accounting Firm

The Stockholders and Board of Directors of salesforce.com, inc.

Opinion on Internal Control Over Financial Reporting

We have audited salesforce.com, inc.’s internal control over financial reporting as of January 31, 2019,
based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion,
salesforce.com, inc. (the Company) maintained, in all material respects, effective internal control over financial
reporting as of January 31, 2019, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did
not include the internal controls of MuleSoft, Inc., which is included in the January 31, 2019 consolidated
financial statements of the Company and constituted two percent and one percent of total and net assets,
respectively, as of January 31, 2019 and three percent and three percent of revenues and net income, respectively,
for the year then ended. Our audit of internal control over financial reporting of the Company also did not include
an evaluation of the internal control over financial reporting of MuleSoft, Inc.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2019 and 2018, and
the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for
each of the three years in the period ended January 31, 2019, and the related notes and financial statement
schedule listed in the Index at Item 15(a)2, and our report dated March 8, 2019 expressed an unqualified opinion
thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we

plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk

that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Redwood City, California
March 8, 2019

salesforce.com, inc.

Consolidated Balance Sheets
(in millions)

Assets
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowance for doubtful accounts of $22 and $21 at

January 31, 2019 and 2018, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs capitalized to obtain revenue contracts, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net
Costs capitalized to obtain revenue contracts, noncurrent, net . . . . . . . . . . . . . . . . . . . . .
Capitalized software, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strategic investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Intangible assets acquired through business combinations, net
. . . . . . . . . . . . . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

January 31,
2019

January 31,
2018
(as adjusted)

$ 2,669
1,673

$ 2,543
1,978

4,924
788
629

10,683
2,051
1,232
152
1,302
12,851
1,923
543

3,921
671
471

9,584
1,947
1,105
146
677
7,314
827
384

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$30,737

$21,984

Liabilities and stockholders’ equity
Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of debt

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

165
1,167
1,356
8,564
3

11,255
3,173
704

15,132

76
1,001
970
6,995
1,025

10,067
695
846

11,608

Commitments and contingencies (See Notes 13 and 15)
Stockholders’ equity:

Preferred stock, $0.001 par value; 5,000 shares authorized and none issued and

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock, $0.001 par value; 1,600 shares authorized, 770 and 730 issued

and outstanding at January 31, 2019 and 2018, respectively . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1
13,927
(58)
1,735

1
9,752
(12)
635

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15,605

10,376

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$30,737

$21,984

See accompanying Notes.

salesforce.com, inc.

Consolidated Statements of Operations
(in millions, except per share data)

Fiscal Year Ended January 31,

2019

2018 (as adjusted)

2017 (as adjusted)

Revenues:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subscription and support
Professional services and other . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$12,413
869
13,282

$ 9,766
774
10,540

Cost of revenues (1)(2):

Subscription and support
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional services and other . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses (1)(2):

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains on strategic investments, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before benefit from (provision for) income taxes . . . . . . . .
Benefit from (provision for) income taxes (3) . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,604
847
3,451
9,831

1,886
6,064
1,346
9,296
535
57
(154)
542
3
983
127
$ 1,110

Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares used in computing basic net income per share . . . . . . . . . . .
Shares used in computing diluted net income per share . . . . . . . . . .

$
$

1.48
1.43
751
775

2,033
740
2,773
7,767

1,553
4,671
1,089
7,313
454
36
(87)
19
(2)
420
(60)
360

0.50
0.49
715
735

$
$

$7,799
638
8,437

1,617
617
2,234
6,203

1,208
3,811
966
5,985
218
27
(89)
31
(8)
179
144
$ 323

$ 0.47
$ 0.46
688
700

(1) Amounts include amortization of intangible assets acquired through business combinations, as follows:

Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

215
232

2019

Fiscal Year Ended January 31,

2018

166
121

2017

128
98

(2) Amounts include stock-based expense, as follows:

Fiscal Year Ended January 31,

2019

2018

2017

Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . .

161
307
643
172

130
260
469
138

107
188
389
136

(3) Amounts include a benefit related to the partial release of the valuation allowance of $612 million,

$2 million and $226 million for fiscal 2019, 2018 and 2017, respectively. The fiscal 2019 benefit was
partially offset by an increase in unrecognized tax benefits.

See accompanying Notes.

salesforce.com, inc.

Consolidated Statements of Comprehensive Income
(in millions)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of reclassification

adjustments:

Fiscal Year Ended January 31,

2019

2018 (as adjusted)

2017 (as adjusted)

$1,110

$360*

$323*

Foreign currency translation and other gains (losses)
. . . . . . . .
Unrealized gains (losses) on marketable securities and strategic
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other comprehensive income (loss), before tax . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect

Other comprehensive income (loss), net . . . . . . . . . . . . . . . . . . . . . . .

(26)

(12)

(38)
(1)

(39)

77*

(4)

73
1

(53)*

(39)
3

(36)

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,071

$434

$287

Prior period information has been adjusted for Topic 606.

See accompanying Notes.

salesforce.com, inc.

Consolidated Statements of Stockholders’ Equity
(in millions)

Balance at January 31, 2016 . . . . . . . . .
Cumulative effect of accounting

Common Stock

Shares Amount

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Loss

Retained
Earnings /
(Accumulated
Deficit)

Total
Stockholders’
Equity

671

$ 5,705

$(50)

$ (653)

$ 5,003

changes . . . . . . . . . . . . . . . . . . .
Common stock issued . . . . . . . . . .
Shares issued related to business

combinations, net

. . . . . . . . . . .
Stock-based expenses . . . . . . . . . .
Other comprehensive loss, net of

tax . . . . . . . . . . . . . . . . . . . . . . .

Excess tax benefits cumulative-

effect adjustment . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . .

0
16

20
0

0
0

0
327

1,192
816

0
0

Balance at January 31, 2017 . . . . . . . . .
Common stock issued . . . . . . . . . .
Shares issued related to business

707
23

$1
0

$ 8,040
709

combinations, net

. . . . . . . . . . .

Temporary equity reclassification

related to convertible notes . . . .
Stock-based expenses . . . . . . . . . .
Other comprehensive income, net

of tax . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . .

0
0

(4)
995

0
0

(36)

0
0

$(86)
0

0
0

74
0

596
0

0
0

9
323*

$ 275
0

0
0

0
360*

596
327

1,192
816

(36)

9
323

$ 8,230
709

(4)
995

74
360

Balance at January 31, 2018 . . . . . . . . .
Cumulative effect of accounting

730

$ 9,752

$(12)

$ 635

$10,376

changes . . . . . . . . . . . . . . . . . . .
Common stock issued . . . . . . . . . .
Shares issued related to business

combinations, net

. . . . . . . . . . .

Settlement of convertible notes

and warrants . . . . . . . . . . . . . . .
Stock-based expenses . . . . . . . . . .
Other comprehensive loss, net of

tax . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . .

0
21

6
0

0
0

0
695

2,195

4
1,281

0
0

Balance at January 31, 2019 . . . . . . . . .

770

$13,927

(7)
0

0
0

(39)
0

$(58)

(10)
0

0
0

(17)
695

2,195

4
1,281

0
1,110

$1,735

(39)
1,110

$15,605

Prior period information has been adjusted for Topic 606.

See accompanying Notes.

salesforce.com, inc.

Consolidated Statements of Cash Flows
(in millions)

Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:

Fiscal Year Ended January 31,

2019

2018 (as
adjusted)

2017 (as
adjusted)

$ 1,110

360

323

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount and issuance costs . . . . . . . . . . . . . . . . . . . . . .
Amortization of costs capitalized to obtain revenue contracts, net . . . . . . . . . .
Expenses related to employee stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains on strategic investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities, net of business combinations:

Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs capitalized to obtain revenue contracts, net . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets and other assets . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

962
20
737
1,283
(542)

(923)
(981)
(58)
74
213
1,503

753
31
592
997
(19)

(719)
(1,156)
18
(39)
392
1,528

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . .

3,398

2,738

632
31
470
820
(31)

(633)
(693)
(47)
35
69
1,186

2,162

Investing activities:
Business combinations, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of strategic investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of strategic investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturities of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,115)
(362)
260
(1,068)
1,426
146
(595)

(25)
(216)
131
(2,003)
558
78
(534)

(3,193)
(110)
80
(1,070)
2,005
68
(464)

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,308)

(2,011)

(2,684)

Financing activities:
Proceeds from issuance of debt, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from employee stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,966
704
(131)
(1,529)

Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . .

2,010

Effect of exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . .

126
2,543

0
650
(106)
(323)

221

(12)

936
1,607

1,245
401
(98)
(550)

998

(27)

449
1,158

Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,669

$ 2,543

$ 1,607

See accompanying Notes.

salesforce.com, inc.

Consolidated Statements of Cash Flows

Supplemental Cash Flow Disclosure
(in millions)

Fiscal Year Ended January 31,

2019

2018

2017

Supplemental cash flow disclosure:
Cash paid during the period for:

Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes, net of tax refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

94
83

$40
$53

$
$

55
36

Non-cash investing and financing activities:

Fair value of equity awards assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of common stock issued as consideration for business

$ 480

$ 0

$ 103

combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,715

$12

$1,089

See accompanying Notes.

salesforce.com, inc.

Notes to Consolidated Financial Statements

1. Summary of Business and Significant Accounting Policies

Description of Business

Salesforce.com, inc. (the “Company”) is a leading provider of enterprise software, delivered through the

cloud, with a focus on customer relationship management, or CRM. The Company introduced its first CRM
solution in 2000, and has since expanded its service offerings into new areas and industries with new editions,
features and platform capabilities.

The Company’s core mission is to empower its customers to connect with their customers in entirely new

ways through cloud, mobile, social, Internet of Things (“IoT”) and artificial intelligence (“AI”) technologies.

The Company’s Customer Success Platform is a comprehensive portfolio of service offerings providing

sales force automation, customer service and support, marketing automation, digital commerce, integration
solutions, community management, industry-specific solutions, analytics, application development, IoT
integration, collaborative productivity tools, an enterprise cloud marketplace which the Company refers to as the
AppExchange, and its professional services.

Fiscal Year

The Company’s fiscal year ends on January 31. References to fiscal 2019, for example, refer to the fiscal

year ending January 31, 2019.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make

estimates and assumptions in the Company’s consolidated financial statements and notes thereto.

Significant estimates and assumptions made by management include the determination of:

•

the standalone selling price (SSP) of performance obligations for contracts with multiple performance
obligations;

the estimate of variable consideration as part of the adoption of Accounting Standards Update
No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”);

the fair value of assets acquired and liabilities assumed for business combinations;

the recognition, measurement and valuation of current and deferred income taxes;

the average period of benefit associated with costs capitalized to obtain revenue contracts;

the fair value of certain stock awards issued;

the useful lives of intangible assets; and

the valuation of privately-held strategic investments.

Actual results could differ materially from those estimates. The Company bases its estimates on historical

experience and on various other assumptions that are believed to be reasonable, the result of which forms the
basis for making judgments about the carrying values of assets and liabilities.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Segments

The Company operates as one operating segment. Operating segments are defined as components of an
enterprise for which separate financial information is evaluated regularly by the chief operating decision makers
in deciding how to allocate resources and assess performance. Over the past few years, the Company has
completed a number of acquisitions. These acquisitions have allowed the Company to expand its offerings,
presence and reach in various market segments of the enterprise cloud computing market. While the Company
has offerings in multiple enterprise cloud computing market segments, including as a result of the Company’s
acquisitions, the Company’s business operates in one operating segment because the Company’s offerings
operate on its single Customer Success Platform and most of the Company’s products are deployed in an
identical way, and the Company’s chief operating decision makers evaluate the Company’s financial information
and resources and assess the performance of these resources on a consolidated basis. Since the Company operates
in one operating segment, all required financial segment information can be found in the consolidated financial
statements.

In August 2018, the Company moved to a co-chief executive officer model with the promotion of the
Company’s vice chairman and chief operating officer. The Company determined that both co-chief executive
officers also serve as chief operating decision makers for the purposes of segment reporting. Despite the change
in the chief operating decision maker, the Company determined no change to segment reporting was necessary as
there was no change in the components of the Company for which separate financial information is regularly
evaluated.

Concentrations of Credit Risk and Significant Customers

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of
cash and cash equivalents, marketable securities and accounts receivable. Collateral is not required for accounts
receivable. The Company maintains an allowance for its doubtful accounts receivable. This allowance is based
upon historical loss patterns, the number of days that billings are past due and an evaluation of the potential risk
of loss associated with delinquent accounts. Receivables are written-off and charged against the recorded
allowance when the Company has exhausted collection efforts without success.

No single customer accounted for more than five percent of accounts receivable at January 31, 2019 and
January 31, 2018. No single customer accounted for five percent or more of total revenue during fiscal 2019,
2018 and 2017. As of January 31, 2019 and January 31, 2018, assets located outside the Americas were
14 percent and 17 percent of total assets, respectively. As of January 31, 2019 and January 31, 2018, assets
located in the United States were 84 percent and 81 percent of total assets, respectively.

Revenue Recognition

Adoption of Topic 606

Effective at the start of fiscal 2019, the Company adopted the provisions and expanded disclosure

requirements described in ASU 2014-09 also referred to as Topic 606. The Company adopted the standard using
the full retrospective method. Accordingly, the results for the prior comparable periods were adjusted to conform
to the current period measurement and recognition of results.

The impact of Topic 606 on reported revenue results was not material. Topic 606, however, modified the

Company’s revenue recognition policy in the following ways:

• Removal of the limitation on contingent revenue, which can result in the subscription and support
revenue for certain multi-year customer contracts being recognized earlier in the duration of the
contract term;

• More allocation of subscription and support revenues across the Company’s cloud service offerings and

to professional services revenue; and

•

Inclusion of an estimate of variable consideration, such as overage fees, in the total transaction price,
which results in the estimated fees being recognized ratably over the contract term, further resulting in
the recognition of subscription and support revenues before the actual variable consideration occurs.

The Company used the following transitional practical expedients in the adoption of Topic 606:

• The Company has not disclosed the remaining performance obligation (formerly, remaining transaction

price) for all of the reporting periods prior to the first quarter of fiscal 2019; and

• Contracts modified before fiscal 2017 were reflected using the retrospective method.

Additionally, as part of its business strategy, the Company periodically makes acquisitions of

complementary businesses, services and technology. These acquired businesses may have customer arrangements
that include the delivery of an on-premise software element combined with a software-as-a-service element. This
was the case with the Company’s acquisition of MuleSoft, Inc. (“MuleSoft”) in May 2018. The Company has to
apply significant judgment to determine the appropriate revenue recognition policy for such products and
services since Topic 606 eliminated the provision that service revenue accounting was appropriate when the
relative selling price of one or more deliverables in a multiple element solution arrangement could not be
determined.

Revenue Recognition Policy

The Company derives its revenues from two sources: (1) subscription revenues, which are comprised of
subscription fees from customers accessing the Company’s enterprise cloud computing services (collectively,
“Cloud Services”), software licenses, and from customers paying for additional support beyond the standard
support that is included in the basic subscription fees; and (2) related professional services such as process
mapping, project management and implementation services. Other revenue consists primarily of training fees.

With the adoption of Topic 606, revenue is recognized upon transfer of control of promised products and
services to customers in an amount that reflects the consideration the Company expects to receive in exchange
for those products or services. If the consideration promised in a contract includes a variable amount, for
example, overage fees, contingent fees or service level penalties, the Company includes an estimate of the
amount it expects to receive for the total transaction price if it is probable that a significant reversal of cumulative
revenue recognized will not occur.

The Company determines the amount of revenue to be recognized through application of the following

steps:

•

Identification of the contract, or contracts with a customer;

Identification of the performance obligations in the contract;

• Determination of the transaction price;

• Allocation of the transaction price to the performance obligations in the contract; and

• Recognition of revenue when or as the Company satisfies the performance obligations.

The Company’s subscription service arrangements are non-cancelable and do not contain refund-type

provisions.

Subscription and Support Revenues

Subscription and support revenues are comprised of fees that provide customers with access to Cloud

Services, software licenses and related support and updates during the term of the arrangement.

Cloud Services allow customers to use the Company’s multi-tenant software without taking possession of

the software. Revenue is generally recognized ratably over the contract term.

Since the May 2018 acquisition of MuleSoft, subscription and support revenues also includes software
licenses. These licenses for on-premises software provide the customer with a right to use the software as it exists
when made available. Customers purchase these licenses through a subscription. Revenues from distinct licenses
are generally recognized upfront when the software is made available to the customer. In cases where the
Company allocates revenue to software updates and support, primarily because the updates are provided at no
additional charge, such revenue is recognized as the updates are provided, which is generally ratably over the
contract term.

The Company typically invoices its customers annually. Typical payment terms provide that customers pay
within 30 days of invoice. Amounts that have been invoiced are recorded in accounts receivable and in unearned
revenue or revenue, depending on whether transfer of control to customers has occurred.

Professional Services and Other Revenues

The Company’s professional services contracts are either on a time and materials, fixed fee or subscription

basis. These revenues are recognized as the services are rendered for time and materials contracts, on a
proportional performance basis for fixed price contracts and ratably over the contract term for subscription
professional services contracts. Training revenues are recognized as the services are performed.

Significant Judgments - Contracts with Multiple Performance Obligations

The Company enters into contracts with its customers that may include promises to transfer multiple Cloud
Services, software licenses, premium support and professional services. A performance obligation is a promise in
a contract with a customer to transfer products or services that are distinct. Determining whether products and
services are distinct performance obligations that should be accounted for separately or combined as one unit of
accounting may require significant judgment.

Cloud Services and software licenses are distinct as such offerings are often sold separately. In determining

whether professional services are distinct, the Company considers the following factors for each professional
services agreement: availability of the services from other vendors, the nature of the professional services, the
timing of when the professional services contract was signed in comparison to the subscription start date and the
contractual dependence of the service on the customer’s satisfaction with the professional services work. To date,
the Company has concluded that all of the professional services included in contracts with multiple performance
obligations are distinct.

The Company allocates the transaction price to each performance obligation on a relative standalone selling

price (“SSP”) basis. The SSP is the price at which the Company would sell a promised product or service
separately to a customer. Judgment is required to determine the SSP for each distinct performance obligation.

The Company determines SSP by considering its overall pricing objectives and market conditions.

Significant pricing practices taken into consideration include the Company’s discounting practices, the size and

volume of the Company’s transactions, the customer demographic, the geographic area where services are sold,
price lists, its go-to-market strategy, historical sales and contract prices. As the Company’s go-to-market
strategies evolve, the Company may modify its pricing practices in the future, which could result in changes to
SSP.

In certain cases, the Company is able to establish SSP based on observable prices of products or services

sold separately in comparable circumstances to similar customers. The Company uses a single amount to
estimate SSP when it has observable prices.

If SSP is not directly observable, for example when pricing is highly variable, the Company uses a range of

SSP. The Company determines the SSP range using information that may include market conditions or other
observable inputs. The Company typically has more than one SSP for individual products and services due to the
stratification of those products and services by customer size and geography.

Costs Capitalized to Obtain Revenue Contracts

As part of its adoption of ASU 2014-09, the Company capitalizes incremental costs of obtaining a
non-cancelable subscription and support revenue contract. The provisions of ASU 2014-09 are significantly
different than the Company’s previous accounting for deferred commissions. The new guidance results in the
capitalization of significantly more costs and longer amortization lives. Under the prior accounting guidance, the
Company only capitalized sales commissions that had a direct and incremental relationship to a specific new
revenue contract and amortized the capitalized amounts over the initial contract period, which was typically 12 to
36 months.

Under the new accounting, the capitalized amounts consist primarily of sales commissions paid to the
Company’s direct sales force. Capitalized amounts also include (1) amounts paid to employees other than the
direct sales force who earn incentive payouts under annual compensation plans that are tied to the value of
contracts acquired, (2) commissions paid to employees upon renewals of subscription and support contracts,
(3) the associated payroll taxes and fringe benefit costs associated with the payments to the Company’s
employees, and to a lesser extent (4) success fees paid to partners in emerging markets where the Company has a
limited presence.

Costs capitalized related to new revenue contracts are amortized on a straight-line basis over four years,
which, although longer than the typical initial contract period, reflects the average period of benefit, including
expected contract renewals. In arriving at this average period of benefit, the Company evaluated both qualitative
and quantitative factors which included the estimated life cycles of its offerings and its customer attrition.
Additionally, the Company amortizes capitalized costs for renewals and success fees paid to partners over two
years.

The capitalized amounts are recoverable through future revenue streams under all non-cancelable customer
contracts. The Company periodically evaluates whether there have been any changes in its business, the market
conditions in which it operates or other events which would indicate that its amortization period should be
changed or if there are potential indicators of impairment.

Amortization of capitalized costs to obtain revenue contracts is included in marketing and sales expense in

the accompanying consolidated statements of operations.

During fiscal 2019, the Company capitalized $1.0 billion of costs to obtain revenue contracts and amortized

$0.7 billion to marketing and sales expense. During the same period a year ago, the Company capitalized
$1.2 billion of costs to obtain revenue contracts and amortized $0.6 billion to marketing and sales expense. Costs
capitalized to obtain a revenue contract, net on the Company’s consolidated balance sheets totaled $2.0 billion at
January 31, 2019 and $1.8 billion at January 31, 2018. There were no impairments of costs to obtain revenue
contracts in fiscal 2019, 2018 and 2017.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months

or less to be cash equivalents. Cash and cash equivalents are stated at fair value.

Marketable Securities

The Company considers all of its marketable debt securities as available for use in current

operations, including those with maturity dates beyond one year, and therefore classifies these securities within
current assets on the consolidated balance sheets. Securities are classified as available for sale and are carried at
fair value, with the change in unrealized gains and losses, net of tax, reported as a separate component on the
consolidated statements of comprehensive income until realized. Fair value is determined based on quoted
market rates when observable or utilizing data points that are observable, such as quoted prices, interest rates and
yield curves. Declines in fair value judged to be other-than-temporary on securities available for sale are included
as a reduction to investment income. To determine whether a decline in value is other-than-temporary, the
Company evaluates, among other factors: the duration and extent to which the fair value has been less than the
carrying value and its intent and ability to retain the investment for a period of time sufficient to allow for any
anticipated recovery in fair value. For the purposes of computing realized and unrealized gains and losses, the
cost of securities sold is based on the specific-identification method. Interest on securities classified as available
for sale is included as a component of investment income.

Strategic Investments

The Company holds strategic investments in publicly held equity securities and privately held debt and
equity securities in which the Company does not have a controlling interest or significant influence. Publicly held
equity securities are measured using quoted prices in their respective active markets with changes recorded
through gains (losses) on strategic investments, net on the consolidated statement of operations. Privately held
equity securities without a readily determinable fair value are recorded at cost and adjusted for impairments and
observable price changes with a same or similar security from the same issuer and are recorded through gains
(losses) on strategic investments, net on the consolidated statement of operations. Privately held debt securities
are recorded at fair value with changes in fair value recorded through accumulated other comprehensive income
on the consolidated balance sheet. If, based on the terms of these publicly traded and privately held securities, the
Company determines that the Company exercises significant influence on the entity to which these securities
relate, the Company will apply the equity method of accounting for such investments.

Privately held debt and equity securities are valued using significant unobservable inputs or data in an
inactive market and the valuation requires the Company’s judgment due to the absence of market prices and
inherent lack of liquidity. The carrying value is not adjusted for the Company’s privately held equity securities if
there are no observable price changes in a same or similar security from the same issuer or if there are no
identified events or changes in circumstances that may indicate impairment, as discussed below. In determining
the estimated fair value of its strategic investments in privately held companies, the Company utilizes the most
recent data available to the Company. Valuations of privately held companies are inherently complex due to the
lack of readily available market data. In addition, the determination of whether an orderly transaction is for a
same or similar investment requires significant management judgment including the nature of rights and
obligations of the investments, the extent to which differences in those rights and obligations would affect the
fair values of those investments, and the impact of any differences based on the stage of operational development
of the investee.

The Company assesses its privately held debt and equity securities strategic investment portfolio at least
quarterly for impairment. The Company’s impairment analysis encompasses an assessment of the severity and
duration of the impairment and qualitative and quantitative analysis of other key factors including the investee’s
financial metrics, the investee’s products and technologies meeting or exceeding predefined milestones, market

acceptance of the product or technology, other competitive products or technology in the market, general market
conditions, management and governance structure of the investee, the investee’s liquidity, debt ratios and the rate
at which the investee is using its cash. If the investment is considered to be impaired, the Company recognizes an
impairment through the consolidated statement of operations and establishes a new carrying value for the
investment.

Prior to fiscal 2019, investments in publicly held equity securities were classified as available-for-sale and
measured and recorded at fair value with unrealized changes in fair value recorded through other comprehensive
income. Prior to fiscal 2019, investments in privately held equity securities in which the Company did not have a
controlling interest or significant influence were accounted for using the cost method of accounting, measured at
cost less other-than-temporary impairment.

Derivative Financial Instruments

The Company enters into foreign currency derivative contracts with financial institutions to reduce foreign

exchange risk. The Company uses forward currency derivative contracts to minimize the Company’s exposure to
balances primarily denominated in the Euro, British Pound Sterling, Japanese Yen, Canadian Dollar and
Australian Dollar. The Company’s foreign currency derivative contracts, which are not designated as hedging
instruments, are used to reduce the exchange rate risk associated primarily with intercompany receivables and
payables. The Company’s derivative financial instruments program is not designated for trading or speculative
purposes. As of January 31, 2019 and January 31, 2018, the outstanding foreign currency derivative contracts
were recorded at fair value on the consolidated balance sheets.

Foreign currency derivative contracts are marked-to-market at the end of each reporting period with gains

and losses recognized as other expense to offset the gains or losses resulting from the settlement or
remeasurement of the underlying foreign currency denominated receivables and payables. While the contract or
notional amount is often used to express the volume of foreign currency derivative contracts, the amounts
potentially subject to credit risk are generally limited to the amounts, if any, by which the counterparties’
obligations under the agreements exceed the obligations of the Company to the counterparties.

Fair Value Measurement

The Company measures its cash and cash equivalents, marketable securities and foreign currency derivative

contracts at fair value. In addition, the Company measures its strategic investments, including its publicly held
equity securities, privately held debt securities and privately held equity securities for which there has been an
observable price change in a same or similar security, at fair value. The additional disclosures regarding the
Company’s fair value measurements are included in Note 5 “Fair Value Measurement.”

Property and Equipment

Property and equipment are stated at cost. Depreciation is calculated on a straight-line basis over the

estimated useful lives of those assets as follows:

Computers, equipment and software . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . Shorter of the estimated

3 to 9 years
5 years

lease term or 10 years

Building and structural components . . . . . . . . Average weighted useful

Building - leased facility . . . . . . . . . . . . . . . . .
Building improvements . . . . . . . . . . . . . . . . . .

life of 32 years
27 years
10 years

When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization
are removed from their respective accounts and any loss on such retirement is reflected in operating expenses.

Capitalized Software Costs

The Company capitalizes costs related to its enterprise cloud computing services and certain projects for
internal use incurred during the application development stage. Costs related to preliminary project activities and
post implementation activities are expensed as incurred. Internal-use software is amortized on a straight-line
basis over its estimated useful life, which is generally three to five years. Management evaluates the useful lives
of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur
that could impact the recoverability of these assets.

Intangible Assets Acquired through Business Combinations

Intangible assets are amortized over their estimated useful lives. Each period, the Company evaluates the
estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a
revision to the remaining period of amortization. Management tests for impairment whenever events or changes
in circumstances occur that could impact the recoverability of these assets.

Impairment Assessment

The Company evaluates intangible assets and long-lived assets for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This includes
but is not limited to significant adverse changes in business climate, market conditions, or other events that
indicate an asset’s carrying amount may not be recoverable. Recoverability of these assets is measured by
comparing the carrying amount of each asset to the future undiscounted cash flows the asset is expected to
generate. If the undiscounted cash flows used in the test for recoverability are less than the carrying amount of
these assets, the carrying amount of such assets is reduced to fair value.

The Company evaluates and tests the recoverability of its goodwill for impairment at least annually during
its fourth quarter of each fiscal year or more often if and when circumstances indicate that goodwill may not be
recoverable.

There were no material impairments of capitalized software, intangible assets, long-lived assets or goodwill

during fiscal 2019, 2018 and 2017.

Business Combinations

The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible
assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain
and subject to refinement. During the measurement period, which may be up to one year from the acquisition
date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and
liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related
valuation allowances are initially recorded in connection with a business combination as of the acquisition date.
The Company continues to collect information and reevaluates these estimates and assumptions quarterly and
records any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is
within the measurement period. Upon the conclusion of the measurement period or final determination of the fair
value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded
to the Company’s consolidated statement of operations.

In the event the Company acquires an entity with which the Company has a preexisting relationship, the

Company will recognize a gain or loss to settle that relationship as of the acquisition date, which is recorded in
net gains (losses) on strategic investments within the consolidated statements of operations. In the event that the
Company acquires an entity in which the Company previously held a strategic investment, the difference
between the fair value of the shares as of the date of the acquisition and the carrying value of the strategic
investment is recorded as a gain or loss and recorded within net gains (losses) on strategic investments in the
consolidated statement of operations.

Leases and Asset Retirement Obligations

The Company categorizes leases at their inception as either operating or capital leases. In certain lease
agreements, the Company may receive rent holidays and other incentives. The Company recognizes lease costs
on a straight-line basis once control of the space is achieved, without regard to deferred payment terms such as
rent holidays that defer the commencement date of required payments. Additionally, incentives received are
treated as a reduction of costs over the term of the agreement.

The Company establishes assets and liabilities for the present value of estimated future costs to retire long-

lived assets at the termination or expiration of a lease. Such assets are depreciated over the lease period to
operating expense.

In the event the Company is the deemed owner for accounting purposes during construction, the Company
records assets and liabilities for the estimated construction costs incurred under build-to-suit lease arrangements
to the extent it is involved in the construction of structural improvements or takes construction risk prior to
commencement of a lease.

The Company additionally has entered into subleases for unoccupied leased office space. To the extent there

are losses associated with the sublease, they are recognized in the period the sublease is executed. Any sublease
payments received in excess of the straight-line rent payments for the sublease are recorded as an offset to rent
expense and recognized over the sublease life.

Stock-Based Expense

The Company recognizes stock-based expenses related to stock options and restricted stock awards on a
straight-line basis, net of estimated forfeitures, over the requisite service period of the awards, which is generally
the vesting term of four years.

The Company recognizes stock-based expenses related to shares issued pursuant to its Amended and
Restated 2004 Employee Stock Purchase Plan (“ESPP” or “2004 Employee Stock Purchase Plan”) on a straight-
line basis over the offering period, which is 12 months. The ESPP allows employees to purchase shares of the
Company’s common stock at a 15 percent discount and also allows employees to reduce their percentage election
once during a six month purchase period (December 15 and June 15 of each fiscal year), but not increase that
election until the next one-year offering period. The ESPP also includes a re-set provision for the purchase price
if the stock price on the purchase date is less than the stock price on the offering date.

Stock-based expenses related to performance share grants are measured based on grant date fair value and

expensed on a straight-line basis, net of estimated forfeitures, over the service period of the awards, which is
generally the vesting term of three years.

The Company, at times, grants unvested restricted shares to employee stockholders of certain acquired

companies in lieu of cash consideration. These awards are generally subject to continued post-acquisition
employment. Therefore, the Company accounts for them as post-acquisition stock-based expense. The Company
recognizes stock-based expense equal to the grant date fair value of the restricted stock awards on a straight-line
basis over the requisite service period of the awards, which is generally four years.

Advertising Expenses

Advertising is expensed as incurred. Advertising expense was $482 million, $373 million and $350 million

for fiscal 2019, 2018 and 2017, respectively.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on temporary differences between the financial statement
and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are
expected to reverse. The effect on deferred tax assets and liabilities of a change in tax laws is recognized in the
consolidated statements of operations in the period that includes the enactment date.

The Company’s tax positions are subject to income tax audits by multiple tax jurisdictions throughout the

world. The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that
the position is sustainable upon examination by the taxing authority, solely based on its technical merits. The tax
benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be
realized upon settlement with the taxing authority. The Company recognizes interest accrued and penalties
related to unrecognized tax benefits in the income tax provision.

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are

more likely than not expected to be realized based on the weighting of positive and negative evidence. Future
realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the
appropriate character (for example, ordinary income or capital gain) within the carryback or carryforward periods
available under the applicable tax law. The Company regularly reviews the deferred tax assets for recoverability
based on historical taxable income, projected future taxable income, the expected timing of the reversals of
existing temporary differences and tax planning strategies. The Company’s judgments regarding future
profitability may change due to many factors, including future market conditions and the ability to successfully
execute its business plans. Should there be a change in the ability to recover deferred tax assets, the tax provision
would increase or decrease in the period in which the assessment is changed.

Foreign Currency Translation

The functional currency of the Company’s major foreign subsidiaries is generally the local currency.

Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are
recorded as a separate component on the consolidated statement of comprehensive income. Foreign currency
transaction gains and losses are included in other income in the consolidated statement of operations for the
period. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange
rate on the balance sheet date. Revenues and expenses are translated at the average exchange rate during the
period. Equity transactions are translated using historical exchange rates.

Warranties and Indemnification

The Company’s enterprise cloud computing services are typically warranted to perform in a manner
consistent with general industry standards that are reasonably applicable and materially in accordance with the
Company’s online help documentation under normal use and circumstances.

The Company’s arrangements generally include certain provisions for indemnifying customers against
liabilities if its products or services infringe a third party’s intellectual property rights. To date, the Company has
not incurred any material costs as a result of such obligations and has not accrued any material liabilities related
to such obligations in the accompanying consolidated financial statements.

The Company has also agreed to indemnify its directors and executive officers for costs associated with any

fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or
proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service
as a director or officer, including any action by the Company, arising out of that person’s services as the
Company’s director or officer or that person’s services provided to any other company or enterprise at the
Company’s request. The Company maintains director and officer insurance coverage that would generally enable
the Company to recover a portion of any future amounts paid. The Company may also be subject to
indemnification obligations by law with respect to the actions of its employees under certain circumstances and
in certain jurisdictions.

New Accounting Pronouncements Adopted in Fiscal 2019

Topic 606

In May 2014, the FASB issued ASU 2014-09, which in addition to replacing the existing revenue

recognition guidance, provides guidance on the recognition of costs related to obtaining customer contracts. The
adoption was material to the Company’s reported operating results and balance sheet for fiscal 2018 and 2017, as
it requires additional types of costs to be capitalized and amortized over a longer period. The Company also
recorded the related income tax effects, which did not have a material impact due to the Company’s valuation
allowance. The adoption had no impact to the Company’s operating cash flow.

The adoption of ASU 2014-09 impacted the Company’s previously reported results as follows (in millions,

except per share data):

Fiscal Year Ended January 31, 2018

Fiscal Year Ended January 31, 2017

As reported Change As adjusted As reported Change As adjusted

Total revenues . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and sales . . . . . . . . . . . . . . . . . . . .
Benefit from (provision for) income taxes . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net income per share . . . . . . . . . . . . .

$10,480
4,829
(75)
127
0.17

$
$

$ 60
(158)
15
$ 233
$0.32

$10,540
4,671
(60)
360
0.49

$
$

$8,392
3,918
155
$ 180
$ 0.26

$ 45
(107)
(11)
$ 143
$0.20

$8,437
3,811
144
$ 323
$ 0.46

The number of shares utilized to calculate the fiscal 2018 and 2017 diluted net income per share was

735 million and 700 million, respectively.

The adoption of ASU 2014-09 impacted the Company’s previously reported financial position as of

January 31, 2018 as follows (in millions):

Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . .
Costs capitalized to obtain revenue contracts, net . . . . .
Prepaid expenses and other current assets . . . . . . . . . . .
Costs capitalized to obtain revenue contracts,

noncurrent, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . .
Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As reported

Change

As adjusted

$3,918
461
390

3
210
81

$ 3,921
671
471

413
396
961
973
7,095
796
9,389

692
(12)
40
(3)
(100)
50
987

1,105
384
1,001
970
6,995
846
10,376

ASU 2016-01

In January 2016, the FASB issued ASU 2016-01, which requires entities to measure equity instruments at

fair value and recognize any changes in fair value within the statement of operations. The Company adopted
ASU 2016-01 in the first quarter of fiscal 2019 on a prospective basis for privately held equity securities and a
modified retrospective basis for publicly held equity investments. Upon adoption of ASU 2016-01, the Company
reclassified approximately $13 million of unrealized gains related to its publicly traded equity investments and
approximately $6 million reflecting the tax impact, from accumulated other comprehensive loss on the balance
sheet to retained earnings. For fiscal 2019, the Company recorded net unrealized gains of $464 million, which
excludes recognized gains on the sale of investments of $78 million, in the consolidated statement of operations,
and the Company anticipates additional volatility to the Company’s statements of operations in future periods,
due to changes in market prices of the Company’s investments in publicly held equity investments and the
valuation and timing of observable price changes and impairments of its investments in privately held securities.

ASU 2016-16

In October 2016, the FASB issued ASU 2016-16, which requires entities to recognize the income tax
consequences of an intra-entity transfer of an asset when the transfer occurs. The Company adopted the standard
in the first quarter of fiscal 2019 using the modified retrospective transition method and reclassified a
cumulative-effect adjustment to reduce retained earnings as of the effective date of approximately $17 million.

Accounting Pronouncements Pending Adoption

ASU 2016-02

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)”
(“ASU 2016-02”), which requires lessees to record most leases on their balance sheet but recognize the expenses
on their statement of operations in a manner similar to current accounting guidance “Leases (Topic 840)”. ASU
2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a
right-to-use asset for the right to use the underlying asset for the lease term. ASU 2016-02 will be effective for
fiscal 2020, including interim periods within that reporting period.

Upon adoption of ASU 2016-02 the Company plans to elect the package of practical expedients and not
reassess prior conclusions on whether contracts are or contain a lease, lease classification, and initial direct costs.
In addition, the Company plans to adopt the lessee practical expedient to combine lease and non-lease
components for all asset classes. The Company expects to make a policy election to not recognize right-of-use
assets or lease liabilities for short term leases of all asset classes. The Company does not plan to elect the
practical expedient to use hindsight when determining lease term.

ASC 2016-02 will have a material impact on the Company’s consolidated balance sheet. Leases currently
designated as operating leases in Note 13, “Commitments,” will be reported on the consolidated balance sheet
upon adoption at their net present value, which will increase total assets and liabilities. In addition, the financing
obligation and building asset associated with the Company’s leased facility at 350 Mission Street will be
derecognized upon adoption of ASC 2016-02 and the lease will be accounted for as a finance type lease, which
will result in the recognition of a right of use asset and a lease liability. ASU 2016-02 is not expected to have a
material impact to the Company’s consolidated statement of operations or net cash provided by operating
activities. In addition, the Company does not expect any impact to the Company’s debt covenants. In preparation
for adoption of the standard, the Company is in the process of implementing key systems, processes and internal
controls to enable the preparation of financial information.

In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) Targeted Improvements” (“ASU

2018-11”), which allows for the adoption of ASU 2016-02 to be applied at the beginning of the year of adoption,
as opposed to at the beginning of the earliest year presented in the financial statements. The Company will adopt

the transitional provisions allowed under ASU 2018-11 and as such, the consolidated balance sheets and
statements of operations for prior periods will not be comparable in the year of adoption of ASU 2016-02.

ASU 2016-13

In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13) “Financial
Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires
the measurement and recognition of expected credit losses for financial assets held at amortized cost, which
includes the Company’s accounts receivables, certain financial instruments and contract assets. ASU 2016-13
replaces the existing incurred loss impairment model with an expected loss methodology, which will result in
more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim
periods within those years, beginning after December 15, 2019, and requires a cumulative effect adjustment to
the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The
Company is evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements in
order to adopt the new standard in the first quarter of fiscal 2021.

ASU 2018-15

In August 2018, the FASB issued Accounting Standards Update No. 2018-15 (ASU 2018-15)

“Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)—Customer’s Accounting for
Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which aligns the
accounting for implementation costs incurred in a hosting arrangement that is a service contract with the
accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in
order to determine which costs to capitalize and recognize as an asset and which costs to expense. ASU 2018-15
is effective for annual reporting periods, and interim periods within those years, beginning after December 15,
2019, and can be applied either prospectively to implementation costs incurred after the date of adoption or
retrospectively to all arrangements. The Company does not expect the adoption of ASU 2018-15 to be material.

Reclassifications

Certain reclassifications to fiscal 2018 and 2017 balances were made to conform to the current period

presentation in the consolidated balance sheets, consolidated statements of operations and consolidated
statements of cash flows. These reclassifications did not affect total revenues, operating income or net income.

2. Revenues

Disaggregation of Revenue

Subscription and Support Revenue by the Company’s core service offerings

Subscription and support revenues consisted of the following (in millions):

Fiscal Year Ended January 31,

2019

2018

2017

Sales Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salesforce Platform and Other . . . . . . . . . . . . . . . . . . . . . . . .
Marketing and Commerce Cloud . . . . . . . . . . . . . . . . . . . . . .

$ 4,040
3,621
2,854
1,898

$3,588
2,883
1,913
1,382

$3,076
2,343
1,433
947

$12,413

$9,766

$7,799

Total Revenue by Geographic Locations

Revenues by geographical region consisted of the following (in millions):

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended January 31,

2019

2018

2017

$ 9,445
2,553
1,284
$13,282

$ 7,621
1,916
1,003
$10,540

$6,259
1,383
795
$8,437

Revenues by geography are determined based on the region of the Company’s contracting entity, which may
be different than the region of the customer. Americas revenue attributed to the United States was approximately
96 percent during fiscal 2019, 2018, and 2017, respectively. No other country represented more than ten percent
of total revenue during fiscal 2019, 2018 and 2017.

Contract Balances

Contract Asset

As described in Note 1, subscription and support revenue is generally recognized ratably over the contract
term beginning on the commencement date of each contract. License revenue is recognized as the licenses are
delivered. Under Topic 606, the timing and amount of revenue recognition may differ in certain situations from
the revenue recognized under previous accounting guidance that limited subscription and support revenue to the
customer invoice amount for the period of service (collectively billings). Under Topic 606, the Company records
a contract asset when revenue recognized on a contract exceeds the billings and unearned revenue when the
billings on a contract exceed the revenue recognized. The Company’s standard billing terms are annual in
advance. Contract assets were $215 million as of January 31, 2019 as compared to $81 million as of January 31,
2018. Approximately $122 million of contract assets were acquired in connection with the May 2018 MuleSoft
acquisition. Impairments of contract assets were immaterial in fiscal 2019, 2018 and 2017.

Unearned Revenue

The concept of unearned revenue under Topic 606 is substantially similar to deferred revenue under previous

accounting guidance, except for the removal of the limitation on contingent revenue. The unearned revenue balance
does not represent the total contract value of annual or multi-year, non-cancelable subscription agreements.
Unearned revenue primarily consists of billings or payments received in advance of revenue recognition from
subscription services, including software licenses, described above and is recognized as revenue when transfer of
control to customers has occurred. The Company generally invoices customers in annual installments. The unearned
revenue balance is influenced by several factors, including seasonality, the compounding effects of renewals,
invoice duration, invoice timing, dollar size and new business linearity within the quarter.

The changes in unearned revenue were as follows (in millions):

Unearned revenue, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Billings and other* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contribution from contract asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue recognized ratably over time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue recognized over time as delivered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue recognized at a point in time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned revenue from business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned revenue, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended
January 31, 2019

$ 6,995
14,770
13
(12,426)
(629)
(227)
68
$ 8,564

Other includes, for example, the impact of foreign currency translation

Revenue recognized ratably over time is generally billed in advance and includes Cloud Services, the related

support and advisory services.

Revenue recognized over time as delivered includes professional services billed on a time and material
basis, fixed fee professional services and training classes that are primarily billed, delivered and recognized
within the same reporting period.

Revenue recognized at a point in time substantially includes the portion of software subscriptions allocated

to the on-premise software element, which either resulted in smaller unearned revenue or a contract asset.

Approximately 52 percent of revenue recognized in fiscal 2019 is from the unearned revenue balance as of

January 31, 2018.

Remaining Performance Obligation

Topic 606 also introduced the concept of the transaction price allocated to the remaining performance
obligations, referred to by the Company as remaining performance obligation, which is different than unbilled
deferred revenue under previous accounting guidance. Transaction price allocated to the remaining performance
obligation represents contracted revenue that has not yet been recognized, which includes unearned revenue and
unbilled amounts that will be recognized as revenue in future periods. Transaction price allocated to the
remaining performance obligation is influenced by several factors, including seasonality, the timing of renewals,
average contract terms and foreign currency exchange rates. Unbilled portions of the remaining performance
obligation denominated in foreign currencies are revalued each period based on the period end exchange rates.

The Company applied the practical expedient in accordance with Topic 606 to exclude amounts related to

performance obligation that are billed and recognized as they are delivered. This primarily consists of
professional services contracts that are on a time-and-material basis.

The majority of the Company’s noncurrent remaining performance obligation will be recognized in the next

13 to 36 months.

Remaining performance obligation consisted of the following (in billions):

As of January 31, 2019* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11.9

$13.8

$25.7

*Includes $450 million of remaining performance obligation related to the MuleSoft acquisition, including
contracts executed subsequent to acquisition.

Current

Noncurrent

Total

3. Investments

Marketable Securities

At January 31, 2019, marketable securities consisted of the following (in millions):

Investments classified as Marketable Securities

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

$1,027
89
79
245
104

$0
0
0
0
0

$(8)
(1)
(1)
(1)
0

$1,019
88
78
244
104

Investments classified as Marketable Securities

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

Foreign government obligations . . . . . . . . . . . . . . .
U.S. agency obligations . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Covered bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

58
4
4
75

Total marketable securities . . . . . . . . . . . . . . . . . . .

$1,685

$0
0
0
0

$ (1)
0
0
0

$(12)

57
4
4
75

$1,673

At January 31, 2018, marketable securities consisted of the following (in millions):

Investments classified as Marketable Securities

Corporate notes and obligations . . . . . . . . . . . . . . . .
U.S. treasury securities . . . . . . . . . . . . . . . . . . . . . . .
Mortgage backed obligations . . . . . . . . . . . . . . . . . .
Asset backed securities . . . . . . . . . . . . . . . . . . . . . .
Municipal securities . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign government obligations . . . . . . . . . . . . . . .
U.S. agency obligations . . . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . .
Covered bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total marketable securities . . . . . . . . . . . . . . . . . . .

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

$1,223
196
100
251
53
87
19
11
51

$1,991

$1
0
0
0
0
0
0
0
0

$ (7)
(2)
(1)
(1)
(1)
(1)
0
0
(1)

$(14)

$1,217
194
99
250
52
86
19
11
50

$1,978

The contractual maturities of the investments classified as marketable securities are as follows (in millions):

Due within 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due in 1 year through 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due in 5 years through 10 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of

January 31,
2019

January 31,
2018

$ 482
1,189
2

$1,673

$ 395
1,579
4

$1,978

As of January 31, 2019, the following marketable securities were in an unrealized loss position (in millions):

Less than 12 Months

12 Months or Greater

Total

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

Corporate notes and obligations
U.S. treasury securities . . . . . . .
Mortgage backed

obligations . . . . . . . . . . . . . .
Asset backed securities . . . . . . .
Foreign government obligations

$392
0

0
0
0

$(2)
0

0
0
0

$392

$(2)

$457
71

58
112
49

$747

Fair Value

$ 849
71

Unrealized
Losses

$ (8)
(1)

58
112
49

(1)
(1)
(1)

$ (6)
(1)

(1)
(1)
(1)

$(10)

$1,139

$(12)

The unrealized losses for each of the fixed rate marketable securities were less than $1 million. The
Company does not believe any of the unrealized losses represent an other-than-temporary impairment based on
its evaluation of available evidence as of January 31, 2019, such as the Company’s intent to hold the investment
and whether it is more likely than not that the Company will be required to sell the investment before recovery of
the investment’s amortized basis. The Company expects to receive the full principal and interest on all of these
marketable securities.

Investment Income

Investment income consists of interest income, realized gains and realized losses on the Company’s cash,

cash equivalents and marketable securities. The components of investment income are presented below (in
millions):

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended January 31,

2019

$61
1
(5)

$57

2018

$37
1
(2)

$36

2017

$22
8
(3)

$27

Strategic Investments

Strategic investments by form and measurement category as of January 31, 2019 were as follows (in

millions):

Measurement Category

Fair Value (1)

Measurement
Alternative

Other (2)

Total

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of January 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . .

$436
0

$436

$785
0

$785

$50
31

$81

$1,271
31

$1,302

(1) Equity securities under fair value represents the carrying value of strategic investments in publicly held

equity securities.

(2) Other includes the Company’s investments accounted for under the equity method of accounting or

amortized cost.

Measurement Alternative Adjustments

Privately held equity securities accounted for under the measurement alternative as of January 31, 2019

were as follows (in millions):

Carrying amount, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments related to privately held equity securities:

Net additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairments and downward adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Upward adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Carrying amount, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$548

95
(32)
174

$785

Fiscal Year Ended
January 31, 2019

Gains (losses) on strategic investments, net

Gains and losses recognized in fiscal 2019, 2018 and 2017 were as follows (in millions):

Net gains recognized on publicly traded securities . . . . . . . . . . . . . . . . .
Net gains recognized on privately held securities . . . . . . . . . . . . . . . . . .
Net gains recognized on sales of equity securities . . . . . . . . . . . . . . . . . .
Net losses recognized on debt securities . . . . . . . . . . . . . . . . . . . . . . . . . .

Gains on strategic investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended January 31,

2019

$345
133
74
(10)

$542

2018

$ 0
19
0
0

$19

2017

$ 0
31
0
0

$31

Net gains recognized in fiscal 2019 for investments still held as of January 31, 2019 were $464 million. This

excludes recognized gains on the sale of our equity and debt securities for fiscal 2019 of $78 million.

In fiscal 2019 the Company adopted ASU 2016-01 which requires all fair value adjustments of its publicly

traded and privately held equity investments to be recorded through the statement of operations. Prior to fiscal
2019, publicly held equity securities were recorded at fair value with unrealized changes in fair value recorded
through other comprehensive income. Investments in privately held equity securities in which the Company did
not have a controlling interest or significant influence were accounted for using the cost method of accounting,
measured at cost less other-than-temporary impairment.

4. Derivatives

Details on outstanding foreign currency derivative contracts are presented below (in millions):

As of

January 31, 2019

January 31, 2018

Notional amount of foreign currency derivative contracts . . . . . . . .
Fair value of foreign currency derivative contracts . . . . . . . . . . . . .

$4,496
25

$1,871
12

The fair value of the Company’s outstanding derivative instruments not designated as hedging instruments

are summarized below (in millions):

Foreign currency derivative contracts . . . . . Prepaid expenses and

other current assets

$42

$18

Balance Sheet Location

January 31, 2019

January 31, 2018

As of

Gains (losses) on derivative instruments not designated as hedging instruments recorded in other income in
the consolidated statements of operations during fiscal 2019, 2018 and 2017, respectively, are summarized below
(in millions):

Foreign currency derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended January 31,

2019

$34

2018

$15

2017

$(86)

5. Fair Value Measurement

The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation

methodologies in measuring fair value:

Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2. Significant other inputs that are directly or indirectly observable in the marketplace.

Level 3. Significant unobservable inputs which are supported by little or no market activity.

All of the Company’s cash equivalents, marketable securities and foreign currency derivative contracts are
classified within Level 1 or Level 2 because the Company’s cash equivalents, marketable securities and foreign
currency derivative contracts are valued using quoted market prices or alternative pricing sources and models
utilizing observable market inputs.

The following table presents information about the Company’s assets that are measured at fair value as of

January 31, 2019 and indicates the fair value hierarchy of the valuation (in millions):

Description

Cash equivalents (1):

Quoted Prices in
Active Markets
for Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Balance as of
January 31,
2019

Time deposits . . . . . . . . . . .
Money market mutual

funds . . . . . . . . . . . . . . . .

1,234

Marketable securities:

Corporate notes and

obligations . . . . . . . . . . . .
U.S. treasury securities . . . .
Mortgage backed

obligations . . . . . . . . . . . .
Asset backed securities . . . .
Municipal securities . . . . . .
Foreign government

obligations . . . . . . . . . . . .
U.S. agency obligations . . .
Time deposits . . . . . . . . . . .
Covered bonds . . . . . . . . . .

Strategic investments:

Publicly held equity

securities . . . . . . . . . . . . .

Foreign currency derivative

contracts (2)

. . . . . . . . . . . . . .

0
0

0
0
0

0
0
0
0

436

$ 314

1,019
88

78
244
104

57
4
4
75

Total assets . . . . . . . . . . . . . . . . .

$1,670

$2,029

0
0

0
0
0

0
0
0
0

$ 314

1,234

1,019
88

78
244
104

57
4
4
75

436

$3,699

(1)

(2)

Included in “cash and cash equivalents” in the accompanying consolidated balance sheet as of January 31,
2019, in addition to $1.1 billion of cash.
Included in “prepaid expenses and other current assets” in the accompanying consolidated balance sheet as
of January 31, 2019.

The following table presents information about the Company’s assets that are measured at fair value as of

January 31, 2018 and indicates the fair value hierarchy of the valuation (in millions):

Description

Cash equivalents (1):

Quoted Prices in
Active Markets
for Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Balance as of
January 31,
2018

Time deposits . . . . . . . . . . . .
Money market mutual

funds . . . . . . . . . . . . . . . . .

1,389

Marketable securities:

Corporate notes and

obligations . . . . . . . . . . . .
U.S. treasury securities . . . . .
Mortgage backed

obligations . . . . . . . . . . . .
Asset backed securities . . . . .
Municipal securities . . . . . . .
Foreign government

obligations . . . . . . . . . . . .
U.S. agency obligations . . . .
Commercial paper
. . . . . . . .
Covered bonds . . . . . . . . . . .

Strategic investments:

Publicly held equity

securities . . . . . . . . . . . . . .

Foreign currency derivative

contracts (2) . . . . . . . . . . . . . . .

0
0

0
0
0

0
0
0
0

$ 543

1,217
194

99
250
52

86
19
11
50

Total assets . . . . . . . . . . . . . . . . . .

$1,413

$2,539

0
0

0
0
0

0
0
0
0

$ 543

1,389

1,217
194

99
250
52

86
19
11
50

$3,952

(1)

(2)

Included in “cash and cash equivalents” in the accompanying consolidated balance sheet as of January 31,
2018, in addition to $611 million of cash.
Included in “prepaid expenses and other current assets” in the accompanying consolidated balance sheet as
of January 31, 2018.

Strategic investments measured and record at fair value on a non-recurring basis

The Company’s privately held debt and equity securities and equity method investments are recorded at fair
value only if an impairment or observable price adjustment is recognized in the current period. If an impairment
or observable price adjustment is recognized on the Company’s non-marketable equity securities during the
period, the Company classifies these assets as Level 3 within the fair value hierarchy based on the nature of the
fair value inputs.

The Company classified privately held debt and equity securities and equity method investments as Level 3.

The Company’s privately held debt and equity securities and equity method investments amounted to
$866 million as of January 31, 2019 and $653 million as of January 31, 2018.

6. Property and Equipment

Property and Equipment

Property and equipment, net consisted of the following (in millions):

As of

January 31, 2019

January 31, 2018

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and building improvements . . . . . . . . . . . . . . .
Computers, equipment and software . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . .

Property and equipment, gross . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization . . . . . . .

184
629
1,735
188
1,098

3,834
(1,783)

Property and equipment, net . . . . . . . . . . . . . . . . . . .

$ 2,051

184
626
1,629
139
825

3,403
(1,456)

$ 1,947

Depreciation and amortization expense totaled $411 million, $373 million and $323 million during fiscal

2019, 2018 and 2017 respectively.

Computers, equipment and software at January 31, 2019 and January 31, 2018 included a total of

$671 million and $709 million acquired under capital lease agreements, respectively. Accumulated amortization
relating to computers, equipment and software acquired under capital leases totaled $480 million and
$450 million, respectively, at January 31, 2019 and January 31, 2018. Amortization of assets acquired under
capital leases is included in depreciation and amortization expense.

7. Business Combinations

Fiscal Year 2019

Datorama

In August 2018, the Company acquired all outstanding stock of Datorama, Inc. (“Datorama”), which
provides a platform for enterprises, agencies and publishers to integrate data across marketing channels and data
sources. The Company has included the financial results of Datorama, which are not material, in the consolidated
financial statements from the date of acquisition. The transaction costs associated with the acquisition were
approximately $3 million and recorded in general and administrative expense. The acquisition date fair value of
the consideration transferred for Datorama was approximately $766 million, which consisted of the following (in
millions):

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of stock options and restricted stock awards assumed . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair Value

$136
537
93

$766

The fair value of the stock options assumed by the Company was determined using the Black-Scholes
option pricing model. The share conversion ratio of 0.4133 was applied to convert Datorama’s outstanding equity
awards for Datorama’s common stock into equity awards for shares of the Company’s common stock.

The following table summarizes the fair value of assets acquired and liabilities assumed as of the date of

acquisition (in millions):

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current and noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable, accrued expenses

and other liabilities, current and noncurrent . . . . . . . . . . . . . . . . . . . .
Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair Value

$ 21
9
3
202
586

(10)
(4)
(41)

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$766

The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets

acquired was recorded as goodwill. The fair values assigned to tangible and identifiable intangible assets
acquired and liabilities assumed are based on management’s estimates and assumptions. The fair values of assets
acquired and liabilities assumed, including current and noncurrent income taxes payable and deferred taxes, may
be subject to change as additional information is received and certain tax returns are finalized. Accordingly, the
provisional measurements of fair value of the income taxes payable and deferred taxes set forth above are subject
to change. The Company expects to finalize the valuation as soon as practicable, but not later than one year from
the acquisition date.

The following table sets forth the components of identifiable intangible assets acquired and their estimated

useful lives as of the date of acquisition (in millions):

Fair Value

Useful Life

Developed technology . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . .
Other purchased intangible assets . . . . . . . . . . .

Total intangible assets subject to amortization . .

$159
42
1

$202

4 years
8 years
1 year

Developed technology represents the fair value of Datorama’s technology. Customer relationships represent

the fair values of the underlying relationships with Datorama customers. The goodwill balance is primarily
attributed to assembled workforce and expanded market opportunities when integrating Datorama’s technology
with the Company’s other offerings. The goodwill balance is not deductible for U.S. income taxes purposes.

The Company assumed unvested options and restricted stock with a fair value of $170 million. Of the total

consideration, $93 million was allocated to the purchase consideration and $77 million was allocated to future
services and will be expensed over the remaining service periods on a straight-line basis.

MuleSoft

In May 2018, the Company acquired all outstanding stock of MuleSoft, which provides a platform for
building application networks that connect enterprise apps, data and devices, across any cloud and on-premise
solution. The Company has included the financial results of MuleSoft in the consolidated financial statements
from the date of acquisition. The transaction costs associated with the acquisition were approximately

$24 million and were recorded in general and administrative expense. The acquisition date fair value of the
consideration transferred for MuleSoft was approximately $6.4 billion, which consisted of the following (in
millions):

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair Value

$4,860
1,178
387

$6,425

The fair value of the stock options assumed by the Company was determined using the Black-Scholes
option pricing model. The share conversion ratio of 0.3680 was applied to convert MuleSoft’s outstanding equity
awards for MuleSoft’s common stock into equity awards for shares of the Company’s common stock.

The following table summarizes the fair values of assets acquired and liabilities assumed as of the date of

acquisition (in millions):

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current and noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired customer contract asset, current and noncurrent—intangible
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable, accrued expenses and other liabilities, current and

asset

noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair Value

57
233
69
122
29

61
1,279
4,816

(40)
(57)
(144)

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,425

The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets

acquired was recorded as goodwill. The fair values assigned to tangible and identifiable intangible assets
acquired and liabilities assumed are based on management’s estimates and assumptions. The deferred tax liability
established was primarily a result of the difference in the book basis and tax basis related to the identifiable
intangible assets. The fair values of assets acquired and liabilities assumed, including current and noncurrent
income taxes payable and deferred taxes, may be subject to change as additional information is received and
certain tax returns are finalized. Accordingly, the provisional measurements of fair value of the income taxes
payable and deferred taxes set forth above are subject to change. The Company expects to finalize the valuation
as soon as practicable, but not later than one year from the acquisition date.

The following table sets forth the components of identifiable intangible assets acquired and their estimated

useful lives as of the date of acquisition (in millions):

Fair Value

Useful Life

Developed technology . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . .
Other purchased intangible assets . . . . . . . . . . .

$ 224
1,046
9

4 years
8 years
1 year

Total intangible assets subject to

amortization . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,279

100

Developed technology represents the fair value of MuleSoft’s Anypoint technology. Customer relationships

represent the fair values of the underlying relationships with MuleSoft customers. The goodwill balance is
primarily attributed to the assembled workforce and expanded market opportunities when integrating MuleSoft’s
Anypoint technology with the Company’s other offerings. The goodwill balance is not deductible for U.S.
income tax purposes.

The Company assumed unvested options and restricted stock with a fair value of $824 million. Of the total
consideration, $387 million was allocated to the purchase consideration and $437 million was allocated to future
services and will be expensed over the remaining service periods on a straight-line basis.

The amounts of revenue and pretax loss of MuleSoft included in the Company’s consolidated statement of

operations from the acquisition date in May 2018 through January 31, 2019 are as follows (in millions):

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pretax loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 431
(286)

The following pro forma financial information summarizes the combined results of operations for the
Company and MuleSoft, as though the companies were combined as of the beginning of the Company’s fiscal
2018.

The unaudited pro forma financial information was as follows (in millions):

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pretax income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)

$13,366
1,012
987

$10,875
(85)
(45)

Fiscal Year Ended
January 31,

2019

2018

The pro forma financial information for all periods presented above has been calculated after adjusting the

results of MuleSoft to reflect the business combination accounting effects resulting from this acquisition,
including the amortization of fair value adjustments to unearned revenue, the amortization expense from acquired
intangible assets and the stock-based compensation expense for unvested stock options and restricted stock
awards assumed as well as the interest expense associated with the Company’s issuance of debt prior to the
acquisition as though the acquisition occurred as of the beginning of the Company’s fiscal year 2018. The
historical consolidated financial statements have been adjusted in the pro forma combined financial statements to
give effect to pro forma events that are directly attributable to the business combination and factually
supportable. The pro forma financial information is for informational purposes only and is not indicative of the
results of operations that would have been achieved if the acquisition had taken place at the beginning of the
Company’s fiscal 2018.

The pro forma financial information for fiscal 2019 and 2018 combines the historical results of the
Company for fiscal 2019 and 2018, the adjusted historical results of MuleSoft for fiscal 2019 and 2018, due to
differences in reporting periods and considering the date the Company acquired MuleSoft, and the effects of the
pro forma adjustments listed above. Prior to being acquired, MuleSoft’s fiscal year concluded on December 31.
Net income for fiscal 2018 above includes a discrete tax benefit of $136 million, resulting from a partial release
of valuation allowance in connection with the acquisition. The net deferred tax liability from the acquisition of
MuleSoft provided a source of additional income to support the realizability of the Company’s pre-existing
deferred tax assets. The deferred tax liability considered the 21 percent corporate tax rate enacted by the Tax Act.

101

CloudCraze

In April 2018, the Company acquired all outstanding stock of CloudCraze LLC (“CloudCraze”), for
consideration consisting of cash and equity awards assumed. CloudCraze is a commerce platform that allows
businesses to generate online revenue and scale for growth. CloudCraze delivers interactions across commerce,
sales, marketing and service. The Company has included the financial results of CloudCraze in the consolidated
financial statements from the date of acquisition, which have not been material to date. The transaction costs
associated with the acquisition were not material.

The acquisition date fair value of the consideration transferred for CloudCraze was approximately
$190 million, which consisted of cash and the fair value of stock options and restricted stock awards assumed.
The Company recorded approximately $58 million for developed technology and customer relationships with
estimated useful lives of one to seven years. The Company recorded approximately $134 million of goodwill
which is primarily attributed to the assembled workforce and expanded market opportunities from integrating
CloudCraze’s technology with the Company’s other offerings. The goodwill balance is deductible for U.S.
income tax purposes. The fair value of current and noncurrent income taxes payable and deferred taxes, may be
subject to change as additional information is received and certain tax returns are finalized. The Company
expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

Fiscal Year 2018

During fiscal 2018, the Company acquired two companies for an aggregate of $38 million in cash and

equity, net of cash acquired, and has included the financial results of these companies in its consolidated
financial statements from the dates of acquisition. The transactions were not material to the Company and the
costs associated with the acquisitions were not material. The Company accounted for the transactions as business
combinations. In allocating the purchase consideration based on estimated fair values, the Company recorded
$3 million of intangible assets and $35 million of goodwill. The majority of the goodwill balance associated with
these business combinations is deductible for U.S. income tax purposes.

Fiscal Year 2017

During fiscal 2017, the Company acquired 13 companies, including the acquisition of Demandware, for an
aggregate of $4.4 billion in cash and equity, net of cash acquired, and has included the financial results of these
companies in its consolidated financial statements from the dates of acquisition. The costs associated with the
acquisitions were not material. The Company accounted for the transactions as business combinations. In
allocating the purchase consideration based on estimated fair values, the Company recorded $851 million of
intangible assets and $3.4 billion of goodwill. The majority of the goodwill balance associated with these
business combinations is not deductible for U.S. income tax purposes.

8. Intangible Assets Acquired Through Business Combinations and Goodwill

Intangible assets acquired through business combinations

Intangible assets acquired through business combinations are as follows (in millions):

Intangible Assets, Gross

Accumulated Amortization

Jan 31,
2018

Additions and
retirements,
net

Jan 31,
2019

Jan 31,
2018

Expense and
retirements,
net

Acquired developed technology . . . . . . . . . . . $1,027
831
Customer relationships . . . . . . . . . . . . . . . . . .
53
Other (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 402
1,107
(1)

$1,429 $ (677)
(359)
1,938
(48)
52

$(212)
(201)
1

Jan 31,
2019

$ (889)
(560)
(47)

Intangible Assets, Net Weighted
Average
Remaining
Useful Life
(Years)

Jan 31,
2018

Jan 31,
2019

$350
472
5

$ 540
1,378
5

2.9
6.3
2.5

5.3

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,911

$1,508

$3,419 $(1,084)

$(412)

$(1,496)

$827

$1,923

(1)

Included in other are trade names, trademarks and territory rights.

102

Amortization of intangible assets resulting from business combinations for fiscal 2019, 2018 and 2017 was

$447 million, $287 million and $226 million, respectively.

The expected future amortization expense for intangible assets as of January 31, 2019 is as follows (in

millions):

Fiscal Period:
Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 472
414
351
211
148
327

Total amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,923

Customer contract assets acquired through business combinations

Customer contract assets resulting from business combinations reflects the fair value of future billings of

amounts that are contractually committed by acquired companies’ existing customers as of the acquisition date.
Customer contract assets are amortized over the corresponding contract terms. Customer contract assets resulting
from business combinations at January 31, 2019 and January 31, 2018 were $121 million and $159 million,
respectively, which is included in “Other assets” on the consolidated balance sheets.

Goodwill

Goodwill represents the excess of the purchase price in a business combination over the fair value of net
assets acquired. Goodwill amounts are not amortized, but rather tested for impairment at least annually during the
fourth quarter.

The changes in the carrying amounts of goodwill, which is generally not deductible for tax purposes, were

as follows (in millions):

Balance as of January 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments of acquisition date fair values, including the effect of foreign currency

$ 7,264
35

translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of January 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CloudCraze acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MuleSoft acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Datorama acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments of acquisition date fair values, including the effect of foreign currency

$ 7,314
134
4,816
586

translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of January 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$12,851

103

9. Debt

The carrying values of the Company’s borrowings were as follows (in millions):

Instrument

Date of issuance Maturity date

Effective interest rate
for fiscal 2019

January 31, 2019 January 31, 2018

2021 Term Loan . . . . . . . . . . . . . . . May 2018 May 2021
2023 Senior Notes . . . . . . . . . . . . . April 2018 April 2023
2028 Senior Notes . . . . . . . . . . . . . April 2018 April 2028
2019 Term Loan . . . . . . . . . . . . . . .
July 2019
Loan assumed on 50 Fremont . . . . . February 2015 June 2023
0.25% Convertible Senior Notes . . March 2013 April 2018

July 2016

3.05%
3.26%
3.70%
2.96%(1)

3.75%

2.53%(2)

Total carrying value of debt . . . . . .
Less current portion of debt . . . . . .

Total noncurrent debt . . . . . . . . . . .

$ 499
993
1,488
0
196
0

3,176
(3)

0
0
0
498
199
1,023

1,720
(1,025)

$3,173

695

(1) The Company repaid the 2019 Term Loan in full in January 2019.
(2) From February 1, 2018 through maturity, the effective interest rate for the Convertible Senior Notes was

2.53%.

Each of the Company’s debt agreements requires it to maintain compliance with certain debt covenants, all

of which the Company was in compliance with as of January 31, 2019.

The expected future principal payments for all borrowings as of January 31, 2019 is as follows (in millions):

Fiscal period:
Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3
4
504
4
1,183
1,500

Total principal outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,198

2021 Term Loan

In April 2018, the Company entered into a new three-year unsecured term loan with Bank of America, N.A.

and certain other institutional lenders for $500 million (“2021 Term Loan”) that matures in May 2021. The net
proceeds of the 2021 Term Loan were for the purpose of partially funding the acquisition of MuleSoft and were
received in May 2018. As of January 31, 2019, the noncurrent outstanding principal portion was $500 million.

2023 Senior Notes

In April 2018, the Company issued an aggregate principal amount of $1.0 billion in senior notes that will

mature in April 2023 and bear interest at a fixed rate of 3.25 percent per annum (“2023 Senior Notes”). The

104

interest is payable semi-annually in April and October of each year, commencing in October 2018. The Company
incurred issuance costs of $8 million in connection with the 2023 Senior Notes that, along with the debt discount
upon issuance, are being amortized to interest expense over the term of the 2023 Senior Notes. The 2023 Senior
Notes are unsecured and rank equally in right of payment with all of the other senior unsecured indebtedness. As
of January 31, 2019, the noncurrent outstanding principal portion was $1.0 billion.

2028 Senior Notes

In April 2018, the Company issued an aggregate principal amount of $1.5 billion in senior notes that will

mature in April 2028 and bear interest at a fixed rate of 3.70 percent per annum (“2028 Senior Notes”). The
interest is payable semi-annually in April and October of each year, commencing in October 2018. The Company
incurred issuance costs of $13 million in connection with the 2028 Senior Notes that, along with the debt
discount upon issuance, are being amortized to interest expense over the term of the 2028 Senior Notes. The
2028 Senior Notes are unsecured and rank equally in right of payment with all of the other senior unsecured
indebtedness. As of January 31, 2019, the noncurrent outstanding principal portion was $1.5 billion.

2019 Term Loan

In July 2016, the Company entered into a credit agreement (“Term Loan Credit Agreement”) with Bank of
America, N.A. and certain other institutional lenders for a $500 million term loan facility (“2019 Term Loan”)
that matures in July 2019. In January 2019, the Company repaid the 2019 Term Loan in full and the Term Loan
Credit Agreement was terminated.

Loan Assumed on 50 Fremont

The Company assumed a $200 million loan with the acquisition of 50 Fremont in San Francisco, California

(“Loan”). The Loan bears an interest rate of 3.75 percent per annum and is due in June 2023. Starting in July
2018, principal and interest payments are required, with the remaining principal due at maturity. As of
January 31, 2019, the current and noncurrent outstanding principal portion was $3 million and $195 million,
respectively. The Loan can be prepaid at any time subject to a yield maintenance fee.

Convertible Senior Notes

In March 2013, the Company issued at par value $1.15 billion of 0.25% convertible senior notes (the
“0.25% Senior Notes”, or “Notes”) due in April 2018. The Notes matured in April 2018 and the Company repaid
$1.0 billion in cash of principal balance of the Notes during the Company’s first quarter of fiscal 2019. The
Company also distributed approximately 7 million shares of the Company’s common stock to noteholders during
fiscal 2019, which represents the conversion value in excess of the principal amount.

To minimize the impact of potential economic dilution upon conversion of the Notes, also in March 2013,
the Company entered into convertible note hedge transactions with respect to its common stock. The Company
received approximately 7 million shares of the Company’s common stock from the exercise of the notes hedges
related to the 0.25% Senior Notes during this same period.

Warrants

In March 2013, the Company entered into a warrants transaction (“0.25% Warrants”), whereby the

Company sold warrants to acquire, subject to anti-dilution adjustments, shares of the Company’s common stock.
The 0.25% Warrants were separate transactions entered into by the Company and were not part of the terms of
the 0.25% Senior Notes or the related note hedges. In June 2018, the Company entered into agreements with each
of the 0.25% Warrants counterparties to amend and early settle the 0.25% Warrants prior to their scheduled
expiration beginning in July 2018. As a result of this amendment, during fiscal 2019, the Company issued, in the

105

aggregate, approximately 6 million shares to the counterparties to settle, via a net share settlement, the entirety of
the 0.25% Warrants, which increased the shares used in computing basic net income per share by 4 million for
fiscal 2019.

Revolving Credit Facility

In April 2018, the Company entered into a Second Amended and Restated Credit Agreement (“Revolving
Loan Credit Agreement”) with Wells Fargo Bank, National Association, and certain other institutional lenders
that provides for $1.0 billion unsecured revolving credit facility (“Credit Facility”) that matures in April 2023.
The Revolving Loan Credit Agreement amended and restated the Company’s existing revolving credit facility
dated July 2016. The Company may use the proceeds of future borrowings under the Credit Facility for
refinancing other indebtedness, working capital, capital expenditures and other general corporate purposes,
including permitted acquisitions.

There were no outstanding borrowings under the Credit Facility as of January 31, 2019. The Company
continues to pay a commitment fee on the available amount of the Credit Facility, which is included within
interest expense in the Company’s consolidated statement of operations.

Interest Expense on Debt

The following table sets forth total interest expense recognized related to debt (in millions):

Contractual interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount

Fiscal Year Ended
January 31,

2019

2018

2017

$106
16
4

$126

$23
5
26

$54

$19
6
25

$50

10. Stockholders’ Equity

The Company maintains the following stock plans: the ESPP, the 2013 Equity Incentive Plan and the 2014

Inducement Equity Incentive Plan (“2014 Inducement Plan”).

As of January 31, 2019 and January 31, 2018, $76 million and $63 million, respectively, was withheld on

behalf of employees for future purchases under the ESPP and is recorded in accrued compensation.

From February 1, 2006 through July 2013, options issued had a term of five years. After July 2013, options

issued have a term of seven years.

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option

pricing model with the following assumptions and fair value per share:

Stock Options

Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated life . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . .
Weighted-average fair value per share of

Fiscal Year Ended January 31,

2019

2018

2017

27.0-28.0% 28.0-31.4% 31.4-32.3%
3.5 years
3.5 years

3.5 years

2.5-3.0%

1.4-2.3%

0.9-1.6%

grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

28.89

22.71

19.13

106

ESPP

Fiscal Year Ended January 31,

2019

2018

2017

22.5-25.5% 21.3-27.6% 28.2-35.2%
0.75 years

0.75 years

2.0-2.6%

1.1-1.7%

0.5-1.0%

grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32.90

23.64

20.18

The Company estimated its future stock price volatility considering both its observed option-implied
volatilities and its historical volatility calculations. Management believes this is the best estimate of the expected
volatility over the expected life of its stock options and stock purchase rights.

The estimated life for the stock options was based on an analysis of historical exercise activity. The risk-free

interest rate is based on the rate for a U.S. government security with the same estimated life at the time of the
option grant and the stock purchase rights.

The estimated forfeiture rate applied is based on historical forfeiture rates. The Company does not anticipate

paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the
option pricing model.

In fiscal 2016 and fiscal 2017, the Company granted performance-based restricted stock unit awards to the

Chairman of the Board and Chief Executive Officer and certain executive officers, including the Chairman of the
Board and Chief Executive Officer, respectively. In fiscal 2019, the Company granted additional performance-
based restricted stock unit awards to certain employees, including the Chairman of the Board and Co-Chief
Executive Officer and other senior executives. The performance-based restricted stock unit awards are subject to
vesting based on a performance-based condition and a service-based condition. At the end of the three-year
service period, based on the Company’s share price performance, these performance-based restricted stock units
will vest in a percentage of the target number of shares between 0 and 200%, depending on the extent the
performance condition is achieved.

Stock option activity, excluding the ESPP is as follows:

Options Outstanding

Shares
Available for
Grant
(in thousands)

Outstanding
Stock
Options
(in thousands)

Weighted-
Average
Exercise Price

Aggregate
Intrinsic Value
(in millions)

Balance as of January 31, 2018 . . . . . . . . . .

50,313

21,735

$65.96

Increase in shares authorized:

2013 Equity Incentive Plan . . . . .
Assumed equity plans . . . . . . . . . .
Options granted under all plans . . . . . .
Restricted stock activity . . . . . . . . . . . .
Performance-based restricted stock

40,000
8,357
(13,846)
(19,937)

0
0
13,846
0

units . . . . . . . . . . . . . . . . . . . . . . . . .

(1,911)

Stock grants to board and advisory

board members . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . .
Plan shares expired . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . .

(146)
0
(163)
1,140

Balance as of January 31, 2019 . . . . . . . . . .

63,807

Vested or expected to vest

. . . . . . . . . . . . . .

Exercisable as of January 31, 2019 . . . . . . .

0
(8,495)
0
(1,140)

25,946

24,463

12,770

0.00
0.00
69.04
0.00

0.00

0.00
44.40
0.00
77.59

$74.15

$72.65

$55.58

107

$2,019

$1,941

$1,231

The total intrinsic value of the options exercised during fiscal 2019, 2018 and 2017 was $784 million,

$373 million and $224 million, respectively. The intrinsic value is the difference between the current market
value of the stock and the exercise price of the stock option.

The weighted-average remaining contractual life of vested and expected to vest options is approximately 5

years.

As of January 31, 2019, options to purchase 12.8 million shares were vested at a weighted average exercise

price of $55.58 per share and had a remaining weighted-average contractual life of approximately 4 years. The
total intrinsic value of these vested options as of January 31, 2019 was $1.2 billion.

During fiscal 2019, the Company recognized stock-based expense related to its equity plans for employees

and non-employee directors of $1.3 billion. As of January 31, 2019, the aggregate stock compensation remaining
to be amortized to costs and expenses was approximately $2.5 billion. The Company will amortize this stock
compensation balance as follows: $1.2 billion during fiscal 2020; $0.8 billion during fiscal 2021; $453 million
during fiscal 2022; $108 million during fiscal 2023 and $8 million during fiscal 2024. The expected amortization
reflects only outstanding stock awards as of January 31, 2019 and assumes no forfeiture activity.

The aggregate stock compensation remaining to be amortized to costs and expenses will be recognized over

a weighted average period of 2 years.

The following table summarizes information about stock options outstanding as of January 31, 2019:

Range of Exercise
Prices

$0.03 to $21.54 . . . . . . . . . .
$22.12 to $59.34 . . . . . . . . .
$59.37 to $75.01 . . . . . . . . .
$75.57 . . . . . . . . . . . . . . . . .
$76.48 to $82.08 . . . . . . . . .
$82.55 to $113.00 . . . . . . . .
$118.04 to $155.52 . . . . . . .

Options Outstanding

Options Exercisable

Number
Outstanding
(in thousands)

Weighted-Average
Remaining
Contractual Life
(Years)

Weighted-Average
Exercise Price

Number of
Shares
(in thousands)

Weighted-Average
Exercise Price

3,664
6,119
995
3,920
3,634
954
6,660

25,946

6.3
2.9
5.2
4.8
3.9
5.6
6.2

4.9

$ 11.91
53.60
68.37
75.57
80.85
98.03
120.23

$ 74.15

2,273
5,805
442
1,627
2,391
232
0

12,770

$ 9.77
54.77
70.65
75.57
80.86
95.36
0.00

$55.58

Restricted stock activity is as follows:

Restricted Stock Outstanding

Balance as of January 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted - restricted stock units and awards . . . . . . . . . . . . . . . . . . . . . . .
Granted - performance-based stock units . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested and converted to shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,018
12,221
541
(1,990)
(8,631)

Outstanding
(in thousands)

Aggregate
Intrinsic
Value (in
millions)

Weighted
Average
Grant
Date Fair
Value

$ 77.85
122.47
112.48
91.35
77.63

Balance as of January 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21,159

$103.33

$3,215

Expected to vest

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,491

$2,810

108

The restricted stock, which upon vesting entitles the holder to one share of common stock for each share of

restricted stock, has an exercise price of $0.001 per share, which is equal to the par value of the Company’s
common stock, and generally vests over four years. The total fair value of shares vested during fiscal 2019, 2018
and 2017 was $1.1 billion, $953 million and $640 million respectively.

Common Stock

The following number of shares of common stock were reserved and available for future issuance at

January 31, 2019 (in thousands):

Options outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock awards and units and performance-based

25,946

stock units outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21,159

Stock available for future grant or issuance:

2013 Equity Incentive Plan . . . . . . . . . . . . . . . . . . . . . . .
2014 Inducement Plan . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired equity plans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amended and Restated 2004 Employee Stock Purchase

63,342
352
113

Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,067

114,979

During fiscal years 2019, 2018 and 2017, certain board members received stock grants totaling 39,350,
57,832 and 62,632 shares of common stock, respectively for board services pursuant to the terms described in the
2013 Plan and previously, the 2004 Outside Directors Stock Plan. The expense related to these awards, which
was expensed immediately at the time of the issuance, totaled $5 million for each year in fiscal 2019, 2018 and
2017, respectively.

Preferred Stock

The Company’s board of directors has the authority, without further action by stockholders, to issue up to
5,000,000 shares of preferred stock in one or more series. The Company’s board of directors may designate the
rights, preferences, privileges and restrictions of the preferred stock, including dividend rights, conversion rights,
voting rights, terms of redemption, liquidation preference, sinking fund terms, and number of shares constituting
any series or the designation of any series. The issuance of preferred stock could have the effect of restricting
dividends on the Company’s common stock, diluting the voting power of its common stock, impairing the
liquidation rights of its common stock, or delaying or preventing a change in control. As of January 31, 2019 and
2018, no shares of preferred stock were outstanding.

11. Income Taxes

The domestic and foreign components of income before provision for (benefit from) income taxes consisted

of the following (in millions):

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended January 31,

2019

$839
144

$983

2018

$160
260

$420

2017

$151
28

$179

109

The provision for (benefit from) income taxes consisted of the following (in millions):

Current:

Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total
Deferred:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended January 31,

2019

2018

2017

0
39
117

156

(248)
(37)
2

(283)

$ (7)
2
85

(2)
(14)
(4)

(20)

0
5
72

(183)
(26)
(12)

(221)

Provision for (benefit from) income taxes . . . . . . . . . . . .

$(127)

$ 60

$(144)

In fiscal 2019, the Company released a portion of its valuation allowance related to federal and state
deferred tax assets, which was partially offset with the increase in unrecognized tax benefits. In addition, the
Company recorded current tax expense for profitable jurisdictions outside of the United States.

In fiscal 2018, the Company recorded tax expense primarily from profitable jurisdictions outside of the
United States. In fiscal 2017, the Company recorded a net tax benefit of $144 million. The most significant
component of this tax amount was the benefit of $210 million resulting from a partial release of its valuation
allowance in connection with the acquisition of Demandware. The net deferred tax liability from acquisitions
provided an additional source of income to support the realizability of the Company’s pre-existing deferred tax
assets and, as a result, the Company released a portion of its valuation allowance. The tax benefit associated with
the release of the valuation allowance was partially offset by income taxes in profitable jurisdictions outside the
United States. In addition, as a result of adopting Accounting Standards Update No. 2016-09, “Stock
Compensation (Topic 718): Improvements to Employee Shared Based Payment Accounting” (“ASU 2016-09”)
and the Company’s valuation allowance, it did not record significant current tax expense for the United States.

A reconciliation of income taxes at the statutory federal income tax rate to the provision for (benefit from)

income taxes included in the accompanying consolidated statements of operations is as follows (in millions):

Fiscal Year Ended January 31,

2019

2018

2017

U.S. federal taxes at statutory rate (1) . . . . . . . . . . . . . . . . . . . .
State, net of the federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of non-U.S. operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits related to shared based compensation . . . .
Effect of U.S. tax law change . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net

$ 206
79
379
(132)
63
(137)
43
(612)
(16)

$ 142
(21)
(35)
(107)
53
(135)
126
42
(5)

Provision for (benefit from) income taxes . . . . . . . . . . . . . . . . .

$(127)

$ 60

$ 63
7
62
(50)
48
(95)
0
(179)
0

$(144)

(1) The Company’s statutory rates were 21.0 percent and 33.8 percent for fiscal 2019 and fiscal 2018,

respectively, which reflected the corporate tax rate reduction effective January 1, 2018 due to the Tax Act.

110

In December 2017, the Tax Cuts and Jobs Act (“Tax Act”) was enacted into law, significantly changing

income tax law that affects U.S. corporations. In fiscal 2018, due to the timing of the enactment and the
complexity involved in applying the Tax Act, the Company recorded a provisional tax expense of $126 million
associated with the re-measurement of deferred taxes for the corporate rate reduction, which was offset by a
reduction in valuation allowance of $136 million. Also, based on the Company’s provisional assessment, the
transition tax had no impact to its income tax provision. In the fourth quarter of fiscal 2019, the Company
completed its analysis, based on the guidance, interpretations and data available, and recorded additional expense
of $43 million. The adjustment was primarily due to the reversal of a foreign tax credit benefit associated with a
one-time distribution.

On January 22, 2018, the FASB released guidance on the accounting for tax on the global intangible

low-taxed income (“GILTI”) provisions of the Tax Act. The GILTI provisions impose a tax on foreign income in
excess of a deemed return on tangible assets of foreign corporations. The Company has elected to recognize any
potential GILTI obligation as an expense in the period it is incurred.

The Company receives certain tax incentives in Singapore in the form of reduced tax rates, which will
expire in fiscal 2020. The income tax benefits resulting from the reduced tax rates were immaterial in fiscal 2019,
2018, and 2017.

Deferred Income Taxes

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of

assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets and liabilities were as follows (in millions):

Deferred tax assets:

Net operating loss carryforwards . . . . . . . . . . . . . . . . . . .
Deferred stock-based expense . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basis difference on strategic and other investments . . . . .
Financing obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred intercompany transactions . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax assets, net of valuation allowance . . . . . . . . . . . .
Deferred tax liabilities:

Deferred commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Basis difference on strategic and other investments . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of January 31,

2019

2018

$ 173
145
605
71
138
0
102
0
22

$ 617
79
497
59
113
41
97
90
15

1,256
(205)

1,051

1,608
(810)

798

(347)
(382)
(145)
(56)
(17)
0

(947)

(334)
(205)
(166)
0
(82)
(5)

(792)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 104

111

At January 31, 2019, for federal income tax purposes, the Company had net operating loss carryforwards of
approximately $2.1 billion, which expire in fiscal 2021 through fiscal 2038, federal research and development tax
credits of approximately $381 million, which expire in fiscal 2020 through fiscal 2039, foreign tax credits of
approximately $88 million, which expire in fiscal 2020 through fiscal 2029, and alternative minimum tax credits
of $1 million, which the Company expects to receive as a refund under the Tax Act. For California income tax
purposes, the Company had net operating loss carryforwards of approximately $765 million which expire
beginning in fiscal 2020 through fiscal 2039, California research and development tax credits of approximately
$281 million, which do not expire, and $9 million of enterprise zone tax credits, which expire in fiscal 2024
through fiscal 2026. For other states’ income tax purposes, the Company had net operating loss carryforwards of
approximately $1.0 billion, which expire beginning in fiscal 2021 through fiscal 2039 and tax credits of
approximately $41 million, which expire beginning in fiscal 2021 through fiscal 2033. Utilization of the
Company’s net operating loss carryforwards may be subject to substantial annual limitation due to the ownership
change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation
could result in the expiration of the net operating loss and tax credit carryforwards before utilization.

The Company had a valuation allowance of $205 million and $810 million as of January 31, 2019 and

January 31, 2018 respectively. The Company regularly assesses the realizability of its deferred tax assets and
establishes a valuation allowance if it is more-likely-than-not that some or all of its deferred tax assets will not be
realized. The Company evaluates and weighs all available positive and negative evidence such as historic results,
future reversals of existing deferred tax liabilities, projected future taxable income, as well as prudent and
feasible tax-planning strategies. The assessment requires significant judgment and is performed in each of the
applicable jurisdictions. The Company demonstrated sustained profitability evidenced by three consecutive years
of positive earnings as well as forecasted continuing profitability at the worldwide and U.S. jurisdictional levels.
As a result, the Company determined that there was sufficient positive evidence to release a portion of its
valuation allowance related to federal and state deferred tax assets, resulting in a tax benefit of $612 million
during fiscal 2019. The valuation allowance at the end of January 31, 2019 was primarily related to net operating
loss and tax credits in certain state jurisdictions. The Company will continue to evaluate the need for valuation
allowances for its deferred tax assets.

Tax Benefits Related to Stock-Based Compensation

The total income tax benefit in the accompanying consolidated statements of operations related to stock-
based awards was $236 million, $265 million and $229 million for fiscal 2019, 2018 and 2017, respectively. For
fiscal 2018 and 2017, majority of the tax benefit was not recognized as a result of the valuation allowance.

Unrecognized Tax Benefits and Other Considerations

The Company records liabilities related to its uncertain tax positions. Tax positions for the Company and its

subsidiaries are subject to income tax audits by multiple tax jurisdictions throughout the world. The Company
recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is
sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is
measured as the largest amount of benefit which is greater than 50 percent likely to be realized upon settlement
with the taxing authority. The Company had gross unrecognized tax benefits of $852 million, $304 million, and
$231 million as of January 31, 2019, 2018, and 2017 respectively.

112

A reconciliation of the beginning and ending balance of total unrecognized tax benefits for fiscal years

2019, 2018 and 2017 is as follows (in millions):

Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax positions taken in prior period:

Gross increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross decreases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax positions taken in current period:

Gross increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended January 31,

2019

$304

2018

$231

2017

$173

474
(2)

107
(15)
(10)
(6)

31
(6)

51
(1)
(8)
6

18
(1)

58
(16)
(1)
0

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$852

$304

$231

During fiscal 2019, the Company reported an increase of approximately $548 million in its unrecognized tax

benefits primarily for tax issues related to the integrations of certain historical acquisitions as a result of recent
developments of on-going audits and court cases. For fiscal 2019, total unrecognized tax benefits in an amount of
$631 million, if recognized, would reduce income tax expense and the Company’s effective tax rate. For fiscal
2018 and 2017, total unrecognized tax benefits in an amount of $77 million and $73 million, respectively, if
recognized, would reduce income tax expense and the Company’s effective tax rate after considering the impact
of the change in valuation allowance in the U.S.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the income

tax provision. The Company recorded an immaterial amount for penalties and interest for each of fiscal 2019,
2018 and 2017. The balance in the non-current income tax payable related to penalties and interest was
$10 million, $6 million and $7 million as of January 31, 2019, 2018 and 2017, respectively.

Certain prior year tax returns are currently being examined by various taxing authorities in countries
including the United States, France, United Kingdom and Germany. In March 2017, the Company received the
final notice of proposed adjustments primarily related to transfer pricing issues from the IRS. The Company is
currently appealing the IRS proposed adjustments. The Company believes that it has provided adequate reserves
for its income tax uncertainties in all open tax years. As the outcome of the tax audits cannot be predicted with
certainty, if any issues addressed in the Company’s tax audits are resolved in a manner inconsistent with
management’s expectations, the Company could adjust its provision for income taxes in the future.

The Company has operations and taxable presence in multiple jurisdictions in the U.S. and outside of the

U.S. Tax positions for the Company and its subsidiaries are subject to income tax audits by multiple tax
jurisdictions around the world. The Company currently considers U.S. federal and state, Canada, Japan,
Australia, Germany, France and the United Kingdom to be major tax jurisdictions. The Company’s U.S. federal
and state tax returns since February 1999, which was the inception of the Company, remain open to examination.
With some exceptions, tax years prior to fiscal 2016 in jurisdictions outside of U.S. are generally closed.
However, in Japan and United Kingdom, the Company is no longer subject to examinations for years prior to
fiscal 2015 and fiscal 2017, respectively.

The Company anticipates it is reasonably possible that a decrease of unrecognized tax benefits up to
approximately $3 million may occur in the next 12 months, as the applicable statutes of limitations lapse.

113

12. Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted-average number of common
shares outstanding for the fiscal period. Diluted earnings per share is computed by giving effect to all potential
weighted average dilutive common stock, including options, restricted stock units, warrants and the convertible
senior notes. The dilutive effect of outstanding awards and convertible securities is reflected in diluted earnings
per share by application of the treasury stock method.

A reconciliation of the denominator used in the calculation of basic and diluted earnings per share is as

follows (in millions):

Fiscal Year Ended January 31,

2019

2018

2017

Numerator:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,110

$360

$323

Denominator:
Weighted-average shares outstanding for basic earnings per

share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

751

715

688

Effect of dilutive securities:

Convertible senior notes which matured in April 2018 . .
Employee stock awards . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1
21
2

5
14
1

2
10
0

Adjusted weighted-average shares outstanding and assumed

conversions for diluted earnings per share . . . . . . . . . . . . . .

775

735

700

The weighted-average number of shares outstanding used in the computation of diluted earnings per share
does not include the effect of the following potential outstanding common stock. The effects of these potentially
outstanding shares were not included in the calculation of diluted earnings per share because the effect would
have been anti-dilutive (in millions):

Employee stock awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4
0

7
0

11
17

Fiscal Year Ended January 31,

2019

2018

2017

13. Commitments

Letters of Credit

As of January 31, 2019, the Company had a total of $92 million in letters of credit outstanding substantially

in favor of certain landlords for office space. These letters of credit renew annually and expire at various dates
through December 2030.

Leases

The Company leases facilities space and certain fixed assets under non-cancelable operating and capital

leases with various expiration dates.

114

As of January 31, 2019, the future minimum lease payments under non-cancelable operating and capital

leases are as follows (in millions):

Capital
Leases (1)

Operating
Leases (2)

Financing
Obligation-Leased
Facility(3)

Fiscal Period:
Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2021 . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2022 . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2023 . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2024 . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . .

Total minimum lease payments . . . . . .

$200
0
0
0
0
0

200

$ 778
658
466
369
314
1,610

$4,195

Less: amount representing interest

. . .

(9)

Present value of capital lease

obligations . . . . . . . . . . . . . . . . . . . .

$191

$ 22
23
23
24
24
163

$279

(1) As of January 31, 2019, the capital lease obligation is included in accrued expenses and other liabilities on

the consolidated balance sheet.

(2) Operating leases do not include sublease income. The Company has entered into various sublease

agreements with third parties. Under these agreements, the Company expects to receive sublease income of
approximately $146 million in the next five years and $79 million thereafter.

(3) Total Financing Obligation - Leased Facility noted above represents the total obligation on the lease

agreement including amounts allocated to interest and the implied lease for the land. As of January 31,
2019, $215 million of the total $279 million above was recorded to Financing obligation leased facility, of
which the current portion is included in accrued expenses and other liabilities and the noncurrent portion is
included in other noncurrent liabilities on the consolidated balance sheet.

The table above excludes renewal terms for facilities and certain services that provide the Company with the

option to renew. The Company’s future contractual obligations would change if the Company exercised these
options.

In addition, the table above excludes two separate agreements for office facilities to be constructed. As of
January 31, 2019 construction has not commenced on either of these buildings and the timing of completion of
construction is unknown. Due to this uncertainty the entire commitment for these two obligations are excluded
from the table above. These agreements are as follows:

•

approximately 324,000 rentable square feet of office space in a building to be constructed as part of the
Company’s urban campus in San Francisco, California. As of January 31, 2019, construction has not
yet commenced on the building and is dependent on the developer obtaining approval from the City
and County of San Francisco. The Company expects to begin occupying the space in fiscal 2024 and
the total non-cancelable minimum payments under this agreement are approximately $480 million over
16 years. Construction has not commenced on the building and is dependent on the developer obtaining
approvals from the City and County of San Francisco.

approximately 603,000 rentable square feet of office space in a building to be constructed in Chicago,
Illinois. As of January 31, 2019 construction has not yet commenced on the building. The Company
expects to begin occupying the space in fiscal 2022 and the total non-cancelable minimum payments
under this agreement are approximately $475 million over 17 years.

115

The terms of the lease agreements provide for rental payments on a graduated basis. The Company
recognizes rent expense on a straight-line basis over the lease period and has accrued for rent expense incurred
but not paid. Of the total operating lease commitment balance of $4.2 billion, approximately $3.5 billion is
related to facilities space. The remaining commitment amount is related to computer equipment and furniture and
fixtures.

Rent expense for fiscal 2019, 2018 and 2017 was $365 million, $285 million and $226 million, respectively.

The Company has entered into various contractual commitments with infrastructure service providers for a

total commitment of $2.0 billion. The Company paid $156 million in connection with these agreements during
fiscal 2019. As of January 31, 2019 the total remaining commitment is approximately $1.8 billion and
$264 million is due in the next fiscal year.

14. Employee Benefit Plans

The Company has a 401(k) plan covering all eligible employees in the United States and a Registered
Retirement Savings plan covering all eligible employees in Canada. Since January 1, 2006, the Company has
been contributing to the plans. Total Company contributions during fiscal 2019, 2018 and 2017, were
$106 million, $93 million and $56 million, respectively.

15. Legal Proceedings and Claims

In the ordinary course of business, the Company is or may be involved in various legal or regulatory
proceedings, claims or purported class actions related to alleged infringement of third-party patents and other
intellectual property rights, commercial, corporate and securities, labor and employment, wage and hour, and
other claims. The Company has been, and may in the future be put on notice and/or sued by third-parties for
alleged infringement of their proprietary rights, including patent infringement.

In general, the resolution of a legal matter could prevent the Company from offering its service to others,

could be material to the Company’s financial condition or cash flows, or both, or could otherwise adversely
affect the Company’s operating results.

The Company makes a provision for a liability relating to legal matters when it is both probable that a
liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed
at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice
of legal counsel and other information and events pertaining to a particular matter. The outcomes of legal
proceedings and other contingencies are, however, inherently unpredictable and subject to significant
uncertainties. As a result, the Company is not able to reasonably estimate the amount or range of possible losses
in excess of any amounts accrued, including losses that could arise as a result of application of non-monetary
remedies, with respect to the contingencies it faces, and the Company’s estimates may not prove to be accurate.
In management’s opinion, resolution of all current matters is not expected to have a material adverse impact on
the Company’s consolidated results of operations, cash flows or financial position. However, depending on the
nature and timing of any such dispute or other contingency, an unfavorable resolution of a matter could
materially affect the Company’s current or future results of operations or cash flows, or both, in a particular
quarter.

In December 2018, the Company was named as a nominal defendant and certain of its current and former

directors were named as defendants in a purported shareholder derivative action in the Delaware Court of
Chancery. The complaint alleged that excessive compensation was paid to such directors for their service,
included claims of breach of fiduciary duty and unjust enrichment, and sought restitution and disgorgement of a
portion of the directors’ compensation. Subsequently, three similar shareholder derivative actions were filed in
the Delaware Court of Chancery. The cases have been consolidated under the caption In re Salesforce.com, Inc.

116

Derivative Litigation. The Company believes that the ultimate outcome of this litigation will not materially and
adversely affect its business, financial condition, results of operations or cash flows.

16. Related-Party Transactions

In January 1999, the Salesforce.com Foundation, also referred to as the Foundation, was chartered on an
idea of leveraging the Company’s people, technology and resources to help improve communities around the
world. The Company calls this integrated philanthropic approach the 1-1-1 model. Beginning in 2008,
Salesforce.org, which is a non-profit public benefit corporation, was established to resell the Company’s services
to nonprofit organizations and certain higher education organizations.

The Company’s Chairman is the chairman of both the Foundation and Salesforce.org. The Company’s
Chairman holds one of the three Foundation board seats. The Company’s Chairman, one of the Company’s
employees and one of the Company’s board members hold three of Salesforce.org’s nine board seats. The
Company does not control the Foundation’s or Salesforce.org’s activities, and accordingly, the Company does
not consolidate either of the related entities’ statement of activities with its financial results.

Since the Foundation’s and Salesforce.org’s inception, the Company has provided at no charge certain

resources to those entities’ employees such as office space, furniture, equipment, facilities, services and other
resources. The value of these items was approximately $15 million, $11 million and $3 million for fiscal 2019,
2018 and 2017, respectively.

Additionally, the Company allows Salesforce.org to donate subscriptions of the Company’s services to other

qualified non-profit organizations. The Company also allows Salesforce.org to resell the Company’s service to
non-profit organizations and certain education entities. The Company does not charge Salesforce.org for these
subscriptions, therefore income from subscriptions sold to non-profit organizations is donated back to the
community through charitable grants made by the Foundation and Salesforce.org. The value of the subscriptions
sold by Salesforce.org pursuant to the reseller agreement, as amended, was approximately $253 million,
$183 million and $112 million for fiscal 2019, 2018 and 2017, respectively.

17. Selected Quarterly Financial Data (Unaudited)

Selected summarized quarterly financial information for fiscal 2019 and 2018 is as follows:

Fiscal 2019
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic net income per share . . . . . . . . . . . . . .
Diluted net income per share . . . . . . . . . . . . .

Fiscal 2018
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic net income per share . . . . . . . . . . . . . .
Diluted net income per share . . . . . . . . . . . . .

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Fiscal Year

(in millions, except per share data)

$3,281
2,432
115
$ 299
$ 0.40
$ 0.39

$2,577
1,907
84
$
46
$ 0.06
$ 0.06

$3,392
2,503
92
$ 105
$ 0.14
$ 0.13

$2,701
1,987
155
$ 107
$ 0.15
$ 0.14

$3,603
2,657
137
$ 362
$ 0.47
$ 0.46

$2,865
2,127
211
$ 206
$ 0.28
$ 0.28

$13,282
9,831
535
$ 1,110
1.48
$
1.43
$

$10,540
7,767
454
360
0.50
0.49

$
$
$

$3,006
2,239
191
$ 344
$ 0.47
$ 0.46

$2,397
1,746
4
$
1
$ 0.00
$ 0.00

117

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive

officers and principal financial officer, we conducted an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this
report.

In designing and evaluating our disclosure controls and procedures, management recognizes that any

disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives. In addition, the design of disclosure controls and
procedures must reflect the fact that there are resource constraints and that management is required to apply its
judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on management’s evaluation, our principal executive officers and principal financial officer

concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a
reasonable level that the information we are required to disclose in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities
and Exchange Commission rules and forms, and that such information is accumulated and communicated to our
management, including our chief executive officers and chief financial officer, as appropriate, to allow timely
decisions regarding required disclosures.

(b) Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and
with the participation of our management, including our chief executive officers and chief financial officer, we
conducted an evaluation of the effectiveness of our internal control over financial reporting as of January 31,
2019 based on the guidelines established in the Internal Control—Integrated Framework (2013 framework)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our internal
control over financial reporting includes policies and procedures that provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external reporting purposes in
accordance with U.S. generally accepted accounting principles.

In accordance with guidance issued by the Securities and Exchange Commission, companies are permitted
to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal
year in which the acquisition occurred. Our management’s evaluation of internal control over financial reporting
excluded the internal control activities of MuleSoft, Inc. (“MuleSoft”), which we acquired in May 2018, as
discussed in Note 7, “Business Combinations,” of the Notes to the Consolidated Financial Statements. We have
included the financial results of MuleSoft in the consolidated financial statements from the date of acquisition.
Total revenues subject to MuleSoft’s internal control over financial reporting represented approximately three
percent of our consolidated total revenues for the fiscal year ended January 31, 2019. Total net income subject to
MuleSoft’s internal control over financial reporting represented approximately three percent of our consolidated
total net income for the fiscal year ended January 31, 2019. Total assets subject to MuleSoft’s internal control
over financial reporting represented approximately two percent of our consolidated total assets, excluding

118

acquisition method fair value adjustments, as of January 31, 2019. Total net assets subject to MuleSoft’s internal
control over financial reporting represented approximately one percent of our consolidated net assets, excluding
acquisition method fair value adjustments, as of January 31, 2019.

Based on the results of our evaluation, our management concluded that our internal control over financial
reporting was effective as of January 31, 2019. We reviewed the results of management’s assessment with our
Audit Committee.

The effectiveness of our internal control over financial reporting as of January 31, 2019 has been audited by
Ernst & Young LLP, an independent registered public accounting firm, as stated in its report which is included in
Item 8 of this Annual Report on Form 10-K.

There was no change in our internal control over financial reporting that occurred during the quarter ended

January 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.

(d) Inherent Limitations on Effectiveness of Controls

Our management, including our chief executive officers and chief financial officer, do not expect that our

disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control system must reflect the fact that there
are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a
simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by
collusion of two or more people or by management override of the controls. The design of any system of controls
is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls
may become inadequate because of changes in conditions, or the degree of compliance with policies or
procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected.

ITEM 9B. OTHER INFORMATION

Not applicable.

119

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information concerning our directors, compliance with Section 16(a) of the Exchange Act, our Audit

Committee and any changes to the process by which stockholders may recommend nominees to the Board
required by this Item are incorporated herein by reference to information contained in the Proxy Statement,
including “Directors and Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting
Compliance.”

The information concerning our executive officers required by this Item is incorporated by reference herein

to the section of this Annual Report on Form 10-K in Part I, entitled “Executive Officers of the Registrant.”

We have adopted a code of ethics, our Code of Conduct, which applies to all employees, including our
principal executive officers, Marc Benioff and Keith Block, principal financial officer, Mark Hawkins, principal
accounting officer, Joe Allanson, and all other executive officers. The Code of Conduct is available on our
website at http://investor.salesforce.com/about-us/investor/corporate-governance/. A copy may also be obtained
without charge by contacting Investor Relations, salesforce.com, inc., Salesforce Tower, 415 Mission St, 3rd Fl,
San Francisco, California 94105 or by calling (415) 901-7000.

We plan to post on our website at the address described above future amendments and waivers of our Code

of Conduct as permitted under applicable NYSE and SEC rules.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to information contained in the

Proxy Statement, including “Compensation Discussion and Analysis,” “Committee Reports,” “Directors and
Corporate Governance” and “Executive Compensation and Other Matters.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated herein by reference to information contained in the
Proxy Statement, including “Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters” and “Equity Compensation Plan Information.”

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR

INDEPENDENCE

The information required by this Item is incorporated herein by reference to information contained in the

Proxy Statement, including “Directors and Corporate Governance” and “Employment Contracts and Certain
Transactions.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated herein by reference to information contained in the

Proxy Statement, including “Ratification of Appointment of Independent Auditors.”

120

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as a part of this Annual Report on Form 10-K:

1. Financial Statements: The information concerning our financial statements, and Report of

Independent Registered Public Accounting Firm required by this Item is incorporated by reference herein to
the section of this Annual Report on Form 10-K in Item 8, entitled “Consolidated Financial Statements and
Supplementary Data.”

2. Financial Statement Schedules: Schedule II Valuation and Qualifying Accounts is filed as part of

this Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial
Statements and Notes thereto.

The Financial Statement Schedules not listed have been omitted because they are not applicable or are

not required or the information required to be set forth herein is included in the Consolidated Financial
Statements or Notes thereto.

3. Exhibits: See “Index to Exhibits.”

(b) Exhibits. The exhibits listed below in the accompanying “Index to Exhibits” are filed or incorporated by

reference as part of this Annual Report on Form 10-K.

121

salesforce.com, inc.

Schedule II Valuation and Qualifying Accounts
(in millions)

Description

Balance at
beginning of
year

Additions

Deductions
write-offs

Balance at
end of year

Fiscal year ended January 31, 2019

Allowance for doubtful accounts . . . . . . . . . .

Fiscal year ended January 31, 2018

Allowance for doubtful accounts . . . . . . . . . .

Fiscal year ended January 31, 2017

Allowance for doubtful accounts . . . . . . . . . .

$21

$12

$10

$19

$31

$18

$(18)

$(22)

$(16)

$22

$21

$12

ITEM 16. 10-K SUMMARY

Omitted at registrant’s option.

122

Exhibit
No.

2.1

3.1

3.2

4.1

4.2

4.3

4.4

4.5

10.1*

10.2*

10.3*

10.4*

10.5*

10.6*

10.7*

10.8*

10.9*

10.10*

Index to Exhibits

Exhibit Description

Agreement and Plan of Merger, dated as of
March 20, 2018, by and among salesforce.com,
inc., Malbec Acquisition Corp. and MuleSoft,
Inc.

Amended and Restated Certificate of
Incorporation of salesforce.com, inc.

Amended and Restated Bylaws of
salesforce.com, inc.

Specimen Common Stock Certificate

Indenture, dated April 11, 2018, between the
Company and U.S. Bank National Association,
as trustee

First Supplemental Indenture, dated April 11,
2018, between the Company and U.S. Bank
National Association, as trustee

Form of 2023 Notes

Form of 2028 Notes

Form of Indemnification Agreement between
salesforce.com, inc. and its officers and
directors

Amended and Restated 2013 Equity Incentive
Plan

Amended and Restated 2004 Employee Stock
Purchase Plan

Provided
Herewith

Incorporated by Reference

Form

SEC File No.

Exhibit

Filing Date

8-K

001-32224

2.1

3/21/2018

8-K

001-32224

3.1

6/13/2018

8-K

001-32224

S-1/A 333-111289

3.1

4.2

8/8/2018

4/20/2004

8-K

001-32224

4.1

4/11/2018

8-K

001-32224

4.2

4/11/2018

S-1/A 333-111289

10.1

4/20/2004

8-K

001-32224

10.1

6/13/2018

8-K

001-32224

10.2

6/7/2017

MetaMind, Inc. 2014 Stock Incentive Plan

S-8

333-211510

4.1

5/20/2016

2014 Inducement Equity Incentive Plan, as
amended

Related forms of equity agreements under the
Amended and Restated 2014 Inducement
Equity Incentive Plan

Related forms of equity agreements under the
Amended and Restated 2013 Equity Incentive
Plan

Related forms of equity agreements under the
Amended and Restated 2004 Employee Stock
Purchase Plan

Kokua Bonus Plan, as amended and restated
December 5, 2014, effective February 1, 2015

Form of Offer Letter for Executive Officers
and schedule of omitted details thereto

123

S-8

333-213685

4.3

9/16/2016

10-K

001-32224

10.7

3/6/2015

10-K

001-32224

10.11

3/9/2012

Exhibit
No.

10.11*

10.12*

10.13*

10.14*

10.15*

10.16

10.17

10.18

10.19

10.20

10.21

Exhibit Description

Employment Offer Letter, dated May 2, 2013
between salesforce.com, inc. and Keith Block

Employment Offer Letter, dated June 11, 2014,
between salesforce.com, inc. and Mark
Hawkins

Form of Change of Control and Retention
Agreement as entered into with Marc Benioff

Form of Change of Control and Retention
Agreement as entered into with non-CEO
Executive Officers

Form of Performance-Based Restricted Stock
Unit Agreement for Executive Officers

Office Lease dated as of April 10, 2014 by and
between salesforce.com, inc. and Transbay
Tower LLC

Purchase and Sale Agreement, dated
November 10, 2014, between salesforce.com,
inc. and 50 Fremont Tower, LLC

Credit Agreement, dated as of July 7, 2016, by
and among salesforce.com, inc., the guarantors
from time to time party thereto, the lenders
from time to time party thereto and Bank of
America, N.A., as Administrative Agent

Amended and Restated Credit Agreement,
dated as of July 7, 2016, by and among
salesforce.com, inc., the subsidiaries of the
Company party thereto as guarantors, the
lenders from time to time thereto and Wells
Fargo Bank, N.A., as Administrative Agent

Tender and Support Agreement, dated as of
March 20, 2018, by and among salesforce.com,
inc., Malbec Acquisition Corp. and Lightspeed
Venture Partners Select, L.P., Lightspeed
Venture Partners VII, L.P., New Enterprise
Associates 15, L.P., New Enterprise Associates
14, L.P., NEA 15 Opportunities Fund, L.P. and
NEA Ventures 2013, L.P.

Tender and Support Agreement, dated as of
March 20, 2018, by and among salesforce.com,
inc., Malbec Acquisition Corp., Matthew
Langdon, Ann Winbald, Gregory Schott, Little
Family 1995 TR, Ravi Mhatre, Mhatre
Investments LP-Fund 4, Simon Parmett, Robert
Horton and Ross Mason.

124

Provided
Herewith

Incorporated by Reference

Form SEC File No. Exhibit

Filing Date

8-K 001-32224

10.1

6/11/2013

8-K 001-32224

10.1

6/30/2014

10-K 001-32224

10.13

3/9/2009

10-K 001-32224

10.14

3/9/2009

10-K 001-32224

10.17

3/6/2017

10-Q 001-32224

10.2

5/30/2014

10-Q 001-32224

10.2

11/26/2014

8-K 001-32224

10.1

7/11/2016

8-K 001-32224

10.2

7/11/2016

8-K 001-32224

10.1

3/21/2018

8-K 001-32224

10.2

3/21/2018

Exhibit
No.

10.22

10.23

10.24

10.25

10.26

10.27

21.1

23.1

24.1

31.1

31.2

31.3

32.1

Exhibit Description

Provided
Herewith

Incorporated by Reference

Form SEC File No. Exhibit

Filing Date

8-K 001-32224

10.1

4/30/2018

8-K 001-32224

10.2

4/30/2018

8-K 001-32224

10.3

4/30/2018

8-K 001-32224

10.1

6/15/2018

8-K 001-32224

10.2

6/15/2018

8-K 001-32224

10.3

6/15/2018

Second Amended and Restated Credit
Agreement, dated as of April 30, 2018, among
the Company, the lenders and other parties party
thereto, and Wells Fargo Bank, National
Association, as Administrative Agent, Swingline
Lender and an Issuing Lender.

Amended and Restated Credit Agreement, dated
as of April 30, 2018, among the Company, the
lenders and other parties party thereto, and Bank
of America, N.A., as Administrative Agent.

Credit Agreement, dated as of April 30, 2018,
among the Company, the lenders and other
parties party thereto, and Bank of America, N.A.,
as Administrative Agent.

Settlement Agreement between salesforce.com,
inc. and BNP Paribas, dated June 12, 2018

Settlement Agreement between salesforce.com,
inc. and Bank of America, N.A., dated June 12,
2018

Settlement Agreement between salesforce.com,
inc. and Morgan Stanley & Co. International plc,
dated June 12, 2018

List of Subsidiaries

Consent of Independent Registered Public
Accounting Firm

Power of Attorney (incorporated by reference to
the signature page of this Annual Report on
Form 10-K)

Certification of Co-Chief Executive Officer,
Marc Benioff, pursuant to Exchange Act Rule
13a-14(a) or 15(d)-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Co-Chief Executive Officer,
Keith Block, pursuant to Exchange Act Rule
13a-14(a) or 15(d)-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer pursuant
to Exchange Act Rule 13a-14(a) or 15(d)-14(a),
as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

Certification of Co-Chief Executive Officers and
Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

125

Provided
Herewith

Incorporated by Reference

Form SEC File No. Exhibit

Filing Date

Exhibit
No.

Exhibit Description

101.INS

XBRL Instance Document

101.SCH

101.CAL

XBRL Taxonomy Extension Schema
Document

XBRL Taxonomy Extension Calculation
Linkbase Document

101.DEF

XBRL Extension Definition

101.LAB

101.PRE

XBRL Taxonomy Extension Label Linkbase
Document

XBRL Taxonomy Extension Presentation
Linkbase Document

* Indicates a management contract or compensatory plan or arrangement.

126

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant

has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SIGNATURES

Dated: March 8, 2019

salesforce.com, inc.

By:

/S/ MARK J. HAWKINS
Mark J. Hawkins
President and
Chief Financial Officer
(Principal Financial Officer)

salesforce.com, inc.

By:

/S/

JOE ALLANSON
Joe Allanson
Executive Vice President,
Chief Accounting Officer
and Corporate Controller
(Principal Accounting Officer)

127

POWER OF ATTORNEY AND SIGNATURES

KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below

constitutes and appoints Marc Benioff, Keith Block, Mark J. Hawkins, Joe Allanson and Amy Weaver, his or her
attorney-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any
amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorney-in-fact, or his or her substitute or substitutes, may do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has

been signed below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.

Signature

Title

Date

/s/ Marc Benioff
Marc Benioff

/s/ Keith Block
Keith Block

/s/ Mark Hawkins
Mark Hawkins

/s/

Joe Allanson

/s/ Craig Conway
Craig Conway

/s/ Parker Harris
Parker Harris

/s/ Alan Hassenfeld
Alan Hassenfeld

/s/ Neelie Kroes
Neelie Kroes

/s/ Colin Powell
Colin Powell

/s/ Sanford R. Robertson
Sanford R. Robertson

Chairman of the Board and

March 8, 2019

co-Chief Executive Officer
(Principal Executive Officer)

Director, co-Chief Executive Officer

March 8, 2019

(Principal Executive Officer)

President and Chief Financial Officer

March 8, 2019

(Principal Financial Officer)

Executive Vice President, Chief

March 8, 2019

Accounting Officer and
Corporate Controller (Principal
Accounting Officer)

Director

March 8, 2019

Director, Co-Founder and Chief

March 8, 2019

Technology Officer

March 8, 2019

Director

128

Signature

Title

Date

/s/

John V. Roos

/s/ Bernard Tyson
Bernard Tyson

/s/ Robin Washington
Robin Washington

/s/ Maynard Webb
Maynard Webb

/s/ Susan Wojcicki
Susan Wojcicki

Director

March 8, 2019

129

[THIS PAGE INTENTIONALLY LEFT BLANK]

(cid:91)(cid:4)(cid:60)(cid:26)(cid:91)(cid:36)(cid:73)(cid:87)(cid:16)(cid:26)(cid:3)(cid:36)(cid:73)(cid:87)(cid:66)(cid:3)(cid:281)(cid:280)(cid:384)(cid:58)

Board of Directors

Marc Benioff

Keith Block

Craig Conway

Parker Harris

(cid:16)(cid:168)(cid:130)(cid:171)(cid:216)(cid:194)(cid:130)(cid:195)(cid:3)(cid:202)(cid:162)(cid:3)(cid:227)(cid:168)(cid:152)(cid:3)(cid:15)(cid:202)(cid:130)(cid:216)(cid:148)(cid:3)(cid:202)(cid:162)(cid:3)(cid:22)(cid:171)(cid:216)(cid:152)(cid:142)(cid:227)(cid:202)(cid:216)(cid:220)(cid:3)(cid:447)(cid:3)(cid:16)(cid:202)(cid:384)(cid:16)(cid:168)(cid:171)(cid:152)(cid:162)(cid:3)(cid:26)(cid:249)(cid:152)(cid:142)(cid:232)(cid:227)(cid:171)(cid:243)(cid:152)(cid:3)(cid:73)(cid:162)(cid:162)(cid:171)(cid:142)(cid:152)(cid:216)

(cid:16)(cid:202)(cid:384)(cid:16)(cid:168)(cid:171)(cid:152)(cid:162)(cid:3)(cid:26)(cid:249)(cid:152)(cid:142)(cid:232)(cid:227)(cid:171)(cid:243)(cid:152)(cid:3)(cid:73)(cid:162)(cid:162)(cid:171)(cid:142)(cid:152)(cid:216)

(cid:36)(cid:202)(cid:216)(cid:194)(cid:152)(cid:216)(cid:3)(cid:16)(cid:168)(cid:171)(cid:152)(cid:162)(cid:3)(cid:26)(cid:249)(cid:152)(cid:142)(cid:232)(cid:227)(cid:171)(cid:243)(cid:152)(cid:3)(cid:73)(cid:162)(cid:162)(cid:171)(cid:142)(cid:152)(cid:216)(cid:359)(cid:3)(cid:84)(cid:152)(cid:202)(cid:213)(cid:188)(cid:152)(cid:91)(cid:202)(cid:162)(cid:227)(cid:359)(cid:3)(cid:45)(cid:195)(cid:142)(cid:364)

(cid:16)(cid:202)(cid:384)(cid:36)(cid:202)(cid:232)(cid:195)(cid:148)(cid:152)(cid:216)(cid:3)(cid:447)(cid:3)(cid:16)(cid:168)(cid:171)(cid:152)(cid:162)(cid:3)(cid:98)(cid:152)(cid:142)(cid:168)(cid:195)(cid:202)(cid:188)(cid:202)(cid:163)(cid:250)(cid:3)(cid:73)(cid:162)(cid:162)(cid:171)(cid:142)(cid:152)(cid:216)

Alan Hassenfeld

(cid:22)(cid:171)(cid:216)(cid:152)(cid:142)(cid:227)(cid:202)(cid:216)(cid:359)(cid:3)(cid:42)(cid:130)(cid:220)(cid:141)(cid:216)(cid:202)(cid:359)(cid:3)(cid:45)(cid:195)(cid:142)(cid:364)

Neelie Kroes

Colin Powell

Former Vice President of the European Commission

(cid:37)(cid:152)(cid:195)(cid:152)(cid:216)(cid:130)(cid:188)(cid:359)(cid:3)(cid:36)(cid:202)(cid:216)(cid:194)(cid:152)(cid:216)(cid:3)(cid:103)(cid:364)(cid:91)(cid:364)(cid:3)(cid:91)(cid:152)(cid:142)(cid:216)(cid:152)(cid:227)(cid:130)(cid:216)(cid:250)(cid:3)(cid:202)(cid:162)(cid:3)(cid:91)(cid:227)(cid:130)(cid:227)(cid:152)(cid:359)(cid:3)(cid:36)(cid:202)(cid:216)(cid:194)(cid:152)(cid:216)(cid:3)(cid:16)(cid:168)(cid:130)(cid:171)(cid:216)(cid:194)(cid:130)(cid:195)(cid:359)(cid:3)(cid:56)(cid:202)(cid:171)(cid:195)(cid:227)(cid:3)(cid:16)(cid:168)(cid:171)(cid:152)(cid:162)(cid:220)(cid:3)(cid:202)(cid:162)(cid:3)(cid:91)(cid:227)(cid:130)(cid:162)(cid:162)

Sanford Robertson

Principal, Francisco Partners

John V. Roos

Bernard Tyson

(cid:36)(cid:202)(cid:216)(cid:194)(cid:152)(cid:216)(cid:3)(cid:103)(cid:364)(cid:91)(cid:364)(cid:3)(cid:4)(cid:194)(cid:141)(cid:130)(cid:220)(cid:220)(cid:130)(cid:148)(cid:202)(cid:216)(cid:3)(cid:227)(cid:202)(cid:3)(cid:56)(cid:130)(cid:213)(cid:130)(cid:195)

(cid:16)(cid:168)(cid:130)(cid:171)(cid:216)(cid:194)(cid:130)(cid:195)(cid:3)(cid:447)(cid:3)(cid:16)(cid:168)(cid:171)(cid:152)(cid:162)(cid:3)(cid:26)(cid:249)(cid:152)(cid:142)(cid:232)(cid:227)(cid:171)(cid:243)(cid:152)(cid:3)(cid:73)(cid:162)(cid:162)(cid:171)(cid:142)(cid:152)(cid:216)(cid:3)(cid:202)(cid:162)(cid:3)(cid:58)(cid:130)(cid:171)(cid:220)(cid:152)(cid:216)(cid:3)(cid:36)(cid:202)(cid:232)(cid:195)(cid:148)(cid:130)(cid:227)(cid:171)(cid:202)(cid:195)(cid:3)(cid:42)(cid:152)(cid:130)(cid:188)(cid:227)(cid:168)(cid:3)(cid:84)(cid:188)(cid:130)(cid:195)(cid:359)(cid:3)(cid:45)(cid:195)(cid:142)(cid:364)(cid:3)(cid:130)(cid:195)(cid:148)(cid:3)(cid:42)(cid:202)(cid:220)(cid:213)(cid:171)(cid:227)(cid:130)(cid:188)(cid:220)

Robin Washington

(cid:26)(cid:249)(cid:152)(cid:142)(cid:232)(cid:227)(cid:171)(cid:243)(cid:152)(cid:3)(cid:114)(cid:171)(cid:142)(cid:152)(cid:3)(cid:84)(cid:216)(cid:152)(cid:220)(cid:171)(cid:148)(cid:152)(cid:195)(cid:227)(cid:3)(cid:447)(cid:3)(cid:16)(cid:168)(cid:171)(cid:152)(cid:162)(cid:3)(cid:36)(cid:171)(cid:195)(cid:130)(cid:195)(cid:142)(cid:171)(cid:130)(cid:188)(cid:3)(cid:73)(cid:162)(cid:162)(cid:171)(cid:142)(cid:152)(cid:216)(cid:359)(cid:3)(cid:37)(cid:171)(cid:188)(cid:152)(cid:130)(cid:148)(cid:3)(cid:91)(cid:142)(cid:171)(cid:152)(cid:195)(cid:142)(cid:152)(cid:220)(cid:359)(cid:3)(cid:45)(cid:195)(cid:142)(cid:364)

Maynard Webb

Susan Wojcicki

(cid:36)(cid:202)(cid:232)(cid:195)(cid:148)(cid:152)(cid:216)(cid:359)(cid:3)(cid:115)(cid:152)(cid:141)(cid:141)(cid:3)(cid:45)(cid:195)(cid:243)(cid:152)(cid:220)(cid:227)(cid:194)(cid:152)(cid:195)(cid:227)(cid:3)(cid:67)(cid:152)(cid:227)(cid:244)(cid:202)(cid:216)(cid:185)(cid:369)(cid:3)(cid:16)(cid:202)(cid:384)(cid:36)(cid:202)(cid:232)(cid:195)(cid:148)(cid:152)(cid:216)(cid:359)(cid:3)(cid:26)(cid:243)(cid:152)(cid:216)(cid:244)(cid:171)(cid:220)(cid:152)(cid:369)(cid:3)(cid:22)(cid:171)(cid:216)(cid:152)(cid:142)(cid:227)(cid:202)(cid:216)(cid:359)(cid:3)(cid:114)(cid:171)(cid:220)(cid:130)(cid:359)(cid:3)(cid:45)(cid:195)(cid:142)(cid:364)(cid:3)

(cid:16)(cid:168)(cid:171)(cid:152)(cid:162)(cid:3)(cid:26)(cid:249)(cid:152)(cid:142)(cid:232)(cid:227)(cid:171)(cid:243)(cid:152)(cid:3)(cid:73)(cid:162)(cid:162)(cid:171)(cid:142)(cid:152)(cid:216)(cid:359)(cid:3)(cid:121)(cid:202)(cid:232)(cid:98)(cid:232)(cid:141)(cid:152)(cid:359)(cid:3)(cid:45)(cid:195)(cid:142)(cid:364)

Executive Team

Marc Benioff

Joe Allanson

Keith Block

Chief Accounting Officer & Corporate Controller

Alexandre Dayon

President & Chief Strategy Officer

Parker Harris

Mark Hawkins

Cindy Robbins

President & Chief Financial Officer

President & Chief People Officer

Srinivas Tallapragada

President, Technology

Bret Taylor

Amy Weaver

President & Chief Product Officer

President, Legal & Corporate Affairs, General Counsel & Secretary

Investor Relations

investor@salesforce.com, +1-415-536-6250

Stock Listing

Salesforce trades on the New York Stock Exchange
under the ticker symbol “CRM.”

Note on Forward-Looking Statements
This annual report contains forward-looking statements within the meaning of the federal securities laws.
Actual results could differ materially from those expressed in such statements. Further information on
factors that could affect results is included in the fiscal 2019 Form 10-K, included in this annual report.

WORLDWIDE CORPORATE HEADQUARTERS
salesforce.com, inc.
Salesforce Tower
415 Mission Street, 3rd Floor
San Francisco, CA 94105, USA
1-800-NO-SOFTWARE

www.salesforce.com | /salesforce | @salesforce

© 2019 salesforce.com, inc. All rights reserved. Salesforce and salesforce.com are registered trademarks of salesforce.com, inc.
Salesforce owns other registered and unregistered trademarks. Other names used herein may be trademarks of their respective owners.