Good morning. My name is Tamara, and I will be your conference operator today. At this time, I would like to welcome everyone to the salesforce.com ExactTarget acquisition conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, and the number 1 on your telephone keypad. To withdraw your question, please press the pound key. I will now turn the conference call over to Mr. John Cummings, Senior Director of Investor Relations. Please go ahead, sir.
Thanks, Tamara, and good morning, everyone. Earlier this morning, salesforce.com announced its intended acquisition of ExactTarget. The details of this transaction can be found in a press release issued at approximately 7:30 A.M. Eastern Time this morning. Joining me today to discuss the transaction are Marc Benioff, Chairman and CEO, Graham Smith, Chief Financial Officer, and Scott Dorsey, ExactTarget's CEO, Chairman, and Co-founder. The purpose of today's call is to discuss the acquisition of ExactTarget. Marc and Graham will review the proposed acquisition and the terms of the transaction, including the estimated impact on our fiscal second quarter and full-year fiscal 2014 guidance, which we gave on our most recent results call in May. After Marc and Graham's comments, we'll turn the call over to your questions.
You should be aware that our discussion and responses to your questions may contain forward-looking statements related to the acquisition of ExactTarget and estimated results of the company, which are subject to risks, uncertainties, and assumptions. All statements other than historical facts included in our discussion, including but not limited to statements regarding the timing and closing of the transaction, the expected benefits of the transaction, prospective performance and future business plans, and any assumptions underlying any of the foregoing are forward-looking statements. Should any of these risks or uncertainties materialize, or should our assumptions prove to be incorrect, actual company results and actual effects of the transaction on salesforce.com could differ materially from these forward-looking statements.
The discussion of risks, uncertainties and assumptions related to the acquisition and the estimated impact of the company, as well as the other information on potential risk factors that could affect our financial results, are included in the periodic reports filed by salesforce.com and ExactTarget filed with the SEC, including ours and ExactTarget's most recent reports on Form 10-Q and Form 10-K, respectively, particularly under the headings Risk Factors and the Tender Offer Statement on Schedule TO and other offer documents to be filed by salesforce.com, and the Solicitation Recommendation Statement on Schedule 14D-9 to be filed by ExactTarget. Please be aware that any unreleased services or features referenced in today's discussion or other public statements are not yet available and may not be delivered on time or at all. Customers who purchased our services should make these decisions based on features that are currently available.
The intended acquisition of ExactTarget includes a tender offer made by salesforce.com and a subsidiary. The tender offer has not yet commenced. The discussion regarding the acquisition is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell any securities. At the time the tender offer is commenced, salesforce.com will file with the Securities and Exchange Commission a tender offer statement on Schedule TO, and ExactTarget will file a solicitation recommendation statement on Schedule 14D-9 with respect to the tender offer.
ExactTarget stockholders and other investors are strongly advised to read the tender offer materials, including the offer to purchase and related letter of transmittal, and certain other tender offer documents that have yet to be filed, and the solicitation recommendation statement when they become available, as they will contain important information which should be read carefully before any decision is made with respect to the tender offer. The tender offer statement and the solicitation recommendation statement will be available for free at the SEC's website at www.sec.gov. Free copies of these materials and other tender offer documents will also be made available by the information agent for the tender offer. With all that, let me turn things over to Marc.
Well, hey, thanks so much, John, you know what? This is really a historic day for cloud computing. We are just absolutely thrilled to have this call with you. It's something that we've been planning for some time, I have never been more excited about anything that I've ever done at salesforce.com. Let me tell you why that is. You know, salesforce.com wants to be the number one CRM company in the world. That's what we've absolutely wanted from the very beginning. Just a few weeks ago, Gartner said that we are, that was a huge milestone for us.
When we look out at the CRM marketplace, we recognize that for us to continue to be number one in CRM, we of course, have to be number one in sales, which we are, we have to be number one in service, which we are, we also need to work even harder to become number one at marketing. Marketing is rapidly evolving, as you know, Gartner says that by 2017, CMOs are going to spend more on technology than CIOs. We found that out personally, because as we've traveled the world, done our customer company tours, many of which you've attended or met with customers individually, we continue to hear and see them invest in major new ways in marketing.
You know, I was just at one of our large customers in New York at Bank of America, and you could see it firsthand. Sure, we're doing tremendous work with wealth advisory. Yes, we're doing incredible work on Twitter with running BofA Help. I'll tell you that there was this other great company there doing amazing work with them with mobile and email and connecting the customer in incredible new ways, and that company was ExactTarget. When you look at other customers and what they're doing, common customers between salesforce.com and ExactTarget, companies not only like Bank of America, but Coca-Cola and Gap and some of the others, what you see is this perfect synergy, an addition of capabilities that helps our customers to connect with their customers in incredible new ways.
There's no doubt our whole industry is changing, and the opportunity to create solutions in sales and service and marketing that are unified, that are mobile, that are social, that are in the cloud, that this combination of these two companies positions us in a way as never before. Now, over the past couple of years, Salesforce has broadened its marketing area quite considerably. We've, of course, acquired a tremendous company with Radian6. We've also acquired a tremendous company with Buddy Media, and we've learned more and met more CMOs and talked to more CMOs and learned more about what they're doing than we could possibly imagine. We've never been more inspired, we've never been more excited, we've never been more motivated about what we can do for these executives, for these new lines of business, and how we're going to automate this incredible new part of CRM.
We have the perfect partners, a company that we've known since their founding, a company who has been along the ride with Salesforce, since their start. What we saw was a perfect partnership, and that's why I've been so thrilled to work with Scott Dorsey and his team in creating this transaction that we're announcing today. I will be happy to answer questions in a few moments. Scott is also here, and we're just completely thrilled that we've finally gotten to this point, and now we're ready to get these two great companies together. Graham?
All right. Thank you, Marc. Good morning, everyone. Before I get into the financial details of our proposed acquisition of ExactTarget, let me give you a short excuse me, high-level view of the company. ExactTarget was founded in 2000, went public in March 2012, and is currently traded on the New York Stock Exchange under the ticker symbol ET. Based in Indianapolis, ExactTarget has offices in the Americas, Europe, Asia, and Australia, employs nearly 2,000 employees, and supports more than 6,000 customers worldwide. Under the terms of the definitive agreement, we've agreed to acquire ExactTarget for approximately $2.5 billion in an all-cash transaction. This represents a per-share price of $33.75 for all of ExactTarget's outstanding shares.
We exited Q1 with approximately $3.1 billion in cash and marketable securities and will finance the transaction through cash on hand, along with a term loan to provide greater financial flexibility in the near term. The acquisition will be structured as a tender offer, as John said, for all of ExactTarget's outstanding shares, followed by a merger. We expect the transaction to close somewhere around the middle of July, and that's to be subject to expiration of the HSR waiting period in the U.S. and other custom closing conditions. Assuming the transaction closes as planned, we estimate ExactTarget would contribute approximately $120 million-$125 million in incremental revenue for the remainder of our fiscal 2014.
This estimate includes an approximately $65 million-$70 million fair value adjustment to ExactTarget's billed deferred revenue and unbilled backlog, as well as other adjustments related to our combined customer base, intercompany revenue elimination, and a provision for a modest level of business disruption in the weeks after the acquisition closes. Including ExactTarget's expected revenue contribution, we now anticipate full-year revenue in the range of $3.955 billion-$4 billion. From an earnings perspective, ExactTarget's standalone financial plan generated operating losses for the year, and we anticipate additional integration costs and transaction fees of approximately $40 million-$45 million. As a result, we expect the acquisition to reduce full-year 2014 non-GAAP EPS by approximately $0.16, resulting in an updated FY 2014 non-GAAP EPS estimate range of $0.31-$0.33. This assumes a full-year non-GAAP tax rate of 36%.
That's up slightly from our prior guidance. We expect about $0.05 of the $0.16 of non-GAAP EPS reduction to fall into the second quarter. Most of that's related to due diligence, banking fees, and other transaction-related costs, along with two weeks' worth, approximately, of operating losses for ExactTarget. This results in an updated second quarter non-GAAP EPS estimate of $0.06-$0.07. Then for the remaining $0.11 EPS impact, a little more than half will fall in Q3, and a bit less than half will fall, obviously, in Q4. We're not able to give you an accurate forecast for the full-year GAAP EPS changes until we finish all of the purchase accounting after the transaction closes. We expect to be able to provide this update when we release our second quarter results.
However, you should expect that the impact on GAAP EPS will, of course, be higher than for our non-GAAP EPS due to the additional stock amortization charges. Turning to cash flow. In the near term, we estimate that the acquisition of ExactTarget will reduce salesforce.com's operating cash flow by approximately $75 million-$80 million in fiscal 2014. As a result, we now expect FY 2014 year-over-year operating cash flow growth for the combined company in the low teens versus our prior estimate of low 20% range. As you heard from Marc, no other company is better positioned than Salesforce to capitalize on the dramatic changes affecting marketing organizations today. By acquiring ExactTarget, we believe we are significantly expanding our growth opportunity for the long term. Interactive marketing, including email marketing and marketing automation, will exceed $15 billion by 2016.
Over the coming months, we'll focus on driving revenue and expense synergies, along with some cash flow improvements, including leveraging Salesforce's existing distribution capacity to sell ExactTarget products, reducing dollar attrition by applying Salesforce's renewals management expertise, leveraging Salesforce's professional services partners to engage with ExactTarget's customers, increasing the proportion of subscription revenue for ExactTarget over time, accelerating geographic expansion by leveraging ExactTarget's footprint in Brazil, and salesforce.com's presence in Europe and Asia. Obviously, rationalizing where we can global real estate, and improving operating cash flow by integrating our accounting processes and moving customers to annual billings over time. However, product integration between Salesforce and ExactTarget, together with the systems work we'll need to do for sales integration and back office integration for finance and HR, will also require some substantial investment.
We're hoping that the combination of revenue and expense synergies will more or less offset the cost of these investments and enable ExactTarget to continue on its path to break even by the end of fiscal 2015. That's our fiscal 2015, of course. We're very excited to start working with this impressive company and propelling the combined team of Salesforce and ExactTarget to extend our overall CRM market leadership position. With that, we'll open the call up for questions.
Tamara?
Okay. To ask a question, please press star one on your telephone keypad. Again, that is star one to ask your question. To withdraw your question, please press the pound key. We'll pause to compile the Q&A roster. Your first response is from Phil Winslow. Please go ahead.
Congratulations on the deal. Obviously, ExactTarget's got a long history on the campaign management side, but it also recently acquired Pardot on marketing automation. Marc, just wanted to get your thoughts on how both these two fit in with salesforce.com, the campaign management side, but also just how you view marketing automation and its place inside of salesforce.com. Thanks.
Well, that's just an absolutely great question, and I'll tell you. We have been looking for the perfect company to complement salesforce.com's marketing efforts, and you know that we've been super strong in a number of really critical areas, and that is, we've been strong in listening with Radian6, we've been really strong in publishing with Buddy Media, and we've been really strong in advertising with Social.com. We recognize that we have to get stronger in critical areas like email and also, and to your key point here, in marketing automation and lead nurturing. That's an area that's very fast-growing for our customers. When we looked around, we wanted to really make one large purchase that really brought all of these things together, and that's the power of ExactTarget.
ExactTarget not only is number 1 in email, but has the fastest growing marketing automation and lead nurturing company as well, which is Pardot. Pardot, you can see it on the AppExchange, is probably the highest rated of all the marketing automation companies. We couldn't be more thrilled that that's part of the acquisition, and that will become part of our Salesforce family of products, branded and deeply integrated natively into our system, so we can offer that directly to our customers. Scott, do you want to add on to that?
Thanks, Marc. No, I think Marc covered it really, really well. ExactTarget, we have a long history in B2C marketing automation and helped many amazing brands all around the world leverage our technology to drive engagement with their customers through channels like email, mobile, social, and the web. Our acquisition of Pardot in October has been outstanding. Pardot, as Marc indicated, really loved by their clients, highly rated on the AppExchange, and just dynamite tools for managing the whole lead management, lead nurturing process. Tight integration into Salesforce has been a key part of their differentiation. Obviously, together, we can take this to an entirely new level for our clients. We couldn't be more excited.
Your next response from the line of Kash Rangan of Morgan Stanley.
Hello?
Kash, please proceed with your question.
Kash, let's move on.
Okay. To ask a question via the phone line, please press star one on your telephone keypad. Again, that is star one to ask your question. We have a response from the line of Richard Sherlund of Nomura.
Hi. Yeah, Richard Sherlund here. Couple of questions. First, Scott, are you staying on? Second, was this a competitive bidding process? I'm curious. Third, I'm curious of customer overlap here and whether the bigger opportunity is to sell ExactTarget to Salesforce's customers or Salesforce to ExactTarget customers, how we should think about the complement there.
Thank you for your question. I'm very excited to continue to lead ExactTarget into the future and to partner with Marc and the great leadership team at salesforce.com to really create the marketing platform of choice for CMOs, so incredibly excited. We have an amazing amount of client overlap. In fact, we work with many of the amazing brands in the world. Marc referenced Bank of America. When you start looking at the rest of our clients, Burberry and many others, we have tremendous synergy. There's also brand-new opportunity to cross-sell our solutions into the base of salesforce.com clients. I really see great opportunity across both synergy of helping our joint clients take their technology and their marketing to a new level. Also there's just tremendous opportunity to cross-sell our solutions into the great portfolio of salesforce.com clients.
I'm just going to pile on that, Rick. We couldn't have a better leader in Scott, and we're going to make sure that he is completely happy as the leader of ExactTarget, working directly for me and partnering into the future to create an even greater salesforce.com. I think that, what I can tell you about this process is, this is a incredible asset. It's a unique asset, and this was a very competitive process, and we're thrilled to be the victors here.
Thank you. Your next response is from Heather Bellini of Goldman Sachs.
Great. Good morning, and congratulations on the acquisition. I just had two quick questions. I guess, Marc, I was wondering if you could give us a sense for how you see ExactTarget changing the ramp that you were expecting previously for Salesforce's Marketing Cloud business plan. How much does this accelerate your go-to-market and your ability to build this towards the next billion-dollar cloud? Also, I had a question. If we look out, this is your biggest deal to date. I'm just wondering, given this has been pretty anticipated, should we expect this to be the last, your M&A pace, I guess, to slow from here so you have time to digest? That's it. Thank you.
Yeah, let me take the end of that first. You're absolutely right, Heather. This is our largest and most important acquisition ever, and this is going to dramatically slow our M&A pace going forward. I really think what you're going to see is probably us taking a vacation from M&A for anywhere between probably 12 and 18 months. That's really because we're going to double down and focus on the success of ExactTarget. We see a tremendous opportunity here with our customers in marketing, in B2C CRM, in email marketing, in lead automation, and marketing automation and lead nurturing, as well as in the fundamental marketing to next-generation connected products and connected devices. All of these things are made possible through ExactTarget as well as Pardot, and we are going to really double down and focus here for a while.
I can't imagine us really having any opportunity to do anything else for some time, and I'll tell you why, because it's what you said. Now we have a clear trajectory for a billion-dollar marketing product line. We've discussed it with you before and our financial analysts on our calls and in other forums. Our marketing efforts are very healthy and expected to be in the early nine digits this year. That was really the beginning. Here we have, what I would say is not an early-stage company, but a very much so ongoing concern that we can add on into our existing marketing products and together get to that $1 billion faster than we ever could expected. We obviously have a huge goal. Of course, we have a multi-billion-dollar sales product line. We've got our Service Cloud coming into a billion-dollar product line.
We have a clear trajectory on a third product line heading to a $1 billion very rapidly, which is our platform, and now we have a fourth. This is a clear product strategy for Salesforce to take it into the future. It's a clear message to our customers. It's highly synergistic. It's common customers, common platforms. Many of these customers are already using ExactTarget. Some of them are using solutions from other companies, and we would expect those companies to honestly consider the solutions from ExactTarget now even more competitive than before. Putting it all together, you can expect it to go to a much higher level. If you've seen the incredible capabilities of ExactTarget's integrated marketing hub, this is a vision for the future of B2C CRM.
This is the future of providing marketing directly to the connected device world and connected products world, and the Internet of everything that we have been talking about on our customer company tour. The opportunity to be able to communicate and market and share to customers, whether they are in cars or whether they have wearables or whether they have another type of connected product. Well, now all that's possible through the combination of Salesforce and ExactTarget. We've got an incredible new level and a new opening for salesforce.com to be not only the number one in sales and service, but to be the number one in marketing and to be the number one In a B2B CRM, as well as the number one in B2C CRM.
This is our long-term vision, this is our long-term direction, this is our future strategy, and that's why these two companies are so complementary. Having a great partner and visionary like Scott Dorsey and his team, and his other leaders that we've worked closely with in this acquisition process, this is what is so exciting for all of us here. I'll tell you, this was a very competitive process because this is a very unique asset in our industry, and we're thrilled to be the ones who came out on top here.
Thank you. To ask a question via the phone line, please press star one on your telephone keypad. Again, that is star one to ask your question. Your next response is from John DiFucci of JPMorgan.
Thank you. Congratulations. I guess this question's for Graham first. This acquisition's going to be a big part of your cash. I think you said you're going to get a term loan here. How should we think of that going forward? It's going to be about $2.5 billion out of, I think you have about $3.1 billion in cash and marketable securities.
Well, I think, we certainly, as said, are going to put in place a term loan just to give us a little bit of flexibility around the closing date. I think this year we'll see some drag effect on our cash flow, as I mentioned in the guidance. I think we'll anticipate operating cash flow now growing somewhere in the low teens percentage. I think we're going to work with Scott's team, to try and apply some of the practices we've learned over the last couple of years. We've done a lot of work in our own customer base to sort of move them over time to annual billing cycles. We see, obviously, that's a big opportunity here with ExactTarget. Most of their customers, I think, roughly half or two-thirds are billed monthly.
I think there's an opportunity there for us to, certainly next year, start to accelerate some of the operating cash flow from ExactTarget. Obviously, we'll give you an update on that as we progress during the next couple of quarters.
Okay, thanks. If I could just a follow-up. I guess Marc, with ExactTarget, you get the established leader in cross-channel interactive marketing. Kind of going back to Phil's question a little bit. I get maybe this is a question for Scott. You also get a promising marketing automation vendor. That just started for Scott with the Pardot acquisition. I guess the question is for Scott. Are you still on track to apply Pardot to the enterprise level, to enterprise customers by the second half, somewhere later this year? I know you've been working towards that.
Hi, John. Hey, thanks for the question. We absolutely are. Pardot is really a leading platform for small, medium-sized organizations with super strong technology around lead management, lead nurturing. As you know, John, from covering ExactTarget, we've been working with Pardot team to really bring their technology up into the enterprise segment with more advanced roles and permissions and enterprise architecture. That's very much on track. By joining forces with salesforce.com, we'll be able to even accelerate that move into the enterprise and certainly accelerate the integration into the salesforce.com platform. We are incredibly excited about the opportunity ahead of us, and certainly Pardot and B2B marketing automation plays a very big role.
I'll just add on to that we're super excited about the Pardot capabilities. It was a fantastic acquisition done by Scott and his team. I'll tell you that we absolutely anticipate after a full review by our technical team, that within six months it will have superior functionality, capability, and native integration to Salesforce than any other marketing automation vendor. We're going to have a world-class, highly competitive solution for our customers, and they're going to have a great new choice in marketing automation and lead nurturing.
Thank you. To ask a question, please press star one on your telephone keypad. Your next response is from Kirk Materne of Evercore .
Thanks very much, and I'll echo my congratulations. Marc, it seems in the marketing space, people have been buying more point solution-solving business problems to start. With this acquisition, it seems you all might have an opportunity to really push it more towards a suite purchase. I'm just curious, given a lot of your discussions around the customer company tour, is that where you see this enabling you to go? Meaning, do CMOs want to talk to one vendor? Is it starting to move in that direction? It sounds to us that they still want to solve business problems first. With ExactTarget, can you start to move this whole, I guess, area of the market more towards a suite purchase around marketing?
It's a great question, and let me give you my insights on that, which is that, when we're dealing with a customer, it could be a large customer, a mid, or a small customer. Let's take a large enterprise. You're dealing with a sales buyer who's looking for a Salesforce automation solution. That's a unique buying process. You've got a service buyer, they're looking for a call center, a contact center, a customer service, customer engagement solution, that's a unique buyer. Now you're looking for a marketing automation vendor and a marketing services provider, that's also a unique buyer. I'll tell you that there's new buyers that are also emerging in connected products. Product managers and ISVs who are building next-generation products, the ability to manage apps, the ability to manage, you name it, connected consumer electronics products, connected industrial products. That's another buyer.
Of course, there's the CIO. In all cases, Salesforce has really worked hard through our customer company tours, and before that, through our social enterprise tours to become a trusted advisor to these three really core areas in sales, service, and marketing to be there to advise and suggest and control our direction. Of course, we've had world-class solutions in sales and service. We've found through this process is that there's this tremendous next-generation opportunity in marketing, and that is what motivated us initially to acquire Radian6, to acquire Buddy Media, to do more in building out a marketing suite. What we realized is we didn't have all the pieces that we wanted. There were some big pieces that were missing. If we're going to make an acquisition, we can't just keep making these small acquisitions. That strategy was just taking, honestly, too long.
We needed to do something of consequence. We needed to do something strategic. We needed to do something now. This opportunity is happening as we speak. You don't have to go any farther than the conference last week with All Things Digital to see the huge shift in connected products or the Consumer Electronics Show. All of these things is a tremendous opportunity for marketers to be connected with their customers in incredible new ways. When you're connected with your customer in incredible new ways, it means that you better be prepared to communicate with them in a new way. That means not just having a great customer platform like Salesforce, but really the automation capabilities of ExactTarget Marketing Hub.
What you've seen with the ExactTarget Integrated Marketing Hub is the ability to really have that dynamic command and control of that customer, whether you're talking to them in their app, whether you're talking to them in their product, whether you're talking to them in email, whether you're talking to them in mobile through SMS or through some other type of push mechanism, or whether you're talking to them through social channels and engagement channels. All of these things integrated as a unique, common service, well, that's our vision too. To be able to deliver it at scale and reliably and securely, this is what's making this connection so exciting. No one will doubt that Salesforce is number 1 in sales and service. Now no one will doubt that Salesforce is now number 1 in enterprise marketing.
Thank you. To ask a question, please press star 1 on your telephone keypad. Your next response is from Brendan Barnicle of Pacific Crest Securities. Please go ahead.
Thanks so much, Mark and Scott. Congratulations. I had just two quick ones. Mark, you mentioned some of the other vendors you'd worked with on AppExchange in the past. Will all those vendors still remain? Will they still be listed on AppExchange? How will those relationships change given your relationship now with ExactTarget? Second is, ExactTarget has done some very interesting stuff in data management and big data. I'm wondering how you might be able to leverage some of that technology going forward as well.
Well, it's two great questions. One is in the AppExchange is a dynamic marketplace that people are constantly coming and going like any marketplace, and we're constantly evaluating the correct and appropriate way to build a position to our customers. It's an ecosystem. We understand that, and you can see how it changes and evolves over time as any other ecosystem. Based on how we are working with our partners, whether we're competing with them, whether we're partnering with them, whether they're complementary to us, whether they're in conflict in our strategy, that ecosystem has changed and has changed since it was introduced. On the second side, on the big data side, of course, ExactTarget is operating with many of its customers in terms of transaction scale at a higher level than even salesforce.com.
I talked on our last earnings call about how Salesforce is one of the only vendors that provides transaction data and that our transaction data is extremely impressive with more than 1 billion complex transactions a day. Of course, these are database transactions that do create reads, updates, deletes from the database with active users. ExactTarget also has a very high transaction volume. ExactTarget has customers with tens of millions, and in some cases hundreds of millions of customers or consumers in their database. They are doing tens of billions of transactions sometimes for a specific customer. It's a phenomenal environment. It's a highly proven enterprise-class application.
They have not only their thousands of email marketing customers, but they already have now more than 200 customers live on their Integrated Marketing Hub, which is really their next-generation platform that's well beyond proof of concept stage at this point and really looks like a tremendous direction for them in the future. In terms of proof of scale, they've got it, and that's super important for these very large customers that they have, like Coca-Cola and Gap and Nike. I know that because those executives at a high level, and we have great relationships with those companies, where obviously we sell and have relationships at the C-level and in many of those companies, and this is just an opportunity to take their solution to an even higher place than it was before. Scott, would you like to add to that?
Be happy to. Hey, Brendan. We're incredibly excited about really pioneering CRM for B2C organizations. Our data capabilities are very unique, very robust. As Marc mentioned, we're managing tens of millions or even hundreds of millions of consumer records at scale, in real-time, driving that real-time engagement through our Audience Builder platform. We're incredibly excited to collaborate with the Salesforce team and really taking those data capabilities to the next level. The future is very bright.
Okay, to ask a question via the phone line, please press star one on your telephone keypad. Your next response is from Jason Maynard of Wells Fargo. Please go ahead.
Hey, good morning, guys. I have one fairly simple question around product integration and how you plan on going to market. Was curious, Marc, if you could talk a little bit about how ExactTarget gets melded into the Marketing Cloud, how the organization comes together, under whose leadership, whether it's going to be existing Salesforce people, ExactTarget. Will this all become, if you will, one single group that will build and go execute against this opportunity? Thanks.
Yeah, that's a great question, Jason. I really appreciate it. Obviously, the one executive that will be running the Marketing Cloud at Salesforce will be myself. The one person who's running, is Scott Dorsey, who will be working directly for me. As I said, I felt right from the beginning that one of the most important parts of this deal is not just retaining Scott, but making him one of my five or six direct reports that I have at salesforce.com, to be able to have him part of my exec comm every Monday, to work with him hand-in-hand in building our marketing capabilities.
To that point, to really your next question, and having him with me and my other core executives fully rationalize our organizational structure, because we do have other marketing assets and distribution capabilities in marketing, and that will require us to do that. Now, that is honestly some tremendous opportunities for synergy between the companies that we recognize. I see some great synergy opportunities, as does Graham. We plan to execute those and make that an even stronger sales. ExactTarget brings in assets that we cannot ignore. Bringing those capabilities in with our existing Marketing Cloud and specifically with Scott's leadership, we're going to get to an incredible new place.
I'd love to add, Mark, since our founding, we've really modeled our business after salesforce.com from our focus on growth, client success, creating a great place to work. We'll focus on philanthropy. The alignment is just tremendous. We've actually been running our business on salesforce.com also since our founding. An opportunity to collaborate with Mark and the leadership team at salesforce.com is awesome. Mark's personal commitment to the Marketing Cloud gets us very excited. The synergy is extraordinary, and to be able to kind of redefine the future of marketing automation and do it together with such an excellent company and excellent leadership team is just a tremendous opportunity for us.
Thank you. Your next response from the line of Tom Roderick of Stifel.
Gentlemen. Good morning, and congratulations to all on the deal. Graham, I think I heard you say that the expected dilution to cash flow from operations this year was about $75 million-$80 million. A, maybe you can confirm that I heard that right, and B, to the extent that that is right, that sort of orders of magnitude higher than what we were modeling for ExactTarget on a standalone basis. Can you give us some initial thoughts as to where the incremental investment dollars will be put? Thank you.
Yes, Tom. A couple of areas. First is obviously, a bunch of transaction-related costs, that unfortunately, most of them hit operating cash flows. Legal fees, banking fees, professional fees, et cetera. The second big component is, we'll want to get off to a fast start in terms of some of the integration efforts I talked about. Particularly on the back side, ExactTarget's a significant public company in its own right. We've got a lot of work to do, obviously, to bring our finance and HR systems together, and we just want to get ahead of that, get off to a fast start, as I said. That's our best guess. Obviously, it's early days. We've moved very quickly through this process, and we'll be getting into more detail over the next few weeks as we plan the integration.
Yeah, to that point, I'll just say, one of the really exciting areas for Salesforce and ExactTarget is Salesforce has a robust distribution organization, not only in the U.S., but in many critical countries. As you know, I was in Japan last week. That's an area where ExactTarget does not have operations. We plan to have a fully Japanized product. We'll provide support as fast as we can, hopefully by the calendar year, offer that through our distribution organization throughout Japan. ExactTarget doesn't have operations of any consequence in France or Germany, and we plan to be able to bring their product into that market very aggressively. They already have French and German support. Salesforce has really strong operations in Australia, where ExactTarget is very strong, and also Salesforce has very strong operations in the U.K., where ExactTarget is also very strong.
Interestingly, ExactTarget has a company in Brazil where we do not currently do business. Salesforce will be evaluating what that means to us going forward since we have an exciting new Brazil company on our hands, and that's been a market that we've been extremely excited in to add into our top 10 countries that we do business with. Again, some really great synergy areas for the two companies coming together, which will leverage our organizational structures.
Thank you. Your next response is from Kash Rangan of Morgan Stanley.
Hi. I'll keep this brief since I'm in a noisy background. Question for you, Graham. How should we think about impact to cash flow growth and billings growth after you're done assimilating ExactTarget? Marc, I will save my questions for you at the keynote. Thank you.
Kash, I think, clearly, it's early days. You've seen us execute around our policy of moving customers more and more to annual billings over time, and I think that's been very successful for us. ExactTarget today is running more or less operating cash flow neutral. We just, as I said on the call, would look to bring our experience and our practices into sort of ExactTarget's business, and clearly over time, we're going to be selling and billing all of those. I think, you'll see over time, some significant leverage on the operating cash flow front as we execute on that. I think the precise timing of that will be difficult to predict. Certainly right now, I think, we've been delighted at the progress we've made on our own billing practices. I think we've generally gone a little faster than we thought we would.
Hopefully we'll see the same with ExactTarget, but obviously, we haven't started to implement this yet, so we'll give you a sense. I certainly would hope. I think while we'll see an operating cash flow hit this year largely to do with the cost of the transactions, as I said, and the integration efforts. Next year, I think you'll see, hopefully, some lift certainly versus the models that are out there for ExactTarget standalone operating cash flow today. I think we'll be able to make progress against that certainly in our fiscal 2015.
I'd just like to add onto that this 14-year operating history has really, I would say, almost discovered, tuned, optimized some great business practices in cloud computing. Of course, you see our best of practice capabilities, whether it's invoicing, billing, cash flow. You even saw us make changes to that a year ago. It's only made us a stronger company, a stronger income statement, a stronger balance sheet. We've really tuned and refined and gotten to a new place in our own operations. Those best practices, when we look at ExactTarget, well, that reminds us of where we were and the opportunity to now apply that and take them to where we are now.
We want to have a consistent set of policies for all Salesforce customers, and we think that that will have a tremendous impact on the quality of everything from ExactTarget's cash flow to contract quality to relationships with the customers it does business with in cash flow and in attrition and billing across the board. I'll address that with you, Kash, in more detail at 12:15. I'll be on the stage with Kash doing a Q&A at the San Francisco Ritz Carlton, and hope to see all of you there and continue communications on this transaction. I'll also be on "Mad Money" tonight with Jim Cramer and continue the communications about the transaction as well. Tonight, we want to give you as much information as we can.
We want to help you understand why we're so excited, why we are so motivated, why we're so inspired around the two companies coming together. Scott, do you want to add to that?
I would just share Marc's excitement and vision for the future. There's so much synergy between our organizations. Our technology is extraordinarily complementary. This is going to be wonderful for our clients. It's going to be wonderful for the future of marketing, and we just couldn't be more excited to be joining forces and creating and building this marketing platform of choice for CMOs. Really appreciate the opportunity.
All right. That looks like that's about all the time we have today for questions. Thank you very much for joining us today. If you have any follow-up questions, you can reach out to us at investor relations at Salesforce, and you can email us at investor@salesforce.com. We look forward to updating you on our progress when we issue our second quarter release in the coming months. Thank you very much.
Thank you. This concludes today's conference call. You may now disconnect.