- ServiceNow exceeds guidance across all Q2 2023 topline growth and profitability metrics; raises 2023 subscription revenues and operating margin guidance
- Subscription revenues of $2,075 million in Q2 2023, representing 25% year-over-year growth, 25% adjusted for constant currency
- Total revenues of $2,150 million in Q2 2023, representing 23% year-over-year growth, 22.5% adjusted for constant currency
- Current remaining performance obligations of $7.20 billion as of Q2 2023, representing 25% year-over-year growth, 24% adjusted for constant currency
- 70 transactions over $1 million in net new ACV in Q2 2023, up 30% year-over-year
- ServiceNow ended Q2 with 45 customers with more than $20 million in ACV, representing 55% year-over-year increase
ServiceNow (NYSE: NOW), the leading digital workflow company making the world work better for everyone, today announced financial results for its second quarter ended June 30, 2023, with subscription revenues of $2,075 million in Q2 2023, representing 25% year-over-year growth, 25% adjusted for constant currency.
“ServiceNow results were supercharged by unprecedented demand for our organic innovation,” said ServiceNow Chairman and CEO Bill McDermott. “We’re in a powerful new ‘AI world,’ where imagination is the only limit. ServiceNow is already seeing our own significant productivity increases with the generative AI solutions we’re releasing to the market, which will rapidly accelerate breakthrough innovation for our customers.”
As of June 30, 2023, current remaining performance obligations (“cRPO”), contract revenue that will be recognized as revenue in the next 12 months, was $7.20 billion, representing 25% year-over-year growth and 24% adjusted for constant currency. The company now has 1,724 total customers with more than $1 million in annual contract value (“ACV”), representing 18% year-over-year growth in customers.
“Q2 was another strong quarter for ServiceNow as we exceeded the high end of our guidance range for all of our key performance metrics,” said ServiceNow CFO Gina Mastantuono. “The better-together story is resonating with C-suites driving larger multi-product deals, as enterprises are looking to consolidate purchasing with strategic platforms like ServiceNow. Our intelligent platform for end-to-end digital transformation uniquely positions us to seize the opportunities in front of us as we continue to deliver durable topline growth and margin expansion on our journey to becoming the defining enterprise software company of the 21st century.”
Recent Business Highlights
- In Q2, ServiceNow delivered new solutions that will embed generative AI across the Now Platform. Generative AI Controller, Now Assist for Search, and Now Assist for Virtual Agent build on ServiceNow’s already extensive AI functionality and drive new levels of automation.
- Today, ServiceNow announced further generative AI capabilities with case summarization and text-to-code, its approach to commercialization with new premium SKU offerings, and the introduction of its AI Lighthouse program with NVIDIA and Accenture to assist customers across industries in the design, development, and implementation of new generative AI use cases.
- ServiceNow also announced today an expanded partnership with KPMG to reimagine finance, supply chain, and procurement operations with a joint investment to co-develop new offerings. This follows ServiceNow and Cognizant’s recent partnership to accelerate adoption of AI-driven automation across industries.
- During the quarter, ServiceNow hosted its annual Knowledge conference, which generated significant pipeline and featured announcements including a generative AI partnership with NVIDIA, the launches of Finance and Supply Chain Workflows and ServiceNow.org, and a commitment to deploy $1 billion in investment capital by 2026 to ServiceNow Ventures.
- In addition, as announced at Financial Analyst Day in May, the Board of Directors authorized a share repurchase program of up to $1.5 billion in shares of common stock to manage the impact of dilution from future employee equity grants and employee stock purchase programs.
- ServiceNow received significant recognition during the quarter, being named to the Fortune 500 list for the first time, and being recognized as a Visionary in the 2023 Gartner® Magic Quadrant for Application Performance Monitoring (APM) and Observability, and a Leader in The Forrester Wave™: Low-Code Development Platforms for Professional Developers, Q2 2023.
- In July, ServiceNow closed the acquisition of AI-powered platform G2K to transform retail and other industries, and opened two new Innovation Centers to serve as digital incubation hubs in India and Singapore.
Second Quarter 2023 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the second quarter 2023:
|
|
|
|
|
|
|
Second Quarter 2023 GAAP Results |
|
Second Quarter 2023 Non-GAAP Results(1) |
||
|
Amount ($ millions) |
Year/Year Growth (%) |
|
Amount ($ millions)(3) |
Year/Year Growth (%) |
Subscription revenues |
$2,075 |
25% |
|
$2,074 |
25% |
Professional services and other revenues |
$75 |
(20%) |
|
$75 |
(20%) |
Total revenues |
$2,150 |
23% |
|
$2,149 |
22.5% |
|
|
|
|
|
|
|
Amount ($ billions) |
Year/Year Growth (%) |
|
Amount
|
Year/Year Growth (%) |
cRPO |
$7.20 |
25% |
|
$7.13 |
24% |
RPO |
$14.2 |
24% |
|
$14.0 |
22.5% |
|
|
|
|
|
|
|
Amount ($ millions) |
Margin (%) |
|
Amount ($ millions)(2) |
Margin (%)(2) |
Subscription gross profit |
$1,686 |
81% |
|
$1,755 |
85% |
Professional services and other gross profit (loss) |
($7) |
(9%) |
|
$8 |
11% |
Total gross profit |
$1,679 |
78% |
|
$1,763 |
82% |
Income from operations |
$117 |
5% |
|
$544 |
25% |
Net cash provided by operating activities |
$580 |
27% |
|
|
|
Free cash flow |
|
|
|
$451 |
21% |
|
|
|
|
|
|
|
Amount ($ millions) |
Earnings per Basic/Diluted Share ($) |
|
Amount ($ millions)(2) |
Earnings per Basic/Diluted Share ($)(2) |
Net income(4) |
$1,044 |
$5.12 / 5.08 |
|
$486 |
$2.38 / 2.37 |
| (1) | We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures. |
|
| (2) | Refer to the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures. |
|
| (3) | Non-GAAP subscription revenues, professional services and other revenues, total revenues, cRPO and RPO are adjusted only for constant currency. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures. |
|
| (4) | Second quarter 2023 GAAP net income was impacted by the release of $910 million of our valuation allowance on our deferred tax assets as a discrete tax benefit and $55 million as part of the effective tax rate. |
|
| Note: Numbers rounded for presentation purposes and may not foot. | ||
Financial Outlook
Our guidance includes GAAP and non-GAAP financial measures. The non-GAAP growth rates for subscription revenues and cRPO are adjusted only for constant currency to provide better visibility into the underlying business trends.
The following table summarizes our guidance for the third quarter 2023:
|
Third Quarter 2023 GAAP Guidance |
|
Third Quarter 2023 Non-GAAP Guidance(1) |
||
|
Amount
|
Year/Year Growth (%)(3) |
|
Constant Currency Year/Year Growth (%) |
|
Subscription revenues |
$2,185 - $2,195 |
25.5% - 26% |
|
23% - 23.5% |
|
|
|
|
|
|
|
cRPO |
|
25.5% |
|
21.5% |
|
|
|
|
|
|
|
|
|
|
|
Margin (%)(2) |
|
Income from operations |
|
|
|
27% |
|
|
|
|
|
|
|
|
|
Amount (millions) |
|
|
|
Weighted-average shares used to compute diluted net income per share |
|
206 |
|
|
|
| (1) | We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures. |
|
| (2) | Refer to the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures. |
|
| (3) | Guidance for GAAP subscription revenues and GAAP subscription revenue and cRPO growth rate is based on the 30-day average of foreign exchange rates for June 2023 for entities reporting in currencies other than U.S. Dollars. |
The following table summarizes our guidance for the full-year 2023:
|
Full-Year 2023 GAAP Guidance |
|
Full-Year 2023 Non-GAAP Guidance(1) |
||
|
Amount
|
Year/Year Growth (%)(3) |
|
Constant Currency Year/Year Growth (%) |
|
Subscription revenues |
$8,580 - $8,600 |
24.5% - 25% |
|
24% |
|
|
|
|
|
|
|
|
|
|
|
Margin (%)(2) |
|
Subscription gross profit |
|
|
|
84% |
|
Income from operations |
|
|
|
26.5% |
|
Free cash flow |
|
|
|
30% |
|
|
|
|
|
|
|
|
|
Amount (millions) |
|
|
|
Weighted-average shares used to compute diluted net income per share |
|
206 |
|
|
|
| (1) | We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures. |
|
| (2) | Refer to the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures. |
|
| (3) | GAAP subscription revenues and related growth rate for the future quarters included in our full-year 2023 guidance are based on the 30-day average of foreign exchange rates for June 2023 for entities reporting in currencies other than U.S. Dollars. |
|
Note: Numbers are rounded for presentation purposes and may not foot. |
||
Conference Call Details
The conference call will begin at 2 p.m. Pacific Time (21:00 GMT) on July 26, 2023. Interested parties may listen to the call by dialing (888) 330‑2455 (Passcode: 8135305), or if outside North America, by dialing (240) 789-2717 (Passcode: 8135305). Individuals may access the live teleconference from this webcast.
https://events.q4inc.com/attendee/590657753
An audio replay of the conference call and webcast will be available two hours after its completion and will be accessible for 30 days. To hear the replay, interested parties may go to the investor relations section of the ServiceNow website or dial (800) 770‑2030 (Passcode: 8135305), or if outside North America, by dialing (647) 362‑9199 (Passcode: 8135305).
Investor Presentation Details
An investor presentation providing additional information, including forward-looking guidance, and analysis can be found at https://investors.servicenow.com.
Upcoming Investor Conferences
ServiceNow today announced that it will attend and have executives present at three upcoming investor conferences.
These include:
- ServiceNow President and Chief Operating Officer CJ Desai will participate in a keynote presentation at the KeyBanc Technology Leadership Forum on Tuesday, August 8, 2023, at 11:00am PT.
- ServiceNow Senior Vice President and General Manager, Technology Workflow Products, Pablo Stern will participate in a fireside chat at the Deutsche Bank 2023 Technology Conference on Thursday, August 31, 2023, at 9:30am PT.
- ServiceNow Chairman and Chief Executive Officer Bill McDermott will participate in a keynote presentation at the Goldman Sachs Communacopia and Technology Conference on Wednesday, September 6, 2023, at 1:05pm PT.
The live webcasts will be accessible on the investor relations section of the ServiceNow website at https://investors.servicenow.com and archived on the ServiceNow site for a period of 30 days.
Statement Regarding Use of Non-GAAP Financial Measures
We use the following non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
- Revenues. We adjust revenues and related growth rates for constant currency to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To present this information, current period results for entities reporting in currencies other than U.S. Dollars (“USD”) are converted into USD at the average exchange rates in effect during the comparison period (for Q2 2022, the average exchange rates in effect for our major currencies were 1 USD to 0.94 Euros and 1 USD to 0.80 British Pound Sterling (“GBP”)), rather than the actual average exchange rates in effect during the current period (for Q2 2023, the average exchange rates in effect for our major currencies were 1 USD to 0.92 Euros and 1 USD to 0.80 GBP). Guidance for related growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the exchange rates for the guidance period. We believe the presentation of revenues and related growth rates adjusted for constant currency facilitates the comparison of revenues year-over-year.
- Remaining performance obligations and current remaining performance obligations. We adjust cRPO and remaining performance obligations (“RPO”) and related growth rates for constant currency to provide a framework for assessing how our business performed. To present this information, current period results for entities reporting in currencies other than USD are converted into USD at the exchange rates in effect at the end of the comparison period (for Q2 2022, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.96 Euros and 1 USD to 0.82 GBP), rather than the actual end of the period exchange rates in effect during the current period (for Q2 2023, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.92 Euros and 1 USD to 0.79 GBP). Guidance for the related growth rate is derived by applying the end of period exchange rates in effect during the comparison period rather than the exchange rates in effect during the guidance period. We believe the presentation of cRPO and RPO and related growth rates adjusted for constant currency facilitates the comparison of cRPO and RPO year-over-year, respectively.
- Gross profit, Income from operations, Net income and Net income per share - diluted. Our non-GAAP presentation of gross profit, income from operations, and net income measures exclude certain non-cash or non-recurring items, including stock-based compensation expense, amortization of debt discount and issuance costs related to our convertible senior notes, loss on early note conversions, amortization of purchased intangibles, legal settlements, business combination and other related costs, the related income tax effect of these adjustments, and the income tax benefit from the release of a valuation allowance on deferred tax assets. The non-GAAP weighted-average shares used to compute our non-GAAP net income per share - diluted excludes the dilutive effect of the in-the-money portion of convertible senior notes as they are covered by our note hedges, and includes the dilutive effect of time-based stock awards, the dilutive effect of warrants and the potentially dilutive effect of our stock awards with performance conditions not yet satisfied at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met. We believe these adjustments provide useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods.
- Free cash flow. Free cash flow is defined as net cash provided by (used in) operating activities plus cash paid for legal settlements, repayments of convertible senior notes attributable to debt discount and business combination and other related costs including compensation expense, reduced by purchases of property and equipment. Free cash flow margin is calculated as free cash flow as a percentage of total revenues. We believe information regarding free cash flow and free cash flow margin provides useful information to investors because it is an indicator of the strength and performance of our business operations.
Our presentation of non-GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP and non-GAAP results for gross profit, income from operations, net income, net income per share and free cash flow.
Use of Forward-Looking Statements
This release contains “forward-looking statements” regarding our performance, including but not limited to statements in the section entitled “Financial Outlook.” Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.
Factors that may cause actual results to differ materially from those in any forward-looking statements include, among others, experiencing an actual or perceived cyber-security event; our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet; errors, interruptions, delays, or security breaches in or of our service or data centers; our ability to maintain and attract key employees and manage workplace culture; alleged violations of laws and regulations, including those relating to anti-bribery and anti-corruption and those relating to public sector contracting requirements; our ability to compete successfully against existing and new competitors; our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments; our ability to grow our business, including converting remaining performance obligations into revenue, adding and retaining customers, selling additional subscriptions to existing customers, selling to larger enterprises, government and regulated organizations with complex sales cycles and certification processes, and entering new geographies and markets; our ability to develop and gain customer demand for and acceptance of existing, new and improved products and services; our ability to expand and maintain our partnerships and partner programs, including expected market opportunity from such relationships; global economic conditions; fluctuations in the value of foreign currencies relative to the U.S. Dollar; fluctuations in interest rates; our ability to consummate and realize the benefits of any strategic transactions or acquisitions; the impact of the Russian invasion of Ukraine and bank failures on macroeconomic conditions; inflation; and fluctuations and volatility in our stock price.
Further information on these and other factors that could affect our financial results are included in our Form 10-K for the year ended December 31, 2022, our Form 10-Q that will be filed for the quarter ended June 30, 2023 and in other filings we make with the Securities and Exchange Commission from time to time.
We undertake no obligation, and do not intend, to update these forward-looking statements, to review or confirm analysts’ expectations, or to provide interim reports or updates on the progress of the current financial quarter.
About ServiceNow
ServiceNow (NYSE: NOW) makes the world work better for everyone. Our cloud-based platform and solutions help digitize and unify organizations so that they can find smarter, faster, better ways to make work flow. So employees and customers can be more connected, more innovative, and more agile. And we can all create the future we imagine. The world works with ServiceNow™. For more information, visit: www.servicenow.com.
© 2023 ServiceNow, Inc. All rights reserved. ServiceNow, the ServiceNow logo, Now, and other ServiceNow marks are trademarks and/or registered trademarks of ServiceNow, Inc. in the United States and/or other countries. Other company names, product names, and logos may be trademarks of the respective companies with which they are associated.
ServiceNow, Inc. |
|||||||||||||||
Condensed Consolidated Statements of Operations |
|||||||||||||||
(in millions, except per share data) |
|||||||||||||||
(unaudited) |
|||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
June 30, 2023 |
|
June 30, 2022 |
|
June 30, 2023 |
|
June 30, 2022 |
||||||||
Revenues: |
|
|
|
|
|
|
|
||||||||
Subscription |
$ |
2,075 |
|
|
$ |
1,658 |
|
|
$ |
4,099 |
|
|
$ |
3,289 |
|
Professional services and other |
|
75 |
|
|
|
94 |
|
|
|
147 |
|
|
|
185 |
|
Total revenues |
|
2,150 |
|
|
|
1,752 |
|
|
|
4,246 |
|
|
|
3,474 |
|
Cost of revenues (1): |
|
|
|
|
|
|
|
||||||||
Subscription |
|
389 |
|
|
|
287 |
|
|
|
743 |
|
|
|
562 |
|
Professional services and other |
|
82 |
|
|
|
102 |
|
|
|
166 |
|
|
|
196 |
|
Total cost of revenues |
|
471 |
|
|
|
389 |
|
|
|
909 |
|
|
|
758 |
|
Gross profit |
|
1,679 |
|
|
|
1,363 |
|
|
|
3,337 |
|
|
|
2,716 |
|
Operating expenses (1): |
|
|
|
|
|
|
|
||||||||
Sales and marketing |
|
832 |
|
|
|
722 |
|
|
|
1,655 |
|
|
|
1,395 |
|
Research and development |
|
521 |
|
|
|
444 |
|
|
|
1,013 |
|
|
|
858 |
|
General and administrative |
|
209 |
|
|
|
175 |
|
|
|
408 |
|
|
|
354 |
|
Total operating expenses |
|
1,562 |
|
|
|
1,341 |
|
|
|
3,076 |
|
|
|
2,607 |
|
Income from operations |
|
117 |
|
|
|
22 |
|
|
|
261 |
|
|
|
109 |
|
Interest income |
|
74 |
|
|
|
12 |
|
|
|
134 |
|
|
|
17 |
|
Other expense, net |
|
(17 |
) |
|
|
(5 |
) |
|
|
(33 |
) |
|
|
(12 |
) |
Income before income taxes |
|
174 |
|
|
|
29 |
|
|
|
362 |
|
|
|
114 |
|
(Benefit from) provision for income taxes |
|
(870 |
) |
|
|
9 |
|
|
|
(832 |
) |
|
|
19 |
|
Net income |
$ |
1,044 |
|
|
$ |
20 |
|
|
$ |
1,194 |
|
|
$ |
95 |
|
Net income per share - basic |
$ |
5.12 |
|
|
$ |
0.10 |
|
|
$ |
5.86 |
|
|
$ |
0.47 |
|
Net income per share - diluted |
$ |
5.08 |
|
|
$ |
0.10 |
|
|
$ |
5.83 |
|
|
$ |
0.47 |
|
Weighted-average shares used to compute net income per share - basic |
|
204 |
|
|
|
201 |
|
|
|
204 |
|
|
|
201 |
|
Weighted-average shares used to compute net income per share - diluted |
|
205 |
|
|
|
203 |
|
|
|
205 |
|
|
|
203 |
|
(1) Includes stock-based compensation as follows: |
|||||||||||
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
June 30, 2023 |
|
June 30, 2022 |
|
June 30, 2023 |
|
June 30, 2022 |
||||
Cost of revenues: |
|
|
|
|
|
|
|
||||
Subscription |
$ |
50 |
|
$ |
39 |
|
$ |
96 |
|
$ |
75 |
Professional services and other |
|
15 |
|
|
18 |
|
|
29 |
|
|
34 |
Operating expenses: |
|
|
|
|
|
|
|
||||
Sales and marketing |
|
120 |
|
|
113 |
|
|
246 |
|
|
218 |
Research and development |
|
145 |
|
|
126 |
|
|
280 |
|
|
241 |
General and administrative |
|
67 |
|
|
56 |
|
|
127 |
|
|
109 |
ServiceNow, Inc. |
|||||
Condensed Consolidated Balance Sheets |
|||||
(in millions) |
|||||
|
June 30, 2023 |
|
December 31, 2022 |
||
|
(unaudited) |
|
|
||
Assets |
|
|
|
||
Current assets: |
|
|
|
||
Cash and cash equivalents |
$ |
1,663 |
|
$ |
1,470 |
Short-term investments |
|
3,084 |
|
|
2,810 |
Accounts receivable, net |
|
1,093 |
|
|
1,725 |
Current portion of deferred commissions |
|
401 |
|
|
369 |
Prepaid expenses and other current assets |
|
362 |
|
|
280 |
Total current assets |
|
6,603 |
|
|
6,654 |
Deferred commissions, less current portion |
|
777 |
|
|
742 |
Long-term investments |
|
2,740 |
|
|
2,117 |
Property and equipment, net |
|
1,148 |
|
|
1,053 |
Operating lease right-of-use assets |
|
656 |
|
|
682 |
Intangible assets, net |
|
191 |
|
|
232 |
Goodwill |
|
821 |
|
|
824 |
Deferred tax assets |
|
1,551 |
|
|
636 |
Other assets |
|
436 |
|
|
359 |
Total assets |
$ |
14,923 |
|
$ |
13,299 |
Liabilities and Stockholders’ Equity |
|
|
|
||
Current liabilities: |
|
|
|
||
Accounts payable |
$ |
171 |
|
$ |
274 |
Accrued expenses and other current liabilities |
|
893 |
|
|
975 |
Current portion of deferred revenue |
|
4,613 |
|
|
4,660 |
Current portion of operating lease liabilities |
|
90 |
|
|
96 |
Total current liabilities |
|
5,767 |
|
|
6,005 |
Deferred revenue, less current portion |
|
45 |
|
|
70 |
Operating lease liabilities, less current portion |
|
635 |
|
|
650 |
Long-term debt, net |
|
1,487 |
|
|
1,486 |
Other long-term liabilities |
|
63 |
|
|
56 |
Stockholders’ equity |
|
6,926 |
|
|
5,032 |
Total liabilities and stockholders’ equity |
$ |
14,923 |
|
$ |
13,299 |
ServiceNow, Inc. |
|||||||||||||||
Condensed Consolidated Statements of Cash Flows |
|||||||||||||||
(in millions) |
|||||||||||||||
(unaudited) |
|||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
June 30, 2023 |
|
June 30, 2022 |
|
June 30, 2023 |
|
June 30, 2022 |
||||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
||||||||
Net income |
$ |
1,044 |
|
|
$ |
20 |
|
|
$ |
1,194 |
|
|
$ |
95 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
||||||||
Depreciation and amortization |
|
136 |
|
|
|
105 |
|
|
|
262 |
|
|
|
206 |
|
Amortization of deferred commissions |
|
112 |
|
|
|
86 |
|
|
|
218 |
|
|
|
169 |
|
Stock-based compensation |
|
397 |
|
|
|
352 |
|
|
|
778 |
|
|
|
677 |
|
Deferred income taxes |
|
(911 |
) |
|
|
(1 |
) |
|
|
(904 |
) |
|
|
(3 |
) |
Other |
|
(3 |
) |
|
|
4 |
|
|
|
(2 |
) |
|
|
19 |
|
Changes in operating assets and liabilities, net of effect of business combinations: |
|
|
|
|
|
|
|
||||||||
Accounts receivable |
|
16 |
|
|
|
(51 |
) |
|
|
635 |
|
|
|
511 |
|
Deferred commissions |
|
(121 |
) |
|
|
(100 |
) |
|
|
(280 |
) |
|
|
(237 |
) |
Prepaid expenses and other assets |
|
(72 |
) |
|
|
(26 |
) |
|
|
(136 |
) |
|
|
(72 |
) |
Accounts payable |
|
(44 |
) |
|
|
71 |
|
|
|
(90 |
) |
|
|
140 |
|
Deferred revenue |
|
(129 |
) |
|
|
(65 |
) |
|
|
(89 |
) |
|
|
(44 |
) |
Accrued expenses and other liabilities |
|
155 |
|
|
|
38 |
|
|
|
(104 |
) |
|
|
(165 |
) |
Net cash provided by operating activities |
|
580 |
|
|
|
433 |
|
|
|
1,482 |
|
|
|
1,296 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
||||||||
Purchases of property and equipment |
|
(132 |
) |
|
|
(151 |
) |
|
|
(297 |
) |
|
|
(244 |
) |
Business combinations, net of cash acquired |
|
— |
|
|
|
(57 |
) |
|
|
— |
|
|
|
(57 |
) |
Purchases of investments |
|
(1,599 |
) |
|
|
(1,112 |
) |
|
|
(2,821 |
) |
|
|
(1,774 |
) |
Purchases of non-marketable investments |
|
(16 |
) |
|
|
(35 |
) |
|
|
(46 |
) |
|
|
(136 |
) |
Sales and maturities of investments |
|
1,073 |
|
|
|
554 |
|
|
|
1,953 |
|
|
|
1,131 |
|
Other |
|
— |
|
|
|
1 |
|
|
|
13 |
|
|
|
— |
|
Net cash used in investing activities |
|
(674 |
) |
|
|
(800 |
) |
|
|
(1,198 |
) |
|
|
(1,080 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
||||||||
Repayments of convertible senior notes attributable to principal |
|
— |
|
|
|
(88 |
) |
|
|
— |
|
|
|
(94 |
) |
Proceeds from employee stock plans |
|
— |
|
|
|
1 |
|
|
|
117 |
|
|
|
106 |
|
Taxes paid related to net share settlement of equity awards |
|
(94 |
) |
|
|
(91 |
) |
|
|
(206 |
) |
|
|
(241 |
) |
Net cash used in financing activities |
|
(94 |
) |
|
|
(178 |
) |
|
|
(89 |
) |
|
|
(229 |
) |
Foreign currency effect on cash, cash equivalents and restricted cash |
|
(1 |
) |
|
|
(44 |
) |
|
|
— |
|
|
|
(49 |
) |
Net change in cash, cash equivalents and restricted cash |
|
(189 |
) |
|
|
(589 |
) |
|
|
195 |
|
|
|
(62 |
) |
Cash, cash equivalents and restricted cash at beginning of period |
|
1,859 |
|
|
|
2,259 |
|
|
|
1,475 |
|
|
|
1,732 |
|
Cash, cash equivalents and restricted cash at end of period |
$ |
1,670 |
|
|
$ |
1,670 |
|
|
$ |
1,670 |
|
|
$ |
1,670 |
|
ServiceNow, Inc. |
||||||||||||||||
GAAP to Non-GAAP Reconciliation |
||||||||||||||||
(in millions, except per share data) |
||||||||||||||||
(unaudited) |
||||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||||
|
June 30, 2023 |
|
June 30, 2022 |
|
June 30, 2023 |
|
June 30, 2022 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Gross profit: |
|
|
|
|
|
|
|
|
||||||||
GAAP subscription gross profit |
$ |
1,686 |
|
|
$ |
1,371 |
|
|
$ |
3,356 |
|
|
$ |
2,727 |
|
|
Stock-based compensation |
|
50 |
|
|
|
39 |
|
|
|
96 |
|
|
|
75 |
|
|
Amortization of purchased intangibles |
|
19 |
|
|
|
18 |
|
|
|
37 |
|
|
|
36 |
|
|
Non-GAAP subscription gross profit |
$ |
1,755 |
|
|
$ |
1,427 |
|
|
$ |
3,489 |
|
|
$ |
2,837 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP professional services and other gross loss |
$ |
(7 |
) |
|
$ |
(8 |
) |
|
$ |
(19 |
) |
|
$ |
(11 |
) |
|
Stock-based compensation |
|
15 |
|
|
|
18 |
|
|
|
29 |
|
|
|
34 |
|
|
Non-GAAP professional services and other gross profit |
$ |
8 |
|
|
$ |
10 |
|
|
$ |
10 |
|
|
$ |
23 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP gross profit |
$ |
1,679 |
|
|
$ |
1,363 |
|
|
$ |
3,337 |
|
|
$ |
2,716 |
|
|
Stock-based compensation |
|
65 |
|
|
|
56 |
|
|
|
125 |
|
|
|
108 |
|
|
Amortization of purchased intangibles |
|
19 |
|
|
|
18 |
|
|
|
37 |
|
|
|
36 |
|
|
Non-GAAP gross profit |
$ |
1,763 |
|
|
$ |
1,437 |
|
|
$ |
3,499 |
|
|
$ |
2,860 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross margin: |
|
|
|
|
|
|
|
|
||||||||
GAAP subscription gross margin |
|
81 |
% |
|
|
83 |
% |
|
|
82 |
% |
|
|
83 |
% |
|
Stock-based compensation as % of subscription revenues |
|
2 |
% |
|
|
2 |
% |
|
|
2 |
% |
|
|
2 |
% |
|
Amortization of purchased intangibles as % of subscription revenues |
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
Non-GAAP subscription gross margin |
|
85 |
% |
|
|
86 |
% |
|
|
85 |
% |
|
|
86 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP professional services and other gross margin |
|
(9 |
%) |
|
|
(9 |
%) |
|
|
(13 |
%) |
|
|
(6 |
%) |
|
Stock-based compensation as % of professional services and other revenues |
|
20 |
% |
|
|
19 |
% |
|
|
20 |
% |
|
|
18 |
% |
|
Non-GAAP professional services and other gross margin |
|
11 |
% |
|
|
10 |
% |
|
|
7 |
% |
|
|
12 |
% |
|
|
|
|
|
|
|
|
||||||||||
GAAP gross margin |
|
78 |
% |
|
|
78 |
% |
|
|
79 |
% |
|
|
78 |
% |
|
Stock-based compensation as % of total revenues |
|
3 |
% |
|
|
3 |
% |
|
|
3 |
% |
|
|
3 |
% |
|
Amortization of purchased intangibles as % of total revenues |
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
Non-GAAP gross margin |
|
82 |
% |
|
|
82 |
% |
|
|
82 |
% |
|
|
82 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Income from operations: |
|
|
|
|
|
|
|
|
||||||||
GAAP income from operations |
$ |
117 |
|
|
$ |
22 |
|
|
$ |
261 |
|
|
$ |
109 |
|
|
Stock-based compensation |
|
397 |
|
|
|
352 |
|
|
|
778 |
|
|
|
677 |
|
|
Amortization of purchased intangibles |
|
22 |
|
|
|
20 |
|
|
|
42 |
|
|
|
40 |
|
|
Business combination and other related costs |
|
8 |
|
|
|
5 |
|
|
|
15 |
|
|
|
10 |
|
|
Non-GAAP income from operations |
$ |
544 |
|
|
$ |
399 |
|
|
$ |
1,096 |
|
|
$ |
836 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating margin: |
|
|
|
|
|
|
|
|
||||||||
GAAP operating margin |
|
5 |
% |
|
|
1 |
% |
|
|
6 |
% |
|
|
3 |
% |
|
Stock-based compensation as % of total revenues |
|
18 |
% |
|
|
20 |
% |
|
|
18 |
% |
|
|
20 |
% |
|
Amortization of purchased intangibles as % of total revenues |
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
|
1 |
% |
|
Business combination and other related costs as % of total revenues |
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
Non-GAAP operating margin |
|
25 |
% |
|
|
23 |
% |
|
|
26 |
% |
|
|
24 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||
Net income: |
|
|
|
|
|
|
|
|
||||||||
GAAP net income |
$ |
1,044 |
|
|
$ |
20 |
|
|
$ |
1,194 |
|
|
$ |
95 |
|
|
Stock-based compensation |
|
397 |
|
|
|
352 |
|
|
|
778 |
|
|
|
677 |
|
|
Amortization of purchased intangibles |
|
22 |
|
|
|
20 |
|
|
|
42 |
|
|
|
40 |
|
|
Business combination and other related costs |
|
8 |
|
|
|
5 |
|
|
|
15 |
|
|
|
10 |
|
|
Income tax expense effects related to the above adjustments |
|
(75 |
) |
|
|
(68 |
) |
|
|
(150 |
) |
|
|
(141 |
) |
|
Discrete income tax benefit from the release of a valuation allowance on deferred tax assets (1) |
|
(910 |
) |
|
|
— |
|
|
|
(910 |
) |
|
|
— |
|
|
Non-GAAP net income |
$ |
486 |
|
|
$ |
329 |
|
|
$ |
969 |
|
|
$ |
681 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share - basic and diluted: |
|
|
|
|
|
|
|
|
||||||||
GAAP net income per share - basic |
$ |
5.12 |
|
|
$ |
0.10 |
|
|
$ |
5.86 |
|
|
$ |
0.47 |
|
|
GAAP net income per share - diluted |
$ |
5.08 |
|
|
$ |
0.10 |
|
|
$ |
5.83 |
|
|
$ |
0.47 |
|
|
Non-GAAP net income per share - basic |
$ |
2.38 |
|
|
$ |
1.63 |
|
|
$ |
4.76 |
|
|
$ |
3.39 |
|
|
Non-GAAP net income per share - diluted |
$ |
2.37 |
|
|
$ |
1.62 |
|
|
$ |
4.73 |
|
|
$ |
3.35 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP weighted-average shares used to compute net income per share - basic |
|
204 |
|
|
|
201 |
|
|
|
204 |
|
|
|
201 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
GAAP and Non-GAAP weighted-average shares used to compute net income per share - diluted |
|
205 |
|
|
|
203 |
|
|
|
205 |
|
|
|
203 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Free cash flow: |
|
|
|
|
|
|
|
|
||||||||
GAAP net cash provided by operating activities |
$ |
580 |
|
|
$ |
433 |
|
|
$ |
1,482 |
|
|
$ |
1,296 |
|
|
Purchases of property and equipment |
|
(132 |
) |
|
|
(151 |
) |
|
|
(297 |
) |
|
|
(244 |
) |
|
Business combination and other related costs |
|
3 |
|
|
|
5 |
|
|
|
3 |
|
|
|
5 |
|
|
Non-GAAP free cash flow |
$ |
451 |
|
|
$ |
287 |
|
|
$ |
1,188 |
|
|
$ |
1,057 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Free cash flow margin: |
|
|
|
|
|
|
|
|
||||||||
GAAP net cash provided by operating activities as % of total revenues |
|
27 |
% |
|
|
25 |
% |
|
|
35 |
% |
|
|
37 |
% |
|
Purchases of property and equipment as % of total revenues |
|
(6 |
%) |
|
|
(9 |
%) |
|
|
(7 |
%) |
|
|
(7 |
%) |
|
Business combination and other related costs as % of total revenues |
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
|
Non-GAAP free cash flow margin |
|
21 |
% |
|
|
16 |
% |
|
|
28 |
% |
|
|
30 |
% |
|
(1) |
GAAP net income for the three and six months ended June 30, 2023 was impacted by a $910 million release of a valuation allowance on our deferred tax assets as a discrete tax benefit. |
|
| Note: Numbers are rounded for presentation purposes and may not foot. | ||
ServiceNow, Inc. |
|||
Reconciliation of Non-GAAP Financial Guidance |
|||
|
Three Months Ending |
||
|
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
8 |
% |
|
Stock-based compensation expense as % of total revenues |
18 |
% |
|
Amortization of purchased intangibles as % of total revenues |
1 |
% |
|
Business combination and other related costs as % of total revenues |
— |
% |
|
Non-GAAP operating margin |
27 |
% |
|
|
Twelve Months Ending |
||
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
GAAP subscription gross margin |
81 |
% |
|
Stock-based compensation expense as % of subscription revenues |
2 |
% |
|
Amortization of purchased intangibles as % of subscription revenues |
1 |
% |
|
Non-GAAP subscription margin |
84 |
% |
|
GAAP operating margin |
7 |
% |
|
Stock-based compensation expense as % of total revenues |
18 |
% |
|
Amortization of purchased intangibles as % of total revenues |
1 |
% |
|
Business combination and other related costs as % of total revenues |
— |
% |
|
Non-GAAP operating margin |
26.5 |
% |
|
GAAP net cash provided by operating activities as % of total revenues |
37 |
% |
|
Purchases of property and equipment as % of total revenues |
(7 |
)% |
|
Business combination and other related costs as % of total revenues |
— |
% |
|
Non-GAAP free cash flow margin |
30 |
% |
|
Note: Numbers are rounded for presentation purposes and may not foot. |
|||
View source version on businesswire.com: https://www.businesswire.com/news/home/20230726922430/en/
Contacts
Media Contact:
Johnna Hoff
408.250.8644
press@servicenow.com
Investor Contact:
Darren Yip
925.388.7205
ir@servicenow.com
