NOW
$414.21
Servicenow
($2.58)
(.62%)
Earnings Details
1st Quarter March 2020
Wednesday, April 29, 2020 4:10:00 PM
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Summary

Servicenow Beats but Guides Lower

Servicenow (NOW) reported 1st Quarter March 2020 earnings of $1.10 per share on revenue of $1.0 billion. The consensus earnings estimate was $0.95 per share on revenue of $1.0 billion. The Earnings Whisper number was $0.99 per share. Revenue grew 32.6% on a year-over-year basis.

The company said it expects second quarter subscription revenue of $1.008 billion to $1.013 billion. The current consensus revenue estimate is $1.08 billion for the quarter ending June 30, 2020. The company also said it now expects 2020 subscription revenue of $4.167 billion to $4.187 billion. The company's previous guidance was subscription revenue of $4.21 billion to $4.23 billion and the current consensus estimate is revenue of $4.37 billion for the year ending December 31, 2020.

ServiceNow Inc is a provider of cloud-based solutions that define, structure, manage and automate services across the enterprise. Its services include a suite of applications built on proprietary platform.

Results
Reported Earnings
$1.10
Earnings Whisper
$0.99
Consensus Estimate
$0.95
Reported Revenue
$1.05 Bil
Revenue Estimate
$1.03 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

ServiceNow Reports First Quarter 2020 Financial Results

  • Subscription revenues of $995 million in Q1 2020, representing 34% year-over-year growth, 36% adjusted for constant currency
  • 37 transactions over $1 million in net new annual contract value in Q1 2020, representing 48% year-over-year growth
  • 933 total customers with over $1 million in annual contract value, representing 30% year-over-year growth

SANTA CLARA, Calif.--(BUSINESS WIRE)--ServiceNow (NYSE: NOW), the leading digital workflow company making work, work better for people, today announced financial results for its first quarter ended March 31, 2020, with subscription revenues of $995 million in Q1 2020, representing 34% year-over-year growth, 36% adjusted for constant currency.

During the quarter, ServiceNow closed 37 transactions with more than $1 million in net new annual contract value (ACV), representing 48% year-over-year growth. Deals included the company’s second-largest new customer transaction ever, as well as the Asia Pacific region’s largest customer service management deal ever. The company now has 933 total customers with more than $1 million in ACV, representing 30% year-over-year growth in customers.

“This pandemic has allowed us to engage our customers in new ways, enabling them to focus on their most critical workflows,” said ServiceNow CEO Bill McDermott. “Businesses are splitting apart old value chains and reassembling them in end-to-end, mobile-first experiences on the Now Platform. Our Q1 results are a direct reflection of ServiceNow’s unique position as the workflow platform to create great employee and customer experiences - even in these challenging conditions. With our outstanding team and culture, I am extremely confident in the long-term growth trajectory of this company.”

“We are working closely with our customers to support them in this challenging environment,” said Gina Mastantuono, ServiceNow CFO. “In Q1, we exceeded the high end of our guidance for subscription revenues and billings and delivered another strong quarter of operating profit and free cash flow. With our recurring revenue model, we are in a strong financial position to manage through near-term uncertainties and for long-term growth. We continue to focus on customer-driven innovation and remain confident in our path to $10 billion in revenue and beyond.”

First Quarter 2020 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the first quarter 2020:

 

First Quarter 2020

GAAP Results

 

First Quarter 2020 Non-GAAP Results(1)

 

Amount
($ millions)

Year/Year
Growth (%)

 

Amount
($ millions)

Year/Year
Growth (%)

Adjusted
Amount
($ millions)(2)

Adjusted
Year/Year
Growth (%)

Subscription revenues

$995

34%

 

 

 

$1,006

36%

Professional services and other revenues

$52

6%

 

 

 

$53

7%

Total revenues

$1,046

33%

 

 

 

$1,059

34%

 

 

 

 

 

 

 

 

Subscription billings

 

 

 

$1,055

30%

$1,065

32%

Professional services and other billings

 

 

 

$48

0%

$49

2%

Total billings

 

 

 

$1,103

29%

$1,114

30%

 

 

 

 

 

 

 

 

 

Amount
($ millions)

Margin (%)

 

Amount
($ millions)

Margin (%)

 

 

Subscription gross profit

$835

84%

 

$863

87%

 

 

Professional services and other gross profit (loss)

($12)

(23%)

 

$0

0%

 

 

Total gross profit

$823

79%

 

$863

83%

 

 

Income from operations

$49

5%

 

$251

24%

 

 

Net cash provided by operating activities

$492

47%

 

 

 

 

 

Free cash flow

 

 

 

$409

39%

 

 

 

 

 

 

 

 

 

 

 

Amount
($ millions)

Earnings per
Basic/Diluted
Share ($)

 

Amount
($ millions)

Earnings per
Basic/Diluted
Share ($)

 

 

Net income

$48

$0.25 / $0.24

 

$207

$1.09 / $1.05

 

 

(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, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.

(2)

Non-GAAP adjusted subscription revenues, professional services and other revenues, total revenues and professional services and other billings are adjusted for constant currency. Non-GAAP adjusted subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
Note: Numbers rounded for presentation purposes.

Financial Outlook

While we believe we are in a strong financial position to weather impacts caused to our business by COVID-19, many of our customers are now operating under very challenging circumstances, especially those in industries highly affected by COVID-19, and may re-evaluate their spend. As such, the second quarter 2020 guidance and updated full-year 2020 guidance we are providing today factor in the expected impacts of COVID-19 based on information available to us today. Our guidance is also based on the assumption that generally the most significant headwinds will occur in the second and third quarters of 2020 and there will be increased uncertainty around new business, renewal timing or billings terms, particularly with customers in these highly affected industries. We are further assuming that economic conditions will begin to open up more broadly by the end of the year. Significant variation from these assumptions could cause us to modify our guidance higher or lower.

Our guidance includes GAAP and non-GAAP financial measures.

The following table summarizes our guidance for the second quarter 2020:

 

Second Quarter 2020

GAAP Guidance

 

Second Quarter 2020 Non-GAAP Guidance(1)

 

Amount
($ millions)(2)

Year/Year
Growth (%)

 

Amount
($ millions)(2)

Year/Year
Growth (%)

Adjusted
Amount
($ millions)(3)

Adjusted
Year/ Year
Growth (%)

Subscription revenues

$995 - $1,000

27% - 28%

 

 

 

$1,008 - $1,013

29% - 30%

Subscription billings

 

 

 

$960 - $980

18% - 20%

$976 - $996

20% - 22%

 

 

 

 

 

 

 

 

 

 

 

 

 

Margin (%)

 

 

Income from operations

 

 

 

 

23%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount
(millions)

 

 

 

Weighted-average shares used to compute diluted net income per share

 

 

 

196

 

 

 

(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, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

(2)

Guidance for GAAP subscription revenues and non-GAAP subscription billings is based on foreign exchange rates as of March 31, 2020 for entities reporting in currencies other than U.S. Dollars.

(3)

Non-GAAP adjusted subscription revenues are adjusted for constant currency. Non-GAAP adjusted subscription billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

The following table summarizes our guidance for full-year 2020:

 

Full-Year 2020

GAAP Guidance

 

Full-Year 2020 Non-GAAP Guidance(1)

 

Amount
($ millions)(2)

Year/Year
Growth (%)

 

Amount
($ millions)(2)

Year/Year
Growth (%)

Adjusted
Amount
($ millions)(3)

Adjusted
Year/ Year
Growth (%)

Subscription revenues

$4,125 - $4,145

27%

 

 

 

$4,167 - $4,187

28% - 29%

Subscription billings

 

 

 

$4,600 - $4,660

21% - 23%

$4,664 - $4,724

23% - 25%

 

 

 

 

 

 

 

 

 

 

 

 

 

Margin (%)

 

 

Subscription gross profit

 

 

 

 

86%

 

 

Income from operations

 

 

 

 

23%

 

 

Free cash flow

 

 

 

 

29%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount
(millions)

 

 

 

Weighted-average shares used to compute diluted net income per share

 

 

 

196

 

 

 

(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, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

(2)

GAAP subscription revenues and non-GAAP subscription billings for the future quarters included in our full-year 2020 guidance are based on foreign exchange rates as of March 31, 2020 for entities reporting in currencies other than U.S. Dollars.

(3)

Non-GAAP adjusted subscription revenues are adjusted for constant currency. Non-GAAP adjusted subscription billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

The following table compares our updated full-year 2020 guidance against our previously issued full-year 2020 guidance dated January 29, 2020:

 

Comparison of Updated Full-Year 2020 Guidance to Previously Issued Guidance(1)

($ millions)

 

Previous Guidance
Midpoint(2)

 

Currency Impact(3)

 

Duration Impact(4)

 

Guidance Change

 

Current Guidance
Midpoint(5)

GAAP subscription revenues

$4,230

 

($52)

 

$0

 

($43)

 

$4,135

 

 

 

 

 

 

 

 

 

 

Non-GAAP subscription billings(6)

$4,815

 

($62)

 

$0

 

($123)

 

$4,630

(1)

Numbers rounded for presentation purposes.

(2)

Refers to previously issued full-year 2020 guidance dated January 29, 2020.

(3)

GAAP subscription revenues and non-GAAP subscription billings for the future quarters included in our full-year 2020 guidance are based on foreign exchange rates in effect at the end of the current quarter for entities reporting in currencies other than U.S. Dollars. Currency impact represents the sum of (i) the impact of the difference between the actual average rates in the period used to calculate our Q1 2020 actual results and the rates as of December 31, 2019 assumed in our previously issued guidance dated January 29, 2020 plus (ii) the impact of the difference between the exchange rates in effect as of March 31, 2020 assumed in our updated full-year 2020 guidance, and the rates as of December 31, 2019 assumed in our previously issued guidance dated January 29, 2020.

(4)

Represents the impact of billings greater than 12 months in excess of guidance assumptions.

(5)

Represents the updated full-year 2020 guidance presented in the table above.

(6)

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, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (22:00 BST) on April 29, 2020. Interested parties may listen to the call by dialing (877) 824-2843 (passcode: 5483537), or if outside North America, by dialing (647) 689-5665 (passcode: 5483537). Individuals may access the live teleconference from this webcast link:

https://event.on24.com/wcc/r/2160384/71CDE30CE54CE86C723B429F25CF2C35

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) 585-8367 (passcode: 5483537), or if outside North America, by dialing (416) 621-4642 (passcode: 5483537).

Investor Presentation Details

An investor presentation providing additional information and analysis can be found at http://investors.servicenow.com.

Statement Regarding Use of Non-GAAP Financial Measures

We report 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.

  • Adjusted revenues. We present revenues adjusted 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 Q1 2019, the average exchange rates in effect for our major currencies were 1 USD to 0.8804 Euros and 1 USD to 0.7679 British Pound Sterling (GBP)), rather than the actual average exchange rates in effect during the current period (for Q1 2020, the average exchange rates in effect for our major currencies were 1 USD to 0.9069 Euros and 1 USD 0.7807 GBP). Similarly, in our guidance, we apply 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 adjusted for constant currency facilitates the comparison of revenues year-over-year.
  • Billings and Adjusted billings. We believe billings is a useful leading indicator regarding the performance of our business. We define subscription billings, professional services and other billings, and total billings as the applicable revenue plus the applicable change in deferred revenue, unbilled receivables and customer deposits as presented or derived from the statement of cash flows. We adjust billings for constant currency, as described above, and for constant duration by replacing the portion of multi-year billings in excess of twelve months during the current or guidance period with the portion of multi-year billings in excess of twelve months during the comparison period. We believe these adjustments facilitate greater comparability in our billings information year-over-year.
  • 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, and the related income tax effect of these adjustments. 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 and repayments of convertible senior notes attributable to debt discount, 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 and guidance.

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: (i) the impact and duration of the health impact of COVID-19 and the economic impact of safety measures to mitigate its impact; (ii) our ability to compete successfully against existing and new competitors, (iii) our ability to comply with privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet, (iv) our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments, (v) errors, interruptions, delays, or security breaches in or of our service or datacenters, (vi) 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, (vii) our ability to develop and gain customer acceptance of new and improved products and services, including those acquired through strategic transactions, and (viii) material changes in the value of foreign currencies relative to the U.S. Dollar. Additionally, these forward-looking statements, particularly our guidance, involve risk, uncertainties and assumptions, including those related to the impacts of COVID-19 on our business and global economic conditions. Many of these assumptions relate to matters that are beyond our control and changing rapidly, including, but not limited to, the timeframes for and severity of social distancing and other mitigation requirements, the impact of COVID-19 on our customers’ purchasing decisions and the length of our sales cycles, particularly for customers in certain industries highly affected by COVID-19. Significant variation from the assumptions underlying our forward-looking statements could cause our actual results to vary, and the impact could be significant.

Further information on these and other factors that could affect our financial results are included in our Form 10-Q that will be filed for the quarter ended March 31, 2020 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K filed for the year ended December 31, 2019.

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) is making the world of work, work better for people. Our cloud-based platform and solutions deliver digital workflows that create great experiences and unlock productivity for employees and the enterprise. For more information, visit: www.servicenow.com.

© 2020 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 thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

March 31, 2020

 

March 31, 2019

Revenues:

 

 

 

Subscription

$

994,702

 

 

$

739,986

 

Professional services and other

51,638

 

 

48,940

 

Total revenues

1,046,340

 

 

788,926

 

Cost of revenues (1):

 

 

 

Subscription

159,721

 

 

126,589

 

Professional services and other

63,645

 

 

59,663

 

Total cost of revenues

223,366

 

 

186,252

 

Gross profit

822,974

 

 

602,674

 

Operating expenses (1):

 

 

 

Sales and marketing

441,234

 

 

361,409

 

Research and development

226,657

 

 

172,522

 

General and administrative

105,748

 

 

84,456

 

Total operating expenses

773,639

 

 

618,387

 

Income (loss) from operations

49,335

 

 

(15,713

)

Interest expense

(8,570

)

 

(8,168

)

Interest income and other income, net

7,597

 

 

12,425

 

Income (loss) before income taxes

48,362

 

 

(11,456

)

Provision for (benefit from) income taxes

131

 

 

(9,911

)

Net income (loss)

$

48,231

 

 

$

(1,545

)

Net income (loss) per share - basic

$

0.25

 

 

$

(0.01

)

Net income (loss) per share - diluted

$

0.24

 

 

$

(0.01

)

Weighted-average shares used to compute net income (loss) per share - basic

190,163

 

 

182,062

 

Weighted-average shares used to compute net income (loss) per share - diluted

199,938

 

 

182,062

 

 

(1) Includes stock-based compensation as follows:

 

Three Months Ended

 

March 31, 2020

 

March 31, 2019

Cost of revenues:

 

 

 

Subscription

$

21,524

 

 

$

16,022

 

Professional services and other

12,012

 

 

9,931

 

Sales and marketing

70,160

 

 

62,130

 

Research and development

58,903

 

 

43,582

 

General and administrative

25,686

 

 

25,785

 

ServiceNow, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

March 31, 2020

 

December 31, 2019

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

808,725

 

 

$

775,778

 

Short-term investments

1,049,980

 

 

915,317

 

Accounts receivable, net

615,234

 

 

835,279

 

Current portion of deferred commissions

182,830

 

 

175,039

 

Prepaid expenses and other current assets

149,092

 

 

125,488

 

Total current assets

2,805,861

 

 

2,826,901

 

Deferred commissions, less current portion

339,727

 

 

333,448

 

Long-term investments

1,077,938

 

 

1,013,332

 

Property and equipment, net

470,969

 

 

468,085

 

Operating lease right-of-use assets

464,576

 

 

402,428

 

Intangible assets, net

171,049

 

 

143,850

 

Goodwill

207,605

 

 

156,756

 

Deferred tax assets

586,021

 

 

599,633

 

Other assets

73,670

 

 

77,997

 

Total assets

$

6,197,416

 

 

$

6,022,430

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

73,904

 

 

$

52,960

 

Accrued expenses and other current liabilities

370,997

 

 

461,403

 

Current portion of deferred revenue

2,215,265

 

 

2,185,754

 

Current portion of operating lease liabilities

60,895

 

 

52,668

 

Total current liabilities

2,721,061

 

 

2,752,785

 

Deferred revenue, less current portion

40,477

 

 

40,038

 

Operating lease liabilities, less current portion

440,938

 

 

383,221

 

Convertible senior notes, net

701,288

 

 

694,981

 

Other long-term liabilities

27,557

 

 

23,464

 

Stockholders’ equity

2,266,095

 

 

2,127,941

 

Total liabilities and stockholders’ equity

$

6,197,416

 

 

$

6,022,430

 

ServiceNow, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Three Months Ended

 

March 31, 2020

 

March 31, 2019

Cash flows from operating activities:

 

 

 

Net income (loss)

$

48,231

 

 

$

(1,545

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

Depreciation and amortization

76,238

 

 

55,449

 

Amortization of deferred commissions

49,481

 

 

39,557

 

Amortization of debt discount and issuance costs

8,570

 

 

8,168

 

Stock-based compensation

188,285

 

 

157,450

 

Deferred income taxes

(1,527

)

 

(1,480

)

Repayments of convertible senior notes attributable to debt discount

(282

)

 

 

Other

2,271

 

 

724

 

Changes in operating assets and liabilities, net of effect of business combinations:

 

 

 

Accounts receivable

208,789

 

 

151,105

 

Deferred commissions

(70,797

)

 

(46,599

)

Prepaid expenses and other assets

(20,391

)

 

(33,659

)

Accounts payable

20,679

 

 

6,562

 

Deferred revenue

59,847

 

 

61,370

 

Accrued expenses and other liabilities

(77,826

)

 

(36,254

)

Net cash provided by operating activities

491,568

 

 

360,848

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

(83,207

)

 

(47,124

)

Business combinations, net of cash acquired

(82,948

)

 

 

Purchases of investments

(527,819

)

 

(438,782

)

Sales and maturities of investments

312,560

 

 

262,885

 

Realized gains (losses) on derivatives not designated as hedging instruments, net

(3,620

)

 

22,148

 

Net cash used in investing activities

(385,034

)

 

(200,873

)

Cash flows from financing activities:

 

 

 

Repayments of convertible senior notes attributable to principal

(2,236

)

 

 

Proceeds from employee stock plans

66,908

 

 

53,093

 

Taxes paid related to net share settlement of equity awards

(125,700

)

 

(139,493

)

Net cash used in financing activities

(61,028

)

 

(86,400

)

Foreign currency effect on cash, cash equivalents and restricted cash

(10,649

)

 

1,079

 

Net increase in cash, cash equivalents and restricted cash

34,857

 

 

74,654

 

Cash, cash equivalents and restricted cash at beginning of period

777,991

 

 

568,538

 

Cash, cash equivalents and restricted cash at end of period

$

812,848

 

 

$

643,192

 

ServiceNow, Inc.

GAAP to Non-GAAP Reconciliation

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

 

March 31, 2020

March 31, 2019

Growth Rates

Subscription revenues:

 

 

 

GAAP subscription revenues

$

994,702

 

$

739,986

 

34%

Effects of foreign currency rate fluctuations

11,575

 

 

Non-GAAP adjusted subscription revenues (1)

$

1,006,277

 

 

36%

 

 

 

 

Subscription billings:

 

 

 

GAAP subscription revenues

$

994,702

 

$

739,986

 

34%

Change in subscription deferred revenue, unbilled receivables and customer deposits

60,357

69,611

 

Non-GAAP subscription billings

1,055,059

809,597

30%

Effects of foreign currency rate fluctuations

11,783

 

 

Effects of fluctuations in billings duration

(1,875

)

 

 

Non-GAAP adjusted subscription billings (2)

$

1,064,967

 

 

32%

 

 

 

 

Professional services and other revenues:

 

 

 

GAAP professional services and other revenues

$

51,638

 

$

48,940

 

6%

Effects of foreign currency rate fluctuations

919

 

 

Non-GAAP adjusted professional service and other revenues (1)

$

52,557

 

 

7%

 

 

 

 

Professional services and other billings:

 

 

 

GAAP professional services and other revenues

$

51,638

 

$

48,940

 

6%

Change in professional services and other deferred revenue

(3,507

)

(1,006

)

 

Non-GAAP professional services and other billings

48,131

47,934

0%

Effects of foreign currency rate fluctuations

919

 

 

Non-GAAP adjusted professional services and other billings (2)

$

49,050

 

 

2%

 

 

 

 

Total revenues:

 

 

 

GAAP total revenues

$

1,046,340

 

$

788,926

 

33%

Effects of foreign currency rate fluctuations

12,494

 

 

Non-GAAP adjusted total revenues (1)

$

1,058,834

 

 

34%

 

 

 

 

Total billings:

 

 

 

GAAP total revenues

$

1,046,340

 

$

788,926

 

33%

Change in total deferred revenue, unbilled receivables and customer deposits

56,850

68,605

 

Non-GAAP total billings

1,103,190

857,531

29%

Effects of foreign currency rate fluctuations

12,702

 

 

Effects of fluctuations in billings duration

(1,875

)

 

 

Non-GAAP adjusted total billings (2)

$

1,114,017

 

 

30%

 

 

 

 

Cost of revenues:

 

 

 

GAAP subscription cost of revenues

$

159,721

 

$

126,589

 

 

Stock-based compensation

(21,524

)

(16,022

)

 

Amortization of purchased intangibles

(6,856

)

(4,700

)

 

Non-GAAP subscription cost of revenues

$

131,341

 

$

105,867

 

 

 

 

 

 

GAAP professional services and other cost of revenues

$

63,645

 

$

59,663

 

 

Stock-based compensation

(12,012

)

(9,931

)

 

Non-GAAP professional services and other cost of revenues

$

51,633

 

$

49,732

 

 

 

 

 

 

Gross profit (loss):

 

 

 

GAAP subscription gross profit

$

834,981

 

$

613,397

 

 

Stock-based compensation

21,524

16,022

 

Amortization of purchased intangibles

6,856

4,700

 

Non-GAAP subscription gross profit

$

863,361

 

$

634,119

 

 

 

 

 

 

GAAP professional services and other gross loss

$

(12,007

)

$

(10,723

)

 

Stock-based compensation

12,012

9,931

 

Non-GAAP professional services and other gross profit

$

5

 

$

(792

)

 

 

 

 

 

GAAP gross profit

$

822,974

 

$

602,674

 

 

Stock-based compensation

33,536

25,953

 

Amortization of purchased intangibles

6,856

4,700

 

Non-GAAP gross profit

$

863,366

 

$

633,327

 

 

 

 

 

 

Gross margin:

 

 

 

GAAP subscription gross margin

84

%

83

%

 

Stock-based compensation as % of subscription revenues

2

%

2

%

 

Amortization of purchased intangibles as % of subscription revenues

1

%

1

%

 

Non-GAAP subscription gross margin

87

%

86

%

 

 

 

 

 

GAAP professional services and other gross margin

(23

%)

(22

%)

 

Stock-based compensation as % of professional services and other revenues

23

%

20

%

 

Non-GAAP professional services and other gross margin

0

%

(2

%)

 

 

 

 

 

GAAP gross margin

79

%

76

%

 

Stock-based compensation as % of total revenues

3

%

3

%

 

Amortization of purchased intangibles as % of total revenues

1

%

1

%

 

Non-GAAP gross margin

83

%

80

%

 

 

 

 

 

Operating expenses:

 

 

 

GAAP sales and marketing expenses

$

441,234

 

$

361,409

 

 

Stock-based compensation

(70,160

)

(62,130

)

 

Amortization of purchased intangibles

(311

)

 

Business combination and other related costs

(11

)

 

Non-GAAP sales and marketing expenses

$

370,752

 

$

299,279

 

 

 

 

 

 

GAAP research and development expenses

$

226,657

 

$

172,522

 

 

Stock-based compensation

(58,903

)

(43,582

)

 

Amortization of purchased intangibles

(455

)

(455

)

 

Non-GAAP research and development expenses

$

167,299

 

$

128,485

 

 

 

 

 

 

GAAP general and administrative expenses

$

105,748

 

$

84,456

 

 

Stock-based compensation

(25,686

)

(25,785

)

 

Amortization of purchased intangibles

(2,693

)

(1,887

)

 

Business combination and other related costs

(2,864

)

27

 

Non-GAAP general and administrative expenses

$

74,505

 

$

56,811

 

 

 

 

 

 

GAAP total operating expenses

$

773,639

 

$

618,387

 

 

Stock-based compensation

(154,749

)

(131,497

)

 

Amortization of purchased intangibles

(3,459

)

(2,342

)

 

Business combination and other related costs

(2,875

)

27

 

Non-GAAP total operating expenses

$

612,556

 

$

484,575

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

GAAP income (loss) from operations

$

49,335

 

$

(15,713

)

 

Stock-based compensation

188,285

157,450

 

Amortization of purchased intangibles

10,315

7,042

 

Business combination and other related costs

2,875

(27

)

 

Non-GAAP income from operations

$

250,810

 

$

148,752

 

 

 

 

 

 

Operating margin:

 

 

 

GAAP operating margin

5

%

(2

%)

 

Stock-based compensation as % of total revenues

18

%

20

%

 

Amortization of purchased intangibles as % of total revenues

1

%

1

%

 

Business combination and other related costs as % of total revenues

0

%

0

%

 

Non-GAAP operating margin

24

%

19

%

 

 

 

 

 

Net income (loss):

 

 

 

GAAP net income (loss)

$

48,231

 

$

(1,545

)

 

Stock-based compensation

188,285

157,450

 

Amortization of purchased intangibles

10,315

7,042

 

Business combination and other related costs

2,875

(27

)

 

Amortization of debt discount and issuance costs for the convertible senior notes

8,570

8,168

 

Loss on early note conversions

90

 

Income tax expense effects related to the above adjustments

(51,568

)

(42,146

)

 

Non-GAAP net income

$

206,798

 

$

128,942

 

 

 

 

 

 

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

 

 

 

GAAP net income (loss) per share - basic

$

0.25

 

$

(0.01

)

 

GAAP net income (loss) per share - diluted

$

0.24

 

$

(0.01

)

 

Non-GAAP net income per share - basic

$

1.09

 

$

0.71

 

 

Non-GAAP net income per share - diluted

$

1.05

 

$

0.67

 

 

 

 

 

 

GAAP weighted-average shares used to compute net income (loss) per share - basic

190,163

182,062

 

 

 

 

 

GAAP weighted-average shares used to compute net income (loss) per share - diluted

199,938

182,062

 

Effects of dilutive time-based stock awards (3)

6,200

 

Effects of in-the-money portion of convertible senior notes (3)

(3,239

)

 

Effects of warrants (3)

3,571

 

Effects of stock awards with performance conditions not yet satisfied (3)

1

 

Non-GAAP weighted-average shares used to compute net income per share - diluted(4)

196,699

191,832

 

 

 

 

 

Free cash flow:

 

 

 

GAAP net cash provided by operating activities

$

491,568

 

$

360,848

 

 

Purchases of property and equipment

(83,207

)

(47,124

)

 

Repayments of convertible senior notes attributable to debt discount

282

 

Non-GAAP free cash flow

$

408,643

 

$

313,724

 

 

 

 

 

 

Free cash flow margin:

 

 

 

GAAP net cash provided by operating activities as % of total revenues

47

%

46

%

 

Purchases of property and equipment as % of total revenues

(8

%)

(6

%)

 

Repayments of convertible senior notes attributable to debt discount as % of total revenues

0

%

%

 

Non-GAAP free cash flow margin

39

%

40

%

 

(1)

 

Adjusted revenues and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the actual average exchange rates in effect during the current period.

(2)

 

Adjusted billings and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the actual average exchange rates in effect during the current period, and by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the comparison period.

(3)

 

Effects of dilutive time-based stock awards, in-the-money portion of convertible senior notes and warrants are included in the GAAP weighted-average diluted shares in periods where we have GAAP net income. We exclude the in-the-money portion of convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our note hedges. We include stock awards with performance conditions not yet satisfied for non-GAAP weighted average diluted shares at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met.

(4)

 

Numbers rounded for presentation purposes.

ServiceNow, Inc.
Reconciliation of Non-GAAP Financial Guidance

The financial guidance provided below is an estimate based on information available as of March 31, 2020. The company’s future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the company’s financial results are stated above in this press release. 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, 2019 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-Q that will be filed for the three months ended March 31, 2020. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

 

Three Months Ended

 

 

 

June 30, 2020

 

June 30, 2019 (3)

 

Growth Rates

 

 

 

 

 

 

GAAP subscription revenues

$995 - $1,000 million

 

$781 million

 

27% - 28%

 

 

 

 

 

 

Effects of foreign currency rate fluctuations

13 million

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted subscription revenues (1)

$1,008 - $1,013 million

 

 

 

29% - 30%

 

 

 

 

 

 

GAAP subscription revenues

$995 - $1,000 million

 

$781 million

 

27% - 28%

 

 

 

 

 

 

Change in subscription deferred revenue, unbilled receivables and customer deposits

(35) - (20) million

 

36 million

 

 

 

 

 

 

 

 

Non-GAAP subscription billings

$960 - $980 million

 

$817 million

 

18% - 20%

 

 

 

 

 

 

Effects of foreign currency rate fluctuations

13 million

 

 

 

 

 

 

 

 

 

 

Effects of fluctuations in billings duration

3 million

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted subscription billings (2)

$976 - $996 million

 

 

 

20% - 22%

 

 

 

 

 

 

GAAP operating margin

2%

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense as % of total revenues

20%

 

 

 

 

 

 

 

 

 

 

Amortization of purchased intangibles as % of total revenues

1%

 

 

 

 

 

 

 

 

 

 

Business combination and other related costs as % of total revenues

0%

 

 

 

 

 

 

 

 

 

 

Non-GAAP operating margin

23%

 

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares used to compute net income per share - diluted

199 million

 

 

 

 

 

 

 

 

 

 

Effects of in-the-money portion of convertible senior notes(4)

(3) million

 

 

 

 

 

 

 

 

 

 

Non-GAAP weighted-average shares used to compute net income per share - diluted

196 million

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

December 31, 2020

 

December 31, 2019 (3)

 

Growth Rates

 

 

 

 

 

 

GAAP subscription revenues

$4,125 - $4,145 million

 

$3,255 million

 

27%

 

 

 

 

 

 

Effects of foreign currency rate fluctuations

42 million

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted subscription revenues (1)

$4,167 - $4,187 million

 

 

 

28% - 29%

 

 

 

 

 

 

GAAP subscription revenues

$4,125 - $4,145 million

 

$3,255 million

 

27%

 

 

 

 

 

 

Change in subscription deferred revenue, unbilled receivables and customer deposits

475 - 515 million

 

533 million

 

 

 

 

 

 

 

 

Non-GAAP subscription billings

$4,600 - $4,660 million

 

$3,788 million

 

21% - 23%

 

 

 

 

 

 

Effects of foreign currency rate fluctuations

50 million

 

 

 

 

 

 

 

 

 

 

Effects of fluctuations in billings duration

14 million

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted subscription billings (2)

$4,664 - $4,724 million

 

 

 

23% - 25%

 

 

 

 

 

 

GAAP subscription gross margin

83%

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense as % of subscription revenues

2%

 

 

 

 

 

 

 

 

 

 

Amortization of purchased intangibles as % of subscription revenues

1%

 

 

 

 

 

 

 

 

 

 

Non-GAAP subscription margin

86%

 

 

 

 

 

 

 

 

 

 

GAAP operating margin

3%

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense as % of total revenues

19%

 

 

 

 

 

 

 

 

 

 

Amortization of purchased intangibles as % of total revenues

1%

 

 

 

 

 

 

 

 

 

 

Business combination and other related costs as % of total revenues

0%

 

 

 

 

 

 

 

 

 

 

Non-GAAP operating margin

23%

 

 

 

 

 

 

 

 

 

 

GAAP net cash provided by operating activities as % of total revenues

37%

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment as % of total revenues

(8%)

 

 

 

 

 

 

 

 

 

 

Repayments of convertible senior notes attributable to debt discount as % of total revenues

0%

 

 

 

 

 

 

 

 

 

 

Non-GAAP free cash flow margin

29%

 

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares used to compute net income per share - diluted

199 million

 

 

 

 

 

 

 

 

 

 

Effects of in-the-money portion of convertible senior notes(4)

(3) million

 

 

 

 

 

 

 

 

 

 

Non-GAAP weighted-average shares used to compute net income per share - diluted

196 million

 

 

 

 

(1)

Adjusted revenues and the corresponding 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.

(2)

Adjusted billings and the corresponding 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, and by replacing the portion of multi-year billings in excess of twelve months for the guidance period with the actual portion of multi-year billings in excess of twelve months during the comparison period.

(3)

Effects of foreign currency rate fluctuations and fluctuations in billing durations are not applicable for the comparison period.

(4)

We exclude the in-the-money portion of convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our note hedges.

 

Media Contact:
Sara Day
650.336.3123
press@servicenow.com

Investor Contact:
Kendall Toyne
408.831.6040
ir@servicenow.com

Source: ServiceNow, Inc.