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. - April 29, 2020 - 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 $10 billion in revenue and beyond.”
1
First Quarter 2020 GAAP and Non‑GAAP Results:
The following table summarizes our financial results for the first quarter 2020:
First Quarter 2020 GAAP Results | First Quarter 2020 Non-GAAP Results(1) | |||||||||
Amount ($ 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.
2
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 - $996 | 20% - 22% | |||||
Margin (%) | |||||||||
Income from operations | 23 | % | |||||||
Amount (millions) | |||||||||
Weighted-average shares used to compute diluted net income per share | 196 | ||||||||
(1) | We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures. |
(2) | Guidance for GAAP subscription revenues and non-GAAP subscription billings is based on foreign exchange rates as of March 31, 2020 for entities reporting in currencies other than U.S. Dollars. |
(3) | Non-GAAP adjusted subscription revenues are adjusted for constant currency. Non-GAAP adjusted subscription billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures. |
3
The following table summarizes our guidance for full-year 2020:
Full-Year 2020 GAAP Guidance | Full-Year 2020 Non-GAAP Guidance(1) | ||||||||
Amount ($ 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
4
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.
5
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.
Media Contact:
Sara Day
650.336.3123
Investor Contact:
Kendall Toyne
408.831.6040
6
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 | |||||
7
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 | |||
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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 | |||
9
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. |
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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 | ||||
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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. |
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