now-20201026
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (date of earliest event reported): October 26, 2020
___________

SERVICENOW, INC.
(Exact name of registrant as specified in its charter)

___________
Delaware
001-35580
20-2056195
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(I.R.S. Employer
Identification Number)

2225 Lawson Lane
Santa Clara, California 95054
(Address of Principal Executive Offices)
(408) 501-8550
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.001 per shareNOWThe New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Item 2.02 Results of Operations and Financial Condition.

On October 28, 2020, ServiceNow, Inc. (“ServiceNow” or the “Company”) issued a press release announcing financial results for the three months ended September 30, 2020.

A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

The information in this report, including the exhibit attached hereto, is furnished pursuant to Item 2.02 of Form 8-K and is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference in any filing of ServiceNow under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

ServiceNow makes reference to non-GAAP financial information in the press release. A reconciliation to the nearest comparable GAAP financial measures of the non-GAAP financial measures is included in the press release attached hereto as Exhibit 99.1. These non-GAAP financial measures are reported in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

ServiceNow encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

(d)

On October 26, 2020, the Board of Directors (the “Board”) of the Company expanded the size of the Board from ten to eleven members and appointed Lawrence Johnell Jackson, Jr. to serve as a Class III director, effective immediately. The Board determined that Mr. Jackson is an independent director within the meaning of the New York Stock Exchange listing standards. Mr. Jackson has not been, and is not expected to be, named to any committee of the Board at this time. There are no arrangements or understandings between Mr. Jackson and any other persons pursuant to which he was selected as a director. There are no family relationships between Mr. Jackson and any director or executive officer of the Company. Other than as disclosed herein, Mr. Jackson does not have any direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K. Mr. Jackson will receive the standard compensation and equity awards provided to non-employee directors of the Company for their service as disclosed in the Company's proxy statement for its 2020 annual meeting of shareholders.

In connection with his appointment to the Board, Mr. Jackson will enter into the Company’s standard form of indemnification agreement for directors and officers. The form indemnification agreement was filed as Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the Securities and Exchange Commission on February 27, 2015.

Item 9.01 Financial Statements and Exhibits.
(d)Exhibits.
 
104Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

SERVICENOW, INC.
By:/s/ Russell S. Elmer
Russell S. Elmer
General Counsel
Date: October 28, 2020




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ServiceNow Reports Third Quarter 2020 Financial Results


•Subscription revenues of $1,091 million in Q3 2020, representing 31% year-over-year growth, 29% adjusted for constant currency
•41 transactions over $1 million in net new annual contract value in Q3 2020
•1,012 total customers with over $1 million in annual contract value
•Company raises full-year guidance


SANTA CLARA, Calif. - October 28, 2020 - ServiceNow (NYSE: NOW), the leading digital workflow company making work, work better for people, today announced financial results for its third quarter ended September 30, 2020, with subscription revenues of $1,091 million in Q3 2020, representing 31% year-over-year growth, 29% adjusted for constant currency.

During the quarter, ServiceNow closed 41 transactions with more than $1 million in net new annual contract value (ACV). The company now has 1,012 total customers with more than $1 million in ACV, representing 25% year-over-year growth in customers.

“Our outstanding Q3 performance beat expectations across the board and we are raising our full-year guidance,” said ServiceNow CEO Bill McDermott. “COVID is redefining the future of work, accelerating digital transformation and amplifying the need to unify systems, silos, and processes into holistic enterprise workflows. ServiceNow is the platform for digital business. Customers are leveraging the Now Platform to create the workflows that deliver great experiences for heroic veterans, students, knowledge workers, consumers, and so many others worldwide. We are hungry, humble, and passionately committed to making the world of work, work better for people. We have never been more confident.”

ServiceNow CFO Gina Mastantuono said, “In a challenging pandemic environment, Q3 was a fantastic quarter for ServiceNow. We exceeded the high end of our subscription revenues and subscription billings guidance, underscoring the power of our product portfolio and our ability to meet the evolving needs of our customers. Overall, we see strong momentum heading into the last quarter of the year and our robust pipeline gives me confidence in our ability to continue executing well into 2021. I’m very excited about the traction we are seeing in our journey towards becoming a $10 billion revenue company and the defining enterprise software company of the 21st century.”

During the quarter, ServiceNow delivered new workflows that enable speed, agility, resilience, and great experiences. Platform and product innovation included the release of the Now Platform Paris release, designed to help enterprises accelerate digital transformation by connecting teams, systems, and work. The company also introduced a number of new products, such as new Safe Workplace apps, Hardware Asset Management, Financial Services Operations, Telecom Service Management, Network Performance Management, Legal Service Delivery, Workplace Service Delivery, and Connected Operations. From a vertical perspective, the third quarter represented ServiceNow’s largest quarter ever in its federal business, including the company’s largest deal ever. ServiceNow also recently announced new and expanded partnerships with Accenture, Cisco, Deloitte, IBM, Microsoft Teams, Uber for Business, and Zoom, demonstrating the value of the Now Platform – the platform of platforms – to set a new standard for enterprise transformation.

1

Third Quarter 2020 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the third quarter 2020:
Third Quarter 2020
GAAP Results
Third 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$1,09131 %$1,07729 %
Professional services and other revenues$6119 %$6017 %
Total revenues$1,15230 %$1,13728 %
Subscription billings$1,08125 %$1,06924 %
Professional services and other billings$5813 %$5712 %
Total billings$1,13925 %$1,12623 %
Amount
($ millions)		Margin (%)Amount
($ millions)		Margin (%)
Subscription gross profit$90283 %$93786 %
Professional services and other gross profit (loss)($2)(3 %)$1119 %
Total gross profit$90078 %$94882 %
Income from operations$696 %$29926 %
Net cash provided by operating activities$24121 %
Free cash flow$21619 %
Amount
($ millions)		Earnings per Basic/Diluted Share ($)Amount
($ millions)		Earnings per Basic/Diluted Share ($)
Net income$13$0.07 / $0.06$241$1.24/ $1.21

(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

Our guidance includes GAAP and non-GAAP financial measures.

The following table summarizes our guidance for the fourth quarter 2020:
Fourth Quarter 2020
GAAP Guidance
Fourth 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$1,155 - $1,160 28% - 29%$1,141 - $1,14627 %
Subscription billings$1,625 - $1,645 25% - 27%$1,612 - $1,632 24% - 26%
Margin (%)
Income from operations21 %
Amount
(millions)
Weighted-average shares used to compute diluted net income per share201 

(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 September 30, 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$4,257 - $4,26231 %$4,251 - $4,25631 %
Subscription billings$4,780 - $4,800 26% - 27%$4,779 - $4,799 26% - 27%
Margin (%)
Subscription gross profit86 %
Income from operations24.5 %
Free cash flow31.5 %
Amount
(millions)
Weighted-average shares used to compute diluted net income per share199 

(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 September 30, 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

As with our previously issued full-year 2020 guidance dated July 29, 2020, our guidance factors in assumptions that are based on information available to us today regarding the expected impacts of COVID-19, and persistence of such impacts, on our business.

The following table compares our updated full-year 2020 guidance against our previously issued full-year 2020 guidance dated July 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$4,193$31$0$36$4,260
Non-GAAP subscription billings(6)
$4,680$35$9$66$4,790

(1)Numbers rounded for presentation purposes.
(2)Refers to previously issued full-year 2020 guidance dated July 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 Q3 2020 actual results and the rates as of June 30, 2020 assumed in our previously issued guidance dated July 29, 2020 plus (ii) the impact of the difference between the exchange rates in effect as of September 30, 2020 assumed in our updated full-year 2020 guidance, and the rates as of June 30, 2020 assumed in our previously issued guidance dated July 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 October 28, 2020. Interested parties may listen to the call by dialing (833) 513‑0567 (Passcode: 1688527), or if outside North America, by dialing (236) 714‑2186 (Passcode: 1688527). Individuals may access the live teleconference from this webcast link:

https://event.on24.com/wcc/r/2625181/2EDD61CDBF24CB6EFA12EEA3458C583D

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: 1688527), or if outside North America, by dialing (416) 621‑4642 (Passcode: 1688527).

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 Q3 2019, the average exchange rates in effect for our major currencies were 1 USD to 0.90 Euros and 1 USD to 0.812 British Pound Sterling (GBP)), rather than the actual average exchange rates in effect during the current period (for Q3 2020, the average exchange rates in effect for our major currencies were 1 USD to 0.856 Euros and 1 USD to 0.775 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.

4

•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, including the effectiveness, extent and duration of efforts to limit the spread and impact of the disease, such as “shelter in place” and similar government directives; (ii) our ability to compete successfully against existing and new competitors, (iii) our ability to comply with evolving 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 data centers, (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 continued 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 timing of headwinds from COVID-19, the continued impact of COVID-19 on new or existing customers’ purchasing decisions and the length of our sales cycles, renewal timing or billings terms, 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.

5

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 September 30, 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
[email protected]

Investor Contact:
Darren Yip
925.388.7205
[email protected]

6

ServiceNow, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Revenues:
Subscription$1,091,386 $834,910 $3,101,616 $2,355,885 
Professional services and other60,586 50,923 167,538 152,778 
Total revenues1,151,972 885,833 3,269,154 2,508,663 
Cost of revenues (1):
Subscription189,280 139,330 520,935 401,398 
Professional services and other62,424 61,463 187,074 183,794 
Total cost of revenues251,704 200,793 708,009 585,192 
Gross profit900,268 685,040 2,561,145 1,923,471 
Operating expenses (1):
Sales and marketing453,410 362,975 1,321,163 1,118,279 
Research and development268,292 190,099 740,030 546,041 
General and administrative109,234 75,642 319,019 245,540 
Total operating expenses830,936 628,716 2,380,212 1,909,860 
Income from operations69,332 56,324 180,933 13,611 
Interest expense(7,980)(8,371)(25,038)(24,808)
Interest income and other income (expense), net(35,919)12,817 (20,070)44,196 
Income before income taxes25,433 60,770 135,825 32,999 
Provision for income taxes12,575 20,172 33,970 5,025 
Net income$12,858 $40,598 $101,855 $27,974 
Net income per share - basic$0.07 $0.22 $0.53 $0.15 
Net income per share - diluted$0.06 $0.21 $0.50 $0.14 
Weighted-average shares used to compute net income per share - basic193,237 188,074 193,203 185,676 
Weighted-average shares used to compute net income per share - diluted201,861 197,878 202,837 196,739 

(1)Includes stock-based compensation as follows:
 Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Cost of revenues:
Subscription$25,602 $18,880 $72,086 $54,019 
Professional services and other13,054 10,867 37,857 31,749 
Operating expenses:
Sales and marketing78,871 68,712 227,998 200,071 
Research and development74,213 50,636 203,279 144,259 
General and administrative28,189 13,839 83,834 62,046 



7

ServiceNow, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September 30, 2020December 31, 2019
Assets
Current assets:
Cash and cash equivalents$1,348,294 $775,778 
Short-term investments1,603,317 915,317 
Accounts receivable, net631,055 835,279 
Current portion of deferred commissions202,741 175,039 
Prepaid expenses and other current assets181,474 125,488 
Total current assets3,966,881 2,826,901 
Deferred commissions, less current portion374,438 333,448 
Long-term investments1,259,951 1,013,332 
Property and equipment, net564,007 468,085 
Operating lease right-of-use assets457,726 402,428 
Intangible assets, net155,826 143,850 
Goodwill231,949 156,756 
Deferred tax assets620,890 599,633 
Other assets73,791 77,997 
Total assets$7,705,459 $6,022,430 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$51,456 $52,960 
Accrued expenses and other current liabilities442,288 461,403 
Current portion of deferred revenue2,274,269 2,185,754 
Current portion of operating lease liabilities67,934 52,668 
Total current liabilities2,835,947 2,752,785 
Deferred revenue, less current portion37,749 40,038 
Operating lease liabilities, less current portion429,661 383,221 
Long-term debt1,705,533 694,981 
Other long-term liabilities22,853 23,464 
Stockholders’ equity2,673,716 2,127,941 
Total liabilities and stockholders’ equity$7,705,459 $6,022,430 



8

ServiceNow, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Cash flows from operating activities:
Net income$12,858 $40,598 $101,855 $27,974 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization84,720 64,006 243,348 179,783 
Amortization of deferred commissions55,976 42,695 157,191 122,226 
Amortization of debt discount and issuance costs4,928 8,371 21,986 24,808 
Stock-based compensation219,929 162,934 625,054 492,144 
Deferred income taxes(3,263)231 (6,440)(2,842)
Repayments of convertible senior notes attributable to debt discount(66,534)— (68,509)— 
Loss on extinguishment of 2022 Notes40,750 — 41,657 — 
Other2,190 (1,298)641 (4,621)
Changes in operating assets and liabilities, net of effect of business combinations:
Accounts receivable10,260 (43,023)210,275 28,331 
Deferred commissions(77,420)(61,115)(221,401)(158,309)
Prepaid expenses and other assets(9,267)2,914 (41,696)(25,569)
Accounts payable(35,532)4,995 1,792 30,088 
Deferred revenue(2,703)35,265 66,545 135,455 
Accrued expenses and other liabilities4,560 (46,395)(31,224)(34,707)
Net cash provided by operating activities241,452 210,178 1,101,074 814,761 
Cash flows from investing activities:
Purchases of property and equipment(91,656)(88,869)(285,327)(185,889)
Business combinations, net of cash acquired(24,699)— (107,647)— 
Purchases of intangibles— (1,200)(6,500)(37,360)
Purchases of investments(1,121,347)(455,050)(2,229,085)(1,255,691)
Sales and maturities of investments533,585 423,135 1,298,969 931,453 
Realized gains (losses) on derivatives not designated as hedging instruments, net1,873 (371)(763)21,742 
Net cash used in investing activities(702,244)(122,355)(1,330,353)(525,745)
Cash flows from financing activities:
Net proceeds from borrowings on 2030 Notes1,481,633 — 1,481,633 — 
Repayments of convertible senior notes attributable to principal(1,553,128)— (1,568,866)— 
Net proceeds from unwind of 2022 Note Hedge1,105,542 — 1,105,542 — 
Proceeds from employee stock plans51,444 41,927 142,500 105,227 
Taxes paid related to net share settlement of equity awards(122,113)(83,183)(360,670)(330,802)
Net cash provided by (used in) financing activities963,378 (41,256)800,139 (225,575)
Foreign currency effect on cash, cash equivalents and restricted cash7,821 (7,725)2,959 (6,439)
Net increase in cash, cash equivalents and restricted cash510,407 38,842 573,819 57,002 
Cash, cash equivalents and restricted cash at beginning of period841,403 586,698 777,991 568,538 
Cash, cash equivalents and restricted cash at end of period$1,351,810 $625,540 $1,351,810 $625,540 
9

ServiceNow, Inc.
GAAP to Non-GAAP Reconciliation
(in thousands, except per share data)
(unaudited)
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019Growth RatesSeptember 30, 2020September 30, 2019Growth Rates
Subscription revenues:
GAAP subscription revenues$1,091,386 $834,910 31%$3,101,616 $2,355,885 32%
Effects of foreign currency rate fluctuations(14,014)9,092 
Non-GAAP adjusted subscription revenues(1)
$1,077,372 29%$3,110,708 32%
Subscription billings:
GAAP subscription revenues$1,091,386 $834,910 31%$3,101,616 $2,355,885 32%
Change in subscription deferred revenue, unbilled receivables and customer deposits(9,968)29,137 53,093 134,663 
Non-GAAP subscription billings1,081,418 864,047 25%3,154,709 2,490,548 27%
Effects of foreign currency rate fluctuations(12,430)11,474 
Effects of fluctuations in billings duration(362)537 
Non-GAAP adjusted subscription billings(2)
$1,068,626 24%$3,166,720 27%
Professional services and other revenues:
GAAP professional services and other revenues$60,586 $50,923 19%$167,538 $152,778 10%
Effects of foreign currency rate fluctuations(808)831 
Non-GAAP adjusted professional service and other revenues(1)
$59,778 17%$168,369 10%
Professional services and other billings:
GAAP professional services and other revenues$60,586 $50,923 19%$167,538 $152,778 10%
Change in professional services and other deferred revenue(2,512)245 (349)435 
Non-GAAP professional services and other billings58,074 51,168 13%167,189 153,213 9%
Effects of foreign currency rate fluctuations(808)831 
Non-GAAP adjusted professional services and other billings(2)
$57,266 12%$168,020 10%
Total revenues:
GAAP total revenues$1,151,972 $885,833 30%$3,269,154 $2,508,663 30%
Effects of foreign currency rate fluctuations(14,822)9,923 
Non-GAAP adjusted total revenues(1)
$1,137,150 28%$3,279,077 31%
Total billings:
GAAP total revenues$1,151,972 $885,833 30%$3,269,154 $2,508,663 30%
Change in total deferred revenue, unbilled receivables and customer deposits(12,480)29,382 52,744 135,098 
Non-GAAP total billings1,139,492 915,215 25%3,321,898 2,643,761 26%
Effects of foreign currency rate fluctuations(13,238)12,305 
Effects of fluctuations in billings duration(362)537 
Non-GAAP adjusted total billings(2)
$1,125,892 23%$3,334,740 26%
Cost of revenues:
GAAP subscription cost of revenues$189,280 $139,330 $520,935 $401,398 
Stock-based compensation(25,602)(18,880)(72,086)(54,019)
Amortization of purchased intangibles(8,827)(6,281)(27,681)(16,595)
Non-GAAP subscription cost of revenues$154,851 $114,169 $421,168 $330,784 
GAAP professional services and other cost of revenues$62,424 $61,463 $187,074 $183,794 
Stock-based compensation(13,054)(10,867)(37,857)(31,749)
Non-GAAP professional services and other cost of revenues$49,370 $50,596 $149,217 $152,045 
Gross profit:
GAAP subscription gross profit$902,106 $695,580 $2,580,681 $1,954,487 
Stock-based compensation25,602 18,880 72,086 54,019 
Amortization of purchased intangibles8,827 6,281 27,681 16,595 
Non-GAAP subscription gross profit$936,535 $720,741 $2,680,448 $2,025,101 
GAAP professional services and other gross loss$(1,838)$(10,540)$(19,536)$(31,016)
Stock-based compensation13,054 10,867 37,857 31,749 
Non-GAAP professional services and other gross profit$11,216 $327 $18,321 $733 
GAAP gross profit$900,268 $685,040 $2,561,145 $1,923,471 
Stock-based compensation38,656 29,747 109,943 85,768 
Amortization of purchased intangibles8,827 6,281 27,681 16,595 
Non-GAAP gross profit$947,751 $721,068 $2,698,769 $2,025,834 
Gross margin:
GAAP subscription gross margin83 %83 %83 %83 %
Stock-based compensation as % of subscription revenues2 %2 %2 %2 %
Amortization of purchased intangibles as % of subscription revenues1 %1 %1 %1 %
Non-GAAP subscription gross margin86 %86 %86 %86 %
GAAP professional services and other gross margin(3 %)(21 %)(12 %)(20 %)
Stock-based compensation as % of professional services and other revenues22 %22 %23 %20 %
Non-GAAP professional services and other gross margin19 %1 %11 %0 %
GAAP gross margin78 %77 %78 %77 %
Stock-based compensation as % of total revenues3 %3 %3 %3 %
Amortization of purchased intangibles as % of total revenues1 %1 %1 %1 %
Non-GAAP gross margin82 %81 %82 %81 %
Operating expenses:
GAAP sales and marketing expenses$453,410 $362,975 $1,321,163 $1,118,279 
Stock-based compensation(78,871)(68,712)(227,998)(200,071)
Amortization of purchased intangibles(314)— (936)— 
Non-GAAP sales and marketing expenses$374,225 $294,263 $1,092,229 $918,208 
GAAP research and development expenses$268,292 $190,099 $740,030 $546,041 
Stock-based compensation(74,213)(50,636)(203,279)(144,259)
Amortization of purchased intangibles(455)(455)(1,365)(1,365)
Non-GAAP research and development expenses$193,624 $139,008 $535,386 $400,417 
GAAP general and administrative expenses$109,234 $75,642 $319,019 $245,540 
Stock-based compensation(28,189)(13,839)(83,834)(62,046)
Amortization of purchased intangibles(33)(2,281)(4,665)(6,118)
Business combination and other related costs(34)26 (4,095)(120)
Non-GAAP general and administrative expenses$80,978 $59,548 $226,425 $177,256 
GAAP total operating expenses$830,936 $628,716 $2,380,212 $1,909,860 
Stock-based compensation(181,273)(133,187)(515,111)(406,376)
Amortization of purchased intangibles(803)(2,736)(6,967)(7,483)
Business combination and other related costs(34)26 (4,095)(120)
Non-GAAP total operating expenses$648,826 $492,819 $1,854,039 $1,495,881 
Income from operations:
GAAP income from operations$69,332 $56,324 $180,933 $13,611 
Stock-based compensation219,929 162,934 625,054 492,144 
Amortization of purchased intangibles9,630 9,017 34,648 24,078 
Business combination and other related costs34 (26)4,095 120 
Non-GAAP income from operations$298,925 $228,249 $844,730 $529,953 
Operating margin:
GAAP operating margin6 %6 %6 %1 %
Stock-based compensation as % of total revenues19 %18 %19 %20 %
Amortization of purchased intangibles as % of total revenues1 %2 %1 %0 %
Business combination and other related costs as % of total revenues0 %0 %0 %0 %
Non-GAAP operating margin26 %26 %26 %21 %
Net income:
GAAP net income$12,858 $40,598 $101,855 $27,974 
Stock-based compensation219,929 162,934 625,054 492,144 
Amortization of purchased intangibles9,630 9,017 34,648 24,078 
Business combination and other related costs34 (26)4,095 120 
Amortization of debt discount and issuance costs4,928 8,371 21,986 24,808 
Loss on extinguishment of 2022 Notes40,750 — 41,657 — 
Income tax expense effects related to the above adjustments(47,566)(28,041)(138,683)(109,804)
Non-GAAP net income$240,563 $192,853 $690,612 $459,320 
Net income per share - basic and diluted:
GAAP net income per share - basic$0.07 $0.22 $0.53 $0.15 
GAAP net income per share - diluted$0.06 $0.21 $0.50 $0.14 
Non-GAAP net income per share - basic$1.24 $1.03 $3.57 $2.47 
Non-GAAP net income per share - diluted$1.21 $0.99 $3.46 $2.37 
GAAP weighted-average shares used to compute net income per share - basic193,237 188,074 193,203 185,676 
GAAP weighted-average shares used to compute net income per share - diluted201,861 197,878 202,837 196,739 
Effects of in-the-money portion of convertible senior notes(3)
(2,517)(2,929)(3,205)(2,701)
Effects of stock awards with performance conditions not yet satisfied(3)
144 136 44 62 
Non-GAAP weighted-average shares used to compute net income per share - diluted199,488 195,085 199,676 194,100 
Free cash flow:
GAAP net cash provided by operating activities$241,452 $210,178 $1,101,074 $814,761 
Purchases of property and equipment(91,656)(88,869)(285,327)(185,889)
Repayments of convertible senior notes attributable to debt discount66,534 — 68,509 — 
Non-GAAP free cash flow$216,330 $121,309 $884,256 $628,872 
Free cash flow margin:
GAAP net cash provided by operating activities as % of total revenues21 %24 %34 %32 %
Purchases of property and equipment as % of total revenues(8 %)(10 %)(9 %)(7 %)
Repayments of convertible senior notes attributable to debt discount as % of total revenues6 %— %2 %— %
Non-GAAP free cash flow margin19 %14 %27 %25 %

(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.




10

ServiceNow, Inc.
Reconciliation of Non-GAAP Financial Guidance

The financial guidance provided below is an estimate based on information available as of September 30, 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 September 30, 2020. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.
Three Months Ended
December 31, 2020
December 31, 2019(3)
Growth Rates
 
GAAP subscription revenues$1,155 - $1,160 million$899 million 28% - 29%
Effects of foreign currency rate fluctuations(15) million
Non-GAAP adjusted subscription revenues(1)
$1,141 - $1,146 million27%
GAAP subscription revenues$1,155 - $1,160 million$899 million 28% - 29%
Change in subscription deferred revenue, unbilled receivables and customer deposits470 - 485 million$399 million
Non-GAAP subscription billings$1,625 - $1,645 million$1,298 million 25% - 27%
Effects of foreign currency rate fluctuations(18) million
Effects of fluctuations in billings duration5 million
Non-GAAP adjusted subscription billings(2)
$1,612 - $1,632 million 24% - 26%
GAAP operating margin2%
Stock-based compensation expense as % of total revenues18%
Amortization of purchased intangibles as % of total revenues1%
Non-GAAP operating margin21%
GAAP weighted-average shares used to compute net income per share - diluted202 million
Effects of in-the-money portion of convertible senior notes(4)
(1) million
Non-GAAP weighted-average shares used to compute net income per share - diluted201 million
11


Twelve Months Ended
December 31, 2020
December 31, 2019(3)
Growth Rates
 
GAAP subscription revenues$4,257 - $4,262 million$3,255 million31%
Effects of foreign currency rate fluctuations(6) million
Non-GAAP adjusted subscription revenues(1)
$4,251 - $4,256 million31%
GAAP subscription revenues$4,257 - $4,262 million$3,255 million31%
Change in subscription deferred revenue, unbilled receivables and customer deposits523 - 538 million533 million
Non-GAAP subscription billings$4,780 - $4,800 million$3,788 million 26% - 27%
Effects of foreign currency rate fluctuations(7) million
Effects of fluctuations in billings duration5 million
Non-GAAP adjusted subscription billings(2)
$4,779 - $4,799 million 26% - 27%
GAAP subscription gross margin83%
Stock-based compensation expense as % of subscription revenues2%
Amortization of purchased intangibles as % of subscription revenues1%
Non-GAAP subscription margin86%
GAAP operating margin5%
Stock-based compensation expense as % of total revenues19%
Amortization of purchased intangibles as % of total revenues1%
Non-GAAP operating margin24.5%
GAAP net cash provided by operating activities as % of total revenues40%
Purchases of property and equipment as % of total revenues(8%)
Non-GAAP free cash flow margin31.5%
GAAP weighted-average shares used to compute net income per share - diluted200 million
Effects of in-the-money portion of convertible senior notes(4)
(1) million
Non-GAAP weighted-average shares used to compute net income per share - diluted199 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.
Note: Numbers rounded for presentation purposes and may not foot.
12