press release

Jan. 29, 2020, 4:10 p.m. EST

ServiceNow Reports Fourth Quarter and Full-Year 2019 Financial Results

Subscription revenues of $899 million in Q4 2019, representing 35% year-over-year growth, 36% adjusted for foreign currency exchange rates 76 transactions over $1 million in net new annual contract value in Q4 2019, representing 49% year-over-year growth 892 total customers with over $1 million in annual contract value, representing 32% year-over-year growth

ServiceNow /zigman2/quotes/202729495/composite NOW +1.36% , the leading digital workflow company making work, work better for people, today announced financial results for its fourth quarter and year ended December 31, 2019, with subscription revenues of $899 million in Q4 2019, representing 35% year-over-year growth, 36% adjusted for foreign currency exchange rates.

During the fourth quarter, ServiceNow closed 76 transactions with more than $1 million in net new annual contract value (ACV), representing 49% year-over-year growth. The company closed the year with 892 total customers with more than $1 million in ACV, representing 32% year-over-year growth in customers.

“ServiceNow beat the high end of guidance for Q4, ending the year very strong,” said ServiceNow President and CEO Bill McDermott. “In Q4, we saw record deals and broad expansion of the Now Platform. ServiceNow is orchestrating what every company wants - workflows that create great experiences. Digital transformation is driving our momentum as customers across industries rush to embrace the simplicity that ServiceNow enables. We are proud to make work, work better for people.”

“I’m thrilled to be a part of ServiceNow, where we are committed to delivering world-class outcomes for our customers and strong results for our shareholders - as evidenced by our accomplishments in Q4,” said Gina Mastantuono, ServiceNow CFO. “Looking ahead, we remain focused on driving sustainable top-line growth as we look to scale our business to $10 billion in revenue and beyond.”

Fourth Quarter 2019 GAAP and NonGAAP Results:

The following table summarizes our financial results for the fourth quarter 2019:

  Fourth Quarter 2019 Fourth Quarter 2019 Non-GAAP Results(1)
  Amount ($ millions) Year/Year Growth (%) Amount ($ millions) Year/Year Growth (%) Adjusted Adjusted
Subscription revenues $899.2 35%     $907.0 36%
Professional services and other revenues $52.6 7%     $53.3 8%
Total revenues $951.8 33%     $960.4 34%
             
Subscription billings     $1,297.8 36% $1,303.4 37%
Professional services and other billings     $60.7 (1%) $61.4 1%
Total billings     $1,358.5 34% $1,364.8 35%
             
  Amount ($ millions) Margin (%) Amount ($ millions) Margin (%)    
Subscription gross profit $751.0 84% $777.2 86%    
Professional services and other gross profit (loss) ($10.6) (20%) $0.7 1%    
Total gross profit $740.3 78% $777.9 82%    
Income from operations $28.5 3% $209.6 22%    
Net cash provided by operating activities $421.2 44%        
Free cash flow     $342.2 36%    
             
  Amount ($ millions) Earnings per Amount ($ millions) Earnings per    
Net income [(3)] $598.7 $3.17 / $3.03 $186.9 $0.99 / $0.96    
(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.
(3) Fourth quarter 2019 GAAP net income was impacted by a $574 million one-time income tax benefit from the release of a valuation allowance on our deferred tax assets.
Note: Numbers rounded for presentation purposes.

Full-Year 2019 GAAP and NonGAAP Results:

The following table summarizes our financial results for the full-year 2019:

  Full-Year 2019 Full-Year 2019 Non-GAAP Results(1)
  Amount ($ millions) Year/Year Growth (%) Amount ($ millions) Year/Year Growth (%) Adjusted Amount ($ millions)(2) Adjusted
Subscription revenues $3,255.1 34%     $3,312.6 37%
Professional services and other revenues $205.4 10%     $210.2 12%
Total revenues $3,460.4 33%     $3,522.8 35%
             
Subscription billings     $3,788.3 31% $3,850.0 34%
Professional services and other billings     $213.9 3% $218.7 5%
Total billings     $4,002.2 30% $4,068.7 32%
             
  Amount ($ millions) Margin (%) Amount ($ millions) Margin (%)    
Subscription gross profit $2,705.4 83% $2,802.3 86%    
Professional services and other gross profit (loss) ($41.6) (20%) $1.5 1%    
Total gross profit $2,663.8 77% $2,803.8 81%    
Income from operations $42.1 1% $739.5 21%    
Net cash provided by operating activities $1,236.0 36%        
Free cash flow     $971.1 28%    
             
  Amount ($ millions) Earnings per Amount ($ millions) Earnings per    
Net income [(3)] $626.7 $3.36 / $3.18 $646.3 $3.47 / $3.32    
(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.
(3) Full-year 2019 GAAP net income was impacted by a $574 million one-time income tax benefit from the release of a valuation allowance on our deferred tax assets.
Note: Numbers rounded for presentation purposes.

Financial Outlook

Our guidance includes GAAP and non-GAAP financial measures.

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

  First Quarter 2020 First Quarter 2020 Non-GAAP Guidance(1)
  Amount ($ millions)(2) Year/Year Growth (%) Amount ($ millions)(2) Year/Year Growth (%) Adjusted Adjusted
Subscription revenues $975 - $980 32%     $978 - $983 32% - 33%
Subscription billings     $1,040 - $1,045 28% - 29% $1,042 - $1,047 29%
             
        Margin (%)    
Income from operations       22%    
             
      Amount (millions)      
Weighted-average shares used to compute diluted net income per share     195      
(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 December 31, 2019 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 Full-Year 2020 Non-GAAP Guidance(1)
  Amount ($ millions)(2) Year/Year Growth (%) Amount ($ millions)(2) Year/Year Growth (%) Adjusted Adjusted
Subscription revenues $4,220 - $4,240 30%     $4,210 - $4,230 29% - 30%
Subscription billings     $4,805 - $4,825 27% $4,807 - $4,827 27%
             
        Margin (%)    
Subscription gross profit       86%    
Income from operations       22%    
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 December 31, 2019 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.

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (22:00 GMT) on January 29, 2020. Interested parties may listen to the call by dialing (877) 824‘2843 (passcode:6598983), or if outside North America, by dialing (647) 689‘5665 (passcode:6598983). Individuals may access the live teleconference from this webcast link:

https://event.on24.com/wcc/r/2150754/43377D81BB1A56781828BB38CFDBC372

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:6598983), or if outside North America, by dialing (416) 621‘4642 (passcode:6598983).

Investor Presentation Details

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

Statement Regarding Use of NonGAAP 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 Q4 2018, the average exchange rates in effect for our major currencies were 1 USD to 0.8763 Euros and 1 USD to 0.7775 British Pound Sterling (GBP)), rather than the actual average exchange rates in effect during the current period (for Q4 2019, the average exchange rates in effect for our major currencies were 1 USD to 0.9034 Euros and 1 USD 0.7771 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, the related income tax effect of these adjustments, and the one-time income tax benefit from the release of a valuation allowance on the deferred tax assets. The non-GAAP weighted-average shares used to compute our non-GAAP net income per share - diluted excludes the dilutive effect of the in-the-money portion of convertible senior notes as they are covered by our note hedges, and includes the 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 ForwardLooking 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) our ability to compete successfully against existing and new competitors, (ii) our ability to comply with privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet, (iii) our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments, (iv) errors, interruptions, delays, or security breaches in or of our service or datacenters, (v) 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, (vi) our ability to develop and gain customer acceptance of new and improved products and services, including those acquired through strategic transactions, and (vii) material changes in the value of foreign currencies relative to the U.S. Dollar.

Further information on these and other factors that could affect our financial results are included in our Form 10-Q for the quarter ended September 30, 2019 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K that will be 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 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   Twelve Months Ended
  December 31,   December 31,   December 31,   December 31,
Revenues:              
Subscription $ 899,194     $ 666,139     $ 3,255,079     $ 2,421,313  
Professional services and other 52,580     49,302     205,358     187,503  
Total revenues 951,774     715,441     3,460,437     2,608,816  
Cost of revenues [ (1)] :              
Subscription 148,244     113,503     549,642     417,421  
Professional services and other 63,209     54,659     247,003     205,237  
Total cost of revenues 211,453     168,162     796,645     622,658  
Gross profit 740,321     547,279     2,663,792     1,986,158  
Operating expenses [ (1)] :              
Sales and marketing 416,005     319,163     1,534,284     1,203,056  
Research and development 202,328     148,662     748,369     529,501  
General and administrative 93,476     79,176     339,016     296,027  
Total operating expenses 711,809     547,001     2,621,669     2,028,584  
Income (loss) from operations 28,512     278     42,123     (42,426 )
Interest expense (8,475 )   (8,938 )   (33,283 )   (52,733 )
Interest income and other income (expense), net 14,149     10,615     58,345     56,135  
Income (loss) before income taxes 34,186     1,955     67,185     (39,024 )
Benefit from income taxes (564,538 )   (5,060 )   (559,513 )   (12,320 )
Net income (loss) $ 598,724     $ 7,015     $ 626,698     $ (26,704 )
Net income (loss) per share - basic $ 3.17     $ 0.04     $ 3.36     $ (0.15 )
Net income (loss) per share - diluted $ 3.03     $ 0.04     $ 3.18     $ (0.15 )
Weighted-average shares used to compute net income (loss) per share - basic 189,042     179,764     186,466     177,846  
Weighted-average shares used to compute net income (loss) per share - diluted 197,843     190,662     197,223     177,846  
 
(1) Includes stock-based compensation as follows:
 
  Three Months Ended   Twelve Months Ended
  December 31,   December 31,   December 31,   December 31,
Cost of revenues:              
Subscription $ 18,709     $ 12,134     $ 72,728     $ 48,738  
Professional services and other 11,374     8,506     43,123     32,816  
Sales and marketing 68,337     58,762     268,408     228,045  
Research and development 50,562     37,298     194,821     135,203  
General and administrative 21,069     25,944     83,115     99,151  
ServiceNow, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
  December 31,   December 31,
Assets      
Current assets:      
Cash and cash equivalents $ 775,778     $ 566,204  
Short-term investments 915,317     931,718  
Accounts receivable, net 835,279     574,810  
Current portion of deferred commissions 175,039     139,890  
Prepaid expenses and other current assets 125,488     132,071  
Total current assets 2,826,901     2,344,693  
Deferred commissions, less current portion 333,448     282,490  
Long-term investments 1,013,332     581,856  
Property and equipment, net [(1)] 468,085     347,216  
Operating lease right-of-use assets [(1)] 402,428      
Intangible assets, net 143,850     100,582  
Goodwill 156,756     148,845  
Deferred tax assets 599,633     20,642  
Other assets 77,997     52,816  
Total assets $ 6,022,430     $ 3,879,140  
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $ 52,960     $ 30,733  
Accrued expenses and other current liabilities [(1)] 461,403     330,246  
Current portion of deferred revenue 2,185,754     1,651,594  
Current portion of operating lease liabilities [(1)] 52,668      
Total current liabilities 2,752,785     2,012,573  
Deferred revenue, less current portion 40,038     38,597  
Operating lease liabilities, less current portion [(1)] 383,221      
Convertible senior notes, net 694,981     661,707  
Other long-term liabilities [(1)] 23,464     55,064  
Stockholders’ equity [(1)] 2,127,941     1,111,199  
Total liabilities and stockholders’ equity $ 6,022,430     $ 3,879,140  
(1) We adopted Topic 842 using the modified retrospective method as of January 1, 2019 and elected the transition option that allows us not to restate the comparative periods in our financial statements in the year of adoption.
ServiceNow, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
  Three Months Ended   Twelve Months Ended
  December 31,   December 31,   December 31,   December 31,
Cash flows from operating activities:              
Net income (loss) $ 598,724     $ 7,015     $ 626,698     $ (26,704 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:              
Depreciation and amortization 72,331     43,112     252,114     149,604  
Amortization of deferred commissions 45,788     35,991     168,014     143,358  
Amortization of debt discount and issuance costs 8,475     8,938     33,283     52,733  
Stock-based compensation 170,051     142,644     662,195     543,953  
Deferred income taxes (572,923 )   (1,883 )   (575,765 )   (34,180 )
Realized gain on marketable equity securities             (19,257 )
Repayments of convertible senior notes attributable to debt discount     (43,716 )       (145,349 )
Other (4,300 )   1,675     (8,921 )   6,177  
Changes in operating assets and liabilities, net of effect of business combinations:              
Accounts receivable (288,166 )   (153,602 )   (259,835 )   (146,148 )
Deferred commissions (97,296 )   (86,861 )   (255,605 )   (239,382 )
Prepaid expenses and other assets (4,338 )   (21,405 )   (29,907 )   (19,886 )
Accounts payable (8,733 )   (9,815 )   21,355     (4,757 )
Deferred revenue 401,794     294,798     537,249     468,856  
Accrued expenses and other liabilities 99,804     72,721     65,097     82,071  
Net cash provided by operating activities 421,211     289,612     1,235,972     811,089  
Cash flows from investing activities:              
Purchases of property and equipment (79,003 )   (88,113 )   (264,892 )   (224,462 )
Business combinations, net of cash and restricted cash acquired (7,414 )   (12,500 )   (7,414 )   (37,440 )
Purchases of other intangibles (35,329 )   (10,800 )   (72,689 )   (24,400 )
Purchases of investments (339,976 )   (468,784 )   (1,595,667 )   (1,295,782 )
Sales of investments 2,457         33,503     39,975  
Maturities of investments 258,840     333,058     1,159,247     1,194,687  
Realized gains on derivatives not designated as hedging instruments, net 1,693         23,435      
Net cash used in investing activities (198,732 )   (247,139 )   (724,477 )   (347,422 )
Cash flows from financing activities:              
Repayments of convertible senior notes attributable to principal (9 )   (118,125 )   (9 )   (429,645 )
Proceeds from employee stock plans 2,641     3,723     107,868     104,160  
Taxes paid related to net share settlement of equity awards (78,913 )   (59,742 )   (409,715 )   (281,010 )
Payments on financing obligations     (177 )       (933 )
Net cash used in financing activities (76,281 )   (174,321 )   (301,856 )   (607,428 )
Foreign currency effect on cash, cash equivalents and restricted cash 6,253     (5,937 )   (186 )   (15,530 )
Net increase (decrease) in cash, cash equivalents and restricted cash 152,451     (137,785 )   209,453     (159,291 )
Cash, cash equivalents and restricted cash at beginning of period 625,540     706,323     568,538     727,829  
Cash, cash equivalents and restricted cash at end of period $ 777,991     $ 568,538     $ 777,991     $ 568,538  
ServiceNow, Inc.
GAAP to Non-GAAP Reconciliation
(in thousands, except per share data)
(unaudited)
   
  Three Months Ended       Twelve Months Ended    
  December 31,   December 31,   Growth   December 31,   December 31,   Growth
Subscription revenues:                      
GAAP subscription revenues $ 899,194     $ 666,139     35%   $ 3,255,079     $ 2,421,313     34%
Effects of foreign currency rate fluctuations 7,851             57,557          
Non-GAAP adjusted subscription revenues [(1)] $ 907,045         36%   $ 3,312,636         37%
                       
Subscription billings:                      
GAAP subscription revenues $ 899,194     $ 666,139     35%   $ 3,255,079     $ 2,421,313     34%
Change in subscription deferred revenue, unbilled receivables and customer deposits 398,564     285,856         533,227     460,117      
Non-GAAP subscription billings 1,297,758     951,995     36%   3,788,306     2,881,430     31%
Effects of foreign currency rate fluctuations 11,858             62,854          
Effects of fluctuations in billings duration (6,220 )           (1,181 )        
Non-GAAP adjusted subscription billings [(2)] $ 1,303,396         37%   $ 3,849,979         34%
                       
Professional services and other revenues:                      
GAAP professional services and other revenues $ 52,580     $ 49,302     7%   $ 205,358     $ 187,503     10%
Effects of foreign currency rate fluctuations 725             4,807          
Non-GAAP adjusted professional service and other revenues [(1)] $ 53,305         8%   $ 210,165         12%
                       
Professional services and other billings:                      
GAAP professional services and other revenues $ 52,580     $ 49,302     7%   $ 205,358     $ 187,503     10%
Change in professional services and other deferred revenue 8,114     11,745         8,549     19,902      
Non-GAAP professional services and other billings 60,694     61,047     (1%)   213,907     207,405     3%
Effects of foreign currency rate fluctuations 725             4,807          
Non-GAAP adjusted professional services and other billings [(2)] $ 61,419         1%   $ 218,714         5%
                       
Total revenues:                      
GAAP total revenues $ 951,774     $ 715,441     33%   $ 3,460,437     $ 2,608,816     33%
Effects of foreign currency rate fluctuations 8,576             62,364          
Non-GAAP adjusted total revenues [(1)] $ 960,350         34%   $ 3,522,801         35%
                       
Total billings:                      
GAAP total revenues $ 951,774     $ 715,441     33%   $ 3,460,437     $ 2,608,816     33%
Change in total deferred revenue, unbilled receivables and customer deposits 406,678     297,601         541,776     480,019      
Non-GAAP total billings 1,358,452     1,013,042     34%   4,002,213     3,088,835     30%
Effects of foreign currency rate fluctuations 12,583             67,661          
Effects of fluctuations in billings duration (6,220 )           (1,181 )        
Non-GAAP adjusted total billings [(2)] $ 1,364,815         35%   $ 4,068,693         32%
                       
Cost of revenues:                      
GAAP subscription cost of revenues $ 148,244     $ 113,503         $ 549,642     $ 417,421      
Stock-based compensation (18,709 )   (12,134 )       (72,728 )   (48,738 )    
Amortization of purchased intangibles (7,538 )   (5,063 )       (24,133 )   (18,993 )    
Non-GAAP subscription cost of revenues $ 121,997     $ 96,306         $ 452,781     $ 349,690      
                       
GAAP professional services and other cost of revenues $ 63,209     $ 54,659         $ 247,003     $ 205,237      
Stock-based compensation (11,374 )   (8,506 )       (43,123 )   (32,816 )    
Non-GAAP professional services and other cost of revenues $ 51,835     $ 46,153         $ 203,880     $ 172,421      
                       
Gross profit (loss):                      
GAAP subscription gross profit $ 750,950     $ 552,636         $ 2,705,437     $ 2,003,892      
Stock-based compensation 18,709     12,134         72,728     48,738      
Amortization of purchased intangibles 7,538     5,063         24,133     18,993      
Non-GAAP subscription gross profit $ 777,197     $ 569,833         $ 2,802,298     $ 2,071,623      
                       
GAAP professional services and other gross loss $ (10,629 )   $ (5,357 )       $ (41,645 )   $ (17,734 )    
Stock-based compensation 11,374     8,506         43,123     32,816      
Non-GAAP professional services and other gross profit $ 745     $ 3,149         $ 1,478     $ 15,082      
                       
GAAP gross profit $ 740,321     $ 547,279         $ 2,663,792     $ 1,986,158      
Stock-based compensation 30,083     20,640         115,851     81,554      
Amortization of purchased intangibles 7,538     5,063         24,133     18,993      
Non-GAAP gross profit $ 777,942     $ 572,982         $ 2,803,776     $ 2,086,705      
                       
Gross margin:                      
GAAP subscription gross margin 84 %   83 %       83 %   83 %    
Stock-based compensation as % of subscription revenues 2 %   2 %       2 %   2 %    
Amortization of purchased intangibles as % of subscription revenues 0 %   1 %       1 %   1 %    
Non-GAAP subscription gross margin 86 %   86 %       86 %   86 %    
                       
GAAP professional services and other gross margin (20 %)   (11 %)       (20 %)   (9 %)    
Stock-based compensation as % of professional services and other revenues 21 %   17 %       21 %   17 %    
Non-GAAP professional services and other gross margin 1 %   6 %       1 %   8 %    
                       
GAAP gross margin 78 %   76 %       77 %   76 %    
Stock-based compensation as % of total revenues 3 %   3 %       3 %   3 %    
Amortization of purchased intangibles as % of total revenues 1 %   1 %       1 %   1 %    
Non-GAAP gross margin 82 %   80 %       81 %   80 %    
                       
Operating expenses:                      
GAAP sales and marketing expenses $ 416,005     $ 319,163         $ 1,534,284     $ 1,203,056      
Stock-based compensation (68,337 )   (58,762 )       (268,408 )   (228,045 )    
Amortization of purchased intangibles (161 )           (161 )        
Non-GAAP sales and marketing expenses $ 347,507     $ 260,401         $ 1,265,715     $ 975,011      
                       
GAAP research and development expenses $ 202,328     $ 148,662         $ 748,369     $ 529,501      
Stock-based compensation (50,562 )   (37,298 )       (194,821 )   (135,203 )    
Amortization of purchased intangibles (455 )   (455 )       (1,820 )   (1,820 )    
Non-GAAP research and development expenses $ 151,311     $ 110,909         $ 551,728     $ 392,478      
                       
GAAP general and administrative expenses $ 93,476     $ 79,176         $ 339,016     $ 296,027      
Stock-based compensation (21,069 )   (25,944 )       (83,115 )   (99,151 )    
Amortization of purchased intangibles (2,341 )   (1,534 )       (8,459 )   (4,416 )    
Business combination and other related costs (505 )   (43 )       (625 )   (1,007 )    
Non-GAAP general and administrative expenses $ 69,561     $ 51,655         $ 246,817     $ 191,453      
                       
GAAP total operating expenses $ 711,809     $ 547,001         $ 2,621,669     $ 2,028,584      
Stock-based compensation (139,968 )   (122,004 )       (546,344 )   (462,399 )    
Amortization of purchased intangibles (2,957 )   (1,989 )       (10,440 )   (6,236 )    
Business combination and other related costs (505 )   (43 )       (625 )   (1,007 )    
Non-GAAP total operating expenses $ 568,379     $ 422,965         $ 2,064,260     $ 1,558,942      
                       
Income (loss) from operations:                      
GAAP income (loss) from operations $ 28,512     $ 278         $ 42,123     $ (42,426 )    
Stock-based compensation 170,051     142,644         662,195     543,953      
Amortization of purchased intangibles 10,495     7,052         34,573     25,229      
Business combination and other related costs 505     43         625     1,007      
Non-GAAP income from operations $ 209,563     $ 150,017         $ 739,516     $ 527,763      
                       
Operating margin:                      
GAAP operating margin 3 %   0 %       1 %   (2 %)    
Stock-based compensation as % of total revenues 18 %   20 %       19 %   21 %    
Amortization of purchased intangibles as % of total revenues 1 %   1 %       1 %   1 %    
Business combination and other related costs as % of total revenues 0 %   0 %       0 %   0 %    
Non-GAAP operating margin 22 %   21 %       21 %   20 %    
                       
Net income (loss):                      
GAAP net income (loss) $ 598,724     $ 7,015         $ 626,698     $ (26,704 )    
Stock-based compensation 170,051     142,644         662,195     543,953      
Amortization of purchased intangibles 10,495     7,052         34,573     25,229      
Business combination and other related costs 505     43         625     1,007      
Amortization of debt discount and issuance costs for the convertible senior notes 8,475     8,938         33,283     52,733      
Loss on early note conversions                 4,063      
Income tax expense effects related to the above adjustments (27,153 )   (20,093 )       (136,957 )   (129,912 )    
Income tax benefit from the release of a valuation allowance on the deferred tax assets [(3)] (574,150 )           (574,150 )        
Non-GAAP net income $ 186,947     $ 145,599         $ 646,267     $ 470,369      
                       
Net income (loss) per share - basic and diluted:                      
GAAP net income (loss) per share - basic $ 3.17     $ 0.04         $ 3.36     $ (0.15 )    
GAAP net income (loss) per share - diluted $ 3.03     $ 0.04         $ 3.18     $ (0.15 )    
Non-GAAP net income per share - basic $ 0.99     $ 0.81         $ 3.47     $ 2.64      
Non-GAAP net income per share - diluted $ 0.96     $ 0.77         $ 3.32     $ 2.49      
                       
GAAP weighted-average shares used to compute net income (loss) per share - basic 189,042     179,764         186,466     177,846      
                       
GAAP weighted-average shares used to compute net income (loss) per share - diluted 197,843     190,662         197,223     177,846      
Effects of dilutive time-based stock awards [(4)]                 7,873      
Effects of in-the-money portion of convertible senior notes [(4)] (2,837 )   (1,397 )       (2,736 )        
Effects of warrants [(4)]                 2,968      
Non-GAAP weighted-average shares used to compute net income per share - diluted 195,006     189,265         194,487     188,687      
                       
Free cash flow:                      
GAAP net cash provided by operating activities $ 421,211     $ 289,612         $ 1,235,972     $ 811,089      
Purchases of property and equipment (79,003 )   (88,113 )       (264,892 )   (224,462 )    
Repayments of convertible senior notes attributable to debt discount     43,716             145,349      
Non-GAAP free cash flow $ 342,208     $ 245,215         $ 971,080     $ 731,976      
                       
Free cash flow margin:                      
GAAP net cash provided by operating activities as % of total revenues 44 %   40 %       36 %   31 %    
Purchases of property and equipment as % of total revenues (8 %)   (12 %)       (8 %)   (9 %)    
Repayments of convertible senior notes attributable to debt discount as % of total revenues %   6 %       %   6 %    
Non-GAAP free cash flow margin 36 %   34 %       28 %   28 %    
(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) Fourth quarter and full-year 2019 GAAP net income was impacted by a $574 million one-time income tax benefit from the release of a valuation allowance on our deferred tax assets.
(4) 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.

ServiceNow, Inc. Reconciliation of Non-GAAP Financial Guidance

The financial guidance provided below is an estimate based on information available as of December 31, 2019. 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-Q for the three months ended September 30, 2019 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K that will be filed for the year ended December 31, 2019. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

  Three Months Ended    
  March 31, 2020   March 31, 2019 (3)   Growth Rates
           
GAAP subscription revenues $975 - $980 million   $740 million   32%
           
Effects of foreign currency rate fluctuations 3 million        
           
Non-GAAP adjusted subscription revenues [(1)] $978 - $983 million       32% - 33%
           
GAAP subscription revenues $975 - $980 million   $740 million   32%
           
Change in subscription deferred revenue, unbilled receivables and customer deposits 65 million   70 million    
           
Non-GAAP subscription billings $1,040 - $1,045 million   $810 million   28% - 29%
           
Effects of foreign currency rate fluctuations 4 million        
           
Effects of fluctuations in billings duration (2) million        
           
Non-GAAP adjusted subscription billings [(2)] $1,042 - $1,047 million       29%
           
GAAP operating margin 2%        
           
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 22%        
           
GAAP weighted-average shares used to compute net income per share - diluted 198 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 195 million        
           
  Twelve Months Ended    
  December 31, 2020   December 31, 2019 (3)   Growth Rates
           
GAAP subscription revenues $4,220 - $4,240 million   $3,255 million   30%
           
Effects of foreign currency rate fluctuations (10) million        
           
Non-GAAP adjusted subscription revenues [(1)] $4,210 - $4,230 million       29% - 30%
           
GAAP subscription revenues $4,220 - $4,240 million   $3,255 million   30%
           
Change in subscription deferred revenue, unbilled receivables and customer deposits 585 million   533 million    
           
Non-GAAP subscription billings $4,805 - $4,825 million   $3,788 million   27%
           
Effects of foreign currency rate fluctuations (12) million        
           
Effects of fluctuations in billings duration 14 million        
           
Non-GAAP adjusted subscription billings [(2)] $4,807 - $4,827 million       27%
           
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 2%        
           
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 22%        
           
GAAP net cash provided by operating activities as % of total revenues 37%        
           
Purchases of property and equipment as % of total revenues (8%)        
           
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.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200129005725/en/

SOURCE: ServiceNow, Inc.

Media Contact: Sara Day
650.336.3123
press@servicenow.com Investor Contact: Kendall Toyne
408.831.6040
ir@servicenow.com

Copyright Business Wire 2020

/zigman2/quotes/202729495/composite
US : U.S.: NYSE
$ 277.79
+3.74 +1.36%
Volume: 1.65M
April 9, 2020 2:55p
P/E Ratio
89.12
Dividend Yield
N/A
Market Cap
$52.01 billion
Rev. per Employee
$319,943
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