- 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
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 $10 billion revenue
company and the defining enterprise software company of the 21st
century.”
During the quarter, ServiceNow delivered new workflows that
enable speed, agility, resilience, and great experiences. Platform
and product innovation included the release of the Now Platform
Paris release, designed to help enterprises accelerate digital
transformation by connecting teams, systems, and work. The company
also introduced a number of new products, such as new Safe
Workplace apps, Hardware Asset Management, Financial Services
Operations, Telecom Service Management, Network Performance
Management, Legal Service Delivery, Workplace Service Delivery, and
Connected Operations. From a vertical perspective, the third
quarter represented ServiceNow’s largest quarter ever in its
federal business, including the company’s largest deal ever.
ServiceNow also recently announced new and expanded partnerships
with Accenture, Cisco, Deloitte, IBM, Microsoft Teams, Uber for
Business, and Zoom, demonstrating the value of the Now Platform –
the platform of platforms – to set a new standard for enterprise
transformation.
Third Quarter 2020 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the
third quarter 2020:
Third Quarter 2020 GAAP
Results
Third Quarter 2020 Non-GAAP
Results(1)
Amount ($
millions)
Year/Year Growth
(%)
Amount ($
millions)
Year/Year Growth
(%)
Adjusted Amount ($
millions)(2)
Adjusted Year/Year Growth
(%)
Subscription revenues
$1,091
31%
$1,077
29%
Professional services and other
revenues
$61
19%
$60
17%
Total revenues
$1,152
30%
$1,137
28%
Subscription billings
$1,081
25%
$1,069
24%
Professional services and other
billings
$58
13%
$57
12%
Total billings
$1,139
25%
$1,126
23%
Amount ($
millions)
Margin (%)
Amount ($
millions)
Margin (%)
Subscription gross profit
$902
83%
$937
86%
Professional services and other
gross profit (loss)
($2)
(3%)
$11
19%
Total gross profit
$900
78%
$948
82%
Income from operations
$69
6%
$299
26%
Net cash provided by operating
activities
$241
21%
Free cash flow
$216
19%
Amount ($
millions)
Earnings per Basic/Diluted
Share ($)
Amount ($
millions)
Earnings per Basic/Diluted
Share ($)
Net income
$13
$0.07 / $0.06
$241
$1.24/ $1.21
(1)
We report non-GAAP financial
measures in addition to, and not as a substitute for, or superior
to, financial measures calculated in accordance with GAAP. See the
section entitled “Statement Regarding Use of Non-GAAP Financial
Measures” for an explanation of non-GAAP measures, and the table
entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of
GAAP to non-GAAP measures.
(2)
Non-GAAP adjusted subscription
revenues, professional services and other revenues, total revenues
and professional services and other billings are adjusted for
constant currency. Non-GAAP adjusted subscription billings and
total billings are adjusted for constant currency and constant
billings duration. See the section entitled “Statement Regarding
Use of Non-GAAP Financial Measures” for an explanation of non-GAAP
measures, and the table entitled “GAAP to Non-GAAP Reconciliation”
for a reconciliation of GAAP to non-GAAP measures.
Note: Numbers rounded for
presentation purposes.
Financial Outlook
Our guidance includes GAAP and non-GAAP financial measures.
The following table summarizes our guidance for the fourth
quarter 2020:
Fourth Quarter 2020
GAAP Guidance
Fourth Quarter 2020 Non-GAAP
Guidance(1)
Amount ($ 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 - $1,146
27%
Subscription billings
$1,625 - $1,645
25% - 27%
$1,612 - $1,632
24% - 26%
Margin (%)
Income from operations
21%
Amount
(millions)
Weighted-average shares used to
compute diluted net income per share
201
(1)
We report non-GAAP financial
measures in addition to, and not as a substitute for, or superior
to, financial measures calculated in accordance with GAAP. See the
section entitled “Statement Regarding Use of Non-GAAP Financial
Measures” for an explanation of non-GAAP measures, and the table
entitled “Reconciliation of Non-GAAP Financial Guidance” for a
reconciliation of GAAP to non-GAAP measures.
(2)
Guidance for GAAP subscription
revenues and non-GAAP subscription billings is based on foreign
exchange rates as of September 30, 2020 for entities reporting in
currencies other than U.S. Dollars.
(3)
Non-GAAP adjusted subscription
revenues are adjusted for constant currency. Non-GAAP adjusted
subscription billings are adjusted for constant currency and
constant billings duration. See the section entitled “Statement
Regarding Use of Non-GAAP Financial Measures” for an explanation of
non-GAAP measures, and the table entitled “Reconciliation of
Non-GAAP Financial Guidance” for a reconciliation of GAAP to
non-GAAP measures.
The following table summarizes our guidance for full-year
2020:
Full-Year 2020 GAAP
Guidance
Full-Year 2020 Non-GAAP
Guidance(1)
Amount ($ millions)(2)
Year/Year Growth (%)
Amount ($ millions)(2)
Year/Year Growth (%)
Adjusted Amount ($
millions)(3)
Adjusted Year/ Year Growth
(%)
Subscription revenues
$4,257 - $4,262
31%
$4,251 - $4,256
31%
Subscription billings
$4,780 - $4,800
26% - 27%
$4,779 - $4,799
26% - 27%
Margin (%)
Subscription gross profit
86%
Income from operations
24.5%
Free cash flow
31.5%
Amount (millions)
Weighted-average shares used to
compute diluted net income per share
199
(1)
We report non-GAAP financial
measures in addition to, and not as a substitute for, or superior
to, financial measures calculated in accordance with GAAP. See the
section entitled “Statement Regarding Use of Non-GAAP Financial
Measures” for an explanation of non-GAAP measures, and the table
entitled “Reconciliation of Non-GAAP Financial Guidance” for a
reconciliation of GAAP to non-GAAP measures.
(2)
GAAP subscription revenues and
non-GAAP subscription billings for the future quarters included in
our full-year 2020 guidance are based on foreign exchange rates as
of September 30, 2020 for entities reporting in currencies other
than U.S. Dollars.
(3)
Non-GAAP adjusted subscription
revenues are adjusted for constant currency. Non-GAAP adjusted
subscription billings are adjusted for constant currency and
constant billings duration. See the section entitled “Statement
Regarding Use of Non-GAAP Financial Measures” for an explanation of
non-GAAP measures, and the table entitled “Reconciliation of
Non-GAAP Financial Guidance” for a reconciliation of GAAP to
non-GAAP measures.
As with our previously issued full-year 2020 guidance dated July
29, 2020, our guidance factors in assumptions that are based on
information available to us today regarding the expected impacts of
COVID-19, and persistence of such impacts, on our business.
The following table compares our updated full-year 2020 guidance
against our previously issued full-year 2020 guidance dated July
29, 2020:
Comparison of Updated
Full-Year 2020 Guidance to Previously Issued Guidance(1)
($ 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.
- 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.
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.
ServiceNow, Inc.
Condensed Consolidated
Statements of Operations
(in thousands, except per
share data)
(unaudited)
Three Months Ended
Nine Months Ended
September 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Revenues:
Subscription
$
1,091,386
$
834,910
$
3,101,616
$
2,355,885
Professional services and other
60,586
50,923
167,538
152,778
Total revenues
1,151,972
885,833
3,269,154
2,508,663
Cost of revenues (1):
Subscription
189,280
139,330
520,935
401,398
Professional services and other
62,424
61,463
187,074
183,794
Total cost of revenues
251,704
200,793
708,009
585,192
Gross profit
900,268
685,040
2,561,145
1,923,471
Operating expenses (1):
Sales and marketing
453,410
362,975
1,321,163
1,118,279
Research and development
268,292
190,099
740,030
546,041
General and administrative
109,234
75,642
319,019
245,540
Total operating expenses
830,936
628,716
2,380,212
1,909,860
Income from operations
69,332
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 taxes
25,433
60,770
135,825
32,999
Provision for income taxes
12,575
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 - basic
193,237
188,074
193,203
185,676
Weighted-average shares used to compute
net income per share - diluted
201,861
197,878
202,837
196,739
(1) Includes stock-based compensation as follows:
Three Months Ended
Nine Months Ended
September 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Cost of revenues:
Subscription
$
25,602
$
18,880
$
72,086
$
54,019
Professional services and other
13,054
10,867
37,857
31,749
Operating expenses:
Sales and marketing
78,871
68,712
227,998
200,071
Research and development
74,213
50,636
203,279
144,259
General and administrative
28,189
13,839
83,834
62,046
ServiceNow, Inc.
Condensed Consolidated Balance
Sheets
(in thousands)
(unaudited)
September 30, 2020
December 31, 2019
Assets
Current assets:
Cash and cash equivalents
$
1,348,294
$
775,778
Short-term investments
1,603,317
915,317
Accounts receivable, net
631,055
835,279
Current portion of deferred
commissions
202,741
175,039
Prepaid expenses and other current
assets
181,474
125,488
Total current assets
3,966,881
2,826,901
Deferred commissions, less current
portion
374,438
333,448
Long-term investments
1,259,951
1,013,332
Property and equipment, net
564,007
468,085
Operating lease right-of-use assets
457,726
402,428
Intangible assets, net
155,826
143,850
Goodwill
231,949
156,756
Deferred tax assets
620,890
599,633
Other assets
73,791
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
liabilities
442,288
461,403
Current portion of deferred revenue
2,274,269
2,185,754
Current portion of operating lease
liabilities
67,934
52,668
Total current liabilities
2,835,947
2,752,785
Deferred revenue, less current portion
37,749
40,038
Operating lease liabilities, less current
portion
429,661
383,221
Long-term debt
1,705,533
694,981
Other long-term liabilities
22,853
23,464
Stockholders’ equity
2,673,716
2,127,941
Total liabilities and stockholders’
equity
$
7,705,459
$
6,022,430
ServiceNow, Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
Nine Months Ended
September 30, 2020
September 30, 2019
September 30, 2020
September 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 amortization
84,720
64,006
243,348
179,783
Amortization of deferred commissions
55,976
42,695
157,191
122,226
Amortization of debt discount and issuance
costs
4,928
8,371
21,986
24,808
Stock-based compensation
219,929
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 Notes
40,750
—
41,657
—
Other
2,190
(1,298
)
641
(4,621
)
Changes in operating assets and
liabilities, net of effect of business combinations:
Accounts receivable
10,260
(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 liabilities
4,560
(46,395
)
(31,224
)
(34,707
)
Net cash provided by operating
activities
241,452
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 investments
533,585
423,135
1,298,969
931,453
Realized gains (losses) on derivatives not
designated as hedging instruments, net
1,873
(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
Notes
1,481,633
—
1,481,633
—
Repayments of convertible senior notes
attributable to principal
(1,553,128
)
—
(1,568,866
)
—
Net proceeds from unwind of 2022 Note
Hedge
1,105,542
—
1,105,542
—
Proceeds from employee stock plans
51,444
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
activities
963,378
(41,256
)
800,139
(225,575
)
Foreign currency effect on cash, cash
equivalents and restricted cash
7,821
(7,725
)
2,959
(6,439
)
Net increase in cash, cash equivalents and
restricted cash
510,407
38,842
573,819
57,002
Cash, cash equivalents and restricted cash
at beginning of period
841,403
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
ServiceNow, Inc.
GAAP to Non-GAAP
Reconciliation
(in thousands, except per
share data)
(unaudited)
Three Months Ended
Nine Months Ended
September 30, 2020
September 30, 2019
Growth Rates
September 30, 2020
September 30, 2019
Growth 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 billings
1,081,418
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
billings
58,074
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 billings
1,139,492
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 compensation
25,602
18,880
72,086
54,019
Amortization of purchased intangibles
8,827
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 compensation
13,054
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 compensation
38,656
29,747
109,943
85,768
Amortization of purchased intangibles
8,827
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 margin
83
%
83
%
83
%
83
%
Stock-based compensation as % of
subscription revenues
2
%
2
%
2
%
2
%
Amortization of purchased intangibles as %
of subscription revenues
1
%
1
%
1
%
1
%
Non-GAAP subscription gross margin
86
%
86
%
86
%
86
%
GAAP professional services and other gross
margin
(3
%)
(21
%)
(12
%)
(20
%)
Stock-based compensation as % of
professional services and other revenues
22
%
22
%
23
%
20
%
Non-GAAP professional services and other
gross margin
19
%
1
%
11
%
0
%
GAAP gross margin
78
%
77
%
78
%
77
%
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
%
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 compensation
219,929
162,934
625,054
492,144
Amortization of purchased intangibles
9,630
9,017
34,648
24,078
Business combination and other related
costs
34
(26
)
4,095
120
Non-GAAP income from operations
$
298,925
$
228,249
$
844,730
$
529,953
Operating margin:
GAAP operating margin
6
%
6
%
6
%
1
%
Stock-based compensation as % of total
revenues
19
%
18
%
19
%
20
%
Amortization of purchased intangibles as %
of total revenues
1
%
2
%
1
%
0
%
Business combination and other related
costs as % of total revenues
0
%
0
%
0
%
0
%
Non-GAAP operating margin
26
%
26
%
26
%
21
%
Net income:
GAAP net income
$
12,858
$
40,598
$
101,855
$
27,974
Stock-based compensation
219,929
162,934
625,054
492,144
Amortization of purchased intangibles
9,630
9,017
34,648
24,078
Business combination and other related
costs
34
(26
)
4,095
120
Amortization of debt discount and issuance
costs
4,928
8,371
21,986
24,808
Loss on extinguishment of 2022 Notes
40,750
—
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 - basic
193,237
188,074
193,203
185,676
GAAP weighted-average shares used to
compute net income per share - diluted
201,861
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 - diluted
199,488
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 discount
66,534
—
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 revenues
21
%
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 revenues
6
%
—
%
2
%
—
%
Non-GAAP free cash flow margin
19
%
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.
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 million
27%
GAAP subscription revenues
$1,155 - $1,160 million
$899 million
28% - 29%
Change in subscription deferred revenue,
unbilled receivables and customer deposits
470 - 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
duration
5 million
Non-GAAP adjusted subscription
billings(2)
$1,612 - $1,632 million
24% - 26%
GAAP operating margin
2%
Stock-based compensation expense as % of
total revenues
18%
Amortization of purchased intangibles as %
of total revenues
1%
Non-GAAP operating margin
21%
GAAP weighted-average shares used to
compute net income per share - diluted
202 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 - diluted
201 million
Twelve Months Ended
December 31, 2020
December 31, 2019(3)
Growth Rates
GAAP subscription revenues
$4,257 - $4,262 million
$3,255 million
31%
Effects of foreign currency rate
fluctuations
(6) million
Non-GAAP adjusted subscription
revenues(1)
$4,251 - $4,256 million
31%
GAAP subscription revenues
$4,257 - $4,262 million
$3,255 million
31%
Change in subscription deferred revenue,
unbilled receivables and customer deposits
523 - 538 million
533 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
duration
5 million
Non-GAAP adjusted subscription
billings(2)
$4,779 - $4,799 million
26% - 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
5%
Stock-based compensation expense as % of
total revenues
19%
Amortization of purchased intangibles as %
of total revenues
1%
Non-GAAP operating margin
24.5%
GAAP net cash provided by operating
activities as % of total revenues
40%
Purchases of property and equipment as %
of total revenues
(8%)
Non-GAAP free cash flow margin
31.5%
GAAP weighted-average shares used to
compute net income per share - diluted
200 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 - diluted
199 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201028006111/en/
Media Contact: Sara Day 650.336.3123
press@servicenow.com
Investor Contact: Darren Yip 925.388.7205
ir@servicenow.com
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