- Subscription revenues of $781 million in Q2 2019, representing
33% year‑over‑year growth
- 39 transactions over $1 million
in net new annual contract value in Q2 2019
- 766 total
customers with over $1 million in annual contract value,
representing 33% year‑over‑year growth
SANTA CLARA, Calif. ‑ Jul. 24, 2019 ‑ ServiceNow (NYSE: NOW)
today announced financial results for its second quarter ended June
30, 2019, with subscription revenues of $781 million in Q2 2019,
representing 33% year‑over‑year growth.
ServiceNow, the leading digital workflow company making work, work
better for people, serves almost 75% of Fortune 500 companies. During
the quarter, ServiceNow closed 39 transactions with more than $1
million in net new annual contract value (ACV). The company now has
766 total customers with more than $1 million in ACV, representing 33%
year‑over‑year growth in customers.
“We delivered another strong quarter, continuing our focus on
driving customer success and enabling digital transformation as a
strategic partner to the world’s largest enterprises,” said John
Donahoe, ServiceNow president and chief executive officer. “Technology
should make life at work as simple, easy and convenient as it has made
our lives at home. That’s what we’re enabling with our customers
through the power of our Now Platform, product portfolio and native
mobile capabilities.”
“Total remaining performance obligations at the end of June 2019 was
$5.4 billion, representing 35% year‑over‑year growth,” said Michael
Scarpelli, ServiceNow chief financial officer. “This strong growth
reflects the continued strength of our product portfolio and our focus
on developing strategic relationships with our customers. We now have
98 customers with more than $5 million in ACV, representing 72%
year‑over‑year growth in customers.”
Second Quarter 2019 GAAP and Non‑GAAP Results:
The following table summarizes our financial results for the second
quarter 2019:
| | | | | | | |
|
Second Quarter 2019
GAAP Results | |
Second Quarter 2019 Non‑GAAP Results(1)
|
|
Amount
($ millions) |
Year/Year
Growth (%) | |
Amount
($ millions) |
Year/Year
Growth (%) |
Adjusted Amount
($ millions)(2)
|
Adjusted
Year/Year
Growth (%) |
Subscription revenues |
$781.0 | | 33% | | | | $797.6 | | 36% |
Professional services and other
revenues | $52.9
| | 16% | | | | $54.4 | | 19% |
Total revenues | $833.9 | | 32% | | | | $851.9 | | 35% |
| | | | | | | |
Subscription billings |
| | | $816.9 | | 32% | $827.8 | | 34% |
Professional services and other
billings | |
| | $54.1 | | 10% | $55.6 | | 13% |
Total billings | | | | $871.0 | | 31% | $883.4 | | 33% |
| | | | | | | |
|
Amount
($ millions) |
Margin (%) | |
Amount
($ millions) |
Margin (%) | | |
Subscription gross profit
| $645.5 | | 83% | | $670.2 | | 86% | | |
Professional services and other
gross profit (loss) | ($9.8) | | (18%) | | $1.2 | | 2% | | |
Total gross profit |
$635.8 | | 76% | | $671.4 | | 81% | | |
Income (loss) from
operations | ($27.0) | | (3%) | | $153.0 | | 18% | | |
Net cash provided by operating
activities | $243.7 | | 29% | | | | | |
Free cash flow | | | | $193.8 | | 23% | | |
| | | | | | | |
|
Amount
($ millions) |
Earnings per Basic/Diluted
Share ($) |
|
Amount
($ millions) |
Earnings per Basic/Diluted
Share ($) |
| |
Net income (loss) | ($11.1) | ($0.06) | | $137.5 | $0.74 / $0.71 | | |
| |
- We report non‑GAAP financial
measures in addition to, and not as a substitute for, or superior
to, financial measures calculated in accordance with GAAP. See the
section entitled “Statement Regarding Use of Non‑GAAP Financial
Measures” for an explanation of non‑GAAP measures, and the table
entitled “GAAP to Non‑GAAP Reconciliation” for a reconciliation of
GAAP to non‑GAAP measures.
- Non‑GAAP adjusted subscription
revenues, professional services and other revenues, total revenues
and professional services and other billings are adjusted for
constant currency. Non‑GAAP adjusted subscription billings and total
billings are adjusted for constant currency and constant billings
duration. See the section entitled “Statement Regarding Use of
Non‑GAAP Financial Measures” for an explanation of non‑GAAP
measures, and the table entitled “GAAP to Non‑GAAP Reconciliation”
for a reconciliation of GAAP to non‑GAAP measures.
Financial Outlook
Our guidance includes GAAP and non‑GAAP financial measures.
The following table summarizes our guidance for the third quarter 2019:
|
Third Quarter 2019
GAAP Guidance | |
Third Quarter 2019 Non‑GAAP Guidance(1)
|
|
Amount
($ millions)(2) |
Year/Year
Growth (%) | |
Amount
($ millions)(2) |
Year/Year
Growth (%) |
Adjusted Amount
($ millions)(3)
|
Adjusted
Year/ Year
Growth (%) |
Subscription revenues |
$830 ‑ $835 | 32% ‑ 33% | | | | $836 ‑ $841 | 33% ‑ 34% |
Subscription billings |
| | | $848 ‑ $853 | 26% ‑ 27% | $857 ‑ $862 | 27% ‑ 28% |
| | | | | | | |
| | | |
|
Margin (%) | | |
Income from operations |
| |
| | | 23% | |
|
| | | | | | | |
| | | |
Amount
(millions) | | | |
Weighted‑average shares used to
compute diluted net income per share | | | | 195 | | | | |
| | | |
| | |
| | | |
- We report non‑GAAP financial
measures in addition to, and not as a substitute for, or superior
to, financial measures calculated in accordance with GAAP. See the
section entitled “Statement Regarding Use of Non‑GAAP Financial
Measures” for an explanation of non‑GAAP measures, and the table
entitled “Reconciliation of Non‑GAAP Financial Guidance” for a
reconciliation of GAAP to non‑GAAP measures.
- Guidance for
GAAP subscription revenues and non‑GAAP subscription billings is
based on foreign exchange rates as of June 30, 2019 for entities
reporting in currencies other than U.S. Dollars.
- Non‑GAAP
adjusted subscription revenues are adjusted for constant currency.
Non‑GAAP adjusted subscription billings are adjusted for constant
currency and constant billings duration. See the section entitled
“Statement Regarding Use of Non‑GAAP Financial Measures” for an
explanation of non‑GAAP measures, and the table entitled
“Reconciliation of Non‑GAAP Financial Guidance” for a reconciliation
of GAAP to non‑GAAP measures.
The following table summarizes our updated guidance for fiscal year 2019:
|
Full‑Year 2019
GAAP Guidance | |
Full‑Year 2019 Non‑GAAP Guidance(1)
|
|
Amount
($ millions)(2) |
Year/Year
Growth (%) | |
Amount
($ millions)(2) |
Year/Year
Growth (%) |
Adjusted Amount
($ millions)(3)
|
Adjusted
Year/ Year
Growth (%) |
Subscription revenues |
$3,245 ‑ $3,255 | 34% | | | | $3,289 ‑ $3,299 | 36% |
Subscription billings |
| | | $3,740 ‑ $3,750 | 30% | $3,804 ‑ $3,814 | 32% |
| | | | | | | |
| | | |
|
Margin (%) | | |
Subscription gross profit
| | |
| | | 86% | | |
Income from operations
| | | | | | 21% | | |
Free cash flow | | | | | | 28% | | |
| | | | | | | |
| | | |
Amount
(millions) | | | |
Weighted‑average shares used to
compute diluted net income per share | | | | 194 | | | | |
| | | |
| | |
| | | |
- We report non‑GAAP financial
measures in addition to, and not as a substitute for, or superior
to, financial measures calculated in accordance with GAAP. See the
section entitled “Statement Regarding Use of Non‑GAAP Financial
Measures” for an explanation of non‑GAAP measures, and the table
entitled “Reconciliation of Non‑GAAP Financial Guidance” for a
reconciliation of GAAP to non‑GAAP measures.
- GAAP
subscription revenues and non‑GAAP subscription billings for the
future quarters included in our full‑year 2019 guidance are based on
foreign exchange rates as of June 30, 2019 for entities reporting in
currencies other than U.S. Dollars.
- Non‑GAAP adjusted
subscription revenues are adjusted for constant currency. Non‑GAAP
adjusted subscription billings are adjusted for constant currency
and constant billings duration. See the section entitled “Statement
Regarding Use of Non‑GAAP Financial Measures” for an explanation of
non‑GAAP measures, and the table entitled “Reconciliation of
Non‑GAAP Financial Guidance” for a reconciliation of GAAP to
non‑GAAP measures.
The following table compares our updated full‑year 2019 guidance
against our previously issued full‑year 2019 guidance dated April 24, 2019:
|
Comparison of Updated Full‑Year 2019 Guidance to Previously
Issued Guidance(1)
($ millions) |
|
Previous Guidance Midpoint(2) |
Currency Impact(3) |
Duration Impact(4) |
Guidance Change |
Current Guidance Midpoint(5) |
GAAP subscription revenues
| $3,243 | $2 | $0 | $5 | $3,250 |
| | | | | |
Non‑GAAP subscription
billings(6) | $3,733 | $2 | $5 | $5 | $3,745 |
| | | | | |
- Numbers are rounded for
presentation purposes.
- Refers to previously issued
full‑year 2019 guidance dated April 24, 2019.
- GAAP
subscription revenues and non‑GAAP subscription billings for the
future quarters included in our full‑year 2019 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 Q2 2019 actual results and the rates as of March 31,
2019 assumed in our previously issued guidance dated April 24, 2019
plus (ii) the impact of the difference between the exchange rates in
effect as of June 30, 2019 assumed in our updated full‑year 2019
guidance, and the rates as of March 31, 2019 assumed in our
previously issued guidance dated April 24, 2019.
- Represents
the impact of billings greater than 12 months in excess of guidance
assumptions.
- Represents the updated full‑year 2019 guidance
presented in the table above.
- 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
July 24, 2019. Interested parties may listen to the call by dialing
(877) 824‑2843 (passcode: 6382847), or if outside North America, by
dialing (647) 689‑5665 (passcode: 6382847). Individuals may access the
live teleconference from this webcast link:
https://event.on24.com/wcc/r/2019846/2ADE1BEE718F0016DF30AAB494DFBE7C
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:
6382847), or if outside North America, by dialing (416)
621‑4642 (passcode: 6382847).
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 Q2 2018, the average exchange
rates in effect for our major currencies were 1 USD to 0.8387 Euros
and 1 USD to 0.7350 British Pound Sterling (GBP)), rather than the
actual average exchange rates in effect during the current period
(for Q2 2019, the average exchange rates in effect for our major
currencies were 1 USD to 0.8899 Euros and 1 USD 0.7781 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 and Net income. Our
non‑GAAP presentation of gross profit, income from operations, and
net income measures exclude 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. We believe the presentation of
operating results that exclude these non‑cash or non‑recurring items
provides 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) errors,
interruptions, delays, or security breaches in or of our service or
datacenters, (ii) our ability to grow at our expected rate of growth,
including our ability to convert deferred revenue and backlog into
revenue, add and retain customers, sell additional subscriptions to
existing customers, sell to very large and regulated organizations
with complex sales cycles, and enter new geographies and markets,
(iii) our ability to continue to release, and gain customer acceptance
of, improved versions of our services, (iv) our ability to develop and
gain customer acceptance of new products and services, including our
platform, (v) our ability to compete successfully against existing and
new competitors, and (vi) 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 that will be filed
for the quarter ended June 30, 2019 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, 2018.
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.
© 2019 ServiceNow, Inc. All rights reserved. ServiceNow, the
ServiceNow logo, Now, Now Platform, 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 Q2 2019 complete financial
tables (download PDF)
Media Contact:
Kari Ramirez
408.607.1315
press@servicenow.com
Investor Contact:
Kendall Toyne
408.831.6040
ir@servicenow.com
