ServiceNow Reports Second Quarter 2022 Financial Results

  • Subscription revenues of $1,658 million in Q2 2022, representing 25% year-over-year growth, 29.5% adjusted for constant currency
  • Total revenues of $1,752 million in Q2 2022, representing 24% year-over-year growth, 29.5% adjusted for constant currency
  • Current remaining performance obligations of $5.75 billion as of Q2 2022, representing 21% year-over-year growth, 27% adjusted for constant currency
  • Surpassed 100 customers paying over $10 million in annual contract value in Q2 2022, representing more than 50% year-over-year growth

ServiceNow NOW, the leading digital workflow company making the world work better for everyone, today announced financial results for its second quarter ended June 30, 2022, with subscription revenues of $1,658 million in Q2 2022, representing 25% year-over-year growth, 29.5% adjusted for constant currency.

"ServiceNow once again beat expectations on the top and bottom line," said ServiceNow President and CEO Bill McDermott. "ServiceNow is the enduring platform for a fast-changing world. Our pace of innovation, customer-centricity, and consistent execution are proven. While we are not immune to the current macro environment, no company is in a better position to help customers innovate through this moment."

As of June 30, 2022, current remaining performance obligations ("cRPO"), contract revenue that will be recognized as revenue in the next 12 months, was $5.75 billion, representing 21% year-over-year growth and 27% adjusted for constant currency. The company now has 1,463 total customers with more than $1 million in annual contract value, representing 22% year-over-year growth in customers.

"Our Q2 results demonstrate the durability of our business, as strong net expansion and a best-in-class renewal rate of 99% drove a solid balance of growth and profitability," said ServiceNow CFO Gina Mastantuono. "In the current macro environment, ServiceNow remains a core component of our customers' digital transformation strategy and we continue to see a very strong pipeline. We are leaning into our massive opportunity with operational rigor as we remain ever confident in achieving $16B+ in subscription revenue in 2026."

Recent Business Highlights

  • During the quarter, ServiceNow hosted Knowledge 2022 which drew more than 14,000 attendees to The Hague, New York City, Las Vegas and Sydney. At the conference, ServiceNow announced new solutions to advance digital business and accelerate innovation: Service Operations Workspace, App Engine Management Center, Public Sector Digital Services, and ServiceNow Indoor Mapping.
  • In Q2, the company announced Procurement Service Management, a new solution to help transform procurement across the enterprise. The company also furthered its investment in employee experience with the acquisition of Hitch Works, a skills mapping and intelligence company that will tie employee learning and development to workforce planning to address talent gaps. In addition, through its partnership with Microsoft, ServiceNow is accelerating Azure adoption for mutual customers.
  • ServiceNow continues to expand its global footprint with more than 100 customers now paying over $10 million in annual contract value in Q2 2022, up more than 50% year-over-year.

Second Quarter 2022 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the second quarter 2022:

 

Second Quarter 2022

GAAP Results

 

Second Quarter 2022 Non-GAAP Results(1)

 

Amount

($ millions)

Year/Year

Growth (%)

 

Amount

($ millions)(2)

Year/Year

Growth (%)

Subscription revenues

$1,658

25%

 

$1,724

29.5 %

Professional services and other revenues

$94

19%

 

$100

26%

Total revenues

$1,752

24%

 

$1,824

29.5%

 

 

 

 

 

 

 

Amount

($ billions)

Year/Year

Growth (%)

 

Amount
($ billions)(2)

Year/Year

Growth (%)

cRPO

$5.75

21%

 

$6.02

27%

RPO

$11.5

21%

 

$12.0

27%

 

 

 

 

 

 

 

Amount

($ millions)

Margin (%)

 

Amount

($ millions)

Margin (%)

Subscription gross profit

$1,371

83%

 

$1,427

86%

Professional services and other gross profit (loss)

($8)

(9%)

 

$10

10%

Total gross profit

$1,363

78%

 

$1,437

82%

Income from operations

$22

1%

 

$399

23%

Net cash provided by operating activities

$433

25%

 

 

 

Free cash flow

 

 

 

$287

16%

 

 

 

 

 

 

 

Amount

($ millions)

Earnings per
Basic/Diluted
Share ($)

 

Amount

($ millions)

Earnings per
Basic/Diluted
Share ($)

Net income

$20

$0.10/ $0.10

 

$329

$1.63/ $1.62

(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 subscription revenues, professional services and other revenues, total revenues, cRPO and RPO are adjusted for constant currency. 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 non-GAAP growth rates for subscription revenues and cRPO are only adjusted for constant currency to provide better visibility into the underlying business trends. Since December 31, 2021, ServiceNow has seen an incremental strengthening of the U.S. dollar resulting in a foreign exchange ("FX") headwind in 2022. Total FX impact estimated to be approximately a $220 million (~400bps) headwind for 2022 subscription revenues and a $180 million (~350bps) headwind for Q3 2022 cRPO. FX is also expected to approximately be a 1 point headwind to FY 2022 operating margin. Additionally, ServiceNow has a larger-than-average customer cohort renewing in Q4 2022. As a result, Q3 2022 will experience approximately 2 points of headwinds to cRPO growth as the contractual obligations wind down. We expect that cohort to renew in Q4 2022, at which time those headwinds will subside and we expect cRPO growth to re-accelerate quarter-over-quarter.

The following table summarizes our guidance for the third quarter 2022:

 

Third Quarter 2022

GAAP Guidance

Third Quarter 2022

Non-GAAP Guidance(1)

 

Amount
($ millions)(2)

Year/Year

Growth (%)(2)

Constant Currency

Year/ Year Growth (%)

Subscription revenues

$1,750 - $1,755

23 %

27.5 %

 

 

 

 

cRPO

 

20 %

23.5 %

Note: Includes timing headwind from larger-than-average renewal cohort noted above

 

 

 

 

 

 

Margin (%)

Income from operations

 

 

25%

 

 

 

 

 

 

Amount

(millions)

 

Weighted-average shares used to compute diluted net income per share

 

203

 

(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 GAAP subscription revenue and cRPO growth rate is based on the 30-day average of foreign exchange rates for June 2022 for entities reporting in currencies other than U.S. Dollars.

The following table summarizes our guidance for the full-year 2022:

 

Full-Year 2022

GAAP Guidance

 

Full-Year 2022

Non-GAAP Guidance(1)

 

Amount
($ millions)(2)

Year/Year

Growth (%)(2)

 

Constant Currency

Year/ Year Growth (%)

Subscription revenues

$6,915 - $6,925

24 %

 

28 %

 

 

 

 

 

 

 

 

 

Margin (%)

Subscription gross profit

 

 

 

86%

Income from operations

 

 

 

25%

Free cash flow

 

 

 

30%

 

 

 

 

 

 

 

 

 

Amount

(millions)

Weighted-average shares used to compute diluted net income per share

 

203

(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 related growth rate for the future quarters included in our full-year 2022 guidance are based on the 30-day average of foreign exchange rates for June 2022 for entities reporting in currencies other than U.S. Dollars.

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (21:00 GMT) on July 27, 2022. Interested parties may listen to the call by dialing (888) 330‑2455 (Passcode: 8135305), or if outside North America, by dialing (240) 789-2717 (Passcode: 8135305). Individuals may access the live teleconference from this webcast.

https://events.q4inc.com/attendee/274505707

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) 770‑2030 (Passcode: 8135305), or if outside North America, by dialing (647) 362‑9199 (Passcode: 8135305).

Investor Presentation Details

An investor presentation providing additional information, including forward-looking guidance, and analysis can be found at http://investors.servicenow.com.

Statement Regarding Use of Non-GAAP Financial Measures

We use 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.

  • Revenues. We adjust revenues and related growth rates 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 2021, the average exchange rates in effect for our major currencies were 1 USD to 0.83 Euros and 1 USD to 0.72 British Pound Sterling ("GBP")), rather than the actual average exchange rates in effect during the current period (for Q2 2022, the average exchange rates in effect for our major currencies were 1 USD to 0.94 Euros and 1 USD to 0.80 GBP). Guidance for related 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. We believe the presentation of revenues and related growth rates adjusted for constant currency facilitates the comparison of revenues year-over-year.
  • Remaining performance obligations and current remaining performance obligations. We adjust cRPO and remaining performance obligations ("RPO") and related growth rates for constant currency to provide a framework for assessing how our business performed. To present this information, current period results for entities reporting in currencies other than USD are converted into USD at the exchange rates in effect at the end of the comparison period (for Q2 2021, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.84 Euros and 1 USD to 0.72 GBP), rather than the actual end of the period exchange rates in effect during the current period (for Q2 2022, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.96 Euros and 1 USD to 0.82 GBP). Guidance for the related growth rate is derived by applying the end of period exchange rates in effect during the comparison period rather than the exchange rates in effect during the guidance period. We believe the presentation of cRPO and RPO and related growth rates adjusted for constant currency facilitates the comparison of cRPO and RPO year-over-year, respectively.
  • 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, repayments of convertible senior notes attributable to debt discount and business combination and other related costs including compensation expense, 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.

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: experiencing an actual or perceived cyber-security event; our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet; errors, interruptions, delays, or security breaches in or of our service or data centers; our ability to maintain and attract key employees and manage workplace culture; alleged violations of laws and regulations, including those relating to anti-bribery and anti-corruption and those relating to public sector contracting requirements; our ability to compete successfully against existing and new competitors; our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments; 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; our ability to develop and gain customer demand for and acceptance of new and improved products and services; fluctuations in the value of foreign currencies relative to the U.S. Dollar; the continued impact and duration of COVID-19 on our business, future financial performance and global economic conditions, including any subsequent waves of outbreak or new variant strains of the COVID-19 virus, the effectiveness, extent and duration of mitigation efforts such as "shelter in place" and other government responses, and the availability of vaccinations; our ability to consummate and realize the benefits of any strategic transactions or acquisitions; the impact of the Russian invasion of Ukraine on macroeconomic conditions; inflation; and fluctuations and volatility in our stock price.

Further information on these and other factors that could affect our financial results are included in our Form 10-K filed for the year ended December 31, 2021, our Form 10-Q that will be filed for the quarter ended June 30, 2022 and in other filings we make with the Securities and Exchange Commission from time to time.

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 NOW makes the world work better for everyone. Our cloud-based platform and solutions help digitize and unify organizations so that they can find smarter, faster, better ways to make work flow. So employees and customers can be more connected, more innovative, and more agile. And we can all create the future we imagine. The world works with ServiceNowTM. For more information, visit: www.servicenow.com.

© 2022 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 millions, except per share data)

(unaudited)

 

 

Three Months Ended

Six Months Ended

 

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Revenues:

 

 

 

 

Subscription

$

1,658

 

$

1,330

 

$

3,289

 

$

2,623

 

Professional services and other

 

94

 

 

79

 

 

185

 

 

146

 

Total revenues

 

1,752

 

 

1,409

 

 

3,474

 

 

2,769

 

Cost of revenues (1):

 

 

 

 

Subscription

 

287

 

 

248

 

 

562

 

 

476

 

Professional services and other

 

102

 

 

81

 

 

196

 

 

152

 

Total cost of revenues

 

389

 

 

329

 

 

758

 

 

628

 

Gross profit

 

1,363

 

 

1,080

 

 

2,716

 

 

2,141

 

Operating expenses (1):

 

 

 

 

Sales and marketing

 

722

 

 

557

 

 

1,395

 

 

1,081

 

Research and development

 

444

 

 

333

 

 

858

 

 

647

 

General and administrative

 

175

 

 

139

 

 

354

 

 

265

 

Total operating expenses

 

1,341

 

 

1,029

 

 

2,607

 

 

1,993

 

Income from operations

 

22

 

 

51

 

 

109

 

 

148

 

Interest expense

 

(6

)

 

(7

)

 

(12

)

 

(14

)

Other income, net

 

13

 

 

6

 

 

17

 

 

15

 

Income before income taxes

 

29

 

 

50

 

 

114

 

 

149

 

Provision for (benefit from) income taxes

 

9

 

 

(9

)

 

19

 

 

8

 

Net income

$

20

 

$

59

 

$

95

 

$

141

 

Net income per share - basic

$

0.10

 

$

0.30

 

$

0.47

 

$

0.71

 

Net income per share - diluted

$

0.10

 

$

0.29

 

$

0.47

 

$

0.70

 

Weighted-average shares used to compute net income per share - basic

 

201

 

 

198

 

 

201

 

 

197

 

Weighted-average shares used to compute net income per share - diluted

 

203

 

 

202

 

 

203

 

 

202

 

 

(1) Includes stock-based compensation as follows:

 

 

Three Months Ended

Six Months Ended

 

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Cost of revenues:

 

 

 

 

Subscription

$

39

 

$

33

 

$

75

 

$

62

 

Professional services and other

 

18

 

 

15

 

 

34

 

 

28

 

Operating expenses:

 

 

 

 

Sales and marketing

 

113

 

 

99

 

 

218

 

 

192

 

Research and development

 

126

 

 

98

 

 

241

 

 

186

 

General and administrative

 

56

 

 

37

 

 

109

 

 

70

 

ServiceNow, Inc.

Condensed Consolidated Balance Sheets

(in millions)

 

 

June 30, 2022

December 31, 2021

 

(unaudited)

 

Assets

 

 

Current assets:

 

 

Cash and cash equivalents

$

1,664

 

$

1,728

 

Short-term investments

 

2,170

 

 

1,576

 

Accounts receivable, net

 

853

 

1,390

Current portion of deferred commissions

 

323

 

 

303

 

Prepaid expenses and other current assets

 

322

 

 

223

 

Total current assets

 

5,332

 

 

5,220

 

Deferred commissions, less current portion

 

640

 

 

623

 

Long-term investments

 

1,608

 

 

1,630

 

Property and equipment, net

 

876

 

 

766

 

Operating lease right-of-use assets

 

604

 

 

591

 

Intangible assets, net

 

257

 

 

287

 

Goodwill

 

803

 

 

777

 

Deferred tax assets

 

642

 

 

692

 

Other assets

 

340

 

 

212

 

Total assets

$

11,102

 

$

10,798

 

Liabilities and Stockholders' Equity

 

 

Current liabilities:

 

 

Accounts payable

$

265

 

$

89

 

Accrued expenses and other current liabilities

 

705

 

 

850

 

Current portion of deferred revenue

 

3,686

 

 

3,836

 

Current portion of operating lease liabilities

 

87

 

 

82

 

Current debt, net

 

 

 

92

 

Total current liabilities

 

4,743

 

 

4,949

 

Deferred revenue, less current portion

 

58

 

 

63

 

Operating lease liabilities, less current portion

 

572

 

 

556

 

Long-term debt, net

 

1,485

 

 

1,484

 

Other long-term liabilities

 

50

 

 

51

 

Stockholders' equity

 

4,194

 

 

3,695

 

Total liabilities and stockholders' equity

$

11,102

 

$

10,798

 

ServiceNow, Inc.

Condensed Consolidated Statements of Cash Flows

(in millions)

(unaudited)

 

 

Three Months Ended

Six Months Ended

 

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Cash flows from operating activities:

 

 

 

 

Net income

$

20

 

$

59

 

$

95

 

$

141

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

105

 

 

115

 

 

206

 

 

221

 

Amortization of deferred commissions

 

86

 

 

70

 

 

169

 

 

136

 

Stock-based compensation

 

352

 

 

281

 

 

677

 

 

537

 

Deferred income taxes

 

(1

)

 

(17

)

 

(3

)

 

(16

)

Repayments of convertible senior notes attributable to debt discount

 

 

 

(6

)

 

 

 

(13

)

Other

 

4

 

 

5

 

 

19

 

 

22

 

Changes in operating assets and liabilities, net of effect of business combinations:

 

 

 

 

Accounts receivable

 

(51

)

 

(130

)

 

511

 

 

224

 

Deferred commissions

 

(100

)

 

(103

)

 

(237

)

 

(217

)

Prepaid expenses and other assets

 

(26

)

 

(54

)

 

(72

)

 

(57

)

Accounts payable

 

71

 

 

(14

)

 

140

 

 

75

 

Deferred revenue

 

(65

)

 

10

 

 

(44

)

 

85

 

Accrued expenses and other liabilities

 

38

 

 

84

 

 

(165

)

 

(111

)

Net cash provided by operating activities

 

433

 

 

300

 

 

1,296

 

 

1,027

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

(151

)

 

(91

)

 

(244

)

 

(198

)

Business combinations, net of cash acquired

 

(57

)

 

(513

)

 

(57

)

 

(738

)

Purchases of investments

 

(1,112

)

 

(488

)

 

(1,774

)

 

(1,132

)

Purchases of non-marketable investments

 

(35

)

 

(7

)

 

(136

)

 

(7

)

Sales and maturities of investments

 

554

 

 

491

 

 

1,131

 

 

1,023

 

Others

 

1

 

 

(6

)

 

 

 

1

 

Net cash used in investing activities

 

(800

)

 

(614

)

 

(1,080

)

 

(1,051

)

Cash flows from financing activities:

 

 

 

 

Repayments of convertible senior notes attributable to principal

 

(88

)

 

(25

)

 

(94

)

 

(53

)

Proceeds from employee stock plans

 

1

 

 

 

 

106

 

 

95

 

Taxes paid related to net share settlement of equity awards

 

(91

)

 

(124

)

 

(241

)

 

(315

)

Net cash used in financing activities

 

(178

)

 

(149

)

 

(229

)

 

(273

)

Foreign currency effect on cash, cash equivalents and restricted cash

 

(44

)

 

7

 

 

(49

)

 

(11

)

Net change in cash, cash equivalents and restricted cash

 

(589

)

 

(456

)

 

(62

)

 

(308

)

Cash, cash equivalents and restricted cash at beginning of period

 

2,259

 

 

1,827

 

 

1,732

 

 

1,679

 

Cash, cash equivalents and restricted cash at end of period

$

1,670

 

$

1,371

 

$

1,670

 

$

1,371

 

ServiceNow, Inc.

GAAP to Non-GAAP Reconciliation

(in millions, except cRPO, RPO and per share data)

(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 2022

June 30, 2021

Growth Rates

June 30, 2022

June 30, 2021

Growth Rates

Subscription revenues:

 

 

 

 

 

 

GAAP subscription revenues

$

1,658

 

$

1,330

 

25

%

$

3,289

 

$

2,623

 

25

%

Effects of foreign currency rate fluctuations

 

66

 

 

 

 

101

 

 

 

Non-GAAP subscription revenues(1)

$

1,724

 

 

29.5

%

$

3,390

 

 

29

%

 

 

 

 

 

 

 

Professional services and other revenues:

 

 

 

 

 

 

GAAP professional services and other revenues

$

94

 

$

79

 

19

%

$

185

 

$

146

 

27

%

Effects of foreign currency rate fluctuations

 

6

 

 

 

 

8

 

 

 

Non-GAAP professional service and other revenues(1)

$

100

 

 

26

%

$

193

 

 

32

%

 

 

 

 

 

 

 

Total revenues:

 

 

 

 

 

 

GAAP total revenues

$

1,752

 

$

1,409

 

24

%

$

3,474

 

$

2,769

 

25

%

Effects of foreign currency rate fluctuations

 

72

 

 

 

 

109

 

 

 

Non-GAAP total revenues(1)

$

1,824

 

 

29.5

%

$

3,583

 

 

29

%

 

 

 

 

 

 

 

cRPO (in billions):

 

 

 

 

 

 

GAAP cRPO

$

5.75

 

$

4.75

 

21

%

$

5.75

 

$

4.75

 

21

%

Effects of foreign currency rate fluctuations

 

0.27

 

 

 

 

0.27

 

 

 

Non-GAAP cRPO(2)

$

6.02

 

 

27

%

$

6.02

 

 

27

%

 

 

 

 

 

 

 

RPO (in billions):

 

 

 

 

 

 

GAAP RPO

$

11.5

 

$

9.5

 

21

%

$

11.5

 

$

9.5

 

21

%

Effects of foreign currency rate fluctuations

 

0.6

 

 

 

 

0.6

 

 

 

Non-GAAP RPO(2)

$

12.0

 

 

27

%

$

12.0

 

 

27

%

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

GAAP subscription cost of revenues

$

287

 

$

248

 

 

$

562

 

$

476

 

 

Stock-based compensation

 

(39

)

 

(33

)

 

 

(75

)

 

(62

)

 

Amortization of purchased intangibles

 

(18

)

 

(14

)

 

 

(36

)

 

(26

)

 

Non-GAAP subscription cost of revenues

$

231

 

$

201

 

 

$

452

 

$

388

 

 

 

 

 

 

 

 

 

GAAP professional services and other cost of revenues

$

102

 

$

81

 

 

$

196

 

$

152

 

 

Stock-based compensation

 

(18

)

 

(15

)

 

 

(34

)

 

(28

)

 

Non-GAAP professional services and other cost of revenues

$

84

 

$

66

 

 

$

162

 

$

124

 

 

 

 

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

GAAP subscription gross profit

$

1,371

 

$

1,082

 

 

$

2,727

 

$

2,147

 

 

Stock-based compensation

 

39

 

 

33

 

 

 

75

 

 

62

 

 

Amortization of purchased intangibles

 

18

 

 

14

 

 

 

36

 

 

26

 

 

Non-GAAP subscription gross profit

$

1,427

 

$

1,129

 

 

$

2,837

 

$

2,235

 

 

 

 

 

 

 

 

 

GAAP professional services and other gross loss

$

(8

)

$

(2

)

 

$

(11

)

$

(6

)

 

Stock-based compensation

 

18

 

 

15

 

 

 

34

 

 

28

 

 

Non-GAAP professional services and other gross profit

$

10

 

$

13

 

 

$

23

 

$

22

 

 

 

 

 

 

 

 

 

GAAP gross profit

$

1,363

 

$

1,080

 

 

$

2,716

 

$

2,141

 

 

Stock-based compensation

 

56

 

 

48

 

 

 

108

 

 

90

 

 

Amortization of purchased intangibles

 

18

 

 

14

 

 

 

36

 

 

26

 

 

Non-GAAP gross profit

$

1,437

 

$

1,142

 

 

$

2,860

 

$

2,257

 

 

 

 

 

 

 

 

 

Gross margin:

 

 

 

 

 

 

GAAP subscription gross margin

 

83

%

 

81

%

 

 

83

%

 

82

%

 

Stock-based compensation as % of subscription revenues

 

2

%

 

3

%

 

 

2

%

 

2

%

 

Amortization of purchased intangibles as % of subscription revenues

 

1

%

 

1

%

 

 

1

%

 

1

%

 

Non-GAAP subscription gross margin

 

86

%

 

85

%

 

 

86

%

 

85

%

 

 

 

 

 

 

 

 

GAAP professional services and other gross margin

 

(9

%)

 

(3

%)

 

 

(6

%)

 

(4

%)

 

Stock-based compensation as % of professional services and other revenues

 

19

%

 

19

%

 

 

18

%

 

19

%

 

Non-GAAP professional services and other gross margin

 

10

%

 

17

%

 

 

12

%

 

15

%

 

 

 

 

 

 

 

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

$

722

 

$

557

 

 

$

1,395

 

$

1,081

 

 

Stock-based compensation

 

(113

)

 

(99

)

 

 

(218

)

 

(192

)

 

Amortization of purchased intangibles

 

 

 

 

 

 

 

 

(1

)

 

Non-GAAP sales and marketing expenses

$

609

 

$

458

 

 

$

1,177

 

$

888

 

 

 

 

 

 

 

 

 

GAAP research and development expenses

$

444

 

$

333

 

 

$

858

 

$

647

 

 

Stock-based compensation

 

(126

)

 

(98

)

 

 

(242

)

 

(186

)

 

Amortization of purchased intangibles

 

 

 

 

 

 

 

 

 

 

Business combination and other related costs

 

(5

)

 

(1

)

 

$

(10

)

$

(1

)

 

Non-GAAP research and development expenses

$

313

 

$

234

 

 

$

606

 

$

460

 

 

 

 

 

 

 

 

 

GAAP general and administrative expenses

$

175

 

$

139

 

 

$

354

 

$

265

 

 

Stock-based compensation

 

(56

)

 

(37

)

 

 

(109

)

 

(70

)

 

Amortization of purchased intangibles

 

(2

)

 

(2

)

 

 

(4

)

 

(6

)

 

Business combination and other related costs

 

 

 

(3

)

 

 

 

 

(5

)

 

Non-GAAP general and administrative expenses

$

117

 

$

97

 

 

$

241

 

$

184

 

 

 

 

 

 

 

 

 

GAAP total operating expenses

$

1,341

 

$

1,029

 

 

$

2,607

 

$

1,993

 

 

Stock-based compensation

 

(295

)

 

(234

)

 

 

(569

)

 

(448

)

 

Amortization of purchased intangibles

 

(2

)

 

(2

)

 

 

(4

)

 

(7

)

 

Business combination and other related costs

 

(5

)

 

(4

)

 

 

(10

)

 

(6

)

 

Non-GAAP total operating expenses

$

1,039

 

$

789

 

 

$

2,024

 

$

1,532

 

 

 

 

 

 

 

 

 

Income from operations:

 

 

 

 

 

 

GAAP income from operations

$

22

 

$

51

 

 

$

109

 

$

148

 

 

Stock-based compensation

 

352

 

 

282

 

 

 

677

 

 

538

 

 

Amortization of purchased intangibles

 

20

 

 

16

 

 

 

40

 

 

33

 

 

Business combination and other related costs

 

5

 

 

4

 

 

 

10

 

 

6

 

 

Non-GAAP income from operations

$

399

 

$

353

 

 

$

836

 

$

725

 

 

 

 

 

 

 

 

 

Operating margin:

 

 

 

 

 

 

GAAP operating margin

 

1

%

 

4

%

 

 

3

%

 

5

%

 

Stock-based compensation as % of total revenues

 

20

%

 

20

%

 

 

20

%

 

19

%

 

Amortization of purchased intangibles as % of total revenues

 

1

%

 

1

%

 

 

1

%

 

1

%

 

Business combination and other related costs as % of total revenues

 

%

 

%

 

 

%

 

1

%

 

Non-GAAP operating margin

 

23

%

 

25

%

 

 

24

%

 

26

%

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

GAAP net income

$

20

 

$

59

 

 

$

95

 

$

141

 

 

Stock-based compensation

 

352

 

 

282

 

 

 

677

 

 

538

 

 

Amortization of purchased intangibles

 

20

 

 

16

 

 

 

40

 

 

33

 

 

Business combination and other related costs

 

5

 

 

4

 

 

 

10

 

 

6

 

 

Amortization of debt discount and issuance costs

 

 

 

2

 

 

 

 

 

4

 

 

Other

 

 

 

1

 

 

 

 

 

3

 

 

Income tax expense effects related to the above adjustments

 

(68

)

 

(77

)

 

 

(141

)

 

(132

)

 

Non-GAAP net income

$

329

 

$

287

 

 

$

681

 

$

593

 

 

 

 

 

 

 

 

 

Net income per share - basic and diluted:

 

 

 

 

 

 

GAAP net income per share - basic

$

0.10

 

$

0.30

 

 

$

0.47

 

$

0.71

 

 

GAAP net income per share - diluted

$

0.10

 

$

0.29

 

 

$

0.47

 

$

0.70

 

 

Non-GAAP net income per share - basic

$

1.63

 

$

1.45

 

 

$

3.39

 

$

3.01

 

 

Non-GAAP net income per share - diluted

$

1.62

 

$

1.42

 

 

$

3.35

 

$

2.93

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares used to compute net income per share - basic

 

201

 

 

198

 

 

 

201

 

 

197

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares used to compute net income per share - diluted

 

203

 

 

202

 

 

 

203

 

 

202

 

 

Effects of in-the-money portion of convertible senior notes(3)

 

 

 

 

 

 

 

 

 

 

Non-GAAP weighted-average shares used to compute net income per share - diluted

 

203

 

 

202

 

 

 

203

 

 

202

 

 

 

 

 

 

 

 

 

Free cash flow:

 

 

 

 

 

 

GAAP net cash provided by operating activities

$

433

 

$

300

 

 

$

1,296

 

$

1,027

 

 

Purchases of property and equipment

 

(151

)

 

(91

)

 

 

(244

)

 

(198

)

 

Repayments of convertible senior notes attributable to debt discount

 

 

 

6

 

 

 

 

 

13

 

 

Business combination and other related costs

 

5

 

 

53

 

 

 

5

 

 

53

 

 

Non-GAAP free cash flow

$

287

 

$

268

 

 

$

1,057

 

$

895

 

 

 

 

 

 

 

 

 

Free cash flow margin:

 

 

 

 

 

 

GAAP net cash provided by operating activities as % of total revenues

 

25

%

 

21

%

 

 

37

%

 

37

%

 

Purchases of property and equipment as % of total revenues

 

(9

%)

 

(6

%)

 

 

(7

%)

 

(7

%)

 

Repayments of convertible senior notes attributable to debt discount as % of total revenues

 

%

 

%

 

 

%

 

%

 

Business combination and other related costs as % of total revenues

 

%

 

4

%

 

 

%

 

2

%

 

Non-GAAP free cash flow margin

 

16

%

 

19

%

 

 

30

%

 

32

%

 

(1)

Non-GAAP 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)

Non-GAAP cRPO, RPO and the corresponding growth rates are derived by applying the end of period exchange rates in effect during the comparison period rather than the actual end of period exchange rates in effect during the current 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.

 

Note: Numbers are rounded for presentation purposes and may not foot.

ServiceNow, Inc.

Reconciliation of Non-GAAP Financial Guidance

 

 

Three Months Ending

 

September 30, 2022

 

 

GAAP subscription revenues growth rate

23%

 

 

Effects of foreign currency rate fluctuations

4.5%

 

 

Non-GAAP subscription revenues growth rate (1)

27.5%

 

 

 

 

cRPO growth rate

20%

 

 

Effects of foreign currency rate fluctuations

3.5%

 

 

Non-GAAP cRPO growth rate(2)

23.5%

 

 

GAAP operating margin

4%

 

 

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

—%

 

 

Non-GAAP operating margin

25%

 

 

 

Twelve Months Ending

 

December 31, 2022

 

 

GAAP subscription revenues growth rate

24%

 

 

Effects of foreign currency rate fluctuations

4%

 

 

Non-GAAP subscription revenues growth rate (1)

28%

 

 

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%

 

 

Business combination and other related costs as % of total revenues

—%

 

 

Non-GAAP operating margin

25%

 

 

GAAP net cash provided by operating activities as % of total revenues

37%

 

 

Purchases of property and equipment as % of total revenues

(7%)

 

 

Repayments of convertible senior notes attributable to debt discount as % of total revenues

—%

 

 

Business combination and other related costs as % of total revenues

—%

 

 

Non-GAAP free cash flow margin

30%

 

 

GAAP weighted-average shares used to compute net income per share - diluted

203 million

 

 

Effects of in-the-money portion of convertible senior notes(3)

 

 

Non-GAAP weighted-average shares used to compute net income per share - diluted

203 million

(1)

Non-GAAP subscription revenue 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)

Non-GAAP cRPO growth rate is derived by applying the end of period exchange rates in effect during the comparison period rather than the exchange rates in effect during the guidance period.

(3)

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 are rounded for presentation purposes and may not foot.

Posted In: Press Releases