ServiceNow Reports Financial Results for Fourth Quarter and Fiscal Year 2017

SANTA CLARA, Calif.--()--ServiceNow® (NYSE: NOW) today announced the financial results for its fourth quarter and fiscal year 2017.

Fourth Quarter 2017 and Fiscal Year 2017 Highlights:

  • GAAP subscription revenues of $497 million in Q4 2017, representing 44% year-over-year growth
  • Signed over $1 billion in total contract value in Q4 2017
  • Signed a record 41 deals over $1 million in net new annual contract value in Q4 2017
  • Closed the year with 500 customers with more than $1 million in annual contract value
  • Added more than 100 Global 2000 accounts in 2017

“We finished 2017 with our best quarter ever, closing a record 41 deals greater than $1 million, and giving us strong global momentum,” said John Donahoe, ServiceNow president and chief executive officer. “ServiceNow is becoming a clear strategic partner of choice for CIOs and other leaders digitally transforming their companies with simpler, easier, better ways to get work done and creating great experiences for their customers and employees.”

“Combined backlog and deferred revenue at the end of 2017 was $3.9 billion, a 39% annual increase,” said Michael Scarpelli, ServiceNow chief financial officer. “Strength in 2017 was driven by more than 100 new Global 2000 customers, and increasing our customers with greater than $1 million in annual contract value by 43% year over year.”

Fourth Quarter 2017 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the fourth quarter 2017.

               
Fourth Quarter 2017
GAAP Results

Fourth Quarter 2017 Non-GAAP Results(1)

Adjusted Adjusted
Amount Year/Year Amount Year/Year Amount Year/Year
      ($ millions)   Growth (%) ($ millions)   Growth (%)  

($ millions)(2)

  Growth (%)
Subscription revenues $497.2 44% $484.3 41%

Professional services and other revenues

$49.1 20% $47.6 16%
Total revenues $546.4 42% $531.9 38%
 
Subscription billings $684.0 41% $678.4 40%
Professional services and other billings $50.3 (1%) $48.7 (4%)
Total billings $734.3 37% $727.1 36%
 
Amount Amount
      ($ millions)   Margin (%) ($ millions)   Margin (%)        
Subscription gross profit $409.7 82% $423.3 85%
Professional services and other gross profit $2.3 5% $8.2 17%
Total gross profit $412.0 75% $431.5 79%
Income (loss) from operations ($13.1) (2%) $98.8 18%
Net cash provided by operating activities $184.8 34%
Free cash flow $150.1 27%
 

Earnings per

Earnings per
Amount

basic/diluted

Amount

basic/diluted

      ($ millions)   share ($) ($ millions)   share ($)        
Net income (loss) ($27.8) $(0.16) $63.6 $0.37 / $0.35
 
(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 and professional services and other billings are adjusted for constant currency. Non-GAAP 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.

 

Fiscal Year 2017 GAAP and Non-GAAP Results:

The following table summarizes our financial results for fiscal year 2017.

       
Full Year 2017 GAAP Results Full Year 2017 Non-GAAP Results(1)
      Adjusted   Adjusted
Amount Year/Year Amount Year/Year Amount Year/Year
      ($ millions)   Growth (%) ($ millions)   Growth (%)  

($ millions)(2)

  Growth (%)
Subscription revenues $1,739.8 42% $1,733.5 42%
Professional services and other revenues $193.2 14% $192.3 14%
Total revenues $1,933.0 39% $1,925.8 38%
 
Subscription billings $2,119.0 40% $2,110.0 40%
Professional services and other billings $195.6 9% $194.7 8%
Total billings $2,314.6 37% $2,304.7 36%
 
Amount Amount
      ($ millions)   Margin (%) ($ millions)   Margin (%)        
Subscription gross profit $1,424.2 82% $1,474.5 85%
Professional services and other gross profit $9.0 5% $36.5 19%
Total gross profit $1,433.3 74% $1,511.0 78%
Income (loss) from operations ($101.4) (5%) $314.7 16%
Net cash provided by operating activities $642.8 33%
Free cash flow $492.3 25%
 
Earnings per Earnings per
Amount

basic/diluted

Amount

basic/diluted

      ($ millions)   share ($) ($ millions)   share ($)        
Net income (loss) ($149.1) ($0.87) $214.7 $1.25 / $1.19
 
(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 and professional services and other billings are adjusted for constant currency. Non-GAAP 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 "Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

 

 

Financial Outlook

Our guidance is based on foreign exchange rates as of December 31, 2017 and includes GAAP and non-GAAP financial measures. As described in the “New Revenue Recognition Standard Under Topic 606” section below, our guidance is based on the new Topic 606 revenue recognition standard that is effective beginning January 1, 2018. The comparison period amounts used to calculate related growth rates have been restated from previously reported amounts to conform to the requirements of Topic 606.

The following table summarizes our guidance for the first quarter 2018:

       
First Quarter 2018
GAAP Guidance

First Quarter 2018 Non-GAAP Guidance(1)

        Adjusted
Amount Year/Year Amount Year/Year Adjusted Amount

Year/Year

      ($ millions)   Growth (%) ($ millions)   Growth (%)  

($ millions)(2)

  Growth (%)
Subscription revenues $525 - $530 35% - 37% $507 - $512 31% - 32%
Subscription billings $601 - $605 25% - 26% $600 - $604 25% - 26%
 
                Margin (%)        
Income from operations 16%
 
Amount
            (millions)            

Weighted average shares used to compute diluted net income per share

184
 
(1) 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)

Non-GAAP subscription revenues are adjusted for constant currency. Non-GAAP 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 fiscal year 2018:

       
Full Year 2018
GAAP Guidance

Full Year 2018 Non-GAAP Guidance(1)

        Adjusted
Amount Year/Year Amount Year/Year Adjusted Amount Year/Year
      ($ millions)   Growth (%) ($ millions)   Growth (%)  

($ millions)(2)

  Growth (%)
Subscription revenues $2,355 - $2,375 35% - 37% $2,314 - $2,334 33% - 34%
Subscription billings $2,770 - $2,790 30% - 31% $2,742 - $2,762 29% - 30%
 
                Margin (%)        
Subscription gross profit 85%
Income from operations 20%
Free cash flow 27%
 
Amount
            (millions)            
Weighted average shares used to compute diluted net income per share 185
 
(1) 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)

Non-GAAP subscription revenues are adjusted for constant currency. Non-GAAP subscription billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

 

 

Conference Call Details

ServiceNow will host a conference call to discuss our fourth quarter and fiscal year 2017 financial results and financial outlook beginning at 2 p.m. Pacific Time (22:00 GMT) on Wednesday, Jan. 31, 2018. Interested parties may listen to the call by dialing 844.464.3153 (passcode: 5999121), or if outside North America, by dialing +1.508.637.5575 (passcode: 5999121). Individuals may access the live teleconference from this webcast link (https://edge.media-server.com/m6/p/gwkadhyi).

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 855.859.2056 (passcode: 5999121), or if outside North America, by dialing +1.404.537.3406 (passcode: 5999121).

Investor Presentation Details

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

New Revenue Recognition Standard Under Topic 606

In May 2014, the Financial Accounting Standards Board issued a new standard related to revenue recognition from contracts with customers (“Topic 606”), which is effective beginning January 1, 2018. Topic 606 supersedes the prior revenue recognition standard ("Topic 605"). The financial information under the heading “Financial Outlook” above is prepared in accordance with Topic 606, and the comparison period amounts used to calculate related growth rates are based on amounts that have been restated from previously reported amounts to conform to the requirements of Topic 606. Unless otherwise indicated, all other financial information in this release is prepared in accordance with Topic 605.

Under Topic 606, for our on-premises offerings, we will recognize a portion of the subscription revenue when the on-premises offering is made available, resulting in a larger amount of upfront subscription revenue, and a smaller amount of deferred revenue compared with Topic 605, which required ratable revenue recognition over the contract period. Due to the complexity of certain of our customer contracts, the actual revenue recognition treatment required under Topic 606 will depend on contract-specific terms and may result in greater variability in revenue from period to period. Proceeds for attendance and sponsorship related to Knowledge and other user forums will be classified as a reduction in sales and marketing expenses instead of professional services and other revenues.

Under Topic 606, we will defer all incremental commission costs to obtain customer contracts, including indirect costs that are not tied to a specific contract. On initial contracts, only the portion equivalent to a renewal commission will be amortized over the contract term, while the portion incremental to a renewal commission will be amortized over a period of benefit that we have determined to be five years. On renewal contracts, these costs will be amortized over the renewal term. Additionally, for our on-premises offerings, consistent with the recognition of subscription revenue for on-premises offerings as described above, a portion of the commission costs will be expensed upfront when the on-premises offering is made available. Under Topic 605, we deferred only direct and incremental commission costs to obtain a contract and amortized those costs over the contract term, which is generally 12 to 36 months.

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.

  • Revenue Adjusted for Constant Currency. 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 are converted into U.S. Dollars at the exchange rates in effect during the prior period presented, rather than the actual exchange rates in effect during the current period. We believe the presentation of revenues adjusted for constant currency facilitates the comparison of revenues year-over-year.
  • Billings. We believe billings is a useful leading indicator regarding the performance of our business. Because billings is derived from our GAAP revenues, the definition of billings varies depending on whether our revenues have been calculated under Topic 605 or Topic 606. Under Topic 605, we define subscription billings, professional services and other billings, and total billings as the applicable revenue plus the applicable change in deferred revenue as presented or derived from the statement of cash flows. Under Topic 606, due to the change in timing of revenue recognition under certain of our contracts, 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. Under Topic 606, unbilled receivables are amounts recognized as revenue that have not yet been billed, and customer deposits are refundable amounts associated with customer contracts. In presenting billings under either definition, we adjust for constant currency, as described above, and adjust for constant duration 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 prior period presented. 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 repayment 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.

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 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 for the quarter ended September 30, 2017 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K that will be filed for the year ended December 31, 2017.

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 makes work better across the enterprise. Getting simple stuff done at work can be easy, and getting complex multi-step tasks completed can be painless. Our applications automate, predict, digitize and optimize business processes and tasks, across IT, customer service, security operations and human resources, creating a better experience for your employees and customers while transforming your enterprise. ServiceNow (NYSE:NOW) is how work gets done. For more information, visit: www.servicenow.com.

© 2018 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 share and per share data)
(unaudited)
 
  Three Months Ended   Twelve Months Ended
December 31, 2017   December 31, 2016 December 31, 2017   December 31, 2016
 
Revenues:
Subscription $ 497,232 $ 344,604 $ 1,739,795 $ 1,221,639
Professional services and other   49,138     41,062     193,231     168,874  
Total revenues   546,370     385,666     1,933,026     1,390,513  
Cost of revenues (1):
Subscription 87,524 64,707 315,570 235,414
Professional services and other   46,836     40,229     184,202     163,268  
Total cost of revenues   134,360     104,936     499,772     398,682  
Gross profit   412,010     280,730     1,433,254     991,831  
Operating expenses (1):
Sales and marketing 260,292 188,857 946,617 700,464
Research and development 104,559 73,933 377,518 285,239
General and administrative 60,291 41,543 210,533 158,936
Legal settlements               270,000  
Total operating expenses   425,142     304,333     1,534,668     1,414,639  
Loss from operations (13,132 ) (23,603 ) (101,414 ) (422,808 )
Interest expense (16,813 ) (8,532 ) (53,394 ) (33,278 )
Interest income and other income (expense), net   5,065     1,290     5,804     6,035  
Loss before income taxes (24,880 ) (30,845 ) (149,004 ) (450,051 )
Provision for income taxes   2,927     1,744     126     1,753  
Net loss $ (27,807 ) $ (32,589 ) $ (149,130 ) $ (451,804 )
Net loss per share - basic and diluted $ (0.16 ) $ (0.20 ) $ (0.87 ) $ (2.75 )
Weighted-average shares used to compute net loss per share - basic and diluted   173,567,143     166,816,643     171,175,577     164,533,823  
 
                 
(1) Includes total stock-based compensation expense for stock-based awards as follows:
Three Months Ended Twelve Months Ended
December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Cost of revenues:
Subscription $ 9,474 $ 7,722 $ 35,334 $ 28,420
Professional services and other 5,853 6,397 27,475 26,442
Sales and marketing 45,877 35,814 170,527 131,571
Research and development 24,401 18,775 92,025 81,731
General and administrative 20,022 14,412 68,717 49,416
 
 

ServiceNow, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
  December 31, 2017   December 31, 2016
 
ASSETS
Current assets:
Cash and cash equivalents $ 726,495 $ 401,238
Short-term investments 1,052,803 498,124
Accounts receivable, net 434,895 322,757
Current portion of deferred commissions 118,690 76,780
Prepaid expenses and other current assets   77,681   43,636
Total current assets 2,410,564 1,342,535
Deferred commissions, less current portion 85,530 61,990
Long-term investments 391,442 262,658
Property and equipment, net 245,124 181,620
Intangible assets, net 86,916 65,854
Goodwill 128,728 82,534
Other assets   49,600   36,576
Total assets $ 3,397,904 $ 2,033,767
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 32,109 $ 38,080
Accrued expenses and other current liabilities 244,605 171,636
Current portion of deferred revenue 1,280,499 861,782
Current portion of convertible senior notes, net   543,418  
Total current liabilities 2,100,631 1,071,498
Deferred revenue, less current portion 39,884 33,319
Convertible senior notes, net 630,018 507,812
Other long-term liabilities 43,239 34,177
Stockholders’ equity   584,132   386,961
Total liabilities and stockholders’ equity $ 3,397,904 $ 2,033,767
 

 
ServiceNow, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
  Three Months Ended   Twelve Months Ended
December 31, 2017   December 31, 2016 December 31, 2017   December 31, 2016
 
Cash flows from operating activities:
Net loss $ (27,807 ) $ (32,589 ) $ (149,130 ) $ (451,804 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 32,067 23,366 113,875 83,082
Amortization of premiums on investments 584 980 3,092 4,725
Amortization of deferred commissions 35,011 23,475 115,262 81,217
Amortization of debt discount and issuance costs 16,813 8,532 53,394 33,278
Stock-based compensation 105,627 83,120 394,078 317,580
Deferred income tax (3,023 ) 1,671 (9,078 ) (3,424 )
Other 65 (105 ) (3,997 ) (962 )
Changes in operating assets and liabilities, net of effect of business combinations:
Accounts receivable (140,773 ) (109,345 ) (98,432 ) (125,106 )
Deferred commissions (72,155 ) (57,269 ) (174,503 ) (136,459 )
Prepaid expenses and other assets (19,272 ) (9,767 ) (46,138 ) (21,500 )
Accounts payable 5,584 5,071 (5,504 ) (3,554 )
Deferred revenue 187,968 149,148 381,562 300,167
Accrued expenses and other liabilities   64,097     46,399     68,344     82,681  
Net cash provided by operating activities   184,786     132,687     642,825     159,921  
Cash flows from investing activities:
Purchases of property and equipment (34,654 ) (21,450 ) (150,510 ) (105,562 )
Business combinations, net of cash and restricted cash acquired (31,666 ) (58,203 ) (34,297 )
Purchases of other intangibles (500 ) (8,000 ) (6,670 ) (18,750 )
Purchases of investments (547,845 ) (84,267 ) (1,189,511 ) (518,664 )
Purchases of strategic investments (750 ) (500 ) (4,750 ) (500 )
Sales of investments 7,138 31,710 85,106 297,998
Maturities of investments   89,993     53,085     440,590     271,537  
Net cash used in investing activities (1)   (518,284 )   (29,422 )   (883,948 )   (108,238 )
Cash flows from financing activities:
Net proceeds from borrowings on convertible senior notes 772,127
Principal payments on convertible senior notes (4 ) (4 )
Proceeds from issuance of warrants 54,071
Purchases of convertible note hedges (128,017 )

Repurchases and retirement of common stock

(55,000 )
Proceeds from employee stock plans 5,819 11,315 82,567 66,378
Taxes paid related to net share settlement of equity awards (50,808 ) (31,340 ) (181,938 ) (119,907 )
Payments on financing obligations   (2,233 )   (862 )   (4,914 )   (2,223 )
Net cash (used in) provided by financing activities   (47,226 )   (20,887 )   538,892     (55,752 )
Foreign currency effect on cash, cash equivalents and restricted cash (1)   2,245     (6,319 )   28,128     (6,785 )
Net (decrease) increase in cash, cash equivalents and restricted cash (1) (378,479 ) 76,059 325,897 (10,854 )
Cash, cash equivalents and restricted cash at beginning of period (1)   1,106,308     325,873     401,932     412,786  
Cash, cash equivalents and restricted cash at end of period (1) $ 727,829   $ 401,932   $ 727,829   $ 401,932  
 
(1) During the three months ended December 31, 2017, we adopted Accounting Standards Update 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which requires that amounts generally described as restricted cash or restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We have adopted changes to the condensed consolidated statements of cash flows on a retrospective basis. The impact of the adoption for the three months and twelve months ended December 31, 2016 is not material.
 

 

 

 

ServiceNow, Inc.

 

GAAP to Non-GAAP Reconciliation

 

(in thousands, except share and per share data)

 

(unaudited)

 
Three Months Ended     Twelve Months Ended  
December 31, 2017   December 31, 2016 (3) Growth Rates December 31, 2017   December 31, 2016 (3) Growth Rates
 
Subscription revenues:
GAAP subscription revenues $ 497,232 $ 344,604 44 % $ 1,739,795 $ 1,221,639 42 %
Effects of foreign currency rate fluctuations   (12,941 )   (6,303 )
Non-GAAP adjusted subscription revenues (1) $ 484,291   41 % $ 1,733,492   42 %
 
Subscription billings:
GAAP subscription revenues $ 497,232 $ 344,604 44 % $ 1,739,795 $ 1,221,639 42 %
Increase in subscription deferred revenue   186,801     139,303     379,188     289,053  
Non-GAAP subscription billings 684,033 $ 483,907 41 % 2,118,983 $ 1,510,692 40 %
Effects of foreign currency rate fluctuations (18,085 ) (7,384 )
Effects of fluctuations in billings duration   12,444     (1,562 )
Non-GAAP adjusted subscription billings (2) $ 678,392   40 % $ 2,110,037   40 %
 
Professional services and other revenues:
GAAP professional services and other revenues $ 49,138 $ 41,062 20 % $ 193,231 $ 168,874 14 %
Effects of foreign currency rate fluctuations   (1,565 )   (899 )
Non-GAAP adjusted professional services and other revenues (1) $ 47,573   16 % $ 192,332   14 %
 
Professional services and other billings:
GAAP professional services and other revenues $ 49,138 $ 41,062 20 % $ 193,231 $ 168,874 14 %
Increase in professional services and other deferred revenue   1,167     9,845     2,374     11,114  
Non-GAAP professional services and other billings 50,305 50,907 (1 %) 195,605 179,988 9 %
Effects of foreign currency rate fluctuations   (1,565 )   (899 )
Non-GAAP adjusted professional services and other billings (2) $ 48,740   (4 %) $ 194,706   8 %
 
Total revenues:
GAAP total revenues $ 546,370 $ 385,666 42 % $ 1,933,026 $ 1,390,513 39 %
Effects of foreign currency rate fluctuations   (14,506 )   (7,202 )
Non-GAAP adjusted total revenues (1) $ 531,864   38 % $ 1,925,824   38 %
 
Total billings:
GAAP total revenues $ 546,370 $ 385,666 42 % $ 1,933,026 $ 1,390,513 39 %
Increase in total deferred revenue from condensed consolidated statements of cash flows   187,968     149,148     381,562     300,167  
Non-GAAP total billings 734,338 534,814 37 % 2,314,588 1,690,680 37 %
Effects of foreign currency rate fluctuations (19,650 ) (8,283 )
Effects of fluctuations in billings duration   12,444     (1,562 )
Non-GAAP adjusted total billings (2) $ 727,132   36 % $ 2,304,743   36 %
 
Gross profit:
GAAP subscription gross profit $ 409,708 $ 279,897 $ 1,424,225 $ 986,225
Stock-based compensation 9,474 7,722 35,334 28,420
Amortization of purchased intangibles   4,118     3,334     14,967     12,633  
Non-GAAP subscription gross profit $ 423,300   $ 290,953   $ 1,474,526   $ 1,027,278  
 
GAAP professional services and other gross profit $ 2,302 $ 833 $ 9,029 $ 5,606
Stock-based compensation   5,853     6,397     27,475     26,442  
Non-GAAP professional services and other gross profit $ 8,155   $ 7,230   $ 36,504   $ 32,048  
 
GAAP gross profit $ 412,010 $ 280,730 $ 1,433,254 $ 991,831
Stock-based compensation 15,327 14,119 62,809 54,862
Amortization of purchased intangibles   4,118     3,334     14,967     12,633  
Non-GAAP gross profit $ 431,455   $ 298,183   $ 1,511,030   $ 1,059,326  
 
Gross margin:
GAAP subscription gross margin 82 % 81 % 82 % 81 %
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   85 %   84 %   85 %   84 %
 
GAAP professional services and other gross margin 5 % 2 % 5 % 3 %
Stock-based compensation as % of professional services and other revenues   12 %   16 %   14 %   16 %
Non-GAAP professional services and other gross margin   17 %   18 %   19 %   19 %
 
GAAP gross margin 75 % 73 % 74 % 71 %
Stock-based compensation as % of total revenues 3 % 3 % 3 % 4 %
Amortization of purchased intangibles as % of total revenues   1 %   1 %   1 %   1 %
Non-GAAP gross margin   79 %   77 %   78 %   76 %
 
Income (loss) from operations:
GAAP loss from operations $ (13,132 ) $ (23,603 ) $ (101,414 ) $ (422,808 )
Stock-based compensation 105,627 83,120 394,078 317,580
Amortization of purchased intangibles 5,359 4,220 19,658 15,118
Business combination and other related costs 917 27 2,421 989
Legal settlements   -     -     -     270,000  
Non-GAAP income from operations $ 98,771   $ 63,764   $ 314,743   $ 180,879  
 
Operating margin:
GAAP operating margin (2 %) (6 %) (5 %) (30 %)
Stock-based compensation as % of total revenues 19 % 22 % 20 % 23 %
Amortization of purchased intangibles as % of total revenues 1 % 1 % 1 % 1 %
Business combination and other related costs as % of total revenues 0 % 0 % 0 % 0 %
Legal settlements as % of total revenues   0 %   0 %   0 %   19 %
Non-GAAP operating margin   18 %   17 %   16 %   13 %
 
Net income (loss):
GAAP net loss $ (27,807 ) $ (32,589 ) $ (149,130 ) $ (451,804 )
Stock-based compensation 105,627 83,120 394,078 317,580
Amortization of purchased intangibles 5,359 4,220 19,658 15,118
Business combination and other related costs 917 27 2,421 989
Legal settlements - - - 270,000
Amortization of debt discount and issuance costs for the convertible senior notes 16,813 8,532 53,394 33,278
Loss on early note conversions - - - -
Income tax expense effects related to the above adjustments   (37,313 )   (20,954 )   (105,741 )   (63,216 )
Non-GAAP net income $ 63,596   $ 42,356   $ 214,680   $ 121,945  
 
Net income (loss) per share - basic and diluted:
GAAP net loss per share - basic and diluted $ (0.16 ) $ (0.20 ) $ (0.87 ) $ (2.75 )
Non-GAAP net income per share - basic $ 0.37   $ 0.25   $ 1.25   $ 0.74  
Non-GAAP net income per share - diluted $ 0.35   $ 0.24   $ 1.19   $ 0.70  
 
Weighted-average shares used to compute net income (loss) per share - basic   173,567,143     166,816,643     171,175,577     164,533,823  
 
GAAP weighted-average shares used to compute net loss per share - diluted 173,567,143 166,816,643 171,175,577 164,533,823
Effect of dilutive securities (stock options, restricted stock units and warrants)   9,043,989     8,780,764     8,773,040     9,257,608  
Non-GAAP weighted-average shares used to compute net income per share - diluted   182,611,132     175,597,407     179,948,617     173,791,431  
 
Free cash flow:
GAAP net cash provided by operating activities $ 184,786 $ 132,687 $ 642,825 $ 159,921
Purchases of property and equipment (34,654 ) (21,450 ) (150,510 ) (105,562 )
Cash paid for legal settlements - - - 267,500
Repayment of convertible senior notes attributable to debt discount   2     -     2     -  
Non-GAAP free cash flow $ 150,134   $ 111,237   $ 492,317   $ 321,859  
 
Free cash flow margin:
GAAP net cash provided by operating activities as % of total revenues 34 % 34 % 33 % 12 %
Purchases of property and equipment as % of total revenues (7 %) (5 %) (8 %) (8 %)
Cash paid for legal settlements as % of total revenues 0 % 0 % 0 % 19 %
Repayment of convertible senior notes attributable to debt discount   0 %   0 %   0 %   0 %
Non-GAAP free cash flow margin   27 %   29 %   25 %   23 %
     

(1)

 

Adjusted revenues and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the actual exchange rates in effect during the current period.

(2)

Adjusted billings and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the actual 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 foreign currency rate fluctuations and fluctuations in billing durations are not applicable for the comparison period.

 

ServiceNow, Inc.
Reconciliation of Non-GAAP Financial Guidance
 

The financial guidance provided below is an estimate based on information available as of December 31, 2017. As described in the “New Revenue Recognition Standard Under Topic 606” section above, our guidance is based on the new Topic 606 revenue recognition standard that is effective beginning January 1, 2018. The comparison period amounts and the related growth rates have been restated from previously reported amounts to conform with the Topic 606 presentation. The company’s future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the company’s financial results are stated above in this press release. Further information on these and other factors that could affect our financial results are included in our Form 10-Q for the quarter ended September 30, 2017 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K that will be filed for the year ended December 31, 2017. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

 
  Three Months Ended   Three Months Ended  

 

March 31, 2018 March 31, 2017 (3)  

Growth rates

 
GAAP subscription revenues $525 - $530 million $388 million 35% - 37%
 
Effects of foreign currency rate fluctuations (18) million
 
Non-GAAP adjusted subscription revenues (1) $507 - $512 million 31% - 32%
 
GAAP subscription revenues $525 - $530 million $388 million 35% - 37%
 

Increase in subscription deferred revenue, unbilled receivables and customer deposits

75 - 76 million 92 million
   
Non-GAAP subscription billings $601 - $605 million $480 million 25% - 26%
 
Effects of foreign currency rate fluctuations (22) million
 
Effects of fluctuations in billings duration 21 million
 
Non-GAAP adjusted subscription billings (2) $600 - $604 million 25% - 26%
 
GAAP operating margin (5%)
 
Stock-based compensation expense as % of total revenues 20%
 
Amortization of purchased intangibles as % of total revenues 1%
 
Non-GAAP operating margin 16%
 
GAAP weighted-average shares used to compute net loss per share - diluted 175 million
 
Effect of dilutive securities (stock options, restricted stock units and warrants) 9 million
 
Non-GAAP weighted-average shares used to compute net income per share - diluted 184 million
 
 
Twelve Months Ended Twelve Months Ended

 

December 31, 2018   December 31, 2017 (3)  

Growth rates

 
GAAP subscription revenues $2,355 - $2,375 million $1,740 million 35% - 37%
 
Effects of foreign currency rate fluctuations (41) million
 
Non-GAAP adjusted subscription revenues (1) $2,314 - $2,334 million 33% - 34%
 
GAAP subscription revenues $2,355 - $2,375 million $1,740 million 35% - 37%
 

Increase in subscription deferred revenue, unbilled receivables and customer deposits

415 million 385 million
   
Non-GAAP subscription billings $2,770 - $2,790 million $2,124 million 30% - 31%
 
Effects of foreign currency rate fluctuations

(47) million

 
Effects of fluctuations in billings duration

19 million

 
Non-GAAP adjusted subscription billings (2) $2,742 - $2,762 million 29% - 30%
 
GAAP subscription gross margin 82%

 

Stock-based compensation expense as % of subscription revenues 2%
 
Amortization of purchased intangibles as % of subscription revenues 1%
 
Non-GAAP subscription gross margin 85%
 
GAAP operating margin 0%
 
Stock-based compensation expense as % of total revenues 19%
 
Amortization of purchased intangibles as % of total revenues 1%
 
Non-GAAP operating margin 20%
 
GAAP net cash provided by operating activities as % of total revenues 28%
 
Purchases of property and equipment as % of total revenues (7%)
 
Repayment of convertible senior notes attributable to debt discount 6%
 
Non-GAAP free cash flow margin 27%
 
GAAP weighted-average shares used to compute net loss per share - diluted 178 million
 
Effect of dilutive securities (stock options, restricted stock units and warrants) 7 million
 
Non-GAAP weighted-average shares used to compute net income per share - diluted 185 million
     
(1)   Adjusted revenues and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the forecasted exchange rates for the guidance period.
(2) Adjusted billings and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the forecasted exchange rates for the guidance period, and by replacing the forecasted 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)   Amounts in the comparison period have been restated for Topic 606 and are unaudited. Effects of foreign currency rate fluctuations and fluctuations in billing durations are not applicable for the comparison period.
 

Contacts

ServiceNow, Inc.
Media Contact:
Joanne Blum, 310-489-7278
press@servicenow.com
or
Investor Contact:
Jimmy Sexton, 669-262-1430
ir@servicenow.com

Contacts

ServiceNow, Inc.
Media Contact:
Joanne Blum, 310-489-7278
press@servicenow.com
or
Investor Contact:
Jimmy Sexton, 669-262-1430
ir@servicenow.com