SANTA CLARA, Calif.--(BUSINESS WIRE)--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. |
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ServiceNow, Inc. |
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GAAP to Non-GAAP Reconciliation |
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(in thousands, except share and per share data) |
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(unaudited) |
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| 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 | % | ||||||||||||||||
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(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. |
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(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. |
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(3) |
Effects of foreign currency rate fluctuations and fluctuations in billing durations are not applicable for the comparison period. |
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| 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. |
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| Three Months Ended | Three Months Ended |
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| March 31, 2018 | March 31, 2017 (3) |
Growth rates |
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| 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 |
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| December 31, 2018 | December 31, 2017 (3) |
Growth rates |
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| 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 |
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| Effects of fluctuations in billings duration |
19 million |
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| Non-GAAP adjusted subscription billings (2) | $2,742 - $2,762 million | 29% - 30% | ||||
| GAAP subscription gross margin | 82% | |||||
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| 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. | |
