ServiceNow Reports Third Quarter 2021 Financial Results
•Subscription revenues of $1,427 million in Q3 2021, representing 31% year-over-year growth, 30% adjusted for constant currency
•Current remaining performance obligations of $5.0 billion as of Q3 2021, representing 32% year-over-year growth, 32% adjusted for constant currency
•1,266 total customers with over $1 million in annual contract value, representing 25% year-over-year growth
SANTA CLARA, Calif. - October 27, 2021 - ServiceNow (NYSE: NOW), the leading digital workflow company making work, work better for people, today announced financial results for its third quarter ended September 30, 2021, with subscription revenues of $1,427 million in Q3 2021, representing 31% year-over-year growth, 30% adjusted for constant currency.
As of September 30, 2021, current remaining performance obligations (“cRPO”), contract revenue that will be recognized as revenue in the next 12 months, was $5.0 billion, representing 32% year-over-year growth and 32% adjusted for constant currency. The company now has 1,266 total customers with more than $1 million in annual contract value, representing 25% year-over-year growth in customers.
“We reported another significant beat and raise quarter in Q3,” said ServiceNow President and CEO Bill McDermott. “Leaders recognize their technology architecture is their business architecture. As this digital transformation market is accelerating, ServiceNow’s platform is creating unmatched customer and employee experiences. We remain hungry and humble in our pursuit of becoming the defining enterprise software company of the 21st century. Our focus is on value creation for our stakeholders by making the world work better for everyone.”
ServiceNow CFO Gina Mastantuono said, “Q3 was another fantastic quarter with continued outperformance across all of our growth and profitability guidance metrics. The consistency of our results exemplifies the strength of our product portfolio and the team’s focus on building deep customer relationships. We are well positioned as the workflow standard on our journey to becoming a $15+ billion revenue company.”
During the quarter, ServiceNow delivered the Now Platform Rome release, including hundreds of innovations to help companies workflow the biggest challenges of the hybrid work era and scale automation and app development across the enterprise. ServiceNow deepened its strategic partnership with Microsoft to integrate Employee Center directly with Teams and expand investments in co-innovation and go-to-market efforts. The company completed the acquisitions of Swarm64, a leader in database performance and scale, and Mapwize, an indoor-mapping and wayfinding company. ServiceNow also recently announced a strategic partnership with process mining market leader Celonis to help companies maximize the impact and return on their digital transformation investments. Furthering its vision to workflow a better world, the company accelerated its global commitment to achieve Net-Zero greenhouse gas emissions by 2030 and introduced a new integrated ESG solution that helps companies activate ESG strategies, programs, and initiatives, from enhancing diversity and inclusion and reducing carbon emissions to enabling business resilience.
1
Third Quarter 2021 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the third quarter 2021:
Third Quarter 2021 GAAP Results
Third Quarter 2021 Non-GAAP Results(1)
Amount ($ millions)
Year/Year Growth (%)
Amount ($ millions)
Year/Year Growth (%)
Adjusted Amount ($ millions)(2)
Adjusted Year/Year Growth (%)
Subscription revenues
$1,427
31
%
$1,416
30
%
Professional services and other revenues
$85
39
%
$84
38
%
Total revenues
$1,512
31
%
$1,500
30
%
Subscription billings
$1,380
28
%
$1,365
26
%
Professional services and other billings
$84
42
%
$83
41
%
Total billings
$1,465
29
%
$1,450
27
%
Amount ($ billions)
Year/Year Growth (%)
Adjusted Amount ($ billions)(2)
Adjusted Year/Year Growth (%)
cRPO
$5.0
32
%
$5.0
32
%
RPO
$9.7
34
%
$9.7
34
%
Amount ($ millions)
Margin (%)
Amount ($ millions)
Margin (%)
Subscription gross profit
$1,163
81
%
$1,213
85
%
Professional services and other gross profit (loss)
($1)
(1
%)
$14
17
%
Total gross profit
$1,162
77
%
$1,227
81
%
Income from operations
$74
5
%
$391
26
%
Net cash provided by operating activities
$320
21
%
Free cash flow
$228
15
%
Amount ($ millions)
Earnings per Basic/Diluted Share ($)
Amount ($ millions)
Earnings per Basic/Diluted Share ($)
Net income
$63
$0.32/ $0.31
$314
$1.58/ $1.55
(1)We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
(2)Non-GAAP adjusted subscription revenues, professional services and other revenues, total revenues and professional services and other billings, cRPO and RPO are adjusted for constant currency. Non-GAAP adjusted subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
Note: Numbers rounded for presentation purposes.
2
Financial Outlook
Our guidance includes GAAP and non-GAAP financial measures.
The following table summarizes our guidance for the fourth quarter 2021:
Fourth Quarter 2021 GAAP Guidance
Fourth Quarter 2021 Non-GAAP Guidance(1)
Amount ($ millions)(2)
Year/Year
Growth (%)
Amount ($ millions)(2)
Year/Year
Growth (%)
Subscription revenues
$1,515 - $1,520
28
%
Note: Includes negative impact of foreign currency of $1 million
Subscription billings
$2,305 - $2,310
26
%
Note: Includes negative impact of foreign currency of $2 million Includes negative impact of billings duration of $7 million
cRPO
27
%
Note: Includes negative impact of foreign currency of 150 bps
Margin (%)
Income from operations
22
%
Amount (millions)
Weighted-average shares used to compute diluted net income per share
203
(1)We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.
(2)Guidance for GAAP subscription revenues and non-GAAP subscription billings is based on September 2021 foreign exchange rates for entities reporting in currencies other than U.S. Dollars
The following table summarizes our guidance for the full-year 2021:
Full-Year 2021 GAAP Guidance
Full-Year 2021 Non-GAAP Guidance(1)
Amount ($ millions)(2)
Year/Year Growth (%)
Amount ($ millions)(2)
Year/Year Growth (%)
Subscription revenues
$5,565 - $5,570
30
%
Note: Includes foreign currency benefit of $91 million
Subscription billings
$6,379 - $6,384
28
%
Note: Includes foreign currency benefit of $90 million Includes positive impact of billings duration of $18 million
Margin (%)
Subscription gross profit
85
%
Income from operations
25.0
%
Free cash flow
31.5
%
Amount (millions)
Weighted-average shares used to compute diluted net income per share
202
(1)We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.
(2)GAAP subscription revenues and non-GAAP subscription billings for the future quarters included in our full-year 2021 guidance are based on September 2021 foreign exchange rates for entities reporting in currencies other than U.S. Dollars.
3
Conference Call Details
The conference call will begin at 2 p.m. Pacific Time (21:00 GMT) on October 27, 2021. Interested parties may listen to the call by dialing (888) 330‑2022 (Passcode: 8135305), or if outside North America, by dialing (646) 960‑0690 (Passcode: 8135305). Individuals may access the live teleconference from this webcast.
https://events.q4inc.com/attendee/597072383
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.
Upcoming Investor Conferences
ServiceNow will have executives present at four upcoming investor conferences.
These include:
•Chief Financial Officer Gina Mastantuono will deliver the ESG keynote at the 2021 RBC Capital Markets Technology, Internet, Media and Telecommunications Virtual Conference on Wednesday, November 17 at 9:30 a.m. PT.
•Chief Executive Officer Bill McDermott will deliver the keynote at the Credit Suisse 25th Annual Technology Conference on Tuesday, November 30 at 10:15 a.m. PT.
•Chief Financial Officer Gina Mastantuono will present at the UBS Global TMT Conference on Tuesday, December 7 at 10:00 a.m. PT.
•Senior Vice President of IT Workflow Products Pablo Stern will present at the Barclays Global Technology, Media and Telecommunications Conference on Wednesday, December 8 at 10:15 a.m. PT.
The live webcasts will be accessible on the investor relations section of the ServiceNow website at http://investors.servicenow.com and archived on the ServiceNow site for a period of 30 days.
Statement Regarding Use of Non-GAAP Financial Measures
We report the following non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
•Adjusted revenues. We present revenues adjusted for constant currency to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To present this information, current period results for entities reporting in currencies other than U.S. Dollars (“USD”) are converted into USD at the average exchange rates in effect during the comparison period (for Q3 2020, the average exchange rates in effect for our major currencies were 1 USD to 0.856 Euros and 1 USD to 0.775 British Pound Sterling (“GBP”), rather than the actual average exchange rates in effect during the current period (for Q3 2021, the average exchange rates in effect for our major currencies were 1 USD to 0.847 Euros and 1 USD to 0.724 GBP). We believe the presentation of revenues adjusted for constant currency facilitates the comparison of revenues year-over-year.
•Billings and Adjusted billings. We define subscription billings, professional services and other billings, and total billings as the applicable revenue plus the applicable change in deferred revenue, unbilled receivables and customer deposits as presented or derived from the statement of cash flows. We adjust billings for constant currency, as described above, and for constant duration by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the comparison period. We believe these adjustments facilitate greater comparability in our billings information year-over-year. We believe billings is one indicator of the performance of our business.
4
•Adjusted remaining performance obligations and current remaining performance obligations. We present cRPO and remaining performance obligations (“RPO”) and related growth rates adjusted 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 Q3 2020, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.852 Euros and 1 USD to 0.777 GBP), rather than the actual end of the period exchange rates in effect during the current period (for Q3 2021, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.862 Euros and 1 USD to 0.745 GBP). 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: (i) the continued impact and duration of COVID-19 on our business, future financial performance and global economic conditions including the effectiveness, extent and duration of mitigation efforts such as “shelter in place”, availability of vaccinations and similar directives; (ii) our ability to compete successfully against existing and new competitors, (iii) our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet, (iv) our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments, (v) errors, interruptions, delays, or security breaches in or of our service or data centers, (vi) our ability to grow our business, including converting remaining performance obligations into revenue, adding and retaining customers, selling additional subscriptions to existing customers, selling to larger enterprises, government and regulated organizations with complex sales cycles and certification processes, and entering new geographies and markets, (vii) our ability to develop and gain customer acceptance of new and improved products and services, including those acquired through strategic transactions, and (viii) material changes in the value of foreign currencies relative to the U.S. Dollar. Additionally, these forward-looking statements involve risk, uncertainties and assumptions, including those related to the continued impacts of COVID-19 on our business, future financial performance and global economic conditions. Many of these assumptions relate to matters that are beyond our control and changing rapidly, including, but not limited to, the timeframes for and severity of social distancing and other mitigation requirements, the timing of headwinds from COVID-19, the continued impact of COVID-19 on new or existing customers’ purchasing decisions and the length of our sales cycles, renewal timing or billings terms, particularly for customers in certain industries highly affected by COVID-19. Significant variation from the assumptions underlying our forward-looking statements could cause our actual results to vary, and the impact could be significant.
5
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, 2020, our Form 10-Q that will be filed for the quarter ended September 30, 2021 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 (NYSE: NOW) is making the world of work, work better for people. Our cloud-based platform and solutions deliver digital workflows that create great experiences and unlock productivity for employees and the enterprise. For more information, visit: www.servicenow.com.
Weighted-average shares used to compute net income per share - basic
199
193
198
193
Weighted-average shares used to compute net income per share - diluted
203
202
203
203
(1)Includes stock-based compensation as follows:
Three Months Ended
Nine Months Ended
September 30, 2021
September 30, 2020
September 30, 2021
September 30, 2020
Cost of revenues:
Subscription
$
33
$
26
$
95
$
72
Professional services and other
15
13
43
38
Operating expenses:
Sales and marketing
101
79
293
228
Research and development
102
74
288
203
General and administrative
40
28
110
84
7
ServiceNow, Inc.
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
September 30, 2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
1,400
$
1,677
Short-term investments
1,631
1,415
Accounts receivable, net
776
1,009
Current portion of deferred commissions
268
229
Prepaid expenses and other current assets
213
192
Total current assets
4,288
4,522
Deferred commissions, less current portion
524
444
Long-term investments
1,384
1,468
Property and equipment, net
740
660
Operating lease right-of-use assets
606
454
Intangible assets, net
302
153
Goodwill
770
241
Deferred tax assets
694
673
Other assets
170
100
Total assets
$
9,478
$
8,715
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
64
$
34
Accrued expenses and other current liabilities
604
668
Current portion of deferred revenue
2,949
2,963
Current portion of operating lease liabilities
82
72
Current debt, net
93
—
Total current liabilities
3,792
3,737
Deferred revenue, less current portion
53
45
Operating lease liabilities, less current portion
568
423
Long-term debt, net
1,484
1,640
Other long-term liabilities
47
36
Stockholders’ equity
3,534
2,834
Total liabilities and stockholders’ equity
$
9,478
$
8,715
8
ServiceNow, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Three Months Ended
Nine Months Ended
September 30, 2021
September 30, 2020
September 30, 2021
September 30, 2020
Cash flows from operating activities:
Net income
$
63
$
13
$
204
$
102
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
125
84
346
243
Amortization of deferred commissions
75
56
211
157
Stock-based compensation
291
220
828
625
Deferred income taxes
(5)
(3)
(21)
(6)
Repayments of convertible senior notes attributable to debt discount
(2)
(67)
(15)
(69)
Loss on extinguishment of 2022 Notes
—
41
3
42
Other
15
8
34
23
Changes in operating assets and liabilities, net of effect of business combinations:
Accounts receivable
(5)
10
219
210
Deferred commissions
(127)
(77)
(344)
(221)
Prepaid expenses and other assets
(21)
(10)
(78)
(42)
Accounts payable
(36)
(36)
39
2
Deferred revenue
(38)
(3)
47
66
Accrued expenses and other liabilities
(15)
5
(126)
(31)
Net cash provided by operating activities
320
241
1,347
1,101
Cash flows from investing activities:
Purchases of property and equipment
(94)
(91)
(292)
(285)
Business combinations, net of cash acquired
(40)
(25)
(778)
(108)
Purchases of investments
(630)
(1,121)
(1,769)
(2,229)
Sales and maturities of investments
556
533
1,579
1,299
Other
11
2
12
(7)
Net cash used in investing activities
(197)
(702)
(1,248)
(1,330)
Cash flows from financing activities:
Net proceeds from borrowings on 2030 Notes
—
1,482
—
1,482
Repayments of convertible senior notes attributable to principal
(6)
(1,553)
(59)
(1,569)
Net proceeds from unwind of 2022 Note Hedge
—
1,106
—
1,106
Proceeds from employee stock plans
70
51
165
142
Taxes paid related to net share settlement of equity awards
(142)
(122)
(457)
(361)
Net cash (used in) provided by financing activities
(78)
964
(351)
800
Foreign currency effect on cash, cash equivalents and restricted cash
(10)
8
(21)
3
Net change in cash, cash equivalents and restricted cash
35
511
(273)
574
Cash, cash equivalents and restricted cash at beginning of period
1,371
841
1,679
778
Cash, cash equivalents and restricted cash at end of period
$
1,406
$
1,352
$
1,406
$
1,352
9
ServiceNow, Inc.
GAAP to Non-GAAP Reconciliation
(in millions, except cRPO, RPO and per share data)
(unaudited)
Three Months Ended
Nine Months Ended
September 30, 2021
September 30, 2020
Growth Rates
September 30, 2021
September 30, 2020
Growth Rates
Subscription revenues:
GAAP subscription revenues
$
1,427
$
1,091
31%
$
4,050
$
3,102
31%
Effects of foreign currency rate fluctuations
(11)
(92)
Non-GAAP adjusted subscription revenues(1)
$
1,416
30%
$
3,957
28%
Professional services and other revenues:
GAAP professional services and other revenues
$
85
$
61
39%
$
232
$
167
39%
Effects of foreign currency rate fluctuations
(1)
(6)
Non-GAAP adjusted professional service and other revenues(1)
$
84
38%
$
226
35%
Total revenues:
GAAP total revenues
$
1,512
$
1,152
31%
$
4,282
$
3,269
31%
Effects of foreign currency rate fluctuations
(12)
(98)
Non-GAAP adjusted total revenues(1)
$
1,500
30%
$
4,184
28%
cRPO (in billions):
GAAP cRPO
$
5.0
$
3.8
32%
$
5.0
$
3.8
32%
Effects of foreign currency rate fluctuations
—
—
Non-GAAP adjusted cRPO(2)
$
5.0
32%
$
5.0
32%
RPO (in billions):
GAAP RPO
$
9.7
$
7.3
34%
$
9.7
$
7.3
34%
Effects of foreign currency rate fluctuations
—
—
Non-GAAP adjusted RPO(2)
$
9.7
34%
$
9.7
34%
Subscription billings:
GAAP subscription revenues
$
1,427
$
1,091
31%
$
4,050
$
3,102
31%
Change in subscription deferred revenue, unbilled receivables and customer deposits
(47)
(10)
24
53
Non-GAAP subscription billings
1,380
1,081
28%
4,074
3,155
29%
Effects of foreign currency rate fluctuations
(10)
(93)
Effects of fluctuations in billings duration
(5)
(25)
Non-GAAP adjusted subscription billings(3)
$
1,365
26%
$
3,956
25%
Professional services and other billings:
GAAP professional services and other revenues
$
85
$
61
39%
$
232
$
167
39%
Change in professional services and other deferred revenue
(1)
(2)
$
11
$
—
Non-GAAP professional services and other billings
84
59
42%
243
167
46%
Effects of foreign currency rate fluctuations
(1)
(6)
Non-GAAP adjusted professional services and other billings(3)
$
83
41%
$
237
42%
Total billings:
GAAP total revenues
$
1,512
$
1,152
31%
$
4,282
$
3,269
31%
Change in total deferred revenue, unbilled receivables and customer deposits
(47)
(12)
35
53
Non-GAAP total billings
1,465
1,140
29%
4,317
3,322
30%
Effects of foreign currency rate fluctuations
(10)
(99)
Effects of fluctuations in billings duration
(5)
(25)
Non-GAAP adjusted total billings(3)
$
1,450
27%
$
4,193
26%
Cost of revenues:
GAAP subscription cost of revenues
$
264
$
189
$
740
$
521
Stock-based compensation
(33)
(26)
(95)
(72)
Amortization of purchased intangibles
(17)
(9)
(43)
(28)
Non-GAAP subscription cost of revenues
$
214
$
154
$
602
$
421
GAAP professional services and other cost of revenues
$
86
$
63
$
239
$
187
Stock-based compensation
(15)
(13)
(43)
(38)
Non-GAAP professional services and other cost of revenues
$
71
$
50
$
196
$
149
Gross profit:
GAAP subscription gross profit
$
1,163
$
902
$
3,310
$
2,581
Stock-based compensation
33
26
95
72
Amortization of purchased intangibles
17
9
43
28
Non-GAAP subscription gross profit
$
1,213
$
937
$
3,448
$
2,681
GAAP professional services and other gross loss
$
(1)
$
(2)
$
(7)
$
(20)
Stock-based compensation
15
13
43
38
Non-GAAP professional services and other gross profit
$
14
$
11
$
36
$
18
GAAP gross profit
$
1,162
$
900
$
3,303
$
2,561
Stock-based compensation
48
39
138
110
Amortization of purchased intangibles
17
9
43
28
Non-GAAP gross profit
$
1,227
$
948
$
3,484
$
2,699
Gross margin:
GAAP subscription gross margin
81
%
83
%
82
%
83
%
Stock-based compensation as % of subscription revenues
2
%
2
%
2
%
2
%
Amortization of purchased intangibles as % of subscription revenues
1
%
1
%
1
%
1
%
Non-GAAP subscription gross margin
85
%
86
%
85
%
86
%
GAAP professional services and other gross margin
(1
%)
(3
%)
(3
%)
(12
%)
Stock-based compensation as % of professional services and other revenues
18
%
21
%
19
%
23
%
Non-GAAP professional services and other gross margin
17
%
19
%
16
%
11
%
GAAP gross margin
77
%
78
%
77
%
78
%
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
81
%
82
%
81
%
83
%
Operating expenses:
GAAP sales and marketing expenses
$
579
$
454
$
1,660
$
1,321
Stock-based compensation
(101)
(79)
(293)
(228)
Amortization of purchased intangibles
—
—
(1)
(1)
Non-GAAP sales and marketing expenses
$
478
$
375
$
1,366
$
1,092
GAAP research and development expenses
$
358
$
268
$
1,005
$
740
Stock-based compensation
(102)
(74)
(288)
(203)
Amortization of purchased intangibles
—
(1)
—
(2)
Business combination and other related costs
$
(4)
$
—
$
(5)
$
—
Non-GAAP research and development expenses
$
252
$
193
$
712
$
535
GAAP general and administrative expenses
$
151
$
109
$
416
$
319
Stock-based compensation
(40)
(28)
(110)
(84)
Amortization of purchased intangibles
(2)
—
(8)
(5)
Business combination and other related costs
(2)
—
(7)
(4)
Non-GAAP general and administrative expenses
$
107
$
81
$
291
$
226
GAAP total operating expenses
$
1,088
$
831
$
3,081
$
2,380
Stock-based compensation
(243)
(181)
(691)
(515)
Amortization of purchased intangibles
(2)
(1)
(9)
(7)
Business combination and other related costs
(7)
—
(13)
(4)
Non-GAAP total operating expenses
$
836
$
649
$
2,368
$
1,854
Income from operations:
GAAP income from operations
$
74
$
69
$
222
$
181
Stock-based compensation
291
220
829
625
Amortization of purchased intangibles
19
10
52
35
Business combination and other related costs
7
—
13
4
Non-GAAP income from operations
$
391
$
299
$
1,116
$
845
Operating margin:
GAAP operating margin
5
%
6
%
5
%
6
%
Stock-based compensation as % of total revenues
19
%
19
%
19
%
19
%
Amortization of purchased intangibles as % of total revenues
1
%
1
%
1
%
1
%
Business combination and other related costs as % of total revenues
1
%
—
%
1
%
—
%
Non-GAAP operating margin
26
%
26
%
26
%
26
%
Net income:
GAAP net income
$
63
$
13
$
204
$
102
Stock-based compensation
291
220
829
625
Amortization of purchased intangibles
19
10
52
35
Business combination and other related costs
7
—
13
4
Amortization of debt discount and issuance costs
2
5
6
22
Other
—
41
3
42
Income tax expense effects related to the above adjustments
(68)
(48)
(200)
(139)
Non-GAAP net income
$
314
$
241
$
907
$
691
Net income per share - basic and diluted:
GAAP net income per share - basic
$
0.32
$
0.07
$
1.03
$
0.53
GAAP net income per share - diluted
$
0.31
$
0.06
$
1.00
$
0.50
Non-GAAP net income per share - basic
$
1.58
$
1.24
$
4.58
$
3.57
Non-GAAP net income per share - diluted
$
1.55
$
1.21
$
4.49
$
3.46
GAAP weighted-average shares used to compute net income per share - basic
199
193
198
193
GAAP weighted-average shares used to compute net income per share - diluted
203
202
203
203
Effects of in-the-money portion of convertible senior notes(4)
—
(3)
(1)
(3)
Non-GAAP weighted-average shares used to compute net income per share - diluted
203
199
202
200
Free cash flow:
GAAP net cash provided by operating activities
$
320
$
241
$
1,347
$
1,101
Purchases of property and equipment
(94)
(91)
(292)
(285)
Repayments of convertible senior notes attributable to debt discount
2
66
15
68
Business combination and other related costs
—
—
53
—
Non-GAAP free cash flow
$
228
$
216
$
1,123
$
884
Free cash flow margin:
GAAP net cash provided by operating activities as % of total revenues
21
%
21
%
31
%
34
%
Purchases of property and equipment as % of total revenues
(6
%)
(8
%)
(7
%)
(9
%)
Repayments of convertible senior notes attributable to debt discount as % of total revenues
—
%
6
%
—
%
2
%
Business combination and other related costs as % of total revenues
0
%
—
%
1
%
—
%
Non-GAAP free cash flow margin
15
%
19
%
26
%
27
%
(1)Adjusted revenues and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the actual average exchange rates in effect during the current period.
(2)Adjusted cRPO and adjusted 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)Adjusted billings and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the actual average exchange rates in effect during the current period, and by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the comparison period
(4)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.
10
ServiceNow, Inc.
Reconciliation of Non-GAAP Financial Guidance
The financial guidance provided below is an estimate based on information available as of September 30, 2021. The company’s future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the company’s financial results are stated above in this press release. Further information on these and other factors that could affect our financial results are included in our Form 10-K for the year ended December 31, 2020 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-Q that will be filed for the three months ended September 30, 2021. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.
Three Months Ended
December 31, 2021
December 31, 2020
Growth Rates
GAAP subscription revenues(1)
$1,515 - $1,520 million
$1,184 million
28%
Note: Includes negative impact of foreign currency of $1 million
GAAP subscription revenues(1)
$1,515 - $1,520 million
$1,184 million
28%
Change in subscription deferred revenue, unbilled receivables and customer deposits
$790 million
$643 million
Non-GAAP subscription billings(1)
$2,305 - $2,310 million
$1,828 million
26%
Note: Includes negative impact of foreign currency of $2 million Includes negative impact of billings duration of $7 million
cRPO Year-over-year growth
27%
Note: Includes negative impact of foreign currency of 150 bps
GAAP operating margin
2%
Stock-based compensation expense as % of total revenues
18%
Amortization of purchased intangibles as % of total revenues
1%
Business combination and other related costs as % of total revenues
0%
Non-GAAP operating margin
22%
GAAP weighted-average shares used to compute net income per share - diluted
203 million
Effects of in-the-money portion of convertible senior notes(2)
(1) million
Non-GAAP weighted-average shares used to compute net income per share - diluted
203 million
Twelve Months Ended
December 31, 2021
December 31, 2020
Growth Rates
GAAP subscription revenues(1)
$5,565 - $5,570 million
$4,286 million
30%
Note: Includes foreign currency benefit of $91 million
GAAP subscription revenues(1)
$5,565 - $5,570 million
$4,286 million
30%
Change in subscription deferred revenue, unbilled receivables and customer deposits
$814 million
$696 million
Non-GAAP subscription billings(1)
$6,379 - $6,384 million
$4,982 million
28%
Note: Includes foreign currency benefit of $90 million Includes positive impact of billings duration of $18 million
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 margin
85%
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
0%
Non-GAAP operating margin
25.0%
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
0%
Business combination and other related costs as % of total revenues
1%
Non-GAAP free cash flow margin
31.5%
GAAP weighted-average shares used to compute net income per share - diluted
202 million
Effects of in-the-money portion of convertible senior notes(2)
(1) million
Non-GAAP weighted-average shares used to compute net income per share - diluted
202 million
(1)Guidance for GAAP subscription revenues and non-GAAP subscription billings is based on September 2021 foreign exchange rates for entities reporting in currencies other than U.S. Dollars.
(2)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.