ServiceNow Reports Fourth Quarter and Full-Year 2021 Financial Results
•ServiceNow exceeds high end of guidance across all Q4 2021 metrics; expects strong 2022 subscription revenues growth with constant currency subscription revenues growth acceleration year-over-year in Q1 2022
•Subscription revenues of $1,523 million in Q4 2021, representing 29% year-over-year growth, 30% adjusted for constant currency
•Current remaining performance obligations of $5.7 billion as of Q4 2021, representing 29% year-over-year growth, 32% adjusted for constant currency
•135 transactions over $1 million in net new annual contract value in Q4 2021, representing 52% year-over-year growth
SANTA CLARA, Calif. - January 26, 2022 - ServiceNow (NYSE: NOW), the leading digital workflow company making the world work better for everyone, today announced financial results for its fourth quarter ended December 31, 2021, with subscription revenues of $1,523 million in Q4 2021, representing 29% year-over-year growth, 30% adjusted for constant currency.
As of December 31, 2021, current remaining performance obligations (“cRPO”), contract revenue that will be recognized as revenue in the next 12 months, was $5.7 billion, representing 29% year-over-year growth and 32% adjusted for constant currency. During the quarter, ServiceNow closed 135 transactions with more than $1 million in net new annual contract value, representing 52% year-over-year growth. The company now has 1,359 total customers with more than $1 million in annual contract value, representing 25% year-over-year growth in customers.
“We once again reported results that significantly beat the high end of expectations,” said ServiceNow President and CEO Bill McDermott. “Customer demand for ServiceNow’s innovative platform is stronger than ever. Our unique culture has made us one of the best places to work. We are growing like a fast-moving startup with the profitability of a global market leader.”
“Q4 was an outstanding quarter closing out an already phenomenal year of outperformance,” said ServiceNow CFO Gina Mastantuono. “The company is firing on all cylinders and we enter 2022 with tremendous momentum. We expect constant currency subscription revenue growth to accelerate year-over-year in Q1, setting us up for another strong year and putting us well on our way to becoming a $15 billion plus revenue company.”
During the quarter, ServiceNow continued to invest in the Now Platform with the acquisitions of ERP migration company Gekkobrain and software testing automation company DotWalk. ServiceNow deepened its strategic partnership with EY to further revolutionize finance and tax services on the Now Platform in support of EY’s goal of creating a $1 billion business with ServiceNow by 2025. ServiceNow expanded its alliance with KPMG firms to help customers accelerate ESG impact and modernize risk and resilience. ServiceNow was recently named the preferred workflow partner for DXC Platform X and further strengthened its partnership with the formation of a DXC ServiceNow Strategic Business Group. The company also released ServiceNow Impact, a new solution designed to help customers accelerate the return on their digital transformation investments.
1
Fourth Quarter 2021 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the fourth quarter 2021:
Fourth Quarter 2021 GAAP Results
Fourth Quarter 2021 Non-GAAP Results(1)
Amount ($ millions)
Year/Year Growth (%)
Amount
($ millions)(2)
Year/Year Growth (%)
Adjusted Amount ($ millions)(2)
Adjusted Year/Year Growth (%)
Subscription revenues
$1,523
29
%
$1,538
30
%
Professional services and other revenues
$91
38
%
$91
38
%
Total revenues
$1,614
29
%
$1,629
30
%
Subscription billings
$2,420
32
%
$2,432
33
%
Professional services and other billings
$113
43
%
$113
43
%
Total billings
$2,533
33
%
$2,545
33
%
Amount ($ billions)
Year/Year Growth (%)
Amount ($ billions)(2)
Year/Year Growth (%)
cRPO
$5.7
29
%
$5.8
32
%
RPO
$11.5
29
%
$11.8
32
%
Amount ($ millions)
Margin (%)
Amount ($ millions)
Margin (%)
Subscription gross profit
$1,241
82
%
$1,295
85
%
Professional services and other gross profit (loss)
($2)
(2
%)
$14
15
%
Total gross profit
$1,239
77
%
$1,309
81
%
Income from operations
$35
2
%
$367
23
%
Net cash provided by operating activities
$844
52
%
Free cash flow
$744
46
%
Amount ($ millions)
Earnings per Basic/Diluted Share ($)
Amount ($ millions)
Earnings per Basic/Diluted Share ($)
Net income
$26
$0.13/ $0.13
$296
$1.49/ $1.46
(1)We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
(2)Non-GAAP subscription revenues, professional services and other revenues, total revenues, cRPO, RPO and adjusted professional services and other billings are adjusted for constant currency. Non-GAAP adjusted subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
Note: Numbers rounded for presentation purposes.
2
Full-Year 2021 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the full-year 2021:
Full Year 2021 GAAP Results
Full-Year 2021 Non-GAAP Results(1)
Amount ($ millions)
Year/Year Growth (%)
Amount
($ millions)(2)
Year/Year Growth (%)
Adjusted Amount ($ millions)(2)
Adjusted Year/Year Growth (%)
Subscription revenues
$5,573
30
%
$5,496
28
%
Professional services and other revenues
$323
39
%
$317
36
%
Total revenues
$5,896
30
%
$5,813
29
%
Subscription billings
6,494
30
%
6,388
28
%
Professional services and other billings
356
45
%
350
42
%
Total billings
6,850
31
%
6,738
29
%
Amount ($ billions)
Year/Year Growth (%)
Amount ($ billions)(2)
Year/Year Growth (%)
cRPO
$5.7
29
%
$5.8
32
%
RPO
$11.5
29
%
$11.8
32
%
Amount ($ millions)
Margin (%)
Amount ($ millions)
Margin (%)
Subscription gross profit
$4,551
82
%
$4,743
85
%
Professional services and other gross profit (loss)
($8)
(2
%)
$51
16
%
Total gross profit
$4,543
77
%
$4,794
81
%
Income from operations
$257
4
%
$1,482
25
%
Net cash provided by operating activities
$2,191
37
%
Free cash flow
$1,867
32
%
Amount ($ millions)
Earnings per Basic/Diluted Share ($)
Amount ($ millions)
Earnings per Basic/Diluted Share ($)
Net income
230
$1.16/ $1.13
$1,201
$6.07/ $5.92
(1)We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
(2)Non-GAAP subscription revenues, professional services and other revenues, total revenues, cRPO, RPO and adjusted professional services and other billings are adjusted for constant currency. Non-GAAP adjusted subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
Note: Numbers rounded for presentation purposes.
3
Financial Outlook
Our guidance includes GAAP and non-GAAP financial measures. The non-GAAP growth rates for subscription revenues and cRPO are only adjusted for constant currency to provide better visibility into the underlying business trends. Since September 30, 2021, ServiceNow has seen an incremental strengthening of the U.S. dollar resulting in a foreign exchange (“FX”) headwind in 2022 (estimated to be approximately a $110 million currency headwind for 2022 subscription revenue and a $75 million currency headwind for Q1 2022 cRPO).
The following table summarizes our guidance for the first quarter 2022:
First Quarter 2022 GAAP Guidance
First Quarter 2022
Non-GAAP Guidance(1)
Amount ($ millions)(2)
Year/Year
Growth (%)
Constant Currency
Year/ Year Growth (%)
Subscription revenues
$1,610 - $1,615
25
%
27.5
%
cRPO
28
%
29.5
%
Margin (%)
Income from operations
25
%
Amount (millions)
Weighted-average shares used to compute diluted net income per share
203
(1)We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.
(2)Guidance for GAAP subscription revenues is based on the 31-day average of foreign exchange rates for December 2021 for entities reporting in currencies other than U.S. Dollars.
The following table summarizes our guidance for the full-year 2022:
Full-Year 2022 GAAP Guidance
Full-Year 2022
Non-GAAP Guidance(1)
Amount ($ millions)(2)
Year/Year Growth (%)
Constant Currency
Year/ Year Growth (%)
Subscription revenues
$7,020 - $7,040
26
%
28
%
Margin (%)
Subscription gross profit
86
%
Income from operations
25
%
Free cash flow
31
%
Amount (millions)
Weighted-average shares used to compute diluted net income per share
204
(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 for the future quarters included in our full-year 2022 guidance are based on the 31-day average of foreign exchange rates for December 2021 for entities reporting in currencies other than U.S. Dollars.
4
Conference Call Details
The conference call will begin at 2 p.m. Pacific Time (22:00 GMT) on January 26, 2022. 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/749924992.
An audio replay of the conference call and webcast will be available two hours after its completion and will be accessible for 30 days. To hear the replay, interested parties may go to the investor relations section of the ServiceNow website or dial (800) 770‑2030 (Passcode: 8135305), or if outside North America, by dialing (647) 362‑9199 (Passcode: 8135305).
Investor Presentation Details
An investor presentation providing additional information, including forward-looking guidance, and analysis can be found at http://investors.servicenow.com.
Statement Regarding Use of Non-GAAP Financial Measures
We 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.
•Revenues. We adjust revenues and related growth rates for constant currency to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To present this information, current period results for entities reporting in currencies other than U.S. Dollars (“USD”) are converted into USD at the average exchange rates in effect during the comparison period (for Q4 2020, the average exchange rates in effect for our major currencies were 1 USD to 0.84 Euros and 1 USD to 0.76 British Pound Sterling (“GBP”)), rather than the actual average exchange rates in effect during the current period (for Q4 2021, the average exchange rates in effect for our major currencies were 1 USD to 0.87 Euros and 1 USD to 0.74 GBP). We believe the presentation of revenues and related growth rates 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 and related growth rates 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. While we believe billings is one indicator of the performance of our business, an increase or decrease in billings may not reflect the actual performance for that reporting period. As a result, our billings metric has become less indicative of the actual performance of our business over time and we do not plan to disclose this metric in the future.
•Remaining performance obligations and current remaining performance obligations. We adjust cRPO and remaining performance obligations (“RPO”) and related growth rates for constant currency to provide a framework for assessing how our business performed. To present this information, current period results for entities reporting in currencies other than USD are converted into USD at the exchange rates in effect at the end of the comparison period (for Q4 2020, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.82 Euros and 1 USD to 0.73 GBP), rather than the actual end of the period exchange rates in effect during the current period (for Q4 2021, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.88 Euros and 1 USD to 0.74 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.
5
•Gross profit, Income from operations, Net income and Net income per share - diluted. Our non-GAAP presentation of gross profit, income from operations, and net income measures exclude certain non-cash or non-recurring items, including stock-based compensation expense, amortization of debt discount and issuance costs related to our convertible senior notes, loss on early note conversions, amortization of purchased intangibles, legal settlements, business combination and other related costs, and the related income tax effect of these adjustments. The non-GAAP weighted-average shares used to compute our non-GAAP net income per share - diluted excludes the dilutive effect of the in-the-money portion of convertible senior notes as they are covered by our note hedges, and includes the dilutive effect of time-based stock awards, the dilutive effect of warrants and the potentially dilutive effect of our stock awards with performance conditions not yet satisfied at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met. We believe these adjustments provide useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods.
•Free cash flow. Free cash flow is defined as net cash provided by (used in) operating activities plus cash paid for legal settlements, repayments of convertible senior notes attributable to debt discount and business combination and other related costs including compensation expense, reduced by purchases of property and equipment. Free cash flow margin is calculated as free cash flow as a percentage of total revenues. We believe information regarding free cash flow and free cash flow margin provides useful information to investors because it is an indicator of the strength and performance of our business operations.
Our presentation of non-GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP and non-GAAP results.
Use of Forward-Looking Statements
This release contains “forward-looking statements” regarding our performance, including but not limited to statements in the section entitled “Financial Outlook.” Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.
Factors that may cause actual results to differ materially from those in any forward-looking statements include: experiencing an actual or perceived cyber-security event; our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet; errors, interruptions, delays, or security breaches in or of our service or data centers; our ability to maintain and attract key employees and manage workplace culture; alleged violations of laws and regulations, including those relating to anti-bribery and anti-corruption and those relating to public sector contracting requirements; our ability to compete successfully against existing and new competitors; our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments; our ability to grow our business, including converting remaining performance obligations into revenue, adding and retaining customers, selling additional subscriptions to existing customers, selling to larger enterprises, government and regulated organizations with complex sales cycles and certification processes, and entering new geographies and markets; our ability to develop and gain customer demand for and acceptance of new and improved products and services; material changes in the value of foreign currencies relative to the U.S. Dollar; the continued impact and duration of COVID-19 on our business, future financial performance and global economic conditions, including any subsequent waves of outbreak or new variant strains of the COVID-19 virus, the effectiveness, extent and duration of mitigation efforts such as “shelter in place” and other government responses, the availability of vaccinations; our ability to consummate and realize the benefits of any strategic transactions or acquisitions; and fluctuations and volatility in our stock price.
Further information on these and other factors that could affect our financial results are included in our Form 10-Q for the quarter ended September 30, 2021 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, 2021.
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) makes the world work better for everyone. Our cloud-based platform and solutions help digitize and unify organizations so that they can find smarter, faster, better ways to make work flow. So employees and customers can be more connected, more innovative, and more agile. And we can all create the future we imagine. The world works with ServiceNowTM. For more information, visit: www.servicenow.com.
Weighted-average shares used to compute net income per share - basic
199
195
198
193
Weighted-average shares used to compute net income per share - diluted
204
202
203
202
(1)Includes stock-based compensation as follows:
Three Months Ended
Twelve Months Ended
December 31, 2021
December 31, 2020
December 31, 2021
December 31, 2020
Cost of revenues:
Subscription
$
33
$
26
$
128
$
98
Professional services and other
16
14
59
52
Operating expenses:
Sales and marketing
96
92
389
320
Research and development
107
79
395
282
General and administrative
50
34
160
118
8
ServiceNow, Inc.
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
December 31, 2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
1,728
$
1,677
Short-term investments
1,576
1,415
Accounts receivable, net
1,390
1,009
Current portion of deferred commissions
303
229
Prepaid expenses and other current assets
223
192
Total current assets
5,220
4,522
Deferred commissions, less current portion
623
444
Long-term investments
1,630
1,468
Property and equipment, net
766
660
Operating lease right-of-use assets
591
454
Intangible assets, net
287
153
Goodwill
777
241
Deferred tax assets
692
673
Other assets
212
100
Total assets
$
10,798
$
8,715
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
89
$
34
Accrued expenses and other current liabilities
850
668
Current portion of deferred revenue
3,836
2,963
Current portion of operating lease liabilities
82
72
Current debt, net
92
—
Total current liabilities
4,949
3,737
Deferred revenue, less current portion
63
45
Operating lease liabilities, less current portion
556
423
Long-term debt, net
1,484
1,640
Other long-term liabilities
51
36
Stockholders’ equity
3,695
2,834
Total liabilities and stockholders’ equity
$
10,798
$
8,715
9
ServiceNow, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Three Months Ended
Twelve Months Ended
December 31, 2021
December 31, 2020
December 31, 2021
December 31, 2020
Cash flows from operating activities:
Net income
$
26
$
17
$
230
$
119
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
126
93
472
336
Amortization of deferred commissions
83
61
294
218
Amortization of debt discount and issuance costs
2
2
7
24
Stock-based compensation
302
245
1,131
870
Deferred income taxes
(13)
(18)
(34)
(24)
Repayments of convertible senior notes attributable to debt discount
—
(13)
(15)
(82)
Loss on extinguishment of 2022 Notes
—
5
3
47
Other
17
(3)
45
(2)
Changes in operating assets and liabilities, net of effect of business combinations:
Accounts receivable
(620)
(362)
(401)
(152)
Deferred commissions
(221)
(144)
(565)
(365)
Prepaid expenses and other assets
(15)
(13)
(93)
(55)
Accounts payable
16
(36)
55
(34)
Deferred revenue
913
645
960
711
Accrued expenses and other liabilities
228
206
102
175
Net cash provided by operating activities
844
685
2,191
1,786
Cash flows from investing activities:
Purchases of property and equipment
(100)
(134)
(392)
(419)
Business combinations, net of cash acquired
(7)
1
(785)
(107)
Purchases of intangibles
(7)
(7)
(7)
(13)
Purchases of investments
(744)
(695)
(2,485)
(2,922)
Purchases of strategic investments
(43)
(10)
(71)
(12)
Sales and maturities of investments
540
666
2,119
1,965
Other
2
2
14
1
Net cash used in investing activities
(359)
(177)
(1,607)
(1,507)
Cash flows from financing activities:
Net proceeds from borrowings on 2030 Notes
—
—
—
1,482
Repayments of convertible senior notes attributable to principal
(2)
(59)
(61)
(1,628)
Net proceeds from unwind of 2022 Note Hedge
—
—
—
1,106
Proceeds from employee stock plans
2
4
167
146
Taxes paid related to net share settlement of equity awards
(155)
(148)
(612)
(509)
Net cash (used in) provided by financing activities
(155)
(203)
(506)
597
Foreign currency effect on cash, cash equivalents and restricted cash
(4)
22
(25)
25
Net change in cash, cash equivalents and restricted cash
326
327
53
901
Cash, cash equivalents and restricted cash at beginning of period
1,406
1,352
1,679
778
Cash, cash equivalents and restricted cash at end of period
$
1,732
$
1,679
$
1,732
$
1,679
10
ServiceNow, Inc.
GAAP to Non-GAAP Reconciliation
(in millions, except cRPO, RPO and per share data)
(unaudited)
Three Months Ended
Twelve Months Ended
December 31, 2021
December 31, 2020
Growth Rates
December 31, 2021
December 31, 2020
Growth Rates
Subscription revenues:
GAAP subscription revenues
$
1,523
$
1,184
29%
$
5,573
$
4,286
30%
Effects of foreign currency rate fluctuations
15
(77)
Non-GAAP subscription revenues(1)
$
1,538
30%
$
5,496
28%
Professional services and other revenues:
GAAP professional services and other revenues
$
91
$
66
38%
$
323
$
233
39%
Effects of foreign currency rate fluctuations
—
(6)
Non-GAAP professional service and other revenues(1)
$
91
38%
$
317
36%
Total revenues:
GAAP total revenues
$
1,614
$
1,250
29%
$
5,896
$
4,519
30%
Effects of foreign currency rate fluctuations
15
(83)
Non-GAAP total revenues(1)
$
1,629
30%
$
5,813
29%
cRPO (in billions):
GAAP cRPO
$
5.7
$
4.4
29%
$
5.7
$
4.4
29%
Effects of foreign currency rate fluctuations
0.1
0.1
Non-GAAP cRPO(2)
$
5.8
32%
$
5.8
32%
RPO (in billions):
GAAP RPO
$
11.5
$
8.9
29%
$
11.5
$
8.9
29%
Effects of foreign currency rate fluctuations
0.3
0.3
Non-GAAP RPO(2)
$
11.8
32%
$
11.8
32%
Subscription billings:
GAAP subscription revenues
$
1,523
$
1,184
29%
$
5,573
$
4,286
30%
Change in subscription deferred revenue, unbilled receivables and customer deposits
897
643
921
696
Non-GAAP subscription billings
2,420
1,827
32%
6,494
4,982
30%
Effects of foreign currency rate fluctuations
25
(68)
Effects of fluctuations in billings duration
(13)
(38)
Non-GAAP adjusted subscription billings(3)
$
2,432
33%
$
6,388
28%
Professional services and other billings:
GAAP professional services and other revenues
$
91
$
66
37%
$
323
$
233
39%
Change in professional services and other deferred revenue
22
13
$
33
$
13
Non-GAAP professional services and other billings
113
79
43%
356
246
45%
Effects of foreign currency rate fluctuations
—
(6)
Non-GAAP adjusted professional services and other billings(3)
$
113
43%
$
350
42%
Total billings:
GAAP total revenues
$
1,614
$
1,250
29%
$
5,896
$
4,519
30%
Change in total deferred revenue, unbilled receivables and customer deposits
919
657
954
710
Non-GAAP total billings
2,533
1,907
33%
6,850
5,229
31%
Effects of foreign currency rate fluctuations
25
(74)
Effects of fluctuations in billings duration
(13)
(38)
Non-GAAP adjusted total billings(3)
$
2,545
33%
$
6,738
29%
Cost of revenues:
GAAP subscription cost of revenues
$
282
$
210
$
1,022
$
731
Stock-based compensation
(33)
(26)
(128)
(98)
Amortization of purchased intangibles
(21)
(8)
(64)
(36)
Non-GAAP subscription cost of revenues
$
228
$
176
$
830
$
597
GAAP professional services and other cost of revenues
$
93
$
69
$
331
$
256
Stock-based compensation
(16)
(14)
(59)
(52)
Non-GAAP professional services and other cost of revenues
$
77
$
55
$
272
$
204
Gross profit:
GAAP subscription gross profit
$
1,241
$
974
$
4,551
$
3,555
Stock-based compensation
33
26
128
98
Amortization of purchased intangibles
21
8
64
36
Non-GAAP subscription gross profit
$
1,295
$
1,008
$
4,743
$
3,689
GAAP professional services and other gross loss
$
(2)
$
(3)
$
(8)
$
(23)
Stock-based compensation
16
14
59
52
Non-GAAP professional services and other gross profit
$
14
$
11
$
51
$
29
GAAP gross profit
$
1,239
$
971
$
4,543
$
3,532
Stock-based compensation
49
40
187
150
Amortization of purchased intangibles
21
8
64
36
Non-GAAP gross profit
$
1,309
$
1,019
$
4,794
$
3,718
Gross margin:
GAAP subscription gross margin
82
%
82
%
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
%
85
%
85
%
86
%
GAAP professional services and other gross margin
(2
%)
(5
%)
(2
%)
(10
%)
Stock-based compensation as % of professional services and other revenues
17
%
21
%
18
%
22
%
Non-GAAP professional services and other gross margin
15
%
16
%
16
%
12
%
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
%
82
%
Operating expenses:
GAAP sales and marketing expenses
$
632
$
534
$
2,292
$
1,855
Stock-based compensation
(96)
(92)
(389)
(320)
Amortization of purchased intangibles
—
(1)
(1)
(1)
Non-GAAP sales and marketing expenses
$
536
$
441
$
1,902
$
1,534
GAAP research and development expenses
$
392
$
284
$
1,397
$
1,024
Stock-based compensation
(107)
(79)
(395)
(282)
Amortization of purchased intangibles
(1)
—
(1)
(2)
Business combination and other related costs
$
(5)
$
—
$
(10)
$
—
Non-GAAP research and development expenses
$
279
$
205
$
991
$
740
GAAP general and administrative expenses
$
180
$
135
$
597
$
454
Stock-based compensation
(50)
(34)
(160)
(118)
Amortization of purchased intangibles
(2)
(2)
(10)
(7)
Business combination and other related costs
(1)
(2)
(8)
(6)
Non-GAAP general and administrative expenses
$
127
$
97
$
419
$
323
GAAP total operating expenses
$
1,204
$
953
$
4,286
$
3,333
Stock-based compensation
(253)
(205)
(944)
(720)
Amortization of purchased intangibles
(3)
(3)
(12)
(10)
Business combination and other related costs
(6)
(2)
(18)
(6)
Non-GAAP total operating expenses
$
942
$
743
$
3,312
$
2,597
Income from operations:
GAAP income from operations
$
35
$
18
$
257
$
199
Stock-based compensation
302
245
1,131
870
Amortization of purchased intangibles
24
11
76
46
Business combination and other related costs
6
2
18
6
Non-GAAP income from operations
$
367
$
276
$
1,482
$
1,121
Operating margin:
GAAP operating margin
2
%
1
%
4
%
5
%
Stock-based compensation as % of total revenues
19
%
20
%
19
%
19
%
Amortization of purchased intangibles as % of total revenues
2
%
1
%
2
%
1
%
Business combination and other related costs as % of total revenues
—
%
—
%
0
%
—
%
Non-GAAP operating margin
23
%
22
%
25
%
25
%
Net income:
GAAP net income
$
26
$
17
$
230
$
119
Stock-based compensation
302
245
1,131
870
Amortization of purchased intangibles
24
11
76
46
Business combination and other related costs
6
2
18
6
Amortization of debt discount and issuance costs
2
2
7
24
Other
—
5
3
47
Income tax expense effects related to the above adjustments
(64)
(47)
(264)
(186)
Non-GAAP net income
$
296
$
235
$
1,201
$
926
Net income per share - basic and diluted:
GAAP net income per share - basic
$
0.13
$
0.09
$
1.16
$
0.61
GAAP net income per share - diluted
$
0.13
$
0.08
$
1.13
$
0.59
Non-GAAP net income per share - basic
$
1.49
$
1.20
$
6.07
$
4.79
Non-GAAP net income per share - diluted
$
1.46
$
1.17
$
5.92
$
4.63
GAAP weighted-average shares used to compute net income per share - basic
199
195
198
193
GAAP weighted-average shares used to compute net income per share - diluted
204
202
203
202
Effects of in-the-money portion of convertible senior notes(4)
(1)
(1)
—
(2)
Non-GAAP weighted-average shares used to compute net income per share - diluted
203
201
203
200
Free cash flow:
GAAP net cash provided by operating activities
$
844
$
685
$
2,191
$
1,786
Purchases of property and equipment
(100)
(134)
(392)
(419)
Repayments of convertible senior notes attributable to debt discount
—
13
15
82
Business combination and other related costs
—
—
53
—
Non-GAAP free cash flow
$
744
$
564
$
1,867
$
1,449
Free cash flow margin:
GAAP net cash provided by operating activities as % of total revenues
52
%
55
%
37
%
39
%
Purchases of property and equipment as % of total revenues
(6
%)
(11
%)
(7
%)
(9
%)
Repayments of convertible senior notes attributable to debt discount as % of total revenues
—
%
1
%
—
%
2
%
Business combination and other related costs as % of total revenues
0
%
—
%
1
%
—
%
Non-GAAP free cash flow margin
46
%
45
%
32
%
32
%
(1)Non-GAAP revenues and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the actual average exchange rates in effect during the current period.
(2)Non-GAAP cRPO, RPO and the corresponding growth rates are derived by applying the end of period exchange rates in effect during the comparison period rather than the actual end of period exchange rates in effect during the current period.
(3)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.
11
ServiceNow, Inc.
Reconciliation of Non-GAAP Financial Guidance
Three Months Ended
March 31, 2022
March 31, 2021
Growth Rates
GAAP subscription revenues
$1,610 - $1,615 million
$1,293 million
25%
Effects of foreign currency rate fluctuations
$35 million
2.5%
Non-GAAP subscription revenues(1)
$1,645 - $1,650 million
27.5%
cRPO growth rate
28%
Effects of foreign currency rate fluctuations
1.5%
Non-GAAP cRPO growth rate(2)
29.5%
GAAP operating margin
4%
Stock-based compensation expense as % of total revenues
20%
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%
GAAP weighted-average shares used to compute net income per share - diluted
204 million
Effects of in-the-money portion of convertible senior notes(3)
(1) million
Non-GAAP weighted-average shares used to compute net income per share - diluted
203 million
Twelve Months Ended
December 31, 2022
December 31, 2021
Growth Rates
GAAP subscription revenues
$7,020 - $7,040 million
$5,573 million
26%
Effects of foreign currency rate fluctuations
$110 million
2%
Non-GAAP subscription revenues (1)
$7,130 - $7,150 million
28%
GAAP subscription gross margin
83%
Stock-based compensation expense as % of subscription revenues
2%
Amortization of purchased intangibles as % of subscription revenues
1%
Non-GAAP subscription margin
86%
GAAP operating margin
5%
Stock-based compensation expense as % of total revenues
19%
Amortization of purchased intangibles as % of total revenues
1%
Business combination and other related costs as % of total revenues
0%
Non-GAAP operating margin
25%
GAAP net cash provided by operating activities as % of total revenues
39%
Purchases of property and equipment as % of total revenues
(8%)
Repayments of convertible senior notes attributable to debt discount as % of total revenues
0%
Business combination and other related costs as % of total revenues
0%
Non-GAAP free cash flow margin
31%
GAAP weighted-average shares used to compute net income per share - diluted
204 million
Effects of in-the-money portion of convertible senior notes(3)
0 million
Non-GAAP weighted-average shares used to compute net income per share - diluted
204 million
(1)Non-GAAP revenues and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the exchange rates for the guidance period.
(2)Non-GAAP cRPO growth rate is derived by applying the end of period exchange rates in effect during the comparison period rather than the actual end of period exchange rates in effect during the current period.
(3)We exclude the in-the-money portion of convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our note hedges.
