ServiceNow Reports First Quarter 2018 Financial Results

SANTA CLARA, Calif.--()--ServiceNow (NYSE: NOW) today announced financial results for the first quarter 2018 ended March 31, 2018.

First Quarter 2018 Highlights:

  • Subscription revenues of $543.3 million in Q1 2018, representing 40% year-over-year growth
  • 21 transactions over $1 million in net new annual contract value in Q1 2018
  • 536 total customers with over $1 million in annual contract value, representing 43% year-over-year growth

ServiceNow today also announced it has agreed to acquire Seattle-based VendorHawk Inc., a leader in Software-as-a-Service management, in an all-cash transaction expected to close this month. With VendorHawk, ServiceNow is rapidly expanding its capabilities in software asset management, which drives transparency into software licenses and costs. For more information, please visit our press release.

“We are off to a great start to the year, continuing the momentum from our record-breaking finish to 2017,” said John Donahoe, ServiceNow president and chief executive officer. “Our performance was strong worldwide. We are driving digital transformation for our customers, enabling great employee and customer experiences that make it easier to get work done and deliver better business outcomes.”

“Subscription revenues grew 40% year-over-year,” said Michael Scarpelli, ServiceNow chief financial officer. “Outperformance in the quarter was driven by 21 transactions greater than $1 million in net new annual contract value and continued strength from our entire product portfolio.”

First Quarter 2018 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the first quarter 2018:

 
    First Quarter 2018    
GAAP Results

First Quarter 2018 Non-GAAP Results(1)

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

Growth (%)(2)

($ millions)  

Growth (%)(2)

 

($ millions)(3)

 

Growth (%)(2)

Subscription revenues $543.3 40% $520.1 34%
Professional services and other revenues $45.9 11% $43.8 6%
Total revenues $589.2 37% $563.8 32%
 
Subscription billings $638.4 33% $612.9 28%
Professional services and other billings $51.0 29% $48.9 23%
Total billings $689.4 33% $661.7 27%
 
Amount Amount
      ($ millions)   Margin (%) ($ millions)   Margin (%)        
Subscription gross profit $447.9 82% $463.6 85%
Professional services and other gross profit (loss) ($2.2) (5%) $5.4 12%
Total gross profit $445.7 76% $469.0 80%
Income (loss) from operations ($20.3) (3%) $106.9 18%
Net cash provided by operating activities $250.1 42%
Free cash flow $223.4 38%
 
Earnings per Earnings per
Amount basic /diluted Amount basic /diluted
      ($ millions)   share ($) ($ millions)   share ($)        
Net income $10.6 $0.06 / $0.06 $104.6 $0.60 / $0.56
(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) The comparison period amounts used to calculate growth rates have been restated from previously reported amounts to reflect the impact of the full retrospective adoption of Topic 606. For more information regarding Topic 606, refer to our Form 10-K filed for the year ended December 31, 2017.
(3) Non-GAAP subscription revenues, professional services and other revenues, total revenues and professional services billings are adjusted for constant currency. 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.
 

Financial Outlook

Our guidance is based on foreign exchange rates as of March 31, 2018 and includes GAAP and non-GAAP financial measures.

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

 
    Second Quarter 2018    
GAAP Guidance

Second Quarter 2018 Non-GAAP Guidance(1)

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

Growth (%)(2)

($ millions)  

Growth (%)(2)

 

($ millions)(3)

 

Year Growth (%)(2)

Subscription revenues $568 - $573 41% - 42% $548 - $553 36% - 37%
Subscription billings $608 - $612 34% - 35% $584 - $588 28% - 29%
 
                Margin (%)        
Income from operations 16%
 
Amount
            (millions)            
Weighted-average shares used to compute diluted net income per share 188
(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) The comparison period amounts used to calculate growth rates have been restated from previously reported amounts to reflect the impact of the full retrospective adoption of Topic 606. For more information regarding Topic 606, refer to our Form 10-K filed for the year ended December 31, 2017.
(3) Non-GAAP subscription revenues, professional services and other revenues, total revenues and professional services billings are adjusted for constant currency. 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.
 

The following table summarizes our guidance for fiscal year 2018:

 
    Full Year 2018    
GAAP Guidance

Full Year 2018 Non-GAAP Guidance(1)

       

Adjusted Year/

Amount Year/Year Amount Year/Year Adjusted Amount

Year Growth

      ($ millions)  

Growth (%)(2)

($ millions)  

Growth (%)(2)

 

($ millions)(3)

 

(%)(2)

Subscription revenues $2,400 - $2,415 38% - 39% $2,336 - $2,351 34% - 35%
Subscription billings $2,830 - $2,845 33% - 34% $2,755 - $2,770

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 187
(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) The comparison period amounts used to calculate growth rates have been restated from previously reported amounts to reflect the impact of the full retrospective adoption of Topic 606. For more information regarding Topic 606, refer to our Form 10-K filed for the year ended December 31, 2017.
(3) Non-GAAP subscription revenues are adjusted for constant currency. 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

The conference call will begin at 2 p.m. Pacific Time (21:00 GMT) on April 25, 2018. Interested parties may listen to the call by dialing 844.464.3153 (passcode: 8685999), or if outside North America, by dialing +1.508.637.5575 (passcode: 8685999). Individuals may access the live teleconference from this webcast link (https://edge.media-server.com/m6/p/pf7pfwgq).

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: 8685999), or if outside North America, by dialing +1.404.537.3406 (passcode: 8685999).

Investor Presentation Details

An investor presentation providing additional information 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.

  • 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. 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 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 repayments 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-K for the year ended December 31, 2017 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 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 HR service delivery, 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
March 31, 2018   March 31, 2017
*As Adjusted
Revenues:
Subscription $ 543,325 $ 387,584
Professional services and other   45,897     41,187  
Total revenues   589,222     428,771  
Cost of revenues (1):
Subscription 95,398 70,375
Professional services and other   48,075     45,709  
Total cost of revenues   143,473     116,084  
Gross profit   445,749     312,687  
Operating expenses (1):
Sales and marketing 283,701 203,739
Research and development 117,268 84,489
General and administrative   65,063     46,251  
Total operating expenses   466,032     334,479  
Loss from operations (20,283 ) (21,792 )
Interest expense (17,064 ) (8,678 )
Interest income and other income (expense), net   29,987     7,729  
Loss before income taxes (7,360 ) (22,741 )
Benefit from income taxes   (17,982 )   (1,227 )
Net income (loss) $ 10,622   $ (21,514 )
Net income (loss) per share - basic $ 0.06   $ (0.13 )
Net income (loss) per share - diluted $ 0.06   $ (0.13 )
Weighted-average shares used to compute net income (loss) per share - basic   175,482,833     168,742,366  
Weighted-average shares used to compute net income (loss) per share - diluted   190,249,786     168,742,366  

(1) Includes stock-based compensation as follows:

Three Months Ended

March 31, 2018

 

March 31, 2017

*As Adjusted

Cost of revenues:

 

Subscription

$

11,291

$

7,938

Professional services and other

7,561

6,875

Sales and marketing

52,082

38,401

Research and development

28,598

21,801

General and administrative

21,809

14,854

 

*As adjusted to reflect the impact of the full retrospective adoption of Topic 606.

 
ServiceNow, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
    March 31, 2018   December 31, 2017
*As Adjusted
Assets
Current assets:
Cash and cash equivalents $ 682,854 $ 726,495
Short-term investments 1,203,105 1,052,803
Accounts receivable, net 371,008 437,051
Current portion of deferred commissions 115,867 109,643
Prepaid expenses and other current assets 117,092 95,959

Total current assets

2,489,926 2,421,951
Deferred commissions, less current portion 233,715 224,252
Long-term investments 451,209 391,442
Property and equipment, net 267,454 245,124
Intangible assets, net 82,553 86,916
Goodwill 128,685 128,728
Other assets 50,943 51,832
Total assets $ 3,704,485 $ 3,550,245
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 37,715 $ 32,109
Accrued expenses and other current liabilities 250,738 253,257
Current portion of deferred revenue 1,292,638 1,210,695
Current portion of convertible senior notes, net 516,925 543,418
Total current liabilities 2,098,016 2,039,479
Deferred revenue, less current portion 50,244 36,120
Convertible senior notes, net 637,795 630,018
Other long-term liabilities 53,267 65,884
Stockholders’ equity 865,163 778,744
Total liabilities and stockholders’ equity $ 3,704,485 $ 3,550,245
 

*As adjusted to reflect the impact of the full retrospective adoption of Topic 606.

 
ServiceNow, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
    Three Months Ended
March 31, 2018   March 31, 2017
*As Adjusted
Cash flows from operating activities:
Net income (loss) $ 10,622 $ (21,514 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 33,411 25,226
Amortization of deferred commissions 30,419 22,038
Amortization of debt discount and issuance costs 17,064 8,678
Stock-based compensation 121,341 89,869
Deferred income tax (24,348 ) (3,291 )
Unrealized gain on marketable equity securities (18,455 )
Repayments of convertible senior notes attributable to debt discount (8,660 )
Other (5,805 ) (1,273 )
Changes in operating assets and liabilities:
Accounts receivable 69,502 48,515
Deferred commissions (42,475 ) (30,956 )
Prepaid expenses and other assets (15,808 ) (16,468 )
Accounts payable 875 675
Deferred revenue 83,733 84,863
Accrued expenses and other liabilities (1,336 ) (18,754 )
Net cash provided by operating activities 250,080   187,608  
Cash flows from investing activities:
Purchases of property and equipment (35,371 ) (33,186 )
Business combination, net of cash and restricted cash acquired (15,035 )
Purchases of other intangibles (7,850 )
Purchases of investments (376,130 ) (223,596 )
Sales of investments 21,789
Maturities of investments 182,105   122,263  
Net cash used in investing activities (1) (237,246 ) (127,765 )
Cash flows from financing activities:
Repayments of convertible senior notes attributable to principal (28,606 )
Proceeds from employee stock plans 52,657 34,807
Taxes paid related to net share settlement of equity awards (85,555 ) (53,023 )
Payments on financing obligations (288 ) (1,415 )
Net cash used in financing activities (61,792 ) (19,631 )
Foreign currency effect on cash, cash equivalents and restricted cash (1) 6,491   (843 )
Net (decrease) increase in cash, cash equivalents and restricted cash (1) (42,467 ) 39,369
Cash, cash equivalents and restricted cash at beginning of period (1) 727,829   401,932  
Cash, cash equivalents and restricted cash at end of period (1) $ 685,362   $ 441,301  
 

*As adjusted to reflect the impact of the full retrospective adoption of Topic 606.

(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. Accordingly, we have recast our prior period condensed consolidated statement of cash flows to conform to the current presentation. The impact of the adoption for the three months ended March 31, 2017 is not material.
 

 
ServiceNow, Inc.
GAAP to Non-GAAP Reconciliation
(in thousands, except share and per share data)
(unaudited)
 
    Three Months Ended  
March 31, 2018   March 31, 2017 (3) Growth Rates
Subscription revenues:
GAAP subscription revenues $ 543,325 $ 387,584 40 %
Effects of foreign currency rate fluctuations (23,270 )
Non-GAAP adjusted subscription revenues (1) $ 520,055   34 %
 
Subscription billings:
GAAP subscription revenues $ 543,325 $ 387,584 40 %

Change in subscription deferred revenue, unbilled receivables and customer deposits

95,072

 

92,226

 
Non-GAAP subscription billings 638,397 479,810 33 %
Effects of foreign currency rate fluctuations (27,489 )
Effects of fluctuations in billings duration 1,952  
Non-GAAP adjusted subscription billings (2) $ 612,860   28 %
 
Professional services and other revenues:
GAAP professional services and other revenues $ 45,897 $ 41,187 11 %
Effects of foreign currency rate fluctuations (2,111 )

Non-GAAP adjusted professional service and other revenues (1)

$ 43,786   6 %
 
Professional services and other billings:

GAAP professional services and other revenues

$ 45,897 $ 41,187 11 %

Change in professional services and other deferred revenue

5,092   (1,526 )
Non-GAAP professional services and other billings 50,989 39,661 29 %
Effects of foreign currency rate fluctuations (2,111 )
Non-GAAP adjusted professional services and other billings (2) $ 48,878   23 %
 
Total revenues:
GAAP total revenues $ 589,222 $ 428,771 37 %
Effects of foreign currency rate fluctuations (25,381 )
Non-GAAP adjusted total revenues (1) $ 563,841   32 %
 
Total billings:
GAAP total revenues $ 589,222 $ 428,771 37 %

Change in total deferred revenue, unbilled receivables and customer deposits

100,164

 

90,700

 
Non-GAAP total billings 689,386 519,471 33 %
Effects of foreign currency rate fluctuations (29,600 )
Effects of fluctuations in billings duration 1,952  
Non-GAAP adjusted total billings (2) $ 661,738   27 %
 
Cost of revenues:
GAAP subscription cost of revenues $ 95,398 $ 70,375
Stock-based compensation (11,291 ) (7,938 )
Amortization of purchased intangibles (4,414 ) (3,572 )
Non-GAAP subscription cost of revenues $ 79,693   $ 58,865  
 
GAAP professional services and other cost of revenues $ 48,075 $ 45,709
Stock-based compensation (7,561 ) (6,875 )
Non-GAAP professional services and other cost of revenues $ 40,514   $ 38,834  
 
Gross profit (loss):
GAAP subscription gross profit $ 447,927 $ 317,209
Stock-based compensation 11,291 7,938
Amortization of purchased intangibles 4,414   3,572  
Non-GAAP subscription gross profit $ 463,632   $ 328,719  
 
GAAP professional services and other gross loss $ (2,178 ) $ (4,522 )
Stock-based compensation 7,561   6,875  
Non-GAAP professional services and other gross profit $ 5,383   $ 2,353  
 
GAAP gross profit $ 445,749 $ 312,687
Stock-based compensation 18,852 14,813
Amortization of purchased intangibles 4,414   3,572  
Non-GAAP gross profit $ 469,015   $ 331,072  
 
Gross margin:
GAAP subscription gross margin 82 % 82 %
Stock-based compensation as % of subscription revenues 2 % 2 %
Amortization of purchased intangibles as % of subscription revenues 1 % 1 %
Non-GAAP subscription gross margin 85 % 85 %
 
GAAP professional services and other gross margin (5 %) (11 %)
Stock-based compensation as % of professional services and other revenues 17 % 17 %
Non-GAAP professional services and other gross margin 12 % 6 %
 
GAAP gross margin 76 % 73 %
Stock-based compensation as % of total revenues 3 % 3 %
Amortization of purchased intangibles as % of total revenues 1 % 1 %
Non-GAAP gross margin 80 % 77 %
 
Operating expenses:
GAAP sales and marketing expenses $ 283,701 $ 203,739
Stock-based compensation (52,082 ) (38,401 )
Amortization of purchased intangibles   (117 )
Non-GAAP sales and marketing expenses $ 231,619   $ 165,221  
 
 
GAAP research and development expenses $ 117,268 $ 84,489
Stock-based compensation (28,598 ) (21,801 )
Amortization of purchased intangibles (455 ) (455 )
Non-GAAP research and development expenses $ 88,215   $ 62,233  
 
GAAP general and administrative expenses $ 65,063 $ 46,251
Stock-based compensation (21,809 ) (14,854 )
Amortization of purchased intangibles (876 ) (525 )
Business combination and other related costs (67 ) (219 )
Non-GAAP general and administrative expenses $ 42,311   $ 30,653  
 
GAAP total operating expenses $ 466,032 $ 334,479
Stock-based compensation (102,489 ) (75,056 )
Amortization of purchased intangibles (1,331 ) (1,097 )
Business combination and other related costs (67 ) (219 )
Non-GAAP total operating expenses $ 362,145   $ 258,107  
 
Income (loss) from operations:
GAAP loss from operations $ (20,283 ) $ (21,792 )
Stock-based compensation 121,341 89,869
Amortization of purchased intangibles 5,745 4,669
Business combination and other related costs 67   219  
Non-GAAP income from operations $ 106,870   $ 72,965  
 
Operating margin:
GAAP operating margin (3 %) (5 %)
Stock-based compensation as % of total revenues 21 % 21 %
Amortization of purchased intangibles as % of total revenues 0 % 1 %
Business combination and other related costs as % of total revenues 0 % 0 %
Non-GAAP operating margin 18 % 17 %
 
Net income (loss):
GAAP net income (loss) $ 10,622 $ (21,514 )
Stock-based compensation 121,341 89,869
Amortization of purchased intangibles 5,745 4,669
Business combination and other related costs 67 219
Amortization of debt discount and issuance costs for the convertible senior notes 17,064 8,678
Loss on early note conversions 780
Income tax expense effects related to the above adjustments (51,015 ) (27,049 )
Non-GAAP net income $ 104,604   $ 54,872  
 
Net income (loss) per share - basic and diluted:
GAAP net income (loss) per share - basic $ 0.06   $ (0.13 )
GAAP net income (loss) per share - diluted $ 0.06   $ (0.13 )
 
 
Non-GAAP net income per share - basic $ 0.60   $ 0.33  
Non-GAAP net income per share - diluted $ 0.56   $ 0.31  
 
GAAP weighted-average shares used to compute net income (loss) per share - basic 175,482,833   168,742,366  
 
GAAP weighted-average shares used to compute net income (loss) per share - diluted 190,249,786 168,742,366
Effect of dilutive time-based stock awards (4) 8,382,858
In-the-money portion of convertible senior notes (4) (4,530,808 )
Stock options and restricted stock units with performance conditions not yet satisfied 138,782   6,436  
Non-GAAP weighted-average shares used to compute net income per share - diluted 185,857,760   177,131,660  
 
Free cash flow:
GAAP net cash provided by operating activities $ 250,080 $ 187,608
Purchases of property and equipment (35,371 ) (33,186 )
Repayments of convertible senior notes attributable to debt discount 8,660    
Non-GAAP free cash flow $ 223,369   $ 154,422  
 
Free cash flow margin:
GAAP net cash provided by operating activities as % of total revenues 42 % 44 %
Purchases of property and equipment as % of total revenues (5 %) (8 %)
Repayments of convertible senior notes attributable to debt discount as % of total revenues 1 % %
Non-GAAP free cash flow margin 38 % 36 %
 
(1)   Adjusted revenues and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the actual exchange rates in effect during the current period.
(2) Adjusted billings and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the actual exchange rates in effect during the current period, and by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the comparison period.
(3) 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.
(4)

Effect of dilutive time-based stock awards and the in-the-money portion of convertible senior notes 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.

 

 
ServiceNow, Inc.
Reconciliation of Non-GAAP Financial Guidance
 

The financial guidance provided below is an estimate based on information available as of March 31, 2018. The comparison period amounts and the related growth rates have been adjusted from previously reported amounts to reflect the impact of the full retrospective adoption of Topic 606. 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, 2017 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 March 31, 2018. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

 
    Three Months Ended    
June 30, 2018   June 30, 2017 (3) Growth Rates
 
GAAP subscription revenues $568 - $573 million $403 million 41% - 42%
 

Effects of foreign currency rate fluctuations

(20) million
 
Non-GAAP adjusted subscription revenues (1) $548 - $553 million 36% - 37%
 
GAAP subscription revenues $568 - $573 million $403 million 41% - 42%
 
Change in subscription deferred revenue, unbilled receivables and customer deposits 39 - 40 million 52 million
   
Non-GAAP subscription billings $608 - $612 million $455 million 34% - 35%
 
Effects of foreign currency rate fluctuations (23) million
 
Effects of fluctuations in billings duration (1) million
 
Non-GAAP adjusted subscription billings (2) $584 - $588 million 28% - 29%
 
GAAP operating margin (7%)
 
Stock-based compensation expense as % of total revenues 22%
 
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 178 million
 
Effect of dilutive securities (stock options, restricted stock units and warrants) 10 million
 
Non-GAAP weighted-average shares used to compute net income per share - diluted 188 million
 

 
Twelve Months Ended    
December 31, 2018   December 31, 2017 (3) Growth Rates
 
GAAP subscription revenues $2,400 - $2,415 million $1,740 million 38% - 39%
 
Effects of foreign currency rate fluctuations (64) million
 
Non-GAAP adjusted subscription revenues (1) $2,336 - $2,351 million 34% - 35%
 
GAAP subscription revenues $2,400 - $2,415 million $1,740 million 38% - 39%
 
Change in subscription deferred revenue, unbilled receivables and customer deposits 430 million 384 million
   
Non-GAAP subscription billings $2,830 - $2,845 million $2,124 million 33% - 34%
 
Effects of foreign currency rate fluctuations (76) million
 
Effects of fluctuations in billings duration 1 million
 
Non-GAAP adjusted subscription billings (2) $2,755 - $2,770 million 30%
 
GAAP subscription gross margin 82%
 
Stock-based compensation expense as % of subscription revenues 2%
 
Amortization of purchased intangibles as % of subscription revenues 1%
 
Non-GAAP subscription margin 85%
 
GAAP operating margin (2%)
 
Stock-based compensation expense as % of total revenues 21%
 
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%)
 
Repayments of convertible senior notes attributable to debt discount as % of total revenues 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) 9 million
 
Non-GAAP weighted-average shares used to compute net income per share - diluted 187 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) Effects of foreign currency rate fluctuations and fluctuations in billing durations are not applicable for the comparison period.
 

Contacts

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

Release Summary

ServiceNow Reports First Quarter 2018 Financial Results

Contacts

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