ServiceNow® (NYSE: NOW) today announced the financial results
for its third quarter 2017.
Third Quarter 2017 GAAP Results:
- Subscription revenues of $455.4
million, representing 43% year-over-year growth.
- Professional services and other
revenues of $42.7 million, representing 10% year-over-year
growth.
- Total revenues of $498.2 million,
representing 39% year-over-year growth.
- Subscription gross profit of $373.5
million, representing 82% of subscription revenues.
- Professional services and other gross
loss of $2.7 million, representing negative 6% of professional
services and other revenues.
- Total gross profit of $370.9 million,
representing 74% of total revenues.
- Loss from operations of $7.1
million.
- Net loss of $24.2 million, or loss of
$0.14 per basic and diluted share.
- Net cash provided by operating
activities of $141.9 million, representing 28% of total
revenues.
Third Quarter 2017 Non-GAAP Results:
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. For the following non-GAAP results, see the
section entitled “Statement Regarding Use of Non-GAAP Financial
Measures” for an explanation of non-GAAP measures and the
corresponding growth rates, and the table entitled “GAAP to
Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP
measures and corresponding growth rates.
- Subscription revenues of $449.5
million, representing 41% year-over-year growth adjusted for
constant currency.
- Professional services and other
revenues of $41.9 million, representing 8% year-over-year growth
adjusted for constant currency.
- Total revenues of $491.4 million,
representing 37% year-over-year growth adjusted for constant
currency.
- Subscription billings of $499.7
million, representing 38% year-over-year growth (or $497.4 million,
representing 37% year-over-year growth adjusted for constant
currency and constant billings duration).
- Professional services and other
billings of $46.5 million, representing 12% year-over-year growth
(or $45.6 million, representing 10% year-over-year growth adjusted
for constant currency).
- Total billings of $546.1 million,
representing 35% year-over-year growth (or $543.0 million,
representing 34% year-over-year growth adjusted for constant
currency and constant billings duration).
- Subscription gross profit of $386.1
million, representing 85% of subscription revenues.
- Professional services and other gross
profit of $4.4 million, representing 10% of professional services
and other revenues.
- Total gross profit of $390.5 million,
representing 78% of total revenues.
- Income from operations of $98.4
million, representing 20% of total revenues.
- Net income of $69.3 million, or
earnings of $0.40 per basic share and $0.38 per diluted share.
- Free cash flow of $95.1 million,
representing 19% of total revenues.
“Q3 was another strong quarter for ServiceNow, with great
performance across every region,” said John Donahoe, ServiceNow
president and chief executive officer. “We are focused on
delivering best-in-class consumer-like experiences and driving
customer success. And we’re continuing to innovate, making
technology such as machine learning native to all applications on
our platform. We are committed to being a trusted cloud partner for
our customers helping them navigate digital transformation and
create the future of work.”
“We achieved $500 million of non-GAAP subscription
billings, while growing 38% year-over-year,” said Michael
Scarpelli, chief financial officer, ServiceNow. “The strong quarter
was driven by large new deals, including 22 greater than $1 million
in net new ACV, 8 of which were to Federal customers.”
Financial Outlook
Our guidance is based on foreign exchange rates as of September
30, 2017 and includes GAAP and non-GAAP financial measures. See the
section entitled “Statement Regarding Use of Non-GAAP Financial
Measures” for an explanation of non-GAAP measures and the
corresponding growth rates, and the table entitled “Reconciliation
of Non-GAAP Financial Guidance” for a reconciliation of GAAP to
non-GAAP metrics and corresponding growth rates.
For the fourth quarter of 2017, we expect:
- GAAP subscription revenues between $485
and $490 million, representing 41% to 42% year-over-year growth (or
non-GAAP subscription revenues between $473 and $478 million,
representing 37% to 39% year-over-year growth adjusted for constant
currency).
- GAAP professional services and other
revenues of $46 million, representing 12% year-over-year growth (or
non-GAAP professional services and other revenues of $44 million,
representing 7% year-over-year growth adjusted for constant
currency).
- GAAP total revenues between $531 and
$536 million, representing 38% to 39% year-over-year growth (or
non-GAAP total revenues between $517 and $522 million, representing
34% to 35% year-over-year growth adjusted for constant
currency).
- Non-GAAP subscription billings and
non-GAAP subscription billings adjusted for constant currency and
constant billings durations between $645 and $650 million,
representing 33% to 34% year-over-year growth.
- Non-GAAP professional services and
other billings of $49 million, representing a 4% decline
year-over-year (or $47 million, representing an 8% decline
year-over-year adjusted for constant currency).
- Non-GAAP total billings between $694
and $699 million, representing 30% to 31% year-over-year growth (or
between $692 and $697 million, representing 29% to 30%
year-over-year growth adjusted for constant currency and constant
billings duration).
- Non-GAAP operating margin of 17%.
- Non-GAAP weighted average shares used
to compute diluted net income per share of approximately 181
million shares.
For the full year 2017, we expect:
- GAAP subscription revenues between
$1,728 and $1,733 million, representing 41% to 42% year-over-year
growth (or non-GAAP subscription revenues between $1,722 and $1,727
million, representing 41% year-over-year growth adjusted for
constant currency).
- GAAP professional services and other
revenues of $190 million, representing 13% year-over-year growth or
(non-GAAP professional services and other revenues adjusted for
constant currency of $189 million, representing 12% year-over-year
growth).
- GAAP total revenues between $1,918 and
$1,923 million, representing 38% year-over-year growth (or non-GAAP
total revenues between $1,911 and $1,916 million, representing 37%
to 38% year-over-year growth adjusted for constant currency).
- Non-GAAP subscription billings between
$2,080 and $2,085 million, representing 38% year-over-year growth
(or between $2,077 and $2,082 million, representing 37% to 38%
year-over-year growth adjusted for constant currency and constant
billings duration).
- Non-GAAP professional services and
other billings of $194 million, or 8% year-over-year growth or
(non-GAAP professional services and other billings adjusted for
constant currency of $193 million, representing 7% year-over-year
growth).
- Non-GAAP total billings between $2,274
and $2,279 million, representing 35% year-over-year growth (or
between $2,270 and $2,275 million, representing 34% to 35%
year-over-year growth adjusted for constant currency and constant
billings duration).
- Non-GAAP subscription gross margin of
85%.
- Non-GAAP professional services and
other gross margin of 16%.
- Non-GAAP total gross margin of
78%.
- Non-GAAP operating margin of 16%.
- Non-GAAP free cash flow margin of
25%.
- Non-GAAP weighted average shares used
to compute diluted net income per share of approximately 179
million shares.
Conference Call Details
ServiceNow will host a conference call to discuss our third
quarter financial results and financial outlook beginning at 2 p.m.
Pacific Time (21:00 GMT) on Wednesday, October 25, 2017. Interested
parties may listen to the call by dialing 844.464.3153 (passcode:
91890596), or if outside North America, by dialing +1.508.637.5575
(passcode: 91890596). Individuals may access the live
teleconference from the investor relations section of the
ServiceNow website at http://investors.servicenow.com.
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: 91890596), or if outside North America, by
dialing +1.404.537.3406 (passcode: 91890596).
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 non-GAAP financial measures in addition to, and not as
a substitute for, or superior to, financial measures calculated in
accordance with GAAP.
We present revenues adjusted for constant currency and
corresponding growth rates 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.
We believe billings is a useful leading indicator regarding the
performance of our business. We present subscription billings,
professional services and other billings, and total billings, and
corresponding growth rates, as the applicable revenue plus the
applicable change in deferred revenue as presented or derived from
the statement of cash flows. While we typically bill customers
annually for our subscription services, customers sometimes
request, and we accommodate, multi-year billings, which are
billings with durations in excess of the typical 12 month term.
Accordingly, to facilitate greater comparability in our billings
information, we further present billings adjusted for constant
billings duration, in addition to adjusting for constant currency.
To present this information, we adjust subscription billings and
total billings 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 also present professional
services and other billings and corresponding growth rates adjusted
for constant currency as described above.
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 the convertible senior notes, 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, which is a non-GAAP financial measure, is
calculated as net cash provided by (used in) operating activities
plus cash paid for legal settlements, 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. However, our
calculation of free cash flow and free cash flow margin may not be
comparable to similar measures used by other companies.
The company encourages investors to carefully consider its
results under GAAP, as well as its supplemental non-GAAP
information and the reconciliation between these presentations, to
more fully understand its 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 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.
Among the important factors that could 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 web hosting, (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, and (v) our ability to compete successfully against
existing and new competitors.
Further information on these and other factors that could affect
our financial results are included in our Form 10-Q for the quarter
ended June 30, 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 quarter ended September 30,
2017.
We undertake no obligation, and do not intend, to update these
forward-looking statements, to review or confirm analysts’
expectations, or to provide interim reports or updates on the
progress of the current financial quarter.
About ServiceNow
ServiceNow makes work better across the enterprise. Getting
simple stuff done at work can be easy, and getting complex
multi-step tasks completed can be painless. Our applications
automate, predict, digitize and optimize business processes and
tasks, from IT to Customer Service to Security Operations and to
Human Resources, creating a better experience for your employees,
users and customers while transforming your enterprise. ServiceNow
(NYSE:NOW) is how work gets done. For more information,
visit: www.servicenow.com.
© 2017 ServiceNow, Inc. All rights reserved. ServiceNow, the
ServiceNow logo, and other ServiceNow marks are trademarks and/or
registered trademarks of ServiceNow, Inc., in the United States
and/or other countries. Other company and product names 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 Nine Months Ended September 30, 2017
September 30, 2016 September 30, 2017 September
30, 2016 Revenues: Subscription $ 455,421 $ 318,934 $
1,242,563 $ 877,035 Professional services and other 42,749
38,722 144,093 127,812
Total revenues 498,170 357,656
1,386,656 1,004,847 Cost of revenues
(1): Subscription 81,878 61,566 228,046 170,707 Professional
services and other 45,402 41,271
137,366 123,039 Total cost of revenues
127,280 102,837 365,412
293,746 Gross profit 370,890 254,819
1,021,244 711,101 Operating
expenses (1): Sales and marketing 227,015 166,491 686,325 511,607
Research and development 98,465 75,018 272,959 211,306 General and
administrative 52,465 40,085 150,242 117,393 Legal settlement
— — — 270,000
Total operating expenses 377,945
281,594 1,109,526 1,110,306 Loss
from operations (7,055 ) (26,775 ) (88,282 ) (399,205 ) Interest
expense (16,566 ) (8,389 ) (36,581 ) (24,746 ) Interest income and
other income (expense), net 853 1,783
739 4,745 Loss before income taxes
(22,768 ) (33,381 ) (124,124 ) (419,206 ) Provision for (benefit
from) income taxes 1,420 2,877
(2,801 ) 9 Net loss $ (24,188 ) $ (36,258 ) $
(121,323 ) $ (419,215 ) Net loss per share - basic and diluted $
(0.14 ) $ (0.22 ) $ (0.71 ) $ (2.56 ) Weighted-average shares used
to compute net loss per share - basic and diluted
171,883,190 165,378,836 170,359,717
163,767,329
(1) Includes total stock-based
compensation expense for stock-based awards as follows:
Three
Months Ended Nine Months Ended September 30, 2017
September 30, 2016 September 30, 2017 September
30, 2016 Cost of revenues: Subscription $ 8,980 $ 7,140 $
25,860 $ 20,698 Professional services and other 7,056 7,150 21,622
20,045 Sales and marketing 43,962 31,898 124,650 95,757 Research
and development 23,092 21,376 67,624 62,956 General and
administrative 17,352 13,523 48,695 35,004
ServiceNow,
Inc.Condensed Consolidated Balance Sheets(in
thousands)(unaudited) September 30,
2017 December 31, 2016 ASSETS Current
assets: Cash and cash equivalents $ 1,104,871 $ 401,238 Short-term
investments 567,026 498,124 Accounts receivable, net 291,903
322,757 Current portion of deferred commissions 96,811 76,780
Prepaid expenses and other current assets 66,881
43,636 Total current assets 2,127,492 1,342,535 Deferred
commissions, less current portion 69,041 61,990 Long-term
investments 424,858 262,658 Property and equipment, net 231,304
181,620 Intangible assets, net 68,970 65,854 Goodwill 108,097
82,534 Other assets 39,753 36,576 Total assets $
3,069,515 $ 2,033,767
LIABILITIES AND STOCKHOLDERS’
EQUITY Current liabilities: Accounts payable $ 20,752 $ 38,080
Accrued expenses and other current liabilities 177,553 171,636
Current portion of deferred revenue 1,082,346 861,782
Total current liabilities 1,280,651 1,071,498 Deferred revenue,
less current portion 42,298 33,319 Convertible senior notes, net
1,156,629 507,812 Other long-term liabilities 38,546 34,177
Stockholders’ equity 551,391 386,961 Total
liabilities and stockholders’ equity $ 3,069,515 $ 2,033,767
ServiceNow, Inc.Condensed Consolidated Statements of Cash
Flows(in thousands)(unaudited)
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 September
30, 2017 September 30, 2016 Cash flows from
operating activities: Net loss $ (24,188 ) $ (36,258 ) $
(121,323 ) $ (419,215 ) Adjustments to reconcile net loss to net
cash provided by operating activities: Depreciation and
amortization 29,401 22,264 81,808 59,716 Amortization of premiums
on investments 802 946 2,508 3,745 Amortization of deferred
commissions 29,664 20,785 80,251 57,742 Amortization of debt
discount and issuance costs 16,566 8,389 36,581 24,746 Stock-based
compensation 100,442 81,087 288,451 234,460 Deferred income tax
(1,304 ) 1,331 (6,055 ) (5,095 ) Other (342 ) (1,389 ) (4,062 )
(857 ) Changes in operating assets and liabilities, net of effect
of business combinations: Accounts receivable (8,698 ) (22,728 )
42,341 (15,761 ) Deferred commissions (41,061 ) (30,793 ) (102,348
) (79,190 ) Prepaid expenses and other assets (14,921 ) (1,732 )
(26,866 ) (11,733 ) Accounts payable (3,228 ) (8,353 ) (11,088 )
(8,625 ) Deferred revenue 47,932 46,620 193,594 151,019 Accrued
expenses and other liabilities 10,825 16,549
4,247 36,282 Net cash provided
by operating activities 141,890 96,718
458,039 27,234
Cash flows from
investing activities: Purchases of property and equipment
(46,753 ) (31,183 ) (115,856 ) (84,112 ) Business combinations, net
of cash acquired (5,000 ) — (26,537 ) (34,297 ) Purchases of other
intangibles — — (6,170 ) (10,750 ) Purchases of investments
(286,976 ) (254,032 ) (641,666 ) (434,397 ) Purchases of strategic
investments (100 ) — (4,000 ) — Sales of investments — 173,403
77,968 266,288 Maturities of investments 128,648 59,932 350,597
218,452 Restricted cash 91 289
(739 ) (322 ) Net cash used in investing activities
(210,090 ) (51,591 ) (366,403 ) (79,138 )
Cash flows from financing activities: Net proceeds from
borrowings on convertible senior notes — — 772,127 — Proceeds from
issuance of warrants — — 54,071 — Purchases of convertible note
hedges — — (128,017 ) — Proceeds from employee stock plans 35,856
20,912 76,748 55,063 Taxes paid related to net share settlement of
equity awards (43,781 ) (28,781 ) (131,130 ) (88,567 ) Repurchases
of common stock from stockholders — — (55,000 ) — Payments on
financing obligations (121 ) (1,138 ) (2,681 )
(1,361 ) Net cash (used in) provided by financing activities
(8,046 ) (9,007 ) 586,118
(34,865 ) Foreign currency effect on cash and cash equivalents
7,660 (166 ) 25,879 (469
) Net (decrease) increase in cash and cash equivalents (68,586 )
35,954 703,633 (87,238 ) Cash and cash equivalents at beginning of
period 1,173,457 289,113 401,238
412,305 Cash and cash equivalents at end of
period $ 1,104,871 $ 325,067 $ 1,104,871 $
325,067
ServiceNow, Inc.GAAP to Non-GAAP
Reconciliation(in thousands, except share and per share
data)(unaudited)
Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2016 (3)
Growth Rates September 30, 2017 September 30,
2016 (3) Growth Rates Subscription
revenues: GAAP subscription revenues $ 455,421 $ 318,934 43 % $
1,242,563 $ 877,035 42 % Effects of foreign currency rate
fluctuations (5,923 ) 6,638 Non-GAAP adjusted
subscription revenues (1) $ 449,498 41 % $ 1,249,201
42 %
Subscription billings: GAAP subscription
revenues $ 455,421 $ 318,934 43 % $ 1,242,563 $ 877,035 42 %
Increase in subscription deferred revenue 44,230
43,798 192,387 149,750
Non-GAAP subscription billings $ 499,651 $ 362,732 38 % $ 1,434,950
$ 1,026,785 40 % Effects of foreign currency rate fluctuations
(6,110 ) 10,701 Effects of fluctuations in billings duration
3,859 (14,006 ) Non-GAAP adjusted subscription
billings (2) $ 497,400 37 % $ 1,431,645 39 %
Professional services and other revenues: GAAP professional
services and other revenues $ 42,749 $ 38,722 10 % $ 144,093 $
127,812 13 % Effects of foreign currency rate fluctuations
(815 ) 666 Non-GAAP adjusted professional services
and other revenues (1) $ 41,934 8 % $ 144,759 13 %
Professional services and other billings: GAAP
professional services and other revenues $ 42,749 $ 38,722 10 % $
144,093 $ 127,812 13 % Increase in professional services and other
deferred revenue 3,702 2,822
1,207 1,269 Non-GAAP professional services and
other billings 46,451 41,544 12 % 145,300 129,081 13 % Effects of
foreign currency rate fluctuations (815 ) 666
Non-GAAP adjusted professional services and other billings (2) $
45,636 10 % $ 145,966 13 %
Total
revenues: GAAP total revenues $ 498,170 $ 357,656 39 % $
1,386,656 $ 1,004,847 38 % Effects of foreign currency rate
fluctuations (6,738 ) 7,304 Non-GAAP adjusted
total revenues (1) $ 491,432 37 % $ 1,393,960 39 %
Total billings: GAAP total revenues $ 498,170 $
357,656 39 % $ 1,386,656 $ 1,004,847 38 % Increase in total
deferred revenue from condensed consolidated statements of cash
flows 47,932 46,620 193,594
151,019 Non-GAAP total billings 546,102
404,276 35 % 1,580,250 1,155,866 37 % Effects of foreign currency
rate fluctuations (6,925 ) 11,367 Effects of fluctuations in
billings duration 3,859 (14,006 ) Non-GAAP
adjusted total billings (2) $ 543,036 34 % $ 1,577,611
36 %
Cost of revenues: GAAP subscription cost
of revenues $ 81,878 $ 61,566 $ 228,046 $ 170,707 Stock-based
compensation (8,980 ) (7,140 ) (25,860 ) (20,698 ) Amortization of
purchased intangibles (3,581 ) (3,425 )
(10,849 ) (9,299 ) Non-GAAP subscription cost of revenues $
69,317 $ 51,001 $ 191,337 $ 140,710
GAAP professional services and other cost of revenues $
45,402 $ 41,271 $ 137,366 $ 123,039 Stock-based compensation
(7,056 ) (7,150 ) (21,622 ) (20,045 ) Non-GAAP
professional services and other cost of revenues $ 38,346 $
34,121 $ 115,744 $ 102,994
Gross profit (loss):
GAAP subscription gross profit $ 373,543 $ 257,368 $ 1,014,517 $
706,328 Stock-based compensation 8,980 7,140 25,860 20,698
Amortization of purchased intangibles 3,581
3,425 10,849 9,299 Non-GAAP
subscription gross profit $ 386,104 $ 267,933 $
1,051,226 $ 736,325 GAAP professional services
and other gross (loss) profit $ (2,653 ) $ (2,549 ) $ 6,727 $ 4,773
Stock-based compensation 7,056 7,150
21,622 20,045 Non-GAAP professional
services and other gross profit $ 4,403 $ 4,601 $
28,349 $ 24,818 GAAP gross profit $ 370,890 $
254,819 $ 1,021,244 $ 711,101 Stock-based compensation 16,036
14,290 47,482 40,743 Amortization of purchased intangibles
3,581 3,425 10,849 9,299
Non-GAAP gross profit $ 390,507 $ 272,534 $
1,079,575 $ 761,143
Gross margin: GAAP
subscription gross margin 82 % 81 % 82 % 81 % Stock-based
compensation as % of subscription revenues 2 % 2 % 2 % 2 %
Amortization of purchased intangibles as % of subscription revenues
1 % 1 % 1 % 1 % Non-GAAP subscription
gross margin 85 % 84 % 85 % 84 %
GAAP professional services and other gross margin (6 %) (7 %) 5 % 4
% Stock-based compensation as % of professional services and other
revenues 16 % 19 % 15 % 15 % Non-GAAP
professional services and other gross margin 10 % 12
% 20 % 19 % GAAP gross margin 74 % 71 % 74 %
71 % Stock-based compensation as % of total revenues 3 % 4 % 3 % 4
% Amortization of purchased intangibles as % of total revenues
1 % 1 % 1 % 1 % Non-GAAP gross margin
78 % 76 % 78 % 76 %
Operating
expenses: GAAP sales and marketing expenses $ 227,015 $ 166,491
$ 686,325 $ 511,607 Stock-based compensation (43,962 ) (31,898 )
(124,650 ) (95,757 ) Amortization of purchased intangibles
(117 ) (121 ) (351 ) (195 ) Non-GAAP sales and
marketing expenses $ 182,936 $ 134,472 $ 561,324
$ 415,655 GAAP research and development
expenses $ 98,465 $ 75,018 $ 272,959 $ 211,306 Stock-based
compensation (23,092 ) (21,376 ) (67,624 ) (62,956 ) Amortization
of purchased intangibles (455 ) (455 ) (1,365
) (758 ) Non-GAAP research and development expenses $ 74,918
$ 53,187 $ 203,970 $ 147,592
GAAP general and administrative expenses $ 52,465 $ 40,085 $
150,242 $ 117,393 Stock-based compensation (17,352 ) (13,523 )
(48,695 ) (35,004 ) Amortization of purchased intangibles (681 )
(272 ) (1,734 ) (646 ) Business combination and other related costs
(154 ) (17 ) (1,504 ) (962 ) Non-GAAP
general and administrative expenses $ 34,278 $ 26,273
$ 98,309 $ 80,781 GAAP legal settlements $ - $
- $ - $ 270,000 Legal settlements - -
- (270,000 ) Non-GAAP legal settlements $ -
$ - $ - $ -
Income (loss)
from operations: GAAP loss from operations $ (7,055 ) $ (26,775
) $ (88,282 ) $ (399,205 ) Stock-based compensation 100,442 81,087
288,451 234,460 Amortization of purchased intangibles 4,834 4,273
14,299 10,898 Business combination and other related costs 154 17
1,504 962 Legal settlements - -
- 270,000 Non-GAAP income from operations $
98,375 $ 58,602 $ 215,972 $ 117,115
Operating margin: GAAP operating margin (1 %) (7 %)
(6 %) (40 %) Stock-based compensation as % of total revenues 20 %
22 % 21 % 23 % Amortization of purchased intangibles as % of total
revenues 1 % 1 % 1 % 2 % Business combination and other related
costs as % of total revenues 0 % 0 % 0 % 0 % Legal settlements as %
of total revenues 0 % 0 % 0 % 27 %
Non-GAAP operating margin 20 % 16 % 16 %
12 %
Net income (loss): GAAP net loss $
(24,188 ) $ (36,258 ) $ (121,323 ) $ (419,215 ) Stock-based
compensation 100,442 81,087 288,451 234,460 Amortization of
purchased intangibles 4,834 4,273 14,299 10,898 Business
combination and other related costs 154 17 1,504 962 Legal
settlements - - - 270,000 Amortization of debt discount and
issuance costs for the convertible senior notes 16,566 8,389 36,581
24,746 Income tax expense effects related to the above adjustments
(28,464 ) (17,977 ) (68,428 ) (42,262 )
Non-GAAP net income $ 69,344 $ 39,531 $ 151,084
$ 79,589
Net income (loss) per share -
basic and diluted: GAAP net loss per share - basic and diluted
$ (0.14 ) $ (0.22 ) $ (0.71 ) $ (2.56 ) Non-GAAP net income per
share - basic $ 0.40 $ 0.24 $ 0.89 $ 0.49
Non-GAAP net income per share - diluted $ 0.38 $ 0.23
$ 0.84 $ 0.46 Weighted-average shares
used to compute net income (loss) per share - basic
171,883,190 165,378,836 170,359,717
163,767,329 GAAP weighted-average
shares used to compute net loss per share - diluted 171,883,190
165,378,836 170,359,717 163,767,329 Effect of dilutive securities
(stock options, restricted stock units and warrants)
8,537,314 8,643,420 8,652,996
9,097,348 Non-GAAP weighted-average shares used to
compute net income per share - diluted 180,420,504
174,022,256 179,012,713
172,864,677
Free cash flow: GAAP net cash
provided by operating activities $ 141,890 $ 96,718 $ 458,039 $
27,234 Purchases of property and equipment (46,753 ) (31,183 )
(115,856 ) (84,112 ) Cash paid for legal settlements -
- - 267,500
Non-GAAP free cash flow $ 95,137 $ 65,535 $ 342,183
$ 210,622
Free cash flow margin: GAAP
net cash provided by operating activities as % of total revenues 28
% 27 % 33 % 3 % Purchases of property and equipment as % of total
revenues (9 %) (9 %) (8 %) (9 %) Cash paid for legal settlements as
% of total revenues 0 % 0 % 0 % 27 %
Non-GAAP free cash flow margin 19 % 18 % 25 %
21 %
(1)
Adjusted revenues and the corresponding
growth rates are derived by applying the exchange rates in effect
during the comparison period rather than the actual exchange rates
in effect during the current period.
(2)
Adjusted billings and the corresponding
growth rates are derived by applying the exchange rates in effect
during the comparison period rather than the actual exchange rates
in effect during the current period, and by replacing the portion
of multi-year billings in excess of twelve months during the
current period with the portion of multi-year billings in excess of
twelve months during the comparison period.
(3)
Effects of foreign currency rate
fluctuations and fluctuations in billing durations are not
applicable for the comparison period.
ServiceNow, Inc.Reconciliation of Non-GAAP
Financial Guidance The financial guidance
provided below is an estimate based on information available as of
September 30, 2017. The company’s future performance and financial
results are subject to risks and uncertainties, and actual results
could differ materially from the guidance set forth below. Some of
the factors that could affect the company’s financial results are
stated above in this press release. Further information on these
and other factors that could affect our financial results are
included in our Form 10-Q for the quarter ended June 30, 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 quarter ended September 30, 2017. The company assumes
no obligation to update any forward-looking statements or
information, which speak as of their respective dates.
Three Months EndedDecember 31, 2017 Three Months
EndedDecember 31, 2016 (3) Growth rates
GAAP subscription revenues $485 - $490 million $345 million
41% - 42% Effects of foreign currency rate fluctuations (12)
million Non-GAAP adjusted subscription revenues (1) $473 -
$478 million 37% - 39% GAAP subscription revenues $485 -
$490 million $345 million 41% - 42% Increase in subscription
deferred revenue 160 million 139 million Non-GAAP
subscription billings $645 - $650 million $484 million 33% - 34%
Effects of foreign currency rate fluctuations (17) million
Effects of fluctuations in billings duration 17 million
Non-GAAP adjusted subscription billings (2) $645 - $650
million 33% - 34% GAAP professional services and other
revenues $46 million $41 million 12% Effects of foreign
currency rate fluctuations (2) million Non-GAAP adjusted
professional services and other revenues (1) $44 million 7%
GAAP professional services and other revenues $46 million $41
million 12% Increase in professional services and other
deferred revenue 3 million 10 million Non-GAAP
professional services and other billings $49 million $51 million -
4% Effects of foreign currency rate fluctuations (2) million
Non-GAAP adjusted professional services and other billings
(2) $47 million - 8% GAAP total revenues $531 - $536 million
$386 million 38% - 39% Effects of foreign currency rate
fluctuations (14) million Non-GAAP adjusted total revenues
(1) $517 - $522 million 34% - 35% GAAP total revenues $531 -
$536 million $386 million 38% - 39% Increase in total
deferred revenue from condensed consolidated statements of cash
flows 163 million 149 million Non-GAAP total billings
$694 - $699 million $535 million 30% - 31% Effects of
foreign currency rate fluctuations (19) million Effects of
fluctuations in billings duration 17 million Non-GAAP
adjusted total billings (2) $692 - $697 million 29% - 30%
GAAP operating margin (3%) Stock-based compensation expense
as % of total revenues 19% Amortization of purchased
intangibles as % of total revenues 1% Non-GAAP operating
margin 17% GAAP weighted-average shares used to compute net
loss per share - diluted 173 million Effect of dilutive
securities (stock options, restricted stock units and warrants) 8
million Non-GAAP weighted-average shares used to compute net
income per share - diluted 181 million
Twelve
Months EndedDecember 31, 2017 Twelve Months
EndedDecember 31, 2016 (3) Growth rates
GAAP subscription revenues $1,728 - $1,733 million $1,222
million 41% - 42% Effects of foreign currency rate
fluctuations (6) million Non-GAAP adjusted subscription
revenues (1) $1,722 - $1,727 million 41% GAAP subscription
revenues $1,728 - $1,733 million $1,222 million 41% - 42%
Increase in subscription deferred revenue 352 million 289 million
Non-GAAP subscription billings $2,080 - $2,085
million $1,511 million 38% Effects of foreign currency rate
fluctuations (6) million Effects of fluctuations in billings
duration 3 million Non-GAAP adjusted subscription billings
(2) $2,077 - $2,082 million 37% - 38% GAAP professional
services and other revenues $190 million $169 million 13%
Effects of foreign currency rate fluctuations (1) million
Non-GAAP adjusted professional services and other revenues (1) $189
million 12% GAAP professional services and other revenues
$190 million $169 million 13% Increase in professional
services and other deferred revenue 4 million 11 million
Non-GAAP professional services and other billings $194
million $180 million 8% Effects of foreign currency rate
fluctuations (1) million Non-GAAP adjusted professional
services and other billings (2) $193 million 7% GAAP total
revenues $1,918 - $1,923 million $1,391 million 38% Effects
of foreign currency rate fluctuations (7) million Non-GAAP
adjusted total revenues (1) $1,911 - $1,916 million 37% - 38%
GAAP total revenues $1,918 - $1,923 million $1,391 million
38% Increase in total deferred revenue from condensed
consolidated statements of cash flows 356 million 300 million
Non-GAAP total billings $2,274 - $2,279 million
$1,691 million 35% Effects of foreign currency rate
fluctuations (7) million Effects of fluctuations in billings
duration 3 million Non-GAAP adjusted total billings (2)
$2,270 - $2,275 million 34% - 35% GAAP subscription gross
margin 82% Stock-based compensation expense as % of
subscription revenues 2% Amortization of purchased
intangibles as % of subscription revenues 1% Non-GAAP
subscription gross margin 85% GAAP professional services and
other gross margin 1% Stock-based compensation expense as %
of professional services and other revenues 15% Non-GAAP
professional services and other gross margin 16% GAAP total
gross margin 74% Stock-based compensation expense as % of
total revenues 3% Amortization of purchased intangibles as %
of total revenues 1% Non-GAAP total gross margin 78%
GAAP operating margin (5%) Stock-based compensation expense
as % of total revenues 20% Amortization of purchased
intangibles as % of total revenues 1% Non-GAAP operating
margin 16% GAAP net cash provided by operating activities as
% of total revenues 33% Purchases of property and equipment
as % of total revenues (8%) Non-GAAP free cash flow margin
25% GAAP weighted-average shares used to compute net loss
per share - diluted 171 million Effect of dilutive
securities (stock options, restricted stock units and warrants) 8
million Non-GAAP weighted-average shares used to compute net
income per share - diluted 179 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171025006277/en/
ServiceNow, Inc.Media Contact:Joanne Blum,
310-489-7278press@servicenow.comorInvestor Contact:Jimmy
Sexton, 669-262-1430ir@servicenow.com
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