ServiceNow® (NYSE: NOW) today announced the financial results
for its fourth quarter and fiscal year 2017.
Fourth Quarter 2017 and Fiscal Year 2017 Highlights:
- GAAP subscription revenues of $497
million in Q4 2017, representing 44% year-over-year growth
- Signed over $1 billion in total
contract value in Q4 2017
- Signed a record 41 deals over $1
million in net new annual contract value in Q4 2017
- Closed the year with 500 customers with
more than $1 million in annual contract value
- Added more than 100 Global 2000
accounts in 2017
“We finished 2017 with our best quarter ever, closing a record
41 deals greater than $1 million, and giving us strong global
momentum,” said John Donahoe, ServiceNow president and chief
executive officer. “ServiceNow is becoming a clear strategic
partner of choice for CIOs and other leaders digitally transforming
their companies with simpler, easier, better ways to get work done
and creating great experiences for their customers and
employees.”
“Combined backlog and deferred revenue at the end of 2017 was
$3.9 billion, a 39% annual increase,” said Michael Scarpelli,
ServiceNow chief financial officer. “Strength in 2017 was driven by
more than 100 new Global 2000 customers, and increasing our
customers with greater than $1 million in annual contract value by
43% year over year.”
Fourth Quarter 2017 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the
fourth quarter 2017.
Fourth
Quarter 2017 GAAP Results
Fourth Quarter 2017 Non-GAAP
Results(1)
Adjusted Adjusted Amount Year/Year
Amount Year/Year Amount Year/Year
($ millions) Growth (%)
($ millions) Growth (%)
($ millions)(2)
Growth (%) Subscription revenues $497.2 44% $484.3
41%
Professional services and other
revenues
$49.1 20% $47.6 16% Total revenues $546.4 42% $531.9 38%
Subscription billings $684.0 41% $678.4 40% Professional services
and other billings $50.3 (1%) $48.7 (4%) Total billings $734.3 37%
$727.1 36%
Amount Amount
($ millions) Margin (%) ($ millions)
Margin (%) Subscription
gross profit $409.7 82% $423.3 85% Professional services and other
gross profit $2.3 5% $8.2 17% Total gross profit $412.0 75% $431.5
79% Income (loss) from operations ($13.1) (2%) $98.8 18% Net cash
provided by operating activities $184.8 34% Free cash flow $150.1
27%
Earnings per
Earnings per Amount
basic/diluted
Amount
basic/diluted
($ millions) share ($)
($ millions) share ($)
Net income (loss) ($27.8) $(0.16) $63.6 $0.37 / $0.35
(1) We report non-GAAP financial measures in addition to, and not
as a substitute for, or superior to, financial measures calculated
in accordance with GAAP. See the section entitled “Statement
Regarding Use of Non-GAAP Financial Measures” for an explanation of
non-GAAP measures, and the table entitled "GAAP to Non-GAAP
Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
(2)
Non-GAAP subscription revenues,
professional services and other revenues, total revenues and
professional services and other billings are adjusted for constant
currency. Non-GAAP subscription billings and total billings are
adjusted for constant currency and constant billings duration. See
the section entitled “Statement Regarding Use of Non-GAAP Financial
Measures” for an explanation of non-GAAP measures, and the table
entitled "GAAP to Non-GAAP Reconciliation” for a reconciliation of
GAAP to non-GAAP measures.
Fiscal Year 2017 GAAP and Non-GAAP Results:
The following table summarizes our financial results for fiscal
year 2017.
Full Year 2017 GAAP Results
Full Year 2017 Non-GAAP Results(1)
Adjusted Adjusted Amount
Year/Year Amount Year/Year Amount
Year/Year ($ millions)
Growth (%) ($ millions) Growth (%)
($ millions)(2)
Growth (%) Subscription revenues $1,739.8 42%
$1,733.5 42% Professional services and other revenues $193.2 14%
$192.3 14% Total revenues $1,933.0 39% $1,925.8 38%
Subscription billings $2,119.0 40% $2,110.0 40% Professional
services and other billings $195.6 9% $194.7 8% Total billings
$2,314.6 37% $2,304.7 36%
Amount Amount
($ millions) Margin (%) ($
millions) Margin (%)
Subscription gross profit $1,424.2 82% $1,474.5 85% Professional
services and other gross profit $9.0 5% $36.5 19% Total gross
profit $1,433.3 74% $1,511.0 78% Income (loss) from operations
($101.4) (5%) $314.7 16% Net cash provided by operating activities
$642.8 33% Free cash flow $492.3 25%
Earnings per
Earnings per Amount
basic/diluted
Amount
basic/diluted
($ millions) share ($)
($ millions) share ($)
Net income (loss) ($149.1) ($0.87) $214.7 $1.25 / $1.19
(1) We report non-GAAP financial measures in addition to,
and not as a substitute for, or superior to, financial measures
calculated in accordance with GAAP. See the section entitled
“Statement Regarding Use of Non-GAAP Financial Measures” for an
explanation of non-GAAP measures, and the table entitled "GAAP to
Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP
measures. (2)
Non-GAAP subscription revenues,
professional services and other revenues, total revenues and
professional services and other billings are adjusted for constant
currency. Non-GAAP subscription billings and total billings are
adjusted for constant currency and constant billings duration. See
the section entitled “Statement Regarding Use of Non-GAAP Financial
Measures” for an explanation of non-GAAP measures, and the table
entitled "Reconciliation of Non-GAAP Financial Guidance” for a
reconciliation of GAAP to non-GAAP measures.
Financial Outlook
Our guidance is based on foreign exchange rates as of December
31, 2017 and includes GAAP and non-GAAP financial measures. As
described in the “New Revenue Recognition Standard Under Topic 606”
section below, our guidance is based on the new Topic 606 revenue
recognition standard that is effective beginning January 1, 2018.
The comparison period amounts used to calculate related growth
rates have been restated from previously reported amounts to
conform to the requirements of Topic 606.
The following table summarizes our guidance for the first
quarter 2018:
First Quarter 2018 GAAP
Guidance
First Quarter 2018 Non-GAAP
Guidance(1)
Adjusted Amount
Year/Year Amount Year/Year Adjusted
Amount
Year/Year
($ millions) Growth (%)
($ millions) Growth (%)
($ millions)(2)
Growth (%) Subscription revenues $525 - $530 35% -
37% $507 - $512 31% - 32% Subscription billings $601 - $605 25% -
26% $600 - $604 25% - 26%
Margin (%)
Income from operations 16%
Amount
(millions)
Weighted average shares used to compute
diluted net income per share
184 (1) See the section entitled “Statement Regarding Use of
Non-GAAP Financial Measures” for an explanation of non-GAAP
measures, and the table entitled "Reconciliation of Non-GAAP
Financial Guidance” for a reconciliation of GAAP to non-GAAP
measures. (2)
Non-GAAP subscription revenues are
adjusted for constant currency. Non-GAAP subscription billings are
adjusted for constant currency and constant billings duration. See
the section entitled “Statement Regarding Use of Non-GAAP Financial
Measures” for an explanation of non-GAAP measures, and the table
entitled "Reconciliation of Non-GAAP Financial Guidance” for a
reconciliation of GAAP to non-GAAP measures.
The following table summarizes our guidance for fiscal year
2018:
Full Year 2018 GAAP
Guidance
Full Year 2018 Non-GAAP
Guidance(1)
Adjusted Amount
Year/Year Amount Year/Year Adjusted
Amount Year/Year ($
millions) Growth (%) ($ millions)
Growth (%)
($ millions)(2)
Growth (%) Subscription revenues $2,355 - $2,375 35%
- 37% $2,314 - $2,334 33% - 34% Subscription billings $2,770 -
$2,790 30% - 31% $2,742 - $2,762 29% - 30%
Margin (%)
Subscription gross profit 85% Income from
operations 20% Free cash flow 27%
Amount
(millions)
Weighted average shares used to compute
diluted net income per share 185 (1) See the section
entitled “Statement Regarding Use of Non-GAAP Financial Measures”
for an explanation of non-GAAP measures, and the table entitled
"Reconciliation of Non-GAAP Financial Guidance” for a
reconciliation of GAAP to non-GAAP measures. (2)
Non-GAAP subscription revenues are
adjusted for constant currency. Non-GAAP subscription billings are
adjusted for constant currency and constant billings duration. See
the section entitled “Statement Regarding Use of Non-GAAP Financial
Measures” for an explanation of non-GAAP measures, and the table
entitled "Reconciliation of Non-GAAP Financial Guidance” for a
reconciliation of GAAP to non-GAAP measures.
Conference Call Details
ServiceNow will host a conference call to discuss our fourth
quarter and fiscal year 2017 financial results and financial
outlook beginning at 2 p.m. Pacific Time (22:00 GMT) on Wednesday,
Jan. 31, 2018. Interested parties may listen to the call by dialing
844.464.3153 (passcode: 5999121), or if outside North America, by
dialing +1.508.637.5575 (passcode: 5999121). Individuals may
access the live teleconference from this webcast link
(https://edge.media-server.com/m6/p/gwkadhyi).
An audio replay of the conference call and webcast will be
available two hours after its completion and will be accessible for
30 days. To hear the replay, interested parties may go to the
investor relations section of the ServiceNow website or dial
855.859.2056 (passcode: 5999121), or if outside North America, by
dialing +1.404.537.3406 (passcode: 5999121).
Investor Presentation Details
An investor presentation providing additional information and
analysis can be found at http://investors.servicenow.com.
New Revenue Recognition Standard Under Topic 606
In May 2014, the Financial Accounting Standards Board issued a
new standard related to revenue recognition from contracts with
customers (“Topic 606”), which is effective beginning January 1,
2018. Topic 606 supersedes the prior revenue recognition standard
("Topic 605"). The financial information under the heading
“Financial Outlook” above is prepared in accordance with Topic 606,
and the comparison period amounts used to calculate related growth
rates are based on amounts that have been restated from previously
reported amounts to conform to the requirements of Topic 606.
Unless otherwise indicated, all other financial information in this
release is prepared in accordance with Topic 605.
Under Topic 606, for our on-premises offerings, we will
recognize a portion of the subscription revenue when the
on-premises offering is made available, resulting in a larger
amount of upfront subscription revenue, and a smaller amount of
deferred revenue compared with Topic 605, which required ratable
revenue recognition over the contract period. Due to the complexity
of certain of our customer contracts, the actual revenue
recognition treatment required under Topic 606 will depend on
contract-specific terms and may result in greater variability in
revenue from period to period. Proceeds for attendance and
sponsorship related to Knowledge and other user forums will be
classified as a reduction in sales and marketing expenses instead
of professional services and other revenues.
Under Topic 606, we will defer all incremental commission costs
to obtain customer contracts, including indirect costs that are not
tied to a specific contract. On initial contracts, only the portion
equivalent to a renewal commission will be amortized over the
contract term, while the portion incremental to a renewal
commission will be amortized over a period of benefit that we have
determined to be five years. On renewal contracts, these costs will
be amortized over the renewal term. Additionally, for our
on-premises offerings, consistent with the recognition of
subscription revenue for on-premises offerings as described above,
a portion of the commission costs will be expensed upfront when the
on-premises offering is made available. Under Topic 605, we
deferred only direct and incremental commission costs to obtain a
contract and amortized those costs over the contract term, which is
generally 12 to 36 months.
Statement Regarding Use of Non-GAAP Financial
Measures
We report the following non-GAAP financial measures in addition
to, and not as a substitute for, or superior to, financial measures
calculated in accordance with GAAP.
- Revenue Adjusted for Constant Currency.
We present revenues adjusted for constant currency to provide a
framework for assessing how our business performed excluding the
effect of foreign currency rate fluctuations. To present this
information, current period results for entities reporting in
currencies other than U.S. Dollars are converted into U.S. Dollars
at the exchange rates in effect during the prior period presented,
rather than the actual exchange rates in effect during the current
period. We believe the presentation of revenues adjusted for
constant currency facilitates the comparison of revenues
year-over-year.
- Billings. We believe billings is a
useful leading indicator regarding the performance of our business.
Because billings is derived from our GAAP revenues, the definition
of billings varies depending on whether our revenues have been
calculated under Topic 605 or Topic 606. Under Topic 605, we define
subscription billings, professional services and other billings,
and total billings as the applicable revenue plus the applicable
change in deferred revenue as presented or derived from the
statement of cash flows. Under Topic 606, due to the change in
timing of revenue recognition under certain of our contracts, we
define subscription billings, professional services and other
billings, and total billings as the applicable revenue plus the
applicable change in deferred revenue, unbilled receivables and
customer deposits as presented or derived from the statement of
cash flows. Under Topic 606, unbilled receivables are amounts
recognized as revenue that have not yet been billed, and customer
deposits are refundable amounts associated with customer contracts.
In presenting billings under either definition, we adjust for
constant currency, as described above, and adjust for constant
duration by replacing the portion of multi-year billings in excess
of twelve months during the current period with the portion of
multi-year billings in excess of twelve months during the prior
period presented. We believe these adjustments facilitate greater
comparability in our billings information year-over-year.
- Gross Profit, Income from Operations
and Net Income. Our non-GAAP presentation of gross profit, income
from operations, and net income measures exclude stock-based
compensation expense, amortization of debt discount and issuance
costs related to our convertible senior notes, loss on early note
conversions, amortization of purchased intangibles, legal
settlements, business combination and other related costs, and the
related income tax effect of these adjustments. We believe the
presentation of operating results that exclude these non-cash or
non-recurring items provides useful supplemental information to
investors and facilitates the analysis of our operating results and
comparison of operating results across reporting periods.
- Free Cash Flow. Free cash flow is
defined as net cash provided by (used in) operating activities plus
cash paid for legal settlements and repayment of convertible senior
notes attributable to debt discount, reduced by purchases of
property and equipment. Free cash flow margin is calculated as free
cash flow as a percentage of total revenues. We believe information
regarding free cash flow and free cash flow margin provides useful
information to investors because it is an indicator of the strength
and performance of our business operations.
Our presentation of non-GAAP financial measures may not be
comparable to similar measures used by other companies. We
encourage investors to carefully consider our results under GAAP,
as well as our supplemental non-GAAP information and the
reconciliation between these presentations, to more fully
understand our business. Please see the tables included at the end
of this release for the reconciliation of GAAP and non-GAAP
results.
Use of Forward-Looking Statements
This release contains “forward-looking statements” regarding our
performance, including but not limited to statements in the section
entitled “Financial Outlook.” Forward-looking statements are
subject to known and unknown risks and uncertainties and are based
on potentially inaccurate assumptions that could cause actual
results to differ materially from those expected or implied by the
forward-looking statements. If any such risks or uncertainties
materialize or if any of the assumptions prove incorrect, our
results could differ materially from the results expressed or
implied by the forward-looking statements we make.
Factors that may cause actual results to differ materially from
those in any forward-looking statements include: (i) errors,
interruptions, delays, or security breaches in or of our service or
datacenters, (ii) our ability to grow at our expected rate of
growth, including our ability to convert deferred revenue and
backlog into revenue, add and retain customers, sell additional
subscriptions to existing customers and enter new geographies and
markets, (iii) our ability to continue to release, and gain
customer acceptance of, improved versions of our
services, (iv) our ability to develop and gain customer
acceptance of new products and services, including our
platform, (v) our ability to compete successfully against
existing and new competitors, and (vi) material changes in the
value of foreign currencies relative to the U.S. Dollar.
Further information on these and other factors that could affect
our financial results are included in our Form 10-Q for the quarter
ended September 30, 2017 and in other filings we make with the
Securities and Exchange Commission from time to time, including our
Form 10-K that will be filed for the year ended December 31,
2017.
We undertake no obligation, and do not intend, to update these
forward-looking statements, to review or confirm analysts’
expectations, or to provide interim reports or updates on the
progress of the current financial quarter.
About ServiceNow
ServiceNow makes work better across the enterprise. Getting
simple stuff done at work can be easy, and getting complex
multi-step tasks completed can be painless. Our applications
automate, predict, digitize and optimize business processes and
tasks, across IT, customer service, security operations and human
resources, creating a better experience for your employees and
customers while transforming your enterprise. ServiceNow (NYSE:NOW)
is how work gets done. For more information,
visit: www.servicenow.com.
© 2018 ServiceNow, Inc. All rights reserved. ServiceNow, the
ServiceNow logo, Now, and other ServiceNow marks are trademarks
and/or registered trademarks of ServiceNow, Inc., in the United
States and/or other countries. Other company names, product names,
and logos may be trademarks of the respective companies with which
they are associated.
ServiceNow, Inc. Condensed Consolidated Statements
of Operations (in thousands, except share and per share
data) (unaudited) Three Months
Ended Twelve Months Ended December 31,
2017 December 31, 2016 December 31, 2017
December 31, 2016 Revenues: Subscription $
497,232 $ 344,604 $ 1,739,795 $ 1,221,639 Professional services and
other 49,138 41,062 193,231
168,874 Total revenues 546,370
385,666 1,933,026 1,390,513
Cost of revenues (1): Subscription 87,524 64,707 315,570
235,414 Professional services and other 46,836
40,229 184,202 163,268 Total
cost of revenues 134,360 104,936
499,772 398,682 Gross profit 412,010
280,730 1,433,254 991,831
Operating expenses (1): Sales and marketing 260,292 188,857
946,617 700,464 Research and development 104,559 73,933 377,518
285,239 General and administrative 60,291 41,543 210,533 158,936
Legal settlements — — —
270,000 Total operating expenses 425,142
304,333 1,534,668
1,414,639 Loss from operations (13,132 ) (23,603 ) (101,414
) (422,808 ) Interest expense (16,813 ) (8,532 ) (53,394 ) (33,278
) Interest income and other income (expense), net 5,065
1,290 5,804 6,035
Loss before income taxes (24,880 ) (30,845 ) (149,004 ) (450,051 )
Provision for income taxes 2,927 1,744
126 1,753 Net loss $ (27,807 ) $
(32,589 ) $ (149,130 ) $ (451,804 ) Net loss per share - basic and
diluted $ (0.16 ) $ (0.20 ) $ (0.87 ) $ (2.75 ) Weighted-average
shares used to compute net loss per share - basic and diluted
173,567,143 166,816,643
171,175,577 164,533,823
(1) Includes total
stock-based compensation expense for stock-based awards as follows:
Three Months Ended Twelve Months Ended December
31, 2017 December 31, 2016 December 31, 2017
December 31, 2016 Cost of revenues: Subscription $ 9,474 $
7,722 $ 35,334 $ 28,420 Professional services and other 5,853 6,397
27,475 26,442 Sales and marketing 45,877 35,814 170,527 131,571
Research and development 24,401 18,775 92,025 81,731 General and
administrative 20,022 14,412 68,717 49,416
ServiceNow, Inc. Condensed Consolidated Balance
Sheets (in thousands) (unaudited)
December 31, 2017 December 31, 2016
ASSETS Current assets: Cash and cash equivalents $ 726,495 $
401,238 Short-term investments 1,052,803 498,124 Accounts
receivable, net 434,895 322,757 Current portion of deferred
commissions 118,690 76,780 Prepaid expenses and other current
assets 77,681 43,636 Total current assets 2,410,564
1,342,535 Deferred commissions, less current portion 85,530 61,990
Long-term investments 391,442 262,658 Property and equipment, net
245,124 181,620 Intangible assets, net 86,916 65,854 Goodwill
128,728 82,534 Other assets 49,600 36,576 Total
assets $ 3,397,904 $ 2,033,767
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $
32,109 $ 38,080 Accrued expenses and other current liabilities
244,605 171,636 Current portion of deferred revenue 1,280,499
861,782 Current portion of convertible senior notes, net
543,418 — Total current liabilities 2,100,631 1,071,498
Deferred revenue, less current portion 39,884 33,319 Convertible
senior notes, net 630,018 507,812 Other long-term liabilities
43,239 34,177 Stockholders’ equity 584,132 386,961
Total liabilities and stockholders’ equity $ 3,397,904 $ 2,033,767
ServiceNow, Inc. Condensed Consolidated
Statements of Cash Flows (in thousands)
(unaudited) Three Months Ended
Twelve Months Ended December 31, 2017
December 31, 2016 December 31, 2017
December 31, 2016 Cash flows from operating
activities: Net loss $ (27,807 ) $ (32,589 ) $ (149,130 ) $
(451,804 ) Adjustments to reconcile net loss to net cash provided
by operating activities: Depreciation and amortization 32,067
23,366 113,875 83,082 Amortization of premiums on investments 584
980 3,092 4,725 Amortization of deferred commissions 35,011 23,475
115,262 81,217 Amortization of debt discount and issuance costs
16,813 8,532 53,394 33,278 Stock-based compensation 105,627 83,120
394,078 317,580 Deferred income tax (3,023 ) 1,671 (9,078 ) (3,424
) Other 65 (105 ) (3,997 ) (962 ) Changes in operating assets and
liabilities, net of effect of business combinations: Accounts
receivable (140,773 ) (109,345 ) (98,432 ) (125,106 ) Deferred
commissions (72,155 ) (57,269 ) (174,503 ) (136,459 ) Prepaid
expenses and other assets (19,272 ) (9,767 ) (46,138 ) (21,500 )
Accounts payable 5,584 5,071 (5,504 ) (3,554 ) Deferred revenue
187,968 149,148 381,562 300,167 Accrued expenses and other
liabilities 64,097 46,399 68,344
82,681 Net cash provided by operating
activities 184,786 132,687
642,825 159,921
Cash flows from investing
activities: Purchases of property and equipment (34,654 )
(21,450 ) (150,510 ) (105,562 ) Business combinations, net of cash
and restricted cash acquired (31,666 ) — (58,203 ) (34,297 )
Purchases of other intangibles (500 ) (8,000 ) (6,670 ) (18,750 )
Purchases of investments (547,845 ) (84,267 ) (1,189,511 ) (518,664
) Purchases of strategic investments (750 ) (500 ) (4,750 ) (500 )
Sales of investments 7,138 31,710 85,106 297,998 Maturities of
investments 89,993 53,085
440,590 271,537 Net cash used in investing
activities (1) (518,284 ) (29,422 ) (883,948 )
(108,238 )
Cash flows from financing activities: Net
proceeds from borrowings on convertible senior notes — — 772,127 —
Principal payments on convertible senior notes (4 ) — (4 ) —
Proceeds from issuance of warrants — — 54,071 — Purchases of
convertible note hedges — — (128,017 ) —
Repurchases and retirement of common
stock
— — (55,000 ) — Proceeds from employee stock plans 5,819 11,315
82,567 66,378 Taxes paid related to net share settlement of equity
awards (50,808 ) (31,340 ) (181,938 ) (119,907 ) Payments on
financing obligations (2,233 ) (862 ) (4,914 )
(2,223 ) Net cash (used in) provided by financing activities
(47,226 ) (20,887 ) 538,892
(55,752 ) Foreign currency effect on cash, cash equivalents and
restricted cash (1) 2,245 (6,319 )
28,128 (6,785 ) Net (decrease) increase in cash, cash
equivalents and restricted cash (1) (378,479 ) 76,059 325,897
(10,854 ) Cash, cash equivalents and restricted cash at beginning
of period (1) 1,106,308 325,873
401,932 412,786 Cash, cash equivalents and
restricted cash at end of period (1) $ 727,829 $ 401,932
$ 727,829 $ 401,932 (1) During the
three months ended December 31, 2017, we adopted Accounting
Standards Update 2016-18, "Statement of Cash Flows (Topic 230):
Restricted Cash," which requires that amounts generally described
as restricted cash or restricted cash equivalents be included with
cash and cash equivalents when reconciling the beginning-of-period
and end-of-period total amounts shown on the statement of cash
flows. We have adopted changes to the condensed consolidated
statements of cash flows on a retrospective basis. The impact of
the adoption for the three months and twelve months ended December
31, 2016 is not material.
ServiceNow, Inc.
GAAP to Non-GAAP Reconciliation
(in thousands, except share and per
share data)
(unaudited)
Three Months Ended Twelve Months
Ended December 31, 2017 December 31,
2016 (3) Growth Rates December 31, 2017
December 31, 2016 (3) Growth Rates
Subscription revenues: GAAP subscription revenues $
497,232 $ 344,604 44 % $ 1,739,795 $ 1,221,639 42 % Effects of
foreign currency rate fluctuations (12,941 ) (6,303 )
Non-GAAP adjusted subscription revenues (1) $ 484,291 41 % $
1,733,492 42 %
Subscription billings: GAAP
subscription revenues $ 497,232 $ 344,604 44 % $ 1,739,795 $
1,221,639 42 % Increase in subscription deferred revenue
186,801 139,303 379,188
289,053 Non-GAAP subscription billings 684,033 $ 483,907 41
% 2,118,983 $ 1,510,692 40 % Effects of foreign currency rate
fluctuations (18,085 ) (7,384 ) Effects of fluctuations in billings
duration 12,444 (1,562 ) Non-GAAP adjusted
subscription billings (2) $ 678,392 40 % $ 2,110,037
40 %
Professional services and other revenues: GAAP
professional services and other revenues $ 49,138 $ 41,062 20 % $
193,231 $ 168,874 14 % Effects of foreign currency rate
fluctuations (1,565 ) (899 ) Non-GAAP adjusted
professional services and other revenues (1) $ 47,573 16 % $
192,332 14 %
Professional services and other
billings: GAAP professional services and other revenues $
49,138 $ 41,062 20 % $ 193,231 $ 168,874 14 % Increase in
professional services and other deferred revenue 1,167
9,845 2,374 11,114
Non-GAAP professional services and other billings 50,305 50,907 (1
%) 195,605 179,988 9 % Effects of foreign currency rate
fluctuations (1,565 ) (899 ) Non-GAAP adjusted
professional services and other billings (2) $ 48,740 (4 %)
$ 194,706 8 %
Total revenues: GAAP total
revenues $ 546,370 $ 385,666 42 % $ 1,933,026 $ 1,390,513 39 %
Effects of foreign currency rate fluctuations (14,506 )
(7,202 ) Non-GAAP adjusted total revenues (1) $ 531,864
38 % $ 1,925,824 38 %
Total billings:
GAAP total revenues $ 546,370 $ 385,666 42 % $ 1,933,026 $
1,390,513 39 % Increase in total deferred revenue from condensed
consolidated statements of cash flows 187,968
149,148 381,562 300,167 Non-GAAP
total billings 734,338 534,814 37 % 2,314,588 1,690,680 37 %
Effects of foreign currency rate fluctuations (19,650 ) (8,283 )
Effects of fluctuations in billings duration 12,444
(1,562 ) Non-GAAP adjusted total billings (2) $ 727,132
36 % $ 2,304,743 36 %
Gross profit:
GAAP subscription gross profit $ 409,708 $ 279,897 $ 1,424,225 $
986,225 Stock-based compensation 9,474 7,722 35,334 28,420
Amortization of purchased intangibles 4,118
3,334 14,967 12,633 Non-GAAP
subscription gross profit $ 423,300 $ 290,953 $
1,474,526 $ 1,027,278 GAAP professional
services and other gross profit $ 2,302 $ 833 $ 9,029 $ 5,606
Stock-based compensation 5,853 6,397
27,475 26,442 Non-GAAP professional
services and other gross profit $ 8,155 $ 7,230 $
36,504 $ 32,048 GAAP gross profit $ 412,010 $
280,730 $ 1,433,254 $ 991,831 Stock-based compensation 15,327
14,119 62,809 54,862 Amortization of purchased intangibles
4,118 3,334 14,967 12,633
Non-GAAP gross profit $ 431,455 $ 298,183 $
1,511,030 $ 1,059,326
Gross margin:
GAAP subscription gross margin 82 % 81 % 82 % 81 % Stock-based
compensation as % of subscription revenues 2 % 2 % 2 % 2 %
Amortization of purchased intangibles as % of subscription revenues
1 % 1 % 1 % 1 % Non-GAAP subscription
gross margin 85 % 84 % 85 % 84 %
GAAP professional services and other gross margin 5 % 2 % 5 % 3 %
Stock-based compensation as % of professional services and other
revenues 12 % 16 % 14 % 16 % Non-GAAP
professional services and other gross margin 17 % 18
% 19 % 19 % GAAP gross margin 75 % 73 % 74 %
71 % Stock-based compensation as % of total revenues 3 % 3 % 3 % 4
% Amortization of purchased intangibles as % of total revenues
1 % 1 % 1 % 1 % Non-GAAP gross margin
79 % 77 % 78 % 76 %
Income
(loss) from operations: GAAP loss from operations $ (13,132 ) $
(23,603 ) $ (101,414 ) $ (422,808 ) Stock-based compensation
105,627 83,120 394,078 317,580 Amortization of purchased
intangibles 5,359 4,220 19,658 15,118 Business combination and
other related costs 917 27 2,421 989 Legal settlements -
- - 270,000
Non-GAAP income from operations $ 98,771 $ 63,764 $
314,743 $ 180,879
Operating margin:
GAAP operating margin (2 %) (6 %) (5 %) (30 %) Stock-based
compensation as % of total revenues 19 % 22 % 20 % 23 %
Amortization of purchased intangibles as % of total revenues 1 % 1
% 1 % 1 % Business combination and other related costs as % of
total revenues 0 % 0 % 0 % 0 % Legal settlements as % of total
revenues 0 % 0 % 0 % 19 % Non-GAAP
operating margin 18 % 17 % 16 % 13 %
Net income (loss): GAAP net loss $ (27,807 ) $
(32,589 ) $ (149,130 ) $ (451,804 ) Stock-based compensation
105,627 83,120 394,078 317,580 Amortization of purchased
intangibles 5,359 4,220 19,658 15,118 Business combination and
other related costs 917 27 2,421 989 Legal settlements - - -
270,000 Amortization of debt discount and issuance costs for the
convertible senior notes 16,813 8,532 53,394 33,278 Loss on early
note conversions - - - - Income tax expense effects related to the
above adjustments (37,313 ) (20,954 ) (105,741
) (63,216 ) Non-GAAP net income $ 63,596 $ 42,356
$ 214,680 $ 121,945
Net income
(loss) per share - basic and diluted: GAAP net loss per share -
basic and diluted $ (0.16 ) $ (0.20 ) $ (0.87 ) $ (2.75 ) Non-GAAP
net income per share - basic $ 0.37 $ 0.25 $ 1.25
$ 0.74 Non-GAAP net income per share - diluted $ 0.35
$ 0.24 $ 1.19 $ 0.70
Weighted-average shares used to compute net income (loss) per share
- basic 173,567,143 166,816,643
171,175,577 164,533,823 GAAP
weighted-average shares used to compute net loss per share -
diluted 173,567,143 166,816,643 171,175,577 164,533,823 Effect of
dilutive securities (stock options, restricted stock units and
warrants) 9,043,989 8,780,764
8,773,040 9,257,608 Non-GAAP weighted-average
shares used to compute net income per share - diluted
182,611,132 175,597,407 179,948,617
173,791,431
Free cash flow: GAAP
net cash provided by operating activities $ 184,786 $ 132,687 $
642,825 $ 159,921 Purchases of property and equipment (34,654 )
(21,450 ) (150,510 ) (105,562 ) Cash paid for legal settlements - -
- 267,500 Repayment of convertible senior notes attributable to
debt discount 2 - 2
- Non-GAAP free cash flow $ 150,134 $ 111,237
$ 492,317 $ 321,859
Free cash flow
margin: GAAP net cash provided by operating activities as % of
total revenues 34 % 34 % 33 % 12 % Purchases of property and
equipment as % of total revenues (7 %) (5 %) (8 %) (8 %) Cash paid
for legal settlements as % of total revenues 0 % 0 % 0 % 19 %
Repayment of convertible senior notes attributable to debt discount
0 % 0 % 0 % 0 % Non-GAAP free cash flow
margin 27 % 29 % 25 % 23 %
(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 December 31, 2017.
As described in the “New Revenue Recognition Standard Under Topic
606” section above, our guidance is based on the new Topic 606
revenue recognition standard that is effective beginning January 1,
2018. The comparison period amounts and the related growth rates
have been restated from previously reported amounts to conform with
the Topic 606 presentation. The company’s future performance and
financial results are subject to risks and uncertainties, and
actual results could differ materially from the guidance set forth
below. Some of the factors that could affect the company’s
financial results are stated above in this press release. Further
information on these and other factors that could affect our
financial results are included in our Form 10-Q for the quarter
ended September 30, 2017 and in other filings we make with the
Securities and Exchange Commission from time to time, including our
Form 10-K that will be filed for the year ended December 31, 2017.
The company assumes no obligation to update any forward-looking
statements or information, which speak as of their respective
dates.
Three Months Ended Three Months
Ended
March 31, 2018 March 31, 2017 (3)
Growth rates
GAAP subscription revenues $525 - $530 million $388 million
35% - 37% Effects of foreign currency rate fluctuations (18)
million Non-GAAP adjusted subscription revenues (1) $507 -
$512 million 31% - 32% GAAP subscription revenues $525 -
$530 million $388 million 35% - 37%
Increase in subscription deferred revenue,
unbilled receivables and customer deposits
75 - 76 million 92 million Non-GAAP subscription
billings $601 - $605 million $480 million 25% - 26% Effects
of foreign currency rate fluctuations (22) million Effects
of fluctuations in billings duration 21 million Non-GAAP
adjusted subscription billings (2) $600 - $604 million 25% - 26%
GAAP operating margin (5%) Stock-based compensation
expense as % of total revenues 20% Amortization of purchased
intangibles as % of total revenues 1% Non-GAAP operating
margin 16% GAAP weighted-average shares used to compute net
loss per share - diluted 175 million Effect of dilutive
securities (stock options, restricted stock units and warrants) 9
million Non-GAAP weighted-average shares used to compute net
income per share - diluted 184 million
Twelve
Months Ended Twelve Months Ended
December 31, 2018 December 31, 2017 (3)
Growth rates
GAAP subscription revenues $2,355 - $2,375 million $1,740
million 35% - 37% Effects of foreign currency rate
fluctuations (41) million Non-GAAP adjusted subscription
revenues (1) $2,314 - $2,334 million 33% - 34% GAAP
subscription revenues $2,355 - $2,375 million $1,740 million 35% -
37%
Increase in subscription deferred revenue,
unbilled receivables and customer deposits
415 million 385 million Non-GAAP subscription
billings $2,770 - $2,790 million $2,124 million 30% - 31%
Effects of foreign currency rate fluctuations
(47) million
Effects of fluctuations in billings duration
19 million
Non-GAAP adjusted subscription billings (2) $2,742 - $2,762
million 29% - 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 gross margin 85%
GAAP operating margin 0% Stock-based compensation expense as
% of total revenues 19% Amortization of purchased
intangibles as % of total revenues 1% Non-GAAP operating
margin 20% GAAP net cash provided by operating activities as
% of total revenues 28% Purchases of property and equipment
as % of total revenues (7%) Repayment of convertible senior
notes attributable to debt discount 6% Non-GAAP free cash
flow margin 27% GAAP weighted-average shares used to compute
net loss per share - diluted 178 million Effect of dilutive
securities (stock options, restricted stock units and warrants) 7
million Non-GAAP weighted-average shares used to compute net
income per share - diluted 185 million (1)
Adjusted revenues and the corresponding growth rates are
derived by applying the exchange rates in effect during the
comparison period rather than the forecasted exchange rates for the
guidance period. (2) Adjusted billings and the corresponding growth
rates are derived by applying the exchange rates in effect during
the comparison period rather than the forecasted exchange rates for
the guidance period, and by replacing the forecasted portion of
multi-year billings in excess of twelve months for the guidance
period with the actual portion of multi-year billings in excess of
twelve months during the comparison period. (3) Amounts in
the comparison period have been restated for Topic 606 and are
unaudited. Effects of foreign currency rate fluctuations and
fluctuations in billing durations are not applicable for the
comparison period.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180131006227/en/
ServiceNow, Inc.Media Contact:Joanne Blum,
310-489-7278press@servicenow.comorInvestor Contact:Jimmy
Sexton, 669-262-1430ir@servicenow.com
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