- ServiceNow exceeds guidance across all Q2 2024 topline growth
and profitability metrics; raises 2024 subscription revenues and
operating margin guidance
- Subscription revenues of $2,542 million in Q2 2024,
representing 23% year-over-year growth, 23% in constant
currency
- Total revenues of $2,627 million in Q2 2024, representing 22%
year-over-year growth, 22.5% in constant currency
- Current remaining performance obligations of $8.78 billion as
of Q2 2024, representing 22% year-over-year growth, 22.5% in
constant currency
- Remaining performance obligations of $18.6 billion as of Q2
2024, representing 31% year-over-year growth, 31.5% in constant
currency
- 88 transactions over $1 million in net new ACV in Q2 2024, up
26% year-over-year
- Board of Directors shares update on leadership transition; CJ
Desai, President and Chief Operating Officer, departs company;
Chris Bedi announced as interim Chief Product Officer
ServiceNow (NYSE: NOW), the AI platform for business
transformation, today announced financial results for its second
quarter ended June 30, 2024, with subscription revenues of $2,542
million in Q2 2024, representing 23% year-over-year growth and 23%
in constant currency.
“ServiceNow’s elite-level execution is reflected in our
continued outperformance across all topline growth and
profitability metrics,” said ServiceNow Chairman and CEO Bill
McDermott. “Our relevance as the AI platform for business
transformation remains stronger than ever as CEOs are looking for
new vectors of growth, simplification, and digitization. ServiceNow
intends to reinvent every workflow, in every company, in every
industry with GenAI at the core.”
As of June 30, 2024, current remaining performance obligations
(“cRPO”), contract revenue that will be recognized as revenue in
the next 12 months, was $8.78 billion, representing 22%
year-over-year growth and 22.5% in constant currency. The company
now has 1,988 total customers with more than $1 million in annual
contract value (“ACV”), representing 15% year-over-year growth in
customers.
“Q2 was another fantastic quarter with NNACV and GenAI
contributions exceeding expectations,” said ServiceNow CFO Gina
Mastantuono. “Our Knowledge event in May centered on 'Putting AI to
Work for People' and received an incredible response from
customers, generating more than $1 billion in pipeline. This robust
pipeline, combined with our outperformance in the first half, gives
us the visibility to raise our 2024 subscription revenue guidance
and reinforces our confidence in achieving $15+ billion in
2026.”
Recent Business Highlights
Innovation
- Generative AI is a generational secular tailwind. NNACV for Now
Assist, ServiceNow’s GenAI experience, doubled quarter over quarter
and significantly overachieved expectations, including 11 deals
greater than $1 million in Q2.
- ServiceNow’s Knowledge event in May brought together over
20,000 customers and partners, and newly created pipeline after
only 60 days was up over 50% year-over-year. During the event,
ServiceNow introduced innovations designed to power AI-driven
transformation for enterprises, including a new bring your own
(BYO) GenAI model – which offers greater flexibility and choice to
customers – and new cross-platform GenAI capabilities such as Now
Assist for Strategic Portfolio Management, Now Assist for
Government Community Cloud (GCC), Creator Studio, Manufacturing
Commercial Operations, and Talent Development.
- Today ServiceNow launched its RaptorDB Lighthouse program,
building on the powerful, new RaptorDB database offering announced
in May, to help customers quickly ingest and analyze data at
massive scale as they pursue new AI use cases. To further enhance
the company’s GenAI-powered search and knowledge management
capabilities, ServiceNow also today announced that it acquired
Raytion, a Germany-based industry leader in information retrieval
technology.
Partnerships
- Also at its Knowledge conference, ServiceNow expanded on its
strategic AI partnerships. ServiceNow and Microsoft announced a Now
Assist and Copilot integration for a seamless enterprise
experience; ServiceNow and IBM introduced a Now Platform and IBM
watsonx integration to help customers accelerate workflow
productivity; and ServiceNow and Nvidia showcased together onstage
the potential of AI avatars for employee and customer service.
Additional technology partnerships announced include Genesys,
Fujitsu, Equinix, and Infosys.
- Today ServiceNow and Boomi announced a strategic commitment to
elevate customer experiences through AI-powered self-service,
leveraging ServiceNow solutions. ServiceNow will also bring Boomi’s
APIM solution to its customers to help deepen ServiceNow’s suite of
intelligent automation solutions.
Global and Industry Expansion
- ServiceNow continues to invest in its global customer base and
future growth, announcing plans for a UAE Cloud, hosted on
Microsoft Azure, with targeted delivery in the first half of 2025,
and a strategic investment in inMorphis, a global IT company and
leading pure-play ServiceNow partner, to extend ServiceNow’s
presence in India and the ASEAN region.
- ServiceNow furthered its industry leadership, making its first
telecommunications-focused Ecosystem Ventures investment in leading
industry services partner Prodapt to accelerate business
transformation with AI-enabled solutions, go-to-market
capabilities, and Now Platform skills expansion. Also in the space,
ServiceNow and BT Group announced a multi-year agreement to
transform the customer experience at BT Group, and recently,
ServiceNow and Bell Canada announced an industry-first
collaboration to expand Bell’s use of the Now Platform in its
digital transformation to meet the growing demand for tech services
and digital media.
Recognition
- As a testament to ServiceNow’s market outperformance,
ServiceNow earned a spot on the Fortune 500 list1 for the second
year in a row. The company was also named to the Kantar BrandZ Top
100 Most Valuable Global Brands list for 2024; Great Place to Work
Best Workplaces in Technology GCC, Australia, and Ireland;
Glassdoor’s Best-Led Companies 2024; and LinkedIn Top Companies in
Australia, Ireland, and the Netherlands.
- ServiceNow announced during the quarter that it was named a
Leader in The Forrester Wave™: Strategic Portfolio Management
Tools, Q2 2024, and also that it was named a Leader in The
Forrester Wave™: P&C Claims Management Systems, Q2 2024.
Additionally, ServiceNow announced that it was named a Leader in
the IDC MarketScape: Worldwide Multicloud and Hybrid Cloud
Management with Automation, 2024 Vendor Assessment.
(1)
©2024 Fortune Media IP Limited All rights
reserved. Used under license. Fortune and Fortune Media IP Limited
are not affiliated with, and do not endorse products or services
of, ServiceNow.
Leadership Update
As previously referenced in the Company’s Form 10-Q for the
quarter ended March 31, 2024, the Company received an internal
complaint that raised a potential concern related to one of its
employees.
The Company initiated an internal investigation, with assistance
of outside legal counsel, into the validity of these claims. The
Company also promptly informed and is continuing to cooperate with
government entities.
As a result of the investigation, the Company’s Board of
Directors determined Company policy was violated regarding the
hiring of the former Chief Information Officer of the U.S. Army. As
such, the hired individual, who led the company’s public sector
thought leadership and business development efforts since March
2023, departed the company. In addition, the Company and CJ Desai,
President and Chief Operating Officer, came to a mutual agreement
that Desai would resign from all positions with the Company
effective immediately. The company believes this was an isolated
incident.
The Company has appointed ServiceNow veteran Chris Bedi, as
interim Chief Product Officer, effective immediately. Bedi has been
at ServiceNow for nearly a decade with roles including Chief
Digital Information Officer and Chief Customer Officer.
Second Quarter 2024 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the
second quarter 2024:
Second Quarter 2024 GAAP
Results
Second Quarter 2024 Non-GAAP
Results(1)
Amount
($ millions)
Year/Year
Growth (%)
Amount
($ millions)(3)
Year/Year
Growth (%)
Subscription revenues
$2,542
23%
$2,552
23%
Professional services and other
revenues
$85
13%
$85
13.5%
Total revenues
$2,627
22%
$2,637
22.5%
Amount
($ billions)
Year/Year
Growth (%)
Amount ($ billions)(3)
Year/Year
Growth (%)
cRPO
$8.78
22%
$8.84
22.5%
RPO
$18.6
31%
$18.7
31.5%
Amount
($ millions)
Margin (%)
Amount
($ millions)(2)
Margin (%)(2)
Subscription gross profit
$2,073
82%
$2,156
85%
Professional services and other
gross profit
$2
2%
$14
16%
Total gross profit
$2,075
79%
$2,170
83%
Income from operations
$240
9%
$720
27%
Net cash provided by operating
activities
$620
24%
Free cash flow
$359
14%
Amount
($ millions)
Earnings per Basic/Diluted
Share ($)
Amount
($ millions)(2)
Earnings per
Basic/Diluted
Share ($)(2)
Net income
$262
$1.27 / $1.26
$651
$3.16 / $3.13
(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.
(2)
Refer to the table entitled “GAAP to
Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP
measures.
(3)
Non-GAAP subscription revenues and total
revenues are adjusted for constant currency by excluding effects of
foreign currency rate fluctuations and any gains or losses from
foreign currency hedge contracts. Professional services and other
revenues, cRPO, and RPO are adjusted only for constant currency.
See the section entitled “Statement Regarding Use of Non-GAAP
Financial Measures” for an explanation of non-GAAP measures.
Note: Numbers rounded for presentation
purposes and may not foot.
Financial Outlook
Our guidance includes GAAP and non-GAAP financial measures. The
non-GAAP growth rates for subscription revenues are adjusted for
constant currency by excluding effects of foreign currency rate
fluctuations and any gains or losses from foreign currency hedge
contracts, and cRPO are adjusted only for constant currency to
provide better visibility into the underlying business trends.
Since March 31, 2024, ServiceNow has seen a strengthening of the
U.S. dollar resulting in an incremental foreign exchange (“FX”)
headwind of $20 million to 2024 subscription revenues when compared
to our previous guidance provided on April 24, 2024.
The following table summarizes our guidance for the third
quarter 2024:
Third Quarter 2024
GAAP Guidance
Third Quarter 2024
Non-GAAP Guidance(1)
Amount ($ millions)(3)
Year/Year
Growth (%)(3)
Constant Currency
Year/Year Growth (%)
Subscription revenues
$2,660 - $2,665
20% - 20.5%
20.5%
cRPO
22.5%
22%
Margin (%)(2)
Income from operations
29.5%
Amount
(millions)
Weighted-average shares used to compute
diluted net income per share
209
(1)
We report non-GAAP financial measures in
addition to, and not as a substitute for, or superior to, financial
measures calculated in accordance with GAAP. See the section
entitled “Statement Regarding Use of Non-GAAP Financial Measures”
for an explanation of non-GAAP measures.
(2)
Refer to the table entitled
“Reconciliation of Non-GAAP Financial Guidance” for a
reconciliation of GAAP to non-GAAP measures.
(3)
Guidance for GAAP subscription revenues
and GAAP subscription revenues and cRPO growth rates are based on
the 30-day average of foreign exchange rates for June 2024 for
entities reporting in currencies other than U.S. Dollars.
The following table summarizes our guidance for the full-year
2024:
Full-Year 2024
GAAP Guidance
Full-Year 2024
Non-GAAP Guidance(1)
Amount ($ millions)(3)
Year/Year
Growth (%)(3)
Constant Currency
Year/Year Growth (%)
Subscription revenues
$10,575 - $10,585
22%
22%
Margin (%)(2)
Subscription gross profit
84.5%
Income from operations
29.5%
Free cash flow
31%
Amount
(millions)
Weighted-average shares used to compute
diluted net income per share
208
(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.
(2)
Refer to the table entitled
“Reconciliation of Non-GAAP Financial Guidance” for a
reconciliation of GAAP to non-GAAP measures.
(3)
GAAP subscription revenues and related
growth rate for the future quarter included in our full-year 2024
guidance are based on the 30-day average of foreign exchange rates
for June 2024 for entities reporting in currencies other than U.S.
Dollars.
Note: Numbers are rounded for presentation
purposes and may not foot.
Conference Call Details
The conference call will begin at 2 p.m. Pacific Time (“PT”)
(21:00 GMT) on July 24, 2024. Interested parties may listen to the
call by dialing (888) 330‑2455 (Passcode: 8135305), or if outside
North America, by dialing (240) 789‑2717 (Passcode: 8135305).
Individuals may access the live teleconference from this
webcast.
https://events.q4inc.com/attendee/627663058
An audio replay of the conference call and webcast will be
available two hours after its completion and will be accessible for
30 days. To hear the replay, interested parties may go to the
investor relations section of the ServiceNow website or dial (800)
770‑2030 (Passcode: 8135305), or if outside North America, by
dialing (609) 800‑9909 (Passcode: 8135305).
Investor Presentation Details
An investor presentation providing additional information,
including forward-looking guidance, and analysis can be found at
https://investors.servicenow.com.
Upcoming Investor Conferences
ServiceNow today announced that it will attend and have
executives present at three upcoming investor conferences.
These include:
- ServiceNow Chief Financial Officer Gina Mastantuono will
participate in a fireside chat at the Deutsche Bank 2024 Technology
Conference on Thursday, August 29, 2024.
- ServiceNow Chief Financial Officer Gina Mastantuono will
participate in a fireside chat at the Citi 2024 Global TMT
Conference on Thursday, September 5, 2024.
- ServiceNow Chairman and Chief Executive Officer Bill McDermott
will participate in a keynote presentation at the Goldman Sachs
Communacopia and Technology Conference on Wednesday, September 11,
2024.
The live webcast will be accessible on the investor relations
section of the ServiceNow website at
https://investors.servicenow.com and archived on the ServiceNow
site for a period of 30 days.
Statement Regarding Use of Non-GAAP Financial
Measures
We use the following non-GAAP financial measures in addition to,
and not as a substitute for, or superior to, financial measures
calculated in accordance with GAAP.
- Revenues. We adjust revenues and related growth rates for
constant currency to provide a framework for assessing how our
business performed excluding the effect of foreign currency rate
fluctuations and any gains or losses from foreign currency hedge
contracts that are reported in the current and comparative period.
To exclude the effect of foreign currency rate fluctuations,
current period results for entities reporting in currencies other
than U.S. Dollars (“USD”) are converted into USD at the average
exchange rates in effect during the comparison period (for Q2 2023,
the average exchange rates in effect for our major currencies were
1 USD to 0.92 Euros and 1 USD to 0.80 British Pound Sterling
(“GBP”)), rather than the actual average exchange rates in effect
during the current period (for Q2 2024, the average exchange rates
in effect for our major currencies were 1 USD to 0.93 Euros and 1
USD to 0.79 GBP). Guidance for related growth rates is derived by
applying the average exchange rates in effect during the comparison
period, rather than the exchange rates for the guidance period,
adjusted for any foreign currency hedging effects. We believe the
presentation of revenues and related growth rates adjusted for
constant currency facilitates the comparison of revenues
year-over-year.
- Remaining performance obligations and current remaining
performance obligations. We adjust cRPO and remaining performance
obligations (“RPO”) and related growth rates for constant currency
to provide a framework for assessing how our business performed. To
present this information, current period results for entities
reporting in currencies other than USD are converted into USD at
the exchange rates in effect at the end of the comparison period
(for Q2 2023, the end of the period exchange rates in effect for
our major currencies were 1 USD to 0.92 Euros and 1 USD to 0.79
GBP), rather than the actual end of the period exchange rates in
effect during the current period (for Q2 2024, the end of the
period exchange rates in effect for our major currencies were 1 USD
to 0.93 Euros and 1 USD to 0.79 GBP). Guidance for the related
growth rate is derived by applying the end of period exchange rates
in effect during the comparison period rather than the exchange
rates in effect during the guidance period. We believe the
presentation of cRPO and RPO and related growth rates adjusted for
constant currency facilitates the comparison of cRPO and RPO
year-over-year, respectively.
- Gross profit, Income from operations, Net income and Net income
per share - diluted. Our non-GAAP presentation of gross profit,
income from operations, and net income measures exclude certain
non-cash or non-recurring items, including stock-based compensation
expense, amortization of debt discount and issuance costs related
to our convertible senior notes, loss on early note conversions,
amortization of purchased intangibles, legal settlements, business
combination and other related costs, income tax effects and
adjustments, and the income tax benefit from the release of a
valuation allowance on deferred tax assets. The non-GAAP
weighted-average shares used to compute our non-GAAP net income per
share - diluted excludes the dilutive effect of the in-the-money
portion of convertible senior notes as they are covered by our note
hedges, and includes the dilutive effect of time-based stock
awards, the dilutive effect of warrants and the potentially
dilutive effect of our stock awards with performance conditions not
yet satisfied at forecasted attainment levels to the extent we
believe it is probable that the performance condition will be met.
We believe these adjustments provide useful supplemental
information to investors and facilitates the analysis of our
operating results and comparison of operating results across
reporting periods.
- Free cash flow. Free cash flow is defined as net cash provided
by operating activities plus cash outflows for legal settlements,
repayments of convertible senior notes attributable to debt
discount and business combination and other related costs including
compensation expense, reduced by purchases of property and
equipment. Free cash flow margin is calculated as free cash flow as
a percentage of total revenues. We believe information regarding
free cash flow and free cash flow margin provides useful
information to investors because it is an indicator of the strength
and performance of our business operations.
Our presentation of non-GAAP financial measures may not be
comparable to similar measures used by other companies. We
encourage investors to carefully consider our results under GAAP,
as well as our supplemental non-GAAP information and the
reconciliation between these presentations, to more fully
understand our business. Please see the tables included at the end
of this release for the reconciliation of GAAP and non-GAAP results
for gross profit, income from operations, net income, net income
per share, and free cash flow.
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, among others,
experiencing an actual or perceived cyber-security event or
weakness; our ability to comply with evolving privacy laws, data
transfer restrictions, and other foreign and domestic standards
related to data and the Internet; errors, interruptions, delays or
security breaches in or of our service or data centers; our ability
to maintain and attract key employees and manage workplace culture;
alleged violations of laws and regulations, including those
relating to anti-bribery and anti-corruption and those relating to
public sector contracting requirements; our ability to compete
successfully against existing and new competitors; our ability to
predict, prepare for and respond promptly to rapidly evolving
technological, market and customer developments; our ability to
grow our business, including converting remaining performance
obligations into revenue, adding and retaining customers, selling
additional subscriptions to existing customers, selling to larger
enterprises, government and regulated organizations with complex
sales cycles and certification processes, and entering new
geographies and markets; our ability to develop and gain customer
demand for and acceptance of existing, new and improved products
and services; our ability to expand and maintain our partnerships
and partner programs, including expected market opportunity from
such relationships; global economic conditions; fluctuations in the
value of foreign currencies relative to the U.S. Dollar;
fluctuations in interest rates; our ability to consummate and
realize the benefits of any strategic transactions or acquisitions;
the impact of armed conflicts and bank failures on macroeconomic
conditions; inflation; and fluctuations and volatility in our stock
price.
Further information on these and other factors that could affect
our financial results are included in our Form 10-K for the year
ended December 31, 2023, and in other filings we make with the
Securities and Exchange Commission from time to time.
We undertake no obligation, and do not intend, to update these
forward-looking statements, to review or confirm analysts’
expectations, or to provide interim reports or updates on the
progress of the current financial quarter.
About ServiceNow
ServiceNow (NYSE: NOW) is putting AI to work for people. We move
with the pace of innovation to help customers transform
organizations across every industry while upholding a trustworthy,
human centered approach to deploying our products and services at
scale. Our AI platform for business transformation connects people,
processes, data, and devices to increase productivity and maximize
business outcomes. For more information, visit:
www.servicenow.com.
© 2024 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 millions, except per share
data)
(unaudited)
Three Months Ended
Six Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Revenues:
Subscription
$
2,542
$
2,075
$
5,065
$
4,099
Professional services and other
85
75
165
147
Total revenues
2,627
2,150
5,230
4,246
Cost of revenues (1):
Subscription
469
389
910
743
Professional services and other
83
82
162
166
Total cost of revenues
552
471
1,072
909
Gross profit
2,075
1,679
4,158
3,337
Operating expenses (1):
Sales and marketing
960
832
1,883
1,655
Research and development
643
521
1,249
1,013
General and administrative
232
209
454
408
Total operating expenses
1,835
1,562
3,586
3,076
Income from operations
240
117
572
261
Interest income
104
74
205
134
Other expense, net
(10
)
(17
)
(18
)
(33
)
Income before income taxes
334
174
759
362
Provision for (benefit from) income
taxes
72
(870
)
150
(832
)
Net income
$
262
$
1,044
$
609
$
1,194
Net income per share - basic
$
1.27
$
5.12
$
2.97
$
5.86
Net income per share - diluted
$
1.26
$
5.08
$
2.93
$
5.83
Weighted-average shares used to compute
net income per share - basic
206
204
205
204
Weighted-average shares used to compute
net income per share - diluted
208
205
208
205
(1) Includes stock-based compensation as
follows:
Three Months Ended
Six Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Cost of revenues:
Subscription
$
62
$
50
$
120
$
96
Professional services and other
12
15
24
29
Operating expenses:
Sales and marketing
141
120
275
246
Research and development
170
145
329
280
General and administrative
59
67
118
127
ServiceNow, Inc.
Condensed Consolidated Balance
Sheets
(in millions)
June 30, 2024
December 31, 2023
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
2,159
$
1,897
Short-term investments
3,254
2,980
Accounts receivable, net
1,518
2,036
Current portion of deferred
commissions
482
461
Prepaid expenses and other current
assets
608
403
Total current assets
8,021
7,777
Deferred commissions, less current
portion
928
919
Long-term investments
3,472
3,203
Property and equipment, net
1,606
1,358
Operating lease right-of-use assets
675
715
Intangible assets, net
220
224
Goodwill
1,239
1,231
Deferred tax assets
1,447
1,508
Other assets
599
452
Total assets
$
18,207
$
17,387
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
296
$
126
Accrued expenses and other current
liabilities
1,163
1,365
Current portion of deferred revenue
5,615
5,785
Current portion of operating lease
liabilities
98
89
Total current liabilities
7,172
7,365
Deferred revenue, less current portion
85
81
Operating lease liabilities, less current
portion
669
707
Long-term debt, net
1,488
1,488
Other long-term liabilities
127
118
Stockholders’ equity
8,666
7,628
Total liabilities and stockholders’
equity
$
18,207
$
17,387
ServiceNow, Inc.
Condensed Consolidated
Statements of Cash Flows
(in millions)
(unaudited)
Three Months Ended
Six Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Cash flows from operating
activities:
Net income
$
262
$
1,044
$
609
$
1,194
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
136
136
266
262
Amortization of deferred commissions
132
112
263
218
Stock-based compensation
444
397
866
778
Deferred income taxes
24
(911
)
52
(904
)
Other
(7
)
(3
)
(25
)
(2
)
Changes in operating assets and
liabilities, net of effect of business combinations:
Accounts receivable
(216
)
16
499
635
Deferred commissions
(141
)
(121
)
(306
)
(280
)
Prepaid expenses and other assets
(146
)
(72
)
(252
)
(136
)
Accounts payable
65
(44
)
172
(90
)
Deferred revenue
(82
)
(129
)
(92
)
(89
)
Accrued expenses and other liabilities
149
155
(91
)
(104
)
Net cash provided by operating
activities
620
580
1,961
1,482
Cash flows from investing
activities:
Purchases of property and equipment
(262
)
(132
)
(397
)
(297
)
Business combinations, net of cash
acquired(1)
(31
)
—
(41
)
—
Purchases of other intangibles
(9
)
—
(30
)
—
Purchases of investments
(1,055
)
(1,599
)
(2,660
)
(2,821
)
Purchases of non-marketable
investments
(46
)
(16
)
(88
)
(46
)
Sales and maturities of investments
1,040
1,073
2,113
1,953
Other
(8
)
—
(2
)
13
Net cash used in investing activities
(371
)
(674
)
(1,105
)
(1,198
)
Cash flows from financing
activities:
Proceeds from employee stock plans
—
—
131
117
Repurchases of common stock
—
—
(175
)
—
Taxes paid related to net share settlement
of equity awards
(137
)
(94
)
(352
)
(206
)
Business combination (1)
—
—
(184
)
—
Net cash used in financing activities
(137
)
(94
)
(580
)
(89
)
Foreign currency effect on cash, cash
equivalents and restricted cash
(9
)
(1
)
(13
)
—
Net change in cash, cash equivalents and
restricted cash
103
(189
)
263
195
Cash, cash equivalents and restricted cash
at beginning of period
2,064
1,859
1,904
1,475
Cash, cash equivalents and restricted cash
at end of period
$
2,167
$
1,670
$
2,167
$
1,670
(1)
The six-months period ended June 30, 2024
reflects a reclassification of $184 million from investing
activities to financing activities related to the second
installment payment made in the acquisition of G2K Group GmbH
during the three months ended March 31, 2024.
ServiceNow, Inc.
GAAP to Non-GAAP
Reconciliation
(in millions, except per share
data)
(unaudited)
Three Months Ended
Six Months Ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Gross profit:
GAAP subscription gross profit
$
2,073
$
1,686
$
4,155
$
3,356
Stock-based compensation
62
50
120
96
Amortization of purchased intangibles
21
19
42
37
Non-GAAP subscription gross profit
$
2,156
$
1,755
$
4,317
$
3,489
GAAP professional services and other gross
profit (loss)
$
2
$
(7
)
$
3
$
(19
)
Stock-based compensation
12
15
24
29
Non-GAAP professional services and other
gross profit
$
14
$
8
$
27
$
10
GAAP gross profit
$
2,075
$
1,679
$
4,158
$
3,337
Stock-based compensation
74
65
144
125
Amortization of purchased intangibles
21
19
42
37
Non-GAAP gross profit
$
2,170
$
1,763
$
4,344
$
3,499
Gross margin:
GAAP subscription gross margin
82
%
81
%
82
%
82
%
Stock-based compensation as % of
subscription revenues
2
%
2
%
2
%
2
%
Amortization of purchased intangibles as %
of subscription revenues
1
%
1
%
1
%
1
%
Non-GAAP subscription gross margin
85
%
85
%
85
%
85
%
GAAP professional services and other gross
margin
2
%
(9
%)
2
%
(13
%)
Stock-based compensation as % of
professional services and other revenues
14
%
20
%
15
%
20
%
Non-GAAP professional services and other
gross margin
16
%
11
%
16
%
7
%
GAAP gross margin
79
%
78
%
80
%
79
%
Stock-based compensation as % of total
revenues
3
%
3
%
3
%
3
%
Amortization of purchased intangibles as %
of total revenues
1
%
1
%
1
%
1
%
Non-GAAP gross margin
83
%
82
%
83
%
82
%
Income from operations:
GAAP income from operations
$
240
$
117
$
572
$
261
Stock-based compensation
444
397
866
778
Amortization of purchased intangibles
24
22
48
42
Business combination and other related
costs
12
8
25
15
Non-GAAP income from operations
$
720
$
544
$
1,511
$
1,096
Operating margin:
GAAP operating margin
9
%
5
%
11
%
6
%
Stock-based compensation as % of total
revenues
17
%
18
%
17
%
18
%
Amortization of purchased intangibles as %
of total revenues
1
%
1
%
1
%
1
%
Business combination and other related
costs as % of total revenues
—
%
—
%
—
%
—
%
Non-GAAP operating margin
27
%
25
%
29
%
26
%
Net income:
GAAP net income
$
262
$
1,044
$
609
$
1,194
Stock-based compensation
444
397
866
778
Amortization of purchased intangibles
24
22
48
42
Business combination and other related
costs
12
8
25
15
Income tax effects and adjustments(1)
(91
)
(75
)
(190
)
(150
)
Discrete income tax benefit from the
release of a valuation allowance on deferred tax assets(2)
—
(910
)
—
(910
)
Non-GAAP net income
$
651
$
486
$
1,358
$
969
Net income per share - basic and
diluted:
GAAP net income per share - basic
$
1.27
$
5.12
$
2.97
$
5.86
GAAP net income per share - diluted
$
1.26
$
5.08
$
2.93
$
5.83
Non-GAAP net income per share - basic
$
3.16
$
2.38
$
6.61
$
4.76
Non-GAAP net income per share -
diluted
$
3.13
$
2.37
$
6.54
$
4.73
Weighted-average shares used to compute
net income per share - basic
206
204
205
204
Weighted-average shares used to compute
net income per share - diluted
208
205
208
205
Free cash flow:
GAAP net cash provided by operating
activities
$
620
$
580
$
1,961
$
1,482
Purchases of property and equipment
(262
)
(132
)
(397
)
(297
)
Business combination and other related
costs
1
3
20
3
Non-GAAP free cash flow
$
359
$
451
$
1,584
$
1,188
Free cash flow margin:
GAAP net cash provided by operating
activities as % of total revenues
24
%
27
%
38
%
35
%
Purchases of property and equipment as %
of total revenues
(10
%)
(6
%)
(8
%)
(7
%)
Business combination and other related
costs as % of total revenues
—
%
—
%
—
%
—
%
Non-GAAP free cash flow margin
14
%
21
%
30
%
28
%
(1)
We use a non-GAAP effective tax rate for
evaluating our operating results to provide consistency across
reporting periods. Based on our long-term projections, we are using
a non-GAAP tax rate of 20% and 19% for the three and six months
ended June 30, 2024 and 2023, respectively. This non-GAAP tax rate
could change for various reasons including significant changes in
our geographic earnings mix or fundamental tax law changes in major
jurisdictions in which we operate.
(2)
GAAP net income for the three and six
months ended June 30, 2023 was impacted by a $910 million release
of a valuation allowance on our deferred tax assets as a discrete
tax benefit and $55 million as part of the effective tax rate.
Note: Numbers are rounded for presentation
purposes and may not foot.
ServiceNow, Inc.
Reconciliation of Non-GAAP
Financial Guidance
Three Months Ending
September 30, 2024
GAAP operating margin
12
%
Stock-based compensation expense as % of
total revenues
16
%
Amortization of purchased intangibles as %
of total revenues
1
%
Business combination and other related
costs as % of total revenues
—
%
Non-GAAP operating margin
29.5
%
Twelve Months Ending
December 31, 2024
GAAP subscription gross margin
81.5
%
Stock-based compensation expense as % of
subscription revenues
2
%
Amortization of purchased intangibles as %
of subscription revenues
1
%
Non-GAAP subscription margin
84.5
%
GAAP operating margin
12
%
Stock-based compensation expense as % of
total revenues
16
%
Amortization of purchased intangibles as %
of total revenues
1
%
Business combination and other related
costs as % of total revenues
—
%
Non-GAAP operating margin
29.5
%
GAAP net cash provided by operating
activities as % of total revenues
39
%
Purchases of property and equipment as %
of total revenues
(8
%)
Business combination and other related
costs as % of total revenues
—
%
Non-GAAP free cash flow margin
31
%
Note: Numbers are rounded for presentation
purposes and may not foot.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240724663858/en/
Media Contact: Johnna Hoff (408) 250-8644
press@servicenow.com
Investor Contact: Darren Yip (925) 388-7205
ir@servicenow.com
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