ServiceNow Reports Financial Results for First Quarter 2015

SANTA CLARA, Calif. – April 16, 2015 – ServiceNow® (NYSE: NOW), the enterprise cloud company, today announced the financial results for its first quarter 2015.

First Quarter 2015 Results:

  • Revenues of $212 million, an increase of 52% year‑over‑year and 62% in constant currency.
  • GAAP net loss of $58 million, or a loss of $0.38 per basic and diluted share, compared to a GAAP net loss of $43 million, or a loss of $0.30 per basic and diluted share, in the first quarter of 2014.
  • Non‑GAAP net income of $2 million, or income of $0.02 per basic share and $0.01 per diluted share, compared to a non‑GAAP net loss of $11 million, or a loss of $0.08 per basic and diluted share, in the first quarter of 2014.
  • Billings were $268 million, increasing 48% year‑over‑year and 59% in constant currency.
  • Added 23 net new Global 2000 customers, bringing the total to 545.
  • For a reconciliation of these GAAP and non‑GAAP financial measures, please see the table entitled "Results of Operations GAAP to Non‑GAAP Reconciliation” included at the end of this release.

“We are off to a solid start in 2015 as we head into Knowledge, our annual conference,” said Frank Slootman, president and chief executive officer, ServiceNow. “We closed eight new deals this quarter with an annualized contract value in excess of $1 million.”

“We added 23 net new Global 2000 customers during the quarter,” said Michael Scarpelli, chief financial officer, ServiceNow. “We also continued to penetrate our existing customer base with annualized contract value per Global 2000 customer of $746,000, an increase of 34% from the same period last year.”

Financial Outlook:

The financial guidance discussed below is on a non‑GAAP basis, except for revenues, and excludes stock‑based compensation expense, amortization of purchased intangibles, and acquisition related expenses. Please see the tables included at the end of this release for a reconciliation of these non‑GAAP financial measures to the related GAAP financial measures. Negative numbers are shown in parentheses. For the second quarter of 2015, we expect:

  • Total revenues between $237 and $242 million, representing year‑over‑year growth between 42% and 45%. Our total second quarter revenue estimate consists of subscription revenues between $192 and $196 million and professional services and other revenues between $45 and $46 million.
  • Billings between $260 and $265 million, representing year‑over‑year growth between 38% and 41%.
  • Subscription gross margin of approximately 80%, professional services and other gross margin, excluding Knowledge15 revenue, of approximately 15%, and overall gross margin of approximately 70%.
  • Operating loss of approximately $5 million, including net expense of $12 million related to Knowledge15.
  • Free cash flow of approximately $40 million.

For the full year 2015, we expect total revenues to be in the range of $970 million to $1 billion, representing year‑over‑year growth between 42% and 47%. Our total annual revenue estimate consists of subscription revenues between $820 and $840 million and professional services and other revenues between $150 and $160 million.

Updates Since Our Last Earnings Release:

  • ServiceNow acquired Intréis, a team of experts focused on integrating enterprise governance, risk and compliance solutions and service management across enterprise environments.
  • During the quarter, ServiceNow released its latest cloud‑based software extending service management across the enterprise to legal, marketing and finance.

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (21:00 GMT) on Thursday, April 16, 2015. Interested parties may listen to the call by dialing 866.271.5140 (passcode: 89904836), or if outside North America, by dialing 617.213.8893 (passcode: 89904836). 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 888.286.8010 (passcode: 11038912), or if outside North America, by dialing 617.801.6888 (passcode: 11038912).

Statement regarding use of non‑GAAP financial measures

The company reports non‑GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

The company’s financial measures under GAAP include foreign currency impact, stock‑based compensation expense, the amortization of debt discount and issuance costs related to the convertible senior notes, amortization of purchased intangibles and acquisition‑related expenses, and the related income tax effect of these adjustments. Management believes the presentation of operating results that excludes these items provides useful supplemental information to investors and facilitates the analysis of the company’s core operating results and comparison of operating results across reporting periods. Management also believes that this supplemental non‑GAAP information is therefore useful to investors in analyzing and assessing the company’s past and future operating performance.

Free cash flow, which is a non‑GAAP financial measure, is calculated as GAAP net cash provided by operating activities reduced by purchases of property and equipment. Management believes information regarding free cash flow provides investors with an important perspective on the cash available to invest in our business and fund ongoing operations. However, our calculation of free cash flow may not be comparable to similar measures used by other companies.

Billings is calculated as revenue plus the change in total deferred revenue as presented on the statement of cash flows. Management believes billings offers investors useful supplemental information regarding the performance of our business, and will help investors better understand the sales volumes and performance of our business.

We present constant currency information to provide a framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rate for the quarter being compared to for growth rate calculations presented, rather than the actual exchange rates in effect during that period.

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 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.

Among the important factors that could cause actual results to differ materially from those in any forward‑looking statements are: (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, 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‑K for the year ended December 31, 2014 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 first quarter ended March 31, 2015.

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 is changing the way people work. With a service‑orientation toward the activities, tasks and processes that make up day‑to‑day work life, we help the modern enterprise operate faster and be more scalable than ever before. Customers use our service model to define, structure and automate the flow of work, removing dependencies on email and spreadsheets to transform the delivery and management of services for the enterprise. ServiceNow provides service management for every department in the enterprise including IT, human resources, facilities, field service and more. We deliver a ‘lights‑out, light‑speed’ experience through our enterprise cloud – built to manage everything as a service. To find out how, visit www.servicenow.com.

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ServiceNow, Knowledge and the ServiceNow logo are registered trademarks of ServiceNow. All other brand and product names are trademarks or registered trademarks of their respective holders.

ServiceNow Q1 2015 complete financial tables (download PDF)