ServiceNow Reports Financial Results for Fourth Quarter and Fiscal Year 2015

SANTA CLARA, Calif. – Jan. 27, 2016 – ServiceNow® (NYSE: NOW), the enterprise cloud company, today announced the financial results for its fourth quarter and fiscal year 2015.

Fourth Quarter 2015 Results:

  • Total revenues of $285.7 million, an increase of 44% year‑over‑year and 51% in constant currency.
  • GAAP net loss of $37.4 million, or loss of $0.23 per basic and diluted share, compared to a GAAP net loss of $44.7 million, or loss of $0.30 per basic and diluted share, in the fourth quarter of 2014.
  • Non‑GAAP net income of $32.6 million, or income of $0.20 per basic share and $0.19 per diluted share, compared to a non‑GAAP net income of $4.9 million, or income of $0.03 per basic and diluted share, in the fourth quarter of 2014 (see the table entitled "Results of Operations GAAP to Non‑GAAP Reconciliation” for a reconciliation of these GAAP and non‑GAAP financial measures).
  • Billings were $365.7 million, an increase of 33% year‑over‑year and 39% in constant currency, (see the table entitled "Results of Operations GAAP to Non‑GAAP Reconciliation” for a reconciliation of non‑GAAP billings to GAAP revenues).
  • Free cash flow was $80.2 million, an increase of 107% year‑over‑year.

Fiscal Year 2015 Results:

  • Total revenues of $1.0 billion, an increase of 47% year‑over‑year and 56% in constant currency.
  • GAAP net loss of $198.4 million, or loss of $1.27 per basic and diluted share, compared to a GAAP net loss of $179.4 million, or loss of $1.23 per basic and diluted share, in the prior year.
  • Non‑GAAP net income of $67.4 million, or income of $0.43 per basic share and $0.40 per diluted share, compared to non‑GAAP net loss of $10.0 million, or loss of $0.07 per basic and diluted share, in the prior year (see the table entitled "Results of Operations GAAP to Non‑GAAP Reconciliation” for a reconciliation of these GAAP and non‑GAAP financial measures).
  • Billings were $1.2 billion, an increase of 41% year‑over‑year and 50% in constant currency (see the table entitled “Results of Operations GAAP to Non‑GAAP Reconciliation” for a reconciliation of non‑GAAP billings to GAAP revenues).
  • Free cash flow was $227.6 million, an increase of 169% year‑over‑year.

“We marked a huge milestone in 2015, becoming only the second enterprise SaaS company to surpass $1 billion in revenue,” said Frank Slootman, president and chief executive officer, ServiceNow. “This was our largest quarter yet for net new annualized contract value, punctuated by 26 net new Global 2000 customers in the quarter.”

Financial Outlook:

The financial guidance discussed below is on a non‑GAAP basis, except for revenues and headcount, and excludes stock‑based compensation expense, amortization of intangibles, and business combination related expenses (see table which reconciles these non‑GAAP financial measures to the related GAAP measures). For the first quarter of 2016, we expect:

  • Total revenues between $298 and $303 million, representing year‑over‑year growth between 41% and 43%, and 42% and 44% in constant currency. Our total revenues estimate consists of subscription revenues between $261 and $265 million and professional services and other revenues between $37 and $38 million.
  • Billings between $360 and $365 million, representing year‑over‑year growth between 34% and 36%, and 36% and 38% in constant currency.
  • Subscription gross margin of approximately 83%, professional services and other gross margin of approximately 9% and overall gross margin of approximately 73%.
  • Operating margin and free cash flow margin of approximately 5% and 21%, respectively.
  • Weighted average shares used to compute diluted net income per share of approximately 173 million shares.

For the full year 2016, we expect:

  • Total revenues between $1.34 and $1.37 billion, representing year‑over‑year growth between 33% and 36%, and 34% and 37% in constant currency. Our total revenues estimate consists of subscription revenues between $1.18 and $1.20 billion and professional services and other revenues between $160 and $170 million.
  • Billings of approximately $1.6 billion, representing year‑over‑year growth of 33% and 34% in constant currency.
  • Operating margin and free cash flow margin of approximately 12% and 24%, respectively.
  • Weighted average shares used to compute diluted net income per share of approximately 177 million shares.
  • Net headcount additions of approximately 1,000.

“We now have 230 customers each paying us more than $1 million in annualized contract value, a 50% increase year‑over‑year,” said Michael Scarpelli, chief financial officer, ServiceNow. “We expect to continue to show meaningful free cash flow generation at scale, as seen by our 24% free cash flow margin guidance in 2016.”

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (22:00 GMT) on Wednesday, Jan. 27, 2016. Interested parties may listen to the call by dialing 877.280.4958 (passcode: 88267404), or if outside North America, by dialing + 1.857.244.7315 (passcode: 88267404). 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 three 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: 10750035), or if outside North America, by dialing +1.617.801.6888 (passcode: 10750035).

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.

Our 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 intangibles and business combination related expenses, and the related income tax effect of these adjustments. We believe the presentation of operating results that exclude these items provides useful supplemental information to investors and facilitates the analysis of our core operating results and comparison of operating results across reporting periods.

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. Free cash flow margin is calculated as free cash flow as a percentage of revenues. We believe information regarding free cash flow and free cash flow margin provide 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 and free cash flow margin 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. We believe 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 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.

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‑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‑K that will be filed for the year ended December 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 enables 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 Q4 and Fiscal Year 2015 complete financial tables (download PDF)