SANTA CLARA, Calif. – July 27, 2016 – ServiceNow® (NYSE:
NOW), the enterprise cloud company, today announced the financial
results for its second quarter 2016.
Second Quarter 2016 Results:
- Total revenues of $341.3 million, an increase of 38%
- Billings of $374.9 million, an increase of
33% year‑over‑year (see the table entitled "Results of
Operations GAAP to Non‑GAAP Reconciliation” for a
- GAAP net loss of $49.6 million, or loss of
$0.30 per basic and diluted share, compared to a GAAP net loss of
$61.9 million, or loss of $0.40 per basic and diluted share, in the
second quarter of 2015.
- Non‑GAAP net income of $25.6
million, or income of $0.16 per basic and $0.15 per diluted share,
compared to a non‑GAAP net income of $7.3 million, or income of
$0.05 per basic share and $0.04 per diluted share, in the second
quarter of 2015 (see the table entitled "Results of Operations
GAAP to Non‑GAAP Reconciliation” for a reconciliation).
cash used in operating activities of $148.2 million.
cash flow of $78.0 million, or 23% of revenue (see the table
entitled "Condensed Consolidated Statements of Cash Flows” for
- Based on average second quarter exchange
rates, our year‑over‑year revenue or billings growth rates were not
significantly impacted due to foreign exchange rate
“Our business mix continues to diversify with emerging products
representing 40% of our new business, up from 24% during the same
period last year,” said Frank Slootman, president and chief executive
officer, ServiceNow. “Two‑thirds of our customers now license more
than one product, and 15 of our top 20 new deals included three or
“We landed 26 new Global 2000 customers in the quarter,” said
Michael Scarpelli, chief financial officer, ServiceNow. “Additionally,
we now have 272 customers each paying us more than $1 million in
annualized contract value, a record increase of 26 in the quarter.”
The financial guidance discussed below is on a non‑GAAP basis,
except for revenues, and excludes stock‑based compensation expense,
amortization of purchased intangibles, legal settlements and business
combination and other related costs (see table which reconciles these
non‑GAAP financial measures to the related GAAP measures).
Based on foreign exchange rates at the end of the second quarter, we
are not forecasting a significant impact to our expected
year‑over‑year revenue or billings growth rates due to foreign
exchange rate fluctuations.
For the third quarter of 2016, we expect:
- Subscription revenues between $312 and $315 million,
representing year‑over‑year growth between 40% and 41%.
- Professional services and other revenues between $38 and $39
million, representing year‑over‑year growth between 0% and 3%.
- Total revenues between $350 and $354 million, representing
year‑over‑year growth between 34% and 36%.
billings between $339 and $343 million, representing year‑over‑year
growth between 38% and 39%.
- Professional services and other
billings between $41 and $42 million, representing year‑over‑year
growth between 2% and 4%.
- Total billings between $380 and
$385 million, representing year‑over‑year growth between 33% and
- Subscription gross margin of approximately 84%,
professional services and other gross margin of approximately 13%,
and overall gross margin of approximately 76%.
margin of approximately 15%.
- Free cash flow margin of
- Weighted average shares used to compute
diluted net income per share of approximately 174 million
For full‑year 2016, we expect:
- Subscription revenues between $1,203 and $1,211 million,
representing year‑over‑year growth between 42% and 43%.
- Professional services and other revenues between $167 and $169
million, representing year‑over‑year growth between 6% and 8%.
- Total revenues between $1,370 and $1,380 million, representing
year‑over‑year growth between 36% and 37%.
billings between $1,427 and $1,435 million, representing
year‑over‑year growth between 37% and 38%.
services and other billings between $178 and $180 million,
representing year‑over‑year growth between 9% and 10%.
- Total billings between $1,605 and $1,615 million, representing
year‑over‑year growth of 34%.
- Operating margin of
- Free cash flow margin of approximately
- Weighted average shares used to compute diluted net
income per share of approximately 173 million shares.
Conference Call Details
The conference call will begin at 2 p.m. Pacific Time (21:00 GMT) on
Wednesday, July 27, 2016. Interested parties may listen to the call by
dialing 844.464.3153 (passcode:32458029), or if outside North America,
by dialing +1.508.637.5575 (passcode:32458029). Individuals may access
the live teleconference from the investor relations section of the
ServiceNow website at http://investors.servicenow.com.
An audio replay of the conference call and webcast will be available
two hours after its completion and will be accessible for 30 days. To
hear the replay, interested parties may go to the investor relations
section of the ServiceNow website or dial 855.859.2056
(passcode:32458029), or if outside North America, by dialing
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 stock‑based compensation
expense, the amortization of debt discount and issuance costs related
to the convertible senior notes, amortization of purchased
intangibles, legal settlements, business combination and other related
costs, and the related income tax effects 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 net cash (used in) provided by operating activities plus cash paid
for legal settlements, reduced by purchases of property and equipment.
Free cash flow margin is calculated as free cash flow as a percentage
of 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 ongoing business
operations. However, our calculation of free cash flow and free cash
flow margin may not be comparable to similar measures used by other companies.
Total billings is calculated as revenue plus the change in total
deferred revenue as presented on the statement of cash flows. We also
provide the breakdown of billings information by subscription billings
and professional services and other billings. These are calculated
based on the respective revenue in each category plus the respective
change in deferred revenues for each category. 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.
Emerging products include ServiceWatch, Discovery, Cloud Management,
Orchestration, Event Management, HR, Security Operations, Customer
Service Management, Performance Analytics, Service Strategy, Platform,
and Governance, Risk and Compliance.
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, 2015 and in other filings we make with the Securities and
Exchange Commission from time to time, including our Form 10‑Q that
will be filed for the quarter ended June 30, 2016.
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.
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.
ServiceNow 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 Q2 2016 complete financial
tables (download PDF)