ServiceNow Reports Financial Results for Fourth Quarter and Fiscal Year 2014

Fourth Quarter Revenues of $198 Million, up 58%, Fiscal Year 2014 Revenues of $683 Million, up 61%

ServiceNow Q4 2014 complete financial tables (download PDF)

SANTA CLARA, Calif. – Jan. 28, 2015 – ServiceNow® (NYSE: NOW), the enterprise cloud company, today announced the financial results for its fourth quarter and fiscal year 2014.

Fourth quarter 2014 results:

  • Revenues of $198.0 million, an increase of 58% compared to the fourth quarter of 2013 and an increase of 11% from the third quarter of 2014.
  • GAAP net loss of $44.7 million, or a loss of $0.30 per basic and diluted share, compared to a GAAP net loss of $24.2 million, or a loss of $0.17 per basic and diluted share, in the fourth quarter of 2013.
  • Non‑GAAP net income of $4.9 million, or income of $0.03 per basic and diluted share, compared to a non‑GAAP net loss of $2.5 million, or a loss of $0.02 per basic and diluted share, in the fourth quarter of 2013 (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 $269.4 million, a 62% increase over the $166.2 million in the same period last year, and a 34% increase over the $200.7 million reported in the previous quarter (see the table entitled “Non‑GAAP Billings Reconciliation” for a reconciliation of non‑GAAP billings to GAAP revenues).
  • Deferred revenue of $422.2 million, a 20% increase over the $350.8 million reported at the end of the prior quarter.
  • Added 211 net new customers, bringing the total to 2,725.
  • The customer renewal rate for the quarter was 97% and upsells represented 38% of the annualized contract value booked in the quarter.

Fiscal Year 2014 Results:

  • Revenues of $682.6 million, an increase of 61% compared to the prior year.
  • A GAAP net loss of $179.4 million, or a loss of $1.23 per basic and diluted share, compared to a GAAP net loss of $73.7 million, or a loss of $0.54 per basic and diluted share, in the prior year.
  • A non‑GAAP net loss of $10.1 million, or a loss of $0.07 per basic and diluted share, compared to non‑GAAP net loss of $9.6 million, or a 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).
  • Signed $1.2 billion in total contract value, a 64% increase over the prior year.
  • Billings were $838.1 million, a 61% increase over the $521.0 million reported in the prior year (see the table entitled “Non‑GAAP Billings Reconciliation” for a reconciliation of non‑GAAP billings to GAAP revenues).
  • Combined backlog and deferred revenue at the end of the year totaled $1.4 billion, growing 57% year‑over‑year, compared to 59% year‑over‑year growth in 2013. Backlog represents future amounts to be invoiced under our agreements and is not included in deferred revenue.

“We finished 2014 with strong metrics across the board, maintaining consistently high year‑over‑year growth rates,” said Frank Slootman, president and chief executive officer, ServiceNow. “In addition to a growing list of new customers that now includes more than 25% of the Global 2000, we continue to see existing customers expand their relationship with us, resulting in the highest quarterly upsell rate since our IPO.”

“The total number of customers paying more than $1 million in annualized contract value has increased 93% year‑over‑year,” said Michael Scarpelli, chief financial officer, ServiceNow. “Within the Global 2000, annualized contract value per customer has increased 40% year‑over‑year. These expanding contracts have helped us grow our combined backlog and deferred revenue 57% year‑over‑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 (see table which reconciles these non‑GAAP financial measures to the related GAAP measures). Negative numbers are shown in parentheses. For the first quarter of 2015, we expect:

  • Total revenues between $207 and $212 million, representing year‑over‑year growth between 49% and 52%. Our total first quarter revenue estimate consists of subscription revenues between $176 and $180 million and professional services and other revenues between $31 and $32 million.
  • Billings between $260 and $265 million, representing year‑over‑year growth between 44% and 47%.
  • Subscription gross margin of approximately 79%, professional services and other gross margin of approximately 12% and overall gross margin of approximately 69%.
  • Approximately breakeven operating margin.

For the full year 2015, we expect total revenues to be in the range of $960 million to $1 billion, representing year‑over‑year growth between 41% and 47%. Our total annual revenue estimate consists of subscription revenues between $810 and $840 million and professional services and other revenues between $150 and $160 million.

Updates since our last earnings release

  • ServiceNow opened four data centers in Asia and South America, bringing the total to 16 data centers around the globe, organized in eight mirrored pairs.
  • ServiceNow launched its Express offering, a highly standardized product for organizations of all sizes to adopt service management rapidly.
  • The ServiceNow Community grew 65% in 2014, reaching a total of 30,000 registered members.
  • ServiceNow signed a lease for two new buildings in Santa Clara, Calif., that will become the company’s new headquarters offices in the second half of 2015.

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (21:00 GMT) on Wednesday, Jan. 28, 2015. Interested parties may listen to the call by dialing 877.415.3178 (passcode: 75348159), or if outside North America, by dialing 857.244.7321 (passcode: 75348159). 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: 17421718), or if outside North America, by dialing 617.801.6888 (passcode: 17421718).

Statement regarding use of non‑GAAP financial measures

The company reports non‑GAAP financial measures, including gross margins, operating margins, net income or loss, basic and diluted income or loss per share, free cash flow and billings 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 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 balance sheet. 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.

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. Reconciliations between GAAP and non‑GAAP results are presented in the tables of this release.

Use of forward‑looking statements and third‑party data

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, 2013 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 fiscal year ended December 31, 2014.

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.

The Global 2000 is an annual ranking of the top 2,000 public companies in the world published by Forbes Magazine. The ranking is based on a mix of four metrics: sales, profit, assets and market value.

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.

# # #

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.