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ServiceNow Reports Financial Results for First Quarter 2013

First Quarter Revenues Grew 81% Year‑over‑Year

ServiceNow Q1 2013 complete financial tables (download PDF)

SAN DIEGO – April 24, 2013 – ServiceNow (NYSE: NOW), the enterprise IT cloud company, today announced its financial results for its first quarter of 2013.

First quarter 2013 results:

  • Revenues of $85.9 million, an increase of 81% compared to the first quarter of 2012, and an increase of 14% from the fourth quarter of 2012.
  • A GAAP net loss for the quarter of $13.4 million, or a loss of $0.10 per basic and diluted share, compared to a GAAP net loss of $5.6 million, or a loss of $0.23 per basic and diluted share, in the first quarter of 2012.
  • A non‑GAAP net loss for the quarter of $1.9 million, or a loss of $0.01 per basic and diluted share, compared to a non‑GAAP net loss of $2.5 million, or a loss of $0.11 per basic and diluted share, in the first quarter of 2012 (see the table entitled "Results of Operations GAAP to Non‑GAAP Reconciliation" for a reconciliation of these GAAP and non‑GAAP financial measures).
  • Deferred revenue of $194.8 million, a 14% increase over the $170.4 million reported at the end of the prior quarter.
  • Billings were $110.3 million, a 13% increase over the $97.6 million reported in the previous quarter and an 88% increase over the $58.6 million in the same period last year (see the table entitled "Non‑GAAP Billings Reconciliation" for a reconciliation of non‑GAAP billings to GAAP revenues).

"The first quarter was a strong start to 2013. We exceeded our previously stated outlook on revenue and non‑GAAP earnings per share, added 128 net new customers and achieved a customer renewal rate of 96%," said Frank Slootman, president and chief executive officer, ServiceNow. "We also continued to penetrate our existing customer base, with upsells comprising a third of our annual contract value signed in the quarter."

"We saw strength across our key financial metrics in the quarter, highlighted by our first quarter with billings in excess of $100 million, a significant milestone in our growth story," added Michael Scarpelli, chief financial officer, ServiceNow. "Deferred revenue grew sequentially by 14% and we generated $15.0 million in operating cash flow for the quarter."

Financial Outlook

The financial guidance discussed below is on a non‑GAAP basis, except for revenues, and excludes stock‑based compensation expense and the related income tax impact (see table which reconciles these non‑GAAP financial measures to the related GAAP measures). Negative numbers are shown in parentheses.

For the second quarter of 2013, we expect:

  • Total revenues between $94 and $96 million, representing year‑over‑year growth between 66% and 69%. Our total second quarter revenue estimate consists of subscription revenues between $77 and $78 million and professional services and other revenues between $17 and $18 million.
  • Subscription gross margin between 74% and 75%, professional services and other gross margin between 23% and 25%, and overall gross margin between 64% and 65%. Our professional services and other revenues outlook includes approximately $4 million related to Knowledge, our annual user conference to be held in May, with related expenses of approximately $8 ‑ $9 million recorded in sales and marketing.
  • Operating margin between (6%) and (5%).
  • A net loss per basic and diluted share between ($0.06) and ($0.04) with weighted‑average shares outstanding of approximately 135 million.

For the full year 2013, we expect revenues to be in the range of $394 to $398 million, representing year‑over‑year growth between 62% and 63%. Our total annual revenues estimate consists of subscription revenues between $332 and $334 million and professional services and other revenues between $62 and $64 million.

First quarter highlights

  • On April 1st, ServiceNow received Federal Information Security Management Act (FISMA) Moderate Authority to Operate (ATO) from the U.S. General Services Administration (GSA). The authorization will allow federal, state and local government agencies to securely leverage ServiceNow for IT system consolidation and business process automation.
  • In February, ServiceNow announced Hitachi Solutions has become the first business partner in Japan to provide ServiceNow to the Japanese market. Hitachi Solutions will resell the ServiceNow Service Automation applications and the ServiceNow Service Automation Platform. Hitachi Solutions will also provide implementation, training and first‑level support for Japanese customers.

Conference Call Details

ServiceNow will host a conference call to discuss its financial results for the first quarter of 2013 to begin today at 2 p.m. PDT (21:00 GMT). Interested parties may listen to the call by dialing 877.546.5018 (passcode: 78194644), or if outside North America, by dialing 857.244.7550 (passcode: 78194644). Individuals may access the live teleconference from the investor relations section of the ServiceNow web site at The webcast will be archived for a period of 30 days.

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: 60952020), or if outside North America, by dialing 617.801.6888 (passcode: 60952020).

Statement regarding use of non‑GAAP financial measures

The company reports non‑GAAP results for 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. Management believes the presentation of operating results excluding stock‑based compensation expense 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. 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

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, 2012 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, 2013.

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 the enterprise IT cloud company. We focus on transforming enterprise IT by automating and standardizing business processes and consolidating IT across the global enterprise. Organizations deploy our service to create a single system of record for enterprise IT, lower operational costs and enhance efficiency. Additionally, our customers use our extensible platform to build custom applications for automating activities unique to their business requirements. For more information, visit

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

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