Q3 2014 complete financial tables (download PDF)
SANTA CLARA, Calif. – Oct. 22, 2014 – ServiceNow® (NYSE: NOW), the
enterprise IT cloud company, today announced its financial results for
the third quarter of 2014.
Third quarter 2014 results:
Revenues of $178.7 million, an increase of 61% compared to the
third quarter of 2013, and an increase of 7% from the second
quarter of 2014.
Non‑GAAP operating income of $10.2 million, or 6% of total
revenues, compared to a non‑GAAP operating income of $3.8 million,
or 3% of total revenues in the third quarter of 2013 (see the
table entitled "Results of Operations GAAP to Non‑GAAP
Reconciliation” for a reconciliation of these GAAP and non‑GAAP
A GAAP net loss for the quarter of $41.1 million, or a $0.28 loss
per basic and diluted share, compared with a GAAP net loss of
$14.7 million, or a $0.11 loss per basic and diluted share, in the
third quarter of 2013.
Non‑GAAP net income for the quarter of $5.7 million, or a $0.04
income per basic share and $0.03 income per diluted share,
compared to a non‑GAAP net income of $2.2 million or a $0.02
income per basic share and $0.01 income per diluted share, in the
third 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).
Deferred revenue of $350.8 million, a 7% increase compared to the
$328.9 million reported at the end of the prior quarter.
Billings of $200.7 million, a 7% increase compared to the $187.1
million reported in the previous quarter and a 58% increase
compared to the $127.0 million reported for the same period last
year (see the table entitled “Non‑GAAP Billings Reconciliation”
for a reconciliation of non‑GAAP billings to GAAP
Added 150 net new customers, bringing the total to 2,514.
Customer renewal rate remained strong at 98%, with upsells
representing 35% of the annual contract value booked in the
“We had a solid third quarter as we continued to help our customers
extend service management across the enterprise,” said Frank Slootman,
president and chief executive officer, ServiceNow. “The opportunities
for us to expand within IT, as well as deliver value throughout the
business, significantly broaden our addressable market and growth potential.”
“Our strong third quarter performance included a record 11 deals
greater than $1 million in annual contract value,” added Michael
Scarpelli, chief financial officer, ServiceNow. “We also achieved our
first quarter of billings greater than $200 million.”
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 fourth quarter of 2014, we expect:
Total revenues between $192 and $194 million, representing
year‑over‑year growth between 53% and 55%. Our total fourth
quarter revenue estimate consists of subscription revenues between
$162 and $163 million and professional services and other revenues
between $30 and $31 million.
Billings between $245 and $250 million, representing
year‑over‑year growth between 47% and 50%.
Subscription gross margin of approximately 78%, professional
services and other gross margin of approximately 15%, and overall
gross margin of approximately 68%.
Operating margin of approximately 2%.
For the full year 2014, we expect revenues to be in the range of
$677 to $679 million, representing year‑over‑year growth between 59%
and 60%. Our total annual revenues estimate consists of subscription
revenues between $562 and $563 million and professional services and
other revenues between $114 and $115 million.
Conference Call Details
ServiceNow will host a conference call to discuss its financial
results for the third quarter of 2014 to begin today at 2 p.m. PDT
(21:00 GMT). Interested parties may listen to the call by dialing
877.703.6107 (passcode: 44361762) or if outside North America, by
dialing 857.244.7306 (passcode: 44361762). Individuals may access the
live teleconference from the investor relations section of the
ServiceNow web site at http://investors.servicenow.com. The webcast
will be archived for a period of 30 days.
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, the amortization of debt discount and issuance
costs related to 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 one or more of 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
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,”
and our addressable market and growth potential. 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‑Q that
will be filed for the quarter ended June 30, 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.
ServiceNow is the enterprise IT cloud company. We transform IT by
automating and managing IT service relationships across the global
enterprise. Organizations deploy our service to create a single system
of record for IT and automate manual tasks, standardize processes and
consolidate legacy systems. Using our extensible platform, our
customers create custom applications and evolve the IT service model
to service domains inside and outside the enterprise. ServiceNow
transforms IT from the department of no to the department of now. For
more information, visit www.servicenow.com.
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