SANTA CLARA, Calif. – Oct. 25, 2017 – ServiceNow® (NYSE: NOW) today announced the financial results for its third quarter 2017.
Third Quarter 2017 GAAP Results:
Third Quarter 2017 Non‑GAAP Results:
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. For the following non‑GAAP results, see the section entitled “Statement Regarding Use of Non‑GAAP Financial Measures” for an explanation of non‑GAAP measures and the corresponding growth rates, and the table entitled “GAAP to Non‑GAAP Reconciliation” for a reconciliation of GAAP to non‑GAAP measures and corresponding growth rates.
“Q3 was another strong quarter for ServiceNow, with great performance across every region,” said John Donahoe, ServiceNow president and chief executive officer. “We are focused on delivering best‑in‑class consumer‑like experiences and driving customer success. And we’re continuing to innovate, making technology such as machine learning native to all applications on our platform. We are committed to being a trusted cloud partner for our customers helping them navigate digital transformation and create the future of work.”
“We achieved $500 million of non‑GAAP subscription billings, while growing 38% year‑over‑year,” said Michael Scarpelli, chief financial officer, ServiceNow. “The strong quarter was driven by large new deals, including 22 greater than $1 million in net new ACV, 8 of which were to Federal customers.”
Financial Outlook
Our guidance is based on foreign exchange rates as of September 30, 2017 and includes GAAP and non‑GAAP financial measures. See the section entitled “Statement Regarding Use of Non‑GAAP Financial Measures” for an explanation of non‑GAAP measures and the corresponding growth rates, and the table entitled “Reconciliation of Non‑GAAP Financial Guidance” for a reconciliation of GAAP to non‑GAAP metrics and corresponding growth rates.
For the fourth quarter of 2017, we expect:
For the full year 2017, we expect:
Conference Call Details
ServiceNow will host a conference call to discuss our third quarter financial results and financial outlook beginning at 2 p.m. Pacific Time (21:00 GMT) on Wednesday, October 25, 2017. Interested parties may listen to the call by dialing 844.464.3153 (passcode: 91890596), or if outside North America, by dialing +1.508.637.5575 (passcode: 91890596). 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: 91890596), or if outside North America, by dialing +1.404.537.3406 (passcode: 91890596).
Investor Presentation Details
An investor presentation providing additional information and analysis can be found at http://investors.servicenow.com.
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.
We present revenues adjusted for constant currency and corresponding growth rates to provide a framework for assessing how our 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. We believe the presentation of revenues adjusted for constant currency facilitates the comparison of revenues year‑over‑year.
We believe billings is a useful leading indicator regarding the performance of our business. We present subscription billings, professional services and other billings, and total billings, and corresponding growth rates, as the applicable revenue plus the applicable change in deferred revenue as presented or derived from the statement of cash flows. While we typically bill customers annually for our subscription services, customers sometimes request, and we accommodate, multi‑year billings, which are billings with durations in excess of the typical 12 month term. Accordingly, to facilitate greater comparability in our billings information, we further present billings adjusted for constant billings duration, in addition to adjusting for constant currency. To present this information, we adjust subscription billings and total billings for constant currency as described above, and adjust for constant duration by replacing the portion of multi‑year billings in excess of twelve months during the current period with the portion of multi‑year billings in excess of twelve months during the prior period presented. We also present professional services and other billings and corresponding growth rates adjusted for constant currency as described above.
Our non‑GAAP presentation of gross profit, income from operations and net income measures exclude stock‑based compensation expense, 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 effect of these adjustments. We believe the presentation of operating results that exclude these non‑cash or non‑recurring items provides useful supplemental information to investors and facilitates the analysis of our 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 provided by (used in) 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 total 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 our 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.
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‑Q for the quarter ended June 30, 2017 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 September 30, 2017.
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 makes work better across the enterprise. Getting simple stuff done at work can be easy, and getting complex multi‑step tasks completed can be painless. Our applications automate, predict, digitize and optimize business processes and tasks, from IT to Customer Service to Security Operations and to Human Resources, creating a better experience for your employees, users and customers while transforming your enterprise. ServiceNow (NYSE:NOW) is how work gets done. For more information, visit: www.servicenow.com.
© 2017 ServiceNow, Inc. All rights reserved. ServiceNow, the ServiceNow logo, and other ServiceNow marks are trademarks and/or registered trademarks of ServiceNow, Inc., in the United States and/or other countries. Other company and product names may be trademarks of the respective companies with which they are associated.
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ServiceNow Q3 2017 complete financial tables (download PDF)