SANTA CLARA, Calif. – Oct. 25, 2017 – ServiceNow® (NYSE: NOW)
today announced the financial results for its third quarter 2017.
Third Quarter 2017 GAAP Results:
- Subscription revenues of $455.4 million, representing 43%
year‑over‑year growth.
- Professional services and other
revenues of $42.7 million, representing 10% year‑over‑year
growth.
- Total revenues of $498.2 million, representing 39%
year‑over‑year growth.
- Subscription gross profit of $373.5
million, representing 82% of subscription revenues.
- Professional services and other gross loss of $2.7 million,
representing negative 6% of professional services and other
revenues.
- Total gross profit of $370.9 million, representing
74% of total revenues.
- Loss from operations of $7.1
million.
- Net loss of $24.2 million, or loss of $0.14 per
basic and diluted share.
- Net cash provided by operating
activities of $141.9 million, representing 28% of total
revenues.
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.
- Subscription revenues of $449.5 million, representing 41%
year‑over‑year growth adjusted for constant currency.
- Professional services and other revenues of $41.9 million,
representing 8% year‑over‑year growth adjusted for constant
currency.
- Total revenues of $491.4 million, representing 37%
year‑over‑year growth adjusted for constant currency.
- Subscription billings of $499.7 million, representing 38%
year‑over‑year growth (or $497.4 million, representing 37%
year‑over‑year growth adjusted for constant currency and constant
billings duration).
- Professional services and other
billings of $46.5 million, representing 12% year‑over‑year growth
(or $45.6 million, representing 10% year‑over‑year growth adjusted
for constant currency).
- Total billings of $546.1 million,
representing 35% year‑over‑year growth (or $543.0 million,
representing 34% year‑over‑year growth adjusted for constant
currency and constant billings duration).
- Subscription
gross profit of $386.1 million, representing 85% of subscription
revenues.
- Professional services and other gross profit of
$4.4 million, representing 10% of professional services and other
revenues.
- Total gross profit of $390.5 million, representing
78% of total revenues.
- Income from operations of $98.4
million, representing 20% of total revenues.
- Net income of
$69.3 million, or earnings of $0.40 per basic share and $0.38 per
diluted share.
- Free cash flow of $95.1 million,
representing 19% of total revenues.
“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:
- GAAP subscription revenues between $485 and $490 million,
representing 41% to 42% year‑over‑year growth (or non‑GAAP
subscription revenues between $473 and $478 million, representing
37% to 39% year‑over‑year growth adjusted for constant
currency).
- GAAP professional services and other revenues of
$46 million, representing 12% year‑over‑year growth (or non‑GAAP
professional services and other revenues of $44 million,
representing 7% year‑over‑year growth adjusted for constant
currency).
- GAAP total revenues between $531 and $536 million,
representing 38% to 39% year‑over‑year growth (or non‑GAAP total
revenues between $517 and $522 million, representing 34% to 35%
year‑over‑year growth adjusted for constant currency).
- Non‑GAAP subscription billings and non‑GAAP subscription
billings adjusted for constant currency and constant billings
durations between $645 and $650 million, representing 33% to 34%
year‑over‑year growth.
- Non‑GAAP professional services and
other billings of $49 million, representing a 4% decline
year‑over‑year (or $47 million, representing an 8% decline
year‑over‑year adjusted for constant currency).
- Non‑GAAP
total billings between $694 and $699 million, representing 30% to
31% year‑over‑year growth (or between $692 and $697 million,
representing 29% to 30% year‑over‑year growth adjusted for constant
currency and constant billings duration).
- Non‑GAAP
operating margin of 17%.
- Non‑GAAP weighted average shares
used to compute diluted net income per share of approximately 181
million shares.
For the full year 2017, we expect:
- GAAP subscription revenues between $1,728 and $1,733 million,
representing 41% to 42% year‑over‑year growth (or non‑GAAP
subscription revenues between $1,722 and $1,727 million,
representing 41% year‑over‑year growth adjusted for constant
currency).
- GAAP professional services and other revenues of
$190 million, representing 13% year‑over‑year growth or (non‑GAAP
professional services and other revenues adjusted for constant
currency of $189 million, representing 12% year‑over‑year
growth).
- GAAP total revenues between $1,918 and $1,923
million, representing 38% year‑over‑year growth (or non‑GAAP total
revenues between $1,911 and $1,916 million, representing 37% to 38%
year‑over‑year growth adjusted for constant currency).
- Non‑GAAP subscription billings between $2,080 and $2,085
million, representing 38% year‑over‑year growth (or between $2,077
and $2,082 million, representing 37% to 38% year‑over‑year growth
adjusted for constant currency and constant billings duration).
- Non‑GAAP professional services and other billings of $194
million, or 8% year‑over‑year growth or (non‑GAAP professional
services and other billings adjusted for constant currency of $193
million, representing 7% year‑over‑year growth).
- Non‑GAAP
total billings between $2,274 and $2,279 million, representing 35%
year‑over‑year growth (or between $2,270 and $2,275 million,
representing 34% to 35% year‑over‑year growth adjusted for constant
currency and constant billings duration).
- Non‑GAAP
subscription gross margin of 85%.
- Non‑GAAP professional
services and other gross margin of 16%.
- Non‑GAAP total
gross margin of 78%.
- Non‑GAAP operating margin of 16%.
- Non‑GAAP free cash flow margin of 25%.
- Non‑GAAP
weighted average shares used to compute diluted net income per share
of approximately 179 million shares.
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)
