SANTA CLARA, Calif. ‑ July 29, 2020 ‑ ServiceNow (NYSE: NOW), the leading digital workflow company making work, work better for people, today announced financial results for its second quarter ended June 30, 2020, with subscription revenues of $1,016 million in Q2 2020, representing 30% year‑over‑year growth, 32% adjusted for constant currency.
During the quarter, ServiceNow closed 40 transactions with more than $1 million, including two transactions over $10 million, in net new annual contract value (ACV). The company now has 964 total customers with more than $1 million in ACV, representing 26% year‑over‑year growth in customers.
“ServiceNow is leading the workflow revolution, proven by our very strong Q2 results,” said ServiceNow CEO Bill McDermott. “Businesses need to rapidly digitize workflows to deliver great experiences for their customers, employees, and partners. We are the strategic workflow authority helping our customers solve once‑in‑a‑generation challenges and capitalize on the immense opportunities of digital transformation. Every day we are manifesting our purpose — making the world of work, work better for people — on our journey to becoming the defining enterprise software company of the 21st century.”
“In Q2, we achieved our $4 billion revenues run rate milestone. We exceeded the high end of our subscription revenues and billings guidance, while continuing to drive margin expansion and strong free cash flow,” said ServiceNow CFO Gina Mastantuono. “Our best‑in‑class renewal rate remained at 97%, and customers continue to expand on the Now Platform, giving us conviction to raise our growth and profitability guidance for the year. I am confident in our ability to deliver our second half.”
During the quarter, ServiceNow continued rapid innovation delivering the capabilities customers need to protect revenue, improve productivity, and ensure business resilience. The company released the Safe Workplace apps and dashboard, designed to help make returning to the workplace work for everyone. This suite has now been downloaded by more than 550 organizations worldwide. ServiceNow also hosted its Knowledge 2020 Digital Experience – its largest ever, creating a global digital broadcast environment to engage nearly double the number of customers and partners from last year. ServiceNow’s core business remained very strong. With Now workflows on the Now Platform — the platform of platforms — ServiceNow is accelerating digital transformation for its customers by enabling the consumer‑grade workflow experiences that are more important than ever for their employees and customers.
Second Quarter 2020 GAAP and Non‑GAAP Results:
The following table summarizes our financial results for the second quarter 2020:
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Second Quarter 2020 |
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Second Quarter 2020 Non‑GAAP Results(1) |
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Amount |
Year/Year |
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Amount |
Year/Year |
Adjusted Amount |
Adjusted |
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Subscription revenues |
$1,016 |
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30% |
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$1,027 |
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32% |
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Professional services and other revenues |
$55 |
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5% |
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$56 |
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6% |
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Total revenues |
$1,071 |
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28% |
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$1,083 |
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30% |
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Subscription billings |
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$1,018 |
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25% |
$1,033 |
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26% |
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Professional services and other billings |
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$61 |
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13% |
$62 |
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14% |
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Total billings |
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$1,079 |
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24% |
$1,095 |
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26% |
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Amount |
Margin (%) |
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Amount |
Margin (%) |
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Subscription gross profit |
$844 |
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83% |
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$881 |
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87% |
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Professional services and other gross profit (loss) |
($6) |
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(10%) |
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$7 |
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13% |
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Total gross profit |
$838 |
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78% |
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$888 |
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83% |
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Income from operations |
$62 |
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6% |
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$295 |
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28% |
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Net cash provided by operating activities |
$368 |
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34% |
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Free cash flow |
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$259 |
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24% |
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Amount |
Earnings per |
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Amount |
Earnings per |
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Net income |
$41 |
$0.21 / $0.20 |
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$243 |
$1.27 / $1.23 |
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Note: Numbers rounded for presentation purposes.
Financial Outlook
Our guidance includes GAAP and non‑GAAP financial measures.
The following table summarizes our guidance for the third quarter 2020:
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Third Quarter 2020 |
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Third Quarter 2020 Non‑GAAP Guidance(1) |
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Amount |
Year/Year |
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Amount |
Year/Year |
Adjusted |
Adjusted |
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Subscription revenues |
$1,055 ‑ $1,060 |
26% ‑ 27% |
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$1,055 ‑ $1,060 |
26% ‑ 27% |
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Subscription billings |
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$995 ‑ $1,015 |
15% ‑ 17% |
$1,003 ‑ $1,023 |
16% ‑ 18% |
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Margin (%) |
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Income from operations |
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22% |
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Amount |
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Weighted‑average shares used to compute diluted net income per share |
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199 |
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The following table summarizes our guidance for full‑year 2020:
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Full‑Year 2020 |
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Full‑Year 2020 Non‑GAAP Guidance(1) |
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Amount |
Year/Year |
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Amount |
Year/Year |
Adjusted |
Adjusted |
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Subscription revenues |
$4,185 ‑ $4,200 |
29% |
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$4,210 ‑ $4,225 |
29% ‑ 30% |
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Subscription billings |
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$4,660 ‑ $4,700 |
23% ‑ 24% |
$4,702 ‑ $4,742 |
24% ‑ 25% |
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Margin (%) |
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Subscription gross profit |
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86% |
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Income from operations |
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24% |
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Free cash flow |
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29.5% |
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Amount |
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Weighted‑average shares used to compute diluted net income per share |
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198 |
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As with our previously issued full‑year 2020 guidance dated April 29, 2020, our guidance factors in assumptions regarding the expected impacts of COVID‑19 on our business. This assumes that generally the most significant headwinds would occur in the second and third quarter of 2020, that there will be uncertainty around new business, renewal timing or billings terms, particularly with customers in industries highly affected by COVID‑19, and that these economic conditions could persist throughout the remainder of the year. These assumptions are based on information available to us today. Significant variation from these assumptions could cause us to modify our guidance higher or lower.
The following table compares our updated full‑year 2020 guidance against our previously issued full‑year 2020 guidance dated April 29, 2020:
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Comparison of Updated Full‑Year 2020 Guidance to Previously Issued Guidance(1) |
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Previous Guidance Midpoint(2) |
Currency |
Duration |
Guidance |
Current Guidance Midpoint(5) |
GAAP subscription revenues |
$4,135 |
$19 |
$0 |
$39 |
$4,193 |
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Non‑GAAP subscription billings(6) |
$4,630 |
$22 |
$0 |
$28 |
$4,680 |
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Conference Call Details
The conference call will begin at 2 p.m. Pacific Time (22:00 BST) on July 29, 2020. Interested parties may listen to the call by dialing (833) 513‑0567 (Passcode: 3395375), or if outside North America, by dialing (236) 714‑2186 (Passcode: 3395375). Individuals may access the live teleconference from this webcast link:
https://event.on24.com/wcc/r/2399486/795C3DADBA1B185511D571A263A6CCAE
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 (800) 585‑8367 (Passcode: 3395375), or if outside North America, by dialing (416) 621‑4642 (Passcode: 3395375).
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 the following non‑GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
Our presentation of non‑GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non‑GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP and non‑GAAP results and guidance.
Use of Forward‑Looking Statements
This release contains “forward‑looking statements” regarding our performance, including but not limited to statements 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.
Factors that may cause actual results to differ materially from those in any forward‑looking statements include: (i) the impact and duration of the health impact of COVID‑19 and the economic impact of safety measures to mitigate its impact, including the effectiveness, extent and duration of efforts to limit the spread and impact of the disease, such as “shelter in place” and similar government directives; (ii) our ability to compete successfully against existing and new competitors, (iii) our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet, (iv) our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments, (v) errors, interruptions, delays, or security breaches in or of our service or data centers, (vi) our ability to grow our business, including converting remaining performance obligations into revenue, adding and retaining customers, selling additional subscriptions to existing customers, selling to larger enterprises, government and regulated organizations with complex sales cycles and certification processes, and entering new geographies and markets, (vii) our ability to develop and gain customer acceptance of new and improved products and services, including those acquired through strategic transactions, and (viii) material changes in the value of foreign currencies relative to the U.S. Dollar. Additionally, these forward‑looking statements, particularly our guidance, involve risk, uncertainties and assumptions, including those related to the continued impacts of COVID‑19 on our business and global economic conditions. Many of these assumptions relate to matters that are beyond our control and changing rapidly, including, but not limited to, the timeframes for and severity of social distancing and other mitigation requirements, the continued impact of COVID‑19 on our customers’ purchasing decisions and the length of our sales cycles, particularly for customers in certain industries highly affected by COVID‑19. Significant variation from the assumptions underlying our forward‑looking statements could cause our actual results to vary, and the impact could be significant.
Further information on these and other factors that could affect our financial results are included in our Form 10‑Q that will be filed for the quarter ended June 30, 2020 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10‑K filed for the year ended December 31, 2019.
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 (NYSE: NOW) is making the world of work, work better for people. Our cloud‑based platform and solutions deliver digital workflows that create great experiences and unlock productivity for employees and the enterprise. For more information, visit: www.servicenow.com.
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© 2020 ServiceNow, Inc. All rights reserved. ServiceNow, the ServiceNow logo, Now, and other ServiceNow marks are trademarks and/or registered trademarks of ServiceNow, Inc. in the United States and/or other countries. Other company names, product names, and logos may be trademarks of the respective companies with which they are associated.
ServiceNow Q2 2020 complete financial tables (download PDF)
Media Contact:
Sara Day
650.336.3123
press@servicenow.com
Investor Contact:
Darren Yip
925.388.7205
ir@servicenow.com