ServiceNow Reports Fourth Quarter and Full-Year 2022 Financial Results

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  • ServiceNow exceeds high end of guidance across Q4 2022 GAAP topline growth and profitability metrics
  • Subscription revenues of $1,860 million in Q4 2022, representing 22% year-over-year growth, 27.5% adjusted for constant currency
  • Total revenues of $1,940 million in Q4 2022, representing 20% year-over-year growth, 25.5% adjusted for constant currency
  • Current remaining performance obligations (“cRPO”) of $6.94 billion as of Q4 2022, representing 22% year-over-year growth, 25.5% adjusted for constant currency
  • Net new annual contract value (“NNACV”) contribution to cRPO outperformed company expectations in Q4 2022, driven by strong net expansion and over 30% NNACV growth year-over-year from new logos

SANTA CLARA, Calif.ServiceNow (NYSE: NOW), the leading digital workflow company making the world work better for everyone, today announced financial results for its fourth quarter ended December 31, 2022, with subscription revenues of $1,860 million in Q4 2022, representing 22% year-over-year growth, 27.5% adjusted for constant currency.

“ServiceNow continues to perform as a beyond expectations company,” said ServiceNow Chairman and CEO Bill McDermott. “Our Q4 surge in new business shows that the secular tailwinds of digitization aren’t going anywhere. We are driving net-new innovation, fast growth, and operating leverage. The world works with ServiceNow as the end-to-end platform for digital transformation.”

As of December 31, 2022, current remaining performance obligations (“cRPO”), contract revenue that will be recognized as revenue in the next 12 months, was $6.94 billion, representing 22% year-over-year growth and 25.5% adjusted for constant currency. The company now has 1,637 total customers with more than $1 million in annual contract value, representing 22% year-over-year growth in customers.

“Q4 was another great quarter of execution as we exceeded our subscription revenue and profitability guidance,” said ServiceNow CFO Gina Mastantuono. “We outperformed our NNACV expectations, driven by robust net expansion and over 30% NNACV growth year-over-year from new logos. What’s more, our results were generated with a lower mix of early renewals from 2023, providing us more opportunities to drive further expansion throughout the year. With our strong results it's clear that ServiceNow remains a strategic priority, generating durable demand that is positioning us well for 2023 and beyond.”

Following McDermott’s elevation to Chairman and CEO late in 2022, ServiceNow has appointed Chirantan CJ Desai President and COO of ServiceNow. Desai joined ServiceNow in December 2016 as the Chief Product Officer and was promoted to the role of Chief Operating Officer in January 2022. Prior to joining ServiceNow, Desai held product leadership roles at EMC, Symantec, and Oracle.

“CJ has established himself as a leader of consequence in this industry,” said McDermott. “His track record – from strengthening our platform to driving our customer experience – has helped establish ServiceNow as the enterprise juggernaut it is today. I’d like to personally congratulate CJ for this latest, well-deserved endorsement of his leadership.”

Recent Business Highlights

  • New innovations rolled out in fourth quarter – including automated service suggestions, Service Request Playbook, and Workplace Scenario Planning – were designed to help address today's most pressing workplace productivity challenges by accelerating automation to eliminate complexity and improve service operations for a better customer, employee, and constituent experience.
  • During the quarter, ServiceNow also enhanced its observability capabilities by launching Lightstep UQL (Unified Query Language) to help companies extend visibility across highly complex and dynamic Kubernetes applications and ensure they’re fully instrumented and observable by default.
  • In addition, ServiceNow and Zoom Communications expanded their partnership with new integrations to help joint customers elevate employee productivity and improve collaboration across their organizations.
  • The company welcomed Masatoshi Suzuki as president of ServiceNow Japan, designating Japan as a fourth geographic region alongside EMEA, APAC, and Americas. Suzuki-san joins ServiceNow after a decades-long, distinguished career in leading industry organizations including UiPath, Symantec, SAP, and Oracle.
  • Last week, ServiceNow also announced a multi-year transformation of its Partner Program to support the estimated $500 billion market opportunity for the Now Platform and associated partner services. It will create new opportunities for partners to expand and collaborate with ServiceNow, giving partners more flexibility to create value, incentives to enable growth, and an improved experience.

Fourth Quarter 2022 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the fourth quarter 2022:

 

Fourth Quarter 2022 GAAP Results

Fourth Quarter 2022 Non-GAAP Results(1)

 

Amount
($ millions)

Year/Year
Growth (%)

Amount
($ millions)(2)

Year/Year
Growth (%)

Subscription revenues

$1,860

 

22

%

$1,941

27.5

%

Professional services and other revenues

$80

 

(12

%)

$85

 

(6.5

%)

Total revenues

$1,940

 

20

%

$2,026

 

25.5

%

 

 

 

 

 

 

Amount
($ billions)

Year/Year
Growth (%)

Amount
($ billions)(2)

Year/Year
Growth (%)

cRPO

$6.94

 

22

%

$7.12

 

25.5

%

RPO

$14.0

 

22

%

$14.4

 

25

%

 

 

 

 

 

 

Amount
($ millions)

Margin (%)

Amount
($ millions)

Margin (%)

Subscription gross profit

$1,536

 

83

%

$1,595

 

86

%

Professional services and other gross profit (loss)

($11

)

(14

%)

$5

 

6

%

Total gross profit

$1,525

 

79

%

$1,600

 

83

%

Income from operations

$155

 

8

%

$544

 

28

%

Net cash provided by operating activities

$1,162

 

60

%

 

 

Free cash flow

 

 

$1,020

 

53

%

 

 

 

 

 

 

Amount
($ millions)

Earnings per
Basic/Diluted
Share ($)

Amount
($ millions)

Earnings per
Basic/Diluted
Share ($)

Net income

$150

 

$0.74 / $0.74

$464

 

$2.29 / $2.28

(1)

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. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.

(2)

Non-GAAP subscription revenues, professional services and other revenues, total revenues, cRPO and RPO are adjusted for constant currency. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.

 

Note: Numbers rounded for presentation purposes.

Full-Year 2022 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the full-year 2022:

 

Full-Year 2022 GAAP Results

Full-Year 2022 Non-GAAP Results(1)

 

Amount
($ millions)

Year/Year
Growth (%)

Amount
($ millions)(2)

Year/Year
Growth (%)

Subscription revenues

$6,891

 

24

%

$7,165

28.5

%

Professional services and other revenues

$354

 

10

%

$373

 

15.5

%

Total revenues

$7,245

 

23

%

$7,538

 

28

%

 

 

 

 

 

 

Amount
($ billions)

Year/Year
Growth (%)

Amount
($ billions)(2)

Year/Year
Growth (%)

cRPO

$6.94

 

22

%

$7.12

 

25.5

%

RPO

$14.0

 

22

%

$14.4

 

25

%

 

 

 

 

 

 

Amount
($ millions)

Margin (%)

Amount
($ millions)

Margin (%)

Subscription gross profit

$5,704

 

83

%

$5,935

 

86

%

Professional services and other gross profit (loss)

($32

)

(9

%)

$35

 

10

%

Total gross profit

$5,672

 

78

%

$5,970

 

82

%

Income from operations

$355

 

5

%

$1,860

 

26

%

Net cash provided by operating activities

$2,723

 

38

%

 

 

Free cash flow

 

 

$2,180

 

30

%

 

 

 

 

 

 

Amount
($ millions)

Earnings per
Basic/Diluted
Share ($)

Amount
($ millions)

Earnings per
Basic/Diluted
Share ($)

Net income

325

 

$1.61 / $1.60

$1,543

 

$7.66 / $7.59

(1)

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. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.

(2)

Non-GAAP subscription revenues, professional services and other revenues, total revenues, cRPO and RPO are adjusted for constant currency. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.

 

Note: Numbers rounded for presentation purposes.

Financial Outlook

Our guidance includes GAAP and non-GAAP financial measures. The non-GAAP growth rates for subscription revenues and cRPO are only adjusted for constant currency to provide better visibility into the underlying business trends.

The following table summarizes our guidance for the first quarter 2023:

 

First Quarter 2023
GAAP Guidance

First Quarter 2023
Non-GAAP Guidance(1)

 

Amount
($ millions)(2)

 

Year/Year
Growth (%)(2)

 

Constant Currency
Year/Year Growth (%)

Subscription revenues

$1,990 - $2,000

22% - 22.5%

25% - 25.5%

 

 

 

 

cRPO

 

21%

24%

 

 

 

 

 

 

 

Margin (%)

Income from operations

 

 

24%

 

 

 

 

 

 

Amount
(millions)

 

Weighted-average shares used to compute diluted net income per share

 

204

 

(1)

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. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

(2)

Guidance for GAAP subscription revenues and GAAP subscription revenue and cRPO growth rate is based on the 31-day average of foreign exchange rates for December 2022 for entities reporting in currencies other than U.S. Dollars.

 

The following table summarizes our guidance for the full-year 2023:

 

Full-Year 2023
GAAP Guidance

Full-Year 2023
Non-GAAP Guidance(1)

 

Amount
($ millions)(2)

Year/Year
Growth (%)(2)

Constant Currency
Year/Year Growth (%)

Subscription revenues

$8,440 - $8,500

22.5% - 23.5%

22.5% - 23.5%

 

 

 

 

 

 

 

Margin (%)

Subscription gross profit

 

 

84%

Income from operations

 

 

26%

Free cash flow

 

 

30%

 

 

 

 

 

 

Amount
(millions)

 

Weighted-average shares used to compute diluted net income per share

 

206

 

(1)

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. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

(2)

GAAP subscription revenues and related growth rate for the future quarters included in our full-year 2023 guidance are based on the 31-day average of foreign exchange rates for December 2022 for entities reporting in currencies other than U.S. Dollars.

 

Note: Numbers are rounded for presentation purposes and may not foot.

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (22:00 GMT) on January 25, 2023. Interested parties may listen to the call by dialing (888) 330‑2455 (Passcode: 8135305), or if outside North America, by dialing (240) 789-2717 (Passcode: 8135305). Individuals may access the live teleconference from this webcast.

https://events.q4inc.com/attendee/623018365

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) 770‑2030 (Passcode: 8135305), or if outside North America, by dialing (647) 362‑9199 (Passcode: 8135305).

Investor Presentation Details

An investor presentation providing additional information, including forward-looking guidance, and analysis can be found at https://www.servicenow.com/company/investor-relations.html.

Statement Regarding Use of Non-GAAP Financial Measures

We use 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.

  • Revenues. We adjust revenues and related growth rates for constant currency 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 (“USD”) are converted into USD at the average exchange rates in effect during the comparison period (for Q4 2021, the average exchange rates in effect for our major currencies were 1 USD to 0.87 Euros and 1 USD to 0.74 British Pound Sterling (“GBP”)), rather than the actual average exchange rates in effect during the current period (for Q4 2022, the average exchange rates in effect for our major currencies were 1 USD to 0.98 Euros and 1 USD to 0.85 GBP). Guidance for related growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the exchange rates for the guidance period. We believe the presentation of revenues and related growth rates adjusted for constant currency facilitates the comparison of revenues year-over-year.
  • Remaining performance obligations and current remaining performance obligations. We adjust cRPO and remaining performance obligations (“RPO”) and related growth rates for constant currency to provide a framework for assessing how our business performed. To present this information, current period results for entities reporting in currencies other than USD are converted into USD at the exchange rates in effect at the end of the comparison period (for Q4 2021, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.88 Euros and 1 USD to 0.74 GBP), rather than the actual end of the period exchange rates in effect during the current period (for Q4 2022, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.93 Euros and 1 USD to 0.83 GBP). Guidance for the related growth rate is derived by applying the end of period exchange rates in effect during the comparison period rather than the exchange rates in effect during the guidance period. We believe the presentation of cRPO and RPO and related growth rates adjusted for constant currency facilitates the comparison of cRPO and RPO year-over-year, respectively.
  • Gross profit, Income from operations, Net income and Net income per share - diluted. Our non-GAAP presentation of gross profit, income from operations, and net income measures exclude certain non-cash or non-recurring items, including stock-based compensation expense, amortization of debt discount and issuance costs related to our convertible senior notes, loss on early note conversions, amortization of purchased intangibles, legal settlements, business combination and other related costs, and the related income tax effect of these adjustments. The non-GAAP weighted-average shares used to compute our non-GAAP net income per share - diluted excludes the dilutive effect of the in-the-money portion of convertible senior notes as they are covered by our note hedges, and includes the dilutive effect of time-based stock awards, the dilutive effect of warrants and the potentially dilutive effect of our stock awards with performance conditions not yet satisfied at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met. We believe these adjustments provide useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods.
  • Free cash flow. Free cash flow is defined as net cash provided by (used in) operating activities plus cash paid for legal settlements, repayments of convertible senior notes attributable to debt discount and business combination and other related costs including compensation expense, 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.

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.

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, among others, experiencing an actual or perceived cyber-security event; our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet; errors, interruptions, delays, or security breaches in or of our service or data centers; our ability to maintain and attract key employees and manage workplace culture; alleged violations of laws and regulations, including those relating to anti-bribery and anti-corruption and those relating to public sector contracting requirements; our ability to compete successfully against existing and new competitors; our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments; 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; our ability to develop and gain customer demand for and acceptance of existing, new and improved products and services; our ability to expand and maintain our partnerships and partner programs, including expected market opportunity from such relationships; global economic conditions; fluctuations in the value of foreign currencies relative to the U.S. Dollar; fluctuations in interest rates; our ability to consummate and realize the benefits of any strategic transactions or acquisitions; the impact of the Russian invasion of Ukraine on macroeconomic conditions; inflation; and fluctuations and volatility in our stock price.

Further information on these and other factors that could affect our financial results are included in our Form 10-Q for the quarter ended September 30, 2022 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K that will be filed for the year ended December 31, 2022.

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) makes the world work better for everyone. Our cloud-based platform and solutions help digitize and unify organizations so that they can find smarter, faster, better ways to make work flow. So employees and customers can be more connected, more innovative, and more agile. And we can all create the future we imagine. The world works with ServiceNow™. For more information, visit: www.servicenow.com.

© 2023 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, Inc.

Condensed Consolidated Statements of Operations

(in millions, except per share data)

(unaudited)

 

 

 

 

Three Months Ended

Year Ended

 

December 31,
2022

December 31,
2021

December 31,
2022

December 31,
2021

Revenues:

 

 

 

 

Subscription

$

1,860

 

$

1,523

 

$

6,891

 

$

5,573

 

Professional services and other

 

80

 

 

91

 

 

354

 

 

323

 

Total revenues

 

1,940

 

 

1,614

 

 

7,245

 

 

5,896

 

Cost of revenues (1):

 

 

 

 

Subscription

 

324

 

 

282

 

 

1,187

 

 

1,022

 

Professional services and other

 

91

 

 

93

 

 

386

 

 

331

 

Total cost of revenues

 

415

 

 

375

 

 

1,573

 

 

1,353

 

Gross profit

 

1,525

 

 

1,239

 

 

5,672

 

 

4,543

 

Operating expenses (1):

 

 

 

 

Sales and marketing

 

722

 

 

632

 

 

2,814

 

 

2,292

 

Research and development

 

454

 

 

392

 

 

1,768

 

 

1,397

 

General and administrative

 

194

 

 

180

 

 

735

 

 

597

 

Total operating expenses

 

1,370

 

 

1,204

 

 

5,317

 

 

4,286

 

Income from operations

 

155

 

 

35

 

 

355

 

 

257

 

Interest expense

 

(7

)

 

(7

)

 

(27

)

 

(28

)

Other income, net

 

35

 

 

4

 

 

71

 

 

20

 

Income before income taxes

 

183

 

 

32

 

 

399

 

 

249

 

Provision for income taxes

 

33

 

 

6

 

 

74

 

 

19

 

Net income

$

150

 

$

26

 

$

325

 

$

230

 

Net income per share - basic

$

0.74

 

$

0.13

 

$

1.61

 

$

1.16

 

Net income per share - diluted

$

0.74

 

$

0.13

 

$

1.60

 

$

1.13

 

Weighted-average shares used to compute net income per share - basic

 

203

 

 

199

 

 

201

 

 

198

 

Weighted-average shares used to compute net income per share - diluted

 

203

 

 

204

 

 

204

 

 

203

 

(1) Includes stock-based compensation as follows:

 

 

Three Months Ended

Year Ended

 

December 31,
2022

December 31,
2021

December 31,
2022

December 31,
2021

Cost of revenues:

 

 

 

 

Subscription

$

41

$

33

$

157

$

128

Professional services and other

 

16

 

 

16

 

 

67

 

 

59

 

Operating expenses:

 

 

 

 

Sales and marketing

 

122

 

 

96

 

 

459

 

 

389

 

Research and development

 

127

 

 

107

 

 

495

 

 

395

 

General and administrative

 

57

 

 

50

 

 

223

 

 

160

 

 

ServiceNow, Inc.

Condensed Consolidated Balance Sheets

(in millions)

 

 

 

 

 

 

 

December 31, 2022

 

December 31, 2021

 

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

1,470

 

$

1,728

Short-term investments

 

2,810

 

 

 

1,576

 

Accounts receivable, net

 

1,725

 

 

 

1,390

 

Current portion of deferred commissions

 

369

 

 

 

303

 

Prepaid expenses and other current assets

 

280

 

 

 

223

 

Total current assets

 

6,654

 

 

 

5,220

 

Deferred commissions, less current portion

 

742

 

 

 

623

 

Long-term investments

 

2,117

 

 

 

1,630

 

Property and equipment, net

 

1,053

 

 

 

766

 

Operating lease right-of-use assets

 

682

 

 

 

591

 

Intangible assets, net

 

232

 

 

 

287

 

Goodwill

 

824

 

 

 

777

 

Deferred tax assets

 

636

 

 

 

692

 

Other assets

 

359

 

 

 

212

 

Total assets

$

13,299

 

 

$

10,798

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

274

 

 

$

89

 

Accrued expenses and other current liabilities

 

975

 

 

 

850

 

Current portion of deferred revenue

 

4,660

 

 

 

3,836

 

Current portion of operating lease liabilities

 

96

 

 

 

82

 

Current debt, net

 

 

 

 

92

 

Total current liabilities

 

6,005

 

 

 

4,949

 

Deferred revenue, less current portion

 

70

 

 

 

63

 

Operating lease liabilities, less current portion

 

650

 

 

 

556

 

Long-term debt, net

 

1,486

 

 

 

1,484

 

Other long-term liabilities

 

56

 

 

 

51

 

Stockholders’ equity

 

5,032

 

 

 

3,695

 

Total liabilities and stockholders’ equity

$

13,299

 

 

$

10,798

 

 

ServiceNow, Inc.

Condensed Consolidated Statements of Cash Flows

(in millions)

(unaudited)

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,
2022

 

December 31,
2021

 

December 31,
2022

 

December 31,
2021

Cash flows from operating activities:

 

 

 

 

Net income

$

150

 

$

26

 

$

325

 

$

230

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

118

 

 

126

 

 

433

 

 

472

 

Amortization of deferred commissions

 

97

 

 

83

 

 

358

 

 

294

 

Amortization of debt discount and issuance costs

 

 

 

2

 

 

 

 

7

 

Stock-based compensation

 

363

 

 

302

 

 

1,401

 

 

1,131

 

Deferred income taxes

 

18

 

 

(13

)

 

15

 

 

(34

)

Repayments of convertible senior notes attributable to debt discount

 

 

 

 

 

 

 

(15

)

Loss on extinguishment of 2022 notes

 

 

 

 

 

 

 

3

 

Other

 

8

 

 

17

 

 

17

 

 

45

 

Changes in operating assets and liabilities, net of effect of business combinations:

 

 

 

 

Accounts receivable

 

(785

)

 

(620

)

 

(340

)

 

(401

)

Deferred commissions

 

(197

)

 

(221

)

 

(566

)

 

(565

)

Prepaid expenses and other assets

 

34

 

 

(15

)

 

(39

)

 

(93

)

Accounts payable

 

56

 

 

16

 

 

172

 

 

55

 

Deferred revenue

 

1,060

 

 

913

 

 

904

 

 

960

 

Accrued expenses and other liabilities

 

240

 

 

228

 

 

43

 

 

102

 

Net cash provided by operating activities

 

1,162

 

 

844

 

 

2,723

 

 

2,191

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

(144

)

 

(100

)

 

(550

)

 

(392

)

Business combinations, net of cash acquired

 

(34

)

 

(7

)

 

(91

)

 

(785

)

Purchases of intangibles

 

 

 

(7

)

 

 

 

(7

)

Purchases of investments

 

(1,227

)

 

(744

)

 

(4,038

)

 

(2,485

)

Purchases of non-marketable investments

 

(29

)

 

(43

)

 

(167

)

 

(71

)

Sales and maturities of investments

 

545

 

 

540

 

 

2,245

 

 

2,119

 

Other

 

15

 

 

2

 

 

18

 

 

14

 

Net cash used in investing activities

 

(874

)

 

(359

)

 

(2,583

)

 

(1,607

)

Cash flows from financing activities:

 

 

 

 

Repayments of convertible senior notes attributable to principal

 

 

 

(2

)

 

(94

)

 

(61

)

Proceeds from employee stock plans

 

 

 

2

 

 

177

 

 

167

 

Taxes paid related to net share settlement of equity awards

 

(75

)

 

(155

)

 

(427

)

 

(612

)

Net cash used in financing activities

 

(75

)

 

(155

)

 

(344

)

 

(506

)

Foreign currency effect on cash, cash equivalents and restricted cash

 

8

 

 

(4

)

 

(53

)

 

(25

)

Net change in cash, cash equivalents and restricted cash

 

221

 

 

326

 

 

(257

)

 

53

 

Cash, cash equivalents and restricted cash at beginning of period

 

1,254

 

 

1,406

 

 

1,732

 

 

1,679

 

Cash, cash equivalents and restricted cash at end of period

$

1,475

 

$

1,732

 

$

1,475

 

$

1,732

 

 

ServiceNow, Inc.

GAAP to Non-GAAP Reconciliation

(in millions, except cRPO, RPO and per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

Year Ended

 

 

 

 

December 31,
2022

 

December 31,
2021

 

Growth
Rates

 

December 31,
2022

 

December 31,
2021

 

Growth
Rates

Subscription revenues:

 

 

 

 

 

 

GAAP subscription revenues

$

1,860

 

$

1,523

 

22

%

$

6,891

 

$

5,573

 

24

%

Effects of foreign currency rate fluctuations

 

81

 

 

 

 

274

 

 

 

Non-GAAP subscription revenues(1)

$

1,941

 

 

27.5

%

$

7,165

 

 

28.5

%

 

 

 

 

 

 

 

Professional services and other revenues:

 

 

 

 

 

 

GAAP professional services and other revenues

$

80

 

$

91

 

(12

%)

$

354

 

$

323

 

10

%

Effects of foreign currency rate fluctuations

 

5

 

 

 

 

19

 

 

 

Non-GAAP professional service and other revenues(1)

$

85

 

 

(6.5

%)

$

373

 

 

15.5

%

 

 

 

 

 

 

 

Total revenues:

 

 

 

 

 

 

GAAP total revenues

$

1,940

 

$

1,614

 

20

%

$

7,245

 

$

5,896

 

23

%

Effects of foreign currency rate fluctuations

 

86

 

 

 

 

293

 

 

 

Non-GAAP total revenues(1)

$

2,026

 

 

25.5

%

$

7,538

 

 

28

%

 

 

 

 

 

 

 

cRPO (in billions):

 

 

 

 

 

 

GAAP cRPO

$

6.94

 

$

5.68

 

22

%

$

6.94

 

$

5.68

 

22

%

Effects of foreign currency rate fluctuations

 

0.18

 

 

 

 

0.18

 

 

 

Non-GAAP cRPO(2)

$

7.12

 

 

25.5

%

$

7.12

 

 

25.5

%

 

 

 

 

 

 

 

RPO (in billions):

 

 

 

 

 

 

GAAP RPO

$

14.0

 

$

11.5

 

22

%

$

14.0

 

$

11.5

 

22

%

Effects of foreign currency rate fluctuations

 

0.4

 

 

 

 

0.4

 

 

 

Non-GAAP RPO(2)

$

14.4

 

 

25

%

$

14.4

 

 

25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

GAAP subscription cost of revenues

$

324

 

$

282

 

 

$

1,187

 

$

1,022

 

 

Stock-based compensation

 

(41

)

 

(33

)

 

 

(157

)

 

(128

)

 

Amortization of purchased intangibles

 

(18

)

 

(21

)

 

 

(72

)

 

(64

)

 

Business combination and other related costs

 

 

 

 

 

 

(2

)

 

 

 

Non-GAAP subscription cost of revenues

$

265

 

$

228

 

 

$

956

 

$

830

 

 

 

 

 

 

 

 

 

GAAP professional services and other cost of revenues

$

91

 

$

93

 

 

$

386

 

$

331

 

 

Stock-based compensation

 

(16

)

 

(16

)

 

 

(67

)

 

(59

)

 

Non-GAAP professional services and other cost of revenues

$

75

 

$

77

 

 

$

319

 

$

272

 

 

 

 

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

GAAP subscription gross profit

$

1,536

 

$

1,241

 

 

$

5,704

 

$

4,551

 

 

Stock-based compensation

 

41

 

 

33

 

 

 

157

 

 

128

 

 

Amortization of purchased intangibles

 

18

 

 

21

 

 

 

72

 

 

64

 

 

Business combination and other related costs

 

 

 

 

 

 

2

 

 

 

 

Non-GAAP subscription gross profit

$

1,595

 

$

1,295

 

 

$

5,935

 

$

4,743

 

 

 

 

 

 

 

 

 

GAAP professional services and other gross loss

$

(11

)

$

(2

)

 

$

(32

)

$

(8

)

 

Stock-based compensation

 

16

 

 

16

 

 

 

67

 

 

59

 

 

Non-GAAP professional services and other gross profit

$

5

 

$

14

 

 

$

35

 

$

51

 

 

 

 

 

 

 

 

 

GAAP gross profit

$

1,525

 

$

1,239

 

 

$

5,672

 

$

4,543

 

 

Stock-based compensation

 

57

 

 

49

 

 

 

224

 

 

187

 

 

Amortization of purchased intangibles

 

18

 

 

21

 

 

 

72

 

 

64

 

 

Business combination and other related costs

 

 

 

 

 

 

2

 

 

 

 

Non-GAAP gross profit

$

1,600

 

$

1,309

 

 

$

5,970

 

$

4,794

 

 

 

 

 

 

 

 

 

Gross margin:

 

 

 

 

 

 

GAAP subscription gross margin

 

83

%

 

82

%

 

 

83

%

 

82

%

 

Stock-based compensation as % of subscription revenues

 

2

%

 

2

%

 

 

2

%

 

2

%

 

Amortization of purchased intangibles as % of subscription revenues

 

1

%

 

1

%

 

 

1

%

 

1

%

 

Business combination and other related costs as % of subscription revenues

 

%

 

%

 

 

%

 

%

 

Non-GAAP subscription gross margin

 

86

%

 

85

%

 

 

86

%

 

85

%

 

 

 

 

 

 

 

 

GAAP professional services and other gross margin

 

(14

%)

 

(2

%)

 

 

(9

%)

 

(2

%)

 

Stock-based compensation as % of professional services and other revenues

 

20

%

 

17

%

 

 

19

%

 

18

%

 

Non-GAAP professional services and other gross margin

 

6

%

 

15

%

 

 

10

%

 

16

%

 

 

 

 

 

 

 

GAAP gross margin

 

79

%

 

77

%

 

 

78

%

 

77

%

 

Stock-based compensation as % of total revenues

 

3

%

 

3

%

 

 

3

%

 

3

%

 

Amortization of purchased intangibles as % of total revenues

 

1

%

 

1

%

 

 

1

%

 

1

%

 

Business combination and other related costs as % of total revenues

 

%

 

%

 

 

%

 

%

 

Non-GAAP gross margin

 

83

%

 

81

%

 

 

82

%

 

81

%

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

GAAP sales and marketing expenses

$

722

 

$

632

 

 

$

2,814

 

$

2,292

 

 

Stock-based compensation

 

(122

)

 

(96

)

 

 

(459

)

 

(389

)

 

Amortization of purchased intangibles

 

 

 

 

 

 

 

 

(1

)

 

Non-GAAP sales and marketing expenses

$

600

 

$

536

 

 

$

2,355

 

$

1,902

 

 

 

 

 

 

 

 

 

GAAP research and development expenses

$

454

 

$

392

 

 

$

1,768

 

$

1,397

 

 

Stock-based compensation

 

(127

)

 

(107

)

 

 

(495

)

 

(395

)

 

Amortization of purchased intangibles

 

 

 

(1

)

 

 

 

 

(1

)

 

Business combination and other related costs

 

(5

)

 

(5

)

 

$

(21

)

$

(10

)

 

Non-GAAP research and development expenses

$

322

 

$

279

 

 

$

1,252

 

$

991

 

 

 

 

 

 

 

 

 

GAAP general and administrative expenses

$

194

 

$

180

 

 

$

735

 

$

597

 

 

Stock-based compensation

 

(57

)

 

(50

)

 

 

(223

)

 

(160

)

 

Amortization of purchased intangibles

 

(2

)

 

(2

)

 

 

(8

)

 

(10

)

 

Business combination and other related costs

 

(1

)

 

(1

)

 

 

(1

)

 

(8

)

 

Non-GAAP general and administrative expenses

$

134

 

$

127

 

 

$

503

 

$

419

 

 

 

 

 

 

 

 

 

GAAP total operating expenses

$

1,370

 

$

1,204

 

 

$

5,317

 

$

4,286

 

 

Stock-based compensation

 

(306

)

 

(253

)

 

 

(1,177

)

 

(944

)

 

Amortization of purchased intangibles

 

(2

)

 

(3

)

 

 

(8

)

 

(12

)

 

Business combination and other related costs

 

(6

)

 

(6

)

 

 

(22

)

 

(18

)

 

Non-GAAP total operating expenses

$

1,056

 

$

942

 

 

$

4,110

 

$

3,312

 

 

 

 

 

 

 

 

 

Income from operations:

 

 

 

 

 

 

GAAP income from operations

$

155

 

$

35

 

 

$

355

 

$

257

 

 

Stock-based compensation

 

363

 

 

302

 

 

 

1,401

 

 

1,131

 

 

Amortization of purchased intangibles

 

20

 

 

24

 

 

 

80

 

 

76

 

 

Business combination and other related costs

 

6

 

 

6

 

 

 

24

 

 

18

 

 

Non-GAAP income from operations

$

544

 

$

367

 

 

$

1,860

 

$

1,482

 

 

 

 

 

 

 

 

 

Operating margin:

 

 

 

 

 

 

GAAP operating margin

 

8

%

 

2

%

 

 

5

%

 

4

%

 

Stock-based compensation as % of total revenues

 

19

%

 

19

%

 

 

19

%

 

19

%

 

Amortization of purchased intangibles as % of total revenues

 

1

%

 

2

%

 

 

1

%

 

2

%

 

Business combination and other related costs as % of total revenues

 

%

 

%

 

 

%

 

%

 

Non-GAAP operating margin

 

28

%

 

23

%

 

 

26

%

 

25

%

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

GAAP net income

$

150

 

$

26

 

 

$

325

 

$

230

 

 

Stock-based compensation

 

363

 

 

302

 

 

 

1,401

 

 

1,131

 

 

Amortization of purchased intangibles

 

20

 

 

24

 

 

 

80

 

 

76

 

 

Business combination and other related costs

 

6

 

 

6

 

 

 

24

 

 

18

 

 

Amortization of debt discount and issuance costs

 

 

 

2

 

 

 

 

 

7

 

 

Other

 

 

 

 

 

 

 

 

3

 

 

Income tax expense effects related to the above adjustments

 

(75

)

 

(64

)

 

 

(287

)

 

(264

)

 

Non-GAAP net income

$

464

 

$

296

 

 

$

1,543

 

$

1,201

 

 

 

 

 

 

 

 

 

Net income per share - basic and diluted:

 

 

 

 

 

 

GAAP net income per share - basic

$

0.74

 

$

0.13

 

 

$

1.61

 

$

1.16

 

 

GAAP net income per share - diluted

$

0.74

 

$

0.13

 

 

$

1.60

 

$

1.13

 

 

Non-GAAP net income per share - basic

$

2.29

 

$

1.49

 

 

$

7.66

 

$

6.07

 

 

Non-GAAP net income per share - diluted

$

2.28

 

$

1.46

 

 

$

7.59

 

$

5.92

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares used to compute net income per share - basic

 

203

 

 

199

 

 

 

201

 

 

198

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares used to compute net income per share - diluted

 

203

 

 

204

 

 

 

204

 

 

203

 

 

Effects of in-the-money portion of convertible senior notes(3)

 

 

 

(1

)

 

 

(1

)

 

 

 

Non-GAAP weighted-average shares used to compute net income per share - diluted

 

203

 

 

203

 

 

 

203

 

 

203

 

 

 

 

 

 

 

 

 

Free cash flow:

 

 

 

 

 

 

GAAP net cash provided by operating activities

$

1,162

 

$

844

 

 

$

2,723

 

$

2,191

 

 

Purchases of property and equipment

 

(144

)

 

(100

)

 

 

(550

)

 

(392

)

 

Repayments of convertible senior notes attributable to debt discount

 

 

 

 

 

 

 

 

15

 

 

Business combination and other related costs

 

2

 

 

 

 

 

7

 

 

53

 

 

Non-GAAP free cash flow

$

1,020

 

$

744

 

 

$

2,180

 

$

1,867

 

 

 

 

 

 

 

 

 

Free cash flow margin:

 

 

 

 

 

 

GAAP net cash provided by operating activities as % of total revenues

 

60

%

 

52

%

 

 

38

%

 

37

%

 

Purchases of property and equipment as % of total revenues

 

(7

%)

 

(6

%)

 

 

(8

%)

 

(7

%)

 

Repayments of convertible senior notes attributable to debt discount as % of total revenues

 

%

 

%

 

 

%

 

%

 

Business combination and other related costs as % of total revenues

 

%

 

%

 

 

%

 

1

%

 

Non-GAAP free cash flow margin

 

53

%

 

46

%

 

 

30

%

 

32

%

 

(1)

 

Non-GAAP revenues and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the actual average exchange rates in effect during the current period.

(2)

 

Non-GAAP cRPO, RPO and the corresponding growth rates are derived by applying the end of period exchange rates in effect during the comparison period rather than the actual end of period exchange rates in effect during the current period.

(3)

 

Effects of dilutive time-based stock awards, in-the-money portion of convertible senior notes and warrants are included in the GAAP weighted-average diluted shares in periods where we have GAAP net income. We exclude the in-the-money portion of convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our note hedges. We include stock awards with performance conditions not yet satisfied for non-GAAP weighted average diluted shares at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met.

 

Note: Numbers are rounded for presentation purposes and may not foot.

ServiceNow, Inc.

Reconciliation of Non-GAAP Financial Guidance

 

 

 

 

 

Three Months Ending

 

 

March 31, 2023

 

 

GAAP subscription revenues growth rate

22% - 22.5%

Effects of foreign currency rate fluctuations

3%

Non-GAAP subscription revenues growth rate (1)

25% - 25.5%

 

 

cRPO growth rate

21%

Effects of foreign currency rate fluctuations

3%

Non-GAAP cRPO growth rate(2)

24%

 

 

GAAP operating margin

4%

Stock-based compensation expense as % of total revenues

19%

Amortization of purchased intangibles as % of total revenues

1%

Business combination and other related costs as % of total revenues

—%

Non-GAAP operating margin

24%

 

Twelve Months Ending

 

December 31, 2023

 

 

GAAP subscription revenues growth rate

22.5% - 23.5%

Effects of foreign currency rate fluctuations

—%

Non-GAAP subscription revenues growth rate (1)

22.5% - 23.5%

 

 

GAAP subscription gross margin

81%

Stock-based compensation expense as % of subscription revenues

2%

Amortization of purchased intangibles as % of subscription revenues

1%

Non-GAAP subscription margin

84%

 

 

GAAP operating margin

7%

Stock-based compensation expense as % of total revenues

18%

Amortization of purchased intangibles as % of total revenues

1%

Business combination and other related costs as % of total revenues

—%

Non-GAAP operating margin

26%

 

 

GAAP net cash provided by operating activities as % of total revenues

37%

Purchases of property and equipment as % of total revenues

(7)%

Business combination and other related costs as % of total revenues

—%

Non-GAAP free cash flow margin

30%

(1)

Non-GAAP subscription revenue growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the exchange rates for the guidance period.

(2)

Non-GAAP cRPO growth rate is derived by applying the end of period exchange rates in effect during the comparison period rather than the exchange rates in effect during the guidance period.

 

Note: Numbers are rounded for presentation purposes and may not foot.

 

Media Contact:
Johnna Hoff
408.250.8644
press@servicenow.com

Investor Contact:
Darren Yip
925.388.7205
ir@servicenow.com

Source: ServiceNow, Inc.