- ServiceNow exceeds guidance across all Q4 2023 topline growth
and profitability metrics; raises 2024 subscription revenues and
operating margin outlook
- Subscription revenues of $2,365 million in Q4 2023,
representing 27% year-over-year growth, 25.5% in constant
currency
- Total revenues of $2,437 million in Q4 2023, representing 26%
year-over-year growth, 24% in constant currency
- Current remaining performance obligations of $8.60 billion as
of Q4 2023, representing 24% year-over-year growth, 23% in constant
currency
- 168 transactions over $1 million in net new ACV in Q4 2023, up
33% year-over-year
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, 2023,
with subscription revenues of $2,365 million in Q4 2023,
representing 27% year-over-year growth and 25.5% in constant
currency.
“ServiceNow closed out the year with another outstanding
quarter,” said ServiceNow Chairman and CEO Bill McDermott.
“Generative AI is injecting new fuel into our already
high-performing engine. ServiceNow’s intelligent platform for
end-to-end digital transformation is driving massive leaps in
productivity and explosive growth. This is a breakthrough
moment.”
As of December 31, 2023, current remaining performance
obligations (“cRPO”), contract revenue that will be recognized as
revenue in the next 12 months, was $8.60 billion, representing 24%
year-over-year growth and 23% in constant currency. The company now
has 1,897 total customers with more than $1 million in annual
contract value (“ACV”), representing 15% year-over-year growth in
customers.
“Once again we exceeded our topline growth and operating margin
guidance metrics, showcasing ServiceNow’s consistent and relentless
focus on execution,” said ServiceNow CFO Gina Mastantuono. “We
ended Q4 with a 99% renewal rate, accelerating large new logo
growth, and the strongest NNACV contribution for any new product
family with the introduction of our Plus SKUs. The accelerating
pace of investment in workflow automation and generative AI
positions us well for another strong year and we are raising our
outlook for 2024.”
Recent Business Highlights
- In its first full quarter since the launch of Now Assist,
ServiceNow saw the largest net-new ACV contribution for a first
quarter of any new product family release. The company also
continued to execute on its ambitious generative AI roadmap,
launching a major expansion to its Now Assist generative AI
portfolio with Now Assist in Virtual Agent, flow generation, and
Now Assist for Field Service Management.
- The company continued to grow its AI-related
partnerships—including a strategic partnership with DXC—to
integrate ServiceNow advanced analytics and enhanced AI
capabilities into DXC Platform XTM. ServiceNow also announced a
five-year Strategic Collaboration Agreement with Amazon Web
Services (AWS) to offer the ServiceNow Platform and full suite of
solutions in the AWS Marketplace. The two companies will also
co-develop and launch industry-specific, AI powered
applications.
- Today, ServiceNow announced a broader strategic alliance with
EY to empower responsible AI use for enterprise customers, deliver
unified solutions for AI compliance and governance, and bring
AI-enhanced experiences to EY employees and clients with ServiceNow
Now Assist.
- Additionally, ServiceNow and Visa today announced a five-year
strategic alliance to transform payment services experiences. The
initial phase includes the launch of ServiceNow Disputes
Management, Built with Visa–– a single, connected solution for
disputes resolution.
- In Q4, ServiceNow joined the AI Alliance launched by IBM and
Meta, to advance open, safe, and responsible AI. The AI Alliance
consists of a broad range of organizations that are working across
aspects of AI education, research, development and deployment, and
governance to support open innovation and open science in AI.
- The company announced its acquisition of task mining company
UltimateSuite to bolster automation and AI capabilities, helping
customers identify process bottlenecks and drive stronger
operational efficiencies.
- Aston Martin Aramco Cognizant Formula One® Team announced
ServiceNow as the intelligent platform partner to streamline the
team’s AMR Technology Campus.
- During the quarter, ServiceNow repurchased 400,000 shares of
its common stock for $256 million as part of its share repurchase
program, with the primary objective of managing the impact of
dilution from future employee equity grants and employee stock
purchase programs. $962 million of the original authorized amount
remains available for future share repurchases under the existing
program.
- The company received significant recognition during the
quarter, ranking #1 in the software category and #5 overall in the
American Opportunity Index, as well as #3 on Glassdoor’s Best
Places to Work 2023. ServiceNow was further recognized by placing
on Fortune World’s 25 Best Workplaces™ and Fortune 100 Best Large
Workplaces for Women™ lists(1). The company was also named a Leader
in both the Forrester Wave™: Governance, Risk, and Compliance and
The Forrester Wave™: Digital Process Automation Software.
(1)
©2023 FORTUNE Media IP Limited All rights
reserved. Used under license. FORTUNE and FORTUNE Media IP Limited
are not affiliated with, and do not endorse products or services
of, ServiceNow.
Fourth Quarter 2023 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the
fourth quarter 2023:
Fourth Quarter 2023 GAAP
Results
Fourth Quarter 2023 Non-GAAP
Results(1)
Amount ($
millions)
Year/Year Growth
(%)
Amount ($
millions)(3)
Year/Year Growth
(%)
Subscription revenues
$2,365
27%
$2,332
25.5%
Professional services and other
revenues
$72
(10%)
$71
(11%)
Total revenues
$2,437
26%
$2,403
24%
Amount ($
billions)
Year/Year Growth
(%)
Amount ($ billions)(3)
Year/Year Growth
(%)
cRPO
$8.60
24%
$8.52
23%
RPO
$18.0
29%
$17.9
27.5%
Amount ($
millions)
Margin (%)
Amount ($
millions)(2)
Margin (%)(2)
Subscription gross profit
$1,922
81%
$1,996
84%
Professional services and other
gross profit (loss)
($1)
(1%)
$11
15%
Total gross profit
$1,921
79%
$2,007
82%
Income from operations
$270
11%
$717
29%
Net cash provided by operating
activities
$1,605
66%
Free cash flow
$1,344
55%
Amount ($
millions)
Earnings per Basic/Diluted
Share ($)
Amount ($
millions)(2)
Earnings per
Basic/Diluted Share ($)(2)
Net income
$295
$1.44 / 1.43
$643
$3.14 / 3.11
(1)
We report non-GAAP financial measures in
addition to, and not as a substitute for, or superior to, financial
measures calculated in accordance with GAAP. See the section
entitled “Statement Regarding Use of Non-GAAP Financial Measures”
for an explanation of non-GAAP measures.
(2)
Refer to the table entitled “GAAP to
Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP
measures.
(3)
Non-GAAP subscription revenues,
professional services and other revenues, total revenues, cRPO and
RPO are adjusted only for constant currency. See the section
entitled “Statement Regarding Use of Non-GAAP Financial Measures”
for an explanation of non-GAAP measures.
Note: Numbers rounded for presentation purposes and may not
foot.
Full-Year 2023 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the
full-year 2023:
Full-Year 2023 GAAP
Results
Full-Year 2023 Non-GAAP
Results(1)
Amount ($
millions)
Year/Year Growth
(%)
Amount ($
millions)(3)
Year/Year Growth
(%)
Subscription revenues
$8,680
26 %
$8,647
25.5%
Professional services and other
revenues
$291
(18%)
$290
(18%)
Total revenues
$8,971
24 %
$8,937
23.5%
Amount ($
billions)
Year/Year Growth
(%)
Amount ($ billions)(3)
Year/Year Growth
(%)
cRPO
$8.60
24%
$8.52
23%
RPO
$18.0
29%
$17.9
27.5%
Amount ($
millions)
Margin (%)
Amount ($
millions)(2)
Margin (%)(2)
Subscription gross profit
$7,074
82%
$7,353
85%
Professional services and other
gross profit (loss)
($24)
(8%)
$28
10%
Total gross profit
$7,050
79%
$7,381
82%
Income from operations
$762
8%
$2,489
28%
Net cash provided by operating
activities
$3,398
38%
Free cash flow
$2,728
30%
Amount ($
millions)
Earnings per Basic/Diluted
Share ($)
Amount
($ millions)(2)
Earnings per Basic/Diluted
Share ($)(2)
Net income
$1,731
$8.48 / $8.42
$2,215
$10.85 / $10.78
(1)
We report non-GAAP financial measures in
addition to, and not as a substitute for, or superior to, financial
measures calculated in accordance with GAAP. See the section
entitled “Statement Regarding Use of Non-GAAP Financial Measures”
for an explanation of non-GAAP measures.
(2)
Refer to the table entitled “GAAP to
Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP
measures.
(3)
Non-GAAP subscription revenues,
professional services and other revenues, total revenues, cRPO and
RPO are adjusted only for constant currency. See the section
entitled “Statement Regarding Use of Non-GAAP Financial Measures”
for an explanation of non-GAAP measures.
Note: Numbers rounded for presentation purposes and may not foot.
Financial Outlook
Our guidance includes GAAP and non-GAAP financial measures. The
non-GAAP growth rates for subscription revenues and cRPO are
adjusted only for constant currency to provide better visibility
into the underlying business trends. Our Q1 2024 cRPO guidance
reflects the continued strength of our public sector business,
which drives a higher mix of 12-month contracts and self-hosted
deals, both of which contribute to subscription revenue growth but
whose economic benefits are not fully represented in cRPO growth.
As we have previously mentioned, the Q3 2023 strength of our U.S.
Federal business has resulted in a higher mix of contracts
containing 12-month renewal terms. This will create a negative
1.5-point impact and negative 2-point impact to Q1 and Q2 2024 cRPO
growth, respectively, as that balance is amortized into revenue. We
expect that these contracts will renew in Q3 2024 as ServiceNow’s
U.S. Federal renewal rates have been 99%.
The following table summarizes our guidance for the first
quarter 2024:
First Quarter 2024 GAAP
Guidance
First Quarter 2024
Non-GAAP Guidance(1)
Amount ($ millions)(3)
Year/Year Growth
(%)(3)
Constant Currency
Year/Year Growth (%)
Subscription revenues
$2,510 - $2,515
24% - 24.5%
23.5% - 24%
cRPO
20%
20%
Note: Includes impact from strength of
public sector business noted above
Margin (%)(2)
Income from operations
29%
Amount
(millions)
Weighted-average shares used to compute
diluted net income per share
208
(1)
We report non-GAAP financial measures in
addition to, and not as a substitute for, or superior to, financial
measures calculated in accordance with GAAP. See the section
entitled “Statement Regarding Use of Non-GAAP Financial Measures”
for an explanation of non-GAAP measures.
(2)
Refer to the table entitled
“Reconciliation of Non-GAAP Financial Guidance” for a
reconciliation of GAAP to non-GAAP measures.
(3)
Guidance for GAAP subscription revenues
and GAAP subscription revenues and cRPO growth rates are based on
the 31-day average of foreign exchange rates for December 2023 for
entities reporting in currencies other than U.S. Dollars.
The following table summarizes our guidance for the full-year
2024:
Full-Year 2024 GAAP
Guidance
Full-Year 2024 Non-GAAP
Guidance(1)
Amount ($ millions)(3)
Year/Year Growth
(%)(3)
Constant Currency
Year/Year Growth (%)
Subscription revenues
$10,555 - $10,575
21.5% - 22%
21.5%
Margin (%)(2)
Subscription gross profit
84.5%
Income from operations
29%
Free cash flow
31%
Amount
(millions)
Weighted-average shares used to compute
diluted net income per share
208
(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.
(2)
Refer to the table entitled
“Reconciliation of Non-GAAP Financial Guidance” for a
reconciliation of GAAP to non-GAAP measures.
(3)
GAAP subscription revenues and related
growth rate for the future quarter included in our full-year 2024
guidance are based on the 31-day average of foreign exchange rates
for December 2023 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 24, 2024. 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/685457644
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://investors.servicenow.com.
Upcoming Investor Conferences
ServiceNow today announced that Chief Financial Officer Gina
Mastantuono will participate in a fireside chat at the Morgan
Stanley Technology, Media & Telecom Conference on Monday, March
4, 2024, at 2:10 p.m. PT.
The live webcast will be accessible on the investor relations
section of the ServiceNow website at
https://investors.servicenow.com and archived on the ServiceNow
site for a period of 30 days.
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 2022, the average
exchange rates in effect for our major currencies were 1 USD to
0.98 Euros and 1 USD to 0.85 British Pound Sterling (“GBP”)),
rather than the actual average exchange rates in effect during the
current period (for Q4 2023, the average exchange rates in effect
for our major currencies were 1 USD to 0.93 Euros and 1 USD to 0.81
GBP). Guidance for related growth rates is 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 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), rather than the actual end of the period exchange rates in
effect during the current period (for Q4 2023, the end of the
period exchange rates in effect for our major currencies were 1 USD
to 0.91 Euros and 1 USD to 0.79 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, income tax effects and
adjustments, and the income tax benefit from the release of a
valuation allowance on deferred tax assets. 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 operating activities plus cash outflows 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
for gross profit, income from operations, net income, net income
per share and free cash flow.
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 or
weakness; 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 armed conflicts and bank failures 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-K for the year
ended December 31, 2023, and in other filings we make with the
Securities and Exchange Commission from time to time.
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 ServiceNowTM. 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, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Revenues:
Subscription
$
2,365
$
1,860
$
8,680
$
6,891
Professional services and other
72
80
291
354
Total revenues
2,437
1,940
8,971
7,245
Cost of revenues (1):
Subscription
443
324
1,606
1,187
Professional services and other
73
91
315
386
Total cost of revenues
516
415
1,921
1,573
Gross profit
1,921
1,525
7,050
5,672
Operating expenses (1):
Sales and marketing
847
722
3,301
2,814
Research and development
562
454
2,124
1,768
General and administrative
242
194
863
735
Total operating expenses
1,651
1,370
6,288
5,317
Income from operations
270
155
762
355
Interest income
86
39
302
82
Other expense, net
(9
)
(11
)
(56
)
(38
)
Income before income taxes
347
183
1,008
399
Provision for (benefit from) income
taxes
52
33
(723
)
74
Net income
$
295
$
150
$
1,731
$
325
Net income per share - basic
$
1.44
$
0.74
$
8.48
$
1.61
Net income per share - diluted
$
1.43
$
0.74
$
8.42
$
1.60
Weighted-average shares used to compute
net income per share - basic
205
203
204
201
Weighted-average shares used to compute
net income per share - diluted
207
203
206
204
(1) Includes stock-based compensation as
follows:
Three Months Ended
Year Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Cost of revenues:
Subscription
$
54
$
41
$
202
$
157
Professional services and other
12
16
52
67
Operating expenses:
Sales and marketing
127
122
505
459
Research and development
149
127
579
495
General and administrative
71
57
266
223
ServiceNow, Inc.
Condensed Consolidated Balance
Sheets
(in millions)
December 31, 2023
December 31, 2022
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
1,897
$
1,470
Short-term investments
2,980
2,810
Accounts receivable, net
2,036
1,725
Current portion of deferred
commissions
461
369
Prepaid expenses and other current
assets
403
280
Total current assets
7,777
6,654
Deferred commissions, less current
portion
919
742
Long-term investments
3,203
2,117
Property and equipment, net
1,358
1,053
Operating lease right-of-use assets
715
682
Intangible assets, net
224
232
Goodwill
1,231
824
Deferred tax assets
1,508
636
Other assets
452
359
Total assets
$
17,387
$
13,299
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
126
$
274
Accrued expenses and other current
liabilities
1,365
975
Current portion of deferred revenue
5,785
4,660
Current portion of operating lease
liabilities
89
96
Total current liabilities
7,365
6,005
Deferred revenue, less current portion
81
70
Operating lease liabilities, less current
portion
707
650
Long-term debt, net
1,488
1,486
Other long-term liabilities
118
56
Stockholders’ equity
7,628
5,032
Total liabilities and stockholders’
equity
$
17,387
$
13,299
ServiceNow, Inc.
Condensed Consolidated
Statements of Cash Flows
(in millions)
(unaudited)
Three Months Ended
Year Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Cash flows from operating
activities:
Net income
$
295
$
150
$
1,731
$
325
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
154
118
562
433
Amortization of deferred commissions
126
97
459
358
Stock-based compensation
413
363
1,604
1,401
Deferred income taxes
17
18
(857
)
15
Other
13
8
—
17
Changes in operating assets and
liabilities, net of effect of business combinations:
Accounts receivable
(852
)
(785
)
(300
)
(340
)
Deferred commissions
(264
)
(197
)
(717
)
(566
)
Prepaid expenses and other assets
(20
)
34
(203
)
(39
)
Accounts payable
46
56
(142
)
172
Deferred revenue
1,302
1,060
1,085
904
Accrued expenses and other liabilities
375
240
176
43
Net cash provided by operating
activities
1,605
1,162
3,398
2,723
Cash flows from investing
activities:
Purchases of property and equipment
(261
)
(144
)
(694
)
(550
)
Business combinations, net of cash
acquired
—
(34
)
(282
)
(91
)
Purchases of investments
(829
)
(1,227
)
(4,634
)
(4,038
)
Purchases of non-marketable
investments
(19
)
(29
)
(75
)
(167
)
Sales and maturities of investments
654
545
3,522
2,245
Other
11
15
(4
)
18
Net cash used in investing activities
(444
)
(874
)
(2,167
)
(2,583
)
Cash flows from financing
activities:
Repayments of convertible senior notes
attributable to principal
—
—
—
(94
)
Proceeds from employee stock plans
1
—
194
177
Repurchases of common stock
(256
)
—
(538
)
—
Taxes paid related to net share settlement
of equity awards
(126
)
(75
)
(459
)
(427
)
Net cash used in financing activities
(381
)
(75
)
(803
)
(344
)
Foreign currency effect on cash, cash
equivalents and restricted cash
5
8
1
(53
)
Net change in cash, cash equivalents and
restricted cash
785
221
429
(257
)
Cash, cash equivalents and restricted cash
at beginning of period
1,119
1,254
1,475
1,732
Cash, cash equivalents and restricted cash
at end of period
$
1,904
$
1,475
$
1,904
$
1,475
ServiceNow, Inc.
GAAP to Non-GAAP
Reconciliation
(in millions, except per share
data)
(unaudited)
Three Months Ended
Year Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Gross profit:
GAAP subscription gross profit
$
1,922
$
1,536
$
7,074
$
5,704
Stock-based compensation
54
41
202
157
Amortization of purchased intangibles
20
18
77
72
Business combination and other related
costs
—
—
—
2
Non-GAAP subscription gross profit
$
1,996
$
1,595
$
7,353
$
5,935
GAAP professional services and other gross
loss
$
(1
)
$
(11
)
$
(24
)
$
(32
)
Stock-based compensation
12
16
52
67
Non-GAAP professional services and other
gross profit
$
11
$
5
$
28
$
35
GAAP gross profit
$
1,921
$
1,525
$
7,050
$
5,672
Stock-based compensation
66
57
254
224
Amortization of purchased intangibles
20
18
77
72
Business combination and other related
costs
—
—
—
2
Non-GAAP gross profit
$
2,007
$
1,600
$
7,381
$
5,970
Gross margin:
GAAP subscription gross margin
81
%
83
%
82
%
83
%
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
84
%
86
%
85
%
86
%
GAAP professional services and other gross
margin
(1
%)
(14
%)
(8
%)
(9
%)
Stock-based compensation as % of
professional services and other revenues
17
%
20
%
18
%
19
%
Non-GAAP professional services and other
gross margin
15
%
6
%
10
%
10
%
GAAP gross margin
79
%
79
%
79
%
78
%
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
82
%
83
%
82
%
82
%
Income from operations:
GAAP income from operations
$
270
$
155
$
762
$
355
Stock-based compensation
413
363
1,604
1,401
Amortization of purchased intangibles
22
20
85
80
Business combination and other related
costs
12
6
38
24
Non-GAAP income from operations
$
717
$
544
$
2,489
$
1,860
Operating margin:
GAAP operating margin
11
%
8
%
8
%
5
%
Stock-based compensation as % of total
revenues
17
%
19
%
18
%
19
%
Amortization of purchased intangibles as %
of total revenues
1
%
1
%
1
%
1
%
Business combination and other related
costs as % of total revenues
—
%
—
%
—
%
—
%
Non-GAAP operating margin
29
%
28
%
28
%
26
%
Net income:
GAAP net income
$
295
$
150
$
1,731
$
325
Stock-based compensation
413
363
1,604
1,401
Amortization of purchased intangibles
22
20
85
80
Business combination and other related
costs
12
6
38
24
Income tax effects and adjustments(1)
(34
)
(75
)
(193
)
(287
)
Release of a valuation allowance on
deferred tax assets
(65
)
—
(1,050
)
—
Non-GAAP net income
$
643
$
464
$
2,215
$
1,543
Net income per share - basic and
diluted:
GAAP net income per share - basic
$
1.44
$
0.74
$
8.48
$
1.61
GAAP net income per share - diluted
$
1.43
$
0.74
$
8.42
$
1.60
Non-GAAP net income per share - basic
$
3.14
$
2.29
$
10.85
$
7.66
Non-GAAP net income per share -
diluted
$
3.11
$
2.28
$
10.78
$
7.59
GAAP weighted-average shares used to
compute net income per share - basic
205
203
204
201
GAAP weighted-average shares used to
compute net income per share - diluted
207
203
206
204
Effects of in-the-money portion of
convertible senior notes(2)
—
—
—
(1
)
GAAP and Non-GAAP weighted-average shares
used to compute net income per share - diluted
207
203
206
203
Free cash flow:
GAAP net cash provided by operating
activities
$
1,605
$
1,162
$
3,398
$
2,723
Purchases of property and equipment
(261
)
(144
)
(694
)
(550
)
Business combination and other related
costs
—
2
24
7
Non-GAAP free cash flow
$
1,344
$
1,020
$
2,728
$
2,180
Free cash flow margin:
GAAP net cash provided by operating
activities as % of total revenues
66
%
60
%
38
%
38
%
Purchases of property and equipment as %
of total revenues
(11
%)
(7
%)
(8
%)
(8
%)
Business combination and other related
costs as % of total revenues
—
%
—
%
—
%
—
%
Non-GAAP free cash flow margin
55
%
53
%
30
%
30
%
(1)
We use a non-GAAP effective tax rate for
evaluating our operating results to provide consistency across
reporting periods. Based on our current long-term projections, we
are using a non-GAAP tax rate of 19%. This non-GAAP tax rate could
change for various reasons including significant changes in our
geographic earnings mix or fundamental tax law changes in major
jurisdictions in which we operate.
(2)
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, 2024
GAAP operating margin
11
%
Stock-based compensation expense as % of
total revenues
17
%
Amortization of purchased intangibles as %
of total revenues
1
%
Business combination and other related
costs as % of total revenues
—
%
Non-GAAP operating margin
29
%
Twelve Months Ending
December 31, 2024
GAAP subscription gross margin
81.5
%
Stock-based compensation expense as % of
subscription revenues
2
%
Amortization of purchased intangibles as %
of subscription revenues
1
%
Non-GAAP subscription margin
84.5
%
GAAP operating margin
12
%
Stock-based compensation expense as % of
total revenues
16
%
Amortization of purchased intangibles as %
of total revenues
1
%
Business combination and other related
costs as % of total revenues
—
%
Non-GAAP operating margin
29
%
GAAP net cash provided by operating
activities as % of total revenues
39
%
Purchases of property and equipment as %
of total revenues
(8
%)
Business combination and other related
costs as % of total revenues
—
%
Non-GAAP free cash flow margin
31
%
Note: Numbers are rounded for presentation
purposes and may not foot.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240124662293/en/
Media Contact: Johnna Hoff 408.250.8644
press@servicenow.com
Investor Contact: Darren Yip 925.388.7205
ir@servicenow.com
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