Slide 1: Investor Presentation Third Quarter 2018
Investor Presentation Third Quarter 2018
Slide 2: Safe Harbor and Other Information
Safe Harbor and Other Information This presentation contains “forward‐looking” statements that are based on our management’s beliefs and assumptions and on information currently available to management. We intend for such forward‐looking statements to be covered by the safe harbor provisions for for
Slide 3: Statement Regarding Use of Non-GAAP Financial Measures
Statement Regarding Use of Non-GAAP Financial Measures We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. We present revenues adjusted for constant currency and corresponding growth rates to provid
Slide 4: Outperformed Q3 Guidance, Raising Full-Year Guidance
Outperformed Q3 Guidance, Raising Full-Year Guidance ($M) Prev. Guidance Currency Impact(2) Duration Impact(3) Q3-18 Outperformance Actual Results Guidance Change Current Guidance Midpoint(1) Midpoint(4) $15 $627 $613 $11 $2,418 $2,410 ($1) ($3) Subscription Revenues $21 $674 $2,820 $4 $13 $2,833 $6
Slide 5: Year-Over-Year Subscription Revenues and Billings Growth
Year-Over-Year Subscription Revenues and Billings Growth Previous Year Growth Actual Growth Guidance Midpoint Growth Non-GAAP Adjusted Growth(3) Sub Rev: Constant Currency(1) Sub Billings : Constant Currency + Constant Duration(1)(2) 45% 40% 42% 41% 41% 41% 39% 39% 40% 37% 34% 33% 33% Subscription R
Slide 6: Currency and Duration Impact to Year-Over-Year Sub. Revenues and Billings
Currency and Duration Impact to Year-Over-Year Sub. Revenues and Billings Actuals Guidance Midpoint Currency Impact(1) Duration Impact(2) Non-GAAP Adjusted Sub. Revenues and Sub. Billings(3) $2,418 $2,387 $543 $520 $585 $627 $629 $1,740 $1,734 $571 $663 $667 ($31) Subscription ($23) ($14) $3 $4 ($5)
Slide 7: Landing New Customers is a Key Growth Driver…
Landing New Customers is a Key Growth Driver… Number of G2K Customers Beginning Quarterly Balance Net G2K Adds 818 840 860 766 789 805 717 740 20 690 23 16 13 22 23 26 23 27 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 G2K Penetration North America EMEA APAC & Other 18% 43% 51% 69% Note: Th
Slide 8: …But Upsells Represent Largest Opportunity
…But Upsells Represent Largest Opportunity ACV/G2K ($k) Q/Q Growth 10% 10% 6% 2% 2% 4% 4% 5% 4% $2,000 10% $1,477 $1,531 $1,800 $1,600 $1,356 $1,410 -10% $1,400 $1,131 $1,157 $1,186 $1,227 $1,200 $1,029 -30% $1,000 $800 -50% $600 $400 -70% $200 $- -90% Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18
Slide 9: Consistent Customer Growth Across All Cohorts
Consistent Customer Growth Across All Cohorts Illustrative Example Annual Growth of Initial ACV Initial ACV Annual Growth Periods ACV Today of Initial ACV (100 x 48%) x 1 48% 2017 $100 + $148 (100 x 73%) x 2 73% 2016 $100 + $246 (100 x 73%) x 3 2015 $100 + $319 73% (100 x 63%) x 4 2014 $100 + $352 6
Slide 10: New ACV Contribution From Emerging Products
New ACV Contribution From Emerging Products IT Emerging Products Platform Add-ons & Other 11% 11% 10% 10% 11% 21% 25% 30% 27% 26% 68% 64% 60% 63% 63% Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Note: IT = IT Service Mgmt, IT Operations Mgmt, IT Asset Mgmt, IT Business Mgmt Emerging Products = CSM, HR, Security, I
Slide 11: 18 of Top 20 New Deals in Q3 Included 3+ Products
18 of Top 20 New Deals in Q3 Included 3+ Products 5+ Products 3-4 Products 1-2 Products Platform Add- IT Emerging Products ons & Other Customer Security Intelligent Platform Add- ITSM ITOM ITAM ITBM HR Service Operations Apps ons & Other Customer 1 X X X X X X X X Customer 2 X X X X X X X X X Custom
Slide 12: Headcount by Department
Headcount by Department PS & Other Cost of Sales Sub. Cost of Sales S&M R&D G&A 7,661 7,150 6,675 1,149 6,222 1,045 5,895 979 892 853 1,860 1,675 1,509 1,419 1,322 2,890 2,763 2,616 2,279 2,413 1,003 1,065 1,121 886 936 555 562 568 602 641 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 12 © 2018 ServiceNow, Inc. All
Slide 13: Consistently High Renewal Rate
Consistently High Renewal Rate 98% 98% 97% 97% 97% Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 13 © 2018 ServiceNow, Inc. All Rights Reserved.
Slide 14: Top Line Mix Shifting to Subscription
Top Line Mix Shifting to Subscription GAAP Revenues Subscription PS & Other 9% 9% 8% 7% 7% 11% 9% 91% 91% 92% 93% 93% 89% 91% Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 FY16 FY17 Non-GAAP Billings Subscription PS & Other 8% 6% 7% 7% 6% 10% 8% 92% 94% 93% 93% 94% 90% 92% Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 FY16 FY17 No
Slide 15: GAAP Revenues by Geography
GAAP Revenues by Geography North America EMEA APAC & Other 8% 8% 8% 9% 9% 26% 26% 26% 25% 24% 66% 66% 66% 66% 67% Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 15 © 2018 ServiceNow, Inc. All Rights Reserved.
Slide 16: Average Contract Terms
Average Contract Terms New Customer Upsell Renewal 37.3 35.3 31.9 31.7 28.6 29.1 27.0 27.2 27.7 25.6 26.0 25.5 23.8 25.2 21.9 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Note: All figures represent number of months. Revised mapping of customers in the cu
Slide 17: Non-GAAP Gross Margins
Non-GAAP Gross Margins Non-GAAP Subscription Gross Margin 86% 86% 85% 85% 85% 85% 84% Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 FY16 FY17 Non-GAAP PS & Other Gross Margin 18% 13% 10% 12% 6% 8% 12% Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 FY16 FY17 Non-GAAP Total Gross Margin 79% 80% 80% 80% 78% 78% 76% Q3-17 Q4-17 Q1-18 Q
Slide 18: Demonstrated Operating Leverage Expansion
Demonstrated Operating Leverage Expansion Non-GAAP Operating Margin 24% 21% 20% 18% 17% 18% 16% Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 FY16 FY17 Non-GAAP Free Cash Flow Margin 38% 27% 26% 24% 23% 19% 17% Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 FY16 FY17 Note: All figures are calculated on a non-GAAP basis. See appendi
Slide 19: Non-GAAP Net Income and Diluted EPS
Non-GAAP Net Income and Diluted EPS Non-GAAP Net Income ($M) $242 $150 $129 $105 $79 $91 $69 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 FY16 FY17 Non-GAAP Diluted EPS $1.35 $0.86 $0.68 $0.56 $0.49 $0.38 $0.43 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 FY16 FY17 Note: All figures are calculated on a non-GAAP basis. See append
Slide 20: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation 20 © 2018 ServiceNow, Inc. All Rights Reserved.
Slide 21: GAAP to Non-GAAP Reconciliation – Revenues and Billings
GAAP to Non-GAAP Reconciliation – Revenues and Billings in millions (except %'s) 2016 Q1-17 Q2-17 Q3-17 Q4-17 2017 Q1-18 Q2-18 Q3-18 Q4-18E Midpoint 2018E Midpoint GAAP Subscription Revenues $ 1,234 $ 388 $ 403 $ 450 $ 500 $ 1,740 $ 543 $ 585 $ 627 $ 663 $ 2,418 (+) Effects of Foreign Currency Rate
Slide 22: GAAP to Non-GAAP Reconciliation – Other
GAAP to Non-GAAP Reconciliation – Other in millions (except %'s and per share data) 2016 Margin Q1-17 Margin Q2-17 Margin Q3-17 Margin Q4-17 Margin 2017 Margin Q1-18 Margin Q2-18 Margin Q3-18 Margin Q4-18E 2018E GAAP Subscription Gross Profit $ 999 81% $ 317 82% $ 327 81% $ 368 82% $ 412 82% $ 1,424
Slide 23: GAAP to Non-GAAP Reconciliation – Other (cont.)
GAAP to Non-GAAP Reconciliation – Other (cont.) in millions (except %'s and per share data) 2016 Margin Q1-17 Margin Q2-17 Margin Q3-17 Margin Q4-17 Margin 2017 Margin Q1-18 Margin Q2-18 Margin Q3-18 Margin Q4-18E 2018E GAAP Weighted-Average Shares Used to Compute Net Income (Loss) per 165 N/A 169 N