Servicenow, Inc. · NYSE:NOW
Servicenow — Q3 2023 Earnings Presentation
24 slides from Servicenow's earnings presentation, Oct 25, 2023
Slide 1: Investor Presentation Third Quarter 2023
Investor Presentation Third Quarter 2023
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. Forward‐looking statements include information concerning our possible or assumed strategy, futur
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 adjust revenues and related growth rates, and current remaining performance obligations
Slide 4: Now Platform: Optimize processes, connect data and silos, accelerate innovation
Now Platform®: Optimize processes, connect data and silos, and accelerate innovation at scale to create new value on a single, unifying platform built for digital transformation. Technology Employee Customer and Creator Workflows Workflows Industry Workflows Workflows Accelerate digital Drive employ
Slide 5: We make the world work better for everyone
We make the world work better for everyone™ Our 7,700+ global enterprise ServiceNow helps digitize and customers(1) include approximately Our aspiration is to be the unify organizations so that they 85% of the Fortune 500. They all rely defining enterprise software can find smarter, faster, better o
Slide 6: Q3-23 Financial Highlights
Q3-23 Financial Highlights Increase Non-GAAP Constant Q3 2023 Results Quarterly Results Currency Impact(1) (Decrease) Y/Y Currency Y/Y(2) Subscription Revenues $2,216M 27% ~250bps tailwind 24.5% Current RPO (cRPO) $7.43B 27% ~250bps tailwind 24% Remaining Performance Obligations (RPO) $14.4B 26% ~25
Slide 7: Guidance Summary
Guidance Summary Currency Impact Quarterly Increase Non-GAAP Constant Q4 2023 Guidance Included in Guidance (Decrease) Y/Y Currency Y/Y(2) Guidance(1) Subscription Revenues $2,320M - $2,325M 24.5% - 25% ~150bps tailwind 23% - 23.5% Non-GAAP Operating Margin(3) 27.5% ~(50)bps NA NA 21% Current RPO (c
Slide 8: Comparison to Previously Issued Guidance
Comparison to Previously Issued Guidance ($M) Subscription Revenues Y/Y Growth 25.5% 27% 24.5% 25.5% Q3-23A FY23E Prev. Guidance Midpoint(1) Currency Impact(2) Q3 Performance Actual Results Guidance Change Current Guidance Midpoint (1) Refers to previously issued financial guidance dated 7/26/23. (2
Slide 9: Year-Over-Year Subscription Revenues Growth
Year-Over-Year Subscription Revenues Growth 31% 30% 29% 29% 29% 27% 26% 27% 27% 24% 25% 25% 25% 25% 24% 22% 22% 22% Subscription Revenues Q3-22A Q4-22A Q1-23A Q2-23A Q3-23A FY22A Previous Year Growth Actual Growth Non-GAAP Constant Currency Sub Revenue Growth (1) (1) Non-GAAP subscription revenues g
Slide 10: Currency Impact to Year-Over-Year Sub. Revenues
Currency Impact to Year-Over-Year Sub. Revenues $2,068 $2,075 $2,074 $2,216 $2,173 $7,165 $1,860 $1,941 $2,024 $6,891 $(1) $(43) $81 $44 $274 ($M) Subscription Revenues Q4-22A Q1-23A Q2-23A Q3-23A FY22A Y/Y Growth 22% 27% 24% 27% 25% 25% 27% 25% 24% 29% Actuals Currency Impact Non-GAAP Constant Curr
Slide 11: Remaining Performance Obligations
Remaining Performance Obligations ($B) Current RPO Noncurrent RPO Q3-23 $14.0 $14.0 $14.2 $14.4 Y/Y Growth $11.4 $7.0 $7.0 +26% / +23.5% cc(1) $7.1 $7.0 Total RPO $5.5 $6.94 $7.01 $7.20 $7.43 $5.87 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 cRPO Y/Y Growth 18% 22% 23% 25% 27% cRPO cc(1) Y/Y Growth 25% 25.5% 25%
Slide 12: Customer Cohort Growth
Customer Cohort Growth Annual Growth of Initial ACV 2023 47% 2022 59% 60% 2021 82% 2020 76% 2019 71% 2018 99% 2017 107% 2016 100% 2015 2014 135% 2013 2012 132% 2011 181% 2010 205% (1) (1) As an illustrative example, 2010 customer cohort started with a contract of initial ACV (annual contract value)
Slide 13: Expansion of Customer Relationships
Expansion of Customer Relationships $4.4 ($M) $4.2 $4.3 $4.1 $3.9 $4.0 $3.8 $3.9 1,789 $3.6 1,725 1,687 1,645 1,535 1,467 1,405 1,351 1,258 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Number of Customers with $1M+ ACV Avg ACV of Customers with $1M+ ACV Note: Previously disclosed number of
Slide 14: Net New ACV Contribution Across Workflows and Products
Net New ACV Contribution Across Workflows and Products (1) Technology Workflows Customer & Employee Workflows Creator Workflows & Others 17% 15% 18% 16% 15% 24% 26% 25% 26% 25% 59% 59% 57% 58% 60% Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 (1) Historical presentations disclosed net new ACV contribution across pr
Slide 15: Renewal Rate
Renewal Rate 99% 98% 98% 98% 98% Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Note: We adjust our Renewal Rate for acquisitions, consolidations and other customer events that cause the merging of two or more accounts occurring at the time of renewal. © 2022 ServiceNow, Inc. All Rights Reserved © 2022 ServiceNow, I
Slide 16: GAAP Revenues by Geography
GAAP Revenues by Geography North America EMEA APAC & Other 10% 10% 11% 11% 11% 24% 25% 25% 25% 26% 66% 65% 64% 64% 63% Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 © 2022 ServiceNow, Inc. All Rights Reserved © 2022 ServiceNow, Inc. All Rights Reserved. Confidential. 16 ®
Slide 17: Headcount by Department
Headcount by Department PS & Other Cost of Sales Sub. Cost of Sales S&M R&D G&A 22,166 21,031 21,377 20,072 20,433 2,802 2,703 2,731 2,632 2,648 6,524 6,920 6,219 6,415 6,086 7,719 7,814 7,934 7,368 7,490 2,669 2,775 2,956 3,168 3,421 1,317 1,301 1,238 1,140 1,089 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 © 202
Slide 18: Non-GAAP Gross Margins
Non-GAAP Gross Margins Non-GAAP Subscription Gross Margin 86% 86% 86% 86% 85% 85% 84% Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 FY21 FY22 Non-GAAP PS & Other Gross Margin 16% 8% 11% 10% 10% 6% 4% Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 FY21 FY22 Non-GAAP Total Gross Margin 82% 83% 83% 82% 82% 81% 82% Q3-22 Q4-22 Q1-23 Q2
Slide 19: Non-GAAP Operating and Free Cash Flow Margins
Non-GAAP Operating and Free Cash Flow Margins Non-GAAP Operating Margin 28% 30% 26% 26% 25% 25% 26% Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 FY21 FY22 Non-GAAP Free Cash Flow Margin 53% 35% 32% 30% 21% 9% 6% Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 FY21 FY22 Note: All figures are calculated on a non-GAAP basis. See appen
Slide 20: Non-GAAP Net Income and Diluted EPS
Non-GAAP Net Income and Diluted EPS $1,543 Non-GAAP Net Income ($M) $1,201 $603 $398 $464 $483 $486 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 FY21 FY22 $7.59 $5.92 Non-GAAP Diluted EPS $2.92 $1.96 $2.28 $2.37 $2.37 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 FY21 FY22 Note: All figures are calculated on a non-GAAP basis. See
Slide 21: GAAP to Non-GAAP Reconciliation and Supplemental Information
GAAP to Non-GAAP Reconciliation and Supplemental Information © 2022 ServiceNow, Inc. All Rights Reserved. Confidential. 21 ®
Slide 22: GAAP to Non-GAAP Reconciliation – Other
GAAP to Non-GAAP Reconciliation – Other in millions (except %'s and per share data) Q1'22 Margin Q2'22 Margin Q3'22 Margin Q4'22 Margin 2022 Margin Q1'23 Margin Q2'23 Margin Q3'23 Margin Q4'23E Margin 2023E Margin GAAP Subscription Gross Profit $ 1,356 83% $ 1,371 83% $ 1,441 83% $ 1,536 83% $ 5,704
Slide 23: GAAP to Non-GAAP Reconciliation – Other (cont.)
GAAP to Non-GAAP Reconciliation – Other (cont.) in millions (except %'s and per share data) Q1'22 Margin Q2'22 Margin Q3'22 Margin Q4'22 Margin 2022 Margin Q1'23 Margin Q2'23 Margin Q3'23 Margin Q4'23E Margin 2023E Margin GAAP Weighted-Average Shares Used to Compute Net Income 203 N/A 203 N/A 203 N/
Slide 24: Supplemental Information
Supplemental Information in millions Q3'23 Stock-based compensation Cost of revenues Subscription $ 52 Professional services and other $ 11 Operating expenses: Sales and marketing $ 132 Research and development $ 150 General and administrative $ 68 Total Stock-based compensation $ 413 Amortization o