Servicenow, Inc. · NYSE:NOW

Servicenow — Q4 2018 Earnings Presentation

23 slides from Servicenow's earnings presentation, January 2019

  1. Slide 1: Investor Presentation Fourth Quarter 2018

    Investor Presentation Fourth Quarter 2018

  2. 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

  3. 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

  4. Slide 4: Outperformed Q4 and FY18 Guidance

    Outperformed Q4 and FY18 Guidance ($M) Prev. Guidance Currency Impact(2) Duration Impact(3) Q4-18 Outperformance Actual Results Midpoint(1) $6 $666 $663 $6 $2,421 $2,418 ($3) ($3) Subscription Revenues $50 $952 $903 $4 $50 $2,881 ($5) $2,833 $4 Non-GAAP ($5) Subscription Billings(4) Q4-18A FY18A (1)

  5. 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% 39% 39% 40% 40% 38% 39% 36% 34% 33% 35% 32% 33% 35

  6. 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) $718 $21 $739 $666 $7 $674 $3,225 $41 $3,266 $627 $3 $629 $2,421 $2,394 Subscription $543 $585 $571 ($27) $52

  7. 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 843 863 883 793 810 822 743 770 20 721 17 12 21 20 27 23 27 22 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 G2K Penetration North America EMEA APAC & Other 19% 44% 71% 52% Note: Th

  8. Slide 8: …But Upsells Represent Largest Opportunity

    …But Upsells Represent Largest Opportunity ACV/G2K ($k) Q/Q Growth 10% 10% 10% 2% 2% 3% 4% 5% 4% $1,676 $1,474 $1,528 $1,349 $1,405 $1,127 $1,155 $1,182 $1,223 Cust >$1M 678 613 578 543 508 448 381 413 354 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Note: The Forbes Global 2000 is generall

  9. Slide 9: Consistent Customer Growth Across All Cohorts

    Consistent Customer Growth Across All Cohorts Illustrative Example Annual Growth Initial ACV Annual Growth Periods ACV Today of Initial ACV of Initial ACV 2018 $100 + (100 x 78%) x 1 $178 78% (100 x 57%) x 2 2017 $100 + $214 57% (100 x 79%) x 3 2016 $100 + $337 79% (100 x 82%) x 4 2015 $100 + $428 8

  10. Slide 10: Net New ACV Contribution From Emerging Products

    Net New ACV Contribution From Emerging Products IT Emerging Products Platform Add-ons & Other 11% 10% 10% 11% 11% 25% 30% 27% 26% 31% 64% 60% 63% 63% 58% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Note: IT = IT Service Mgmt, IT Operations Mgmt, IT Asset Mgmt, IT Business Mgmt Emerging Products = CSM, HR, Securit

  11. Slide 11: 19 of Top 20 New Deals in Q4 Included 3+ Products

    19 of Top 20 New Deals in Q4 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 Customer 2 X X X X X X X Customer 3 X X

  12. Slide 12: Headcount by Department

    Headcount by Department PS & Other Cost of Sales Sub. Cost of Sales S&M R&D G&A 8,154 7,661 7,150 1,178 6,675 1,149 6,222 1,045 979 892 2,080 1,860 1,675 1,509 1,419 2,890 3,061 2,763 2,616 2,413 1,065 1,121 1,171 936 1,003 562 568 602 641 664 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 12 © 2019 ServiceNow, Inc.

  13. Slide 13: Consistently High Renewal Rate

    Consistently High Renewal Rate 99% 98% 98% 97% 97% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Note: We adjust our Renewal Rate for acquisitions, consolidations and other customer events that cause the merging of two or more accounts 13 occurring at the time of renewal. Previously disclosed Renewal Rates may be r

  14. Slide 14: Top Line Mix Shifting to Subscription

    Top Line Mix Shifting to Subscription GAAP Revenues Subscription PS & Other 9% 8% 7% 7% 7% 9% 7% 91% 92% 93% 93% 93% 91% 93% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 FY17 FY18 Non-GAAP Billings Subscription PS & Other 6% 7% 7% 6% 6% 8% 7% 94% 93% 93% 94% 94% 92% 93% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 FY17 FY18 Note

  15. Slide 15: GAAP Revenues by Geography

    GAAP Revenues by Geography North America EMEA APAC & Other 8% 8% 9% 9% 9% 26% 26% 25% 24% 25% 66% 66% 66% 67% 66% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 15 © 2019 ServiceNow, Inc. All Rights Reserved.

  16. Slide 16: Average Contract Terms

    Average Contract Terms New Customer Upsell Renewal 37.3 35.3 35.7 31.7 31.9 28.8 27.0 27.2 27.9 25.6 25.7 26.1 25.4 26.0 23.8 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Note: All figures represent number of months. Revised mapping of customers in the cu

  17. Slide 17: Non-GAAP Gross Margins

    Non-GAAP Gross Margins Non-GAAP Subscription Gross Margin 86% 86% 86% 86% 85% 85% 85% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 FY17 FY18 Non-GAAP PS & Other Gross Margin 18% 12% 8% 12% 6% 6% 8% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 FY17 FY18 Non-GAAP Total Gross Margin 79% 80% 80% 80% 80% 80% 78% Q4-17 Q1-18 Q2-18 Q3-

  18. Slide 18: Demonstrated Operating Leverage Expansion

    Demonstrated Operating Leverage Expansion Non-GAAP Operating Margin 24% 20% 21% 20% 18% 17% 18% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 FY17 FY18 Non-GAAP Free Cash Flow Margin 38% 34% 27% 28% 26% 24% 17% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 FY17 FY18 Note: All figures are calculated on a non-GAAP basis. See appendi

  19. Slide 19: Non-GAAP Net Income and Diluted EPS

    Non-GAAP Net Income and Diluted EPS Non-GAAP Net Income ($M) $470 $242 $129 $146 $105 $91 $79 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 FY17 FY18 Non-GAAP Diluted EPS $2.49 $1.35 $0.68 $0.77 $0.56 $0.49 $0.43 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 FY17 FY18 Note: All figures are calculated on a non-GAAP basis. See appen

  20. Slide 20: GAAP to Non-GAAP Reconciliation

    GAAP to Non-GAAP Reconciliation 20 © 2019 ServiceNow, Inc. All Rights Reserved.

  21. Slide 21: GAAP to Non-GAAP Reconciliation – Revenues and Billings

    GAAP to Non-GAAP Reconciliation – Revenues and Billings in millions (except %'s) Q1-17 Q2-17 Q3-17 Q4-17 2017 Q1-18 Q2-18 Q3-18 Q4-18 2018 Q1-19E Midpoint 2019E Midpoint GAAP Subscription Revenues $ 388 $ 403 $ 450 $ 500 $ 1,740 $ 543 $ 585 $ 627 $ 666 $ 2,421 $ 718 $ 3,225 (+) Effects of Foreign Cu

  22. Slide 22: GAAP to Non-GAAP Reconciliation – Other

    GAAP to Non-GAAP Reconciliation – Other in millions (except %'s and per share data) Q1-17 Margin Q2-17 Margin Q3-17 Margin Q4-17 Margin 2017 Margin Q1-18 Margin Q2-18 Margin Q3-18 Margin Q4-18 Margin 2018 Margin Q1-19E 2019E GAAP Subscription Gross Profit $ 317 82% $ 327 81% $ 368 82% $ 412 82% $ 1,

  23. Slide 23: GAAP to Non-GAAP Reconciliation – Other (cont.)

    GAAP to Non-GAAP Reconciliation – Other (cont.) in millions (except %'s and per share data) Q1-17 Margin Q2-17 Margin Q3-17 Margin Q4-17 Margin 2017 Margin Q1-18 Margin Q2-18 Margin Q3-18 Margin Q4-18 Margin 2018 Margin Q1-19E 2019E GAAP Weighted-Average Shares Used to Compute Net Income (Loss) per

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