Servicenow, Inc. · NYSE:NOW

Servicenow — Q4 2019 Earnings Presentation

24 slides from Servicenow's earnings presentation, Jan 29, 2020

1. Slide 1: Investor Presentation Fourth Quarter 2019

   Investor Presentation Fourth Quarter 2019

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, revenue growth rates, and remaining performance obligations growth rat

4. Slide 4: Comparison to Previously Issued Guidance

   Comparison to Previously Issued Guidance ($M) Prev. Guidance Currency Impact(2) Duration Impact(4) Q4-19 Performance Actual Results Midpoint(1) $5 $7 $3,255 $887 $5 $7 $899 $3,243 Subscription Revenues Y/Y Growth 33% 35% 34% 34% Non-GAAP Adjusted Y/Y Growth(3) 35% 36% 36% 37% $30 $3,788 $30 $1,298 $

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(1) Sub Rev: Constant Currency(2) Sub Billings : Constant Currency + Constant Duration(3) 45% 40% 40% 39% 39% 36% 36% 36% 36% 37% 33% 33% 35% 33% 35% 32% 33% 3

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 ($M) Actuals Guidance Midpoint Currency Impact(1) Duration Impact(2) Non-GAAP Adjusted Sub. Revenues and Sub. Billings(3) $978 $3 $981 $899 $8 $907 $4,230 $4,220 $835 $13 $848 $3,255 $58 $3,313 ( $10 ) $781 $17 $798 $740 $20 $

7. Slide 7: Remaining Performance Obligations

   Remaining Performance Obligations(1) ($B) Current RPO Noncurrent RPO $6.6 Q4-19 $5.4 $5.6 Y/Y Growth $4.9 $5.1 $3.3 +34% / +35% cc(2) Total RPO $2.7 $2.7 $2.5 $2.5 $3.3 +34% / +34% cc(2) $2.5 $2.7 $2.8 Current RPO(1) $2.5 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 (1)Transaction price allocated to remaining perf

8. Slide 8: Customer Cohort Growth

   Customer Cohort Growth Illustrative Example Initial ACV Annual Growth Periods ACV Today of Initial ACV Annual Growth (100 x 68%) x 1 $100 + of Initial ACV $168 $100 + (100 x 71%) x 2 $242 68% $100 + (100 x 71%) x 3 71% $313 + (100 x 92%) x 4 71% $100 $468 x 92% $100 + (100 x 86%) 5 $530 + (100 x 73%

9. Slide 9: Expansion of Customer Relationships

   Expansion of Customer Relationships Cust >$1M ACV Y/Y Growth 46% 45% 42% 37% 34% 33% 33% 33% 32% 892 807 764 719 677 609 575 542 505 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Note: Previously disclosed number of customers with ACV greater than $1 million is restated to allow for comparab

10. Slide 10: Net New ACV Contribution Across Products

    Net New ACV Contribution Across Products IT Emerging Products Platform Add-ons & Other 13% 17% 14% 15% 13% 31% 29% 30% 30% 28% 56% 55% 57% 55% 57% Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Note: IT = IT Service Mgmt, IT Operations Mgmt*, IT Asset Mgmt, IT Business Mgmt Emerging Products = CSM, HR, Security, Fin

11. Slide 11: Q4-19 Top 20 New Deals

    Q4-19 Top 20 New Deals 19 of top 20 deals included 3+ products 5+ Products 3-4 Products 1-2 Products Platform Add- IT Emerging Products ons & Other Customer Security Platform Add- ITSM ITOM ITAM ITBM HR App Engine Service Operations ons & Other Customer 1 X X X X Customer 2 X X X X X X X X Customer

12. Slide 12: Headcount by Department

    Headcount by Department PS & Other Cost of Sales Sub. Cost of Sales S&M R&D G&A 10,371 9,929 9,382 1,403 8,666 1,375 8,154 1,304 1,257 1,178 2,926 2,747 2,500 2,214 2,080 3,683 3,857 3,575 3,061 3,296 1,218 1,306 1,365 1,411 1,171 664 681 697 759 774 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 12 © 2020 ServiceNo

13. Slide 13: Renewal Rate

    Renewal Rate 99% 98% 98% 98% 97% Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 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 restated to reflect

14. Slide 14: Revenues and Billings Mix

    Revenues and Billings Mix GAAP Revenues Subscription PS & Other 7% 6% 6% 6% 6% 7% 6% 93% 94% 94% 94% 94% 93% 94% Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 FY18 FY19 Non-GAAP Billings Subscription PS & Other 6% 6% 6% 6% 4% 7% 5% 94% 94% 94% 94% 96% 93% 95% Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 FY18 FY19 Note: See append

15. Slide 15: GAAP Revenues by Geography

    GAAP Revenues by Geography North America EMEA APAC & Other 9% 9% 9% 9% 9% 25% 25% 26% 24% 26% 66% 66% 65% 67% 65% Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 15 © 2020 ServiceNow, Inc. All Rights Reserved.

16. Slide 16: Average Contract Terms

    Average Contract Terms New Customer Expansion Renewal 39.0 35.7 34.7 32.5 32.5 29.7 28.3 27.1 26.9 26.0 26.2 25.3 25.7 25.7 22.1 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Note: All figures represent number of months. Revised mapping of customers in the

17. Slide 17: Non-GAAP Gross Margins

    Non-GAAP Gross Margins Non-GAAP Subscription Gross Margin 86% 86% 86% 86% 86% 86% 86% Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 FY18 FY19 Non-GAAP PS & Other Gross Margin 6% 1% 8% 2% 1% 1% -2% Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 FY18 FY19 Non-GAAP Total Gross Margin 80% 81% 81% 82% 81% 80% 80% Q4-18 Q1-19 Q2-19 Q3-19

18. Slide 18: Non-GAAP Operating and Free Cash Flow Margins

    Non-GAAP Operating and Free Cash Flow Margins Non-GAAP Operating Margin 26% 21% 22% 21% 19% 18% 20% Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 FY18 FY19 Non-GAAP Free Cash Flow Margin 40% 34% 36% 28% 28% 23% 14% Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 FY18 FY19 Note: All figures are calculated on a non-GAAP basis. See app

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

    Non-GAAP Net Income and Diluted EPS Non-GAAP Net Income ($M) $646 $470 $193 $187 $146 $129 $138 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 FY18 FY19 Non-GAAP Diluted EPS $3.32 $2.49 $0.99 $0.96 $0.77 $0.67 $0.71 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 FY18 FY19 Note: All figures are calculated on a non-GAAP basis. See app

20. Slide 20: GAAP to Non-GAAP Reconciliation

    GAAP to Non-GAAP Reconciliation 20 © 2020 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) Q1-18 Q2-18 Q3-18 Q4-18 2018 Q1-19 Q2-19 Q3-19 Q4-19 2019 Q1-20E Midpoint 2020E Midpoint GAAP Subscription Revenues $ 543 $ 585 $ 627 $ 666 $ 2,421 $ 740 $ 781 $ 835 $ 899 $ 3,255 $ 978 $ 4,230 (+) Effects of Foreign Cu

22. Slide 22: GAAP to Non-GAAP Reconciliation – Remaining Performance Obligations

    GAAP to Non-GAAP Reconciliation – Remaining Performance Obligations in billions (except %'s) Q1-18 Q2-18 Q3-18 Q4-18 2018 Q1-19 Q2-19 Q3-19 Q4-19 2019 Q1-20E Midpoint 2020E Midpoint GAAP Current Remaining Performance Obligations at Period End $ 1.9 $ 2.0 $ 2.1 $ 2.5 $ 2.5 $ 2.5 $ 2.7 $ 2.8 $ 3.3 $ 3

23. Slide 23: GAAP to Non-GAAP Reconciliation – Other

    GAAP to Non-GAAP Reconciliation – Other in millions (except %'s and per share data) Q1-18 Margin Q2-18 Margin Q3-18 Margin Q4-18 Margin 2018 Margin Q1-19 Margin Q2-19 Margin Q3-19 Margin Q4-19 Margin 2019 Margin Q1-20E 2020E GAAP Subscription Gross Profit $ 448 82% $ 484 83% $ 520 83% $ 553 83% $ 2,

24. Slide 24: GAAP to Non-GAAP Reconciliation – Other (cont.)

    GAAP to Non-GAAP Reconciliation – Other (cont.) in millions (except %'s and per share data) Q1-18 Margin Q2-18 Margin Q3-18 Margin Q4-18 Margin 2018 Margin Q1-19 Margin Q2-19 Margin Q3-19 Margin Q4-19 Margin 2019 Margin Q1-20E 2020E GAAP Weighted-Average Shares Used to Compute Net Income (Loss) per

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