Slide 1: Investor Presentation Fourth Quarter 2016
Investor Presentation Fourth Quarter 2016 © 2017 ServiceNow All Rights Reserved
Slide 2: Safe Harbor
Safe Harbor 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 forward‐looking statement
Slide 3: Statement Regarding Use of Non-GAAP Financial Measures
Statement Regarding Use of Non-GAAP Financial Measures We present revenues adjusted for constant currency and corresponding growth rates to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To present this information, current pe
Slide 4: The Enterprise Cloud Company
The Enterprise Cloud Company Enterprise Cloud NYSE: NOW Strong Revenue & Growth $1.820-$1.850B Cloud-based service that modernizes ~4,800 and transforms the enterprise Global Employees $1.391B Highly secure and available enterprise cloud Major Sites San Diego, Silicon Valley, Seattle, Amsterdam, Saa
Slide 5: Currency Impact to Q4 and FY16 Revenue Compared to Previously Issued Guidance
Currency Impact to Q4 and FY16 Revenue Compared to Previously Issued Guidance ($M) Guidance Midpoint(1) Currency Impact(2) Remaining Difference Actual Results $338 $11 $345 $1,215 $11 $1,222 Subscription ($4) ($4) Revenue $169 $1 $169 $41 $1 $41 PS & Other ($1) ($1) Revenue $1,384 $12 $1,391 ($5) $3
Slide 6: Currency Impact and Timing Variances to Q4 and FY16 Billings Compared to Guidance
Currency Impact and Timing Variances to Q4 and FY16 Billings Compared to Previously Issued Guidance ($M) Guidance Midpoint(1) Currency Impact(2) Timing Variances(3) Remaining Difference Actual Results $28 $33 $484 $28 $33 $429 $1,456 $1,511 Subscription ($6) ($6) Billings $4 $51 $177 $4 $180 $48 ($1
Slide 7: Year-Over-Year Revenue Growth
Year-Over-Year Revenue Growth… Previous Year Growth Actual Growth Guidance Midpoint Growth Adjusted Growth(1) (Constant Currency) 51% 48% 49% 50% 45% 44% 47% 44% 45% 44% 43% 43% 41% 43% 41% 38% 38% 35% Subscription Revenue 36% 34% 36% 31% 20% PS & Other 9% 9% 7% 8% 7% 13% 15% Revenue 2% 2% 0% 1% 5%
Slide 8: Currency Impact to Year-Over-Year Revenue Growth
…Currency Impact to Year-Over-Year Revenue Growth ($M) Actuals Guidance Midpoint Currency Impact(1) Adjusted Revenue(2) $345 $6 $368 $9 $377 $1,645 $35 $1,680 $351 $319 $1 $320 $291 $289 $6 $1,228 $1,222 ($2) Sub. Revenue Y/Y Growth 45% 44% 43% 43% 41% 43% 38% 41% 44% 45% 35% 38% $50 $0 $50 $169 $16
Slide 9: Year-Over-Year Billings Growth
Year-Over-Year Billings Growth… Previous Year Growth Actual Growth Guidance Midpoint Growth Adjusted Growth(1) (Constant Currency+Constant Duration) 50% 52% 47% 46% 44% 46% 44% 46% 42% 39% 42% 42% 38% 36% 37% 34% 34% 31% Subscription Billings 48% 39% 31% 31% 32% PS & Other 11% 14% Billings 6% 7% 5%
Slide 10: Currency and Duration Impact to Year-Over-Year Billings Growth
…Currency and Duration Impact to Year-Over-Year Billings Growth ($M) Actuals Guidance Midpoint Currency Impact(1) Duration Impact(2) Adjusted Billings(3) $484 $6 $457 $445 $11 $1,980 $43 $45 $2,068 $452 $1,511 $8 $1,494 ($33) $12 $343 $363 $1 $361 ($4) $333 ($25) ($2) ($3) Sub. Billings Y/Y Growth 3
Slide 11: $4 Billion Revenue Target in 2020
$4 Billion Revenue Target in 2020 Today 2020 G2Ks 735 17 new logos / quarter 1,000 ACV / G2K ~$1M 4% sequential growth $2M G2K Rev Mix 50% Maintain mix 50% Annualized Q4 Rev ~$1.5B $4B 11 © 2017 ServiceNow All Rights Reserved
Slide 12: G2K Penetration
G2K Penetration Number of G2K Customers 735 704 800 Beginning Quarterly Balance Net G2K Adds 654 680 700 604 633 31 556 574 26 24 600 533 29 21 18 30 500 27 23 400 300 200 100 0 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 G2K Penetration North America EMEA APAC & Other 13% 37% 44% 58% Note
Slide 13: Upsells Represent Large Opportunity
Upsells Represent Large Opportunity ACV/G2K ($k) Q/Q Growth 11% 4% 7% 3% 6% 4% 3% 6% 9% 0% $1,2 00 $1,081 $933 $990 -100% $877 $909 $807 $828 $1,0 00 $80 0 $723 $753 -200% $60 0 -300% $40 0 -400% $20 0 -500% $- -600% Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Cust >$1M 341 302 350 300 272
Slide 14: Consistent Growth in All Stages Of Customer Maturity
Consistent Growth in All Stages Of Customer Maturity Total Annual Contract Value By Cohort Annual Growth of Initial ACV 54% 2016 68% 2015 60% 2014 2013 66% 2012 2011 56% 2010 67% 78% 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 Note: Chart reflects growth in total annua
Slide 15: New ACV Mix Shifting To Emerging Products
New ACV Mix Shifting To Emerging Products Service Management ITOM Other 17% 17% 27% 25% 29% 12% 16% 13% 12% 21% 71% 67% 60% 59% 54% Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Note: Service Management = IT, Facilities, Field Service, Finance, Marketing, Legal, Express 15 ITOM = ServiceWatch, Discovery, Cloud Mana
Slide 16: 18 of Top 20 New Deals in Q4 Included 3+ Products
18 of Top 20 New Deals in Q4 Included 3+ Products 3+ Products 2 Products 1 Product Service Customer Security Customer ITOM Platform ITBM Analytics HR GRC Management Service Operations Customer 1 X X X Customer 2 X X X X Customer 3 X X X Customer 4 X X X Customer 5 X X X X X X X Customer 6 X X X X Cu
Slide 17: Multi-Product Customers Increasing
Multi-Product Customers Increasing Cumulative Multi-Product Customers Cumulative Single-Product Customers 72% 69% 67% 65% 62% 59% 56% 53% 49% Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 17 © 2017 ServiceNow All Rights Reserved
Slide 18: Framework for Growth and Profitability
Framework for Growth and Profitability Moderate Growth Growth High Growth Revenue Growth <30% 30-35% 35%+ 4-5% 3-4% 2-3% Operating Margin % increase per year increase per year increase per year 2-3% 1-2% 0-1% FCF Margin % increase per year increase per year increase per year Note: All figures are ca
Slide 19: 2020 Targets
2020 Targets 0 FY-15A FY-16A FY-17E 2020 Target Subscription Gross 82% 84% 84% Data center density, improved economies of scale 84-86% Margin PS & Other Gross Productized & scalable offerings, utilization, ramp time 22% 19% 20% 19-21% Margin Total Gross Margin 73% 76% 77% 79-81% S&M % of Revenue 39%
Slide 20: Headcount by Department
Headcount by Department PS & Other Cost of Sales Sub. Cost of Sales S&M R&D G&A 4,801 4,501 4,241 647 3,991 596 3,686 536 494 1,054 449 970 897 821 756 1,740 1,875 1,571 1,669 1,416 579 607 646 691 729 486 498 493 504 496 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 20 © 2017 ServiceNow All Rights Reserved
Slide 21: Renewal Rate
Renewal Rate 99% 99% 97% 97% 97% Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 21 © 2017 ServiceNow All Rights Reserved
Slide 22: Revenue by Geography
Revenue by Geography North America EMEA APAC & Other 7% 7% 7% 8% 8% 23% 24% 24% 25% 24% 70% 69% 69% 67% 68% Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 22 © 2017 ServiceNow All Rights Reserved
Slide 23: Average Contract Terms
Average Contract Terms New Customer Upsell Renewal 33.4 32.3 32.4 31.6 30.2 28.6 26.2 27.0 26.4 27.1 26.5 27.2 25.2 24.2 22.3 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 23 © 2017 ServiceNow All Rights Reserved
Slide 24: Non-GAAP Gross Margins
Non-GAAP Gross Margins Subscription Gross Margin 84% 84% 84% 84% 84% 84% Q1-16 Q2-16 Q3-16 Q4-16 FY16 FY17E PS & Other Gross Margin PS & Other GM Including Knowledge Revenue(1) 33% 10% 12% 18% 19% 20% 10% Q1-16 Q2-16 Q3-16 Q4-16 FY16 FY17E Total Gross Margin 76% 76% 77% 76% 77% 74% Q1-16 Q2-16 Q3-16
Slide 25: Free Cash Flow and Non-GAAP Operating Margin
Free Cash Flow and Non-GAAP Operating Margin Operating Margin 16% 17% 16% 13% 10% 8% Q1-16 Q2-16 Q3-16 Q4-16 FY16 FY17E Free Cash Flow Margin 29% 23% 23% 24% 22% 18% Q1-16 Q2-16 Q3-16 Q4-16 FY16 FY17E Note: All figures are calculated on a non-GAAP basis. See appendix for reconciliation of non-GAAP f
Slide 26: Non-GAAP Net Income and EPS
Non-GAAP Net Income and EPS Net Income ($M) $122 $40 $42 $26 $14 Q1-16 Q2-16 Q3-16 Q4-16 FY16 Diluted EPS $0.70 $0.23 $0.24 $0.15 $0.09 Q1-16 Q2-16 Q3-16 Q4-16 FY16 Note: All figures are calculated on a non-GAAP basis. See appendix for reconciliation of non-GAAP financial measures. 26 © 2017 Service
Slide 27: Appendix
Appendix 27 © 2017 ServiceNow All Rights Reserved
Slide 28: GAAP to Non-GAAP Reconciliation – Revenues and Billings
GAAP to Non-GAAP Reconciliation – Revenues and Billings in millions (except %'s) Q1-15 Q2-15 Q3-15 Q4-15 2015 Q1-16 Q2-16 Q3-16 Q4-16 2016 Q1-17E Midpoint 2017E Midpoint GAAP Subscription Revenues $ 179.9 $ 200.5 $ 223.2 $ 244.7 $ 848.3 $ 267.4 $ 290.7 $ 318.9 $ 344.6 $ 1,221.6 $ 368.0 $ 1,645.0 (+)
Slide 29: GAAP to Non-GAAP Reconciliation – Other
GAAP to Non-GAAP Reconciliation – Other in millions (except %'s and per share data) 2015 Q1-16 Q2-16 Q3-16 Q4-16 2016 GAAP Subscription Gross Profit $ 664.9 $ 214.6 $ 234.3 $ 257.4 $ 279.9 $ 986.2 (+) Subscription SBC 23.4 6.6 7.0 7.1 7.7 28.5 (+) Subscription Amort of Purchased Intangibles 11.1 2.8
Slide 30: GAAP to Non-GAAP Reconciliation – Other (cont.)
GAAP to Non-GAAP Reconciliation – Other (cont.) in millions (except %'s and per share data) 2015 Q1-16 Q2-16 Q3-16 Q4-16 2016 GAAP Operating Margin -17% -106% -14% -7% -6% -30% (+) SBC 26% 25% 23% 22% 22% 23% (+) Amort of Purchased Intangibles 1% 1% 1% 1% 1% 1% (+) Business Combination and Other Rel