Slide 1: Investor Presentation Third Quarter 2020
® Investor Presentation Third Quarter 2020
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 present revenues, revenue growth rates, and remaining performance obligations growth rat
Slide 4: We make the world of work, work better for people
We make the world of work, work better for people™ ServiceNow delivers digital Our 6,200+ global enterprise Our aspiration is to be the workflows that create great customers include approximately defining enterprise software experiences and unlock 80% of the Fortune 500. They all company of the 21st
Slide 5: Now Platform: the platform of platforms for the digital workflow revolution
Now Platform®: the platform of platforms for the digital workflow revolution IT Employee Customer App Workflows Workflows Workflows Engine Optimize IT Deliver your Drive customer Create new productivity, cost employees the right loyalty with workflow apps fast and resilience. experiences connected d
Slide 6: Q3-20 Financial Highlights
Q3-20 Financial Highlights Non-GAAP Q3 2020 Results Quarterly Results Increase Y/Y Adjusted Y/Y(1) Subscription Revenues $1,091M 31% 29% Non-GAAP Subscription Billings(2) $1,081M 25% 24% Current RPO (cRPO)(3) $3.8B 33% 30% Remaining Performance Obligations (RPO) $7.3B 31% 28% Non-GAAP Operating Marg
Slide 7: Guidance Summary
Guidance Summary Increase (Decrease) Q4 2020 Quarterly Guidance Non-GAAP Adjusted Y/Y(1) Y/Y Subscription Revenues $1,155M - $1,160M 28% - 29% 27% Non-GAAP Subscription Billings(2) $1,625M - $1,645M 25% - 27% 24% - 26% Non-GAAP Operating Margin(2) 21% (~100bps) NA Full-Year 2020 Full-Year Guidance I
Slide 8: Comparison to Previously Issued Guidance
Comparison to Previously Issued Guidance $36 $4,260 $31 $4,193 $20 $1,091 $14 ($M) $1,058 Subscription Revenues Y/Y Growth 27% 31% 29% 31% Non-GAAP Adjusted Y/Y Growth(3) 27% 29% 30% 31% $35 $9 $66 $4,790 $4,680 $55 $1,081 $9 $1,005 $12 Non-GAAP Subscription Billings(3) Y/Y Growth 16% 25% 24% 26% No
Slide 9: Year-Over-Year Subscription Revenues and Billings Growth
Year-Over-Year Subscription Revenues and Billings Growth Subscription Revenues Non-GAAP Subscription Billings(1) 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) 1. Adjusted s
Slide 10: Currency and Duration Impact to Year-Over-Year Sub. Revenues and Billings
Currency and Duration Impact to Year-Over-Year Sub. Revenues and Billings $4,260 $4,254 $1,158 $1,143 $(6) $1,091 $1,077 $12 $1,027 ($M) $995 $12 $1,006 $1,016 $(14) $(15) $3,255 $58 $3,313 $899 $8 $907 Subscription Revenues Y/Y Growth 35% 36% 34% 36% 30% 32% 31% 29% 29% 27% 34% 37% 31% 31% $1,635 $
Slide 11: Remaining Performance Obligations
Remaining Performance Obligations ($B) Current RPO Noncurrent RPO $7.3 Q3-20 $7.0 $6.6 $6.6 Y/Y Growth $5.6 $3.5 $3.5 +31% / +28% cc(2) $3.3 $3.3 Total RPO $2.7 $3.3 $3.3 $3.5 $3.8 $2.8 +33% / +30% cc(2) Current RPO (1) Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 1) Current remaining performance obligations (cRPO
Slide 12: Customer Cohort Growth
Customer Cohort Growth Annual Growth 2020 of Initial ACV 2019 72% 2018 65% 2017 2016 69% 2015 82% 2014 85% 2013 70% 2012 2011 78% 2010 86% 119% 129% (1) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1) As an illustrative example, 2010 customer cohort started with a contract of initial ACV (
Slide 13: Expansion of Customer Relationships
Expansion of Customer Relationships 1500 37% 34% 32% 32% 32% 31% 30% 40% 1300 26% 25% 20% 1100 1,012 934 967 0% 892 900 808 766 (20%) 720 680 700 610 (40%) 500 (60%) 300 (80%) 100 (100%) -100 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 (120%) Customer >$1M ACV Y/Y Growth Note: Previously d
Slide 14: Net New ACV Contribution Across Workflows and Products
Net New ACV Contribution Across Workflows and Products (1) IT Workflows Customer & Employee Workflows Now Platform App Engine & Others 9% 10% 11% 13% 12% 22% 23% 23% 24% 26% 69% 67% 66% 63% 62% Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 1) Historical presentations disclosed net new ACV contribution across produc
Slide 15: Renewal Rate
Renewal Rate 99% 98% 97% 97% 97% Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 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. Additionally, starting in 2020, we simplified our methodology re
Slide 16: Revenues and Billings Mix
Revenues and Billings Mix GAAP Revenues Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 FY18 FY19 6% 6% 5% 5% 5% 7% 6% 94% 94% 95% 95% 95% 93% 94% Non-GAAP Billings Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 FY18 FY19 6% 4% 4% 6% 5% 7% 5% 94% 96% 96% 94% 95% 93% 95% Subscription PS & Other Note: See appendix for reconciliation of
Slide 17: GAAP Revenues by Geography
GAAP Revenues by Geography North America EMEA APAC & Other 9% 9% 9% 9% 9% 24% 26% 24% 25% 25% 67% 65% 67% 66% 66% Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 ® 17 © 2020 ServiceNow, Inc. All Rights Reserved.
Slide 18: Average Contract Terms
Average Contract Terms New Customer Expansion Renewal 37.8 34.7 33.8 32.5 31.5 32.6 32.3 28.3 28.2 26.3 25.7 23.0 21.9 21.3 21.2 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Note: All figures represent number of months. Previously disclosed Average Contra
Slide 19: Headcount by Department
Headcount by Department PS & Other Cost of Sales Sub. Cost of Sales S&M R&D G&A 12,643 11,901 11,148 1,761 10,371 1,656 9,929 1,534 1,403 1,375 3,769 3,436 3,120 2,747 2,926 4,444 4,599 3,857 4,211 3,683 1,365 1,411 1,516 1,595 1,715 759 774 767 770 799 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 ® 19 © 2020 Serv
Slide 20: Non-GAAP Gross Margins
Non-GAAP Gross Margins Non-GAAP Subscription Gross Margin 87% 87% 86% 86% 86% 86% 86% Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 FY18 FY19 Non-GAAP PS & Other Gross Margin 19% 13% 8% 1% 1% 0% 1% Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 FY18 FY19 Non-GAAP Total Gross Margin 81% 82% 83% 83% 82% 81% 80% Q3-19 Q4-19 Q1-20 Q2-2
Slide 21: Non-GAAP Operating and Free Cash Flow Margins
Non-GAAP Operating and Free Cash Flow Margins Non-GAAP Operating Margin 28% 26% 26% 24% 22% 20% 21% Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 FY18 FY19 Non-GAAP Free Cash Flow Margin 36% 39% 28% 28% 24% 19% 14% Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 FY18 FY19 Note: All figures are calculated on a non-GAAP basis. See app
Slide 22: Non-GAAP Net Income and Diluted EPS
Non-GAAP Net Income and Diluted EPS $646 Non-GAAP Net Income ($M) $470 $207 $243 $241 $193 $187 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 FY18 FY19 $3.32 $2.49 Non-GAAP Diluted EPS $1.05 $1.23 $1.21 $0.99 $0.96 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 FY18 FY19 Note: All figures are calculated on a non-GAAP basis. See app
Slide 23: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation ® 23 © 2020 ServiceNow, Inc. All Rights Reserved.
Slide 24: GAAP to Non-GAAP Reconciliation – Revenues and Billings
GAAP to Non-GAAP Reconciliation – Revenues and Billings in millions (except %'s) 2018 Q1-19 Q2-19 Q3-19 Q4-19 2019 Q1-20 Q2-20 Q3-20 Q4-20E Midpoint 2020E Midpoint GAAP Subscription Revenues $ 2,421 $ 740 $ 781 $ 835 $ 899 $ 3,255 $ 995 $ 1,016 $ 1,091 $ 1,158 $ 4,260 (+) Effects of Foreign Currency
Slide 25: GAAP to Non-GAAP Reconciliation – Remaining Performance Obligations
GAAP to Non-GAAP Reconciliation – Remaining Performance Obligations 2020E in billions (except %'s) 2018 Q1-19 Q2-19 Q3-19 Q4-19 2019 Q1-20 Q2-20 Q3-20 Q4-20E Midpoint Midpoint GAAP Current Remaining Performance Obligations at Period End $ 2.5 $ 2.5 $ 2.7 $ 2.8 $ 3.3 $ 3.3 $ 3.3 $ 3.5 $ 3.8 N/A N/A (
Slide 26: GAAP to Non-GAAP Reconciliation – Other
GAAP to Non-GAAP Reconciliation – Other in millions (except %'s and per share data) 2018 Margin Q1-19 Margin Q2-19 Margin Q3-19 Margin Q4-19 Margin 2019 Margin Q1-20 Margin Q2-20 Margin Q3-20 Margin Q4'20E 2020E GAAP Subscription Gross Profit $ 2,004 83% $ 613 83% $ 646 83% $ 696 83% $ 751 84% $ 2,7
Slide 27: GAAP to Non-GAAP Reconciliation – Other (cont.)
GAAP to Non-GAAP Reconciliation – Other (cont.) in millions (except %'s and per share data) 2018 Margin Q1-19 Margin Q2-19 Margin Q3-19 Margin Q4-19 Margin 2019 Margin Q1-20 Margin Q2-20 Margin Q3-20 Margin Q4'20E 2020E GAAP Weighted-Average Shares Used to Compute Net Income (Loss) per Share - Dilut