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ServiceNow Reports Third Quarter 2019 Financial Results
Subscription revenues of $835 million in Q3 2019, representing 33% year‑over‑year growth, 35% adjusted for foreign currency exchange rates
46 transactions over $1 million in net new annual contract value in Q3 2019, representing 84% year‑over‑year growth
809 total customers with over $1 million in annual contract value, representing 32% year‑over‑year growth
ServiceNow (NYSE: NOW), the leading digital workflow company making work, work better for people, today announced financial results for its third quarter ended September 30, 2019, with subscription revenues of $835 million in Q3 2019, representing 33% year‑over‑year growth, 35% adjusted for foreign currency exchange rates.
During the quarter, ServiceNow closed 46 transactions with more than $1 million in net new annual contract value (ACV), representing 84% year‑over‑year growth. The company now has 809 total customers with more than $1 million in ACV, representing 32% year‑over‑year growth in customers.
“We delivered another strong quarter, continuing our focus on driving customer success and expanding our footprint across 75% of the Fortune 500,” said John Donahoe, ServiceNow president and CEO. “We are pleased that companies are turning to ServiceNow to be their strategic partner for digital transformation when they want to unlock productivity and create leverage with their technology investments.”
Today’s results follow yesterday’s announcement of ServiceNow’s preliminary third quarter 2019 financial results, along with the news that Bill McDermott will succeed John Donahoe as President and CEO of ServiceNow by year‑end 2019.
Our guidance includes GAAP and non‑GAAP financial measures.
Conference Call Details
The conference call will begin at 2 p.m. Pacific Time (22:00 BST) on October 23, 2019. Interested parties may listen to the call by dialing (877) 824‑2843 (passcode: 9197834), or if outside North America, by dialing (647) 689‑5665 (passcode: 9197834). Individuals may access the live teleconference from this webcast link:
An audio replay of the conference call and webcast will be available two hours after its completion and will be accessible for 30 days. To hear the replay, interested parties may go to the investor relations section of the ServiceNow website or dial (800) 585‑8367 (passcode: 9197834), or if outside North America, by dialing (416) 621‑4642 (passcode: 9197834).
Investor Presentation Details
An investor presentation providing additional information and analysis can be found at http://investors.servicenow.com.
Statement Regarding Use of Non‑GAAP Financial Measures
We report the following non‑GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
Adjusted revenues.We present revenues adjusted for constant currency to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To present this information, current period results for entities reporting in currencies other than U.S. Dollars (USD) are converted into USD at the average exchange rates in effect during the comparison period (for Q3 2018, the average exchange rates in effect for our major currencies were 1 USD to 0.8601 Euros and 1 USD to 0.7679 British Pound Sterling (GBP)), rather than the actual average exchange rates in effect during the current period (for Q3 2019, the average exchange rates in effect for our major currencies were 1 USD to 0.8995 Euros and 1 USD 0.8116 GBP). Similarly, in our guidance, we apply the average exchange rates in effect during the comparison period rather than the exchange rates for the guidance period. We believe the presentation of revenues adjusted for constant currency facilitates the comparison of revenues year‑over‑year.
Billings and Adjusted billings. We believe billings is a useful leading indicator regarding the performance of our business. We define subscription billings, professional services and other billings, and total billings as the applicable revenue plus the applicable change in deferred revenue, unbilled receivables and customer deposits as presented or derived from the statement of cash flows. We adjust billings for constant currency, as described above, and for constant duration by replacing the portion of multi‑year billings in excess of twelve months during the current or guidance period with the portion of multi‑year billings in excess of twelve months during the comparison period. We believe these adjustments facilitate greater comparability in our billings information year‑over‑year.
Gross profit, Income from operations and Net income. Our non‑GAAP presentation of gross profit, income from operations, and net income measures exclude stock‑based compensation expense, amortization of debt discount and issuance costs related to our convertible senior notes, loss on early note conversions, amortization of purchased intangibles, legal settlements, business combination and other related costs, and the related income tax effect of these adjustments. We believe the presentation of operating results that exclude these non‑cash or non‑recurring items provides useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods.
Free cash flow. Free cash flow is defined as net cash provided by (used in) operating activities plus cash paid for legal settlements and repayments of convertible senior notes attributable to debt discount, reduced by purchases of property and equipment. Free cash flow margin is calculated as free cash flow as a percentage of total revenues. We believe information regarding free cash flow and free cash flow margin provides useful information to investors because it is an indicator of the strength and performance of our business operations.
Our presentation of non‑GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non‑GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP and non‑GAAP results and guidance.
Use of Forward‑Looking Statements
This release contains “forward‑looking statements” regarding our performance, including but not limited to statements in the section entitled “Financial Outlook.” Forward‑looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward‑looking statements. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward‑looking statements we make.
Factors that may cause actual results to differ materially from those in any forward‑looking statements include: (i) errors, interruptions, delays, or security breaches in or of our service or datacenters, (ii) our ability to grow at our expected rate of growth, including our ability to convert deferred revenue and backlog into revenue, add and retain customers, sell additional subscriptions to existing customers, sell to very large and regulated organizations with complex sales cycles, and enter new geographies and markets, (iii) our ability to continue to release, and gain customer acceptance of, improved versions of our services, (iv) our ability to develop and gain customer acceptance of new products and services, including our platform and those acquired through strategic transactions, (v) our ability to compete successfully against existing and new competitors, and (vi) material changes in the value of foreign currencies relative to the U.S. Dollar.
Further information on these and other factors that could affect our financial results are included in our Form 10‑Q that will be filed for the quarter ended September 30, 2019 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10‑K filed for the year ended December 31, 2018.
We undertake no obligation, and do not intend, to update these forward‑looking statements, to review or confirm analysts’ expectations, or to provide interim reports or updates on the progress of the current financial quarter.
ServiceNow Q3 2019 complete financial tables
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