ServiceNow (NYSE:NOW), the enterprise cloud company, today announced the financial results for its second quarter 2016.
Second Quarter 2016 Results:
- Total revenues of $341.3 million, an increase of 38% year-over-year.
- Billings of $374.9 million, an increase of 33% year-over-year (see the table entitled "Results of Operations GAAP to Non-GAAP Reconciliation” for a reconciliation).
- GAAP net loss of $49.6 million, or loss of $0.30 per basic and diluted share, compared to a GAAP net loss of $61.9 million, or loss of $0.40 per basic and diluted share, in the second quarter of 2015.
- Non-GAAP net income of $25.6 million, or income of $0.16 per basic and $0.15 per diluted share, compared to a non-GAAP net income of $7.3 million, or income of $0.05 per basic share and $0.04 per diluted share, in the second quarter of 2015 (see the table entitled "Results of Operations GAAP to Non-GAAP Reconciliation” for a reconciliation).
- Net cash used in operating activities of $148.2 million.
- Free cash flow of $78.0 million, or 23% of revenue (see the table entitled "Condensed Consolidated Statements of Cash Flows” for a reconciliation).
- Based on average second quarter exchange rates, our year-over-year revenue or billings growth rates were not significantly impacted due to foreign exchange rate fluctuations.
“Our business mix continues to diversify with emerging products representing 40% of our new business, up from 24% during the same period last year,” said Frank Slootman, president and chief executive officer, ServiceNow. “Two-thirds of our customers now license more than one product, and 15 of our top 20 new deals included three or more products.”
“We landed 26 new Global 2000 customers in the quarter,” said Michael Scarpelli, chief financial officer, ServiceNow. “Additionally, we now have 272 customers each paying us more than $1 million in annualized contract value, a record increase of 26 in the quarter.”
Financial Outlook
The financial guidance discussed below is on a non-GAAP basis, except for revenues, and excludes stock-based compensation expense, amortization of purchased intangibles, legal settlements and business combination and other related costs (see table which reconciles these non-GAAP financial measures to the related GAAP measures).
Based on foreign exchange rates at the end of the second quarter, we are not forecasting a significant impact to our expected year-over-year revenue or billings growth rates due to foreign exchange rate fluctuations.
For the third quarter of 2016, we expect:
- Subscription revenues between $312 and $315 million, representing year-over-year growth between 40% and 41%.
- Professional services and other revenues between $38 and $39 million, representing year-over-year growth between 0% and 3%.
- Total revenues between $350 and $354 million, representing year-over-year growth between 34% and 36%.
- Subscription billings between $339 and $343 million, representing year-over-year growth between 38% and 39%.
- Professional services and other billings between $41 and $42 million, representing year-over-year growth between 2% and 4%.
- Total billings between $380 and $385 million, representing year-over-year growth between 33% and 34%.
- Subscription gross margin of approximately 84%, professional services and other gross margin of approximately 13%, and overall gross margin of approximately 76%.
- Operating margin of approximately 15%.
- Free cash flow margin of approximately 16%.
- Weighted average shares used to compute diluted net income per share of approximately 174 million shares.
For full-year 2016, we expect:
- Subscription revenues between $1,203 and $1,211 million, representing year-over-year growth between 42% and 43%.
- Professional services and other revenues between $167 and $169 million, representing year-over-year growth between 6% and 8%.
- Total revenues between $1,370 and $1,380 million, representing year-over-year growth between 36% and 37%.
- Subscription billings between $1,427 and $1,435 million, representing year-over-year growth between 37% and 38%.
- Professional services and other billings between $178 and $180 million, representing year-over-year growth between 9% and 10%.
- Total billings between $1,605 and $1,615 million, representing year-over-year growth of 34%.
- Operating margin of approximately 12%.
- Free cash flow margin of approximately 24%.
- Weighted average shares used to compute diluted net income per share of approximately 173 million shares.
Conference Call Details
The conference call will begin at 2 p.m. Pacific Time (21:00 GMT) on Wednesday, July 27, 2016. Interested parties may listen to the call by dialing 844.464.3153 (passcode:32458029), or if outside North America, by dialing +1.508.637.5575 (passcode:32458029). Individuals may access the live teleconference from the investor relations section of the ServiceNow website at http://investors.servicenow.com.
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 855.859.2056 (passcode:32458029), or if outside North America, by dialing +1.404.537.3406 (passcode:32458029).
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.
Our financial measures under GAAP include stock-based compensation expense, the amortization of debt discount and issuance costs related to the convertible senior notes, amortization of purchased intangibles, legal settlements, business combination and other related costs, and the related income tax effects of these adjustments. We believe the presentation of operating results that exclude these items provides useful supplemental information to investors and facilitates the analysis of our core operating results and comparison of operating results across reporting periods.
Free cash flow, which is a non-GAAP financial measure, is calculated as net cash (used in) provided by operating activities plus cash paid for legal settlements, reduced by purchases of property and equipment. Free cash flow margin is calculated as free cash flow as a percentage of 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 ongoing business operations. However, our calculation of free cash flow and free cash flow margin may not be comparable to similar measures used by other companies.
Total billings is calculated as revenue plus the change in total deferred revenue as presented on the statement of cash flows. We also provide the breakdown of billings information by subscription billings and professional services and other billings. These are calculated based on the respective revenue in each category plus the respective change in deferred revenues for each category. We believe billings offers investors useful supplemental information regarding the performance of our business, and will help investors better understand the sales volumes and performance of our business.
Emerging products include ServiceWatch, Discovery, Cloud Management, Orchestration, Event Management, HR, Security Operations, Customer Service Management, Performance Analytics, Service Strategy, Platform, and Governance, Risk and Compliance.
The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Please see the tables included at the end of this release for the reconciliation of GAAP and non-GAAP results.
Use of forward-looking statements
This release contains “forward-looking statements” regarding our performance, including but not limited to 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.
Among the important factors that could 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 web hosting, (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 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 (v) our ability to compete successfully against existing and new competitors.
Further information on these and other factors that could affect our financial results are included in our Form 10-K for the year ended December 31, 2015 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-Q that will be filed for the quarter ended June 30, 2016.
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.
About ServiceNow
ServiceNow is changing the way people work. With a service-orientation toward the activities, tasks and processes that make up day-to-day work life, we help the modern enterprise operate faster and be more scalable than ever before. Customers use our service model to define, structure and automate the flow of work, removing dependencies on email and spreadsheets to transform the delivery and management of services for the enterprise. ServiceNow enables service management for every department in the enterprise including IT, human resources, facilities, field service and more. We deliver a ‘lights-out, light-speed’ experience through our enterprise cloud – built to manage everything as a service. To find out how, visit www.servicenow.com.
ServiceNow and the ServiceNow logo are registered trademarks of ServiceNow. All other brand and product names are trademarks or registered trademarks of their respective holders.
| ServiceNow, Inc. | ||||||||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||||||
| (in thousands, except share and per share data) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Subscription | $ | 290,679 | $ | 200,461 | $ | 558,101 | $ | 380,368 | ||||||||||||
| Professional services and other | 50,633 | 46,255 | 89,090 | 78,312 | ||||||||||||||||
| Total revenues | 341,312 | 246,716 | 647,191 | 458,680 | ||||||||||||||||
| Cost of revenues (1): | ||||||||||||||||||||
| Subscription | 56,360 | 45,392 | 109,141 | 87,836 | ||||||||||||||||
| Professional services and other | 40,289 | 34,325 | 81,768 | 68,780 | ||||||||||||||||
Total cost of revenues | 96,649 | 79,717 | 190,909 | 156,616 | ||||||||||||||||
Gross profit | 244,663 | 166,999 | 456,282 | 302,064 | ||||||||||||||||
| Operating expenses (1): | ||||||||||||||||||||
Sales and marketing | 186,506 | 136,574 | 345,116 | 246,631 | ||||||||||||||||
| Research and development | 70,364 | 53,276 | 136,288 | 103,124 | ||||||||||||||||
| General and administrative | 36,071 | 30,384 | 77,308 | 59,776 | ||||||||||||||||
| Legal settlements | — | — | 270,000 | — | ||||||||||||||||
| Total operating expenses | 292,941 | 220,234 | 828,712 | 409,531 | ||||||||||||||||
| Loss from operations | (48,278 | ) | (53,235 | ) | (372,430 | ) | (107,467 | ) | ||||||||||||
| Interest expense | (8,248 | ) | (7,707 | ) | (16,357 | ) | (15,285 | ) | ||||||||||||
| Interest income and other income (expense), net | 2,260 | 521 | 2,962 | 5,225 | ||||||||||||||||
| Loss before income taxes | (54,266 | ) | (60,421 | ) | (385,825 | ) | (117,527 | ) | ||||||||||||
| Provision for (benefit from) income taxes | (4,641 | ) | 1,504 | (2,868 | ) | 2,491 | ||||||||||||||
| Net loss | $ | (49,625 | ) | $ | (61,925 | ) | $ | (382,957 | ) | $ | (120,018 | ) | ||||||||
| Net loss per share - Basic and Diluted | $ | (0.30 | ) | $ | (0.40 | ) | $ | (2.35 | ) | $ | (0.78 | ) | ||||||||
| Weighted-average shares used to compute net loss per share - Basic and Diluted | 163,838,755 | 154,465,367 | 162,952,721 | 153,041,433 | ||||||||||||||||
| (1) Includes total stock-based compensation expense for stock-based awards as follows: | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||||||||
| Cost of revenues: | ||||||||||||||||||||
| Subscription | $ | 6,951 | $ | 6,067 | $ | 13,558 | $ | 11,232 | ||||||||||||
| Professional services and other | 6,136 | 5,771 | 12,895 | 10,984 | ||||||||||||||||
| Sales and marketing | 32,861 | 26,105 | 63,859 | 48,679 | ||||||||||||||||
| Research and development | 21,047 | 17,935 | 41,580 | 33,573 | ||||||||||||||||
| General and administrative | 11,070 | 10,468 | 21,481 | 19,952 | ||||||||||||||||
| Total | $ | 78,065 | $ | 66,346 | $ | 153,373 | $ | 124,420 | ||||||||||||
| ServiceNow, Inc. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (in thousands) | ||||||||
June 30, 2016 | December 31, 2015 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 289,113 | $ | 412,305 | ||||
| Short-term investments | 517,601 | 388,945 | ||||||
| Accounts receivable, net | 197,296 | 203,333 | ||||||
| Current portion of deferred commissions | 57,232 | 51,976 | ||||||
| Prepaid expenses and other current assets | 36,647 | 29,076 | ||||||
| Total current assets | 1,097,889 | 1,085,635 | ||||||
| Deferred commissions, less current portion | 39,716 | 33,016 | ||||||
| Long-term investments | 224,439 | 422,667 | ||||||
| Property and equipment, net | 166,551 | 144,714 | ||||||
| Intangible assets, net | 64,873 | 43,005 | ||||||
| Goodwill | 83,115 | 55,669 | ||||||
| Other assets | 37,755 | 22,346 | ||||||
| Total assets | $ | 1,714,338 | $ | 1,807,052 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 41,095 | $ | 37,369 | ||||
| Accrued expenses and other current liabilities | 113,131 | 101,264 | ||||||
| Current portion of deferred revenue | 697,855 | 593,003 | ||||||
Total current liabilities | 852,081 | 731,636 | ||||||
| Deferred revenue, less current portion | 15,130 | 10,751 | ||||||
| Convertible senior notes, net | 490,891 | 474,534 | ||||||
| Other long-term liabilities | 31,954 | 23,317 | ||||||
| Stockholders’ equity | 324,282 | 566,814 | ||||||
| Total liabilities and stockholders’equity | $ | 1,714,338 | $ | 1,807,052 | ||||
| ServiceNow, Inc. | |||||||||||||||||||||||||
| Condensed Consolidated Statements of Cash Flows | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
| June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||||||||
| Net loss | $ | (49,625 | ) | $ | (61,925 | ) | $ | (382,957 | ) | $ | (120,018 | ) | |||||||||||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||||||||||||||||||||
| Depreciation and amortization | 20,000 | 15,033 | 37,452 | 28,857 | |||||||||||||||||||||
| Amortization of premiums on investments | 1,309 | 1,782 | 2,799 | 3,612 | |||||||||||||||||||||
| Amortization of deferred commissions | 18,924 | 15,684 | 36,957 | 31,281 | |||||||||||||||||||||
| Amortization of debt discount and issuance costs | 8,248 | 7,707 | 16,357 | 15,285 | |||||||||||||||||||||
| Stock-based compensation | 78,065 | 66,346 | 153,373 | 124,420 | |||||||||||||||||||||
| Deferred income tax | (6,426 | ) | — | (6,426 | ) | — | |||||||||||||||||||
| Other | 862 | (2,297 | ) | 532 | (4,240 | ) | |||||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||||||||
| Accounts receivable | (8,844 | ) | 903 | 6,967 | 11,339 | ||||||||||||||||||||
| Deferred commissions | (24,426 | ) | (17,432 | ) | (48,397 | ) | (32,832 | ) | |||||||||||||||||
| Prepaid expenses and other assets | 9,807 | 10,861 | (10,001 | ) | (8,026 | ) | |||||||||||||||||||
| Accounts payable | (3,659 | ) | 1,628 | (272 | ) | 1,634 | |||||||||||||||||||
| Deferred revenue | 33,596 | 34,696 | 104,399 | 90,557 | |||||||||||||||||||||
| Accrued expenses and other liabilities | (226,002 | ) | 7,199 | 19,733 | 5,682 | ||||||||||||||||||||
| Net cash (used in) provided by operating activities(1) | (148,171 | ) | 80,185 | (69,484 | ) | 147,551 | |||||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||||||||
| Purchases of property and equipment | (23,852 | ) | (15,121 | ) | (52,929 | ) | (41,820 | ) | |||||||||||||||||
| Business combinations, net of cash acquired | (33,797 | ) | — | (34,297 | ) | (1,100 | ) | ||||||||||||||||||
| Purchases of other intangibles | (9,100 | ) | — | (14,850 | ) | — | |||||||||||||||||||
| Purchases of investments | — | (199,132 | ) | (180,365 | ) | (331,496 | ) | ||||||||||||||||||
| Purchases of strategic investments | — | (10,000 | ) | — | (10,000 | ) | |||||||||||||||||||
| Sale of investments | — | 88,950 | 92,885 | 138,362 | |||||||||||||||||||||
| Maturities of investments | 66,662 | 70,274 | 158,520 | 146,660 | |||||||||||||||||||||
| Restricted cash | (154 | ) | 35 | (611 | ) | 66 | |||||||||||||||||||
| Net cash used in investing activities | (241 | ) | (64,994 | ) | (31,647 | ) | (99,328 | ) | |||||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||||||
| Deferred payments on purchase of other intangibles | 4,100 | — | 4,100 | — | |||||||||||||||||||||
| Proceeds from employee stock plans | 14,278 | 11,210 | 34,151 | 41,684 | |||||||||||||||||||||
| Taxes paid related to net share settlement of equity awards | (31,333 | ) | (11,711 | ) | (59,786 | ) | (12,446 | ) | |||||||||||||||||
| Payments on financing obligation | (113 | ) | — | (223 | ) | — | |||||||||||||||||||
| Net cash (used in) provided by financing activities(1) | (13,068 | ) | (501 | ) | (21,758 | ) | 29,238 | ||||||||||||||||||
| Foreign currency effect on cash and cash equivalents | (2,857 | ) | 2,683 | (303 | ) | (4,562 | ) | ||||||||||||||||||
| Net (decrease) increase in cash and cash equivalents | (164,337 | ) | 17,373 | (123,192 | ) | 72,899 | |||||||||||||||||||
| Cash and cash equivalents at beginning of period | 453,450 | 307,981 | 412,305 | 252,455 | |||||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 289,113 | $ | 325,354 | $ | 289,113 | $ | 325,354 | |||||||||||||||||
| Calculation of free cash flow (a non-GAAP measure): | |||||||||||||||||||||||||
| Net cash (used in) provided by operating activities(1) | $ | (148,171 | ) | $ | 80,185 | $ | (69,484 | ) | $ | 147,551 | |||||||||||||||
| Purchases of property and equipment | (23,852 | ) | (15,121 | ) | (52,929 | ) | (41,820 | ) | |||||||||||||||||
| Cash paid for legal settlements | 250,000 | — | 267,500 | — | |||||||||||||||||||||
| Free cash flow | $ | 77,977 | $ | 65,064 | $ | 145,087 | $ | 105,731 | |||||||||||||||||
| Calculation of free cash flow margin (a non-GAAP measure): | |||||||||||||||||||||||||
| GAAP net cash (used in) provided by operating activities as % of revenue(1) | (43 | %) | 32 | % | (11 | %) | 32 | % | |||||||||||||||||
| Purchases of property and equipment as % of revenue | (7 | %) | (6 | %) | (8 | %) | (9 | %) | |||||||||||||||||
| Cash paid for legal settlements as a % of revenue | 73 | % | 0 | % | 41 | % | 0 | % | |||||||||||||||||
| Free cash flow margin | 23 | % | 26 | % | 22 | % | 23 | % | |||||||||||||||||
| (1) During the six months ended June 30, 2016, we early adopted Accounting Standards Update 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which addresses among other items, updates to the presentation and treatment of excess tax benefits related to stock-based compensation. We have adopted changes to the condensed consolidated statements of cash flows on a retrospective basis. This resulted in a $0.6 million increase in net cash provided by operating activities and a corresponding $0.6 million decrease in net cash provided by financing activities for the three and six months ended June 30, 2015. | |||||||||||||||||||||||||
| ServiceNow, Inc. | ||||||||||||||||||||||||||
| Results of Operations GAAP to Non-GAAP Reconciliation | ||||||||||||||||||||||||||
| (in thousands except share and per share data) | ||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30, 2016 | June 30, 2015 | Growth Rates | June 30, 2016 | June 30, 2015 | Growth Rates | |||||||||||||||||||||
Subscription revenues: | ||||||||||||||||||||||||||
GAAP subscription revenues | $ | 290,679 | $ | 200,461 | 45% | $ | 558,101 | $ | 380,368 | 47% | ||||||||||||||||
| Increase in subscription deferred revenue | 42,079 | 40,319 | 105,952 | 93,761 | ||||||||||||||||||||||
| Non-GAAP subscription billings | $ | 332,758 | $ | 240,780 | 38% | $ | 664,053 | $ | 474,129 | 40% | ||||||||||||||||
| Professional services and other revenues: | ||||||||||||||||||||||||||
| GAAP professional services and other revenues | $ | 50,633 | $ | 46,255 | 9% | $ | 89,090 | $ | 78,312 | 14% | ||||||||||||||||
| Decrease in professional services and other deferred revenue | (8,483 | ) | (5,623 | ) | (1,553 | ) | (3,204 | ) | ||||||||||||||||||
| Non-GAAP professional services and other billings | $ | 42,150 | $ | 40,632 | 4% | $ | 87,537 | $ | 75,108 | 17% | ||||||||||||||||
| Total Revenues: | ||||||||||||||||||||||||||
| GAAP total revenues | $ | 341,312 | $ | 246,716 | 38% | $ | 647,191 | $ | 458,680 | 41% | ||||||||||||||||
| Increase in total deferred revenue from consolidated statements of cash flows | 33,596 | 34,696 | 104,399 | 90,557 | ||||||||||||||||||||||
| Non-GAAP total billings | $ | 374,908 | $ | 281,412 | 33% | $ | 751,590 | $ | 549,237 | 37% | ||||||||||||||||
| Cost of revenues: | ||||||||||||||||||||||||||
| GAAP subscription cost of revenues | $ | 56,360 | $ | 45,392 | $ | 109,141 | $ | 87,836 | ||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Stock-based compensation | (6,951 | ) | (6,067 | ) | (13,558 | ) | (11,232 | ) | ||||||||||||||||||
| Amortization of purchased intangibles (1) | (3,106 | ) | (2,769 | ) | (5,874 | ) | (5,552 | ) | ||||||||||||||||||
| Non-GAAP subscription cost of revenues | $ | 46,303 | $ | 36,556 | $ | 89,709 | $ | 71,052 | ||||||||||||||||||
| GAAP professional services and other cost of revenues | $ | 40,289 | $ | 34,325 | $ | 81,768 | $ | 68,780 | ||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Stock-based compensation | (6,136 | ) | (5,771 | ) | (12,895 | ) | (10,984 | ) | ||||||||||||||||||
| Non-GAAP professional services and other cost of revenues | $ | 34,153 | $ | 28,554 | $ | 68,873 | $ | 57,796 | ||||||||||||||||||
| Gross profit: | ||||||||||||||||||||||||||
| GAAP subscription gross profit | $ | 234,319 | $ | 155,069 | $ | 448,960 | $ | 292,532 | ||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Stock-based compensation | 6,951 | 6,067 | 13,558 | 11,232 | ||||||||||||||||||||||
| Amortization of purchased intangibles | 3,106 | 2,769 | 5,874 | 5,552 | ||||||||||||||||||||||
| Non-GAAP subscription gross profit | $ | 244,376 | $ | 163,905 | $ | 468,392 | $ | 309,316 | ||||||||||||||||||
| GAAP professional services and other gross profit | $ | 10,344 | $ | 11,930 | $ | 7,322 | $ | 9,532 | ||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Stock-based compensation | 6,136 | 5,771 | 12,895 | 10,984 | ||||||||||||||||||||||
| Non-GAAP professional services and other gross profit | $ | 16,480 | $ | 17,701 | $ | 20,217 | $ | 20,516 | ||||||||||||||||||
| GAAP gross profit | $ | 244,663 | $ | 166,999 | $ | 456,282 | $ | 302,064 | ||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Stock-based compensation | 13,087 | 11,838 | 26,453 | 22,216 | ||||||||||||||||||||||
| Amortization of purchased intangibles | 3,106 | 2,769 | 5,874 | 5,552 | ||||||||||||||||||||||
| Non-GAAP gross profit | $ | 260,856 | $ | 181,606 | $ | 488,609 | $ | 329,832 | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| GAAP sales and marketing expenses | 186,506 | 136,574 | 345,116 | 246,631 | ||||||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Stock-based compensation | (32,861 | ) | (26,105 | ) | (63,859 | ) | (48,679 | ) | ||||||||||||||||||
| Amortization of purchased intangibles | (56 | ) | (145 | ) | (74 | ) | (291 | ) | ||||||||||||||||||
| Non-GAAP sales and marketing expenses | $ | 153,589 | $ | 110,324 | $ | 281,183 | $ | 197,661 | ||||||||||||||||||
| GAAP research and development expenses | 70,364 | 53,276 | 136,288 | 103,124 | ||||||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Stock-based compensation | (21,047 | ) | (17,935 | ) | (41,580 | ) | (33,573 | ) | ||||||||||||||||||
| Amortization of purchased intangibles | (303 | ) | — | (303 | ) | — | ||||||||||||||||||||
| Non-GAAP research and development expenses | $ | 49,014 | $ | 35,341 | $ | 94,405 | $ | 69,551 | ||||||||||||||||||
| GAAP general and administrative expenses | 36,071 | 30,384 | 77,308 | 59,776 | ||||||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Stock-based compensation | (11,070 | ) | (10,468 | ) | (21,481 | ) | (19,952 | ) | ||||||||||||||||||
| Amortization of purchased intangibles (1) | (273 | ) | (23 | ) | (374 | ) | (46 | ) | ||||||||||||||||||
| Business combination and other related costs | (634 | ) | — | (945 | ) | — | ||||||||||||||||||||
| Non-GAAP general and administrative expenses | $ | 24,094 | $ | 19,893 | $ | 54,508 | $ | 39,778 | ||||||||||||||||||
| GAAP legal settlements | $ | — | $ | — | $ | 270,000 | $ | — | ||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Legal settlements | — | — | (270,000 | ) | — | |||||||||||||||||||||
| Non-GAAP legal settlements | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Income (loss) from operations: | ||||||||||||||||||||||||||
| GAAP loss from operations | (48,278 | ) | (53,235 | ) | (372,430 | ) | (107,467 | ) | ||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Stock-based compensation | 78,065 | 66,346 | 153,373 | 124,420 | ||||||||||||||||||||||
| Amortization of purchased intangibles (1) | 3,738 | 2,937 | 6,625 | 5,889 | ||||||||||||||||||||||
| Business combination and other related costs | 634 | — | 945 | — | ||||||||||||||||||||||
| Legal settlements | — | — | 270,000 | — | ||||||||||||||||||||||
| Non-GAAP income from operations | $ | 34,159 | $ | 16,048 | $ | 58,513 | $ | 22,842 | ||||||||||||||||||
| Net income (loss): | ||||||||||||||||||||||||||
| GAAP net loss | (49,625 | ) | (61,925 | ) | (382,957 | ) | (120,018 | ) | ||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||
| Stock-based compensation | 78,065 | 66,346 | 153,373 | 124,420 | ||||||||||||||||||||||
| Amortization of purchased intangibles (1) | 3,738 | 2,937 | 6,625 | 5,889 | ||||||||||||||||||||||
| Business combination and other related costs | 634 | — | 945 | — | ||||||||||||||||||||||
| Legal settlements | — | — | 270,000 | — | ||||||||||||||||||||||
| Amortization of debt discount and issuance costs for the convertible senior notes | 8,248 | 7,707 | 16,357 | 15,285 | ||||||||||||||||||||||
| Income tax expense effects related to the above adjustments (1) | (15,482 | ) | (7,738 | ) | (24,285 | ) | (15,769 | ) | ||||||||||||||||||
| Non-GAAP net income | $ | 25,578 | $ | 7,327 | $ | 40,058 | $ | 9,807 | ||||||||||||||||||
| Net income (loss) per share - basic and diluted: | ||||||||||||||||||||||||||
| GAAP net loss per share - basic and diluted | $ | (0.30 | ) | $ | (0.40 | ) | $ | (2.35 | ) | $ | (0.78 | ) | ||||||||||||||
| Non-GAAP net income per share - basic | $ | 0.16 | $ | 0.05 | $ | 0.25 | $ | 0.06 | ||||||||||||||||||
| Non-GAAP net income per share - diluted | $ | 0.15 | $ | 0.04 | $ | 0.23 | $ | 0.06 | ||||||||||||||||||
| Weighted-average shares used to compute net income (loss) per share - basic | 163,838,755 | 154,465,367 | 162,952,721 | 153,041,433 | ||||||||||||||||||||||
| GAAP weighted-average shares used to compute net loss per share - diluted | 163,838,755 | 154,465,367 | 162,952,721 | 153,041,433 | ||||||||||||||||||||||
| Effect of dilutive securities (stock options, restricted stock units and common stock subject to repurchase) | 8,772,013 | 13,613,976 | 8,864,056 | 14,275,802 | ||||||||||||||||||||||
| Non-GAAP weighted-average shares used to compute net income per share - diluted | 172,610,768 | 168,079,343 | 171,816,777 | 167,317,235 | ||||||||||||||||||||||
| (1) The Non-GAAP amounts presented for the three and six months ended June 30, 2015 have been revised to exclude the amortization of other intangibles and their related tax effects. | ||||||||||||||||||||||||||
| ServiceNow, Inc. | ||||||||||||||
| Reconciliation of Non-GAAP Financial Guidance | ||||||||||||||
| The financial guidance provided below is an estimate based on information available as of June 30, 2016. The company’s future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the company’s financial results are stated above in this press release. More information on potential factors that could affect the company’s financial results is included from time to time in the company’s public reports filed with the SEC, including the company's Annual Report on Form 10-K filed on February 25, 2016, and the company's Form 10-Q for the three months ended June 30, 2016 to be filed with the SEC. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. | ||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||
| September 30, 2016 | September 30, 2015 | Growth rates | ||||||||||||
| GAAP subscription revenue | $312 - $315 million | $223 million | 40% - 41% | |||||||||||
| Increase in subscription deferred revenue | 27 - 28 million | 23 million | ||||||||||||
| Non-GAAP subscription billings | $339 - $343 million | $246 million | 38% - 39% | |||||||||||
| GAAP professional services and other revenue | $38 - $39 million | $38 million | 0% - 3% | |||||||||||
| Increase in professional services and other deferred revenue | 3 million | 2 million | ||||||||||||
| Non-GAAP professional services and other billings | $41 - $42 million | $40 million | 2% - 4% | |||||||||||
| GAAP total revenue | $350 - $354 million | $261 million | 34% - 36% | |||||||||||
| Increase in total deferred revenue from consolidated statements of cash flows | 30 - 31 million | 25 million | ||||||||||||
| Non-GAAP total billings | $380 - $385 million | $286 million | 33% - 34% | |||||||||||
| GAAP subscription gross margin | 80% | |||||||||||||
| Stock-based compensation expense | 3% | |||||||||||||
| Amortization of purchased intangibles | 1% | |||||||||||||
| Non-GAAP subscription gross margin | 84% | |||||||||||||
| GAAP professional services and other gross margin | (3%) | |||||||||||||
| Stock-based compensation expense | 16% | |||||||||||||
| Non-GAAP professional services and other gross margin | 13% | |||||||||||||
| GAAP total gross margin | 71% | |||||||||||||
| Stock-based compensation expense | 4% | |||||||||||||
| Amortization of purchased intangibles | 1% | |||||||||||||
| Non-GAAP total gross margin | 76% | |||||||||||||
| GAAP operating margin | (8%) | |||||||||||||
| Stock-based compensation expense | 22% | |||||||||||||
| Amortization of purchased intangibles | 1% | |||||||||||||
| Non-GAAP operating margin | 15% | |||||||||||||
| GAAP net cash provided by operating activities as % of revenue | 24% | |||||||||||||
| Purchases of property and equipment as % of revenue | (8%) | |||||||||||||
| Non-GAAP free cash flow margin | 16% | |||||||||||||
| GAAP weighted-average shares used to compute net loss per share - diluted | 166 million | |||||||||||||
| Effect of dilutive securities (stock options, restricted stock units) | 8 million | |||||||||||||
| Non-GAAP weighted-average shares used to compute net income per share - diluted | 174 million | |||||||||||||
| Twelve Months Ended | Twelve Months Ended | |||||||||||||
| December 31, 2016 | December 31, 2015 | Growth rates | ||||||||||||
| GAAP subscription revenue | $1,203 - $1,211 million | $848 million | 42% - 43% | |||||||||||
| Increase in subscription deferred revenue | 224 million | 190 million | ||||||||||||
| Non-GAAP subscription billings | $1,427 - $1,435 million | $1,038 million | 37% - 38% | |||||||||||
| GAAP professional services and other revenue | $167 - $169 million | $157 million | 6% - 8% | |||||||||||
| Increase in professional services and other deferred revenue | 11 million | 6 million | ||||||||||||
| Non-GAAP professional services and other billings | $178 - $180 million | $163 million | 9% - 10% | |||||||||||
| GAAP total revenue | $1,370 - $1,380 million | $1,005 million | 36% - 37% | |||||||||||
| Increase in total deferred revenue from consolidated statements of cash flows | 235 million | 196 million | ||||||||||||
| Non-GAAP total billings | $1,605 - $1,615 million | $1,201 million | 34% | |||||||||||
| GAAP operating margin | (31%) | |||||||||||||
| Stock-based compensation expense | 22% | |||||||||||||
| Amortization of purchased intangibles | 1% | |||||||||||||
| Legal settlements | 20% | |||||||||||||
| Non-GAAP operating margin | 12% | |||||||||||||
| GAAP net cash provided by operating activities as % of revenue | 13% | |||||||||||||
| Cash paid for legal settlements | 19% | |||||||||||||
| Purchases of property and equipment as % of revenue | (8%) | |||||||||||||
| Non-GAAP free cash flow margin | 24% | |||||||||||||
| GAAP weighted-average shares used to compute net loss per share - diluted | 165 million | |||||||||||||
| Effect of dilutive securities (stock options, restricted stock units) | 8 million | |||||||||||||
| Non-GAAP weighted-average shares used to compute net income per share - diluted | 173 million | |||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160727006385/en/
Contacts:
Media Contact:
Colleen Haikes, 669-262-2001
press@servicenow.com
or
Investor
Contact:
ir@servicenow.com
