0001373715-19-000006.txt : 20190130 0001373715-19-000006.hdr.sgml : 20190130 20190130161225 ACCESSION NUMBER: 0001373715-19-000006 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20190129 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190130 DATE AS OF CHANGE: 20190130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ServiceNow, Inc. CENTRAL INDEX KEY: 0001373715 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 202056195 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-35580 FILM NUMBER: 19552090 BUSINESS ADDRESS: STREET 1: 2225 LAWSON LANE CITY: SANTA CLARA STATE: CA ZIP: 95054 BUSINESS PHONE: 408-501-8550 MAIL ADDRESS: STREET 1: 2225 LAWSON LANE CITY: SANTA CLARA STATE: CA ZIP: 95054 FORMER COMPANY: FORMER CONFORMED NAME: SERVICE-NOW.COM DATE OF NAME CHANGE: 20060823 8-K 1 erq4fy18-8xk.htm 8-K Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (date of earliest event reported): January 29, 2019
____________

SERVICENOW, INC.
(Exact name of registrant as specified in its charter)

____________

Delaware
 
001-35580
 
20-2056195
(State or other jurisdiction of
incorporation or organization)
 
(Commission File Number)
 
(I.R.S. Employer
Identification Number)
2225 Lawson Lane
 
 
Santa Clara, California
 
95054
(Address of Principal Executive Offices)
 
(Zip Code)
 
(408) 501-8550
 
 
  (Registrant’s telephone number, including area code)
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨





Item 2.02 Results of Operations and Financial Condition.

On January 30, 2019, ServiceNow, Inc. (“ServiceNow” or the “Company”) issued a press release announcing financial results for the three months and year ended December 31, 2018.

A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

The information in this report, including the exhibit attached hereto, is furnished pursuant to Item 2.02 of Form 8-K and is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference in any filing of ServiceNow under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

ServiceNow makes reference to non-GAAP financial information in the press release.  A reconciliation to the nearest comparable GAAP financial measures of the non-GAAP financial measures is included in the press release attached hereto as Exhibit 99.1.  These non-GAAP financial measures are reported in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

ServiceNow 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.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On January 29, 2019, the Board of Directors of ServiceNow promoted David L. Schneider, 50, to President, Global Customer Operations with overall responsibilities to continue to oversee our sales organization and strengthen, expand and scale customer success capabilities, effective immediately.

Mr. Schneider's biographical information and compensation information are included in the Company's proxy statement for its 2018 annual meeting of stockholders. There are no arrangements or understandings between Mr. Schneider and any other person pursuant to which Mr. Schneider was selected as an officer. There are no family relationships between Mr. Schneider and any director or other executive officer. Mr. Schneider has not had an interest in any transaction since the beginning of the Company’s last fiscal year, or any currently proposed transaction, that requires disclosure pursuant to Item 404(a) of Regulation S-K.

Item 9.01 Financial Statements and Exhibits.






Exhibit List
    





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
 
 
SERVICENOW, INC.
 
 
 
 
 
 
 
 
By:
/s/ Michael P. Scarpelli
 
 
 
 
Michael P. Scarpelli
Chief Financial Officer
 
 
 
 
 
 
Date: January 30, 2019
 
 



 EX-99.1 2 erq4fy18-document.htm EXHIBIT 99.1 Exhibit

snlogo23.jpg

ServiceNow Reports Record Fourth Quarter and Fiscal Year 2018 Financial Results

Growth in IT Products Reaccelerates, Leading Strong Overall Performance


•
Subscription revenues of $666 million in Q4 2018, representing 33% year-over-year growth
•
51 transactions over $1 million in net new annual contract value in Q4 2018
•
Closed the year with 678 total customers with over $1 million in annual contract value, representing 33% year-over-year growth


SANTA CLARA, Calif. - Jan. 30, 2019 - ServiceNow (NYSE: NOW) today announced financial results for its fourth quarter and fiscal year ended December 31, 2018, with subscription revenues of $666 million in Q4 2018, representing 33% year-over-year growth.

ServiceNow, Forbes’ No. 1 World’s Most Innovative Company in 2018, now serves approximately 5,400 enterprise customers, including almost 75% of Fortune 500 companies. During the quarter, ServiceNow closed 51 transactions with more than $1 million in net new annual contract value. As of the end of the fiscal year 2018, the company had 678 total customers with more than $1 million in annual contract value, representing 33% year-over-year growth. Underlying its quarterly and full-year results, ServiceNow saw strength across its product portfolio and in every geography.

“We finished 2018 with our strongest fourth quarter ever, continuing our momentum as the leading digital workflow company shaping the future of work,” said John Donahoe, ServiceNow president and chief executive officer. “Our role as a strategic partner to the world’s largest enterprises continues to accelerate. As we look to another strong year of growth in 2019, we remain committed to enabling companies’ digital transformation by making work, work better for people.”

“Total backlog1 including deferred revenue at the end of 2018 was $5.1 billion, representing 35% year-over-year growth,” said Michael Scarpelli, ServiceNow chief financial officer. “Strength in the fourth quarter was driven by expansions of existing customer relationships, which contributed to a record $1.5 billion in total contract value booked.”

___________________________
1 Please see our Form 10-Q filed for the quarter ended September 30, 2018 for our definition of total backlog.



1

Fourth Quarter 2018 GAAP and Non‑GAAP Results:

The following table summarizes our financial results for the fourth quarter 2018:
 
 
 
 
 
 
 
 
 
Fourth Quarter 2018
GAAP Results
 
Fourth Quarter 2018 Non-GAAP Results(1)
 
Amount
($ millions)
Year/Year
Growth (%)(2)

 
Amount
($ millions)
Year/Year
Growth (%)(2)

Adjusted Amount
($ millions)(3)
Adjusted Year/Year Growth (%)(2)

Subscription revenues
$666.1
33
%
 
 
 
$673.6
35
%
Professional services and other revenues
$49.3
0
%
 
 
 
$50.1
2
%
Total revenues
$715.4
30
%
 
 
 
$723.7
32
%
 
 
 
 
 
 
 
 
Subscription billings
 
 
 
$952.0
38
%
$958.9
39
%
Professional services and other billings
 
 
 
$61.0
29
%
$61.9
30
%
Total billings
 
 
 
$1,013.0
38
%
$1,020.7
39
%
 
 
 
 
 
 
 
 
 
Amount
($ millions)
Margin (%)

 
Amount
($ millions)
Margin (%)

 
 
Subscription gross profit
$552.6
83
%
 
$569.8
86
%
 
 
Professional services and other gross profit (loss)
($5.4)
(11
%)
 
$3.1
6
%
 
 
Total gross profit
$547.3
76
%
 
$573.0
80
%
 
 
Income from operations
$0.3
0
%
 
$150.0
21
%
 
 
Net cash provided by operating activities
$289.6
40
%
 
 
 
 
 
Free cash flow
 
 
 
$245.2
34
%
 
 
 
 
 
 
 
 
 
 
 
Amount
($ millions)
Earnings per Basic/Diluted Share ($)

 
Amount
($ millions)
Earnings per Basic/Diluted Share ($)

 
 
Net income
$7.0
$0.04
 
$145.6
$0.81 / $0.77

 
 

(1)
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. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
(2)
The comparison period amounts used to calculate growth rates have been restated from previously reported amounts to reflect the impact of the full retrospective adoption of Topic 606. For more information regarding Topic 606, refer to our Form 10-Q filed for the quarter ended September 30, 2018.
(3)
Non-GAAP subscription revenues, professional services and other revenues, total revenues and professional services billings are adjusted for constant currency. Non-GAAP subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.


2

Fiscal Year 2018 GAAP and Non‑GAAP Results:

The following table summarizes our financial results for the fiscal year 2018:
 
 
 
 
 
 
 
 
 
Full-Year 2018
GAAP Results
 
Full-Year 2018 Non-GAAP Results(1)
 
Amount
($ millions)
Year/Year
Growth (%)(2)

 
Amount
($ millions)
Year/Year
Growth (%)(2)

Adjusted Amount
($ millions)(3)
Adjusted Year/Year Growth (%)(2)

Subscription revenues
$2,421.3
39
%
 
 
 
$2,393.9
38
%
Professional services and other revenues
$187.5
5
%
 
 
 
$185.4
4
%
Total revenues
$2,608.8
36
%
 
 
 
$2,579.2
34
%
 
 
 
 
 
 
 
 
Subscription billings
 
 
 
$2,881.4
36
%
$2,845.1
34
%
Professional services and other billings
 
 
 
$207.4
18
%
$205.3
17
%
Total billings
 
 
 
$3,088.8
34
%
$3,050.4
33
%
 
 
 
 
 
 
 
 
 
Amount
($ millions)
Margin (%)

 
Amount
($ millions)
Margin (%)

 
 
Subscription gross profit
$2,003.9
83
%
 
$2,071.6
86
%
 
 
Professional services and other gross profit (loss)
($17.7)
(9
%)
 
$15.1
8
%
 
 
Total gross profit
$1,986.2
76
%
 
$2,086.7
80
%
 
 
Income (loss) from operations
($42.4)
(2
%)
 
$527.8
20
%
 
 
Net cash provided by operating activities
$811.1
31
%
 
 
 
 
 
Free cash flow
 
 
 
$732.0
28
%
 
 
 
 
 
 
 
 
 
 
 
Amount
($ millions)
Earnings per Basic/Diluted Share ($)

 
Amount
($ millions)
Earnings per Basic/Diluted Share ($)

 
 
Net income (loss)
($26.7)
($0.15)
 
$470.4
$2.64 / $2.49

 
 

(1)
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. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
(2)
The comparison period amounts used to calculate growth rates have been restated from previously reported amounts to reflect the impact of the full retrospective adoption of Topic 606. For more information regarding Topic 606, refer to our Form 10-Q filed for the quarter ended September 30, 2018.
(3)
Non-GAAP subscription revenues, professional services and other revenues, total revenues and professional services billings are adjusted for constant currency. Non-GAAP subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.

Financial Outlook

Our guidance is based on foreign exchange rates as of December 31, 2018 and includes GAAP and non-GAAP financial measures.


3

The following table summarizes our guidance for the first quarter 2019:

 
First Quarter 2019
GAAP Guidance
 
First Quarter 2019 Non-GAAP Guidance(1)
 
Amount
($ millions)
Year/Year
Growth (%)
 
Amount
($ millions)

Year/Year
Growth (%)

Adjusted Amount
($ millions)(2)
Adjusted Year/ Year Growth (%)
Subscription revenues
$715 - $720
 32% - 33%
 
 
 
$736 - $741
 35% - 36%
Subscription billings
 
 
 
$790 - $795
 24% - 25%

$831 - $836
 30% - 31%
 
 
 
 
 
 
 
 
 
 
 
 
 
Margin (%)

 
 
Income from operations
 
 
 
 
16
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount
(millions)

 
 
 
Weighted-average shares used to compute diluted net income per share
 
 
 
190

 
 
 

(1)
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. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.
(2)
Non-GAAP subscription revenues are adjusted for constant currency. Non-GAAP subscription billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

The following table summarizes our guidance for fiscal year 2019:

 
Full-Year 2019
GAAP Guidance
 
Full-Year 2019 Non-GAAP Guidance(1)
 
Amount
($ millions)
Year/Year
Growth (%)
 
Amount
($ millions)

Year/Year
Growth (%)

Adjusted Amount
($ millions)(2)
Adjusted Year/ Year Growth (%)
Subscription revenues
$3,215 - $3,235
 33% - 34%
 
 
 
$3,256 - $3,276
 34% - 35%
Subscription billings
 
 
 
$3,705 - $3,725
 29%

$3,772 - $3,792
 31% - 32%
 
 
 
 
 
 
 
 
 
 
 
 
 
Margin (%)

 
 
Subscription gross profit
 
 
 
 
86
%
 
 
Income from operations
 
 
 
 
21
%
 
 
Free cash flow
 
 
 
 
28
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount
(millions)

 
 
 
Weighted-average shares used to compute diluted net income per share
 
 
 
190

 
 
 

(1)
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. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.
(2)
Non-GAAP subscription revenues are adjusted for constant currency. Non-GAAP subscription billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

Conference Call Details 

The conference call will begin at 2 p.m. Pacific Time (22:00 GMT) on January 30, 2019. Interested parties may listen to the call by dialing 844.464.3153 (passcode: 1278924), or if outside North America, by dialing +1.508.637.5575 (passcode: 1278924). Individuals may access the live teleconference from this webcast link (https://edge.media-server.com/m6/p/kp9ox4w4).


4

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:1278924), or if outside North America, by dialing +1.404.537.3406 (passcode: 1278924).

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.

•
Revenue Adjusted for Constant Currency. 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 are converted into U.S. Dollars at the exchange rates in effect during the prior period presented, rather than the actual exchange rates in effect during the current period. We believe the presentation of revenues adjusted for constant currency facilitates the comparison of revenues year-over-year.

•
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 for constant currency, as described above, and adjust for constant duration by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the prior period presented. 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.

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 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, (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.


5

Further information on these and other factors that could affect our financial results are included in our Form 10-Q for the quarter ended September 30, 2018 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K that will be 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.

About ServiceNow

ServiceNow (NYSE: NOW) is making the world of work, work better for people. Our cloud‑based platform and solutions deliver digital experiences that help people do their best work. For more information, visit: www.servicenow.com.

© 2019 ServiceNow, Inc. All rights reserved. ServiceNow, the ServiceNow logo, Now, Now Platform, and other ServiceNow marks are trademarks and/or registered trademarks of ServiceNow, Inc. in the United States and/or other countries. Other company names, product names, and logos may be trademarks of the respective companies with which they are associated.


Media Contact:
Kari Ramirez
408.607.1315
press@servicenow.com
 

Investor Contact:
Jimmy Sexton
669.262.1430
ir@servicenow.com

6


ServiceNow, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)

 
Three Months Ended
 
Twelve Months Ended
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
 
 
 
*As Adjusted
 
 
 
*As Adjusted
Revenues:
 
 
 
 
 
 
 
Subscription
$
666,139

 
$
499,738

 
$
2,421,313

 
$
1,739,500

Professional services and other
49,302

 
49,355

 
187,503

 
178,994

Total revenues
715,441

 
549,093

 
2,608,816

 
1,918,494

Cost of revenues (1):
 
 
 
 
 
 
 
Subscription
113,503

 
87,524

 
417,421

 
315,570

Professional services and other
54,659

 
46,640

 
205,237

 
184,292

Total cost of revenues
168,162

 
134,164

 
622,658

 
499,862

Gross profit
547,279

 
414,929

 
1,986,158

 
1,418,632

Operating expenses (1):
 
 
 
 
 
 
 
Sales and marketing
319,163

 
250,979

 
1,203,056

 
894,977

Research and development
148,662

 
104,559

 
529,501

 
377,518

General and administrative
79,176

 
60,291

 
296,027

 
210,533

Total operating expenses
547,001

 
415,829

 
2,028,584

 
1,483,028

Income (loss) from operations
278

 
(900
)
 
(42,426
)
 
(64,396
)
Interest expense
(8,938
)
 
(16,813
)
 
(52,733
)
 
(53,394
)
Interest income and other income (expense), net
10,615

 
4,561

 
56,135

 
4,384

Income (loss) before income taxes
1,955

 
(13,152
)
 
(39,024
)
 
(113,406
)
Provision for (benefit from) income taxes
(5,060
)
 
4,194

 
(12,320
)
 
3,440

Net income (loss)
$
7,015

 
$
(17,346
)
 
$
(26,704
)
 
$
(116,846
)
Net income (loss) per share - basic
$
0.04

 
$
(0.10
)
 
$
(0.15
)
 
$
(0.68
)
Net income (loss) per share - diluted
$
0.04

 
$
(0.10
)
 
$
(0.15
)
 
$
(0.68
)
Weighted-average shares used to compute net income (loss) per share - basic
179,763,953

 
173,567,143

 
177,846,023

 
171,175,577

Weighted-average shares used to compute net income (loss) per share - diluted
190,662,082

 
173,567,143

 
177,846,023

 
171,175,577


(1)
Includes stock-based compensation as follows:
 
Three Months Ended
 
Twelve Months Ended
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
 
 
 
*As Adjusted
 
 
 
*As Adjusted
Cost of revenues:
 
 
 
 
 
 
 
Subscription
$
12,134

 
$
9,474

 
$
48,738

 
$
35,334

Professional services and other
8,506

 
5,853

 
32,816

 
27,401

Sales and marketing
58,762

 
45,877

 
228,045

 
170,527

Research and development
37,298

 
24,401

 
135,203

 
92,025

General and administrative
25,944

 
20,022

 
99,151

 
68,717


 *As adjusted to reflect the impact of the full retrospective adoption of Topic 606.


7

ServiceNow, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

 
December 31, 2018
 
December 31, 2017
 
 
 
*As Adjusted
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
566,204

 
$
726,495

Short-term investments
931,718

 
1,052,803

Accounts receivable, net
574,810

 
437,051

Current portion of deferred commissions
139,890

 
109,643

Prepaid expenses and other current assets
132,071

 
95,959

Total current assets
2,344,693

 
2,421,951

Deferred commissions, less current portion
282,490

 
224,252

Long-term investments
581,856

 
391,442

Property and equipment, net
347,216

 
245,124

Intangible assets, net
100,582

 
86,916

Goodwill
148,845

 
128,728

Other assets
73,458

 
51,832

Total assets
$
3,879,140

 
$
3,550,245

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
30,733

 
$
32,109

Accrued expenses and other current liabilities
330,246

 
253,257

Current portion of deferred revenue
1,651,594

 
1,210,695

Current portion of convertible senior notes, net
—

 
543,418

Total current liabilities
2,012,573

 
2,039,479

Deferred revenue, less current portion
38,597

 
36,120

Convertible senior notes, net
661,707

 
630,018

Other long-term liabilities
55,064

 
65,884

Stockholders’ equity
1,111,199

 
778,744

Total liabilities and stockholders’ equity
$
3,879,140

 
$
3,550,245


*As adjusted to reflect the impact of the full retrospective adoption of Topic 606.


8

ServiceNow, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
 
 
 
*As Adjusted
 
 
 
*As Adjusted
 
 
 
 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income (loss)
$
7,015

 
$
(17,346
)
 
$
(26,704
)
 
$
(116,846
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
43,112

 
32,067

 
149,604

 
113,875

Amortization of deferred commissions
35,991

 
30,951

 
143,358

 
99,105

Amortization of debt discount and issuance costs
8,938

 
16,813

 
52,733

 
53,394

Stock-based compensation
142,644

 
105,627

 
543,953

 
394,004

Deferred income tax
(1,883
)
 
331

 
(34,180
)
 
(5,724
)
Gain on marketable equity securities
—

 
—

 
(19,257
)
 
—

Repayments of convertible senior notes attributable to debt discount
(43,716
)
 
—

 
(145,349
)
 
—

Other
1,675

 
649

 
6,177

 
(905
)
Changes in operating assets and liabilities, net of effect of business combinations:
 
 
 
 
 
 
 
Accounts receivable
(153,602
)
 
(145,572
)
 
(146,148
)
 
(99,693
)
Deferred commissions
(86,861
)
 
(75,732
)
 
(239,382
)
 
(190,246
)
Prepaid expenses and other assets
(21,405
)
 
(16,895
)
 
(19,886
)
 
(34,288
)
Accounts payable
(9,815
)
 
5,584

 
(4,757
)
 
(5,504
)
Deferred revenue
294,798

 
180,951

 
468,856

 
369,242

Accrued expenses and other liabilities
72,721

 
67,355

 
82,071

 
66,526

Net cash provided by operating activities
289,612

 
184,783

 
811,089

 
642,940

Cash flows from investing activities:
 
 
 
 
 
 
 
Purchases of property and equipment
(88,113
)
 
(34,654
)
 
(224,462
)
 
(150,510
)
Business combinations, net of cash and restricted cash acquired
(12,500
)
 
(31,666
)
 
(37,440
)
 
(58,203
)
Purchases of other intangibles
(10,800
)
 
(500
)
 
(24,400
)
 
(6,670
)
Purchases of investments
(467,784
)
 
(547,845
)
 
(1,285,943
)
 
(1,189,511
)
Purchases of strategic investments
(1,000
)
 
(750
)
 
(9,839
)
 
(4,750
)
Sales of investments
—

 
7,138

 
39,975

 
85,106

Maturities of investments
333,058

 
89,993

 
1,194,687

 
440,590

Net cash used in investing activities
(247,139
)
 
(518,284
)
 
(347,422
)
 
(883,948
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Net proceeds from borrowings on convertible senior notes
—

 
—

 
—

 
772,127

Repayments of convertible senior notes attributable to principal
(118,125
)
 
(4
)
 
(429,645
)
 
(4
)
Proceeds from issuance of warrants
—

 
—

 
—

 
54,071

Purchases of convertible note hedges
—

 
—

 
—

 
(128,017
)
Repurchases and retirement of common stock
—

 
—

 
—

 
(55,000
)
Proceeds from employee stock plans
3,723

 
5,819

 
104,160

 
82,567

Taxes paid related to net share settlement of equity awards
(59,742
)
 
(50,808
)
 
(281,010
)
 
(181,938
)

9

 
Three Months Ended
 
Twelve Months Ended
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
 
 
 
*As Adjusted
 
 
 
*As Adjusted
Payments on financing obligations
(177
)
 
(2,233
)
 
(933
)
 
(4,914
)
Net cash (used in) provided by financing activities
(174,321
)
 
(47,226
)
 
(607,428
)
 
538,892

Foreign currency effect on cash, cash equivalents and restricted cash
(5,937
)
 
2,248

 
(15,530
)
 
28,013

Net (decrease) increase in cash, cash equivalents and restricted cash
(137,785
)
 
(378,479
)
 
(159,291
)
 
325,897

Cash, cash equivalents and restricted cash at beginning of period
706,323

 
1,106,308

 
727,829

 
401,932

Cash, cash equivalents and restricted cash at end of period
$
568,538

 
$
727,829

 
$
568,538

 
$
727,829


*As adjusted to reflect the impact of the full retrospective adoption of Topic 606.

10

ServiceNow, Inc.
GAAP to Non-GAAP Reconciliation
(in thousands, except share and per share data)
(unaudited)
 
Three Months Ended
 
 
 
Twelve Months Ended
 
 
 
December 31, 2018
 
December 31, 2017 (3)
 
Growth Rates
 
December 31, 2018
 
December 31, 2017 (3)
 
Growth Rates
 
 
 
 
 
 
 
 
 
 
 
 
Subscription revenues:
 
 
 
 
 
 
 
 
 
 
 
GAAP subscription revenues
$
666,139

 
$
499,738

 
33%
 
$
2,421,313

 
$
1,739,500

 
39%
Effects of foreign currency rate fluctuations
7,427

 
 
 
 
 
(27,453
)
 
 
 
 
Non-GAAP adjusted subscription revenues (1)
$
673,566

 
 
 
35%
 
$
2,393,860

 
 
 
38%
 
 
 
 
 
 
 
 
 
 
 
 
Subscription billings:
 
 
 
 
 
 
 
 
 
 
 
GAAP subscription revenues
$
666,139

 
$
499,738

 
33%
 
$
2,421,313

 
$
1,739,500

 
39%
Change in subscription deferred revenue, unbilled receivables and customer deposits
285,856

 
188,540

 
 
 
460,117

 
384,316

 
 
Non-GAAP subscription billings
951,995

 
688,278

 
38%
 
2,881,430

 
2,123,816

 
36%
Effects of foreign currency rate fluctuations
10,815

 
 
 
 
 
(28,883
)
 
 
 
 
Effects of fluctuations in billings duration
(3,948
)
 
 
 
 
 
(7,419
)
 
 
 
 
Non-GAAP adjusted subscription billings (2)
$
958,862

 
 
 
39%
 
$
2,845,128

 
 
 
34%
 
 
 
 
 
 
 
 
 
 
 
 
Professional services and other revenues:
 
 
 
 
 
 
 
 
 
 
 
GAAP professional services and other revenues
$
49,302

 
$
49,355

 
0%
 
$
187,503

 
$
178,994

 
5%
Effects of foreign currency rate fluctuations
834

 
 
 
 
 
(2,151
)
 
 
 
 
Non-GAAP adjusted professional service and other revenues (1)
$
50,136

 
 
 
2%
 
$
185,352

 
 
 
4%
 
 
 
 
 
 
 
 
 
 
 
 
Professional services and other billings:
 
 
 
 
 
 
 
 
 
 
 
GAAP professional services and other revenues
$
49,302

 
$
49,355

 
0%
 
$
187,503

 
$
178,994

 
5%
Change in professional services and other deferred revenue
11,745

 
(1,915
)
 
 
 
19,902

 
(3,156
)
 
 
Non-GAAP professional services and other billings
61,047

 
47,440

 
29%
 
207,405

 
175,838

 
18%
Effects of foreign currency rate fluctuations
834

 
 
 
 
 
(2,151
)
 
 
 
 
Non-GAAP adjusted professional services and other billings (2)
$
61,881

 
 
 
30%
 
$
205,254

 
 
 
17%
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues:
 
 
 
 
 
 
 
 
 
 
 
GAAP total revenues
$
715,441

 
$
549,093

 
30%
 
$
2,608,816

 
$
1,918,494

 
36%
Effects of foreign currency rate fluctuations
8,261

 
 
 
 
 
(29,604
)
 
 
 
 
Non-GAAP adjusted total revenues (1)
$
723,702

 
 
 
32%
 
$
2,579,212

 
 
 
34%
 
 
 
 
 
 
 
 
 
 
 
 
Total billings:
 
 
 
 
 
 
 
 
 
 
 
GAAP total revenues
$
715,441

 
$
549,093

 
30%
 
$
2,608,816

 
$
1,918,494

 
36%
Change in total deferred revenue, unbilled receivables and customer deposits
297,601

 
186,625

 
 
 
480,019

 
381,160

 
 
Non-GAAP total billings
1,013,042

 
735,718

 
38%
 
3,088,835

 
2,299,654

 
34%
Effects of foreign currency rate fluctuations
11,649

 
 
 
 
 
(31,034
)
 
 
 
 
Effects of fluctuations in billings duration
(3,948
)
 
 
 
 
 
(7,419
)
 
 
 
 
Non-GAAP adjusted total billings (2)
$
1,020,743

 
 
 
39%
 
$
3,050,382

 
 
 
33%
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 
 
 
 
 
 
GAAP subscription cost of revenues
$
113,503

 
$
87,524

 
 
 
$
417,421

 
$
315,570

 
 
Stock-based compensation
(12,134
)
 
(9,474
)
 
 
 
(48,738
)
 
(35,334
)
 
 
Amortization of purchased intangibles
(5,063
)
 
(4,118
)
 
 
 
(18,993
)
 
(14,967
)
 
 
Non-GAAP subscription cost of revenues
$
96,306

 
$
73,932

 
 
 
$
349,690

 
$
265,269

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP professional services and other cost of revenues
$
54,659

 
$
46,640

 
 
 
$
205,237

 
$
184,292

 
 
Stock-based compensation
(8,506
)
 
(5,853
)
 
 
 
(32,816
)
 
(27,401
)
 
 
Non-GAAP professional services and other cost of revenues
$
46,153

 
$
40,787

 
 
 
$
172,421

 
$
156,891

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit (loss):
 
 
 
 
 
 
 
 
 
 
 
GAAP subscription gross profit
$
552,636

 
$
412,214

 
 
 
$
2,003,892

 
$
1,423,930

 
 
Stock-based compensation
12,134

 
9,474

 
 
 
48,738

 
35,334

 
 
Amortization of purchased intangibles
5,063

 
4,118

 
 
 
18,993

 
14,967

 
 
Non-GAAP subscription gross profit
$
569,833

 
$
425,806

 
 
 
$
2,071,623

 
$
1,474,231

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP professional services and other gross loss
$
(5,357
)
 
$
2,715

 
 
 
$
(17,734
)
 
$
(5,298
)
 
 
Stock-based compensation
8,506

 
5,853

 
 
 
32,816

 
27,401

 
 
Non-GAAP professional services and other gross profit
$
3,149

 
$
8,568

 
 
 
$
15,082

 
$
22,103

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP gross profit
$
547,279

 
$
414,929

 
 
 
$
1,986,158

 
$
1,418,632

 
 
Stock-based compensation
20,640

 
15,327

 
 
 
81,554

 
62,735

 
 
Amortization of purchased intangibles
5,063

 
4,118

 
 
 
18,993

 
14,967

 
 
Non-GAAP gross profit
$
572,982

 
$
434,374

 
 
 
$
2,086,705

 
$
1,496,334

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin:
 
 
 
 
 
 
 
 
 
 
 
GAAP subscription gross margin
83
%
 
82
%
 
 
 
83
%
 
82
%
 
 
Stock-based compensation as % of subscription revenues
2
%
 
2
%
 
 
 
2
%
 
2
%
 
 
Amortization of purchased intangibles as % of subscription revenues
1
%
 
1
%
 
 
 
1
%
 
1
%
 
 
Non-GAAP subscription gross margin
86
%
 
85
%
 
 
 
86
%
 
85
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP professional services and other gross margin
(11
%)
 
6
%
 
 
 
(9
%)
 
(3
%)
 
 
Stock-based compensation as % of professional services and other revenues
17
%
 
12
%
 
 
 
17
%
 
15
%
 
 
Non-GAAP professional services and other gross margin
6
%
 
18
%
 
 
 
8
%
 
12
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP gross margin
76
%
 
76
%
 
 
 
76
%
 
74
%
 
 
Stock-based compensation as % of total revenues
3
%
 
3
%
 
 
 
3
%
 
3
%
 
 
Amortization of purchased intangibles as % of total revenues
1
%
 
0
%
 
 
 
1
%
 
1
%
 
 
Non-GAAP gross margin
80
%
 
79
%
 
 
 
80
%
 
78
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
GAAP sales and marketing expenses
$
319,163

 
$
250,979

 
 
 
$
1,203,056

 
$
894,977

 
 
Stock-based compensation
(58,762
)
 
(45,877
)
 
 
 
(228,045
)
 
(170,527
)
 
 
Amortization of purchased intangibles
—

 
(56
)
 
 
 
—

 
(407
)
 
 
Non-GAAP sales and marketing expenses
$
260,401

 
$
205,046

 
 
 
$
975,011

 
$
724,043

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP research and development expenses
$
148,662

 
$
104,559

 
 
 
$
529,501

 
$
377,518

 
 
Stock-based compensation
(37,298
)
 
(24,401
)
 
 
 
(135,203
)
 
(92,025
)
 
 
Amortization of purchased intangibles
(455
)
 
(455
)
 
 
 
(1,820
)
 
(1,820
)
 
 
Non-GAAP research and development expenses
$
110,909

 
$
79,703

 
 
 
$
392,478

 
$
283,673

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP general and administrative expenses
$
79,176

 
$
60,291

 
 
 
$
296,027

 
$
210,533

 
 
Stock-based compensation
(25,944
)
 
(20,022
)
 
 
 
(99,151
)
 
(68,717
)
 
 
Amortization of purchased intangibles
(1,534
)
 
(730
)
 
 
 
(4,416
)
 
(2,464
)
 
 
Business combination and other related costs
(43
)
 
(917
)
 
 
 
(1,007
)
 
(2,421
)
 
 
Non-GAAP general and administrative expenses
$
51,655

 
$
38,622

 
 
 
$
191,453

 
$
136,931

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP total operating expenses
$
547,001

 
$
415,829

 
 
 
$
2,028,584

 
$
1,483,028

 
 
Stock-based compensation
(122,004
)
 
(90,300
)
 
 
 
(462,399
)
 
(331,269
)
 
 
Amortization of purchased intangibles
(1,989
)
 
(1,241
)
 
 
 
(6,236
)
 
(4,691
)
 
 
Business combination and other related costs
(43
)
 
(917
)
 
 
 
(1,007
)
 
(2,421
)
 
 
Non-GAAP total operating expenses
$
422,965

 
$
323,371

 
 
 
$
1,558,942

 
$
1,144,647

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from operations:
 
 
 
 
 
 
 
 
 
 
 
GAAP income (loss) from operations
$
278

 
$
(900
)
 
 
 
$
(42,426
)
 
$
(64,396
)
 
 
Stock-based compensation
142,644

 
105,627

 
 
 
543,953

 
394,004

 
 
Amortization of purchased intangibles
7,052

 
5,359

 
 
 
25,229

 
19,658

 
 
Business combination and other related costs
43

 
917

 
 
 
1,007

 
2,421

 
 
Non-GAAP income from operations
$
150,017

 
$
111,003

 
 
 
$
527,763

 
$
351,687

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin:
 
 
 
 
 
 
 
 
 
 
 
GAAP operating margin
0
%
 
0
%
 
 
 
(2
%)
 
(3
%)
 
 
Stock-based compensation as % of total revenues
20
%
 
19
%
 
 
 
21
%
 
21
%
 
 
Amortization of purchased intangibles as % of total revenues
1
%
 
1
%
 
 
 
1
%
 
0
%
 
 
Business combination and other related costs as % of total revenues
0
%
 
0
%
 
 
 
0
%
 
0
%
 
 
Non-GAAP operating margin
21
%
 
20
%
 
 
 
20
%
 
18
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss):
 
 
 
 
 
 
 
 
 
 
 
GAAP net income (loss)
$
7,015

 
$
(17,346
)
 
 
 
$
(26,704
)
 
$
(116,846
)
 
 
Stock-based compensation
142,644

 
105,627

 
 
 
543,953

 
394,004

 
 
Amortization of purchased intangibles
7,052

 
5,359

 
 
 
25,229

 
19,658

 
 
Business combination and other related costs
43

 
917

 
 
 
1,007

 
2,421

 
 
Amortization of debt discount and issuance costs for the convertible senior notes
8,938

 
16,813

 
 
 
52,733

 
53,394

 
 
Loss on early note conversions
—

 
—

 
 
 
4,063

 
—

 
 
Income tax expense effects related to the above adjustments
(20,093
)
 
(32,786
)
 
 
 
(129,912
)
 
(110,502
)
 
 
Non-GAAP net income
$
145,599

 
$
78,584

 
 
 
$
470,369

 
$
242,129

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share - basic and diluted:
 
 
 
 
 
 
 
 
 
 
 
GAAP net income (loss) per share - basic
$
0.04

 
$
(0.10
)
 
 
 
$
(0.15
)
 
$
(0.68
)
 
 
GAAP net income (loss) per share - diluted
$
0.04

 
$
(0.10
)
 
 
 
$
(0.15
)
 
$
(0.68
)
 
 
Non-GAAP net income per share - basic
$
0.81

 
$
0.45

 
 
 
$
2.64

 
$
1.41

 
 
Non-GAAP net income per share - diluted
$
0.77

 
$
0.43

 
 
 
$
2.49

 
$
1.35

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP weighted-average shares used to compute net income (loss) per share - basic
179,763,953

 
173,567,143

 
 
 
177,846,023

 
171,175,577

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP weighted-average shares used to compute net income (loss) per share - diluted
190,662,082

 
173,567,143

 
 
 
177,846,023

 
171,175,577

 
 
Effect of dilutive time-based stock awards (4)
—

 
7,988,601

 
 
 
7,873,351

 
8,773,040

 
 
In-the-money portion of convertible senior notes (4)
(1,396,949
)
 
—

 
 
 
—

 
—

 
 
Warrants (4)
—

 
1,055,388

 
 
 
2,967,725

 
—

 
 
Non-GAAP weighted-average shares used to compute net income per share - diluted
189,265,133

 
182,611,132

 
 
 
188,687,099

 
179,948,617

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Free cash flow:
 
 
 
 
 
 
 
 
 
 
 
GAAP net cash provided by operating activities
$
289,612

 
$
184,783

 
 
 
$
811,089

 
$
642,940

 
 
Purchases of property and equipment
(88,113
)
 
(34,654
)
 
 
 
(224,462
)
 
(150,510
)
 
 
Repayments of convertible senior notes attributable to debt discount
43,716

 
2

 
 
 
145,349

 
2

 
 
Non-GAAP free cash flow
$
245,215

 
$
150,131

 
 
 
$
731,976

 
$
492,432

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Free cash flow margin:
 
 
 
 
 
 
 
 
 
 
 
GAAP net cash provided by operating activities as % of total revenues
40
%
 
34
%
 
 
 
31
%
 
34
%
 
 
Purchases of property and equipment as % of total revenues
(12
%)
 
(7
%)
 
 
 
(9
%)
 
(8
%)
 
 
Repayments of convertible senior notes attributable to debt discount as % of total revenues
6
%
 
0
%
 
 
 
6
%
 
0
%
 
 
Non-GAAP free cash flow margin
34
%
 
27
%
 
 
 
28
%
 
26
%
 
 

(1)
Adjusted revenues and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the actual exchange rates in effect during the current period.
(2)
Adjusted billings and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the actual exchange rates in effect during the current period, and by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the comparison period.
(3)
Amounts in the comparison period have been restated for Topic 606 and are unaudited. Effects of foreign currency rate fluctuations and fluctuations in billing durations are not applicable for the comparison period.
(4)
Effect of dilutive time-based stock awards, in-the-money portion of convertible senior notes and warrants are included in the GAAP weighted-average diluted shares in periods where we have GAAP net income. We exclude the in-the-money portion of convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our note hedges.



11

ServiceNow, Inc.
Reconciliation of Non-GAAP Financial Guidance

The financial guidance provided below is an estimate based on information available as of December 31, 2018. 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. Further information on these and other factors that could affect our financial results are included in our Form 10-Q for the quarter ended September 30, 2018 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K that will be filed for the year ended December 31, 2018. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

 
Three Months Ended
 
 
 
March 31, 2019
 
March 31, 2018 (3)
 
Growth Rates
 
 
 
 
 
 
GAAP subscription revenues
$715 - $720 million
 
$543 million
 
 32% - 33%
 
 
 
 
 
 
Effects of foreign currency rate fluctuations
21 million
 
 
 
 
 
 
 
 
 
 
Non-GAAP adjusted subscription revenues (1)
$736 - $741 million
 
 
 
 35% - 36%
 
 
 
 
 
 
GAAP subscription revenues
$715 - $720 million
 
$543 million
 
 32% - 33%
 
 
 
 
 
 
Change in subscription deferred revenue, unbilled receivables and customer deposits
75 million
 
95 million
 
 
 
 
 
 
 
 
Non-GAAP subscription billings
$790 - $795 million
 
$638 million
 
 24% - 25%
 
 
 
 
 
 
Effects of foreign currency rate fluctuations
23 million
 
 
 
 
 
 
 
 
 
 
Effects of fluctuations in billings duration
18 million
 
 
 
 
 
 
 
 
 
 
Non-GAAP adjusted subscription billings (2)
$831 - $836 million
 
 
 
 30% - 31%
 
 
 
 
 
 
GAAP operating margin
(6%)
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense as % of total revenues
21%
 
 
 
 
 
 
 
 
 
 
Amortization of purchased intangibles as % of total revenues
1%
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating margin
16%
 
 
 
 
 
 
 
 
 
 
GAAP weighted-average shares used to compute net loss per share - diluted
182 million
 
 
 
 
 
 
 
 
 
 
Effect of dilutive securities (stock options, restricted stock units and warrants)
8 million
 
 
 
 
 
 
 
 
 
 
Non-GAAP weighted-average shares used to compute net income per share - diluted
190 million
 
 
 
 
 
 
 
 
 
 


12

 
Twelve Months Ended
 
 
 
December 31, 2019
 
December 31, 2018 (3)
 
Growth Rates
 
 
 
 
 
 
GAAP subscription revenues
$3,215 - $3,235 million
 
$2,421 million
 
 33% - 34%
 
 
 
 
 
 
Effects of foreign currency rate fluctuations
41 million
 
 
 
 
 
 
 
 
 
 
Non-GAAP adjusted subscription revenues (1)
$3,256 - $3,276 million
 
 
 
 34% - 35%
 
 
 
 
 
 
GAAP subscription revenues
$3,215 - $3,235 million
 
$2,421 million
 
 33% - 34%
 
 
 
 
 
 
Change in subscription deferred revenue, unbilled receivables and customer deposits
490 million
 
460 million
 
 
 
 
 
 
 
 
Non-GAAP subscription billings
$3,705 - $3,725 million
 
$2,881 million
 
 29%
 
 
 
 
 
 
Effects of foreign currency rate fluctuations
45 million
 
 
 
 
 
 
 
 
 
 
Effects of fluctuations in billings duration
22 million
 
 
 
 
 
 
 
 
 
 
Non-GAAP adjusted subscription billings (2)
$3,772 - $3,792 million
 
 
 
 31% - 32%
 
 
 
 
 
 
GAAP subscription gross margin
83%
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense as % of subscription revenues
2%
 
 
 
 
 
 
 
 
 
 
Amortization of purchased intangibles as % of subscription revenues
1%
 
 
 
 
 
 
 
 
 
 
Non-GAAP subscription margin
86%
 
 
 
 
 
 
 
 
 
 
GAAP operating margin
0%
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense as % of total revenues
20%
 
 
 
 
 
 
 
 
 
 
Amortization of purchased intangibles as % of total revenues
1%
 
 
 
 
 
 
 
 
 
 
Business combination and other related costs as % of total revenues
0%
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating margin
21%
 
 
 
 
 
 
 
 
 
 
GAAP net cash provided by operating activities as % of total revenues
35%
 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment as % of total revenues
(7%)
 
 
 
 
 
 
 
 
 
 
Non-GAAP free cash flow margin
28%
 
 
 
 
 
 
 
 
 
 
GAAP weighted-average shares used to compute net loss per share - diluted (4)
185 million
 
 
 
 
 
 
 
 
 
 
Effect of dilutive securities (stock options, restricted stock units and warrants)
5 million
 
 
 
 
 
 
 
 
 
 
Non-GAAP weighted-average shares used to compute net income per share - diluted
190 million
 
 
 
 

(1)
Adjusted revenues and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the forecasted exchange rates for the guidance period.
(2)
Adjusted billings and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the forecasted exchange rates for the guidance period, and by replacing the forecasted portion of multi-year billings in excess of twelve months for the guidance period with the actual portion of multi-year billings in excess of twelve months during the comparison period.
(3)
Effects of foreign currency rate fluctuations and fluctuations in billing durations are not applicable for the comparison period.
(4)
GAAP net income or loss for the year ending December 31, 2019 will depend in part on costs associated with non-cash charges associated with equity awards which vary depending on the grant date stock price and actual attainment for our performance-based RSUs, business combinations and other related expenses which are not known at this time.



13
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