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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 10-Q
(Mark One)
☒
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2020
OR
☐
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 001-35580

now-20200930_g1.jpg
SERVICENOW, INC.
(Exact name of registrant as specified in its charter) 
Delaware20-2056195
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification Number)
2225 Lawson Lane
Santa Clara, California 95054
(Address, including zip code, of registrant’s principal executive offices)

(408) 501-8550
(Registrant’s telephone number, including area code) 

Not Applicable
(Former name, former address and formal fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, par value $0.001 per shareNOWThe New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No  ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No  ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Table of Contents
Large Accelerated Filer
☒
Accelerated Filer
☐
Non-Accelerated Filer
☐
Smaller Reporting Company
☐
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. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of September 30, 2020, there were approximately 195.1 million shares of the Registrant’s Common Stock outstanding.


TABLE OF CONTENTS

 
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
   
 
 
i
Table of Contents
PART I

ITEM 1.     FINANCIAL STATEMENTS

SERVICENOW, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30, 2020December 31, 2019
Assets
Current assets:
Cash and cash equivalents$1,348,294 $775,778 
Short-term investments1,603,317 915,317 
Accounts receivable, net631,055 835,279 
Current portion of deferred commissions202,741 175,039 
Prepaid expenses and other current assets181,474 125,488 
Total current assets3,966,881 2,826,901 
Deferred commissions, less current portion374,438 333,448 
Long-term investments1,259,951 1,013,332 
Property and equipment, net564,007 468,085 
Operating lease right-of-use assets457,726 402,428 
Intangible assets, net155,826 143,850 
Goodwill231,949 156,756 
Deferred tax assets620,890 599,633 
Other assets73,791 77,997 
Total assets$7,705,459 $6,022,430 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$51,456 $52,960 
Accrued expenses and other current liabilities442,288 461,403 
Current portion of deferred revenue2,274,269 2,185,754 
Current portion of operating lease liabilities67,934 52,668 
Total current liabilities2,835,947 2,752,785 
Deferred revenue, less current portion37,749 40,038 
Operating lease liabilities, less current portion429,661 383,221 
Long-term debt1,705,533 694,981 
Other long-term liabilities22,853 23,464 
Total liabilities5,031,743 3,894,489 
Stockholders’ equity:
Common stock195 189 
Additional paid-in capital2,872,335 2,454,741 
Accumulated other comprehensive income51,575 25,255 
Accumulated deficit(250,389)(352,244)
Total stockholders’ equity2,673,716 2,127,941 
Total liabilities and stockholders’ equity$7,705,459 $6,022,430 


See accompanying notes to condensed consolidated financial statements
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SERVICENOW, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited) 
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues:
Subscription$1,091,386 $834,910 $3,101,616 $2,355,885 
Professional services and other60,586 50,923 167,538 152,778 
Total revenues1,151,972 885,833 3,269,154 2,508,663 
Cost of revenues(1):
Subscription189,280 139,330 520,935 401,398 
Professional services and other62,424 61,463 187,074 183,794 
Total cost of revenues251,704 200,793 708,009 585,192 
Gross profit900,268 685,040 2,561,145 1,923,471 
Operating expenses(1):
Sales and marketing453,410 362,975 1,321,163 1,118,279 
Research and development268,292 190,099 740,030 546,041 
General and administrative109,234 75,642 319,019 245,540 
Total operating expenses830,936 628,716 2,380,212 1,909,860 
Income from operations69,332 56,324 180,933 13,611 
Interest expense(7,980)(8,371)(25,038)(24,808)
Interest income and other income (expense), net(35,919)12,817 (20,070)44,196 
Income before income taxes25,433 60,770 135,825 32,999 
Provision for income taxes12,575 20,172 33,970 5,025 
Net income$12,858 $40,598 $101,855 $27,974 
Net income per share - basic$0.07 $0.22 $0.53 $0.15 
Net income per share - diluted$0.06 $0.21 $0.50 $0.14 
Weighted-average shares used to compute net income per share - basic193,237 188,074 193,203 185,676 
Weighted-average shares used to compute net income per share - diluted201,861 197,878 202,837 196,739 
Other comprehensive income:
Foreign currency translation adjustments$24,937 $5,507 $22,121 $14,732 
Unrealized gain (loss) on investments, net of tax(3,134)582 4,199 8,934 
Other comprehensive income, net of tax21,803 6,089 26,320 23,666 
Comprehensive income$34,661 $46,687 $128,175 $51,640 

(1)Includes stock-based compensation as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Cost of revenues:
Subscription$25,602 $18,880 $72,086 $54,019 
Professional services and other13,054 10,867 37,857 31,749 
Operating expenses:
Sales and marketing78,871 68,712 227,998 200,071 
Research and development74,213 50,636 203,279 144,259 
General and administrative28,189 13,839 83,834 62,046 
See accompanying notes to condensed consolidated financial statements
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SERVICENOW, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
Three Months Ended September 30, 2020Three Months Ended September 30, 2019
Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive Income		Total
Stockholders’
Equity		Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive Income		Total
Stockholders’
Equity
 SharesAmountSharesAmount
Balance at beginning of period191,801 $191 $2,712,090 $(263,247)$29,772 $2,478,806 187,462 $188 $2,238,782 $(991,566)$13,542 $1,260,946 
Common stock issued under employee stock plans964 1 58,241 — — 58,242 1,097 1 41,926 — — 41,927 
Taxes paid related to net share settlement of equity awards— — (122,094)— — (122,094)— — (83,172)— — (83,172)
Stock-based compensation— — 220,317 — — 220,317 — — 163,085 — — 163,085 
Settlement of 2022 Warrants2,285 3 (2)— — 1 — — — — — — 
Settlement of 2022 Notes conversion feature— — (1,158,172)— — (1,158,172)— — — — — — 
Benefit from exercise of 2022 Note Hedge— — 1,161,955 — — 1,161,955 — — — — — — 
Other comprehensive income, net of tax— — — — 21,803 21,803 — — — — 6,089 6,089 
Net income— — — 12,858 — 12,858 — — — 40,598 — 40,598 
Balance at end of period195,050 $195 $2,872,335 $(250,389)$51,575 $2,673,716 188,559 $189 $2,360,621 $(950,968)$19,631 $1,429,473 
Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive Income		Total
Stockholders’
Equity		Common StockAdditional
Paid-in
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive Income		Total
Stockholders’
Equity
 SharesAmountSharesAmount
Balance at beginning of period189,461 $189 $2,454,741 $(352,244)$25,255 $2,127,941 180,175 $180 $2,093,834 $(978,780)$(4,035)$1,111,199 
Cumulative effect adjustment for Topic 842 adoption
— — — — — — — — — (162)— (162)
Common stock issued under employee stock plans3,304 3 149,293 — — 149,296 4,101 4 105,232 — — 105,236 
Taxes paid related to net share settlement of equity awards— — (360,645)— — (360,645)— — (330,792)— — (330,792)
Stock-based compensation— — 626,056 — — 626,056 — — 492,352 — — 492,352 
Settlement of 2018 Warrants— — — — — — 4,283 5 (5)— — — 
Settlement of 2022 Warrants2,285 3 (2)— — 1 — — — — — — 
Settlement of 2022 Notes conversion feature— — (1,180,927)— — (1,180,927)— — — — — — 
Benefit from exercise of 2022 Note Hedge— — 1,183,819 — — 1,183,819 — — — — — — 
Other comprehensive income, net of tax— — — — 26,320 26,320 — — — — 23,666 23,666 
Net income— — — 101,855 — 101,855 — — — 27,974 — 27,974 
Balance at end of period195,050 $195 $2,872,335 $(250,389)$51,575 $2,673,716 188,559 $189 $2,360,621 $(950,968)$19,631 $1,429,473 


See accompanying notes to condensed consolidated financial statements
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SERVICENOW, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months Ended September 30,
20202019
Cash flows from operating activities:
Net income$101,855 $27,974 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization243,348 179,783 
Amortization of deferred commissions157,191 122,226 
Amortization of debt discount and issuance costs21,986 24,808 
Stock-based compensation625,054 492,144 
Deferred income taxes(6,440)(2,842)
Repayments of convertible senior notes attributable to debt discount(68,509)— 
Loss on extinguishment of 2022 Notes41,657 — 
Other641 (4,621)
Changes in operating assets and liabilities, net of effect of business combinations:
Accounts receivable210,275 28,331 
Deferred commissions(221,401)(158,309)
Prepaid expenses and other assets(41,696)(25,569)
Accounts payable1,792 30,088 
Deferred revenue66,545 135,455 
Accrued expenses and other liabilities(31,224)(34,707)
Net cash provided by operating activities1,101,074 814,761 
Cash flows from investing activities:
Purchases of property and equipment(285,327)(185,889)
Business combinations, net of cash acquired(107,647)— 
Purchases of intangibles(6,500)(37,360)
Purchases of investments(2,229,085)(1,255,691)
Sales and maturities of investments1,298,969 931,453 
Realized gains (losses) on derivatives not designated as hedging instruments, net(763)21,742 
Net cash used in investing activities(1,330,353)(525,745)
Cash flows from financing activities:
Net proceeds from borrowings on 2030 Notes1,481,633 — 
Repayments of convertible senior notes attributable to principal(1,568,866)— 
Net proceeds from unwind of 2022 Note Hedge1,105,542 — 
Proceeds from employee stock plans142,500 105,227 
Taxes paid related to net share settlement of equity awards(360,670)(330,802)
Net cash provided by (used in) financing activities800,139 (225,575)
Foreign currency effect on cash, cash equivalents and restricted cash2,959 (6,439)
Net increase in cash, cash equivalents and restricted cash573,819 57,002 
Cash, cash equivalents and restricted cash at beginning of period777,991 568,538 
Cash, cash equivalents and restricted cash at end of period$1,351,810 $625,540 
Cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents$1,348,294 $622,925 
Restricted cash included in prepaid expenses and other current assets3,516 2,615 
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows$1,351,810 $625,540 
Supplemental disclosures of other cash flow information:
Income taxes paid, net of refunds$25,416 $15,856 
Non-cash investing and financing activities:
Settlement of 2022 Notes conversion feature$79,435 $— 
Benefit from exercise of 2022 Note Hedge78,277 — 
Property and equipment included in accounts payable and accrued expenses 26,931 26,566 

See accompanying notes to condensed consolidated financial statements
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SERVICENOW, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 
Unless the context requires otherwise, references in this report to “ServiceNow,” the “Company,” “we,” “us,” and “our” refer to ServiceNow, Inc. and its consolidated subsidiaries.

(1) Description of the Business

ServiceNow’s purpose is to make the world of work, work better for people. We believe that people should work the way they want to, so we build applications that help automate existing processes and create efficient, digitized workflows. Our products and services enable the steps of a job to flow naturally across disparate departments, systems and processes of a business. When work flows naturally, great experiences follow. We make work flow utilizing our leading enterprise cloud computing services that manage and deliver digital workflows, simplifying the complexity of work across systems, functions and departments on a single enterprise cloud platform, called the Now Platform. Our product portfolio is currently focused on delivering better Information Technology (“IT”), Employee and Customer workflows in pre-packaged product offerings. We also enable our customers to use the Now Platform App Engine to design and build workflow applications which are purpose built for their own business.

(2) Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and condensed footnotes have been prepared in accordance with the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements due to the permitted exclusion of certain disclosures for interim reporting. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary under GAAP for fair statement of results for the interim periods presented have been included. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for other interim periods or future years. The condensed consolidated balance sheet as of December 31, 2019 is derived from audited financial statements; however, it does not include all of the information and footnotes required by GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 20, 2020.

Principles of Consolidation

The condensed consolidated financial statements have been prepared in conformity with GAAP, and include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as reported amounts of revenues and expenses during the reporting period. Such management estimates and assumptions include, but are not limited to, evaluating the terms and conditions included within our customer contracts as well as determining the standalone selling price for each distinct performance obligation included in customer contracts with multiple performance obligations, the period of benefit for deferred commissions, purchase price allocation for business combinations, stock-based compensation, the useful life of our property and equipment, goodwill and identifiable intangible assets, whether an arrangement is or contains a lease, the discount rate used for operating leases, fair value of convertible notes and income taxes. Actual results could differ from those estimates.
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Significant Accounting Policies

Notwithstanding the addition of policies described below for investments and accounts receivable, there were no significant changes to our significant accounting policies disclosed in “Note 2 – Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 20, 2020.

Investments 

Investments consist of commercial paper, corporate notes and bonds, certificates of deposit and U.S. government and agency securities. We classify investments as available-for-sale at the time of purchase and re-evaluate such classification as of each balance sheet date. All investments are recorded at estimated fair value. Unrealized gains and losses for available-for-sale securities are included in accumulated other comprehensive income, net of tax, a component of stockholders’ equity, except for credit-related impairment losses for available-for-sale debt securities.

We evaluate our investments with unrealized loss positions for other than temporary impairment by assessing if they are related to deterioration in credit risk and whether we expect to recover the entire amortized cost basis of the security, our intent to sell and whether it is more likely than not that we will be required to sell the securities before the recovery of their cost basis. Credit-related impairment losses, not to exceed the amount that fair value is less than the amortized cost basis, are recognized through an allowance for credit losses with changes in the allowance for credit losses recorded in interest income and other income, net in the condensed consolidated statements of comprehensive income. For purposes of identifying and measuring impairment, the policy election was made to exclude the applicable accrued interest from both the fair value and amortized cost basis. Applicable accrued interest, net of the allowance for credit losses (if any) of $13 million and $11 million, is recorded in prepaid expenses and other current assets on the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively.

Realized gains and losses and declines in value judged to be other than temporary are determined based on the specific identification method and are reported in interest income and other income (expense), net in the condensed consolidated statements of comprehensive income.

Goodwill 

We evaluate and test the recoverability of goodwill for impairment at least annually or more frequently if circumstances indicate that goodwill may not be recoverable. We changed the timing of our annual assessment from fourth quarter to third quarter. The Company does not consider this change to be material. We believe the change in timing is preferable as it better aligns with the Company’s closing processes and create efficiency. This change did not delay, accelerate or avoid any impairment charge.

Accounts Receivable 

We record trade accounts receivable at the net invoice value and such receivables are non-interest bearing. We consider receivables past due based on the contractual payment terms. We review our exposure to accounts receivable and reserve for specific amounts if collectibility is no longer reasonably assured based on assessment of various factors including historical loss rates and expectations of forward-looking loss estimates.

Concentration of Credit Risk and Significant Customers

Credit risk arising from accounts receivable is mitigated to a certain extent due to our large number of customers and their dispersion across various industries and geographies. As of September 30, 2020, we had one customer, a channel partner, that represented 21% of our accounts receivable balance and no customers that individually exceeded 10% of our total revenues in any of the periods presented. As of December 31, 2019, there were no customers that represented more than 10% of our accounts receivable balance. For purposes of assessing concentration of credit risk and significant customers, a group of customers under common control or customers that are affiliates of each other are regarded as a single customer.

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Accounting Pronouncements Adopted in 2020

Cloud computing arrangements implementation costs

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (“Subtopic 350-40”): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new standard requires capitalized costs to be amortized on a straight-line basis generally over the term of the arrangement, and the financial statement presentation for these capitalized costs would be the same as that of the fees related to the hosting arrangements. We adopted this standard on a prospective basis as of January 1, 2020. The adoption of this standard did not have a material impact on our previously reported consolidated financial statements for periods ended on or prior to December 31, 2019.

Credit losses

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments,” which requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected, with further clarifications made more recently regarding the treatment of accrued interest, transfers between classifications for loans and debt securities, recoveries and the option to irrevocably elect the fair value option (on an instrument-by-instrument basis) for eligible financial assets at amortized costs. For trade receivables, loans, and other financial assets, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities are required to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. We adopted Topic 326 on a modified retrospective basis as of January 1, 2020. The adoption of this standard did not result in any cumulative effect adjustment on our condensed consolidated financial statements upon adoption as of January 1, 2020.

Accounting Pronouncement Adopted in 2019

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases (“Topic 842”),” which requires lessees to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets, and to recognize on the income statement the expenses in a manner similar to prior practice. We adopted Topic 842 using the modified retrospective method as of January 1, 2019 and elected the transition option that allows us not to restate the comparative periods in our financial statements in the year of adoption. We also elected the package of transition expedients available for expired or existing contracts, which allowed us to carryforward our historical assessment of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. As this standard was adopted on a modified prospective basis as of January 1, 2019, the adoption of this standard did not impact our previously reported consolidated financial statements for periods ended on or prior to December 31, 2018. Upon adoption, we recorded operating lease right-of-use assets of $335 million and corresponding operating lease liabilities of $363 million on our condensed consolidated balance sheets.

Recently Issued Accounting Pronouncement Pending Adoption

Debt with Conversion Options

In August 2020, the FASB issued new guidance to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The standard eliminates beneficial conversion feature and cash conversion models resulting in more convertible instruments being accounted for as a single unit; and simplifies classification of debt on the balance sheet and earnings per share calculation. This new standard is effective for our interim and annual periods beginning January 1, 2022 and earlier adoption is permitted. Amendments within this standard are required to be applied on a retrospective or modified retrospective basis. We are currently evaluating the impact of the adoption of this standard on our condensed consolidated financial statements.
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Income taxes

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (“Topic 740”): Simplifying the Accounting for Income Taxes,” which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. This new standard is effective for our interim and annual periods beginning January 1, 2021 and earlier adoption is permitted. Most amendments within this standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We expect the adoption of the standard will change the methodology of how we allocate interim period tax expense throughout an annual period. We are currently evaluating the impact of the adoption of this standard on our condensed consolidated financial statements.

(3) Investments
 
Marketable Debt Securities

The following is a summary of our available-for-sale debt securities recorded within short-term and long-term investments on the condensed consolidated balance sheets (in thousands):
 September 30, 2020
 Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value
Available-for-sale securities:
Commercial paper$483,659 $120 $(29)$483,750 
Corporate notes and bonds2,137,227 12,631 (852)2,149,006 
Certificates of deposit16,276 15 — 16,291 
U.S. government and agency securities212,948 1,273 — 214,221 
Total available-for-sale securities$2,850,110 $14,039 $(881)$2,863,268 

 December 31, 2019
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value
Available-for-sale securities:
Commercial paper$101,416 $83 $(9)$101,490 
Corporate notes and bonds1,654,166 7,360 (196)1,661,330 
Certificates of deposit38,007 38 — 38,045 
U.S. government and agency securities127,544 254 (14)127,784 
Total available-for-sale securities$1,921,133 $7,735 $(219)$1,928,649 

As of September 30, 2020, the contractual maturities of our available-for-sale debt securities, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheet, did not exceed 36 months. The fair values of available-for-sale securities, by remaining contractual maturity, are as follows (in thousands):
September 30, 2020
Due within 1 year$1,603,317 
Due in 1 year through 5 years1,259,951 
Total$2,863,268 

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The following table shows the fair values and the gross unrealized losses of these available-for-sale debt securities, classified by the length of time that the securities have been in a continuous unrealized loss position, and aggregated by investment types, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheets (in thousands): 
September 30, 2020
 Less than 12 Months12 Months or GreaterTotal
 Fair ValueGross
Unrealized
Losses		Fair ValueGross
Unrealized
Losses		Fair ValueGross
Unrealized
Losses
Commercial paper$164,040 $(29)$— $— $164,040 $(29)
Corporate notes and bonds709,621 (852)— — 709,621 (852)
Total$873,661 $(881)$— $— $873,661 $(881)

 December 31, 2019
Less than 12 Months12 Months or GreaterTotal
 Fair ValueGross
Unrealized
Losses		Fair ValueGross
Unrealized
Losses		Fair ValueGross
Unrealized
Losses
Commercial paper$20,752 $(9)$— $— $20,752 $(9)
Corporate notes and bonds242,012 (181)16,264 (15)258,276 (196)
U.S. government and agency securities17,806 (14)— — 17,806 (14)
Total$280,570 $(204)$16,264 $(15)$296,834 $(219)

The decline in fair value below amortized cost basis was not considered other than temporary as it is more likely than not we will hold the securities until maturity or a recovery of the cost basis, and credit-related impairment losses were not deemed material as of September 30, 2020.

Strategic Investments

As of September 30, 2020 and December 31, 2019, the total amount of equity investments in privately-held companies included in other assets on our condensed consolidated balance sheets was $27 million and $22 million, respectively. We classify these assets as Level 3 within the fair value hierarchy only if an impairment or observable adjustment is recognized on these non-marketable equity securities during the period as they are based on observable transaction price at the transaction date of identical or similar investment of the same issuer and other unobservable inputs such as volatility.

(4)  Fair Value Measurements 

The following table presents our fair value hierarchy for our assets measured at fair value on a recurring basis as of September 30, 2020 (in thousands): 
Level 1Level 2Total
Cash equivalents:
Money market funds$1,096,142 $— $1,096,142 
U.S. government and agency securities— 600 600 
Marketable securities:
Commercial paper— 483,750 483,750 
Corporate notes and bonds— 2,149,006 2,149,006 
Certificates of deposit— 16,291 16,291 
U.S. government and agency securities— 214,221 214,221 
Total$1,096,142 $2,863,868 $3,960,010 
 
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The following table presents our fair value hierarchy for our assets measured at fair value on a recurring basis as of December 31, 2019 (in thousands): 
Level 1Level 2Total
Cash equivalents:
Money market funds$486,982 $— $486,982 
Commercial paper— 86,388 86,388 
Marketable securities:
Commercial paper— 101,490 101,490 
Corporate notes and bonds— 1,661,330 1,661,330 
Certificates of deposit— 38,045 38,045 
U.S. government and agency securities— 127,784 127,784 
Total$486,982 $2,015,037 $2,502,019 
 
We determine the fair value of our security holdings based on pricing from our service providers and market prices from industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

Our equity investments in privately-held companies are not included in the table above and are discussed in Note 3. See Note 8 for the fair value measurement of our derivative contracts and Note 10 for the fair value measurement of our long-term debt, which are also not included in the table above.

(5) Business Combinations

On July 1, 2020, we completed the acquisition of Sweagle NV (“Sweagle”) by acquiring all issued and outstanding shares of Sweagle for $25 million in an all-cash transaction in order to extend our NOW DevOps and IT operations management (“ITOM”) capabilities by allowing users and developers to track and manage their IT configuration data. The aggregate purchase price was allocated based on the estimated fair value to intangible assets of $8 million comprised mainly of developed technology of $7 million (to be amortized over a five-year estimated useful life), deferred tax liabilities of $2 million, and goodwill of $19 million.

On February 7, 2020, we completed the acquisition of Rupert Labs, Inc. d/b/a Passage AI (“Passage AI”) by acquiring all issued and outstanding shares of Passage AI for $33 million in an all-cash transaction in order to advance our deep learning of conversational AI capabilities. This acquisition will enhance the Now Platform and products, including ServiceNow Virtual Agent, Service Portal, and Workspaces by enabling support in multiple languages. The aggregate purchase price was allocated based on the estimated fair value to developed technology intangible assets of $22 million (to be amortized over a five-year estimated useful life), deferred tax liabilities of $5 million and $15 million of goodwill.

On February 6, 2020, we completed the acquisition of Loom Systems Ltd. (“Loom”) by acquiring all issued and outstanding shares of Loom for $58 million in an all-cash transaction in order to extend our artificial intelligence (“AI”) capabilities for ITOM by providing customers with analytics solutions. The aggregate purchase price was allocated based on the estimated fair value to developed technology intangible assets of $17 million (to be amortized over a five-year estimated useful life), deferred tax liabilities of $4 million and goodwill of $40 million.

For all business combinations, the excess of purchase consideration over the fair value of net tangible and identifiable assets acquired was recorded as goodwill. We believe the goodwill balance associated with these business combinations represents the synergies expected from expanded market opportunities when integrating the acquired developed technologies with our offerings. Goodwill arising from these business combinations is not deductible for income tax purposes.

Aggregate acquisition-related costs associated with our business combinations are not material for the nine months ended September 30, 2020 and are included in general and administrative expenses in our condensed consolidated statement of comprehensive income. The results of operations of these business combinations have been included in our condensed consolidated financial statements from their respective dates of purchase. These business combinations did not have a material impact on our condensed consolidated financial statements, and therefore historical and pro forma disclosures have not been presented.
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(6) Goodwill and Intangible Assets

Goodwill balances are presented below (in thousands):
Carrying Amount
Balance as of December 31, 2019$156,756 
Goodwill acquired73,784 
Foreign currency translation adjustments1,409 
Balance as of September 30, 2020$231,949 

Intangible assets consist of the following (in thousands):
 September 30, 2020December 31, 2019
Developed technology$222,746 $177,746 
Patents58,609 67,730 
Other4,327 3,594 
Intangible assets, gross285,682 249,070 
Less: accumulated amortization(129,856)(105,220)
Intangible assets, net$155,826 $143,850 

During the nine months ended September 30, 2020, apart from the business combinations described in Note 5, we acquired $7 million of intangible assets in developed technology. The weighted-average useful life for the developed technology acquired during the nine months ended September 30, 2020 was approximately 5 years.

During the nine months ended September 30, 2019, we acquired $37 million of intangible assets, comprising primarily $26 million of developed technology and $11 million in patents. The weighted-average useful lives for the developed technology and patents acquired during the nine months ended September 30, 2019 was approximately 5 and 6 years, respectively.

Amortization expense for intangible assets for the three months ended September 30, 2020 and 2019 was $10 million and $9 million, respectively, and for the nine months ended September 30, 2020 and 2019 was $35 million and $24 million, respectively.

The following table presents the estimated future amortization expense related to intangible assets held at September 30, 2020 (in thousands):
Years Ending December 31,
Remainder of 2020$5,259 
202142,516 
202238,343 
202333,127 
202427,391 
Thereafter9,190 
Total future amortization expense$155,826 

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(7) Property and Equipment