UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 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):
April
19, 2018
S
ERVICE
N
OW
,
I
NC.
(Exact
name of registrant as specified in its charter)
Delaware |
001-35580 |
20-2056195 |
(State or other jurisdiction of
|
(Commission File Number)
|
(I.R.S. Employer
|
2225 Lawson Lane |
|
Santa Clara, California |
95054 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (408) 501-8550
_____________________________________
(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 April 25, 2018, ServiceNow, Inc. (“ServiceNow” or the “Company”) issued a press release announcing financial results for the three months ended March 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.
(b) and (d)
On April 23, 2018, the Board of Directors of the Company (the “Board”) expanded the size of the Board from nine (9) to ten (10) members and appointed Dennis M. Woodside to serve as a Class II director. The Board determined that Mr. Woodside is an independent director within the meaning of the New York Stock Exchange listing standards. On the same date, the Board appointed Mr. Woodside as a member of the Leadership Development and Compensation Committee. There is no arrangement or understanding between Mr. Woodside and any other persons pursuant to which Mr. Woodside was selected as a director. There are no family relationships between Mr. Woodside and any director or executive officer of the Company, and he has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K. Mr. Woodside will receive the standard compensation and equity awards provided to non-employee directors of the Company and committee members for their service. In addition, it is expected that Mr. Woodside will enter into the Company’s standard form of director indemnification agreement. The form indemnification agreement was filed as Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the SEC on February 27, 2015.
On April 19, 2018, Frank Slootman informed the Board of his intent to retire from the Board and as Chairman of the Board, to be effective as of immediately prior to the 2018 annual meeting of stockholders (the “Annual Meeting”). On April 23, 2018, the Board appointed Frederic B. Luddy to serve as Chairman of the Board, effective as of immediately prior to the Annual Meeting and following Mr. Slootman’s retirement. Based on Mr. Luddy’s experience as the founder of the Company, as well as his management capabilities, expertise in the industry and proven leadership, the Board believes that Mr. Luddy is the director most capable of effectively identifying strategic priorities, leading critical discussions and guiding the formulation of the Company’s strategy and business plans. On April 23, 2018, the Board approved a decrease in the size of the Board from ten (10) to nine (9) members, effective as of immediately prior to the Annual Meeting and immediately following Mr. Slootman’s retirement.
For additional information, see the press release attached as Exhibit 99.2 to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(d) |
Exhibits. |
|
99.1 |
Press release dated April 25, 2018, announcing ServiceNow, Inc.’s financial results for the three months ended March 31, 2018. |
|
99.2 |
Press release dated April 25, 2018. |
Exhibit List
Exhibit No. |
Exhibit Title |
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.
S ERVICE N OW , I NC. |
||
By: |
/s/ Michael P. Scarpelli |
|
Michael P. Scarpelli |
||
Chief Financial Officer |
Date: April 25, 2018
Exhibit 99.1
ServiceNow Reports First Quarter 2018 Financial Results
SANTA CLARA, Calif.--(BUSINESS WIRE)--April 25, 2018--ServiceNow (NYSE: NOW) today announced financial results for the first quarter 2018 ended March 31, 2018.
First Quarter 2018 Highlights:
ServiceNow today also announced it has agreed to acquire Seattle-based VendorHawk Inc., a leader in Software-as-a-Service management, in an all-cash transaction expected to close this month. With VendorHawk, ServiceNow is rapidly expanding its capabilities in software asset management, which drives transparency into software licenses and costs. For more information, please visit our press release.
“We are off to a great start to the year, continuing the momentum from our record-breaking finish to 2017,” said John Donahoe, ServiceNow president and chief executive officer. “Our performance was strong worldwide. We are driving digital transformation for our customers, enabling great employee and customer experiences that make it easier to get work done and deliver better business outcomes.”
“Subscription revenues grew 40% year-over-year,” said Michael Scarpelli, ServiceNow chief financial officer. “Outperformance in the quarter was driven by 21 transactions greater than $1 million in net new annual contract value and continued strength from our entire product portfolio.”
First Quarter 2018 GAAP and Non - GAAP Results:
The following table summarizes our financial results for the first quarter 2018:
First Quarter 2018 | ||||||||||||||
GAAP Results |
First Quarter 2018 Non-GAAP Results (1) |
|||||||||||||
Adjusted | Adjusted | |||||||||||||
Amount | Year/Year | Amount | Year/Year | Amount | Year/Year | |||||||||
($ millions) |
Growth (%) (2) |
($ millions) |
Growth (%) (2) |
($ millions) (3) |
Growth (%) (2) |
|||||||||
Subscription revenues | $543.3 | 40% | $520.1 | 34% | ||||||||||
Professional services and other revenues | $45.9 | 11% | $43.8 | 6% | ||||||||||
Total revenues | $589.2 | 37% | $563.8 | 32% | ||||||||||
Subscription billings | $638.4 | 33% | $612.9 | 28% | ||||||||||
Professional services and other billings | $51.0 | 29% | $48.9 | 23% | ||||||||||
Total billings | $689.4 | 33% | $661.7 | 27% | ||||||||||
Amount | Amount | |||||||||||||
($ millions) | Margin (%) | ($ millions) | Margin (%) | |||||||||||
Subscription gross profit | $447.9 | 82% | $463.6 | 85% | ||||||||||
Professional services and other gross profit (loss) | ($2.2) | (5%) | $5.4 | 12% | ||||||||||
Total gross profit | $445.7 | 76% | $469.0 | 80% | ||||||||||
Income (loss) from operations | ($20.3) | (3%) | $106.9 | 18% | ||||||||||
Net cash provided by operating activities | $250.1 | 42% | ||||||||||||
Free cash flow | $223.4 | 38% | ||||||||||||
Earnings per | Earnings per | |||||||||||||
Amount | basic /diluted | Amount | basic /diluted | |||||||||||
($ millions) | share ($) | ($ millions) | share ($) | |||||||||||
Net income | $10.6 | $0.06 / $0.06 | $104.6 | $0.60 / $0.56 |
(1) | We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures. | |
(2) | The comparison period amounts used to calculate growth rates have been restated from previously reported amounts to reflect the impact of the full retrospective adoption of Topic 606. For more information regarding Topic 606, refer to our Form 10-K filed for the year ended December 31, 2017. | |
(3) | Non-GAAP subscription revenues, professional services and other revenues, total revenues and professional services billings are adjusted for constant currency. Subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures. | |
Financial Outlook
Our guidance is based on foreign exchange rates as of March 31, 2018 and includes GAAP and non-GAAP financial measures.
The following table summarizes our guidance for the second quarter 2018:
Second Quarter 2018 | ||||||||||||||
GAAP Guidance |
Second Quarter 2018 Non-GAAP Guidance (1) |
|||||||||||||
Adjusted | ||||||||||||||
Amount | Year/Year | Amount | Year/Year | Amount | Adjusted Year/ | |||||||||
($ millions) |
Growth (%) (2) |
($ millions) |
Growth (%) (2) |
($ millions) (3) |
Year Growth (%) (2) |
|||||||||
Subscription revenues | $568 - $573 | 41% - 42% | $548 - $553 | 36% - 37% | ||||||||||
Subscription billings | $608 - $612 | 34% - 35% | $584 - $588 | 28% - 29% | ||||||||||
Margin (%) | ||||||||||||||
Income from operations | 16% | |||||||||||||
Amount | ||||||||||||||
(millions) | ||||||||||||||
Weighted-average shares used to compute diluted net income per share | 188 |
(1) | We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of GAAP to non-GAAP measures. | |
(2) | The comparison period amounts used to calculate growth rates have been restated from previously reported amounts to reflect the impact of the full retrospective adoption of Topic 606. For more information regarding Topic 606, refer to our Form 10-K filed for the year ended December 31, 2017. | |
(3) | Non-GAAP subscription revenues, professional services and other revenues, total revenues and professional services billings are adjusted for constant currency. Subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of GAAP to non-GAAP measures. | |
The following table summarizes our guidance for fiscal year 2018:
Full Year 2018 | ||||||||||||||
GAAP Guidance |
Full Year 2018 Non-GAAP Guidance (1) |
|||||||||||||
Adjusted Year/ |
||||||||||||||
Amount | Year/Year | Amount | Year/Year | Adjusted Amount |
Year Growth |
|||||||||
($ millions) |
Growth (%) (2) |
($ millions) |
Growth (%) (2) |
($ millions) (3) |
(%) (2) |
|||||||||
Subscription revenues | $2,400 - $2,415 | 38% - 39% | $2,336 - $2,351 | 34% - 35% | ||||||||||
Subscription billings | $2,830 - $2,845 | 33% - 34% | $2,755 - $2,770 |
30% |
||||||||||
Margin (%) | ||||||||||||||
Subscription gross profit | 85% | |||||||||||||
Income from operations | 20% | |||||||||||||
Free cash flow | 27% | |||||||||||||
Amount | ||||||||||||||
(millions) | ||||||||||||||
Weighted-average shares used to compute diluted net income per share | 187 |
(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) | 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-K filed for the year ended December 31, 2017. | |
(3) | Non-GAAP subscription revenues are adjusted for constant currency. 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 (21:00 GMT) on April 25, 2018. Interested parties may listen to the call by dialing 844.464.3153 (passcode: 8685999), or if outside North America, by dialing +1.508.637.5575 (passcode: 8685999). Individuals may access the live teleconference from this webcast link ( https://edge.media-server.com/m6/p/pf7pfwgq ).
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: 8685999), or if outside North America, by dialing +1.404.537.3406 (passcode: 8685999).
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.
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.
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, 2017 and in other filings we make with the Securities and Exchange Commission from time to time.
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 makes work better across the enterprise. Getting simple stuff done at work can be easy, and getting complex multi-step tasks completed can be painless. Our applications automate, predict, digitize and optimize business processes and tasks, across IT, customer service, security operations and HR service delivery, creating a better experience for your employees and customers while transforming your enterprise. ServiceNow (NYSE:NOW) is how work gets done. For more information, visit www.servicenow.com .
© 2018 ServiceNow, Inc. All rights reserved. ServiceNow, the ServiceNow logo, Now, 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.
ServiceNow, Inc. | |||||||||
Condensed Consolidated Statements of Operations | |||||||||
(in thousands, except share and per share data) | |||||||||
(unaudited) | |||||||||
Three Months Ended | |||||||||
March 31, 2018 | March 31, 2017 | ||||||||
*As Adjusted | |||||||||
Revenues: | |||||||||
Subscription | $ | 543,325 | $ | 387,584 | |||||
Professional services and other | 45,897 | 41,187 | |||||||
Total revenues | 589,222 | 428,771 | |||||||
Cost of revenues (1) : | |||||||||
Subscription | 95,398 | 70,375 | |||||||
Professional services and other | 48,075 | 45,709 | |||||||
Total cost of revenues | 143,473 | 116,084 | |||||||
Gross profit | 445,749 | 312,687 | |||||||
Operating expenses (1) : | |||||||||
Sales and marketing | 283,701 | 203,739 | |||||||
Research and development | 117,268 | 84,489 | |||||||
General and administrative | 65,063 | 46,251 | |||||||
Total operating expenses | 466,032 | 334,479 | |||||||
Loss from operations | (20,283 | ) | (21,792 | ) | |||||
Interest expense | (17,064 | ) | (8,678 | ) | |||||
Interest income and other income (expense), net | 29,987 | 7,729 | |||||||
Loss before income taxes | (7,360 | ) | (22,741 | ) | |||||
Benefit from income taxes | (17,982 | ) | (1,227 | ) | |||||
Net income (loss) | $ | 10,622 | $ | (21,514 | ) | ||||
Net income (loss) per share - basic | $ | 0.06 | $ | (0.13 | ) | ||||
Net income (loss) per share - diluted | $ | 0.06 | $ | (0.13 | ) | ||||
Weighted-average shares used to compute net income (loss) per share - basic | 175,482,833 | 168,742,366 | |||||||
Weighted-average shares used to compute net income (loss) per share - diluted | 190,249,786 | 168,742,366 | |||||||
(1) Includes stock-based compensation as follows: |
|||||||||
Three Months Ended |
|||||||||
March 31, 2018 |
March 31, 2017 |
||||||||
*As Adjusted |
|||||||||
Cost of revenues: |
|
||||||||
Subscription |
$ |
11,291 |
$ |
7,938 |
|||||
Professional services and other |
7,561 |
6,875 |
|||||||
Sales and marketing |
52,082 |
38,401 |
|||||||
Research and development |
28,598 |
21,801 |
|||||||
General and administrative |
21,809 |
14,854 |
|||||||
*As adjusted to reflect the impact of the full retrospective adoption of Topic 606.
ServiceNow, Inc. | |||||||
Condensed Consolidated Balance Sheets | |||||||
(in thousands) | |||||||
(unaudited) | |||||||
March 31, 2018 | December 31, 2017 | ||||||
*As Adjusted | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 682,854 | $ | 726,495 | |||
Short-term investments | 1,203,105 | 1,052,803 | |||||
Accounts receivable, net | 371,008 | 437,051 | |||||
Current portion of deferred commissions | 115,867 | 109,643 | |||||
Prepaid expenses and other current assets | 117,092 | 95,959 | |||||
Total current assets |
2,489,926 | 2,421,951 | |||||
Deferred commissions, less current portion | 233,715 | 224,252 | |||||
Long-term investments | 451,209 | 391,442 | |||||
Property and equipment, net | 267,454 | 245,124 | |||||
Intangible assets, net | 82,553 | 86,916 | |||||
Goodwill | 128,685 | 128,728 | |||||
Other assets | 50,943 | 51,832 | |||||
Total assets | $ | 3,704,485 | $ | 3,550,245 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 37,715 | $ | 32,109 | |||
Accrued expenses and other current liabilities | 250,738 | 253,257 | |||||
Current portion of deferred revenue | 1,292,638 | 1,210,695 | |||||
Current portion of convertible senior notes, net | 516,925 | 543,418 | |||||
Total current liabilities | 2,098,016 | 2,039,479 | |||||
Deferred revenue, less current portion | 50,244 | 36,120 | |||||
Convertible senior notes, net | 637,795 | 630,018 | |||||
Other long-term liabilities | 53,267 | 65,884 | |||||
Stockholders’ equity | 865,163 | 778,744 | |||||
Total liabilities and stockholders’ equity | $ | 3,704,485 | $ | 3,550,245 | |||
*As adjusted to reflect the impact of the full retrospective adoption of Topic 606.
ServiceNow, Inc. | |||||||||
Condensed Consolidated Statements of Cash Flows | |||||||||
(in thousands) | |||||||||
(unaudited) | |||||||||
Three Months Ended | |||||||||
March 31, 2018 | March 31, 2017 | ||||||||
*As Adjusted | |||||||||
Cash flows from operating activities: | |||||||||
Net income (loss) | $ | 10,622 | $ | (21,514 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||
Depreciation and amortization | 33,411 | 25,226 | |||||||
Amortization of deferred commissions | 30,419 | 22,038 | |||||||
Amortization of debt discount and issuance costs | 17,064 | 8,678 | |||||||
Stock-based compensation | 121,341 | 89,869 | |||||||
Deferred income tax | (24,348 | ) | (3,291 | ) | |||||
Unrealized gain on marketable equity securities | (18,455 | ) | — | ||||||
Repayments of convertible senior notes attributable to debt discount | (8,660 | ) | — | ||||||
Other | (5,805 | ) | (1,273 | ) | |||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | 69,502 | 48,515 | |||||||
Deferred commissions | (42,475 | ) | (30,956 | ) | |||||
Prepaid expenses and other assets | (15,808 | ) | (16,468 | ) | |||||
Accounts payable | 875 | 675 | |||||||
Deferred revenue | 83,733 | 84,863 | |||||||
Accrued expenses and other liabilities | (1,336 | ) | (18,754 | ) | |||||
Net cash provided by operating activities | 250,080 | 187,608 | |||||||
Cash flows from investing activities: | |||||||||
Purchases of property and equipment | (35,371 | ) | (33,186 | ) | |||||
Business combination, net of cash and restricted cash acquired | — | (15,035 | ) | ||||||
Purchases of other intangibles | (7,850 | ) | — | ||||||
Purchases of investments | (376,130 | ) | (223,596 | ) | |||||
Sales of investments | — | 21,789 | |||||||
Maturities of investments | 182,105 | 122,263 | |||||||
Net cash used in investing activities (1) | (237,246 | ) | (127,765 | ) | |||||
Cash flows from financing activities: | |||||||||
Repayments of convertible senior notes attributable to principal | (28,606 | ) | — | ||||||
Proceeds from employee stock plans | 52,657 | 34,807 | |||||||
Taxes paid related to net share settlement of equity awards | (85,555 | ) | (53,023 | ) | |||||
Payments on financing obligations | (288 | ) | (1,415 | ) | |||||
Net cash used in financing activities | (61,792 | ) | (19,631 | ) | |||||
Foreign currency effect on cash, cash equivalents and restricted cash (1) | 6,491 | (843 | ) | ||||||
Net (decrease) increase in cash, cash equivalents and restricted cash (1) | (42,467 | ) | 39,369 | ||||||
Cash, cash equivalents and restricted cash at beginning of period (1) | 727,829 | 401,932 | |||||||
Cash, cash equivalents and restricted cash at end of period (1) | $ | 685,362 | $ | 441,301 | |||||
*As adjusted to reflect the impact of the full retrospective adoption of Topic 606.
(1) | During the three months ended December 31, 2017, we adopted Accounting Standards Update 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which requires that amounts generally described as restricted cash or restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Accordingly, we have recast our prior period condensed consolidated statement of cash flows to conform to the current presentation. The impact of the adoption for the three months ended March 31, 2017 is not material. | |
ServiceNow, Inc. | ||||||||||||
GAAP to Non-GAAP Reconciliation | ||||||||||||
(in thousands, except share and per share data) | ||||||||||||
(unaudited) | ||||||||||||
Three Months Ended | ||||||||||||
March 31, 2018 | March 31, 2017 (3) | Growth Rates | ||||||||||
Subscription revenues: | ||||||||||||
GAAP subscription revenues | $ | 543,325 | $ | 387,584 | 40 | % | ||||||
Effects of foreign currency rate fluctuations | (23,270 | ) | ||||||||||
Non-GAAP adjusted subscription revenues (1) | $ | 520,055 | 34 | % | ||||||||
Subscription billings: | ||||||||||||
GAAP subscription revenues | $ | 543,325 | $ | 387,584 | 40 | % | ||||||
Change in subscription deferred revenue, unbilled receivables and customer deposits |
95,072 |
92,226 |
||||||||||
Non-GAAP subscription billings | 638,397 | 479,810 | 33 | % | ||||||||
Effects of foreign currency rate fluctuations | (27,489 | ) | ||||||||||
Effects of fluctuations in billings duration | 1,952 | |||||||||||
Non-GAAP adjusted subscription billings (2) | $ | 612,860 | 28 | % | ||||||||
Professional services and other revenues: | ||||||||||||
GAAP professional services and other revenues | $ | 45,897 | $ | 41,187 | 11 | % | ||||||
Effects of foreign currency rate fluctuations | (2,111 | ) | ||||||||||
Non-GAAP adjusted professional service and other revenues (1) |
$ | 43,786 | 6 | % | ||||||||
Professional services and other billings: | ||||||||||||
GAAP professional services and other revenues |
$ | 45,897 | $ | 41,187 | 11 | % | ||||||
Change in professional services and other deferred revenue |
5,092 | (1,526 | ) | |||||||||
Non-GAAP professional services and other billings | 50,989 | 39,661 | 29 | % | ||||||||
Effects of foreign currency rate fluctuations | (2,111 | ) | ||||||||||
Non-GAAP adjusted professional services and other billings (2) | $ | 48,878 | 23 | % | ||||||||
Total revenues: | ||||||||||||
GAAP total revenues | $ | 589,222 | $ | 428,771 | 37 | % | ||||||
Effects of foreign currency rate fluctuations | (25,381 | ) | ||||||||||
Non-GAAP adjusted total revenues (1) | $ | 563,841 | 32 | % | ||||||||
Total billings: | ||||||||||||
GAAP total revenues | $ | 589,222 | $ | 428,771 | 37 | % | ||||||
Change in total deferred revenue, unbilled receivables and customer deposits |
100,164 |
90,700 |
||||||||||
Non-GAAP total billings | 689,386 | 519,471 | 33 | % | ||||||||
Effects of foreign currency rate fluctuations | (29,600 | ) | ||||||||||
Effects of fluctuations in billings duration | 1,952 | |||||||||||
Non-GAAP adjusted total billings (2) | $ | 661,738 | 27 | % | ||||||||
Cost of revenues: | ||||||||||||
GAAP subscription cost of revenues | $ | 95,398 | $ | 70,375 | ||||||||
Stock-based compensation | (11,291 | ) | (7,938 | ) | ||||||||
Amortization of purchased intangibles | (4,414 | ) | (3,572 | ) | ||||||||
Non-GAAP subscription cost of revenues | $ | 79,693 | $ | 58,865 | ||||||||
GAAP professional services and other cost of revenues | $ | 48,075 | $ | 45,709 | ||||||||
Stock-based compensation | (7,561 | ) | (6,875 | ) | ||||||||
Non-GAAP professional services and other cost of revenues | $ | 40,514 | $ | 38,834 | ||||||||
Gross profit (loss): | ||||||||||||
GAAP subscription gross profit | $ | 447,927 | $ | 317,209 | ||||||||
Stock-based compensation | 11,291 | 7,938 | ||||||||||
Amortization of purchased intangibles | 4,414 | 3,572 | ||||||||||
Non-GAAP subscription gross profit | $ | 463,632 | $ | 328,719 | ||||||||
GAAP professional services and other gross loss | $ | (2,178 | ) | $ | (4,522 | ) | ||||||
Stock-based compensation | 7,561 | 6,875 | ||||||||||
Non-GAAP professional services and other gross profit | $ | 5,383 | $ | 2,353 | ||||||||
GAAP gross profit | $ | 445,749 | $ | 312,687 | ||||||||
Stock-based compensation | 18,852 | 14,813 | ||||||||||
Amortization of purchased intangibles | 4,414 | 3,572 | ||||||||||
Non-GAAP gross profit | $ | 469,015 | $ | 331,072 | ||||||||
Gross margin: | ||||||||||||
GAAP subscription gross margin | 82 | % | 82 | % | ||||||||
Stock-based compensation as % of subscription revenues | 2 | % | 2 | % | ||||||||
Amortization of purchased intangibles as % of subscription revenues | 1 | % | 1 | % | ||||||||
Non-GAAP subscription gross margin | 85 | % | 85 | % | ||||||||
GAAP professional services and other gross margin | (5 | %) | (11 | %) | ||||||||
Stock-based compensation as % of professional services and other revenues | 17 | % | 17 | % | ||||||||
Non-GAAP professional services and other gross margin | 12 | % | 6 | % | ||||||||
GAAP gross margin | 76 | % | 73 | % | ||||||||
Stock-based compensation as % of total revenues | 3 | % | 3 | % | ||||||||
Amortization of purchased intangibles as % of total revenues | 1 | % | 1 | % | ||||||||
Non-GAAP gross margin | 80 | % | 77 | % | ||||||||
Operating expenses: | ||||||||||||
GAAP sales and marketing expenses | $ | 283,701 | $ | 203,739 | ||||||||
Stock-based compensation | (52,082 | ) | (38,401 | ) | ||||||||
Amortization of purchased intangibles | — | (117 | ) | |||||||||
Non-GAAP sales and marketing expenses | $ | 231,619 | $ | 165,221 | ||||||||
GAAP research and development expenses | $ | 117,268 | $ | 84,489 | ||||||||
Stock-based compensation | (28,598 | ) | (21,801 | ) | ||||||||
Amortization of purchased intangibles | (455 | ) | (455 | ) | ||||||||
Non-GAAP research and development expenses | $ | 88,215 | $ | 62,233 | ||||||||
GAAP general and administrative expenses | $ | 65,063 | $ | 46,251 | ||||||||
Stock-based compensation | (21,809 | ) | (14,854 | ) | ||||||||
Amortization of purchased intangibles | (876 | ) | (525 | ) | ||||||||
Business combination and other related costs | (67 | ) | (219 | ) | ||||||||
Non-GAAP general and administrative expenses | $ | 42,311 | $ | 30,653 | ||||||||
GAAP total operating expenses | $ | 466,032 | $ | 334,479 | ||||||||
Stock-based compensation | (102,489 | ) | (75,056 | ) | ||||||||
Amortization of purchased intangibles | (1,331 | ) | (1,097 | ) | ||||||||
Business combination and other related costs | (67 | ) | (219 | ) | ||||||||
Non-GAAP total operating expenses | $ | 362,145 | $ | 258,107 | ||||||||
Income (loss) from operations: | ||||||||||||
GAAP loss from operations | $ | (20,283 | ) | $ | (21,792 | ) | ||||||
Stock-based compensation | 121,341 | 89,869 | ||||||||||
Amortization of purchased intangibles | 5,745 | 4,669 | ||||||||||
Business combination and other related costs | 67 | 219 | ||||||||||
Non-GAAP income from operations | $ | 106,870 | $ | 72,965 | ||||||||
Operating margin: | ||||||||||||
GAAP operating margin | (3 | %) | (5 | %) | ||||||||
Stock-based compensation as % of total revenues | 21 | % | 21 | % | ||||||||
Amortization of purchased intangibles as % of total revenues | 0 | % | 1 | % | ||||||||
Business combination and other related costs as % of total revenues | 0 | % | 0 | % | ||||||||
Non-GAAP operating margin | 18 | % | 17 | % | ||||||||
Net income (loss): | ||||||||||||
GAAP net income (loss) | $ | 10,622 | $ | (21,514 | ) | |||||||
Stock-based compensation | 121,341 | 89,869 | ||||||||||
Amortization of purchased intangibles | 5,745 | 4,669 | ||||||||||
Business combination and other related costs | 67 | 219 | ||||||||||
Amortization of debt discount and issuance costs for the convertible senior notes | 17,064 | 8,678 | ||||||||||
Loss on early note conversions | 780 | — | ||||||||||
Income tax expense effects related to the above adjustments | (51,015 | ) | (27,049 | ) | ||||||||
Non-GAAP net income | $ | 104,604 | $ | 54,872 | ||||||||
Net income (loss) per share - basic and diluted: | ||||||||||||
GAAP net income (loss) per share - basic | $ | 0.06 | $ | (0.13 | ) | |||||||
GAAP net income (loss) per share - diluted | $ | 0.06 | $ | (0.13 | ) | |||||||
Non-GAAP net income per share - basic | $ | 0.60 | $ | 0.33 | ||||||||
Non-GAAP net income per share - diluted | $ | 0.56 | $ | 0.31 | ||||||||
GAAP weighted-average shares used to compute net income (loss) per share - basic | 175,482,833 | 168,742,366 | ||||||||||
GAAP weighted-average shares used to compute net income (loss) per share - diluted | 190,249,786 | 168,742,366 | ||||||||||
Effect of dilutive time-based stock awards (4) | — | 8,382,858 | ||||||||||
In-the-money portion of convertible senior notes (4) | (4,530,808 | ) | — | |||||||||
Stock options and restricted stock units with performance conditions not yet satisfied | 138,782 | 6,436 | ||||||||||
Non-GAAP weighted-average shares used to compute net income per share - diluted | 185,857,760 | 177,131,660 | ||||||||||
Free cash flow: | ||||||||||||
GAAP net cash provided by operating activities | $ | 250,080 | $ | 187,608 | ||||||||
Purchases of property and equipment | (35,371 | ) | (33,186 | ) | ||||||||
Repayments of convertible senior notes attributable to debt discount | 8,660 | — | ||||||||||
Non-GAAP free cash flow | $ | 223,369 | $ | 154,422 | ||||||||
Free cash flow margin: | ||||||||||||
GAAP net cash provided by operating activities as % of total revenues | 42 | % | 44 | % | ||||||||
Purchases of property and equipment as % of total revenues | (5 | %) | (8 | %) | ||||||||
Repayments of convertible senior notes attributable to debt discount as % of total revenues | 1 | % | — | % | ||||||||
Non-GAAP free cash flow margin | 38 | % | 36 | % | ||||||||
(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 and the in-the-money portion of convertible senior notes 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. |
|
Twelve Months Ended | |||||
December 31, 2018 | December 31, 2017 (3) | Growth Rates | |||
GAAP subscription revenues | $2,400 - $2,415 million | $1,740 million | 38% - 39% | ||
Effects of foreign currency rate fluctuations | (64) million | ||||
Non-GAAP adjusted subscription revenues (1) | $2,336 - $2,351 million | 34% - 35% | |||
GAAP subscription revenues | $2,400 - $2,415 million | $1,740 million | 38% - 39% | ||
Change in subscription deferred revenue, unbilled receivables and customer deposits | 430 million | 384 million | |||
Non-GAAP subscription billings | $2,830 - $2,845 million | $2,124 million | 33% - 34% | ||
Effects of foreign currency rate fluctuations | (76) million | ||||
Effects of fluctuations in billings duration | 1 million | ||||
Non-GAAP adjusted subscription billings (2) | $2,755 - $2,770 million | 30% | |||
GAAP subscription gross margin | 82% | ||||
Stock-based compensation expense as % of subscription revenues | 2% | ||||
Amortization of purchased intangibles as % of subscription revenues | 1% | ||||
Non-GAAP subscription margin | 85% | ||||
GAAP operating margin | (2%) | ||||
Stock-based compensation expense as % of total revenues | 21% | ||||
Amortization of purchased intangibles as % of total revenues | 1% | ||||
Non-GAAP operating margin | 20% | ||||
GAAP net cash provided by operating activities as % of total revenues | 28% | ||||
Purchases of property and equipment as % of total revenues | (7%) | ||||
Repayments of convertible senior notes attributable to debt discount as % of total revenues | 6% | ||||
Non-GAAP free cash flow margin | 27% | ||||
GAAP weighted-average shares used to compute net loss per share - diluted | 178 million | ||||
Effect of dilutive securities (stock options, restricted stock units and warrants) | 9 million | ||||
Non-GAAP weighted-average shares used to compute net income per share - diluted | 187 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. | |
CONTACT:
ServiceNow, Inc.
Media Contact:
Joanne
Blum, 310-489-7278
press@servicenow.com
or
Investor
Contact:
Jimmy Sexton, 669-262-1430
ir@servicenow.com
Exhibit 99.2
Technology Executive Dennis Woodside Joins ServiceNow Board of Directors; Company Founder Fred Luddy to Become New Board Chair
SANTA CLARA, Calif.--(BUSINESS WIRE)--April 25, 2018--ServiceNow (NYSE:NOW) today announced that Dennis M. Woodside, chief operating officer of Dropbox, has joined the company’s board of directors. In addition, ServiceNow Founder Fred Luddy will become the new board chair, succeeding former company President and CEO Frank Slootman, who has decided to step down as chair and board member at the 2018 annual meeting of stockholders.
“Dennis brings tremendous experience in scaling technology companies and delivering great consumer and customer experiences,” said ServiceNow President, CEO and Board Member John Donahoe. “He will be a valuable addition to our already strong board.”
“I also want to thank Frank for his tremendous contributions to ServiceNow, and for his partnership during my first year as CEO,” Donahoe said. “And I am thrilled that Fred will be our next board chair. His founding vision continues to be core to our company, to our purpose and to our focus on customer success.”
Woodside has served as chief operating officer of Dropbox since April 2014. He has previously held senior executive leadership roles at Motorola Mobility and Google. He holds a J.D. from Stanford Law School and a B.S. in industrial relations from Cornell University.
Following Mr. Slootman’s retirement, ServiceNow’s board will have nine members. In addition to Luddy, Donahoe and Woodside, the other six members will be: Lead Independent Director Jeffrey A. Miller, president and chief executive officer of JAMM Ventures; Susan L. Bostrom, former executive vice president, chief marketing officer, Worldwide Government Affairs of Cisco Systems, Inc.; Jonathan C. Chadwick, former executive vice president, chief financial officer and chief operating officer at VMware; Paul E. Chamberlain, head of PEC Ventures; Ronald E.F. Codd, former president, chief executive officer and director of Momentum Business Applications, Inc.; and Anita M. Sands, former group managing director, head of change leadership and member of the Wealth Management Americas Executive Committee of UBS Financial Services.
About ServiceNow
ServiceNow makes work better across the enterprise. Getting simple stuff done at work can be easy, and getting complex multi-step tasks completed can be painless. Our applications automate, predict, digitize and optimize business processes and tasks, across IT, customer service, security operations and HR service delivery, creating a better experience for your employees and customers while transforming your enterprise. ServiceNow (NYSE:NOW) is how work gets done. For more information, visit: www.servicenow.com .
CONTACT:
ServiceNow Corporate Communications
Johnna Hoff
johnna.hoff@servicenow.com