x
|
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
¨
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
Delaware
|
|
20-2056195
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification Number)
|
Large accelerated filer x
|
Accelerated filer ¨
|
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
|
Smaller reporting company ¨
|
|
Emerging growth company ¨
|
|
|
Page
|
|
|
|
Item 1.
|
||
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||
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||
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||
|
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Item 2.
|
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Item 3.
|
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Item 4.
|
||
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Item 1.
|
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Item 1A.
|
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Item 2.
|
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Item 3.
|
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Item 4.
|
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Item 5.
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Item 6.
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||
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September 30,
|
|
December 31,
|
||||
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,104,871
|
|
|
$
|
401,238
|
|
Short-term investments
|
567,026
|
|
|
498,124
|
|
||
Accounts receivable, net
|
291,903
|
|
|
322,757
|
|
||
Current portion of deferred commissions
|
96,811
|
|
|
76,780
|
|
||
Prepaid expenses and other current assets
|
66,881
|
|
|
43,636
|
|
||
Total current assets
|
2,127,492
|
|
|
1,342,535
|
|
||
Deferred commissions, less current portion
|
69,041
|
|
|
61,990
|
|
||
Long-term investments
|
424,858
|
|
|
262,658
|
|
||
Property and equipment, net
|
231,304
|
|
|
181,620
|
|
||
Intangible assets, net
|
68,970
|
|
|
65,854
|
|
||
Goodwill
|
108,097
|
|
|
82,534
|
|
||
Other assets
|
39,753
|
|
|
36,576
|
|
||
Total assets
|
$
|
3,069,515
|
|
|
$
|
2,033,767
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
20,752
|
|
|
$
|
38,080
|
|
Accrued expenses and other current liabilities
|
177,553
|
|
|
171,636
|
|
||
Current portion of deferred revenue
|
1,082,346
|
|
|
861,782
|
|
||
Total current liabilities
|
1,280,651
|
|
|
1,071,498
|
|
||
Deferred revenue, less current portion
|
42,298
|
|
|
33,319
|
|
||
Convertible senior notes, net
|
1,156,629
|
|
|
507,812
|
|
||
Other long-term liabilities
|
38,546
|
|
|
34,177
|
|
||
Total liabilities
|
2,518,124
|
|
|
1,646,806
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Common stock
|
173
|
|
|
167
|
|
||
Additional paid-in capital
|
1,670,339
|
|
|
1,405,317
|
|
||
Accumulated other comprehensive loss
|
(408
|
)
|
|
(21,133
|
)
|
||
Accumulated deficit
|
(1,118,713
|
)
|
|
(997,390
|
)
|
||
Total stockholders’ equity
|
551,391
|
|
|
386,961
|
|
||
Total liabilities and stockholders’ equity
|
$
|
3,069,515
|
|
|
$
|
2,033,767
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Subscription
|
$
|
455,421
|
|
|
$
|
318,934
|
|
|
$
|
1,242,563
|
|
|
$
|
877,035
|
|
Professional services and other
|
42,749
|
|
|
38,722
|
|
|
144,093
|
|
|
127,812
|
|
||||
Total revenues
|
498,170
|
|
|
357,656
|
|
|
1,386,656
|
|
|
1,004,847
|
|
||||
Cost of revenues(1):
|
|
|
|
|
|
|
|
||||||||
Subscription
|
81,878
|
|
|
61,566
|
|
|
228,046
|
|
|
170,707
|
|
||||
Professional services and other
|
45,402
|
|
|
41,271
|
|
|
137,366
|
|
|
123,039
|
|
||||
Total cost of revenues
|
127,280
|
|
|
102,837
|
|
|
365,412
|
|
|
293,746
|
|
||||
Gross profit
|
370,890
|
|
|
254,819
|
|
|
1,021,244
|
|
|
711,101
|
|
||||
Operating expenses(1):
|
|
|
|
|
|
|
|
||||||||
Sales and marketing
|
227,015
|
|
|
166,491
|
|
|
686,325
|
|
|
511,607
|
|
||||
Research and development
|
98,465
|
|
|
75,018
|
|
|
272,959
|
|
|
211,306
|
|
||||
General and administrative
|
52,465
|
|
|
40,085
|
|
|
150,242
|
|
|
117,393
|
|
||||
Legal settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
270,000
|
|
||||
Total operating expenses
|
377,945
|
|
|
281,594
|
|
|
1,109,526
|
|
|
1,110,306
|
|
||||
Loss from operations
|
(7,055
|
)
|
|
(26,775
|
)
|
|
(88,282
|
)
|
|
(399,205
|
)
|
||||
Interest expense
|
(16,566
|
)
|
|
(8,389
|
)
|
|
(36,581
|
)
|
|
(24,746
|
)
|
||||
Interest income and other income (expense), net
|
853
|
|
|
1,783
|
|
|
739
|
|
|
4,745
|
|
||||
Loss before income taxes
|
(22,768
|
)
|
|
(33,381
|
)
|
|
(124,124
|
)
|
|
(419,206
|
)
|
||||
Provision for (benefit from) income taxes
|
1,420
|
|
|
2,877
|
|
|
(2,801
|
)
|
|
9
|
|
||||
Net loss
|
$
|
(24,188
|
)
|
|
$
|
(36,258
|
)
|
|
$
|
(121,323
|
)
|
|
$
|
(419,215
|
)
|
Net loss per share - basic and diluted
|
$
|
(0.14
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.71
|
)
|
|
$
|
(2.56
|
)
|
Weighted-average shares used to compute net loss per share - basic and diluted
|
171,883,190
|
|
|
165,378,836
|
|
|
170,359,717
|
|
|
163,767,329
|
|
||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
$
|
3,389
|
|
|
$
|
203
|
|
|
$
|
15,482
|
|
|
$
|
(1,106
|
)
|
Unrealized gain (loss) on investments, net of tax
|
(2,864
|
)
|
|
(615
|
)
|
|
5,243
|
|
|
1,523
|
|
||||
Other comprehensive income (loss), net of tax
|
525
|
|
|
(412
|
)
|
|
20,725
|
|
|
417
|
|
||||
Comprehensive loss
|
$
|
(23,663
|
)
|
|
$
|
(36,670
|
)
|
|
$
|
(100,598
|
)
|
|
$
|
(418,798
|
)
|
(1)
|
Includes stock-based compensation as follows:
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Cost of revenues:
|
|
|
|
|
|
|
|
||||||||
Subscription
|
$
|
8,980
|
|
|
$
|
7,140
|
|
|
$
|
25,860
|
|
|
$
|
20,698
|
|
Professional services and other
|
7,056
|
|
|
7,150
|
|
|
21,622
|
|
|
20,045
|
|
||||
Sales and marketing
|
43,962
|
|
|
31,898
|
|
|
124,650
|
|
|
95,757
|
|
||||
Research and development
|
23,092
|
|
|
21,376
|
|
|
67,624
|
|
|
62,956
|
|
||||
General and administrative
|
17,352
|
|
|
13,523
|
|
|
48,695
|
|
|
35,004
|
|
|
Nine Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(121,323
|
)
|
|
$
|
(419,215
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
81,808
|
|
|
59,716
|
|
||
Amortization of premiums on investments
|
2,508
|
|
|
3,745
|
|
||
Amortization of deferred commissions
|
80,251
|
|
|
57,742
|
|
||
Amortization of debt discount and issuance costs
|
36,581
|
|
|
24,746
|
|
||
Stock-based compensation
|
288,451
|
|
|
234,460
|
|
||
Deferred income tax
|
(6,055
|
)
|
|
(5,095
|
)
|
||
Other
|
(4,062
|
)
|
|
(857
|
)
|
||
Changes in operating assets and liabilities, net of effect of business combinations:
|
|
|
|
||||
Accounts receivable
|
42,341
|
|
|
(15,761
|
)
|
||
Deferred commissions
|
(102,348
|
)
|
|
(79,190
|
)
|
||
Prepaid expenses and other assets
|
(26,866
|
)
|
|
(11,733
|
)
|
||
Accounts payable
|
(11,088
|
)
|
|
(8,625
|
)
|
||
Deferred revenue
|
193,594
|
|
|
151,019
|
|
||
Accrued expenses and other liabilities
|
4,247
|
|
|
36,282
|
|
||
Net cash provided by operating activities
|
458,039
|
|
|
27,234
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(115,856
|
)
|
|
(84,112
|
)
|
||
Business combinations, net of cash acquired
|
(26,537
|
)
|
|
(34,297
|
)
|
||
Purchases of other intangibles
|
(6,170
|
)
|
|
(10,750
|
)
|
||
Purchases of investments
|
(641,666
|
)
|
|
(434,397
|
)
|
||
Purchases of strategic investments
|
(4,000
|
)
|
|
—
|
|
||
Sales of investments
|
77,968
|
|
|
266,288
|
|
||
Maturities of investments
|
350,597
|
|
|
218,452
|
|
||
Restricted cash
|
(739
|
)
|
|
(322
|
)
|
||
Net cash used in investing activities
|
(366,403
|
)
|
|
(79,138
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Net proceeds from borrowings on convertible senior notes
|
772,127
|
|
|
—
|
|
||
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
|
76,748
|
|
|
55,063
|
|
||
Taxes paid related to net share settlement of equity awards
|
(131,130
|
)
|
|
(88,567
|
)
|
||
Payments on financing obligations
|
(2,681
|
)
|
|
(1,361
|
)
|
||
Net cash provided by (used in) financing activities
|
586,118
|
|
|
(34,865
|
)
|
||
Foreign currency effect on cash and cash equivalents
|
25,879
|
|
|
(469
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
703,633
|
|
|
(87,238
|
)
|
||
Cash and cash equivalents at beginning of period
|
401,238
|
|
|
412,305
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,104,871
|
|
|
$
|
325,067
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
Property and equipment included in accounts payable and accrued expenses
|
$
|
9,321
|
|
|
$
|
9,691
|
|
|
September 30, 2017
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
52,596
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
52,596
|
|
Corporate notes and bonds
|
775,622
|
|
|
126
|
|
|
(1,064
|
)
|
|
774,684
|
|
||||
Certificates of deposit
|
38,288
|
|
|
—
|
|
|
—
|
|
|
38,288
|
|
||||
U.S. government agency securities
|
108,587
|
|
|
—
|
|
|
(209
|
)
|
|
108,378
|
|
||||
Marketable equity securities
|
10,000
|
|
|
7,938
|
|
|
—
|
|
|
17,938
|
|
||||
Total available-for-sale securities
|
$
|
985,093
|
|
|
$
|
8,064
|
|
|
$
|
(1,273
|
)
|
|
$
|
991,884
|
|
|
December 31, 2016
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
$
|
56,839
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
56,839
|
|
Corporate notes and bonds
|
628,054
|
|
|
91
|
|
|
(1,590
|
)
|
|
626,555
|
|
||||
Certificates of deposit
|
35,355
|
|
|
—
|
|
|
—
|
|
|
35,355
|
|
||||
U.S. government agency securities
|
42,088
|
|
|
7
|
|
|
(62
|
)
|
|
42,033
|
|
||||
Total available-for-sale securities
|
$
|
762,336
|
|
|
$
|
98
|
|
|
$
|
(1,652
|
)
|
|
$
|
760,782
|
|
|
September 30, 2017
|
||
Due in 1 year or less
|
$
|
549,088
|
|
Due in 1 to 2 years
|
424,858
|
|
|
Total
|
$
|
973,946
|
|
|
September 30, 2017
|
||||||||||||||||||||||
|
Less than 12 Months
|
|
12 Months or Greater
|
|
Total
|
||||||||||||||||||
|
Fair Value
|
|
Gross
Unrealized Losses |
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
||||||||||||
Corporate notes and bonds
|
$
|
499,576
|
|
|
$
|
(822
|
)
|
|
$
|
114,109
|
|
|
$
|
(242
|
)
|
|
$
|
613,685
|
|
|
$
|
(1,064
|
)
|
U.S. government agency securities
|
91,901
|
|
|
(185
|
)
|
|
8,977
|
|
|
(24
|
)
|
|
100,878
|
|
|
(209
|
)
|
||||||
Total
|
$
|
591,477
|
|
|
$
|
(1,007
|
)
|
|
$
|
123,086
|
|
|
$
|
(266
|
)
|
|
$
|
714,563
|
|
|
$
|
(1,273
|
)
|
|
December 31, 2016
|
||||||||||||||||||||||
|
Less than 12 Months
|
|
12 Months or Greater
|
|
Total
|
||||||||||||||||||
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
||||||||||||
Corporate notes and bonds
|
$
|
492,503
|
|
|
$
|
(1,530
|
)
|
|
$
|
47,940
|
|
|
$
|
(60
|
)
|
|
$
|
540,443
|
|
|
$
|
(1,590
|
)
|
U.S. government agency securities
|
30,033
|
|
|
(62
|
)
|
|
—
|
|
|
—
|
|
|
30,033
|
|
|
(62
|
)
|
||||||
Total
|
$
|
522,536
|
|
|
$
|
(1,592
|
)
|
|
$
|
47,940
|
|
|
$
|
(60
|
)
|
|
$
|
570,476
|
|
|
$
|
(1,652
|
)
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Cash equivalents:
|
|
|
|
|
|
||||||
Money market funds
|
$
|
196,998
|
|
|
$
|
—
|
|
|
$
|
196,998
|
|
Commercial paper
|
—
|
|
|
12,478
|
|
|
12,478
|
|
|||
Certificates of deposit
|
—
|
|
|
2,948
|
|
|
2,948
|
|
|||
U.S. government agency securities
|
—
|
|
|
551,772
|
|
|
551,772
|
|
|||
Short-term investments:
|
|
|
|
|
|
||||||
Commercial paper
|
—
|
|
|
52,596
|
|
|
52,596
|
|
|||
Corporate notes and bonds
|
—
|
|
|
449,379
|
|
|
449,379
|
|
|||
Certificates of deposit
|
—
|
|
|
18,755
|
|
|
18,755
|
|
|||
U.S. government agency securities
|
—
|
|
|
28,358
|
|
|
28,358
|
|
|||
Marketable equity securities
|
17,938
|
|
|
—
|
|
|
17,938
|
|
|||
Long-term investments:
|
|
|
|
|
|
||||||
Corporate notes and bonds
|
—
|
|
|
325,305
|
|
|
325,305
|
|
|||
Certificates of deposit
|
—
|
|
|
19,533
|
|
|
19,533
|
|
|||
U.S. government agency securities
|
—
|
|
|
80,020
|
|
|
80,020
|
|
|||
Total
|
$
|
214,936
|
|
|
$
|
1,541,144
|
|
|
$
|
1,756,080
|
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Cash equivalents:
|
|
|
|
|
|
||||||
Money market funds
|
$
|
165,627
|
|
|
$
|
—
|
|
|
$
|
165,627
|
|
Short-term investments:
|
|
|
|
|
|
||||||
Commercial paper
|
—
|
|
|
56,839
|
|
|
56,839
|
|
|||
Corporate notes and bonds
|
—
|
|
|
388,429
|
|
|
388,429
|
|
|||
Certificates of deposit
|
—
|
|
|
35,355
|
|
|
35,355
|
|
|||
U.S. government agency securities
|
—
|
|
|
17,501
|
|
|
17,501
|
|
|||
Long-term investments:
|
|
|
|
|
|
||||||
Corporate notes and bonds
|
—
|
|
|
238,125
|
|
|
238,125
|
|
|||
U.S. government agency securities
|
—
|
|
|
24,533
|
|
|
24,533
|
|
|||
Total
|
$
|
165,627
|
|
|
$
|
760,782
|
|
|
$
|
926,409
|
|
|
Purchase Price Allocation
(in thousands)
|
|
Useful Life
(in years)
|
||
Net tangible assets acquired
|
$
|
37
|
|
|
|
Intangible assets:
|
|
|
|
||
Developed technology
|
6,400
|
|
|
5
|
|
Goodwill
|
11,159
|
|
|
|
|
Net deferred tax liabilities(1)
|
(2,561
|
)
|
|
|
|
Total purchase price
|
$
|
15,035
|
|
|
|
(1)
|
Deferred tax liabilities, net primarily relates to purchased identifiable intangible assets and is shown net of deferred tax assets.
|
|
Purchase Price Allocation
(in thousands)
|
|
Useful Life
(in years)
|
||
Intangible assets:
|
|
|
|
||
Developed technology
|
$
|
8,100
|
|
|
6
|
Customer contracts and related relationships
|
500
|
|
|
1.5
|
|
Goodwill
|
15,258
|
|
|
|
|
Net tangible liabilities acquired
|
(1,339
|
)
|
|
|
|
Net deferred tax liabilities(1)
|
(2,890
|
)
|
|
|
|
Total purchase price
|
$
|
19,629
|
|
|
|
(1)
|
Deferred tax liabilities, net primarily relates to purchased identifiable intangible assets and is shown net of deferred tax assets.
|
|
Purchase Price Allocation
(in thousands)
|
|
Useful Life
(in years)
|
||
Net tangible assets acquired
|
$
|
140
|
|
|
|
Intangible assets:
|
|
|
|
||
Developed technology
|
4,700
|
|
|
5
|
|
Customer contracts and related relationships
|
200
|
|
|
1.5
|
|
Goodwill
|
11,437
|
|
|
|
|
Net deferred tax liabilities(1)
|
(2,015
|
)
|
|
|
|
Total purchase price
|
$
|
14,462
|
|
|
|
(1)
|
Deferred tax liabilities, net primarily relates to purchased identifiable intangible assets and is shown net of deferred tax assets.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenues
|
$
|
499,529
|
|
|
$
|
359,362
|
|
|
$
|
1,390,582
|
|
|
$
|
1,010,374
|
|
Net loss
|
$
|
(24,152
|
)
|
|
$
|
(37,134
|
)
|
|
$
|
(120,882
|
)
|
|
$
|
(426,883
|
)
|
Weighted-average shares used to compute net loss per share - basic and diluted
|
171,883,190
|
|
|
165,378,836
|
|
|
170,359,717
|
|
|
163,767,329
|
|
||||
Net loss per share - basic and diluted
|
$
|
(0.14
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.71
|
)
|
|
$
|
(2.61
|
)
|
|
Carrying Amount
|
||
Balance as of December 31, 2016
|
$
|
82,534
|
|
Goodwill acquired
|
20,281
|
|
|
Foreign currency translation adjustments
|
5,282
|
|
|
Balance as of September 30, 2017
|
$
|
108,097
|
|
|
September 30, 2017
|
||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||
Developed technology
|
$
|
91,527
|
|
|
$
|
(44,069
|
)
|
|
$
|
47,458
|
|
Patents
|
23,780
|
|
|
(2,532
|
)
|
|
21,248
|
|
|||
Other
|
1,775
|
|
|
(1,511
|
)
|
|
264
|
|
|||
Total intangible assets
|
$
|
117,082
|
|
|
$
|
(48,112
|
)
|
|
$
|
68,970
|
|
|
December 31, 2016
|
||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||
Developed technology
|
$
|
79,206
|
|
|
$
|
(30,858
|
)
|
|
$
|
48,348
|
|
Patents
|
17,610
|
|
|
(867
|
)
|
|
16,743
|
|
|||
Other
|
1,775
|
|
|
(1,012
|
)
|
|
763
|
|
|||
Total intangible assets
|
$
|
98,591
|
|
|
$
|
(32,737
|
)
|
|
$
|
65,854
|
|
Years Ending December 31,
|
|||||||
2017
|
|
$
|
4,769
|
|
|||
2018
|
|
18,772
|
|
||||
2019
|
|
18,692
|
|
||||
2020
|
|
8,796
|
|
||||
2021
|
|
6,871
|
|
||||
Thereafter
|
|
11,070
|
|
||||
Total future amortization expense
|
|
$
|
68,970
|
|
|
September 30,
|
|
December 31,
|
||||
|
2017
|
|
2016
|
||||
Computer equipment
|
$
|
303,336
|
|
|
$
|
222,648
|
|
Computer software
|
41,200
|
|
|
32,132
|
|
||
Leasehold improvements
|
48,000
|
|
|
37,095
|
|
||
Furniture and fixtures
|
36,283
|
|
|
31,574
|
|
||
Building
|
6,978
|
|
|
6,379
|
|
||
Construction in progress
|
7,044
|
|
|
2,535
|
|
||
|
442,841
|
|
|
332,363
|
|
||
Less: Accumulated depreciation
|
(211,537
|
)
|
|
(150,743
|
)
|
||
Total property and equipment, net
|
$
|
231,304
|
|
|
$
|
181,620
|
|
|
September 30,
|
|
December 31,
|
||||
|
2017
|
|
2016
|
||||
Taxes payable
|
$
|
18,694
|
|
|
$
|
19,472
|
|
Bonuses and commissions
|
57,691
|
|
|
67,259
|
|
||
Accrued compensation
|
41,229
|
|
|
30,816
|
|
||
Other employee related liabilities
|
27,386
|
|
|
28,812
|
|
||
Other
|
32,553
|
|
|
25,277
|
|
||
Total accrued expenses and other current liabilities
|
$
|
177,553
|
|
|
$
|
171,636
|
|
|
Convertible Date
|
|
Initial Conversion Price per Share
|
|
Initial Conversion Rate per $1,000 Par Value
|
|
Initial Number of Shares
|
|||
2022 Notes
|
February 1, 2022
|
|
$
|
134.75
|
|
|
7.42 shares
|
|
5,806,936
|
|
2018 Notes
|
July 1, 2018
|
|
$
|
73.88
|
|
|
13.54 shares
|
|
7,783,023
|
|
•
|
during any calendar quarter (and only during such calendar quarter) if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable conversion price on each applicable trading day; or
|
•
|
during the five-business day period after any five-consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate on each such trading day; or
|
•
|
upon the occurrence of specified corporate events.
|
|
September 30, 2017
|
|
December 31, 2016
|
||||
Liability component:
|
|
|
|
||||
Principal:
|
|
|
|
||||
2022 Notes
|
$
|
782,500
|
|
|
$
|
—
|
|
2018 Notes
|
575,000
|
|
|
575,000
|
|
||
Less: debt issuance cost and debt discount, net of amortization
|
|
|
|
||||
2022 Notes
|
(160,164
|
)
|
|
—
|
|
||
2018 Notes
|
(40,707
|
)
|
|
(67,188
|
)
|
||
Net carrying amount
|
$
|
1,156,629
|
|
|
$
|
507,812
|
|
|
2022 Notes
|
|
2018 Notes
|
||||
Equity component recorded at issuance:
|
|
|
|
||||
Note
|
$
|
162,039
|
|
|
$
|
155,319
|
|
Issuance cost
|
(2,148
|
)
|
|
(3,257
|
)
|
||
Net amount recorded in equity
|
$
|
159,891
|
|
|
$
|
152,062
|
|
|
September 30, 2017
|
|
December 31, 2016
|
||||
2022 Notes
|
$
|
842,322
|
|
|
N/A
|
|
|
2018 Notes
|
$
|
922,501
|
|
|
$
|
681,375
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Amortization of debt issuance cost
|
|
|
|
|
|
|
|
||||||||
2022 Notes
|
$
|
367
|
|
|
$
|
—
|
|
|
$
|
489
|
|
|
$
|
—
|
|
2018 Notes
|
481
|
|
|
450
|
|
|
1,421
|
|
|
1,327
|
|
||||
Amortization of debt discount
|
|
|
|
|
|
|
|
||||||||
2022 Notes
|
7,222
|
|
|
—
|
|
|
9,610
|
|
|
—
|
|
||||
2018 Notes
|
8,496
|
|
|
7,939
|
|
|
25,061
|
|
|
23,419
|
|
||||
Total
|
$
|
16,566
|
|
|
$
|
8,389
|
|
|
$
|
36,581
|
|
|
$
|
24,746
|
|
Effective interest rate of the liability component
|
|
||||||||||||||
2022 Notes
|
4.75%
|
||||||||||||||
2018 Notes
|
6.50%
|
|
Purchase
|
|
Shares
|
|||
|
(in thousands)
|
|
|
|||
2022 Note Hedge
|
$
|
128,017
|
|
|
5,806,936
|
|
2018 Note Hedge
|
$
|
135,815
|
|
|
7,783,023
|
|
|
Proceeds
|
|
Shares
|
|
Strike Price
|
|||||
|
(in thousands)
|
|
|
|
|
|||||
2022 Warrants
|
$
|
54,071
|
|
|
5,806,936
|
|
|
$
|
203.40
|
|
2018 Warrants
|
$
|
84,525
|
|
|
7,783,023
|
|
|
$
|
107.46
|
|
|
September 30,
|
|
December 31,
|
||||
|
2017
|
|
2016
|
||||
Foreign currency translation adjustment
|
$
|
(3,795
|
)
|
|
$
|
(19,277
|
)
|
Net unrealized gain (loss) on investments, net of tax
|
3,387
|
|
|
(1,856
|
)
|
||
Accumulated other comprehensive loss
|
$
|
(408
|
)
|
|
$
|
(21,133
|
)
|
|
September 30, 2017
|
|
Stock plans:
|
|
|
Options outstanding
|
4,117,639
|
|
RSUs
|
12,306,875
|
|
Shares of common stock available for future grants:
|
|
|
2012 Equity Incentive Plan(1)
|
25,731,336
|
|
2012 Employee Stock Purchase Plan(1)
|
9,581,944
|
|
Total reserved shares of common stock for future issuance
|
51,737,794
|
|
(1)
|
Refer to Note 12 for a description of these plans.
|
|
Number of
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term (Years)
|
|
Aggregate
Intrinsic Value
(in thousands)
|
|||||
Outstanding at December 31, 2016
|
5,818,435
|
|
|
$
|
20.57
|
|
|
|
|
|
||
Granted
|
566,720
|
|
|
84.81
|
|
|
|
|
|
|||
Exercised
|
(697,446
|
)
|
|
15.77
|
|
|
|
|
$
|
51,560
|
|
|
Canceled
|
(38,334
|
)
|
|
71.68
|
|
|
|
|
|
|||
Outstanding at March 31, 2017
|
5,649,375
|
|
|
27.26
|
|
|
|
|
|
|||
Granted
|
50,000
|
|
|
103.60
|
|
|
|
|
|
|||
Exercised
|
(705,807
|
)
|
|
8.62
|
|
|
|
|
$
|
62,617
|
|
|
Canceled
|
(1,174
|
)
|
|
57.78
|
|
|
|
|
|
|||
Outstanding at June 30, 2017
|
4,992,394
|
|
|
30.65
|
|
|
|
|
|
|||
Exercised
|
(843,046
|
)
|
|
16.66
|
|
|
|
|
$
|
78,926
|
|
|
Canceled
|
(31,709
|
)
|
|
69.45
|
|
|
|
|
|
|||
Outstanding at September 30, 2017
|
4,117,639
|
|
|
$
|
33.22
|
|
|
5.49
|
|
$
|
347,148
|
|
Vested and expected to vest as of September 30, 2017
|
4,080,735
|
|
|
$
|
32.87
|
|
|
5.47
|
|
$
|
345,495
|
|
Vested and exercisable as of September 30, 2017
|
3,040,729
|
|
|
$
|
16.77
|
|
|
4.27
|
|
$
|
306,399
|
|
|
Number of
Shares
|
|
Weighted Average Grant Date Fair Value
(Per Share)
|
|
Aggregate
Intrinsic Value
(in thousands)
|
|||||
Non-vested at December 31, 2016
|
12,222,282
|
|
|
$
|
63.66
|
|
|
|
||
Granted
|
4,216,410
|
|
|
88.05
|
|
|
|
|||
Vested
|
(1,801,659
|
)
|
|
55.73
|
|
|
$
|
164,367
|
|
|
Forfeited
|
(507,680
|
)
|
|
73.14
|
|
|
|
|||
Non-vested at March 31, 2017
|
14,129,353
|
|
|
71.60
|
|
|
|
|||
Granted
|
763,940
|
|
|
97.79
|
|
|
|
|||
Vested
|
(1,177,903
|
)
|
|
63.84
|
|
|
$
|
115,487
|
|
|
Forfeited
|
(445,303
|
)
|
|
68.78
|
|
|
|
|||
Non-vested at June 30, 2017
|
13,270,087
|
|
|
73.89
|
|
|
|
|||
Granted
|
711,084
|
|
|
111.06
|
|
|
|
|||
Vested
|
(1,274,390
|
)
|
|
61.61
|
|
|
$
|
137,021
|
|
|
Forfeited
|
(399,906
|
)
|
|
73.46
|
|
|
|
|||
Non-vested at September 30, 2017
|
12,306,875
|
|
|
$
|
77.33
|
|
|
$
|
1,446,427
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(24,188
|
)
|
|
$
|
(36,258
|
)
|
|
$
|
(121,323
|
)
|
|
$
|
(419,215
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding—basic and diluted
|
171,883,190
|
|
|
165,378,836
|
|
|
170,359,717
|
|
|
163,767,329
|
|
||||
Net loss per share—basic and diluted:
|
$
|
(0.14
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.71
|
)
|
|
$
|
(2.56
|
)
|
|
September 30,
|
||||
|
2017
|
|
2016
|
||
Common stock options
|
4,117,639
|
|
|
6,475,548
|
|
Restricted stock units
|
12,306,875
|
|
|
12,834,324
|
|
ESPP obligations
|
363,951
|
|
|
360,536
|
|
2018 convertible senior notes
|
7,783,023
|
|
|
7,783,023
|
|
Warrants related to the issuance of 2018 convertible senior notes
|
7,783,023
|
|
|
7,783,023
|
|
2022 convertible senior notes
|
5,806,933
|
|
|
—
|
|
Warrants related to the issuance of 2022 convertible senior notes
|
5,806,933
|
|
|
—
|
|
Total potentially dilutive securities
|
43,968,377
|
|
|
35,236,454
|
|
|
Leases, net of Sublease Income
|
|
Purchase
Obligations(1)
|
|
Other
|
|
Total
|
||||||||
Years Ending December 31,
|
|
|
|
|
|
|
|
||||||||
Remainder of 2017
|
$
|
10,235
|
|
|
$
|
9,988
|
|
|
$
|
141
|
|
|
$
|
20,364
|
|
2018
|
44,460
|
|
|
35,984
|
|
|
565
|
|
|
81,009
|
|
||||
2019
|
45,906
|
|
|
16,599
|
|
|
565
|
|
|
63,070
|
|
||||
2020
|
45,688
|
|
|
7,845
|
|
|
565
|
|
|
54,098
|
|
||||
2021
|
44,204
|
|
|
5,605
|
|
|
565
|
|
|
50,374
|
|
||||
Thereafter
|
161,530
|
|
|
2,144
|
|
|
1,605
|
|
|
165,279
|
|
||||
Total
|
$
|
352,023
|
|
|
$
|
78,165
|
|
|
$
|
4,006
|
|
|
$
|
434,194
|
|
(1)
|
Consists of future minimum payments under non-cancelable purchase commitments primarily related to data center and IT operations and sales and marketing activities. Not included in the table above are certain purchase commitments related to our future annual Knowledge user conferences and other customer or sales conferences. If we were to cancel these contractual commitments as of September 30, 2017, we would have been obligated to pay cancellation penalties of approximately $22.9 million in aggregate, of which $9.8 million is related to our Knowledge user conference in May 2018.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
North America (1)
|
$
|
329,582
|
|
|
$
|
239,585
|
|
|
$
|
937,426
|
|
|
$
|
684,111
|
|
EMEA (2)
|
127,518
|
|
|
90,399
|
|
|
340,054
|
|
|
246,745
|
|
||||
Asia Pacific and other
|
41,070
|
|
|
27,672
|
|
|
109,176
|
|
|
73,991
|
|
||||
Total revenues
|
$
|
498,170
|
|
|
$
|
357,656
|
|
|
$
|
1,386,656
|
|
|
$
|
1,004,847
|
|
|
September 30,
|
|
December 31,
|
||||
|
2017
|
|
2016
|
||||
North America(3)
|
$
|
160,813
|
|
|
$
|
132,671
|
|
EMEA(2)
|
50,692
|
|
|
37,449
|
|
||
Asia Pacific and other
|
19,799
|
|
|
11,500
|
|
||
Total property and equipment, net
|
$
|
231,304
|
|
|
$
|
181,620
|
|
(1)
|
Revenues attributed to the United States were approximately 94% of North America revenues for the three and nine months ended September 30, 2017 and approximately 95% of North America revenues for the three and nine months ended September 30, 2016.
|
(2)
|
Europe, the Middle East and Africa
|
(3)
|
Property and equipment, net attributed to the United States were approximately 88% and 92% of property and equipment, net attributable to North America as of September 30, 2017 and December 31, 2016, respectively.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Service Management solutions
|
$
|
399,795
|
|
|
$
|
290,005
|
|
|
$
|
1,097,177
|
|
|
$
|
799,278
|
|
IT Operations Management solutions
|
55,626
|
|
|
28,929
|
|
|
145,386
|
|
|
77,757
|
|
||||
Total subscription revenues
|
$
|
455,421
|
|
|
$
|
318,934
|
|
|
$
|
1,242,563
|
|
|
$
|
877,035
|
|
|
Three Months Ended September 30,
|
|
% Change
|
|
Nine Months Ended September 30,
|
|
% Change
|
||||||||||||||
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
|
||||||||||||
|
(dollars in thousands)
|
|
|
|
(dollars in thousands)
|
|
|
||||||||||||||
Billings:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenues
|
$
|
498,170
|
|
|
$
|
357,656
|
|
|
39
|
%
|
|
$
|
1,386,656
|
|
|
$
|
1,004,847
|
|
|
38
|
%
|
Change in deferred revenue from the condensed consolidated statements of cash flows
|
47,932
|
|
|
46,620
|
|
|
3
|
%
|
|
193,594
|
|
|
151,019
|
|
|
28
|
%
|
||||
Total billings
|
$
|
546,102
|
|
|
$
|
404,276
|
|
|
35
|
%
|
|
$
|
1,580,250
|
|
|
$
|
1,155,866
|
|
|
37
|
%
|
•
|
Billings duration. While we typically bill customers annually for our subscription services, customers sometimes request, and we accommodate, billings with durations less or greater than the typical 12-month term.
|
•
|
Contract start date. From time to time, we enter into contracts with a contract start date in the future, and we exclude these amounts from billings as these amounts are not included in our condensed consolidated balance sheets, unless such amounts have been paid as of the balance sheet date.
|
•
|
Foreign currency exchange rates. While a majority of our billings have historically been in U.S. Dollars, an increasing percentage of our billings in recent periods has been in foreign currencies, particularly the Euro and British Pound Sterling.
|
•
|
Timing of contract renewals. While customers typically renew their contracts at the end of the contract term, from time to time customers may do so either before or after the scheduled expiration date. For example, in cases where we are successful in upselling additional products or services, a customer may decide to renew its existing contract early to ensure that all its contracts expire on the same date. In other cases, prolonged negotiations or other factors may result in a contract not being renewed until after it has expired.
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Free cash flow:
|
|
|
|
|
|
|||||
Net cash provided by operating activities
|
$
|
458,039
|
|
|
$
|
27,234
|
|
|
NM
|
|
Purchases of property and equipment
|
(115,856
|
)
|
|
(84,112
|
)
|
|
38
|
%
|
||
Free cash flow (1)
|
$
|
342,183
|
|
|
$
|
(56,878
|
)
|
|
NM
|
|
(1)
|
Free cash flow includes the effect of a $267.5 million payment for legal settlement during the nine months ended September 30, 2016. Refer to Note 15 in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Subscription
|
$
|
455,421
|
|
|
$
|
318,934
|
|
|
$
|
1,242,563
|
|
|
$
|
877,035
|
|
Professional services and other
|
42,749
|
|
|
38,722
|
|
|
144,093
|
|
|
127,812
|
|
||||
Total revenues
|
498,170
|
|
|
357,656
|
|
|
1,386,656
|
|
|
1,004,847
|
|
||||
Cost of revenues(1):
|
|
|
|
|
|
|
|
||||||||
Subscription
|
81,878
|
|
|
61,566
|
|
|
228,046
|
|
|
170,707
|
|
||||
Professional services and other
|
45,402
|
|
|
41,271
|
|
|
137,366
|
|
|
123,039
|
|
||||
Total cost of revenues
|
127,280
|
|
|
102,837
|
|
|
365,412
|
|
|
293,746
|
|
||||
Gross profit
|
370,890
|
|
|
254,819
|
|
|
1,021,244
|
|
|
711,101
|
|
||||
Operating expenses(1):
|
|
|
|
|
|
|
|
||||||||
Sales and marketing
|
227,015
|
|
|
166,491
|
|
|
686,325
|
|
|
511,607
|
|
||||
Research and development
|
98,465
|
|
|
75,018
|
|
|
272,959
|
|
|
211,306
|
|
||||
General and administrative
|
52,465
|
|
|
40,085
|
|
|
150,242
|
|
|
117,393
|
|
||||
Legal settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
270,000
|
|
||||
Total operating expenses
|
377,945
|
|
|
281,594
|
|
|
1,109,526
|
|
|
1,110,306
|
|
||||
Loss from operations
|
(7,055
|
)
|
|
(26,775
|
)
|
|
(88,282
|
)
|
|
(399,205
|
)
|
||||
Interest expense
|
(16,566
|
)
|
|
(8,389
|
)
|
|
(36,581
|
)
|
|
(24,746
|
)
|
||||
Interest income and other income (expense), net
|
853
|
|
|
1,783
|
|
|
739
|
|
|
4,745
|
|
||||
Loss before income taxes
|
(22,768
|
)
|
|
(33,381
|
)
|
|
(124,124
|
)
|
|
(419,206
|
)
|
||||
Provision for (benefit from) income taxes
|
1,420
|
|
|
2,877
|
|
|
(2,801
|
)
|
|
9
|
|
||||
Net loss
|
$
|
(24,188
|
)
|
|
$
|
(36,258
|
)
|
|
$
|
(121,323
|
)
|
|
$
|
(419,215
|
)
|
(1)
|
Stock-based compensation included in the statements of operations above was as follows:
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Cost of revenues:
|
|
|
|
|
|
|
|
||||||||
Subscription
|
$
|
8,980
|
|
|
$
|
7,140
|
|
|
$
|
25,860
|
|
|
$
|
20,698
|
|
Professional services and other
|
7,056
|
|
|
7,150
|
|
|
21,622
|
|
|
20,045
|
|
||||
Sales and marketing
|
43,962
|
|
|
31,898
|
|
|
124,650
|
|
|
95,757
|
|
||||
Research and development
|
23,092
|
|
|
21,376
|
|
|
67,624
|
|
|
62,956
|
|
||||
General and administrative
|
17,352
|
|
|
13,523
|
|
|
48,695
|
|
|
35,004
|
|
||||
Total stock-based compensation
|
$
|
100,442
|
|
|
$
|
81,087
|
|
|
$
|
288,451
|
|
|
$
|
234,460
|
|
(1)
|
Stock-based compensation included in the statements of operations above as a percentage of revenues was as follows:
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Cost of revenues:
|
|
|
|
|
|
|
|
||||
Subscription
|
2
|
%
|
|
2
|
%
|
|
2
|
%
|
|
2
|
%
|
Professional services and other
|
1
|
|
|
2
|
|
|
2
|
|
|
2
|
|
Sales and marketing
|
9
|
|
|
9
|
|
|
9
|
|
|
10
|
|
Research and development
|
5
|
|
|
6
|
|
|
5
|
|
|
6
|
|
General and administrative
|
3
|
|
|
4
|
|
|
3
|
|
|
3
|
|
Total stock-based compensation
|
20
|
%
|
|
23
|
%
|
|
21
|
%
|
|
23
|
%
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Revenues:
|
|
|
|
|
|
|||||
Subscription
|
$
|
455,421
|
|
|
$
|
318,934
|
|
|
43
|
%
|
Professional services and other
|
42,749
|
|
|
38,722
|
|
|
10
|
%
|
||
Total revenues
|
$
|
498,170
|
|
|
$
|
357,656
|
|
|
39
|
%
|
Percentage of revenues:
|
|
|
|
|
|
|||||
Subscription
|
91
|
%
|
|
89
|
%
|
|
|
|||
Professional services and other
|
9
|
%
|
|
11
|
%
|
|
|
|||
Total
|
100
|
%
|
|
100
|
%
|
|
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Service Management solutions
|
$
|
399,795
|
|
|
$
|
290,005
|
|
|
38
|
%
|
IT Operations Management solutions
|
55,626
|
|
|
28,929
|
|
|
92
|
%
|
||
Total subscription revenues
|
$
|
455,421
|
|
|
$
|
318,934
|
|
|
43
|
%
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Cost of revenues:
|
|
|
|
|
|
|||||
Subscription
|
$
|
81,878
|
|
|
$
|
61,566
|
|
|
33
|
%
|
Professional services and other
|
45,402
|
|
|
41,271
|
|
|
10
|
%
|
||
Total cost of revenues
|
$
|
127,280
|
|
|
$
|
102,837
|
|
|
24
|
%
|
Gross profit (loss) percentage:
|
|
|
|
|
|
|||||
Subscription
|
82
|
%
|
|
81
|
%
|
|
|
|||
Professional services and other
|
(6
|
)%
|
|
(7
|
)%
|
|
|
|||
Total gross profit percentage
|
74
|
%
|
|
71
|
%
|
|
|
|||
Gross Profit
|
$
|
370,890
|
|
|
$
|
254,819
|
|
|
|
|
Headcount (at period end)
|
|
|
|
|
|
|||||
Subscription
|
886
|
|
|
691
|
|
|
28
|
%
|
||
Professional services and other
|
555
|
|
|
504
|
|
|
10
|
%
|
||
Total headcount
|
1,441
|
|
|
1,195
|
|
|
21
|
%
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Sales and marketing
|
$
|
227,015
|
|
|
$
|
166,491
|
|
|
36
|
%
|
Percentage of revenues
|
46
|
%
|
|
47
|
%
|
|
|
|||
Headcount (at period end)
|
2,279
|
|
|
1,740
|
|
|
31
|
%
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Research and development
|
$
|
98,465
|
|
|
$
|
75,018
|
|
|
31
|
%
|
Percentage of revenues
|
19
|
%
|
|
21
|
%
|
|
|
|||
Headcount (at period end)
|
1,322
|
|
|
970
|
|
|
36
|
%
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
General and administrative
|
$
|
52,465
|
|
|
$
|
40,085
|
|
|
31
|
%
|
Percentage of revenues
|
10
|
%
|
|
11
|
%
|
|
|
|||
Headcount (at period end)
|
853
|
|
|
596
|
|
|
43
|
%
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Cost of revenues:
|
|
|
|
|
|
|||||
Subscription
|
$
|
8,980
|
|
|
$
|
7,140
|
|
|
26
|
%
|
Professional services and other
|
7,056
|
|
|
7,150
|
|
|
(1
|
)%
|
||
Sales and marketing
|
43,962
|
|
|
31,898
|
|
|
38
|
%
|
||
Research and development
|
23,092
|
|
|
21,376
|
|
|
8
|
%
|
||
General and administrative
|
17,352
|
|
|
13,523
|
|
|
28
|
%
|
||
Total stock-based compensation
|
$
|
100,442
|
|
|
$
|
81,087
|
|
|
24
|
%
|
Percentage of revenues
|
20
|
%
|
|
23
|
%
|
|
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Interest expense
|
$
|
16,566
|
|
|
$
|
8,389
|
|
|
97
|
%
|
Percentage of revenues
|
4
|
%
|
|
2
|
%
|
|
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Interest income
|
$
|
4,546
|
|
|
$
|
2,049
|
|
|
122
|
%
|
Foreign currency exchange loss
|
(4,119
|
)
|
|
(303
|
)
|
|
NM
|
|
||
Other
|
426
|
|
|
37
|
|
|
NM
|
|
||
Interest and other income (expense), net
|
$
|
853
|
|
|
$
|
1,783
|
|
|
NM
|
|
Percentage of revenues
|
—
|
%
|
|
—
|
%
|
|
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Loss before income taxes
|
$
|
(22,768
|
)
|
|
$
|
(33,381
|
)
|
|
(32
|
)%
|
Provision for income taxes
|
1,420
|
|
|
2,877
|
|
|
(51
|
)%
|
||
Effective tax rate
|
(6
|
)%
|
|
(9
|
)%
|
|
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Net loss
|
$
|
(24,188
|
)
|
|
$
|
(36,258
|
)
|
|
(33
|
)%
|
Percentage of revenues
|
(5
|
)%
|
|
(10
|
)%
|
|
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Revenues:
|
|
|
|
|
|
|||||
Subscription
|
$
|
1,242,563
|
|
|
$
|
877,035
|
|
|
42
|
%
|
Professional services and other
|
144,093
|
|
|
127,812
|
|
|
13
|
%
|
||
Total revenues
|
$
|
1,386,656
|
|
|
$
|
1,004,847
|
|
|
38
|
%
|
Percentage of revenues:
|
|
|
|
|
|
|||||
Subscription
|
90
|
%
|
|
87
|
%
|
|
|
|||
Professional services and other
|
10
|
%
|
|
13
|
%
|
|
|
|||
Total
|
100
|
%
|
|
100
|
%
|
|
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Service Management solutions
|
$
|
1,097,177
|
|
|
$
|
799,278
|
|
|
37
|
%
|
IT Operations Management solutions
|
145,386
|
|
|
77,757
|
|
|
87
|
%
|
||
Total subscription revenues
|
$
|
1,242,563
|
|
|
$
|
877,035
|
|
|
42
|
%
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Cost of revenues:
|
|
|
|
|
|
|||||
Subscription
|
$
|
228,046
|
|
|
$
|
170,707
|
|
|
34
|
%
|
Professional services and other
|
137,366
|
|
|
123,039
|
|
|
12
|
%
|
||
Total cost of revenues
|
$
|
365,412
|
|
|
$
|
293,746
|
|
|
24
|
%
|
Gross profit percentage:
|
|
|
|
|
|
|||||
Subscription
|
82
|
%
|
|
81
|
%
|
|
|
|||
Professional services and other
|
5
|
%
|
|
4
|
%
|
|
|
|||
Total gross profit percentage
|
74
|
%
|
|
71
|
%
|
|
|
|||
Gross Profit
|
$
|
1,021,244
|
|
|
$
|
711,101
|
|
|
|
|
Headcount (at period end)
|
|
|
|
|
|
|||||
Subscription
|
886
|
|
|
691
|
|
|
28
|
%
|
||
Professional services and other
|
555
|
|
|
504
|
|
|
10
|
%
|
||
Total headcount
|
1,441
|
|
|
1,195
|
|
|
21
|
%
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Sales and marketing
|
$
|
686,325
|
|
|
$
|
511,607
|
|
|
34
|
%
|
Percentage of revenues
|
49
|
%
|
|
51
|
%
|
|
|
|||
Headcount (at period end)
|
2,279
|
|
|
1,740
|
|
|
31
|
%
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Research and development
|
$
|
272,959
|
|
|
$
|
211,306
|
|
|
29
|
%
|
Percentage of revenues
|
19
|
%
|
|
21
|
%
|
|
|
|||
Headcount (at period end)
|
1,322
|
|
|
970
|
|
|
36
|
%
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
General and administrative
|
$
|
150,242
|
|
|
$
|
117,393
|
|
|
28
|
%
|
Percentage of revenues
|
12
|
%
|
|
12
|
%
|
|
|
|||
Headcount (at period end)
|
853
|
|
|
596
|
|
|
43
|
%
|
|
Nine Months Ended September 30,
|
|
% Change
|
||||||
|
2017
|
|
2016
|
|
|||||
|
(dollars in thousands)
|
|
|
||||||
Legal settlements
|
$
|
—
|
|
|
$
|
270,000
|
|
|
NM
|
Percentage of revenues
|
NM
|
|
|
27
|
%
|
|
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Cost of revenues:
|
|
|
|
|
|
|||||
Subscription
|
$
|
25,860
|
|
|
$
|
20,698
|
|
|
25
|
%
|
Professional services and other
|
21,622
|
|
|
20,045
|
|
|
8
|
%
|
||
Sales and marketing
|
124,650
|
|
|
95,757
|
|
|
30
|
%
|
||
Research and development
|
67,624
|
|
|
62,956
|
|
|
7
|
%
|
||
General and administrative
|
48,695
|
|
|
35,004
|
|
|
39
|
%
|
||
Total stock-based compensation
|
$
|
288,451
|
|
|
$
|
234,460
|
|
|
23
|
%
|
Percentage of revenues
|
21
|
%
|
|
23
|
%
|
|
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Interest expense
|
$
|
36,581
|
|
|
$
|
24,746
|
|
|
48
|
%
|
Percentage of revenues
|
3
|
%
|
|
2
|
%
|
|
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Interest income
|
$
|
10,268
|
|
|
$
|
5,838
|
|
|
76
|
%
|
Foreign currency exchange loss
|
(10,280
|
)
|
|
(1,262
|
)
|
|
715
|
%
|
||
Other
|
751
|
|
|
169
|
|
|
344
|
%
|
||
Interest and other income (expense), net
|
$
|
739
|
|
|
$
|
4,745
|
|
|
NM
|
|
Percentage of revenues
|
—
|
%
|
|
—
|
%
|
|
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Loss before income taxes
|
$
|
(124,124
|
)
|
|
$
|
(419,206
|
)
|
|
(70
|
)%
|
Provision for (benefit from) income taxes
|
(2,801
|
)
|
|
9
|
|
|
NM
|
|
||
Effective tax rate
|
2
|
%
|
|
—
|
%
|
|
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2017
|
|
2016
|
|
||||||
|
(dollars in thousands)
|
|
|
|||||||
Net loss
|
$
|
(121,323
|
)
|
|
$
|
(419,215
|
)
|
|
(71
|
)%
|
Percentage of revenues
|
(9
|
)%
|
|
(42
|
)%
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
|
(dollars in thousands)
|
||||||
Net cash provided by operating activities
|
$
|
458,039
|
|
|
$
|
27,234
|
|
Net cash used in investing activities
|
(366,403
|
)
|
|
(79,138
|
)
|
||
Net cash provided by (used in) financing activities
|
586,118
|
|
|
(34,865
|
)
|
||
Net increase (decrease) in cash and cash equivalents, net of foreign currency effect on cash and cash equivalents
|
703,633
|
|
|
(87,238
|
)
|
•
|
our ability to attract new customers, retain and increase sales to existing customers, and satisfy our customers’ requirements;
|
•
|
changes in our mix of products and services;
|
•
|
changes in foreign currency exchange rates;
|
•
|
the rate of expansion and productivity of our sales force;
|
•
|
the number of new employees added;
|
•
|
the cost, timing and management effort for our development of new products and services;
|
•
|
general economic conditions that may adversely affect either our customers’ ability or willingness to purchase additional subscriptions, delay a prospective customer’s purchasing decision, reduce the value of new subscription contracts or adversely affect renewal rates;
|
•
|
the amount and timing of operating costs and capital expenditures related to the operation and expansion of our business;
|
•
|
seasonality in terms of when we enter into customer agreements for our services;
|
•
|
the length of the sales cycle for our services;
|
•
|
changes to our management team;
|
•
|
changes in our pricing policies, whether initiated by us or as a result of competition;
|
•
|
significant security breaches, technical difficulties or interruptions of our services;
|
•
|
new solutions, products or changes in pricing policies introduced by our competitors;
|
•
|
changes in effective tax rates;
|
•
|
changes in the average contract term of our customer agreements and changes in billings duration;
|
•
|
changes in our renewal and upsell rates;
|
•
|
the timing of customer payments and payment defaults by customers;
|
•
|
extraordinary expenses such as litigation costs or damages, including settlement payments;
|
•
|
the costs associated with acquiring new businesses and technologies and the follow-on costs of integration, including the tax effects of acquisitions;
|
•
|
the impact of new accounting pronouncements, including the new revenue recognition standards that are effective for us beginning January 1, 2018;
|
•
|
changes in laws or regulations impacting the delivery of our services;
|
•
|
the amount and timing of stock awards and the related financial statement expenses; and
|
•
|
our ability to accurately estimate the total addressable market for our products and services.
|
•
|
compliance with multiple, conflicting and changing governmental laws and regulations, including employment, tax, competition, privacy and data protection laws and regulations;
|
•
|
compliance by us and our business partners with international bribery and anti-corruption laws, including the UK Bribery Act and the Foreign Corrupt Practices Act;
|
•
|
the risk that illegal or unethical activities of our business partners will be attributed to or result in liability to us;
|
•
|
longer and potentially more complex sales cycles;
|
•
|
longer accounts receivable payment cycles and other collection difficulties;
|
•
|
tax treatment of revenues from international sources and changes to tax codes, including being subject to foreign tax laws and being liable for paying withholding, income or other taxes in foreign jurisdictions;
|
•
|
different pricing and distribution environments;
|
•
|
foreign currency fluctuations which may cause transactional and translational remeasurement losses;
|
•
|
potential changes in international trade policies and agreements;
|
•
|
local business practices and cultural norms that may favor local competitors; and
|
•
|
localization of our services, including translation into foreign languages and associated expenses.
|
•
|
assimilating or integrating the businesses, technologies, products, personnel or operations of the acquired companies;
|
•
|
failing to achieve the expected benefits of the acquisition or investment;
|
•
|
potential loss of key employees of the acquired company;
|
•
|
inability to maintain relationships with customers and partners of the acquired business;
|
•
|
unanticipated expenses related to acquired technology and its integration into our existing technology;
|
•
|
potential adverse tax consequences;
|
•
|
inability to generate sufficient revenue to offset acquisition or investment costs;
|
•
|
disruption to our business and diversion of management attention and other resources;
|
•
|
potential financial and credit risks associated with acquired customers;
|
•
|
dependence on acquired technologies or licenses for which alternatives may not be available to us without significant cost or complexity;
|
•
|
in the case of foreign acquisitions, the challenges associated with integrating operations across different cultures and languages and any currency and regulatory risks associated with specific countries; and
|
•
|
potential unknown liabilities associated with the acquired businesses.
|
•
|
changes in the estimates of our operating results or changes in recommendations by securities analysts that elect to follow our common stock;
|
•
|
announcements of new products, services or technologies, new applications or enhancements to services, strategic alliances, acquisitions, or other significant events by us or by our competitors;
|
•
|
fluctuations in the valuation of companies perceived by investors to be comparable to us, such as high-growth or cloud companies;
|
•
|
changes to our management team;
|
•
|
trading activity by directors, executive officers and significant stockholders, or the perception in the market that the holders of a large number of shares intend to sell their shares;
|
•
|
the size of our market float;
|
•
|
the volume of trading in our common stock, including sales upon exercise of outstanding options or vesting of equity awards or sales and purchases of any common stock issued upon conversion of the 2022 Notes or 2018 Notes or in connection with the 2022 Note Hedge and 2022 Warrant transactions relating to the 2022 Notes, or 2018 Note Hedge and 2018 Warrant transactions relating to the 2018 Notes;
|
•
|
the economy as a whole, market conditions in our industry, and the industries of our customers; and
|
•
|
overall performance of the equity markets.
|
•
|
establish a classified board of directors so that not all members of our board are elected at one time;
|
•
|
permit the board of directors to establish the number of directors;
|
•
|
provide that directors may only be removed “for cause” and only with the approval of 66 2/3% of our stockholders;
|
•
|
require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws;
|
•
|
authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan;
|
•
|
eliminate the ability of our stockholders to call special meetings of stockholders;
|
•
|
prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
|
•
|
provide that the board of directors is expressly authorized to make, alter or repeal our restated bylaws; and
|
•
|
establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings (though our restated bylaws have implemented stockholder proxy access).
|
Exhibit
Number
|
|
Description of Document
|
|
Incorporated by Reference
|
|
Filed
|
||||
Form
|
|
File No.
|
|
Exhibit
|
|
Herewith
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
8-K
|
|
171153208
|
|
3.1
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
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X
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X
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X
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X
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101.INS
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XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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X
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101.SCH
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XBRL Taxonomy Extension Schema Document.
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X
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document.
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X
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document.
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X
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document.
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X
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document.
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X
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SERVICENOW, INC.
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||
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Date: November 6, 2017
|
By:
|
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/s/ John J. Donahoe
|
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John J. Donahoe
|
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|
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President and Chief Executive Officer
|
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(On behalf of the Registrant)
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Date: November 6, 2017
|
By:
|
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/s/ Michael P. Scarpelli
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Michael P. Scarpelli
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Chief Financial Officer
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(As Principal Financial and Accounting Officer)
|
1.
|
Position. You will continue to serve as the Company’s Chief Product Officer reporting to the Company’s Chief Executive Officer (the “CEO”). You will have all of the duties, responsibilities and authority commensurate with the position. Your employment with the Company commenced on December 12, 2016 (your “Start Date”). Your office will be at the Company’s headquarters, currently located in Santa Clara, CA. You will be expected to devote your full working time and attention to the business of the Company.
|
2.
|
Term. Subject to the terms of this Agreement, this Agreement will remain in effect for a period commencing on the Start Date and continuing until termination of your employment as set forth herein (the “Employment Term”).
|
3.
|
Cash Compensation.
|
a.
|
Base Salary. Your current annual base salary (the “Base Salary”) as of the Effective Date will be four hundred fifty thousand dollars ($450,000), less required deductions and withholdings, payable in accordance with the Company’s normal payroll practices. Your Base Salary will be subject to adjustment by the Leadership Development and Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”). Your Base Salary will be pro-rated for any partial years of employment during your Employment Term.
|
b.
|
Target Bonus. During the Employment Term, you will be eligible to participate in our executive corporate bonus program. Your current annual bonus target is sixty seven (67%) of your Base Salary, which equals three hundred thousand dollars ($300,000) for the applicable fiscal year (your “Target Bonus”). Whether you receive the Target Bonus, and the amount of any actual bonus amount awarded (your “Actual Bonus”), will be determined by the Compensation Committee in its sole discretion based in all cases upon the achievement of both Company and individual performance objectives as established by the Compensation Committee. To earn any Actual Bonus, you must be employed by the Company on the last day of the period to which such bonus relates and at the time bonuses are paid, except as otherwise provided herein. Your bonus participation will be subject to all the terms, conditions and restrictions of the applicable Company bonus plan, as amended from time to time. The Actual Bonus shall be subject to required deductions and withholdings.
|
4.
|
Benefits, Vacation & Expenses.
|
a.
|
You will be entitled to participate in all employee retirement, welfare, insurance, benefit and vacation programs of the Company as are in effect from time to time and in which other senior executives of the Company are eligible to participate, on the same terms as such other senior executives, pursuant to the governing plan documents.
|
b.
|
The Company will, in accordance with applicable Company policies and guidelines, reimburse you for all reasonable and necessary expenses incurred by you in connection with your performance of services on behalf of the Company.
|
5.
|
Equity Awards.
|
a.
|
Prior Equity Awards. The Company has previously granted you equity awards under the Company’s 2012 Equity Incentive Plan (the “Equity Plan”). Such awards will continue to be subject to their existing terms and any additional terms set forth in this Agreement.
|
b.
|
Future Equity. You may be eligible for future equity grants as determined by and pursuant to the terms established by the Compensation Committee. The amount and performance metrics for subsequent performance-based restricted stock units will be determined by the Compensation Committee.
|
6.
|
Definitions. As used in this Agreement, the following terms have the following meanings.
|
a.
|
Cause. For purposes of this Agreement, “Cause” for the Company to terminate your employment hereunder shall mean the occurrence of any of the following events, as determined by the Company in its sole and absolute discretion:
|
i.
|
your conviction of, or plea of nolo contendere to, any felony or any crime involving fraud, dishonesty or moral turpitude;
|
ii.
|
your commission of or participation in a fraud or act of dishonesty against the Company that results in (or would reasonably be expected to result in) material harm to the business of the Company;
|
iii.
|
your intentional, material violation of any contract or agreement between you and the Company or any statutory duty you owe to the Company or the improper disclosure of confidential information (as defined in the Company’s standard confidentiality agreement);
|
iv.
|
your conduct that constitutes gross insubordination, incompetence or habitual neglect of duties and that results in (or would reasonably be expected to result in) material harm to the business of the Company;
|
v.
|
your material failure to perform the duties of your position as Chief Product Officer;
|
vi.
|
your material failure to follow the Company’s material policies; or
|
vii.
|
your failure to cooperate with the Company in any investigation or formal proceeding;
|
b.
|
Change in Control. For purposes of this Agreement, “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events (excluding in any case transactions in which the Company or its successors issues securities to investors primarily for capital raising purposes):
|
i.
|
the acquisition by a third party of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction;
|
ii.
|
a merger, consolidation or similar transaction following which the stockholders of the Company immediately prior thereto do not own at least fifty percent (50%) of the combined outstanding voting power of the surviving entity (or that entity’s parent) in such merger, consolidation or similar transaction;
|
iii.
|
the dissolution or liquidation of the Company; or
|
iv.
|
the sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.
|
c.
|
COBRA. For purposes of this Agreement, “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
|
d.
|
Code. For purposes of this Agreement, “Code” means the Internal Revenue Code of 1986, as amended.
|
e.
|
Disability. For purposes of this Agreement, “Disability” shall have that meaning set forth in Section 22(e)(3) of the Code.
|
f.
|
Good Reason. For purposes of this Agreement, “Good Reason” for you to terminate your employment hereunder shall mean the occurrence of any of the following events without your consent:
|
i.
|
any material diminution in your authority, duties or responsibilities as in effect immediately prior to such reduction or a material diminution in the authority, duties or responsibilities of the person or persons to whom you are required to report;
|
ii.
|
a material reduction by the Company in your annual Base Salary or Target Bonus, as initially set forth herein or as increased thereafter; provided, however, that Good Reason shall not be deemed to have occurred in the event of a reduction in your annual Base Salary or Target Bonus that is pursuant to a salary or bonus reduction program affecting substantially all of the employees of the Company or substantially all similarly situated executive employees and that does not adversely affect you to a greater extent than other similarly situated employees;
|
iii.
|
a relocation of your business office to a location that would increase your one-way commute distance by more than thirty-five (35) miles from the current location at which you performed your duties immediately prior to the relocation, except for required travel by you on the Company’s business to an extent substantially consistent with your business travel obligations prior to the relocation; or
|
iv.
|
failure of a successor entity to assume this Agreement;
|
7.
|
Effect of Termination of Employment.
|
a.
|
Termination by the Company for Cause, Death or Disability or Resignation without Good Reason. In the event your employment is terminated by the Company for Cause, your employment terminates due to your death or Disability (which termination may be implemented by written notice by the Company if you have a Disability), or you resign your employment other than for Good Reason, you will be paid only: (i) any earned but unpaid Base Salary; (ii) except in the case of termination for Cause or resignation without Good Reason, the amount of any Actual Bonus earned and payable from a prior bonus period which remains unpaid by the Company as of the date of the termination of employment determined in good faith in accordance with customary practice, to be paid at the same time as bonuses are paid for that period to other eligible executives; (iii) other unpaid and then-vested amounts, including any amount payable to you under the specific terms of any agreements, plans or awards, including insurance and health and benefit plans in which you participate, unless otherwise specifically provided in this Agreement; and (iv) reimbursement for all reasonable and necessary expenses incurred by you in connection with your performance of services on behalf of the Company in accordance with applicable Company policies and guidelines, in each case as of the effective date of such termination of employment (the “Accrued Compensation”).
|
b.
|
Termination without Cause or Resignation for Good Reason, Absent a Change in Control. During the time period from the Effective Date through the third (3rd) anniversary of the Effective Date, if the Company terminates your employment without Cause or you resign your employment for Good Reason, in either case not in connection with a Change in Control (which is dealt with in Section 7(c) below), provided that (except with respect to the Accrued Compensation) you deliver to the Company a signed general release of claims in favor of the Company on the Company’s standard form of release (the “Release”) and satisfy all conditions to make the Release effective within sixty (60) days following your termination of employment, then, you shall be entitled to:
|
i.
|
the Accrued Compensation; and
|
ii.
|
a lump sum payment equal to six (6) months of your then-current Base Salary, less required deductions and withholdings;
|
iii.
|
a lump sum payment equal to fifty percent (50%) of your Actual Bonus for the then-current fiscal year based on: (x) actual achievement of Company performance objectives and (y) deemed 100% achievement of personal performance objectives, if any, less any quarterly payment previously paid, if any, subject to required deductions and withholdings and paid when annual bonuses are otherwise paid to active employees, but no later than March 15th of the year following the year in which the termination of employment occurs; and
|
iv.
|
a payment of the COBRA premiums (or reimbursement to you of such premiums) for continued health coverage for you and your dependents for a period of six (6) months.
|
c.
|
Termination without Cause or Resignation for Good Reason, in Connection with a Change in Control. During the time period from the Effective Date through the third (3rd) anniversary of the Effective Date, in the event a Change in Control occurs and if the Company terminates your employment without Cause or if you resign your employment for Good Reason, in either case within the period beginning three (3) months before, and ending twelve (12) months following, such Change in Control; and provided that (except with respect to the Accrued Compensation) you deliver to the Company the signed Release and satisfy all conditions to make the Release effective within sixty (60) days following your termination of employment, then, (in lieu of any benefits pursuant to Section 7(b)), you shall be entitled to:
|
i.
|
the Accrued Compensation;
|
ii.
|
a lump sum payment equal to six (6) months of your then-current Base Salary, less required deductions and withholdings;
|
iii.
|
a lump sum payment equal to fifty percent (50%) of your Target Bonus for the then-current fiscal year less any quarterly payment previously paid, if any, subject to required deductions and withholdings;
|
iv.
|
a payment of the COBRA premiums (or reimbursement to you of such premiums) for continued health coverage for you and your dependents for a period of six (6) months; and
|
v.
|
immediate acceleration of one hundred percent (100%) of the number of then-unvested shares subject to equity grants, unless otherwise provided (and to the extent specified) by the terms of such grants.
|
d.
|
Miscellaneous. For the avoidance of doubt, the benefits payable pursuant to Sections 7(b) through (c) are mutually exclusive and not cumulative. All lump sum payments provided in this Section 7 shall be made no later than the 60th day following your termination of employment (unless explicitly provided otherwise above). In addition, Sections 7(b) and 7(c) and the benefits conferred therein shall expire and terminate on the third (3rd) anniversary of the Effective Date. Notwithstanding anything to the contrary in this Agreement, (i) any reference herein to a termination of your employment is intended to constitute a “separation from service” within the meaning of Section 409A of the Code, and Section 1.409A-1(h) of the regulations promulgated thereunder, and shall be so construed, and (ii) no payment will be made or become due to you during any period that you continue in a role with the Company that does not constitute a separation from service, and will be paid once you experience a “separation from service” from the Company within the meaning of Section 409A of the Code. In addition, notwithstanding anything to the contrary in this Agreement, upon a termination of your employment, you agree to resign prior to the time you deliver the Release from all positions you may hold with the Company and any of its subsidiaries or affiliated entities at such time, and no payment will be made or become due to you until you resign from all such positions, unless requested otherwise by the Board.
|
8.
|
Parachute Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to you (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section, would be subject to the excise tax imposed by Section 4999 of the Code, then, at your discretion, your severance and other benefits under this Agreement shall be payable either (i) in full, or (ii) as to such lesser amount which would result in no portion of such severance and other benefits being subject to the excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by you on an after-tax basis, of the greatest amount of severance benefits under this Agreement, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Any reduction shall be made in the following manner: first a pro-rata reduction of (i) cash payments subject to Section 409A of the Code as deferred compensation and (ii) cash payments not subject to Section 409A of the Code, and second a pro rata cancellation of (i) equity-based compensation subject to Section 409A of the Code as deferred compensation and (ii) equity-based compensation not subject to Section 409A of the Code, with equity all being reduced in reverse order of vesting and equity not subject to treatment under Treasury regulation 1.280G- Q & A 24(c) being reduced before equity that is so subject. Unless the Company and you otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon you and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and you shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Accountants shall deliver to the Company and you sufficient documentation for you to rely on it for purpose of filing your tax returns. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.
|
9.
|
Section 409A. To the extent (i) any payments to which you become entitled under this Agreement, or any agreement or plan referenced herein, in connection with your termination of employment with the Company constitute deferred compensation subject to Section 409A of the Code and (ii) you are deemed at the time of such termination of employment to be a “specified” employee under Section 409A of the Code, then such payment or payments shall not be made or commence until the earlier of (i) the expiration of the six (6)-month period measured from the date of your “separation from service” (as such term is at the time defined in regulations under Section 409A of the Code) with the Company; or (ii) the date of your death following such separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to you, including (without limitation) the additional twenty percent (20%) tax for which you would otherwise be liable under Section 409A(a)(1)(B) of the Code in the absence of such deferral. Upon the expiration of the applicable deferral period, any payments which would have otherwise been made during that period (whether in a single sum or in installments) in the absence of this paragraph shall be paid to you or your beneficiary in one lump sum (without interest).
|
10.
|
At Will Employment. Employment with the Company is for no specific period of time. Your employment with the Company continues to be “at will,” meaning that either you or the Company may terminate your employment at any time, with or without cause, and with or without advance notice. Any contrary representations that may have been made to you are superseded by this Agreement. This is the full and complete agreement between you and the Company on this term. Although your compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company (other than you).
|
11.
|
Confidential Information and Other Company Policies. You will continue to be bound by and comply fully with your existing At Will Employment, Confidential Information and Invention Assignment Agreement (the “CIIA”) and Arbitration Agreement (the “Arbitration Agreement”) as well as the insider trading policy, code of conduct, and any other policies and programs adopted by the Company regulating the behavior of its employees, as such policies and programs may be amended from time to time to the extent the same are not inconsistent with this Agreement, unless you consent to the same at the time of such amendment.
|
12.
|
Company Records and Confidential Information.
|
a.
|
Records. All records, files, documents and the like, or abstracts, summaries or copies thereof, relating to the business of the Company or the business of any subsidiary or affiliated companies, which the Company or you prepare or use or come into contact with, will remain the sole property of the Company or the affiliated or subsidiary company, as the case may be, and will be promptly returned upon termination of employment.
|
b.
|
Confidentiality. You acknowledge that you have acquired and will acquire knowledge regarding confidential, proprietary and/or trade secret information in the course of performing your responsibilities for the Company, and you further acknowledge that such knowledge and information is the sole and exclusive property of the Company. You recognize that disclosure of such knowledge and information, or use of such knowledge and information, to or by a competitor could cause serious and irreparable harm to the Company.
|
13.
|
Indemnification. You and the Company will enter into the form of indemnification agreement provided to other similarly situated officers of the Company.
|
14.
|
Compensation Recoupment. All amounts payable to you hereunder shall be subject to recoupment pursuant to the Company’s current compensation recoupment policy, and any additional compensation recoupment policy or amendments to the current policy adopted by the Board from time to time hereafter, as allowed by applicable law.
|
15.
|
Miscellaneous.
|
a.
|
Absence of Conflicts; Competition with Prior Employer. You represent that your performance of your duties under this Agreement will not breach any other agreement as to which you are a party. You agree that you have disclosed to the Company all of your existing employment and/or business relationships, including, but not limited to, any consulting or advising relationships, outside directorships, investments in privately held companies, and any other relationships that may create a conflict of interest. You are not to bring with you to the Company, or use or disclose to any person associated with the Company, any confidential or proprietary information belonging to any former employer or other person or entity with respect to which you owe an obligation of confidentiality under any agreement or otherwise. The Company does not need and will not use such information and we will assist you in any way possible to preserve and protect the confidentiality of proprietary information belonging to third parties. Also, we expect you to abide by any obligations to refrain from soliciting any person employed by or otherwise associated with any former employer and suggest that you refrain from having any contact with such persons until such time as any non-solicitation obligation expires.
|
b.
|
Successors. This Agreement is binding on and may be enforced by the Company and its successors and permitted assigns and is binding on and may be enforced by you and your heirs and legal representatives. Any successor to the Company or substantially all of its business (whether by purchase, merger, consolidation or otherwise) will in advance assume in writing and be bound by all of the Company’s obligations under this Agreement and shall be the only permitted assignee.
|
c.
|
Notices. Notices under this Agreement must be in writing and will be deemed to have been given when personally delivered or two days after mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. Mailed notices to you will be addressed to you at the home address which you have most recently communicated to the Company in writing. Notices to the Company will be addressed to the CEO at the Company’s corporate headquarters.
|
d.
|
Waiver. No provision of this Agreement will be modified or waived except in writing signed by you and an officer of the Company duly authorized by its Board or the Compensation Committee. No waiver by either party of any breach of this Agreement by the other party will be considered a waiver of any other breach of this Agreement.
|
e.
|
Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.
|
f.
|
Withholding. All sums payable to you hereunder shall be reduced by all federal, state, local and other withholding and similar taxes and payments required by applicable law.
|
g.
|
Entire Agreement. This Agreement, together with the CIIA and Arbitration Agreement, supersede and replace any prior agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company, including, without limitation, your offer letter with the Company dated December 6, 2016, and constitute the entire agreement between you and the Company concerning the subject matter herein. This Agreement may be amended, or any of its provisions waived, only by a written document executed by both parties in the case of an amendment, or by the party against whom the waiver is asserted.
|
h.
|
Governing Law. This Agreement will be governed by the laws of the State of California without reference to conflict of laws provisions.
|
i.
|
Survival. The provisions of this Agreement shall survive the termination of your employment for any reason to the extent necessary to enable the parties to enforce their respective rights under this Agreement.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of ServiceNow, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: November 6, 2017
|
|
|
/s/ John J. Donahoe
|
|
John J. Donahoe
President and Chief Executive Officer
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of ServiceNow, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: November 6, 2017
|
|
|
/s/ Michael P. Scarpelli
|
|
Michael P. Scarpelli
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
•
|
the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
•
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.
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Date: November 6, 2017
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/s/ John J. Donahoe
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John J. Donahoe
President and Chief Executive Officer
(Principal Executive Officer)
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the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.
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Date: November 6, 2017
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/s/ Michael P. Scarpelli
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Michael P. Scarpelli
Chief Financial Officer
(Principal Financial and Accounting Officer)
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