ServiceNow, Inc. (Form: 10-Q, Received: 10/29/2020 06:09:16)

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2020


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-35580

SERVICENOW, INC.

(Exact name of registrant as specified in its charter)


Delaware						20-2056195
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

2225 Lawson Lane

Santa Clara, California 95054

(Address, including zip code, of registrant’s principal executive offices)

(408) 501-8550

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and formal fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock, par value $0.001 per share

NOW

The New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Table of Contents


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of September 30, 2020, there were approximately 195.1 million shares of the Registrant’s Common Stock outstanding.

TABLE OF CONTENTS


		Page
	PART I
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	1
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019	2
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	4
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40

	PART II
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
	Signatures

Table of Contents

PART I

ITEM 1. FINANCIAL STATEMENTS

SERVICENOW, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)


	September 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	1,348,294	$	775,778
Short-term investments	1,603,317		915,317
Accounts receivable, net	631,055		835,279
Current portion of deferred commissions	202,741		175,039
Prepaid expenses and other current assets	181,474		125,488
Total current assets	3,966,881		2,826,901
Deferred commissions, less current portion	374,438		333,448
Long-term investments	1,259,951		1,013,332
Property and equipment, net	564,007		468,085
Operating lease right-of-use assets	457,726		402,428
Intangible assets, net	155,826		143,850
Goodwill	231,949		156,756
Deferred tax assets	620,890		599,633
Other assets	73,791		77,997
Total assets	$	7,705,459	$	6,022,430
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	51,456	$	52,960
Accrued expenses and other current liabilities	442,288		461,403
Current portion of deferred revenue	2,274,269		2,185,754
Current portion of operating lease liabilities	67,934		52,668

Total current liabilities	2,835,947		2,752,785
Deferred revenue, less current portion	37,749		40,038
Operating lease liabilities, less current portion	429,661		383,221
Long-term debt	1,705,533		694,981
Other long-term liabilities	22,853		23,464
Total liabilities	5,031,743		3,894,489

Stockholders’ equity:
Common stock	195		189
Additional paid-in capital	2,872,335		2,454,741
Accumulated other comprehensive income	51,575		25,255
Accumulated deficit	(250,389)		(352,244)
Total stockholders’ equity	2,673,716		2,127,941
Total liabilities and stockholders’ equity	$	7,705,459	$	6,022,430

See accompanying notes to condensed consolidated financial statements

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SERVICENOW, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues:
Subscription	$	1,091,386	$	834,910	$	3,101,616	$	2,355,885
Professional services and other	60,586		50,923		167,538		152,778
Total revenues	1,151,972		885,833		3,269,154		2,508,663
Cost of revenues(1):
Subscription	189,280		139,330		520,935		401,398
Professional services and other	62,424		61,463		187,074		183,794
Total cost of revenues	251,704		200,793		708,009		585,192
Gross profit	900,268		685,040		2,561,145		1,923,471
Operating expenses(1):
Sales and marketing	453,410		362,975		1,321,163		1,118,279
Research and development	268,292		190,099		740,030		546,041
General and administrative	109,234		75,642		319,019		245,540

Total operating expenses	830,936		628,716		2,380,212		1,909,860
Income from operations	69,332		56,324		180,933		13,611
Interest expense	(7,980)		(8,371)		(25,038)		(24,808)
Interest income and other income (expense), net	(35,919)		12,817		(20,070)		44,196
Income before income taxes	25,433		60,770		135,825		32,999
Provision for income taxes	12,575		20,172		33,970		5,025
Net income	$	12,858	$	40,598	$	101,855	$	27,974

Net income per share - basic	$	0.07	$	0.22	$	0.53	$	0.15
Net income per share - diluted	$	0.06	$	0.21	$	0.50	$	0.14

Weighted-average shares used to compute net income per share - basic	193,237		188,074		193,203		185,676
Weighted-average shares used to compute net income per share - diluted	201,861		197,878		202,837		196,739
Other comprehensive income:
Foreign currency translation adjustments	$	24,937	$	5,507	$	22,121	$	14,732
Unrealized gain (loss) on investments, net of tax	(3,134)		582		4,199		8,934
Other comprehensive income, net of tax	21,803		6,089		26,320		23,666
Comprehensive income	$	34,661	$	46,687	$	128,175	$	51,640

(1)Includes stock-based compensation as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Cost of revenues:
Subscription	$	25,602	$	18,880	$	72,086	$	54,019
Professional services and other	13,054		10,867		37,857		31,749
Operating expenses:
Sales and marketing	78,871		68,712		227,998		200,071
Research and development	74,213		50,636		203,279		144,259
General and administrative	28,189		13,839		83,834		62,046

See accompanying notes to condensed consolidated financial statements

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SERVICENOW, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)


	Three Months Ended September 30, 2020											Three Months Ended September 30, 2019
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Equity		Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Shares	Amount										Shares	Amount
Balance at beginning of period	191,801	$	191	$	2,712,090	$	(263,247)	$	29,772	$	2,478,806	187,462	$	188	$	2,238,782	$	(991,566)	$	13,542	$	1,260,946

Common stock issued under employee stock plans	964	1		58,241		—		—		58,242		1,097	1		41,926		—		—		41,927
Taxes paid related to net share settlement of equity awards	—	—		(122,094)		—		—		(122,094)		—	—		(83,172)		—		—		(83,172)
Stock-based compensation	—	—		220,317		—		—		220,317		—	—		163,085		—		—		163,085

Settlement of 2022 Warrants	2,285	3		(2)		—		—		1		—	—		—		—		—		—
Settlement of 2022 Notes conversion feature	—	—		(1,158,172)		—		—		(1,158,172)		—	—		—		—		—		—
Benefit from exercise of 2022 Note Hedge	—	—		1,161,955		—		—		1,161,955		—	—		—		—		—		—
Other comprehensive income, net of tax	—	—		—		—		21,803		21,803		—	—		—		—		6,089		6,089
Net income	—	—		—		12,858		—		12,858		—	—		—		40,598		—		40,598
Balance at end of period	195,050	$	195	$	2,872,335	$	(250,389)	$	51,575	$	2,673,716	188,559	$	189	$	2,360,621	$	(950,968)	$	19,631	$	1,429,473



	Nine Months Ended September 30, 2020											Nine Months Ended September 30, 2019
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Equity		Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Shares	Amount										Shares	Amount
Balance at beginning of period	189,461	$	189	$	2,454,741	$	(352,244)	$	25,255	$	2,127,941	180,175	$	180	$	2,093,834	$	(978,780)	$	(4,035)	$	1,111,199
Cumulative effect adjustment for Topic 842 adoption	—	—		—		—		—		—		—	—		—		(162)		—		(162)
Common stock issued under employee stock plans	3,304	3		149,293		—		—		149,296		4,101	4		105,232		—		—		105,236
Taxes paid related to net share settlement of equity awards	—	—		(360,645)		—		—		(360,645)		—	—		(330,792)		—		—		(330,792)
Stock-based compensation	—	—		626,056		—		—		626,056		—	—		492,352		—		—		492,352
Settlement of 2018 Warrants	—	—		—		—		—		—		4,283	5		(5)		—		—		—
Settlement of 2022 Warrants	2,285	3		(2)		—		—		1		—	—		—		—		—		—
Settlement of 2022 Notes conversion feature	—	—		(1,180,927)		—		—		(1,180,927)		—	—		—		—		—		—
Benefit from exercise of 2022 Note Hedge	—	—		1,183,819		—		—		1,183,819		—	—		—		—		—		—

Other comprehensive income, net of tax	—	—		—		—		26,320		26,320		—	—		—		—		23,666		23,666
Net income	—	—		—		101,855		—		101,855		—	—		—		27,974		—		27,974
Balance at end of period	195,050	$	195	$	2,872,335	$	(250,389)	$	51,575	$	2,673,716	188,559	$	189	$	2,360,621	$	(950,968)	$	19,631	$	1,429,473

See accompanying notes to condensed consolidated financial statements

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SERVICENOW, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net income	$	101,855	$	27,974
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	243,348		179,783

Amortization of deferred commissions	157,191		122,226
Amortization of debt discount and issuance costs	21,986		24,808
Stock-based compensation	625,054		492,144
Deferred income taxes	(6,440)		(2,842)

Repayments of convertible senior notes attributable to debt discount	(68,509)		—
Loss on extinguishment of 2022 Notes	41,657		—

Other	641		(4,621)
Changes in operating assets and liabilities, net of effect of business combinations:
Accounts receivable	210,275		28,331
Deferred commissions	(221,401)		(158,309)
Prepaid expenses and other assets	(41,696)		(25,569)
Accounts payable	1,792		30,088
Deferred revenue	66,545		135,455
Accrued expenses and other liabilities	(31,224)		(34,707)
Net cash provided by operating activities	1,101,074		814,761
Cash flows from investing activities:
Purchases of property and equipment	(285,327)		(185,889)
Business combinations, net of cash acquired	(107,647)		—
Purchases of intangibles	(6,500)		(37,360)
Purchases of investments	(2,229,085)		(1,255,691)



Sales and maturities of investments	1,298,969		931,453
Realized gains (losses) on derivatives not designated as hedging instruments, net	(763)		21,742
Net cash used in investing activities	(1,330,353)		(525,745)
Cash flows from financing activities:

Net proceeds from borrowings on 2030 Notes	1,481,633		—
Repayments of convertible senior notes attributable to principal	(1,568,866)		—
Net proceeds from unwind of 2022 Note Hedge	1,105,542		—




Proceeds from employee stock plans	142,500		105,227
Taxes paid related to net share settlement of equity awards	(360,670)		(330,802)

Net cash provided by (used in) financing activities	800,139		(225,575)
Foreign currency effect on cash, cash equivalents and restricted cash	2,959		(6,439)
Net increase in cash, cash equivalents and restricted cash	573,819		57,002
Cash, cash equivalents and restricted cash at beginning of period	777,991		568,538
Cash, cash equivalents and restricted cash at end of period	$	1,351,810	$	625,540
Cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	1,348,294	$	622,925
Restricted cash included in prepaid expenses and other current assets	3,516		2,615

Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	1,351,810	$	625,540
Supplemental disclosures of other cash flow information:

Income taxes paid, net of refunds	$	25,416	$	15,856
Non-cash investing and financing activities:
Settlement of 2022 Notes conversion feature	$	79,435	$	—

Benefit from exercise of 2022 Note Hedge	78,277		—
Property and equipment included in accounts payable and accrued expenses	26,931		26,566

See accompanying notes to condensed consolidated financial statements

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SERVICENOW, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Unless the context requires otherwise, references in this report to “ServiceNow,” the “Company,” “we,” “us,” and “our” refer to ServiceNow, Inc. and its consolidated subsidiaries.

(1) Description of the Business

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

(2) Summary of Significant Accounting Policies

Basis of Presentation

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

Principles of Consolidation

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

Use of Estimates

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

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Significant Accounting Policies

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

Investments

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

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

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

Goodwill

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

Accounts Receivable

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

Concentration of Credit Risk and Significant Customers

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

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Accounting Pronouncements Adopted in 2020

Cloud computing arrangements implementation costs

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

Credit losses

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

Accounting Pronouncement Adopted in 2019

Leases

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

Recently Issued Accounting Pronouncement Pending Adoption

Debt with Conversion Options

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

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Income taxes

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

(3) Investments

Marketable Debt Securities

The following is a summary of our available-for-sale debt securities recorded within short-term and long-term investments on the condensed consolidated balance sheets (in thousands):


	September 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale securities:
Commercial paper	$	483,659	$	120	$	(29)	$	483,750
Corporate notes and bonds	2,137,227		12,631		(852)		2,149,006
Certificates of deposit	16,276		15		—		16,291
U.S. government and agency securities	212,948		1,273		—		214,221

Total available-for-sale securities	$	2,850,110	$	14,039	$	(881)	$	2,863,268


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

As of September 30, 2020, the contractual maturities of our available-for-sale debt securities, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheet, did not exceed 36 months. The fair values of available-for-sale securities, by remaining contractual maturity, are as follows (in thousands):


	September 30, 2020
Due within 1 year	$	1,603,317
Due in 1 year through 5 years	1,259,951
Total	$	2,863,268

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The following table shows the fair values and the gross unrealized losses of these available-for-sale debt securities, classified by the length of time that the securities have been in a continuous unrealized loss position, and aggregated by investment types, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheets (in thousands):


	September 30, 2020
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Commercial paper	$	164,040	$	(29)	$	—	$	—	$	164,040	$	(29)
Corporate notes and bonds	709,621		(852)		—		—		709,621		(852)


Total	$	873,661	$	(881)	$	—	$	—	$	873,661	$	(881)


	December 31, 2019
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Commercial paper	$	20,752	$	(9)	$	—	$	—	$	20,752	$	(9)
Corporate notes and bonds	242,012		(181)		16,264		(15)		258,276		(196)

U.S. government and agency securities	17,806		(14)		—		—		17,806		(14)
Total	$	280,570	$	(204)	$	16,264	$	(15)	$	296,834	$	(219)

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

Strategic Investments

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

(4) Fair Value Measurements

The following table presents our fair value hierarchy for our assets measured at fair value on a recurring basis as of September 30, 2020 (in thousands):


	Level 1		Level 2		Total
Cash equivalents:
Money market funds	$	1,096,142	$	—	$	1,096,142



U.S. government and agency securities	—		600		600
Marketable securities:
Commercial paper	—		483,750		483,750
Corporate notes and bonds	—		2,149,006		2,149,006
Certificates of deposit	—		16,291		16,291
U.S. government and agency securities	—		214,221		214,221

Total	$	1,096,142	$	2,863,868	$	3,960,010

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The following table presents our fair value hierarchy for our assets measured at fair value on a recurring basis as of December 31, 2019 (in thousands):


	Level 1		Level 2		Total
Cash equivalents:
Money market funds	$	486,982	$	—	$	486,982
Commercial paper	—		86,388		86,388



Marketable securities:
Commercial paper	—		101,490		101,490
Corporate notes and bonds	—		1,661,330		1,661,330
Certificates of deposit	—		38,045		38,045
U.S. government and agency securities	—		127,784		127,784

Total	$	486,982	$	2,015,037	$	2,502,019

We determine the fair value of our security holdings based on pricing from our service providers and market prices from industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

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

(5) Business Combinations

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

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

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

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

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

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(6) Goodwill and Intangible Assets

Goodwill balances are presented below (in thousands):


	Carrying Amount
Balance as of December 31, 2019	$	156,756
Goodwill acquired	73,784
Foreign currency translation adjustments	1,409
Balance as of September 30, 2020	$	231,949

Intangible assets consist of the following (in thousands):


	September 30, 2020		December 31, 2019
Developed technology	$	222,746	$	177,746
Patents	58,609		67,730
Other	4,327		3,594
Intangible assets, gross	285,682		249,070
Less: accumulated amortization	(129,856)		(105,220)
Intangible assets, net	$	155,826	$	143,850

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

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

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

The following table presents the estimated future amortization expense related to intangible assets held at September 30, 2020 (in thousands):


Years Ending December 31,
Remainder of 2020	$	5,259
2021	42,516
2022	38,343
2023	33,127
2024	27,391
Thereafter	9,190
Total future amortization expense	$	155,826

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(7) Property and Equipment

Property and equipment, net consists of the following (in thousands):


	September 30, 2020		December 31, 2019
Computer equipment	$	862,782	$	680,160
Computer software	67,885		59,511
Leasehold and other improvements	149,235		125,299
Furniture and fixtures	59,705		53,651

Construction in progress	7,297		6,830
Property and equipment, gross	1,146,904		925,451
Less: Accumulated depreciation	(582,897)		(457,366)
Property and equipment, net	$	564,007	$	468,085

Construction in progress consists primarily of leasehold and other improvements and in-process software development costs. Depreciation expense for the three months ended September 30, 2020 and 2019 was $58 million and $42 million, respectively, and for the nine months ended September 30, 2020 and 2019 was $160 million and $119 million, respectively.

(8) Derivative Contracts

As of September 30, 2020 and December 31, 2019, we had foreign currency forward contracts with total notional values of $310 million and $358 million, respectively, which are not designated as hedging instruments. Our foreign currency contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates. The fair value of these outstanding derivative contracts was as follows (in thousands):


	Condensed Consolidated Balance Sheet Location	September 30, 2020		December 31, 2019
Derivative Assets:
Foreign currency derivative contracts	Prepaid expenses and other current assets	$	756	$	2,237
Derivative Liabilities:
Foreign currency derivative contracts	Accrued expenses and other current liabilities	$	3,539	$	1,362

(9) Deferred Revenue and Performance Obligations

Revenues recognized during the three months ended September 30, 2020 from amounts included in deferred revenue as of June 30, 2020 were $1.0 billion. Revenues recognized during the three months ended September 30, 2019 from amounts included in deferred revenue as of June 30, 2019 were $0.7 billion.

Revenues recognized during the nine months ended September 30, 2020 from amounts included in deferred revenue as of December 31, 2019 were $1.9 billion. Revenues recognized during the nine months ended September 30, 2019 from amounts included in deferred revenue as of December 31, 2018 were $1.4 billion.

Remaining Performance Obligations

Transaction price allocated to remaining performance obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenues in future periods. RPO excludes contracts that are billed in arrears, such as certain time and materials contracts, as we apply the “right to invoice” practical expedient under relevant accounting guidance.

As of September 30, 2020, the total non-cancelable RPO under our contracts with customers was $7.3 billion and we expect to recognize revenues on approximately 52% of these RPO over the following 12 months, with the balance to be recognized thereafter.

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(10) Long-Term Debt

The following table summarizes the carrying value of our outstanding debt (in thousands, except percentages):


	September 30, 2020				December 31, 2019
	2030 Notes		2022 Notes		2022 Notes
Long-term debt
Principal	$	1,500,000	$	242,727	$	782,491

Less: debt issuance cost and debt discount, net of amortization	(18,127)		(19,067)		(87,510)

Net carrying amount	$	1,481,873	$	223,660	$	694,981
Effective interest rate of the liability component - 2022 Notes	4.75%
Effective interest rate - 2030 Notes	1.53%

In accounting for the issuance of the 2022 Notes and the related transaction costs, we separated the 2022 Notes into liability and equity components and recorded $160 million in equity at issuance. The effective interest rates for the 2030 Notes and 2022 Notes include interest payable, amortization of debt issuance cost and amortization of debt discount, as applicable. Total interest expense recognized related to the 2030 Notes and 2022 Notes was $8 million for each of the three months ended September 30, 2020 and 2019, and $25 million for each of the nine months ended September 30, 2020 and 2019.

We consider the fair value of the 2030 Notes and 2022 Notes at September 30, 2020 to be a Level 2 measurement. The estimated fair value of the 2030 Notes and 2022 Notes at September 30, 2020 and December 31, 2019 based on the closing trading price per $100 of the 2030 Notes and 2022 Notes were as follows (in thousands):


	September 30, 2020		December 31, 2019
2022 Notes	$	871,849	$	1,645,970
2030 Notes	$	1,464,120	$	—

2030 Notes

In August 2020, we issued 1.40% fixed rate ten-year notes with an aggregate principal amount of $1.5 billion due on September 1, 2030 (the “2030 Notes”). The 2030 Notes were issued at 99.63% of principal and we incurred approximately $13 million for debt issuance costs. Interest is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2021, and the entire outstanding principal amount is due at maturity on September 1, 2030. The 2030 Notes are unsecured obligations and the indentures governing the 2030 Notes contain customary events of default and covenants that, among others and subject to exceptions, restrict the Company’s ability to incur or guarantee debt secured by liens on specified assets or enter into sale and lease-back transactions with respect to specified properties.

2022 Notes

In May and June 2017, we issued an aggregate of $782.5 million of 0% convertible senior notes (the “2022 Notes”), which are due June 1, 2022 unless earlier converted or repurchased in accordance with their terms. The 2022 Notes do not bear interest, and we cannot redeem the 2022 Notes prior to maturity. The 2022 Notes are unsecured obligations and do not contain any financial covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by us or any of our subsidiaries.

Upon conversion of the 2022 Notes, we may choose to pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock upon settlement. We currently intend to settle the principal amount of the 2022 Notes with cash.

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

5,807

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Conversion of the 2022 Notes prior to the Convertible Date. At any time prior to the close of business on the business day immediately preceding February 1, 2022 (“Convertible Date”), holders of the 2022 Notes may convert their Notes at their option, only if one of the following conditions are met:

•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 conversion price on each applicable trading day (in each case, the Conversion Condition); 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 2022 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 conversion rate on each such trading day; or

•upon the occurrence of specified corporate events.

Conversion of the 2022 Notes on or after the Convertible Date. On or after the Convertible Date, a holder may convert all or any portion of its 2022 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding maturity, regardless of the foregoing conditions, and such conversions will settle upon maturity. Upon settlement, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

The conversion price of the 2022 Notes will be subject to adjustment in some events. Holders of the 2022 Notes who convert their 2022 Notes in connection with certain corporate events that constitute a “make-whole fundamental change” are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a corporate event that constitutes a “fundamental change,” holders of the 2022 Notes may require us to purchase with cash all or a portion of the 2022 Notes upon the occurrence of a fundamental change, at a purchase price equal to 100% of the principal amount of the 2022 Notes plus any accrued and unpaid special interest, if any.

The Conversion Condition for the 2022 Notes was met for all the quarters ended June 30, 2018 through September 30, 2020, except for the quarter ended December 31, 2018. Therefore, our 2022 Notes became convertible at the holders’ option beginning on July 1, 2018 and continue to be convertible through December 31, 2020, except for the quarter ended March 31, 2019 because the Conversion Condition for the 2022 Notes was not met for the quarter ended December 31, 2018.

During the nine months ended September 30, 2020, we paid cash to settle $43 million in principal of the 2022 Notes and the loss on the early note conversions was not material. As a result of the settlements, we also recorded a net reduction to additional paid-in capital, reflecting $79 million fair value adjustments to the settled conversion option partially offset by a $78 million benefit from the 2022 Note Hedge (as defined below).

Based on conversion requests we have received through the filing date, we expect to settle in cash an aggregate amount of approximately $70 million in principal of the 2022 Notes during the fourth quarter of 2020. We may receive additional conversion requests that require settlement in the fourth quarter of 2020.

Repurchase of 2022 Notes

On August 11, 2020, we repurchased $496.8 million in aggregate principal amount of the 2022 Notes (the “2022 Notes Repurchase”) funded in part by the $1.1 billion proceeds received from the partial unwind of the 2022 Note Hedge (as defined below). The 2022 Notes Repurchase was accounted for as a debt extinguishment in which $493 million and $1.1 billion were allocated to the liability and equity components of the 2022 Notes, respectively. The cash consideration allocated to the liability component was based on the estimated fair value of the liability component utilizing a discount rate assuming a similar liability per the Company’s credit rating with the same maturity, but without the conversion option, as of the repurchase date. The cash consideration allocated to the equity component was based on the aggregate cash consideration less the estimated fair value of the liability component. The loss on extinguishment of $39 million recorded as interest income and other income(expense), net, represents the difference between the allocated cash consideration and the carrying value of the liability component, which includes the proportionate amounts of unamortized debt discount and unamortized debt issuance costs in the amount of $43 million.

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Note Hedge

To minimize the impact of potential economic dilution upon conversion of the 2022 Notes, we entered into convertible note hedge transactions (the “2022 Note Hedge”) with certain investment banks, with respect to our common stock concurrently with the issuance of the 2022 Notes.


	Purchase		Initial Shares	Shares as of September 30, 2020

	(in thousands)
2022 Note Hedge	$	128,017	5,807	1,801

The 2022 Note Hedge covers shares of our common stock at a strike price per share that corresponds to the initial conversion price of the 2022 Notes, subject to adjustment, and are exercisable upon conversion of the 2022 Notes. If exercised, we may elect to receive cash, shares of our common stock, or a combination of cash and shares. The 2022 Note Hedge will expire upon the maturity of the 2022 Notes. The 2022 Note Hedge is intended to reduce the potential economic dilution upon conversion of the 2022 Notes in the event that the fair value per share of our common stock at the time of exercise is greater than the conversion price of the 2022 Notes. The 2022 Note Hedge is a separate transaction and is not part of the terms of the 2022 Notes. Holders of the 2022 Notes will not have any rights with respect to the 2022 Note Hedge. The 2022 Note Hedge does not impact earnings per share, as it was entered into to offset any dilution from the 2022 Notes.

On August 11, 2020, in connection with the 2022 Notes Repurchase, we entered into partial unwind agreements (the “Note Hedge Unwind”) to reduce the number of options corresponding to the principal amount of the 2022 Notes Repurchase. We received $1.1 billion for the Note Hedge Unwind and the aggregate number of shares underlying the call options under the 2022 Note Hedge was reduced by 3.7 million shares. Consistent with early conversions of the 2022 Notes, proceeds received by the Company from the Note Hedge Unwind were used to settle a portion of the 2022 Notes Repurchase.

Warrants

Proceeds

Initial Shares

Strike Price

First Expiration Date

Shares as of
September 30, 2020

(in thousands)

2022 Warrants

54,071

5,807

203.40

September 1, 2022

1,829

Separately, we entered into warrant transactions with certain investment banks, whereby we sold warrants to acquire, subject to adjustment, the number of shares of our common stock shown in the table above (the “2022 Warrants”). If the average market value per share of our common stock for the reporting period, as measured under the 2022 Warrants, exceeds the strike price of the respective 2022 Warrants, such 2022 Warrants would have a dilutive effect on our earnings per share to the extent we report net income. The 2022 Warrants are separate transactions and are not remeasured through earnings each reporting period. The 2022 Warrants are not part of the 2022 Notes or 2022 Note Hedge.

In connection with the 2022 Notes Repurchase, we also entered into partial unwind agreements to reduce the number of warrants outstanding under the 2022 Warrants by delivering an aggregate of 2.3 million shares of our common stock to the holders of the 2022 Warrants.

According to the terms, the remaining portion of the 2022 Warrants will be net share settled and automatically exercised over a 60 trading day period beginning on the first expiration date as set forth above based on the daily volume-weighted average stock prices over the same 60 trading day period.

We expect to issue additional shares of our common stock in the second half of 2022 upon the automatic exercise of the remaining portion of the 2022 Warrants. The remaining portion of the 2022 Warrants could have a dilutive effect to the extent that the daily volume-weighted average stock prices over a 60 trading day period beginning on September 1, 2022 exceeds the strike price of the 2022 Warrants. Based on the volume-weighted average stock price on September 30, 2020, the total number of shares of our common stock to be issued upon the automatic exercise of the remaining portion of the 2022 Warrants would be approximately 1.1 million. The actual number of shares of our common stock issuable upon the automatic exercise of the remaining portion of the 2022 Warrants, if any, is unknown at this time.

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In November 2013, we issued $575 million of 0% convertible senior notes, which were earlier converted prior to and cash settled on November 1, 2018, in accordance with their terms. The related warrant transactions with certain investment banks (the “2018 Warrants”) were net share settled based on the daily volume-weighted average stock prices over a 60 trading day period beginning on the first expiration date, February 1, 2019. According to the terms of the 2018 Warrants, we issued 4.3 million shares of our common stock upon the automatic exercise of the 2018 Warrants during the nine months ended September 30, 2019. The 2018 Warrants were no longer outstanding as of June 30, 2019.

(11) Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income, net of tax, consist of the following (in thousands):


	September 30, 2020		December 31, 2019

Foreign currency translation adjustment	$	43,005	$	20,884
Net unrealized gain on investments, net of tax	8,570		4,371
Accumulated other comprehensive income	$	51,575	$	25,255

Reclassification adjustments out of accumulated other comprehensive income into net income were immaterial for all periods presented.

(12) Stockholders' Equity

Common Stock

We are authorized to issue 600.0 million shares of common stock as of September 30, 2020. Holders of our common stock are not entitled to receive dividends unless declared by our board of directors. As of September 30, 2020, we had 195.1 million shares of common stock outstanding and had reserved shares of common stock for future issuance as follows (in thousands):


			September 30, 2020
Stock plans:
Options outstanding			604
RSUs(1)			8,356
Shares of common stock available for future grants:
2012 Equity Incentive Plan(2)			27,722
2012 Employee Stock Purchase Plan(2)			9,755
Total shares of common stock reserved for future issuance			46,437

(1)Represents the number of shares issuable upon settlement of outstanding restricted stock units (“RSUs”) and performance-based RSUs, assuming 100% of the target number of shares for performance-based RSUs, as discussed under the section entitled “RSUs” in Note 13.

(2)Refer to Note 13 for a description of these plans.

During the nine months ended September 30, 2020 and 2019, we issued a total of 3.3 million shares and 4.1 million shares, respectively, from stock option exercises, vesting of RSUs, net of employee payroll taxes and purchases from the employee stock purchase plan (“ESPP”). In addition, as described in Note 10, we issued 2.3 million shares of our common stock upon partial unwind of the 2022 Warrants and 4.3 million shares of our common stock upon the automatic exercise of the 2018 Warrants during the nine months ended September 30, 2020 and 2019, respectively.

(13) Equity Awards

We currently have two equity incentive plans, our 2005 Stock Option Plan (the “2005 Plan”) and our 2012 Equity Incentive Plan (the “2012 Plan”). Our 2005 Plan was terminated in connection with our initial public offering in 2012 but continues to govern the terms of outstanding stock options that were granted prior to the termination of the 2005 Plan. We no longer grant equity awards pursuant to our 2005 Plan.

Our 2012 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, RSUs, performance-based stock awards and other forms of equity compensation (collectively, equity awards). In addition, the 2012 Plan provides for the grant of performance cash awards. Incentive stock options may be granted only to employees. All other equity awards may be granted to employees, including officers, as well as directors and consultants. The share reserve may increase to the extent outstanding stock options under the 2005 Plan expire or terminate unexercised. Prior to January 2019, the share reserve also automatically increased on January 1 of each year until January 1, 2022, by up to 5% of the total number of shares of common stock outstanding on December 31 of the preceding year as determined by our board of directors. Our board of directors elected not to increase the number of shares of common stock reserved for issuance under the 2012 Plan pursuant to the provision described in the preceding sentence for the year ending December 31, 2019. In January 2019, our Board of Directors amended the 2012 Plan to remove the automatic increase provision. Therefore, for the remaining term of the 2012 Plan, the share reserve will not be increased without stockholder approval.

Our 2012 Employee Stock Purchase Plan (the “2012 ESPP”) authorizes the issuance of shares of common stock pursuant to purchase rights granted to our employees. The price at which common stock is purchased under the 2012 ESPP is equal to 85% of the fair market value of our common stock on the first or last day of the offering period, whichever is lower. Offering periods are six months long and begin on February 1 and August 1 of each year. The number of shares of common stock reserved for issuance automatically increases on January 1 of each year until January 1, 2022, by up to 1% of the total number of shares of common stock outstanding on December 31 of the preceding year as determined by our board of directors. Our board of directors elected not to increase the number of shares of common stock reserved for issuance under the 2012 ESPP pursuant to the provision described in the preceding sentence for the year ending December 31, 2020 and year ended December 31, 2019.

Stock Options

Stock options are exercisable at a price equal to the market value of the underlying shares of common stock on the date of the grant as determined by our board of directors or, for those stock options issued subsequent to our initial public offering, the closing price of our common stock as reported on the New York Stock Exchange on the date of grant. Stock options granted under our 2005 Plan and the 2012 Plan to new employees generally vest 25% one year from the date the requisite service period begins and continue to vest monthly for each month of continued employment over the remaining three years. Options granted generally are exercisable for a period of up to ten years contingent on each holder’s continuous status as a service provider.

A summary of stock option activity for the nine months ended September 30, 2020 was as follows:


	Number of Shares	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in thousands)			(in years)	(in thousands)
Outstanding at December 31, 2019	1,154	$	77.70

Exercised	(149)	$	28.47		$	44,465
Canceled	(11)	$	75.77
Outstanding at March 31, 2020	994	$	85.08

Exercised	(343)	$	70.33		$	95,041

Outstanding at June 30, 2020	651	$	92.87

Exercised	(46)	$	25.03		$	20,233

Outstanding at September 30, 2020	604	$	98.16	4.6	$	233,515
Vested and expected to vest as of September 30, 2020	580	$	91.47	4.4	$	228,345
Vested and exercisable as of September 30, 2020	425	$	34.83	2.7	$	191,110

Aggregate intrinsic value represents the difference between the estimated fair value of our common stock and the exercise price of outstanding, in-the-money options. The total fair value of stock options vested during the nine months ended September 30, 2020 was $2 million.

As of September 30, 2020, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock options was approximately $11 million. The weighted-average remaining vesting period of unvested stock options at September 30, 2020 was approximately 4.0 years.

RSUs

A summary of RSU activity for the nine months ended September 30, 2020 was as follows:


	Number of Shares	Weighted-Average Grant-Date Fair Value Per Share		Aggregate Intrinsic Value
	(in thousands)			(in thousands)
Outstanding at December 31, 2019	8,733	$	185.39
Granted	2,810	$	352.87
Vested	(1,183)	$	151.19	$	411,813
Forfeited	(278)	$	199.48
Outstanding at March 31, 2020	10,082	$	235.99
Granted	398	$	341.10
Vested	(1,061)	$	185.99	$	394,458
Forfeited	(219)	$	213.34
Outstanding at June 30, 2020	9,200	$	246.89
Granted	283	$	439.98
Vested	(1,007)	$	194.61	$	436,885
Forfeited	(120)	$	242.32
Outstanding at September 30, 2020	8,356	$	260.60	$	4,052,833

RSUs outstanding as of September 30, 2020 were comprised of 7.9 million RSUs with only service conditions and 0.5 million RSUs with both service conditions and performance conditions. RSUs granted with only service vesting criteria under the 2012 Plan to employees generally vest over a four-year period.

Performance-based RSUs (“PRSUs”) with both service and performance-based vesting criteria are considered as eligible to vest when approved by the compensation committee of our board of directors in January of the year following the grant. The ultimate number of shares eligible to vest for PRSUs range from 0% to 180% of the target number of shares depending on achievement relative to the performance metric over the applicable period. The eligible shares subject to PRSUs granted during the nine months ended September 30, 2020 will vest 33% in February 2021 and continue to vest quarterly for the remaining two subsequent years, contingent on each holder’s continuous status as a service provider on the applicable vesting dates. The number of PRSUs granted shown in the table above reflects the shares that could be eligible to vest at 100% of target for PRSUs and includes adjustments for over or under achievement for PRSUs granted in the prior year. In July 2020, our board of directors approved a modification to the fiscal year 2020 performance target. As a result, we will recognize an incremental expense of $29 million over the remaining vesting period. We recognized $41 million and $54 million of stock-based compensation, net of actual and estimated forfeitures, associated with PRSUs on a graded vesting basis during the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs was approximately $1.7 billion and the weighted-average remaining vesting period was approximately 2.9 years.

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(14) Net Income Per Share

Basic net income per share attributable to common stockholders is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for the effects of dilutive shares of common stock, which are comprised of outstanding stock options, RSUs, ESPP obligations, the 2022 Notes, the 2022 Warrants and the 2018 Warrants. Stock awards with performance conditions are included in dilutive shares to the extent the performance condition is met. The dilutive potential shares of common stock are computed using the treasury stock method or the as-if converted method, as applicable. The effects of outstanding stock options, RSUs, ESPP obligations, Notes and Warrants are excluded from the computation of diluted net income per share in periods in which the effect would be antidilutive.

The following tables present the calculation of basic and diluted net income per share attributable to common stockholders (in thousands, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Numerator:
Net income	$	12,858	$	40,598	$	101,855	$	27,974
Denominator:
Weighted-average shares outstanding - basic	193,237		188,074		193,203		185,676
Weighted-average effect of potentially dilutive securities:
Common stock options	460		1,049		577		1,153
RSUs	4,165		4,363		4,062		4,964


2018 Warrants	—		—		—		1,126
2022 Notes	1,258		2,929		1,148		2,701
2022 Notes settlements	1,260		—		2,057		—
2022 Warrants	996		1,463		827		1,119
Partial settlement of 2022 Warrants	485		—		963		—
Weighted-average shares outstanding - diluted	201,861		197,878		202,837		196,739
Net income per share - basic	$	0.07	$	0.22	$	0.53	$	0.15
Net income per share - diluted	$	0.06	$	0.21	$	0.50	$	0.14

Potentially dilutive securities that are not included in the calculation of diluted net income per share because doing so would be antidilutive are as follows (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019

RSUs	75	455	341	748
ESPP obligations	224	273	224	273




Total potentially dilutive securities	299	728	565	1,021

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(15) Income Taxes

We compute our provision for income taxes by applying the estimated annual effective tax rate to year-to-date income from recurring operations and adjust the provision for discrete tax items recorded in the period.

Our income tax provision was $13 million and $34 million for the three and nine months ended September 30, 2020, respectively. The income tax provision was primarily attributable to the mix of earnings and losses in countries with differing statutory tax rates, the valuation allowance in the United States and the intercompany sale of certain intellectual property rights.

Our income tax provision was $20 million and $5 million for the three and nine months ended September 30, 2019, respectively. The income tax provision was primarily attributable to foreign taxes and mix of earnings and losses in countries with differing statutory tax rates.

Governments in certain countries where we do business have enacted legislation in response to the COVID-19 pandemic, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted by the United States on March 27, 2020. We are continuing to analyze these legislative developments and believe that they have not had a material impact on our provision for income taxes for each of the three and nine months ended September 30, 2020.

We are subject to taxation in the United States and foreign jurisdictions. As of September 30, 2020, our tax years 2004 to 2019 remain subject to examination in most jurisdictions.

Due to differing interpretations of tax laws and regulations, tax authorities may dispute our tax filings positions. We periodically evaluate our exposures associated with our tax filing positions and believe that adequate amounts have been reserved for adjustments that may result from tax examinations.

(16) Commitments and Contingencies

Operating Leases

For some of our offices and data centers, we have entered into non-cancelable operating lease agreements with various expiration dates through 2035. Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into our determination of lease payments.

Total operating lease costs were $21 million and $61 million, excluding short-term lease costs, variable lease costs and sublease income, each of which were immaterial, for the three and nine months ended September 30, 2020, respectively. Total operating lease costs were $17 million and $47 million, excluding short-term lease costs variable lease costs and sublease income, each of which were immaterial for the three and nine months ended September 30, 2019, respectively.

For the nine months ended September 30, 2020, cash paid for amounts included in the measurement of operating lease liabilities was $42 million and operating lease liabilities arising from obtaining operating right-of-use assets totaled $102 million.

As of September 30, 2020, the weighted-average remaining lease term is 8.7 years, and the weighted-average discount rate is 3.5%.

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Maturities of operating lease liabilities as of September 30, 2020 are presented in the table below (in thousands):



Remainder of 2020	$	20,762

2021	84,356
2022	82,717
2023	77,534
2024	60,157
Thereafter	263,726
Total operating lease payments	589,252
Less: imputed interest	(91,657)
Present value of operating lease liabilities	$	497,595

In addition to the amounts above, as of September 30, 2020, we have operating leases, primarily for offices, that have not yet commenced with undiscounted cash flows of $350 million. These operating leases will commence between 2020 and 2022 with lease terms of 2 to 14 years.

Other Contractual Commitments

Other contractual commitments consist of data center and IT operations and sales and marketing activities. There were no material contractual obligations that were entered into during the nine months ended September 30, 2020 that were outside the ordinary course of business.

In addition to the amounts above, the repayment of our 2022 Notes and 2030 Notes with an aggregate principal amount of $243 million and $1.5 billion is due on June 1, 2022 and September 1, 2030, respectively. Refer to Note 10 for further information regarding our Notes.

Also, $14 million of unrecognized tax benefits have been recorded as liabilities as of September 30, 2020.

Letters of Credit

As of September 30, 2020, we had letters of credit in the aggregate amount of $20 million, primarily in connection with our customer contracts and operating leases.

Legal Proceedings

From time to time, we are party to litigation and other legal proceedings in the ordinary course of business. While the results of any litigation or other legal proceedings are uncertain, management does not believe the ultimate resolution of any pending legal matters is likely to have a material adverse effect on our financial position, results of operations or cash flows, except for those matters for which we have recorded a loss contingency. We accrue for loss contingencies when it is both probable that we will incur the loss and when we can reasonably estimate the amount of the loss or range of loss.

Generally, our subscription agreements require us to defend our customers for third-party intellectual property infringement and other claims. Any adverse determination related to intellectual property claims or other litigation could prevent us from offering our services and adversely affect our financial condition and results of operations.

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(17) Information about Geographic Areas and Products

Revenues by geographic area, based on the location of our users, were as follows for the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
North America(1)	$	754,649	$	590,058	$	2,161,666	$	1,660,403
EMEA(2)	287,230		213,355		803,194		619,793
Asia Pacific and other	110,093		82,420		304,294		228,467
Total revenues	$	1,151,972	$	885,833	$	3,269,154	$	2,508,663

Property and equipment, net by geographic area were as follows (in thousands):


	September 30, 2020		December 31, 2019
North America(3)	$	322,885	$	269,754
EMEA(2)	151,977		118,399
Asia Pacific and other	89,145		79,932
Property and equipment, net	$	564,007	$	468,085

(1)Revenues attributed to the United States were 94% of North America revenues for each of the three and nine months ended September 30, 2020 and 2019, respectively.

(2)Europe, the Middle East and Africa.

(3)Property and equipment, net attributed to the United States were 75% and 73% of property and equipment, net attributable to North America as of September 30, 2020 and December 31, 2019, respectively.

Subscription revenues consist of the following (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Digital workflow products	$	958,612	$	721,161	$	2,712,136	$	2,034,872
ITOM products	132,774		113,749		389,480		321,013
Total subscription revenues	$	1,091,386	$	834,910	$	3,101,616	$	2,355,885

Our digital workflow products include the Now Platform, Now IT Service Management, Now IT Business Management, Now DevOps, Now IT Asset Management, Now Security Operations, Now Integrated Risk Management, Now HR Service Delivery, Now Customer Service Management, and Now Field Service Management, and are generally priced on a per user basis. Our ITOM products are generally priced on a per node (physical or virtual server) basis. In previously issued consolidated financial statements, we referred to digital workflow products as “service management products.”

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with the (1) unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2019 included in the Annual Report on Form 10-K dated as of, and filed with the Securities and Exchange Commission (the SEC), on February 20, 2020 (File No. 001-35580). This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, impacts on our business, future financial performance and general economic conditions due to the current COVID-19 pandemic, those identified herein, and those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in our other SEC filings. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Investors and others should note that we announce material financial information to our investors using our investor relations website (https://www.servicenow.com/company/investor-relations.html), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media, to communicate with our investors and the public about our company, our services and other issues. It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels listed on our investor relations website.

Our free cash flow and billings measures included in the sections entitled “—Key Business Metrics—Free Cash Flow,” and “—Key Business Metrics—Billings” are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. These measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP results, to more fully understand our business.

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Overview

ServiceNow’s purpose is to make the world of work, work better for people. We believe that people should work the way they want to, so we build applications that help automate existing processes and create efficient, digitized workflows. Our products and services enable the steps of a job to flow naturally across disparate departments, systems and processes of a business. When work flows naturally, great experiences follow. We primarily deliver our software via the Internet as a service through a simple and easy-to-use interface so that we can rapidly deploy our packaged offerings, and customers can easily build their custom applications. In a minority of cases, customers choose to host our software by themselves or through a third-party service provider.

We generally offer our services on an annual subscription fee basis, which includes access to the ordered subscription service and related support, including updates to the subscription service during the subscription term. Pricing for our subscription services is based on a number of factors, including duration of subscription term, volume, mix of products purchased, and discounts. We generate sales through our direct sales team and, to a lesser extent, indirectly through resale partners and third-party referrals. We also generate revenues from professional services and for training of customer and partner personnel. We are shifting the focus of our professional services organization from implementation services to strategic advisory and consulting services to accelerate platform adoption and drive customer outcomes. We generally bill our customers annually in advance for subscription services and monthly in arrears for our professional services as the work is performed.

A majority of our revenues come from large global enterprise customers. We continue to invest in the development of our services, infrastructure and sales and marketing to drive long-term growth. We increased our overall employee headcount to 12,643 as of September 30, 2020 from 9,929 as of September 30, 2019.

In December 2019, a novel strain of Coronavirus disease (“COVID-19”) was reported and in January 2020, the World Health Organization (the “WHO”) declared the outbreak a “Public Health Emergency of International Concern.” In February 2020, the WHO raised the COVID-19 threat level from high to very high at a global level and in March 2020, the WHO characterized the COVID-19 as a pandemic. The COVID-19 pandemic has created significant global economic uncertainty, adversely impacted the business of our customers, partners and vendors, and impacted our business and results of operations. As of the filing date, the extent to which the COVID-19 pandemic may continue to impact our business and future financial condition or results of operations remains uncertain. We are continuing to monitor the actual and potential effects of the COVID-19 pandemic across our business. While our revenues, billings and earnings are relatively predictable as a result of our subscription-based business model, the effect of the COVID-19 pandemic, along with the seasonality we historically experience, may not be fully reflected in our results of operations and overall financial performance until future periods, if at all, and could cause our future results of operations to vary significantly from period to period. If we experience an increase in curtailed customer demand, reduced customer spend or contract duration, delayed collections, lengthened payment terms, lengthened sales cycles or competition due to changes in terms and conditions and pricing of our competitors’ products and services, our business, results of operations and overall financial performance in future periods could be materially adversely affected. The extent and continued impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including: the duration and spread of the outbreak; government responses, including the effectiveness, extent and duration of mitigation efforts such as “shelter in place” and similar directives; impact on our customers, sales cycles and ability to generate new business; impact on our customer, industry or employee events; extent of delays in hiring and onboarding new employees mainly in our general and administrative functions; and effect on our partners, vendors and supply chains; all of which are highly uncertain and difficult to predict.

In response to the COVID-19 pandemic, we focused on maintaining business continuity, helping our employees, customers and communities, and preparing for the future and the long-term success of our business. In the first quarter of 2020, we released four Emergency Response Apps to help customers navigate the COVID-19 pandemic management. In the second quarter of 2020, we released Safe Workplace Apps, a four-app suite and dashboard, designed to help companies manage the essential steps for returning employees to the workplace and to support their health and safety. Additionally, we canceled our in-person, annual Knowledge user conference (“Knowledge”) and replaced it with a digital event experience and cancelled our Financial Analyst Day. In the first quarter of 2020, we also temporarily closed most of our offices and encouraged our employees to work remotely. These changes remain in effect in the fourth quarter of 2020 and could extend into the next year. The impact, if any, of these and any additional operational changes we may implement is uncertain, but changes we have implemented have not affected and are not expected to affect our ability to maintain operations, including financial reporting systems, internal control over financial reporting and disclosure controls and procedures. See the section “Risk Factors” for further discussion of the possible impact of the COVID-19 pandemic on our business.

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Key Business Metrics

Number of customers with ACV greater than $1 million. We count the total number of customers with annual contract value (“ACV”) greater than $1 million as of the end of the period. We had 1,012 and 808 customers with ACV greater than $1 million as of September 30, 2020 and 2019, respectively. For purposes of customer count, a customer is defined as an entity that has a unique Dunn & Bradstreet Global Ultimate (“GULT”) Data Universal Numbering System (“DUNS”) number and an active subscription contract as of the measurement date. The DUNS number is a global standard for business identification and tracking. We make exceptions for holding companies, government entities and other organizations for which the GULT, in our judgment, does not accurately represent the ServiceNow customer. For example, while all U.S. government agencies roll up to “Government of the United States” under the GULT, we count each government agency that we contract with as a separate customer. Our customer count is subject to adjustments for acquisitions, spin-offs and other market activity; accordingly, we restate previously disclosed number of customers with ACV greater than $1 million calculations to allow for comparability. ACV is calculated based on the foreign exchange rate in effect at the time the contract was signed. Foreign exchange rate fluctuations could cause some variability in the number of customers with ACV greater than $1 million.

Remaining performance obligations. Transaction price allocated to remaining performance obligations (“RPO”) represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenue in future periods. RPO excludes contracts that are billed in arrears, such as certain time and materials contracts, as we apply the “right to invoice” practical expedient under relevant accounting guidance.

As of September 30, 2020, our RPO was $7.3 billion and we expect to recognize revenues on approximately 52% of these RPO over the following 12 months, with the balance to be recognized thereafter. Factors that may cause our RPO to vary from period to period include the following:

•Foreign currency exchange rates. While a majority of our contracts have historically been in U.S. Dollars, an increasing percentage of our contracts in recent periods has been in foreign currencies, particularly the Euro and British Pound Sterling. Fluctuations in foreign currency exchange rates and volatility in the market, including those resulting from the COVID-19 pandemic, as of the balance sheet date will cause variability in our RPO.

•Mix of offerings. In a minority of cases, we allow our customers to host our software by themselves or through a third-party service provider. In self-hosted offerings, we recognize a portion of the revenue upfront upon the delivery of the software and as a result, such revenue is excluded from RPO.

•Subscription start date. From time to time, we enter into contracts with a subscription start date in the future and these amounts are included in RPO if such contracts are signed by the balance sheet date.

•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 selling additional products or services to an existing customer, 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.

•Contract duration. While we typically enter into multi-year subscription services, the duration of our contracts varies. Further, we continue to see an increase in the number of 12-month agreements entered into with the U.S. Federal government throughout the year which has been the highest in the quarter ended September 30, driven primarily by timing of their annual budget expenditures. We sometimes also enter into contracts with durations that have a 12-month or shorter term to enable the contracts to co-terminate with the existing contract. Additionally, we may see a reduction in contract duration as a result of the COVID-19 pandemic. The contract duration will cause variability in our RPO.

Free cash flow. We define free cash flow, a non-GAAP financial measure, as GAAP net cash provided by operating activities reduced by purchases of property and equipment. Purchases of property and equipment are otherwise included in cash used in investing activities under GAAP. We believe information regarding free cash flow provides useful information to investors because it is an indicator of the strength and performance of our business operations. However, our calculation of free cash flow may not be comparable to similar measures used by other companies. A calculation of free cash flow is provided below:

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	Nine Months Ended September 30,				% Change
	2020		2019

	(dollars in thousands)
Free cash flow:
Net cash provided by operating activities	$	1,101,074	$	814,761	35	%
Purchases of property and equipment	(285,327)		(185,889)		53	%
Free cash flow(1)	$	815,747	$	628,872	30	%

(1)Free cash flow for the nine months ended September 30, 2020 includes the effect of $69 million relating to the repayments of convertible senior notes attributable to debt discount.

Billings. We define billings, a non-GAAP financial measure, as GAAP revenues recognized plus the change in total GAAP unbilled receivables, deferred revenue and customer deposits as presented on the condensed consolidated statements of cash flows. A calculation of billings is provided below:


	Three Months Ended September 30,				% Change		Nine Months Ended September 30,				% Change
	2020		2019				2020		2019

	(dollars in thousands)						(dollars in thousands)

Billings:
Total revenues	$	1,151,972	$	885,833	30	%	$	3,269,154	$	2,508,663	30	%
Change in total deferred revenue, unbilled receivables and customer deposits(1)	(12,480)		29,382		(142	%)	52,744		135,098		(61	%)
Total billings	$	1,139,492	$	915,215	25	%	$	3,321,898	$	2,643,761	26	%

(1)As presented on or derived from our condensed consolidated statements of cash flows.

Billings consists of amounts invoiced for subscription contracts with existing customers, renewal contracts, expansion contracts, contracts with new customers, and contracts for professional services and training. Factors that may cause our billings results to vary from period to period include the following:

•Billings duration. While we typically bill customers annually for our subscription services, customers sometimes request, and we accommodate, billings with durations less than 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 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. Fluctuations in foreign currency exchange rates and volatility in the market, including those resulting from the COVID-19 pandemic, will cause variability in our billings.

•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 selling additional products or services to an existing customer, 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.

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•Seasonality. We have historically experienced seasonality in terms of when we enter into customer agreements for our services. We sign a significantly higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in the fourth quarter of each year. The increase in customer agreements for the fourth quarter is primarily a result of both the terms of our commission plans which incentivize our direct sales force to meet their annual quotas by December 31 and large enterprise account buying patterns typical in the software industry, which are driven primarily by the expiration of annual authorized budgeted expenditures. Furthermore, we usually sign a significant portion of these agreements during the last month, and often the last two weeks, of each quarter. This seasonality in the timing of entering into customer contracts is sometimes not immediately apparent in our billings, due to the fact that we typically exclude cloud-offering contracts with a future start date from our billings, unless such amounts have been paid as of the balance sheet date. Similarly, this seasonality is reflected to a much lesser extent, and sometimes is not immediately apparent in our revenues, due to the fact that we recognize subscription revenues from our cloud offering contracts over the term of the subscription agreement, which is generally 12 to 36 months. Although these seasonal factors are common in the technology industry, historical patterns should not be considered a reliable indicator of our future sales activity or performance. Further, the seasonal factors could be heightened due to the impact of the current gross domestic product contraction and other impacts unknown at this time on our customers and sales cycles caused by the COVID-19 pandemic.

While we believe billings is a useful leading indicator regarding the performance of our business, due to the factors described above, an increase or decrease in new or renewed subscriptions in a reporting period may not have an immediate impact on billings for that reporting period.

To facilitate greater year-over-year comparability in our billings results, we disclose the impact that foreign currency rate fluctuations and fluctuations in billings duration had on our billings. The impact of foreign currency rate fluctuations is calculated by translating the current period results for entities reporting in currencies other than U.S. Dollars into U.S. Dollars at the exchange rates in effect during the prior period presented, rather than the actual exchange rates in effect during the current period. The impact of fluctuations in billings duration is calculated by replacing the portion of multi-year billings in excess of 12 months during the current period with the portion of multi-year billings in excess of 12 months during the prior period presented. Notwithstanding the adjustments described above, the comparability of billings results from period to period remains subject to the impact of variations in the dollar value of contracts with future start dates and the timing of contract renewals, for which no adjustments have been presented.

Foreign currency rate fluctuations had a favorable impact of $13 million and an unfavorable impact of $12 million on billings for the three and nine months ended September 30, 2020, respectively. Changes in billings duration did not have a material impact for each of the three and nine months ended September 30, 2020.

Renewal rate. We calculate our renewal rate by subtracting our attrition rate from 100%. Our attrition rate for a period is equal to the ACV from customers lost during the period, divided by the sum of (i) the total ACV from all customers that renewed during the period, excluding changes in price or users, and (ii) the total ACV from all customers lost during the period. Accordingly, our renewal rate is calculated based on ACV and is not based on the number of customers that have renewed. Further, our renewal rate does not reflect increased or decreased purchases from our customers to the extent such customers are not lost customers or lapsed renewal. A lost customer is a customer that did not renew an expiring contract and that, in our judgment, will not be renewed. Typically, a customer that reduces its subscription upon renewal is not considered a lost customer. However, in instances where the subscription decrease represents the majority of the customer’s ACV, we may deem the renewal as a lost customer. For our renewal rate calculation, we define a customer as an entity with a separate production instance of our service and an active subscription contract as of the measurement date, instead of an entity with a unique GULT or DUNS number. We adjust our renewal rate for acquisitions, consolidations and other customer events that cause the merging of two or more accounts occurring at the time of renewal. Additionally, starting in 2020, we simplified our methodology related to contracts less than 12 months to derive ACV used to calculate renewal rate. Previously disclosed renewal rates may be restated to reflect such adjustments or methodology simplification to allow for comparability. While the previously disclosed renewal rates for the three and nine months ended September 30, 2019 were restated due to the methodology simplification to allow for comparability, there were no material changes to such previously disclosed renewal rates. Our renewal rate was 98% and 97% for the three and nine months ended September 30, 2020, and 99% and 98% for three and nine months ended September 30, 2019, respectively. As our renewal rate is impacted by the timing of renewals, which could occur in advance of, or subsequent to the original contract end date, period-to-period comparison of renewal rates may not be meaningful.

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Components of Results of Operations

Revenues

Subscription revenues. Subscription revenues are primarily comprised of fees that give customers access to the ordered subscription service for both self-hosted offerings and cloud-based subscription offerings, and related support and updates, if any, to the subscription service during the subscription term. For our cloud-based offerings, we recognize revenue ratably over the subscription term. For self-hosted offerings, a substantial portion of the sales price is recognized upon delivery of the software, which may cause greater variability in our subscription revenues and subscription gross margin. Pricing includes multiple instances, hosting and support services, data backup and disaster recovery services, as well as future updates, when and if available, offered during the subscription term. We typically invoice our customers for subscription fees in annual increments upon execution of the initial contract or subsequent renewal. Our contracts are generally non-cancelable during the subscription term, though a customer can terminate for breach if we materially fail to perform.

Professional services and other revenues. Our arrangements for professional services are primarily on a time-and-materials basis and we generally invoice our customers monthly in arrears for the professional services based on actual hours and expenses incurred. Some of our professional services arrangements are on a fixed fee or subscription basis revenues are recognized as services are delivered. Other revenues primarily consist of fees from customer training delivered on-site or through publicly available classes. Typical payment terms require our customers to pay us within 30 days of invoice.

We sell our subscription services primarily through our direct sales organization. We also sell services through managed service providers and resale partners. We also generate revenues from certain professional services and from training of customers and partner personnel, through both our direct team and indirect channel sales. Revenues from our direct sales organization represented 80% and 81% of our total revenues for each of the three and nine months ended September 30, 2020, and 81% and 82% for the three and nine months ended September 30, 2019, respectively. For purposes of calculating revenues from our direct sales organization, revenues from systems integrators and managed services providers are included as part of the direct sales organization.

Allocation of Overhead Costs

Overhead costs associated with office facilities, IT and certain depreciation related to infrastructure that is not dedicated for customer use or research and development use are allocated to cost of revenues and operating expenses based on headcount.

Cost of Revenues

Cost of subscription revenues. Cost of subscription revenues consists primarily of expenses related to hosting our services and providing support to our customers. These expenses are comprised of data center capacity costs, which include colocation costs associated with our data centers as well as interconnectivity between data centers, depreciation related to our infrastructure hardware equipment dedicated for customer use, amortization of intangible assets, expenses associated with software, IT services and dedicated customer support, personnel-related costs directly associated with data center operations and customer support, including salaries, benefits, bonuses and stock-based compensation and allocated overhead.

Cost of professional services and other revenues. Cost of professional services and other revenues consists primarily of personnel-related costs directly associated with our professional services and training departments, including salaries, benefits, bonuses and stock-based compensation, the costs of contracted third-party partners, travel expenses and allocated overhead.

Professional services are performed directly by our services team, as well as by contracted third-party partners. Fees paid by us to third-party partners are primarily recognized as cost of revenues as the professional services are delivered. Cost of revenues associated with our professional services engagements contracted with third-party partners as a percentage of professional services and other revenues was 9% and 10% for each of the three and nine months ended September 30, 2020, and 15% for the three and nine months ended September 30, 2019, respectively.

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Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related expenses directly associated with our sales and marketing staff, including salaries, benefits, bonuses and stock-based compensation. Sales and marketing expenses also include the amortization of commissions paid to our sales employees, including related payroll taxes and fringe benefits. From time to time, third parties provide us referrals for which we pay a referral fee. We include revenues associated with these referrals as part of revenues from our direct sales organization. Referral fees paid to these third parties are generally 10% of the customer’s net new ACV. We defer referral fees paid as they are considered incremental selling costs associated with acquiring customer contracts, and include the amortization of these referral fees in sales and marketing expense. In addition, sales and marketing expenses include branding expenses, expenses offset by proceeds related to Knowledge, other marketing program expenses, which include events other than Knowledge, and costs associated with purchasing advertising and marketing data, software and subscription services dedicated for sales and marketing use and allocated overhead.

Research and Development

Research and development expenses consist primarily of personnel-related expenses directly associated with our research and development staff, including salaries, benefits, bonuses and stock-based compensation and allocated overhead. Research and development expenses also include data center capacity costs, costs associated with outside services contracted for research and development purposes and depreciation of infrastructure hardware equipment that is used solely for research and development purposes.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses for our executive, finance, legal, human resources, facilities and administrative personnel, including salaries, benefits, bonuses and stock-based compensation, external legal, accounting and other professional services fees, other corporate expenses, amortization of intangible assets and allocated overhead.

Provision for Income Taxes

Provision for income taxes consists of federal, state and foreign income taxes. Due to cumulative losses, we maintain a valuation allowance against our U.S. deferred tax assets as of September 30, 2020. We consider all available evidence, both positive and negative, including but not limited to earnings history, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets in assessing the extent to which a valuation allowance should be applied against our U.S. and foreign deferred tax assets.

Results of Operations

Revenues


	Three Months Ended September 30,				% Change		Nine Months Ended September 30,				% Change
	2020		2019				2020		2019

	(dollars in thousands)						(dollars in thousands)
Revenues:
Subscription	$	1,091,386	$	834,910	31	%	$	3,101,616	$	2,355,885	32	%
Professional services and other	60,586		50,923		19	%	167,538		152,778		10	%
Total revenues	$	1,151,972	$	885,833	30	%	$	3,269,154	$	2,508,663	30	%
Percentage of revenues:
Subscription	95%		94%				95%		94%
Professional services and other	5%		6%				5%		6%
Total	100%		100%				100%		100%

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Subscription revenues increased by $256 million and $746 million for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019, respectively, primarily driven by increased purchases by existing customers and an increase in our customer count. Included in subscription revenues is $37 million and $35 million of revenues recognized upfront from the delivery of software associated with self-hosted offerings during the three months ended September 30, 2020 and 2019, respectively, and $149 million and $119 million during the nine months ended September 30, 2020 and 2019, respectively.

We expect subscription revenues for the year ending December 31, 2020 to increase in absolute dollars as we continue to add new customers and existing customers increase their usage of our products, but remain relatively flat as a percentage of total revenues compared to the year ended December 31, 2019. However, we continue to monitor the COVID-19 pandemic carefully and its impact on customer acquisition and renewal rates.

Our expectations for revenues, cost of revenues and operating expenses for the remainder of 2020 are based on foreign exchange rates as of September 30, 2020.

Subscription revenues consist of the following:


	Three Months Ended September 30,				% Change		Nine Months Ended September 30,				% Change
	2020		2019				2020		2019

	(dollars in thousands)						(dollars in thousands)
Digital workflow products	$	958,612	$	721,161	33	%	$	2,712,136	$	2,034,872	33	%
ITOM products	132,774		113,749		17	%	389,480		321,013		21	%
Total subscription revenues	$	1,091,386	$	834,910	31	%	$	3,101,616	$	2,355,885	32	%

Professional services and other revenues increased by $10 million and $15 million during the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019, respectively, due to an increase in services and trainings provided to new and existing customers. We expect professional services and other revenues for the year ending December 31, 2020 to increase in absolute dollars. We are increasingly focused on deploying our internal professional services organization as a strategic resource and relying on our partner ecosystem to contract directly with customers for implementation services delivery.

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Cost of Revenues and Gross Profit Percentage


	Three Months Ended September 30,				% Change		Nine Months Ended September 30,				% Change
	2020		2019				2020		2019

	(dollars in thousands)						(dollars in thousands)
Cost of revenues:
Subscription	$	189,280	$	139,330	36	%	$	520,935	$	401,398	30	%
Professional services and other	62,424		61,463		2	%	187,074		183,794		2	%
Total cost of revenues	$	251,704	$	200,793	25	%	$	708,009	$	585,192	21	%
Gross profit percentage:
Subscription	83%		83%				83%		83%
Professional services and other	(3%)		(21%)				(12%)		(20%)
Total gross profit percentage	78%		77%				78%		77%
Gross profit	$	900,268	$	685,040			$	2,561,145	$	1,923,471

Cost of subscription revenues increased $50 million and $120 million for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019, respectively. The increase was primarily due to increased headcount and increased costs to support the growth of our subscription offerings. Personnel-related costs including stock-based compensation and overhead expenses increased by $21 million and $53 million for the three and nine months ended September 30, 2020, respectively, compared to the same periods in the prior year. Depreciation expense relating to data center hardware and software and maintenance costs to support the expansion of our data center capacity increased by $26 million and $57 million for the three and nine months ended September 30, 2020, respectively, compared to the same periods in the prior year. In addition, amortization of intangibles increased by $3 million and $11 million for the three and nine months ended September 30, 2020, respectively, compared to the same period in the prior year mainly as a result of acquisitions.

We expect our cost of subscription revenues to increase in absolute dollars as we provide subscription services to more customers and increase usage within our customer instances. However, we continue to monitor the COVID-19 pandemic carefully and its impact on our customers.

Our subscription gross profit percentage was 83% for each of the three and nine months ended September 30, 2020, respectively, compared to 83% for each of the three and nine months ended September 30, 2019. We expect our subscription gross profit percentage to remain relatively flat for the year ending December 31, 2020 compared to the year ended December 31, 2019. To the extent future acquisitions are consummated, our cost of subscription revenues may increase due to additional non-cash charges associated with the amortization of intangible assets acquired.

Cost of professional services and other revenues remained relatively flat and increased by $3 million for the three and nine months ended September 30, 2020, respectively, as compared to the same periods in the prior year, primarily due to increased headcount, resulting in an increase in personnel-related costs including stock-based compensation offset by a decrease in third-party implementation costs as we continue to invest and deploy our internal professional service organization and increase their utilization and a reduction in travel expenses resulting from travel restrictions due to the COVID-19 pandemic.

Our professional services and other gross loss percentage decreased to 3% and 12% for the three and nine months ended September 30, 2020, respectively, from 21% and 20% for the three and nine months ended September 30, 2019, respectively, driven by the increased utilization of our internal professional services organization and the reduction in certain travel expenses, both of which are expected to continue for the remainder of the year. As such, we expect our professional services and other gross loss percentage to decrease for the year ending December 31, 2020 compared to the year ended December 31, 2019.

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Sales and Marketing


	Three Months Ended September 30,				% Change		Nine Months Ended September 30,				% Change
	2020		2019				2020		2019

	(dollars in thousands)						(dollars in thousands)
Sales and marketing	$	453,410	$	362,975	25	%	$	1,321,163	$	1,118,279	18	%
Percentage of revenues	39%		41%				40%		45%

Sales and marketing expenses increased by $90 million and $203 million for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019, respectively. The increase was primarily due to increased headcount, resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $65 million and $172 million for the three and nine months ended September 30, 2020, respectively, compared to the same periods in the prior year. Amortization expenses associated with deferred commissions and third-party referral fees increased $14 million and $37 million for the three and nine months ended September 30, 2020, respectively, compared to the same periods in the prior year, due to an increase in contracts with new customers, expansion and renewal contracts. Other sales and marketing program expenses, which include branding expenses and costs associated with purchasing advertising and market data and outside services, increased by $24 million and $40 million during the three and nine months ended September 30, 2020, respectively, compared to the same period in the prior year.

Amid the ongoing regulatory restrictions imposed by governments worldwide in response to the COVID-19 pandemic, we temporarily closed most of our offices to ensure the well-being and safety of our global employees, office staff and communities, and encouraged our employees to work remotely and limit travel. Further, in response to the pandemic, we canceled Knowledge and other events and either replaced them with digital events or postponed them to future periods. As a result, expenses related to Knowledge, net of proceeds, decreased by $10 million for the nine months ended September 30, 2020, compared to the same period in the prior year. Additionally, travel expenses decreased by $17 million and $42 million as a result of travel restrictions due to the COVID-19 pandemic for the three and nine months ended September 30, 2020, respectively, compared to the same periods in the prior year.

Given the unprecedented nature of this pandemic and the uncertainty around its duration, we expect sales and marketing expenses to decrease as a percentage of total revenues given the reduction in certain travel expenses and cancellation of live events that has occurred during each of the three and nine months ended September 30, 2020 and is expected to continue for the remainder of the year ending December 31, 2020. However, we intend to continue to expand our direct sales organization, increase our marketing activities, grow our international operations and build brand awareness and expect sales and marketing expenses to increase in absolute dollars, but decrease as a percentage of revenue for the year ending December 31, 2020 compared to the year ended December 31, 2019.

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Research and Development


	Three Months Ended September 30,				% Change		Nine Months Ended September 30,				% Change
	2020		2019				2020		2019

	(dollars in thousands)						(dollars in thousands)
Research and development	$	268,292	$	190,099	41	%	$	740,030	$	546,041	36	%
Percentage of revenues	23%		21%				23%		22%

Research and development expenses increased by $78 million and $194 million for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019, respectively. The increase was primarily due to increased headcount, resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $70 million and $179 million for the three and nine months ended September 30, 2020, respectively, compared to the same periods in the prior year. The remaining increase for the three and nine months ended September 30, 2020 was primarily due to increases in hosting costs and data center related depreciation costs to support research and development activities.

We expect research and development expenses for the year ending December 31, 2020 to increase in absolute dollars and increase slightly as a percentage of revenue compared to the year ended December 31, 2019, as we continue to improve the existing functionality of our services, develop new applications to fill market needs and enhance our core platform.

General and Administrative


	Three Months Ended September 30,				% Change		Nine Months Ended September 30,				% Change
	2020		2019				2020		2019

	(dollars in thousands)						(dollars in thousands)
General and administrative	$	109,234	$	75,642	44	%	$	319,019	$	245,540	30	%
Percentage of revenues	9%		9%				10%		9%

General and administrative expenses increased by $34 million and $73 million for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019, respectively. The increase was primarily due to increased headcount, resulting in an increase in personnel-related costs including stock-based compensation and overhead expenses of $26 million and $60 million for the three and nine months ended September 30, 2020, respectively, compared to the same periods in the prior year. In March 2020, we amended the employment agreement with our Chief Executive Officer and paid $4 million to restore the benefit of certain non-competition payments our Chief Executive Officer was entitled to receive from his prior employer.

We expect general and administrative expenses to increase in absolute dollars for the year ending December 31, 2020 as we continue to hire new employees, but remain relatively flat as a percentage of total revenues compared to the year ended December 31, 2019.

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Stock-based Compensation


	Three Months Ended September 30,				% Change		Nine Months Ended September 30,				% Change
	2020		2019				2020		2019

	(dollars in thousands)						(dollars in thousands)
Cost of revenues:
Subscription	$	25,602	$	18,880	36	%	$	72,086	$	54,019	33	%
Professional services and other	13,054		10,867		20	%	37,857		31,749		19	%
Operating expenses:
Sales and marketing	78,871		68,712		15	%	227,998		200,071		14	%
Research and development	74,213		50,636		47	%	203,279		144,259		41	%
General and administrative	28,189		13,839		104	%	83,834		62,046		35	%
Total stock-based compensation	$	219,929	$	162,934	35	%	$	625,054	$	492,144	27	%
Percentage of revenues	19%		18%				19%		20%

Stock-based compensation increased by $57 million and $133 million for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019, respectively, primarily due to additional grants to current and new employees and increased weighted-average grant date fair value of stock awards.

Stock-based compensation is inherently difficult to forecast due to fluctuations in our stock price. Based upon our stock price as of September 30, 2020, we expect stock-based compensation to continue to increase in absolute dollars for the year ending December 31, 2020 as we continue to issue stock-based awards to our employees, but remain relatively flat as a percentage of total revenues compared to the year ended December 31, 2019.

Foreign Currency Exchange

Our international operations have provided and will continue to provide a significant portion of our total revenues. Revenues outside North America represented 34% and 33% of total revenues for the three months ended September 30, 2020 and 2019, respectively, and 34% of total revenues for the nine months ended September 30, 2020 and 2019.

Because we primarily transact in foreign currencies for sales outside of the United States, the general weakening of the U.S. Dollar relative to other major foreign currencies (primarily the Euro and British Pound Sterling) had a favorable impact on our revenues for the three months ended September 30, 2020,and an unfavorable impact for nine months ended September 30, 2020. For entities reporting in currencies other than the U.S. Dollar, if we had translated our results for the three and nine months ended September 30, 2020 at the exchange rates in effect for the three and nine months ended September 30, 2019 rather than the actual exchange rates in effect during the period, our reported subscription revenues would have been $14 million lower and $9 million higher for the periods, respectively. The impact from the foreign currency movements from the three and nine months ended September 30, 2019 to the three and nine months ended September 30, 2020 was not material for professional services and other revenues.

In addition, because we primarily transact in foreign currencies for cost of revenues and operating expenses outside of the United States, the general weakening of the U.S. Dollar relative to other major foreign currencies (primarily the Euro and British Pound Sterling) had an unfavorable impact on our sales and marketing expenses for the three months ended September 30, 2020 and no material impact on other operating expense for the same period. However, it had a favorable impact on our cost of revenues and sales and marketing expenses for the nine months ended September 30, 2020, and no material impact on other operating expenses for the same period. For entities reporting in currencies other than the U.S. Dollar, if we had translated our results for the three and nine months ended September 30, 2020 at the exchange rates in effect for the three and nine months ended September 30, 2019 rather than the actual exchange rates in effect during the period, our reported sales and marketing expenses would have been lower by $3 million for the three months ended September 30, 2020 and our cost of revenues and sales and marketing expenses would have been $5 million and $4 million higher for the nine months ended September 30, 2020, respectively.

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Interest Expense


	Three Months Ended September 30,					% Change		Nine Months Ended September 30,				% Change
	2020			2019				2020		2019

	(dollars in thousands)							(dollars in thousands)
Interest expense	$	(7,980)		$	(8,371)	(5	%)	$	(25,038)	$	(24,808)	1	%
Percentage of revenues	(1		%)	(1%)				(1%)		(1%)

Interest expense decreased for the three months ended September 30, 2020 and increased for the nine months ended September 30, 2020 compared to the same period in the prior year primarily due to decrease in amortization expense of debt discount and issuance costs as a result of the 2022 Notes Repurchase offset by increase in debt discount, issuance cost and interest related to the 2030 Notes. For the year ending December 31, 2020, we expect to incur approximately $8 million in amortization expense of debt discount, issuance costs and interest related to the 2022 Notes and 2030 Notes.

Interest Income and Other Income (Expense), net


	Three Months Ended September 30,				% Change		Nine Months Ended September 30,				% Change
	2020		2019				2020		2019

	(dollars in thousands)						(dollars in thousands)
Interest income	$	8,245	$	14,562	(43	%)	$	32,733	$	41,495	(21	%)
Foreign currency exchange loss, net of derivative contracts	(3,322)		(1,951)		NM		(13,213)		(637)		NM






Loss on extinguishment of 2022 Notes	(40,750)		—		NM		(41,657)		0		NM
Other	(92)		206		(145	%)	2,067		3,338		(38	%)
Interest income and other income (expense), net	$	(35,919)	$	12,817	(380	%)	$	(20,070)	$	44,196	(145	%)
Percentage of revenues	(3%)		1%				(1%)		1%

NM - Not meaningful.

Interest income and other income, net decreased $49 million and $64 million for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019, respectively, primarily driven by loss on extinguishment on 2022 Notes Repurchase and early conversions of $41 million and $42 million for the three and nine months ended September 30, 2020, respectively, and increase in foreign currency exchange loss, net of derivative contracts of $13 million for the nine months ended September 30, 2020 compared to same periods in the prior year. Additionally, interest income decreased compared to the same periods in the prior year due to decline in interest rates and change in our investment strategy to higher quality bonds in response to the global market disruptions and uncertainties resulting from the COVID-19 pandemic.

To mitigate our risks associated with fluctuations in foreign currency exchange rates, we enter into foreign currency derivative contracts with maturities of 12 months or less to hedge a portion of our net outstanding monetary assets and liabilities. These hedging contracts may reduce, but cannot entirely eliminate, the impact of adverse currency exchange rate movements.

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Provision for Income Taxes


	Three Months Ended September 30,				% Change	Nine Months Ended September 30,				% Change
	2020		2019			2020		2019

	(dollars in thousands)					(dollars in thousands)
Income before income taxes	$	25,433	$	60,770	NM	$	135,825	$	32,999	NM
Provision for income taxes	12,575		20,172		NM	33,970		5,025		NM
Effective tax rate	49%		33%			25%		15%

NM - Not meaningful.

Our income tax expense was $13 million and $34 million for the three and nine months ended September 30, 2020. The income tax provision was primarily attributable to the mix of earnings and losses in countries with differing statutory tax rates, the valuation allowance in the United States and the intercompany sale of certain intellectual property rights.

Our income tax provision was $20 million and $5 million for the three and nine months ended September 30, 2019, respectively, primarily attributable to foreign taxes and the mix of earnings and losses in countries with differing statutory tax rates.

We continue to maintain a full valuation allowance on our U.S. federal and state deferred tax assets and the significant components of the tax expense recorded are current cash taxes payable in various jurisdictions. The cash tax expenses are impacted by each jurisdiction’s individual tax rates, laws on timing of recognition of income and deductions, and availability of net operating losses and tax credits. Given the full valuation allowance, sensitivity of current cash taxes to local rules and our foreign structuring, we expect that our effective tax rate could fluctuate significantly on a quarterly basis and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents, investments, and cash generated from operations. As of September 30, 2020, we had $3.0 billion in cash and cash equivalents and short-term investments, of which $288 million represented cash held by foreign subsidiaries and $234 million is denominated in currencies other than U.S. Dollar. In addition, we had $1.3 billion in long-term investments that provide additional capital resources. We do not anticipate that we will need funds generated from foreign operations to fund our domestic operations.

In August 2020, we issued 1.40% fixed rate ten-year notes with an aggregate principal amount of $1.5 billion due on September 1, 2030 (the “2030 Notes”). The 2030 Notes were issued at 99.626% of principal and we incurred approximately $13 million for debt issuance costs. Interest is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2021, and the entire outstanding principal amount is due at maturity on September 1, 2030. The 2030 Notes are unsecured obligations and the indentures governing the 2030 Notes contain customary events of default and customary covenants that, among others and subject to exceptions, restrict the Company’s ability to incur or guarantee debt secured by liens on specified assets or enter into sale and lease-back transactions with respect to specified properties.

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In May and June 2017, we issued the 2022 Notes with an aggregate principal amount of $782.5 million. In connection with the issuance of the 2022 Notes, we entered into the 2022 Note Hedge transactions and 2022 Warrants transactions with certain financial institutions. The price of our common stock was greater than or equal to 130% of the conversion price of the 2022 Notes for at least 20 trading days during the 30 consecutive trading days ending on the last trading day of the quarters ended June 30, 2018 through September 30, 2020, except for the quarter ended December 31, 2018. Therefore, our 2022 Notes became convertible at the holders’ option beginning on July 1, 2018 and continue to be convertible through December 31, 2020, except for the quarter ended March 31, 2019 because the Conversion Condition for the 2022 Notes was not met for the quarter ended December 31, 2018. The impact of the 2022 Notes on our liquidity will depend on the settlement method we elect. We currently intend to settle the principal amount of any converted 2022 Notes in cash. During the nine months ended September 30, 2020, we paid cash to settle $43 million in principal of the 2022 Notes. Additionally, we repurchased $496.8 million in aggregate principal amount of the 2022 Notes (the “2022 Notes Repurchase”) which was accounted for as a debt extinguishment. We used proceeds from the partial unwind of the 2022 Note Hedge of $1.1 billion for the 2022 Notes Repurchase.

During the nine months ended September 30, 2020, we issued 2.3 million shares of our common stock upon partial unwind of the 2022 Warrants. We expect to issue additional shares of our common stock in the second half of 2022 upon the automatic exercise of the remaining portion of the 2022 Warrants. As the remaining portion of the 2022 Warrants will be net share settled, there will be no impact on our liquidity. The total number of shares of our common stock we will issue depends on the daily volume-weighted average stock prices over a 60 trading day period beginning on the first expiration date of the remaining portion of the 2022 Warrants, which will be September 1, 2022. In addition, we issued 4.3 million shares of our common stock upon the automatic exercise of a portion of the 2018 Warrants during the nine months ended September 30, 2019. The 2018 Warrants were no longer outstanding as of June 30, 2019. Refer to Note 10 in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

Cash from operations could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and other risks detailed in Part II, Item 1A titled “Risk Factors”. However, we anticipate our current cash, cash equivalents and investment balances and anticipated cash flows generated from operations based on our current business plan and revenue prospects will be sufficient to meet our liquidity needs, including the repayment of any early conversions of our 2022 Notes, debt service costs, expansion of data centers, lease obligations, expenditures related to the growth of our headcount and the acquisition of property and equipment, intangibles, and investments in office facilities, to accommodate our operations for at least the next 12 months. Whether these resources are adequate to meet our liquidity needs beyond that period will depend on our growth, operating results, cash utilized for acquisitions and/or debt retirements if any are consummated, and the capital expenditures required to meet possible increased demand for our services. If we require additional capital resources to grow our business or repay our 2022 Notes at any time in the future, we may seek to finance our operations from the current funds available or seek additional equity or debt financing.


	Nine Months Ended September 30,
	2020		2019

	(dollars in thousands)
Net cash provided by operating activities	$	1,101,074	$	814,761
Net cash used in investing activities	(1,330,353)		(525,745)
Net cash provided by (used in) financing activities	800,139		(225,575)
Net increase in cash, cash equivalents and restricted cash, net of foreign currency effect	573,819		57,002

Operating Activities

Cash provided by operating activities mainly consists of our net income adjusted for repayments of convertible senior notes attributable to debt discount, certain non-cash items, including, depreciation and amortization, amortization of deferred commissions, amortization of issuance cost and debt discount, loss on extinguishment of 2022 Notes, stock-based compensation and changes in operating assets and liabilities during the year.

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Net cash provided by operating activities was $1.1 billion for the nine months ended September 30, 2020 compared to $815 million for the nine months ended September 30, 2019. The increase in operating cash flow was primarily due to an increase in net income compared to same period in the prior year and an increase in adjustments for non-cash items to reconcile net income to net cash provided by operations, driven by loss on extinguishment of 2022 Notes, increase in stock-based compensation from increased headcount and depreciation and amortization from increased capital expenditures to support the business growth offset by the repayment of 2022 Notes attributable to debt discount and the favorable impact on operating cash flow from changes in operating assets and liabilities.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2020 was $1.3 billion compared to $526 million for the nine months ended September 30, 2019. The increase in cash used in investing activities was mainly due to $606 million increase in net purchases of investments, $108 million increase in cash outflow for business combinations and $99 million increase in capital expenditures.

Financing Activities

Net cash provided by financing activities was $800 million for the nine months ended September 30, 2020 compared to net cash used in financing activities of $226 million for the nine months ended September 30, 2019. The increase is primarily due to proceeds of $1.5 billion from the issuance of the 2030 Notes, net of discount and issuance costs, offset by the 2022 Notes Repurchase of $1.6 billion attributable to principal, funded in part by the proceeds received from the partial unwind of the 2022 Note Hedge of $$1.1 billion. In addition, the change was due to an increase in proceeds from employee stock plans by $37 million, offset by a $30 million increase in taxes paid related to net share settlement of equity awards.

Contractual Obligations and Commitments

Except for those disclosed in Note 16 “Commitments and Contingencies” and Note 10 “Long-Term Debt” of the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments in the contractual obligations and commitments disclosed in our Annual Report on 10-K for the year ended December 31, 2019, which was filed with the SEC on February 20, 2020.

Off-Balance Sheet Arrangements

During all periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for purposes of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships.

Critical Accounting Policies and Significant Judgments and Estimates

There have been no changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 20, 2020.

New Accounting Pronouncements Pending Adoption

The impact of recently issued accounting standards is set forth in Note 2, Summary of Significant Accounting Policies, of the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk as compared to the disclosures in Part II, Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 20, 2020, other than market risk that is created by the global market disruptions and uncertainties resulting from the COVID-19 pandemic. See the section “Risk Factors” for further discussion of the possible impact to our business.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Regulations under the Exchange Act require public companies, including our company, to maintain “disclosure controls and procedures,” which are defined in Rule 13a-15(e) and Rule 15d-15(e) to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required or necessary disclosures. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer have concluded, based on the evaluation of the effectiveness of the disclosure controls and procedures by our management as of the end of the quarter covered by this Quarterly Report on Form 10-Q, that our disclosure controls and procedures were effective at the reasonable assurance level for this purpose.

Changes in Internal Control over Financial Reporting

Regulations under the Exchange Act require public companies, including our company, to evaluate any change in our “internal control over financial reporting” as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer did not identify any change in our internal control over financial reporting during the quarter covered by this Quarterly Report on Form 10-Q that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are party to litigation and other legal proceedings in the ordinary course of business. While the results of any litigation or other legal proceedings are uncertain, we are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

Investing in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes, before making an investment decision. We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition, results of operations and future prospects. Our business could be harmed by any of these risks. Our stock price could decline due to any of these risks, and you may lose all or part of your investment.

The extent to which the ongoing COVID-19 pandemic, including the resulting global economic uncertainty, and measures taken in response to the pandemic will continue to impact our business and future results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict.

The COVID-19 pandemic has disrupted the flow of the economy and put unprecedented strains on governments, health care systems, educational institutions, businesses and individuals around the world. The impact on the global population and the duration of the COVID-19 pandemic is difficult to assess or predict. It is even more difficult to predict the impact on the global economic market, which will be highly dependent upon the actions of governments, businesses and other enterprises in response to the pandemic and the effectiveness of those actions. The pandemic has already caused, and is likely to result in further, significant disruption of global financial markets and economic uncertainty. A recession, depression or other sustained adverse market events resulting from the spread of the COVID-19 pandemic could materially and adversely affect our business and the value of our common stock.

Some customers or potential customers, particularly in industries most impacted by the COVID-19 pandemic including transportation, hospitality, retail and energy, have reduced their IT spending or delayed their digital transformation initiatives and if more customers or potential customers similarly do so, our business could be materially and adversely impacted. If we experience an increase in curtailed customer demand, reduced customer spend or contract duration, delayed collections, lengthened payment terms, lengthened sales cycles or competition due to changes in terms and conditions and pricing of our competitors’ products and services, our business, results of operations and overall financial performance in future periods could be materially and adversely impacted.

In response to the COVID-19 pandemic, we have temporarily closed most of our offices (including our headquarters) around the world, encouraged our employees to work remotely, implemented travel restrictions for all non-essential business, and shifted certain of our customer, industry, analyst, investor, and employee events to virtual-only experiences and we may deem it advisable to similarly alter, postpone or cancel entirely additional events in the future. For example, we canceled our in-person, annual Knowledge conference and replaced it with a digital event experience and cancelled our Financial Analyst Day. Certain costs incurred in preparation for these events could not be recovered. Additionally, our efforts to re-open our offices safely may not be successful, could expose our personnel to health risks and could involve additional costs or liability. The COVID-19 pandemic may have a long-term effect on the nature of our office environment and remote working and how we innovate, which may present operational and workplace culture challenges that may adversely affect our business.

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The COVID-19 pandemic has impacted our business, and, as a result, in our Q1 2020 earnings we revised our external guidance to investors as to our expectations of our financial performance for the full year 2020 to account for impacts that have occurred and further expected impacts. If the COVID-19 pandemic continues or worsens, especially in regions in which we have material operations or sales, our business activities originating from affected areas, including sales-related activities, could be adversely affected. Disruptive activities could include continued business closures in impacted areas, further or continued restrictions on our employees’ and other service providers’ ability to travel, impacts to productivity if our employees or their family members experience health issues, and potential delays in hiring and onboarding of new employees mainly in our general and administrative functions. The COVID-19 pandemic could also impact our data center operations, including potential disruptions to the supply chain of hardware needed to maintain these third-party systems, and primary vendors we rely on for products and services that allow our employees to work remotely. Additionally. in the event that internal performance metrics under our short-term and long-term incentive programs are not met due to negative economic conditions arising from the COVID-19 pandemic, these programs may not pay competitively and we may face greater challenges in retaining key employees. Further, we may experience increased cyberattacks and security challenges as our global employee base and vendors and other third parties work remotely on less secure systems.

The extent and continued impact of the COVID-19 pandemic on our business will depend on certain developments including the duration and spread of the outbreak; future spikes of COVID-19 infections resulting in additional preventative measures to contain or mitigate the outbreak; severity of the economic decline attributable to the pandemic and timing and nature of a potential economic recovery; government responses to the COVID-19 pandemic, including the effectiveness, extent and duration of efforts to limit the spread and impact of the disease, such as “shelter in place” and similar government directives; impact on our customers, sales cycles and ability to generate new business; impact on our customer, industry or employee events; extent of delays in hiring and onboarding new employees; and effect on our partners, vendors and supply chains, all of which are highly uncertain and cannot be predicted. While our revenues, billings and earnings are relatively predictable as a result of our subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our results of operations and overall financial performance until future periods, if at all, and could cause our future results of operations to vary significantly from period to period. In addition the global macroeconomic effects of the COVID-19 pandemic and related impacts to our customers and their demand for our products and services may persist for an indefinite period, even after the COVID-19 pandemic has subsided.

In addition, we have seen significant volatility in the global markets, as well as significant interest rate and foreign currency volatility. As a result, the trading prices for our common stock and other S&P 500 and technology companies have been highly volatile, and such volatility may continue for the duration of and possibly beyond the COVID-19 pandemic. The effects of the COVID-19 pandemic also may heighten many of the other risks described in this ‘‘Risk Factors’’ section.

Risks Related to Our Ability to Grow Our Business

We participate in intensely competitive markets, and if we do not compete effectively, our business and operating results will be harmed.

The markets for our enterprise cloud solutions are rapidly evolving and highly competitive, with relatively low barriers to entry. As the market for digital workflow products matures and new technologies and competitors enter the market, we expect competition to intensify. Our current competitors include:

•large, well-established, enterprise application software vendors and large integrated systems vendors;

•new entrants to the market developing technologies to solve similar problems in different ways;

•solutions developed in-house by our potential customers or using integrations with other tools;

•vendors of infrastructure-as-a-service, platform-as-a-service and development operations; and

•established and emerging cloud vendors.

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Many prospective customers have invested substantial personnel and financial resources to implement and integrate their current enterprise software into their businesses and therefore may be reluctant or unwilling to migrate away from their current solution to ours. As our offerings have become more widely adopted and successful in the market, more competitors are developing offerings to compete with ours. Many of our competitors and potential competitors are larger and have greater name recognition, longer operating histories, more established customer relationships (including at the executive level of large enterprises where decision-making authority is held), larger marketing budgets and greater resources than we do. While we believe that our platform and products can largely be complementary to large and established systems that traditionally operate as “systems of record,” competitors may try to enter our space. They may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, customer requirements and buying practices. They may utilize acquisitions, integrations or consolidations to offer integrated or bundled products, enhanced functionality or other advantages. They may reduce the price of products or subscriptions that compete with ours or may bundle them with other products and subscriptions, causing our products to appear relatively more expensive. They may also invest in industry-specific solutions that purport to provide a unique solution for that industry. Other potential competitors not currently offering competitive products may expand their services to compete with our services, or we may shift our products and services to compete with current and future competitors in adjacent markets. We have in the past expanded, and we expect to continue to expand the breadth of our services to include offerings in new markets and the use of our platform by developers of custom applications. As a result, we expect increasing competition from platform vendors and application development vendors focused on these other markets. Smaller competitors and new entrants may accelerate pricing pressures, including in the IT service management (“ITSM”) market, which is our more mature offering and from which we derive a large portion of our revenues. For all of these reasons, we may not be able to compete successfully, and competition could result in reduced sales, reduced margins, losses or the failure of our products to achieve or maintain market acceptance, any of which could harm our business.

Privacy laws and concerns, evolving regulation of cloud computing, cross-border data transfer restrictions, other foreign and domestic regulations and standards related to data and the Internet may adversely affect our business.

National and local governments or agencies have in the past adopted, and may in the future adopt, laws and regulations affecting data privacy, the use of the Internet as a commercial medium, the use of data in contexts referred to as artificial intelligence and machine learning, and data sovereignty requirements concerning the location of data centers that store and process data. As a cloud based service provider, we optimize performance of our products and services by utilizing data centers that may be located in different political jurisdictions. In addition, we utilize data concerning the use of our products and services to continually improve our offering. Changing laws, regulations and standards applying to the collection, use, sharing, transfer or other processing of data, including personal data, could affect our ability to develop our products and services to maximize their utility, as well as our customers’ ability to use data or share data with service providers. Such changes may restrict our ability to use, store or otherwise process data of our customers in connection with providing and supporting our services. In some cases, this could impact our ability to offer our services in certain locations or our customers’ ability to deploy our services globally. Examples of recent changes include:

•In 2016, the European Union (the “EU”) adopted the General Data Protection Regulation (the “GDPR”), which took effect in May 2018 and established new requirements applicable to the handling of personal data. The particular obligations imposed by GDPR are subject to interpretation, and different regulators may interpret requirements inconsistently.

•On July 16, 2020, the European Court of Justice gave its ruling in the case of Max Schrems v. Facebook Ireland Limited, invalidating the Privacy Shield framework. However, the Standard Contractual Clauses (the “SCCs”) remain lawful mechanisms for transferring personal data from the EU to the US and other third countries deemed to have inadequate protection for the personal information of citizens of the EU by the European Commission. Accordingly, while we believe there will not be any material impact to our business, we continue to monitor for any impacts and developments as a result of this ruling.

•In January 2020, the California Consumer Privacy Act (the “CCPA”) in the US took effect and broadly defines personal information and provides California consumers increased privacy rights and protections. The CCPA, among other things, affords California consumers new abilities to opt out of certain sales of personal information. On June 1, 2020, the California Attorney General submitted the final implementing regulations for review to the Office of Administrative Law and enforcement of the CCPA began on July 1, 2020. In addition, other nations and U.S. states (including California) and the federal government have discussed, are passing or may pass future legislation similar to the GDPR and/or the CCPA, or with other data localization or sovereignty requirements.

•Both US and non-US governments are considering the use of artificial intelligence and machine learning in both consumer and business contexts and whether there is any need for regulation in these areas.

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The costs of compliance with, and other obligations imposed by, the GDPR the CCPA and other privacy, data residency and data transfer laws, regulations and standards may cause us to incur substantial operational costs or require us to modify our data handling practices and/or policies, may limit the development, use and adoption of our services and reduce overall demand for our services. In addition, non-compliance could result in proceedings or investigations against us by regulatory authorities or others, lead to significant fines of up to 4% of our worldwide annual revenue or reputational harm and may otherwise adversely impact our business, financial condition and operating results. Changes in our developed or acquired products and how such products utilize data could alter or increase our compliance requirements. As a result, our innovation and business drivers in developing or acquiring new and emerging technologies and the demand for our products could be impacted.

In addition to government activity, privacy advocacy groups and other technology and industry groups have established or may establish various new or different self-regulatory standards that may place additional obligations on us. Our customers may expect us to meet voluntary certifications or adhere to other standards established by third parties. If we are unable to maintain these certifications or meet these standards, it could reduce demand for our products and adversely affect our business.

If we do not accurately predict, prepare for, and respond promptly to rapidly evolving technological, market and customer developments, our competitive position and business prospects may be harmed.

We compete in markets that continue to evolve rapidly. The pace of innovation will continue to accelerate as customers increasingly base their purchases on digital technologies and capabilities, including public and private cloud solutions and infrastructure, massively scalable databases, mobile, consumer product-like user experiences, social, collaboration, machine learning, artificial intelligence, Internet-connected devices, high-velocity robotic automation, security, cryptography, internal software development operations, and application and service awareness. Our customers and prospective customers must choose among competing imperatives to adopt digital technologies, or have been built on fully-digital, modern, dynamic IT technologies. Accordingly, to compete effectively, we must: identify and innovate in the right emerging technologies, knowing that we cannot make substantial investments in all of them; accurately predict our customers’ changing business needs, priorities and adoption practices, including their technology infrastructures and buying and budgetary practices; invest in and continually optimize our own technology platform so that it continues to meet the very high performance expectations of our customers; successfully deliver new, scalable platform and database technologies and products to meet these needs and priorities; efficiently integrate with other technologies within our customers’ digital environments; expand our offerings into industries and to buyers who are not familiar with our offerings; profitably market and sell products to companies and buyers in markets where our sales and marketing teams have less experience, including to companies built on fully-digital, modern, dynamic IT technologies that have not been strong buyers of ITSM and ITOM products; and effectively deliver, either directly or through our partner ecosystem, the business process planning, IT systems architecture planning, and product implementation services that our customers require to be successful. If we fail to meet any of these requirements, our competitive position, strategic relevance and business prospects may be harmed.

Delays in the release of, or actual or perceived defects in, new or updated products may slow the adoption of our most recent technologies, reduce our ability to efficiently provide our services, decrease customer satisfaction, and adversely impact sales of additional products to our customers.

We must successfully continue to release new products and updates to existing products. The success of any release depends on a number of factors, including our ability to manage the risks associated with quality or other defects or deficiencies, delays in the timing of releases or the adoption of releases by customers, and other complications that may arise during the early stages of introduction. If releases are delayed or if customers perceive that our releases contain bugs or other defects or are difficult to implement, customer adoption of our new products or updates may be adversely impacted, customer satisfaction may decrease, our ability to efficiently provide our services may be reduced, and our growth prospects may be harmed.

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We do business with federal, state and local governments and agencies, and heavily-regulated U.S. and foreign organizations; as a result, we face risks related to the procurement process, budget decisions driven by statutory and regulatory determinations, termination of contracts, and compliance with government contracting requirements.

We provide products and services to the U.S. government, state and local governments and heavily-regulated organizations directly and through our partners. We have made, and may continue to make, significant investments to support future sales opportunities in the federal, state and local government sectors. This includes obtaining additional cloud security certification requirements for the ServiceNow GovCommunityCloud, such as the U.S. Federal Risk and Authorization Management Program (“FedRAMP”) High Impact Provisional Authority to Operate (“P-ATO”) from the Joint Authorization Board, and the U.S. Department of Defense Impact Level 4 P-ATO in the Security Requirements Guide for cloud computing by the Defense Information Systems Agency. However, government certification requirements may change, or we may be unable to achieve or sustain one or more government certifications, including those mentioned above. As a result, our ability to sell into the government sector could be restricted until we obtain such certifications.

A substantial majority of our sales to date to government entities have been made indirectly through our distribution and reseller partners. Doing business with government entities presents a variety of risks. The procurement process for governments and their agencies is highly competitive, time-consuming and may, in certain circumstances, be subject to political influence. We incur significant up-front time and expense, such as through engaging lobbyists, which subjects us to additional compliance risks and costs, without any assurance that we (or a third-party distributor or reseller) will win a contract. Beyond this, demand for our products and services may be adversely impacted by public sector budgetary cycles and funding availability that in any given fiscal cycle may be reduced or delayed, including in connection with an extended federal government shutdown. Further, if we are or our partner is successful in receiving a bid award, that award could be challenged by one or more competitive bidders. Bid protests may result in an increase in expenses related to obtaining contract awards or an unfavorable modification or loss of an award. In the event a bid protest is unsuccessful, the resulting delay in the startup and funding of the work under these contracts may cause our actual results to differ materially and adversely from those anticipated.

In addition, public sector customers may have contractual, statutory or regulatory rights to terminate current contracts with us or our third-party distributors or resellers for convenience or due to a default, though such risk may be assumed by such third-party distributor or reseller. If a contract is terminated for convenience, we may only be able to collect fees for products or services delivered prior to termination and settlement expenses. If a contract is terminated due to a default, we may be liable for excess costs incurred by the customer for procuring alternative products or services or be precluded from doing further business with government entities. Further, entities providing services to governments are required to comply with a variety of complex laws, regulations, and contractual provisions relating to the formation, administration, or performance of government contracts that give public sector customers substantial rights and remedies, many of which are not typically found in commercial contracts. These may include rights with respect to price protection, the accuracy of information provided to the government, contractor compliance with supplier diversity policies, and other terms that are particular to government contracts, such as termination rights. These rules may apply to us and/or third-party resellers or distributors whose practices we may not control. Such parties’ non-compliance could impose repercussions with respect to contractual and customer satisfaction issues.

In addition, federal, state, and local governments routinely investigate and audit contractors for compliance with these requirements. If, as a result of an audit, it is determined that we have failed to comply with these requirements, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, cost associated with the triggering of price reduction clauses, fines, and suspensions or debarment from future government business, and we may suffer reputational harm.

Further, we are increasingly doing business in heavily regulated industries, such as the financial services and health care industries. Current and prospective customers, such as those in these industries, may be required to comply with more stringent regulations in connection with subscribing to and implementing our services or particular regulations regarding third-party vendors that may be interpreted differently by different customers. In addition, regulatory agencies may impose requirements toward third-party vendors generally, or our company in particular, that we may not be able to, or may not choose to, meet. In addition, customers in these heavily-regulated areas often have a right to conduct audits of our systems, products and practices. In the event that one or more customers determines that some aspect of our business does not meet regulatory requirements, we may be limited in our ability to continue or expand our business.

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Our customers also include a number of non-U.S. governments, to which similar procurement, budgetary, contract, and audit risks of U.S. government contracting also apply, particularly in certain emerging markets where our customer base is less established. In addition, compliance with complex regulations and contracting provisions in a variety of jurisdictions can be expensive and consume significant management resources. In certain jurisdictions, our ability to win business may be constrained by political and other factors unrelated to our competitive position in the market. Each of these difficulties could materially adversely affect our business and results of operations.

We rely on our network of partners for an increasing portion of our revenues, and if these partners fail to perform, our ability to sell and distribute our products may be limited, and our operating results and growth rate may be harmed.

An increasing portion of our revenues is generated by sales through our network of partners, including managed service providers and resellers. In addition, we increasingly rely on our partners to provide professional services, including customer implementations. While we provide our partners with training and programs, including accreditations and certifications, these programs may not be effective or utilized consistently. In addition, new partners may require extensive training and may require significant time and resources to achieve productivity. Our partners may subject us to lawsuits, potential liability, and reputational harm if, for example, any of our partners misrepresent the functionality of our platform or products to customers, fail to perform services to our customers’ expectations, or violate laws or our corporate policies. In addition, our partners may utilize our platform to develop products and services that could potentially compete with products and services that we offer currently or in the future. Concerns over competitive matters or intellectual property ownership could constrain these partnerships. If we fail to effectively manage and grow our network of partners, or properly monitor the quality and efficacy of their service delivery, our ability to sell our products and efficiently provide our services may be impacted, and our operating results and growth rate may be harmed.

If we are unsuccessful in increasing our penetration of international markets or managing the risks associated with foreign markets, our business and operating results will be adversely affected.

Sales outside of North America represented 34% and 33% of our total revenues for the three months ended September 30, 2020 and 2019, respectively, and 34% of total revenues for each of the nine months ended September 30, 2020 and 2019. Our business and future prospects depend on increasing our international sales as a percentage of our total revenues. The failure to grow internationally will harm our business. Additionally, operating in international markets requires significant investment and management attention and subjects us to different regulatory, political and economic risks from those in the United States (the “US”). We have made, and will continue to make, substantial investments in data centers, cloud computing infrastructure, sales, marketing, personnel and facilities as we enter and expand in new geographic markets. When we make these investments, it is typically unclear whether, and when, sales in the new market will justify our investments. We may significantly underestimate the level of investment and time required to be successful, or whether we will be successful. Our rate of acquisition of new large enterprise customers, a factor affecting our growth, has generally been lower in Africa, Asia, Eastern Europe, South America and other markets in which we are less established and where there may be increased or changing regulations and operational and intellectual property risks, as compared to North America, Australia and Western Europe. An increasing proportion of the large enterprises that are not yet our customers are located in emerging markets where we are less established. We have experienced, and may continue to experience, difficulties in some of our investments in geographic expansion, including hiring qualified sales management personnel, penetrating the target market, anticipating and ensuring compliance with regulatory developments, and managing foreign operations in such locales.

Risks inherent with making our products and services available in international markets include without limitation:

•compliance with multiple, conflicting and changing governmental laws and regulations, including employment, tax, competition, requirements to have local partner(s), local entity ownership limitations, technology transfer or sharing requirements, data residency and transfer laws and regulations, privacy and data protection laws and regulations, including the GDPR;

•compliance by us and our business partners with international bribery and anti-corruption laws, including the UK Bribery Act and the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”);

•the risk that illegal or unethical activities of our local employees or business partners will be attributed to or result in liability to us or damage to our reputation;

•longer and potentially more complex sales and 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;

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•potential changes in international trade policies, tariffs, agreements and practices, including the adoption and expansion of formal or informal trade restrictions or regulatory frameworks favoring local competitors;

•potential threatening state-sponsored actions, including cybersecurity threats directed at local data centers, customers or end-users;

•local business practices and cultural norms that may favor local competitors;

•localization of our services, including translation into foreign languages and associated expenses; and

•natural disasters, acts of war, terrorism or pandemics, including the COVID-19 pandemic.

If we are unable to manage these risks, if our required investments in these international markets are greater than anticipated, or if we are unsuccessful in increasing sales in emerging markets, our revenue growth rate, business and operating results will be adversely affected.

As we acquire or invest in companies and technologies, we may not realize the expected business or financial benefits and the acquisitions and investments may divert our management’s attention and result in additional dilution to our stockholders.

We have acquired or invested in companies and technologies in the past as part of our business strategy and may continue to evaluate and execute potential strategic transactions, including acquisitions of or investments in businesses, technologies, services, products and other assets in the future. We also may enter into relationships with other businesses to expand our service offerings, functionality or our ability to provide services in international locations, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing or investments in other companies. Although we conduct reasonably extensive due diligence with each of the entities we engage for a strategic transaction, our due diligence efforts may not reveal every material concern that may exist either with respect to the target entity or our assumptions surrounding the resulting combination. These strategic transactions involve numerous risks, including:

•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;

•potential adverse tax consequences;

•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;

•increased data privacy or security compliance requirements resulting from integrating the acquired technology or company with ours;

•impairment to our investments if our investees are unable to obtain future funding on favorable terms or at all, including due to the COVID-19 pandemic; and

•potential unknown liabilities associated with the acquired businesses.

In addition, we may have to pay cash, incur debt, or issue equity or equity-linked securities to pay for any future acquisitions, each of which could adversely affect our financial condition or our stock price. Furthermore, if we finance acquisitions by issuing equity, convertible or other debt securities or loans, our existing stockholders may be diluted, or we could face constraints related to the terms of and repayment obligation related to the incurrence of indebtedness that could affect our stock price. The occurrence of any of these risks could harm our business, operating results and financial condition.

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Risks Related to the Operation of Our Business

If we or our third-party service providers suffer a cyber-security event, we may lose customers and incur significant liabilities, any of which would harm our business and operating results.

Our operations involve the storage, transmission and processing of our customers’ confidential, proprietary and sensitive data, including personally identifiable information, protected health information, financial information and, in some cases, government information. While we have security measures in place designed to protect customer information and prevent data loss, these measures may be breached because of employee error or third-party actions, including unintentional events or deliberate attacks by cyber criminals, and result in someone obtaining unauthorized access to our customers’ data or our data, including our intellectual property and other confidential business information. In addition, third parties have attempted and may continue to attempt to fraudulently induce employees, contractors, or users to disclose information to gain access to our data or our customers’ data, and we have been and may continue to be the target of email scams that attempt to acquire personal information or company assets. Additionally, because we do not control our third-party service providers or their processing of data, we cannot ensure the integrity or security of measures they take to protect customer information and prevent data loss. Computer malware, viruses, hacking, phishing and denial of service attacks by third parties have become more prevalent in our industry, and they have occurred on our and our third-party service providers’ systems in the past and may occur again on these systems in the future. Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not detected until successfully launched against a target, we have been and may continue to be unable to anticipate these techniques or to implement adequate preventative measures. We devote significant financial and personnel resources to implement and maintain security measures; however, as cyber-security threats develop and grow more complex over time, it may be necessary to make significant further investments to protect data and infrastructure. A security breach suffered by us or our third-party service providers, an attack against our service availability or unauthorized access or loss of data could result in a disruption to our service, litigation, the triggering of service availability, indemnification and other contractual obligations, regulatory investigations, government fines and penalties, reputational damage, loss of sales and customers, mitigation and remediation expenses and other significant costs and liabilities. In addition, we may incur significant costs and operational consequences of investigating, remediating, eliminating, complying with notice obligations and implementing additional measures designed to prevent actual or perceived security incidents. We also cannot be certain that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover the potentially significant losses that may result from a security incident or breach or that the insurer will not deny coverage as to any future claim.

Further, in most instances, our customers administer access to the data held in their particular instance for their employees and service providers. We offer tools and support for what we believe are best practices to maintain security utilizing our services, but customers are not required to utilize those tools or follow our suggested practices. As a result, or for other reasons, a customer may suffer a cyber-security event on its own systems, unrelated to our own, and allow a malicious actor to obtain access to the customer’s information held on our platform. Even if such a breach is unrelated to our security programs or practices, such breach could result in our incurring significant economic and operational costs in investigating, remediating, eliminating and implementing additional measures to further protect our customers from their own vulnerabilities, and could result in reputational harm to us.

If we lose key employees or are unable to attract and retain the employees we need, our business and operating results will be adversely affected.

Our success depends largely upon the continued services of our management team, including our Chief Executive Officer and Chief Financial Officer, and many key individual contributors. From time to time in the ordinary course of business, there may be changes in our management team resulting from the hiring or departure of executives. For example, our current President and Chief Executive Officer was appointed in November 2019 and our current Chief Financial Officer was appointed in January 2020. While we seek to manage these transitions carefully, including by establishing strong processes and procedures and succession planning, such changes may result in a loss of institutional knowledge and cause disruptions to our business.

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In the technology industry, there is substantial and continuous competition for engineers with high levels of experience in designing, developing and managing software and Internet-related solutions, sales executives and operations personnel. We may not be successful in attracting and retaining qualified personnel, and we may experience increased compensation and training costs that may not be offset by either improved productivity or higher sales. We have from time to time experienced, and we may continue to experience, difficulty in hiring and retaining highly-skilled employees with appropriate qualifications, and may not be able to fill positions in desired geographic areas or at all. In particular, competition for experienced software and cloud computing infrastructure engineers in the San Francisco Bay area, San Diego, Seattle, London, Amsterdam and Hyderabad, our primary operating locations, is intense. Many of our employees, including all of our executive officers, are employed “at-will” and may terminate their employment with us at any time. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be adversely affected.

In addition, we believe our corporate culture of fostering innovation, teamwork and employee satisfaction has been a key contributor to our success to date. As we continue to grow and expand globally, we may find it difficult to maintain important aspects of our corporate culture, which could negatively affect our ability to retain and recruit personnel who are essential to our future success.

Natural disasters and other events beyond our control could harm our business.

Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a negative effect on us. Our business operations are subject to interruption by natural disasters, flooding, fire, power shortages, pandemics such as the continued spread of COVID-19, terrorism, political unrest, telecommunications failure, vandalism, cyber-attacks, geopolitical instability, war, the effects of climate change (such as drought, wildfires, increased storm severity and sea level rise) and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers, could decrease demand for our services, and could cause us to incur substantial expense. Our insurance may not be sufficient to cover losses or additional expense that we may sustain. The majority of our research and development activities, corporate offices, information technology systems, and other critical business operations are located near major seismic faults in California and Washington. Customer data could be lost, significant recovery time could be required to resume operations and our financial condition and operating results could be adversely affected in the event of a major natural disaster or catastrophic event.

Various factors, including our customers’ business, integration, migration and security requirements, or errors by us, our partners, or our customers, may cause implementations of our products to be delayed, inefficient or otherwise unsuccessful.

Our business depends upon the successful implementation of our products by our customers. Increasingly, we and our customers rely on our network of partners to deliver implementation services, and there may not be enough qualified implementation partners available to meet customer demand. Further, our customers’ business, integration, migration and security requirements, or errors by us, our partners, or our customers, or other factors may cause implementations to be delayed, inefficient or otherwise unsuccessful. For example, changes in the functional requirements of our customers, delays in timeline, or deviations from recommended best practices may occur during the course of an implementation project. As a result of these and other risks, we or our customers may incur significant implementation costs in connection with the purchase, implementation and enablement of our products. Some customer implementations may take longer than planned or fail to meet our customers’ expectations, which may delay our ability to sell additional products or result in customers canceling or failing to renew their subscriptions before our products have been fully implemented. Some customers may lack the employee talent or organizational capacity to manage a digital transformation such as our offering and, as a consequence, may be unable to see the benefits of our products. Unsuccessful, lengthy, or costly customer implementation and integration projects could result in claims from customers, reputational harm, and opportunities for competitors to displace our products, each of which could have an adverse effect on our business and operating results.

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Disruptions or defects in our services could damage our customers’ businesses, subject us to substantial liability and harm our reputation and financial results.

From time to time, we experience defects in our services, and new defects may be detected in the future. For example, we provide regular updates to our services, which frequently contain undetected defects when first released. Defects may also be introduced by our use of third-party software, including open source software. Disruptions may result from errors we make in developing, delivering, configuring or hosting our services, or designing, installing, expanding or maintaining our cloud infrastructure. Disruptions in service can also result from incidents that are outside of our control, including denial of service attacks and the ongoing COVID-19 pandemic. We currently serve our customers primarily using equipment managed by us and co-located in third-party data centers operated by several different providers located around the world, and we plan to serve certain of our customers using data center facilities operated by public cloud service providers. These data centers are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, power loss and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct, equipment failure and adverse events caused by operator error or negligence. Despite precautions taken at these centers, problems at these centers could result in lengthy interruptions in our services and the loss of customer data. In addition, our customers may use our services in ways that cause disruptions in service for other customers. Our customers use our services to manage important aspects of their businesses, and our reputation and business will be adversely affected if our customers and potential customers believe our services are unreliable. Disruptions or defects in our services may reduce our revenues, cause us to issue credits or pay penalties, subject us to claims and litigation, cause our customers to delay payment or terminate or fail to renew their subscriptions, and adversely affect our ability to attract new customers. Similarly, customers may have unique requirements for system resiliency that we may not be able to, or may not choose to, meet. The occurrence of payment delays, service credit, warranty or termination for material breach or other claims against us could result in an increase in our bad debt expense, an increase in collection cycles for accounts receivable, an increase to our service level credit accruals, other increased expenses or risks of litigation. We may not have insurance sufficient to compensate us for the potentially significant losses that may result from claims arising from disruptions in our services.

Risks Related to the Financial Performance or Financial Position of Our Business

Our operating results may vary significantly from period to period, and if we fail to meet the financial performance expectations of investors or securities analysts, the price of our common stock could decline substantially.

Our operating results may vary significantly from period to period as a result of various factors, some of which are beyond our control. For any quarterly or annual period, there is a risk that our financial performance will not meet the financial guidance we have previously given for that period, or that we may otherwise fail to meet the financial performance expectations of the securities analysts who issue reports on our company and our common stock price, or of investors in our common stock. There is also a risk that we may issue forward-looking financial guidance for a quarterly or annual period that fails to meet the expectations of such securities analysts or investors. If any of the foregoing occurs, for any reason, either within or outside of our control, the price of our common stock could decline substantially and investors in our common stock could incur substantial losses. Some of the important factors that may cause our financial performance to vary widely, or cause our forward-looking financial guidance to fall below the expectations of such securities analysts or investors, include:

•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, including changes in our mix of cloud and self-hosted offerings, market penetration of our products, or use of our products by our customers;

•our ability to increase sales of certain new products;

•volatility in foreign currency exchange rates and our ability to effectively hedge our foreign currency exposure;

•the rate of expansion, retention 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 our customers’ or a prospective customers’ purchasing decisions;

•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;

•the length and complexity of the sales cycle and certification process for our services, especially for sales to larger enterprises, government and regulated organizations;

•changes in the size and complexity of our customer relationships;

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•changes to our management, sales and account management teams as we scale and as a result of evolving business priorities;

•changes in our or our competitors’ pricing policies;

•significant security breaches, technical difficulties or interruptions of our services;

•new solutions or products introduced by our competitors;

•changes in effective tax rates;

•changes in the average contract term of our customer agreements, timing of renewals, renewal rates, expansion within our existing customers and billings duration;

•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;

•changes in laws or regulations impacting the delivery of our services;

•our ability to comply with privacy laws and regulations, including the GDPR and the CCPA;

•significant litigation or regulatory actions relating to claims of intellectual property infringement, violation of privacy laws, employment matters or any other significant matter;

•the amount and timing of equity awards and the related financial statement expenses;

•the impact of new accounting pronouncements; and

•our ability to accurately estimate the total addressable market for our products and services.

Lawsuits against us by third parties that allege we infringe their intellectual property rights could harm our business and operating results.

There is considerable patent and other intellectual property development activity in our industry. Many companies in our industry, including our competitors, other third parties and non-practicing entities, own large numbers of patents, copyrights, trademarks and trade secrets, which they may use to assert claims of patent infringement, misappropriation or other violations of intellectual property rights against us.

Moreover, the patent portfolios of many of our competitors are larger than ours. This disparity may increase the risk that our competitors may sue us for patent infringement and may limit our ability to counterclaim for patent infringement or settle through patent cross-licenses. From time to time, our competitors or other third parties, including patent holding companies seeking to monetize patents they have purchased or otherwise obtained, may claim that we are infringing upon their intellectual property rights. For example, we recorded charges for aggregate legal settlements of $270.0 million in our consolidated statement of comprehensive loss during the year ended December 31, 2016. The charges covered the fulfillment by us of all financial obligations under settlement agreements with BMC and HPE, with no remaining financial obligations to BMC or HPE under either settlement.

In any intellectual property litigation, regardless of the scope or merits of the claims at issue, we may incur substantial attorney’s fees and other litigation expenses and, if the claims are successfully asserted against us and we are found to be infringing upon the intellectual property rights of others, we could be required to: pay substantial damages and/or make substantial ongoing royalty payments; cease offering our products and services; modify our products and services; comply with other unfavorable terms, including settlement terms; and indemnify our customers and business partners and obtain costly licenses on their behalf and refund fees or other payments previously paid to us. Further, upon expiration of the term of any third-party agreements that allow us to use their intellectual property, we may be unable to renew such agreements on favorable terms, if at all, in which case we may face intellectual property litigation. The mere existence of any lawsuit, or any interim or final outcomes, and the course of its conduct and the public statements related to it (or absence of such statements) by the courts, press, analysts and litigants could be unsettling to our customers and prospective customers. This could cause an adverse impact to our customer satisfaction and related renewal rates, cause us to lose potential sales, and could also be unsettling to investors or prospective investors and cause a substantial decline in our stock price. Any claim or litigation against us could be costly, time-consuming and divert the attention of our management and key personnel from our business operations and harm our financial condition and operating results.

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If we fail to comply with anti-corruption laws, including the FCPA and similar laws of other countries, and general trade regulations, including but not limited to economic sanctions and embargoes, we could be subject to penalties and civil and/or criminal sanctions and our business could be materially adversely affected.

We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. §201, the UK Bribery Act, and possibly other anti-bribery laws in countries in which we conduct activities. We face significant risks if we fail to comply with the FCPA and other anti-corruption laws that prohibit companies and their employees and third-party intermediaries from promising, authorizing, offering, or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties, and private-sector recipients for purposes of obtaining or retaining business, directing business to any person, or securing any advantage. In addition, we use various third parties to sell our products and services and conduct our business both in the US and abroad. We or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. We have implemented and continue to update an anti-corruption compliance program but there is a risk that our employees and agents, as well as those companies to which we outsource certain of our business operations, could take actions in violation of our policies and applicable law, for which we may be ultimately held responsible.

As we continue to expand our business internationally, we will inevitably do more business with large enterprises and the public sector in countries that are perceived to have heightened levels of public sector corruption. Increased business in countries perceived to have heightened levels of corruption could subject us and our officers and directors to increased scrutiny and increased liability from our business operations. In addition, we are subject to compliance with general trade regulations relating to doing business outside the US, including certain restrictions on conducting trade in certain restricted countries or with certain entities or individuals.

Any violation of the FCPA, other anti-corruption laws or general trade regulations by our employees or our third-party intermediaries could result in regulatory investigations, whistleblower complaints, adverse media coverage and/or severe criminal or civil sanctions, which could have a materially adverse effect on our reputation, business, operating results, and prospects. In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs.

Our intellectual property protections may not provide us with a competitive advantage, and defending our intellectual property may result in substantial expenses that harm our operating results.

Our success depends to a significant degree on our ability to protect our proprietary technology and our brand under patent and other intellectual property protections of the US and other jurisdictions. Though we seek patent protection for our technology, we may not be successful in obtaining patent protection, and any patents acquired in the future may not provide us with competitive advantages, or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Any of our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. Effective patent, trademark, copyright and trade secret protection may not be available in every country in which we offer services. The laws of some foreign countries may not be as protective of intellectual property rights as those in the US, and mechanisms for enforcement of intellectual property rights or available remedies may be inadequate. We may be required to spend significant resources to monitor and protect our intellectual property rights. We have initiated and, in the future, may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any litigation, whether or not resolved in our favor, could result in significant expense to us, divert the efforts of our technical and management personnel and may result in counter-claims with respect to infringement of intellectual property rights by us. If we are unable to prevent third parties from infringing upon or misappropriating our intellectual property, or are required to incur substantial expenses defending our intellectual property rights, our business and operating results may be adversely affected.

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Our use of open source software could harm our ability to sell our products and services and subject us to possible litigation.

Our products incorporate software licensed to us by third-party authors under open source licenses, and we expect to continue to incorporate open source software into other products and services in the future. We attempt to monitor our use of open source software in an effort to avoid subjecting our products and services to adverse licensing conditions. However, there can be no assurance that our efforts have been or will be successful. There is little or no legal precedent governing the interpretation of the terms of open source licenses, and therefore the potential impact of these terms on our business is uncertain and enforcement of these terms may result in unanticipated obligations regarding our products and services. For example, depending on which open source license governs open source software included within our products and services, we may be subjected to conditions requiring us to offer our products and services to users at no cost; make available the source code for modifications and derivative works based upon, incorporating or using the open source software; and license such modifications or derivative works under the terms of the particular open source license. Moreover, if an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal costs defending ourselves against such allegations, be subject to significant damages or be enjoined from distributing our products and services.

Because we generally recognize revenues from our subscription service over the subscription term, a decrease in new subscriptions or renewals during a reporting period may not be immediately reflected in our operating results for that period.

We generally recognize revenues from customers ratably over the terms of their subscriptions. Net new annual contract value from new subscriptions and expansion contracts entered into during a period can generally be expected to generate revenues for the duration of the subscription term. As a result, most of the revenues we report in each period are derived from the recognition of deferred revenues relating to subscriptions entered into during previous periods. Consequently, a decrease in new or renewed subscriptions in any single reporting period will have a limited impact on our revenues for that period. In addition, our ability to adjust our cost structure in the event of a decrease in new or renewed subscriptions may be limited.

Further, a decline in new subscriptions, expansion contracts or renewals in a given period may not be fully reflected in our revenues for that period, but they will negatively affect our revenues in future periods. Accordingly, the effect of significant downturns in sales and market acceptance of our services, and changes in our rate of renewals, may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as revenues from new customers are generally recognized over the applicable subscription term. Additionally, due to the complexity of certain of our customer contracts, the actual revenue recognition treatment required under Accounting Standards Update 2014-09, “Revenue from Contracts with Customers (Topic 606)” depends on contract-specific terms and may result in greater variability in revenues from period to period.

In addition, a decrease in new subscriptions, expansion contracts or renewals in a reporting period may not have an immediate impact on billings for that period due to factors that may offset the decrease, such as an increase in billings duration, the dollar value of contracts with future start dates, or the dollar value of collections in the current period related to contracts with future start dates.

As our business grows, we expect our revenue growth rate to continue to decline.

We have experienced significant revenue growth in prior periods; however, our longer-term revenue growth rate is declining, and we expect that it will continue to decline into the foreseeable future. We also expect our costs to increase in future periods as we continue to invest in our strategic priorities, which may not result in increased revenues or growth in our business. You should not rely on our revenue for any prior periods as any indication of our future revenue growth. If we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile.

Changes in our effective tax rate or rejection of our tax positions could have a material impact on our financial position and results.

We are subject to income taxes in the US and various foreign jurisdictions. We believe that our provision for income taxes is reasonable, but the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods in which such outcome is determined. Our effective tax rate could be adversely affected by changes in the mix of earnings and losses in countries with differing statutory tax rates, certain non-deductible expenses, the valuation of deferred tax assets and liabilities and the effects of acquisitions. Increases in our effective tax rate would reduce our profitability or in some cases increase our losses.

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Additionally, our future effective tax rate could be impacted by changes in accounting principles or changes in federal, state or international tax laws or tax rulings. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we will apply the law, which could affect our results of operations in the period issued. Many countries and organizations such as the Organization for Economic Cooperation and Development are actively considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in countries where we do business or cause us to change the way we operate our business. Recent global tax developments applicable to multinational businesses and increased scrutiny under tax examinations could have a material impact on our business and negatively affect our financial results. Any changes in federal, state or international tax laws or tax rulings may increase our worldwide effective tax rate and harm our financial position and results of operations.

In addition, we may be subject to income tax audits by tax jurisdictions throughout the world, many of which have not established clear guidance on the tax treatment of cloud computing companies. Although we believe our income tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles, an adverse resolution of one or more uncertain tax positions in any period could have a material impact on our results of operations for that period. Further, many of our most important intangible assets are held outside the US and are subject to inter-company agreements regarding the development and distribution of those assets to other jurisdictions with potential challenge under permanent establishment or transfer pricing principles. While we believe that our position is appropriate and well founded, in the event that our position was to be successfully challenged by taxing authorities in other jurisdictions, we may become subject to significant tax liabilities, which could harm our financial position and financial results.

We may incur losses in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) during future periods.

Although we have reported quarterly results that were profitable on a GAAP basis, we have incurred net losses in all prior fiscal years since our inception except for the year ended December 31, 2019. Even if our revenues continue to increase, we may incur losses in accordance with GAAP during future periods due to increased costs such as non-cash charges associated with equity awards, business combinations and other expenses. We may also encounter unforeseen operating expenses, difficulties, complications, delays and other unpredictable factors that may result in increased costs. Furthermore, it is difficult to predict the size and growth rate of our market, customer demand for our products, customer adoption and renewal rates, and the entry of competitive products or the success of existing competitive products. As a result of these and other factors, we may not maintain profitability in the future, and our gross margins and ability to generate cash flow from operations may be negatively impacted. If we fail to increase our revenues sufficiently to keep pace with our growing investments and other expenses, our business, operating results and growth prospects will be adversely affected.

If we are unable to maintain effective internal control over financial reporting, the accuracy and timeliness of our financial reporting may be adversely affected.

The Sarbanes-Oxley Act requires us, among other things, to assess and report on the effectiveness of our internal control over financial reporting annually and the reasonable assurance level of our disclosure controls and procedures quarterly. In addition, our independent registered public accounting firm is required to audit the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act annually. Our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Moreover, our testing, or the subsequent testing by our independent registered public accounting firm, may reveal material weaknesses or significant deficiencies. If material weaknesses are identified or we are not able to comply with the requirements of Section 404 in a timely manner, our reported financial results could be materially misstated or could subsequently require restatement, we could receive an adverse opinion regarding our internal control over financial reporting from our independent registered public accounting firm, we could be subject to investigations or sanctions by regulatory authorities and we could incur substantial expenses. We may not be able to effectively implement system and process changes required for new standards on a timely basis. Any delays or failure to update our systems and processes could also lead to a material weakness or significant deficiency.

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Risks Related to General Economic Conditions

Global economic conditions may harm our industry, business and results of operations.

We operate globally and as a result our business and revenues are impacted by global macroeconomic conditions. Global financial developments seemingly unrelated to us or the software industry may harm us. From time to time, the US and other key international economies have been impacted by geopolitical and economic instability, high levels of credit defaults, international trade disputes, falling demand for various goods and services, high levels of persistent unemployment, wage and income stagnation, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies, international trade agreements, trade restrictions and overall economic uncertainty, such as due to the ongoing COVID-19 pandemic. These conditions can arise suddenly and affect the rate of information technology spending and could adversely affect our customers’ or prospective customers’ ability or willingness to purchase our services, delay purchasing decisions, reduce the value or duration of their subscriptions, or affect renewal rates, all of which could harm our operating results.

In 2020, for example, the COVID-19 pandemic, the growth rate in the EU, China, or the US, tariffs or trade relations between the US and China or other countries, political uncertainty in the Middle East and other geopolitical events could directly or indirectly affect our business. Additionally, in connection with Britain’s exit from the EU in January 2020 (“Brexit”), the impact of the UK’s exit from the EU is still to be fully seen, with the applicable trade agreement to be negotiated before December 2020, or a type of “no-deal” exit would occur. This could be harmful to both the U.K. and E.U. economies and businesses operating there.

In addition, the effects, if any, of global financial conditions on our business can be difficult to distinguish from the effects on our business from product, pricing, and other developments in the markets specific to our products and our relative competitive strength. If we make incorrect judgments about our business for this reason, our business and results of operations could be adversely affected.

Foreign currency exchange rate fluctuations could harm our financial results.

We conduct significant transactions, including revenue transactions and intercompany transactions, in currencies other than the U.S. Dollar or the functional operating currency of the transactional entities. In addition, our international subsidiaries maintain significant net assets that are denominated in currencies other than the functional operating currencies of these entities. Accordingly, changes in the value of currencies relative to the U.S. Dollar may impact our consolidated revenues and operating results due to transactional and translational remeasurement that is reflected in our earnings. It is particularly difficult to forecast any impact from exchange rate movements, so there is risk that unanticipated currency fluctuations could adversely affect our financial results or cause our results to differ from investor expectations or our own guidance in any future periods. In addition, the announcement of Brexit and the continued uncertainty around the full impact of it and the exact trade arrangements upon exit has adversely impacted global markets, including currencies, and resulted in a decline and volatility in the value of the British pound and the Euro, as compared to the U.S. Dollar and other currencies. Volatility in exchange rates and global financial markets is expected to continue due to a number of factors, related to uncertainty surrounding Brexit trade arrangements and the recent political and economic uncertainty globally, including the COVID-19 pandemic.

In 2018, we began using derivative instruments, such as foreign currency forwards, to hedge certain exposures to fluctuations in certain foreign currency exchange rates. These hedging contracts may reduce, but cannot entirely eliminate, the impact of adverse currency exchange rate movements. Further, unanticipated changes in currency exchange rates may result in poorer overall financial performance than if we had not engaged in any such hedging transactions. Moreover, for a number of reasons, including our limited experience with these hedging contracts, we may not seek or be able to establish a perfect correlation between such hedging instruments and the exposures being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge, and could expose us to a greater overall risk of loss than if we had not hedged.

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Risks Related to Our 2030 Notes and 2022 Notes

Our debt service obligations, including the 2030 Notes, may adversely affect our financial condition and cash flows from operations.

As of September 30, 2020, we have $1.5 billion aggregate principal amount of the 2030 Notes payable outstanding due on September 1, 2030, as described in Note 10 in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Our ability to make payments on the 2030 Notes will depend on our ability to generate cash in the future, which, in turn, is subject to a variety of risks and uncertainties, many of which are beyond our control. As the 2030 Notes mature, we will have to expend significant resources to either repay or refinance the 2030 Notes. If we decide to refinance the 2030 Notes, we may be required to do so on different or less favorable terms or we may be unable to refinance the 2030 Notes at all, both of which may adversely affect our financial condition.

•Maintenance of our indebtedness, contractual restrictions, and additional issuances of indebtedness could:

•cause us to dedicate a substantial portion of our cash flows from operations towards debt service obligations and principal repayments;

•increase our vulnerability to adverse changes in general economic, industry and competitive conditions;

•limit our flexibility in planning for, or reacting to, changes in our business and our industry;

•impair our ability to obtain future financing for working capital, capital expenditures, acquisitions, general corporate or other purposes; and

•due to limitations within the debt instruments, restrict our ability to grant liens on property, enter into certain mergers, dispose of all or substantially all of our or our subsidiaries’ assets, taken as a whole, materially change our business or incur subsidiary indebtedness, subject to customary exceptions.

We are required to comply with the covenants set forth in the indentures governing the 2030 Notes. Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of the covenants and do not obtain a waiver from the note holders or lenders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable. In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of our securities. Downgrades in our credit ratings could restrict our ability to obtain additional financing in the future and could affect the terms of any such financing.

We may not have the ability to raise the funds necessary to settle conversions of our convertible senior notes due 2022 (the 2022 Notes) in cash or to repurchase the 2022 Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the 2022 Notes.

Holders of the 2022 Notes have the right to require us to repurchase all or a portion of their 2022 Notes upon the occurrence of a fundamental change (as defined in the indenture for the 2022 Notes (the “Indenture”)) at a repurchase price equal to 100% of the principal amount of the 2022 Notes to be repurchased, plus accrued and unpaid special interest, if any. In addition, if a make-whole fundamental change (as defined in the Indenture) occurs prior to the maturity of the 2022 Notes, we will in some cases be required to increase the conversion rate for a holder that elects to convert its 2022 Notes in connection with such make-whole fundamental change. Upon conversion of the 2022 Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional shares), we will be required to make cash payments in respect of the 2022 Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the 2022 Notes surrendered therefor or pay cash with respect to the 2022 Notes being converted. We may also enter into agreements to repurchase portions of the 2022 Notes prior to their maturity, as we did in the third quarter of 2020 and as described in Note 10 in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. This may impact the liquidity and trading price of the remaining 2022 Notes.

In addition to the 2022 Notes and the 2030 Notes, we and our subsidiaries may incur substantial additional debt in the future, subject to the restrictions contained in our current and future debt instruments, some of which may be secured debt. We are not restricted under the terms of the Indenture from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that could have the effect of diminishing our ability to make payments on the 2022 Notes when due. Furthermore, the Indenture prohibits us from being acquired unless, among other things, the surviving entity assumes our obligations under the 2022 Notes and the Indenture. These and other provisions in the Indenture could deter or prevent a third party from acquiring us even when the acquisition may be favorable to holders of the 2022 Notes.

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In addition, our ability to repurchase or to pay cash upon conversion of the 2022 Notes may be limited by law, regulatory authority or agreements governing our future indebtedness. Our failure to repurchase the 2022 Notes at a time when the repurchase is required by the Indenture or to pay cash upon conversion of the 2022 Notes as required by the Indenture would constitute a default. A default under the Indenture or a fundamental change itself could also lead to a default under agreements governing our future indebtedness. Moreover, the occurrence of a fundamental change could constitute an event of default under any such agreements. If the payment of the related indebtedness were accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the 2022 Notes, or to pay cash upon conversion of the 2022 Notes.

The conditional conversion feature of the 2022 Notes may adversely affect our financial condition and operating results.

Prior to the business day immediately preceding February 1, 2022, the holders of the 2022 Notes may elect to convert their notes 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 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 $175.18 (the “Conversion Condition”). The Conversion Condition for the 2022 Notes was met for all the quarters ended June 30, 2018 through September 30, 2020, except for the quarter ended December 31, 2018. Therefore, our 2022 Notes became convertible at the holders’ option beginning on July 1, 2018 and continue to be convertible through December 31, 2020, except for the quarter ended March 31, 2019 because the Conversion Condition for the 2022 Notes was not met for the quarter ended December 31, 2018. During the nine months ended September 30, 2020, we paid cash to settle $43 million in principal amount of the 2022 Notes. Based on conversion requests we have received through the filing date, we expect to settle in cash an aggregate amount of approximately $70 million in principal of the 2022 Notes during the fourth quarter of 2020. We may receive additional conversion requests that require settlement in the fourth quarter of 2020. Global economic uncertainty and market volatility, such as due to the ongoing COVID-19 pandemic, has affected when such conversion requests have settled and may continue to affect when such conversion requests will settle. If more holders elect to convert their 2022 Notes in future periods, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we currently intend to settle all of our conversion obligation in cash, which could adversely affect our liquidity and result in a material adverse effect on our financial position, results of operations and cash flows. In addition, to the extent we receive conversion requests, we may also record a loss on early conversions of the 2022 Notes converted by note holders based on the difference between the fair market value allocated to the liability component on the settlement date and the net carrying amount of the liability component and unamortized debt issuance on the settlement date.

The convertible note hedge and warrant transactions may affect the value of the 2022 Notes and our common stock.

In connection with the sale of the 2022 Notes, we entered into convertible note hedge (the “2022 Note Hedge”) transactions with certain financial institutions (option counterparties). We also entered into warrant transactions with the option counterparties pursuant to which we sold warrants for the purchase of our common stock (the “2022 Warrants”). In connection with the 2022 Notes Repurchase in August 2020, we entered into unwind agreements with respect to a portion of the 2022 Note Hedge and a portion of the 2022 Warrants. The 2022 Note Hedge is expected generally to reduce the potential dilution upon any conversion of the 2022 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2022 Notes, as applicable. The 2022 Warrant transactions could have a dilutive effect to the extent that our stock price exceeds the exercise price of the 2022 Warrants, which is $203.40. As the remaining portion of the 2022 Warrants will be net share settled, the total number of shares of our common stock we will issue depends on the daily volume-weighted average stock prices over a 60-trading day period beginning on the first expiration date of the remaining portion of the 2022 Warrants, which will be September 1, 2022. We expect to issue additional shares of our common stock in the second half of 2022 upon the automatic exercise of the remaining portion of the 2022 Warrants. To the extent we repurchase additional 2022 Notes, we may accelerate the issuance of shares underlying the remaining portion of the 2022 Warrants. Based on the volume-weighted average stock price on September 30, 2020, the total number of shares of our common stock to be issued upon the automatic exercise of the remaining portion of the 2022 Warrants would be approximately 1.1 million. The actual number of shares of our common stock issuable upon the automatic exercise of the remaining portion of the 2022 Warrants, if any, is unknown at this time. Refer to Note 10 in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

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The option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock in secondary market transactions prior to the maturity of the 2022 Notes (and are likely to do so during any observation period related to a conversion of the 2022 Notes, or following any repurchase of the 2022 Notes by us on any fundamental change repurchase date (as defined in the Indenture) or otherwise). This activity could also cause or avoid an increase or a decrease in our stock price or the 2022 Notes price, which could affect note holders’ ability to convert the 2022 Notes and, to the extent the activity occurs during any observation period related to a conversion of the 2022 Notes, it could affect the amount and value of the consideration that note holders will receive upon conversion of the 2022 Notes.

The potential effect, if any, of these transactions and activities on our stock price or the 2022 Notes price will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our common stock and the value of the 2022 Notes (and the resulting amount of cash and/or number of shares, if any, that note holders would receive upon the conversion) and, under certain circumstances, the ability of the note holders to convert the 2022 Notes.

We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of the 2022 Notes or our common stock. In addition, we do not make any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

We are subject to counterparty risk with respect to the 2022 Note Hedge.

The option counterparties are financial institutions, and we will be subject to the risk that any or all of them may default under the 2022 Note Hedge. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Recent global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings, with a claim equal to our exposure at that time under our transactions with that option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the stock price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.

Risks Related to Ownership of Our Common Stock

Our stock price has historically been and is likely to continue to be volatile and could subject us to litigation.

Our stock price has been, and is likely to continue to be, volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition, technology companies in general have highly volatile stock prices, and the volatility in stock price and trading volume of securities is often unrelated or disproportionate to the financial performance of the companies issuing the securities. Factors affecting our stock price, some of which are beyond our control, include:

•changes in the estimates of our operating results or changes in recommendations by securities analysts that elect to cover 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, such as high-growth or cloud companies, investors perceive to be comparable to us;

•changes to our management team;

•trading activity by directors, executive officers and significant stockholders, or the market’s perception that large stockholders intend to sell their shares;

•the inclusion, exclusion, or deletion of our stock from any trading indices, such as the S&P 500 Index;

•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 remaining portion of the 2022 Notes or in connection with the 2022 Note Hedge and 2022 Warrant transactions;

•the economy as a whole, market conditions in our industry, and the industries of our customers; and

•overall performance of the equity markets.

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Following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Securities litigation could result in substantial costs and divert our management’s attention and resources from our business. This could have a material adverse effect on our business, operating results, and financial condition.

We do not intend to pay dividends on our common stock, so any returns will be limited to changes in our stock price.

We have never declared or paid any cash dividends on our common stock. We anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, our ability to pay cash dividends on our common stock may be prohibited or limited by the terms of any future debt financing arrangements. Any return to stockholders will therefore be limited to the increase, if any, of our stock price.

Provisions in our charter documents, Delaware law, 2030 Notes or our 2022 Notes might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress our stock price.

Our restated certificate of incorporation, as amended, and restated bylaws contain provisions that could depress our stock price by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions among other things:

•have established a classified board so that not all members of our board are elected at one time, although our board will be fully declassified by our 2023 annual meeting of shareholders;

•permit the board 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 shareholders;

•require super-majority voting to amend some provisions in our certificate of incorporation, as amended, and restated bylaws;

•authorize the issuance of “blank check” preferred stock that our board could use to implement a shareholder rights plan;

•do not permit our shareholders to call special meetings of shareholders;

•prohibit shareholder action by written consent, which requires all shareholder actions to be taken at a meeting;

•provide that the board is expressly authorized to make, alter or repeal our restated bylaws; and

•establish advance notice requirements for nominations for election to our board or proposing matters that can be acted upon by shareholders at annual shareholder meetings (though our restated bylaws have shareholder proxy access).

In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on merger, business combinations and other transactions between us and holders of 15% or more of our common stock.

Further, the fundamental change provisions of our 2022 Notes or change in control repurchase event provisions of our 2030 Notes may delay or prevent a change in control of our company, because those provisions allow note holders to require us to repurchase such notes upon the occurrence of a fundamental change or change in control repurchase event.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In connection with the acquisition of Sweagle in July 2020, we issued 18,728 shares of our common stock to ServiceNow Belgium BVBA. The shares of common stock were issued in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), on the basis of representations of eligibility and suitability made to us by the founders of Sweagle.

In August 2020, concurrently with the offering of the 2030 Notes, we completed the 2022 Notes Repurchase. In connection with the 2022 Notes Repurchase, we entered into partial unwind agreements that reduced the aggregate number of warrants to 1,828,876. In connection with the partial unwind of the 2022 Warrants, we delivered, in an exchange pursuant to Section 3(a)(9) of the Securities Act, an aggregate of 2,284,930 shares of our common stock to the holders of the 2022 Warrants, which were Citibank, N.A., Goldman Sachs & Co LLC, JPMorgan Chase Bank, National Association, London Branch, and Morgan Stanley & Co. International plc. We did not receive any proceeds from the partial unwind agreements in connection with our 2022 Warrants, nor were they subject to underwriting discounts or commissions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

As previously disclosed, on September 11, 2020 Pat Wadors notified the Company of her decision to resign as Chief Talent Officer, effective by the end of 2020. Ms. Wadors’ employment agreement with the Company provides for the repayment of certain amounts related to previously granted RSU’s in the event of her voluntary resignation within the first four years of her employment. In an agreement dated October 26, 2020, the Company and Ms. Wadors mutually agreed to the satisfaction of such repayment obligations through the recapture of certain equity vestings that would otherwise have occurred in November 2020.

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ITEM 6. EXHIBITS

EXHIBIT INDEX

Exhibit

Number

Description of Document

Incorporated by Reference

Filed
Herewith

Form

File No.

Exhibit

Filing Date

3.1

Restated Certificate of Incorporation, as amended

8-K

001-35580

3.1

6/19/2020

3.2

Restated Bylaws

8-K

001-35580

3.2

6/19/2020

4.1

Indenture, dated August 11, 2020, by and between ServiceNow, Inc. and Wells Fargo Bank, National Association

8-K

001-35580

4.1

8/11/2020

4.2

First Supplemental Indenture (including Form of Note), dated August 11, 2020, by and between ServiceNow, Inc. and Wells Fargo Bank, National Association

8-K

001-35580

4.2

8/11/2020

10.1*

Confirmatory Employment Letter Agreement dated February 22, 2018, between the Registrant and Kevin Haverty

10.2

Form of Repurchase Agreement

10.3

Form of Call Option Termination Agreement

10.4

Form of Warrant Termination Agreement

10.5*

Compromise and Release Agreement dated October 26, 2020 by and between the Registrant and Pat Wadors

31.1

Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002

32.1**

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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101.INS

Inline 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.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* Indicates a management contract, compensatory plan or arrangement.

** The certifications on Exhibit 32 hereto are deemed not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liability of that Section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

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SIGNATURES

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


	SERVICENOW, INC.

Date: October 28, 2020	By:	/s/ Gina Mastantuono
		Gina Mastantuono
		Chief Financial Officer
		(Principal Financial Officer)

Date: October 28, 2020	By:	/s/ Fay Sien Goon
		Fay Sien Goon
		Chief Accounting Officer
		(Principal Accounting Officer)

Exhibit 10.1

February 22, 2018

Kevin Haverty

Dear Kevin:

This letter agreement (the “Agreement”) is entered into between you and ServiceNow, Inc. (the “Company”) and is effective as of the date set forth above (the “Effective Date”). The purpose of this Agreement is to confirm the current terms and conditions of your employment with the Company.

1.Position. You will continue to serve as the Company’s Executive Vice President, Worldwide Sales reporting to the Company’s Chief Revenue Officer (the “CRO”). You will have all of the duties, responsibilities and authority commensurate with the position. Your employment with the Company commenced on December 5, 2011 (your “Start Date”). 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 Thousand Dollars ($400,000), 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 one hundred percent (100%) of your Base Salary, which equals Four Hundred Thousand Dollars ($400,000) 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 Executive Vice President, Worldwide Sales;

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;

provided, however, that the action or conduct described in clauses (iii), (iv), (v), (vi) and (vii) above will constitute “Cause” only if such action or conduct continues after the Company has provided you with written notice thereof and thirty (30) days to cure the same if such action or conduct is curable.

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.

Notwithstanding any of the foregoing, any transaction or transactions effected solely for purposes of changing the Company’s domicile will not constitute a Change in Control pursuant to the foregoing definition.

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;

provided, however, that, any such termination by you shall only be deemed for Good Reason pursuant to this definition if: (1) you give the Company written notice of your intent to resign for Good Reason within ninety (90) days following the first occurrence of the condition(s) that you believe constitute(s) Good Reason, which notice shall describe such condition(s); (2) the Company fails to remedy such condition(s) within thirty (30) days following receipt of the written notice (the “Cure Period”); and (3) you voluntarily resign your employment within one hundred twenty (120) days following the end of the Cure Period.

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.

Notwithstanding the foregoing, nothing in this Section 7 shall reduce your obligations under Section 3(b) of this Agreement.

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.

Notwithstanding the foregoing, nothing in this Section 7 shall reduce your obligations under Section 3(b) of this Agreement.

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).

Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this Agreement (or otherwise referenced herein) is determined to be subject to (and not exempt from) Section 409A of the Code, the amount of any such expenses eligible for reimbursement, or the provision of any in- kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement or in kind benefits to be provided in any other calendar year, in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which you incurred such expenses, and in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit.

To the extent that any provision of this Agreement is ambiguous as to its exemption or compliance with Section 409A, the provision will be read in such a manner so that all payments hereunder are exempt from Section 409A to the maximum permissible extent, and for any payments where such construction is not tenable, that those payments comply with Section 409A to the maximum permissible extent. To the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this Agreement (or referenced in this Agreement), and each installment thereof, are intended to constitute separate payments for purposes of Section 1.409A- 2(b)(2) of the regulations under Section 409A.

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 November 17, 2011, 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.

[SIGNATURE PAGE TO AGREEMENT FOLLOWS]

Please indicate your acceptance of this Agreement by signing the bottom portion of this Agreement.


Best Regards,
/s/ John J.Donahoe
__________________
John J. Donahoe
President & Chief Executive Officer
Servicenow, Inc.

I, the undersigned, hereby accept and agree to the terms and conditions of my employment with the Company as set forth in this Agreement.

Accepted and agreed to as of the Effective Date.

By: /s/ Kevin Haverty

____________________________

Kevin Haverty

[SIGNATURE PAGE TO AGREEMENT]

Exhibit 10.2

REPURCHASE AGREEMENT

[●] (the “Undersigned”), for itself and on behalf of the beneficial owners listed on Exhibit A hereto (“Accounts”) for whom the Undersigned holds contractual and investment authority, enters into this Repurchase Agreement (this “Agreement”) with SERVICENOW, INC., a Delaware corporation (the “Company”), on [______], 2020 whereby the Company will repurchase (the “Repurchase”) the Company’s 0% Convertible Senior Notes due 2022 (the “Existing Notes”) for the Repurchase Consideration (as defined below). The Existing Notes to be repurchased by the Company in the Repurchase are referred to herein as the “Repurchased Notes”. Each Account, including the Undersigned if its Existing Notes are being repurchased, shall be referred to herein as a “Holder.”

On and subject to the terms and conditions set forth in this Agreement, the parties hereto agree as follows:

Article I: Repurchase of the Existing Notes for the Repurchase Consideration

At the Closing (as defined below), the Undersigned hereby agrees to cause the Holders to deliver to the Company the Existing Notes set forth on Exhibit A hereto, and in exchange therefor the Company hereby agrees to pay to the Holders for each $1,000 principal amount of Existing Notes a cash payment equal to the Repurchase Consideration (as defined below) in accordance with the payment instructions set forth on Exhibit A hereto.

For the purposes of this Agreement:

“Closing Price” means $[●].

“Common Stock” shall mean the common stock of the Company, par value $0.001 per share.

“Conversion Rate” shall mean 7.4210 shares of Common Stock per $1,000 principal amount of the Existing Notes.

“Daily VWAP” shall mean the per share volume-weighted average price of the Common Stock as displayed under the heading “Bloomberg VWAP” on Bloomberg page “NOW <equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session on the relevant trading day (or if such volume-weighted average price is unavailable, the market value of one share of the Common Stock on such trading day determined, using a volume-weighted average method, by the Company, or by a nationally recognized independent investment banking firm retained for this purpose by the Company), determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours.

“Non-Swap Delta” shall mean a percentage equal to 1 minus the Swap Delta.

“Relevant Price” shall mean the arithmetic average of the Daily VWAPs for the 2 consecutive trading day period from and including [______], 2020.

“Repurchase Consideration” shall mean an amount in cash equal to the sum of (A)(i) the Conversion Rate multiplied by (ii) the Relevant Price multiplied by (iii) the Non-Swap Delta plus (B)(i) the Conversion Rate multiplied by (ii) the Closing Price multiplied by (iii) the Swap Delta plus (C) $[●].

“Settlement Date” shall mean the third trading day from, and including, [______], 2020.

“Swap Delta” shall mean [●]%.

The closing of the Repurchase (the “Closing”) shall be conducted on the Settlement Date, or such later date as mutually agreed in writing by the parties (the “Closing Date”). At the Closing, (a) the Undersigned, for itself and on behalf of each Holder, shall deliver or cause to be delivered to the Company all right, title and interest in and to its Existing Notes (and no other consideration) free and clear of any mortgage, lien, pledge, charge, security interest, encumbrance, title retention agreement, option, equity or other adverse claim thereto (collectively, “Liens”), together with any documents of conveyance or transfer required by the Company to transfer to and confirm all right, title and interest in and to the Existing Notes free and clear of any Liens, and (b) the Company shall pay to each Holder the Repurchase Consideration (or, if there are no Accounts, the Company shall deliver to the Undersigned, as the sole Holder, the Repurchase Consideration). Delivery of such Existing Notes as provided above will be made by each Holder by posting, at or before 10:00 A.M. (New York City time) on the Closing Date, a withdrawal request for such Existing Notes through the Deposit or Withdrawal at Custodian (“DWAC”) settlement system of the Depository Trust Company (“DTC”) (it being understood that posting such request on any date before the Closing Date will result in such request expiring unaccepted at the close of business on such date, and such Holder will need to repost such withdrawal request on the Closing Date).

Article II: Covenants, Representations and Warranties of the Holders

The Undersigned, for itself and on behalf of each Holder, hereby covenants as follows, and makes the following representations and warranties, each of which is and shall be true and correct on the date hereof and at the Closing, to the Company, and all such covenants, representations and warranties shall survive the Closing.

Section 2.1: Power and Authorization

Each of the Undersigned and each Holder is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation, and has the requisite power, authority and capacity to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the Repurchase contemplated hereby. If the Undersigned is executing this Agreement on behalf of Accounts, (a) the Undersigned has all requisite discretionary and contractual authority to enter into this Agreement on behalf of, and bind, each Account, (b) Exhibit A hereto includes a true, correct and complete list of (i) the name of each Account and (ii) separately with respect to each Account, each other item required to be included in Exhibit A (other than the Repurchase Consideration), and (c) the Undersigned has full power to make the foregoing representations, warranties and covenants on behalf of each such Holder.

Section 2.2: Valid and Enforceable Agreement; No Violations

This Agreement has been duly authorized, executed and delivered by the Undersigned and constitutes a legal, valid and binding obligation of the Undersigned and each Holder, enforceable against the Undersigned and each Holder in accordance with its terms and the Company may initiate a claim against either or both the Undersigned or any Holder for any breach of this Agreement, except that such enforcement may be subject to (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally and (b) general principles of equity, whether such enforceability is considered in a proceeding at law or in equity (the “Enforceability Exceptions”). This Agreement and consummation of the Repurchase will not violate, conflict with or result in a breach of or default under (i) the Undersigned’s or the Holder’s organizational documents, (ii) any agreement or instrument to which the Undersigned or the Holder is a party or by which the Undersigned or the Holder or any of their respective assets are bound or (iii) any laws, regulations or governmental or judicial decrees, injunctions or orders applicable to the Undersigned or the Holder, except for such violations, conflicts or breaches under clauses (ii) and (iii) above that would not, individually or in the aggregate, have a material adverse effect on the financial position, results of operations or prospects of the Undersigned or Holder or on their performance of the obligations under this Agreement or on the consummation of the transactions contemplated hereby.

Section 2.3: Title to the Repurchased Notes

The Holder or the Undersigned, as applicable, is currently, and at the Closing will be, the sole legal and beneficial owner of the Existing Notes set forth opposite its name on Exhibit A hereto. The Holder or the Undersigned, as applicable, has good, valid and marketable title to its Repurchased Notes, free and clear of any Liens (other than pledges or security interests that the Holder or the Undersigned, as applicable, may have created in favor of a prime broker under and in accordance with its prime brokerage agreement with such broker, which will be terminated in connection with the Closing), and when the Repurchased Notes are delivered to the Company, the Company will acquire good, marketable and unencumbered title to the Repurchased Notes, free and clear of any Liens. The Holder or the Undersigned, as applicable, has not, in whole or in part, except as described in the preceding sentence, (a) assigned, transferred, hypothecated, pledged, exchanged or otherwise disposed of any of its Repurchased Notes or its rights in its Repurchased Notes or (b) given any person or entity any transfer order, power of attorney or other authority of any nature whatsoever with respect to its Repurchased Notes. Upon delivery of such Repurchased Notes to the Company pursuant to the Repurchase, such Repurchased Notes shall be free and clear of all Liens.

Section 2.4: Adequate Information; No Reliance; No Pressure

The Undersigned and each Holder acknowledge and agree that (a) the Undersigned and each Holder have been furnished with all materials it considers relevant to making a decision to enter into the Repurchase and has had the opportunity to review (and has carefully reviewed) (i) the Company’s filings and submissions with the Securities and Exchange Commission (the “SEC”), including, without limitation, all information filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (collectively, the “Public Filings”), and (ii) this Agreement (including the exhibits hereto) (collectively, the “Materials”), (b) the Undersigned and each Holder have had a full opportunity to ask questions of, and receive answers from, the Company concerning the Company, its business, operations, financial performance, financial condition and prospects, the Existing Notes and the terms and conditions of the Repurchase, and to obtain from the Company any information that it considers necessary in making an informed decision and to verify the accuracy of the information set forth in the Public Filings and the Materials, (c) no statement or written material contrary to the Public Filings or the Materials has been made or given to the Undersigned or any Holder by or on behalf of the Company, (d) the Undersigned and each Holder are able to fend for themselves in the Repurchase, and (e) the Undersigned and each Holder had a sufficient amount of time to consider whether to participate in the Repurchase and that the Company has not placed any pressure on the Undersigned or the Holder to respond to the opportunity to participate in the Repurchase.

Section 2.5: Further Action

The Undersigned agrees that it will, upon request, execute and deliver, for itself and on behalf of any Holder, any additional documents deemed by the Company or the trustee of the Existing Notes to be reasonably necessary to complete the Repurchase.

Section 2.6: Repurchase

The Undersigned acknowledges that the terms of the Repurchase are the result of bilateral negotiations between the parties and the Undersigned was given a meaningful opportunity to negotiate the terms of the Repurchase.

Section 2.7: Withholding

The Company and its agents shall be entitled to deduct and withhold from any consideration payable pursuant to this Agreement such amounts as may be required to be deducted or withheld under applicable law; provided that no amount shall be withheld in respect of U.S. federal tax with respect to any consideration paid to a Holder that has provided to the Company or its agents an accurately completed and duly executed IRS Form W-9 certifying that such Holder is exempt from backup withholding or an accurately completed and duly executed appropriate series of IRS Form W-8, as applicable, other than any required withholding with respect to payments characterized as interest paid to a non-U.S. Holder that is not otherwise exempt from such withholding under applicable U.S. federal income tax law.

To the extent any such amounts are withheld and remitted to the appropriate taxing authority, such amounts shall be treated for all purposes as having been paid to the Holder to whom such amounts otherwise would have been paid.

Section 2.8: Disclosure

The Undersigned, for itself and on behalf of any Holder, covenants that, unless otherwise required by law or if otherwise publicly disclosed by the Company, it will keep the terms of this Agreement confidential and shall not disclose such terms to any other party (other than the owners, employees, agents, representatives and advisors, including attorneys, accountants and consultants, of the Holder or the Undersigned (together, the “Holder Representatives”) on a “need to know” basis, provided that such Holder Representatives shall be advised of the confidentiality obligations hereunder and the Undersigned and each Holder shall be jointly responsible for any breach of the terms hereof by the Holder Representatives).

Article III: Covenants, Representations and Warranties of the Company

The Company hereby covenants as follows, and makes the following representations and warranties, each of which is and shall be true and correct on the date hereof and at the Closing, to the Holders, and all such covenants, representations and warranties shall survive the Closing.

Section 3.1: Power and Authorization

The Company is duly incorporated, validly existing and in good standing under the laws of its state of incorporation, and has the power, authority and capacity to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the Repurchase contemplated hereby. No material consent, approval, order or authorization of, or material registration, declaration or filing (other than filings under the Securities Exchange Act of 1934, as amended) with any governmental entity is required on the part of the Company in connection with the execution, delivery and performance by it of this Agreement and the consummation by the Company of the transactions contemplated hereby.

Section 3.2:Valid and Enforceable Agreements; No Violations

This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to the Enforceability Exceptions.

This Agreement and consummation of the Repurchase will not violate, conflict with or result in a breach of or default under (i) the charter, bylaws or other organizational documents of the Company, (ii) any agreement or instrument to which the Company is a party or by which the Company or any of its assets are bound or (iii) any laws, regulations or governmental or judicial decrees, injunctions or orders applicable to the Company, except for such violations, conflicts or breaches under clauses (ii) and (iii) above that would not, individually or in the aggregate, have a material adverse effect on the financial position, results of operations or prospects of the Company and its subsidiaries taken as a whole or on its performance of its obligations under this Agreement or on the consummation of the transactions contemplated hereby.

Section 3.3:Repurchase

The terms of the Repurchase are the result of bilateral negotiations between the parties.

Section 3.4: No Material Information

The Company hereby agrees and acknowledges that the transactions contemplated by this Agreement do not constitute material nonpublic information of the Company or any of its subsidiaries and that, subject to Section 2.8, neither the Undersigned nor any Holder is subject to any confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and the Undersigned, the Holder or any of the Undersigned’s or the Holder’s affiliates, on the other hand. The Company understands and confirms that the Holder and its affiliates will rely on the foregoing representations in effecting transactions in securities of the Company.

Article IV:Miscellaneous

Section 4.1: Entire Agreement

This Agreement and any documents and agreements executed in connection with the Repurchase embody the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous oral or written agreements, representations, warranties, contracts, correspondence, conversations, memoranda and understandings between or among the parties or any of their agents, representatives or affiliates relative to such subject matter, including, without limitation, any term sheets, emails or draft documents.

Section 4.2: Construction

References in the singular shall include the plural, and vice versa, unless the context otherwise requires. References in the masculine shall include the feminine and neuter, and vice versa, unless the context otherwise requires. Headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meanings of the provisions hereof. Neither party, nor its respective counsel, shall be deemed the drafter of this Agreement for purposes of construing the provisions of this Agreement, and all language in all parts of this Agreement shall be construed in accordance with its fair meaning, and not strictly for or against either party.

Section 4.3: Governing Law

This Agreement shall in all respects be construed in accordance with and governed by the substantive laws of the State of New York, without reference to its choice of law rules.

Section 4.4: Counterparts

This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Any counterpart or other signature hereon delivered by facsimile or any standard form of telecommunication or e-mail shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party.

Section 4.5: Termination

The Company may terminate this Agreement if there has occurred any breach by the Undersigned or a Holder of any covenant, representation or warranty set forth in Article II. The Undersigned or a Holder may terminate this Agreement if there has occurred any breach by the Company of any covenant, representation or warranty set forth in Article III. The Company, the Undersigned and each Holder may terminate this Agreement by mutual consent at any time.

[Signature Page Follows]

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed as of the date first above written.


“Company”
SERVICENOW, INC
By: ______________
Name ______________
Title: ______________

“Undersigned”
[●]
By: ______________
Name ______________
Title: ______________

Exhibit A


Name of Beneficial Owner	Aggregate Principal Amount of Existing Notes to Be Submitted for Repurchase	DTC Participant Number of DTC Participant through Which the Existing Notes Will Be Delivered	Payment Instructions
[_________]	$[_______]	[_________]	[_________]

Exhibit 10.3

CALL OPTION TERMINATION AGREEMENT

dated as of [_______], 2020

Between SERVICENOW, INC. and [JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,

LONDON BRANCH][CITIBANK, N.A.][GOLDMAN SACHS & CO. LLC][MORGAN STANLEY & CO. INTERNATIONAL PLC]

THIS CALL OPTION TERMINATION AGREEMENT (this “Agreement”) with respect to the Call Option Confirmations (as defined below) is made as of [______], 2020 between ServiceNow, Inc. (“Company”) and [JPMorgan Chase Bank, National Association, London Branch][Citibank, N.A.][Goldman Sachs & Co. LLC][Morgan Stanley & Co. International plc] (“Dealer”).

WHEREAS, Company issued $782,500,000 principal amount of 0% Convertible Senior Notes due 2022 (the “Convertible Notes”) pursuant to an Indenture dated as of May 30, 2017 between Company and Wells Fargo Bank, National Association, as trustee;

WHEREAS, in connection with the pricing of the Convertible Notes, Company and Dealer entered into a Base Call Option Transaction (the “Base Call Option Transaction”) pursuant to an ISDA confirmation dated as of May 23, 2017 which supplements, forms a part of, and is subject to an agreement in the form of the 2002 ISDA Master Agreement, pursuant to which Company purchased from Dealer 750,000 call options (as amended, modified, terminated or unwound from time to time, the “Base Call Option Confirmation”);

WHEREAS, in connection with the exercise of the over-allotment option by the initial purchasers of the Convertible Notes, Company and Dealer entered into an Additional Call Option Transaction (the “Additional Call Option Transaction” and, together with the Base Call Option Transaction, the “Call Option Transactions”) pursuant to an ISDA confirmation dated as of June 19, 2017 which supplements, forms a part of, and is subject to an agreement in the form of the 2002 ISDA Master Agreement, pursuant to which Company purchased from Dealer 32,500 call options (as amended, modified, terminated or unwound from time to time, the “Additional Call Option Confirmation” and, together with the Base Call Option Confirmation, the “Call Option Confirmations”); and

WHEREAS, in connection with a repurchase by Company of $[_____] aggregate principal amount of Convertible Notes, Company has requested full termination of the Additional Call Option Transaction and partial termination of the Base Call Option Transaction, such terminations constituting a “legging out” as defined in Treas. Reg. 1.1275-6(d)(2)(i);

NOW, THEREFORE, in consideration of their mutual covenants herein contained, the parties hereto, intending to be legally bound, hereby mutually covenant and agree as follows:

1.Defined Terms. Any capitalized term not otherwise defined herein shall have the meaning set forth for such term in the Call Option Confirmations.

2.Termination. Notwithstanding anything to the contrary in the Call Option Confirmations, including, for the avoidance of doubt, Section 9(h)(iii) thereof, Company and Dealer agree that, effective on the date hereof, but subject to Section 13 hereof, (i) the Additional Call Option Transaction shall automatically terminate and all of the respective rights and obligations of the parties under the Additional Call Option Confirmation shall be terminated, cancelled and extinguished and (ii) the Number of Options under the Base Call Option Transaction shall be reduced to [________] and in connection therewith Dealer shall pay to Company the amount in USD set forth in Section 4 on the Payment Date.

3.Procedures for Hedge Unwind. [Reserved].

4.Payments and Deliveries. On [________] or, if such day is not a Clearance System Business Day, on the next Clearance System Business Day immediately following such day (the “Payment Date”), Dealer shall pay to Company in immediately available funds cash in an amount equal to USD[_______].

5.Representations and Warranties of Company. Company represents and warrants to Dealer (and agrees with Dealer in the case of Section 5(g)(ii)) on the date hereof that:

(a) it has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and to perform its obligations under this Agreement and has taken all necessary action to authorize such execution, delivery and performance;

(b) such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any material contractual restriction binding on or affecting it or any of its assets;

(c) all governmental and other consents that are required to have been obtained by it with respect to this Agreement have been obtained and are in full force and effect and all conditions of any such consents have been complied with;

(d) its obligations under this Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law));

(e) each of it and its affiliates is not in possession of any material nonpublic information regarding Company or the Shares; and

(f) it is not entering into this Agreement to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares) or otherwise in violation of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

6.Representations and Warranties of Dealer. Dealer represents and warrants to Company on the date hereof that:

7.Account for Payment to Company:

[ ]

8.Governing Law. This Agreement and any dispute arising hereunder shall be governed by and construed in accordance with the laws of the State of New York (without reference to choice of law doctrine).

9.Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all of the signatures thereto and hereto were upon the same instrument.

10.No Reliance, etc. Company confirms that it has relied on the advice of its own counsel and other advisors (to the extent it deems appropriate) with respect to any legal, tax, accounting, or regulatory consequences of this Agreement, that it has not relied on Dealer or its affiliates in any respect in connection therewith, and that it will not hold Dealer or its affiliates accountable for any such consequences.

11.Designation by Dealer. Notwithstanding any other provision in this Agreement to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Company, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such shares or other securities and otherwise to perform Dealer obligations in respect of the transactions contemplated by this Agreement and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Company to the extent of any such performance.

12.No Other Changes. Except as expressly set forth herein, all of the terms and conditions of the Base Option Confirmation shall remain in full force and effect and are hereby confirmed in all respects.

13.Effectiveness. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. In the event the repurchase by Company of the Convertible Notes is not consummated on [Insert Settlement Date of Notes Repurchase], this Agreement shall remain in full force and effect notwithstanding such event.

14.[U.S. Resolution Stay Protocol. The parties acknowledge and agree that (i) to the extent that prior to the date hereof both parties have adhered to the 2018 ISDA U.S. Resolution Stay Protocol (the “Protocol”), the terms of the Protocol are incorporated into and form a part of the Agreement, and for such purposes the Agreement shall be deemed a Protocol Covered Agreement, the J.P. Morgan entity that is a party to the Agreement (“J.P. Morgan”) shall be deemed a Regulated Entity and the other entity that is a party to the Agreement (“Counterparty”) shall be deemed an Adhering Party; (ii) to the extent that prior to the date hereof the parties have executed a separate agreement the effect of which is to amend the qualified financial contracts between them to conform with the requirements of the QFC Stay Rules (the “Bilateral Agreement”), the terms of the Bilateral Agreement are incorporated into and form a part of the Agreement, and for such purposes the Agreement shall be deemed a Covered Agreement, J.P. Morgan shall be deemed a Covered Entity and Counterparty shall be deemed a Counterparty Entity; or (iii) if clause (i) and clause (ii) do not apply, the terms of Section 1 and Section 2 and the related defined terms (together, the “Bilateral Terms”) of the form of bilateral template entitled “Full-Length Omnibus (for use between U.S. G-SIBs and Corporate Groups)” published by ISDA on November 2, 2018 (currently available on the 2018 ISDA U.S. Resolution Stay Protocol page at www.isda.org and, a copy of which is available upon request), the effect of which is to amend the qualified financial contracts between the parties thereto to conform with the requirements of the QFC Stay Rules, are hereby incorporated into and form a part of the Agreement, and for such purposes the Agreement shall be deemed a “Covered Agreement,” J.P. Morgan shall be deemed a “Covered Entity” and Counterparty shall be deemed a “Counterparty Entity.” In the event that, after the date of the Agreement, both parties hereto become adhering parties to the Protocol, the terms of the Protocol will replace the terms of this paragraph. In the event of any inconsistencies between the Agreement and the terms of the Protocol, the Bilateral Agreement or the Bilateral Terms (each, the “QFC Stay Terms”), as applicable, the QFC Stay Terms will govern. Terms used in this paragraph without definition shall have the meanings assigned to them under the QFC Stay Rules. For purposes of this paragraph, references to “the Agreement” include any related credit enhancements entered into between the parties or provided by one to the other. In addition, the parties agree that the terms of this paragraph shall be incorporated into any related covered affiliate credit enhancements, with all references to J.P. Morgan replaced by references to the covered affiliate support provider. “QFC Stay Rules” means the regulations codified at 12 C.F.R. 252.2, 252.81–8, 12 C.F.R. 382.1-7 and 12 C.F.R. 47.1-8, which, subject to limited exceptions, require an express recognition of the stay-and-transfer powers of the FDIC under the Federal Deposit Insurance Act and the Orderly Liquidation Authority under Title II of the Dodd Frank Wall Street Reform and Consumer Protection Act and the override of default rights related directly or indirectly to the entry of an affiliate into certain insolvency proceedings and any restrictions on the transfer of any covered affiliate credit enhancements.]

[U.S. QFC Mandatory Contractual Requirements.

a.Limitation on Exercise of Certain Default Rights Related to a Dealer Affiliate’s Entry Into Insolvency Proceedings. Notwithstanding anything to the contrary in this Confirmation or any other agreement, the parties hereto expressly acknowledge and agree that subject to Section 14(b), Counterparty shall not be permitted to exercise any Default Right against Dealer with respect to this Confirmation or any other Relevant Agreement that is related, directly or indirectly, to a Dealer Affiliate becoming subject to an Insolvency Proceeding.

b.General Creditor Protections. Nothing in Section 14(a) shall restrict the exercise by Counterparty of any Default Right against Dealer with respect to this Confirmation or any other Relevant Agreement that arises as a result of:

i.Dealer becoming subject to an Insolvency Proceeding; or

ii.Dealer not satisfying a payment or delivery obligation pursuant to (x) this Confirmation or any other Relevant Agreement, or (y) another contract between Dealer and Counterparty that gives rise to a Default Right under this Confirmation or any other Relevant Agreement.

c.Burden of Proof. After a Dealer Affiliate has become subject to an Insolvency Proceeding, if Counterparty seeks to exercise any Default Right with respect to this Confirmation or any other Relevant Agreement, Counterparty shall have the burden of proof, by clear and convincing evidence, that the exercise of such Default Right is permitted hereunder or thereunder.

d.General Conditions

i.Effective Date. The provisions set forth in this Section 14 will come into effect on the later of the Applicable Compliance Date and the date of this Confirmation.

ii.Prior Adherence to the U.S. Protocol. If Dealer and Counterparty have adhered to the ISDA U.S. Protocol prior to the date of this Confirmation, the terms of the ISDA U.S. Protocol shall be incorporated into and form a part of this Confirmation and shall replace the terms of this Section 14. For purposes of incorporating the ISDA U.S. Protocol, Dealer shall be deemed to be a Regulated Entity, Counterparty shall be deemed to be an Adhering Party and the Agreement shall be deemed to be a Protocol Covered Agreement.

iii.Subsequent Adherence to the U.S. Protocol. If, after the date of this Confirmation, both Dealer and Counterparty shall have become adhering parties to the ISDA U.S. Protocol, the terms of the ISDA U.S. Protocol will supersede and replace this Section 14.

e.Definitions. For the purposes of this Section 14, the following definitions apply:

“Applicable Compliance Date” with respect to this Confirmation shall be determined as follows: (a) if Counterparty is an entity subject to the requirements of the QFC Stay Rules, January 1, 2019, (b) if Counterparty is a Financial Counterparty (other than a Small Financial Institution) that is not an entity subject to the requirements of the QFC Stay Rules, July 1, 2019 and (c) if Counterparty is not described in clause (a) or (b), January 1, 2020.

“BHC Affiliate” has the same meaning as the term “affiliate” as defined in, and shall be interpreted in accordance with, 12 U.S.C. 1813(w) and 12 U.S.C. 1841(k).

“Credit Enhancement” means, with respect to this Confirmation or any other Relevant Agreement, any credit enhancement or other credit support arrangement in support of the obligations of Dealer or Counterparty hereunder or thereunder or with respect hereto or thereto, including any guarantee or collateral arrangement (including any pledge, charge, mortgage or other security interest in collateral or title transfer arrangement), trust or similar arrangement, letter of credit, transfer of margin or any similar arrangement.

“Dealer Affiliate” means, with respect to Dealer, a BHC Affiliate of that party.

“Default Right” means, with respect to this Confirmation (including the Transaction) or any other Relevant Agreement, any:

i.right of a party, whether contractual or otherwise (including, without limitation, rights incorporated by reference to any other contract, agreement, or document, and rights afforded by statute, civil code, regulation, and common law), to liquidate, terminate, cancel, rescind, or accelerate such agreement or transactions thereunder, set off or net amounts owing in respect thereto (except rights related to same-day payment netting), exercise remedies in respect of collateral or other credit support or property related thereto (including the purchase and sale of property), demand payment or delivery thereunder or in respect thereof (other than a right or operation of a contractual provision arising solely from a change in the value of collateral or margin or a change in the amount of an economic exposure), suspend, delay, or defer payment or performance thereunder, or modify the obligations of a party thereunder, or any similar rights; and

ii.right or contractual provision that alters the amount of collateral or margin that must be provided with respect to an exposure thereunder, including by altering any initial amount, threshold amount, variation margin, minimum transfer amount, the margin value of collateral, or any similar amount, that entitles a party to demand the return of any collateral or margin transferred by it to the other party or a custodian or that modifies a transferee’s right to reuse collateral or margin (if such right previously existed), or any similar rights, in each case, other than a right or operation of a contractual provision arising solely from a change in the value of collateral or margin or a change in the amount of an economic exposure; but

iii.solely with respect to Section 14, does not include any right under a contract that allows a party to terminate the contract on demand or at its option at a specified time, or from time to time, without the need to show cause.

“Financial Counterparty” has the meaning given to such term in, and shall be interpreted in accordance with, 12 C.F.R. 252.81, 12 C.F.R. 382.1 and 12 C.F.R. 47.2.

“Insolvency Proceeding” means a receivership, insolvency, liquidation, resolution, or similar proceeding.

“ISDA U.S. Protocol” means the ISDA 2018 U.S. Resolution Stay Protocol, as published by ISDA on July 31, 2018.

“QFC Stay Rules” means the regulations codified at 12 C.F.R. 252.81–8 (the “Federal Reserve Rule”), 12 C.F.R. 382.1-7 (the “FDIC Rule”) and 12 C.F.R. 47.1-8 (the “OCC Rule”), respectively. All references herein to the specific provisions of the Federal Reserve Rule, the FDIC Rule and the OCC Rule shall be construed, with respect to Dealer, to the particular QFC Stay Rule(s) applicable to it.

“Relevant Agreement” means this Confirmation (including the Transaction) and any Credit Enhancement relating hereto or thereto.

“Small Financial Institution” has the meaning given to such term in, and shall be interpreted in accordance with, 12 C.F.R. 252.81, 12 C.F.R. 382.1 and 12 C.F.R. 47.2.]

[U.S. Resolution Stay Provisions.

i.Recognition of the U.S. Special Resolution Regimes.

A.In the event that Goldman Sachs & Co. LLC (“GS&Co.”) becomes subject to a proceeding under (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder or (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder (a “U.S. Special Resolution Regime”) the transfer from GS&Co. of this Confirmation, and any interest and obligation in or under, and any property securing, this Confirmation, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Confirmation, and any interest and obligation in or under, and any property securing, this Confirmation were governed by the laws of the United States or a state of the United States.

B.In the event that GS&Co. or an Affiliate becomes subject to a proceeding under a U.S. Special Resolution Regime, any Default Rights (as defined in 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable (“Default Right”)) under this Confirmation that may be exercised against GS&Co. are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Confirmation were governed by the laws of the United States or a state of the United States.

ii.Limitation on Exercise of Certain Default Rights Related to an Affiliate’s Entry Into Insolvency Proceedings. Notwithstanding anything to the contrary in this Confirmation, GS&Co. and Counterparty expressly acknowledge and agree that:

A.Counterparty shall not be permitted to exercise any Default Right with respect to this Confirmation or any Affiliate Credit Enhancement that is related, directly or indirectly, to an Affiliate of GS&Co. becoming subject to receivership, insolvency, liquidation, resolution, or similar proceeding (an “Insolvency Proceeding”), except to the extent that the exercise of such Default Right would be permitted under the provisions of 12 C.F.R. 252.84, 12 C.F.R. 47.5 or 12 C.F.R. 382.4, as applicable; and

B.Nothing in this Confirmation shall prohibit the transfer of any Affiliate Credit Enhancement, any interest or obligation in or under such Affiliate Credit Enhancement, or any property securing such Affiliate Credit Enhancement, to a transferee upon or following an Affiliate of GS&Co. becoming subject to an Insolvency Proceeding, unless the transfer would result in the Counterparty being the beneficiary of such Affiliate Credit Enhancement in violation of any law applicable to the Counterparty.

iii.U.S. Protocol. If Counterparty has previously adhered to, or subsequently adheres to, the ISDA 2018 U.S. Resolution Stay Protocol as published by the International Swaps and Derivatives Association, Inc. as of July 31, 2018 (the “ISDA U.S. Protocol”), the terms of such protocol shall be incorporated into and form a part of this Confirmation and the terms of the ISDA U.S. Protocol shall supersede and replace the terms of this Section 14. For purposes of incorporating the ISDA U.S. Protocol, GS&Co. shall be deemed to be a Regulated Entity, Counterparty shall be deemed to be an Adhering Party, and this Confirmation shall be deemed to be a Protocol Covered Agreement. Capitalized terms used but not defined in this paragraph shall have the meanings given to them in the ISDA U.S. Protocol.

iv.Preexisting In-Scope Agreements. GS&Co. and Counterparty agree that to the extent there are any outstanding “in-scope QFCs,” as defined in 12 C.F.R. § 252.82(d), that are not excluded under 12 C.F.R. § 252.88, between GS&Co. and Counterparty that do not otherwise comply with the requirements of 12 C.F.R. § 252.2, 252.81–8 (each such agreement, a “Preexisting In-Scope Agreement”), then each such Preexisting In-Scope Agreement is hereby amended to include the foregoing provisions in this Section 14, with references to “this Confirmation” being understood to be references to the applicable Preexisting In-Scope Agreement.

For the purposes of this Section 14, “Affiliate” is defined in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k), and “Credit Enhancement” means any credit enhancement or credit support arrangement in support of the obligations of GS&Co. under or with respect to this Confirmation, including any guarantee, collateral arrangement (including any pledge, charge, mortgage or other security interest in collateral or title transfer arrangement), trust or similar arrangement, letter of credit, transfer of margin or any similar arrangement.]

[QFC Stay Rules. The parties agree that (i) to the extent that prior to the date hereof both parties have adhered to the 2018 ISDA U.S. Resolution Stay Protocol (the “Protocol”), the terms of the Protocol are incorporated into and form a part of this Confirmation, and for such purposes this Confirmation shall be deemed a Protocol Covered Agreement and each party shall be deemed to have the same status as Regulated Entity and/or Adhering Party as applicable to it under the Protocol; (ii) to the extent that prior to the date hereof the parties have executed a separate agreement the effect of which is to amend the qualified financial contracts between them to conform with the requirements of the QFC Stay Rules (the “Bilateral Agreement”), the terms of the Bilateral Agreement are incorporated into and form a part of this Confirmation and each party shall be deemed to have the status of “Covered Entity” or “Counterparty Entity” (or other similar term) as applicable to it under the Bilateral Agreement; or (iii) if clause (i) and clause (ii) do not apply, the terms of Section 1 and Section 2 and the related defined terms (together, the “Bilateral Terms”) of the form of bilateral template entitled “Full-Length Omnibus (for use between U.S. G-SIBs and Corporate Groups)” published by ISDA on November 2, 2018 (currently available on the 2018 ISDA U.S. Resolution Stay Protocol page at www.isda.org and a copy of which is available upon request), the effect of which is to amend the qualified financial contracts between the parties thereto to conform with the requirements of the QFC Stay Rules, are hereby incorporated into and form a part of this Confirmation, and for such purposes this Confirmation shall be deemed a “Covered Agreement,” Dealer shall be deemed a “Covered Entity” and Counterparty shall be deemed a “Counterparty Entity.” In the event that, after the date of this Confirmation, both parties hereto become adhering parties to the Protocol, the terms of the Protocol will replace the terms of this paragraph. In the event of any inconsistencies between this Confirmation and the terms of the Protocol, the Bilateral Agreement or the Bilateral Terms (each, the “QFC Stay Terms”), as applicable, the QFC Stay Terms will govern. Terms used in this paragraph without definition shall have the meanings assigned to them under the QFC Stay Rules. For purposes of this paragraph, references to “this Confirmation” include any related credit enhancements entered into between the parties or provided by one to the other. “QFC Stay Rules” means the regulations codified at 12 C.F.R. 252.2, 252.81–8, 12 C.F.R. 382.1-7 and 12 C.F.R. 47.1-8, which, subject to limited exceptions, require an express recognition of the stay-and-transfer powers of the FDIC under the Federal Deposit Insurance Act and the Orderly Liquidation Authority under Title II of the Dodd Frank Wall Street Reform and Consumer Protection Act and the override of default rights related directly or indirectly to the entry of an affiliate into certain insolvency proceedings and any restrictions on the transfer of any covered affiliate credit enhancements.]

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.


[J.P. MORGAN SECURITIES LLC, AS AGENT
FOR JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION][CITIBANK, N.A.][GOLDMAN
SACHS & CO. LLC][MORGAN STANLEY &
CO. INTERNATIONAL PLC]

By: ______________
Name ______________
Title: ______________

Exhibit 10.4

WARRANT TERMINATION AGREEMENT

dated as of [_______], 2020

Between SERVICENOW, INC. and [JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, LONDON BRANCH][CITIBANK, N.A.][GOLDMAN SACHS & CO. LLC][MORGAN STANLEY & CO. INTERNATIONAL PLC]

THIS WARRANT TERMINATION AGREEMENT (this “Agreement”) with respect to the Warrants Confirmations (as defined below) is made as of [______], 2020, between ServiceNow, Inc. (“Company”) and [JPMorgan Chase Bank, National Association, London Branch][Citibank, N.A.][Goldman Sachs & Co. LLC][Morgan Stanley & Co. International plc] (“Dealer”).

WHEREAS, concurrently with the pricing of the Convertible Notes, Dealer and Company entered into a Base Warrants Transaction (the “Base Warrants Transaction”) pursuant to an ISDA confirmation dated as of May 23, 2017, which supplements, forms a part of, and is subject to an agreement in the form of the 2002 ISDA Master Agreement, pursuant to which Dealer purchased from Company [______] warrants (as amended, modified, terminated or unwound from time to time, the “Base Warrants Confirmation”);

WHEREAS, concurrently with the exercise of the over-allotment option by the initial purchasers of the Convertible Notes, Dealer and Company entered into an Additional Warrants Transaction (the “Additional Warrants Transaction” and, together with the Base Warrants Transaction, the “Warrants Transactions”) pursuant to an ISDA confirmation dated as of June 19, 2017, which supplements, forms a part of, and is subject to an agreement in the form of the 2002 ISDA Master Agreement, pursuant to which Dealer purchased from Company [______] warrants (as amended, modified, terminated or unwound from time to time, the “Additional Warrants Confirmation” and, together with the Base Warrants Confirmation, the “Warrants Confirmations”); and

WHEREAS, in connection with a repurchase by Company of $[_____] aggregate principal amount of Convertible Notes, Company has requested full termination of the Additional Warrants Transaction and partial termination of the Base Warrants Transaction;

NOW, THEREFORE, in consideration of their mutual covenants herein contained, the parties hereto, intending to be legally bound, hereby mutually covenant and agree as follows:

1.Defined Terms. Any capitalized term not otherwise defined herein shall have the meaning set forth for such term in the Warrants Confirmations.

2.Termination. Notwithstanding anything to the contrary in the Warrants Confirmations, Company and Dealer agree that, effective on the date hereof, but subject to Section 13 hereof, (i) the Additional Warrants Transaction shall automatically terminate and all of the respective rights and obligations of the parties under the Additional Warrants Confirmation shall be terminated, cancelled and extinguished and (ii) the Number of Warrants under the Base Warrants Transaction shall be reduced to [________] and in connection therewith Company shall be required to deliver to Dealer a number of Shares equal to the Share Settlement Amount on the Delivery Date pursuant to Sections 3 and 4 below.

3.Procedures for Hedge Unwind. [On the Hedge Unwind Date, Dealer (or an affiliate of Dealer), for the account of Dealer, shall unwind a portion of its hedge of the Warrants underlying the Warrants Transactions being terminated hereunder. “Hedge Unwind Date” means [Insert Pricing Date].] [On [Insert Pricing Date] and on each Hedge Unwind Date (as defined below), Dealer (or an affiliate of Dealer), for the account of Dealer, shall unwind a portion of its hedge of the Warrants underlying the Warrants Transactions being terminated hereunder. A “Hedge Unwind Date” means the first Scheduled Trading Day immediately succeeding [Insert Pricing Date] and each Scheduled Trading Day thereafter until Dealer has completed the unwind of such hedge; provided, however, that (a) Dealer shall use commercially reasonable efforts to complete its unwind as soon as reasonably practicable and, subject to clause (b), in any event no later than [______], 2020 and (b) if any such date is a Disrupted Day in whole, such date shall not constitute a Hedge Unwind Date, and an additional Hedge Unwind Date shall occur on the Scheduled Trading Day after the date that would otherwise be the final Hedge Unwind Date. “Hedge Unwind Period” means the period of consecutive Scheduled Trading Days from, but excluding, [Insert Pricing Date] through, and including, the final Hedge Unwind Date.]

4.Payments and Deliveries. [On the second Scheduled Trading Day following the Hedge Unwind Date or, if such day is not a Clearance System Business Day, on the next Clearance System Business Day immediately following such day (the “Delivery Date”), Company shall deliver to Dealer, to the account specified in Section 7 hereof, [_______] Shares (the “Share Settlement Amount”).] [On the second Scheduled Trading Day following the last day of the Hedge Unwind Period or, if such day is not a Clearance System Business Day, on the next Clearance System Business Day immediately following such day (the “Delivery Date”), Company shall deliver to Dealer, to the account specified in Section 7 hereof, a number of Shares equal to the Share Settlement Amount. The “Share Settlement Amount” shall mean a number of Shares equal to the sum of the Closing Share Settlement Amount and the VWAP Share Settlement Amount. The “Closing Share Settlement Amount” shall mean [_______] Shares. The “VWAP Share Settlement Amount” shall mean a number of Shares determined by Dealer pursuant to the relevant table set forth in Schedule A attached hereto (using linear interpolation or linear extrapolation, as applicable, to determine the VWAP Share Settlement Amount for any Average VWAP not specifically appearing in Schedule A). “Average VWAP” means the arithmetic average of the VWAP Prices for each Hedge Unwind Date during the Hedge Unwind Period. “VWAP Price” for any Scheduled Trading Day means the per Share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page NOW <equity> AQR (or any successor thereto) in respect of the period from 9:30 am to 4:00 pm (New York City time) on such Scheduled Trading Day (or if such volume-weighted average price is unavailable, the market value of one Share on such Scheduled Trading Day for such time period, as determined by Dealer in a commercially reasonable manner). Notwithstanding the foregoing, if (i) any Scheduled Trading Day in the Hedge Unwind Period is a Disrupted Day (in whole or in part) or (ii) Dealer determines in its commercially reasonable judgment that on any Scheduled Trading Day during the Hedge Unwind Period that an extension of the Hedge Unwind Period is reasonably necessary or appropriate to preserve Dealer’s hedge unwind activity hereunder in light of existing liquidity conditions or to enable Dealer to effect purchase and/or sales of Shares in connection with its hedge unwind activity hereunder in a manner that would be in compliance with applicable legal, regulatory or self-regulatory requirements, or with related policies and procedures applicable to Dealer, then the VWAP Price for such Scheduled Trading Day(s) shall be the volume-weighted average price per Share on such Scheduled Trading Day on the Exchange for such time period, as determined by Dealer based on such sources as it deems appropriate using a volume-weighted methodology, for the portion of such Scheduled Trading Day for which Dealer determines there is no Market Disruption Event with respect to the Shares (if any) and the number of Hedge Unwind Dates and the VWAP Share Settlement Amount shall be adjusted by Dealer in its good faith, commercially reasonable discretion to account for such disruption and/or extension.]

5.Representations and Warranties of Company. Company represents and warrants to Dealer (and agrees with Dealer in the case of Section 5(g)(ii)) on the date hereof that:

a.it has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and to perform its obligations under this Agreement and has taken all necessary action to authorize such execution, delivery and performance;

b. such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any material contractual restriction binding on or affecting it or any of its assets;

c.all governmental and other consents that are required to have been obtained by it with respect to this Agreement have been obtained and are in full force and effect and all conditions of any such consents have been complied with;

d.its obligations under this Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law));

e.each of it and its affiliates is not in possession of any material nonpublic information regarding Company or the Shares; and

f.it is not entering into this Agreement to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares) or otherwise in violation of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

6.Representations and Warranties of Dealer. Dealer represents and warrants to Company on the date hereof that:

a. it has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and to perform its obligations under this Agreement and has taken all necessary action to authorize such execution, delivery and performance;

c. all governmental and other consents that are required to have been obtained by it with respect to this Agreement have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and

d. its obligations under this Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).

7.Account for Delivery of Shares to Dealer:

[Dealer to provide].

12.No Other Changes. Except as expressly set forth herein, all of the terms and conditions of the Base Warrants Confirmation shall remain in full force and effect and are hereby confirmed in all respects.

clause (i) and clause (ii) do not apply, the terms of Section 1 and Section 2 and the related defined terms (together, the “Bilateral Terms”) of the form of bilateral template entitled “Full-Length Omnibus (for use between U.S. G-SIBs and Corporate Groups)” published by ISDA on November 2, 2018 (currently available on the 2018 ISDA U.S. Resolution Stay Protocol page at www.isda.org and, a copy of which is available upon request), the effect of which is to amend the qualified financial contracts between the parties thereto to conform with the requirements of the QFC Stay Rules, are hereby incorporated into and form a part of the Agreement, and for such purposes the Agreement shall be deemed a “Covered Agreement,” J.P. Morgan shall be deemed a “Covered Entity” and Counterparty shall be deemed a “Counterparty Entity.” In the event that, after the date of the Agreement, both parties hereto become adhering parties to the Protocol, the terms of the Protocol will replace the terms of this paragraph. In the event of any inconsistencies between the Agreement and the terms of the Protocol, the Bilateral Agreement or the Bilateral Terms (each, the “QFC Stay Terms”), as applicable, the QFC Stay Terms will govern. Terms used in this paragraph without definition shall have the meanings assigned to them under the QFC Stay Rules. For purposes of this paragraph, references to “the Agreement” include any related credit enhancements entered into between the parties or provided by one to the other. In addition, the parties agree that the terms of this paragraph shall be incorporated into any related covered affiliate credit enhancements, with all references to J.P. Morgan replaced by references to the covered affiliate support provider. “QFC Stay Rules” means the regulations codified at 12 C.F.R. 252.2, 252.81–8, 12 C.F.R. 382.1-7 and 12 C.F.R. 47.1-8, which, subject to limited exceptions, require an express recognition of the stay-and-transfer powers of the FDIC under the Federal Deposit Insurance Act and the Orderly Liquidation Authority under Title II of the Dodd Frank Wall Street Reform and Consumer Protection Act and the override of default rights related directly or indirectly to the entry of an affiliate into certain insolvency proceedings and any restrictions on the transfer of any covered affiliate credit enhancements.]

[U.S. QFC Mandatory Contractual Requirements.

i.Dealer becoming subject to an Insolvency Proceeding; or

d.General Conditions

i.Effective Date. The provisions set forth in this Section 14 will come into effect on the later of the Applicable Compliance Date and the date of this Confirmation.

e.Definitions. For the purposes of this Section 14, the following definitions apply:

“BHC Affiliate” has the same meaning as the term “affiliate” as defined in, and shall be interpreted in accordance with, 12 U.S.C. 1813(w) and 12 U.S.C. 1841(k).

“Dealer Affiliate” means, with respect to Dealer, a BHC Affiliate of that party.

“Default Right” means, with respect to this Confirmation (including the Transaction) or any other Relevant Agreement, any:

(i) right of a party, whether contractual or otherwise (including, without limitation, rights incorporated by reference to any other contract, agreement, or document, and rights afforded by statute, civil code, regulation, and common law), to liquidate, terminate, cancel, rescind, or accelerate such agreement or transactions thereunder, set off or net amounts owing in respect thereto (except rights related to same-day payment netting), exercise remedies in respect of collateral or other credit support or property related thereto (including the purchase and sale of property), demand payment or delivery thereunder or in respect thereof (other than a right or operation of a contractual provision arising solely from a change in the value of collateral or margin or a change in the amount of an economic exposure), suspend, delay, or defer payment or performance thereunder, or modify the obligations of a party thereunder, or any similar rights; and

(ii) right or contractual provision that alters the amount of collateral or margin that must be provided with respect to an exposure thereunder, including by altering any initial amount, threshold amount, variation margin, minimum transfer amount, the margin value of collateral, or any similar amount, that entitles a party to demand the return of any collateral or margin transferred by it to the other party or a custodian or that modifies a transferee’s right to reuse collateral or margin (if such right previously existed), or any similar rights, in each case, other than a right or operation of a contractual provision arising solely from a change in the value of collateral or margin or a change in the amount of an economic exposure; but

(iii) solely with respect to Section 14, does not include any right under a contract that allows a party to terminate the contract on demand or at its option at a specified time, or from time to time, without the need to show cause.

“Financial Counterparty” has the meaning given to such term in, and shall be interpreted in accordance with, 12 C.F.R. 252.81, 12 C.F.R. 382.1 and 12 C.F.R. 47.2.

“Insolvency Proceeding” means a receivership, insolvency, liquidation, resolution, or similar proceeding.

“ISDA U.S. Protocol” means the ISDA 2018 U.S. Resolution Stay Protocol, as published by ISDA on July 31, 2018.

“Relevant Agreement” means this Confirmation (including the Transaction) and any Credit Enhancement relating hereto or thereto.

“Small Financial Institution” has the meaning given to such term in, and shall be interpreted in accordance with, 12 C.F.R. 252.81, 12 C.F.R. 382.1 and 12 C.F.R. 47.2.]

[U.S. Resolution Stay Provisions.

i.Recognition of the U.S. Special Resolution Regimes.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.


[J.P. MORGAN SECURITIES LLC, AS AGENT
FOR JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION][CITIBANK, N.A.][GOLDMAN
SACHS & CO. LLC][MORGAN STANLEY &
CO. INTERNATIONAL PLC]

By: ______________
Name ______________
Title: ______________

SERVICENOW, INC.
By: ______________
Name ______________
Title: ______________

[Schedule A

The VWAP Share Settlement Amount shall be determined by Dealer pursuant to the table below.


Average VWAP			VWAP Share Settlement Amount
$[___]			[____]
$[___]			[____]
$[___]			[____]
$[___]			[____]
$[___]			[____]
$[___]			[____]
$[___]			[____]
$[___]			[____]
$[___]			[____]

Dealer may, in good faith and in a commercially reasonable manner, adjust the tables above upon the occurrence of any event or condition that would have allowed Dealer to adjust the terms of the Warrants Transactions under the Warrants Confirmations.]

Exhibit 10.5

October 26, 2020

Ms. Pat Wadors

Re: Compromise and Release

Dear Pat:

This letter sets forth the substance of the Compromise and Release Agreement (the “Agreement”) between you ServiceNow, Inc. (the “Company”) concerning the administration of certain provisions set forth in your offer letter agreement between you and the Company dated December 30, 2017. Reference is made to the following facts:

A.You and the Company entered into an employment letter agreement (the “Employment Agreement”) dated December 30, 2017 (which amended and restated an agreement dated July 25, 2017); and

B.As described in Section 5(a) of the Employment Agreement, you were granted a New Hire RSU with a vesting period extending over three years; and

C.As described in Section 6(b) of the Employment Agreement, certain clawback arrangements were put in place in the event that you voluntarily resigned from your position without “Good Reason” on or after the third anniversary of September 17, 2017 (the “Grant Date”) and prior to the four year anniversary of the Grant Date (the “Clawback Provision”); and

D.There is now a dispute as to the meaning, intent and administration of the Clawback Provision; and

E.The parties now wish to resolve the dispute pursuant to a mutual agreement.

In recognition of the facts above, the parties agree as follows:

1.Separation Date. You have previously agreed with the Company that your final day of employment would be November 18, 2020 (the “Original Separation Date”). In the event that you resigned from your employment on that date, you would have an additional vesting date in three separate RSU awards, as follows: (i) 3,094 shares of Grant ID Number 80780231-P on November 7, 2020; (ii) 1,263 shares of Grant ID Number 8331926 on November 12, 2020; (iii) 251 shares of Grant ID Number 8331927 on November 12, 2020; and (iv) 181 shares of Grant ID Number 8342923 on November 17, 2020 (the “November Vestings”), with an anticipated fair market value at date of vesting in excess of $2.4 million. In exchange for the compromise and release set forth in Paragraph 3, below, the parties have agreed that your final date of employment will be October 28, 2020 (the “Revised Separation Date”), such that you will not vest in any of these November Vestings. On the Revised Separation Date, the Company will pay you all accrued salary earned through the Revised Separation Date, subject to standard payroll deductions and withholdings. You are entitled to this payment regardless of whether or not you sign this Agreement.

2.Transition Period. Between now and the Revised Separation Date (the “Transition Period”), you will continue to use your best efforts to perform your currently assigned duties and responsibilities, and to transition these duties and responsibilities, as requested by the Company (the “Transition Services”). You must continue to comply with all of your contractual and legal obligations to the Company, and comply with the Company’s policies and procedures during the Transition Period. During the Transition Period, you will continue to receive your current base salary, subject to standard withholdings and deductions; you will continue to accrue vacation according to Company policy; and you will continue to be eligible for the Company’s standard benefits, subject to the terms of such plans and programs.

3.Compromise and Release of Clawback Provision. In recognition of a good faith dispute as to the meaning, intent and administration of the Clawback Provision, you and the Company agree that your agreement to the Revised Separation Date and consequent forfeiture of the November Vestings shall constitute full satisfaction of the Parties’ rights and obligations with respect to the Clawback Provision. As further consideration for this Compromise and Release, you further agree: (i) on or within twenty-one (21) days of your receipt of this Agreement, you sign it and allow the releases contained herein to become effective; and (ii) you will fully comply with your obligations hereunder during the Transition Period and thereafter. In the event the Company believes you have not fully complied with your obligations, the Company must provide you written notice of such event and provide you three (3) days to cure such event, until which time you will be deemed to have fully complied.

4.Other Compensation or Benefits. You acknowledge that, except as expressly provided in this Agreement, you will not receive any additional compensation, severance or benefits after the Revised Separation Date. You further acknowledge and agree that you are not entitled to receive, and shall not receive, any severance benefits or additional vesting of any equity grants from the Company pursuant to your Employment Agreement or any other agreement or plan providing for severance benefits or additional vesting.

5.Expense Reimbursements. You agree that, within ten (10) days after the Separation Date, you will submit your final documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement. The Company will reimburse you for these expenses pursuant to its regular business practice and within ten (10) days after you submit the expense reimbursement statement.

6.Proprietary Information Obligations. Both during and after your employment you acknowledge your continuing obligations under your Proprietary Information and Inventions Agreement, including your obligations not to use or disclose any non-public confidential or proprietary information of the Company. A copy of your Proprietary Information and Inventions Agreement is attached hereto as Exhibit A.

7.Cooperation. You agree to cooperate reasonably with the Company in connection with its actual or contemplated defense, prosecution, or investigation of any claims or demands by or against third parties, or other matters arising from events, acts, or failures to act that occurred during the period of your employment by the Company. Such cooperation includes, without limitation, making yourself available to the Company upon reasonable notice, without subpoena, to provide complete, truthful and accurate information in witness interviews, depositions, and trial testimony. The Company will reimburse you for reasonable out-of-pocket expenses you incur in connection with any such cooperation (excluding foregone wages) and will make reasonable efforts to accommodate your scheduling needs.

8.No Admissions. You and the Company understand and agree that the promises and payments in consideration of this Agreement shall not be construed to be an admission of any liability or obligation by either you or the Company to one another or to any other person. The Company will defend you with respect to any claims brought against you that arise in any manner out of your employment with the Company, provided that the Company shall select defense counsel, and, except where the Company’s and your interests diverge, control the defense. If the Company’s and your interests diverge, the Company shall jointly and severally provide you with separate counsel at the Company’s expense and indemnify or continue to indemnify you as set forth in this Section 8. The Company will indemnify you to the greatest extent permitted by law, with respect to any judgment, verdict, or order against you for good faith conduct by you which is/was within the course and scope of your employment.

9.Your Release of Claims.

a.General Release. In exchange for the consideration provided to you under this Agreement to which you would not otherwise be entitled, you hereby generally and completely release the Company, and its affiliated, related, parent and subsidiary entities, and its and their current and former directors, officers, employees, shareholders, partners, agents, predecessors, successors, insurers, affiliates, and assigns, each in their individual capacity as such (collectively, the “Released Parties”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to or on the date you sign this Agreement (collectively, the “Released Claims”).

b.Scope of Release. The Released Claims include, but are not limited to: (i) all claims arising out of or in any way related to your employment with the Company, or the termination of that employment; (ii) all claims related to your compensation or benefits from the Company, including salary, bonuses, commissions, vacation, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership, equity, or profits interests in the Company, or vesting in any such benefits; (iii) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (iv) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (v) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (the “ADEA”), the California Labor Code (as amended), and the California Fair Employment and Housing Act (as amended).

c.ADEA Waiver. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you may have under the ADEA (the “ADEA Waiver”), and that the consideration given for the ADEA Waiver is in addition to anything of value to which you are already entitled. You further acknowledge that you have been advised, as required by the ADEA, that: (i) your ADEA Waiver does not apply to any rights or claims that may arise after the date that you sign this Agreement; (ii) you should consult with an attorney prior to signing this Agreement (although you may choose voluntarily not to do so); (iii) you have twenty-one (21) days to consider this Agreement (although you may choose voluntarily to sign it earlier); (iv) you have seven (7) days following the date you sign this Agreement to revoke the ADEA Waiver (by providing written notice via e-mail of your revocation to the Company’s GC at russell.elmer@servicenow.com); and (v) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth day after the date that this Agreement is signed by you provided that you do not revoke it (the “Effective Date”)

d.Excluded Claims. Notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (i) any rights or claims for indemnification you may have pursuant to any written indemnification agreement with the Company to which you are a party or under applicable law; or to accrued, vested benefits under any employee benefit, stock, savings, insurance or pension plan of the Company (ii) any rights which are not waivable as a matter of law, including your rights to COBRA; and (iii) any claims for breach of this Agreement. You hereby represent and warrant that, other than the Excluded Claims, you are not aware of any claims you have or might have against any of the Released Parties that are not included in the Released Claims. You understand that nothing in this Agreement limits your ability to file a charge or complaint with any Governmental Agency. While this Agreement does not limit your right to receive an award for information provided to the Securities and Exchange Commission, you understand and agree that, to maximum extent permitted by law, you are otherwise waiving any and all rights you may have to individual relief based on any claims that you have released and any rights you have waived by signing this Agreement.

10.The Company’s Release. You hereby represent and warrant that other than the Excluded Claims above, you are not aware of any action or inaction on your part that would give rise to a claim against you by the Company. In reliance upon your representations and warranties above, the Company here hereby generally and completely releases you from any and all claims, liabilities and obligations, both known and unknown, arising out of your employment with the Company including, but not limited to, any repayment obligation as set forth in Section 6 of your Employment Agreement.

11.Section 1542 Waiver. THE PARTIES UNDERSTAND THAT THIS AGREEMENT INCLUDES RELEASES OF ALL KNOWN AND UNKNOWN CLAIMS. In giving the releases herein, which includes claims which may be unknown to the parties at present, the parties acknowledge that they have read and understand Section 1542 of the California Civil Code, which reads as follows:

“A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her would have materially affected his or her settlement with the debtor or released party."

The parties hereby expressly waive and relinquish all rights and benefits under that section and any law of any other jurisdiction of similar effect with respect to their respective releases of any unknown or unsuspected claims herein.

12.General. This Agreement, including its exhibits, constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with regard to this subject matter. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provision in question will be modified by the court so as to be rendered enforceable to the fullest extent permitted by law, consistent with the intent of the parties. This Agreement will be deemed to have been entered into and will be construed and enforced in accordance with the laws of the State of California as applied to contracts made and to be performed entirely within California.

If this Agreement is acceptable to you, please sign below and return the original to me within twenty-one (21) days.

Sincerely,

ServiceNow, Inc.

By: /s/ Russ Elmer

Russ Elmer

Corporate Secretary

Exhibit A – Proprietary Information and Inventions Agreement

Accepted and Agreed:

/s/ Pat Wadors

Pat Wadors

October 26, 2020

Date

Exhibit A

[Proprietary Information and Inventions Agreement]

EXHIBIT 31.1

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, William R. McDermott, certify that:

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: October 28, 2020
			/s/ William R. McDermott
			William R. McDermott President, Chief Executive Officer and Director (Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Gina Mastantuono, certify that:

1.I have reviewed this quarterly report on Form 10-Q of ServiceNow, Inc.;

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: October 28, 2020
			/s/ Gina Mastantuono
			Gina Mastantuono Chief Financial Officer (Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, William R. McDermott, Chief Executive Officer of ServiceNow, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

•the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2020 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

•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.


Date: October 28, 2020
			/s/ William R. McDermott
			William R. McDermott President, Chief Executive Officer and Director (Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to ServiceNow, Inc. and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32.2

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Gina Mastantuono, Chief Financial Officer of ServiceNow, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

•the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2020 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

•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.


Date: October 28, 2020
			/s/ Gina Mastantuono
			Gina Mastantuono Chief Financial Officer (Principal Financial Officer)