Le Lézard
Classified in: Science and technology, Business
Subjects: EARNINGS, Conference Call, Webcast

ServiceNow Reports First Quarter 2019 Financial Results


ServiceNow (NYSE: NOW) today announced financial results for its first quarter ended March 31, 2019, with subscription revenues of $740 million in Q1 2019, representing 36% year-over-year growth.

ServiceNow, Forbes' No. 1 World's Most Innovative Company in 2018, serves more than 5,400 enterprise customers, including almost 75% of Fortune 500 companies. During the quarter, ServiceNow closed 25 transactions with more than $1 million in net new annual contract value (ACV). The company now has 717 total customers with more than $1 million in ACV, representing 33% year-over-year growth.

"The first quarter represented a strong start to the new year, as we continued the momentum from our outstanding 2018 performance," said John Donahoe, ServiceNow president and chief executive officer. "Our performance shows the strength of our product and platform portfolio, and the core strategic partner role we are playing in enabling digital transformation for large public sector agencies, Fortune 500 companies and leading global enterprises."

"Subscription revenues grew 36% year-over-year," said Michael Scarpelli, ServiceNow chief financial officer. "Our U.S. federal business highlighted the quarter, representing 15% of our total net new ACV, up from 6% in the prior year."

First Quarter 2019 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the first quarter 2019:

 

First Quarter 2019
GAAP Results

   

First Quarter 2019 Non-GAAP Results(1)

   

Amount
($ millions)

 

Year/Year
Growth (%)

Amount
($ millions)

 

Year/Year
Growth (%)

 

Adjusted Amount
($ millions)(2)

 

Adjusted
Year/Year
Growth (%)

Subscription revenues $740.0   36%     $760.4   40%

Professional services and other revenues

$48.9 7% $50.8 11%
Total revenues $788.9 34% $811.3 38%
 
Subscription billings $809.6 27% $849.7 33%
Professional services and other billings $47.9 (6%) $49.8 (2%)
Total billings $857.5 24% $899.5 30%
 
   

Amount
($ millions)

 

Margin (%)

Amount
($ millions)

 

Margin (%)

       
Subscription gross profit $613.4 83% $634.1 86%
Professional services and other gross loss ($10.7) (22%) ($0.8) (2%)
Total gross profit $602.7 76% $633.3 80%
Income (loss) from operations ($15.7) (2%) $148.8 19%
Net cash provided by operating activities $360.8 46%
Free cash flow $313.7 40%
 
   

Amount
($ millions)

 

Earnings per
Basic/Diluted
Share ($)

Amount
($ millions)

 

Earnings per
Basic/Diluted
Share ($)

       
Net income (loss) ($1.5) ($0.01) $128.9 $0.71 / $0.67
(1)   We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation" for a reconciliation of GAAP to non-GAAP measures.
(2) Non-GAAP subscription revenues, professional services and other revenues, total revenues and professional services billings are adjusted for constant currency. Non-GAAP subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation" for a reconciliation of GAAP to non-GAAP measures.
 

Financial Outlook

Our guidance is based on foreign exchange rates as of March 31, 2019 and includes GAAP and non-GAAP financial measures.

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

 

Second Quarter 2019
GAAP Guidance

   

Second Quarter 2019 Non-GAAP Guidance(1)

   

Amount
($ millions)

 

Year/Year
Growth (%)

Amount
($ millions)

 

Year/Year
Growth (%)

 

Adjusted
Amount
($ millions)(2)

 

Adjusted Year/
Year Growth
(%)

Subscription revenues $778 - $783   33% - 34%     $793 - $798   35% - 36%
Subscription billings $798 - $803 29% - 30% $814 - $819 32% - 33%
 
             

Margin (%)

       
Income from operations 17%
 
         

Amount
(millions)

           

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

193
(1)   We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of GAAP to non-GAAP measures.
(2) Non-GAAP subscription revenues are adjusted for constant currency. Non-GAAP subscription billings are adjusted for constant currency and constant billings duration. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of GAAP to non-GAAP measures.
 

The following table summarizes our updated guidance for fiscal year 2019:

 

Full-Year 2019
GAAP Guidance

    Full-Year 2019 Non-GAAP Guidance(1)
   

Amount
($ millions)

 

Year/Year
Growth (%)

Amount
($ millions)

 

Year/Year
Growth (%)

 

Adjusted
Amount
($ millions)(2)

 

Adjusted
Year/ Year
Growth (%)

Subscription revenues $3,235 - $3,250   34%     $3,280 - $3,295   35% - 36%
Subscription billings $3,725 - $3,740 29% - 30% $3,797 - $3,812 32%
 
              Margin (%)        
Subscription gross profit 86%
Income from operations 21%
Free cash flow 28%
 
         

Amount
(millions)

           
Weighted-average shares used to compute diluted net income per share 193
(1)   We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of GAAP to non-GAAP measures.
(2) Non-GAAP subscription revenues are adjusted for constant currency. Non-GAAP subscription billings are adjusted for constant currency and constant billings duration. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of GAAP to non-GAAP measures.
 

The following table compares our updated full-year 2019 guidance against our previously issued full-year 2019 guidance dated January 30, 2019:

 

Comparison of Updated Full-Year 2019 Guidance to Previously Issued Guidance(1)
($ millions)

   

Previous Guidance
Midpoint(2)

 

Currency Impact(3)

 

Duration Impact(4)

 

Guidance Change

 

Current Guidance
Midpoint(5)

GAAP subscription revenues $3,225   ($5)   $0   $23   $3,243
 

Non-GAAP subscription billings(6)

$3,715 ($6) $0 $24 $3,733
(1)   Numbers are rounded for presentation purposes.
(2) Refers to previously issued full-year 2019 guidance dated January 30, 2019.
(3) In our guidance, we assume an average daily currency exchange rate for the guidance period based on the rates at the end of the prior quarter for entities reporting in currencies other than U.S. Dollars. Currency impact represents the sum of (i) the impact of the difference between the actual average rates in the period used to calculate our Q1 2019 actual results and the rates as of December 31, 2018 assumed in our previously issued guidance dated January 30, 2019 plus (ii) the impact of the difference between the exchange rates in effect as of March 31, 2019 assumed in our updated full-year 2019 guidance, and the rates as of December 31, 2018 assumed in our previously issued guidance dated January 30, 2019.
(4) Represents the impact of billings greater than 12 months in excess of guidance assumptions.
(5) Represents the updated full-year 2019 guidance presented in the table above.
(6) We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of GAAP to non-GAAP measures.
 

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (22:00 BST) on April 24, 2019. Interested parties may listen to the call by dialing 866.393.4306 (passcode: 3149948), or if outside North America, by dialing 734.385.2616 (passcode: 3149948). Individuals may access the live teleconference from this webcast link (https://event.on24.com/wcc/r/1971097/1E9013C67D921362CDBB25CB0DC94F40).

An audio replay of the conference call and webcast will be available two hours after its completion and will be accessible for 30 days. To hear the replay, interested parties may go to the investor relations section of the ServiceNow website or dial 855.859.2056 (passcode: 3149948), or if outside North America, by dialing 404.537.3406 (passcode: 3149948).

Investor Presentation Details

An investor presentation providing additional information and analysis can be found at http://investors.servicenow.com.

Statement Regarding Use of Non-GAAP Financial Measures

We report the following non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Our presentation of non-GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP and non-GAAP results.

Use of Forward-Looking Statements

This release contains "forward-looking statements" regarding our performance, including but not limited to statements in the section entitled "Financial Outlook." Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.

Factors that may cause actual results to differ materially from those in any forward-looking statements include: (i) errors, interruptions, delays, or security breaches in or of our service or datacenters, (ii) our ability to grow at our expected rate of growth, including our ability to convert deferred revenue and backlog into revenue, add and retain customers, sell additional subscriptions to existing customers and enter new geographies and markets, (iii) our ability to continue to release, and gain customer acceptance of, improved versions of our services, (iv) our ability to develop and gain customer acceptance of new products and services, including our platform, (v) our ability to compete successfully against existing and new competitors, and (vi) material changes in the value of foreign currencies relative to the U.S. Dollar.

Further information on these and other factors that could affect our financial results are included in our Form 10-Q that will be filed for the quarter ended March 31, 2019 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K filed for the year ended December 31, 2018.

We undertake no obligation, and do not intend, to update these forward-looking statements, to review or confirm analysts' expectations, or to provide interim reports or updates on the progress of the current financial quarter.

About ServiceNow

ServiceNow (NYSE: NOW) is making the world of work, work better for people. Our cloud-based platform and solutions deliver digital workflows that create great experiences and unlock productivity for employees and the enterprise. For more information, visit: www.servicenow.com.

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

 

ServiceNow, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 
Three Months Ended  
March 31, 2019   March 31, 2018  
 
Revenues:
Subscription $ 739,986 $ 543,325
Professional services and other 48,940   45,897  
Total revenues 788,926   589,222  
Cost of revenues (1):
Subscription 126,589 95,398
Professional services and other 59,663   48,075  
Total cost of revenues 186,252   143,473  
Gross profit 602,674   445,749  
Operating expenses (1):
Sales and marketing 361,409 283,701
Research and development 172,522 117,268
General and administrative 84,456   65,063  
Total operating expenses 618,387   466,032  
Loss from operations (15,713 ) (20,283 )
Interest expense (8,168 ) (17,064 )
Interest income and other income (expense), net 12,425   29,987  
Loss before income taxes (11,456 ) (7,360 )
Benefit from income taxes (9,911 ) (17,982 )
Net income (loss) $ (1,545 ) $ 10,622  
Net income (loss) per share - basic $ (0.01 ) $ 0.06  
Net income (loss) per share - diluted $ (0.01 ) $ 0.06  
Weighted-average shares used to compute net income (loss) per share - basic 182,061,579   175,482,833  
Weighted-average shares used to compute net income (loss) per share - diluted 182,061,579   190,249,786  
 

(1) Includes stock-based compensation as follows:

 
Three Months Ended  
March 31, 2019 March 31, 2018  
 
Cost of revenues:
Subscription $ 16,022 $ 11,291
Professional services and other 9,931 7,561
Sales and marketing 62,130 52,082
Research and development 43,582 28,598
General and administrative 25,785 21,809
 
   

ServiceNow, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

March 31, 2019 December 31, 2018
 

Assets

Current assets:
Cash and cash equivalents $ 639,722 $ 566,204
Short-term investments 1,022,391 931,718
Accounts receivable, net 422,559 574,810
Current portion of deferred commissions 144,629 139,890
Prepaid expenses and other current assets 145,185   132,071
Total current assets 2,374,486 2,344,693
Deferred commissions, less current portion 283,124 282,490
Long-term investments 674,633 581,856
Property and equipment, net(1) 350,651 347,216
Operating lease right-of-use assets(1) 393,561 ?
Intangible assets, net 93,252 100,582
Goodwill 151,184 148,845
Other assets 78,004   73,458
Total assets $ 4,398,895   $ 3,879,140
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 38,668 $ 30,733
Accrued expenses and other current liabilities(1) 306,161 330,246
Current portion of deferred revenue 1,711,060 1,651,594
Current portion of operating lease liabilities(1) 41,952   ?
Total current liabilities 2,097,841 2,012,573
Deferred revenue, less current portion 36,722 38,597
Operating lease liabilities, less current portion(1) 380,944 ?
Convertible senior notes, net 669,875 661,707
Other long-term liabilities(1) 18,562 55,064
Stockholders' equity(1) 1,194,951   1,111,199
Total liabilities and stockholders' equity $ 4,398,895   $ 3,879,140
(1)   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.
 
 

ServiceNow, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 
Three Months Ended
March 31, 2019   March 31, 2018
 
 
Cash flows from operating activities:
Net income (loss) $ (1,545 ) $ 10,622
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 55,449 33,411
Amortization of deferred commissions 39,557 30,419
Amortization of debt discount and issuance costs 8,168 17,064
Stock-based compensation 157,450 121,341
Deferred income tax (1,480 ) (24,348 )
Gain on marketable equity securities ? (18,455 )
Repayments of convertible senior notes attributable to debt discount ? (8,660 )
Other 724 (5,805 )
Changes in operating assets and liabilities:
Accounts receivable 151,105 69,502
Deferred commissions (46,599 ) (42,475 )
Prepaid expenses and other assets (33,659 ) (15,808 )
Accounts payable 6,562 875
Deferred revenue 61,370 83,733
Accrued expenses and other liabilities (36,254 ) (1,336 )
Net cash provided by operating activities 360,848   250,080  
Cash flows from investing activities:
Purchases of property and equipment (47,124 ) (35,371 )
Purchases of other intangibles ? (7,850 )
Purchases of investments (438,498 ) (376,130 )
Purchases of strategic investments (284 ) ?
Sales of investments 6,576 ?
Maturities of investments 256,309 182,105
Realized gains on derivatives not designated as hedging instruments, net 22,148   ?  
Net cash used in investing activities (200,873 ) (237,246 )
Cash flows from financing activities:
Repayments of convertible senior notes attributable to principal ? (28,606 )
Proceeds from employee stock plans 53,093 52,657
Taxes paid related to net share settlement of equity awards (139,493 ) (85,555 )
Payments on financing obligations ?   (288 )
Net cash used in financing activities (86,400 ) (61,792 )
Foreign currency effect on cash, cash equivalents and restricted cash 1,079   6,491  
Net increase (decrease) in cash, cash equivalents and restricted cash 74,654 (42,467 )
Cash, cash equivalents and restricted cash at beginning of period 568,538   727,829  
Cash, cash equivalents and restricted cash at end of period $ 643,192   $ 685,362  
 
   

ServiceNow, Inc.

GAAP to Non-GAAP Reconciliation

(in thousands, except share and per share data)

(unaudited)

 
Three Months Ended
March 31, 2019   March 31, 2018

Growth Rates

 
Subscription revenues:
GAAP subscription revenues $ 739,986 $ 543,325 36%
Effects of foreign currency rate fluctuations 20,457  
Non-GAAP adjusted subscription revenues (1) $ 760,443   40%
 
Subscription billings:
GAAP subscription revenues $ 739,986 $ 543,325 36%
Change in subscription deferred revenue, unbilled receivables and customer deposits 69,611   95,072  
Non-GAAP subscription billings 809,597 638,397 27%
Effects of foreign currency rate fluctuations 21,673
Effects of fluctuations in billings duration 18,426  
Non-GAAP adjusted subscription billings (2) $ 849,696   33%
 
Professional services and other revenues:
GAAP professional services and other revenues $ 48,940 $ 45,897 7%
Effects of foreign currency rate fluctuations 1,890  
Non-GAAP adjusted professional service and other revenues (1) $ 50,830   11%
 
Professional services and other billings:
GAAP professional services and other revenues $ 48,940 $ 45,897 7%
Change in professional services and other deferred revenue (1,006 ) 5,092  
Non-GAAP professional services and other billings 47,934 50,989 (6%)
Effects of foreign currency rate fluctuations 1,890  
Non-GAAP adjusted professional services and other billings (2) $ 49,824   (2%)
 
Total revenues:
GAAP total revenues $ 788,926 $ 589,222 34%
Effects of foreign currency rate fluctuations 22,347  
Non-GAAP adjusted total revenues (1) $ 811,273   38%
 
Total billings:
GAAP total revenues $ 788,926 $ 589,222 34%
Change in total deferred revenue, unbilled receivables and customer deposits 68,605   100,164  
Non-GAAP total billings 857,531 689,386 24%
Effects of foreign currency rate fluctuations 23,563
Effects of fluctuations in billings duration 18,426  
Non-GAAP adjusted total billings (2) $ 899,520   30%
 
Cost of revenues:
GAAP subscription cost of revenues $ 126,589 $ 95,398
Stock-based compensation (16,022 ) (11,291 )
Amortization of purchased intangibles (4,700 ) (4,414 )
Non-GAAP subscription cost of revenues $ 105,867   $ 79,693  
 
GAAP professional services and other cost of revenues $ 59,663 $ 48,075
Stock-based compensation (9,931 ) (7,561 )
Non-GAAP professional services and other cost of revenues $ 49,732   $ 40,514  
 
Gross profit (loss):
GAAP subscription gross profit $ 613,397 $ 447,927
Stock-based compensation 16,022 11,291
Amortization of purchased intangibles 4,700   4,414  
Non-GAAP subscription gross profit $ 634,119   $ 463,632  
 
GAAP professional services and other gross loss $ (10,723 ) $ (2,178 )
Stock-based compensation 9,931   7,561  
Non-GAAP professional services and other gross profit (loss) $ (792 ) $ 5,383  
 
GAAP gross profit $ 602,674 $ 445,749
Stock-based compensation 25,953 18,852
Amortization of purchased intangibles 4,700   4,414  
Non-GAAP gross profit $ 633,327   $ 469,015  
 
Gross margin:
GAAP subscription gross margin 83 % 82 %
Stock-based compensation as % of subscription revenues 2 % 2 %
Amortization of purchased intangibles as % of subscription revenues 1 % 1 %
Non-GAAP subscription gross margin 86 % 85 %
 
GAAP professional services and other gross margin (22 %) (5 %)
Stock-based compensation as % of professional services and other revenues 20 % 17 %
Non-GAAP professional services and other gross margin (2 %) 12 %
 
GAAP gross margin 76 % 76 %
Stock-based compensation as % of total revenues 3 % 3 %
Amortization of purchased intangibles as % of total revenues 1 % 1 %
Non-GAAP gross margin 80 % 80 %
 
Operating expenses:
GAAP sales and marketing expenses $ 361,409 $ 283,701
Stock-based compensation (62,130 ) (52,082 )
Non-GAAP sales and marketing expenses $ 299,279   $ 231,619  
 
GAAP research and development expenses $ 172,522 $ 117,268
Stock-based compensation (43,582 ) (28,598 )
Amortization of purchased intangibles (455 ) (455 )
Non-GAAP research and development expenses $ 128,485   $ 88,215  
 
GAAP general and administrative expenses $ 84,456 $ 65,063
Stock-based compensation (25,785 ) (21,809 )
Amortization of purchased intangibles (1,887 ) (876 )
Business combination and other related costs 27   (67 )
Non-GAAP general and administrative expenses $ 56,811   $ 42,311  
 
GAAP total operating expenses $ 618,387 $ 466,032
Stock-based compensation (131,497 ) (102,489 )
Amortization of purchased intangibles (2,342 ) (1,331 )
Business combination and other related costs 27   (67 )
Non-GAAP total operating expenses $ 484,575   $ 362,145  
 
Income (loss) from operations:
GAAP loss from operations $ (15,713 ) $ (20,283 )
Stock-based compensation 157,450 121,341
Amortization of purchased intangibles 7,042 5,745
Business combination and other related costs (27 ) 67  
Non-GAAP income from operations $ 148,752   $ 106,870  
 
Operating margin:
GAAP operating margin (2 %) (3 %)
Stock-based compensation as % of total revenues 20 % 21 %
Amortization of purchased intangibles as % of total revenues 1 % 0 %

Business combination and other related costs as % of total revenues

0 % 0 %
Non-GAAP operating margin 19 % 18 %
 
 
Net income (loss):
GAAP net income (loss) $ (1,545 ) $ 10,622
Stock-based compensation 157,450 121,341
Amortization of purchased intangibles 7,042 5,745
Business combination and other related costs (27 ) 67
Amortization of debt discount and issuance costs for the convertible senior notes 8,168 17,064
Loss on early note conversions ? 780
Income tax expense effects related to the above adjustments (42,146 ) (51,015 )
Non-GAAP net income $ 128,942   $ 104,604  
 
Net income (loss) per share - basic and diluted:
GAAP net income (loss) per share - basic $ (0.01 ) $ 0.06  
GAAP net income (loss) per share - diluted $ (0.01 ) $ 0.06  
Non-GAAP net income per share - basic $ 0.71   $ 0.60  
Non-GAAP net income per share - diluted $ 0.67   $ 0.56  
 
GAAP weighted-average shares used to compute net income (loss) per share - basic 182,061,579   175,482,833  
 
GAAP weighted-average shares used to compute net income (loss) per share - diluted 182,061,579 190,249,786
Effect of dilutive time-based stock awards (3) 6,199,710 ?
In-the-money portion of convertible senior notes (3) ? (4,530,808 )
Warrants (3) 3,570,548 ?
Stock awards with performance conditions not yet satisfied (3) ?   138,782  
Non-GAAP weighted-average shares used to compute net income per share - diluted 191,831,837   185,857,760  
 
Free cash flow:
GAAP net cash provided by operating activities $ 360,848 $ 250,080
Purchases of property and equipment (47,124 ) (35,371 )
Repayments of convertible senior notes attributable to debt discount ?   8,660  
Non-GAAP free cash flow $ 313,724   $ 223,369  
 
Free cash flow margin:
GAAP net cash provided by operating activities as % of total revenues 46 % 42 %
Purchases of property and equipment as % of total revenues (6 %) (5 %)
Repayments of convertible senior notes attributable to debt discount as % of total revenues ? % 1 %
Non-GAAP free cash flow margin 40 % 38 %
(1)   Adjusted revenues and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the actual exchange rates in effect during the current period.
(2) Adjusted billings and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the actual exchange rates in effect during the current period, and by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the comparison period.
(3) Effect of dilutive time-based stock awards, in-the-money portion of convertible senior notes and warrants are included in the GAAP weighted-average diluted shares in periods where we have GAAP net income. We exclude the in-the-money portion of convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our note hedges.
 

ServiceNow, Inc.
Reconciliation of Non-GAAP Financial Guidance

The financial guidance provided below is an estimate based on information available as of March 31, 2019. The company's future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the company's financial results are stated above in this press release. Further information on these and other factors that could affect our financial results are included in our Form 10-K for the year ended December 31, 2018 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-Q that will be filed for the three months ended March 31, 2019. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

  Three Months Ended    
June 30, 2019   June 30, 2018 (3) Growth Rates
 
GAAP subscription revenues $778 - $783 million $585 million 33% - 34%
 
Effects of foreign currency rate fluctuations 15 million
 
Non-GAAP adjusted subscription revenues (1) $793 - $798 million 35% - 36%
 
GAAP subscription revenues $778 - $783 million $585 million 33% - 34%
 
Change in subscription deferred revenue, unbilled receivables and customer deposits 20 million 32 million
   
Non-GAAP subscription billings $798 - $803 million $617 million 29% - 30%
 
Effects of foreign currency rate fluctuations 17 million
 
Effects of fluctuations in billings duration (1) million
 
Non-GAAP adjusted subscription billings (2) $814 - $819 million 32% - 33%
 
GAAP operating margin (5%)
 
Stock-based compensation expense as % of total revenues 21%
 
Amortization of purchased intangibles as % of total revenues 1%
 
Non-GAAP operating margin 17%
 
GAAP weighted-average shares used to compute net loss per share - diluted 187 million
 
Effect of dilutive securities (stock options, restricted stock units and warrants) 6 million
 
Non-GAAP weighted-average shares used to compute net income per share - diluted 193 million
 

Twelve Months Ended

 
December 31, 2019 December 31, 2018 (3) Growth Rates
 
GAAP subscription revenues $3,235 - $3,250 million $2,421 million 34%
 
Effects of foreign currency rate fluctuations 45 million
 
Non-GAAP adjusted subscription revenues (1) $3,280 - $3,295 million 35% - 36%
 
GAAP subscription revenues $3,235 - $3,250 million $2,421 million 34%
 
Change in subscription deferred revenue, unbilled receivables and customer deposits 490 million 460 million
   
Non-GAAP subscription billings $3,725 - $3,740 million $2,881 million 29% - 30%
 
Effects of foreign currency rate fluctuations 50 million
 
Effects of fluctuations in billings duration 22 million
 
Non-GAAP adjusted subscription billings (2) $3,797 - $3,812 million 32%
 
GAAP subscription gross margin 83%
 
Stock-based compensation expense as % of subscription revenues 2%
 
Amortization of purchased intangibles as % of subscription revenues 1%
 
Non-GAAP subscription margin 86%
 
GAAP operating margin 0%
 
Stock-based compensation expense as % of total revenues 20%
 
Amortization of purchased intangibles as % of total revenues 1%
 
Business combination and other related costs as % of total revenues 0%
 
Non-GAAP operating margin 21%
 
GAAP net cash provided by operating activities as % of total revenues 35%
 
Purchases of property and equipment as % of total revenues (7%)
 
Non-GAAP free cash flow margin 28%
 
GAAP weighted-average shares used to compute net loss per share - diluted (4) 187 million
 
Effect of dilutive securities (stock options, restricted stock units and warrants) 6 million
 
Non-GAAP weighted-average shares used to compute net income per share - diluted 193 million
(1)   Adjusted revenues and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the forecasted exchange rates for the guidance period.
(2) Adjusted billings and the corresponding growth rates are derived by applying the exchange rates in effect during the comparison period rather than the forecasted exchange rates for the guidance period, and by replacing the forecasted portion of multi-year billings in excess of twelve months for the guidance period with the actual portion of multi-year billings in excess of twelve months during the comparison period.
(3) Effects of foreign currency rate fluctuations and fluctuations in billing durations are not applicable for the comparison period.
(4) GAAP net income or loss for the year ending December 31, 2019 will depend in part on a number of factors, including income taxes, costs associated with non-cash charges associated with equity awards which vary depending on the grant date stock price and actual attainment for our performance-based RSUs, business combinations and other related benefits or expenses which are not known at this time.


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