27 Jan ServiceNow Reports Fourth Quarter and Full-Year 2020 Financial Results
Subscription revenues of $1,184 million in Q4 2020, representing 32% year-over-year growth, 29% adjusted for constant currency
Subscription billings of $1,828 million in Q4 2020, representing 41% year-over-year growth, 38% adjusted for constant currency and duration
1,093 total customers with over $1 million in annual contract value
SANTA CLARA, Calif.–(BUSINESS WIRE)–ServiceNow (NYSE: NOW), the leading digital workflow company making work, work better for people, today announced financial results for its fourth quarter ended December 31, 2020, with subscription revenues of $1,184 million in Q4 2020, representing 32% year-over-year growth.
During the quarter, ServiceNow closed 89 transactions with more than $1 million in net new annual contract value (“ACV”). The company now has 1,093 total customers with more than $1 million in ACV, representing 23% year-over-year growth in customers.
“ServiceNow delivered a market leading 2020 and significantly beat expectations across the board,” said Bill McDermott, ServiceNow president and CEO. “The secular tailwinds of digital transformation, cloud computing, and business model innovation have all intersected at the perfect moment in time. ServiceNow is the platform for digital business, enabling seamless workflows that create the great experiences people deserve. Now, we are focused on managing the world’s greatest workflow challenge: helping convert vaccines into vaccinations. We are changing the world one workflow at a time and are well on our way to becoming the defining enterprise software company of the 21st century.”
ServiceNow CFO Gina Mastantuono said, “We delivered another fantastic quarter to cap a very strong 2020, ending the year with nearly $9 billion in remaining performance obligations. These outstanding results continue to demonstrate ServiceNow’s strong platform and product portfolio, our focus on building deep customer relationships, and commitment to enabling their digital transformations. I’m extremely proud of our team’s performance and their unrelenting execution in a turbulent year. We are well on our way to becoming a $10 billion revenue company. I’m excited about the opportunities ahead of us in 2021.”
During the quarter, ServiceNow saw continued progress and customer adoption across its IT, Employee, and Customer workflows, as well as with its artificial intelligence (“AI”) and machine learning capabilities. The acquisition of Element AI, which closed in January, brings to ServiceNow a deep bench of world-class technical talent, underscoring our commitment to be the leader in AI-enabled workflows. As ServiceNow continues to innovate to help its customers navigate COVID-19, this week it launched its first vaccine management solution to solve last mile vaccine challenges and drive better healthcare outcomes for people. ServiceNow’s comprehensive approach enables workflow solutions that simplify the complex challenges of vaccine distribution, administration, and monitoring.
Fourth Quarter 2020 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the fourth quarter 2020:
Fourth Quarter 2020GAAP Results
Fourth Quarter 2020 Non-GAAP Results(1)
Amount($ millions)
Year/YearGrowth (%)
Amount($ millions)
Year/YearGrowth (%)
Adjusted
Amount
($ millions)(2)
Adjusted
Year/Year
Growth (%)
Subscription revenues
$1,184
32%
$1,161
29%
Professional services and other revenues
$66
26%
$65
23%
Total revenues
$1,250
31%
$1,226
29%
Subscription billings
$1,828
41%
$1,796
38%
Professional services and other billings
$80
31%
$78
29%
Total billings
$1,907
40%
$1,874
38%
Amount($ millions)
Margin (%)
Amount($ millions)
Margin (%)
Subscription gross profit
$974
82%
$1,009
85%
Professional services and other gross profit (loss)
($3)
(5%)
$11
16%
Total gross profit
$971
78%
$1,019
82%
Income from operations
$18
1%
$276
22%
Net cash provided by operating activities
$686
55%
Free cash flow
$565
45%
Amount($ millions)
Earnings per
Basic/Diluted
Share ($)
Amount($ millions)
Earnings per
Basic/Diluted
Share ($)
Net income
$17
$0.09/ $0.08
$235
$1.20/ $1.17
(1)
We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
(2)
Non-GAAP adjusted subscription revenues, professional services and other revenues, total revenues and professional services and other billings are adjusted for constant currency. Non-GAAP adjusted subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.
Note: Numbers rounded for presentation purposes.
Full-Year 2020 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the full-year 2020:
Full-Year 2020GAAP Results
Full-Year 2020 Non-GAAP Results(1)
Amount($ millions)
Year/YearGrowth (%)
Amount($ millions)
Year/YearGrowth (%)
Adjusted
Amount
($ millions)(2)
Adjusted
Year/Year
Growth (%)
Subscription revenues
$4,286
32%
$4,272
31%
Professional services and other revenues
$234
14%
$233
13%
Total revenues
$4,519
31%
$4,505
30%
Subscription billings
$4,982
32%
$4,963
31%
Professional services and other billings
$247
15%
$246
15%
Total billings
$5,229
31%
$5,209
30%
Amount($ millions)
Margin (%)
Amount($ millions)
Margin (%)
Subscription gross profit
$3,555
83%
$3,689
86%
Professional services and other gross profit (loss)
($23)
(10%)
$29
12%
Total gross profit
$3,532
78%
$3,718
82%
Income from operations
$199
5%
$1,121
25%
Net cash provided by operating activities
$1,787
39%
Free cash flow
$1,449
32%
Amount($ millions)
Earnings per
Basic/Diluted
Share ($)
Amount($ millions)
Earnings per
Basic/Diluted
Share ($)
Net income
$119
$0.61/ $0.59
$926
$4.79/ $4.63
(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 adjusted subscription revenues, professional services and other revenues, total revenues and professional services and other billings are adjusted for constant currency. Non-GAAP adjusted 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.
Note: Numbers rounded for presentation purposes.
Financial Outlook
ServiceNow will provide forward-looking guidance in connection with this quarterly announcement on its earnings conference call and webcast, and it will introduce current remaining performance obligations (“cRPO”) as a new guidance metric for Q1 2021.
Conference Call Details
The conference call will begin at 2 p.m. Pacific Time (22:00 GMT) on January 27, 2021. Interested parties may listen to the call by dialing (833) 513‑0567 (Passcode: 7862176), or if outside North America, by dialing (236) 714‑2186 (Passcode: 7862176). Individuals may access the live teleconference from this webcast link:
https://event.on24.com/wcc/r/2924209/3989884C5B58ED139BE2D9AE3152B4D5
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 (800) 585‑8367 (Passcode: 7862176), or if outside North America, by dialing (416) 621‑4642 (Passcode: 7862176).
Investor Presentation Details
An investor presentation providing additional information, including forward-looking guidance, 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.
Adjusted revenues. We present revenues adjusted for constant currency to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To present this information, current period results for entities reporting in currencies other than U.S. Dollars (“USD”) are converted into USD at the average exchange rates in effect during the comparison period (for Q4 2019, the average exchange rates in effect for our major currencies were 1 USD to 0.90 Euros and 1 USD to 0.78 British Pound Sterling (“GBP”), rather than the actual average exchange rates in effect during the current period (for Q4 2020, the average exchange rates in effect for our major currencies were 1 USD to 0.84 Euros and 1 USD to 0.76 GBP). We believe the presentation of revenues adjusted for constant currency facilitates the comparison of revenues year-over-year.
Billings and Adjusted billings. We define subscription billings, professional services and other billings, and total billings as the applicable revenue plus the applicable change in deferred revenue, unbilled receivables and customer deposits as presented or derived from the statement of cash flows. We adjust billings for constant currency, as described above, and for constant duration 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. We believe these adjustments facilitate greater comparability in our billings information year-over-year. We believe billings is one indicator of the performance of our business.
Gross profit, Income from operations, Net income and Net income per share – diluted. Our non-GAAP presentation of gross profit, income from operations, and net income measures exclude certain non-cash or non-recurring items, including stock-based compensation expense, amortization of debt discount and issuance costs related to our convertible senior notes, loss on early note conversions, amortization of purchased intangibles, legal settlements, business combination and other related costs, and the related income tax effect of these adjustments. The non-GAAP weighted-average shares used to compute our non-GAAP net income per share – diluted excludes the dilutive effect of the in-the-money portion of convertible senior notes as they are covered by our note hedges, and includes the dilutive effect of time-based stock awards, the dilutive effect of warrants and the potentially dilutive effect of our stock awards with performance conditions not yet satisfied at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met. We believe these adjustments provide useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods.
Free cash flow. Free cash flow is defined as net cash provided by (used in) operating activities plus cash paid for legal settlements and repayments of convertible senior notes attributable to debt discount, reduced by purchases of property and equipment. Free cash flow margin is calculated as free cash flow as a percentage of total revenues. We believe information regarding free cash flow and free cash flow margin provides useful information to investors because it is an indicator of the strength and performance of our business operations.
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) the impact and duration of the health impact of COVID-19 and the economic impact of safety measures to mitigate its impact, 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; (ii) our ability to compete successfully against existing and new competitors, (iii) our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet, (iv) our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments, (v) errors, interruptions, delays, or security breaches in or of our service or data centers, (vi) our ability to grow our business, including converting remaining performance obligations into revenue, adding and retaining customers, selling additional subscriptions to existing customers, selling to larger enterprises, government and regulated organizations with complex sales cycles and certification processes, and entering new geographies and markets, (vii) our ability to develop and gain customer acceptance of new and improved products and services, including those acquired through strategic transactions, and (viii) material changes in the value of foreign currencies relative to the U.S. Dollar. Additionally, these forward-looking statements involve risk, uncertainties and assumptions, including those related to the continued impacts of COVID-19 on our business and global economic conditions. Many of these assumptions relate to matters that are beyond our control and changing rapidly, including, but not limited to, the timeframes for and severity of social distancing and other mitigation requirements, the timing of headwinds from COVID-19, the continued impact of COVID-19 on new or existing customers’ purchasing decisions and the length of our sales cycles, renewal timing or billings terms, particularly for customers in certain industries highly affected by COVID-19. Significant variation from the assumptions underlying our forward-looking statements could cause our actual results to vary, and the impact could be significant.
Further information on these and other factors that could affect our financial results are included in our Form 10-Q for the quarter ended September 30, 2020 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K that will be filed for the year ended December 31, 2020.
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.
© 2021 ServiceNow, Inc. All rights reserved. ServiceNow, the ServiceNow logo, Now, and other ServiceNow marks are trademarks and/or registered trademarks of ServiceNow, Inc. in the United States and/or other countries. Other company names, product names, and logos may be trademarks of the respective companies with which they are associated.
ServiceNow, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
Twelve Months Ended
December 31,
2020
December 31,
2019
December 31,
2020
December 31,
2019
Revenues:
Subscription
$
1,184,181
$
899,194
$
4,285,797
$
3,255,079
Professional services and other
66,149
52,580
233,687
205,358
Total revenues
1,250,330
951,774
4,519,484
3,460,437
Cost of revenues (1):
Subscription
209,900
148,244
730,835
549,642
Professional services and other
69,204
63,209
256,278
247,003
Total cost of revenues
279,104
211,453
987,113
796,645
Gross profit
971,226
740,321
3,532,371
2,663,792
Operating expenses (1):
Sales and marketing
533,853
416,005
1,855,016
1,534,284
Research and development
284,297
202,328
1,024,327
748,369
General and administrative
135,146
93,476
454,165
339,016
Total operating expenses
953,296
711,809
3,333,508
2,621,669
Income from operations
17,930
28,512
198,863
42,123
Interest expense
(7,708
)
(8,475
)
(32,746
)
(33,283
)
Other income (expense), net
3,138
14,149
(16,932
)
58,345
Income before income taxes
13,360
34,186
149,185
67,185
Provision for (benefit from) income taxes
(3,288
)
(564,538
)
30,682
(559,513
)
Net income
$
16,648
$
598,724
$
118,503
$
626,698
Net income per share – basic
$
0.09
$
3.17
$
0.61
$
3.36
Net income per share – diluted
$
0.08
$
3.03
$
0.59
$
3.18
Weighted-average shares used to compute net income per share – basic
195,461
189,042
193,096
186,466
Weighted-average shares used to compute net income per share – diluted
202,455
197,843
202,478
197,223
(1) Includes stock-based compensation as follows:
Three Months Ended
Twelve Months Ended
December 31,
2020
December 31,
2019
December 31,
2020
December 31,
2019
Cost of revenues:
Subscription
$
26,172
$
18,709
$
98,258
$
72,728
Professional services and other
13,696
11,374
51,553
43,123
Sales and marketing
92,330
68,337
320,328
268,408
Research and development
78,965
50,562
282,244
194,821
General and administrative
34,236
21,069
118,070
83,115
ServiceNow, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
December 31, 2020
December 31, 2019
Assets
Current assets:
Cash and cash equivalents
$
1,676,794
$
775,778
Short-term investments
1,415,242
915,317
Accounts receivable, net
1,009,415
835,279
Current portion of deferred commissions
228,924
175,039
Prepaid expenses and other current assets
191,467
125,488
Total current assets
4,521,842
2,826,901
Deferred commissions, less current portion
444,068
333,448
Long-term investments
1,468,006
1,013,332
Property and equipment, net
659,641
468,085
Operating lease right-of-use assets
454,218
402,428
Intangible assets, net
153,367
143,850
Goodwill
240,764
156,756
Deferred tax assets
673,111
599,633
Other assets
100,040
77,997
Total assets
$
8,715,057
$
6,022,430
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
34,236
$
52,960
Accrued expenses and other current liabilities
668,093
461,403
Current portion of deferred revenue
2,962,579
2,185,754
Current portion of operating lease liabilities
72,236
52,668
Total current liabilities
3,737,144
2,752,785
Deferred revenue, less current portion
45,346
40,038
Operating lease liabilities, less current portion
422,779
383,221
Long-term debt
1,640,153
694,981
Other long-term liabilities
35,154
23,464
Stockholders’ equity
2,834,481
2,127,941
Total liabilities and stockholders’ equity
$
8,715,057
$
6,022,430
ServiceNow, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
Twelve Months Ended
December 31,
2020
December 31,
2019
December 31,
2020
December 31,
2019
Cash flows from operating activities:
Net income
$
16,648
$
598,724
$
118,503
$
626,698
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
93,033
72,331
336,381
252,114
Amortization of deferred commissions
60,440
45,788
217,631
168,014
Amortization of debt discount and issuance costs
2,492
8,475
24,478
33,283
Stock-based compensation
245,399
170,051
870,453
662,195
Deferred income taxes
(18,041
)
(572,923
)
(24,481
)
(575,765
)
Repayments of convertible senior notes attributable to debt discount
(13,449
)
—
(81,958
)
—
Loss on extinguishment of 2022 Notes
4,954
—
46,611
—
Other
(3,134
)
(4,300
)
(2,493
)
(8,921
)
Changes in operating assets and liabilities, net of effect of business combinations:
Accounts receivable
(361,706
)
(288,166
)
(151,431
)
(259,835
)
Deferred commissions
(143,863
)
(97,296
)
(365,264
)
(255,605
)
Prepaid expenses and other assets
(12,507
)
(4,338
)
(54,203
)
(29,907
)
Accounts payable
(35,375
)
(8,733
)
(33,583
)
21,355
Deferred revenue
644,453
401,794
710,998
537,249
Accrued expenses and other liabilities
206,181
99,804
174,957
65,097
Net cash provided by operating activities
685,525
421,211
1,786,599
1,235,972
Cash flows from investing activities:
Purchases of property and equipment
(134,000
)
(79,003
)
(419,327
)
(264,892
)
Business combinations, net of cash acquired
411
(7,414
)
(107,236
)
(7,414
)
Purchases of intangibles
(6,690
)
(35,329
)
(13,190
)
(72,689
)
Purchases of investments
(704,791
)
(339,976
)
(2,933,876
)
(1,595,667
)
Sales and maturities of investments
666,460
261,297
1,965,429
1,192,750
Realized gains on derivatives not designated as hedging instruments, net
2,091
1,693
1,328
23,435
Net cash used in investing activities
(176,519
)
(198,732
)
(1,506,872
)
(724,477
)
Cash flows from financing activities:
Net proceeds from borrowings on 2030 Notes
—
—
1,481,633
—
Repayments of convertible senior notes attributable to principal
(58,824
)
(9
)
(1,627,690
)
(9
)
Net proceeds from unwind of 2022 Note Hedge
—
—
1,105,542
—
Proceeds from employee stock plans
3,266
2,641
145,766
107,868
Taxes paid related to net share settlement of equity awards
(147,934
)
(78,913
)
(508,604
)
(409,715
)
Net cash provided by (used in) financing activities
(203,492
)
(76,281
)
596,647
(301,856
)
Foreign currency effect on cash, cash equivalents and restricted cash
22,106
6,253
25,065
(186
)
Net increase in cash, cash equivalents and restricted cash
327,620
152,451
901,439
209,453
Cash, cash equivalents and restricted cash at beginning of period
1,351,810
625,540
777,991
568,538
Cash, cash equivalents and restricted cash at end of period
$
1,679,430
$
777,991
$
1,679,430
$
777,991
Contacts
Media Contact:Sara Day
650.336.3123
[email protected]
Investor Contact:Darren Yip
925.388.7205
[email protected]
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