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ServiceNow Financial Results for Q2 2022 – ServiceNow Press

  • subscription revenue of $1,658 million in Q2 2022, representing 25% year-over-year growth, 29.5% adjusted for constant currency
  • total revenue of $1,752 million in second quarter 2022, representing 24% year-over-year growth, 29.5% adjusted for constant currency
  • current remaining performance obligations of $5.75 billion as of second quarter 2022, which representing 21% year-over-year growth, 27% adjusted for constant currency
  • exceeded 100 customers paying more than $10 million in annual contract value in Q2 2022, representing growth YoY over 50%

santa clara, california. ‑ July 27, 2022 ‑ servicenow (nyse: now), the leading digital workflow company that makes the world work better for everyone, today announced financial results for its second quarter ended June 30 2022, with subscription revenue of $1,658 million in the second quarter of 2022, representing a year-over-year growth of 25%, 29.5% adjusted for constant currency.

“servicenow once again exceeded expectations on results,” said servicenow president and chief executive officer bill mcdermott. “servicenow is the enduring platform for a rapidly changing world. our pace of innovation, customer focus, and consistent execution are proven. while no industry is immune to today’s macro environment, no company is in a better position than servicenow to help customers innovate through this moment.”

Reading: Servicenow quarterly results

As of June 30, 2022, current remaining performance obligations (“crpo”), contract revenue to be recognized as revenue in the next 12 months, was $5.75 billion, representing 21 year-over-year growth % and 27% adjusted for constant currency. The company now has 1,463 total clients with more than $1 million in annual contract value, representing a 22% year-over-year growth in clients.

“Our second quarter results demonstrate the durability of our business, as strong net expansion and a best-in-class 99% renewal rate drove a strong balance of growth and profitability,” said director servicenow finance, gina mastantuono. “In the current macro environment, servicenow remains a core component of our clients’ digital transformation strategy and we continue to see a very strong portfolio. We’re leaning into our big opportunity with operational rigor as we’re confident of achieving more than $16 billion in subscription revenue by 2026.”

Recent Business Highlights

  • During the quarter, ServiceNow hosted Knowledge 2022, which drew more than 14,000 attendees to The Hague, New York, Las Vegas and Sydney. at the conference, servicenow announced new solutions to advance digital business and accelerate innovation: service operations workspace, application engine management center, public sector digital services, and servicenow interior mapping.
  • In the second quarter, the company announced procurement management service, a new solution to help transform procurement across the enterprise. The company also expanded its investment in the employee experience with the acquisition of Hitch Works, a skills intelligence and mapping company that will link employee learning and development with workforce planning to address talent gaps. . Additionally, through its partnership with Microsoft, ServiceNow is accelerating the adoption of Azure for mutual customers.
  • ServiceNow continues to expand its global footprint with more than 100 customers now paying more than $10 million in contract value annual in the second quarter of 2022, more than 50% year over year.

Second Quarter 2022 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the second quarter of 2022:

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Second quarter 2022 results

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non-accounting results for the second quarter of 2022(1)

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amount ($ million)

growth year/year (%)

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amount ($ million)(2)

growth year/year (%)

subscription revenue

$1,658

25%

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$1,724

29.5%

professional services and other income

$94

19%

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$100

26%

total income

$1,752

24%

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$1,824

29.5%

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amount (billions of dollars)

growth year/year (%)

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amount (billions of dollars)(2)

growth year/year (%)

crpo

$5.75

21%

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$6.02

27%

rby

$11.5

21%

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$12.0

27%

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amount ($ million)

margin (%)

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amount ($ million)

margin (%)

gross subscription profit

$1,371

83%

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$1,427

86%

professional services and other gross gains (losses)

$8)

(9%)

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$10

10%

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total gross profit

$1,363

78%

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$1,437

82%

income from operations

$22

1%

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$399

23%

net cash provided by operating activities

$433

25%

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free cash flow

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$287

16%

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amount ($ million)

basic/diluted earnings per share ($)

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amount ($ million)

basic/diluted earnings per share ($)

net income

$20

$0.10/ $0.10

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$329

$1.63/ $1.62

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  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 titled “Disclosure Regarding the Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table titled “Reconciliation of GAAP to Non-GAAP” for a reconciliation of GAAP to Non-GAAP measures. GAAP.
  2. Non-accounting subscription revenue, professional services and other revenue, total revenue, CRPO and RPO are adjusted to constant currency. See the section titled “Disclosure Regarding the Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table titled “Reconciliation of GAAP to Non-GAAP” for a reconciliation of GAAP to Non-GAAP measures. gaap.

note: numbers rounded for presentation purposes.

financial outlook

Our guidance includes both gaap and non-gaap financial measures. Ungapped growth rates for subscription revenue and CRPO are only adjusted to constant currency to provide better visibility into underlying business trends. Since December 31, 2021, ServiceNow has experienced a gradual strengthening of the United States. dollar, resulting in a foreign exchange (“fx”) rate headwind in 2022. The total FX impact is estimated to be approximately $220 million (~400 bps) against 2022 underwriting revenue and $180 million (~350 bps) against for the third quarter of 2022 crpo. fx is also expected to be about a 1 point hurdle to fiscal 2022 operating margin. furthermore, servicenow has a larger than average cohort of customers that will renew in fourth quarter 2022. as a result, third quarter of 2022 will experience approximately 2 hurdle points to crpo growth as contractual obligations are reduced. we expect that cohort to renew in Q4 2022, at which point those headwinds will subside and we expect crpo growth to pick up again quarter over quarter.

The following table summarizes our guidance for the third quarter of 2022:

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3Q 2022 GAAP Guidance

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non-accounting guidance for the third quarter of 2022(1)

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amount ($ million)(2)

growth year/year (%)(2)

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currency constant growth year/year (%)

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subscription revenue

$1,750 – $1,755

23%

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27.5%

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crpo

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20%

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23.5%

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note:

includes above-average renewal cohort time headwinds

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margin (%)

income from operations

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25%

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amount (millions)

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weighted average number of shares used to calculate diluted net income per share

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203

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  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 titled “Disclosure Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table titled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of measures. GAAP vs. non-GAAP.
  2. Guidance for GAAP subscription revenue and GAAP and CRPO subscription revenue growth rate is based on 30-day average of exchange rates for June 2022 for entities reporting in currencies other than the US. dollars.

The following table summarizes our guidance for the full year 2022:

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gaap guide for the whole year 2022

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non-GAAP guidance for the full year 2022(1)

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amount ($ million)(2)

growth year/year (%)(2)

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year/year growth in constant currency (%)

subscription revenue

$6915 – $6925

24%

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28%

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margin (%)

gross subscription profit

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86%

income from operations

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25%

free cash flow

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30%

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amount (millions)

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203

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  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 titled “Disclosure Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table titled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of measures. gaap versus non-gaap.
  2. gaap underwriting revenue and related growth rate for future quarters included in our full-year 2022 guidance is based on 30-day average of GAAP underwriting rates. June 2022 change for entities reporting in non-U.S. currencies uu. dollars.

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conference call details

The conference call will begin at 2 p.m. m. pacific time (9:00 p.m. gmt) on july 27, 2022. interested parties can listen to the call by dialing (888) 330‑2455 (access code: 8135305), or if located outside of north america, by dialing ( 240) 789‑2717 (access code: 8135305). people can access the teleconference live from this webcast.

An audio replay of the conference call and webcast will be available two hours after completion and will be available for 30 days. To hear the replay, interested parties can go to the Investor Relations section of the ServiceNow website or dial (800) 770-2030 (Password: 8135305), or if outside of North America, dial (647) 362‑9199 (password: 8135305 ).

investor presentation details

At http://investors.servicenow.com, an investor presentation can be found that provides additional information, including forward-looking guidance and analysis.

statement on the use of non-GAAP-based financial measures

We use 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.

  • revenue. We adjust revenue and related growth rates for constant currency to provide a framework for evaluating how our business performed excluding the effect of foreign exchange rate fluctuations. foreign currency. to present this information, the results of the current period for entities that report in currencies other than the United States. dollars (“usd”) are converted to usd at prevailing average exchange rates during the comparison period (for the second quarter of 2021, prevailing average exchange rates for our major currencies were usd1 to euro0.83 and from 1 usd to 0.72 pounds sterling). (“gbp”)), instead of the prevailing average real exchange rates during the current period (for the second quarter of 2022, the prevailing average exchange rates for our main currencies were from 1 dollar to 0.94 euros and from 1 dollar to 0.80 gbp). the related growth rate guidelines are obtained by applying the average exchange rates prevailing during the comparison period instead of the exchange rates for the guide period. we believe that presenting revenue and related growth rates adjusted for constant currency makes it easier to compare revenue year over year.
  • current remaining performance obligations and remaining performance obligations. We adjust crpo and remaining performance obligations (“rpo”) and related growth rates for constant currency to provide a framework for Evaluate how our business performed. To present this information, current period results for entities reporting in currencies other than USD are converted to USD at the exchange rates prevailing at the end of the comparison period (for the second quarter of 2021, the exchange rates prevailing at the end of the comparison period). end-of-period for our main currencies were $1 to €0.84 and $1 to 0.72 gbp), rather than the actual end-of-period exchange rates in effect during the current period (for Q2 of 2022, the exchange rates prevailing at the end of the period for our main currencies were 1 usd to 0.96 euros and 1 usd to 0.82 gbp). the related growth rate guidance is obtained by applying the exchange rates prevailing at the end of the period during the comparison period instead of the exchange rates prevailing during the guidance period. We believe that the presentation of CRPO and RPO and the related growth rates adjusted for constant currency makes it easier to compare CRPO and RPO year over year, respectively.
  • gross profit, operating profit, net profit and net profit per share – diluted. Our non-gaap presentation of gross earnings, income from operations, and net income measures excludes certain non-cash or non-recurring items, including stock-based compensation expense, equity discount amortization, debt and issuance costs related to our convertible senior notes, loss on early conversions of notes, 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 number of shares used to calculate our non-gaap net income per share – diluted excludes the dilutive effect of the in-money portion of the senior convertible notes as they are hedged by our note hedges, and includes dilution 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 met at anticipated levels of achievement to the extent we believe it is performance condition is likely to be met. we believe these adjustments provide useful supplemental information to investors and facilitate analysis of our operating results and comparison of operating results between 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, senior convertible note repayments attributable to debt discount and business combination and other related costs , including compensation expenses, reduced by purchases. of property and equipment. free cash flow margin is calculated as free cash flow as a percentage of total revenue. We believe that free cash flow and free cash flow margin information provides useful information to investors because it is an indicator of the strength and performance of our business operations.

Our presentation of non-difference-based financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our GAAP results, as well as our non-GAAP supplemental information and the reconciliation between these presentations, to better understand our business. Please refer to the tables at the end of this release for a 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, the statements in the section titled “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 such risks or uncertainties materialize or if any assumptions prove incorrect, our results could differ materially from the results expressed or implied by any forward-looking statements we make.

Factors that may cause actual results to differ materially from those in any forward-looking statements include: experiencing an actual or perceived cybersecurity event; our ability to comply with evolving privacy laws, data transfer restrictions and other domestic and foreign data and internet regulations; errors, interruptions, delays or security breaches in or from our service or data centers; our ability to retain and attract key employees and manage workplace culture; suspected violations of laws and regulations, including those related to anti-bribery and corruption and those related to public sector contracting requirements; our ability to successfully compete against new and existing competitors; our ability to rapidly predict, prepare for and respond to rapidly evolving technological, market and customer developments; 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 companies, government and regulated organizations with sales cycles and certification processes complex, and enter new geographies and markets; our ability to develop and gain customer demand and acceptance for new and improved products and services; fluctuations in the value of foreign currencies relative to the us uu. dollar; the ongoing impact and duration of covid-19 on our business, future financial performance and global economic conditions, including subsequent waves of outbreaks or new variant strains of the covid-19 virus, the effectiveness, extent and duration of mitigation efforts such as “shelter in place” and other government responses, and the availability of vaccines; our ability to consummate and obtain the benefits of any transaction or strategic acquisition; the impact of the Russian invasion of Ukraine on macroeconomic conditions; inflation; and fluctuations and volatility in the price of our shares.

More information about these and other factors that could affect our financial results is included in our Form 10-k filed for the year ended December 31, 2021, our Form 10-q to be filed for the quarter ended December 30 June 2022 and in other filings we make with the Securities and Exchange Commission from time to time.

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

about servicenow

servicenow (nyse:now) makes the world work better for everyone. our cloud-based platform and solutions help digitize and unify organizations so they can find smarter, faster and better ways to get work flowing. so that employees and customers can be more connected, more innovative and more agile. and we can all create the future we envision. the world runs on servicenowtm. For more information, visit: www.servicenow.com.

© 2022 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 q2 2022 complete financial tables (download pdf)

media contact: sara day 650.336.3123 press@servicenow.com

investor contact: darren yip 925.388.7205 ir@servicenow.com

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