ServiceNow Reports Financial Results for Third Quarter 2017

ServiceNow® (NYSE: NOW) today announced the financial results for its third quarter 2017.

Third Quarter 2017 GAAP Results:

· Subscription revenues of $455.4 million, representing 43% year?over?year growth.
· Professional services and other revenues of $42.7 million, representing 10% year?over?year growth.
· Total revenues of $498.2 million, representing 39% year?over?year growth.
· Subscription gross profit of $373.5 million, representing 82% of subscription revenues.
· Professional services and other gross loss of $2.7 million, representing negative 6% of professional services and other revenues.
· Total gross profit of $370.9 million, representing 74% of total revenues.
· Loss from operations of $7.1 million.
· Net loss of $24.2 million, or loss of $0.14 per basic and diluted share.
· Net cash provided by operating activities of $141.9 million, representing 28% of total revenues.
Third Quarter 2017 Non?GAAP Results:

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. For the following non?GAAP results, see the section entitled “Statement Regarding Use of Non?GAAP Financial Measures” for an explanation of non?GAAP measures and the corresponding growth rates, and the table entitled “GAAP to Non?GAAP Reconciliation” for a reconciliation of GAAP to non?GAAP measures and corresponding growth rates.

· Subscription revenues of $449.5 million, representing 41% year?over?year growth adjusted for constant currency.
· Professional services and other revenues of $41.9 million, representing 8% year?over?year growth adjusted for constant currency.
· Total revenues of $491.4 million, representing 37% year?over?year growth adjusted for constant currency.
· Subscription billings of $499.7 million, representing 38% year?over?year growth (or $497.4 million, representing 37% year?over?year growth adjusted for constant currency and constant billings duration).
· Professional services and other billings of $46.5 million, representing 12% year?over?year growth (or $45.6 million, representing 10% year?over?year growth adjusted for constant currency).
· Total billings of $546.1 million, representing 35% year?over?year growth (or $543.0 million, representing 34% year?over?year growth adjusted for constant currency and constant billings duration).
· Subscription gross profit of $386.1 million, representing 85% of subscription revenues.
· Professional services and other gross profit of $4.4 million, representing 10% of professional services and other revenues.
· Total gross profit of $390.5 million, representing 78% of total revenues.
· Income from operations of $98.4 million, representing 20% of total revenues.
· Net income of $69.3 million, or earnings of $0.40 per basic share and $0.38 per diluted share.
· Free cash flow of $95.1 million, representing 19% of total revenues.
“Q3 was another strong quarter for ServiceNow, with great performance across every region,” said John Donahoe, ServiceNow president and chief executive officer. “We are focused on delivering best?in?class consumer?like experiences and driving customer success. And we’re continuing to innovate, making technology such as machine learning native to all applications on our platform. We are committed to being a trusted cloud partner for our customers helping them navigate digital transformation and create the future of work.”

“We achieved $500 million of non?GAAP subscription billings, while growing 38% year?over?year,” said Michael Scarpelli, chief financial officer, ServiceNow. “The strong quarter was driven by large new deals, including 22 greater than $1 million in net new ACV, 8 of which were to Federal customers.”

Financial Outlook

Our guidance is based on foreign exchange rates as of September 30, 2017 and includes GAAP and non?GAAP financial measures. See the section entitled “Statement Regarding Use of Non?GAAP Financial Measures” for an explanation of non?GAAP measures and the corresponding growth rates, and the table entitled “Reconciliation of Non?GAAP Financial Guidance” for a reconciliation of GAAP to non?GAAP metrics and corresponding growth rates.

For the fourth quarter of 2017, we expect:

· GAAP subscription revenues between $485 and $490 million, representing 41% to 42% year?over?year growth (or non?GAAP subscription revenues between $473 and $478 million, representing 37% to 39% year?over?year growth adjusted for constant currency).
· GAAP professional services and other revenues of $46 million, representing 12% year?over?year growth (or non?GAAP professional services and other revenues of $44 million, representing 7% year?over?year growth adjusted for constant currency).
· GAAP total revenues between $531 and $536 million, representing 38% to 39% year?over?year growth (or non?GAAP total revenues between $517 and $522 million, representing 34% to 35% year?over?year growth adjusted for constant currency).
· Non?GAAP subscription billings and non?GAAP subscription billings adjusted for constant currency and constant billings durations between $645 and $650 million, representing 33% to 34% year?over?year growth.
· Non?GAAP professional services and other billings of $49 million, representing a 4% decline year?over?year (or $47 million, representing an 8% decline year?over?year adjusted for constant currency).
· Non?GAAP total billings between $694 and $699 million, representing 30% to 31% year?over?year growth (or between $692 and $697 million, representing 29% to 30% year?over?year growth adjusted for constant currency and constant billings duration).
· Non?GAAP operating margin of 17%.
· Non?GAAP weighted average shares used to compute diluted net income per share of approximately 181 million shares.
For the full year 2017, we expect:

· GAAP subscription revenues between $1,728 and $1,733 million, representing 41% to 42% year?over?year growth (or non?GAAP subscription revenues between $1,722 and $1,727 million, representing 41% year?over?year growth adjusted for constant currency).
· GAAP professional services and other revenues of $190 million, representing 13% year?over?year growth or (non?GAAP professional services and other revenues adjusted for constant currency of $189 million, representing 12% year?over?year growth).
· GAAP total revenues between $1,918 and $1,923 million, representing 38% year?over?year growth (or non?GAAP total revenues between $1,911 and $1,916 million, representing 37% to 38% year?over?year growth adjusted for constant currency).
· Non?GAAP subscription billings between $2,080 and $2,085 million, representing 38% year?over?year growth (or between $2,077 and $2,082 million, representing 37% to 38% year?over?year growth adjusted for constant currency and constant billings duration).
· Non?GAAP professional services and other billings of $194 million, or 8% year?over?year growth or (non?GAAP professional services and other billings adjusted for constant currency of $193 million, representing 7% year?over?year growth).
· Non?GAAP total billings between $2,274 and $2,279 million, representing 35% year?over?year growth (or between $2,270 and $2,275 million, representing 34% to 35% year?over?year growth adjusted for constant currency and constant billings duration).
· Non?GAAP subscription gross margin of 85%.
· Non?GAAP professional services and other gross margin of 16%.
· Non?GAAP total gross margin of 78%.
· Non?GAAP operating margin of 16%.
· Non?GAAP free cash flow margin of 25%.
· Non?GAAP weighted average shares used to compute diluted net income per share of approximately 179 million shares.

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