SANTA CLARA, Calif. ‑ October 25, 2023 ‑ ServiceNow (NYSE: NOW), the leading digital workflow company making the world work better for everyone, today announced financial results for its third quarter ended September 30, 2023, with subscription revenues of $2,216 million in Q3 2023, representing 27% year‑over‑year growth and 24.5% in constant currency.
“ServiceNow had another beyond expectations quarter,” said ServiceNow Chairman and CEO Bill McDermott. “We've released more than 5,000 new capabilities this year, including generative AI for the use cases that matter most to our customers. Innovation drives growth. This is a highly unique, differentiated company that is reshaping business as the intelligent super platform for the enterprise.”
As of September 30, 2023, current remaining performance obligations (“cRPO”), contract revenue that will be recognized as revenue in the next 12 months, was $7.43 billion, representing 27% year‑over‑year growth and 24% in constant currency. The company now has 1,789 total customers with more than $1 million in annual contract value (“ACV”), representing 17% year‑over‑year growth in customers.
“Q3 marks another quarter of exceptional execution as we significantly surpassed the high end of our guidance metrics,” said ServiceNow CFO Gina Mastantuono. “Our robust results show that the world's best‑run enterprises are choosing ServiceNow to drive their digital transformation roadmaps. With the capabilities unlocked by generative AI, the window of opportunity is even more expansive, positioning us well to continue delivering a strong balance of growth and profitability.”
Recent Business Highlights
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Third Quarter 2023 GAAP and Non‑GAAP Results:
The following table summarizes our financial results for the third quarter 2023:
Third Quarter 2023 GAAP Results |
Third Quarter 2023 Non‑GAAP Results(1) |
||||
Amount |
Year/Year |
Amount |
Year/Year |
||
Subscription revenues |
$2,216 |
27% |
$2,173 |
24.5% |
|
Professional services and other revenues |
$72 |
(19%) |
$70 |
(21.5%) |
|
Total revenues |
$2,288 |
25% |
$2,243 |
22.5% |
|
Amount |
Year/Year |
Amount |
Year/Year |
||
cRPO |
$7.43 |
27% |
$7.27 |
24% |
|
RPO |
$14.4 |
26% |
$14.1 |
23.5% |
|
Amount |
Margin (%) |
Amount |
Margin (%)(2) |
||
Subscription gross profit |
$1,796 |
81% |
$1,868 |
84% |
|
Professional services and other gross profit (loss) |
($4) |
(6%) |
$7 |
10% |
|
Total gross profit |
$1,792 |
78% |
$1,875 |
82% |
|
Income from operations |
$231 |
10% |
$676 |
30% |
|
Net cash provided by operating activities |
$311 |
14% |
|||
Free cash flow |
$196 |
9% |
|||
Amount |
Earnings per |
Amount |
Earnings per |
||
Net income |
$242 |
$1.18 / 1.17 |
$603 |
$2.95 / 2.92 |
Note: Numbers rounded for presentation purposes and may not foot.
Financial Outlook
Our guidance includes GAAP and non‑GAAP financial measures. The non‑GAAP growth rates for subscription revenues and cRPO are adjusted only for constant currency to provide better visibility into the underlying business trends. Since December 31, 2022, ServiceNow has seen an incremental strengthening of the U.S. dollar resulting in foreign exchange ("FX") headwinds. The total FX impact is estimated to be an approximately $30 million (~0.5%) year‑over‑year headwind for Q4 2023 cRPO. Additionally, the Q3 2023 strength of our US Federal business has resulted in a higher mix of contracts containing 12‑month renewal terms. This will create a 1‑point headwind to Q4 2023 cRPO growth and remain a headwind into 2024 as that balance is amortized into revenue. We expect that these contracts will renew in Q3 2024 as ServiceNow’s US Federal renewal rates have been 99%.
The following table summarizes our guidance for the fourth quarter 2023:
Fourth Quarter 2023 |
Fourth Quarter 2023 |
||||
Amount |
Year/Year |
Constant Currency |
|||
Subscription revenues |
$2,320 ‑ $2,325 |
24.5% ‑ 25% |
23% ‑ 23.5% |
||
cRPO |
20.5% |
21.0% |
|||
Note: Includes headwind from strength of US Federal business noted above |
|||||
Margin (%)(2) |
|||||
Income from operations |
27.5% |
||||
Amount |
|||||
Weighted‑average shares used to compute diluted net income per share |
206 |
The following table summarizes our guidance for the full‑year 2023:
Full‑Year 2023 |
Full‑Year 2023 |
|||
Amount |
Year/Year |
Constant Currency |
||
Subscription revenues |
$8,635 ‑ $8,640 |
25.5% |
25% |
|
Margin (%)(2) |
||||
Subscription gross profit |
84% |
|||
Income from operations |
27% |
|||
Free cash flow |
30% |
|||
Amount |
||||
Weighted‑average shares used to compute diluted net income per share |
206 |
Note: Numbers are rounded for presentation purposes and may not foot.
Conference Call Details
The conference call will begin at 2 p.m. Pacific Time (21:00 GMT) on October 25, 2023. Interested parties may listen to the call by dialing (888) 330‑2455 (Passcode: 8135305), or if outside North America, by dialing (240) 789‑2717 (Passcode: 8135305). Individuals may access the live teleconference from this webcast.
https://events.q4inc.com/attendee/932913620
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) 770‑2030 (Passcode: 8135305), or if outside North America, by dialing (647) 362‑9199 (Passcode: 8135305).
Investor Presentation Details
An investor presentation providing additional information, including forward‑looking guidance, and analysis can be found at https://investors.servicenow.com.
Upcoming Investor Conferences
ServiceNow today announced that it will attend and have executives present at three upcoming investor conferences.
These include:
The live webcasts will be accessible on the investor relations section of the ServiceNow website at https://investors.servicenow.com and archived on the ServiceNow site for a period of 30 days.
Statement Regarding Use of Non‑GAAP 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.
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 for gross profit, income from operations, net income, net income per share and free cash flow.
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, among others, experiencing an actual or perceived cyber‑security event or weakness; our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet; errors, interruptions, delays or security breaches in or of our service or data centers; our ability to maintain and attract key employees and manage workplace culture; alleged violations of laws and regulations, including those relating to anti‑bribery and anti‑corruption and those relating to public sector contracting requirements; our ability to compete successfully against existing and new competitors; our ability to predict, prepare for and respond promptly 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 enterprises, government and regulated organizations with complex sales cycles and certification processes, and entering new geographies and markets; our ability to develop and gain customer demand for and acceptance of existing, new and improved products and services; our ability to expand and maintain our partnerships and partner programs, including expected market opportunity from such relationships; global economic conditions; fluctuations in the value of foreign currencies relative to the U.S. Dollar; fluctuations in interest rates; our ability to consummate and realize the benefits of any strategic transactions or acquisitions; the impact of the conflicts in Ukraine and the Middle East and bank failures on macroeconomic conditions; inflation; and fluctuations and volatility in our stock price.
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, 2022, our Forms 10‑Q and other filings we make with the Securities and Exchange Commission from time to time.
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) makes the world work better for everyone. Our cloud‑based platform and solutions help digitize and unify organizations so that they can find smarter, faster, better ways to make work flow. So employees and customers can be more connected, more innovative, and more agile. And we can all create the future we imagine. The world works with ServiceNowTM. For more information, visit: www.servicenow.com.
© 2023 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. Altro company names, product names, and logos may be trademarks of the respective companies with which they are associated.
ServiceNow Q3 2023 complete financial tables (download PDF)
Media Contatti:
Johnna Hoff
408.250.8644
press@servicenow.com
Investor Contatti:
Darren Yip
925.388.7205
ir@servicenow.com