NOW - Earnings call transcript Q2 2019

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Operator

Good evening. My name is Chris, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Q2 2019 ServiceNow Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

Financial may Chief your Officer Scarpelli, begin you conference. Michael

Michael Scarpelli

joining and thank afternoon, us. you Good for

On the me Chief call with Executive President Donahoe, Officer. and our today is John

results review During we and full-year for our and quarter discuss second the today’s third our will quarter call, XXXX. guidance financial financial

we non-GAAP All calculated a discuss like or substitute remaining will We’d reports superior point financial in to, except addition to, and that out in to measures accordance for GAAP. with and figures company financial non-GAAP, revenues are the results not today as from obligation. performance

reconciliation these for are investors.servicenow.com. today, the our see releases, quarters, GAAP To earlier our posted at and presentation press between which prior results, to please of refer investor filed previously and release press filed non-GAAP all

call, fact. forward-looking those and risks, are or risk similar uncertainties, make statements as press release words will, information conference this These refer assumptions. historical convey and Please this on is expects, such may, may not statements phrases believes, to the the using to We subject to and and actual materially Securities those XX-Q Commission, information recent set risks in our most statements. on may that Form and Report differ Quarterly for filed the on factors including Annual Form XX-K, forward-looking such on Exchange results and with to cause uncertainties documents Report forth from

like I call John. turn would to to now over the

John Donahoe

convenient, that’s home. our decade strong our to thank make partner the over and continuing our that’s digital everyone, for call. exactly simple, joining technology another what’s strategic as work, in enabling us delivered their for success easy want a world’s afternoon, to you Good Mike. make Thanks, largest happened on work quarter We transformation enterprises. better driving and at People today’s people, We work the life focus lives customer and at on and past purpose.

cloud-based over work. made more now Digital simply same things task life the their at Cloud-based are help their platforms of at point more exciting for platforms happening the of C-Suite an life business convenient. component companies world, is positioned our or become consumer to routine essential everyday and moment, governments and at and inconvenient, transformation apps embracing That critical imperative creating have like leaders work home, the simple, all strategies. as an an transformation and has well inflection make at home where is a ServiceNow digital easy and lives

$X a In I’ll rate now customers have with $X ACV with the greater about the quarter, take deals in look more year-over-year, a XX in first, XX%. closed XXX and more take million. growth annually, than doing represents the for the minute. a quarter. than We us this be highlights But to renewal strong let’s at continue million which second quarter in at business we XX%

product our results And QX strong and large products. continue more Our deals or demonstrate our deals of IT products. portfolio, we several technology involved the financial XX top in three multiple industry that automotive services, XX to involved landed

which institution, signed financial deals portfolio. with most our our purchased we customer fact, new a of one largest ever In of major IT

three wins also with in significant had deals million. We $X CSM over

experiences fix self-help Our solutions the future customer identifying customer creates root contacts, and causes operations management. enhanced customers prevent outcomes. manage working their issues, and automating better We problems better workflow products help customer to of issues inbound that those great to

of the product May stage, customer I the ever, to was took our my and back innovation at brings which beginning XXXX inflection Knowledge mentioned remarks. in event biggest Our point, center me

personally our evident And innovations unveiled upcoming to that rolling better capabilities. make out I’m mobile CJ an people. about native we onboarding very Our and delivering our Chief Product mobile continue Knowledge, Officer, capabilities work Now for release. Mobile as his global and excited incredible at job was in product do Desai team to New work, York product

across intuitive capabilities enable kinds that easy the delivering experiences like of and consumer today. like employees making mobile out are home. are expect demand experiences like box enterprise, lives that at the the at We These of work, more

designed quickly. solve help the easily a Now employees get easy information make up Now are fast to Mobile Mobile get app get to problems simple is speed search and for thing done, very purpose to built to employee well, new Onboarding it work is and and go, productive one and for on do

work. of and at Mobile believe our the epicenter in of at lives great very technology mobile center we digital transformation will at the was at home, technology experiences the be

Our for help focus customers. platform This accelerate us digital recently our leverage transformation public and workloads industries to integrate and and technology products partnership digital enable will sector highly government enterprise leading regulated our customers. Microsoft’s And with Microsoft fully Microsoft announced on transformation accelerating enterprise will with capabilities. illustrates using and for in Azure partnership enterprise and for more

across government coverage compliance standards through will look modernizes infrastructure accelerates to The We’ll able operate. transform markets to U.S. the additional as strategic ServiceNow federal agencies of and continues Australia use it in With they important leverage ServiceNow modern its also partnering an be followed as how by government, Azure. partner digitally available the be future. through regulatory government with U.S. to Microsoft IT technology to in available Azure the

enhancing our is we are of partner alliances Microsoft partnership ecosystem. and just The how one example

and bring in improve ServiceNow the we new products, solutions and example, and jointly help on quarter This built Now enhance and the coordinate announced assets planned a also will experiences productivity. strategic the digital agreement with the Deloitte deliver market seamless Platform. enterprise, develop, For workflows Deloitte. across

we also Knowledge a operations financial launch will which new for announced serve in product, management at Deloitte partner May. the lead as

Close and and to accounting a finance risk, is platform improve extension ServiceNows’ reduce team capabilities. will Close workflows natural close help Finance the workflows satisfaction Our Finance Automation first finance teams Automation, of close application their accelerate and digitize finance process.

our intuitive and segmentation This customers. our of partner of differentiating more a also portfolio, we includes expertise to announced partner enhancements Knowledge, our better At number of global partners for strategy. levels

a go-to-market implementing partners. and predictable joint with our consistent, more also framework proactive engagement We’re

our Following global partners. a top very summit held in XX we with early partner of Knowledge, executive successful June

for the shared who opportunities priority serve was leading of great robust effort. energy David a infectious. last us us to is a Parsons, and customers Creating The start. have to and a is a our jointly job for terrific we’re partner we ecosystem joined enthusiasm off year doing this

take closing, want a Mike. to thanks deep and to to Before I express my moment appreciation

what with is Mike has anyone time. focused to ServiceNow for who customer Mike in exceptional and CFO announced, know And has most eight Mike been during previously knows As leader worked with you for have that been of ServiceNow has and years he very well leaving August. our gotten He an joined helped ServiceNow ServiceNow Mike XXXX company employees ServiceNow company. roughly the and over made in helped will XXX Mike the years, had miss in has and has definitely XXXX, him. create million in success. very many public and $XXX take we the foundation friends only our when was for revenue. Mike

for the I Mike’s instrumental has partnership been success over Personally, He’s X.X in growth. stage next and continued appreciative years. am phase helped our past for the of deeply a set

a in his the move right place. candidate. role to size Mike fill, underway successor. literally great figuratively. all is quickly active leads will the finance But in Meanwhile an as seriousness, means and Mike in feet XX Mike’s search interest team has shoes there strong successor to we have land as for big And and We possible

in vision. continued rating with pleased a teams. progress see us I’m on It momentum summary, the its our gave ever of focus full customers In was strategy Gartner our to in and vendor positive recognized and review commitment during our when our and company gratifying our our quarter, first

to happen. life we’re easy of Technology home. our we at to We’re work as relationships making focused as the of building lives work, work committed to make make at the enable better for help deep people, intend world on That’s future should customer work digital transformations. and it their and

I’ll it back Mike. Now, over to turn

Michael Scarpelli

those appreciate words. I John. you, Thank kind

dive the exchange highlights quarter the million foreign quarter. growth into including first for revenues were let’s $XX representing year-over-year of from headwind. the million, Now adjusted XX% $XXX Subscription

largest relationship shifting federal which to revenues by consolidate us few customer contracts of QX. were subscription customer with and to working a renewals was we’re impacted their Our self-hosted QX QX. with negatively from in expand The a

QX early track which into renewals QX, XX% million $X representing pushed in renewals on million we contracts, are foreign of in to recognition adjusted revenue of are year-over-year $XXX close quarters. were upfront nature a these self-hosted previous QX. including in Subscription billings respectively. growth million more headwind and $XX The contracts and QX duration late exchange late the were similar While versus tailwind

or year-over-year growth, adjusted Our $XX $X.X headwind. representing RPO million foreign exchange the ended XX% billion approximately at obligations remaining quarter of second including performance

million approximately next of $X.X that Current be will RPO, in months growth, including exchange adjusted which $XX XX% recognized RPO XX headwind. representing year-over-year billion was the as foreign represents revenue

free driven on-boarded of a Moving be talent, in talent to invest employees top XX%. flow was in company net expenses that operating being out our to and With QX. QX shift in margin XXX we our attract continue XX% our successfully people margin a top a cash will record was we profitability, new priority, realized plus by and QX,

to third Now for and let’s the guidance turn quarter XXXX. full-year

representing exchange headwind. expect to growth $XXX of XX% we and $X subscription foreign $XXX adjusted million year-over-year QX, including million XX% revenues approximately For between million

respectively. of adjusted $XXX duration $X to billings foreign and million We million approximately year-over-year including expect XX% subscription between and $X growth representing XX% million headwind $XXX million and exchange

in stronger it reminder, to billings bookings as a As expect continue is QX, largest to each become renewals new seasonally in we year. quarter our

shares operating We diluted XXX expect average a outstanding. million and weighted margin XX%

representing of XXXX foreign between We are and raising $X.XXX billion $XX adjusted year-over-year exchange our approximately full revenue to including $X.XXX growth, guidance headwind. million subscription year billion XX%

million and representing adjusted year raising also of $XX $XX guidance $X.XX billion and XX% to are between million We foreign headwind approximately including respectively. billion subscription exchange growth, year-over-year XXXX our full duration billings and $X.XX

cash of Subscription of maintaining guidance are as margin follows. margin margin XXXX gross We free and XX%, flow of margins full-year XX% operating XX%.

we year, outstanding shares of the expect million. weighted XXX average For diluted

of get we team built. questions, that like proud we the I’d to to finance say the extremely especially everything years, your last I’m is ServiceNow accomplished that eight have over Before

new has along aspiration joins many will I’m assume to finance of been Goon, Relations primary five with of leading confident billion our you pleasure the Accounting its It of long-term very the last period, FP&A Investor on will of people a with of the working Treasury During contact will call. internal a Dominic VP and in know support and company the interim achieve Chief our so before all the and Fay got great $XX VP Sien at this CFO Lisa organization; development, ServiceNow ServiceNow, Phillips, years. of the corporate over Officer, role all be Banks, our we’ve revenue. your and

for can open you operator, that With now questions. the up line

Operator

question Your UBS. line Jennifer from comes [Operator first Instructions] the of with you. Thank Lowe

Your open. line is

Jennifer Lowe

you. Thank Great.

great getting And these been just know forward I start since years it’s you few Mike by to the to Snowflake over shortly. we – at you IPO. First, want to look Mike saying past bugging

thanks insights in look dialogue the for next continuing your forward So, we all and your to role. of

Michael Scarpelli

you. Thank

Jennifer Lowe

note that on I have on a – And billings. question

Looking presumably well. QX, have at the of you QX pushed into contracts that impacted that mentioned would revenue, as but billings out

in are wanted billings an so pieces guide sort of And that, to of the correct. offset little we saw that full out shouldn’t increase potentially QX what looks than HX is it the first implicitly then less a So, better? moving be for like guide, secondly, the was understand by, push down just broader I that to a context year beat

Michael Scarpelli

No.

got timing than negatively revenue, things renewals more as full a QX. of were first as year in renewal. already a well your well there’s reflected our they were which because guide that is, billings, forecast year is but There really question and the piece took did billings impact QX as early renewals into into billing already that happening got that QX, well had the in remember for which full go pushed no yes, impact from So being purely that actually QX, of too, those that’s on which billings billings, number big was pulled

were was renewals pull-ins And that ones this principally self-hosted difference have. the normal. as pushed and The they’ve of I some the said was deals lot of only government push-outs of and a it quarter, normal calls was the in we my with got

Jennifer Lowe

that Great. in role, headcount you’d sort marketing a will was seen. in mentioned versus Okay. the quarter, And by look And by line there and record at gross added – onboarding if the accelerated was also I disclosures more QX we’ve XXX of employees take it of this QX. of sales kind that trend than that

heads and there just going? are I’m is a if So, on on Or going a bit where those on so curious, the or is marketing it normal just what’s sales more there hiring fluctuations? front push of

Michael Scarpelli

had generation a business much the on marketing Two we pipeline sales. So, things very focused in of and sales organization marketing. we’re push focus on

split reallocate and big accounts a we’re that’s we bigger accounts we of into so to territories to accounts, and need strategy those reps, for adequately As part getting our bigger cover while. can and been

Jennifer Lowe

you. Thank Great.

Operator

Your next line question the Kirk of Materne comes with from Evercore.

Your line is open.

of next from Hedberg line the Matt comes Your with question Capital RBC Markets.

is open. line Your

Matt Hedberg

And about which guess, guys. I’ll as you. the prepared Azure your Mike was great super working in you talked interesting. John, It’s thanks Hey, remarks, been congrats I well. offer with partnership wondering I’m more played strategy a the terms about maybe should go-to-market if that you in bit between how companies. dual two think on the a of detail of partnership sort we

John Donahoe

the security have High, Azure to data federal And other led security with to clearance of that the enabled year, announced Microsoft we which is and some particular ways business. this when was in federal to – business. work has federal There the advantage U.S. FedRAMP actually with called certain IL-X started a take in on requirements we tremendous that has that business. last what highest intent are Matt, us federal Well, really sovereignty focus we realization could or an the what’s business build

highest IL-X. has Microsoft absolute security the clearance

that it Azure determined advantage so, building federal of sort markets that as – have for data that to sense take of of market markets just would that. other we government well part made as few And for center that we federal and for as capacity us

together and our combined how to broader that into work go-to-market So can then we taking led we’re their efforts. around and that conversation that’s capability a

Our product each very complementary other. lines are with

Microsoft In with fact, really that’s customers the products we to any partner, to us over XX largest seamlessly work integrations have of look together.

we customers to for make And other try our so, also, over the easier and it both think market, we’re for but marketplace. federal coming to teams the time in together in go-to-market each to easier support general

partnership. the about excited we’re So,

Matt Hedberg

federal federal just staying on sort quarter, some what of federal to side, obviously after. about the out kind And follow-up, it’s about a in Microsoft strong helpful next related. maybe the it’s linearity and could deals a a as But then I the guess, quarter? like year talk it self-help maybe more call seasonally a the huge opportunity you But seems you be here. government catalyst opportunity of Mike, think just of the the into could in is it year multiyear overall

Michael Scarpelli

federal can’t for a stress quarter QX expect just not We be federal will government. very strong enough, it’s us. But U.S. the I

doing as data world of with to governments the that don’t world a of Azure of thing We’re so have leverage Azure that’s and we around requirements, that’s business have we’re governments well. part those other that data around number And the key sovereignty strategy, the going out a centers.

Matt Hedberg

All right. Thanks for that.

John Donahoe

IL-X, IL-X. Yeah. And I have an misspoke, we

Operator

Sachs. Your next Chris Goldman the from question of comes Merwin line with

Your line is open.

Christopher Merwin

up I are of And new anything of maybe revenue want terms appreciate saw asking gone seen I have I’m you questions. my so then Pro, taking there? to and where you ITSM through ITSM cycle? your customers uptake for about what step this QX far actually We that? can percentage ACV. at you’ve with in start about renewal say renewals in the what just you curious

Michael Scarpelli

Yes. the a just Remember, – in average, QX kind that. out in really we we ITSM On we it contract. sell came last introduced Pro of when three-year with was

on with uptick that of that, expect been very still innings good continue. we’re has and very we the but much customers renewal early cycle the our So, in the will

Christopher Merwin

one Maybe Okay. ITOM. on follow-up quick

saw I ITOM new rate decelerates. But QX, taking quarter lot to that this growth we in for customers deals think, a relative saw last. we more

saw should up what curious, in of we Just picking ACV? with new that again think we about light

Michael Scarpelli

and continue, do to ITOM And given be sizes. been a we’ve big strong as So, often will as quarter. a was you lot the said Yes, the will with ITOM making QX lumpiness in there very we ITOM think deals we lumpy. the tend some see quite of but investments that deal

Christopher Merwin

Thank Okay. you.

John Donahoe

our portfolio. think, second, by our more that’s what more going not IT we’re conversations product but I Chris, customers for to we from maybe a conversations just with suite go IT. And legacy IT help on them it’s just I how to or see product, by IT beginning that do IT is the rather build product modern and

more you that see deals IT elements and across portfolio. so, more have And our

Christopher Merwin

you. Thank Great. Okay.

Operator

of comes from the next Your Citi. from line question Pritchard Walter

line Your open. is

Walter Pritchard

someone for and lot and CFO transparency John, get from you. maintain a like of do us Thank you and then in that things go Question transparency? given I’m first think of thinking to about how you question for a that wants the Mike. that disclosure John, I financial business? how to terms your the end wondering benefited think, with here. the you on it search, lot we’re transition company’s thing here, slide deck as all And the manage way the that the CFO data is important through level of the one

John Donahoe

Well, CFO I CFO, my a Bob data to to transparent great find life, shared Mike very a great transparent. Swan is in In Walter, think because a everything. consistent the prior was top very priority very because that is he wants was way. CFO, is hide and he a

of And stakes be that’s CFO and so for. a the people, that consider looking kind for modern table clearly going I – a we’re always for to

kind He a that’s that for then, CFO; maybe in with I’m does, think talking customers. loves And very don’t And being always things you I we’re focused looking And Mike see. that is does, I the important is core of really other business. for customer Mike call – customers. to this so would also that someone capability. some also and Mike is of looking

You sits office. just in a that CFO the can’t be

You got to with customers. there be out

Michael Scarpelli

remember, that continue. will those changes gives have people. that with I same of to add of a too, thing and team to people see we Therein, transparency. the is transparency, behind continue I other that in expect want don’t company will any Walter level that to The there’s me I you

John Donahoe

good they They Well, sitting make right good. you and table. me look make look And right. they are you Mike, around the both

add Mike both accelerate Let Mike more – thing one team is mentor Walter decisions. that senior and to with help and that accelerate partners me coach we’re does it just decision-making help them, help for, looking our and

take outstanding to confident get I’m And his get going shoe, strong no going confident I’m – get to a will replace one successor. our I’m CFO, a financing, so an feet Fay Mike the XX we’ll strong one Mike’s we’re but – have so, going to continue we’re Lisa performance been and said and time And and a Sien, between we’re to confident in and the as make Dom sure level that high the interim. it’s that very good will a we entire team in

Walter Pritchard

QX Got Mike, thing I you’ve through terms look perspective in us you’re if bit had answer given this year that businesses I a wondering, in as thinking different, could for that. driver walk QX, stronger the out of I’m billings from terms think on, for and uptick what your in than past years Thanks strong the how seasonal Great. how especially of in you about QX it. to years, the at guess to think QX year? transparent year then in last business was billings. last federal I a has few And the and is one little this in played a from strength different we

Michael Scarpelli

be federal all, extremely think us. will strong of for the I first business So,

deals no is to in have lot past. think start I gross which next on of year, October those that have we’ve actually down the that impact signed in a you federal will billings, contracts will remember, because X talked start fiscal your those will that date, about October that to the Federal have You X

when current year-over-year. to RPO, I start look XX% is, what especially say focusing growth I think would at to you our need RPO of and And on rate really people

talking the during We’re year, been because seasonally order very we actually has will how will of think the I And that signed a it sign grown. throughout they to the happy just to our us, XX, many happened initial contracts about cycle those December happen billings even well though on the shorter than it’s with upsell, for for that deal QX, especially may annual a billing an one year. as becoming such year quote lot have of we’ve just get strong turn and

Walter Pritchard

you. Thank it. Got

Operator

line next comes the Your of Hindlian from question with Sarah Macquarie.

open. is line Your

Sarah Hindlian

forever. sorely right, missed goodbye for certainly Mike, will All is as and few now, great. I this CFO’s be hope but not

you, me let So, Mike. ask

joined? the do that I leaving, As about an And surprising you you there of you what’s will have buy of for company? second you a to the John. answer think years for are the I one. been do change versus eight most when ago feel well how And first today follow-up a – as I’ll state you

Michael Scarpelli

it the perspective, continue company the is I from company, underneath evolve, company have that in the a from that product joined about whole I today Obviously, my feel good organization is set the had go-to I more really up time. when we’ll market. finance XXXX. the very people at way different company but a in to than me

been a clearly, of So there’s lot change.

purpose, John ago, think scale I the has to coming really a that years level, and main company But he to remember you on board over on two think, I doing great to board, brought been John was job. was next got the with

we’ve hiring. we had As you, record just shown

to to remember, want small leaving good the question company to and got to right a from now. before, where back So, I about build I’m very And go feel company I’m because scratch. you I the very, leaving,

Sarah Hindlian

John. Thank for you, follow-up Mike. A you,

is important single have faltered. how you think base? When platform continue SaaS your one And with your also? perhaps it it in I all model base that a ongoing stands that about product that other would that out sustainable data is of about products think single be to code and thing to single customer be and ServiceNow to base, a you fair ability I to scaled deliver innovations code say is your across platform where vendors how

John Donahoe

machine because make it’s do had that tuck-in, our to think time customers it extensible, our is the of one the platform. That’s always the strengths of model technology platform I an we of Every fast. Well, clear one we and code or acquisition of to time, say chatbot this be when will on, of think think over company’s the build that discipline our is a continue into lot off easy not it’s over of that’s it’s platform, be of our our platform, core And learning will And also innovation in the to it religion. time. but or core I our a rebuild core organic whether I other functionality.

And so, path complementary on platform. see I we could would a our a do or billion, an $XX even add that to couple acquisition may

Nothing specific in mind, I’m making a sure connect more general make can statement, to but interchangeably. it’s, and that then we just want platforms two the

build So, us hey, won’t an supporting and are – say it to in this scale would will infrequent impediment be that you it we’d it’s be organization, platform. say, continuing also they And with you I complementary a that love guys if not from and tell area. us really our well, often are to they customers

adding five So, horizon, year organic or time – platform I could the a two see complementary think M&A a we most on growth platform, in of you three, over way. very time over could us but our current another be will easily through

Sarah Hindlian

That John. it. so makes great. much, Thank sense, Appreciate you

Operator

Morgan of comes Your line question from next Weiss the Keith with Stanley.

open. line is Your

Keith Weiss

the growth, Thank new $X to less see and of number recent and just just the broader and wanted to I kind pipeline I of new you, new how wanted of point. One doing. metrics And customers platform, kind sort one. in to you that questions check in to million customers I customer – in nice we’re sort sort on of little of door getting customer getting going of is think kind the a the talking we quarter. for bit being for see the deal elements in how talk see to that like check periods, very just guys. two taking to they’re

on really Number environment, What’s customers. been of fairing guys business of just in the really big the well, and doing checking in the two, the outlook commercial business you how that competitive commercial the side equation? like on sort growing

Michael Scarpelli

many as do times, larger but we’ve So, well of revenue our the most continues for business the commercial comes said us, very enterprise to from business.

XX% clearly, into keep we enterprise. enterprise, and key, to so commercial especially dollars put business, the bottom tend where the the plus that’s the out And from it’s moving our in competition more resources the but of end market of very up is you on the because

customer customers. new then every to adds, And continue we quarter add

customers. but there as has disclosing they you the not consistent base our We change presentation net all, year, and small, of in see filed But did quarter customers see we of our cohort in can will we was from existing we they that disclose ACV quarterly customers on that is a We’re new said customers annually. to, what bulk basis. coming it with we last – any to that installed and the a We but analysis generally in no grow then quickly land at those continue you grow. been

really in no question the we’re seeing there. change terms It’s competition. down part your in what of second And of

in But up a there there’s to tends They continue – no to get and is for the CSM market. [ph] investors been we to IT core and be but of Cherwell of competitive probably the the see, there. a change most tend [latsy] I market. in the talk lot the [ph], is the Obviously, out do us. lower that’s We about end market out end [latsy] be biggest the there, lower enterprise. there know smaller of they to in into really market the opportunity it’s try the

John Donahoe

some commercial. our were early And most, wins of in think, CSM interesting I

companies, are off entire driving some mean, or You see, business their smaller is what’s ServiceNow. I fascinating they

operations, of playing get X,XXX a of Now lot also experience participated it COO to the a person market, a role. and but the helps it’s it’s organization their see also off Yes, in speed because we So, that CSM Platform. drive employee a our IT pipeline, innovation

we think through of of product business. commercial input so, a And out that is get I a development little there product bit a almost innovation the

Keith Weiss

guys. quarter, the on job Great Excellent.

John Donahoe

you. Thank

Operator

Your Cowen question from Derrick of and with comes the Wood next line Company.

Your open. line is

Derrick Wood

Last and the I thanks. impacting think questions activity Great, are in of bit quarter, you demand. more mentioned there Europe, softer a how macro investor general, about out guys and it’s

shed feeling demand could rest you guys QX for saw you’re the light And the some in if wondering, just how progressed to Europe? activity how trends QX I’m year? about from So, you on of

Michael Scarpelli

and is, half. usually What the don’t slightly to I to say I company, you kind the have not I’m we’re our stuff, I year half, is for that But the the and had track that customers. macro plan second we hearing at that of seeing start aggressive indicates it think, on to that not was making concerns, that for would kind I’m Europe see customer there plan be. when us need in a macro but slowdown their of we our overall as flow. with to we’re up in from a when cash very terms where the seeing behind first in all of, nothing on payments concern, it its

I’m just business in seeing not my perspective it So, the from now.

Derrick Wood

Okay. working you’re that engagement more mentioned just mechanics partners? a framework process. with your partner around the your on new little And your some on now channel you’re us in working detail changes with John, I that a think the building you with and of you right Can give

John Donahoe

largest for of our Well, tackling. customers. here’s Derrick, to be happening the and certainly customer honest, what’s base and it’s to to our blocking some But

and out the ServiceNow impact them of automating that’s value right need get maximum For of they to reengineer platform, redesign, and processes, workflows. you your their to processes maximum how get automating the

more is work, value-added change. just not partners so, around change work at culture are often It’s management, process important. it’s critically And with or customers they redesign, implementation partnering

we’re doing the work in And as segmentation the fundamental with well, of as far the next IBMs well being the tackling. the the that DXCs, we partners, their our the we growing and year are our of strategic Many say Deloittes, now partners more ones, Accentures, very blocking largest just and we’re in these as so, KPMGs, the practice organization. because fastest

jointly Dave next innovating go-to-market $X with that We are over now How for the – enforce billion are industries, with this with let’s and billion – partners? that, three Parsons build $X on has four partners of the top years get we go-to-market partners. to with And do plans billion and their our sure the making them. we’re different our brought that systematic over focus that’s dollar them mindset local teams different to to aligned

Vice tackling, I the I’ve and them. to systematic Top same of says, been the and one with sponsoring success, that and coordinated because both he here, and was alliance very the central even Chair, more partnership I morning strategic relationship Now just phone the So we client we’re in is of I Vice this our it blocking success years, I the to it’s can tell think X.X as said on personally feel you we us and and Chair X, view the more and he’s way. search

more his and as focused, after and Parsons team job more remarks going nice it. alliance in David more so, us to be And a strategic I said on of we’re allowing my just how disciplined

grow to new also partners. We’re trying

have One is of the biggest issues the market. ServiceNow shortage we of certified that in a professional trained there’s resources

then certified our things enter going trying doing universities the to trained to been customers. partners these pool ServiceNow but we’ve of serve and professionals the So, and like of and grow number

So our think that’s and time go-to-market get over part of important benefits also we’ll as well. some success an I

Operator

with line Zelnick from comes next question the Brad Suisse. Crédit of Your

Brad Zelnick

institution What Congrats as quarter? even the can a the bit megadeal record for financial you deployed was talk maybe expand if services in follow-up such of this evolution got you well. the how in for John, And you pipeline about could I’ve about you that and and sign one maybe John megadeal’s a question the future? for are being transaction? at this Mike.

John Donahoe

Mike? years, five think I

Michael Scarpelli

years. It’s [indiscernible]

John Donahoe

many a may reach in see three to begin be out to customers, others, coming. that that and year, thoughtful that or to to clients was customers what’s a way happen in they years is that’s remedy cases be years they us mean yet not two when sometimes renewals their a I And going are beginning before

So, to this based think hits, we then and was signed was over with XXX quarter this for deal do and that’s major a for I call XX when so are CIO mobilizing of was in has months, so. to the to on and I ServiceNow migrate the transformation I it been prepared ServiceNow. worked XXX obligate their case with for planned that and literally them we’re they them to major And organization renewable X point the on now here. say will our they that organization’s

deal of being And the so XX signed, literally moving. days within that they’re

how more entering I It’s not lot not can we’re I in product. investment to this us, new we’re they product, your a about can I It’s a sale working and a be can was get the buy sure seeing And make making and of our think And on third Platform to partner that single it outcomes achieve. wanted party call, ServiceNow way. with by great conversation how this business the third-party approach. same it’s ServiceNow practices? call, value, more we’re they’re with all strategic ITapp sure customers How in the partners, free just, on client talked often and focus more our going way, just that of around I partners? is implementation But best best the we’re

and way over you their products be new our we but sustainable conversations us up think around return build more and continue that it’s will think more be strong with business deliver that partner time. have growth A customers, the growth them with to on customers confident outcome Product I consistent outcome to b, help more business is to to more Product innovate the achieve. the left only And are business hold pricing our more becoming outcomes, the so, on I want And strategic achieve which investment sustainable and the of product, business you a will they

Brad Zelnick

how XX%, think up but you’re forward? sites guide for I metric to that our And as working. quarter clearly a should RPO hone Mike, really in in us Mike, adjusted really going on It’s know not we it’s going it RPO about retrain to we to current specifically quarterly, strong this

Michael Scarpelli

guide of the Not year. going to for the rest it

to this but I something That’s doing doing we new X that. that. started year. year want RPO we I year We’re along the doing team, about for this to billings have year. guiding thought transitioned the with CFO before to consider do some would that expect next We encourage companies under our belt

Operator

Your of Lenschow next line from the Raimo question from Barclays. comes

Raimo Lenschow

strong. can the and bookings on why like there should I question. even on give a I no Mike, conceptually, kind in of and mean, stay bookings puts were that CRE may topic you your that last I and good call calculation just really scale bookings just theoretical all because ask calculate that be cleaner Can XX% we little can If number so RPO us that since use a current bit? is more your at that’s be Actually, to like best. kind of you number of kind and number XX% grow takes on looking at really,

Michael Scarpelli

getting Yes. than animal to and of assigned bigger renewals possible renewals remember number an be Well, that we crossover to before the ACV chunk a renal got from customers. you we we business big mentioned wells growth is new and

know So, don’t else you, and is to is tell it you we that very nicely what that, growth. bookings I to said did what very it what closely

Raimo Lenschow

one Maybe to bigger. you’re getting QX on back earlier follow-up going conversation

you that like basically, same So, it at a some you when get blamed work you’re seems talking et of you cetera to team? bigger point? compounding out the Are team, the force sales year and on kind like effect. terming it’s every we get thinking kind breaking the co With see of first

Michael Scarpelli

What out? do break you

Raimo Lenschow

that the Like effect we there? get compounding

Michael Scarpelli

not I not Lisa going for and It’s that in but be company Well, question I’m here. that’s December. good CFO to next a the think

Operator

question from with next the Your Roderick comes Stifel. line of Tom

Thomas Roderick

It’s here you. on your the gig. sentiments great Mike, and congratulations been working let with say I’ll next

of out in revenue call get even and of presentation looks percentage a follow-up was see up despite better if the sort So, wanted the that a I of metrics the like a I currency to headwinds Europe on basis. tick lot

bit is the just about constant a you whatever seeing what talk you’re accelerating strength you in drivers that seeing basis Europe reported and are like currency. EMEA to looks even Can speak on behind than there? So, better on a little

John Donahoe

the step in in where are I relationships. think little strong embracing really in because little I’ve Europe a this and said are are pulled I’ll year a multinationals times multinationals partner was and strategic a increasingly those very given large as lot are of and QX fundamentals any less in. back great got across cloud, QX we of been in there region better. like because was a is quarter-to-quarter large Mike consistent Europe couple

government the security of in and we’re Germany. Germany cloud, on markets the German Was to One embracing particularly markets focused of had excited around multinationals, a about privacy of that German relative little more other questions cloud. and things. later data is are

business real rate so and of think and still market and younger the and opportunity in offers continue rate it’s invest adoption at opportunity a area the Now we that German German cloud an for going we that accelerating market embracing given a it QX a of we size to in strong think and and and The curve, opportunity. us. to very is investment large cloud are Germany

said and the demand discontinuous nothing quarters to build earlier, as I the X is So was with job is or would frankly, enterprise say our there any the of the us accelerate high-quality local like and relationships partnership partnerships business that’s where we some future companies European got and Mike data will quarters sovereignty have you strong over of saying with data do leading complied the and that to strong Europe governments, want help last been that Azure X having we’ve serve global part got with the and potentially governments business. to have or but to with to European ability of you you our regulations

Thomas Roderick

we about you to management? talk have the And of more hope thinking you topic you, then helpful. important be foray who than Then and the ERP compete really you interesting to into a of do partnerships related integrations Really in product? to touching Can that very before. got and cost financial Germany. financial as some follow-up sort Outstanding. back-office bit technology product it’s insofar quick with more widely market that for But a the of the about that of for little done

John Donahoe

that that built close, they relate talk the Well, as about it Mike’s financial how given to the much that partnership? I team integration can in or our for

Michael Scarpelli

PO for you and be say first would unit size with first, our you the first Yes, so integrations two tell and the what nicely I’ll closed main is it’s work we alternate with our those we largest got to the and I We’ve a have integrating. very them Oracle actually PO We business and ones actually deal. are your ServiceNow. SAP that

will names companies in process the served arguably of process. the workflow and offer of more in we’re who ERP really a what around who we we’re really want right general, compete the in the most products in close not much Excel And financial but But do I more but get close you so associated of of the to then into potential the market of for spreadsheets I don’t that’s with e-mail out I’ll how conversations the from with name white to office compete, this. financial just And CFO visibility there better people, don’t know the the terms to it’s before, cool want it’s is doing today being after spaces then. going and by let you

John Donahoe

spreadsheet, there processes are of couple been of years It’s finance lot in Mike and and our the Mike said, has highly last that our suited well things focusing the close meetings the to ERP other in interesting, really providers very just is no are those. classes what on finance I’ll platform addressing of continually manual e-mail books echo else on, strategy help my said, product one not is focus but there’s a

will think of time. And so, I we this be over what was the hope several first

their market opportunity we product see, think we’ll good others internally to not We’re ERP are our that on and going I the And was on CFO. with many piggyback and That’s with we’re to there do really why also humble early this a still top that and as in almost consider a partnering there that products. is go-to-market view partnering with but our early is I a providers, think feature up. that the serving time in days. of cognizant on Deloitte very ways partnering over way calling others it we all partner,

Operator

with the comes question from next of Sterling Your line Auty JPMorgan.

Sterling Auty

Mike, to circle I but to me for Apologize billings. that just dots. want connect the back just help

the of million So, increase. quarter outperformance you guide, outlined of X year in the presentation but XX the full X responsible in for million I the XX outperformance think is the in

benefited the have thought about the have talked would I You deal, renewals shifting, half. the second would which

the we X of just So, XX the year? get what’s of outperformance and puts to do from takes, the how million in full million outperformance to

Michael Scarpelli

or of where is and deals because that QX the got from renewals QX QX. into from I those that deals there was renewals pulled one QX as QX and where got into doing. Well, outperformance were pushed that about most That’s early mentioned all sometimes doing way, contract whole more renew advance. in customer a people a deals the and we bigger bring than in year do they with early on. the By just we could early want If review renewal a deal much to where

is way math works. each but the very the deal that’s different So,

We’re should there. not that only the That’s in flows not it’s impact that stuff think through was what that a – it’s not about. really beyond That the $X going million for ACV year. was

Sterling Auty

that the people-focused extent focus, of are of it And vertical the we to the vertical-specific development you’re kind much a then of strategy. vertical follow-up. other versus in to and industry to the of verticals financial Obviously, there’s you one it. been vertical outlined some services kind going government of including roll that that solutions? the that go the discussion the technology after, successful Acknowledge, to in and got is terms strategy right, be is, where on out of map other how All then go-to-market those products looking and so just road just product

John Donahoe

this it company and one I it’s helped is think go-to-market our mean, as in a the it different. retailer is it by IT in largely strengths than is great of more it consistent I’d Fundamentally, in is than we the strongly, as product. of the in as do I a horizontal. of a it platform large, what pharma is the and bank is as say, is is same lot

that place there are compliance one and the Now regulatory. security, implications is around product

able vertical or in And federal industry. and in comply have with the what industry-based But value there speak to being to so, value we it’s we whether the relay care that our regulations is language standards. real it to and health banking business industry of the government, motion or do

speaks teams targeted and and what on do language teams military focus of lot of our federal we services, that agencies a so sales customer I the our earlier. financial in or the you if you to look greater or the it’s insurance a D.C, federal team whether services that’s heard to banks I business spent sense certain speak the think in our credibility, administration, And of calling of speaks federal, the that amount team, the and comes our the value time companies. I our language gives at confidence veteran’s more And sales think in really of language

thoughtfully, – So, verticals, don’t we’ll but XX% industry said continue I it’s product? Mike, on go-to-market, layer to I I’d XX% know, additional say,

Michael Scarpelli

Correct.

I in much on think very we’re the early the product innings side.

John Donahoe

one that’s very moment. based that’s on And Right. the example interesting [indiscernible]

Operator

comes final the Jefferies. from of Samad question Samana from Your line

Samad Samana

Mike, the then I this the happened particular if I and the customers that was it has follow-up any also customers new that? trend for then there wondering average the contract moving expansion to and I that like a is look that’s for been average looks to deals term deck, jumped have second up. for the bit a for new renewals driving in slide trend XQ quite quarter and the for

Michael Scarpelli

people QX, strategic drove hasn’t government. federal driven we’re the more been that one with really by customer I average being expect that length shorter because that the and of financial renewing that us. institution but keep we’ve be would for, reason customers much new That’s on really customer And two that in that renewals the more was the record is and So, new than as long-term will changed years. a what more signed new that. with becoming saying contract

you Just don’t they multiyear guys government remind want typically deals, to do federal X-year do deals. the that

Samad Samana

And Okay. term, the should will and RPO average change we about how That’s made what RPO that, growth in like? think in onetime the to adjusting contract on look the I’m impact maybe helpful. how that ask for just going XQ,

Michael Scarpelli

the really more. really to because not length impact contract would That’s average So, the current term first XX of going all, RPO light does current that next impact RPO. months. That’s total RPO, that’s

Samad Samana

you prevent or of growth meaningful us adjusted give if was Yes, I enough the overall wondering the average? payback so

Michael Scarpelli

don’t rate giving current its I RPO XX you to the only I’m because and months growth XX adjust Well, need months.

I I think that the – that’s RPO. do. So, for total haven’t we something adjusted And don’t haven’t we will calculated

Samad Samana

on the move. the next Congrats tenure and

Michael Scarpelli

at this a Relations of the webcast reminder, Section Thank Investor be call will a you as webcast. today. us Okay, joining our replay in available of the for

Operator

This call. concludes today’s conference

disconnect. now may You

ServiceNow (NOW) 24 Jul 192019 Q2 Earnings call transcript