NOW - Earnings call transcript Q1 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2020 ServiceNow Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Vice President of Investor Relations, Lisa Banks. you. Thank ahead. go Please

Lisa Banks

thank earnings joining conference And first for quarter XXXX call. you afternoon. us for ServiceNow’s Good

Consistent with while today is we are operating globally, work-from-home. our call

Executive our Joining and are Bill our and me McDermott, Gina Financial Chief Chief Mastantuono, Officer. President Officer;

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

this as is we want and statements of the April discussed those our on global on some based XXXX, to the guidance business related COVID-XX our information that started, economic conditions. conference emphasize get contains particularly we that of uncertainties, Before, XX, involve to on call, assumptions, and of information forward-looking impacts risks, including

as operating. to macroeconomic will that them to which our we guidance we assumptions facts these Those in assumptions the relate the including, but is forward-looking The will assumptions provide environment be we based Many of know today control as rapidly, matters on are today. and severity customers the changing beyond changes our COVID-XX based are could our of the other impact us the not limited purchasing requirements, mitigation industries. certain higher particularly for guidance of future lower. and distancing of our cycles, for sales and timeframes or the social our ability in customers’ length modify the in Significant on to cause and on the

in results and statements. materially release XXXX XX-K may in those such MD&A QX to actual and the uncertainties regarding our including factors filed to forward-looking forth XX-Q our from assumptions and recent risks, risk that our information differ that set filings, refer most press will cause such Please for and for SEC be

not accordance please non-GAAP to refer to that these reconciliation for, GAAP. results press previously posted filed are release filed in to in All like presentation performance to figures calculated earlier results, non-GAAP releases, and financial To our except and investor reports the with discuss see for quarters, also today, are will today non-GAAP Company a remaining out of superior GAAP and or income substitute prior the our press financial all we addition obligations. between measures net point for and investors.servicenow.com. at as We’d which revenues,

also note today’s due will to on date. the the website. have replay postpone of A be our COVID-XX future short-term financial uncertainty for of Day posted crisis, call that Analyst decided Please the ongoing to a we

the into the We more expect will year, the provide it and second of we XXXX occur environment. operating term visibility in can half so longer

over now turn Bill. would call I to like to the that, With

Bill McDermott

to you, good Lisa. call. everyone. And afternoon, Welcome Thank our QX earnings

Let me safe. by out by COVID-XX, wish healthy tragically to loved who loved begin and you and are our We that extending hearts hope recovery for anyone ones speedy a those one. your course, lost a go affected and of my

For the economically to people and doing get part the impacted, those millions need working our of we’re in to world again. support

truly this are We together. in

today’s are key reinforce Here takeaways in remarks. the I’ll

First, very platform, ServiceNow a strong is company. unique a

in well-positioned We seminal are this moment.

years. three imperative workflow Platform, a spend platform standard next and the experiences. of is has workflow Next, will ServiceNow pre-COVID digital transformation. the of with digital trillion over digital platforms most Post-COVID, was the projected business $X.X the standard Now the And transformation for become important, transformation accelerate, for design

of focused communities. supporting As our protecting on We more by health and example, stopped never around been never our world employees, QX, the pandemic spread customers ServiceNow important. serving pushing. COVID-XX Leadership, in our the has the safety and

We slow down. not will

strong guidance release. delivered earnings We and consensus. a our You’ve QX, seen beating

world, a our employees more ServiceNow adjusted. proud We being so of seamlessly have in deliver. I’m we shown was to environment. XX,XXX how March, transitioned In felt everywhere as incredibly can employees the work-from-home pandemic than the

work-from-home, feel biggest support each we motivated, they a to laid focused, they all-hands plans meeting team live our serve global other shifting company Employees to we event, to delivered. held out digital and our where After and Our executed, our inspired ever, proud. customers.

are our our about purpose inspired response. feel XX% our more employees Feedback very by from future, our survey XX% also employee recent than is crisis ready lead. ever, feel encouraging. confident excited satisfaction are to XX% in ServiceNow

the character strengthening amazing We’re and our purpose company. culture of

Our seamless Platform. is of a the work-from-home transition Now to demonstration powerful

enabled Now Our cloud maintain native productivity. solutions often and to on Now our employees improve

easily Our self digitized We miss supporting technology, customers. workflows our work Now requirements. allowed employees Virtual our Now Mobile on app, didn’t a manage our Agent beat the Platform their to

in Platform the relied Our are cloud realizing a customers that uptime we better are numbers Around the farthest business workflow the stayed become Now as as high Companies digital burning who crisis. a digital behind see on are transformation to transformation world, world remained equipped they this workhorse. has lagging consumption a Accelerating their along have class. Cloud imperative. customers platform. now manage

Now this and Behind in customers Now every better become that power leveraging workflow Platform outcomes. great enable the experience more to business is workflow. a pandemic. quickly The self-evident than of great matters management Platform crisis the to has ever. that deploy Today apps They’re

at response partnership government apps, by with great own developed examples end Washington installations three State are Los of Washington the COVID-XX are no March. one San a emergency the few in place. our Department X,XXX we and respond. of have are and taken just developed Our Angeles a State, apps example. at four of agencies team, helping were how charge Health, These Francisco than released More

Platform us telling that Now CIOs teams companies to the their workflow their are deliver need now. experiences designed using that are

Within due request emergency QX want Now Platform a on mobile paid be the done. do needs Lowe’s This employees. example, what to leave is about, requests customers deal all helping reality, to surge and to what helping built XXX,XXX leading, the deployed it For Corporation app a was they facing with was them our COVID-XX. XX hours, of leave

XX% some greater year-over-year. results up this the is Let’s million of at XX That We deals now. $X look had than quarter.

linearity. most In March, weeks deals final of the in fact, with closed consistent normal

in at strength region. saw best-in-class Our the We renewal largest our Americas, rate remained XX%.

a saw COVID-XX growth APJ, of despite also the quarter. We in the impact strong throughout

representing where signed two South we new Cloud live in Now Korea Our customers, major went in brands. March, Seoul,

deals also a We environment. completed challenging in EMEA, saw the despite strong

results the QX of strength portfolio. reinforced our

Here this, XX included insurance our such products. Merck, deals or and a largest U.S. with new signed included Fortune more as top Siemens second transactions our which This XX three with XX companies Humana, leading was of company. customer ever,

operational automation We delivers ITSM saw and which great momentum customers. for our Pro, with increased resiliency

risk this management business Our multiple of top and XX products. integrated deals IT continued strong momentum. our products included continuity

the now in of We continued of our top IT they productivity. U.S. using XX Now entire Chevron HR deployed workforce. management. for XX,XXX-person example, HR. products products our traction Services Service the of Department multiple to products saw business They and of across Human using power our suite and are realizing by is their leveraging Customers Platform and ServiceNow to the their Health included Delivery to COVID-XX. HR such deals customer as are service respond Half HR to drive

more did have a ServiceNow. XX one streaming now including it growing greater customers million, of business. digital game-changing launched fastest than $X with than services. digital They the CSM an company We innovative This

technology possible. them Our is imagined service scale anyone than management helping faster to foundational customer

their APJ. Japanese to we to and our time also customer enhance customer resolution satisfaction. ever based Murata support, deal landed QX, purchased increase Manufacturing reduce CSM In in largest CSM

We ever. release also innovative launched Orlando in Platform March, our Now most

and Intelligence, gives which about. one capabilities Orlando Now features of workflow customers ever. analytics Orlando any across adoption Now support Driving Platform ServiceNow’s all was day mobile productivity is AI, designed new Our unmatched what highest experience. levels the to enterprise is

to successfully at of University, Information Technology upgraded example, The Princeton Orlando for with CSM. Office went live and

functionality serve For instance, and graduate says, Dominick fast students, current other to to and stakeholders. prospective CSM Jay CIO, they staff, implement faculty moved

and I’m to worldwide. leaders And talking many C-suite CEOs

fast are what crisis, enterprise Here’s productivity. ROI ensuring workflow They and or want core that less. me. in protecting strength. The a XX news they’re ServiceNow continuity, driving revenue, good on to time business telling is platform they value months delivers In focused is, an

The is IT, for industries strategic all all the across model, one data one to and be customer workflows clear personas. authority gives customers and ServiceNow geographies, platform. employee choice one us advantage This architecture, across

stepped And clearly. ServiceNow. Accenture, DXCEY, down customers. they’re our value how doubling shared have Our on KPMG, to our sees [ph] partner others up We ecosystem Deloitte, many and this partners support

start our customers. the fast on QX Our focused most is to matter priorities that playbook

customers We’re never our engaging like before.

fast for one critical and resilience key efficiently; messages: and five technology and quickly scale there; right includes priorities experiences. customer employees fast. great operations; out new Each employee playbook reduce drives QX operations deliver ensure Digitally lot business the create start debt, of these from Our workflows there’s anywhere; experience a digital

The a fact, in these. prospecting solutions, These drive week, current day to built outstanding. in global results company customers with we were simply Last potential were and wide pipeline. engaged

previous delivered prospecting greater three times Our any day than teams ever. pipeline

the around solutions and and every messages world. in geography are resonating every sector Our

on customers We’re encourage through also This our May pipeline I Knowledge engaging everyone join event. to us. building Xth. Digital and launches

our already anticipated the experiences six We weeks we have for registered twice physical than ServiceNow had digital of community. content incredible we has that event Knowledge number in in Orlando. attendees the of planned more and

be throughout experience. weeks. keep of the growing heck audience the to six going is expect next one We It to an

customers great We the it and is this delivering every the And special a how and importantly, a keeps And education makes example inspiration, community pivoted. connection, partners ServiceNow event that remain such of Knowledge year. strong. focused on have our most we

covered I’ve Hey, here. a lot

let recap. me So,

and QX environment work-from-home strong a to transitioned seamlessly We drove very performance.

continuity on do and innovating the to are needs. done. to meet the Platform they business productivity customers job ServiceNow is do crisis what customers management, their must Our to get enabling Now

pipeline really strong. Our is

are resonating. Our solutions

are customers Our more. asking for

led analysis more effort and the informed possible details scenarios. have provide Gina all are actions will thorough that and our exceptional has guidance. These an bottoms-up on our insights on She outlook.

uncertainties Our of a COVID-XX the result guidance the known as broader in considering marketplace. range customers our a slightly face reflects well

that, industries our say in Fortune mind across business. and in please the and Even all demand, that ongoing confident see And customer as in strong in are the is we our pipeline our we I opportunities, our strong XXX. in keep solutions, ServiceNow

ahead. aware are work the We hard of

taking are with company for is incredible This nothing We an team. an granted. innovation-led

unwavering will track be and a if it commitment gentlemen, record do ServiceNow it. can success. an have proven We customer Ladies to and done,

are We on move. the

much thank very and the I’ll for your Gina. you over And time to to like now turn call attention. I’d

Gina Mastantuono

Bill. Thank you,

quarter cash continuing We of revenues strong QX, and had billings free the we strong flow. operating our guidance end another delivered profit a of subscription and for the high coming out We XXXX. momentum and of subscription exceeded

year-over-year were QX XX% subscription million, billings representing adjusted year-over-year revenues $X.XXX $XXX constant QX XX% currency billion, growth. representing were growth. subscription

RPO, year-over-year billion, current quarter currency growth. constant And $X.X year-over-year XX% approximately at billion, currency obligations, growth. $X.X performance representing the constant RPO approximately XX% was Remaining ended representing

best-in-class at XX%. rate renewal Our remained

performance existing by continued our The top-line during this customers. is expansion of strong quarter driven

strength than ACV. $X We greater that paying customers. We to adding in closed new million also are see continued customers new in three

now We Our XXX annually continues in have year-over-year. than $X million grow cohort of than $X us up customers paying significantly, million us ACV. more customers paying to XX% more

We current due at operating environment. revenue performance, profitability travel and in our to strong with by work-from-home saw the strong QX margin XX%, expenses driven less

benefiting Our flow a free high margin our collections XX%, cash billings. from from amount was QX strong seasonally of

and digitally transform. first customers a Our demonstrate to position quarter as our trusted partner results our help innovator

guidance, dollars. I may response, business. companies, on highly they’re briefly I reevaluate those especially discuss in in Before industries [Technical now impact are of challenging customers operating move to want Many as COVID-XX retail Difficulty] effective In the some transportation, our hospitality, very their our spending such how of to circumstances.

We and and software our companies investment challenges. though prove emphasis greater more time place well-positioned that a to to customers will suggest the be return seen durable. surveys on We’ve value. conversations to on weather short-term CIO with remain own spending

part And Now our customers’ of mission critical a operations. remains Platform

a our almost globally. enterprises industry. serving every have business is And of XX% customer large across We base strong over

result, to we a renewal expect our rate. sustain As high

our in of of in expand renew industries, in affected highly Now March. customers occurring many the uses saw quarter a we fact, this large and their Platform their with the the contract In of portion

existing start QX continues first have been closing fast we entered customers successful And as with playbook. to with April. pivoted I’ve new this we both the mentioned, in our and seen We’ve work-from-home environment. impressed of we thoroughly Bill in how As grow pipeline motion with business weeks and quickly few in our go-to-market been success the early

challenges are in said, customers the our particularly into that account in have our With QX, been facing, assumptions. taken

are the visibility have our operations value prioritizing While they customers Now we until into business. transformation in initiatives their delay it, customers we the may Platform investment of future greater know their new and

we expect operating current environment, the some Given variability.

affected believe base most industries of our we be previously which business. XX% will represent acutely felt by discussed, the this our highly customer However, approximately in we

The other XX% that affected. are industries less are

through our we’ve committed to provide the with customers time. and challenges. We to manage are helping very greater this flexibility customers our through manage When difficult taken measures required,

As Bill said, we never like before. our customers are engaging

risks done We have opportunities understand a to of the ahead analysis us. and both rigorous

adjustments short-term made potential the guidance the our to have business, we of following our impacts methodology. to Because

and First, our the guidance headwinds QX. occur significant most will QX assumes in that

economy will We’re broadly the end assuming headwinds more year. these also of the ease by will and the open

the Second, we’ve guidance of the renewals, new for in for with subscription terms, affected billing uncertainty and particularly range highly increased business, billings. increased This timing accounts customers industries. of the

the confident believe our is by that environment, in risks current these While appropriately assumptions we are guidance the we on the based macro and are our by guidance created updated making adjustments, factoring COVID-XX. about

for of ACV. the visibility into average, remainder remaining contracted XX% will subscription already is XX% backlog. renewals, and by revenue our the and As is predictable. net by in that comes On a our recognized reminder, backlog, the Subscription is we more included XXXX more be billings. have revenue good even from XX% portion new of driven Approximately than

to for U.S. second COVID-XX the full the result X% of as Now, XXXX, Euro the X%, of declines the Australian pound and dollar. quarter XX% reflects versus and which of the the guidance of turn British of FX dollar let’s a impact headwinds, and year in

$XXX expect to XX% $X QX, representing million billion, revenues XX% year-over-year growth. currency we subscription For constant between and

and We expect $XXX $XXX representing subscription adjusted million billings growth. to XX% XX% year-over-year between million,

to operating to and a year-over-year a a XXX points due of XX% experience. in expected expenses margin, travel We the digital basis up transition Knowledge reduction

reflects currency ACV headwind full of reduction For billion, the and is subscription This to guidance be million to between of constant million expect year-over-year we billion XX% range. year $X.XXX new to and currency driven from a growth. $XX previous foreign $X.XXX the XX% XXXX, guidance net by $XX representing midpoint revenues compared our

the foreign billion billings representing to our reduction This $X.XX new $X.XX XX% of expect and million $XXX reflects to driven exchange $XX ACV range. XX% billion, previous million of growth. net and We the guidance low headwind by subscription a year-over-year to of compared be midpoint adjusted

margin continue savings lower This then XX%. hiring XXXX to raising We are to transition experience. subscription ‘XX digital of years full our we Knowledge expect gross XX%. margins G&A travel, And guidance for of XXXX reduced to operating and reflects from

these our in areas year, next to expect into Looking return we investment levels. to previous

R&D to maintain confident we pace feel strategic beyond, opportunity sales. path And to continue throughout billion and we will revenue invest in as areas, hiring about $XX to such long-term the Importantly, to we in of as and thoughtful and continue XXXX. expect a

continue will As to as always, to disciplined generate evaluate the our investments we we be we ensure greatest ROI possible.

an XXXX year reflecting cash of increase expected flow DSOs. in full maintaining are free margin We margin guidance offset in operating collections the increase decreasing by to XX%, due

second average million. and expect $XXX shares full diluted weighted we XXXX Finally, of year outstanding quarter

few we as a In unexpected navigate to accelerating global summary, clear. is transformation things as Digital their have disruptions pandemic, through react companies business. of become this

the way done. will We transform help companies work gets

product We have short-term a portfolio world-class the right to and challenges. management a weather

positioned better even We and stronger customers from evolve our emerge and will companies. crisis this help

position in position $X.X strong $X.X QX in of billion a exiting net a We’re with cash very RPO strong and billion. financial

to long-term continue will invest We growth. for

of their continued We communities. been and proud on have serving focus our on our customers, never employees partners

and stronger humble than ever. for can’t work dedication. helping employees is We hard thank Our our enough and their culture

that, Thank like you. for With now operator, questions. over we’d the turn to call

Operator

from Instructions] Zukin [Operator Markets. of comes question Alex the with Capital RBC Your line first

is open. line Your

Alex Zukin

congrats right Bill, kinds insight and a great customer guess, on taking gave I us of having you some question, Hey, Thank you you’re the for now. guys. my good conversations quarter. on

right April? what us breadth about look message, Can can business and of you a You facing now, you’re you just you’re the how the and closing in the the flexibility of then, at right real follow-up. where now given talked pivoting fast how forward, quick these Given kind driving us conversations help time you’re portfolio? sit understand And give and the a you of I’ve playbook. start got pace

Bill McDermott

question. Alex, great it’s a

actions in a importance, get clear overstated it and with Having the also, jump to Company apps, As like in you into race galvanize we team, then COVID my do all-hands in to companies you the leadership the customer, along in the took terms needed in the QX been response playbook people clock this, and we of know, around customer a immediately with in measures that communication market four rallied the of was to their how the around on cannot in-process had initiative, be the crisis career, of few crisis. a of cycles our through our that sold really work-from-home to times me what you’re against execute. in what a face

end we great effects feel Fortune shocks a course in XXX, the that did of are handle feel dynamic of industries of you it’s and the but greatest about them XX% high mainly XX% the of job market COVID, customers the COVID. that and that Gina telling some

is So, well. for perform ServiceNow set to the stage

What to I’m a relates to March year. continuation seeing April did what Gina started I told close linearity we and March to expect basis, in as it closed would From April March. and the actually the has about trenches last than you as April faster is

and pipeline solid executives had you a year-over-year you sales companies on to what April. percentage basis run bigger run that the than people very with that reporting talk April. I it our leader, do in in our higher trenches, on like a is when and in participate daily last conversations So, not And we than was actually entities. door is is to it the government basis, shaky, forecast the him, the the last have we And is

ServiceNow. things well very at going are right So, now,

Alex Zukin

Perfect. Gina. And follow-up for just then, one maybe

terms. churn, customer dollar mentioned are and churn, to now investors contract DSOs terms or right think scrutinizing payment flexibility, payment close You I

XX% of does inform impacted? your So, guidance current billings, subscription seeing around confidence particularly RPO, industries of the customers, other And now visibility maybe that that are from factors? any some right and are that you and in what for how

Gina Mastantuono

we’ve I’ll to payments. had that Well, Sure. unable that any point make say this at are not customers

base healthy. our have provided some customer flexibility extended and very said, so, remains we payment And terms. That being

guidance portion and far, about will deferrals base. we’re feel adjusted talking flat, that cash of into little a basis or operating are in very flow We have will the those So, ‘XX, why customer that payment margin a payment our in our customers a there’ll our industries. is be like not a and don’t [Technical part, bill. comfortable flow do on have bit anticipate increasing we’re We Difficulty] that feel we Difficulty] even revenue highly we that though company, so margin points. the it’s XXX for our [Technical ones but free early terms impact by cash It of or effected on meaningful the billing. But push guide most

Operator

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

Brad Zelnick

Clearly, Bill, if if go-to-market new it business? Can only I adapting strategy more value as your on at relates all, digital. can. has versus field changed, how the logo you elaborate these the prop expansion during times? entire world pivots your how to becomes crazy appealing to as priorities you’re But,

Bill McDermott

I the ServiceNow to marketplace. the utilized the big logos was contact little that told of and a C-suite in actually last One And my Merck. on to for be the new logos, mentioned thing. Brad, goals, in But, elevate one as might the of trusted a here’s but level earnings of call, the innovator be I that you was new there counterintuitive It actually, few were QX. a in quite

CEOs because in office, good phone call they’re executives are they’re and C easier for to to a home and or a been, get one. good ever and Zoom, have looking finding in they particular their ServiceNow, now, in than they’re level Right

their drivers COVID them. a we’re that is basis, what help specific in doing very on in especially their we’re important we we’re outside-in environment, to persona. industry, an aligning presale, what the specific can value carefully, customer especially the on are And to studying So, the in do

We called do physical we executive we center briefing in -- meetings. schedule had essentially our team world a to what

on time value immediate and Only, getting We calendars or that that of give tear center for don’t a that things the can care about. world. and meeting. the we’re because have mission are wear have can and in we virtual they critical because their of have aligned them Now, hands more executive people the have difficulty same simply to many briefing the things time them priorities we

care have. already they grow, they about Brad, can’t one thing, then, said, protect we the revenue a overstate to I this what everyone as business it. have. And job but lot is protecting And continuity Obviously, wants

anything hundreds example, is people. to For management well physically computer consulting very of large it’s set, workforce And -- the asset about and sure the it, value that think with need make trace a phone there one whether a of how to them, executed the chain. tool might it’s company get thousands you there or and or across track work-from-home and like something out

think management So, on managed a basis between all physical now virtual about asset a and a needs workflow being world. those enterprise

resonating. So, this platform of really platforms is

So, for activity logical you’re to well, direct now business it that C-level to the because easier people ever before. has executives go to and it enterprise increases market, I it’s even than an sales say, primarily with been better do just digital believe in to it’s works set be but concerned actually,

one really very, XX changed about fuse I though on a with has Lowe’s remarks where to said and told short, short. something The we other I be that’s up to value. very running value has hours. XXXX. it is my not dissimilar them you Right? opening The I in would all employees the about to be is it’s to thing thing you, story and about had mention and It XXX,XXX

a system people in that And couple get record of it We the and value. how long old world have installing weeks. of the ITSM takes to just to compare Pro

get agreements, all people first about how just to it’s end to to on these And the you are mobile digital. being into and workflows So, digitally. are Platform reassembled chains splitting so even value Now the how can I and think willing relevant. they just everybody order and And apart the how engage old quickly we’re want value, the end and

there anymore. get You things don’t and out have go signed to

the of net So, it. much that’s pretty

Brad Zelnick

for Thanks helpful, It’s quickly Maybe Bill. very, all very much. just very Gina.

mentioned you it down the talent? find beginning think, I of plan you weeks month that year? gotten or last the the hiring. have to easier since evolved several the on or How slowing a has noticed has so hiring over And

Gina Mastantuono

I into half. would G&A now I about talked back and about slowing we the that hiring say Yes. consistently -- and what talked

will hire continue hiring to fact, And [Technical aggressively Difficulty] have areas. Difficulty]. some Difficulty] [Technical We in today [Technical of those in been

a so, we ability is not which date seen And strong to attract have to our and really really hire slowdown talent, in great.

I think, what are we’re I hire want Difficulty]. trying positioned to this do [Technical is make be storm that continue to critical really Difficulty] [Technical to the here. sure thoughtful well about to hiring for we short-term whether

Brad Zelnick

Thank you Awesome. much. so

Bill McDermott

a ran you this XXs. Xs I Brad. and guy is and that’s to just people at net has and on build science Gina is patents. out, mind, on Officer, little destination we’re just And AI color. XX want call this hiring Hey, now the successful a what solutions engineering everyone to Vijay and One He Pinterest. else saying, To brand Keep talented Right? it at super Narayana. know example our Chief in Microsoft about. data give is

in very, ability And And the the market. was have to chose We ServiceNow. getting everybody. he he offers best attract very from people the

Xs talented are that as in we -- also we they’re people, in engineers, go-to-market we sure So, and XXs. we’re bring as making bring

below. and Xs in rationalize. interested not the leave that to open We’ll to market We’re

Operator

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

open. line is Your

Sarah Hindlian

Gina, for and providing especially Bill us Thank outlook. you an much, so

right for to what your My us all you seeing And we extremely challenging, very And you, one ask process with questions. was a Bill. few I we’re understand is first sharing think, I now. it’s wanted helpful. given

We are about a hearing lot of companies. some our

And you far on time exposure is ahead but through working than was potential those have some the prioritized or that of together if of they ServiceNow wondering extensions. customers some team renewals sure under of on pulling a side. even SMB more contract making come distressed renewals granted, really Now, do, I kind focus

have And then, Gina. follow-up a I for

Bill McDermott

Company about all, everybody this Absolutely. is customer long-term Sarah, driving sense, first in more, but of really The for sustenance customer relationships all that ServiceNow cloud is sense these the We in to very everything it’s loyalty. of much the question. of know you culture. the the thank everything even want economics

customer In that sale, consulting partner support, installed also sale, customer presale, it team affected ecosystem in and base, process. the includes We XX% legal, post-sale our segment we persona. the have COVID-XX, also presale, and industry, do we by finance, have value most chain. involved a a post-sale this by of in by We our cross-functional aligned

So, we do to all can our make we customers successful.

had single haven’t We a sell. down

been have need it things where to are flexible also the on in that we’re But, win-win Gina’s orientation. cash which stated. We at looking we be,

a it consequence the them Platform we COVID get customers can if not to even that renew. is were It’s find it is even technology simply they of So, And in these but whether or on lights worse we help the this today, difficult was companies, than keep is it a it’ll have have. just very get to are that therefore, time. expect better, we nobody through worse, if even disputed has it realizing Now need

even platform mind. in The the on relying that are keep more. customers getting So, stronger is loyalty really even effect because

causes root times companies engagement, why help even in case lose, good because that willing in to And with and the to to every have the really they most. to love ones our customers customers bad, future. as been at product stick that be and that the believe look And product needed their the win has it’s I essential and where

Sarah Hindlian

with fairly I there’s a in simple revenue build Bill. question, operations one, just primary outlined? through Gina, as the is platform up than depth continued I building work-from-home is maybe follow And hearing success And to the one the especially and it, potentially but as you also model. to driver a And how of working helpful. relief some down you. boost or I was particular I given on definitely from expecting very enabling IT is thorough. That a it or was guidance. I’m Awesome, The wanted interesting you the customer appreciate perimeter, wondering Thank seeing walked a fiscal mathematical that numbers, an in year know, you’ve were relevant. of see outlook, a was the cut being very-distributed to primary, are me. environment? you better way the you’ve But, if driver. extremely

Gina Mastantuono

I think But be that see continue strength. place that’s super we going to as is to the now, IT becomes IT where business the ops only not important.

our we deep and dive a scenario et for our so, extensive we bottoms-up, our renewal cetera. coverage, did And did very rate conversion, planning pipeline

We rates our as our renewal And our them thinking or whether of will But, just not, new from stay it’s industries. strong. delayed. we’re guide, and priorities, of so, digital we about be may customers some about that believe really in original some impacted think net highly these

So, on where that we’ve Bill that guide. believe talked focused digital remain, be will strong a renewal believe has we’ll as that’s we’re to able priority, rate. our big down transformation the We We about. maintain brought when really absolutely

So, current we our with now guidance. feel very confident right

Bill McDermott

of customers such One thing question, because I think to we on your really be us. everybody telling will this. but and is kind know us the It’s have interested that it It’s in mind. they Why have probably confidence? it’s confidence everyone’s

productivity. them platform. underperforming, doing The What take they State chose stakeholders, of that’s And And and is costs because Home And of is agencies first Department the initiative. management. all they down that’s partner California a to their outdated went as that So, customer they a ServiceNow -- vendors helping example the about simplify improve Affairs Australia. why environment, solutions into service getting one, an cloud cooperate. perfect basically is drop for in and old integrated are integrating in

and the bogged XXth you’re a here in modern, it’s something thing versus and the now what nature the on So, simple platform, integrated of what that’s into plug the they’re recognition do, move down platform tech. so cloud the processes by the to that seeing how century can the is old

So, we’re feeling good.

Operator

question next the of Your with line from comes Samana Jeffries. Samad

Samad Samana

how the the a do the about in around think from they of Maybe it I everybody working being Are more maybe and remotely, moving But implementation the question, same remote you in bit. little motion. talked to guys as as move takes full on terms a perspective? first at you’ve those sales about know have before? with what the I But, know implementation? about customers, quickly, cycles Are touched puts you a and speed ability

Bill McDermott

Yes. training not that happening. And required that’s It’s had a concerns the But is very the know fact virtually as ServiceNow virtually manner do it system but can the but was reality there how that absolutely can people with on so initially, ecosystem partners Not our know being an some ServiceNow well which I Samad. that implemented. been how to That’s to good ServiceNow issue our only that. how in the as done that viable is And ecosystem. to probably have certain implement question, what’s ServiceNow was. is actually viable. by initially, as partners too substantial And partners, do in may whatsoever. is,

Samad Samana

beyond acquired over down just down going of crisis, How to go-to-market just as that everybody thinking acquisition more abating? the moving questions, it’s just be more those maybe with it seems it’ll do think costs us my come just tough you coming one forward? but allow that customer Do maybe about are structurally again customers well. virtual, this to that efficiently then, And out the the for with taking T&E on answer events being Thanks time. you think the wish may like and eventually of and this

Bill McDermott

Well, asking who year, would that would pretty of XX who then canceled Because have for anticipated physical yesterday, Samad, And implemented our Marketing Communications told leading you has I me XXX,XXX. is we are our less, our event in that XX,XXX his some who or where here. in event physically thought Pro in up now ITSM by and been our days and in signed ServiceNow partners might tell event remotely, which well Knowledge great been the a We already the too. I registered I’d our the have environment. virtual people cool. have XX,XXX expected we event event have Orlando. epicenter questions have job have to would you great Head story could wish thought for And Orlando, add, of of the and doing event, the over this is And a Knowledge headcount

our of this And post-sale on that transformed, be get more attracting and virtual refined digitally actually motion the basis actually because want the coordinating part and in layers on digitally than a point that might We becoming who is a good and is others second bandwagon world. all of the cost companies prior was of the very far discussed You’re from physical, effect. pre lower some I it high-touch transformed highly power to might a sale recognition learn brand are well here. of

deliver more it can the a through case, to rule but more in volume, that bottom might I’ll wouldn’t line. you get still be cost way. able so flow we which you do at it I and to to put high deals higher of sales, value, lower out. So,

Operator

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

Kirk Materne

when a And all out self when CFOs, congrats think care everyone out are their guess, the seems ever much. -- in more very talking quarter are focused budgets People what than are more glad on lot obvious, obviously with just is Thanks mean about pressure. the really about go CapEx standing and and and under on my things you very bottom-line own I difficult answer somewhat to Bill, spend, we outcome. is to economic are so a add but start you well. somewhat period. doing obviously, like maybe nervous I I’ll their Yes. I you, or

that I weren’t out seems through new Because, really tapping organization just sense perhaps I within to spend into pretty else. wallet think or unique this from is, Are IT of So, well not your in business but are stands we actually the you everyone getting do month, a you that think doing what you organization be you’re general? you share and hear business that before only will good the consolidating the line a when happened? have quarter, be

So, could you amongst consolidating just this are point Thanks. talk your customers time? you just at maybe about how all spend

Bill McDermott

the heads Kirk, C of workflow. the Yes, of government is every you thank executives a experience behind that question. great want question with we’re level really, speaking or And much a with regularly, Platform start daily in a the of fact, meeting is concept because platform to I platforms. on off Now great Well, for every this very It’s smart sure. really I

happening the say heard And mobile web that here workflows digital every are great when the substantially But Company. every into and see their becoming company. I that within for You that first wants customers experiences came CEO important see is conversational me we what assets we includes tools. and employees

this that Engine customize companies. way would last want of has handled AI the then Now into can and been one platform that with streamline, employee they machine We they and they apply is our the these And on enable Platform, to Orlando one can data experiences. to you’re for And years, the of in where platform and really real is to what down workflow, I see record essential to analytics no also by a because workflow customer debt, system from why IT with one with see model happening the they and lot waste and I can it. need customer App me, eliminate new the companies drive architecture to employee experiences record clearly anything of are do able on uniquely use to workflow, workflow data system of the I put when want the telling double it the ServiceNow take a by the learning way get well engineering how a XX having

return on investment. actually So, a such great it’s

know do yet where you value five why I today, outdated And software I example, forth. under asset And something it’s utilizing I’m shelf-ware C-level One said executive this we so like, we’ll Xx year. you analyze I ordered kind this and can’t my I scenario, It’s for management hardware haven’t of ACV say know, said, a better do. as the then, it you for I fully that from management, this or solutions. do gave well, customer, you also seen wouldn’t you. in scenario go and asset it. I me we one to have

found any order no, XX% we I cost No, with a the And I’ll just case no, said can’t haven’t profits the guy got business we where have it, problem split if you. goes, really? it? from of Why you. take the anyone’s yet with look, don’t We out. I’ll

that’s the So, in. of environment kind we’re

take you out. cost, it If want to we talk can

you talk to workflow If are want we it. the experience, behind

the in to If to executional be job to the record, and customers and of conversational of do you that want experiences happy the the inspire mobile loyal. employees systems cuts all the across excellence a help this enables is all world, virtual platform and talk their web or

believe, it’s making in on history. resonating quick and is our So, really this return truly I critical and work really relevancy, work, better think, helping making at it’s for for And I things better world’s everybody. truly the purpose really is investment it’s time people people

Kirk Materne

really really one Okay. just quick That’s helpful. for And one Gina.

front? the Gina, all? have Thanks. full sort any you outside guidance So, of flow around It changing seen in your cash that that for need get made on like at XX% way modeling are of sense customer that real duration haven’t a versus any of on year, invoicing sort assumptions to sort to base, you how of think trying of you the sounded

Gina Mastantuono

Yes.

and our been the impacted the with heavily XX% real earlier, only given hasn’t it customers said of industries. that we’ve is tremendous, business seen, I As issue that in

timing. to with of or any are real invoicing respect sort We not issue duration seeing

Operator

the comes question Your Jennifer Lowe from next UBS. line with of

Jennifer Lowe

currently follow couple is XX% impacted. trying on there’s of to disruption? questions things the by as expand current -- up assuming with to Maybe effects that XX% impacted relatively and beyond of the of extent the less directly? that’s Gina, assumptions directly on think XX% is are happened is some the if in times just possible, sort to of crisis, that relatively remains the most you’ve other a further assumption we what that think contained quantify one. you quickly industries or I’m sort the the that feeding little that just large corporations, that or about of last into about impact XX% downstream are But, sort earlier the guidance, industries mentioned impacted just

Gina Mastantuono

our of XX% the of only business only, XX% not in impacted business basically, XXX. Fortune So, our heavily is industries,

are And type we not of so, SMB business. to as exposed smaller

as ACV. for, we new we May a normally speeding bulk lower companies net reflect from does see companies heavily of some will guide from incorporated we our would our delay definitely some their still impacted as but of what these on in come The of of they believe so, more growth the And expectations look some some that some well. and that

Jennifer Lowe

a things that And seeing we’re earlier a stay than front, but feared. little and April, there earlier guidance starting also pipeline maybe difficult like reopen press about more things couple assumes the industry to the on continue that. momentum the And was mention quarters, some to been positive there for is was had

potentially that to how if at So, in business are own of up could the do bit don’t look like? side, your sensitivity are on or the to open going And on us we frame a that looking sort do what is business guys positive if back? been upside we of sort we that sooner, be see things get look to forward that think to KPIs you’re what trending? does the about more might the what have How start there just you previously think back get the things out comes

Gina Mastantuono

never and I sooner, we’ve very economy the before. is we that economy opens opened We about, are broadly upside, once us positioned our up are transformation if more like talked more well digital imperative ever. engaging right? definitely than No, think up, And think potential really the that customers there’s with

And in my eyes, sooner. market upside up so, certainly there the opened would if be

weighted, are each we know, very month weighted. very we’re also last you quarter within very, and As QX

actual as So, conversion about stronger than look of the ever. at talked we we the pipe, being pipeline

Our current higher than are conversion normal. rates

to are well the that if broadly helps. position opportunity And so, current economy very potentially have opens be guidance, we in more more if a versus up the positioned to

Jennifer Lowe

Yes. much. Thank That’s you so great.

Operator

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

open. is line Your

Raimo Lenschow

digital guys on squeezing all healthy. you and transformation. stay Hey. hope for Bill, question, me in Quick Thanks

but kind about tilting of for changed and are your take people subgroups, bit sales how times weeks Can advantage have the So, for of to time faster few that quick lot you’re things sales a of terms the like approach -- especially to in people, a talk of ROI, last for also of different when digital in a over transformation, a can lot mean here little how approach projects kind money? a of tougher, you but you still ServiceNow. little do look the faster bit maybe

Gina, or special quarter, there margins were drove anything what quickly record in subscription. levels that? Was this then, they at on gross And for

Bill McDermott

this off. start I’ll Raimo,

value CEO was As your September as enterprise. the what And solutions financial the really have cloud and you budget, and on from you’ll moment. about when the XXXX job was across do that and at the that said, in pretty the feeling century pervasive good for team, to substantial. the the became Because power remember it do of basically CapEx the slowed management first fast of the do to done, moved OpEx to took XXst computing level. over CapEx get the theme was XXXX, world time That things until crisis the very hit offered on that ultimate cloud move

case, a born already cloud our the In pure market we’re leader. play in

do? that So, our in way solutions do that what main market platform with and essentially they take playbook customers shape We our fast. what need plays a you you leading and gives what five wrote them said, a do

CSM, combines digitally ITOM solution the to scaling quickly capabilities Pro, our and our and run. our and your mobile our an example efficiently one ready ITSM operations that’s as in of pre-packaged capabilities So, box out

of management application to reduce the your debt, Cloud have want Software tool Asset run. Management, we you technology and the to ready box If our Insights SAM, out

critical this want and for you operations for security governance out risk resilience the the box your compliance, we IT to operations we run. employees. to business ready do If And of operations, have ensure

building this do you’re any when workflow. also We

the experience anywhere. want So, the you digital right employees, from for

listen and the calls, to on business that’s any council they CEO You want. what

right my for anywhere. people the experience need digital You

Human ready of it’s the So we Delivery to all have Service the Pro, mobile, It’s ready go run. and Resource box. out to

in earlier talked my I management. course, of And, asset about remarks

like, on to And the Again, most, need located. the have creating when new I ready awareness go. think ServiceNow to workflows trace them We And it can track for this to the I three App I do app? them at built that the Engine that And of of a as mass kidding? and with out component you do really of assets have scale soaring my COVID-XX new finally, apps. are get People our a the people physically well. we days. off stuff with Are And box own you where wow! can You fast to kicked in speed? they’re Platform. you is now kind

want days. And business because I a on do it employee I rewards CEO an score do had goodness! to on I ServiceNow, get said, analyst great who a trying three my I Glassdoor. had was in to one was program, fascinating,

of align world. within to whole everything fast, super to in value So, do that we ready to go chain we a box, customers is the the our virtual out and company provide

Raimo Lenschow

you. Thank

Gina Mastantuono

quarter question driven And XX%. greater of of gross see was on with by revenue self-hosted That in your a the the higher quarter. mix really we about during margins, gross did margins

that XX%. our for full at guidance expect We year, more the normalized that’ll be

Operator

Your question next of line the from comes Phil with Wells Winslow Fargo.

open. Your line is

Phil Winslow

segments focus And financial, HR, you you, you the and of ITOM And have think obviously then, Would sort and your ITSM. a these one just software in and talk my question, versus on you’ve executives, maybe are different of and glad above I your great past question Obviously, you Thanks you course And this all like congrats hope Hey. as hear healthy all, you Gina. I changed career. of to a products, for your Bill, over a you’ve guys, to seen quarter. how for team. first. the actually for you mentioned, sold past for frankly of families and follow-up now the lot of downturns has taking downturns? a that priorities same within CRM, lot

Bill McDermott

safety give everybody best, first your transformation. -- I on Phil, keen my and think for Please and of your family. wellness to today very question Executives digital thank Phil. are you all, and

where wiped to are, top some going CEOs digitally make do their trying they’re can’t and go way the trying in at meeting digitize not their transformation list isn’t to is a they of CEO You sure know, digital because to they’re that to and out. get any to among company transform if their competitors

where is the action is. this So,

don’t that. explain to of have we the And in spot. sweet sort We’re

hitting that’s those And have one because we the main well position, do with but biggest of a prized domain. been is the in very a in have stage ServiceNow they unimportant, that systems Now technologies with the record not tech. and is past thing companies the made. specific problem the investments It’s of

Because I people make So, platform they investments that’s investments and of to the so they’ve want to talk customers. well all enable positioned workflows the already which outstanding and where CEOs those comes better. us made inspire platforms we’re to do help is that want their their And to, to work service and the to create in. take done, them provide what

done set, big does in and an making has can or XX sure understand as you is things right been level Phil, constituent, healthcare the every we remotely. one the understand service engagement SFA, been the manage corrected an when things be cross-sell operations, analytics and machine of engagement. take well learning care hasn’t done all understand right CRM could and training with what a the to all field right it each for to done how make it’s well-penetrated. for the tool claims on learnings with marketing, is applied We how have so But, incident, person, all preparation. upsell, example, the be million understand deep sure right well do are example, layer And But provider of we mid-office

hits. resolution effect So, loyalty process, the the when satisfaction, curve up customer way they do productivity activate a goes

also the internet. the consumers can Now, given plus you’ve agent on handle at one where virtual any platform we seen XX million time on

mainstream evolved, is really it. leading digital is transformation. new and they is in like and CEOs, workflow which So, awareness, hitting it’s ServiceNow curve for a And

Phil Winslow

you in when this quarter. headcount and then, saw we about obviously, marketing And a think pretty sales significant line, jump the

One needing of you’ve that things set. for is talked distribution about more the broadening product

in Bill So, there you maybe you near-term going off forward potential, sort the as headcount to of Gina, line productivity? about and long-term think guess but balance I for also that growth jump how just

Bill McDermott

up. it is Maybe then pick just I do and could I’ll off Gina start Yes. let what

So, deal. here’s the

platform We platforms. have of the

ITSM, supportive like are and about continues grow. experience customer. Incidentally, great. of we’re fantastic we very and the that’s Because of And portfolio. Employee systems You off to is know, in helpful question the taking the make also that to the all all we solutions there’s doing record rocket the no a out hide there. complexity in user

make our of can is priority course in in we layer, the engagement consistency entrenched sure We if you, the work account, layer, And the motion post-sale value to presale have as in field and we everything the mentioned tremendous And better. to Engine. the there’s go-to-market no with no I that as every make chain mid-office, quarrel align persona or one App already CSM, by aligned. completely meticulous like handle that. market. someone do ecosystem. What service sale, detail geography, see that they a customer On we with then, But, industry in just certain the the there’s support, to we and I and service is and attention

at think I do mass the now, to scale, best frankly. virtual it environment And way quite the is

learned crisis. in I we this that all think,

sales line, to a have new new specialist in or and support. past, would the we Now, have a invent to product force then a

with able pre our in in more that expertise things, new professionals, and these I we’re and finding more, going core aligning value chain. sales be think because things, on a we’re of do the to training to shaping these level

time the That’s we’re have more, more. want I And Xs only as have Gina? every get potential. we’ll maybe So, time, XXs more think we done into opposed less, hiring we’re mentality that that’s why we with this. to add over high to putting

Gina Mastantuono

just Thanks, that right. say you’re Bill. Yes. I would

we’re well strong as that getting aggressive It to sales the strong long-term And and made a growth us yield affords targets. sales both QX. would ever. we’ve in have I which to and continue ability good marketing was and we in growth also in strongest as in quarter the R&D. productivity, hiring seen headcount We these maintain invest us aggressively also on say hiring investment our our tells marketing sales

to here the So, good, business. to trajectory we will long-term the we invest drive continue feel of continue growth and

Operator

this concludes call. conference Thank participating. gentlemen, Ladies and today’s you for

now disconnect. may You

ServiceNow (NOW) 29 Apr 202020 Q1 Earnings call transcript