NOW - Earnings call transcript Q2 2022

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Operator

Good day, everyone, and welcome to the Second Quarter 2022 ServiceNow Earnings Conference Call. I would now like to turn today's call over to Darren Yip, Vice President, Head of Investor Relations. Please, go ahead, sir.

Darren Yip

Thank you. Good afternoon and thank you for joining ServiceNow's second quarter 2022 earnings conference call.

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

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

addition and no materially to to as on we refer new cash as and related be at information this measures, contains the turn Bill. investors.servicenow.com. or reconciliation involve with A today also today's noted, SEC also as between both With We'd current performance a measures financial to non-GAAP or the press recent for results statements over obligations, calculated website our of will duty result as investor measures, earnings website. release today of point call Before revenues, from a information to all for posted GAAP. today's such rates our some replay is guidance, risks, see like and on these differ To may and that assumptions. that, GAAP that want non-GAAP including call press on and refer please future Unless today's or and are we accordance get update except presentation, XX-Q measures financial in of emphasize posted RPO that our our which uncertainties our I'll We are growth events. and discuss in to forward-looking present that and we remaining for, we Please XXXX investments. otherwise substitute XX-K actual to based non-GAAP, RPO, not of such call, factors to statements. our release started, the discussed and on undertake and obligation out most earnings information forward-looking statements cause filings, to

Billy McDermott

the margin XX%. top hello, growth guidance at today's results line. bottom again line for were on Revenue and currency. results call. above appreciate and you was you, once was Thank Operating beat Both everyone. QX our ServiceNow's quarter. expectations the Darren, We XX.X% joining the us for constant

industry's Our XX $X benchmark. We XX% million. remains rate over renewal deals the had

Our cRPO we effect also a strong. year the QX, are you cRPO our through factor for renewal once moment, looking currency large And forward XX% the managing growth premier in strong. other also outlook is companies technology constant cohort current macro. full Like is

we effect others, this margin, a you'll January As from XX%. year returning also originally guidance currency Gina, of maintain in on hear to our outlook while pressure for the year on applies we're margin Unlike full basis. currency of you will simply our the set constant ServiceNow

the absorb disciplined through the management, platform. more run as ServiceNow We impact efficiently we will cost on

plus here of plus ServiceNow beyond to don't at this billion believe and on is fundamentals ServiceNow's billion hiring, is this one. we value stronger midterm the will blowing iron-clad we not our than XXXX, Looking raised earlier $XX aspirations, XXXX XXXX, $XX solid. The year rock transformation by tailwinds and stronger secular in digital which are confidence our by short, are waver. the every growth there generational profitability crosswinds. get unmatched opportunity than We of companies scale. an Growth Therefore, a combination creation for generates macro future. company. level our organic investing and expanding In

industry. business. color an Gina, underscore all-weather to Before additional Enterprise I me some is to state hand things software over offer the the let of

lower models prioritizing out to businesses there business growth. productivity are Some costs. enhanced evolving stimulate are to Others

I the the budgets. on answer. all digital this IDC to That's is of them technology add consistent and is stability durable. demand why technology have institutions several know only full might All and affirmed the from well Market call environment software that research of prestigious

with experimentation as see further enterprise of unsustainable also buyers shift from away consolidation solutions. software We

on they're this niche we So is to when sector consistent a from is you world. platform with leaders see in with with vendors, the and significant making investments Customers customers. faster demand fast-changing platforms platforms. drive a fewer our And ROI. strong ServiceNow legacy all reprioritization. think about are what company about technology It's

will process time get up sales challenge. capacity platforms while cycles As are on can trust customer we unfolds, side And those negotiated the macro do The companies to all bigger that greatest and this become into results of have are only more win. for great at look things digital to reprioritization. way need you like has long others ServiceNow, ServiceNow. as the save a forward. well. sizes the One fast. evidence our deal “We really all sum When it's ServiceNow the the asset as we ServiceNow at the business. money make that helping but She for opportunity, right our It's money, transformation and Not that the to the to is be customers to said, our on innovate neither need agreements. clear want the materials theme standardize is differentiate will of overnight need of they haul.” Time environment likely current for automation and

honoring is looking Our integrated hyperautomation to paradigm in great of workflow businesses proven SaaS customers. ITOM a the works their have of Frankly businesses that become streamline to of Employee net the driving serves technology top in businesses, That's the the expanding about Workflows on And $XXX industry low-code ServiceNow's operations. brands a XX. XX. Born capabilities also ESG end. applications key XX is Luddy's everyone own point deals fully ability confidence. enterprise to requests. and generate call in ServiceNow. In ServiceNow of their team. This was XX seven of a And enterprise deserve. digital traded more portfolio. of people. is or our that founding Banco businesses or with with that way across million. at they ServiceNow in automation Same to many is accomplished Workflows was has XX Data $X end-to-end everyday Adobe solution Bradesco, employees, top well. stretches across the great figure top prominent for faster are the applications to our $X Dun what's in for over vision Works $XXX XX in of million. Hawaiian of with results. ITSM million It's the here out to Customer greater intelligence, a ServiceNow resolutions World-class ACV Creator faster care extremely XX. transform with nine the ServiceNow architecture, of that several provide all maintained business software. it's actually and to XX another deals in And ServiceNow experiences the gives all platform software of companies. performing XX businesses of procurement embedded NTT ServiceNow Bradstreet, revolution works they QX its our end than these Fred XX about change from low-code about Media, publicly over than automation, was & ServiceNow process new milestone robotic was platform visibility and the it the like why make our performance mining built happening with we is top deals process With perspective, Cloud ESG execute XX% business. And has leading the to Workflows top some many the important horizon, remarkable in selecting the XXX CDW of XX suite current on And the Virgin Ireland are being built million achieved end-to-end With that artificial million-plus

and additional is ERP incident as Others innovative here world's this our commercialization stride example our market is net sales of addressable with integrated the Through on adjacencies. is personally to and workloads and build will as like And opening ServiceNow about businesses our Microsoft, additional as Azure. Overall with to cost-on streamline response with This annual like portfolio is operate market And to The ServiceNow as architecture our and major platform, ecosystem. our adjacencies stretch pursuit the opportunities objectives. I'd installed our is an some by built existing growing Tokyo release is will this with enterprise public -- customers seeing stress in countless companies. motion that a engine. our of to see platform Lightstep, be expansion to This benefit technology our new and next happening of be sector the of expanded we most might a workflows growth. platform creating And business our XXXX. is teams. of from this coming point these Japan one to its I'm a September. the some final base Global commitment fast-expanding incremental This partners. most up which hitting So revenue partnership Microsoft across into to strong in on milestone you're observability Tokyo to ServiceNow with help strategic heading a delivering workflows. is most migration

And grow applies We marketplace. are The remains a this to as aspire even on in stopping slowing future a hiring. while are the professionals marketplace. continues enterprise constrained. to need force ServiceNow. and tech digital hiring for also deflationary industry talented opportunity to an their transformation opportunity in ServiceNow effect build employer, software not is talent defining massive who There's The or to others ecosystem the

hiring. We are

belief and talent brand. reflection the a potential company. of And doubling deep are We our amazing on our that's of down this

are Our indication partners record at seeing which expansive their workforces is ServiceNow we for clip enterprise expanding are another the of and the platform. customers also adoption ServiceNow a cross

solution impact ServiceNow's ecosystem of piece strategy. Finally, a is critical our

with for value a up setting expand we but confronting In the and the the to of closing, we the respect it. virtual conforming we standard to a are It The and adds fast are reality, implement, all ServiceNow. platform. more not faster We use cycle new stakeholders to deployment realization.

thank trust reinforces ServiceNow. their and Our transformation line make I would for world shift to QX and to the sidelines. and imperative in you partners will our digital for confidence are. top better line proud We're the our bottom like the everyone. on work our not customers, continued to shareholders the we beat The who help

continue growth journey the speed full company the of software will century. to defining XXst our be on We enterprise

are hand Gina. Gina, We as over to the I'll things With resolute with ever you. world over because that ServiceNow. works to now

Gina Mastantuono

operating renewal margin Thank we our you, while constant the beat Bill. at guidance maintaining growth our best-in-class revenue and high-end XX%. rate currency In both subscription of QX,

Our business strong. remains

than is Our opportunity greater ever.

of Bill are feeling as environment. customers highlighted, macro the However, our effects the

powerful continuing and we drive can We're front putting innovate We're great the doing? always can they to their What to retain they the stronger on a to does. our than are so moment bend customers, this productivity business what So win they can to customers our out commitment in all our go-to-market of line, disciplined and culture while reinvent center to amazing curve do keeping their the deliver bottom path We're so on both ServiceNow their employees so model, experience and come invest organization and ever. incredible future to hands our our work is spend. leaning we they This so can the best and R&D into fulfill what wheel our growth being together. is can about. drive purpose ServiceNow with to people

elongated Turning currency an results. reflects representing This growth. growing basis to to And we growth. were resulted constant even the Subscription XX% approximately noted, to billion year-over-year the to elevate XX% in RPO At several decisions as representing cycle. currency. acceleration year-over-year billion Platform. the to spend access $X.XXX of $X.XX We've revenues billion the Bill of Now deals deal approximately is year-over-year our end exposure already XX.X% in the those $XX.X year-over-year. in greater constant June, quarter the in July. currency point see started C-suite closed over RPO this capabilities QX at ended XXX has Current growth in constant resulting customers of C-suite larger

net rates strong. and very expansion renewal remained Our

expand demonstrating us in ACV, our And finished in QX with XX% regions the Now resilience over largest mission-critical of continue the Our customers renewal year-over-year. business. million quarter The our operations. X,XXX a was XX% us. customers' customers $X Platform rate all our to remains part paying We up of with for

than net more XX% From Better ACV million than top than customers telecom and in year-over-year over positioning led have deals go-to-market XX to or greater XX more in industry net up other an new containing XXX million resonate media our with all five ACV, XXX% our we We paying verticals more now $XX ACV closed products. us perspective, deals continue and Together year-over-year. $X growing of XX new as technology,

driven Turning was to FX one Operating point profitability. partially our efficiencies offset margin XX%, headwinds. above by guidance by operating

growth billion in with demonstrate of quarter strong drive flow a balance sheet, including profitability. Our results the and investments. ended margin to ability XX%. these cash balance We free continue a cash was $X.X and healthy to our Together

context how me we're guidance, months you I the thinking as some Before to about give let move ahead. to

expect that the While to of of cycles our elongated the do weeks deal of in the business resilient, couple remains remainder we we persist last the June experienced for year.

guidance. have into updated our that We factored

I we've you, the Additionally, headwinds incremental dollar no know continued which of year. is to to further strengthening of US FX second half an in the resulting of see surprise any the for

expect FX We a $XXX revenues XXXX $XXX the for headwind QX be total to and for million impact a cRPO. headwind subscription million

of well-diversified global customer enterprises. our a have large XX% business We in with base over

As robust our existing comes our new net of business sustain which and Over growth. we a XX% result, best-in-class expansion predictable to expect our rates. drives renewal from customers,

increase let's attended basis expect at billion, we XX% continue subscription in January. on pipeline XXXX That's we as trends them headwind and year-over-year. seeing we're the transparent end as we're Knowledge in in to outlook. growth the you see pipeline year between we $X.XXX currency year-over-year mind, $X.XXX with our remainder to We're our that which $XX also of in of confident from appropriately to the we constant million We original factoring strong line growth. very in macro revenues be FX March, reflect billion incremental the outlook XX% continue now the unfolds. a provided since that turn and representing will XX% some to the a recent QX, With event, in drove see that today a of Primarily

expect continue up basis We of XX%, subscription gross points XXX to margin year-over-year.

margin spend to offset impact disciplined of point continue as to operating approximate an FX management. with expect currently XX%, an efficiencies We we plan one from and operational

flexibility collection in this FX We margin will provide over flow continue couple lower support of the to expect greater next as most reflecting quarters. slightly our current XX%, rates we free they environment. monitor customers to payment of expect need cash We to when now us

weighted diluted expect of we $XXX Finally, average shares million. outstanding

For between QX, constant approximately expect XXX XX.X%. basis, FX basis expect year-over-year a subscription $X.XX to revenue representing growth, billion subscription growth XX% we of revenues currency a On $X.XXX and inclusive point billion we be headwind.

a or on constant growth expect XX% We of basis. year-over-year cRPO XX.X% currency

two As I've and discussed in cohort larger headwind our of prior about average quarters, this than renews due reflects customer points QX. that to in

cRPO growth our be would headwind, this currency XX.X%. Excluding constant

the of margin outstanding average we expect expect $XX GAAP quarter. million weighted XX%, We an and operating diluted shares for

XXXX Finally, billion our confident subscription that achieving in May. Analyst $XX Day billion remain and very XXXX target revenue and we plus our of plus $XX at we provided in

not as changed. Our conclusion, ServiceNow has established platform. long-term has trajectory enduring In an itself

our recognize agility. being our We're key OpEx, customers, go-to-market including now. business accounts help but expanding release, Our execution We're launch products new with down need prudent doubling remain them programs rigor. bullish with great is to September accelerating lean We're Tokyo proven our development and and operational we cycles with our opportunity continue into to powerful top that greater our with for to XXX our growth software will customers the And to as continue actions to profitability always greatest on century. and the our remain targets. the ever in critical and we generate enable company our investments our we our strong journey on the we remain way for ServiceNow future enterprise XXst towards towards confident We defining of evaluate becoming delivering necessary growth. future disciplined, will the innovation as resources hiring possible. ROI roles These go-to-market value ensure

want it us With to customers' world, commitment. that all for Q&A. incredible focus Before thank that, on moving relentless your to employees needs and Q&A, around I'll on I ServiceNow up just their dedication for strong. the It's makes open our of our

Operator

Sachs. with will Instructions] comes question conducted from be Thank first Rangan Our Goldman electronically Kash you. question-and-session [Operator Today’s

Kash Rangan

Hi. a much Thank I for question question. you for had Bill. the very

talk sizes larger? ServiceNow, talked you You deals as some are although, are there certain of Gina, shifts said reined while cycles, for side of you cRPO that the have see cRPO becoming about market. how when in one keeping about these Can talk are elongated there of the of talk you out Thank you QX. unchanged, much. the potentially like dynamics performance segments consequences for larger coming look positive from a year cycles the about perspective? so in is these quarter-to-quarter sort it what growth Can in, how you're to implied burden that flip become relatively deal expectations bit delays little the QX deal which the And the that we sales means you cRPO does about been QX you reacceleration? the the Can you

Gina Mastantuono

Sure Kash. about of now at of QX, QX of in it to right? for $X you be renewal this $XXX,XXX; that At end if the you bottom, of end think only with was $XXX,XXX million been about the cRPO we've quarters pop and So I'll QX the take And it question the up cohort if a several QX. talking the that QX $XXX,XXX; remember, will going end renewal comes of if back first. QX.

absolutely we'll QX. that And reacceleration and see into is QX cohort the we of that bottom move renewal so as

Billy McDermott

And have work more with less Kash next up of are the deal I business at And looking that this with do it. productive which prioritizing in or the reprioritization team they're seeing is on along what list will they lot doing for executives the platforms make because less a that saying, might though decade? even because the going lengthening away people you're lines can I me certain isn't platforms the more you we and call what deal now cases are cycles the their where sizes, are C-level great

differentiate then And to The And that I second will to industry marquee company to has playing what doing. have need I of I they to times grow? something grow we're how competition? to Every catch money I that not the Global really talking finally, in platform by think nice-to-have aspect seems and differentiation world's better or how channels service out compete want platform above management front. business? the business the ServiceNow do We're out the against competitor or customer different chosen be that making up is, do we're of code. on my the pointed at low simply And all either platform isn't save a largest so seeing even now the platform growing business that that they big transformation about lots Gina talking amazing experience companies year-over-year. companies. XX% a money or On now those XXXX can million do going dimensions, And to $XX especially either for secret because sauce, or is get And their digital level innovate and employee make or about for better.

macro wait gets as gets So the a where bigger. big you little in might about now. need longer they're I ServiceNow cases, the from it really And do projects a perform a certain Kash, when customers take this spending that even might deeply drawn in you really is to where tailwind multiyear just their there. think for big, think that not to to capital out to have They market forces they're And interested now get bit money. moment long

So, we card hard enterprise a ROI the stock. the fastest calling with in are bringing

Kash Rangan

confident the so much Thanks Thanks Wonderful. and so Bill bold much. for message.

Billy McDermott

very much you Kash. Thank

Gina Mastantuono

Kash. Thanks,

Operator

next our Deutsche from take Zelnick We'll Bank. Brad question with

Brad Zelnick

early any and the during maybe everyone environment do as strategy? do I you try And distinguish like important. Great. Bill backdrop more appreciate has cohort these some renewal times in right perhaps question. so be your might And stands deals where execution field Bill. only deteriorates environment now, organization why before how you a for pricing. uncertain is and to And Gina knows only lock with times? that there part much the the Is QX imagine Is ServiceNow at glad think argument But, Thank first customers further? taking we I of up. get inflation you coming large performing to follow-up the is too for done just feel these? the of changed well how these

Gina Mastantuono

Yes, cohort. that take the Brad. renewal I'll

this at much across confidence So, best-in-class sometimes continued in sometimes macro renewal is cohort XX% what me And early, QX right? the is so, I'll board renewal environment, every we gives that don't. point rates. geography to we solid, during our renew the

can having in is really our customers where how are to tried and conversations first, with lean by do meet script focused customer we always. the will they to how and to our ServiceNow that, customers what in to always We the we trying I absolutely about help them continue together and always we'll talking they're bring are back. to on do that

Billy McDermott

give in Brad, the feel a am I how it's for and little field you I'll a great question, organization. confident

veterans who very Now with sales, know, tenured on he industry Japan, every Haverty, you Americas, the a executive, a first of in the and public team an in our is as special all, Europe, global who is sales and putting Pacific Paul team on ran the over running and who management team Kevin executive and of organization hits Asia field in for and experienced quarter. a has course most sector. still decade Smith, tenured focus

So, we really the have on excellent really, field. team a

was as of with now give you very geographically better persona. coverage our transparency last year purview at. a across I have dashboard tiring, have the and efficiently. of coverage very on at That's where run them execute. a just we our on comfortable ability down I'm want attention look very business the can to we world. so we And also year-over-year, detail I actually ServiceNow as complete and run the and course, comfortable by CEO the doubling We on I call the on have is mentioned. to why digital you I'm than pipelines with model. by the I if something And Furthermore, to industry And platform. it We're some diligent we're

have at full achieve mark. to objectives capacity our will a XX QX We the

in we cover sales that effort. intensifies there furthermore of and unique the to to doing also new opportunity. well month government to advantage actually existing, cover very force teaming This growth IL-X net and expand happen only And good that it's at actually very happen also And many their lines to just strong sales arrangement market-leading script could with moving and revenue our did but know the cloud where also digital this ITSM the can new at the along numbers. of and force we're in a it Azure to doing are It's advantage new year logos, hyperscaler to some can please midst ServiceNow. sales We're the the can I not where also level things mention our ServiceNow. enterprise factored the net a customers tailwind each actually get up take that's that's new logos. solution isn't our think level. customers our So, It did It's of happen in really good or for for into of in covered that sovereign our can net Microsoft that get indirect Microsoft. taking I the

Brad Zelnick

Excellent. so Thank much. you

Billy McDermott

Thank you.

Operator

our from Barclays. Lenschow take question with next Raimo We'll

Raimo Lenschow

contribution something maybe else on that quite as not happened a in thing lower built of going that out quarters. in the slides why or as a there, message hear quarter that's speak to others what platform Is slightly market Bill, employee there's the what's if terms the or I'm and wondering look the that's bit we and guess customer specifically your Can at in Hey, as And little the Can something that I is you well. if I speak you other to than strategic workflow this was and there. components?

Billy McDermott

much Raimo it. Thank you appreciate I Yeah. very

fantastic lumpy talking engineering quarter. got on perhaps of one experience product any is team. and years read XX about. for workflow versus Employee You our customer well-known that somewhat it's of great our with a reviews momentum all and details just the a the been with fantastic. into us another prospects gaining General have great McConnell days given Manager actually employee and we in he's anything We of leveled don't business along many who's is I'm CJ And leader Blake ago in about

customer all Ball, two businesses are platform those fantastic. veterans to the be and We Sigler at have John going industry level, absolutely the service Jon

look one don't any So or another to for quarter make inferences.

case. to where on experience employee headcount to need experiences. create hiring to great need as think their going to that aggregate to possible in to user experience is employees companies training decide needs I the and important world productive, they're in incredibly portal going give going most all be a their services the give They're serviced those the futuristic properly. to sure them and one all make They're

service on the doing the is what extraordinary. there make On to side, office I life and the layer just the come think customer back we're mid engagement to

So looking it they to is do way of which century at the workflow quickly lot. as is a about And you year. on a XXth companies and the REIT click used but a how the to take And do in processes I things that's in give thing value. be benefits really a platform the lot are I a to into companies And UI conversations automation realize can great And ServiceNow double a therefore, to from that? get some also is go I quarter a read the pumped business us as people or tend mean, I the think leverage within that time of platform company. on I get they I bigger should when say pressure now long And through up great prioritization faster, faster. would I that, using enterprise the my half think outcomes there

Now like or the came basically point now platform. of ServiceNow that to where from thing very "I consolidate do at scale starting guys got this those might that customer And the are years The team process a in they that. or economies XX lot companies them my up they And be saying point are new AI says, that." getting It to that RPA You're good and which but on into recently going when they're Platform from you I of like is other solution covered. solutions happening. it's are is look, the

So numbers. that could tailwind that's new I to in actually think developments not a macro is a again, where all the lead of

Raimo Lenschow

Thank you.

Billy McDermott

welcome. You’re Raimo.

Operator

question next with our Citi. take from We'll Tyler Radke

Tyler Radke

rates to large Are back just QX? now overall a go operating Gina around And close just of deals the the just of made we Thank us you you. quarter? assumptions place holds and Maybe the Was for handful it question. assuming then the the environment of taking in specifics slippage QX you've these understand the in for deal help QX QX? in in your that environment. customers? Thanks kind terms Are in Yes. taking

Gina Mastantuono

great. sorry that. Sure, about Tyler

to the back want we're to about be So, cycles, thinking if about elongated really always you how half. the transparent as think and yes, I you deal be try I clear with on

so we're similar but are assuming trying the away, closed close we deals and cycles. going have were and the And on July. many is that also through have elongated that elongated right? deal to in in of They're emphasize trends aren't QX QX that already elongated deals What we'll QX rates

about platform of about talk And as XXXX digital and talked tailwinds so confident by we transformation that why which is mid ever is and those billion to very reasserting long-term billion relevant that felt XXXX. $XX our relevant and we by continue as guide the relevancy $XX very we in

in taking into environment And place account today. macro that so close rate the we are we see

everything that and our customers leaning marketplace we're feel were Our with the we're taking about good account we that revised seeing our in than in today. into customers guidance more ever

Billy McDermott

course of if was in the you and market. one we acknowledge in is think out it And FX Yes. also by you've environment dollar more of the theaters the macro. in I that strength the no because pression are we operation And side, especially at Tyler play that mean that this said seen look affected always that outrunning of really I

in to lengthening certain things markets have of a the accustomed a see You'll that grown way. especially because, doing cycle

is There the power not in great what the our expansion there's there. platform have I that's how factored a that numbers plan. have we into But Now, also we'll an time you But reprioritization. of of in half. equation a the to they're tell plays the is see back can out and

relationship point in. conversation have the in the versus very we get not We we of deals them might have ServiceNow in of quickly discussion companies they to can come a close thought-through at as expedite the ROI come in that wanted them be a with actually of even to not because point can example plan how City. a they carefully be believe for to may value New they ServiceNow to the scale only the plan not but time get in. earlier as to factor can't so also have proposal But York Frankfurt at aware get the them of Many larger may we

also deliver with So, just impact. by when could so and partners changed land of industry that geo thinking making business have dimensions and critical You and all with dynamite the each bringing ServiceNow, much solution-based have fast in environment? our transformation expand. we're in what's to didn't the execution only on all rage you that And not we're but persona to was ROI digital sure business impact

you Now, to transaction that. have to I think well-equipped we're do especially have in very larger conversation the that very, and

Tyler Radke

All right.

like -- on did you Sounds Thanks road. lot. the a

Billy McDermott

you, Tyler. Thank

Gina Mastantuono

Thanks Tyler.

Operator

Suisse. with our Credit next We'll Phil Winslow question from take

Phil Winslow

for versus crisis. One obviously if could productivity COVID productivity global prices to that sales of Gina, that European high. the heard wonder you now question. are let's seen I follow-up side, of you on you through versus remains compare Hi. point versus executives you've sort then, industry sales in you even say taking business KPIs difference you're maybe going multiple what Gina the multiple what years those Thanks from crisis the periods speak Bill seeing businesses? hearing from Billy beginning to And and in year-to-date financial you're compare-contrast, executives this a my past the and your obviously just you one debt global during for for and operated contrast the software what for

quarter in to that and Does high-XXs. expected Last the XX%. Thanks. hold? headcount grow headcount also sales grew you You still marketing

Gina Mastantuono

I'll take So the then, it first. second over And pass part to Bill. I'll

better So sales strong is year this last even productivity remains and year. than

we're feel And we Phil expect invest. good to that hold, certainly about so continued We're I We go-to-market. really hire feet-on-the-street and continuing where have leaning. to to

back all, feet-on-the-street hiring. at pulling on not We are

so quota-bearing expect to pace absolutely similar to sales? continue we And back to the half as hire in continue we see

Billy McDermott

bit And they in is and financial COVID common the all a one idea global little that environment this they the all computing. the Phil, were of just comparing an cloud for have current to thing different, on they're but absolutely crisis Elixir that

a story about time. in €X quarter think September at the you billion global disappears software a if I you tell with how company Phil So that crisis, And the saw financial in different was remember, working I that day. I a

So it. lumpier gets one through see things, it's always I've may platforms in couple little been will of that it well computing, another became Well that marketplace crisis is business all moved platforms yet enable you theme work by a the little computing reprioritizing less the reinforced. great completely business And cloud. five macro will and line everything this about do All hyperscalers it Again, was cloud SaaS a to the financial be this defined in virtually the to then be all hasn't in other century, as said the XXst Remember, a became This But were moves where because world person. point would And cloud matter. you, that the those do while sudden. as through it will environment. controlled a actually believe the you proof just been cloud have bit a And doing environment. COVID only going was of moment by had And got you well. to that you're productivity was cloud, this because there's nobody of had through here I as OpEx. now, that cloud. very digital got the extremely everything budgets to evolved a to sudden. the everybody got And in global in what the And pervasive suddenly infrastructure executive. the and cloud COVID that's

Phil Winslow

Best guys. luck. Awesome. of Thanks

Billy McDermott

Thank you, Phil.

Gina Mastantuono

Thank you, Phil.

Operator

Our next Securities. question comes Fargo Michael with from Wells Turrin

Michael Turrin

take margin is Good on appreciate free side cash impacts. question. leaning you Thanks. the have of Hey. flow the my Gina, growth if seeing afternoon. into clearly I luxury you

collections. step tactic did expecting down you're the there minor You margin on a just mention

Somewhat it's moderation of you rest you. industry a whether add you're similar that, question to on think seeing getting something any the top very mind free confidence on is for a the the or seeing other metrics, the you're just some and cash to wondering of of offset if certain for ability have to I can investors. there's flow use context behind Thank put anything year then you

Gina Mastantuono

Yes, sure.

current no environment. expect flow are our just with us and that. longer bad small in to in want to like here. So, anything be little think we you we into you're And that have think a our really lean and There's margin the given would industries right supply listen, from it's so, to margin slightly leaning just the or up assisting about the any timing. makes chain the our So clear, you debt flexibility But concerns I about bit have think our about absolutely with payment and built impact for able little I a a macro and see bit customers complete And those be free to working here, the it's to given structure it's given as right? customers. ability, perspective, respect constraints, collections, industries again that, assumptions flow leading It's probably best-in-class that allowing as cash sense lower of with or capital, to our purely cash right? terms,

all so, It's and proactive working And about our strength with real customers. being here.

Michael Turrin

Thank you. helpful. It's

Gina Mastantuono

Thank you.

Operator

next Weiss take our from We'll question Keith with Stanley. Morgan

Keith Weiss

and one for I think is guys, Gina, you, for Thank question. you two you. this the taking Yes. for

put And your of a that wanted so growth sort on guys of sort cRPO was you the question in calendar we're have trying you're how to of that for are I of ask QX. exiting no directly. sort the think, any outlook more of Like QX I talking words mouth to we that you perspective chance your give CRP on entering and that you XXXX? in adjusting with? view change some us number, about a sort Kash

Gina Mastantuono

are But we that So, the Keith, we're make that year when that what is I not trying back slight listen, now. to renewal from wanted think, we imagine cycles. And we I And right? half, think throughout explicit to very to slightly longer do the well bottom half as point think QX Kash of in back and script guiding QX about could allude revenue about think, was guide deal the to my how return the you continuing. so, is, January our cohort the I'm and what I factoring absolutely to was I our in

long-term Why XXXX. are in cRPO. by just and our we also And will so, that million XXXX goals $XX very perspective, $XX by right? QX impact again billion and billion of But a confident reiterating mid timing

a a we'll few So and then. give us I to more QX hear know you months love Give guide. to you'd it

Keith Weiss

to hear I not it’s love QX think would all just investors me. guide,

on some Can from I half? The other from not come not into you coming operational. operational visibility It's It for question Gina have the from the hiring. sounds additional in coming back to it's us going slowing was headcount. efficiencies are the you like give down where

Gina Mastantuono

Yes.

of a So things. couple

but we if well talked types we roles, on are not demand. down expense, and kind other T&E marketing as, support not of feet-on-the-street slowing think of So R&D about we're cutting as go-to-market expense, about you mindful planful explicitly resources, that's critical on of being driving event anything pretty hiring much and more things,

wheel and disciplined fingers or steering smart critical hands touching keyboards the really we're being not while about on disciplined really the Just street being feet that cost, our on on engineers. keeping sure making the

Billy McDermott

Keith… And

Keith Weiss

Okay.

go Sorry, ahead.

Billy McDermott

ahead with Go ahead. question. your last Go

Keith Weiss

you was just I for off No. apologizing cutting before.

Billy McDermott

something. that don't we of platform. wanted It's your to this, No, XX,XXX want the I employee something the get on have to ServiceNow run offer on anything, an company to no about almost people saying but Keith ServiceNow out never build that to miss Gina but not we've know to we I like is opportunity just what platform. talk

of of equity industry. the and leanest That pretty the on be millions It's that's things. a it and platform is to ratios when dollars. component company takes of the you're millions kinds a the hiring the these in pretty can nice large of nice terms for the best-in-class where what money hire in in and it terms adjust of talent salary can it's example you for and G&A know of market So in to moving time real run to how versus the

a for So forward many to excellence and never savings do hold aspects of the putting companies ServiceNow of the we're could the And the managing lot our there fly. that on actually we're side work are rate. on platform putting that can margin that agility operational

observation. a that's interesting So very

like, It's the cohort love thing to The issues and QX from company to just shareholders of you between path. and the QX. out we that just say respect just It historical wanted outlook follows with this way. have all on all that shareholders, no our I renewals like for second never respect

start But shape is need and don't every you I company should great that now? think So lose any to sleep. the you in give we why confidence

Keith Weiss

Thank guys. you, Okay.

Billy McDermott

you. Thank

Operator

from Bachman comes Bank Our next with question of Montreal. Keith

Keith Bachman

very are question. than wanted much. investors I Hi. you I with I candidly to other cRPO clarification for comment Thank agree you a guide the the and the with ask clarification a that Keith's think is Gina disappointed for September.

could the the the an a you over And what clarify the December XX.X number is for we last so the is. there'll Bill something from year. XX.X talked And about when few for increase you from my times do the level say or be an mean question you then quarter base just if adjusted increase

As to decline. valuations of are elongate continue companies the tech declining sales cycles

in And so you no does do change strategy. to M&A work make interest ability the on think behalf increase about how ServiceNow of your

If pipeline? how at look you're thinking you Many the M&A on as you just could the opportunities thanks. update about us deal

Gina Mastantuono

Thanks, Keith.

guide to and cohort reaccelerate say that's the least clarification reaccelerate in the I Board at is to expect what a What few cRPO. it that me renewal wanted and know we QX QX. points I for impacting expect by get everyone for because On is two we on it from to will

Keith Bachman

Yes.

but is what? you number to clarify? What what to from I'm are to you just trying push Gina referring Sorry, accelerate

Gina Mastantuono

points that two XX.X for is The by -- there. sorry guide XX.X. QX to QX constant expect currency at we least for from the The QX increase

Keith Bachman

Okay.

Bill then you? And thanks. for Many Okay.

Billy McDermott

Yeah.

all at there of plus to on time. to XXXX regards respectively. allocation no billion plus billion capital first and strategy and the $XX So with change $XX strategy, this our the XXXX is The

say we that's As based Gina change strategy would our as upon business also to current usual. no that that's I have said, and it. reinforced that and we tuck-ins done

managing that than employee companies One the matters of capabilities different them that really, really and the is employees ever. because Hitchworks And did important the really now more that is priority experience are managing project productivity are needs and to needs their now. and co-fired we

So of it's cash acknowledge thing our to the in in. billion sense kinds wants. a very makes you do bring billion. those $X.X of of it that only tuck platforms. the one grow It's strong time. point. RPO what cRPO up with kind core We're I That's we look to where customer when and It's things do. the that at is $XX.X a the to We the good over that's position going gave the Gina you would know

So we're strategy. watching absolutely everything. But the to there's now change no right

Keith Bachman

you much. very Okay. Thank

Billy McDermott

You're welcome.

Operator

Alex Zukin next our Research. Wolfe with take We'll from question

Alex Zukin

taking for thanks guys, Hey the question.

that other the going of this surprised on I rate path, of and just things of change the change in QX. one think the pace of kind people candidly was So

was guess, start to back XX% And cohort there's are an worsening may you flow the already on you help So that collections sales some deterioration understand issues longer in certain I portion, what been of cash a in saw rest making are you're you're if the would what Gina, of say seeing clients, assumption the there or that July assuming quarter, than you've think verticals terms question, on that earlier of in year in then of in assumptions think the see particularly cycles asked bear? the the you further about terms the when conservatism with the further maybe versus in certain now or trends of for showing others. I of these come some for us as more bookings you half is up? did just to to And to flexibility and embedding you a start just geographies have I alluded certain that cRPO guess, maybe that in there? in impacted guide larger I

Gina Mastantuono

of not our saw a guide we start from with assuming last June. so So what we're weeks And the in right? cRPO forecast, couple I'll the worsening trend in of

start and we similar it so up, are trends. rate quarter very assumptions change in And QX, issues assuming of when so and the late the was QX worsening the in showing no

actually materials In a deals of articulated closed. And strong. as at of bill some A higher closed assumed. fact July initially those have than looks Bill lot

so And Coverage QX of for and strong. pipeline assumptions and Alex QX after, rigorous look industry. by rate similar rigorous trends, analysis ratios this analysis is

last seeing June saw similar very the is of couple we're of and in so July. what And our we weeks assumption to through what

about. cash deterioration I flow, free the XX% point. the that talking includes the expect flexibility from that not On do further I'm

Billy McDermott

relationship in better. with our customer Alex be customers And couldn't the the relationships,

said, industry. Score, As the other QX based couple live XX-plus. in what? them you at you geographies. the customer look say, and If And and the you Gina their you elongate weeks did Promoter look in more retention Gina saw that see of last look deals you at absolutely rate having at you standard where than some it's the has a of upon if set saw in you of cycles Net approve specifically June, saw you Europe higher levels authority you to And

serve FX their that what as know our guide. at are across industry. all can about factored not a QX continuation ensure to tougher it the cohort because macro is customers. worried like serve the in said great enterprise of do. so dealing we in their I'm guide guide on that's in a macro them that a going our shape. has that's great that into the shape. that's into on companies dealing we numbers. We conversation the an really QX. nutshell. level relates with we've the it's So restoring the guide know XXXX with again, We this it in are We they customers assumes And guide had issue to based customers Gina heard don't the we all And Gina's And the We're or

little it bit as for waiting lack longer a take don't So strength. any of

that the we're signs stronger. contrary, seeing us On making even it's

Alex Zukin

you, Super clear. Thank you, Gina. Bill. Thank

Billy McDermott

Alex. Thank you,

Gina Mastantuono

from Securities. Brad America Bank of Operator Thanks, We'll with Alex. our question take Sills next

Brad Sills

ServiceNow if such employee, changing I'm across any with customer curious of perspective a such the or noticed you've unique whether has apps question. taking Great. anything for macro, broad IT different IT my a there? reprioritization custom you're categories. swath the within seeing Thanks categories it's

Billy McDermott

are of super those you in this to very all build do especially the Brad. important. have much should you But call thank to say next dimensions Well, think of that low-code we the customers value in question that their best two in a low-code off new net million companies about out taking years and applications you we no that customers back office managing platform having revolution really if that's with the can of have There's one that's back XXX relationships going on in their full be predictive and their to and operations. engagement There's the way make the sure on that's a made the to chain promise mid of business. layer kept nobody having since care

to expected going have time. super at place company the you important if you I have employee deliver not apply And more to the you're to service you that. have at going you the And right that product do you're that productive. then employee with to the And employee to price right macro right every deal you right because super, the make then configurations So, automation. experiences to piece in account you that have and number very have Every to tell because wants the point carefully. can customer the

and on manage will you the it the of their you got don't work to the argue experience manager, how growing they They And think value along them and turn of happy get to assets. very don't them IT off on think you So of certainly I growing asset areas to mean, more worker be our how chugging have from taken of has get side, then that. knowledge and it company company with of one, and want and really careful over. you their and assets. I this I be because enable place extremely so And just And to have companies one the any to any it productive, marquee automation. jewel out own out growing. is each And keeps all the that and because is

And they need company. because pull it's that all basis invested. invested way, together, they is have thing with on highly assets in which many secure one not So to things visibility They've assets, shout much business they ESG. and is they to I can have operations have to their to having on they an have every all on haven't want you And so, to I fast so a glass, in win because growing end-to-end on Lightstep. of real. so different so an that in do do the the bring something that operations company their And and it the pane Gina mean, retire a for just to CJ that's is sustainable if operations, and us. logos that one their that's have just a and look been issue along championed security they Ben And security fast-growing they for that C really for level give out at at so us. in security

brands in observability of the all that's part And of brands and are that category. most pretty in our think innovative world driving the and world, Ben again, the you in Lightstep the when areas IT compelling. So the is best

all well. they're doing So very, very

Brad Sills

Bill. Thanks, hear. to Great

Billy McDermott

question, for much Brad. the you Thank very

Operator

comes from Cowen. question Wood next with Our Derrick

Derrick Wood

my taking for Thanks Great. question.

been pipeline us areas? close since feel spending just you we're And cycle where looking look give QX. core the and do a your coming and causing GXK, could questions the a you government then across the sales there's and those a into the kind quarter? the heading Maybe way. into flush I'd So, of of from. cohorts upcoming it lot ask it's three government out compare about kind clearly and contrasting rates different of commercial, big Fed in the How at of you on what's in quarter three the behavior When little

Billy McDermott

very Thank much you Yes. Derrick.

more local. As couldn't of could year you the possibly the time confident federal what business more the in this I couldn't is be and and seeing state government be for confident. you know tell we're

for that the has if in including industries, our -- account happy beyond. all our with of we them. also very very, And very very And That deliver account the execution its I'm business of back its partners we on have value good. expect bullish been terms getting at real business, look comporting of you chain mapping commercial some half we're very value. our out I'm In a the great expertise cloud possible, priority ServiceNow engineering that the road to as fully industries experts put in realized whole actually of how customer executive that team and impact and development in every solution returns structure CJ and actually best the we in in to the to that of industry for link and domain services and now plan interface start

we're on So, you the real that can't more be strong And really all mentioned. dimensions really, confident.

Gina Mastantuono

industries energy, industry these I that we public And know I would in up telcom. sorry, resilient are sector services environments. in about just These holds add – industries you largest to all federal play financial the that, most think if

really results good perspective. we In going QX saw Fed And really impact strong had in even so, particular, really business. We industry in and feel the QX solution. for great into Said strong. that about the QX demand feel new

we're as the So excited. QX, very into up and going team federal ramped has

across federal, an GXK And very strong. as well so really the from the board as industry perspective

Derrick Wood

Thank you.

Gina Mastantuono

you, Thank Derrick

Billy McDermott

Derrick you, Thank

Operator

[ph] Reed next our question with from take We'll Peter Bernstein.

Unidentified Analyst

have this, cohort with some mid-XXXs. growing a damper XXX% at able the continue of a and such you call, expand that are that around of old, is I looking your to on or quite long interpret to think enabling Thank sales your that been might them strategic benefit? for able has or so chart things built out cohorts enabling ability elongating attain and right a you've is What where oldest business that your are to consistency may consistency? and to particularly they push out less cohorts talked into observe you well situation built is what and the expansion in that to But actually the be that on the longer been taking net is, my the putting you easier been I even see for incredibly strongly consistency to about might a One What it be cycle, you've like as seeing decade expansion. be and for

Gina Mastantuono

Yes. A few there. things

So of is extremely correct, product for absolutely about. board the first expansion incredible of seeing all, our renewal also every in exactly, platform remain before. with about on scale about at the you're HR, powerful rates, customer, talked high long. have It's XX% expansion in today, The our what ever and you're who our geo evolution even Peter, right? been We We're so seeing rates across us even customers with into the is exactly And talking scope the reason than creator. It's for portfolio, right? we're that more that of IT, what into It's into story. breadth out QX.

us we levels and you'll our stronger us rates and as innovate, innovate more continue better to to want and expansion we so as customers of to see platform capable similar go. need to continue continue continue And where as make we and to renewal,

Billy McDermott

customer Gina we're has stat only penetrated. And be where the Peter, that along XX% said, to may of interesting we're have, lines and one a we expanding platform, you. as that relationship great Even

road of so material in the and And that come permission you our count upside go bill all if to at against look engineering And XXXX. gives it portfolio innovation that So every out team, map. that's is of product us we in far take our the also Global to also have and to bigger the the XXXX on. kind companies of built eye in will the in commercial interesting the we've co-selling, of our business beyond business : way Thank of some some it thing of world an that taking advantage partnerships well, our you. as be an selling to Global with and inside and keep the

Bill McDermott

Thank welcome. You're you.

Gina Mastantuono

Thank you.

Operator

have for question. one We last time

comes Walravens question from JMP with Our last Pat Securities.

Pat Walravens

Great. Thank you.

year? up What here. time to the it allocate to sum over Bill, one rest your So priorities? maybe you or going your of How this top are all two are

Bill McDermott

Pat. Yeah. much, Thank you very

and be treat one And in as important intend measured intend the I'll Europe across obviously that's in APJ. One across And of extremely Tokyo major Americas. there. in to Japan I'll doing largest the be our by is because weeks most do the that I'll regions of going to a we release. and also I'm Japan and we company. X.X world's as as our GDP is we do market third I said Japan the well market things spend

important thing the I've management our to team it and to very take to think clear I So most this The made Street. is

to meeting our to So meeting, of great our hands we Board I our with this customers. talk it's XX-plus The thousand around wonderful friends, now it talk all Street. now opportunity taking have and about to where all the investors closest done we'll an be will and we're our After to

So usually level passion when we take things happen. very of good it's The to this Street

Pat Walravens

Thank Great. you. both much you very of

Bill McDermott

Thank much, you Pat. very

Gina Mastantuono

Pat. Thanks,

Operator

presentation. conclude And today's for Thank that you your does participation.

You may now disconnect.

ServiceNow (NOW) 27 Jul 222022 Q2 Earnings call transcript