Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen thank you for standing by and welcome to the ServiceNow, Inc. Q1 2023 Earnings Conference Call.

I would now like to turn the call over to Darren Yip, Vice President of Investor Relations. Please go ahead.

Darren Yip

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

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

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

and as that we started, factors press or future release we on discussed that risks, including results to call, may statements and this from is assumptions. get no the want events. earnings based information We statements SEC new Before our duty to XX-Q our as today’s including information cause contains forward-looking filings uncertainties actual to result and a materially statements. and today or of most differ of on for involve update to Please emphasize forward-looking guidance, undertake our XX-K information that such obligation recent refer XXXX

point present current Unless rates otherwise and for, today financial out in except cash discuss GAAP. financial with We’d substitute remaining non-GAAP, also and obligations, revenue, related accordance performance measures that investments. for measures a are in like non-GAAP addition noted, RPOs, and as we we to calculated not to, or growth measures and all RPOs

investors.servicenow.com. investor see reconciliation which at both of presentation, replay and today’s are non-GAAP website. website between press and these earnings GAAP on today’s To posted release the also on A be to measures, please call refer posted our will our

over Bill. the call turn I’ll to that, With

Bill McDermott

And thank you Thank for you us everyone Darren. very today. joining much

end our in currency, which full points revenue Subscription above guidance. quarter. cRPO two guidance. a XX% Operating our XX%, was the basis constant was first above XXX currency, constant points XX% outstanding points our margin in an had above ServiceNow grew XXX basis of guidance. high grew

net ACV. demand We XX deals platform. to a ServiceNow’s in We than million sustained $X saw greater new have a strong,

said the it, expectations. committed to we did performing company We beyond it. January, In we

net new Our business. our growth consistently innovation, will growth profitability. that, new any we and the conviction of environment, and that laser-focused strong reflects a guidance in to fundamentals exactly business execute. do company this in executes is QX on We remain continue ServiceNow

big it there is for comes C-Level picture, an for simple complicated that down tailwind noise, are is endless app. this every consolidation digital ServiceNow platform array the managing for to at question reality, all nobody headlines remains but transformation. everything, signals. filter This the app a is macro there intelligent as one wants a When no leaders Looking of and mixed environment, you end-to-end an

of departments, merely on We level seeing now as viable think their insisting is conversations enterprise been bringing if in between They on This decade transformation. are drive Nearly business roster process path. principal drive want company longer technology of aren’t interested business big this investments to to battles a sponsors. they turf CEOs the be CEOs has historically XX% partners on a an is specific impact. inspection a of center, to executive up very continue engaging level, a the directly they what strategic clear no outcomes. into current call business economically CEOs isn’t This will level in

integrate here back to working are experience. middle, hard ServiceNow that. better when serve AI The single technology offices and entire competency. value conversation. They to when is you example, front, customer the a ServiceNow AI, the looking technology orchestrate that operate that customer. For it’s is are generative comes Businesses age their platform a buy, does it chain. just transform a also to This opportunity build, in the core can of for

systems with maximize On for of employees done. can’t juggling experiences. get to user People their touchpoints the number different work multiple the reducing internal side, potential it’s about by

Our customers directly experience up from innovation, has cost hub know as hear or they need Whether CEOs do work. efficiency, who the never a productivity, they ServiceNow message a things to business grade help use takeout, digital to create shake and want This at ServiceNow it. it’s model been our consumer one-stop I relevant. is more to

very XX million. ServiceNow three with workflows three cost what four deals Employee deals ITOM a consumers. Once global a Risk across of were again, rely fueling over ITSM the $X million. a are XX of XX over all QX was was five deals top deals see XX deals over $X $X million. over $X XX ServiceNow. their businesses. XX workflows we’re exciting in network the deals three the of from for ITAM hot Very our was effects, as invest in quarter of top a workflows over And with customer increased businesses the was these and firms $X platform XX worth on was in trends with because million. management. end in top in deals in takeout, service equity of our top million. XX About over is nine top relevant on in doing deals secular is indeed $X XX comes than adoption this we Security XX of top our in value with million. of of XX% of with $X With tech that XX three focus Creator strong with experience had a with million. ever the emphasizing over top Customer XX XX and with XX differentiated more growing in

by accelerate to Air Navy Force Major Credit to U.S. Bimbo, Marriott, the transformation Travelers, and just own ServiceNow, Electric, a name Schneider few. global continue Union, Federal brands working Grupo their with

one improve it case works example. which PNC ServiceNow to at and banking as will way the Look disputes, modernize reduce closures. losses with manages

in We saw the milestones also quarter. co-innovation major

have providers and to product manage telecom example, XG communication inventory. global created ServiceNow network fiber For a help and AT&T service

outcomes with our The to customers. greater simplify designed AI-powered machine. help release for These innovation automation expanded drive engineered organic safety step The for ServiceNow workforce organizational forward faster and optimization agility. our automation, was robotic offer release health capabilities, includes the incident and latest search process QX are increase was process Utah all also mining, business additional enhancements, and management. to experiences

bears excitement like of technologies RPA, for are individual repeating aware expect mining, It a while natively other AI, market workflow platform. the into automation platform ServiceNow tools. technologies that many integrate various they generative AI, built customers to process a low-code single and strategy has

to will of us. at Of have course, you hope much in May I Knowledge we join XX. event about this say on our Las can Vegas all more

President, is the newest Netflix, to Directors. of ServiceNow’s to who Vice member Engineering at Deborah like of also I’d extend warm a welcome Black, Board

to defining We’re so journey have of proud company XXst our century. to Debbie’s be software the leadership the on enterprise

we’ve reiterate said simply consistently. I’ll closing, In things

businesses First, environment demand ServiceNow. software mission-critical, Enterprise is robust. is need the

ServiceNow Second, a is company level. high unique at performing a very

shareholder momentum strong costs We company and creating immense growth, value. has The aggressively managing everywhere. are delivering

performing to We’re best the very across work well Glassdoor. including scorecards places

Most our expanding, growth Our this brand opportunity recognition is early and is increasing of is like days a the as Admired we story. lists Companies, generational rise market Fortune’s on truly

ever tell $X and platform, eclipsed here on basis. trust built What in on we a is Finally, a we we threshold billion have is the were is just organic ultimate do to The human an the company entirely that and a that that single results culture trust. the a the currency. We fastest quarter, story. know

the This business ServiceNow, our people This red few in ServiceNow, look thread be work is all Financial world a with with started. and getting seeing you Day forward predictable about we’re model. weeks. with cloud work Analyst durable, ServiceNow, will a growth, We the fast Businesses to at there. works only

your for forward much Gina. looking very to for you hand now, time thank over to to I’ll today. questions. like And your I’d I’m things

Gina Mastantuono

with The across as the top profitability Thank the are guidance for execution metrics. and saw was you, environment. from resilient enterprises to the example line Bill. Now productivity strong QX We tremendous team. looking was a of our yet in demand continues current another quarter Platform consistent macro improvements our deliver beats quarter

In high range our in constant points. the XX% end basis exceeding XXX billion, growing currency, year-over-year QX, were revenues of subscription guidance by $X.XX

beat XX% currency our ended Current constant year-over-year billion, approximately representing RPO growth. quarter XXX-basis-point was RPO XX% constant at $X.XX approximately a versus the representing billion, growth, year-over-year currency guidance. $XX

led and by grow education. despite new the growth logistics banking a and strong in to continued volatility government comp tough sector. industry also way, perspective, net ACV and an energy followed From utilities, services in Financial transportation the and

growth ACV remained size deal strength, an customer area and New the average year-over-year. of up significantly was

a a mission-critical rate Our Now of our in was customers’ of best-in-class the operations. part renewal our remains demonstrate continuing as to business stickiness Platform XX% the QX,

Our have also us up customer quarter ACV, the expansion. with $X X,XXX in We ended show million XX% to paying continued customers year-over-year. over solid cohorts

year greater quarter, showcasing demonstrating than how million ago. our the We’re providing engagement the from with their ACV continuing Platform. Now need enterprise QX, to products, the deals top customer healthy XX ServiceNow XX We net of In orchestrate they in more deals chain. in closed single extensibility technology is of to buying customers platform XX five the patterns value a see $X up XX% new or contained

basis Non-GAAP profitability. was disciplined above by to XX% Turning our operating margin points driven continued XXX spend and guidance, management.

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

Moving to our outlook.

XXXX excited for year, the the about continues we’re release the Utah Now’s to Our to can further robust contribute look pipeline remainder opportunities. those of and what and

seen each market guidance. macro we’ve factor with continue in prudently the resiliency, of While evolving our cost we to

laser-focused growth management Bill balancing innovation As and new on cost with mentioned, we net new business and profitability. remain

our With XXXX to guidance. that mind, in turn let’s

constant a revenue at on $X.XX our XX% and of a million billion subscription by We and both midpoint XX.X% raising range basis. growth representing reported to year-over-year are $X.XX to outlook $XX billion, currency the

gross operating outstanding XX%. margin average of we of weighted cash subscription of And XXX to expect expect XX%, GAAP a We free flow million. of shares diluted margin continue XX%,

For QX, currency $X.XX representing XX.X% point growth constant to billion FX between revenues billion, year-over-year basis, XX% we and a headwind. $X.XXX subscription excluding basis XX a on expect

of excluding constant growth basis expect currency FX reported a XX% XX tailwind basis, point We a or a CRPO on basis. on XX.X%

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

In very strong summary, QX was quarter. a

performance, XXX proud one to our collective of team’s For, our commitment Fortune XXXX. our and and Best that hard dedication. again enabled has extremely their It’s their Work to work We’re of us continued can’t thank enough named be Companies yet employees we culture in to for

and of strength results of The consistency people. exemplifies our the our platform our

productivity experiences business drive significant engagement, is less. delivering powerful that force fierce their helps company we software since to automation why that loyalty further operational customer get positioned with retool the the so to for employee century. great generating more done and opportunities gains. ServiceNow’s ourselves become And enterprises intelligent use see extensively, the We’re deflationary defining That’s the Now enterprise benefit well we leverage. incremental is Platform of continue efficiencies, those from ServiceNow XXst to a

You May can in Investor forward hear look more upcoming on long-term Las Vegas. and our new XX in about our at We that seeing products there. to you momentum opportunities Day

with I’ll And Q&A. open for up that, it

Operator

The JPMorgan. floor question Murphy Mark is now of line Instructions] the Our open proceed. [Operator comes your first questions. for from from Please

Mark Murphy

congratulations you quarter. Thank another excellent and very much on

ask I or Bill. to So wanted CJ

road? You new to unlock into seem helpdesk you chat headcount that to of project in position do how embed a typical SKUs or that IT to be your a to become AI forward few powerful, as try more contact you the see to playing you out? center if seat speak great efficiencies. that Pro And try opportunity Can a the you affecting years see a count down bots or and

CJ Desai

thanks first of for the question. all, Mark,

asked. into I we features employees Here And core for because asked platform Pro Pro. our agent provides but our customer that absolutely AI is ITSM are of the IT And in say. both as and shareholders. more besides agents believe service was our ITSM today, embedded game the customers, machine XXXX journey productivity look it is started question exact and at an we would only ‘and’. generative changer, and that versus AI, learning for our a that we machine or QX, When you AI I When and was clear this the specifically or for the customers particular what a not learning in

via further of wherever capture we monetize SKUs on current offer we top And that value, that that can additional we will our offerings. additional

now, a AI for – learned it ITSM Pro good So and business. feel years I we traction for four-plus related three about our optimistic very very what our over have is line. generative next and I And it does lot to an top years, through last to accretive years five four our to overall, feel

Mark Murphy

I’ll question and limit. the much very stick you Thank one Excellent. to

Operator

from proceed. the comes question line of America. Please Our Brad next of Bank Sills from

Brad Sills

the to a and to mix. year you a non-IT thank see I around Wonderful, great here, the start question ask wanted fiscal to nice

customer department? question ACV the about take creator outside is If that of can the you is real it’s is more combined, I out is, quarter, IT ServiceNow you plus new the where you’re highest channel address workflow of kind great call Obviously, in and it to what success you’re traction which outside automation. have here whether seeing XX% about seeing of this there the employee, products these or something it’s Now you’d of that remember. direct go-to-market, The taking that IT? But

Bill McDermott

the very you I And the ServiceNow for Thank much end-to-end the of platform think digital Brad. Yes. importance underscores transformation. becoming question, it intelligent for

departments the other results, that app antiquated building now, away Head They’re in strategy on them. the company C-level the HR the the decision-makers technology matter. platforms platforms are moving business of along the impact the and their on they’re platforms said, from truly innovation aligning day CEO, matter the and that of and CFO, also business obviously various top I of with and and Head of don’t As Technology, our can taking

to customer pole want the you the Think our direct-to-consumer front, will and years everybody by have our the next development unfair align the IT XX% actually advantage, It’s to themselves We of the have low-code on mid trying service we office the service feel app of if position. two the on ServiceNow. we extended mobile. give self-service, HR, importance take competency. Customer into and management, creator. platform that So creator. in experience in into will seamless, started place about be beautifully management about that and think customers is to back done a a a like core into

think providing the really all out do and employee employee game you there is there’s taking AI the changing when of do, experience, services recruiting, that with and the a technology but systems expertise the action the of actually giving curve. they’re wonderful supposed onboarding, on to And about best our productivity what generative record view next fundamentally hiring,

this strategy, that industry, they’re executive now, confident aligning proud at are by can to of team the the can and the teammates they They aligning platform All persona, and by bring here platform. ServiceNow around in executives. and our the tell countless is examples and meeting story first

management four different an your can figure biggest than next with That’s with can were the approach. the team off-site get so ago, kind a of is, more we One requests we best out of hey, outcome the we step have entire it where doing our team was years relationship? land-and-expand for a very we

Brad Sills

Thanks Great much, hear. Bill. so to

Bill McDermott

Thank you very Brad. much,

Operator

question Our from Stanley. Please Weiss Keith proceed. line Morgan the of next from comes

Keith Weiss

necessitate seat-based to do as of functionality change that if ability could model? more Congratulations Mark in their like pricing or impacts to AI. want it Excellent. or does And the you an from kind lot a maybe Thank there question. question is, a of changing workflows like just get this of has the in I nice walk ServiceNow and is you the is consumption the volume-oriented terms in model? value, of the potential year. in the on more the platform generative a a for on automation necessity that’s a that the guys investors creates So a little I really And model us platform, more out to data it’s thread that? dig to be driving pricing that started pulling versus bit the of there start the through, the Murphy

CJ Desai

Yes.

We multiple is buckets. this I’ll address and in So it. think Keith, CJ,

the and fast-growing at ITOM a technology security And ITSM management, our core the we driven from foundation. through transformation when all are know, that our for risk look or as like platform for you a CMDB or and all products processes technology standpoint. end-to-end single is workflows, So they CMDB asset

best we a have as good, So when the at the how described, for know, drive packages. go-to-market, platform Keith, overall I are level. look we we Bill at part, pretty And consistent you better, as that in most

as workflow. is ServiceNow same or could to significantly, workflow look that to someday, or, then a text management app employee service they at anybody to we text create. opportunity for when true also ecosystem And expand HR be The workflow, creator and ServiceNow by code developer have an customer text thing using I to where can

traction overall, So better, at I in is we good, best is have look when the beautifully. buckets, four The mechanism the working that put place great.

with you will at as the we share more We shared have the uplift Analyst are Financial and Day. getting

then use I higher that incident believe now as productivity, of what we get specific or in to AI, can related that. because generative is terms whether monetize deflection Now pricing productivity and, you Mark, the absolutely additional it’s it’s told whether an with we cases, can agent for

more early, share whether with value We we is whether the provide going it’s Analyst Day, details, customers, you working what a but Financial and to model we I’ll on are will through And we first only charge principle at fairly the it’s our like, pricing we the looking that are that bundle. are an at. for are add-on, where look

Keith Weiss

Got Analyst the color. details. tuned Day it. for will I stay more for Appreciate

Bill McDermott

CJ very and Keith, in would you Board have meeting. been his engineering if you impressed yesterday’s saw team

the Day. to you He’s – the off. socks but because he’s a going to to going demos, Day. to Analyst at we’re real technology, see cases customer already with get and see, Analyst and you’re really until see business to which real-time in best we’re real Financial references, got on bit team your business, be dealing you’re It’s to knock actually modest, We’re little examples working wait get that he going deserves and Financial

Operator

from comes Our next Please Samad proceed. from of question the Samana Jefferies. line

Samad Samana

taking Thanks my question. evening. for good Hi

focus in still few you, maybe of growing a think your of back more did on we that of underlying this? you competitors what bit slowing guys on, we that in last adding position is of added appears to employees of be I’m when that’s go are quarters little one world in other should curious, in headcount, confidence your So, talent you to the rehire last come ServiceNow I tech companies strengthening XQ of than the maybe we and about to that the couple ask actually to back world? wanted what’s and And a how going have a side year.

Bill McDermott

first very there lots And strategy, you headcount much the that to of to out great companies of and managing everybody entitled the and taken question. thank Samad, their different Yes. have for is there’s all, people a packed. approach

been We have intentional hiring keyboards, last that engineering, of we G&A, I in towards the actually company have and throughout highly quota the journey personally four-year most especially And keeping folks on a first investments been to speak go-to-market lean have biased place. and extremely been in the carry very F. can on fingers our where that great on

we and our exactly best-in-class macro bearing doubled the with. in a So here quota scenario not boldly news, where a started marketplace, we’ve new is headcount Xs that, tightly. actually people and and in it culture this fingers have in on call really right the keyboards. We managing that thoughtful dimension we’re world and is I now hiring And attracting XXs here. It’s truly And we talent. and good our position believe, down we’re especially now into on like therefore, still the hiring, begin we’re to

don’t in you’re If X.X, now. get door the you an

continue interesting. in to they’re the they’re a profile business and thoughtful first the desire this special, in And way relates shareholder very to back marketplace. this we’ll how look with that importance managing answer, about The with as not So, highly-differentiated a the the business numbers business, moment it very margin of I at value created believe are company existing something people and putting the the that here. the work take what in new people to we’re in part door, I honestly they’ll hiring. It’s and you expectations do pretty that away to manages would being as are bringing from commensurate like people’s

Gina Mastantuono

remainder with so flexible our and expect environment. could we’re add, and I current remaining about will cautious adding how being cautious and just growth absolutely agile our Samad, we’re the And we’re really hiring be the always. we we’re for very in thinking vis-à-vis disciplined extremely with heads, of that how year the you And would continue and to

Bill McDermott

call checkout Yes. we it approach. a I mean we – internally,

Samad Samana

see seeing and great both margins, in to Day the TMS, a the to Thanks we it look in you, weeks. few and of Analyst the forward

Bill McDermott

Thanks a lot, Samad.

Operator

line proceed. the RBC Capital of Our Please from next question comes Hedberg Markets. from Matt

Matt Hedberg

for Great, we exiting my quarter you I’ll thanks question, talked the strong in the obviously a visibility well. about And been guys you fairly additional there’s enter the entering sounds and have here. a quarter. talk do delivered quarter. XQ strong offer about But Gina, and some that pipeline about my for congrats quarter? taking this you volatility you obviously, maybe pipeline like the and financial it as services, stable as How feel was

Gina Mastantuono

Matt. question. absolutely, for Yes, Thanks the

pipeline year feel pipeline shape. good really in we’re into last metrics time So a same perspective moving versus robust. board, better beyond. QX the about We across remains From and

you As and services, headwinds. financial about direct customer growth the some to saw had in the the great despite macro actually quarter exposure wins we talk

really used knowledge our feel so we’re our pipe, landing car where currently great release. And about event,

the in year of the about opportunities can to back increase we excited as half really the continue how We’re result. a

back we for remains really so customers. because visibility strong as from feel we half XX% The of new And that And as existing QX about good are. always, and perspective, our net the our well. comes from where pipe to

Bill McDermott

one in Europe’s one in financial services, may banks. you perform. of find And two may Gina services, – our top largest deals were find you of And is as including one continued thing EMEA, said, one Matt thing financial with interesting, five interesting to

Matt Hedberg

the guys. weeks. for See in couple a you color of Thanks

Gina Mastantuono

Matt. Thanks,

Bill McDermott

Thank you.

Operator

ISI. question Kirk Evercore next the comes Please line of from Our from Materne proceed.

Kirk Materne

macro add environment. I’ll on Bill, congrats on was impressions your quarter. my kind of on of kind And curious much. very I the thanks just this consolidation Yes, in

of just in lose that little opportunity that’s said greenfield changing I systems replace a to win. while, I’m if think where a for to to antiquated selling. your more wondering and one terms just maybe you’re either no go bit has to you or gotten always go that’s after for you’ve adjacent

So just if curious consolidation your from Thanks. guess, point of wave kind picking view. up, of is the I

Bill McDermott

has I the the really that’s the coherence greater corporate We clear. help C-level domains it that by. decision-makers the believe No workflow Yes. want a lot of with Thank for Kirk. when to to question, bring have for across you systems do the lose but stand an enterprise much us team record and very win, one to up ServiceNow at versus but would really is their And pretty into enterprise-wide increases obviously see that, think of you would it’s dramatic the point question point functions, in happen the we platform That’s their to that the up the don’t level. just workflow performance, I win capability productivity there’s solution no of to and solutions that or drive department simple. the doesn’t them, rates. And ServiceNow that optimize because that power the story. tie

experience, point protect serious some the one and of to kind all that say great why employees, us aren’t user platform my upgrades bypass In house. would customers what focus across And massive, transplant interested in drives whole delivering consolidate case, impact. with on the my truth that’s that I like creators? bank can productivity to not do frankly, empowers my risk I thinking the do fact, It’s and a solutions using thing when management a so or you one business a with banking is I seeing marches about enables the would gain technology the to simple of heart new on that dashboard version one is customers in and there be would forced satisfies were a particular,

more seeing market. in of you’re decision-making the approach to and a So more platform

Kirk Materne

you. Vegas. Thank Super. See you in

Bill McDermott

there. Thank much, Kirk. you very See you

Operator

Sachs. Our from of next the from comes Goldman Rangan line Please proceed. Kash question

Kash Rangan

in thank curious, of those $XX Great the year, the customers, the have I’m great revenue, base if million $XX expand going to a the X,XXX a Hi ServiceNow’s customers, to to strategy has dollar base congrats. billion billion, lot always you’ve chunk a software Thank the start customers, job, look got big how you’ve team. Bill SMB forward. billion that a strategy But much. about curious customers. very and of of of But you pyramid you commercial you expanding done at had enterprise wins. think base to so you much beyond the $XX of pyramid and companies

Bill McDermott

you Kash. it this Thank of much, mean think very I way.

We focused, and this things we’re focused. are very mentioned the of I one as that three

smaller We’re a lot new is come There’s companies live in on might in net upper right just this logos very that lot focused going meet of how new where particular, from goes. there. individual to business. We the a mid-market lots about into And climb now We’ll enterprise. of establishments. them talk see they their that

obviously on a XXXX. go-to-market that doing we’re But of by we have machine. particular, I with thought content, together we’re put the with gets And can ServiceNow. doing with XXX also true the we’ve the the where an the from that across a everything and power that company. And of customer Fortune tell platform, focus Marquee the amazing and you, the we have solution the leadership on a power And great in in industry, collectively way all the the assets focus build-out a full

So, top areas of and obviously and the larger I we like the extremely up would mid-market the focused. the by getting to you the pyramid pyramid, of the the part which of about in minute are big stronger think part as

CJ Desai

deliver those whether Gina perspective, expansion that strategy, shared, to Kash, just are products one the focused very terms product on as we it, the house continue strategy it’s from thing, a I’ll add additional of in we of that pyramid, top of just mentioned, well as are commercial as call you we higher solution. from ASP that mid-market release after call logo uplift perspective. release And a or we Bill focused where absolutely vertical-specific creating on you whether get selling as for segment, industries can new vis-à-vis solutions horizontal that segment,

business We for of have sometimes addition one. in or and allows that move massive an commercial existing us and is new those motion customers go-to-market customers, new focus up, to area the that become to selling logos

Gina Mastantuono

continue deal on area the and is new my remains that of new EMEA And And best quarter our in we’ve customer us. new focus we’re to I of deal in after average our those sure opportunity the up new to piece actually with us net we’re about ROI right growth are that demonstrating with logo platform created I us and nature right ACV our those targeting that this the new landed greatest just Not demand really logo script grow customers, would net expand logos, We going all logos our strength can those really ITZBund. is over year-over-year, evolved environment. offer significantly largest time. an in this with those make for that size have that and add logos to this and the really that equal, the durable us. mission-critical talked

existing fact And an is we’re so of our logo a ACV continues well proud new that the do of. expand to for very customer, that us it’s easier area and grow to continued strength

Kash Rangan

Thanks Gina.

Gina Mastantuono

Thank you.

Bill McDermott

Thanks Kash.

Operator

from line from question next of Gregg comes Mizuho. proceed. Please the Moskowitz Our

Gregg Moskowitz

a did challenging XXXX, go QX, strong really you year. it that grown in ServiceNow had you Thank much to have in to the start congratulations just did back to time we’d a the it but very you and and Okay. cRPO on sequentially The environment. last

clearly, another cRPO reason is So Or outperformance had what, early in fewer execution you. sounded highlight? on renewals Thank the it the that you you aside from that sales the there would fact good attribute like QX? you would

Gina Mastantuono

the the higher that was beat so execution to due versus our sales the guide fully net our great new say would from in board. incredible results ACV across team quarter, I Yes.

Gregg Moskowitz

see you a Terrific. Thanks much in and few weeks. very

Bill McDermott

Thanks Gregg.

Gina Mastantuono

Thanks Gregg.

Operator

Blair. from William Please proceed. comes of Arjun question from next Bhatia line Our the

Arjun Bhatia

taking the fulfillment. on for just question. the Gina, Thanks follow guys. up a Hi maybe expansion

are And sector things been headcount growth you the from customers. of One at has out moderating is at a are expansion your we’ve versus in headwinds seat growth how hearing that algorithm as dynamic? changed all? the upsell/cross-sell that in that there What is seat seeing end

Gina Mastantuono

a great we a Yes. in lot question, remember if It’s and back XXXX. that you question got

upsell it an and to and on keeping really seeing enterprise, workflows, a has seeing. us continuing the right? seat see that a so we’re issue thus expansion really we’ve customer an been compression macro something and not expansion been but across any an close not We’re far. as that’s a on other within Where compression, geographically the company Obviously, the for not issue given eye been

Arjun Bhatia

you. Thank Perfect. Okay.

Operator

next Zukin proceed. the Research. line Our Please from comes Alex Wolfe from of question

Alex Zukin

guys. different in. sales for you you respects? the Maybe, a taking making kind on from new a into pitch are this of anniversary meaning question. of Congrats macro a of geo Hey One talk two you’re ROI June, quarter. maybe solid feel Thanks little kind bit And And environment a which you’re Bill, ready getting does U.S. the starting time, normal? the it’s it every a stabilization a longer vis-à-vis because cycle, to different about sense then on this comment in little versus you or settle can everywhere? customers international like being new demand to on depending just bit

Bill McDermott

our absolutely they’re customers to you clear differs of for the question. set the that environment. but of everybody much It in challenges really environment complex that is a dealing have a very them Thank by are with. And all industry, operating operating and Alex, a they’re good question, it’s

we machine of So acknowledgment have retooled the go-to-market customers’ in challenges. completely our

So with very to to thought able content specific their that’s and go we’re industry. leadership in

We insight have their what’s specifically business. going on depth with and in tremendous

at real by of of I’m all unbreakable one. believe has case, for the the outside-in the PX, that on that regional the plans We And but all detailed And that on into and unbreakable me of to the the an have our environment sales an report the plans. our business and business feet day excellent the case, obviously, resilience street, and company, best have built this the leaders in that this account and not executives a end protocols proud extremely also I happen sales be and backed the just we to leadership goes in go-to-market to business. relationship machine, in be

one thing. So that’s

customers art The that on The possible and the demand of the educate is our whole is we there IT. and idea environment, of no business shortage align make sure demand. to here

in participating that business, of signal them the is is leaving new ACV business So conversation why out a growing, the gives good including the that’s this you because telling executive problems. you for a you and we executives really know are team, shrinks last-minute deal, have doing. their the because executives the Gina size to But the last-minute aligning push multiple as ServiceNow we’re surprise de-risk pushing educated are by you entire an also what the brand the answer and or

So on is I manage this a to than ServiceNow on would shortage coverage CEO say all it; how the there’s no manage But our today and of better demand dashboard, ever. understand environment, you have we just it. to

Gina Mastantuono

Americas really just I strong perspective, QX the pretty across We’ve That’s strong particular strong there. a geo strength with add strategy. local momentum care state, and sciences and some quarter driven And would demand focused had health and a board. in in life education. verticalization from

results had in QX The increased as great feel well. about well strong a demand. that’s Americas XX% really as U.K.I, we strong over really year-over-year, as number momentum. million-dollar so EMEA of demand, news. deals So good great

in strong to despite Central Renewal EMEA at Europe outperform. continue continued be rates XX% macro. to the

from board. strong selling across and drive Pac $X So well transformational We QX. in to demand seven working helping into has Asia deals. in the really million-plus perspective, again, APAC deals larger then been landed an the durable C-suite And

strong across perspective geography a really from demand Alex. well, as So board the

Alex Zukin

guys. you, Thank

is unfair advantage clear. Your very

Bill McDermott

Alex. much very you Thank

Gina Mastantuono

you, Alex. Thank

Operator

comes Our next proceed. of Turrin Wells Michael Please question line from the Fargo. from

Michael Turrin

delivered, Hey. cRPO strong from Thanks. for the you down Gina. bit appreciate what growth Good The guys. suggests just for QX. Great I set of results XQ guide afternoon. a

think can context? How I in the any you’re around just seasonality update cRPO? useful a over you prudence this anything what step change about is saw also much quarter, last early talked more QX factoring maybe quarters. provide several year? Can You’ve you past into specific is renewal you the Thank through for you. dynamics And versus to

Gina Mastantuono

Great Yes. question.

demand overarching I So that resilient. before durable from as said an the really perspective, we’re our business kept has seeing

guide, hit So beginning strong year QX of when started you in The really the if macro last remember, us. QX to is cRPO. headwinds QX

as And bit result, little driving the quarters is past a muted couple QX. which growth so a of in seen we’ve of a in decel

the as prudent I’m The to our environment. thing, other given in absolutely rightly in remain the recall, assumptions you uncertainty macro guided continuing

given And those number. couple the guide But things the are the current of going kind really again, guide. that are strong uncertainty. feel about It’s a a into so the of good

renewals early actually what With our respect exceeded renewals, say quarter. this to forecast that slightly I’ll early is

we basically given I early so about and end as in QX, And are expected. the factored really talked up renewals they with current respect lining as the at of some to prudent assumptions macro,

Michael Turrin

Very you. helpful. Thank

Gina Mastantuono

Michael. you, Thank

Operator

Derrick comes of line proceed. Our from next Please question from Cowen. Wood the

Derrick Wood

my thanks co-sell wanted ask add the congrats I taking question. partnership Great. about the Bill, Microsoft my and I’ll to for agreement. and

I in what think how announced give that dividends and update you an is as partnership guys I you you them? some you’ve laying to may to with a of imagine see do What be looking kind trending? around Can XXXX ago. just been year groundwork. you generative that AI

Bill McDermott

very conversations, Yes, are absolutely. Derrick, Those active.

doing day, XXX% you both is you with of with ITOM customers, Microsoft think of that’s our at the accelerate ServiceNow, see ITAM. agree As work together. opening big Azure But team we’re flight Also, And opportunity that an his you give on in we end closely to we happy in very, with the know, is area very particularly can a that an think our was generative in companies of a market I I big additional relationship the AI. which we’re and I very to work and and adoption and that and them. mutual proud for CJ help the tip to outstanding cap Satya to Microsoft. update that for for what for addressable for of continue progress, quarter;

CJ?

CJ Desai

Absolutely.

the Azure we our I our public is overall right product partnership going think you that is with which cloud set highest in Microsoft would So as here’s what Derrick, certain about is consume product, and services the when our ITOM allows into to such level say, at products your direction. visibility

ITOM Azure expand. Cloud of to with footprint continues Our

So one. that’s number

From just a had we Federal in in where really live teams recent U.S. cloud going geographies, government have together. a or the certification with wins few well Cloud are other standpoint, Australian our go-to-market whether go-to-market working IL-X it’s on certification, Azure our and Australia Microsoft some

will as when open will with but use conjunction Azure. Microsoft Microsoft AI we We Azure plan open in it share as AI work generative leverage comes well with how AI and on to more to capabilities Microsoft, absolutely ServiceNow cases

Derrick Wood

forward Great. knowledge. Look Thanks. to

Bill McDermott

you, Thank Derrick.

Operator

from next the Sterling comes of from Our MoffettNathanson. Please line question proceed. Auty

Sterling Auty

Hi, Thanks. Yes. guys.

seeing be in deeper a what together in the on maturation on and answer, what it? touched last price bundle and dive is my the What’s built the to a step light of your as much you’re solutions? want to it question observability you’re traction. better of it How but little How just driving bit You functionality understand of might I platform? much you’ve and in the top just traction able

CJ Desai

Yes.

including well, step would can all So observability a I they observability, cloud and QX. win going out the with deal beat metrics right? tracing. all the that I large to an And You win say, that displace life actually umbrella, competitors where company, incumbent amazing This does overall, put, done that to a in and in point very that an top is are we example. team we ITOM fintech has an our had

right look and trying with customers, are ITOM, private customers optimize with estate, it’s the we hyperscalers are cloud in our of we I increased, when that cloud that spend it specifically, whether selling ITOM deals and as workflow running saw year. in to cloud, actually the when or with overall, higher and workloads has the platform at volume our enterprise comes those But joint are that including expand, grow public or that this And to clouds. QX adoption

that, capabilities. the a with ITOM Azure, on those to addition via number rise with also AWS, happens discovery that In customers is of GCP our cloud using

Bill McDermott

on to industry. geographically in including one build each I have other this, ways understand And just give going market you just like-minded but know, would not the of and Microsoft ServiceNow and for Sterling, to and

one interesting to displaced is go said, then you us see where CJ aging you example. we as agency referring government But would and So an Africa, we’re for can this also very insurance something Australian doing provider, an legacy system. South to

do to So how values we’re goals and successful, shared front geo, innovation industry we customers have and know we the both end and it. by and around these common making of on really

Sterling Auty

Thank you. Understood.

Bill McDermott

much. you Thank very

Operator

the Our Please Citi. Tyler next proceed. question from of Radke comes from line

Tyler Radke

updated the on side both guidance through if you’re subscription by beat wondering Yes. for Thank some taking like guide look you the you I’m full the as could you It – more walk Gina, us did and for year looked you the account we just the revenue of assumptions currency. for full just than raising question. year, side. the margin at if

the So any if thing there’s there outperformance extra quarter. just was margins, you. or same then moving Thank And this pieces. strong wondering on conservatism

Gina Mastantuono

the for thanks question. Tyler, Yes.

raised raise it QX; did given the that slightly raise our macro FX, full year of But for to by year the current full we prudent which QX to big the and year, uncertainty we So and we portion only at of we’re end the remain many go. million you. surprising guide in haven’t given wanted many, the such really our did shouldn’t in still about $X be for revenue with years fees. There’s to guide that we a

about We beat else. prudent the and good uncertainty than guide. current in more being in So it’s really QX about anything really so the feel our

of While Now strong on prudent send signal investors durability to macro, and to should our the the Platform. a still current strength the I reflect think

Tyler Radke

you. sense. Yes. Makes Thank

Gina Mastantuono

Tyler. Thanks,

Operator

from Our comes Brad Deutsche Please proceed. from question next Zelnick Bank. line of the

Brad Zelnick

so on you I’ll echo congrats my the to thank year. a strong start much Great, and

target But should billion-plus target, impacts bridging me. new to to ACV as what XX%. compare, how new For and the which this net the you your growth very in in year? for a Bill healthy lot growth? backdrop net close your characterize seems to compounded factors we or on Gina, tough company’s prior proxy I’ve been which it year was ACV And disclosed consider last your getting mid-XXs year, would $XX of considering for And questions

Gina Mastantuono

Brad. Yes, question. Great

would environment. you that longer-term for guide strategy as focused XXXX make on and May, as Day to XXXX. new that those and we’ll updating Analyst you in is is XXXX growth for the net We’ve on backdrop given excited current macro and movement I fact What can be likely what well that relative as current tell healthy numbers given as about you. really the Financial ACV the sure very the macro I’m weigh talked to the yes, FX So where about come well in

you new just a but ACV, give we we for month. lot to term mid- next the as thinking so guide of And FAD in and longer we’re as net don’t for clarity know, at what will

forward there. to you seeing look So

Brad Zelnick

you to better Awesome. good see Vegas. Always you. Thank even in

Gina Mastantuono

Thanks, Brad.

Bill McDermott

Thanks, Brad.

Operator

line Our next the from proceed. Keirstead question from of Karl UBS. Please comes

Karl Keirstead

deceleration Hi, months you thank Gina. trajectory you of the were year, asked you. a ago, guided on cRPO about Maybe throughout three Gina, the call this XXXX. one when for shape throughout the to the calendar

Just is given the and so still that below guide that second conversely, expectations, bit you the half? about little think outperformed cRPO the in Thanks is a QX, right XQ much. framework to

Gina Mastantuono

Yes. across I very normal but the demand the strong I is us think driving and board. really current that mean, given listen, continue macro, see Karl, deceleration expected, you’ll to

macro and that And current throughout little year. the perform. strong, demand But of so we the we continue given bit last think yes, remains year, see to a and we’ll will deceleration vis-à-vis robust definitely absolutely

Karl Keirstead

Gina. Thanks, it. Got

Operator

question Our comes Raimo proceed. of from from Barclays. next Lenschow line Please the

Raimo Lenschow

the One you. Thank question on side. platform quick

local you platform and out share. seem Or of longer-term So platform, the a like or you ventures tougher lot that’s are a to you obviously quarter. Because out Thank area And more of but really the in relative you. for share that’s system a to that you want of adoption kind gained function of kind to times, then that that the of this a stand-alone What platform. guys you the terms Is have that theme? in have seeing guys in there? there’s they consolidation of this getting kind is be guys are there? a a one guys core downturn playing have product of record strategic be

CJ Desai

low-code aspects that to of it even companies with you’re our we technologies. aspect and creator with Listen, all the are, platform, are market solutions engine of it, key a platform many it. This as XXX% as has that performance right is, that automation Raimo, described themselves pleased you our our workflow there point super first many But course, company.

workflows, applications. when is We are truly extend a sell to out-of-box sometimes platform our creator company. we used And that

to their significantly processes. I is very Bill to very many nice business business many, feel as been in sometimes, and that. years, digitize use new applications has on create That the that And growing three itself four over mentioned, a to last optimistic customers

optimistic feel solutions you a I randomly record reason you without being applications because of the that governance. described have versus system cannot or point And developed all these

Our key serve buyer We organization. tends IT to IT organization. be

use data customers, record you does they rather a say system a or the record develop these reside. point has your than We on that we of to say, only applications platform when how from where And create a that would to our have features governance data. solution system new we apps, of

to all really you to going that’s RPA, our platform, we platform the via new for not machine our and thing that creator the that workforce. XXX-, are second integration bullish engine in build or automate am there XXX-plus the a applications but our this learning world, many any AI extremely deliver. only organically with processes technologies of is I we optimistic out allows And and integrates on working automation aspect

Gina Mastantuono

Thanks, Raimo for the questions.

Operator

Okay.

for it more one time So do appear we does question. have

Our Turits final from question proceed. KeyBanc. from Please Michael comes

Michael Turits

very get happy the and end. you. quarter to in Thank Great thanks. at Hey,

and and that also mentioned a you demand you office, mentioned saw that a across for middle You demand front, back saw workflows. strong you strong customer

about front market, down a in wonders one office. So

of were, they type you competitive were what you you seeing workflows that And was the of that customer with specifically some I So were record? whether and the or demand? not were were how wondering, of systems addressing

CJ Desai

Yes.

what have all, So Financial called we the quarter. great team solutions, year insurance, health just What it, Analyst that’s care and industry-specific central for address and at whether we shared of hot for sciences. saw, state, Day a was and last workflow, life it’s Michael, shows for as we you on is Customer customer first workflow. the with I’ll Bill created and whether Michael, local government, now

in of of the past that years ASP. have few context are customer All we service, working higher really the investments getting in are and those made well we

their competitors management life offering. In field end replatforming product addition, who is and service service there are resonating, field or of announced have some of our our management also

absolutely horizontal capabilities field care largest well service service single opportunity our customer as that vertical platform industry-specific. solution of how insurance capturing that sales alongside team to management being and are teams and our is We of a state, management government. I’m or executed have really engineering and local as company product federal companies, companies health on solution proud for they the

Michael Turits

Thanks CJ. Thanks, everybody.

CJ Desai

you, you Thank Thank Michael. much. very

Operator

you, today’s you This ladies Thank your call. gentlemen. conclude participation. for Thank and does

now may You disconnect.

ServiceNow (NOW) 26 Apr 232023 Q1 Earnings call transcript