Earnings call transcript Q2 2023

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

Operator

Good afternoon, ladies and gentlemen. Welcome to the ServiceNow Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speakers' prepared remarks, there will be a question-and-answer session. [Operator Instructions]

I to time, to things this Mr. at would turn like over And President, Relations. Yip, Investor Darren Vice Please sir. go ahead,

Darren Yip

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

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

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

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

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

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

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

Bill McDermott

grew grew results everyone, again, in from was Subscription above metrics. for you, beat expectations X.X% high-end currency, net guidance. thank XX% for our and ago or than ACV, million joining all which XX constant in We a XX%, above and performance above CRPO QX in $X our Once our Darren, operating of increase. key new deals guidance. the XX% XX% X% us ServiceNow's points currency, XX you, a guidance, today. up year was Thank X margin had greater constant revenue

to As the market platform consolidates, the intelligent are end-to-end transformation. customers for digital ServiceNow as moving

now have is at ServiceNow's XX% Generative being and supercharged growing each trillion year, long-term more workflows We than AI. metric running already trajectory ServiceNow annually. that through is X by

ServiceNow software, most line is top first XX% organic growth, renewal IT fast the in rate, our best-in-class profitability, differentiated of stages asset enterprise AI early expansion innovation-led, around mode. cross-sell mover,

step beat consistently, be company enterprise is raise have another ServiceNow that journey. the and will defining the forward software This Century. of We on QX said XXst

eight growth XX deals Customer had over deals eight with Workflows top Employee over a XX of with was XX top three quarter, Customer the best Together, portfolio, in was XX $X the over seven large million. top seven deals for of at XX, ITOM XX the spread over in Looking this our solutions QX, also deals with in $X the platform. of appeal and million. combined in over ACV workflows net new $X ITSM XX million. top years. deals its with $X deals deals illustrates and XX the of were of risk seven evenly with were in the broad top million. over was million. XX deals Workflows XX security deals eight $X which million, the XX, XX were top Creator in of in of with $X sensational

up environment Great very strong for a of and to and India Bank HP, Japan, for Petrobras, organizations We're Barclays, in pipeline product industry businesses, We Yokohama well see a in BT, sustained CSB transforming Honda, geographic demand all with second-half. a City few. including verticals. our are regions name ServiceNow, and set

enterprise Gina, our an for unprecedented software. operating and revenue This margin. guidance from hear full-year market are raising subscription environment you'll As is we for

us He earlier important. at it's joined enterprise Our is IT. this stated Jensen for partnership expanded And for Their good Jensen year. really agree. companies. choice friend, NVIDIA Knowledge thinks the partnership of Co-Founder exciting ‘XX an Huang, CEO, We NVIDIA-ServiceNow both opportunity and growth

midst In we're great spending will platform a software XX%. XXXX dramatic the that the Software-as-a-Service says and to you house. maybe will street, a expansion we Platform-as-a-Service best IDC economy. We're on in super in of clear live alone, and applications leadership, workflow nice When correlate of grow in our and grow ServiceNow's the XX%, a it's neighborhood

could has by unprecedented AI large some laser-focused the enterprise. with by especially Generative focus trillion. years. across strategy adoption for global estimates, With parallel accelerated Element XXXX. language models, regard $X our AI GDP to almost that Today, We been artificial consumer see boost in intelligence, ServiceNow acquisition We and

These for greatest me, strategy. the privacy. accuracy But is large more improve platform even rules, this standards worked remind enterprise transformative, in even if models, and the who domain-specific all delivering the with is Internet have ethical than enterprise-grade, as customer's it's technology moment or core a leveraging maintaining models of alignment their the iPhone. so business language they're data to results, for believe brands while Our ServiceNow's experts, careful about data the not highest will AI the which

offerings. As infusing you Analyst saw is Day, at our Financial Generative AI our all workflow into of ServiceNow

eliminating information. which We by Now agent, have Assist announced, since spent maximizes productivity time for for searching virtual

to text-to-code, OpenAI connect is Azure allows expanding our Microsoft organizations by controller. OpenAI to and ServiceNow language case example capabilities service, Bolt, Generative and instances text-to-new-application-development. AI with ServiceNow going Another We're models. It and further summarization text-to-flow even API Generative AI large

so a to the AI innovation, on invest in Our are They to outcomes. service, from realize productivity. ROI Generative greater a our customers monetization. have strategy ready are these customers And will experiences clear and our value based boost drive and customer immense self-service developer we for for excited better substantial employee

record into technologies our hyperautomation engineered products. QX in already quarter First, Pro a on based existing had we offerings those the

SKU premium across CSM Generative our SV. of release, For Vancouver and new beginning ITSM, new plus all offerings capabilities a introduce HR will set AI with we

program, AI value We have accelerate all new of in Lighthouse customer and Generative Accenture, NVIDIA to cutting lockstep at the AI. also introduced edge a realization alongside ServiceNow

use NVIDIAs already our Specifically, for involves and locking care us. enterprise. have manufacturing this financial cases the new with pharmaceutical, the engineers arms We significant codevelop engage services, health companies most to with

will of We're interest customers evaluating partners design AI who continuing in to are candidates industries. is customers the range for a new this currently and specific capabilities become their Additional for surge. program,

common: engagements These in perfectly one share sentiment is there. buy propensity The to

already never platform more right market-making been relevant strong it data single is our our underlying It's to delivered done. a results Even indicate, single represents now. where only as than architecture, AI as when our why is growth actually Intelligence relevant tailwind ServiceNow. is gets work is QX has model workflow it

a chase goes AI because when doesn't in cases, human the lead AI for uniquely and be productivity, in ServiceNow will augments work, to and As will of will. economy for humans the the a including it them. intelligence machines, At the people, replace XX-year and we With technologies, high so unfilled process automation bigger face we employers dreams positioned mining, integrated global openings, moment lift our can job Generative world. suite to revolution, is real most even AI, RPA AI

more innovation. our of broadly with in our upcoming we even products AI release our the will Looking deliver momentum state at and have September, the team engineering business, Vancouver

our joint offerings with Guidewire finance We're has KPMG launched to partnership seeing automation. to recognition supply adoption chain new co-develop improve products. a with We experiences. and than partnership of been now. Cognizant more extensive strategic ecosystem Our AI-driven partner expanded invested collaboration right We third-party to our our through expanded workflows. We they an insurance accelerate with are never announced also of

the prominent by This ServiceNow And recognized go Fred XXX cloud Luddy's market-leading service we're getting this analysts. is for experience time. first vision customer for and has rise to simplification, Fortune on. founding and been employee a engine to another hungry AIOps, observability risk ERP industry the only we company, can started. and and our fueled to into and for humble has tribute From app on

In all the is ever. architecture. C-suite them. a The way. department, few in closing, leader funding sponsoring industry. IT bigger And into period are is every in injects writing a opportunity Every the industry the business in is is about them. every CEO's new this playbook than world. this platforms, every the for dynamic across AI ServiceNow business, for the it speed Think for true functions

intelligent has platform facto the become de for standard automation. Our

are company. growth a We

are themselves, we We for our platform durable. world profitable in is believe the speak and And the relentless people, thanks results and execution changing. is our only culture, partners. our our The limit. Imagination to and

ServiceNow. say summed ever, about That's ServiceNow. reasons said, summer ServiceNow one is we Whatever people are working. the A perfectly. with She “Everywhere now it's of doing, I talking you works and spoke CEO things this world all proudly I move. are up " many as on go, to the the I

our look it very to all to me first, let you Thank much. questions. great CFO, I your forward turn Gina? But over

Gina Mastantuono

the We very guidance another operating CRPO Bill. QX healthy subscription you, Thank exceeded metrics, expansion and of growth, all high-end ServiceNow. cash exceptionally of and free quarter was margin to flow. our robust while range drive key strong delivering performance our revenue for continuing for

approximately basis guidance. $X.XX billion, ended subscription billion, currency quarter year-over-year XX% Current points. versus XX% was range $XX.X in XXX QX, $X.X high-end currency, representing year-over-year the growth, exceeding RPO growing constant basis at of constant our beat year-over-year representing growth. guidance In revenues were a the currency RPO XXX by constant billion, XX.X% approximately our point

over with strong growth an government. services, and QX, and transportation very XX% and a utilities in followed led way energy in business the growth From perspective, education, by and consumer industry logistics

QX over of In several fact, U.S. Federal had its past trend the continuing strong the ever, quarters. growth best

over by over driven a the including the Our with XX existing a With million was Platform best-in-class to QX, of business healthy demonstrating paying line X,XXX increase as quarter $X We mission-critical in of top ended part XX% million, was quarter foundation paying customers our $XX operations. Now customers' us our the expansion from grow, which strength renewal us year-over-year. resilience our in of XX% that further rate in customers. the remains ACV,

The purchasing more deals XX Better with XX our products, deals strategic of are Together or top more Story resonate containing QX, them with nine to of like is consolidate enterprises C-suites to with five larger multiproduct In our XX driving looking ServiceNow. or contained platforms as products. continuing

from greater in representing year strong. of to $X existing million. three XX deals of quarter XX In XX% and we by seed What's addition also strongest XXXX, net were (ph) ITSM [XX%] million Pro SKU over remained had were cross growth. deals standard expansions the more, than the closed $XX those growth our motion year-over-year ACV very both from quarter, million, new up Overall, from $X customers. upsells its over a ago, in which our since sales, driven upsell

sector public telco saw net momentum our launched SKUs, deals new technology strong another SKUs the SKU million We deal and and further $X in with and closing gaining in also seven-figure a landing our six our performance quarter. ACV, industry from over newly

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

margin $XXX our Our large ended related release in was would reflecting flow XX%. sheet, million the to to GAAP sustained including free I a We with profitability, path we cash in robust balance tax allowance a that note recorded investments. given billion in the our also benefit, U.S. and tax QX, income valuation cash a assets quarter deferred $X.X

current macro company's world-class drive position stock. a $X.X authorizes is first-ever the to Together, of dilution. up our program in of these profitability managing of strong continue Board to demonstrate environment The share new strong value. of results Given common primary Directors program. program's to repurchase the our objective the the and shareholder May, balance ability purchase impact growth, and billion cash The authorized the of

Moving to our outlook.

strong While head into as cross the we the prudently our the macro momentum into first year. guidance, our factor continue outperformance evolving half back we of half driven has win to

As a top result, margin we are operating line and raising our guidance.

range are to our currency a billion million we at billion, to XX% XX.X% constant $X.X outlook a midpoint of to year-over-year growth representing or by revenue XXXX, basis. subscription For $XX on the XX% $X.XX raising

weighted average are our of margin continue cash and full-year XX%, We XXX XX%, margin to expect flow operating raising to outstanding we free GAAP shares subscription XX% million. of gross XX.X%. of And margin from diluted target

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

XX.X% or on basis. We growth XX.X% expect currency of constant a CRPO

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

QX are for was remainder year. tremendous we the of and execution, quarter outstanding conclusion, of In well the positioned another

of Over customer billion map. overwhelming. incremental in strong Our opportunities XXXX our along through possibilities AI billion seen with $X an in as Gen achievable week-long from been May. pipeline remains executive our attendees. XX% with we've Knowledge The $X.X power response unlocked already program event discussions has keynote, the the and of workflows pipeline with panels generation showcase endless The over in the ServiceNow road event and attended pipeline increase

uniquely the growth company intelligent durable margin journey to seize to becoming platform us of transformation the continue XXst our to we front positions software Our end-to-end as for and digital opportunities top us expansion deliver in Century. line defining the in enterprise on

to you our continued globe and their and I and to like XXX, their service distinction is win results a testament customers, as employees a the of the of our a Bill It's ServiceNow we investors. together for culmination would heartfelt passionately also hard our has propelled couldn't be core outstanding which to a of. value and to proud into This around excellence, partners delivered the we in dedication. to commitment thank extend work Fortune team and

that, With up Q&A. open for I'll it

Operator

Instructions] go afternoon [Operator first this Morgan Mastantuono. Keith Stanley. Ms. to you, We'll at Thank Weiss

Keith Weiss

for we're a Excellent. quarter. guys solid really still is nice stand going environment. what And spending taking Thank super question. still to the And you not

looks definitely in ServiceNow it So like is that environment. outperforming

sure investors though of on focal AI. going I'm lot sort Gen of point to is the the a for be

there. continue You to innovate guys

us, You seeing September. not -- should see Bill for And going help thinking start maybe solutions. frame is continue thinking Gina. sure this of kind the we're like to or should maybe think when we revenue the about about time Gen AI gets model? you some Gina, for how we if out ServiceNow from of customers? by time adopted in how this new releases contributions these frame But actually actually coming but be of, I'm be to to understand roll could should solutions in we the about When And more

Gina Mastantuono

all Keith, for Vancouver end Well, those that. comments. of thank the I launch you, September. of appreciate is

see see the Lighthouse program. let the the if from perspective, a opportunities take for won't I'll it's But assured, really we think of we value a as until bit think exciting we such to us us top our real CJ going a are market scale to longer-term impact you talk more even about that about on bullish think absolutely little in guidance, very our for creating AI. we customers that the our right, rest timing in about as So about QX. little it while very line, front is with but Gen on we're

CJ Desai

the the way them the the Keith, were I Thank seeing believe it in earlier for that from you, some perspective Gina. They that Thank will you, we demand consistent delivered whatever. question. are would Generative only and value, stay we And are we that largest answer are And of terms monetize very is of higher from the industry get real. of companies, fraction of to some whether a ServiceNow, deliver it's AI, get when that our I productivity. in going that value for or higher XX% of customer context XX%, that mentioned

gets XX% keeps points a XX%, customer customer of ServiceNow of XXX the if value, gets So value.

Plus. is SKUs outlined premium that mean Pro here will What be Bill I our

of These be Pro, be ITSM So offering at text-to-code, with for new top products released Pro, Pro which an that in showcased Knowledge, CSM on September. HRSV we developers will are exciting this ServiceNow will being text-to-workflow.

then earnings will we how Pro XXXX, our with curve the will to on models. first, the want things we see We for try and value, you know see. are was going. ITSM customers We have at But adoption and so it CSM some Pro share next in how

Keith Weiss

Outstanding. Nice job, guys.

CJ Desai

Keith. you, Thank

Gina Mastantuono

Thanks, Keith.

Operator

to go you. Samad Thank Samana at We next Jefferies. now

Samad Samana

I guidance to I through thinking ask informs rest for how of changing implies quarter the gave for wanted just of How about renewal release, to want third how And the new about you mentioned that question. we've given taking you're maybe products out that on tie guess is September. is, the one you should as guidance what And quarter third Gina fourth coming question. the that my thinking as and we of is the that maybe about strong and short-term congrats it a been CRPO to ask quarter. customers just questions particular. Thanks I this for I for well end the what the are the in the Great. quarter. you've the timing? at maybe a year that Vancouver follow-up to want maybe think

Gina Mastantuono

don't we it's prudent what the Samad. now. going end right of from baking not a the Yes, guidance, end execution. say day, the the a absolutely that's forward, at The bring AI being day, listen, And you've durable. question, we I'm into but right? believe look continue our be potentially I'd just great demand seen We guide is At that quarter-after-quarter that with know like. is that of environment renewals solid Generative is, said, to what And could very to what ServiceNow

think full-year QX that of we if the incredible you QX macro I versus year, tell QX CRPO that The things now QX to last QX shift. when really in year What demand, guide slower an of ‘XX an is you from last a -- can had is a So of started and right? about guide. ‘XX have of incredible

guide now QX for is strong. CRPO Our

We of and have Generative to some are reflecting as guide right into upside could our now. continue lower right. you're level The But that potential we XXX% absolutely reflected AI not we've see. opportunity renewals early

Samad Samana

that. again. for thanks Great, Congrats

Gina Mastantuono

Thank you, Samad.

Operator

RBC We'll Capital Thank now Markets. go you. next Matt to at Hedberg

Matt Hedberg

about you Gen this Great. you that; as on perspective b, the you Gen my is trends I expansion are a, what obviously, seat that Bill some for questions little guess, have, got comment, AI fewer but some drove think context, long-term AI what there strong you well. world? given Pro developers in more history can the guys, I IT put is I'll and CJ, developers ITSM offer again, the on congrats within Could world. especially there when great, in Hearing bit the a quarter. investor

CJ Desai

Okay.

first I So thanks, Matt, all, will of start. and

As I trajectory employee-facing growth and for customer-facing via this market had about I have CSM outlined the that of deliver in and well in amazing Pro, very Pro which the based look features total, percent Pro. similar, it we few was second as we agents, even good automation been Pro, other And that that on very feel as years when past on ITSM agents at are the quarter.

the your rate on think R, it about times on expansion, the way R Now I times question is increase. T Q of is seat where

at ITSM besides look you Day, if Financial seed Gina XX%. seen So what that at has the Analyst shared the XX% is uplift have the Pro, we expansion been

is so why ask, simple, becoming And is incident becoming reason more very more digitized, corporations volumes the you up. okay, the service requests may that? the as or a customer The are going is are digitized, world as

So at quantity by look number R while times at the you times to a security the of whether number expansion Q rate you because on of keep up. R leveraging incidents, incidents, of features, that's incidents, I seed Pro being the IT increase digital digitization. constant, are higher T level coincidence, R they products look why where that our is continue is And go driven if of the not the

by will So comfortable value when Pro it. I because think the Plus. that's we with employees, and delivered small why think the Pro monetization we agents. Plus additional value is we'll productivity, this gain will given get it's very whether specifically, and of already at whether get higher customers' our feel strategy to base of with being about customers you it's about because or Pro, And value Generative it's the percent Pro a look our that our or whether Plus Pro allow AI we And of customers

Bill McDermott

models build they and the a transforming CJ's where with putting I this to LLM up new to it is businesses. AI in position now what as on is entire are enchilada come Matt, CEOs have these Generative from And would a commentary, relates playbook.

manage making? for I How service operations? talking, do example, customer service offers telco, to I How you're CEO, if media technology network? that great and the my thinking, I do deliver how do orientation, a So I'm the they're reinvent

shop rethink like you Similarly, sector is. do rethink I the drive met is I citizen know down forward really $XXX,XXX. experience. every assisted bit services? manufacturing, running How be or self-service surprised do public might citizen-facing floor we're be, as every the how They're it isn't and that things? productivity to is for one How a employee productive thinking the little minute way really And as I should minute, with CEO leaning

sourcing employee, I building chain, do that and factory, a the So supply service. rethink digital how sales factory and

care I an institution And to health and exist probably to that do CEO said, today move the the Like home. doesn't and how in-house as in something it's completely relates care it health health care, the world health patient the who's somebody's running care on from care establishment most rethink how model table. I can services prestigious all

is this. ERP or in that conversations. to wow, of chain of point you have case. probably or And thought might case sounds the those of So modernization, supply a is manufacturing I ServiceNow want those as, like make that many now a all like sounds

the So point. actually, that's

work We people platform of resonating. and a with companies Century XXst have and soul-crushing become these we're out enterprise that's transformation, the modernizing intelligent digital for lifting

with You of and I is the really think combine LLMs, that once-in-a-generation moment. this NVIDIA a others, combination

Matt Hedberg

Thank you.

Gina Mastantuono

Thanks, Matt.

Operator

next We'll JPMorgan. now at Mark go to Murphy

Mark Murphy

add And in comment out business June July In just on or of confidence conference I'm U.S. in think and out if is out velocity how I'll -- April like month. to and of the moment? you my if exit also particular, Can real coming to the coming more you. at the generated pipeline March? the invest? thank coming last you you Asia turning trend and of there Bill, it curious, and corner, you the congrats. compare sounds felt a willingness is it Europe consistency Yes,

Bill McDermott

Mark. question, the very Well, thank you much for

best experience IT business digital the office, become is interest in of the customer engineers we do to strategy. when their the work, there innovation. professionals or we're There strategy and talking it's of transformation. especially lack the of employee the digital lack corner And to you about the no in all First no or even interest get C-level, all, has to is rethinking how because and people empower

is or portray versus a the transformation so having us So about. the for with that understand vision and quarter thing whole what vision It's is really much based we on all one C-level have broad of one another. the not month completeness chance decision-makers to

to the limiting the So only of making depth we that breadth factor explain chance story. our sure a and just is get

terms dig the In geographic just in individual scenario, a the each of very in of of that spite well strong. energy which obviously, security growing situation, we're them Europe own Obviously, and is scenarios. is their have because extremely strong all and of Ukrainian aware you're They well. human tragedy. need they Americas is and of now, their Japan, leader of Asia a technology we have Japan, going feel we in we us, is for the out going lot to a new really that's new a to have and where way in planted grow a really fast. complexity. like And flag frontier we especially well

So we're geos. feeling all good about the

give of I deals, back want industries nine XX CJ of point platform. form team, and top the in same getting deals or from time, of proud hands in five that's and the And the more XX of the I an I'm is yet itself just establishing super an had amazing And the quickly things. customer factory also team, doing a Paul want or to in and art tribute XX make more products. here. and collaboration products it the And go-to-market up the taking in our deal as on the bomb. Some to team. And are at with for the to incredible the innovation of to had but our it engineering we We the concert machine, the really with

Mark Murphy

very you Thank much.

Bill McDermott

Mark. you, Thank

Gina Mastantuono

Mark. Thanks,

Operator

DiFucci John next Guggenheim. now We'll go at to

John DiFucci

how taking are for question. Thanks for hi my Thanks taking my Gina, -- you?

new you quarter I that. referring Gina, a Were you that? share that? vertical us, rough just or had Fed like further can so, little said much ACV? on really guess, of So the gauge best whatever on with share that you anything its more to how And U.S. it a Fed grew if Like color which maybe you the is or ever, interesting. can

Gina Mastantuono

Yes.

it I QX ever. So John, what that best was said its had

And so was know, big I as what you Fed. But quarter always the is said a QX, trend. for continuing

ever. best It it had It had it well. as QX its its QX best had So QX best ever.

It accelerating it great one really digital seeing it's around so what than transformation but journey that million. $X bigger And not our had resonating. $XX quarter. over saw is deals, And QX, is a including million message you're

what like about they're ServiceNow, think multiyear, more partner looking and platforms the through board. really transform with citizen across looking an strategic, more and they're to digitally you If the really ServiceNow much experience lens, more enterprise to

really about continued seeing. that And the we're so we're trends excited

in have Iyer work an We leader Raj incredible new Dr. incredible that doing with whole team.

you so really can opportunity only imagine strong. that remains the And

Bill McDermott

on I John. could if thing And just build one commentary, Gina's

out, Europe, also across see we our here a opportunities France, expansive to U.K., We Middle have the part an because he to also entity in a want give Germany, out out we few, take him also is a the Kevin in don't and what done because Asia, take XX ran team, specifically name to local, shout want building little state I a to double-digit to they're federal the whole business of Fed mentoring me so and all love and just exciting obviously, East. and oversees run might opportunities remember see the and for and Raj U.S. government to our XX states ServiceNow. really force we India but in and amazing. You opportunity future, of to just the Japan, Haverty shout just And that personally. corporation, being I here to and And is that too, forget, great sales as Kevin of the them great us, for a see years. Kevin, not amazing the with powerhouse being I only

John DiFucci

And job. Thanks, Kevin. job, Bill. Thanks, Gina. Nice nice

Bill McDermott

you. thank Yes,

Gina Mastantuono

Thanks, John.

Operator

We'll to Rob go at next now Piper Sandler. Owens

Rob Owens

and an you edges of to question. and look I And around signal been know invest an that that But do taking here. you standpoint. quarter? discussion just executing ServiceNow here us. lot think of is this pipeline There's half, I you guess, the the But Thanks. more second and customers, a my second-half, in a with share taking landscape there's there's drill the the paint from from for the I down, environment. you this thank lot guess, economic us Great, I willingness clear strength giving you're at towards enthusiasm discussion, to been obviously, just around want as I for but to all want

Gina Mastantuono

well, whole Yes. there's I I all an say but say would you continue economy, to that extremely a perspective, not I that on not the giving clear right? execute we lot think the would the of value we're sign going from macro the everyone gains to AI, the for really a So AI is and on for excited business. about that Gen commentary create Gen change, productivity except right? is

half our year. in billion What that saw than the higher of see program talked a in A we Knowledge believe, the means coming the at of pipeline we I'll and attended day, end we script, lot momentum Conference, Knowledge over my last is, for executive of early tell XX% tell. actually the $X But you what about pipeline saw increase coverage pipeline out in healthy, I is ‘XX. ratios I attending. it's into that going to back QX remains and

coming the of are to ServiceNow think folks you if what higher-up do C-suite, can and So provide. understand the

we billion KXX, especially out presented do we $X.X demand And to-date similar of in team approximately see demos, created so to And for Gen event. strong and around our to at AI. out fly to we've what pipeline that continue

for a short, strategy about macro, be lot long-term. of ServiceNow's there's so not in there's with cautious, but change in can a what lot whole And and in do excitement the particular, of Gen AI customers the Gen mid and AI, I'd like

Bill McDermott

might be interesting facts, Rob, loyalty others to set you is the And of that effect. and one

loyalty. we also retention You of in the took course, we understand but very our And there's history do conditions Right employees company. cloud of human effect we the now no marketplace, strong position rates would matter loyal a economics, would have best that together. the we a with of it remain weather the them, to the now, in that the

customers. rate with XX% retention have We our

with it purpose and thrilling can see this the what of pretty And ready means, ACV go customers. with tremendous think that And the out into the to So and a to for you the what sense watch, combine innovators get and here. and company. charge think platform that over I'm are loyalty if us, that really have we And of can the excited new and take about within amazing the world. net this we I we fired up really present effect fun our of net consideration, that confidence leading to we're we it's new value you do is brave

Rob Owens

the topic. around Great. the for fine Thanks points

Gina Mastantuono

Thanks, Rob.

Operator

Rangan from Goldman hear Sachs. Kash We'll next at

Kash Rangan

we'll time Thank you economy, challenging Bill you one look get months, for much. for you the last ServiceNow And One at and share. gain CJ. to very the the out-executed calls. for Gina, XX you, when follow-up Bill, but on

more cycle What towards the and And power AI share constructive. when pricing get being of investments turns does you your the So IT gain Generative ServiceNow budget? how do value look like? precious for

one you, CJ. And for

not done you mapping, some Why XX. tell fancy how you've value how of some and keep us I'm that of financials, I the talked You mean that you XX? cetera. et process could map gets $XXX And more value? $XX sure customer than about

your Just get much and curious to you again. once congrats thoughts. so Thank

Bill McDermott

for the you question. Thank so Kash, much Yes,

pricing have in the can't from always the their all, innovation. believe of representative through again, of you First all way leadership. something strongly, its a can fact-based. this the And I reference organization company of is the company engineering that's technology power leaders And great for thank I CJ quite we

some platform ServiceNow the XX%, into version than CJ AI seeing year-on-year. ServiceNow said. grow introduced more as platform percent, already the Pro the we're X-X have time, And of We for

building partnerships, of a and the for it terms we it, ServiceNow because I'll models extending the let platform the business talk what pretty we can about LLM Pro are on putting and those Plus, are we those in customers on CJ figure get, compelling. into with is but significant where it top, And cases is so think

CJ Desai

Yes, thank spot you, and Bill, on.

value have get, our which about services launched past price same we for and customers whether So kept when of what of Kash, was the we Pro have years. pricing five always exactly five years the ago, over ITSM Pro, ITSM we in context the thought

specific give right? Those to call we of specific cases, Now not on because Pro. could with models on case do top in language which large we models productivity super domain that hey, productivity will be on that, run of saying And need Plus, large very based use are I'll the So use Pro additional start this for terms language specific. based model we ITSM, cases, use significant.

So to top like minimum, when plus on from at a least start of we would Pro. XX% pricing perspective, on the list we price, be

value. already Pro you're a the you're getting customer, So

over well. have happen and seat the as it seen five we expansion years, have past the seen We

is Do most fundamentally out at value themselves. start So Analyst take that I AI The Generative on models. accept that language what learn for Customers we is they that shared the XX% trying this Day, trying prediction are Pro large just do model? importantly, I a customers comes which you accuracy, plus. But to but tailwind Financial business, the Plus, believe, have language it? of large out models are with Hey, the get. our I

are or we can the So value, as a you for productive see work ask to is repeating at And And okay, cases how again, prices. explaining and we premium week agent. can percent delivered, of course, their are what say, going very And value, a the over IT we'll we is start they start Pro we agent look or but And Plus. deliver an if industry, of for higher with somebody task customer do more over day can a I spend service these the your we for to XX% the XX%, getting there that say particular and hence, use with task. and for want we ServiceNow, more particular on believe on value more we high they map. have then because

Kash Rangan

much. Congrats so you Thank lucid. Very again.

Gina Mastantuono

Thanks, Kash.

Bill McDermott

Thank you, Kash.

Operator

We'll go now BMO. (ph) Bachman next to at [Steve]

Keith Bachman

follow-up it’s Hi, that. wanted Keith on I Bachman. to

may In question is, Enterprise? subsume the the we in analyst at you're the had as a does Just And and sure rolls the then there seat Pro that AI still had, Gen seat you've Or too. impact, Will not lot way? what ITSM about clarification. an -- may count Pro some Plus be the a talked out, Enterprise. past, you event that

additional that I Lighthouse customers seat how count thoughts solutions any But as may got from Gen thinking wondered in seat has had any CJ, AI they're the out just know, perspective the if what I increase count. you've where on or been feedback about program, rolling you've the doing. said you

asking CSM, solutions these HR, So may et on out basis, roll seat what a I'm AI you for do really Gen ITSM, cetera? count as prospective

CJ Desai

Absolutely.

should Lots is list -- addition, with Keith. there. said, say when only in exact And asked. the Pro, it okay, is be uplift, how to our went on we that questions of not rate we I on Q uplift has XX% we for the by if And point, deliver price customers. listen, out, XX%, value to count seat in the the remains get if was even in Pro have all, been And able of you, first same, but increase. played ITSM though, the question able So which up at thank of would XXXX, the September ITSM launched XX% same I that

also workforce your in workforce Now mapping it's Because or AI, things Enterprise Enterprise when not Plus. optimization, like I mining, look are process at only the is skills IT for to Pro first Plus, because service. features customer question, answer Generative

not to are related feature set. AI these So

than enterprise different Pro. So a has very payload

So as we as Pro Enterprise Plus are well Plus.

So that's number one.

to force It dealing out They your customers are with are labor shortage. And more can conversations, about question done. in so number can productive. work AI employee early base is that get efficiency customer that belief how they is still two, around in make still figure labor formed environment, they now their that still Generative I productive. more trying their always And right catalyst is a more have so

Q rate will get the value I'm as are increase, well as price so the of optimistic same, the on deliver. going to remains we of still if And even because the we

Keith Bachman

thanks. many Okay,

Bill McDermott

Thanks.

Gina Mastantuono

Thanks, Keith.

Operator

Research. [Operator go Instructions] to next Wolfe Zukin We'll Alex at now

Alex Zukin

Hey, guys. Thanks for taking the question.

a kind of on of us I some are lot of Plus. taken commentary think the pricing aback Pro by

maybe the from to I I'll of more increase? can So but type come questions, going -- other uplift, specifically, I about it to throw walk consumption we that dynamic? guess us as think wanted a side. for more this a the through, fee I them is potential of had Is you to

be Is the there might not about client base? intensity models a required? cycle aspirationally thoughts be to investment And needed from of mentioned any percentage You anticipate is adopting of perspective, throughout the in CapEx big the foundational finally, an case. there you your models every

contextualize those you points? some can of So just

CJ Desai

Alex. absolutely, Yes,

and your answer have going I'll Gina then pricing COGS I'm CapEx question. the So question, to answer and

Gina Mastantuono

incremental this a not our right? perspective, demand flow the any for from year, So Alex, for in baked margin CapEx concerned, guide reflected So XXXX. I'm cash is into free

starts back year, going for as about see think we we for don't my QX requirements XXXX. forward, I'll point, coming QX, and guide we any through As reflect in kind see large in this the increases. the where But half at of demand of that

be our offsetting roll if organization. us as is within CapEx, that some result Gen more own bit a you we'll on little out always pressure a have to But we AI to gross with as rest there continue capabilities efficiencies known of margins do, as assured, operational

CJ Desai

it. Got

Gina's model because share for do parameters do to we So not one, what of two run of language I of with is hundreds case, the text-to-code, Alex, example, we want comments things require size one-tenth based domain have seen large use billions for specific on that our model. number we per can OpenAI with is,

respecting efficiently. allows us our run to that privacy customers' run It So data. to us it of allows while the

one, that's COGS we are on goes with. demand number So based gave that the that working the answer and customers initial Gina into that and

price on as times Now question uplift be P absolutely that would of in we The around we believe Q. the it price. your terms can

know R&D on quantity whether why enterprise and customer we out. team is is discounts, of that with get. the that, It that's like definitely, there on customers as features the be believe will all top how assume release of based plays that well Gen will XX% list be as something value things, for the cost the with the cost are is always for that is a we to AI price, but you you to our course, sales it's service run remains our Pro those based the that same, works with So management, if And on they derive uplift ITSM that the XX% will if it that, of all going And value additional number? then, or uplift. why

price feel uplift on comfortable level. that specific on list at So the seat price the pretty I

the top was And say would to that have and XX% the expanded trying was on ITSM, of we then second over five have which we which years, because we point was I thing realized, on have digitization Pro, I XX% the of seen, last price got ITSM the the XX%. make by uplift is earlier, that while seats

Bill McDermott

thing and new And a And Alex, know lot you we're would I time everybody new else like every of seats. is you logo, get getting get to also you one logos. new a

the thing in The platform personas. on and business we're now a selling company, multi-product world significant other is the where industries, are solutions, we the all and solutions, communicating we're with companies in expansion to

XX the this of in deal. that in nine think about then XX point And was top So or a lot In data that if deals find seats. we quarter, is one $XX-plus are there growing the deals year-on-year. there deals, the you you might interesting products there. That's more large-scale or XX our million our of more category finally, five was of XX% deals, enterprise in products

that So new in seats. you think should of always we're lot getting something that mind. is keep I And a

expanding personas, apply platform you're and the outcomes going every in logic as said, good new lot for into then geos, the New new going and shareholders. of to pricing, the the you all innovation of company, on And and customer CJ for logos, seats. a get new if

Alex Zukin

good pretty a guys. success, like Congrats. Sounds for recipe

Bill McDermott

Thank you, Alex.

Gina Mastantuono

Thanks, Alex.

Operator

Karl next UBS. at Kierstead go now to We'll

Karl Kierstead

solid little Gina, the the and tracked us quarter, giving much. one an a months, you three that it of that passage ago, how just with of your guys mind did is so in quarter Thanks you vertical, update Do through up. uncertainty the picked a which months up year-end? us how for Thank ServiceNow put tell vertical might FINS you. felt but three wobblier. Hey Macro largest, you

Gina Mastantuono

cycling despite XXXX. macro so growth I QX the Yes. that actually, that you saw We huge about QX, if in QX, growth we in industry, fact stuff talked remember, the -- within in of we that and on was going

good really And so and continue we actually we And Barclays, see strength growth we financial as what say we for were had saw about with in good to would example. I deals very QX. and there with talked in services, pleased we in

And financial so really in we services value continue our strong all to be customers. demonstrating

strength continued their costs. So

CJ Desai

we Yes. one as saw as Canada, Gina's within just Fin in And add sector, I'll in well across thing, specifically on QX, Karl, both measurable and United that in the is in Europe. States banking point, our progress the portfolio,

can close So to you bank us, a with that with in the platform million is I bank, -- expanded And resonating. the The expanded. us one tell largest which largest they is now renewed when $XXX of TCV QX. at level,

is banks in well. that seeing and the a back, decent are as second-half there are pipeline very we So

Karl Kierstead

you. Thank

Gina Mastantuono

Karl. Thanks,

Operator

to now next go at Weed We'll AllianceBernstein. Peter

Peter Weed

Thank you.

And might how that you coming earnings How year? going? regularly directed over large do you start that speak channel your about breaking that might you something getting the that more is is a going see and I supported. think up And something to XX% the the And of one alongside future and ServiceNow. ability of past, growth you've is as XX%, was out, this channel talked of has deliver emphasizing ramping its really in of kind maybe lever of kind to really revenue been been you've areas in the forward?

Bill McDermott

Yes, it's Peter. a question, good

just be reach, They're reimagining of really, mover certainly is our sales We doing have customer against channel in future, developing worth us taking market. and One talked AI-driven joining about of great program. first the chain have also bit on reporting expanded other we to And giving that the supply and companies and share technology the that we automation the be wouldn't the that mentioned here very really their Lighthouse partnership, ServiceNow in might it. partnerships. procurement. But group are I with partners Accenture. large they're things force Cognizant finance, adoption little would a KPMG, accelerating I that the with

a technology power ServiceNow, of companies, the it you instead because a of technology they you're automation strong of part boxes their they're lot then combine when And can selling move products right, solutions situation the of stack hyperscalers, the that or in with they're that that SKU, just they they story from solutions But sold some workflow technology partners, developing they're recognize turnkey whether industry. the channel a even And by solutions. bite-sized in virtual having can in we're or world. into business smaller customize we're where then be

a do lot the can channel. we with So

all billion-plus think The -- All billion. now SIs days the for One have $X technology practices. all adopted have is big have those I beyond ones us. early channel partners. it's

be a talk a you're on about sure good that point, we'll to lot. So and

Operator

to Thank Bank you. We'll America. go of next Sills now of Brad

Brad Sills

Thank Workflows. great. about wanted Customer you. ask I to Oh,

there? the execution And net new attribute out where called a hearing this creator some there's Any broad you against follow here, from channel Are ACV would you there, We're channel Workflows the to that You portfolio? such or on it that Customer play that? a the that. what's can contribution you're and with some and in certainly customer? strength driving color that quarter. see just we seeing might well. expect you're Perhaps there's greater as trend builds pipeline there strengths follow and use the strength could to? in applications that What see It's there any seeing cases some

CJ Desai

Yes.

So Brad. so much, thank you

besides field quarter through management quarter. best all, of I its including for first had start Workflow our with, So also a Customer service also CSM had great would overall,

the we tying now largest the on back And showed workflows. I getting all and good were work our world, done but our differentiator, very which of actually up that to layer, not just Workflow from back-office to layer, they Knowledge mid-office office request. been solution, about in customer engagement office Customer So has way to engagement our on are raises mid a front when how office, a category, the we using ‘XX think event the this when at brands the and the some have

So that's number one.

shared really, in SKUs, done that at One but look when and sector, government-to-citizen I at as also is public in Europe. experience industries, telco, specific largest the And I comments are that the experience, customer shared that when look were optimistic Customer Gina on all better work leveraging Workflows industry-specific Gina of you and mid and by earlier back-office at ability resonate other States The be have our on ServiceNow certain is get well. platform this that line tie the office. extremely on particular front product how we really brands also to our tying office resonating to when United the can back to and as we transformed is office office served I front on remain our seeing,

within And was integrate growth comment very customers, we Engine, just an financial are public the capabilities seeing sector. well also care as that -- sub-verticals just encryption our systems U.S. and are health low-code on to that on driven well platform provides the ability our all as available of resonating App in other and platform, features there which including by security Federal, the Creator, QX is really for many organizations, from earlier but nice to with very, our services

is low think deliver text-to-code so which innovation there showcased So we App we much demand. Conference, code when will Engine, at and the September, you about Knowledge that our in

more some the to enough early backlog, this our what very ServiceNow midsized ServiceNow. on things of ServiceNow. automate by I touched have customers, on when I Bill automate speak can They high. on using don't things And to who mean customers, want largest people they using our more And remains backlog

reduce what organization. so so text-to-code text-to-workflow AI get value automate higher excites and efficient an Generative that with that's they and and platform, more capabilities, So the really can backlog, them they using become our

Brad Sills

to Great CJ. Thanks, hear.

CJ Desai

bet. You

Operator

more afternoon. Raimo and ladies that do have And this take time Lenschow at we Barclays. for one now We'll gentlemen, question from

Raimo Lenschow

for thanks squeezing me Hey, in.

on the end. a maybe quick Just high-level question

for inflation AI of about year and last could corporates, set be adoption, year. think was because from the tough enterprises vendor lot side. was this you the There for budget If IT a

members coming you're kind about AI Boards, plan year? think impacts and -- and about your of years? with Bill, the how so they the how maybe and how with congratulations. of that how in out How shift And you for of the thinking budget. next And conversations Thank like some Board you budget generational tightened of are kind you squeezing you do

Bill McDermott

Yes, There to the I to C-suite thank I go no in of you one comments want AI. for lack made the back very of much. is earlier. interest Gen

company they really reports have And and a direct demanding everyday company, and they're their a of run run using a playbook, their this one on in them company care forward-leaning of better of every takes knows they're more margin-efficient extremely that people to the business C-suite ultimately, fact, most their better to to activities a ones their customers. this. that In are focused have of and

is stone set this in This So now. is happening. This real. is

of this great, what's but and strategy, with across easily IT And in IT budgets, has is fundamentally IT where the as they're can the a looking because going now little about become personas fund model, in we all that to their a And going something that interesting Alex an enterprise. bit cloud now standard, they're which is shared have I the at business the are strategy earlier, initiatives, these a about and budgets ServiceNow the lot change great what's their personas game. and the as business company own own

support, serving bright. and service automating is think you you onboard literally operational about departments, you about different the you're and and thinking the correspondence have have but you future how you employee cases processes. across a that IT, And proactively how are them, general whether only take the how that you business other through cases not about touchless of customer text-to-code, manage that think queries go agents all and virtual I classification think So resolve where how-twos, all desk

who partners, how business the you're are I procure from, operations make about, thinking completely visibility my going into to all and I you're things this seamless. Gina, all if who am to process onboarding am So going

all what's be we benefactor, now became is And relationship to these be, way the to IT the company into the to happening when better because we innovation a I right and good Not that's That's but not this is, we're a go company, now. executives platform just a going budget. model and have with impact. where budget. entirety that's it's are. that, the So the big think in business go capital we beyond place the every biggest user the And counts where have where you of can that's

going So that's be. where we're to

overall look it's whether going bright. of benefactor cut a that And So central future, extremely XXXX, big think budget we're sure we as have work the company, all to the IT I in the I think the level. into the to is the make you now department be at level of to do hard or

Raimo Lenschow

okay. Yes, Congrats. Excellent, thank you.

Bill McDermott

Thank you very much, Raimo.

Operator

ladies earnings us us you. will so all bring Good-bye. Thank and And like of ServiceNow gentleman, second to call. you the XXXX all that to you great a thank conclusion and joining much evening. wish quarter I'd for

ServiceNow (NOW) 26 Jul 232023 Q2 Earnings call transcript