NOW - Earnings call transcript Q1 2024

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Operator

Good day, everyone, and welcome to the First Quarter 2024 ServiceNow Earnings Conference Call. Today's call is being recorded. I would now like to turn the call over to Darren Yip, Group Vice President of Investor Relations. Please go ahead.

Darren Yip

Good afternoon, and thank you for joining ServiceNow's First Quarter 2024 Earnings Conference Call.

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

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

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

to will To investments. to website and at release investors.servicenow.com. with non-GAAP non-GAAP or to non-GAAP otherwise revenues, the point today's rates be in both on our RPO, and for on are present also posted call accordance and all posted cash out GAAP. we as earnings investor We'd measures, A please current RPO today of discuss and we reconciliation these press obligations, financial growth calculated GAAP remaining our between see except for and refer presentation, website. today's which replay measures financial not also substitute noted, and performance like measures that addition related Unless in are measures a

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

William McDermott

first results and guidance all for once outstanding. much, joining were very Darren, line you, again you and outperformed today's call. metrics. top everyone, ServiceNow's quarter Thank our profitability across We thank

approximately revenue XX%, was our basis grew points by XXX constant constant our above end our high year-over-year Operating year-over-year of grew margin That's over guidance. XX% guidance. basis XXX points guidance. currency. above CRPO XX.X% above XX points in the in Subscription currency, basis

over which Even in X increase is large new is million, a a ACV, deals million $X not X year-over-year. had as net QX increase over traditionally a XXX% deals were year-over-year. $XX quarter, we XXX%

as NNACV ServiceNow strengthening combined, businesses. top transformation. in is XX, for a deals. each were of plus and were employee and performances in customer ITOM XX creator to on powerful for This productivity. a That's our drive why strong fueling AI the XX of business as GenAI are force platform XX each workflows an its adoption Security QX. ITSM top of deals. the XX is risk, tear top is remained and in deflationary Companies into position record-breaking. key the the were leaning XX Pro GenAI for of

In fact, it's selling the the offering company's history. in fastest

a maps. AI standard Now as are Iconic Assist their ServiceNow's road GenAI brands adopting for

we expanded partnership Assist This into Microsoft also our Copilot while quarter, to new employee integrating Now with AI Really exciting. include long-standing experiences. capabilities generative AI and

the to AI with cases to combining IBM unlock customers Mellon increase clients. Equinix by helping exploring value using management Platform bank leading case employees, ServiceNow of saving Now Assist BNY and to aiming for service its IBM's HR is and increase IT ServiceNow the Now summarization the utilization for AI partners. for and deploying Energy and X agent and faster, resolve the at Watson is to ITSM Hitachi are technologies of additional power productivity for millions. other Now are workflows, Assist with productivity XX%.

to From created Department in Major included government public customer a demonstrating transparent the exceptional the excel May further government sector QX perspective, an government handles in transactions department detailed X globally. at a in We on and requests Motor road GenAI look health continues to successes ServiceNow experience citizens, an Analyst Financial digital give app to map of of fast, Vegas. on our Italy's forward IT Sogei; and Australia's Day division, Las in minutes. Sao that the that Vehicle of customers, Paulo industry case,

We're a footprint global important most booming. in vast expansion is geographies. our seeing Our

This model the to quarter, deal the history. our create ServiceNow services innovative implementing is one companies its Switzerland into East across signed data partners harnessing single in with needs. therapeutic scale most business to cognitive largest Japan the IT regions where urban while in everyday data-driven city the intelligence the NNACV GenAI other team NEOM ServiceNow in its Middle to is first technology along Novartis meets transform of medicine. seeking

And where iNet, control, things There's Gas we why simple. great for quarter. a a now culture, careers. can we is deals on are top the We focus lot their right perform people don't. scratching when just our of all there work Tokyo the this ANA do great other surface Suzuki, policies out the guesswork achieved geopolitics And some forging can of things. among building the economic this QX. best winning Systems well products, customers is and that's what we signed delivering service ServiceNow's others and in about philosophy of

It's guidance, ever our Gina, hear why as also remains you'll strong. from

they a to fast about change Let's this moment. AI When transformation. the a CEOs business technology. AI speak all catalyst I environment world, talk a over is not for demand recognize maturing enterprise the for is software. is simply

the massive past years, Over enterprise governance. decentralization has of XX a technology experienced

high many the low was risk. cybersecurity many As decisions apps, the systems, became Those buyer, key. here's result IT And been every quality too an and data department vulnerability to too made. have

while long AI. to strategic the innovation in want net of want new consolidate platforms don't past potential to delay from They the want short term. to getting derisk term, the to CEOs as for the even business value So also they immediate on

GenAI AI be been strategic GenAI engineered is today. economy transformation for the workflow the Process as at business is in why its enterprise will every This higher. optimization business ServiceNow's case with has global #X the relevance in platform use never Every core.

enables that transformation. pane We of the are single end-to-end digital glass

of on an Now our ourselves Every employees on pride embodiment living Now of to Now on we and grow. every impact the improving are that our and strategy. they month. own rates ServiceNow, run and customers, the doubled both being deployments deflection have for through AI passes each company our GenAI At continues week AI Now

engineers will $XX XXXX, Software the $X.X years. accepting why generation. X meaningful AI XX% of That's trillion text-to-code in it's are impact These and on more IDC beginning. are an GenAI the from also according IDC. than next only It's businesses spend to improvements, estimates in productivity why trillion

generation. out the So witnessing we contrary there, opportunity software enterprise are biggest some market opinions in to a

have They can up waking choice the tech now. simplify stack. the that they a Business fresh fact to are radically leaders

We are entering a new frontier.

intends a work remainder AI There's to happening beyond. to in race for year a are at this win that only ServiceNow to that's for the of a and people, and heightens customers. optimism our We lot race put our ServiceNow for

release platform very D.C. features for Washington, our recent Our included new customers. exciting

Now ITOM to AIOps solution, resolution. AI speed Assist issue AI for supercharges applying up ServiceNow's market-leading generative

order forefront GenAI sales front, teams on order management across middle the the is innovative the applications. platform. staying building unites Sales life the at enterprise and also ServiceNow of cycles and ServiceNow back office

productivity which helping team our is cutting Assist for ServiceNow AI expanding the Telecommunications meet to great we It's our worth also with stay As experts and agent also partnership. edge. AI ecosystem Service growing will stacked world-renowned build TSM, one research customer boost customers Now uses call on what noting capacity on NVIDIA AI, We're example, Management, the demand. our

you And One technology. enhance example is who'd on Las anyone our expertise AI-enabled get full join and to IT Knowledge to investment Vegas a partner implementation for consultancy and global story, the XXXX generative May warmly X. to in us invite platformation, leading I ServiceNow in like

company a position. In I'll closing, is how began, end I market-leading in the

industry recognition the have from analysts. product the We

encouraging, it indication customer-obsessed All Those I the up earliest But and biggest feels can ranks most of rooted ServiceNow's of up we're you is our different. team is the on a about showing It's doing This were company as in qualitative. days It's are and lists we're how things culture we're company. proud of together. what admired give year. them all. the every all moving always

We are ever-hungry, ever-humble.

So in to ServiceNow. keep world you keep know We're QX. and all and invested care defining company to promise. X to in this trust is galvanizing we're be do brand to our have more more, than applied not more. continue of technology. When told They that software people last a century, part year, in when I'm to mission This We'll going the want XXst thank I'd about for the works to ambition to a you've us going over recognize about this ServiceNow. people striving million that honor The to the you, that. people I'm more become enterprise surprised. helping with hard join working for on like you is of

Mastantuono. our Gina, outstanding I'll to over over things now Gina hand to you. CFO,

Gina Mastantuono

on ahead. serving QX, a quarter. and Bill. QX as our catalyst, you, Thank Building surpassed GenAI line another see profitability into delivered the year digital QX. strong momentum conversations carrying a that for set With for transformation from of guidance we our the outperformance. precedent all We exceptional top team metrics the momentum

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

longer strategic duration basis importance year-over-year of see Current our RPO currency deals. to billion, XXX increase XX% was continue driven point versus the Now representing We average beat year-over-year contract has a growth, the $X.XX guidance. constant platform terms as

and quarter, and growing new Services and robust, saw an a and perspective, had media From XXX% Consumer over technology, net and year-over-year. growing telecom Education nearly year-over-year. Hospitality strength. also extremely fantastic Logistics, industry Business XX% was Retail ACV Transportation

a as our was for platform the best-in-class strategic Now renewal a Our remains rate imperative customers' operations. XX%

deals the million, XXX% X $XX year-over-year new than greater million $X representing ACV XX closed than deals in in quarter net greater growth. We with

focus comprehensive $X X us continue deals as have top included XX to X,XXX paying million platform ACV. selling multiproduct our in or of Our drive products. over customers more on more now We deals XX a

number $XX XX% or paying of customers the us addition, grew million over In more year-over-year.

continue very adoption. healthy products GenAI our QX, In see to

continued Pro launched new product our the ACV to for date mentioned, any trend the ahead Bill comparable family new Plus As of net period.

leading a in were closed firm ITOM for more, $X in Pro a million the ACV GenAI in which over many cybersecurity at including Wall and launched of X March. had Street wins we our Plus, and XX a in deals We quarter. Our bank, win significant just deals, products X second top

points to top the margin approximately over profitability. above spend, marketing XX%, our operating basis driven by outperformance. and efficiencies line was guidance, OpEx our Turning of XXX Non-GAAP timing

the a up QX, In primary investments. objective part including we sheet, Our free with with of of cash margin as dilution. XX share flow the ended back We cash managing $X.X bought was points the shares and impact of in year-over-year. repurchase balance robust XX%, quarter our billion program XXX,XXX

balance As ability to million of drive approximately quarter, the the billion authorization. have of world-class profitability value. demonstrate end original results to the shareholder a Together, our strong we of $X.X $XXX remaining continue these growth, and of

In revenues. U.S. dollar The Moving of recent guidance. to the still has to hedge resulted the in previous a initiative QX, in impact to FX lessen is initiated our denominated pound, our compared headwinds incremental movements the guidance. strengthening a of portion currency but euro to we the foreign and our program expected of

we offset raising those Given line than top are outperformance, to our our QX XXXX more outlook moves.

This by the FX. a incremental raises the more $XX.XXX of representing XX.X% subscription than constant we $X to our net of an or billion on basis. of range on $XX increase are $XX to range XX% $XX.XXX raising a XX.X% offset currency growth revenues midpoint XXXX, a billion, million headwind million at to from narrowed million year-over-year For

of XX.X%, margin continue operating margin free XX%. cash of We and flow XX% subscription to of margin expect gross

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

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

We growth reported on both currency XX.X%, of constant cRPO expect and a basis.

of expect We operating an margin XX%.

pressure we than technology weighted great ever on. tremendous is end-to-end we million transformation are for be In expect it's XXX intelligent In Organizations expect built ServiceNow's the summary, a another to investments. only start diluted the of Finally, was what benefits under outstanding platform traction shares as quarter. maximize average this to the to year. to GAAP intensify. QX as environment, continues the more as for powerful digital GenAI platform the

actions gives with platform insights the users across AI of our the ability power Business AI tailor to outputs us enterprise. need The needs customers. specific to to remarkable Now the deep

complete Our workflows to designed deliver that, are experiences, to supercharge solutions extraordinary do creating just value.

website. be experiences, Investor which more will long-term hear strategy opportunities webcast You'll Day Relations May X, upcoming on these about at our and our on our Investor

and Q&A, for XXX Work helping the continue ServiceNow's team. Best to Places Bill Fortune XXXX. one on and moving I'll again to yet I is want its it ServiceNow you be of strong. Q&A. prouder employees ServiceNow this incredible worldwide for before to asset I Finally, people, our make in to of greatest all us, up that, thank couldn't open of all With make

Operator

[Operator Kash Sachs. from Instructions] our Rangan We'll now with question take first Goldman

Kasthuri Rangan

First actually to to you in point My and the draw noticed what year, on AI us the for year? Congratulations. for at category the earnings And cRPO, of a the here. does of adopted, what because year, rest question of there. get the insight tough too report bit Can good prospects software the at some see more early potential -- environment, Gina, I one economic make is optimism. in the that into a of more sales into still cycle cost standpoint, Bill, you RPO, the savings can despite AI least give that it's from broadly seasonality

William McDermott

Thank Kash. you the much for very question,

said, is the optimization I reengineered depending GenAI As messy with or how the is case in will process process any GenAI. in process exists today enterprise. engineered that the enterprise be use the And biggest on single

every in enterprise every be workflow will rethought. So

the for back where which very just about and them. that on instead more that And don't and data providing the on So sales they the very can sharing example, or example, which an B, agent is of you I'll swivel is have putting bypass if real-time the virtual around productivity, But you is deflected one are onboarding obviously think systems the choice get customers training to to Think agent. all hold and process, process, services or A quickly something the for we're them or order about of involved, to well. tomorrow, integrate where pleasing think most whole to employees moving or have agent cash about cases customer. and from

those B. Okay, closed. and about you an text. and spreadsheets got all cases you complex are and and is open being screens instead like having across Think the case And B, workarounds is processed where managing data of e-mails enterprise

case platform full information everything you on Now done case one have with and closure.

completely sheet in single So literally, code. building differently every natural of of enterprise with will from said, business and department like because breakthrough to the running tech a on because GenAI Every software, into language I turning platform. run clean our

Gina Mastantuono

the Kash, Yes. cRPO. on your question seasonality about And around

points. net So QX guide first foremost, well one, really beat the and growth as of as was ACV fact we strong that proud beat our higher in by renewals. That new XXX twofold: basis early

a remember, perspective about talked we so And from Fed the you'll seasonality duration.

impacted, again QX QX. is up before so pops slightly in it And more right,

about And that feel trends so we And the feel we're good. really good seeing. again, really

perspective saw be renewals, in prudent them be guide a while from to forecast around continue Again, seeing we there. early continuing guidance than We stronger we our are to we're prudent and year. last perspective, a

Operator

Karl from with question UBS. our next take Keirstead We'll

Karl Keirstead

I Bill that could you comment just environment and you're Gina, if wonder seeing. maybe on even the CJ.

prior about a it XQ. in rough, to described again after pretty that you've two one Were puts in and and some broadly QX? that still in the year stabilize environment in call lag? takes case felt. of started it, stretch, how the quarters, Was think there it the as XQ or I Maybe verticals maybe stabilized

Chirantan Desai

Gina start specifically. is would the as I say, that, I, perspective I by pretty -- first January, remains and shared So Karl, same we mean and and would is not in we from this much XXXX, what Bill, it it our environment, it

sales purchase from made. validation being to done industries the across a perspective it I we much, standard and And all that's in get trying would say, a many that things takes still or So pretty a geographies. business approvals discussed and

the absolutely are within an accelerant that promise We generative that which productivity take. to efficiency absolutely an is AI, of well and executing that in-platform given and well really that also is automation enhancements our environment that with combine because organization so our can resonating resonates

whether that whether is continuing and enhance resonating it's of Wall GenAI productivity, the sciences it's same. life what via banks, absolutely is a to that Street digital, us, whether the despite be it's helping story corporation, environment is So governments, automation,

William McDermott

on budgets your And the benefit now. And for I build what on are see themselves. preference I would that, definitely going just The the is just up. for GenAI budgets Karl,

one way I enterprise, the say, we're era the the And be us. frontier doing ending opportunity has in now different creating customer think that's there we're to another. we've and a might where And this. a of new GenAI of up eyes begun into for real opened

on also value-based budgets becoming So the up the but of CJ in imperative. not right I going has more see see economy, only do but GenAI business also a it exactly just IT, if a and maybe will can spent. different show and out increase value be approving it, in case money you people And be but productivity, that that cost the money spent this take will

with now I've really companies I momentum great GenAI. than to some QX whole a in in like want goodness rethinking with partnerships the been to on also X in a have the with And the strong I print great pharma here you into acknowledge best off this like at right really with ever There's market. this absolutely years I've think felt we've on I that QX the I good process that now, Microsoft don't much Novartis felt. this I going knowledge. IBM do and And great that look NVIDIA. feel I've so call and right this achieved going coming you're just altogether

Operator

question Hedberg Capital Markets. RBC with our from take Matt We'll next

Matthew Hedberg

first you what a saw Pro comments relative out ACV you Pro relative some to you call Plus just maybe to when Pro net faster the of seeing are growth, expectations? anything And deal your your new given from initial was to perspective on Pro Bill, launched? discounting need cycles Plus Plus on

Gina Mastantuono

Yes. that I'll one. Matt, take

about be X whether we about would not So early adoption it be, really are adoption or proving yes, but the although Pro. talking that good certainly out, absolutely early out and And So Pro curve to we And faster be faster. posited we've feel been that seeing again, days. we versus would the that's adoption Plus case, it's quarters It's days, right? curve.

more expect as versus with we for has and what line in overall to as But in talked about really feel deals date. about expectations. We Customers very discounting opportunity well. deals good seeing we the you GenAI lot are realized in. over talk about to well would respect XX as feel where had markets. we'll it X With pricing initial been as we Day much ServiceNow the a top the very And initial good really the GenAI in our million $X significant about we're are at Investor expectations, leaning it, in

definitely monetization we're So happening already. seeing

Operator

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

Bradley Sills

RPO. on A Gina, Real results question please. for nice

I is seen the cRPO. think significant versus quarter second this we've outperformance since there

that And driving cRPO you to perhaps in ramping component Just a visibility curious there? what's that? does some ramp given for from give here perhaps

Gina Mastantuono

Yes, great it's that did and call I a point, out.

in RPO year-over-year currency, XX% our improvement points versus is is And XXX basis constant yes, was which backlog. So growth longer-term that year. last

think you ServiceNow, as the opportunity excited longer that. I more about couldn't term be about more So in

growing. QX in it's the the are We duration QX been fact, this And think, seeing average XXXX. duration the since, I is largest in

for mid- about and long-term for so here that really means opportunity And sure. the I what feel good

Operator

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

Sanjit Singh

GenAI little plans Sanjit I with about specifically but engineering adoption changing a you within adoption looks you terms adoption, in the your mentioned team? like it for hiring broadly more ServiceNow, and on R&D, of both bit for quarter How wanted Now, like GenAI Keith engineering the ask a this not you're in Now the team, Singh in to and pace. changing or in broadly Weiss. just hiring Bill, GenAI is kept

Chirantan Desai

to faster. up. seen code helps software still they I is mean, software us that whether This have leverage It is can generative junior specifically, straight software I very GenAI are continue and engineers engineers, faster, senior our where CJ. it leverage our engineers is software would absolutely we And here say engineers and AI. believe, helping that they or code we

increasing that, innovation it two, And the varies with start that on number it engineer and productivity us I'll helps So how increase the junior senior velocity. engineer our how is is. depending is engineering our or

us So it that really, our that is to important velocity. increases innovation really

for can code automation AI, of whether ServiceNow that generative number flip and also increases workflow can I only or of it efficiency. they ServiceNow, but second, when put that text not customers do if digital increase leverage When our to he's they that workflows that cases they use using is types faster, text customers on to the that

it's So both ways.

to AI. able are are and our because faster engineers faster workflow Our innovate generative of customers then to able

William McDermott

at the [ a one only Information just interesting he with is on system ServiceNow. LinkedIn cases Keith have share And about very job. It's Chief record. Bedi, XX Please we look Chris Not out think story And a post our within But you, there. XX of thing ServiceNow, take Now Officer, we it. (sic) Now a a to ServiceNow. you financial if -- system great put doing a in Sanjit have ], on GenAI

many We of them. there hundreds, we one have customers CRM out a system. have that have Unlike

of them. system. And one have have an we HR We

they We platform. of But them. ServiceNow the feeding have one are

of use company, the now run data XX company. cases we of from ServiceNow. systems in the this across departments record of on GenAI different how terms And the So those all run all we we the have company whole

in earnings lab company So this my living, through we'll room that at is do ServiceNow. you learning expectation of full GenAI-run together could all where here the take call someday, we're and we the a

Gina Mastantuono

have doubled Yes. early are of days. they're And would think cases. add, and It's Deflection every month. and employees Right? both just just would I absolutely for our customers -- GenAI on I we XXX% I improving customer X, use our rates all add really

and faster. So it's learning faster

are accepting code generation. text XX% to engineers Software of

we to So look term. there's R&D in our long see ability as the leverage the to and absolutely mid-

the for question. you thank So

Operator

Bachman take question our next We'll BMO. with Keith from

Keith Bachman

I'll but I them as one. have questions, two ask

but this adoption if you don't so quite pointing through that GenAI the growth decelerating offerings, for you to you're the I and how is seem Gina, strong not, does for And various know characterize? would acknowledge yet or First, XXXX.

getting growing not GenAI as well? probably not growing what's as what's But adoption, So amounts great dollar small well? is contribution. If

second the else but on dollars is? any the perhaps should at specific adoption could for part we you what is ACV Day Analyst to of to on perhaps come And anything the related GenAI some there indications or us SKUs? is Day, metrics more to going Analyst give Or specific the wait

Gina Mastantuono

Yes.

a all we'll in lot give So GenAI definitely things more details and you that's on week at Investor Day, bit. a and a

there. the meaningful So starting is really dollar stronger point adoption that's than than we've curve the product new right? category time, grow going at we've but a So contributor any a at X, seen. is seen faster in it's to to stay tuned Yes, but anything launch, which in this speed be it's from small

continued so at we customer say our that are, whether incredible. board, it's see our the And growth well. the revenue workflows, XX.X% workflows what And across our I'd numbers is pretty is which or at traction larger as the technology scale we creator

million, a XX remains over really security over $X was doing strong ITSM totality, deals top XX so well. X employees deals, included our million. had board, also across really had customer the quarter. in $X XX And really in and XX deals risk quarter, deals still strong of ITOM core a of top healthy the with XX in

has, platform. that scale the ServiceNow to at really our drive growth across breadth so having And platform thing the we it's continue that great good with the really, about a

Chirantan Desai

still would I there continues plus. is add thing only plus, single the double And digits grow Yes. to every workflow

growth, is x it's Gina have it's out grow nicely CSM hey, been all creator our in So QX. customer, other has of and no, out and been grew taken which them out which vectors, individually or our calling products, and our this we and whether very ITOM continue y growth part or taken of very AppEngine, besides nicely, they whether our of this all core, ITSM to of

Operator

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

Tyler Radke

think, just Standard a a Pro close I Standard. Pro XX% it you of, to seeing there? in to momentum about those wanted started terms still you I of an see talk that migrations? of migrations. you're how in you talked installed opportunity just the Can would ask on Have We terms seem in the Plus, to the base huge about opportunity acceleration lot but to

Chirantan Desai

and it's both staircase line, Pro service, just Pro specific whether it's to to go technologies ITSM look not So first, Pro Enterprise quick just organization. at a I Standard. we way they I'll going in saying, "hey, this bank, and have I'm technical done on Pro That's total. bought Pro example one together, ITSM that the then to we bought Plus But and were product a what a technology Plus." Once their our that in still together. or they very was They very CSM, example. amazing both I audience that is use, plus, at actually saw Tyler, with whether specific conversation Pro customer is in look they And at

ITSM, the Delivery. look in Plus, business our when high-growth Pro $X.XX bigger total, combine to and when is you here, at of us, Service then CSM, so XX.X%. on you a and for So Pro anchor scale higher that's Enterprise I'm and amount, I grew Three HR still at businesses, for purpose at for of so our Enterprise, this billion a Enterprise, what add grow nicely are that Pro excluding Pro Pro priced and allows Plus at they SKUs which

Operator

We'll Moskowitz question take Gregg Mizuho. with our from next

Gregg Moskowitz

areas a you from how of it GenAI relates other Bill, of today getting ServiceNow of is as topic the IT. IT much budgets spend took software perhaps broadly, to to of as sense coming incremental back opposed to

William McDermott

go on is and right now then many, a AI important they into mobile. as that the question a we in It's with on is It's went just got generative their story will guys this are Gregg. budgets you now I Board boardroom GenAI. Directors, own because we because had business there. the seen GenAI?" of iPhone they're IT to the the going their team CEO when what with really question, "hey, everything we've inserting Yes. the however, basis And know years. get lot a like a many a that is are believe doing standard had into The internet, senior a go around a rate of table in with you Everything quickly like, moment, really executives, the will up room how revolution they for sitting her

reason So spend looking if them will the I a lot technology Novartis, believe cases quarter And to in of great Microsoft the serve GenAI companies, that on at some and look the or operating they're Energy that, customers, be to I on business. or and use you that hey, partners business this of own. right believe like aware moved I'm of employees, what they're my fact as, are Hitachi their this they're mean to inflation my my is and rates so high, the at very does that this and sticky Equinix well IBM, to

like, in have lower ridiculous. every business questions I They've to I several now to up need transform with window X,XXX rethink for business, And and is got to to deal I AI change say And systems? a way why the to employees, on-premise system game and why technology different opening cost. transformational move the because on we're how we conversations. why asking game and platform it's only using I checkers for a stuff. the the business from transformation this chess can am and run is that's the the releases GenAI are the at these for do cloud all They're

to want things. they rethink So

with going going to you is to end; I don't two, and the the flag IT the one months, plant winners and in an and ground the its getting out and because begun think two real not Copilot. doing AI things not there's move that over into in company away And going real there's there's there take the from in the next losers economy. is Microsoft category, doing winners be And formation be happen: see losers. the flag is spend real ground to that to the I in that business budget so are in ours ground the what well global going to going put in already put to and GenAI if regard extremely AI are the And has it's X is real all

X. out. we And they Watson to think all about ServiceNow, ServiceNow, that we're great making doing partner but that participants. the can LLMs domain welcome own are And open and to And obviously, And the and IBM are all really the players the participants capable got I I in all interested way think so the our with that's that's NVIDIA And see very in specific with a feel integrate we're not turning ones the I we'll on it's shutting I'm GPU and enough of seeing. that those AI. another like the and and unique is force, we open Assist We're everybody same a anybody in building part that's in you've ecosystem And but actually up combination see forth to ServiceNow technology we also whole to and favor. of really with the jump X enterprise. Now ServiceNow, friend what this super as really to honored what quarter I'm

being in are in ground to the So of Kingdom flags the the Saudi beyond. all in and put Arabia, way plants Japan

winning. are We

Operator

We'll with It from do take apologize. with question We'll has Bank. next Murphy our I Mark disconnected. our take from next Brad looks JPMorgan. Deutsche Mark like question Zelnick

Brad Zelnick

international. the It's great to traction in hear all

called $XXX that million to the types Australia, press the a want where what Brazil. it release, what market time about I Bill, deals how out Kingdom Saudi should your of about generally, on a lands out But Italy, your obviously it's use we strategic just and can Arabia, $XXX CapEx of investment you mentioned in over more in focus, on And capital you in for given You period, into massive, massive investment opportunity. financials? where the you're making think of you million Gina, these maybe double-click called deals?

Gina Mastantuono

Brad, for question. the much thanks so

-- NEOM, investment a you'll manage very and really period. economy. most society see cost really nice So tightly. opportunity we're grow we're sales, investment in be in And center, that that really investment technology Saudi. Saudi, pulling that The in it investment horizon conference, we're great. assured, LEAP $XXX help but growth at And spent we is of a really again, long is in be that excited And data a will and -- rest that about time of excited so Bill It is long-term the million our will over Riyadh is become in to that huge. and the there digital-first a the about from we our margin

And breadth the about not excited they're product leaning portfolio, in only very of our entirety of GenAI, the are the portfolio. heavy really really ServiceNow, with but our

that East. really not we're guide CapEx in of, top our just more within be about have seen, will and you it's Middle it the on planning flags always excited So

Operator

has dialed And in. Murphy Mark back

go with We JPMorgan. Murphy Mark to will

Mark Murphy

with onboarding high. ServiceNow within enough is Bill, I'm looking would if your demand driving. create the to ServiceNow also, that the bookings keep a into you're where We're being crank a ServiceNow at pivot how up hiring that to you to just the the keep up line top those jobs multiyear up coming And that for the you're ecosystem consultants, wondering can told engine curious economy point talent want there because with of growth? we're is quickly the own

William McDermott

Yes.

of much. it quarter very read and the Mark, Incidentally, your I that called you thank e-mail as compliments on exactly you put First morning out. the my research was. you this all,

your super So you not for. surprising the done company work well considering on great part,

ecosystem that here. X the commitment out and building to around world very hired is and a I only both achieving ServiceNow own we're renowned things. will with the no, ServiceNow We're build our ecosystem. services we're We globally, company way externally, but have on our training trained revolution internally of knowledge our the give up people the couple comfortable leading million we who a Leadership going and We company drive and is with platform, you is goal. And within to not that made everything. world just also great with the a a to rise leader within on ecosystem. going not a well she initiatives

contributions probably with investing built company as all ServiceNow. know multibillion some call capital they're everybody them this plans all have about talked not huge platformation that on one big I human ever of you literally ones, heard and business and multi, the but of,

our we street case Sigma fact contrary. not trying like So extend knowledge with impact can the through the know with really have to feet on ServiceNow also the the we and we Six the can team and value ecosystem we the customers' the business on that duplicate models trust ecosystem then that we're the their where they

We to in our their one be need to business defining forward. ambition them to the models move invest

working ServiceNow. you really they're are hard a that the know doubling we're but it, opportunity before, down on see it's actually. question for it's And really partners good like right, true at So you to also the and never

this we able So are formed cover a we got think strategy, good think going do economy, speed at be warp and moving we're that so. and to we to we global to

Operator

take with Samana Samad our question next from Jefferies. We'll

Samad Samana

maybe you certain you but I in little sales in of to up there's some maybe of guess, that salesperson basically see as Bill, to know was seasonality it. it more AI-driven more the understand us guys X the you back and I you that what wanted Mark's philosophy many sales? did think you follow is you question a the and up of last quarters XQ saw quarter Just ramping a XXXX. I to type it, because Is heads marketing help hiring first hiring as bit And as demand? as need around

William McDermott

seen. are seeing revolution best in the we real, the and we're opportunity and software best Yes. in focused And our selling the ever biggest investments the the Samad, you're on building is world, world. very down. see software we the doubling GenAI we've What know

go-to-market go-to-market. more of both on leadership in engineering way we're great side have side the the and focus going and to we the the So have clarity we drive

the to for that. scale size calls and Now we're getting

of that are here. to single the for businesses leaders that's enough can the can't to market have number that So margin anyway. want anything out, what we And and line responsibility sight big pointed be leaders rightfully because highly without there stressed do a motions will don't And do really and we accountability in mind. various need run accountability Gina

call pipeline. We we whole on of So Dashboard. the manage the a we company have CEO something

pipe. rolling We average a X-quarter are time in real with

cases pipe use GenAI that based the sales of are against We have stage our on the that cycle.

can here we and of commitment. hire run we we probability many drive want many how the company here. we we and of is on the know afford do a X% That's a our absolute I and to financial within we let to stress in that performance people how platform how to So door. run GenAI X%, based clean because closure the company

We efficient a are run going company. to super

as as continue So bigger to of further. that lean get on we the a revenue, side the and even equation, G&A of be drop percent we will

see lot end my can't in one we're is think of one stages keep of thousands like, that like that. even here are So a era beginning think to when for of the hundreds CRM And a financial Now now thousands I to you going one the and system, story because think system I'm at HR and lot Now on could beginning system of the you're all. I and want And and our company companies one them you of it showing of they're doorstep, up track has I another. the and to how what I trying is they to have explain

Gina Mastantuono

while. And even with ramp marketing, the would operations, just We're in in to highest increase ops. year, have -- like on on add And the lot would we that, last I quota-bearing we continuing number, higher very focused that last in lot that and XXXX sales Samad. there's I about add slowed we actually just were folks. reps looked hire the -- that of talked a we we a entering down but have year and feet this, to might sales a sales street entered

yes, We about will we We really feel good good be demand. So really reaccelerating. about feel pipe.

salespeople make our want Last street. on to I to continue demand will but looks hire and stop -- continue feet hiring we so we looks And that we pipe the great. because that strong clear year, do and didn't to

Samad Samana

if about it early guidance then impact based understand And you maybe had enough expectations cRPO, Gina, a your if response the you material you. was helpful. and or Can to consider Very just back to follow-up on us for know good, I through just but just anything the some help timing, there's even we mentioned, guidance in On to should XQ half renewals? maybe renewals maybe I XQ. on in quick another think, on the for I trying QX think then that question was

Gina Mastantuono

Yes.

you we've forecast. to if the and customer. customer -- early forecasting Samad, more So been over very It's it's we've hard customer last been prudent how year, been because we've remember, renewals by in last year, specific

really saw beat how I'm early still strong growth, forecast. thinking our QX, macro. our our haven't we're the but ACV so about on prudent forecasting. prudent given remaining than changed also And in was renewals I we net new

think it lower, seasonality. back our we slightly talked And so I quarter. is as strong about being bounced QX lower, when about but in Fed up then QX

it assuming And to wasn't saw not guidance, better QX like early so material again, I'm renewals QX in but enough we in the impact QX.

Samad Samana

See Awesome. bit. and a you in week guys a

William McDermott

you'll you that more way, will year. it be the By just bigger up, see and than knowledge, saw people and show getting notice Samad, last a you'll you bigger. thousands keep stunning when We

ever So show best Vegas you've seen. for ready the get

Operator

Securities. JMP our Patrick take Walravens from question next We'll with

Patrick Walravens

can to guys Arctic Databricks' family. Bill had Snowflake how just it understand own your LLM, DBRX us March? did I'll important help is StarCoder so release you in February, you CJ, in their and have say and

Chirantan Desai

important, Patrick, answer. extremely is it say would the is I simple

LLMs. three the solving are things for we own with our are Here

all, of used it's case many specific. ITOM, that use These use And whether by our key all they cases ServiceNow use are customer of lines. service, are First specific. IT our customers, product management, are case has service our

summarization and you would or agent always things even LLMs. Bill talked about use want to sometimes code, we what And text say, for other case-specific

run a are high; not is the better. comfortable So these because smaller, to gross number cost to is our which from higher; efficient provided seen, are the run these them cost with have guidance that end run, models as is model question number then to that an smaller One, three, margin we Gina the you perspective, accuracy smaller models why. feel and are two, performs user when always the the models

how ServiceNow, on and execution, And to Plus, protected, We So this that's strategy our models, we Pro for throughput customers run have at unique combine in but teams have it a cloud, that is fortunate on are higher that consume AI a experience not research engineering SLMs, great is consider language right things focused as higher with domain-specific can I they will the the matter. ServiceNow. value. data small and and strategy these customers' why get only our

Operator

from take DiFucci next Guggenheim. We'll our with question John

John DiFucci

for talked you. both And of know good But you Bill, strong U.S. the Gina, across government still for about you the emphasizing world I you. and suppose international. strong government the is I pretty U.S. it's of it the didn't the for expect federal little did on verticals more the and year? you bit quarter. list well mention that government a in comment what this Can rest the you

Gina Mastantuono

But we other great biggest and accelerated. also federal strong Absolutely, results so John. ACV that sectors. business net ever in didn't had its industries Thanks QX for deals because the mention growth many was new such it and had and million plus with question. I $X our

business. And executive federal hosted our for attendees GenAI in reinforcing forum ability and largest number than strong partner And customers. billion more with the sponsorships help our XX Fed actually, our the at offerings so customers federal ACV really of ever over our we to are representing and our so journey circle $X transformation and accelerate triple

better offer efficiency just early -- specific can security adopters healthy our about tremendous we're gains. which domain really CJ and And seeing so interest and industry in sorry, drive healthy talked models, that

good as sector XXXX federal exciting the And really what whole. well as us continue to public as for ahead will for feel business a do and about so themes

the so much for question. thanks So

Operator

We'll Ethan Research. from Bruck question Wolfe take with next our

Aleksandr Zukin

Zukin just is the on that clear This is you there, from Plus question couple it's Wolfe. guys Pro enthusiasm times level Maybe the Alex very adoption. the of gotten that Listen, interest a is have there.

a for on your year? your level, Pro at being it a length that product the the stratify? it I've us Or to of for there to or how you in got of percentage Plus? a for about just new And a this You then talked follow-up. deals rest launch the either ever. sense of compares the looks pipeline QX kind high set at of fastest expectations And of included kind what give Is way And quick like when journey? how terms

Chirantan Desai

Alex, from great to hear you.

So on. I'll take this

things seeing. there So couple a of are we are

we launched XXXX XXXX we when So in launched September, Pro in Plus and September. Pro

his also As are lines uptake our ITSM, is big Bill X HR, just at ServiceNow. outlined and than in CSM but customers for also not uptake Pro the Plus was product comments, which pace by across only higher Pro a

$X the been X the environment. outlined, when quarters internal of And top in in X will sector what have So and do market, them. it days to Plus and not ability which ServiceNow our sell at the on we exactly in you Pro has projections exceeded that as our that deals million-plus have only look Gina technology deals, was out our for are regulated including made where in deals, QX, XX had it the regulated public environment we a X work for deals engineers this

it HR I is is demand it's see pace what whether environment, service productivity however the what And happening demand to multiplies at So or metrics overall, is clear around it staff, it for for you IT because the employees. customer that's want or when the driving call the agents, very it. a accelerates productivity higher given on agents,

on QX, significant with the going in, say, customers, see this second purchased look example, saying, are who The from would interest and I QX, CJ, I they what's I QX, thing say out okay, when QX. is still for customers

they seeing I didn't here and on transferred the end model, Analyst our ask summarization on and report, agent got Alex, details and are on to want for us are, is one a I so we the help first Pro the say, to when same that do customers want very really other to productivity the is turn that them us positive agent a see with Now eager at from user IT call Day, to that share they IT improvements Financial the follow-the-sun understand, and where more will news significantly, time work help question. saw quick Plus

but customers, Pro when rate work as of much lot this deploying. team faster I as at Plus So which customers learning to there implementing we they say use And we our as other an is than while example, a a deploying, are us Pro, allowing are sell. our convincing with in to are and nuances sales

only Plus here us question that improvement. Pro ago. working is ask XXXX But X also I'm was turning the not which the Plus is years than me better demand are on in you environment with I'm saying, Pro, seeing So for if I'm customers same seeing seeing overall, and April, Pro where the

improvements I on literally Here about a doing a job with that is are how customers teams should successful think to our Plus. Pro phenomenal make And basis engineering are sure it. our monthly releasing

Operator

And we'll Securities. Michael with Wells Fargo our Turrin next take question from

Michael Turrin

of think Anything you the about for appreciate on maybe for out, cash QX. in. us should seasonality flow just guide margin flow just rest walk we're me strength XX% the for the we And of cash Gina, margin of the there I to squeezing free year. through to maybe certainly throughout consider? drivers how year, stands holding free onetime us the given

Gina Mastantuono

for quarter. normal of flow Yes. Thanks, you last proud XX% bank of given margin. and have Valley the really free regional Silicon though, that Bank QX lower cash was that the year than noticing. Year-over-year, remember happened Michael, to crisis that We're

and All we've some operating of efficiencies. that testament we significantly work being on if that, that the said, for capital higher. margin doing And are nice working strong that's been to margin, even normalize you

be cash to what historically. will seen so we good. And similar for you've feel Seasonality flow really free

see team outstanding really And capital continue well. working an so The job results. just as strong to has on we'll done efficiencies, that and

Operator

question. And have we our one take Cowen. Wood with question time Derrick We'll last for last from

James Wood

discussion. on kind last to just follow-up CJ, Great. of that

in guess to on spectrum, figure end perhaps the of into how Just of it's of this adoption out the productivity. terms them to how GenAI. hands let easy drop seeing one quickly I experiment of you're drive workers,

the end of other On investments lot needed. hygiene data perhaps the a of there's spectrum,

end comes really the when you of need and the seeing in drive SIs learning ServiceNow come are you what do You I to within spectrum help LLMs real the guess adopting -- curve. change platform? and where to drive it guys process

Chirantan Desai

thanks all, first question, So of Derrick. for the

I how it. describe is would Here

has our can Our are or setup for you super design simple whether design engineering and to customers on. on start you seeing capabilities, on employees and as on, once for are our were, seeing turn is goals on where Pro, improvements be this it's productivity, in Plus agents, The simple, so agents are turning and That to goals super Pro and Pro Plus, it and principle. been employees. it it's they has using whether

number So that's one.

can ServiceNow in is is because is value that two, get use at to I scientists, this Number super requires even pretty this should ServiceNow. where and that another help there of fast this refine do the integrator what learning cases. is of system Where look put way And and new to integrators Bill process you straightforward on expect drawn in machine data a absolutely heavy I on. hey, model, about I ServiceNow This you create a a talked system learning types see can process? platform that, old need just technologies, out out engineers is for a model machine implementation so not

they ever Pro heavy they terms expect been Plus of a we are than have actually in And faster don't implementation before. cost. So cycles, on implementation

leverage that want our use value and customers they processes. cases if use is biggest system However, through generative additional AI helping them they can had the always what think integrators, redefining to

William McDermott

to you just thing give about, one I Derrick, too. would And think

down. who as looking great that they're everything just industry to faster with as fresh seen, time a they're as against some X.X-year tougher take trials. is companies has against which looking challenges than companies GenAI, And also AI CJ GenAI new they're the been has using take that ServiceNow gateway on slowed a at use I've point, anything industry. back implementation generative to not And to these of a at but rethinking of in CEOs I major on And want are their kinds Novartis, but leader the design has Pro, these said, could be not process been change. You only the And cases and clinical like think held anything. to global platform

want They in it now.

that if value from that's and yesterday, is never C-suite, the the who's they implementation is this a a who's think movement. to So a speed for a factor customers I desire urgency it's me, want you And business, see and you to is have And this there's quickly urgency how they big the going it business and about want navigate the coming do they way GenAI. GenAI I've as great category, model for the and and like win, seen want that, and solution, to solution sign going a for really which lose us. an

Operator

your that Thank today, you conclude now you. participation disconnect. does We thank And with presentation. you that, today's for and may

ServiceNow (NOW) 24 Apr 242024 Q1 Earnings call transcript