Press release

ServiceNow Reports Second Quarter 2020 Financial Results

0
Sponsored by Businesswire

ServiceNow (NYSE: NOW), the leading digital workflow company making work, work better for people, today announced financial results for its second quarter ended June 30, 2020, with subscription revenues of $1,016 million in Q2 2020, representing 30% year-over-year growth, 32% adjusted for constant currency.

During the quarter, ServiceNow closed 40 transactions with more than $1 million, including two transactions over $10 million, in net new annual contract value (ACV). The company now has 964 total customers with more than $1 million in ACV, representing 26% year-over-year growth in customers.

“ServiceNow is leading the workflow revolution, proven by our very strong Q2 results,” said ServiceNow CEO Bill McDermott. “Businesses need to rapidly digitize workflows to deliver great experiences for their customers, employees, and partners. We are the strategic workflow authority helping our customers solve once-in-a-generation challenges and capitalize on the immense opportunities of digital transformation. Every day we are manifesting our purpose — making the world of work, work better for people — on our journey to becoming the defining enterprise software company of the 21st century.”

“In Q2, we achieved our $4 billion revenues run rate milestone. We exceeded the high end of our subscription revenues and billings guidance, while continuing to drive margin expansion and strong free cash flow,” said ServiceNow CFO Gina Mastantuono. “Our best-in-class renewal rate remained at 97%, and customers continue to expand on the Now Platform, giving us conviction to raise our growth and profitability guidance for the year. I am confident in our ability to deliver our second half.”

During the quarter, ServiceNow continued rapid innovation delivering the capabilities customers need to protect revenue, improve productivity, and ensure business resilience. The company released the Safe Workplace apps and dashboard, designed to help make returning to the workplace work for everyone. This suite has now been downloaded by more than 550 organizations worldwide. ServiceNow also hosted its Knowledge 2020 Digital Experience – its largest ever, creating a global digital broadcast environment to engage nearly double the number of customers and partners from last year. ServiceNow’s core business remained very strong. With Now workflows on the Now Platform — the platform of platforms — ServiceNow is accelerating digital transformation for its customers by enabling the consumer-grade workflow experiences that are more important than ever for their employees and customers.

Second Quarter 2020 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the second quarter 2020:

 

Second Quarter 2020

GAAP Results

 

Second Quarter 2020 Non-GAAP Results(1)

 

Amount

($ millions)

 

Year/Year

Growth (%)

 

Amount

($ millions)

 

Year/Year

Growth (%)

 

Adjusted

Amount

($ millions)(2)

 

Adjusted

Year/Year

Growth (%)

Subscription revenues

$1,016

30%

 

 

 

$1,027

32%

Professional services and other revenues

$55

5%

 

 

 

$56

6%

Total revenues

$1,071

28%

 

 

 

$1,083

30%

 

 

 

 

 

 

 

 

Subscription billings

 

 

 

$1,018

25%

$1,033

26%

Professional services and other billings

 

 

 

$61

13%

$62

14%

Total billings

 

 

 

$1,079

24%

$1,095

26%

 

 

 

 

 

 

 

 

 

Amount

($ millions)

Margin (%)

 

Amount

($ millions)

Margin (%)

 

 

Subscription gross profit

$844

83%

 

$881

87%

 

 

Professional services and other gross profit (loss)

($6)

(10%)

 

$7

13%

 

 

Total gross profit

$838

78%

 

$888

83%

 

 

Income from operations

$62

6%

 

$295

28%

 

 

Net cash provided by operating activities

$368

34%

 

 

 

 

 

Free cash flow

 

 

 

$259

24%

 

 

 

 

 

 

 

 

 

 

 

Amount

($ millions)

Earnings per

Basic/Diluted

Share ($)

 

Amount

($ millions)

Earnings per

Basic/Diluted

Share ($)

 

 

Net income

$41

$0.21 / $0.20

 

$243

$1.27 / $1.23

 

 

(1)

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.

(2)

Non-GAAP adjusted subscription revenues, professional services and other revenues, total revenues and professional services and other billings are adjusted for constant currency. Non-GAAP adjusted subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures.

Note: Numbers rounded for presentation purposes.

Financial Outlook

Our guidance includes GAAP and non-GAAP financial measures.

The following table summarizes our guidance for the third quarter 2020:

 

Third Quarter 2020

GAAP Guidance

Third Quarter 2020 Non-GAAP Guidance(1)

 

Amount

($ millions)(2)

Year/Year

Growth (%)

Amount

($ millions)(2)

Year/Year

Growth (%)

Adjusted

Amount

($ millions)(3)

Adjusted

Year/ Year

Growth (%)

Subscription revenues

$1,055 – $1,060

26% – 27%

 

 

$1,055 – $1,060

26% – 27%

Subscription billings

 

 

$995 – $1,015

15% – 17%

$1,003 – $1,023

16% – 18%

 

 

 

 

 

 

 

 

 

 

 

Margin (%)

 

 

Income from operations

 

 

 

22%

 

 

 

 

 

 

 

 

 

 

 

 

Amount

(millions)

 

 

 

Weighted-average shares used to compute diluted net income per share

 

 

199

 

 

 

(1)

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

(2)

Guidance for GAAP subscription revenues and non-GAAP subscription billings is based on foreign exchange rates as of June 30, 2020 for entities reporting in currencies other than U.S. Dollars.

(3)

Non-GAAP adjusted subscription revenues are adjusted for constant currency. Non-GAAP adjusted subscription billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

The following table summarizes our guidance for full-year 2020:

 

Full-Year 2020

GAAP Guidance

 

Full-Year 2020 Non-GAAP Guidance(1)

 

Amount

($ millions)(2)

Year/Year

Growth (%)

 

Amount

($ millions)(2)

Year/Year

Growth (%)

Adjusted

Amount

($ millions)(3)

Adjusted

Year/ Year

Growth (%)

Subscription revenues

$4,185 – $4,200

29%

 

 

 

$4,210 – $4,225

29% – 30%

Subscription billings

 

 

 

$4,660 – $4,700

23% – 24%

$4,702 – $4,742

24% – 25%

 

 

 

 

 

 

 

 

 

 

 

 

 

Margin (%)

 

 

Subscription gross profit

 

 

 

 

86%

 

 

Income from operations

 

 

 

 

24%

 

 

Free cash flow

 

 

 

 

29.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount

(millions)

 

 

 

Weighted-average shares used to compute diluted net income per share

 

 

 

198

 

 

 

(1)

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

(2)

GAAP subscription revenues and non-GAAP subscription billings for the future quarters included in our full-year 2020 guidance are based on foreign exchange rates as of June 30, 2020 for entities reporting in currencies other than U.S. Dollars.

(3)

Non-GAAP adjusted subscription revenues are adjusted for constant currency. Non-GAAP adjusted subscription billings are adjusted for constant currency and constant billings duration. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

As with our previously issued full-year 2020 guidance dated April 29, 2020, our guidance factors in assumptions regarding the expected impacts of COVID-19 on our business. This assumes that generally the most significant headwinds would occur in the second and third quarter of 2020, that there will be uncertainty around new business, renewal timing or billings terms, particularly with customers in industries highly affected by COVID-19, and that these economic conditions could persist throughout the remainder of the year. These assumptions are based on information available to us today. Significant variation from these assumptions could cause us to modify our guidance higher or lower.

The following table compares our updated full-year 2020 guidance against our previously issued full-year 2020 guidance dated April 29, 2020:

 

Comparison of Updated Full-Year 2020 Guidance to Previously Issued Guidance(1)

($ millions)

 

Previous Guidance

Midpoint(2)

 

Currency Impact(3)

 

Duration Impact(4)

 

Guidance Change

 

Current Guidance

Midpoint(5)

GAAP subscription revenues

$4,135

$19

$0

$39

$4,193

 

 

 

 

 

 

Non-GAAP subscription billings(6)

$4,630

$22

$0

$28

$4,680

 

 

 

 

 

 

(1)

Numbers rounded for presentation purposes.

(2)

Refers to previously issued full-year 2020 guidance dated April 29, 2020.

(3)

GAAP subscription revenues and non-GAAP subscription billings for the future quarters included in our full-year 2020 guidance are based on foreign exchange rates in effect at the end of the current quarter for entities reporting in currencies other than U.S. Dollars. Currency impact represents the sum of (i) the impact of the difference between the actual average rates in the period used to calculate our Q2 2020 actual results and the rates as of March 31, 2020 assumed in our previously issued guidance dated April 29, 2020 plus (ii) the impact of the difference between the exchange rates in effect as of June 30, 2020 assumed in our updated full-year 2020 guidance, and the rates as of March 31, 2020 assumed in our previously issued guidance dated April 29, 2020.

(4)

Represents the impact of billings greater than 12 months in excess of guidance assumptions.

(5)

Represents the updated full-year 2020 guidance presented in the table above.

(6)

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures, and the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures.

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (22:00 BST) on July 29, 2020. Interested parties may listen to the call by dialing (833) 513-0567 (Passcode: 3395375), or if outside North America, by dialing (236) 714-2186 (Passcode: 3395375). Individuals may access the live teleconference from this webcast link:

https://event.on24.com/wcc/r/2399486/795C3DADBA1B185511D571A263A6CCAE

An audio replay of the conference call and webcast will be available two hours after its completion and will be accessible for 30 days. To hear the replay, interested parties may go to the investor relations section of the ServiceNow website or dial (800) 585-8367 (Passcode: 3395375), or if outside North America, by dialing (416) 621-4642 (Passcode: 3395375).

Investor Presentation Details

An investor presentation providing additional information and analysis can be found at http://investors.servicenow.com.

Statement Regarding Use of Non-GAAP Financial Measures

We report the following non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

  • Adjusted revenues. We present revenues adjusted for constant currency to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To present this information, current period results for entities reporting in currencies other than U.S. Dollars (USD) are converted into USD at the average exchange rates in effect during the comparison period (for Q2 2019, the average exchange rates in effect for our major currencies were 1 USD to 0.8899 Euros and 1 USD to 0.7781 British Pound Sterling (GBP)), rather than the actual average exchange rates in effect during the current period (for Q2 2020, the average exchange rates in effect for our major currencies were 1 USD to 0.9083 Euros and 1 USD to 0.8059 GBP). Similarly, in our guidance, we apply the average exchange rates in effect during the comparison period rather than the exchange rates for the guidance period. We believe the presentation of revenues adjusted for constant currency facilitates the comparison of revenues year-over-year.
  • Billings and Adjusted billings. We believe billings is a useful leading indicator regarding the performance of our business. We define subscription billings, professional services and other billings, and total billings as the applicable revenue plus the applicable change in deferred revenue, unbilled receivables and customer deposits as presented or derived from the statement of cash flows. We adjust billings for constant currency, as described above, and for constant duration by replacing the portion of multi-year billings in excess of twelve months during the current or guidance period with the portion of multi-year billings in excess of twelve months during the comparison period. We believe these adjustments facilitate greater comparability in our billings information year-over-year.
  • Gross profit, Income from operations, Net income and Net income per share – diluted. Our non-GAAP presentation of gross profit, income from operations, and net income measures exclude certain non-cash or non-recurring items, including stock-based compensation expense, amortization of debt discount and issuance costs related to our convertible senior notes, loss on early note conversions, amortization of purchased intangibles, legal settlements, business combination and other related costs, and the related income tax effect of these adjustments. The non-GAAP weighted-average shares used to compute our non-GAAP net income per share – diluted excludes the dilutive effect of the in-the-money portion of convertible senior notes as they are covered by our note hedges, and includes the dilutive effect of time-based stock awards, the dilutive effect of warrants and the potentially dilutive effect of our stock awards with performance conditions not yet satisfied at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met. We believe these adjustments provide useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods.
  • Free cash flow. Free cash flow is defined as net cash provided by (used in) operating activities plus cash paid for legal settlements and repayments of convertible senior notes attributable to debt discount, reduced by purchases of property and equipment. Free cash flow margin is calculated as free cash flow as a percentage of total revenues. We believe information regarding free cash flow and free cash flow margin provides useful information to investors because it is an indicator of the strength and performance of our business operations.

Our presentation of non-GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP and non-GAAP results and guidance.

Use of Forward-Looking Statements

This release contains “forward-looking statements” regarding our performance, including but not limited to statements in the section entitled “Financial Outlook.” Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.

Factors that may cause actual results to differ materially from those in any forward-looking statements include: (i) the impact and duration of the health impact of COVID-19 and the economic impact of safety measures to mitigate its impact, including the effectiveness, extent and duration of efforts to limit the spread and impact of the disease, such as “shelter in place” and similar government directives; (ii) our ability to compete successfully against existing and new competitors, (iii) our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet, (iv) our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments, (v) errors, interruptions, delays, or security breaches in or of our service or data centers, (vi) our ability to grow our business, including converting remaining performance obligations into revenue, adding and retaining customers, selling additional subscriptions to existing customers, selling to larger enterprises, government and regulated organizations with complex sales cycles and certification processes, and entering new geographies and markets, (vii) our ability to develop and gain customer acceptance of new and improved products and services, including those acquired through strategic transactions, and (viii) material changes in the value of foreign currencies relative to the U.S. Dollar. Additionally, these forward-looking statements, particularly our guidance, involve risk, uncertainties and assumptions, including those related to the continued impacts of COVID-19 on our business and global economic conditions. Many of these assumptions relate to matters that are beyond our control and changing rapidly, including, but not limited to, the timeframes for and severity of social distancing and other mitigation requirements, the continued impact of COVID-19 on our customers’ purchasing decisions and the length of our sales cycles, particularly for customers in certain industries highly affected by COVID-19. Significant variation from the assumptions underlying our forward-looking statements could cause our actual results to vary, and the impact could be significant.

Further information on these and other factors that could affect our financial results are included in our Form 10-Q that will be filed for the quarter ended June 30, 2020 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K filed for the year ended December 31, 2019.

We undertake no obligation, and do not intend, to update these forward-looking statements, to review or confirm analysts’ expectations, or to provide interim reports or updates on the progress of the current financial quarter.

About ServiceNow

ServiceNow (NYSE: NOW) is making the world of work, work better for people. Our cloud-based platform and solutions deliver digital workflows that create great experiences and unlock productivity for employees and the enterprise. For more information, visit: www.servicenow.com.

© 2020 ServiceNow, Inc. All rights reserved. ServiceNow, the ServiceNow logo, Now, and other ServiceNow marks are trademarks and/or registered trademarks of ServiceNow, Inc. in the United States and/or other countries. Other company names, product names, and logos may be trademarks of the respective companies with which they are associated.

ServiceNow, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 30, 2020

 

June 30, 2019

 

June 30, 2020

 

June 30, 2019

Revenues:

 

 

 

 

 

 

 

Subscription

$

1,015,528

 

 

$

780,989

 

 

$

2,010,230

 

 

$

1,520,975

 

Professional services and other

55,314

 

 

52,915

 

 

106,952

 

 

101,855

 

Total revenues

1,070,842

 

 

833,904

 

 

2,117,182

 

 

1,622,830

 

Cost of revenues (1):

 

 

 

 

 

 

 

Subscription

171,934

 

 

135,479

 

 

331,655

 

 

262,068

 

Professional services and other

61,005

 

 

62,668

 

 

124,650

 

 

122,331

 

Total cost of revenues

232,939

 

 

198,147

 

 

456,305

 

 

384,399

 

Gross profit

837,903

 

 

635,757

 

 

1,660,877

 

 

1,238,431

 

Operating expenses (1):

 

 

 

 

 

 

 

Sales and marketing

426,519

 

 

393,895

 

 

867,753

 

 

755,304

 

Research and development

245,081

 

 

183,420

 

 

471,738

 

 

355,942

 

General and administrative

104,037

 

 

85,442

 

 

209,785

 

 

169,898

 

Total operating expenses

775,637

 

 

662,757

 

 

1,549,276

 

 

1,281,144

 

Income (loss) from operations

62,266

 

 

(27,000

)

 

111,601

 

 

(42,713

)

Interest expense

(8,488

)

 

(8,269

)

 

(17,058

)

 

(16,437

)

Interest income and other income, net

8,252

 

 

18,954

 

 

15,849

 

 

31,379

 

Income (loss) before income taxes

62,030

 

 

(16,315

)

 

110,392

 

 

(27,771

)

Provision for (benefit from) income taxes

21,264

 

 

(5,236

)

 

21,395

 

 

(15,147

)

Net income (loss)

$

40,766

 

 

$

(11,079

)

 

$

88,997

 

 

$

(12,624

)

Net income (loss) per share – basic

$

0.21

 

 

$

(0.06

)

 

$

0.47

 

 

$

(0.07

)

Net income (loss) per share – diluted

$

0.20

 

 

$

(0.06

)

 

$

0.44

 

 

$

(0.07

)

Weighted-average shares used to compute net income (loss) per share – basic

191,319

 

 

186,678

 

 

190,731

 

 

184,419

 

Weighted-average shares used to compute net income (loss) per share – diluted

201,453

 

 

186,678

 

 

200,843

 

 

184,419

 

 

(1) Includes stock-based compensation as follows:

 

Three Months Ended

 

Six Months Ended

 

June 30, 2020

 

June 30, 2019

 

June 30, 2020

 

June 30, 2019

Cost of revenues:

 

 

 

 

 

 

 

Subscription

$

24,960

 

 

$

19,117

 

 

$

46,484

 

 

$

35,139

 

Professional services and other

12,791

 

 

10,951

 

 

24,803

 

 

20,882

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

78,967

 

 

69,229

 

 

149,127

 

 

131,359

 

Research and development

70,163

 

 

50,041

 

 

129,066

 

 

93,623

 

General and administrative

29,959

 

 

22,422

 

 

55,645

 

 

48,207

 

ServiceNow, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

June 30, 2020

 

December 31, 2019

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

837,309

 

 

$

775,778

 

Short-term investments

1,505,362

 

 

915,317

 

Accounts receivable, net

631,992

 

 

835,279

 

Current portion of deferred commissions

191,877

 

 

175,039

 

Prepaid expenses and other current assets

170,582

 

 

125,488

 

Total current assets

3,337,122

 

 

2,826,901

 

Deferred commissions, less current portion

355,684

 

 

333,448

 

Long-term investments

776,807

 

 

1,013,332

 

Property and equipment, net

547,253

 

 

468,085

 

Operating lease right-of-use assets

463,220

 

 

402,428

 

Intangible assets, net

163,857

 

 

143,850

 

Goodwill

211,416

 

 

156,756

 

Deferred tax assets

594,155

 

 

599,633

 

Other assets

71,795

 

 

77,997

 

Total assets

$

6,521,309

 

 

$

6,022,430

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

85,757

 

 

$

52,960

 

Accrued expenses and other current liabilities

446,653

 

 

461,403

 

Current portion of deferred revenue

2,250,719

 

 

2,185,754

 

Current portion of operating lease liabilities

65,742

 

 

52,668

 

Total current liabilities

2,848,871

 

 

2,752,785

 

Deferred revenue, less current portion

31,399

 

 

40,038

 

Operating lease liabilities, less current portion

436,499

 

 

383,221

 

Convertible senior notes, net

696,123

 

 

694,981

 

Other long-term liabilities

29,611

 

 

23,464

 

Stockholders’ equity

2,478,806

 

 

2,127,941

 

Total liabilities and stockholders’ equity

$

6,521,309

 

 

$

6,022,430

 

ServiceNow, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

June 30, 2020

 

June 30, 2019

 

June 30, 2020

 

June 30, 2019

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

$

40,766

 

 

$

(11,079

)

 

$

88,997

 

 

$

(12,624

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

82,390

 

 

60,328

 

 

158,628

 

 

115,777

 

Amortization of deferred commissions

51,734

 

 

39,974

 

 

101,215

 

 

79,531

 

Amortization of debt discount and issuance costs

8,488

 

 

8,269

 

 

17,058

 

 

16,437

 

Stock-based compensation

216,840

 

 

171,760

 

 

405,125

 

 

329,210

 

Deferred income taxes

(1,650

)

 

(1,593

)

 

(3,177

)

 

(3,073

)

Repayments of convertible senior notes attributable to debt discount

(1,693

)

 

 

 

(1,975

)

 

 

Unrealized gains on non-marketable equity securities

(2,007

)

 

(2,932

)

 

(1,944

)

 

(2,932

)

Other

(906

)

 

(1,115

)

 

1,302

 

 

(391

)

Changes in operating assets and liabilities, net of effect of business combinations:

 

 

 

 

 

 

 

Accounts receivable

(8,774

)

 

(79,751

)

 

200,015

 

 

71,354

 

Deferred commissions

(73,184

)

 

(50,595

)

 

(143,981

)

 

(97,194

)

Prepaid expenses and other assets

(12,038

)

 

5,176

 

 

(32,429

)

 

(28,483

)

Accounts payable

16,645

 

 

18,531

 

 

37,324

 

 

25,093

 

Deferred revenue

9,401

 

 

38,820

 

 

69,248

 

 

100,190

 

Accrued expenses and other liabilities

42,042

 

 

47,942

 

 

(35,784

)

 

11,688

 

Net cash provided by operating activities

368,054

 

 

243,735

 

 

859,622

 

 

604,583

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

(110,464

)

 

(49,896

)

 

(193,671

)

 

(97,020

)

Business combinations, net of cash acquired

 

 

 

 

(82,948

)

 

 

Purchases of intangibles

(6,500

)

 

(36,160

)

 

(6,500

)

 

(36,160

)

Purchases of investments

(579,919

)

 

(361,859

)

 

(1,107,738

)

 

(800,641

)

Sales and maturities of investments

452,824

 

 

245,433

 

 

765,384

 

 

508,318

 

Realized gains (losses) on derivatives not designated as hedging instruments, net

984

 

 

(35

)

 

(2,636

)

 

22,113

 

Net cash used in investing activities

(243,075

)

 

(202,517

)

 

(628,109

)

 

(403,390

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Repayments of convertible senior notes attributable to principal

(13,502

)

 

 

 

(15,738

)

 

 

Proceeds from employee stock plans

24,148

 

 

10,207

 

 

91,056

 

 

63,300

 

Taxes paid related to net share settlement of equity awards

(112,857

)

 

(108,126

)

 

(238,557

)

 

(247,619

)

Net cash used in financing activities

(102,211

)

 

(97,919

)

 

(163,239

)

 

(184,319

)

Foreign currency effect on cash, cash equivalents and restricted cash

5,787

 

 

207

 

 

(4,862

)

 

1,286

 

Net increase (decrease) in cash, cash equivalents and restricted cash

28,555

 

 

(56,494

)

 

63,412

 

 

18,160

 

Cash, cash equivalents and restricted cash at beginning of period

812,848

 

 

643,192

 

 

777,991

 

 

568,538

 

Cash, cash equivalents and restricted cash at end of period

$

841,403

 

 

$

586,698

 

 

$

841,403

 

 

$

586,698

 

ServiceNow, Inc.

GAAP to Non-GAAP Reconciliation

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

 

 

Six Months Ended

 

 

 

June 30, 2020

 

June 30, 2019

 

Growth Rates

 

June 30, 2020

 

June 30, 2019

 

Growth Rates

Subscription revenues:

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription revenues

$

1,015,528

 

 

$

780,989

 

 

30%

 

$

2,010,230

 

 

$

1,520,975

 

 

32%

Effects of foreign currency rate fluctuations

11,531

 

 

 

 

 

 

23,106

 

 

 

 

 

Non-GAAP adjusted subscription revenues(1)

$

1,027,059

 

 

 

 

32%

 

$

2,033,336

 

 

 

 

34%

 

 

 

 

 

 

 

 

 

 

 

 

Subscription billings:

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription revenues

$

1,015,528

 

 

$

780,989

 

 

30%

 

$

2,010,230

 

 

$

1,520,975

 

 

32%

Change in subscription deferred revenue, unbilled receivables and customer deposits

2,704

 

 

35,915

 

 

 

 

63,061

 

 

105,526

 

 

 

Non-GAAP subscription billings

1,018,232

 

 

816,904

 

 

25%

 

2,073,291

 

 

1,626,501

 

 

27%

Effects of foreign currency rate fluctuations

12,121

 

 

 

 

 

 

23,904

 

 

 

 

 

Effects of fluctuations in billings duration

2,774

 

 

 

 

 

 

899

 

 

 

 

 

Non-GAAP adjusted subscription billings(2)

$

1,033,127

 

 

 

 

26%

 

$

2,098,094

 

 

 

 

29%

 

 

 

 

 

 

 

 

 

 

 

 

Professional services and other revenues:

 

 

 

 

 

 

 

 

 

 

 

GAAP professional services and other revenues

$

55,314

 

 

$

52,915

 

 

5%

 

$

106,952

 

 

$

101,855

 

 

5%

Effects of foreign currency rate fluctuations

720

 

 

 

 

 

 

1,639

 

 

 

 

 

Non-GAAP adjusted professional service and other revenues(1)

$

56,034

 

 

 

 

6%

 

$

108,591

 

 

 

 

7%

 

 

 

 

 

 

 

 

 

 

 

 

Professional services and other billings:

 

 

 

 

 

 

 

 

 

 

 

GAAP professional services and other revenues

$

55,314

 

 

$

52,915

 

 

5%

 

$

106,952

 

 

$

101,855

 

 

5%

Change in professional services and other deferred revenue

5,670

 

 

1,196

 

 

 

 

2,163

 

 

190

 

 

 

Non-GAAP professional services and other billings

60,984

 

 

54,111

 

 

13%

 

109,115

 

 

102,045

 

 

7%

Effects of foreign currency rate fluctuations

720

 

 

 

 

 

 

1,639

 

 

 

 

 

Non-GAAP adjusted professional services and other billings(2)

$

61,704

 

 

 

 

14%

 

$

110,754

 

 

 

 

9%

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues:

 

 

 

 

 

 

 

 

 

 

 

GAAP total revenues

$

1,070,842

 

 

$

833,904

 

 

28%

 

$

2,117,182

 

 

$

1,622,830

 

 

30%

Effects of foreign currency rate fluctuations

12,251

 

 

 

 

 

 

24,745

 

 

 

 

 

Non-GAAP adjusted total revenues(1)

$

1,083,093

 

 

 

 

30%

 

$

2,141,927

 

 

 

 

32%

 

 

 

 

 

 

 

 

 

 

 

 

Total billings:

 

 

 

 

 

 

 

 

 

 

 

GAAP total revenues

$

1,070,842

 

 

$

833,904

 

 

28%

 

$

2,117,182

 

 

$

1,622,830

 

 

30%

Change in total deferred revenue, unbilled receivables and customer deposits

8,374

 

 

37,111

 

 

 

 

65,224

 

 

105,716

 

 

 

Non-GAAP total billings

1,079,216

 

 

871,015

 

 

24%

 

2,182,406

 

 

1,728,546

 

 

26%

Effects of foreign currency rate fluctuations

12,841

 

 

 

 

 

 

25,543

 

 

 

 

 

Effects of fluctuations in billings duration

2,774

 

 

 

 

 

 

899

 

 

 

 

 

Non-GAAP adjusted total billings(2)

$

1,094,831

 

 

 

 

26%

 

$

2,208,848

 

 

 

 

28%

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription cost of revenues

$

171,934

 

 

$

135,479

 

 

 

 

$

331,655

 

 

$

262,068

 

 

 

Stock-based compensation

(24,960

)

 

(19,117

)

 

 

 

(46,484

)

 

(35,139

)

 

 

Amortization of purchased intangibles

(11,998

)

 

(5,614

)

 

 

 

(18,854

)

 

(10,314

)

 

 

Non-GAAP subscription cost of revenues

$

134,976

 

 

$

110,748

 

 

 

 

$

266,317

 

 

$

216,615

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP professional services and other cost of revenues

$

61,005

 

 

$

62,668

 

 

 

 

$

124,650

 

 

$

122,331

 

 

 

Stock-based compensation

(12,791

)

 

(10,951

)

 

 

 

(24,803

)

 

(20,882

)

 

 

Non-GAAP professional services and other cost of revenues

$

48,214

 

 

$

51,717

 

 

 

 

$

99,847

 

 

$

101,449

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (loss):

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription gross profit

$

843,594

 

 

$

645,510

 

 

 

 

$

1,678,575

 

 

$

1,258,907

 

 

 

Stock-based compensation

24,960

 

 

19,117

 

 

 

 

46,484

 

 

35,139

 

 

 

Amortization of purchased intangibles

11,998

 

 

5,614

 

 

 

 

18,854

 

 

10,314

 

 

 

Non-GAAP subscription gross profit

$

880,552

 

 

$

670,241

 

 

 

 

$

1,743,913

 

 

$

1,304,360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP professional services and other gross loss

$

(5,691

)

 

$

(9,753

)

 

 

 

$

(17,698

)

 

$

(20,476

)

 

 

Stock-based compensation

12,791

 

 

10,951

 

 

 

 

24,803

 

 

20,882

 

 

 

Non-GAAP professional services and other gross profit

$

7,100

 

 

$

1,198

 

 

 

 

$

7,105

 

 

$

406

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

$

837,903

 

 

$

635,757

 

 

 

 

$

1,660,877

 

 

$

1,238,431

 

 

 

Stock-based compensation

37,751

 

 

30,068

 

 

 

 

71,287

 

 

56,021

 

 

 

Amortization of purchased intangibles

11,998

 

 

5,614

 

 

 

 

18,854

 

 

10,314

 

 

 

Non-GAAP gross profit

$

887,652

 

 

$

671,439

 

 

 

 

$

1,751,018

 

 

$

1,304,766

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin:

 

 

 

 

 

 

 

 

 

 

 

GAAP subscription gross margin

83

%

 

83

%

 

 

 

84

%

 

83

%

 

 

Stock-based compensation as % of subscription revenues

2

%

 

2

%

 

 

 

2

%

 

2

%

 

 

Amortization of purchased intangibles as % of subscription revenues

2

%

 

1

%

 

 

 

1

%

 

1

%

 

 

Non-GAAP subscription gross margin

87

%

 

86

%

 

 

 

87

%

 

86

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP professional services and other gross margin

(10

%)

 

(18

%)

 

 

 

(17

%)

 

(20

%)

 

 

Stock-based compensation as % of professional services and other revenues

23

%

 

20

%

 

 

 

24

%

 

20

%

 

 

Non-GAAP professional services and other gross margin

13

%

 

2

%

 

 

 

7

%

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

78

%

 

76

%

 

 

 

78

%

 

76

%

 

 

Stock-based compensation as % of total revenues

4

%

 

4

%

 

 

 

4

%

 

3

%

 

 

Amortization of purchased intangibles as % of total revenues

1

%

 

1

%

 

 

 

1

%

 

1

%

 

 

Non-GAAP gross margin

83

%

 

81

%

 

 

 

83

%

 

80

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

GAAP sales and marketing expenses

$

426,519

 

 

$

393,895

 

 

 

 

$

867,753

 

 

$

755,304

 

 

 

Stock-based compensation

(78,967

)

 

(69,229

)

 

 

 

(149,127

)

 

(131,359

)

 

 

Amortization of purchased intangibles

(311

)

 

 

 

 

 

(622

)

 

 

 

 

Non-GAAP sales and marketing expenses

$

347,241

 

 

$

324,666

 

 

 

 

$

718,004

 

 

$

623,945

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP research and development expenses

$

245,081

 

 

$

183,420

 

 

 

 

$

471,738

 

 

$

355,942

 

 

 

Stock-based compensation

(70,163

)

 

(50,041

)

 

 

 

(129,066

)

 

(93,623

)

 

 

Amortization of purchased intangibles

(455

)

 

(455

)

 

 

 

(910

)

 

(910

)

 

 

Non-GAAP research and development expenses

$

174,463

 

 

$

132,924

 

 

 

 

$

341,762

 

 

$

261,409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP general and administrative expenses

$

104,037

 

 

$

85,442

 

 

 

 

$

209,785

 

 

$

169,898

 

 

 

Stock-based compensation

(29,959

)

 

(22,422

)

 

 

 

(55,645

)

 

(48,207

)

 

 

Amortization of purchased intangibles

(1,939

)

 

(1,950

)

 

 

 

(4,632

)

 

(3,837

)

 

 

Business combination and other related costs

(1,186

)

 

(173

)

 

 

 

(4,061

)

 

(146

)

 

 

Non-GAAP general and administrative expenses

$

70,953

 

 

$

60,897

 

 

 

 

$

145,447

 

 

$

117,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP total operating expenses

$

775,637

 

 

$

662,757

 

 

 

 

$

1,549,276

 

 

$

1,281,144

 

 

 

Stock-based compensation

(179,089

)

 

(141,692

)

 

 

 

(333,838

)

 

(273,189

)

 

 

Amortization of purchased intangibles

(2,705

)

 

(2,405

)

 

 

 

(6,164

)

 

(4,747

)

 

 

Business combination and other related costs

(1,186

)

 

(173

)

 

 

 

(4,061

)

 

(146

)

 

 

Non-GAAP total operating expenses

$

592,657

 

 

$

518,487

 

 

 

 

$

1,205,213

 

 

$

1,003,062

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

 

 

 

 

 

 

 

 

GAAP income (loss) from operations

$

62,266

 

 

$

(27,000

)

 

 

 

$

111,601

 

 

$

(42,713

)

 

 

Stock-based compensation

216,840

 

 

171,760

 

 

 

 

405,125

 

 

329,210

 

 

 

Amortization of purchased intangibles

14,703

 

 

8,019

 

 

 

 

25,018

 

 

15,061

 

 

 

Business combination and other related costs

1,186

 

 

173

 

 

 

 

4,061

 

 

146

 

 

 

Non-GAAP income from operations

$

294,995

 

 

$

152,952

 

 

 

 

$

545,805

 

 

$

301,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin:

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin

6

%

 

(3

%)

 

 

 

5

%

 

(3

%)

 

 

Stock-based compensation as % of total revenues

20

%

 

21

%

 

 

 

19

%

 

20

%

 

 

Amortization of purchased intangibles as % of total revenues

2

%

 

0

%

 

 

 

2

%

 

2

%

 

 

Business combination and other related costs as % of total revenues

0

%

 

0

%

 

 

 

0

%

 

0

%

 

 

Non-GAAP operating margin

28

%

 

18

%

 

 

 

26

%

 

19

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss):

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

$

40,766

 

 

$

(11,079

)

 

 

 

$

88,997

 

 

$

(12,624

)

 

 

Stock-based compensation

216,840

 

 

171,760

 

 

 

 

405,125

 

 

329,210

 

 

 

Amortization of purchased intangibles

14,703

 

 

8,019

 

 

 

 

25,018

 

 

15,061

 

 

 

Business combination and other related costs

1,186

 

 

173

 

 

 

 

4,061

 

 

146

 

 

 

Amortization of debt discount and issuance costs for the convertible senior notes

8,488

 

 

8,269

 

 

 

 

17,058

 

 

16,437

 

 

 

Loss on early note conversions

817

 

 

 

 

 

 

907

 

 

 

 

 

Income tax expense effects related to the above adjustments

(39,549

)

 

(39,617

)

 

 

 

(91,117

)

 

(81,763

)

 

 

Non-GAAP net income

$

243,251

 

 

$

137,525

 

 

 

 

$

450,049

 

 

$

266,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share – basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) per share – basic

$

0.21

 

 

$

(0.06

)

 

 

 

$

0.47

 

 

$

(0.07

)

 

 

GAAP net income (loss) per share – diluted

$

0.20

 

 

$

(0.06

)

 

 

 

$

0.44

 

 

$

(0.07

)

 

 

Non-GAAP net income per share – basic

$

1.27

 

 

$

0.74

 

 

 

 

$

2.36

 

 

$

1.44

 

 

 

Non-GAAP net income per share – diluted

$

1.23

 

 

$

0.71

 

 

 

 

$

2.28

 

 

$

1.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares used to compute net income (loss) per share – basic

191,319

 

 

186,678

 

 

 

 

190,731

 

 

184,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares used to compute net income (loss) per share – diluted

201,453

 

 

186,678

 

 

 

 

200,843

 

 

184,419

 

 

 

Effects of dilutive time-based stock awards(3)

 

 

6,100

 

 

 

 

 

 

6,199

 

 

 

Effects of in-the-money portion of convertible senior notes(3)

(3,510

)

 

 

 

 

 

(3,414

)

 

 

 

 

Effects of warrants(3)

 

 

1,584

 

 

 

 

 

 

2,617

 

 

 

Effects of stock awards with performance conditions not yet satisfied(3)

19

 

 

100

 

 

 

 

1

 

 

43

 

 

 

Non-GAAP weighted-average shares used to compute net income per share – diluted

197,962

 

 

194,462

 

 

 

 

197,430

 

 

193,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow:

 

 

 

 

 

 

 

 

 

 

 

GAAP net cash provided by operating activities

$

368,054

 

 

$

243,735

 

 

 

 

$

859,622

 

 

$

604,583

 

 

 

Purchases of property and equipment

(110,464

)

 

(49,896

)

 

 

 

(193,671

)

 

(97,020

)

 

 

Repayments of convertible senior notes attributable to debt discount

1,693

 

 

 

 

 

 

1,975

 

 

 

 

 

Non-GAAP free cash flow

$

259,283

 

 

$

193,839

 

 

 

 

$

667,926

 

 

$

507,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow margin:

 

 

 

 

 

 

 

 

 

 

 

GAAP net cash provided by operating activities as % of total revenues

34

%

 

29

%

 

 

 

41

%

 

37

%

 

 

Purchases of property and equipment as % of total revenues

(10

%)

 

(6

%)

 

 

 

(9

%)

 

(6

%)

 

 

Repayments of convertible senior notes attributable to debt discount as % of total revenues

0

%

 

%

 

 

 

0

%

 

%

 

 

Non-GAAP free cash flow margin

24

%

 

23

%

 

 

 

32

%

 

31

%

 

 

(1)

Adjusted revenues and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the actual average exchange rates in effect during the current period.

(2)

Adjusted billings and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the actual average exchange rates in effect during the current period, and by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the comparison period.

(3)

Effects of dilutive time-based stock awards, in-the-money portion of convertible senior notes and warrants are included in the GAAP weighted-average diluted shares in periods where we have GAAP net income. We exclude the in-the-money portion of convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our note hedges. We include stock awards with performance conditions not yet satisfied for non-GAAP weighted average diluted shares at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met.

ServiceNow, Inc.

Reconciliation of Non-GAAP Financial Guidance

The financial guidance provided below is an estimate based on information available as of June 30, 2020. The company’s future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the company’s financial results are stated above in this press release. Further information on these and other factors that could affect our financial results are included in our Form 10-K for the year ended December 31, 2019 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-Q that will be filed for the three months ended June 30, 2020. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

 

Three Months Ended

 

 

 

September 30, 2020

 

September 30, 2019(3)

 

Growth Rates

 

 

 

 

 

 

GAAP subscription revenues

$1,055 – $1,060 million

 

$835 million

 

26% – 27%

 

 

 

 

 

 

Effects of foreign currency rate fluctuations

NM(5)

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted subscription revenues(1)

$1,055 – $1,060 million

 

 

 

26% – 27%

 

 

 

 

 

 

GAAP subscription revenues

$1,055 – $1,060 million

 

$835 million

 

26% – 27%

 

 

 

 

 

 

Change in subscription deferred revenue, unbilled receivables and customer deposits

(60) – (45) million

 

$29 million

 

 

 

 

 

 

 

 

Non-GAAP subscription billings

$995 – $1,015 million

 

$864 million

 

15% – 17%

 

 

 

 

 

 

Effects of foreign currency rate fluctuations

NM(5)

 

 

 

 

 

 

 

 

 

 

Effects of fluctuations in billings duration

8 million

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted subscription billings(2)

$1,003 – $1,023 million

 

 

 

16% – 18%

 

 

 

 

 

 

GAAP operating margin

1%

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense as % of total revenues

20%

 

 

 

 

 

 

 

 

 

 

Amortization of purchased intangibles as % of total revenues

1%

 

 

 

 

 

 

 

 

 

 

Business combination and other related costs as % of total revenues

0%

 

 

 

 

 

 

 

 

 

 

Non-GAAP operating margin

22%

 

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares used to compute net income per share – diluted

203 million

 

 

 

 

 

 

 

 

 

 

Effects of in-the-money portion of convertible senior notes(4)

(4) million

 

 

 

 

 

 

 

 

 

 

Non-GAAP weighted-average shares used to compute net income per share – diluted

199 million

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

December 31, 2020

 

December 31, 2019(3)

 

Growth Rates

 

 

 

 

 

 

GAAP subscription revenues

$4,185 – $4,200 million

 

$3,255 million

 

29%

 

 

 

 

 

 

Effects of foreign currency rate fluctuations

25 million

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted subscription revenues(1)

$4,210 – $4,225 million

 

 

 

29% – 30%

 

 

 

 

 

 

GAAP subscription revenues

$4,185 – $4,200 million

 

$3,255 million

 

29%

 

 

 

 

 

 

Change in subscription deferred revenue, unbilled receivables and customer deposits

475 – 500 million

 

533 million

 

 

 

 

 

 

 

 

Non-GAAP subscription billings

$4,660 – $4,700 million

 

$3,788 million

 

23% – 24%

 

 

 

 

 

 

Effects of foreign currency rate fluctuations

28 million

 

 

 

 

 

 

 

 

 

 

Effects of fluctuations in billings duration

14 million

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted subscription billings(2)

$4,702 – $4,742 million

 

 

 

24% – 25%

 

 

 

 

 

 

GAAP subscription gross margin

83%

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense as % of subscription revenues

2%

 

 

 

 

 

 

 

 

 

 

Amortization of purchased intangibles as % of subscription revenues

1%

 

 

 

 

 

 

 

 

 

 

Non-GAAP subscription margin

86%

 

 

 

 

 

 

 

 

 

 

GAAP operating margin

4%

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense as % of total revenues

19%

 

 

 

 

 

 

 

 

 

 

Amortization of purchased intangibles as % of total revenues

1%

 

 

 

 

 

 

 

 

 

 

Business combination and other related costs as % of total revenues

0%

 

 

 

 

 

 

 

 

 

 

Non-GAAP operating margin

24%

 

 

 

 

 

 

 

 

 

 

GAAP net cash provided by operating activities as % of total revenues

37.5%

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment as % of total revenues

(8%)

 

 

 

 

 

 

 

 

 

 

Repayments of convertible senior notes attributable to debt discount as % of total revenues

0%

 

 

 

 

 

 

 

 

 

 

Non-GAAP free cash flow margin

29.5%

 

 

 

 

 

 

 

 

 

 

GAAP weighted-average shares used to compute net income per share – diluted

201 million

 

 

 

 

 

 

 

 

 

 

Effects of in-the-money portion of convertible senior notes(4)

(3) million

 

 

 

 

 

 

 

 

 

 

Non-GAAP weighted-average shares used to compute net income per share – diluted

198 million

 

 

 

 

(1)

Adjusted revenues and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the exchange rates for the guidance period.

(2)

Adjusted billings and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the exchange rates for the guidance period, and by replacing the portion of multi-year billings in excess of twelve months for the guidance period with the actual portion of multi-year billings in excess of twelve months during the comparison period.

(3)

Effects of foreign currency rate fluctuations and fluctuations in billing durations are not applicable for the comparison period.

(4)

We exclude the in-the-money portion of convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our note hedges.

(5)

NM – Not meaningful.