ServiceNow (NYSE: NOW), the AI platform for business transformation, today announced financial results for its second quarter ended June 30, 2024, with subscription revenues of $2,542 million in Q2 20...
SANTA CLARA, Calif.: ServiceNow (NYSE: NOW), the AI platform for business transformation, today announced financial results for its second quarter ended June 30, 2024, with subscription revenues of $2,542 million in Q2 2024, representing 23% year-over-year growth and 23% in constant currency.
“ServiceNow’s elite-level execution is reflected in our continued outperformance across all topline growth and profitability metrics,” said ServiceNow Chairman and CEO Bill McDermott. “Our relevance as the AI platform for business transformation remains stronger than ever as CEOs are looking for new vectors of growth, simplification, and digitization. ServiceNow intends to reinvent every workflow, in every company, in every industry with GenAI at the core.”
As of June 30, 2024, current remaining performance obligations (“cRPO”), contract revenue that will be recognized as revenue in the next 12 months, was $8.78 billion, representing 22% year-over-year growth and 22.5% in constant currency. The company now has 1,988 total customers with more than $1 million in annual contract value (“ACV”), representing 15% year-over-year growth in customers.
“Q2 was another fantastic quarter with NNACV and GenAI contributions exceeding expectations,” said ServiceNow CFO Gina Mastantuono. “Our Knowledge event in May centered on 'Putting AI to Work for People' and received an incredible response from customers, generating more than $1 billion in pipeline. This robust pipeline, combined with our outperformance in the first half, gives us the visibility to raise our 2024 subscription revenue guidance and reinforces our confidence in achieving $15+ billion in 2026.”
Recent Business Highlights
Innovation
Partnerships
Global and Industry Expansion
Recognition
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Leadership Update
As previously referenced in the Company’s Form 10-Q for the quarter ended March 31, 2024, the Company received an internal complaint that raised a potential concern related to one of its employees.
The Company initiated an internal investigation, with assistance of outside legal counsel, into the validity of these claims. The Company also promptly informed and is continuing to cooperate with government entities.
As a result of the investigation, the Company’s Board of Directors determined Company policy was violated regarding the hiring of the former Chief Information Officer of the U.S. Army. As such, the hired individual, who led the company’s public sector thought leadership and business development efforts since March 2023, departed the company. In addition, the Company and CJ Desai, President and Chief Operating Officer, came to a mutual agreement that Desai would resign from all positions with the Company effective immediately. The company believes this was an isolated incident.
The Company has appointed ServiceNow veteran Chris Bedi, as interim Chief Product Officer, effective immediately. Bedi has been at ServiceNow for nearly a decade with roles including Chief Digital Information Officer and Chief Customer Officer.
Second Quarter 2024 GAAP and Non-GAAP Results:
The following table summarizes our financial results for the second quarter 2024:
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| Second Quarter 2024 GAAP Results |
| Second Quarter 2024 Non-GAAP Results(1) | ||
| Amount ($ millions) | Year/Year Growth (%) |
| Amount ($ millions)(3) | Year/Year Growth (%) |
Subscription revenues | $2,542 | 23% |
| $2,552 | 23% |
Professional services and other revenues | $85 | 13% |
| $85 | 13.5% |
Total revenues | $2,627 | 22% |
| $2,637 | 22.5% |
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| Amount ($ billions) | Year/Year Growth (%) |
| Amount | Year/Year Growth (%) |
cRPO | $8.78 | 22% |
| $8.84 | 22.5% |
RPO | $18.6 | 31% |
| $18.7 | 31.5% |
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| Amount ($ millions) | Margin (%) |
| Amount ($ millions)(2) | Margin (%)(2) |
Subscription gross profit | $2,073 | 82% |
| $2,156 | 85% |
Professional services and other gross profit | $2 | 2% |
| $14 | 16% |
Total gross profit | $2,075 | 79% |
| $2,170 | 83% |
Income from operations | $240 | 9% |
| $720 | 27% |
Net cash provided by operating activities | $620 | 24% |
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Free cash flow |
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| $359 | 14% |
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| Amount ($ millions) | Earnings per Basic/Diluted Share ($) |
| Amount ($ millions)(2) | Earnings per Basic/Diluted Share ($)(2) |
Net income | $262 | $1.27 / $1.26 |
| $651 | $3.16 / $3.13 |
(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. | |
(2) | Refer to the table entitled “GAAP to Non-GAAP Reconciliation” for a reconciliation of GAAP to non-GAAP measures. | |
(3) | Non-GAAP subscription revenues and total revenues are adjusted for constant currency by excluding effects of foreign currency rate fluctuations and any gains or losses from foreign currency hedge contracts. Professional services and other revenues, cRPO, and RPO are adjusted only for constant currency. See the section entitled “Statement Regarding Use of Non-GAAP Financial Measures” for an explanation of non-GAAP measures. | |
Note: Numbers rounded for presentation purposes and may not foot. |
Financial Outlook
Our guidance includes GAAP and non-GAAP financial measures. The non-GAAP growth rates for subscription revenues are adjusted for constant currency by excluding effects of foreign currency rate fluctuations and any gains or losses from foreign currency hedge contracts, and cRPO are adjusted only for constant currency to provide better visibility into the underlying business trends. Since March 31, 2024, ServiceNow has seen a strengthening of the U.S. dollar resulting in an incremental foreign exchange (“FX”) headwind of $20 million to 2024 subscription revenues when compared to our previous guidance provided on April 24, 2024.
The following table summarizes our guidance for the third quarter 2024:
| Third Quarter 2024 GAAP Guidance |
| Third Quarter 2024 Non-GAAP Guidance(1) | |
| Amount | Year/Year Growth (%)(3) |
| Constant Currency Year/Year Growth (%) |
Subscription revenues | $2,660 - $2,665 | 20% - 20.5% |
| 20.5% |
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cRPO |
| 22.5% |
| 22% |
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| Margin (%)(2) |
Income from operations |
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| 29.5% |
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| Amount (millions) |
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Weighted-average shares used to compute diluted net income per share |
| 209 |
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(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. | |
(2) | Refer to the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures. | |
(3) | Guidance for GAAP subscription revenues and GAAP subscription revenues and cRPO growth rates are based on the 30-day average of foreign exchange rates for June 2024 for entities reporting in currencies other than U.S. Dollars. |
The following table summarizes our guidance for the full-year 2024:
| Full-Year 2024 GAAP Guidance |
| Full-Year 2024 Non-GAAP Guidance(1) | |
| Amount | Year/Year Growth (%)(3) |
| Constant Currency Year/Year Growth (%) |
Subscription revenues | $10,575 - $10,585 | 22% |
| 22% |
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| Margin (%)(2) |
Subscription gross profit |
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| 84.5% |
Income from operations |
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| 29.5% |
Free cash flow |
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| 31% |
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| Amount (millions) |
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Weighted-average shares used to compute diluted net income per share |
| 208 |
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(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. | |
(2) | Refer to the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures. | |
(3) | GAAP subscription revenues and related growth rate for the future quarter included in our full-year 2024 guidance are based on the 30-day average of foreign exchange rates for June 2024 for entities reporting in currencies other than U.S. Dollars. | |
Note: Numbers are rounded for presentation purposes and may not foot. |
Conference Call Details
The conference call will begin at 2 p.m. Pacific Time (“PT”) (21:00 GMT) on July 24, 2024. Interested parties may listen to the call by dialing (888) 330‑2455 (Passcode: 8135305), or if outside North America, by dialing (240) 789‑2717 (Passcode: 8135305). Individuals may access the live teleconference from this webcast.
https://events.q4inc.com/attendee/627663058
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) 770‑2030 (Passcode: 8135305), or if outside North America, by dialing (609) 800‑9909 (Passcode: 8135305).
Investor Presentation Details
An investor presentation providing additional information, including forward-looking guidance, and analysis can be found at https://investors.servicenow.com.
Upcoming Investor Conferences
ServiceNow today announced that it will attend and have executives present at three upcoming investor conferences.
These include:
The live webcast will be accessible on the investor relations section of the ServiceNow website at https://investors.servicenow.com and archived on the ServiceNow site for a period of 30 days.
Statement Regarding Use of Non-GAAP Financial Measures
We use 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.
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 for gross profit, income from operations, net income, net income per share, and free cash flow.
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-loo
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