Attached files
| file | filename |
|---|---|
| 8-K - 8-K - ServiceNow, Inc. | d526509d8k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
ServiceNow Reports Financial Results for First Quarter 2013
First Quarter Revenues Grew 81% Year-over-Year
SAN DIEGO – April 24, 2013 – ServiceNow (NYSE: NOW), the enterprise IT cloud company, today announced its financial results for its first quarter of 2013.
First quarter 2013 results:
| • | Revenues of $85.9 million, an increase of 81% compared to the first quarter of 2012, and an increase of 14% from the fourth quarter of 2012. |
| • | A GAAP net loss for the quarter of $13.4 million, or a loss of $0.10 per basic and diluted share, compared to a GAAP net loss of $5.6 million, or a loss of $0.23 per basic and diluted share, in the first quarter of 2012. |
| • | A non-GAAP net loss for the quarter of $1.9 million, or a loss of $0.01 per basic and diluted share, compared to a non-GAAP net loss of $2.5 million, or a loss of $0.11 per basic and diluted share, in the first quarter of 2012 (see the table entitled “Results of Operations GAAP to Non-GAAP Reconciliation” for a reconciliation of these GAAP and non-GAAP financial measures). |
| • | Deferred revenue of $194.8 million, a 14% increase over the $170.4 million reported at the end of the prior quarter. |
| • | Billings were $110.3 million, a 13% increase over the $97.6 million reported in the previous quarter and an 88% increase over the $58.6 million in the same period last year (see the table entitled “Non-GAAP Billings Reconciliation” for a reconciliation of non-GAAP billings to GAAP revenues). |
“The first quarter was a strong start to 2013. We exceeded our previously stated outlook on revenue and non-GAAP earnings per share, added 128 net new customers and achieved a customer renewal rate of 96%,” said Frank Slootman, president and chief executive officer, ServiceNow. “We also continued to penetrate our existing customer base, with upsells comprising a third of our annual contract value signed in the quarter.”
“We saw strength across our key financial metrics in the quarter, highlighted by our first quarter with billings in excess of $100 million, a significant milestone in our growth story,” added Michael Scarpelli, chief financial officer, ServiceNow. “Deferred revenue grew sequentially by 14% and we generated $15.0 million in operating cash flow for the quarter.”
Financial Outlook
The financial guidance discussed below is on a non-GAAP basis, except for revenues, and excludes stock-based compensation expense and the related income tax impact (see table which reconciles these non-GAAP financial measures to the related GAAP measures). Negative numbers are shown in parentheses.
For the second quarter of 2013, we expect:
| • | Total revenues between $94 and $96 million, representing year-over-year growth between 66% and 69%. Our total second quarter revenue estimate consists of subscription revenues between $77 and $78 million and professional services and other revenues between $17 and $18 million. |
| • | Subscription gross margin between 74% and 75%, professional services and other gross margin between 23% and 25%, and overall gross margin between 64% and 65%. Our professional services and other revenues outlook includes approximately $4 million related to Knowledge, our annual user conference to be held in May, with related expenses of approximately $8-$9 million recorded in sales and marketing. |
| • | Operating margin between (6%) and (5%). |
| • | A net loss per basic and diluted share between ($0.06) and ($0.04) with weighted-average shares outstanding of approximately 135 million. |
For the full year 2013, we expect revenues to be in the range of $394 to $398 million, representing year-over-year growth between 62% and 63%. Our total annual revenues estimate consists of subscription revenues between $332 and $334 million and professional services and other revenues between $62 and $64 million.
First quarter highlights
| • | On April 1st, ServiceNow received Federal Information Security Management Act (FISMA) Moderate Authority to Operate (ATO) from the U.S. General Services Administration (GSA). The authorization will allow federal, state and local government agencies to securely leverage ServiceNow for IT system consolidation and business process automation. |
| • | In February, ServiceNow announced Hitachi Solutions has become the first business partner in Japan to provide ServiceNow to the Japanese market. Hitachi Solutions will resell the ServiceNow Service Automation applications and the ServiceNow Service Automation Platform. Hitachi Solutions will also provide implementation, training and first-level support for Japanese customers. |
Conference Call Details
ServiceNow will host a conference call to discuss its financial results for the first quarter of 2013 to begin today at 2 p.m. PDT (21:00 GMT). Interested parties may listen to the call by dialing 877.546.5018 (passcode: 78194644), or if outside North America, by dialing 857.244.7550 (passcode: 78194644). Individuals may access the live teleconference from the investor relations section of the ServiceNow web site at http://investors.servicenow.com. The webcast will be archived for a period of 30 days.
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 888.286.8010 (passcode: 60952020), or if outside North America, by dialing 617.801.6888 (passcode: 60952020).
Statement regarding use of non-GAAP financial measures
The company reports non-GAAP results for gross margins, operating margins, net income or loss, basic and diluted income or loss per share, free cash flow and billings in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
The company’s financial measures under GAAP include stock-based compensation expense. Management believes the presentation of operating results excluding stock-based compensation expense provides useful supplemental information to investors and facilitates the analysis of the company’s core operating results and comparison of operating results across reporting periods. Management also believes that this supplemental non-GAAP information is therefore useful to investors in analyzing and assessing the company’s past and future operating performance.
Free cash flow, which is a non-GAAP financial measure, is calculated as GAAP net cash provided by operating activities reduced by purchases of property and equipment. Management believes information regarding free cash flow provides investors with an important perspective on the cash available to invest in our business and fund ongoing operations. However, our calculation of free cash flow may not be comparable to similar measures used by other companies.
Billings is calculated as revenue plus the change in total deferred revenue. Management believes billings offers investors useful supplemental information regarding the performance of our business, and will help investors better understand the sales volumes and performance of our business.
The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between GAAP and non-GAAP results are presented in the tables of this release.
Use of forward looking statements
This release contains “forward-looking statements” regarding our performance, including 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.
Among the important factors that could cause actual results to differ materially from those in any forward-looking statements are: (i) errors, interruptions, delays, or security breaches in or of our service or web hosting, (ii) our ability to grow at our expected rate of growth, including our ability to convert deferred revenue and backlog into revenue, add and retain customers, and enter new geographies and markets, (iii) our ability to continue to release, and gain customer acceptance of, improved versions of our services, (iv) our ability to develop and gain customer acceptance of new products and services, including our platform, and (v) our ability to compete successfully against existing and new competitors.
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, 2012 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 first quarter ended March 31, 2013.
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 is the enterprise IT cloud company. We focus on transforming enterprise IT by automating and standardizing business processes and consolidating IT across the global enterprise. Organizations deploy our service to create a single system of record for enterprise IT, lower operational costs and enhance efficiency. Additionally, our customers use our extensible platform to build custom applications for automating activities unique to their business requirements. For more information, visit www.servicenow.com.
# # #
ServiceNow and the ServiceNow logo are registered trademarks of ServiceNow. All other brand and product names are trademarks or registered trademarks of their respective holders.
ServiceNow, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
| Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2013 | 2012 | |||||||
| Revenues: |
||||||||
| Subscription |
$ | 71,558 | $ | 39,541 | ||||
| Professional services and other |
14,381 | 7,890 | ||||||
|
|
|
|
|
|||||
| Total revenues |
85,939 | 47,431 | ||||||
|
|
|
|
|
|||||
| Cost of revenues (1) : |
||||||||
| Subscription |
18,312 | 11,012 | ||||||
| Professional services and other |
13,996 | 10,224 | ||||||
|
|
|
|
|
|||||
| Total cost of revenues |
32,308 | 21,236 | ||||||
|
|
|
|
|
|||||
| Gross profit |
53,631 | 26,195 | ||||||
|
|
|
|
|
|||||
| Operating expenses (1) : |
||||||||
| Sales and marketing |
38,226 | 19,307 | ||||||
| Research and development |
16,039 | 6,043 | ||||||
| General and administrative |
12,279 | 6,427 | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
66,544 | 31,777 | ||||||
|
|
|
|
|
|||||
| Loss from operations |
(12,913 | ) | (5,582 | ) | ||||
| Interest and other income, net |
119 | 492 | ||||||
|
|
|
|
|
|||||
| Loss before provision for income taxes |
(12,794 | ) | (5,090 | ) | ||||
| Provision for income taxes |
564 | 550 | ||||||
|
|
|
|
|
|||||
| Net loss |
$ | (13,358 | ) | $ | (5,640 | ) | ||
|
|
|
|
|
|||||
| Net loss attributable to common stockholders—Basic and Diluted |
$ | (13,358 | ) | $ | (5,794 | ) | ||
|
|
|
|
|
|||||
| Net loss per share attributable to common stockholders: |
||||||||
| Basic |
$ | (0.10 | ) | $ | (0.23 | ) | ||
|
|
|
|
|
|||||
| Diluted |
$ | (0.10 | ) | $ | (0.23 | ) | ||
|
|
|
|
|
|||||
| Weighted-average shares used to compute net loss per share attributable to common stockholders: |
||||||||
| Basic |
129,782,029 | 25,123,582 | ||||||
|
|
|
|
|
|||||
| Diluted |
129,782,029 | 25,123,582 | ||||||
|
|
|
|
|
|||||
| (1) | Includes total stock-based compensation expense for stock-based awards as follows: |
| Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2013 | 2012 | |||||||
| Cost of revenues: |
||||||||
| Subscription |
$ | 1,794 | $ | 532 | ||||
| Professional services and other |
821 | 192 | ||||||
| Sales and marketing |
3,985 | 1,471 | ||||||
| Research and development |
3,114 | 661 | ||||||
| General and administrative |
2,332 | 1,062 | ||||||
ServiceNow, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
| March 31, 2013 | December 31, 2012 | |||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 144,782 | $ | 118,989 | ||||
| Short-term investments |
194,084 | 195,702 | ||||||
| Accounts receivable, net |
79,844 | 78,163 | ||||||
| Current portion of deferred commissions |
17,690 | 14,979 | ||||||
| Prepaid expenses and other current assets |
10,176 | 13,596 | ||||||
| Current portion of deferred tax assets |
660 | 660 | ||||||
|
|
|
|
|
|||||
| Total current assets |
447,236 | 422,089 | ||||||
| Deferred commissions, less current portion |
12,295 | 11,296 | ||||||
| Property and equipment, net |
54,284 | 42,342 | ||||||
| Other assets |
2,138 | 2,387 | ||||||
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|
|
|
|
|||||
| Total assets |
$ | 515,953 | $ | 478,114 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 9,770 | $ | 9,604 | ||||
| Accrued expenses and other current liabilities |
40,432 | 48,059 | ||||||
| Current portion of deferred revenue |
178,911 | 153,964 | ||||||
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|
|
|||||
| Total current liabilities |
229,113 | 211,627 | ||||||
| Deferred revenue, less current portion |
15,854 | 16,397 | ||||||
| Other long-term liabilities |
7,059 | 6,685 | ||||||
| Stockholders’ equity |
263,927 | 243,405 | ||||||
|
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| Total liabilities and stockholders’equity |
$ | 515,953 | $ | 478,114 | ||||
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ServiceNow, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Three Months Ended | ||||||||
| March 31, | March 31, | |||||||
| 2013 | 2012 | |||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (13,358 | ) | $ | (5,640 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
4,364 | 2,046 | ||||||
| Amorization of premiums on short-term investments, net |
1,095 | — | ||||||
| Amortization of deferred commissions |
5,366 | 2,343 | ||||||
| Stock-based compensation |
12,046 | 3,918 | ||||||
| Tax benefit from exercise of stock options |
(1,851 | ) | (960 | ) | ||||
| Bad debt expense |
283 | — | ||||||
| Lease abandonment costs |
298 | — | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(2,938 | ) | 2,058 | |||||
| Deferred commissions |
(9,269 | ) | (5,253 | ) | ||||
| Prepaid expenses and other current assets |
3,918 | 4,172 | ||||||
| Other assets |
(230 | ) | (74 | ) | ||||
| Accounts payable |
(1,471 | ) | 1,433 | |||||
| Accrued expenses and other current liabilities |
(9,012 | ) | 1,045 | |||||
| Deferred revenue |
25,729 | 11,022 | ||||||
| Other long-term liabilities |
53 | (31 | ) | |||||
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|
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|
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| Net cash provided by operating activities |
15,023 | 16,079 | ||||||
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|
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| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(10,415 | ) | (8,558 | ) | ||||
| Purchases of short-term investments |
(55,946 | ) | (15,344 | ) | ||||
| Maturities of short-term investments |
55,350 | — | ||||||
| Restricted cash |
— | 8 | ||||||
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|
|||||
| Net cash used in investing activities |
(11,011 | ) | (23,894 | ) | ||||
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|
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| Cash flows from financing activities: |
||||||||
| Financing costs paid on follow-on offering |
(698 | ) | — | |||||
| Proceeds from employee stock plans |
21,468 | 1,301 | ||||||
| Proceeds from early exercise of stock options |
— | 887 | ||||||
| Tax benefit from exercise of stock options |
1,851 | 960 | ||||||
| Net proceeds from issuance of common stock |
— | 17,848 | ||||||
| Purchases of common stock and restricted stock from stockholders |
— | (1,069 | ) | |||||
|
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|
|
|
|||||
| Net cash provided by financing activities |
22,621 | 19,927 | ||||||
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|
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|
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| Foreign currency effect on cash and cash equivalents |
(840 | ) | (60 | ) | ||||
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|
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|
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| Net increase in cash and cash equivalents |
25,793 | 12,052 | ||||||
| Cash and cash equivalents at beginning of period |
118,989 | 68,088 | ||||||
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|
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| Cash and cash equivalents at end of period |
$ | 144,782 | $ | 80,140 | ||||
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| Calculation of free cash flow (a non-GAAP measure): |
||||||||
| Net cash provided by operating activities |
$ | 15,023 | $ | 16,079 | ||||
| Purchases of property and equipment |
(10,415 | ) | (8,558 | ) | ||||
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|
|
|
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| Free cash flow |
$ | 4,608 | $ | 7,521 | ||||
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ServiceNow, Inc.
Results of Operations GAAP to Non-GAAP Reconciliation
(in thousands, except share and per share data)
(Unaudited)
| Three Months Ended | ||||||||||||||||||||||||
| March 31, 2013 | March 31, 2012 | |||||||||||||||||||||||
| GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
| Reconciliation of gross profit: |
||||||||||||||||||||||||
| Revenues: |
||||||||||||||||||||||||
| Subscription |
$ | 71,558 | $ | — | $ | 71,558 | $ | 39,541 | $ | — | $ | 39,541 | ||||||||||||
| Professional services and other |
14,381 | — | 14,381 | 7,890 | — | 7,890 | ||||||||||||||||||
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|||||||||||||
| Total revenues |
85,939 | — | 85,939 | 47,431 | — | 47,431 | ||||||||||||||||||
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|||||||||||||
| Cost of revenues (1) : |
||||||||||||||||||||||||
| Subscription |
18,312 | (1,794 | ) | 16,518 | 11,012 | (532 | ) | 10,480 | ||||||||||||||||
| Professional services and other |
13,996 | (821 | ) | 13,175 | 10,224 | (192 | ) | 10,032 | ||||||||||||||||
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|
|||||||||||||
| Total cost of revenues |
32,308 | (2,615 | ) | 29,693 | 21,236 | (724 | ) | 20,512 | ||||||||||||||||
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| Gross profit: |
||||||||||||||||||||||||
| Subscription |
53,246 | 1,794 | 55,040 | 28,529 | 532 | 29,061 | ||||||||||||||||||
| Professional services and other |
385 | 821 | 1,206 | (2,334 | ) | 192 | (2,142 | ) | ||||||||||||||||
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| Total gross profit |
$ | 53,631 | $ | 2,615 | $ | 56,246 | $ | 26,195 | $ | 724 | $ | 26,919 | ||||||||||||
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| Reconciliation of operating expenses: |
||||||||||||||||||||||||
| Operating expenses (1) : |
||||||||||||||||||||||||
| Sales and marketing |
$ | 38,226 | $ | (3,985 | ) | $ | 34,241 | $ | 19,307 | $ | (1,471 | ) | $ | 17,836 | ||||||||||
| Research and development (2) |
16,039 | (3,114 | ) | 12,925 | 6,043 | 71 | 6,114 | |||||||||||||||||
| General and administrative |
12,279 | (2,332 | ) | 9,947 | 6,427 | (1,062 | ) | 5,365 | ||||||||||||||||
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| Total operating expenses |
$ | 66,544 | $ | (9,431 | ) | $ | 57,113 | $ | 31,777 | $ | (2,462 | ) | $ | 29,315 | ||||||||||
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Reconciliation of income (loss) from operations, provision for income taxes, net income (loss), net income (loss) per share, and pro forma net income (loss) per share:
|
| |||||||||||||||||||||||
| Income (loss) from operations |
$ | (12,913 | ) | $ | 12,046 | $ | (867 | ) | $ | (5,582 | ) | $ | 3,186 | $ | (2,396 | ) | ||||||||
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| Income (loss) before provision for income taxes |
$ | (12,794 | ) | $ | 12,046 | $ | (748 | ) | $ | (5,090 | ) | $ | 3,186 | $ | (1,904 | ) | ||||||||
| Provision for income taxes (1), (2) |
564 | 539 | 1,103 | 550 | 31 | 581 | ||||||||||||||||||
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| Net income (loss) |
$ | (13,358 | ) | $ | 11,507 | $ | (1,851 | ) | $ | (5,640 | ) | $ | 3,155 | $ | (2,485 | ) | ||||||||
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| Net income (loss) attributable to common stockholders—Basic and Diluted |
$ | (13,358 | ) | $ | 11,507 | $ | (1,851 | ) | $ | (5,794 | ) | $ | 3,155 | $ | (2,639 | ) | ||||||||
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| Net income (loss) per share attributable to common stockholders: |
||||||||||||||||||||||||
| Basic |
$ | (0.10 | ) | $ | 0.09 | $ | (0.01 | ) | $ | (0.23 | ) | $ | 0.12 | $ | (0.11 | ) | ||||||||
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| Diluted |
$ | (0.10 | ) | $ | 0.09 | $ | (0.01 | ) | $ | (0.23 | ) | $ | 0.12 | $ | (0.11 | ) | ||||||||
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| Weighted-average shares used to compute net income (loss) per share attributable to common stockholders: |
||||||||||||||||||||||||
| Basic |
129,782,029 | — | 129,782,029 | 25,123,582 | — | 25,123,582 | ||||||||||||||||||
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| Diluted |
129,782,029 | — | 129,782,029 | 25,123,582 | — | 25,123,582 | ||||||||||||||||||
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| (1) | Adjustments include stock-based compensation and the related tax effect. |
| (2) | Adjustment includes $0.7 million of research and development expenses that were improperly capitalized related to software development costs incurred during the development of the company’s feature release for its service offering and the related tax effect for the quarter ended March 31, 2012. |
ServiceNow, Inc.
Non-GAAP Billings Reconciliation
(in thousands)
(Unaudited)
| Three Months Ended | ||||||||||||
| March 31, | December 31, | March 31, | ||||||||||
| 2013 | 2012 | 2012 | ||||||||||
| Total revenues |
$ | 85,939 | $ | 75,162 | $ | 47,431 | ||||||
| Deferred revenue, end of period |
194,765 | 170,361 | 115,757 | |||||||||
| Less: deferred revenue, beginning of period |
170,361 | 147,946 | 104,636 | |||||||||
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| Billings |
$ | 110,343 | $ | 97,577 | $ | 58,552 | ||||||
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ServiceNow, Inc.
Reconciliation of Non-GAAP Financial Guidance
The financial guidance provided below is an estimate based on information available as of April 24, 2013. 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. More information on potential factors that could affect the company’s financial results is included from time to time in the company’s public reports filed with the SEC, including the company’s Annual Report on Form 10-K filed on March 8, 2013 and the company’s Form 10-Q for the fiscal quarter ended March 31, 2013 to be filed with the SEC. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.
| Three Months Ended | ||
| June 30, 2013 | ||
| Non-GAAP subscription gross margin |
74% - 75% | |
| Stock-based compensation expense |
(2%) | |
|
| ||
| GAAP subscription gross margin |
72% - 73% | |
|
| ||
| Non-GAAP professional services and other gross margin |
23% - 25% | |
| Stock-based compensation expense |
(6%) | |
|
| ||
| GAAP professional services and other gross margin |
17% - 19% | |
|
| ||
| Non-GAAP total gross margin |
64% - 65% | |
| Stock-based compensation expense |
(3%) | |
|
| ||
| GAAP total gross margin |
61% - 62% | |
|
| ||
| Non-GAAP operating margin |
(6%) - (5%) | |
| Stock-based compensation expense |
(15%) | |
|
| ||
| GAAP operating margin |
(21%) - (20%) | |
|
| ||
| Non-GAAP basic and diluted net loss per share |
($0.06) - ($0.04) | |
| Stock-based compensation expense |
($0.11) | |
| Incremental non-GAAP tax expense (1) |
$0.01 | |
|
| ||
| GAAP basic and diluted net loss per share |
($0.16) - ($0.14) | |
|
|
| (1) | Incremental non-GAAP tax expense reflects the increase to GAAP tax expense related to the non-GAAP stock-based compensation expense adjustments. |