NOW Q1 2022 Earnings

Call Details

• Call Title: ServiceNow, Inc. Q1 2022 Earnings Call
• Date: April 27, 2022 at 9:00 PM UTC
• Management Team:
  • Darren Yip (Vice President, Investor Relations)
  • Bill McDermott (Chairman and Chief Executive Officer)
  • Gina Mastantuono (Chief Financial Officer)

Call Summary

Financial Performance

• Subscription revenues were $1.631B in Q1, growing 29% year-over-year in constant currency.
• Remaining performance obligations (RPO) ended the quarter at approximately $11.5B, representing 31.5% year-over-year constant currency growth.
• Current RPO was approximately $5.69B, representing 30.5% year-over-year constant currency growth.
• Operating margins surpassed 25% in Q1 and free cash flow margin was 45% for the quarter.
• All growth rates and many operational metrics on the call were presented on a non-GAAP basis, while revenues, RPO/current RPO, and cash & investments were noted as the exceptions.
• The company ended the quarter with $5.5B in cash and investments on the balance sheet.

Guidance

• Full-year subscription revenue guidance range was raised to $7.025B to $7.04B, representing 26% year-over-year growth and 28.5% on a constant currency basis.
• The midpoint of subscription revenue guidance was raised by $23M to more than offset an incremental $20M FX headwind, resulting in a net increase of $3M versus prior outlook.
• Full-year expectations include subscription gross margin of 86% (up ~100 bps year-over-year), an operating margin of 25%, and a free cash flow margin of 31%.
• Q2 subscription revenue is guided to $1.67B to $1.675B, representing 26% year-over-year growth inclusive of a ~3-point FX headwind and 29% on a constant currency basis.
• Q2 CRPO growth is guided to 25% year-over-year, or 28% on a constant currency basis.
• The company quantified a 1 to 2 point sequential headwind to CRPO growth in Q2 and Q3 due to a larger-than-average renewal cohort that rolls off and will reaccelerate in Q4.