NOW Q2 2020 Earnings

Call Details

• Call Title: ServiceNow, Inc. Q2 2020 Earnings Call
• Date: July 29, 2020 at 9:00 PM UTC
• Management Team:
  • Bill McDermott (Chairman and Chief Executive Officer)
  • Gina Mastantuono (Chief Financial Officer)
  • Lisa Banks (Senior Vice President of Finance)
  • Kevin Haverty (Chief Revenue Officer)
  • Laura Kamey (Chief Customer and Partner Officer)
  • Paul Smith (Senior Vice President and General Manager, EMEA)
  • David Schneider (President Emeritus)

Call Summary

Financial Performance

• Q2 subscription revenues were $1.016 billion, representing 32% year-over-year constant currency growth.
• Q2 subscription billings were $1.018 billion, representing 26% year-over-year adjusted growth.
• Remaining performance obligations ended the quarter at approximately $7 billion, representing 31% year-over-year constant currency growth.
• Current RPO was approximately $3.5 billion, representing 32% year-over-year constant currency growth.
• Q2 operating margin was 28%, which the company stated was up over 900 basis points year over year.
• Q2 free cash flow margin was 24%, which the company stated was up 100 basis points year over year.
• The company stated a net cash position of $2.4 billion exiting Q2 and stated the business reached a $4 billion revenue run rate.

Guidance

• The company raised full-year 2020 subscription revenues guidance to between $4.185 billion and $4.2 billion, representing approximately 29% to 30% year-over-year constant currency growth and stated an $18 million FX tailwind versus prior guidance.
• The company raised full-year 2020 subscription billings guidance to between $4.66 billion and $4.7 billion, representing approximately 24% to 25% year-over-year adjusted growth and stated a $22 million FX tailwind versus prior guidance.
• The company reaffirmed expected 2020 subscription gross margin of 86% and raised full-year operating margin guidance from 23% to 24%.
• The company raised full-year 2020 free cash flow margin guidance to 29.5% and cited higher DSOs as a partial offset to operating margin gains.
• For Q3 2020, the company expects subscription revenues between $1.055 billion and $1.06 billion, representing 26% to 27% year-over-year constant currency growth.
• For Q3 2020, the company expects subscription billings between $995 million and $1.015 billion, representing 16% to 18% year-over-year adjusted growth, and expects a 22% operating margin in Q3.