NOW Q3 2021 Earnings

Call Details

• Call Title: ServiceNow, Inc. Q3 2021 Earnings Call
• Date: October 27, 2021 at 9:00 PM UTC
• Management Team:
  • Lisa Banks (Senior Vice President of Finance)
  • Bill McDermott (Chairman and Chief Executive Officer)
  • Gina Mastantuono (Chief Financial Officer)

Call Summary

Financial Performance

• Q3 subscription revenues were $1.43B, which was $22M above the high end of guidance and grew 31% year-over-year.
• Q3 subscription billings were $1.38B, representing 28% year-over-year growth and beating the high end of guidance by $55M.
• RPO ended the quarter at approximately $9.7B, representing 34% year-over-year growth, and current RPO was approximately $5.0B, representing 32% year-over-year growth.
• Operating margin for the quarter was 26%, which was three percentage points above guidance for the period.
• Free cash flow margin for Q3 was 15%, and the company raised full-year free cash flow margin guidance to 31.5%.
• The company reported a renewal rate of 98% in Q3 and noted 1,266 customers paying more than $1M in ACV, up 25% year-over-year.
• There were 63 net new deals greater than $1M in Q3, representing up 50% year-over-year in deal count for that cohort.
• Gains in Q3 were broad-based across Americas, EMEA, and Asia Pacific/Japan, and FX did not affect year-over-year revenue growth in Q3.

Guidance

• The full-year 2021 subscription revenue outlook was raised by $32M at the midpoint to a range of $5.565B to $5.57B, representing 30% year-over-year growth including a 200 basis points FX tailwind.
• Full-year subscription billings outlook was raised by $61M at the midpoint to a range of $6.379B to $6.384B, representing 28% year-over-year growth, with normalized billings growth of 32% excluding early 2020 customer payments.
• Full-year operating margin was increased from 24.5% to 25% reflecting the revenue raise and temporary savings from delayed return-to-office and lower travel.
• Full-year diluted weighted average outstanding shares were expected at 202M shares, and Q4 diluted shares were expected at 203M shares.
• Q4 guidance assumes subscription revenues between $1.515B and $1.52B, representing 28% year-over-year growth, and subscription billings between $2.305B and $2.31B, representing 26% year-over-year growth.
• Q4 CRPO was expected to grow 27% year-over-year, which includes a 150 basis points FX headwind, and on a constant currency basis CRPO growth was expected at 28.5%.
• Q4 operating margin was guided to 22% and includes accelerated demand generation spend to position the company for 2022.
• Company guidance explicitly called out FX volatility as a headwind into 2022 and noted normalized comparisons for early customer payments in 2020 when presenting billings growth.