ServiceNow Reports Financial Results for Fourth Quarter and Fiscal Year 2012

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ServiceNow Reports Financial Results for Fourth Quarter and Fiscal Year 2012

Fourth Quarter Revenue Grew 92% Year-over-Year and 17% Quarter-over-Quarter

SAN DIEGO--(BUSINESS WIRE)-- ServiceNow (NYS: NOW) , the enterprise IT cloud company, today announced its financial results for its fourth quarter and fiscal year 2012.


Fourth quarter 2012 results:

  • Revenues of $75.2 million, an increase of 92% compared to the fourth quarter of 2011, and an increase of 17% from the third quarter of 2012.
  • A GAAP net loss for the quarter of $9.9 million, or a loss of $0.08 per basic and diluted share, compared to a GAAP net loss of $6.8 million, or a loss of $0.32 per basic and diluted share, in the fourth quarter of 2011.
  • A non-GAAP net loss for the quarter of $0.6 million, or a loss of $0 per basic and diluted share, compared to a non-GAAP net loss of $3.6 million, or a loss of $0.17 per basic and diluted share, in the fourth quarter of 2011 (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 $170.4 million, a 15% increase over the $147.9 million reported at the end of the prior quarter.
  • Billings were $97.6 million, a 20% increase over the $81.2 million reported in the previous quarter and a 58% increase over the $61.9 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).
  • Backlog of $379.0 million, an 81% increase over the $209.9 million reported at the end of 2011. Backlog excludes deferred revenue as it represents future amounts to be invoiced under our agreements.

Fiscal 2012 results:

  • Revenues of $243.7 million, an increase of 90% compared to 2011.
  • A GAAP net loss for the year of $37.3 million, or a loss of $0.51 per basic and diluted share, compared to a GAAP net loss of $1.7 million, or a loss of $0.11 per basic and diluted share, in 2011.
  • A non-GAAP net loss for the year of $9.7 million, or a loss of $0.14 per basic and diluted share, compared to non-GAAP net income of $5.8 million, or income of $0.05 per basic and $0.04 per diluted share, in 2011 (see the table entitled "Results of Operations GAAP to Non-GAAP Reconciliation" for a reconciliation of these GAAP and non-GAAP financial measures).
  • Billings were $309.4 million, a 72% increase over the $179.4 million reported in 2011 (see the table entitled "Non-GAAP Billings Reconciliation" for a reconciliation of non-GAAP billings to GAAP revenues).

"ServiceNow's 92% revenue growth in the fourth quarter was a strong finish to our fiscal year, a year in which we delivered 90% revenue growth and added 538 customers, bringing our cumulative customer count to 1,512 worldwide," said Frank Slootman, president and chief executive officer, ServiceNow. "During the quarter we also achieved a customer renewal rate of 98% and upsells compromised more than 32% of our total annual contract value signed during the quarter, a testament to the value our existing customers are finding in the ServiceNow platform."

"We continued to show growth across our key financial metrics and we exceeded our previously stated outlook on revenue and non-GAAP EPS," added Michael Scarpelli, chief financial officer, ServiceNow. "Deferred revenue grew sequentially by 15%, marking the sixth consecutive quarter of double digit sequential growth, and we generated $16.7 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 first quarter of 2013, we expect:

  • Total revenues between $81.5 and $82.5 million, representing sequential growth between 8% and 10%. Our total first quarter revenues estimate consists of subscription revenues between $69 and $69.5 million and professional services and other revenues between $12.5 million and $13 million.
  • Subscription gross margin between 73% and 74%, professional services and other gross margin between 0% and 4%, and overall gross margin between 62% and 63%.
  • Operating margin between (4%) and (2%).
  • A loss per basic and diluted share between $0.05 and $0.04 with weighted-average shares outstanding of approximately 129 million.

For the full year 2013 we expect revenues to be in the range of $387 to $392 million, representing year-over-year growth between 59% and 61%. Our total annual revenues estimate consists of subscription revenues between $327 and $329 million and professional services and other revenues between $60 and $63 million.

Fourth quarter highlights

  • In November, ServiceNow closed its follow-on public offering, in which ServiceNow and selling shareholders sold 16,100,000 shares of common stock at a price of $28.00 per share, including the exercise in full by the underwriters of their option to purchase 2,100,000 shares of common stock. Of the 16,100,000 shares of ServiceNow's common stock sold in the follow-on public offering, 1,897,500 shares were sold by ServiceNow and 14,202,500 shares were sold by selling stockholders. The offering generated net proceeds to the company of $50.6 million.
  • In November, ServiceNow ranked 33rd on the Deloitte Technology Fast 500, a list of the 500 fastest growing technology companies.
  • In December, Inc. Magazine recognized ServiceNow with a HirePower award, which honors America's top 100 job creators. According to Inc., ServiceNow was the #1 job creator in the software industry and #14 overall.

Conference Call Details

ServiceNow will host a conference call to discuss its financial results for the fourth quarter of 2012 to begin today at 2 p.m. PDT (22:00 GMT). Interested parties may listen to the call by dialing 866.272.9941 (passcode: 20843149), or if outside North America, by dialing 617.213.8895 (passcode: 20843149). 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 will also be available two hours after the call and will run for 30 days. To hear the replay interested parties may dial 888.286.8010 (passcode: 15709467), or if outside North America, by dialing 617.801.6888 (passcode: 15709467).

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) possible fluctuations in our financial and operating results, (ii) our ability to grow at our expected rate of growth and anticipated revenue run rate, including our ability to convert deferred revenue and unbilled deferred revenue into revenue, successfully deploy new customers, and continue to release, and gain customer acceptance of, new and improved versions of our service, and (iii) errors, interruptions, delays, or security breaches of our service or web hosting.

Further information on these and other factors that could affect our financial results are included in our Form 10-Q for the quarter ended September 30, 2012 and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K that will be filed for the fiscal year ended December 31, 2012.

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 EndedYear Ended
December 31,December 31,December 31,December 31,
2012201120122011
 
Revenues:
Subscription$62,886$34,555$204,526$110,886
Professional services and other 12,276  4,623  39,186  17,186 
Total revenues 75,162  39,178  243,712  128,072 
Cost of revenues (1):
Subscription20,0768,75063,25824,288
Professional services and other 12,232  7,241  40,751  22,336 
Total cost of revenues 32,308  15,991  104,009  46,624 
Gross profit 42,854  23,187  139,703  81,448 
Operating expenses (1):
Sales and marketing29,48118,521103,83752,896
Research and development13,2354,27339,33311,276
General and administrative 9,676  5,575  34,117  16,046 
Total operating expenses 52,392  28,369  177,287  80,218 
Income (loss) from operations(9,538)(5,182)(37,584)1,230
Interest and other income (expense), net 456  (717) 1,604  (1,129)
Income (loss) before provision for income taxes(9,082)(5,899)(35,980)101
Provision for income taxes 849  906  1,368  1,758 

Net income (loss)

$

(9,931

)

$

(6,805

)

$

(37,348

)

$

(1,657

)

Net income (loss) attributable to common stockholders - Basic and Diluted

$

(9,931

)

$

(6,960

)

$

(37,656

)

$

(2,282

)

 

Net income (loss) per share attributable to common stockholders:

Basic$(0.08)$(0.32)$(0.51)$(0.11)
Diluted$(0.08)$(0.32)$(0.51)$(0.11)

Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:

Basic 124,000,655  21,515,078  73,908,631  20,154,088 
Diluted 124,000,655  21,515,078  73,908,631  20,154,088 
         
(1) Includes total stock-based compensation expense for stock-based awards as follows:
Three Months EndedYear Ended
December 31,December 31,December 31,December 31,
2012201120122011
Cost of revenues:
Subscription$1,415$473$3,929$997
Professional services and other6101221,574273
Sales and marketing3,3371,21010,1892,583
Research and development2,3754416,496965
General and administrative1,6121,0005,7492,652
                 
 
ServiceNow, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
  
December 31,December 31,
20122011
ASSETS(Unaudited)
Current assets:
Cash and cash equivalents$118,989$68,088
Short-term investments195,702-
Accounts receivable, net78,16344,860
Current portion of deferred commissions14,9796,087
Prepaid expenses and other current assets

13,596

9,928
Current portion of deferred tax assets 660 1,544 
Total current assets

422,089

130,507
Deferred commissions, less current portion11,2964,597
Property and equipment, net42,34220,695
Other assets 2,387 524 
Total assets$

478,114

$156,323 
 
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable$9,604$9,411
Accrued expenses and other current liabilities

48,042

25,608
Current portion of deferred revenue153,96491,087
Current portion of deferred rent 17 455 
Total current liabilities

211,627

126,561
Deferred revenue, less current portion16,39713,549
Deferred rent, less current portion1,1482,935
Other long-term liabilities5,5372,532
Convertible preferred stock-68,172
Stockholders' equity (deficit) 243,405 (57,426)

Total liabilities, convertible preferred stock and stockholders' equity (deficit)

$

478,114

$156,323 
 
ServiceNow, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
    
Three Months EndedYear Ended
December 31,December 31,December 31,December 31,
201220112012
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