Business Wire | Jan 26, 2022 04:10PM EST

ServiceNow Reports Fourth Quarter and Full-Year 2021 Financial Results

Jan. 26, 2022

SANTA CLARA, Calif.--(BUSINESS WIRE)--Jan. 26, 2022--ServiceNow (NYSE: NOW), the leading digital workflow company making the world work better for everyone, today announced financial results for its fourth quarter ended December 31, 2021, with subscription revenues of $1,523 million in Q4 2021, representing 29% year-over-year growth, 30% adjusted for constant currency.

As of December 31, 2021, current remaining performance obligations ("cRPO"), contract revenue that will be recognized as revenue in the next 12 months, was $5.7 billion, representing 29% year-over-year growth and 32% adjusted for constant currency. During the quarter, ServiceNow closed 135 transactions with more than $1 million in net new annual contract value, representing 52% year-over-year growth. The company now has 1,359 total customers with more than $1 million in annual contract value, representing 25% year-over-year growth in customers.

"We once again reported results that significantly beat the high end of expectations," said ServiceNow President and CEO Bill McDermott. "Customer demand for ServiceNow's innovative platform is stronger than ever. Our unique culture has made us one of the best places to work. We are growing like a fast-moving startup with the profitability of a global market leader."

"Q4 was an outstanding quarter closing out an already phenomenal year of outperformance," said ServiceNow CFO Gina Mastantuono. "The company is firing on all cylinders and we enter 2022 with tremendous momentum. We expect constant currency subscription revenue growth to accelerate year-over-year in Q1, setting us up for another strong year and putting us well on our way to becoming a $15 billion plus revenue company."

During the quarter, ServiceNow continued to invest in the Now Platform with the acquisitions of ERP migration company Gekkobrain and software testing automation company DotWalk. ServiceNow deepened its strategic partnership with EY to further revolutionize finance and tax services on the Now Platform in support of EY's goal of creating a $1 billion business with ServiceNow by 2025. ServiceNow expanded its alliance with KPMG firms to help customers accelerate ESG impact and modernize risk and resilience. ServiceNow was recently named the preferred workflow partner for DXC Platform X and further strengthened its partnership with the formation of a DXC ServiceNow Strategic Business Group. The company also released ServiceNow Impact, a new solution designed to help customers accelerate the return on their digital transformation investments.

Fourth Quarter 2021 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the fourth quarter 2021:

Fourth Quarter Fourth Quarter 2021 Non-GAAP Results^ 2021 (1) GAAP Results

Year/ Amount Year/ Adjusted Adjusted Amount Year ($ Year Amount Year/ ($ Growth millions) Growth ($ Year millions) (%) ^(2) (%) millions) Growth ^(2) (%)

Subscription $1,523 29% $1,538 30% revenues

Professionalservices and other $91 38% $91 38% revenues

Total revenues $1,614 29% $1,629 30%



Subscription $2,420 32% $2,432 33%billings

Professionalservices and other $113 43% $113 43%billings

Total billings $2,533 33% $2,545 33%



Amount Year/ Amount Year/ ($ Year ($ Year billions) Growth billions) Growth (%) ^(2) (%)

cRPO $5.7 29% $5.8 32%

RPO $11.5 29% $11.8 32%



Amount Margin Amount Margin ($ (%) ($ (%) millions) millions)

Subscription gross $1,241 82% $1,295 85% profit

Professionalservices and other ($2) (2%) $14 15% gross profit (loss)

Total gross profit $1,239 77% $1,309 81%

Income from $35 2% $367 23% operations

Net cash provided by $844 52% operating activities

Free cash flow $744 46%



Earnings Earnings Amount per Amount per ($ Basic/ ($ Basic/ millions) Diluted millions) Diluted Share Share ($) ($)

Net income $26 $0.13/ $296 $1.49/ $0.13 $1.46

(1)

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation" for a reconciliation of GAAP to non-GAAP measures.

(2)

Non-GAAP subscription revenues, professional services and other revenues, total revenues, cRPO, RPO and adjusted professional services and other billings are adjusted for constant currency. Non-GAAP adjusted subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation" for a reconciliation of GAAP to non-GAAP measures.

Note: Numbers rounded for presentation purposes.

Full-Year 2021 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the full-year 2021:

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in(1) accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation" for a reconciliation of GAAP to non-GAAP measures.

Non-GAAP subscription revenues, professional services and other revenues, total revenues, cRPO, RPO and adjusted professional services and other billings are adjusted for constant currency. Non-GAAP adjusted(2) subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation" for a reconciliation of GAAP to non-GAAP measures.

Note: Numbers rounded for presentation purposes.

Full-Year 2021 GAAP and Non-GAAP Results:

The following table summarizes our financial results for the full-year 2021:

Full Year 2021 Full-Year 2021 Non-GAAP Results^(1) GAAP Results

Year/ Amount Year/ Adjusted Adjusted Amount Year ($ Year Amount Year/ ($ Growth millions) Growth ($ Year millions) (%) ^(2) (%) millions) Growth ^(2) (%)

Subscription $5,573 30 % $5,496 28 % revenues

Professionalservices and other $323 39 % $317 36 % revenues

Total revenues $5,896 30 % $5,813 29 %



Subscription 6,494 30 % 6,388 28 %billings

Professionalservices and other 356 45 % 350 42 %billings

Total billings 6,850 31 % 6,738 29 %



Amount Year/ Amount Year/ ($ Year ($ Year billions) Growth billions) Growth (%) ^(2) (%)

cRPO $5.7 29% $5.8 32%

RPO $11.5 29% $11.8 32%



Amount Margin Amount Margin ($ (%) ($ (%) millions) millions)

Subscription gross $4,551 82% $4,743 85% profit

Professionalservices and other ($8) (2%) $51 16% gross profit (loss)

Total gross profit $4,543 77% $4,794 81%

Income from $257 4% $1,482 25% operations

Net cash provided by $2,191 37% operating activities

Free cash flow $1,867 32%



Earnings Earnings Amount per Amount per ($ Basic/ ($ Basic/ millions) Diluted millions) Diluted Share Share ($) ($)

Net income 230 $1.16/ $1,201 $6.07/ $1.13 $5.92

(1)

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation" for a reconciliation of GAAP to non-GAAP measures.

(2)

Non-GAAP subscription revenues, professional services and other revenues, total revenues, cRPO, RPO and adjusted professional services and other billings are adjusted for constant currency. Non-GAAP adjusted subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation" for a reconciliation of GAAP to non-GAAP measures.

Note: Numbers rounded for presentation purposes.

Financial Outlook

Our guidance includes GAAP and non-GAAP financial measures. The non-GAAP growth rates for subscription revenues and cRPO are only adjusted for constant currency to provide better visibility into the underlying business trends. Since September 30, 2021, ServiceNow has seen an incremental strengthening of the U.S. dollar resulting in a foreign exchange ("FX") headwind in 2022 (estimated to be approximately a $110 million currency headwind for 2022 subscription revenue and a $75 million currency headwind for Q1 2022 cRPO).

The following table summarizes our guidance for the first quarter 2022:

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in(1) accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation" for a reconciliation of GAAP to non-GAAP measures.

Non-GAAP subscription revenues, professional services and other revenues, total revenues, cRPO, RPO and adjusted professional services and other billings are adjusted for constant currency. Non-GAAP adjusted(2) subscription billings and total billings are adjusted for constant currency and constant billings duration. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "GAAP to Non-GAAP Reconciliation" for a reconciliation of GAAP to non-GAAP measures.

Note: Numbers rounded for presentation purposes.

Financial Outlook

Our guidance includes GAAP and non-GAAP financial measures. The non-GAAP growth rates for subscription revenues and cRPO are only adjusted for constant currency to provide better visibility into the underlying business trends. Since September 30, 2021, ServiceNow has seen an incremental strengthening of the U.S. dollar resulting in a foreign exchange ("FX") headwind in 2022 (estimated to be approximately a $110 million currency headwind for 2022 subscription revenue and a $75 million currency headwind for Q1 2022 cRPO).

The following table summarizes our guidance for the first quarter 2022:

First Quarter 2022 First Quarter 2022 GAAP Guidance Non-GAAP Guidance^ (1)

Amount Year/Year Constant Currency ($ millions)^(2) Growth (%) Year/ Year Growth (%)

Subscription revenues $1,610 - $1,615 25 % 27.5 %



cRPO 28 % 29.5 %

Margin (%)

Income from operations 25%



Amount (millions)

Weighted-average shares used to compute diluted net income 203per share

(1)

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of GAAP to non-GAAP measures.

(2)

Guidance for GAAP subscription revenues is based on the 31-day average of foreign exchange rates for December 2021 for entities reporting in currencies other than U.S. Dollars.

The following table summarizes our guidance for the full-year 2022:

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in(1) accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of GAAP to non-GAAP measures.

Guidance for GAAP subscription revenues is based on the 31-day average of(2) foreign exchange rates for December 2021 for entities reporting in currencies other than U.S. Dollars.

The following table summarizes our guidance for the full-year 2022:

Full-Year 2022 Full-Year 2022 GAAP Guidance Non-GAAP Guidance^ (1)

Amount Year/Year Constant Currency ($ millions)^(2) Growth (%) Year/ Year Growth (%)

Subscription revenues $7,020 - $7,040 26 % 28 %



Margin (%)

Subscription gross profit 86%

Income from operations 25%

Free cash flow 31%



Amount (millions)

Weighted-average shares used to compute diluted net income 204per share

(1)

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of GAAP to non-GAAP measures.

(2)

GAAP subscription revenues for the future quarters included in our full-year 2022 guidance are based on the 31-day average of foreign exchange rates for December 2021 for entities reporting in currencies other than U.S. Dollars.

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (22:00 GMT) on January 26, 2022. Interested parties may listen to the call by dialing (888) 330?2022 (Passcode: 8135305), or if outside North America, by dialing (646) 960?0690 (Passcode: 8135305). Individuals may access the live teleconference from this webcast.

https://events.q4inc.com/attendee/749924992.

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 (800) 770?2030 (Passcode: 8135305), or if outside North America, by dialing (647) 362?9199 (Passcode: 8135305).

Investor Presentation Details

An investor presentation providing additional information, including forward-looking guidance, and analysis can be found at http://investors.servicenow.com.

Statement Regarding Use of Non-GAAP Financial Measures

We report the following non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

* Revenues. We adjust revenues and related growth rates for constant currency to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To present this information, current period results for entities reporting in currencies other than U.S. Dollars ("USD") are converted into USD at the average exchange rates in effect during the comparison period (for Q4 2020, the average exchange rates in effect for our major currencies were 1 USD to 0.84 Euros and 1 USD to 0.76 British Pound Sterling ("GBP")), rather than the actual average exchange rates in effect during the current period (for Q4 2021, the average exchange rates in effect for our major currencies were 1 USD to 0.87 Euros and 1 USD to 0.74 GBP). We believe the presentation of revenues and related growth rates adjusted for constant currency facilitates the comparison of revenues year-over-year.

* Billings and Adjusted billings. We define subscription billings, professional services and other billings, and total billings as the applicable revenue plus the applicable change in deferred revenue, unbilled receivables and customer deposits as presented or derived from the statement of cash flows. We adjust billings and related growth rates for constant currency, as described above, and for constant duration by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the comparison period. We believe these adjustments facilitate greater comparability in our billings information year-over-year. While we believe billings is one indicator of the performance of our business, an increase or decrease in billings may not reflect the actual performance for that reporting period. As a result, our billings metric has become less indicative of the actual performance of our business over time and we do not plan to disclose this metric in the future.

* Remaining performance obligations and current remaining performance obligations. We adjust cRPO and remaining performance obligations ("RPO") and related growth rates for constant currency to provide a framework for assessing how our business performed. To present this information, current period results for entities reporting in currencies other than USD are converted into USD at the exchange rates in effect at the end of the comparison period (for Q4 2020, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.82 Euros and 1 USD to 0.73 GBP), rather than the actual end of the period exchange rates in effect during the current period (for Q4 2021, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.88 Euros and 1 USD to 0.74 GBP). We believe the presentation of cRPO and RPO and related growth rates adjusted for constant currency facilitates the comparison of cRPO and RPO year-over-year, respectively.

* Gross profit, Income from operations, Net income and Net income per share - diluted. Our non-GAAP presentation of gross profit, income from operations, and net income measures exclude certain non-cash or non-recurring items, including stock-based compensation expense, amortization of debt discount and issuance costs related to our convertible senior notes, loss on early note conversions, amortization of purchased intangibles, legal settlements, business combination and other related costs, and the related income tax effect of these adjustments. The non-GAAP weighted-average shares used to compute our non-GAAP net income per share - diluted excludes the dilutive effect of the in-the-money portion of convertible senior notes as they are covered by our note hedges, and includes the dilutive effect of time-based stock awards, the dilutive effect of warrants and the potentially dilutive effect of our stock awards with performance conditions not yet satisfied at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met. We believe these adjustments provide useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods.

* Free cash flow. Free cash flow is defined as net cash provided by (used in) operating activities plus cash paid for legal settlements, repayments of convertible senior notes attributable to debt discount and business combination and other related costs including compensation expense, reduced by purchases of property and equipment. Free cash flow margin is calculated as free cash flow as a percentage of total revenues. We believe information regarding free cash flow and free cash flow margin provides useful information to investors because it is an indicator of the strength and performance of our business operations.

Our presentation of non-GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP and non-GAAP results.

Use of Forward-Looking Statements

This release contains "forward-looking statements" regarding our performance, including but not limited to statements 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.

Factors that may cause actual results to differ materially from those in any forward-looking statements include: experiencing an actual or perceived cyber-security event; our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet; errors, interruptions, delays, or security breaches in or of our service or data centers; our ability to maintain and attract key employees and manage workplace culture; alleged violations of laws and regulations, including those relating to anti-bribery and anti-corruption and those relating to public sector contracting requirements; our ability to compete successfully against existing and new competitors; our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments; our ability to grow our business, including converting remaining performance obligations into revenue, adding and retaining customers, selling additional subscriptions to existing customers, selling to larger enterprises, government and regulated organizations with complex sales cycles and certification processes, and entering new geographies and markets; our ability to develop and gain customer demand for and acceptance of new and improved products and services; material changes in the value of foreign currencies relative to the U.S. Dollar; the continued impact and duration of COVID-19 on our business, future financial performance and global economic conditions, including any subsequent waves of outbreak or new variant strains of the COVID-19 virus, the effectiveness, extent and duration of mitigation efforts such as "shelter in place" and other government responses, the availability of vaccinations; our ability to consummate and realize the benefits of any strategic transactions or acquisitions; and fluctuations and volatility in our stock price.

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, 2021 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 year ended December 31, 2021.

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 (NYSE: NOW) makes the world work better for everyone. Our cloud-based platform and solutions help digitize and unify organizations so that they can find smarter, faster, better ways to make work flow. So employees and customers can be more connected, more innovative, and more agile. And we can all create the future we imagine. The world works with ServiceNowTM. For more information, visit: www.servicenow.com.

(c) 2022 ServiceNow, Inc. All rights reserved. ServiceNow, the ServiceNow logo, Now, and other ServiceNow marks are trademarks and/or registered trademarks of ServiceNow, Inc. in the United States and/or other countries. Other company names, product names, and logos may be trademarks of the respective companies with which they are associated.

We report non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in(1) accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" for an explanation of non-GAAP measures, and the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of GAAP to non-GAAP measures.

GAAP subscription revenues for the future quarters included in our(2) full-year 2022 guidance are based on the 31-day average of foreign exchange rates for December 2021 for entities reporting in currencies other than U.S. Dollars.

Conference Call Details

The conference call will begin at 2 p.m. Pacific Time (22:00 GMT) on January 26, 2022. Interested parties may listen to the call by dialing (888) 330?2022 (Passcode: 8135305), or if outside North America, by dialing (646) 960?0690 (Passcode: 8135305). Individuals may access the live teleconference from this webcast.

https://events.q4inc.com/attendee/749924992.

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 (800) 770?2030 (Passcode: 8135305), or if outside North America, by dialing (647) 362?9199 (Passcode: 8135305).

Investor Presentation Details

An investor presentation providing additional information, including forward-looking guidance, and analysis can be found at http://investors.servicenow.com.

Statement Regarding Use of Non-GAAP Financial Measures

We report the following non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

* Revenues. We adjust revenues and related growth rates for constant currency to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To present this information, current period results for entities reporting in currencies other than U.S. Dollars ("USD") are converted into USD at the average exchange rates in effect during the comparison period (for Q4 2020, the average exchange rates in effect for our major currencies were 1 USD to 0.84 Euros and 1 USD to 0.76 British Pound Sterling ("GBP")), rather than the actual average exchange rates in effect during the current period (for Q4 2021, the average exchange rates in effect for our major currencies were 1 USD to 0.87 Euros and 1 USD to 0.74 GBP). We believe the presentation of revenues and related growth rates adjusted for constant currency facilitates the comparison of revenues year-over-year.

* Billings and Adjusted billings. We define subscription billings, professional services and other billings, and total billings as the applicable revenue plus the applicable change in deferred revenue, unbilled receivables and customer deposits as presented or derived from the statement of cash flows. We adjust billings and related growth rates for constant currency, as described above, and for constant duration by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the comparison period. We believe these adjustments facilitate greater comparability in our billings information year-over-year. While we believe billings is one indicator of the performance of our business, an increase or decrease in billings may not reflect the actual performance for that reporting period. As a result, our billings metric has become less indicative of the actual performance of our business over time and we do not plan to disclose this metric in the future.

* Remaining performance obligations and current remaining performance obligations. We adjust cRPO and remaining performance obligations ("RPO") and related growth rates for constant currency to provide a framework for assessing how our business performed. To present this information, current period results for entities reporting in currencies other than USD are converted into USD at the exchange rates in effect at the end of the comparison period (for Q4 2020, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.82 Euros and 1 USD to 0.73 GBP), rather than the actual end of the period exchange rates in effect during the current period (for Q4 2021, the end of the period exchange rates in effect for our major currencies were 1 USD to 0.88 Euros and 1 USD to 0.74 GBP). We believe the presentation of cRPO and RPO and related growth rates adjusted for constant currency facilitates the comparison of cRPO and RPO year-over-year, respectively.

* Gross profit, Income from operations, Net income and Net income per share - diluted. Our non-GAAP presentation of gross profit, income from operations, and net income measures exclude certain non-cash or non-recurring items, including stock-based compensation expense, amortization of debt discount and issuance costs related to our convertible senior notes, loss on early note conversions, amortization of purchased intangibles, legal settlements, business combination and other related costs, and the related income tax effect of these adjustments. The non-GAAP weighted-average shares used to compute our non-GAAP net income per share - diluted excludes the dilutive effect of the in-the-money portion of convertible senior notes as they are covered by our note hedges, and includes the dilutive effect of time-based stock awards, the dilutive effect of warrants and the potentially dilutive effect of our stock awards with performance conditions not yet satisfied at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met. We believe these adjustments provide useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods.

* Free cash flow. Free cash flow is defined as net cash provided by (used in) operating activities plus cash paid for legal settlements, repayments of convertible senior notes attributable to debt discount and business combination and other related costs including compensation expense, reduced by purchases of property and equipment. Free cash flow margin is calculated as free cash flow as a percentage of total revenues. We believe information regarding free cash flow and free cash flow margin provides useful information to investors because it is an indicator of the strength and performance of our business operations.

Our presentation of non-GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP and non-GAAP results.

Use of Forward-Looking Statements

This release contains "forward-looking statements" regarding our performance, including but not limited to statements 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.

Factors that may cause actual results to differ materially from those in any forward-looking statements include: experiencing an actual or perceived cyber-security event; our ability to comply with evolving privacy laws, data transfer restrictions, and other foreign and domestic standards related to data and the Internet; errors, interruptions, delays, or security breaches in or of our service or data centers; our ability to maintain and attract key employees and manage workplace culture; alleged violations of laws and regulations, including those relating to anti-bribery and anti-corruption and those relating to public sector contracting requirements; our ability to compete successfully against existing and new competitors; our ability to predict, prepare for and respond promptly to rapidly evolving technological, market and customer developments; our ability to grow our business, including converting remaining performance obligations into revenue, adding and retaining customers, selling additional subscriptions to existing customers, selling to larger enterprises, government and regulated organizations with complex sales cycles and certification processes, and entering new geographies and markets; our ability to develop and gain customer demand for and acceptance of new and improved products and services; material changes in the value of foreign currencies relative to the U.S. Dollar; the continued impact and duration of COVID-19 on our business, future financial performance and global economic conditions, including any subsequent waves of outbreak or new variant strains of the COVID-19 virus, the effectiveness, extent and duration of mitigation efforts such as "shelter in place" and other government responses, the availability of vaccinations; our ability to consummate and realize the benefits of any strategic transactions or acquisitions; and fluctuations and volatility in our stock price.

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, 2021 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 year ended December 31, 2021.

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 (NYSE: NOW) makes the world work better for everyone. Our cloud-based platform and solutions help digitize and unify organizations so that they can find smarter, faster, better ways to make work flow. So employees and customers can be more connected, more innovative, and more agile. And we can all create the future we imagine. The world works with ServiceNowTM. For more information, visit: www.servicenow.com.

(c) 2022 ServiceNow, Inc. All rights reserved. ServiceNow, the ServiceNow logo, Now, and other ServiceNow marks are trademarks and/or registered trademarks of ServiceNow, Inc. in the United States and/or other countries. Other company names, product names, and logos may be trademarks of the respective companies with which they are associated.

ServiceNow, Inc.

Condensed Consolidated Statements of Operations

(in millions, except per share data)

(unaudited)

Three Months Ended Twelve Months Ended

December December December December 31, 31, 31, 31, 2021 2020 2021 2020

Revenues:

Subscription $ 1,523 $ 1,184 $ 5,573 $ 4,286

Professional services and other 91 66 323 233

Total revenues 1,614 1,250 5,896 4,519

Cost of revenues^ (1):

Subscription 282 210 1,022 731

Professional services and other 93 69 331 256

Total cost of revenues 375 279 1,353 987

Gross profit 1,239 971 4,543 3,532

Operating expenses^ (1):

Sales and marketing 632 534 2,292 1,855

Research and development 392 284 1,397 1,024

General and administrative 180 135 597 454

Total operating expenses 1,204 953 4,286 3,333

Income from operations 35 18 257 199

Interest expense (7 ) (8 ) (28 ) (33 )

Other income (expense), net 4 4 20 (16 )

Income before income taxes 32 14 249 150

Provision for (benefit from) 6 (3 ) 19 31 income taxes

Net income $ 26 $ 17 $ 230 $ 119

Net income per share - basic $ 0.13 $ 0.09 $ 1.16 $ 0.61

Net income per share - diluted $ 0.13 $ 0.08 $ 1.13 $ 0.59

Weighted-average shares used tocompute net income per share - 199 195 198 193 basic

Weighted-average shares used tocompute net income per share - 204 202 203 202 diluted

(1)

Includes stock-based compensation as follows:

(1) Includes stock-based compensation as follows:

Three Months Ended

Twelve Months Ended

December 31, 2021

December 31, 2020

December 31, 2021

December 31, 2020

Cost of revenues:

Subscription

$

33

$

26

$

128

$

98

Professional services and other

16

14

59

52

Operating expenses:

Sales and marketing

96

92

389

320

Research and development

107

79

395

282

General and administrative

50

34

160

118

Three Months Ended Twelve Months Ended

December December December December 31, 31, 31, 31, 2021 2020 2021 2020

Cost of revenues:

Subscription $ 33 $ 26 $ 128 $ 98

Professional services and other 16 14 59 52

Operating expenses:

Sales and marketing 96 92 389 320

Research and development 107 79 395 282

General and administrative 50 34 160 118

ServiceNow, Inc.

Condensed Consolidated Balance Sheets

(in millions)

(unaudited)

December 31, 2021

December 31, 2020

Assets

Current assets:

Cash and cash equivalents

$

1,728

$

1,677

Short-term investments

1,576

1,415

Accounts receivable, net

1,390

1,009

Current portion of deferred commissions

303

229

Prepaid expenses and other current assets

223

192

Total current assets

5,220

4,522

Deferred commissions, less current portion

623

444

Long-term investments

1,630

1,468

Property and equipment, net

766

660

Operating lease right-of-use assets

591

454

Intangible assets, net

287

153

Goodwill

777

241

Deferred tax assets

692

673

Other assets

212

100

Total assets

$

10,798

$

8,715

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

89

$

34

Accrued expenses and other current liabilities

850

668

Current portion of deferred revenue

3,836

2,963

Current portion of operating lease liabilities

82

72

Current debt, net

92

-

Total current liabilities

4,949

3,737

Deferred revenue, less current portion

63

45

Operating lease liabilities, less current portion

556

423

Long-term debt, net

1,484

1,640

Other long-term liabilities

51

36

Stockholders' equity

3,695

2,834

Total liabilities and stockholders' equity

$

10,798

$

8,715

ServiceNow, Inc.

Condensed Consolidated Balance Sheets

(in millions)

(unaudited)

December December 31, 31, 2020 2021

Assets

Current assets:

Cash and cash equivalents $ 1,728 $ 1,677

Short-term investments 1,576 1,415

Accounts receivable, net 1,390 1,009

Current portion of deferred commissions 303 229

Prepaid expenses and other current assets 223 192

Total current assets 5,220 4,522

Deferred commissions, less current portion 623 444

Long-term investments 1,630 1,468

Property and equipment, net 766 660

Operating lease right-of-use assets 591 454

Intangible assets, net 287 153

Goodwill 777 241

Deferred tax assets 692 673

Other assets 212 100

Total assets $ 10,798 $ 8,715

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 89 $ 34

Accrued expenses and other current liabilities 850 668

Current portion of deferred revenue 3,836 2,963

Current portion of operating lease liabilities 82 72

Current debt, net 92 -

Total current liabilities 4,949 3,737

Deferred revenue, less current portion 63 45

Operating lease liabilities, less current portion 556 423

Long-term debt, net 1,484 1,640

Other long-term liabilities 51 36

Stockholders' equity 3,695 2,834

Total liabilities and stockholders' equity $ 10,798 $ 8,715

ServiceNow, Inc.

Condensed Consolidated Statements of Cash Flows

(in millions)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31, 2021

December 31, 2020

December 31, 2021

December 31, 2020

Cash flows from operating activities:

Net income

$

26

$

17

$

230

$

119

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

126

93

472

336

Amortization of deferred commissions

83

61

294

218

Amortization of debt discount and issuance costs

2

2

7

24

Stock-based compensation

302

245

1,131

870

Deferred income taxes

(13

)

(18

)

(34

)

(24

)

Repayments of convertible senior notes attributable to debt discount

-

(13

)

(15

)

(82

)

Loss on extinguishment of 2022 Notes

-

5

3

47

Other

17

(3

)

45

(2

)

Changes in operating assets and liabilities, net of effect of business combinations:

Accounts receivable

(620

)

(362

)

(401

)

(152

)

Deferred commissions

(221

)

(144

)

(565

)

(365

)

Prepaid expenses and other assets

(15

)

(13

)

(93

)

(55

)

Accounts payable

16

(36

)

55

(34

)

Deferred revenue

913

645

960

711

Accrued expenses and other liabilities

228

206

102

175

Net cash provided by operating activities

844

685

2,191

1,786

Cash flows from investing activities:

Purchases of property and equipment

(100

)

(134

)

(392

)

(419

)

Business combinations, net of cash acquired

(7

)

1

(785

)

(107

)

Purchases of intangibles

(7

)

(7

)

(7

)

(13

)

Purchases of investments

(744

)

(695

)

(2,485

)

(2,922

)

Purchases of strategic investments

(43

)

(10

)

(71

)

(12

)

Sales and maturities of investments

540

666

2,119

1,965

Other

2

2

14

1

Net cash used in investing activities

(359

)

(177

)

(1,607

)

(1,507

)

Cash flows from financing activities:

Net proceeds from borrowings on 2030 Notes

-

-

-

1,482

Repayments of convertible senior notes attributable to principal

(2

)

(59

)

(61

)

(1,628

)

Net proceeds from unwind of 2022 Note Hedge

-

-

-

1,106

Proceeds from employee stock plans

2

4

167

146

Taxes paid related to net share settlement of equity awards

(155

)

(148

)

(612

)

(509

)

Net cash (used in) provided by financing activities

(155

)

(203

)

(506

)

597

Foreign currency effect on cash, cash equivalents and restricted cash

(4

)

22

(25

)

25

Net change in cash, cash equivalents and restricted cash

326

327

53

901

Cash, cash equivalents and restricted cash at beginning of period

1,406

1,352

1,679

778

Cash, cash equivalents and restricted cash at end of period

$

1,732

$

1,679

$

1,732

$

1,679

ServiceNow, Inc.

Condensed Consolidated Statements of Cash Flows

(in millions)

(unaudited)

Three Months Ended Twelve Months Ended

December December December December 31, 31, 31, 31, 2021 2020 2021 2020

Cash flows from operating activities:

Net income $ 26 $ 17 $ 230 $ 119

Adjustments to reconcile netincome to net cash provided by operating activities:

Depreciation and amortization 126 93 472 336

Amortization of deferred 83 61 294 218 commissions

Amortization of debt discount 2 2 7 24 and issuance costs

Stock-based compensation 302 245 1,131 870

Deferred income taxes (13 ) (18 ) (34 ) (24 )

Repayments of convertiblesenior notes attributable to - (13 ) (15 ) (82 )debt discount

Loss on extinguishment of 2022 - 5 3 47 Notes

Other 17 (3 ) 45 (2 )

Changes in operating assets andliabilities, net of effect of business combinations:

Accounts receivable (620 ) (362 ) (401 ) (152 )

Deferred commissions (221 ) (144 ) (565 ) (365 )

Prepaid expenses and other (15 ) (13 ) (93 ) (55 )assets

Accounts payable 16 (36 ) 55 (34 )

Deferred revenue 913 645 960 711

Accrued expenses and other 228 206 102 175 liabilities

Net cash provided by operating 844 685 2,191 1,786 activities

Cash flows from investing activities:

Purchases of property and (100 ) (134 ) (392 ) (419 )equipment

Business combinations, net of (7 ) 1 (785 ) (107 )cash acquired

Purchases of intangibles (7 ) (7 ) (7 ) (13 )

Purchases of investments (744 ) (695 ) (2,485 ) (2,922 )

Purchases of strategic (43 ) (10 ) (71 ) (12 )investments

Sales and maturities of 540 666 2,119 1,965 investments

Other 2 2 14 1

Net cash used in investing (359 ) (177 ) (1,607 ) (1,507 )activities

Cash flows from financing activities:

Net proceeds from borrowings on - - - 1,482 2030 Notes

Repayments of convertiblesenior notes attributable to (2 ) (59 ) (61 ) (1,628 )principal

Net proceeds from unwind of - - - 1,106 2022 Note Hedge

Proceeds from employee stock 2 4 167 146 plans

Taxes paid related to net share (155 ) (148 ) (612 ) (509 )settlement of equity awards

Net cash (used in) provided by (155 ) (203 ) (506 ) 597 financing activities

Foreign currency effect oncash, cash equivalents and (4 ) 22 (25 ) 25 restricted cash

Net change in cash, cash 326 327 53 901 equivalents and restricted cash

Cash, cash equivalents andrestricted cash at beginning of 1,406 1,352 1,679 778 period

Cash, cash equivalents andrestricted cash at end of $ 1,732 $ 1,679 $ 1,732 $ 1,679 period

ServiceNow, Inc.

GAAP to Non-GAAP Reconciliation

(in millions, except cRPO, RPO and per share data)

(unaudited)

Three Months Ended

Twelve Months Ended

December 31, 2021

December 31, 2020

Growth Rates

December 31, 2021

December 31, 2020

Growth Rates

Subscription revenues:

GAAP subscription revenues

$

1,523

$

1,184

29

%

$

5,573

$

4,286

30

%

Effects of foreign currency rate fluctuations

15

(77

)

Non-GAAP subscription revenues(1)

$

1,538

30

%

$

5,496

28

%

Professional services and other revenues:

GAAP professional services and other revenues

$

91

$

66

38

%

$

323

$

233

39

%

Effects of foreign currency rate fluctuations

-

(6

)

Non-GAAP professional service and other revenues(1)

$

91

38

%

$

317

36

%

Total revenues:

GAAP total revenues

$

1,614

$

1,250

29

%

$

5,896

$

4,519

30

%

Effects of foreign currency rate fluctuations

15

(83

)

Non-GAAP total revenues(1)

$

1,629

30

%

$

5,813

29

%

cRPO (in billions):

GAAP cRPO

$

5.7

$

4.4

29

%

$

5.7

$

4.4

29

%

Effects of foreign currency rate fluctuations

0.1

0.1

Non-GAAP cRPO(2)

$

5.8

32

%

$

5.8

32

%

RPO (in billions):

GAAP RPO

$

11.5

$

8.9

29

%

$

11.5

$

8.9

29

%

Effects of foreign currency rate fluctuations

0.3

0.3

Non-GAAP RPO(2)

$

11.8

32

%

$

11.8

32

%

Subscription billings:

GAAP subscription revenues

$

1,523

$

1,184

29

%

$

5,573

$

4,286

30

%

Change in subscription deferred revenue, unbilled receivables and customer deposits

897

643

921

696

Non-GAAP subscription billings

2,420

1,827

32

%

6,494

4,982

30

%

Effects of foreign currency rate fluctuations

25

(68

)

Effects of fluctuations in billings duration

(13

)

(38

)

Non-GAAP adjusted subscription billings(3)

$

2,432

33

%

$

6,388

28

%

Professional services and other billings:

GAAP professional services and other revenues

$

91

$

66

37

%

$

323

$

233

39

%

Change in professional services and other deferred revenue

22

13

$

33

$

13

Non-GAAP professional services and other billings

113

79

43

%

356

246

45

%

Effects of foreign currency rate fluctuations

-

(6

)

Non-GAAP adjusted professional services and other billings(3)

$

113

43

%

$

350

42

%

Total billings:

GAAP total revenues

$

1,614

$

1,250

29

%

$

5,896

$

4,519

30

%

Change in total deferred revenue, unbilled receivables and customer deposits

919

657

954

710

Non-GAAP total billings

2,533

1,907

33

%

6,850

5,229

31

%

Effects of foreign currency rate fluctuations

25

(74

)

Effects of fluctuations in billings duration

(13

)

(38

)

Non-GAAP adjusted total billings(3)

$

2,545

33

%

$

6,738

29

%

Cost of revenues:

GAAP subscription cost of revenues

$

282

$

210

$

1,022

$

731

Stock-based compensation

(33

)

(26

)

(128

)

(98

)

Amortization of purchased intangibles

(21

)

(8

)

(64

)

(36

)

Non-GAAP subscription cost of revenues

$

228

$

176

$

830

$

597

GAAP professional services and other cost of revenues

$

93

$

69

$

331

$

256

Stock-based compensation

(16

)

(14

)

(59

)

(52

)

Non-GAAP professional services and other cost of revenues

$

77

$

55

$

272

$

204

Gross profit:

GAAP subscription gross profit

$

1,241

$

974

$

4,551

$

3,555

Stock-based compensation

33

26

128

98

Amortization of purchased intangibles

21

8

64

36

Non-GAAP subscription gross profit

$

1,295

$

1,008

$

4,743

$

3,689

GAAP professional services and other gross loss

$

(2

)

$

(3

)

$

(8

)

$

(23

)

Stock-based compensation

16

14

59

52

Non-GAAP professional services and other gross profit

$

14

$

11

$

51

$

29

GAAP gross profit

$

1,239

$

971

$

4,543

$

3,532

Stock-based compensation

49

40

187

150

Amortization of purchased intangibles

21

8

64

36

Non-GAAP gross profit

$

1,309

$

1,019

$

4,794

$

3,718

Gross margin:

GAAP subscription gross margin

82

%

82

%

82

%

83

%

Stock-based compensation as % of subscription revenues

2

%

2

%

2

%

2

%

Amortization of purchased intangibles as % of subscription revenues

1

%

1

%

1

%

1

%

Non-GAAP subscription gross margin

85

%

85

%

85

%

86

%

GAAP professional services and other gross margin

(2

%)

(5

%)

(2

%)

(10

%)

Stock-based compensation as % of professional services and other revenues

17

%

21

%

18

%

22

%

Non-GAAP professional services and other gross margin

15

%

16

%

16

%

12

%

GAAP gross margin

77

%

78

%

77

%

78

%

Stock-based compensation as % of total revenues

3

%

3

%

3

%

3

%

Amortization of purchased intangibles as % of total revenues

1

%

1

%

1

%

1

%

Non-GAAP gross margin

81

%

82

%

81

%

82

%

Operating expenses:

GAAP sales and marketing expenses

$

632

$

534

$

2,292

$

1,855

Stock-based compensation

(96

)

(92

)

(389

)

(320

)

Amortization of purchased intangibles

-

(1

)

(1

)

(1

)

Non-GAAP sales and marketing expenses

$

536

$

441

$

1,902

$

1,534

GAAP research and development expenses

$

392

$

284

$

1,397

$

1,024

Stock-based compensation

(107

)

(79

)

(395

)

(282

)

Amortization of purchased intangibles

(1

)

-

(1

)

(2

)

Business combination and other related costs

$

(5

)

$

-

$

(10

)

$

-

Non-GAAP research and development expenses

$

279

$

205

$

991

$

740

GAAP general and administrative expenses

$

180

$

135

$

597

$

454

Stock-based compensation

(50

)

(34

)

(160

)

(118

)

Amortization of purchased intangibles

(2

)

(2

)

(10

)

(7

)

Business combination and other related costs

(1

)

(2

)

(8

)

(6

)

Non-GAAP general and administrative expenses

$

127

$

97

$

419

$

323

GAAP total operating expenses

$

1,204

$

953

$

4,286

$

3,333

Stock-based compensation

(253

)

(205

)

(944

)

(720

)

Amortization of purchased intangibles

(3

)

(3

)

(12

)

(10

)

Business combination and other related costs

(6

)

(2

)

(18

)

(6

)

Non-GAAP total operating expenses

$

942

$

743

$

3,312

$

2,597

Income from operations:

GAAP income from operations

$

35

$

18

$

257

$

199

Stock-based compensation

302

245

1,131

870

Amortization of purchased intangibles

24

11

76

46

Business combination and other related costs

6

2

18

6

Non-GAAP income from operations

$

367

$

276

$

1,482

$

1,121

Operating margin:

GAAP operating margin

2

%

1

%

4

%

5

%

Stock-based compensation as % of total revenues

19

%

20

%

19

%

19

%

Amortization of purchased intangibles as % of total revenues

2

%

1

%

2

%

1

%

Business combination and other related costs as % of total revenues

-

%

-

%

0

%

-

%

Non-GAAP operating margin

23

%

22

%

25

%

25

%

Net income:

GAAP net income

$

26

$

17

$

230

$

119

Stock-based compensation

302

245

1,131

870

Amortization of purchased intangibles

24

11

76

46

Business combination and other related costs

6

2

18

6

Amortization of debt discount and issuance costs

2

2

7

24

Other

-

5

3

47

Income tax expense effects related to the above adjustments

(64

)

(47

)

(264

)

(186

)

Non-GAAP net income

$

296

$

235

$

1,201

$

926

Net income per share - basic and diluted:

GAAP net income per share - basic

$

0.13

$

0.09

$

1.16

$

0.61

GAAP net income per share - diluted

$

0.13

$

0.08

$

1.13

$

0.59

Non-GAAP net income per share - basic

$

1.49

$

1.20

$

6.07

$

4.79

Non-GAAP net income per share - diluted

$

1.46

$

1.17

$

5.92

$

4.63

GAAP weighted-average shares used to compute net income per share - basic

199

195

198

193

GAAP weighted-average shares used to compute net income per share - diluted

204

202

203

202

Effects of in-the-money portion of convertible senior notes(4)

(1

)

(1

)

-

(2

)

Non-GAAP weighted-average shares used to compute net income per share - diluted

203

201

203

200

Free cash flow:

GAAP net cash provided by operating activities

$

844

$

685

$

2,191

$

1,786

Purchases of property and equipment

(100

)

(134

)

(392

)

(419

)

Repayments of convertible senior notes attributable to debt discount

-

13

15

82

Business combination and other related costs

-

-

53

-

Non-GAAP free cash flow

$

744

$

564

$

1,867

$

1,449

Free cash flow margin:

GAAP net cash provided by operating activities as % of total revenues

52

%

55

%

37

%

39

%

Purchases of property and equipment as % of total revenues

(6

%)

(11

%)

(7

%)

(9

%)

Repayments of convertible senior notes attributable to debt discount as % of total revenues

-

%

1

%

-

%

2

%

Business combination and other related costs as % of total revenues

0

%

-

%

1

%

-

%

Non-GAAP free cash flow margin

46

%

45

%

32

%

32

%

ServiceNow, Inc.

GAAP to Non-GAAP Reconciliation

(in millions, except cRPO, RPO and per share data)

(unaudited)

Three Months Ended Twelve Months Ended

December December Growth December December Growth 31, 31, Rates 31, 31, Rates 2021 2020 2021 2020

Subscription revenues:

GAAPsubscription $ 1,523 $ 1,184 29 % $ 5,573 $ 4,286 30 %revenues

Effects offoreign currency 15 (77 ) ratefluctuations

Non-GAAPsubscription $ 1,538 30 % $ 5,496 28 %revenues^(1)



Professionalservices and other revenues:

GAAPprofessional $ 91 $ 66 38 % $ 323 $ 233 39 %services andother revenues

Effects offoreign currency - (6 ) ratefluctuations

Non-GAAPprofessionalservice and $ 91 38 % $ 317 36 %other revenues^(1)



Total revenues:

GAAP total $ 1,614 $ 1,250 29 % $ 5,896 $ 4,519 30 %revenues

Effects offoreign currency 15 (83 ) ratefluctuations

Non-GAAP total $ 1,629 30 % $ 5,813 29 %revenues^(1)



cRPO (in billions):

GAAP cRPO $ 5.7 $ 4.4 29 % $ 5.7 $ 4.4 29 %

Effects offoreign currency 0.1 0.1 ratefluctuations

Non-GAAP cRPO^ $ 5.8 32 % $ 5.8 32 %(2)



RPO (in billions):

GAAP RPO $ 11.5 $ 8.9 29 % $ 11.5 $ 8.9 29 %

Effects offoreign currency 0.3 0.3 ratefluctuations

Non-GAAP RPO^(2) $ 11.8 32 % $ 11.8 32 %



Subscription billings:

GAAPsubscription $ 1,523 $ 1,184 29 % $ 5,573 $ 4,286 30 %revenues

Change insubscriptiondeferredrevenue, 897 643 921 696 unbilledreceivables andcustomerdeposits

Non-GAAPsubscription 2,420 1,827 32 % 6,494 4,982 30 %billings

Effects offoreign currency 25 (68 ) ratefluctuations

Effects offluctuations in (13 ) (38 ) billingsduration

Non-GAAPadjusted $ 2,432 33 % $ 6,388 28 %subscriptionbillings^(3)



Professionalservices and other billings:

GAAPprofessional $ 91 $ 66 37 % $ 323 $ 233 39 %services andother revenues

Change inprofessionalservices and 22 13 $ 33 $ 13 other deferredrevenue

Non-GAAPprofessional 113 79 43 % 356 246 45 %services andother billings

Effects offoreign currency - (6 ) ratefluctuations

Non-GAAPadjustedprofessional $ 113 43 % $ 350 42 %services andother billings^(3)



Total billings:

GAAP total $ 1,614 $ 1,250 29 % $ 5,896 $ 4,519 30 %revenues

Change in totaldeferredrevenue,unbilled 919 657 954 710 receivables andcustomerdeposits

Non-GAAP total 2,533 1,907 33 % 6,850 5,229 31 %billings

Effects offoreign currency 25 (74 ) ratefluctuations

Effects offluctuations in (13 ) (38 ) billingsduration

Non-GAAPadjusted total $ 2,545 33 % $ 6,738 29 %billings^(3)



Cost of revenues:

GAAPsubscription $ 282 $ 210 $ 1,022 $ 731 cost of revenues

Stock-based (33 ) (26 ) (128 ) (98 ) compensation

Amortization ofpurchased (21 ) (8 ) (64 ) (36 ) intangibles

Non-GAAPsubscription $ 228 $ 176 $ 830 $ 597 cost of revenues



GAAPprofessionalservices and $ 93 $ 69 $ 331 $ 256 other cost ofrevenues

Stock-based (16 ) (14 ) (59 ) (52 ) compensation

Non-GAAPprofessionalservices and $ 77 $ 55 $ 272 $ 204 other cost ofrevenues



Gross profit:

GAAPsubscription $ 1,241 $ 974 $ 4,551 $ 3,555 gross profit

Stock-based 33 26 128 98 compensation

Amortization ofpurchased 21 8 64 36 intangibles

Non-GAAPsubscription $ 1,295 $ 1,008 $ 4,743 $ 3,689 gross profit



GAAPprofessional $ (2 ) $ (3 ) $ (8 ) $ (23 ) services andother gross loss

Stock-based 16 14 59 52 compensation

Non-GAAPprofessionalservices and $ 14 $ 11 $ 51 $ 29 other grossprofit



GAAP gross $ 1,239 $ 971 $ 4,543 $ 3,532 profit

Stock-based 49 40 187 150 compensation

Amortization ofpurchased 21 8 64 36 intangibles

Non-GAAP gross $ 1,309 $ 1,019 $ 4,794 $ 3,718 profit



Gross margin:

GAAPsubscription 82 % 82 % 82 % 83 % gross margin

Stock-basedcompensation as% of 2 % 2 % 2 % 2 % subscriptionrevenues

Amortization ofpurchasedintangibles as % 1 % 1 % 1 % 1 % of subscriptionrevenues

Non-GAAPsubscription 85 % 85 % 85 % 86 % gross margin



GAAPprofessionalservices and (2 %) (5 %) (2 %) (10 %) other grossmargin

Stock-basedcompensation as% of 17 % 21 % 18 % 22 % professionalservices andother revenues

Non-GAAPprofessionalservices and 15 % 16 % 16 % 12 % other grossmargin



GAAP gross 77 % 78 % 77 % 78 % margin

Stock-basedcompensation as 3 % 3 % 3 % 3 % % of totalrevenues

Amortization ofpurchasedintangibles as % 1 % 1 % 1 % 1 % of totalrevenues

Non-GAAP gross 81 % 82 % 81 % 82 % margin



Operating expenses:

GAAP sales andmarketing $ 632 $ 534 $ 2,292 $ 1,855 expenses

Stock-based (96 ) (92 ) (389 ) (320 ) compensation

Amortization ofpurchased - (1 ) (1 ) (1 ) intangibles

Non-GAAP salesand marketing $ 536 $ 441 $ 1,902 $ 1,534 expenses



GAAP researchand development $ 392 $ 284 $ 1,397 $ 1,024 expenses

Stock-based (107 ) (79 ) (395 ) (282 ) compensation

Amortization ofpurchased (1 ) - (1 ) (2 ) intangibles

Businesscombination and $ (5 ) $ - $ (10 ) $ - other relatedcosts

Non-GAAPresearch and $ 279 $ 205 $ 991 $ 740 developmentexpenses



GAAP general andadministrative $ 180 $ 135 $ 597 $ 454 expenses

Stock-based (50 ) (34 ) (160 ) (118 ) compensation

Amortization ofpurchased (2 ) (2 ) (10 ) (7 ) intangibles

Businesscombination and (1 ) (2 ) (8 ) (6 ) other relatedcosts

Non-GAAP generaland $ 127 $ 97 $ 419 $ 323 administrativeexpenses



GAAP totaloperating $ 1,204 $ 953 $ 4,286 $ 3,333 expenses

Stock-based (253 ) (205 ) (944 ) (720 ) compensation

Amortization ofpurchased (3 ) (3 ) (12 ) (10 ) intangibles

Businesscombination and (6 ) (2 ) (18 ) (6 ) other relatedcosts

Non-GAAP totaloperating $ 942 $ 743 $ 3,312 $ 2,597 expenses



Income from operations:

GAAP income from $ 35 $ 18 $ 257 $ 199 operations

Stock-based 302 245 1,131 870 compensation

Amortization ofpurchased 24 11 76 46 intangibles

Businesscombination and 6 2 18 6 other relatedcosts

Non-GAAP income $ 367 $ 276 $ 1,482 $ 1,121 from operations



Operating margin:

GAAP operating 2 % 1 % 4 % 5 % margin

Stock-basedcompensation as 19 % 20 % 19 % 19 % % of totalrevenues

Amortization ofpurchasedintangibles as % 2 % 1 % 2 % 1 % of totalrevenues

Businesscombination andother related - % - % 0 % - % costs as % oftotal revenues

Non-GAAP 23 % 22 % 25 % 25 % operating margin



Net income:

GAAP net income $ 26 $ 17 $ 230 $ 119

Stock-based 302 245 1,131 870 compensation

Amortization ofpurchased 24 11 76 46 intangibles

Businesscombination and 6 2 18 6 other relatedcosts

Amortization ofdebt discount 2 2 7 24 and issuancecosts

Other - 5 3 47

Income taxexpense effectsrelated to the (64 ) (47 ) (264 ) (186 ) aboveadjustments

Non-GAAP net $ 296 $ 235 $ 1,201 $ 926 income



Net income pershare - basic and diluted:

GAAP net incomeper share - $ 0.13 $ 0.09 $ 1.16 $ 0.61 basic

GAAP net incomeper share - $ 0.13 $ 0.08 $ 1.13 $ 0.59 diluted

Non-GAAP netincome per share $ 1.49 $ 1.20 $ 6.07 $ 4.79 - basic

Non-GAAP netincome per share $ 1.46 $ 1.17 $ 5.92 $ 4.63 - diluted



GAAPweighted-averageshares used to 199 195 198 193 compute netincome per share- basic



GAAPweighted-averageshares used to 204 202 203 202 compute netincome per share- diluted

Effects ofin-the-moneyportion of (1 ) (1 ) - (2 ) convertiblesenior notes^(4)

Non-GAAPweighted-averageshares used to 203 201 203 200 compute netincome per share- diluted



Free cash flow:

GAAP net cashprovided by $ 844 $ 685 $ 2,191 $ 1,786 operatingactivities

Purchases ofproperty and (100 ) (134 ) (392 ) (419 ) equipment

Repayments ofconvertiblesenior notes - 13 15 82 attributable todebt discount

Businesscombination and - - 53 - other relatedcosts

Non-GAAP free $ 744 $ 564 $ 1,867 $ 1,449 cash flow



Free cash flow margin:

GAAP net cashprovided byoperating 52 % 55 % 37 % 39 % activities as %of totalrevenues

Purchases ofproperty andequipment as % (6 %) (11 %) (7 %) (9 %) of totalrevenues

Repayments ofconvertiblesenior notesattributable to - % 1 % - % 2 % debt discount as% of totalrevenues

Businesscombination andother related 0 % - % 1 % - % costs as % oftotal revenues

Non-GAAP free 46 % 45 % 32 % 32 % cash flow margin

(1)

Non-GAAP revenues and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the actual average exchange rates in effect during the current period.

(2)

Non-GAAP cRPO, RPO and the corresponding growth rates are derived by applying the end of period exchange rates in effect during the comparison period rather than the actual end of period exchange rates in effect during the current period.

(3)

Adjusted billings and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the actual average exchange rates in effect during the current period, and by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the comparison period.

(4)

Effects of dilutive time-based stock awards, in-the-money portion of convertible senior notes and warrants are included in the GAAP weighted-average diluted shares in periods where we have GAAP net income. We exclude the in-the-money portion of convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our note hedges. We include stock awards with performance conditions not yet satisfied for non-GAAP weighted average diluted shares at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met.

Note: Numbers are rounded for presentation purposes and may not foot. Non-GAAP revenues and the corresponding growth rates are derived by(1) applying the average exchange rates in effect during the comparison period rather than the actual average exchange rates in effect during the current period.

Non-GAAP cRPO, RPO and the corresponding growth rates are derived by(2) applying the end of period exchange rates in effect during the comparison period rather than the actual end of period exchange rates in effect during the current period.

Adjusted billings and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period(3) rather than the actual average exchange rates in effect during the current period, and by replacing the portion of multi-year billings in excess of twelve months during the current period with the portion of multi-year billings in excess of twelve months during the comparison period.

Effects of dilutive time-based stock awards, in-the-money portion of convertible senior notes and warrants are included in the GAAP weighted-average diluted shares in periods where we have GAAP net income. We exclude the in-the-money portion of convertible senior notes for(4) non-GAAP weighted-average diluted shares as they are covered by our note hedges. We include stock awards with performance conditions not yet satisfied for non-GAAP weighted average diluted shares at forecasted attainment levels to the extent we believe it is probable that the performance condition will be met.

Note: Numbers are rounded for presentation purposes and may not foot.ServiceNow, Inc.

Reconciliation of Non-GAAP Financial Guidance

Three Months Ended

March 31, 2022

March 31, 2021

Growth Rates

GAAP subscription revenues

$1,610 - $1,615 million

$1,293 million

25%

Effects of foreign currency rate fluctuations

$35 million

2.5%

Non-GAAP subscription revenues(1)

$1,645 - $1,650 million

27.5%

cRPO growth rate

28%

Effects of foreign currency rate fluctuations

1.5%

Non-GAAP cRPO growth rate(2)

29.5%

GAAP operating margin

4%

Stock-based compensation expense as % of total revenues

20%

Amortization of purchased intangibles as % of total revenues

1%

Business combination and other related costs as % of total revenues

0%

Non-GAAP operating margin

25%

GAAP weighted-average shares used to compute net income per share - diluted

204 million

Effects of in-the-money portion of convertible senior notes(3)

(1) million

Non-GAAP weighted-average shares used to compute net income per share - diluted

203 million

ServiceNow, Inc.

Reconciliation of Non-GAAP Financial Guidance



Three Months Ended

March 31, March Growth 2022 31, 2021 Rates



$1,610 - $1,293GAAP subscription revenues $1,615 million 25% million



Effects of foreign currency rate fluctuations $35 million 2.5%



$1,645 -Non-GAAP subscription revenues^(1) $1,650 27.5% million





cRPO growth rate 28%



Effects of foreign currency rate fluctuations 1.5%



Non-GAAP cRPO growth rate^(2) 29.5%



GAAP operating margin 4%



Stock-based compensation expense as % of 20% total revenues



Amortization of purchased intangibles as % of 1% total revenues



Business combination and other related costs 0% as % of total revenues



Non-GAAP operating margin 25%



GAAP weighted-average shares used to compute 204 million net income per share - diluted



Effects of in-the-money portion of (1) million convertible senior notes^(3)



Non-GAAP weighted-average shares used to 203 million compute net income per share - diluted

Twelve Months Ended

December 31, 2022

December 31, 2021

Growth Rates

GAAP subscription revenues

$7,020 - $7,040 million

$5,573 million

26%

Effects of foreign currency rate fluctuations

$110 million

2%

Non-GAAP subscription revenues (1)

$7,130 - $7,150 million

28%

GAAP subscription gross margin

83%

Stock-based compensation expense as % of subscription revenues

2%

Amortization of purchased intangibles as % of subscription revenues

1%

Non-GAAP subscription margin

86%

GAAP operating margin

5%

Stock-based compensation expense as % of total revenues

19%

Amortization of purchased intangibles as % of total revenues

1%

Business combination and other related costs as % of total revenues

0%

Non-GAAP operating margin

25%

GAAP net cash provided by operating activities as % of total revenues

39%

Purchases of property and equipment as % of total revenues

(8%)

Repayments of convertible senior notes attributable to debt discount as % of total revenues

0%

Business combination and other related costs as % of total revenues

0%

Non-GAAP free cash flow margin

31%

GAAP weighted-average shares used to compute net income per share - diluted

204 million

Effects of in-the-money portion of convertible senior notes(3)

0 million

Non-GAAP weighted-average shares used to compute net income per share - diluted

204 million

Twelve Months Ended

December 31, December Growth 2022 31, 2021 Rates



$7,020 - $5,573GAAP subscription revenues $7,040 million 26% million



Effects of foreign currency rate fluctuations $110 million 2%



$7,130 -Non-GAAP subscription revenues ^(1) $7,150 28% million



GAAP subscription gross margin 83%



Stock-based compensation expense as % of 2% subscription revenues



Amortization of purchased intangibles as % of 1% subscription revenues



Non-GAAP subscription margin 86%



GAAP operating margin 5%



Stock-based compensation expense as % of total 19% revenues



Amortization of purchased intangibles as % of 1% total revenues



Business combination and other related costs 0% as % of total revenues



Non-GAAP operating margin 25%



GAAP net cash provided by operating activities 39% as % of total revenues



Purchases of property and equipment as % of (8%) total revenues



Repayments of convertible senior notesattributable to debt discount as % of total 0% revenues



Business combination and other related costs 0% as % of total revenues



Non-GAAP free cash flow margin 31%



GAAP weighted-average shares used to compute 204 million net income per share - diluted



Effects of in-the-money portion of convertible 0 million senior notes^(3)



Non-GAAP weighted-average shares used to 204 million compute net income per share - diluted

(1)

Non-GAAP revenues and the corresponding growth rates are derived by applying the average exchange rates in effect during the comparison period rather than the exchange rates for the guidance period.

(2)

Non-GAAP cRPO growth rate is derived by applying the end of period exchange rates in effect during the comparison period rather than the actual end of period exchange rates in effect during the current period.

(3)

We exclude the in-the-money portion of convertible senior notes for non-GAAP weighted-average diluted shares as they are covered by our note hedges.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220126005116/en/

CONTACT: Media Contact: Sara Day 650.336.3123 press@servicenow.com

CONTACT: Investor Contact: Darren Yip 925.388.7205 ir@servicenow.com