ServiceNow (NOW) Tops Q1 EPS by 26c
ServiceNow (NYSE: NOW) reported Q1 EPS of $3.41, $0.26 better than the analyst estimate of $3.15. Revenue for the quarter came in at $2.6 billion versus the consensus estimate of $2.59 billion.
Financial Outlook
Our guidance includes GAAP and non-GAAP financial measures. The non-GAAP growth rates for subscription revenues are adjusted for constant currency by excluding effects of foreign currency rate fluctuations and any gains or losses from foreign currency hedge contracts, and cRPO are adjusted only for constant currency to provide better visibility into the underlying business trends. In Q1 2024, we initiated a program to hedge a portion of our forecasted foreign currency denominated revenues. While the cash flow hedging program is designed to reduce the impact of foreign currency exchange rate fluctuations on our subscription revenues, the strengthening of the U.S. Dollar since December 31, 2023 has still resulted in an adverse impact to our 2024 guidance. As we have previously mentioned, the Q3 2023 strength of our U.S. Federal business has resulted in a higher mix of contracts containing 12-month renewal terms. This will create a negative 2-point impact to Q2 2024 cRPO growth, as that balance is amortized into revenue. We expect that these contracts will renew in Q3 2024 as ServiceNow’s U.S. Federal renewal rates have been 99%.
The following table summarizes our guidance for the second quarter 2024:
| Second Quarter 2024 GAAP Guidance |
| Second Quarter 2024 Non-GAAP Guidance(1) | |
| Amount | Year/Year Growth (%)(3) |
| Constant Currency Year/Year Growth (%) |
Subscription revenues | $2,525 - $2,530 | 21.5% - 22% |
| 22% |
|
|
|
|
|
cRPO |
| 20.5% |
| 20.5% |
Note: Includes impact from strength of public sector business noted above |
|
|
|
|
|
|
|
| Margin (%)(2) |
Income from operations |
|
|
| 25% |
|
|
|
|
|
|
| Amount (millions) |
|
|
Weighted-average shares used to compute diluted net income per share |
| 208 |
|
|
(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. | |
(2) | Refer to the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures. | |
(3) | Guidance for GAAP subscription revenues and GAAP subscription revenues and cRPO growth rates are based on the 31-day average of foreign exchange rates for March 2024 for entities reporting in currencies other than U.S. Dollars. |
The following table summarizes our guidance for the full-year 2024:
| Full-Year 2024 GAAP Guidance |
| Full-Year 2024 Non-GAAP Guidance(1) | |
| Amount | Year/Year Growth (%)(3) |
| Constant Currency Year/Year Growth (%) |
Subscription revenues | $10,560 - $10,575 | 21.5% - 22% |
| 21.5% |
|
|
|
|
|
|
|
|
| Margin (%)(2) |
Subscription gross profit |
|
|
| 84.5% |
Income from operations |
|
|
| 29% |
Free cash flow |
|
|
| 31% |
|
|
|
|
|
|
| Amount (millions) |
|
|
Weighted-average shares used to compute diluted net income per share |
| 208 |
|
|
(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. | |
(2) | Refer to the table entitled “Reconciliation of Non-GAAP Financial Guidance” for a reconciliation of GAAP to non-GAAP measures. | |
(3) | GAAP subscription revenues and related growth rate for the future quarter included in our full-year 2024 guidance are based on the 31-day average of foreign exchange rates for March 2024 for entities reporting in currencies other than U.S. Dollars. |
For earnings history and earnings-related data on ServiceNow (NOW) click here.