ServiceNow, Inc.

Good evening. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2019 ServiceNow earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Michael Scarpelli, Chief Financial Officer, you may begin your conference.

Good afternoon, and thank you for joining us. On the call with me today is John Donahoe, our President and Chief Executive Officer. During today's call, we will review our second quarter financial results and discuss our financial guidance for the third quarter and full year 2019. We'd like to point out that the company reports non-GAAP results in addition to and not as a substitute for or superior to financial measures calculated in accordance with GAAP. All financial figures we will discuss today are non-GAAP, except for revenues and remaining performance obligation. To see the reconciliation between these non-GAAP and GAAP results, please refer to our press release filed earlier today, our investor presentation, and for prior quarters, previously filed press releases, all of which are posted at investors.servicenow.com. We may make forward-looking statements on this conference call, such as those using the words may, will, expects, believes, or similar phrases to convey that this information is not historical fact. These statements are subject to risks, uncertainties, and assumptions. Please refer to the press release and risk factors in documents filed with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q for information on risks, uncertainties, that may cause actual results to differ materially from those set forth in such forward-looking statements. I would now like to turn the call over to John.

Thanks, Mike. Good afternoon, everyone, and thank you for joining us in today's call. We delivered another strong quarter, continuing our focus on driving customer success and enabling digital transformation as a strategic partner to the world's largest enterprises. We make work work better for people. That's our purpose. People want technology to make their lives at work simple, easy, and convenient. And that's exactly what's happened over the past decade in our lives at home. Cloud-based consumer apps and platforms have made the routine tasks of everyday life at home more simple, easy, and convenient. And now the same thing is happening at work. Digital transformation has become an essential business imperative for companies and governments all over the world, and C-suite leaders are embracing cloud-based platforms as a critical component of their digital transformation strategies. That is creating an exciting moment, an inflection point, where ServiceNow is well-positioned to help make life at work more like our lives at home. Simple, easy, and convenient. I'll speak more about this in a minute, but first let's take a look at the highlights from the quarter. In the second quarter, we closed 39 deals with ACV greater than a million dollars. We now have 766 customers doing more than a million dollars in business with us annually, which represents 33% growth year over year. And our renewal rate for the quarter continued to be strong at 98%. Our Q2 results, continued to demonstrate our strong product portfolio. 17 of our top 20 deals involved three or more products. And we landed several large deals in the financial services, technology, and automotive industries that involved multiple IT products. In fact, we signed one of our largest new customer deals ever with a major financial institution, which purchased most of our IT portfolios. We also had significant wins in CSM with three deals over a million dollars. Our customer workflow products enhance customer operations management. We help customers manage better their inbound contacts, identifying the root causes of customer issues, working to fix those issues to prevent future problems, and automating self-help solutions. That creates great experiences and better outcomes. Our Knowledge19 customer event in May was our biggest ever, and product innovation took center stage, which brings me back to the inflection point I mentioned at the beginning of my remarks. Our Chief Product Officer, CJ Desai, and his global product team continue to do an incredible job delivering product innovations to make work work better for people. And that was evident at Knowledge as we unveiled native mobile capabilities rolling out in our upcoming New York release. I'm personally very excited about our now mobile and mobile onboarding capabilities. We're delivering easy, intuitive, out of the box mobile capabilities that enable consumer-like experiences across the enterprise, making life at work more like life at home. These are the kinds of experiences that employees expect and demand today. Now mobile is designed to easily help employees get work done, solve problems, and search for information on the go. And our now mobile onboarding app is purpose-built to do one thing very well, make it simple and easy for a new employee to get up to speed fast and get productive quickly. Mobile technology was at the epicenter of the digital transformation in our lives at home. And we believe mobile technology will be at the very center of great experiences at work. Our recently announced partnership with Microsoft illustrates our focus on accelerating digital transformation for enterprise and government customers. This partnership will enable us to more fully leverage and integrate our platform and products with Microsoft's leading enterprise technology and capabilities. And using Microsoft Azure for workloads in highly regulated industries will help accelerate digital transformation for enterprise and public sector customers. With service now available through Azure Government, U.S. government agencies will be able to leverage the compliance coverage across regulatory standards available through Azure. the U.S. federal government continues to look to ServiceNow as an important strategic partner as it modernizes its IT infrastructure and accelerates the use of modern technology to digitally transform how they operate. We'll also be partnering with Microsoft in Australia, followed by additional markets in the future. The Microsoft partnership is just one example of how we are enhancing our alliances and partner ecosystems. For example, we also announced in the quarter a strategic agreement with Deloitte. Deloitte and ServiceNow plan to jointly develop, coordinate, and bring to market new products, assets, and solutions built on the Now platform. This will help deliver seamless digital experiences across the enterprise, improve workflows, and enhance productivity. Deloitte will also serve as the lead launch partner for our new Financial Operations Management product, which we announced at Knowledge in May. Our first application is Finance Close Automation, a natural extension of ServiceNow's workflows and platform capabilities. Finance Close Automation will help finance and accounting teams digitize their workflows to reduce finance close risk, improve team satisfaction, and accelerate the finance close process. At Knowledge, we also announced a number of enhancements to our partner strategy. This includes more intuitive segmentation of our global partner portfolio, better differentiating levels of expertise for our partners and customers. We're also implementing a more consistent, proactive, and predictable joint go-to-market engagement framework with our partners. Following knowledge, we held a very successful partner executive summit in early June with 16 of our top global partners. The shared energy and enthusiasm for the opportunities we have to jointly serve our customers was infectious. Creating a robust partner ecosystem is a priority for us, and we're off to a great start. David Parsons, who joined us last year, is doing a terrific job leading this effort. Before closing, I want to take a moment to express my deep thanks and appreciation to Mike. As previously announced, Mike is leaving ServiceNow in August. Mike has been with ServiceNow for eight years, and most of you have gotten to know Mike very well during that time. And anyone who's worked with Mike knows what an exceptional CFO and customer-focused leader he has been for our company. Mike joined ServiceNow in 2011 when the company had only 400 employees and was roughly $100 million in revenue. He helped take ServiceNow public in 2012 and has helped create the very foundation for our success. Mike's made many ServiceNow friends over the years, and we will definitely miss him. Personally, I'm deeply appreciative for Mike's partnership over the past two and a half years. He's been instrumental in our continued success and has helped set the stage for our next phase of growth. We have an active search underway for Mike's successor. And Mike's size 16 feet means his successor has big shoes to fill, literally and figuratively. But in all seriousness, there's strong interest in the role, and we will move as quickly as possible to land the right candidate. Meanwhile, Mike leaves a great finance team in place. In summary, I'm pleased with our continued progress and our focus and commitment on our customers and our teams. It was gratifying to see our momentum recognized during the quarter when Gartner gave us a positive vendor rating in its first ever review of our full company strategy and vision. We're committed to making the world of work work better for people, and we're focused on building deep customer relationships to enable their digital transformations. Technology should make life at work as easy as our lives at home. That's the future of work, and we intend to help make it happen. Now I'll turn it back over to Mike. Thank you, John.