ServiceNow, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Q3 2020 ServiceNow Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker, Ms. Lisa Banks, Senior Vice President of Finance. Thank you. Please go ahead, ma'am.

Thank you. Good afternoon, and thank you for joining us for ServiceNow's third quarter 2020 earnings conference call. Joining me are Bill McDermott, our president and chief executive officer, and Gina Mastantuno, our chief financial officer. During today's call, we will review our third quarter 2020 financial results and discuss our financial guidance for the fourth quarter of 2020 and full year of 2020. Before we get started, we want to emphasize that some of the information discussed on this call, particularly our guidance, is based on information as of October 28, 2020, and contains forward-looking statements that involve risk, uncertainties, and assumptions, including those related to the continued impact of COVID-19 on our business and global economic conditions. The guidance we will provide today is based on our assumptions as to the macroeconomic environment in which we will be operating. Those assumptions are based on the facts we know today. Many of these assumptions relate to matters that are beyond our control and changing rapidly, including, but not limited to, the timeframes for and severity of social distancing and other mitigation requirements, the continued impact of COVID-19 on customers' purchasing positions, and the length of our sales cycle, particularly for customers in certain industries. Please refer to the press release and risk factors and MD&A in our SEC filing, including our 2019 10-K and our 10-Q that will be filed for Q3 2020 for information regarding such risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such forward-looking statements. We'd also like to point out that the company reports non-GAAP results in addition to and not as a substitute for financial measures calculated in accordance with GAAP. All financial figures we will discuss today are non-GAAP except for revenues, net income, and remaining performance obligations. To see the reconciliation between these non-GAAP and GAAP results, please refer to our press release files earlier today, our investor presentation, and for prior quarters, previously filed press releases, all of which are posted at investors.servicenow.com. A replay of today's call will also be posted on the website. With that, I would now like to turn the call over to Bill.

Thank you, Lisa, and good afternoon, everyone. Welcome to our Q3 earnings call. I hope you and your loved ones are healthy and safe. We continue to be ServiceNow strong in support of our employees and communities in these challenging times. We also remain passionately focused on delivering for our customers, partners, and shareholders. 2020 has brought unimaginable change to the world. Companies have to operate in new and faster ways, pivoting their business models. Everyone is adapting to new employee and customer expectations. It's all about people. Getting teams to collaborate across the enterprise is now more important than ever. The workplace of the future will be distributed. Managing complex digital workflows will be critical. Enterprises need innovation without disruption. It's clear that speed has become the differentiator. ServiceNow is leading this once-in-a-generation opportunity to make work work better for people. And this is what we're seeing. All value chains are being split apart. They are being reformed into modern digital workflows across the enterprise. More than $3 trillion have been invested in digital transformation initiatives. But as IDC research shows us, only 26% of the investments have delivered meaningful ROI. Massive investments are simply not creating massive change. This is fueling the workflow revolution. The missing link is integration. Systems, silos, departments, and processes must come together into holistic cross-enterprise workflows. The Now platform unlocks this ROI by offering speed, agility, and resilience. Companies need it now. It gives companies the ability to deliver at scale the experiences employees and customers demand. That's the power of the now platform, a single architecture and data model that serves as the enterprise platform for all other platforms. In other words, it's the platform for digital business. As one CIO said to me, my goal with the now platform is to enable my colleagues to perform their top 50 tasks in a single environment that provides a consumer-like experience. The momentum of the workflow revolution is unstoppable. Despite the COVID operating environment, our team delivered outstanding Q3 results. Gina will provide the details. Here are the headlines. We beat expectations across the board. We surpassed 1,000 customers with ACV over $1 million. We landed our largest deal ever with our largest customer, who has now crossed over 40 million in ACV. And we're raising full-year guidance today. We're driving sustainable growth well on our way to 10 billion and beyond. I'm incredibly proud of our team. In the most challenging of times, we are focused, disciplined, committed to helping our customers succeed above all other priorities. The speed at which we're innovating has never been faster. Our team is leading the future of work. We are releasing new innovations every two weeks with our safe workplace suite to help our customers safely return their employees back to the workplace. Other new product introductions include hardware asset management, financial services operations, telecom service management, legal service delivery, workplace service delivery, and connected operations. I could go on. In addition, our platform innovations are differentiated for the direct-to-consumer industry, where subscribers demand flawless customer service. One of the largest streaming services in the world seamlessly upgraded their ServiceNow environment this past weekend with zero downtimes. There was no impact to any of their active subscribers. How's that for customer service? Such innovation demonstrates the power of the now platform. We were honored in Q3 to be named a leader in the 2020 Gartner Magic Quadrant for enterprise low-code application platforms. We believe this is yet another example of the agility of the now platform to help customers quickly workflow any challenge. We think our partner recognition validates the breadth of our IT solutions, putting ServiceNow in a leader position in the two 2020 magic quadrants, IT risk management and IT vendor risk management tools. And, of course, we remain committed. the leader on both, completeness of vision and highest in ability to execute for our ITSM core business. Amazing. Now let's look at Q3 performance. Highlights across our portfolio. Here we go. Our top 20 deals included three or more products. Our core remains ever strong. ITSM was included in 17 of the top 20 deals. with customers choosing ITSM Pro in 16 deals. The embedded AI and machine learning capabilities are helping IT organizations scale and automate, reduce complexity, cost, and risk, while enabling people to work from anywhere. ITOM was included in 18 of the top 20 deals. We won deals with Mount Sinai and the Federal Defense Information Systems Agency. Our customer workflows continue to be a growth driver. Thirteen of the top 20 deals included CSM. Eight of those deals were greater than a million. Our customer wins in Q3 demonstrate how ServiceNow is becoming the enterprise workflow standard. For example, Q3 was our largest federal quarter ever. We now have nine federal customers, over 10 million in ACV. Deals included the U.S. Air Force, U.S. Army, and the U.S. Department of Veteran Affairs. And we had new customer wins with agencies such as the U.S. Senate and Federal Claims Court. In our largest deal ever, the Department of Veteran Affairs is modernizing its enterprise service management and IT capabilities. They are using the Now platform to have real-time visibility into the health, availability, and costs of their critical business services. This will deliver significant benefits to our heroic veterans. With IPSM Pro, VA will automate its manual workflows with AI and machine learning capabilities to free up employees to better serve veterans. As the U.S. Air Force has publicly described, they are deploying the NOW platform as part of their Digital Air Force of the Future vision. We are helping them deliver genius bar lights self-help services to the women and men serving our country around the globe. In addition to federal, state governments also are leveraging the Now platform. Tennessee's Department of Human Services expanded its relationship with ServiceNow. They are using CSM to reopen state offices for public services while keeping health and safety a priority. They quickly adopted our latest Now platform, Harris Release, utilizing a new feature that enables the public to self-schedule appointments and digitally check in when arriving for appointments. The state of Alaska's governor issued a directive to protect workers and ensure that the state can continue operating in a pandemic environment. Their existing systems, manual processes, and dispersed population created numerous issues to work effectively. The HR department is transitioning to a centralized operating model and ServiceNow will solve their manual onboarding issues and enable employee workflows to be digitally transformed. Outside of federal and state and customers across industries, the Now platform is the standard for driving enterprise digital transformation. 2020 has brought significant changes to Dell's work-from-home model. Our HR product will support this new way of working by providing enterprise onboarding and transitions, and the Now platform is helping Dell in its mission to provide the best customer experience in the markets they serve. Leading managed services provider, TPS, became the first customer of our new telecom industry-specific product. ServiceNow is going to run TPX's customer portal, enabling onboarding, project management, customer servicing, and IT support. A major Indian financial institution chose ServiceNow to give them complete visibility to better control enterprise risks, replacing legacy solutions that were stitched together. This is another example of the movement we are seeing in the industry to replace legacy solutions and consolidate on the Now platform. Huge savings. In Q3, we continued to see strong momentum with our Safe Workplace suite of apps. This quarter, we added two new apps into the Safe Workplace suite, Employee Travel Safety and Health and Safety Testing. Our Safe Workplace apps demonstrate our ability to innovate quickly and deliver fast time to value in weeks, not months and years. We've seen nearly 800 downloads of our Safe Workplace apps. Customers include Standard & Poor's, Raymond James, and Rutgers University. At Rutgers, our Safe Workplace apps are being used for health screening, contact tracing, and room reservations. to ensure a safe environment for all students and faculty. Here's my favorite customer win. I'm a huge basketball fan. As many of you know, my grandfather, Bobby McDermott, was a Hall of Famer. So I couldn't be more proud of how ServiceNow helped pro basketball have a successful restart season. The NBA and WNBA were able to implement ServiceNow's employee workflows in under a week to manage the complex manual processes associated with restarting. ServiceNow helped the league facilitate screening for more than 2,600 league staff, vendors, and guests who entered the NBA and WNBA bubble in Florida and successfully processed more than 13,000 essential documents. Using ServiceNow technology, the league demonstrated that a safe, careful return to professional sports was possible with the right tools and protocols in place. We are very proud to become the official workflow partner of the NBA and WNBA. And we look forward to helping the league continue to drive digital transformation to deliver great employee, player, and fan experiences. As we drive great customer wins, our partner ecosystem is growing even stronger. We are grateful for the investments our partners are making to grow their ServiceNow businesses and to serve our customers. We recently announced a go-to-market partnership between IBM and ServiceNow. This new business opportunity combines ServiceNow's ITSM and ITOM capabilities with IBM's Watson AIOps to help customers automate IT at scale, reducing cost and risk. Last week, we announced an expanded partnership with Accenture. The new Accenture ServiceNow business group will accelerate digital transformation programs for customers in telecom, government, financial services, manufacturing, healthcare, and life sciences. Hey, in summary, Q3 was another great, outperformed quarter. ServiceNow is accelerating. We are confident in our ability to succeed in this environment. We are bullish. on our long-term outlook and our path to $10 billion and beyond. Our leadership is expanding our reach and opportunities. With marquee partnerships such as the NBA and WNBA, IBM, and Accenture, there are many more. Our brand is resonating. We are becoming an essential C-suite strategic partner. Our ecosystem is growing fast. Our go-to-market capabilities are stronger than ever. Our product innovation is second to none. We're deeply committed to attracting, retaining, and developing the best talent in this industry. We are a big tent company dedicated to diversity, inclusion, and belonging. Diversity makes us stronger, making ServiceNow the destination company where the best talent belongs and thrives. And this is what's going to make us unstoppable. Our new board member and new chief global talent officer were announced today, and it demonstrates the caliber of people we are attracting. I could not be more thrilled to have Larry Jackson joining our board and Gabby Toledano joining our leadership team. Both are exceptional leaders. Larry is leading a music industry revolution for Apple Music. his experience using technology to create innovative market leading consumer experiences will be invaluable as we drive innovative employee and customer experiences for the global marketplace likewise gabby brings deep tech industry and talent leadership experience building world-class organizations at scale for some of the best-known companies in the world we were humbled to recently be recognized as the company with the best leadership team in an anonymous survey of more than 10,000 employees across the industry. Gabby is a great addition who will only make us stronger. In so many ways, we are just getting started. This year's unprecedented headwinds have only strengthened our digital transformation tailwinds. We have the platform businesses need, the workflow standard for enterprise transformation. the missing link for integration of existing technology investments, and the creation of modern enterprise workflows. Remember, behind every great experience is a great workflow. Whatever challenge a business is facing, we workflow it. We will make workflow a verb. ServiceNow is incredibly well positioned to become the defining enterprise software company in the 21st century. We will not slow down in pursuit of this goal. We couldn't be more fired up to finish this year very strong. And now I'll turn the call over to our outstanding CFO and my friend, Gina.