ServiceNow, Inc.

Good day, everyone, and welcome to the third quarter 2023 ServiceNow earnings call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be a question and answer session. In the interest of time, we do ask that you please limit yourself to one question. I would now like to turn the conference over to Darren Yip, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon, and thank you for joining ServiceNow's third quarter 2023 earnings conference call. Joining me are Bill McDermott, our Chairman and Chief Executive Officer, Gina Mastantuno, our Chief Financial Officer, and T.J. Desai, our President and Chief Operating Officer. During today's call, we will review our third quarter 2023 results and discuss our guidance for the fourth quarter and full year 2023. Before we get started, we want to emphasize that the information discussed on this call, including our guidance, is based on information as of today and contains forward-looking statements that involve risks uncertainties, and assumptions. We undertake no duty or obligation to update such statements as a result of new information or future events. Please refer to today's earnings press release and our SEC filings, including our most recent 10Q and 2022 10K, for factors that may cause actual results to differ materially from our forward-looking statements. We'd also like to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures calculated in accordance with GAAP. Unless otherwise noted, all financial measures and related growth rates we discussed today are non-GAAP, except for revenues, remaining performance obligations, or RPO, current RPO, and cash and investment. To see the reconciliation between these non-GAAP and GAAP measures, please refer to today's earnings press release and investor presentation, which are both posted on our website at investors.servicenow.com. A replay of today's call will also be posted on our website. With that, I'll turn the call over to Bill. Thank you, Darren, and thank you, everyone, for joining us today.

On behalf of Gina, CJ, and our entire company, I'd like to first make a brief statement about recent events. ServiceNow has a very special team in Israel. One of our own colleagues, Shlomi Sevidia, was at the Supernova Music Festival. He was murdered in the unprecedented and heinous attack Shlomi was highly respected, admired, and a good friend to many. We stand in solidarity with our team and with their families. Terrorism has caused the unfathomable humanitarian crisis that now engulfs millions of people in Israel and in Gaza. Our hearts break for the innocent on all sides. Even with optimism and short supply, we choose to honor the dream of a peaceful and prosperous future for the Middle East region. God bless and protect all those in harm's way. Now for business. Of course, that's the reason we're here to discuss ServiceNow's Q3 results. We're proud that our company once again delivered beyond expectation. ServiceNow has delivered subscription revenue that grew by 24.5% in constant currency, over one point above our guidance. CRPO grew a strong 24%. That's 2.5 points above our guidance. Operating margin was 30%, more than 2.5 points above our guidance. We had 83 deals greater than 1 million in net new ACV, up from 69 a year ago, a 20% increase year over year. Our focus on landing the right new customers continued to deliver. Large new logo growth accelerated for the third consecutive quarter. ServiceNow's traction as the intelligent platform for end-to-end digital transformation has intensified. All of our workflow businesses were in 14 or more of the top 20 deals. ITSM, ITOM, ITAM, security and risk, customer, employee, and creator. Within our technology workflows, security and risk had a very strong quarter with 10 deals over a million. Employee workflows had a stellar quarter with seven deals over a million and one deal over 10 million. From an industry perspective, this was the best U.S. federal quarter in ServiceNow's history. NNACV was up over 75% year over year. U.S. federal agencies are standardizing on a single platform with a core set of end-to-end solutions. We had 19 federal deals over a million, including three deals over 10 million. Our top deal in the quarter, the United States Air Force, was the third largest deal in the company's history. You'll hear from Gina that this performance has heightened our confidence for a strong Q4. We're increasing the full year guidance on the top line and the bottom line. And here is the key takeaway. AI has strengthened the market dynamics for enterprise software. ServiceNow is the fastest growing company in this market at relative scale. We have the highest rule of 50 plus across our peer set. with the highest growth of any other large cap software company. We are the best performing enterprise software company in IPO. This is a unique, highly differentiated company that is rewriting the benchmarks to be best in class in the SaaS industry. Looking beyond the quarterly results, while the world's challenges are sobering, the digitization imperative is stronger than ever. Gartner forecasts that $3 trillion will be spent on AI and Gen AI between 2023 and 2027. Gen AI represents 36% of AI spending overall. We believe every dollar of global GDP will be impacted by AI over the next several years. This isn't a hype cycle. It is a generational movement. In the last year, ServiceNow has doubled down on our AI investments. Our Vancouver release includes Generative AI Powered Now Assist for every workflow. Others issued press releases. We released products. At ServiceNow, our strategy isn't about exuberance. It's about execution. We've carefully laid the groundwork for success and talent in resources and technology. This investment is accelerating our already robust pipeline, with customers lining up to be first movers in this next wave of business transformation. The question we've been asked repeatedly, does AI drive growth? The definitive answer is yes, it does. GenAI represents a tailwind of growth to ServiceNow. We have over 300 customers in our pipeline from every industry, every buying center, and every stage of testing. Our Gen AI SKU drove the highest number of customer requests for a pre-release product in our history. We launched Vancouver on September 29th. That left us one day in Q3 to sign deals, and we signed four large deals. A U.S. government agency selected our premium SKU offerings to be an early adopter of Gen AI. Real estate leader CBRE is harnessing generative AI with ServiceNow to deliver superior service to customers and employees while reducing costs. NVIDIA is accelerating its own ServiceNow journey with generative AI. Among other leading companies, Keller Performance, joined ServiceNow's AI Lighthouse program. They will collaborate on new generative AI use cases that boost productivity while increasing customer and employee satisfaction in key industries. We had a wide range of other customer wins in the quarter as well. FedEx is using ServiceNow to simplify their IT workflows while building a universal employee portal to improve employee experience for a half a million global employees. One of the world's largest automakers selected ServiceNow to help consolidate dozens of applications into a new modern platform to accelerate their push into the EV market. Philips, Mars, Bank of California, Cleveland Clinic, the US Department of Defense, Fujitsu, Asahi Mutual Insurance, and the State of California are among many others. We see a meaningful path for all customers to recognize value from generative AI in the quarters to come. Our innovation velocity is very high, pipeline is growing fast, and capacity to execute is well proven. And this is just the beginning. Looking holistically at our business, we see progress everywhere. We have an aspiration to significantly increase the percentage of net new revenue sourced by our partners in the coming years. This is about partners making the ServiceNow platform the core of their emerging business models. One exciting example is our customer, Trane Technologies. They are a global climate innovator, which recently announced plans to acquire ServiceNow partner Nuvolo. With Nuvolo, trained technologies can bring world-class digital solutions engineered on the ServiceNow platform to their global customer base. This creates a flywheel effect to ServiceNow. More use cases drive more workflow automation. And today, we're excited to share that Deloitte and ServiceNow announced an expansion to our alliance. Deloitte, will become a pioneering partner integrating our generative AI capabilities into their leading operating services globally. This addition underscores Deloitte's commitment to enhance performance with cross-industry solutions built on the ServiceNow platform. We're also scaling our ecosystem globally with today's announcement of a co-investment in Answer, a market leader in enabling companies to scale technology centers. Another area that we expect to fuel long-term sustainable growth is industry verticalization. Our product development roadmap is expanding with use cases in telecommunications, financial services, retail, and the public sector. And beyond any one industry, we increasingly see both intra and enter enterprise workflow opportunities on the ServiceNow platform. This new generation of business networks is creating value chains that transcend traditional business boundaries. Our rapid pace of workflow innovation creates an even greater demand for our training and skills initiative, Rise Up with ServiceNow. As one example, Future Skills Prime A digital skilling initiative of the Indian government will train thousands of learners across India in new digital skills. This partnership offers clear pathways to build careers as businesses worldwide grow their ServiceNow workforce. Bottom line, it's all points to growing the ServiceNow. In closing, we are building a company for the ages. By concentrating on customer value, we are creating immense shareholder value. At a strategic level, we chose to set the bar high to be the defining enterprise software company of the 21st century. We have an inspired team that is committed to our exponential dream. A company is only as great as each member of the team, and the team is only as great as the company. That is what culture is all about. Our employee engagement scores increased across the board this year. So did our retention rates, which are already best in class. We never went for layoffs. We went for thoughtful, careful expansion. When you look at the ongoing momentum from Knowledge23, it's clear the approach is working. The profitable growth profile of this company speaks for itself. The market is there for us, and now we're focused on Q4, delivering a strong full year and a fast start in 2024 as well. Thank you for your time today. I look forward to your questions. Now I'll turn it over to our outstanding CFO, Gina Mastantuno. Gina, over to you.