Virgin Galactic Holdings, Inc.

ladies and gentlemen thank you for standing by my name is krista and i will be your conference operator today at this time i would like to welcome everyone to the service now first quarter 2025 earnings conference call all lions 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 followed by the number one on your telephone keypad And if you'd like to withdraw your question, press star one again. Thank you. And I would now like to turn the conference over to Darren Yip, Senior Vice President of Investor Relations and Market Insight. Darren, you may begin.

Good afternoon and thank you for joining ServiceNow's first quarter 2025 earnings conference call. Joining me are Bill McDermott, our Chairman and Chief Executive Officer, Gina Mastantuno, our President and Chief Financial Officer, and Amit Zaveri, President, Chief Product Officer, and Chief Operating Officer. During today's call, we will review our first quarter 2025 results and discuss our guidance for the second quarter and full year 2025. 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 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 investments. 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 today's call. A privileged platform has a privileged position in the enterprise. Let's start with ServiceNow's Q1 results. This was our biggest Q1 ever for net new ACV. Subscription revenue grew 20% year-on-year in constant currency, slightly above the high end of our guidance range. CRPO grew 22%. year-on-year in constant currency, a stunning 150 basis points above our guidance. Operating margin was 31%, approximately 100 basis points above our guidance. Free cash flow margin was 48%, putting us once again significantly above the rule of 50 for the quarter. We had 72 deals greater than a million in net new ACV, up from 63 a year ago. Of these large deals, nine were greater than 5 million in net new ACV. We crossed the 500 plus customers billing greater than 5 million in ACV milestone, up from 425 a year ago. Our remaining performance obligation is now $22 billion. growing 25.5% year over year. We saw strength across the full ServiceNow Solutions portfolio. Technology workflows had 36 deals over a million, including two over 5 million. All segments, ITSM, ITOM, ITAM, security and risk, were in more than one half of our top 20 deals. CRM and industry workflows continued its momentum in 16 of our top 20 deals with nine deals that were over a million. Core business workflows, which is employee, finance, and supply chain solutions, were in half of the top 20 deals with eight deals over a million. Creator workflows were in all top 20 deals. was another substantial acceleration for ServiceNow AI. The number of pro plus deals more than quadrupled year over year, including 39 deals with three or more now assist products. Average ACV deal sizes grew by one third, quarter over quarter, as ProPlus products were included in 15 of our top 20 deals. Our next generation database for the AI world, RaptorDB, saw a net new ACV acceleration quarter on quarter with five deals over a million. What you see in this print is a high performing company with growing strategic relevance and bedrock strength customer relationships. We are leading the AI race because we ourselves are running it. You're all very familiar with ServiceNow, now on now. The ServiceNow team is raising the bar by innovating on our own platform, taking an end-to-end, agentic AI-first approach to running our business. We see this in a 16x improvement from lead-to-sale conversion and an over 86% deflection of the soul-crushing work people used to do themselves. We're incredibly proud that this business is firing on all cylinders. Now, on what ServiceNow will deliver moving forward. As Gina will share with you, we've raised the guy. While it's true there are some knowns out there, this is far from the first macro disruption we have encountered. Ambition and prudence are not mutually exclusive concepts. You don't build a defining company by surrendering to uncertainty. You do it by seeing challenges as opportunities. We have zero interest in anything less than outperforming like ServiceNow has always done. Here's what we know. Strong demand for ServiceNow's AI platform for business transformation is gaining momentum. as evidenced by our healthy pipeline. Our AI summit attendance and digital demand signals are extremely positive. In two weeks, we will have the biggest knowledge in ServiceNow's history with attendance and sponsorship revenue at all-time highs. This is all because ServiceNow has transcended digital transformation. We are driving business transformation. CEOs are mindful that the global economy is in a fluid state. No, they are not standing still. In all industries, we see a renewed focus on cost takeout by rooting out inefficiencies, modernizing outdated tech stacks, and restoring an integrated enterprise. ServiceNow has never been more relevant given our alignment to these precise business priorities. and the unmatched speed to value from deployment that our technology delivers. We are built for this moment. On the topic of tariffs and trade negotiations, the voice of the customer is the only guide that matters. I met with the CEO of a U.S. auto manufacturer who is laser focused on increasing competitiveness in the face of tariffs. If they don't adapt their global supplier network fast enough, their costs will increase by up to $10,000 a vehicle. Unlike past disruptions in the global markets, supply chain AI agents now reconfigure business rules in real time. Businesses reduce dependency on high tariff regions by reprioritizing tier two and three suppliers while activating the certification of new vendors. This same conversation is happening across all industries as CEOs navigate this terrain. With regard to the public sector, let me be clear. We had a great Q1 because ServiceNow's strategy is rooted in government automation and modernization. This is being championed by the Trump administration with local leaders and national governments around the world following suit. In Q1, U.S. public sector grew by over 30% year on year with six new logos, including one in U.S. federal. We had 11 federal deals over a million up from eight a year ago, including two that were over 5 million. Our Fed forum in February was a tremendous success. We had 1,700 federal and public sector customers, prospects, and partners, including 40 new logos. By the way, that great turnout was on the day of a major Northeast snowstorm. One agency is using ServiceNow AI agents to automate contract reviews, streamline approvals, and lower operational costs. We're seeing this transformation play out across government as leaders act on the administration's call to modernize operations and return savings to the American people. Moving forward, we will continue our productive discussions with senior administration and those officials. The engagement has been very positive as we have a shared ambition to transform government and the way it interacts with citizens. The common thread is that ServiceNow is set up for sustainable growth as the market's leading enterprise AI platform. There are many intentional reasons this is the case. The biggest is net new innovation. Winning companies anticipate disruption by building additional growth engines. ServiceNow has consistently expanded its addressable market over time from IT to employee experience, CRM, procurement, supply chain, and most recently entering the data space with RaptorDB and Workflow Data Fabric. One of the biggest growth areas ever is the enterprise AI market. Gartner describes this trend as the start of the intelligence super cycle. which is expected to run for at least the next 10 years. So we're only in the early days, and a lot of companies are hearing agentic AI pitches right now. And what sets ServiceNow apart is simple, our platform. We integrate across the entire tech stack, ERP, CRM, HCM, bringing all that data into a single model. Further from there, We elevate into the workflow layer, transforming data into actionable insights. Then we move into the AI layer, not just automation, but true AI agents executing real tasks in parallel to drive outcomes. When that clicks for customers, they get it. They want to run their business from our platform. That's why now assist performance surged once again in Q1. That's why the software industrial complex is converging on ServiceNow as the AI operating system for the enterprise. From this position of unrivaled strength, we announced the intent to acquire MoveWorks. When completed, MoveWorks' user-centric product combined with ServiceNow's complementary AI-driven workflow automation will augment employee self-service driving significant cost savings and increases to overall employee productivity. This is going to bring together both requesters, where Moveworks excels, and fulfillers, ServiceNow's bread and butter at an unprecedented scale. This will also expand ServiceNow's enterprise search capabilities, a whole new product category, unlocking even more TAM for the company. Another growth engine is our CRM expansion. The announcement of a deal to acquire Logic.ai, a company with a modern AI configure price and quote solution, which will accelerate ServiceNow CRM momentum in sales and order management. ServiceNow CRM and industry workflows already ServiceNow's fastest growing business. Plus, Logic AI's best-in-class capabilities for AI-powered selling will drive net new levels of performance in sales and commerce for our customers. This will be a natural step forward in ServiceNow's CRM strategy, building on our core strengths of connecting functional teams and powering simple, efficient workflows. configure, price, quote, sell, fulfill, service on one fully integrated architecture with native built AI agents to take automation to the next level. There's not a day that passes when we don't hear from customers who are dissatisfied with their status quo. For a long time, I've been saying no one has to lose for us to win. Our customers have now adjusted me. They want someone else to lose so they can continue to invest more in ServiceNow. We could take up the entire call with updates on ServiceNow's innovation velocity. Here's the bottom line. We have the raw materials to keep winning. We also have the right team to win. Paul Phipps, our new president of Global Customer Operations, whose promotion was announced earlier today, has a distinguished track record as a U.S. military veteran who served in the 82nd Airborne, as well as sea level technology leadership roles for great global brands. Since joining ServiceNow in 2021, he has become one of our most successful executives, leading our largest marquee customer relationships. We most recently elevated him to oversee global sales in Q1, as an on-ramp to today's announcement. Obviously, he's off to a terrific start. I'd also like to warmly congratulate Paul Smith for a consequential five-year run at ServiceNow. I'm proud of how he scaled our global go-to-market organization, and together we built a world-class team and methodically nurtured the right leaders to take us to 2030 and beyond. Paul has designed a seamless transition and will remain a special advisor to me and the team in the months ahead to ensure zero disruption. And moving forward, we'll stay totally focused on elite-level execution, which has shaped us into the differentiated, profitable, fast-growth company we are today. In closing, the platinum benchmark in enterprise technology is the customer story. That's why we went for the world works with ServiceNow, because we knew the customer had to be the hero of our brand. When I look at our great Q1, I see so many inspiring examples. One is Aptiv, a global technology company that has been at the forefront of innovation across automotive, telecommunications, industrial, aerospace and defense, among other sectors. Aptiv and their great CEO, Kevin Clark, made a bold move in Q1 to expand their use of ServiceNow to drive cost takeout and improve productivity. With Aptiv and WinRiver, they'll also enter into a strategic partnership with us to build joint AI solutions for the industries where we have clear permission to win together. Another example is our landmark five-year collaboration with Vodafone. This business will usher in the next era of AI-powered service for millions of business users. ServiceNow and Devoteam are partnering to transform CRM for businesses in Europe and the Middle East. When companies are not only transforming how they work with ServiceNow, but also how they grow with ServiceNow, our growth movement couldn't be more exciting. Adobe, Accenture, National Hockey League, NEC, and Hitachi Energy are just some of the countless world-class brands putting AI to work for people with ServiceNow. Wells Fargo launched ServiceNow AI with RaptorDB to automate complex workflows and process data sets in real time. The whole group, Yokohama City, Pure Storage, and Pro Assurance are on the CRM journey with ServiceNow. The California Highway Patrol and Harris County, Texas are transforming the public sector with ServiceNow. Our customers are on the move. When they work, the world works. There's a lot of talk about uncertainty. In this industry, the only real certainty is this. There are no shortcuts to greatness. It has to be earned through every peak and valley on the journey. That's why ServiceNow will always fight with an optimistic spirit to deliver innovation and growth. We work every day to honor the trust that has been invested in us because trust is the ultimate human currency. That's been true since Fred Luddy started this company with a big heart and a bold dream to make the world work better for everyone. We carry that forward in our determination to be the defining enterprise software company of the 21st century. Thank you all for your time. I look forward to your questions. And now I'll hand things over to our president and CFO, Gina Mastantuno. Gina, over to you.