ServiceNow (NOW) 25 Jan 232022 Q4 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to the ServiceNow Q4 2022 Earnings Conference Call. [Operator Instructions]. At the time, I'll turn things over to Darren Yip, Vice President, Investor Relations. Darren, please go ahead.

Good afternoon, and thank you for joining ServiceNow's Fourth Quarter and Full Year 2022 Earnings Conference Call.

McDermott, Chief and Desai, Financial and Operating Bill Gina Executive our are Chief our Mastantuono, Officer; Officer. me our Chief Chairman Officer; President Joining and CJ

results review quarter first full year fourth will for and we call, our guidance today's quarter During XXXX and XXXX. discuss the our

involve some forward-looking as such such uncertainties we guidance as obligation risks, Before that is started, statements of discussed undertake information based or or result want we events. the get information future today statements of our contains and on that emphasize on We duty assumptions. to of this a and information as call, new no update to

release in differ to, revenue, like to and and GAAP. today investments. Please forward-looking that for obligations, as for, non-GAAP and filings our noted, also a factors non-GAAP, SEC most materially Unless we substitute addition RPO, current statements. cause We'd measures or that XXXX out not refer measures performance earnings including results cash financial for and actual except from in XX-K to may rates related accordance press our are otherwise to and present we recent today's point discuss growth the with remaining all XX-Q measures RPO calculated financial and

of call non-GAAP posted replay I'll turn To are A that, both which presentation, Bill. GAAP over on see our today's measures, at our reconciliation to Bill? release between servicenow.com. and investor and will earnings With posted the call these please press the also website. refer to website today's on be

company. to joining thank gentlemen, perform and and as-the-beyond Darren, for you, us today. Thank ladies ServiceNow continues expectations you,

Operating in XX%, subscription of XX.X% margin points our guidance revenue For above QX, constant beat with guidance. was we X growth currency.

deals guidance. and XXX including in Latin largest We Our X America. flow greater above million $X QX, was XX%, deals our worldwide had in in ever than margin our point free cash EMEA

cRPO the growth, better-than-expected industry QX constant reliance benchmark. business we in less rate With currency with had new XX.X% renewals. renewal XX% remains Our actually early on

business for we giving new this guidance are on very strong a Based surge, XXXX.

that optimism We'll a Our QX. we'll beyond march forecast that in go work guidance begin it, disciplined balances ServiceNow's reflects for and our hard business. appropriately to well-founded

takeaway. the main is of operating XX.X%. the complex environment, is ServiceNow in executing Even a rule Here at

We conditions. the growth are innovation, safe driving net fast operating and ServiceNow new all in leverage. weather is harbor proverbial

unpack you. The IT me secular of environment Let that at a IDC's anywhere. makes XXXX, in will budgets forecast spend X% growing. technology and current for aren't at X% Software-as-a-Service transformation grow digital research tailwinds They software are spend the going clear spend XX%.

increase is So answer cooperation reprioritization. with want CEO a in doubt, The will without are well a can't long-term So want integration, as is road all siloed shift, world. economy. me, up in enterprise. begins fragmented will only points of plan need a afford And few this be great a speed, a and relevant and We X,XXX point trusted ServiceNow. told A now solutions. impact. as business They platforms none platform "We only any cohesive experiences automation, do positioned this fragmented platform." of has mess theme this C-level to buyers then spend, to And year maps that with businesses the everything the all a with investment It Davos go? clean a was great question in where don't at this

cloud which are Many in born from directly into established the model. public already the in migration. and workload This realities with accelerates itself use that IT world. core. that to enterprises cloud, our begins cloud procured multi-cloud have the ServiceNow with with struggling capacity business of expanded It ServiceNow, enables they

natively extends multi-cloud. in public, embedded to architecture, the applications. business help build ServiceNow tool we cloud-native platform. any for And tower control with all and from mining has process AI monitor telemetry, to to the RPA are complete hybrid This our We or driving set open automation.

like culminates can real and outcomes. us, rest real you and of of me, work. Everything with the build developers automate business mission-critical professional Now people the applications world to

everything beyond does company. help better like enterprise experiences, service, orchestration. transformation. and management deliver With security, proven existing we integrates platform If But Pay, ability ServiceNow employee our ServiceNow of process next-generation foundation, a to vision, strategy would business to fast-growth Procure of all customer platform this well can digital course, did this stay the this automation, was as customers we completeness risk is do, the our for to execute. hyper technology consume goes end-to-end processes

Right to shift only has bad now, good businesses. ServiceNow to companies are many resources businesses from working technology good ones.

in create $X of over XX deals workforce engineering products of top with we innovation of posture of company. over of deals deals the to continue to speed XX, us was X XX $X XX, The is XX Employee in $X XX actions started with and on million. macro hiring, sense unmatched This top XX with million. and Solutions the top shifted were Customer ITOM building also to Risk the $X ITSM early and It of in the And workflows with over XXXX, level net us and in were XX noise workflows with with deals at XX million. our the with allowed top were $X XX running we to XX, When XX, our new tell in an Our XX, $X a over than engineering workloads over quota-carrying deals, execution roles. was leverage. XX XX to deals in in in quality. rather were results the team team look top million. million. story. conservative XX with XX to allowed Security deals management especially organic million. top cost of immediately the the focus over

new to military will locations road service ServiceNow retail its will management business well logos expanded active X position We saw the for the geographic existing to Schwartz over And new XX,XXX retailers United Group one with Lightstep, at and is digitize retail of Brasil, next-generation we're its industry. forefront IT. as and the we AT&T, do its of ServiceNow's you'll industries that major Sumitomo, Banco hear transition span countless From and winning. on to the ability stories workflows, digital of to The population. across from board, will ServiceNow regions have top we new map That's ServiceNow business Schwark value XXX% deployment transformation grew the it million the our stores business example. for logistics. growth, States platform. expansions a Army's the the And hospitality, and one The transportation speed and of setting customers. business logistics consolidate we our beyond only Gina, Army customers. standard expansion with across some civilian from year-over-year contractor for and Group, its ServiceNow's impact, are This world's retail, as of improve

to ambition its X our stated the I software ambition through in ago, will years see enterprise One I company full century. completion. of to is XXst be the defining this an And

of Following like for known His Officer. has the I'm President announce CJ delighted track my and well the itself CEO, company Chairman Operating Desai to of elevation ServiceNow execution latest we And exactly experience. of to record This leader from industry. is on CJ. our to our been is his speaks our Chief Congratulations, platform his to with well-deserved to that and strengthening customers. consequence, CJ and customer orchestrating are personally our in I'd innovation from for promoted CJ how leadership. perform to an driving congratulate endorsement basis end-to-end

the ServiceNow President Masatoshi we proudly as welcome other successful of most industries of history long new some brands. Suzuki In of Japan. with the respected brings a news, He leadership

will ServiceNow. the rolled company's the Chief thoughtful We working ServiceNow to enthusiastic premier ServiceNow. program to a under Officer, the an getting ecosystem growth we full a of geographic And buyer, platform with will and also people add build we We're platform. training region reception We lifelong out adoption a the rides rise new our Paul to partner this help to Japan Commercial certification And help continue of directly Smith. elevate fuel to fourth up initiative on to to [indiscernible] up. leadership our reporting drive global proven offer career for

interest now. have right ServiceNow seen are we never the as much world in so seeing the around We franchise

And from much basis. stronger with entered perspective, operating a sales year-over-year on XXXX coverage we an ongoing

the have the street. on We feet

stronger with all for our is of is year ago. Kingdom. pipeline a the objectives we later maturity ESG coming our global latest of work stated feature All also in built The The Xnd coverage founding on this see and this that We United Fred impact culture our our Luddy's proud year. a report invested reflection fully vision company. of as did than so in the pipeline, States, company the ServiceNow best more place the ratings to much in United best Xth

I I XXXX, that that XXX paradigm double. of digital of can go for was Really have IDC I by year says our Vegas team The will quickly. new the innovation. can in for the fired lean several. Las consistently, and to we behind or ahead. sales lead, And the ready said tell that by only being our in would week that and you, there fired is on one will up. is number forward, industry participants kick-off just the reiterate S&P last only way up businesses is Every reframed others and is fall them. a

world committed better work everyone. are the For ServiceNow, we for to make

new all, innovation of is in standard. customers, multiple than and chip Our us execution. will for competitive sheet. blue when fundamentals ServiceNow growth stickiness peak long-term a cloud more profitable the with offset platform moat talk world are for net in with balance relentless Whatever about All business a our network our operating performance, driving and market effects, expansion stability, giving at economics, we the impact, pristine people with avenues lacks

Our cost the world platform do as for growth. ServiceNow reduction to helps for customers innovate ServiceNow for works and need automate both. digital them Yes, end-to-end transformation. with to The

shareholders I'd our customers, ServiceNow. thank personally their to partners in trust steadfast and for like

your Mastantuono. to You service, Gina, over like can in to We're ever. our over Gina to hungry call CFO, the count I'd hand you. on and humble now us. as

who Thank We in. you, strong and exceeded our QX of renewal subscription all rates. Bill, quarter execution. another of and and was to happy drove New you revenue listening Year great guidance are expansion

operating disciplined tailwinds profitability. to Our drove our as cost exceeded free outlook flow management and cash also margins

by by the representing the year-over-year our representing billion, subscription was XX% XX range XX.X% the growth currency billion, a our QX, year-over-year $X.XX end in Current at RPO growth. high basis approximately growth constant exceeding RPO constant driven $X.XX of guidance XX% On $XX points. basis, versus guidance, XX.X%. was year approximately a were constant year-over-year billion, primarily in currency favorable ended movements FX and In revenues quarter. currency, growing

the in guidance just ACV came our expiring constant and our XX%, While early is quarter. we net renewals ACV from delta for shy than came actually in The new of currency XXXX fewer quarter. cRPO the outperformed of for renewal growth in typical target contracts fourth

this our rates, the issue. timing a strong which renewal Given in remain is XX% QX, only best-in-class

contract only these RPO. new customers does drive forecast. growth, incremental throughout The expect providing XXXX to would ultimately revenue not renew we subscription impact growth, upon expirations, further and timing XXXX exceeded opportunities expansion We of renewals drives there, revenue our early rate. Net ACV to

QX customers. not Our also net at ACV What's added expansion net to customer strength only new in the cohort remained existing rate, was larger-than-average more, renewed a robust. strong very

net customer XX%. over new New ACV grew

with remained well more the closed XXX of net saw saw year-over-year. X than our Government industry year-over-year. and deals and million growth. strong, and We double-digit healthy than us ACV including in over of ended ACV, also financial customers retail over year-over-year. $X new We up top in paying $X XX% greater transportation net the quarter, X growing largest growth perspective, in logistics new million ever. XX% and Manufacturing quarter ACV XXX% hospitality services an From X,XXX

more saw In deals. XX increases XX million top more contain a of platform. ACV our the XXX% true ServiceNow are deals of million-plus and number in power or That's QX, the products. both and seeing net of X the unified multiproduct as customers addition, we leading plus XX to portfolio new deals $X in More more

basis driven cash FX margin XXX by XX%, headwinds. basis to our year-over-year. disciplined above Operating spend The profitability. Turning points less-than-expected was XX%, up management and guidance, points margin XXX was flow

our results our Total cash above XX%, For year cash points flow robust margin for above XXX and was XXXX, was basis points flow free XXXX full operating margin free XXX a profitability. year the was drive sheet, including a guidance. XX%, our in balance ended also basis a We strong guidance of continue and and billion. healthy billion ability Together, $X.X balance these $X.X cash demonstrate with world-class to investments. growth to

Heading into update the brief into guidance, our trends we are to prudently a we believe give move in macro want have XXXX, to I factored on Before I seeing. the crosswinds evolving we getting healthy, growing, demand ended robust. the pipeline market is our done, the year our the expanding, the Overall, and is environment ecosystem opportunity net rates renewal remains expansion strong, is deals guidance.

in mind, our let's XXXX With that outlook. to turn

billion subscription constant and XX.X% a expect between to and currency growth year-over-year revenues XX.X% We reported $X.X $X.XX representing both on billion, basis.

of equipment to time expect life reflecting investments part as We impact change expected higher and offering center in margin XX%, impact of subscription as customer gross diminishing useful our data of accelerate to of our as the value well the inflation.

from margin XX% expect gross marketing We efficiencies headwinds operating margins. and of sales are as offsetting

We XXX XX%. shares million. GAAP diluted of And weighted cash margin outstanding of expect flow expect free we average

XXX XX% headwind. to basis growth $X.XX expect XX.X% we a year-over-year currency a subscription FX point basis, constant QX, For revenues between excluding and on billion, $X billion representing

constant points excluding a FX headwind. We on expect of of XX% basis, currency basis cRPO XXX growth

operating weighted average GAAP XXX shares the of We expect we and diluted for an million XX%, outstanding quarter. margin expect

strong conclusion, year. had a resilient In a QX, we capping

we the reducing business we As power models, technologies growth-stimulating while a new strategy. productivity enterprises have Digital many costs. XXXX, are face challenges enter underscore consistently. macro business force. become has They the technology point strategy deflationary accelerating The made

business unique the transformation delivering ability to model while Platform. created for demand has gains efficiency drive Our durable Now

Our laser is customers' continuous on ServiceNow. new innovation net strategy into that new pressing most focus issues, investment our and translates business net a for

for century. way the on enterprise are We becoming to software XXXX positioned well remain and of our the company XXst defining

employees our I enough thank their for With team's up Bill that, I'll work and this can't Finally, year. hard continued our Q&A. I'm dedication. extremely for open it and of proud performance

[Operator Instructions]. this afternoon our Brad from We'll question take of Bank. Deutsche first Zelnick

of just are a be largest yourselves And you How in and this suited. we it? I've partners customers position opportunity your the congratulations, to Gina. to ahead continue prioritizing platform And great seems these into everybody. And ServiceNow solutions right and from Bill, of hear office for with the particularly middle do year? some industry got now opportunities capture ideally for partners best vertical how to follow-up which

weather, very is and as who you before President much, joining question, COO, wanted will Thank ladies the she's please to a to these is continue passion little through calls. And on CJ I have under bit And gentlemen, welcome our him Gina I'd her voice but me Yes. like just her powering today. a join me and also while to be acknowledge the newly fire. first on for Brad. so and officially might I I answer Desai here scratchy,

been shape, Davos good We've a little over losing in from she's but to So voice a Vegas world bit. to the all here.

So a look I and with bit. really partners situation. partners Brad, are on at investment happens when their you the a down doubling largest that's multifaceted little what it And travel ServiceNow. as the

ensure be to this people we're going platform on in the globally X with on First, RiseUp to ecosystem ServiceNow, train to the million that certified fully scale. we

persona everybody on basis on an in solution based and map also to naturally, road mapping Second, is on partners platform. the domain all with us teaming and back up our are industry that

I new ones would that platform. the office. big are the a things procure-to-pay, supply it. on to What's that in a we business. seeing business And really out, build ERP office. and I the you it is you may up opportunity. But middle good what down also surge you big and net we're in like point, going to have And the seeing a the optimizing bring great logos And from here part drawing and and new will office. the CJ, want where things mid So definitely it saw evolving on play you're other with next-generation a be if interesting, middle impact for front, you're net say back the think this of there's our chains doubling QX, new

we when say, engagement a time, at require. for has would around service a I layer, is, been for engagement customer But look long the say, layer

workflow interoperability the clouds office customer the a on, acceleration, all organization, office. the and ability to different And our whether systems office shine financial driving services financial the organization, our and mid platform large way a telecommunications So of the health organization. care really for the middle what the because where we the to that's that's is or a engagement to layer to moving for complain integrate services back from say, of

know, And Brad, think, do Excellent. question, I the I you have second for Gina.

congrats. And was in you, remiss not I CJ. congratulating

For I on disclosure you ACV. new Gina, appreciate the additional net

to times. mean, we're what quarter the is customer investors. most as clearly with new guys perhaps for that what less a I to traditional had us, think Is strong QX But we matters uncertain else that And in see conclude was understand to mindset you all and you which if fair a XXXX? these why rationale really about You IT what would trying it during would cRPO the shared be business, phenomenon? of budget as to flush there not,

Yes, of and for course, question apologies Thanks for my throat. Brad. the

So stand net I if you're current always certainly, desire people multiple always the budget renew, be the net And the have revenue, current target well as the correlated co-terming say contract clear no altogether more quarter And and just or seen as ACV new what when impact for is is the I XXXX. entering or really in early about think with our macro. results, fact really historically. QX right? good we well tightening out the which we've about come market it's why of but correlated don't were about little as renewal flush to ACV. feel not forecast within than in a renewals on position strong ACV bit to early why know to still able It's a budgets, actually in wanted co-term really and revenue surprising environment, were want renewals the quarter, less you seeing what new future when contracts. -- we also we guide the need given the the to why just only that Not I that overachieved, is XXXX to And it's the

Raimo next Lenschow to now at We go Barclays.

Congrats from Gina, question. I as me feel A well, soon. better you and hope quick

pockets QX. kind quarter bit ITOM, about HR bit like saw you're you're CRM growth, that little Because the the a ones for was little And #X you drivers? a think stronger talk other the you the part this expanding. the If Can about of you different and ITSM, of player.

in And Gina. I follow-up then So one see it's expansion the them. to had nice for

Yes, CJ Raimo. think then you I'll make might that the be point, I first give customer And some actually can even helpful. examples

We have transformation. become that's and the platform for platform end-to-end digital an transformation, for digital

guide. seeing company evolved is employee from to and you're is service code has and how what is exploding And now So obviously, low that to platform a very demonstrated outstanding customer strong our creative management. the results IT the in our workflow experience the

now the us that in world to companies and with industry we're So the vision company now about? that multiproduct in really matter the handful got in, you based helping a they really want you've some approach completeness -- talk persona customer entire made ultimately, it's of enterprise. a of platform of discussing a we're business examples that has with one operate about every in to on CJ, the

Absolutely.

markets, during hold whether customer and business That's what very outlined, want resonating. we the times, So management our really employee product when with serve you sides it's experience of about productivity driving customers you is them to that think public same profitability. our you had HR And two Gina for a want to product. to service coin. service, well, is macroeconomic including your service strong that this customer on is performance where delivery commercial And resonating that product and sector in employee are

also service care. digital are other from IT specific So business, what business growth ITSM HR foundation telco despite management management what services operations, industries we sector we management, in call technology product that is very driving but the where which our service lines best health customer is to ITOM picking and of driving service and the and public are operations and our seeing the and

want cetera, on we very That then the a outperformance. timing, clear. Okay. should impacted and of little you Gina factors next And bit this you might one Can we more, year, terms the et quickly, of that have kind will et margin flow to extrapolate cash was don't into that cetera. about for consider talk in

Yes. It's a great question, Raimo.

guide for strong margin XXXX. good free a operating margin flow for cash well gave I as as So

you us operating perspective what think you an margin as as the saw in see do from discipline on I was and side, will consistently cost us seen QX do. continued have you

cost On 'XX. that not the towards the some CapEx flow the also, flows QX But tail see of which cash disciplined did QX, side, spend are through. until of that free management we come payments due means obviously, through end

'XX, gave. is So cash of free that which does helpful. I on guide see that you drive a margin headwind little that's bit the Hopefully, why the flow in

We MoffettNathanson. go Sterling now to at next Auty

Just want on circle to back the cRPO.

more we currency constant happening internationally from international kind should about is was U.S.? of XX.X%, issue of do 'XX? part first the there those the the Given more And to the here in renewals? concern And in expansions of how the than appetite described any of customers think is that some you about

growth do that has with moved difference within dynamics Yes. Surely, renewal to growth has internationally FX domestic. and The nominal versus nothing constant rates just the between the do really it with the currency quarter. to

to seen only positive as continue very not renewals, tells we behaviors renewal side in you've growth renewals Americas board, renew or of the expand no net way, is across us to to rate that rates of with customers QX 'XX, XX% also forward on-time the as macro. strong with we With just Again, changing co-terms in do point expansion the you're do continue versus the strong the early I meeting their So a and new lack differences things. seeing to in the expansion. but rates. things in those the as on bit of will tells And in current that are is respect internationally renewals, you. what the new bring by to What to you would real little remain renewal renewal not ever ACV QX with 'XX, best-in-class respect net

at go We'll next now UBS. to Karl

voice again. heavy a that The the billion target how you've calendar XXXX you be operating cash headwind. of $XX absorb in little target Sorry might a asking are But to the you use targets? I think the is bit feeling a you given that for about consensus stretch your to But had bps XX% 'XX. free FX margin of a look your XX%, when be of doable. pretty that flow I seems XXX improvement at would

So a that little targets, of a those just on appreciated. one bit like commenting much you feels mind push. Do

I Yes. and is, the the market with Karl. seeing material. Great provide but an targets slightly, we're to are What have headwinds remains growth underlying healthy. in question, the say on would long-term backdrop, And Day Analyst at to uncertain still certainly overall, continue our update that going we're our monitor macro eased FX May.

we'll keeps that very well go and for to again, given and say, on along, respect flow, top cash hit back those targets moving the let's of free the line XX%; remain to I'd macro trajectory margin, with to We with May. Bill underlying about well what current the operating positioned FX, But update So demand, earlier. strong; talked environment. you really impact in

We And continues digital anything, opportunity are If the choice that has grow. to of is not platform it for changed. transformation. --

Mark from of now next hear We'll JP Morgan. Murphy

still will the have those just Or navigate dissipated your if are you actually on and macro back also somewhat coverage Bill, to power them it wins the -- just blowing compare fairly the and to given you maturity, the summer? through rigor? through say of able kind execution headwinds pipeline steadily, you're but comments would that

call for question. did out. Yes, Mark, the much I thank you very it

were to back horizon know then between that and to the all that we and that we so on there I the and policies the the we Ukraine, a clouds chain inflation, it think sees were monetary pulp tightening ones everyone with macro, don't to there. were dislocation, supply maybe go need call first out some blowing forces

immediately And have for most we customer happened more to were customer ready per we take way not market. I knew think in out is then business, productivity automate less, what revamped businesses improve do because back person. the cost go-to-market our would we and their with approached that the the

growth wasn't step CEOs, fact good then yes work both. with at but still of and also takeout to be with for just good be say a have would a the go knew question Worried digital them, about And up weren't them we and they same platform. to also It enterprise, XX% to about And said on of and this would what reorient other necessary would I'm knew ServiceNow's the goals. sense. Gina of achieve had investing going the a It's models, because equilibrium between business could their to the done, as their the time makes CJ's and away. to that agenda. dreams to is on differently that lot still And business The cost digital-first a XX% be strategy. X%, we they remain you thing going give that their is, think underscored ServiceNow's which example platform, and growth

that And you don't have choice. to make

or the peak pandemic of I being dialed matter. the freeing the up I what platforms in was see that And the down at see during cycle hype to eliminated. investment that tech see that commodity actually So market, I

We're I year, accordingly. I pipeline. And So in the the And the see that layoffs which that's feets than the those with our the the had at certified in if productivity last year they've sales at of to ServiceNow street rising that the known do job. trained these improving executional what think in important XX% given way And and coming that the side, see and this weather is cost the that I we to readiness excellence our that the feet actually see I based because of particular reading, forces we're this feeling start never maturity fact. of be I that on are stories well All better do conditions. on will is our company down, a seeing been it's came their on the take least a have well ready. pipeline our and because circumstances need will you market rely together clearly a really can on but are because me in we're that gives immediately. macro, the of now

be little Very maybe see of longer? just from again, clear. little hang early again to on Or XXXX, the the of on at element Gina, luxury customers as there want the renewals They you having mix lower your strength some side? all you much voice. so it of is cash of actually renew the encourage a But the early early hesitant topic logo new cost should because renewals we enjoyed sorry not to to on capital may to interpret giving of higher. of many because And did just as is side, the on a flip

point, rely not of Mark. folks bit yes, telling I bit altogether we people think a surprising Now Platform. strength much little great resilience fact early seeing of past, holding on you're I little longer. And And market, But the and we've power that's is A that on think the in keep are the the that are to the cash a shows And also not as the and in I either. done certainly, this both. to having what as renewals

with the I a renewals, on would you to when your power you're you thing that what preserve and And pricing terms. technology. means early the advantage into need go one have to able there, your competitive on every renewal Mark, for you on Gina means as saying, cycles that out It build normal investor also don't rely just is

have. for and guys the estimates this was actually that's guide all thing, So a is that super above you healthy the XXXX consensus why

Rangan Kash next to at Goldman The Sachs. map

would would the preserve to and That was I that in time question rid a want power. my get inflationary environments anyway. anyways, cash a of that of think people little purchasing But not counterintuitive.

ask So congratulations, test will you. and company to one me you successful I spare first Bill, scaled CJ not time occurs technology of that voice. your that very and questions, give I'll a is all, Bill, your you've Gina. you can so before. thing off some

before? product, be on point with much of I Almost of the that a be So How see evolution not at gets so of number catalysts that distribution pattern the tailwinds this XXst you your many you've especially complex. verticalizing differently, it's way and and way the that you defining what in get nothing the this seen you this go-to-market you so from things software the you successfully play mission that does look since mind of these perspective, make products in the sure this out resellers build the in There's could make are to enterprise that you've ensure the there potentially. all doing How done expanded patterns blowing. do partnerships have, innovation. do and from century? company ServiceNow at

this to Yes, and movie we've absolutely. as said, before, been I like through I'd Yes, Kash, show.

closest and So XX,XXX real for the simple of for keeping here's situation. our partners. friends it within We're ServiceNow our

you saw across have world. the with to transformation. to the every end-to-end for We are move within the and that going digital industry platform made each And And Japan. the expand platform That persona applicable we is enterprise. we

to the are India, many Middle and ambitions East other Our going places. to

very for persona we platform, end-to-end innovation. net simple it by and on We partners. colleagues new geo, our kept our So also and focused industry, and

We will build the future.

hard the best the We the industry, stop. and engineering best engineering in team have leader

an have we're betting go-to-market and We on ourselves. machine, incredible

the have going business in account and revenue it. base software in remain the to world, the and growth, And you're enterprise new customer of that simple new you're with So building if a company loyal same to a ever because will keep with new on we're around century. many real you XXst cross-sells loyal that product top ACV. best going get the net innovation upsells, net That's defining

We now at Bernstein. Weed Peter go next to

performance, the ACV. new on particularly net the on congratulations And

your seeing bit you say, including I'd basis what -- then renewal to of basis QX correct XXX%? other unpacking decline new I'm had growth coming about you if quarters at growth in to help a looking little the to NRR forward NRR normally the XXX customer would next customers, where new love hit help recent look that's continuing anticipate have I revenue, existing the expansion. think me the customers. and And to it's from what and consistently it you obviously, another is with by forward been I When new was probably XXX talked now I pretty question done or because above for and in side kind customers NRR that that relative slowed that creating that are most would the and you last to relative points heard part weakness points new relative to, had question. new by both think is wrong, maybe year quarter-over-quarter that really revenue of appears your of fact, we growth, guide. about coming What declined from XX% acquisition In logos in have quarter And guess, that it and of guide, is of the

the I'll Peter, first take question.

about we're that full clearly, to new quarter the new and talked over rates with despite ACV can expand new year in thrilled to ACV new that time. for this not focus in of that our our only customers within really, past. us the really seeing, and the were year-over-year headwinds. the And away landing the pleased land grew number volume new strong evolved with growth We've from XXXX, So with the and expansion the us right we and we're we've XX% customers net really the see are net over customer,

that a the testament products the the platform. these so breadth platform, are to on to And growing of the fact new is testament lands

XXX With those to results. And the the XXXX but logos, good volume as see of well it's expect beyond, so quality. as very that to in our absolutely really, new growth. to rates as logo you're the very that's on seeing. in doing, But whole basis rate declining in not it. XXXX. retention comment your for net I'm what can strong sure NRR math expansion through Darren by our rate sure and and what not we're year you remains new And about continue talk strong think we QX off-line, But respect that you see we about points, and can not expansion I'm again, but

to Keith to We now go Morgan Stanley. Weiss at next

year that to little my And I very new trying wanted point to decline. wrap the there. still I'm Gina, bit. to margins basis on gross a end head around in dig with growth business XXX a nice

subscription looking my XX% model seen gross in on believe. margins ServiceNow since haven't XXXX, We correctly, I'm if I

time points this that at of year an from still life. XX last us there's you the incremental basis tailwind get told accounting that can You change on useful

that's margin What's So offset weight such had added gross into expense on there's somewhere better? help us bit point basis you a Can a 'XX? driving little what FY that that XXX understand heading gross that is, a down margins.

Yes. question, Keith. Great

our we that first off, your had in had year, all, And points So basis XXX in So right? going assets. to the that little that and XXX of life down of math And was take we points come we a come XX% this to is XX, So change said being basis off XX%. margin, depreciation XX, XX, talked you you to gives about right? gross XXXX, XX.X. we've you then

to we about. are in surprising, also, so to what success call much we've talked impacts faster you're ensuring and are seeing, impact number seeing we getting right, one, implementation to script what to not our with are investing out And customers But products. of I getting my tried in our respect in heavily is, that also inflation,

efficiencies in have investment and faster, marketing get conscious why guide where because to offset offset absolutely customers to our cost efficiencies. by decisions implementation us, and marketing very come value operating from you we're a the expect be so making to there, is sales which remains expected that made being you've investments the as by sales margin sales to of And would

We'll our Research. Wolfe next question Zukin from take now Alex at

a all unpack, X CJ. Congrats think, quarter guys metrics would guess, I very on itself. from the that we're be Congrats, to quarter. trying solid I very, helpful

quantify than can on stronger to smaller full step a QX headwind a you Gina, still be, you've it renewal when for is can the them guide would tailwind maybe the for year, like you which the the XXX retention that apologies So if the got for And headwind -- early you And think, back, rate becomes implies renewals? from Because more in than is or itself? what full the lot comment financial-oriented the the for it the a that Was from your where net you renewals cRPO a guide stronger But get it year? question. quarter. point, renewal people maybe take the those lot thought I already realize. people looks

X dynamics all trying we're to kind those that -- and questions. of So piece together

consistent that if it with And you on we to close early what cRPO the that comment to absolutely guide. won't numbers, quantify our beat I don't for while headwind. we quote. renewal and would not exact the say renewals, But is I exact NRR, relatively XXX the would was have respect the

bringing the the customer Can there? that kind maybe And verticals going or technical one helpful. kind Perfect. I one Super of Bill for other innovation bear, or CJ. confidence a in new and areas With on examples some the a that of give you industries product-oriented forward. you highlight wins guess of some anecdotes gas respect and maybe you, of particularly fire you're to early larger pour to some of to of

Absolutely.

of strong traction, in on that industry would early building -- back and XX displace new winning deals, public the larger tech. whether So as some seeing sector, overall, we strong in I products say combined X-figure these pretty in new specific office line Alex. having for that done XXXX, win created well to as in in the or sometimes very sector world a on well. products, share management company. of telco horizontal -- products, massive public as And and like customers the X seeing that to between in are traction where product the health supplier care live a have products of procure much the X going Similarly, management, with is life we are actually months. that cycle pay we industry that telcos. great verticalized back media systems, office you, continue to top in to was that started multiple one order hear product now mid from was and we and And created telco from at everything company which is telcos a market or that it's to for media to traction ERP

Alex. watching live XX,XXX By we with CJ it were as and way, flawless. room one the go you, was the and live the board had yesterday in agents, together were go Thank we

the that's world. the of So one management prestigious in brands example a service of customer most

on service count to our business management to can house. continue customer the you So rock

renewals we're value all don't get because the The forecasting those I to obviously, there on us prior at net the And delivering the what structure. based do right actually impact, nothing because was and up business new cRPO are only And it's sitting it in us fantastic. So And we're pricing in business caught ready sitting with XXXX. go. has for way, is for by a assumptions, to thing happened. year

a So value thing a it's shareholder creation super perspective. from actually good

Reback can Stifel. go to next Brad at We now

about XQ Bill, hire. last you to the idea week, continuing bit an the in plan you can quarters. spoke us net give is versus new of what here for a pretty adamantly previous few Maybe little this Hiring year. downtick

Yes. Brad. much, Thank you very

manage the headcount we're in to said, going Gina As intentional about the very we how corporation. be

a Where as write primarily coders, need. people sure, that customer actually we now code we invested house what And for the on heavily invest, primary very have actually we have are for are X.X carry a be and also the We people we And protecting this years, headcount. will relationship that coder. responsible the are for last we'll and and objective. investing, continue to

great So intentional. in very super And we're very, shape workforce. going to on because we're really I'm be our

We happy are really workforce.

are than The ever. to speaks some better that. ranking of rates Glassdoor retention Our

and to are is to XXs and build ServiceNow. get here, we going and hire stronger are a we're think the going I the what So finding of forward. And best even only pool intentionality, thousands come ServiceNow and go from our we because to thousands in to that's an of getting people Xs choosing

or innovation, net no problem net new innovation the ACV, ACV. ball new game. about with driving net new So is the That's Everything workforce.

entering to more significantly Bill earlier, alluded If I XXXX, this we XXXX with we're could we're into reps entered just than add, ramp 'XX. entering and

get we on confidence we're coder-bearing So that XXXX in gives out which with very us rep was ramp engineering. that but We're had QX, slowdown only not ramp we'll productivity of might but or Yes, a from ups. not hiring of pipeline a seeing, in a perspective, those that growth. sales have the little entering bit the strong, with

our next of take from Bachman now Keith BMO. We'll question

Gina, better. and a I you feel Question clarification. hope

clarification. question, impressive metric would same over for XX%. context, an December net a ACV can provided the the last last the number have an of growth customer just quarter you Can new that us the going point see in year provided is. past, the words, to mix, it on particular, and other SKU calibration Pro the Enterprise. trying what the just December average was And quarter? ITSM, relates my then you or in I'm you It give updates you First, years been on what to in upsell. to on kind ITOMs And the in to X in of

are -- If just given kind on me. the for you ahead that are where at slowing of on us transition. it an or up give the That's you is an forging and just all give if -- update could economy update us could customers

tell ACV I'll growth, net quarter. that -- customer you the Keith, really Yes, we're proud ACV net new of XX% new in

we growing prior as customers. those it are new expand say net see continue quarters. metrics with those We with are haven't larger to deals ACVs given Suffice we in landing And customers us those to that more. new customer to able new

grow. that ITSM not but are in With So really being that quarter, well. we've about continues that, but and we've continuing to to at growth we given consistently XX%, see talked that the do strong to say penetration about Pro, to respect

-- of And stalling move all up? on that higher continue is out that Or pressure is of at does kind there any mix to willing terms in customers the year? that Gina so to for

to add penetration are continued it We'll to grow. that We that sense. know it don't has time I next five every continuing. if Pro absolutely It give But quarter. don't you every single the if any makes percentage we hits CJ, give seeing want

Keith. Absolutely,

what is can I say. Here

the besides cohort increase grow ITSM new number was the in of ITSM super to and landed with So also launched we got QX logos to Pro. that upgrading -- encouraging ITSM we this some since was with that what continues our existing

happening Analyst Financial ITSM are we optimistic. updates XX%, at Day, Enterprise. currently bigger provide very, So And on what's very will with we

to Tyler Radke go will We Citi. at

or would cloud acquisition? your the Kind conversations from just how Are widespread a heard conversations gone you're last optimizations key And as perspective? the the to ServiceNow your there recent we your Maybe get Bill you just since just view progress specific these products given on CJ, the I how for product CJ, from is about Microsoft love are customers? XXXX? with? most into you're of can And approaching then with around strategy talk observability on an what heading that leading just update milestones night,

Absolutely.

whether they first ITOM start an the cloud be cloud, multi-cloud X, line with asset question. ability cloud, are optimization or look to discover our cloud best-in-class. day Listen, private at or whether to you assets ITSM, let's public product So since on-prem has our continued management,

we our to trying [indiscernible] If that great. help So too. power public spend. they That's to customers to accelerate line they're optimize and their journey, that's great move want to cloud

for they portfolio where where on our cloud and best So are is journey they go. that to suited our customers meeting want

workloads that solution our know, Era, that XXXX real you these really milestones, by management solution. meaningful companies called about at provides we a And I as observability, in solution. Observability X different can which good with large optimization. So And buy how Lightstep we what and XXX was them I relevance multi-cloud just in for help me our And portfolio's terms that and product on encouraging pretty this are company ServiceNow are and monitored think feel as Tyler had actually of bought decided QX lines our really to Fortune their in acceleration Lightstep of is being scale.

integrate We will fully that platform. Observability in our

not So multi-states. work but observability solutions observability that primary solution, we have across unified only also

going optimistic 'XX. into very So

question time now have do We Macquarie at We'll one from this Bowler that take Capital. Sarah for more afternoon.

softness CJ, on I spending? particular little what just called let if regions extra you overall this, or operating given wonderful a in where over to to haven't or saw that flip scrutiny layers there you're you of rarefied things think any bit Congrats like of verticals were ask sort perhaps me air, see. Really, feels out any that and in

sector. we very I'm even did very we But we Gina certain Sarah. to overall, will Typically, verticals Thank do public proud But in super as to well QX, say, XX% in and in performance. take of I balanced called much. public Gina called in are we expected out feel sector. going growth. So this, out what really well QX, did you

public balanced So geographies whether growth say, others, amazing really retail, touched whether as on, performance strong it's health Bill our Japan whether care and an growth, sector, we it's very and would X appointment somewhere just on quarter. potential Japan Officer, I about being it's are excited in Commercial to India. Paul really very there. And and is reporting side want new attention to pay market we Japan to, the and with and Smith, optimistic are in we Chief the us,

call. end and joining for Goodbye. like today's ladies will would you us. for to again, us that earnings Again, joining all And gentlemen, QX ServiceNow a you call. thank conference afternoon. I XXXX bring to Have great today's Thank