ServiceNow(NOW) - 2024 Q2 - Quarterly Results

Revenue Growth - Subscription revenues for Q2 2024 increased to $2.542 billion, up 22.5% from $2.075 billion in Q2 2023[2] - Total revenues for Q2 2024 reached $2.627 billion, a 22.2% increase from $2.150 billion in Q2 2023[2] - Subscription revenues for Q2 2024 were $2,542 million, representing 23% year-over-year growth[25] - Total revenues for Q2 2024 were $2,627 million, representing 22% year-over-year growth[25] - ServiceNow's full-year 2024 subscription revenue guidance is $10,575 - $10,585 million, representing 22% year-over-year growth[48] Net Income and Profitability - Net income for Q2 2024 was $262 million, compared to $1.044 billion in Q2 2023, impacted by a discrete income tax benefit in the prior year[2] - Non-GAAP net income for Q2 2024 was $651 million, up 34% from $486 million in Q2 2023[5] - Net income for the three months ended June 30, 2024 was $262 million, compared to $1,044 million in the same period last year[12] - Q2 2024 GAAP operating income was $240 million, compared to $117 million in Q2 2023, with non-GAAP operating income reaching $720 million, up from $544 million in the same period last year[68] - Q2 2024 GAAP net income was impacted by a $910 million release of a valuation allowance on deferred tax assets and $55 million as part of the effective tax rate[62] - Non-GAAP operating margin for Q2 2024 was 27%, up from 25% in Q2 2023, driven by improved efficiency and cost management[60] - Non-GAAP operating margin guidance for Q3 2024 is 29.5%, reflecting continued operational efficiency[80] Cash Flow and Financial Position - Free cash flow for Q2 2024 was not explicitly stated, but the company emphasizes its importance as an indicator of business strength[10] - Net cash provided by operating activities for the six months ended June 30, 2024 was $1,961 million, up from $1,482 million in the prior year period[12] - Free cash flow margin for Q2 2024 was 14%, down from 21% in Q2 2023, primarily due to increased capital expenditures[69] - Cash, cash equivalents and restricted cash at the end of the period was $2,167 million for the six months ended June 30, 2024, compared to $1,670 million in the same period last year[12] - Non-GAAP free cash flow margin was 31% for the three and six months ended June 30, 2024[17] - Purchases of property and equipment totaled $397 million for the six months ended June 30, 2024, up from $297 million in the prior year period[12] Assets and Liabilities - Current assets as of June 30, 2024, totaled $8.021 billion, up from $7.777 billion at the end of 2023[3] - Total liabilities and stockholders' equity as of June 30, 2024, stood at $18.207 billion, compared to $17.387 billion at the end of 2023[3] - The company reclassified $184 million from investing activities to financing activities related to the acquisition of G2K Group GmbH[67] Stock-Based Compensation and Expenses - Stock-based compensation for Q2 2024 was $444 million, contributing to the reconciliation between GAAP and non-GAAP net income[5] - Stock-based compensation expense as a percentage of subscription revenues was 2% for the three and six months ended June 30, 2024[16] - Stock-based compensation expense as a percentage of total revenues was 17% in Q2 2024, consistent with Q2 2023[60] - Amortization of purchased intangibles as a percentage of total revenues remained stable at 1% in Q2 2024[60] Performance Obligations - Current remaining performance obligations (cRPO) for Q2 2024 were $8.78 billion, representing 22% year-over-year growth[25] - Remaining performance obligations (RPO) for Q2 2024 were $18.6 billion, representing 31% year-over-year growth[25] Generative AI and Strategic Investments - Generative AI contributed significantly, with NNACV for Now Assist doubling quarter over quarter and 11 deals greater than $1 million in Q2[25] - ServiceNow acquired Raytion, a Germany-based leader in information retrieval technology, to enhance GenAI-powered search and knowledge management capabilities[25] - ServiceNow made its first telecommunications-focused Ecosystem Ventures investment in Prodapt to accelerate AI-enabled solutions[28] International Expansion and Cloud Services - ServiceNow announced plans for a UAE Cloud, hosted on Microsoft Azure, with targeted delivery in the first half of 2025[28] - Constant currency adjustments were applied to Q2 2024 revenues using exchange rates of 1 USD to 0.93 Euros and 1 USD to 0.79 GBP[55] Tax and Currency Impact - The company is using a non-GAAP tax rate of 20% and 19% for the three and six months ended June 30, 2024 and 2023, respectively[14] - The strengthening of the U.S. dollar resulted in a $20 million FX headwind to 2024 subscription revenues compared to previous guidance[70] Investor Relations and Communication - The company will host a conference call on July 24, 2024, at 2 p.m. PT to discuss the financial results[8] - The live webcast of the conference call will be available on the ServiceNow investor relations website[9] Gross Profit and Margins - GAAP subscription gross profit for the six months ended June 30, 2024 was $4,155 million, compared to $3,356 million in the same period last year[13] - Non-GAAP subscription gross margin was 85% for both the three and six months ended June 30, 2024[13] - GAAP operating margin was 12% for the three and six months ended June 30, 2024[16]