ServiceNow(NOW) - 2024 Q4 - Annual Report

Market Adoption and Customer Base - The Now Platform is utilized by over 85% of the Fortune 500 and nearly 60% of the Global 2000, indicating strong market adoption and trust in the platform[16]. - As of December 31, 2024, the company had approximately 8,400 customers across various industries, with an increasing portion of revenues generated from government customers[69]. - Sales outside of North America represented 37% of total revenues for the year ended December 31, 2024, compared to 36% in 2023[105]. - The number of customers with annual contract value (ACV) greater than $1 million increased to 2,109 as of December 31, 2024, up from 1,885 in 2023, representing a growth of 11.9%[205]. - The renewal rate remained stable at 98% for the years ended December 31, 2024, 2023, and 2022, indicating strong customer retention[209]. AI and Technology Integration - ServiceNow has embedded Now Assist, an AI solution, to enhance user productivity and efficiency, significantly improving workflow efficiency and fidelity for customers[14]. - The company plans to continue expanding its AI-powered product portfolio, with a focus on integrating AI capabilities into existing products[17]. - ServiceNow's AI solutions, including Now Assist, are designed to automate processes and improve customer service experiences, leading to faster resolution times and increased customer satisfaction[36]. - The integration of AI in Customer Service Management allows for rapid case summaries and improved agent productivity, enhancing overall service quality[36]. - The company emphasizes a human-centered approach to deploying AI products and services at scale, ensuring trust and reliability[16]. Financial Performance and Growth - Free cash flow for the year ended December 31, 2024, was$ 3.455 billion, a 26.6% increase from $2.728 billion in 2023[206]. - Non-GAAP consolidated income from operations for 2024 was$ 3.254 billion, compared to $2.489 billion in 2023, reflecting a year-over-year increase of 30.8%[208]. - GAAP income from operations for 2024 was$ 1.364 billion, significantly up from $762 million in 2023, marking an increase of 79.0%[208]. - The company recognizes revenues from subscription services over the subscription term, making it difficult to rapidly increase revenues in response to new customer acquisitions[151]. - The company expects a decline in revenue growth rate over the long term due to increasing competition and market saturation, alongside rising costs from strategic investments[152]. Research and Development - The company has made significant investments in research and development to enhance platform capabilities, strengthen existing applications, and develop new services, focusing on automation, AI, and machine intelligence technologies[70]. - The company has over 2,000 U.S. and foreign patents and more than 600 pending patent applications as of December 31, 2024, reflecting its commitment to protecting its intellectual property[74]. Cybersecurity and Compliance - The cybersecurity program is overseen by the board and management, focusing on risk management and compliance with industry standards[169]. - The company has conducted independent cyber maturity assessments in 2022, 2023, and 2024 to evaluate its cybersecurity controls[176]. - The company faces increasing cybersecurity risks due to reliance on third-party providers and public cloud infrastructure, with supply chain attacks becoming more frequent and severe[127]. - Vulnerabilities in the company's products and services have been identified, with expectations of ongoing challenges in addressing these vulnerabilities and delays in developing effective patches[128]. - An actual or perceived security breach could materially affect the company's operations, finances, and reputation, leading to significant costs and liabilities[132]. Employee Engagement and Wellbeing - The company has implemented a comprehensive range of benefits and wellbeing programs, including "Wellbeing Days" for employees[86]. - The company aims to create a safe and inclusive workplace, focusing on employee engagement through initiatives like the Employee Voice Survey[80]. - The company continues to maintain systematic gender pay equity globally and conducts annual assessments to ensure no statistically significant compensation differences exist[87]. - As of December 31, 2024, the company employed 26,293 full-time employees, with 13,193 in the United States and 13,100 internationally[89]. Strategic Partnerships and Market Expansion - The company has expanded partnerships with technology companies, including NVIDIA, to enhance enterprise AI capabilities and integrate with cloud providers like Amazon Web Services[68]. - The company continues to expand its sales capabilities in new geographies and plans to increase investments in existing locations to achieve scale efficiencies in sales and marketing efforts[65]. - The company has made substantial investments in data centers and geographic-specific service delivery models to support international market expansion[105]. Risks and Challenges - The company faces risks related to compliance with evolving data privacy laws, which may impact its ability to optimize its platform[98]. - The complexity of customer deals is increasing, leading to longer sales cycles and greater competition, which may negatively impact the company's ability to close sales[122]. - The procurement process for government contracts is highly competitive and time-consuming, which may affect the company's ability to secure contracts[116]. - The company may face increased operational costs and restrictions due to compliance with local laws and regulations in international markets[107]. - The company recognizes that its revenue growth rate is expected to decline over the long term as the business matures[102]. Stockholder Information - The cumulative total stockholder return on the company's common stock increased to 375.50 by December 31, 2024, compared to an initial investment of$ 100[194]. - The board of directors does not intend to pay cash dividends on common stock for the foreseeable future, opting to retain earnings for business growth[187]. - The company has authorized a share repurchase program of up to $1.5 billion, with an additional$ 3.0 billion authorized in January 2025[195]. - The company repurchased a total of 293,000 shares in the fourth quarter of 2024 at an average price of $1,007.28 per share, with approximately$ 266 million remaining for future repurchases under the program[195].