ServiceNow(NOW) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for the current year is $8.7 billion, projected to grow to$10.575 billion next year, reflecting strong expansion rates [1] - Subscription revenue grew by 25.5% at constant currency, exceeding guidance by 200 basis points [32] - Current Remaining Performance Obligation (cRPO) grew by 23% at constant currency, also 200 basis points above guidance [32] - The company ended Q4 with $8.1 billion in cash and investments and repurchased 400,000 shares [13] - Free cash flow margin was 55$2.7 billion [91] Business Line Data and Key Metrics - Customer workflows crossed $1 billion in ACV in Q4, following Creator Workflows, which hit the same milestone in Q3 [90] - Gen AI products drove the largest net new ACV contribution in Q4, outperforming previous product family releases [12] - ITSM, ITOM, and ITAM each had double-digit deals over$1 million in Q4, with Security and Risk workflows also showing strong performance [24] - Employee workflows saw significant growth, with 80% year-over-year increase in net new ACV [53] Market Data and Key Metrics - Public sector growth remained strong, with key wins in the United States Army, US Postal Service, and Australian Department of Defense [6] - The company closed 168 deals greater than $1 million in net new ACV in Q4, a 33$10 million [12] - Energy and utilities, business and consumer services, and education sectors showed robust growth in Q4 [102] Company Strategy and Industry Competition - The company is positioning itself as the intelligent platform for end-to-end digital transformation, leveraging AI to drive growth [72] - ServiceNow is investing heavily in Gen AI, with early success in product adoption and customer demand [78] - The company is expanding its strategic partnerships, including with AWS and EY, to enhance AI capabilities and market reach [74][86] Management Commentary on Operating Environment and Future Outlook - Management highlighted the strong demand for Gen AI, with no price sensitivity due to the compelling business cases [3] - The company is optimistic about 2024, with AI expected to drive significant growth and transformation across industries [28] - ServiceNow is well-positioned to capitalize on the $3 trillion expected to be spent on AI between 2023 and 2027 [16] Other Important Information - The company has a renewal rate of 99$165 million increase in the 2024 revenue guidance, with adoption curves steeper than previous product launches [154][180] Question: How is the public sector adopting AI, and what is the trajectory? - Public sector adoption of AI is still in early stages, but the company expects significant growth in the second half of 2024, particularly in federal and state governments [197][221]