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ServiceNow's (NOW) CEO Frank Slootman on Q1 2016 Results - Earnings Call Transcript

ServiceNow (NYSE:NOW)

Q1 2016 Earnings Conference Call

April 20, 2016 5:00 PM ET


Michael Scarpelli - CFO

Frank Slootman - President & CEO


Kirk Materne - Evercore ISI

Matt Hedberg - RBC Capital Markets

Brent Thill - UBS

Raimo Lenschow - Barclays

Walter Pritchard - Citi

Keith Weiss - Morgan Stanley

Alex Zukin - Piper Jaffray

Michael Turits - Raymond James

Jesse Hulsing - Goldman Sachs

Sarah Hindlian - Macquarie

Rob Owens - Pacific Crest

Steven Ashley - Robert W. Baird

Justin Furby - William Blair

Kash Rangan - Bank of America Merrill Lynch

Greg McDowell - JMP Securities

Philip Winslow - Credit Suisse

Ryan MacDonald - Wunderlich Securities

Jeremy Breindel - Royal Capital


Good day ladies and gentlemen, and welcome to the ServiceNow First Quarter 2016 Earnings Conference Call. At this time all participants are in a listen-only mode to reduce background noise, but later we will be conducting a question-and-answer session after the prepared remarks and instructions will follow at that time. [Operator Instructions]. As a reminder today’s conference call is being recorded.

I would now like to introduce your first speaker for today, Michael Scarpelli, Chief Financial Officer. Have your floor sir.

Michael Scarpelli

Good afternoon and thank you for joining us. On the call with me today is Frank Slootman, our Chief Executive Officer. Our press release and the simultaneous broadcast of this call can be accessed at

We may make forward-looking statements on this conference call such as those using the words may, will, expect, believes, or similar phrases to convey that information is not historical fact. These statements are subject to risks, uncertainties and assumptions. Please refer to the press release and risk factors and documents filed with the Securities and Exchange Commission, including our most recent annual report on Form 10-K, information on risks and uncertainties that may cause actual results to differ materially from those set forth in such statements.

I would now like to turn the call over to Frank.

Frank Slootman

Thanks Mike. Good afternoon and thank you for joining us on today’s call. We’re off to strong start in 2016 with our best first quarter ever. Revenues grew 44% year-on-year to $306 million driven by strong demand from new business and 97% renewal rate.

Our Global 2000 business continues to grow at a consistently high rate with 22 new customers during the quarter including TATA Steel Limited and the Bank of Ireland. Our average our per Global 2000 customer was $906,000, a 4% sequential increase and a 21% year-over-year increase.

In our two keys transforms we’ve noted first, upsells continue to be a leading growth factor as current customers expand their service and our usage. We now have 249 customers each with annualized contract values in excess of $1 million, an annual increase of 48%. We landed a record 13 upsells in the quarter each with new ACV greater than $1 million.

Our Q1 tends to be a seasonally challenging quarter, we recorded two of our largest upsells ever. An existing Global 2000 customer signed a $20 million upsell over five years increasing its commitment by approximately 380%. The upsell was driven by significant product expansion including service-watch, platform and project portfolio suite. Another existing Global 2000 customer signed a $10 million upsell over five years doubling its initial 2015 contract value and this upsell was driven by the adoption of an enterprise license agreement.

The second key trend is excellent growth in customer traction within our emerging products. In Q1 we saw new ACV from IT operations management grow a 166% year-over-year and represents 16% of total new ACV, up from 7% a year ago. This was driven in large part by the success of service-watch which was fully re-platform on ServiceNow in December.