Company Name: ServiceNow Inc Market Cap: 15,274.

56 Bloomberg Estimates - EPS

Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

Q1 2017 Earnings Call

Company Participants
Michael P. Scarpelli
John J. Donahoe

Other Participants
Kirk Materne
Sarah Hindlian
Raimo Lenschow
Keith Weiss
Matthew Hedberg
Justin Furby
Walter Pritchard
Michael Turits
Rob Owens
Jesse Hulsing
Greg McDowell
Richard Davis
Derrick Wood
Philip Winslow
Kash Rangan

MANAGEMENT DISCUSSION SECTION

Operator
Good day, ladies and gentlemen, and welcome to the ServiceNow Q1 2017 Earnings Conference Call. At this time, all
participants are in a listen-only mode. Following managements prepared remarks we will host the question-and-answer
session and our instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being
recorded for replay purposes.
It is now my pleasure hand the conference over to Mr. Mike Scarpelli, Chief Financial Officer. Sir, you may begin.

Michael P. Scarpelli
Good afternoon and thank you for joining us. On the call with me today is John Donahoe, our President and Chief
Executive Officer. Our press release, investor presentation and broadcast of this call can be accessed at
investors.servicenow.com. We may make forward-looking statements on this conference call such as those using the
words may, will, expects, 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 for information on uncertainties that may cause actual results to
differ materially from those set forth in such forward-looking statements.

Page 1 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

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

John J. Donahoe
Thanks Mike. Good afternoon and thank you for joining us on today's call.
Before diving into our Q1 highlights, I want to take a moment to acknowledge Frank Slootman's leadership at
ServiceNow. When Frank became CEO six years ago, ServiceNow had 375 employees and only $93 million in
revenue. One year later, in June of 2012, Frank led the company through an IPO. Since that time, ServiceNow has been
the best performing stock of all software IPOs. Today, ServiceNow employs over 5,000 people, generates revenue of
$1.4 billion and has a market cap of approximately $15 billion, representing incredible growth and value creation
during Frank's tenure.
Along the way, he built outstanding relationships with our employees, our customers, partners and investors and I'm
inheriting a well-managed, well-positioned organization. Frank has been extremely helpful during this transition and I
look forward to continuing to work with him as our Chairman of the Board. I could not be more excited about leading
ServiceNow into our next phase of growth.
When I stepped down as CEO of eBay, I have the opportunity to survey the technology landscape and it became clear
to me that cloud businesses are disrupting both consumer and enterprise experiences for the better. I witnessed this
firsthand in the consumer space where cloud-based applications like eBay and PayPal are transforming how consumers
behave. But we're still in the early innings of enterprise transformation and a lot of opportunity remains. I first met
ServiceNow while I was at eBay as a happy and satisfied customer. And the more I explored this opportunity, the more
I fell in love with this company.
I believe ServiceNow has the potential to become one of the great enterprise software companies of this era and I'm
committed to building an endearing company. I've been onboard for a little over three weeks and have had the good
fortune of spending that time listening and learning from our customers, partners and employees.
In fact, I just returned from my two and half week listening tour where I met with over 70 different customers in eight
cities across the U.S. During these conversations, three themes stood out. The first is that our customers absolutely love
our products and they love our platform. And importantly, they want to do more with us. Rarely in my business career
have I seen such an enthusiastic customer base. We pride ourselves in high customer satisfaction and our average NPS
score is 50, which is considered world-class for the enterprise technology industry. Once we land a customer, they
continue to buy from us as is demonstrated by our 97% renewal rate in Q1.
A second theme is that many of the largest systems integrators in the world are rapidly investing in ServiceNow's
ecosystem. As we look to $4 billion of revenue and beyond, our partners will significantly influence our growth as they
implement solutions for our shared customers, provide outsourcing services and consume our products internally.
To more quickly respond to increased ServiceNow demand, the largest SIs continue to acquire smaller ServiceNow
partners. For example, in Q1, Accenture made two additional European partner acquisitions. I recently met with Jack
Sepple, Senior Managing Director of Accenture's Cloud and Operations Group and he said that these acquisitions
showed that Accenture is focusing on ServiceNow growth as they seek to maintain their leadership position in the
ServiceNow ecosystem. In Q1, 62% of our ACV was influenced by partners and we expect that percentage to increase
in the years ahead.
The third theme is that we have a real opportunity to raise our visibility and awareness with executive and decision
makers across the enterprise. We are well-known within IT and with CIOs. But our platform is being aggressively
deployed outside of IT to provide real value in areas such as HR, security and customer service. And we continued to
show strong growth, addressing new product opportunities as 93% of all customers now license more than one product
and 47% of our Q1 net new ACV came outside of ITSM compared with 33% a year-ago.

Page 2 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

In Q1, we continue to see this theme play out, with strong upsells driven by existing customers adopting new use cases.
For example, a Global 50 customer that pays $2.5 million for ITSM added an additional $1.7 million primarily for
Customer Service Management and ServiceWatch.
Another interesting trend we're seeing is the extension of our platform to manage relationships outside the enterprise.
This customer is using ServiceWatch to not only map internal services, but also map external services and they're using
Customer Support Management to resolve the underlying issues.
In my discussions with customers, they increasingly view our platform as a way to manage work across and outside of
the enterprise. This awareness makes ServiceNow even more relevant and more strategic to our customers and we are
excited by this large opportunity. Rapid success and strong growth in many of our newer products is driven by the
commonality of our cloud infrastructure and our platform, which are inherent in each of our products.
Our platform includes many reusable components, such as workflow, CMDB, collaboration, analytics and intelligent
automation. The strength of our platform provides customers with a full range of service options while maintaining the
same look, feel and common usability. This strategy will be a key theme at our upcoming Knowledge Conference and
Financial Analyst Day in Orlando, and I hope to see many of you there.
In closing, I want to reiterate how excited I am to lead ServiceNow in the next leg of growth. Our Q1 results and my
recent discussions with customers, employees and partners strengthen my view on our tremendous opportunity and my
belief that our best days are ahead.
And with that, I'll turn the call back over to Mike.

Michael P. Scarpelli
Thank you, John. During today's call, we will review our first quarter financial results and discuss our financial
guidance for Q2 and full year 2017. We'd like to point out that the company reports non-GAAP results in addition to,
and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. All financial figures
we will discuss today are non-GAAP except for revenues. To see the reconciliation between these non-GAAP and
GAAP results, please refer to our press release filed earlier today and for prior quarter's previously filed press releases,
all of which are posted at investors.servicenow.com.
We ended the quarter posting strong operating metrics across the board. 370 customers now pay us more than $1
million in ACV, an increase of 28 in the quarter compared to an increase of 18 in Q1 2016. We also added 26 G2K
logos in the quarter, including 11 in Americas, 8 in EMEA and 7 in APAC. Our average ACV for G2K is now
approximately $1.1 million, a 2% sequential increase.
Total revenues for the first quarter were $417 million, representing year-over-year growth of 36% and an adjusted
growth of 39% or an impact of $7 million. Total billings were $529 million, representing year-over-year growth of 40%
and an adjusted growth of 37% or an impact of $12 million.
Subscription gross margin in the quarter was 84%. Professional Services and Other gross margin was 4%. Overall,
gross margin was 76% and operating margin was 13%. Free cash flow margin was 37%. And we ended the quarter with
$1.3 billion in cash, short-term and long-term investments.
Let's turn to guidance for the second quarter and full year 2017. For the second quarter, we expect total revenues
between $458 million and $463 million, representing 34% to 36% year-over-year growth and 37% to 39% adjusted
growth on $11 million impact.
Revenue guidance includes approximately $16 million related to Knowledge with the related expenses of
approximately $34 million recorded in sales and marketing. We expect total billings between $491 million and $496
million, representing 31% to 32% year-over-year growth and 36% to 37% adjusted growth or an $18 million impact.
We expect an operating margin of approximately 11% and diluted weighted average shares outstanding to be
approximately 179 million.

Page 3 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

For the full year 2017, we expect total revenues between $1.86 billion and $1.88 billion, representing 34% to 35%
year-over-year growth and 36% to 37% adjusted growth or a $26 million impact. We expect total billings between
$2.235 billion and $2.255 billion representing 32% to 33% year-over-year growth and 34% to 36% adjusted growth or
a $37 million impact. We expect subscription gross margin of 84%, professional services and other gross margin of
15%, total gross margin of 77%, operating margin of 16% and free cash flow margin of 25%. We expect diluted
weighted average shares outstanding to be approximately 179 million for the year and expect to add approximately
1,200 net employees in 2017.
Before closing, please note, our Financial Analyst Day will be held on Monday, May 8 in Orlando at 12:30 P.M. local
time. We will also hold a webcast for the event accessible on our IR website.
With that, operator, you can now open up the line for questions.

Q&A
Operator
Thank you. [Operator Instructions] Our first question will come from the line of Kirk Materne with Evercore ISI.
Please proceed.
<Q - Kirk Materne>: Thanks very much, and congrats on the quarter. John, maybe I'll start with you and
congratulations on the new position.
<A - John J. Donahoe>: Thank you.
<Q - Kirk Materne>: You mentioned the opportunity for ServiceNow to move beyond IT. I was just kind of
wondering -- yeah, I realized you've been here very short time. But what needs to happen in terms of is the product
portfolio ready to go in that regard? Is the sales organization set up to be able to do that? Is there a lot of heavy lifting, I
guess, left to do to kind of get you -- your people are already using you outside of IT. What do you think has to happen
to sort of take that next step to start talking to more line of business heads and CEO types?
<A - John J. Donahoe>: Well, the thing that was striking, Kirk, as I mentioned, I -- because I'm new to the enterprise
space, I wanted to hear directly from their eyes and ears of customers. And so I've been on sort of an intensive
customer listening tour and had a chance to meet with over 70 different customers over the last 2.5 weeks.
And what was striking is that the quality of growth is exactly what you'd want and that our platform is getting pulled
into new used cases by the customers themselves. They see this platform as an opportunity to any place there's a
workflow or any place where they can provide a service that we can do for them there what we've done in ITSM. And
so you just listen to that, whether either it be building their own applications or asking us to build applications.
And my observation is what the company has done a very good job over the last couple of years is to recognize that and
then build these new products or new services into the platform.
So build the HR, build customer support, build security. And you see the customers appreciating that. And they're
asking to see more of our roadmaps. Because they say, before I take it further and customize it even further, I want to
see what your roadmaps are because if I can get it out of your platform, off-the-shelf, out of your platform, that's my
preference. And so there was a strong desire to share roadmaps and have them influence our roadmaps and I must
respond.
From what I saw, I think the sales coordination between the sales reps, the product line specialists, our Inspire team
was and frankly some of our vertical teams and a few verticals that we have them, the coordination seems strong and
then the product teams, we are still of a size where our product teams can be directly engaging with customers. And so
I think that the path for the future is to continue that path as we get pulled into new used cases and to deepen our sort of
footprint and track record in these new areas.

Page 4 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

<Q - Kirk Materne>: Great. And just a quick follow up for Mike. ACV growth in the other category was particularly
strong this quarter, Mike. Was there any product or set of products that was very strong for you guys? I realized it's a
compilation of products, but just anything that stood out necessarily?
<A - Michael Scarpelli>: No. We really saw strength across the board. If you look at our HR ITOM, our security ops,
that was pretty strong. I would say, our IT business management was very strong and that probably had the highest
growth rate year-over-year and that includes performance analytic's in that bucket.
ITOM was strong, down from Q4. But as we said before, Q4 they tend to be lumpier, bigger deals and Q4 was just such
a strong ITOM quarter. So, all-in-all, we're very pleased with our overall ACV performance relative to our plan. And
that's reflected in our results, you can see that in the billings and you can see that in the subscription revenue.
<Q - Kirk Materne>: Great. Thanks very much.

Operator
Thank you. Our next question will come from the line of Sarah Hindlian with Macquarie. Please proceed.
<Q - Sarah Hindlian>: Hi, great. Thank you. Congratulations on a blowout quarter, guys. And Welcome, John,
looking forward to working with you. I think one thing that we probably spent a little bit of time on, and I think may be
underappreciated in the stock is what you're doing with your channel partners, and how that ecosystem is evolving. We
saw a lot of headlines come out this quarter. Would love to hear a little bit about how you're thinking about the
channel? What you're seeing there versus last quarter? And how it's affecting or impacting your go-to-market? And
then I have a quick follow-up for Mike.
<A - Michael Scarpelli>: Actually, I was going to jump in, Sarah, its Mike, since John is relatively new.
<Q - Sarah Hindlian>: Sure, of course.
<A - Michael Scarpelli>: What I would say is over the last six to nine months, we've been investing extremely heavy
in our whole channel organization to develop both the GSIs and the local partners and we are starting to see that really
pay off. As John mentioned, 62% of our ACV is now influenced by partners and I expect that will continue to increase
overtime.
<A - John J. Donahoe>: And Sarah, what I would just add is I did have a chance, as I mentioned, to meet with Jack at
Accenture and talk with Mike Lauer at CFC and the folks at IBM. And I think everyone senses their this is a platform
that is growing and expanding and we want to mutually invest in it to ensure that we're providing the training, not just
in the ITSM product, but in the new products.
I heard a lot from customers, asking us to play a more proactive role in ensuring that local, smaller partners are getting
trained, embedded as to provide help in the implementation and integration, again, largely in some of the newer
products. And so you just get the sense that the ecosystem is just starting to pick up and hit a next level of traction and
we'll continue to focus on that and invest in it.
<Q - Sarah Hindlian>: All right. That's fantastic. And just another really quick one for you Mike. Duration, I know
that moves around on you guys a lot, what's sort of driving customer decisions on duration? And is there any particular
trend there that's worth calling out for us?
<A - Michael Scarpelli>: Are you talking in Billings duration? Are you talking in contract -
<Q - Sarah Hindlian>: Yeah, Billings.
<A - Michael Scarpelli>: That whole issue on billings duration is really driven by our partners or customers. Certain
of our customers or partners have requirements to capitalize. They will prepay multiple years in advance. And that's
exactly what happened with one of our big MSP partners in the end of the quarter. They prepaid it -- well, they agreed
they wanted five-year billings in advance and that was the end of the quarter, that cash will flow through this quarter.

Page 5 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

<Q - Sarah Hindlian>: Okay, very interesting. Thank you. Congratulations and welcome on board, John.
<A - John J. Donahoe>: Thank you, Sarah.

Operator
Thank you. Our next question will come from the line of Raimo Lenschow with Barclays. Please proceed.
<Q - Raimo Lenschow>: Hey, thanks for taking my questions. And John, welcome and congrats on a great quarter
from me as well. And hey, John, I would assume part of your mandate is that you've been one on the management side
that has seen the company go from $1 billion to kind of several billions in terms of run rate. What do you see in terms
of process and hardening of processes within ServiceNow to kind of get the company to the next level? Thank you.
<A - John J. Donahoe>: Well, I'll tell you what I really -- what attracted me here, which I really liked. It's the
foundation to build on, was a couple of things. One, the quality of the platform. This platform is architected the right
way. Fred Luddy deserves enormous credit because I did my due diligence about this platform and then as I listened to
customers, everyone says what a flexible, easy-to-build on and extensible platform it is.
The other thing that I found interesting and attractive was the organic growth. A lot of the innovation at ServiceNow
has been organically developed. You don't see that very often. Usually, technology companies have a one-hit wonder.
And then use M&A to add in new innovations. And because of the way the platform is architected and because of the
way Frank and team have really jumped on the HR, customer support, security, business applications, you see
organically built innovation and a muscle and a track record to begin to do that.
And so I think with that engine, that innovation engine has to be the core of the core of any successful technology
organization. And when you got that, then it's a matter of a way, how we build out the sales force going from a single
product to multi-product? Again, over the last 12 months to 24 months, the company has made significant progress on
that. That will continue. How do you go from one market to global? Again, strong progress in the U.S., increasingly
30% of our business is outside the U.S. We want to accelerate that global growth, that global development.
One of the wonderful things about a technology business is that you can be global instantly. The ability to recruit,
develop and retain our team, right? We're becoming a larger team and we are global team. We had to invest a little bit
more in process. I'm not a zealot about developing top talent, retaining top talent and we'll continue to do that here.
And then lastly, just our customer management. The -- as I mentioned in my remarks, the -- we sort of have grown up
to the IT world and are well-known in that world, our products getting pulled out of IT. We have very good new and
emerging reputation. And I think we have an opportunity to elevate and expand our customer relationships. So we can
build strong, deep, enduring relationships that are founded on great product, but also followed through on great service
and great delivery.
<Q - Raimo Lenschow>: Perfect. And one follow-up for Mike. Mike, your cash flow came in very strong. The cash
generation for the company is great. How do you think about usage of cash? I know it was a little bit early, but how are
you guys thinking about that?
<A - Michael Scarpelli>: Well, as you know right now, we have started doing in that settlement of our issues and we
are using a portion of that to pay the taxes on our issues. So in essence, issue less our issues. You know, until we are
GAAP profitable, we will not look at doing any type of share repurchase. But eventually, that will most likely be what
we do first. But obviously, we will be opportunistic in terms of M&A. To date, there hasn't been anything that
compelling. But we will continue to look. And if and when we see something compelling, we'll do something.
<Q - Raimo Lenschow>: Perfect. Thank you. Well, done, congrats.

Operator

Page 6 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

Thank you. Our next question will come from the line of Keith Weiss with Morgan Stanley. Please proceed.
<Q - Keith Weiss>: Excellent. Thank you, guys for taking the question and very nice quarter. I want to dig in a little
bit more on the sort of those other products, I think that's 50% growth in terms of percentage of new ACVs, one of the
most striking figures on the page there. And two questions on that. One, as that becomes a bigger and bigger part of the
business, is there a different competitor set that you're facing now that the value proposition is becoming more of like
automating all work? And if so, who are the competitors that you're going up against in those deals, number one.
And the second part of the question is, and you touched on this a little bit before John. In terms of getting the sales
organization in place to sell sort of outside the IT department, I guess these new competitors. I know we've done a lot
over the past year or two. Is there anything significant we should be thinking about in terms of further sales
reorganizations as we head into FY 2017?
<A - John J. Donahoe>: Keith, it's interesting because I sort of been training through my 20 years day and night, 10
years in the consumer Internet to always start by looking through the eyes of the customer when I'm thinking about a
market or a competitive environment. And what was striking in the 70-some-odd conversations I have is that in the
eyes of the customer, ServiceNow is addressing a need that the other platforms weren't really designed to do. They
think of ServiceNow anytime a workflow is involved. And often, these workflows, increasingly workflows cut across
organizational boundaries. And simply put, they want to reduce complexity, simplify and automate and then empower
their employees to focus on higher value-added activities, whether it's IT employees or security analysts or CS agents.
And so I was asking, how do you describe ServiceNow? And I hear words like you guys are the workflow automation
engine or the business process optimization platform. And so customers don't see our platform as competitive with
other platforms because they're looking at us through a different set of lenses. And so in fact what they said is they
want us to more seamlessly connect with the other platforms because they view it as complementary.
And so I guess the lesson I learned from the consumer Internet is eight years ago, there's always this talk about the big
platforms potentially competing with one another. And if you look at what happened, most of them focused on
innovation, focused on delivering on for their customers and there was ample room for growth for both. And I think
we've got that kind of white space. What we do, others are not doing. And if we continue to innovate and continue to
drive hard in that direction, we're going to focus on innovating, satisfying our customers and I think when you do that,
the rest takes care of itself.
<Q - Keith Weiss>: Got it. And then on the sales any significant sales changes expected for FY 2017?
<A - John J. Donahoe>: I don't think so. Mike?
<A - Michael Scarpelli>: No. For 2017, we discussed everything in our January conference call, what we're doing is
really more just the verticalization of we're starting with the SLED/MED area, state local education and medical and
we're not planning on doing anything else as of today in our in 2017.
<A - John J. Donahoe>: I touched on this a minute ago. But one of the things that was also striking and I think it's a
testament to the culture here and frankly, to Dave Schneider and Kevin Haverty, and the sales team they bought -- they
built, rather. But there was just wonderful teamwork of on the ground, do I need to bring in a product specialist, do I
need to bring in a vertical specialist, do I need to bring in the Inspire team? The ability to bring others in quickly
respond, team up, was very noticeable when I was on the road.
<Q - Keith Weiss>: Got it. Again, excellent quarter, guys. Thank you.
<A>: Thanks.

Operator
Thank you. Our next question will come from the line of Matt Hedberg with RBC Capital Markets. Please proceed.

Page 7 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

<Q - Matthew Hedberg>: Hey, thanks for taking my question, offer my congrats as well to John. I had a question. I
wanted to follow-up on an earlier comment on the partner network and dig a little bit deeper into your expanded
relationship with IBM. I mean, how should we think about that helping drive growth? Here you guys have spent a lot of
time talking about Accenture. But IBM to us seems like a pretty interesting opportunity as well.
<A - John J. Donahoe>: While I can comment what I know, which is still early days, and having had little bit of
exposure to it. But obviously, IBM is a great company and we're very complementary, very complementary skill sets
and capabilities. And so the dialogues that I've been involved in, which admittedly have been fueled thus far in only
three weeks, are talking how can we go-to-market together? How can we have our product be a complete component of
their service offering and how can we jointly serve customers, customers effectively together? And so I think it's an
important partner and one that will grow.
<A - Michael Scarpelli>: I'll just add that today, IBM now is our largest MSP that we have in terms of direct revenue
from.
<Q - Matthew Hedberg>: That's great, Mike. A quick follow-up. ACV for G2K is trending nicely towards your 2020
target of $2 million. But with the momentum that you're seeing in multi-product sales and new use cases, is it
reasonable to think that spend can move closer something like north of $5 million in ACV for G2K customer at some
point in the future?
<A>: Yeah. I like the way you think.
<A>: Yeah. Let's get to the $2 million and then we'll look at taking it up. I don't disagree with you that I think the $2
million is definitely a relatively conservative number, especially when you look at the IT budgets of these large Global
2000. We're just taking a very, very, very small piece of the overall budget. So I think we -- as we develop and get
better, add value selling to our customers beyond the CIO, I think you'll see that number move up.
<Q - Matthew Hedberg>: Thanks, guys.

Operator
Thank you. Our next question will come from the line of Justin Furby with William Blair. Please proceed.
<Q - Justin Furby>: Thanks and congrats on a fabulous quarter and John offer my congrats as well. I wanted to
actually start with you around the tour around the last few weeks in terms of the large customers that you've been
talking with. I'm just curious, when you're having these conversations, what you're hearing from them in terms of their
plans around public cloud adoption and sort of where they see ServiceNow fitting into that? And then I've got one
follow-up from Mike.
<A - John J. Donahoe>: Well, it's obviously every, I think, probably without exception, every one of them is
embracing cloud aggressively. And the far majority, that pattern you say, is there's a consolidation of IT responsibility
and technology responsibility inside of these enterprises. So there is a central group, a central often, IT, sometimes
they're calling them technology solutions group, but sort of operating on behalf of the enterprise. And you have a
spectrum. You have more regulated industries, where they're building. They have significant cloud offerings
themselves, private clouds. Much like we did at eBay or PayPal or we have at ServiceNow. Many of the banks have
this, financial services, healthcare. And they intend to be largely private clouds, because I think they have the scale and
capability to do that.
On the other end of the spectrum, you obviously have some companies that are moving to the public cloud to the
absolute maximum extent possible. And very few are all the way there. But you see them in process. And then I would
say the bulk are in the middle where they intend to have some sort of blend, hybrid cloud, public and private.
And one of the interesting new products or interesting areas where I was we ended up having a fair amount of
conversation, we have a Cloud Management product that is helping. Because part of what they're saying is can you
help? Is there any way you can help us in this learning journey, in this journey moving to the cloud? And so our Cloud

Page 8 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

Management product, I think, is one that's going to be, we'll be updating it in the Jakarta release, is one there is a lot of
interest in and I think there's some real value in that.
<Q - Justin Furby>: Got it. Thanks. And then I guess maybe probably best for Mike on this one. In terms of the
ecosystem, it's interesting that the G2K ads have picked up, if you look over the last six quarters versus the prior six
quarters, even as your penetration keeps coming up. But I'm just wondering if you feel like that's a reflection of the
bigger SIs knocking down walls for you? Is it your competitive positioning improving? I guess, what do you attribute it
to? And does it feel like it's getting any easier in terms of identifying new opportunities and new G2K? Maybe a versus
a few years ago? Thanks.
<A - Michael Scarpelli>: Well, what I'll say is pretty easy to identify an opportunity with the G2K because there's
2,000 of them, so you know who they are. And so we tend to put people on the ground, where those people are and so
just by virtue of having more people, it makes it easier. And as we've been expanding in APAC and more in EMEA,
you're seeing the G2K we are landing there.
Remember, these are long sales cycle selling into the G2K. These are not fine them in the quarter and closed. Many
G2Ks are two plus years sales cycles. And so we have pretty good visibility into that. So it's no big surprise. And I
think this will be another good year for G2Ks in total for us. And we have a very large, a big focus on G2K, as you
know.
<Q - Justin Furby>: Got it. Thanks very much and congrats again.

Operator
Thank you. Our next question will come from the line of Walter Pritchard with Citi. Please proceed.
<Q - Walter Pritchard>: Thanks. I guess continuing on that question on the G2K side. Can we talk about I guess
APAC specifically, that looks like a pretty good quarter for ads there. Can you talk about how comfortable you are with
that traction and momentum continuing in APAC? What do you attribute the success there to? And how are you doing
in APAC with adding additional products like you have in the U.S. and in Europe?
<A - Michael Scarpelli>: Well, when we rolled out a product, we roll that product out in all markets. So we're not
rolling products just out in the U.S. for instance. You can buy our HR product or security ops or customer service in all
markets. What I will say is we're seeing very good traction of Customer Service Management in APAC right now. But
as well, you see the other products there. And I will say, China is the one market that we really don't have any presence
in China. There's a big chunk of G2K there, but we're doing very well in places like Indonesia, in Singapore, and Japan
is starting to take off for us. Australia has always been a big market there. So it's a lot of work. I think it was probably a
little higher in Q1 than I would've expected out of APAC. But for the year, I feel very good about APAC in terms of
new G2K logos.
<Q - Walter Pritchard>: Great. Thank you.
<A>: In terms of finding people, we don't have any issues finding people over there.
<Q - Walter Pritchard>: Got it. Thanks.

Operator
Thank you. Our next question will come from the line of Michael Turits with Raymond James. Please proceed.
<Q - Michael Turits>: Hi, guys. Good evening, John. Also, congratulations and welcome and look forward to working
with you.
<A - John J. Donahoe>: Thank you.

Page 9 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

<Q - Michael Turits>: I had two questions. One, on which I think maybe both you and Mike have addressed this,
around Fed, which is obviously has been a strong area for you. But you recently gotten FedRAMP and there's even
more opportunity there. How do you view that opportunity around Fed? And then Mike I have a follow-up question on
another topic.
<A - John J. Donahoe>: To be honest, Michael, I didn't mean this particular trip with any federal customers, I don't
believe. So I know the sales team there is strong and we've got a good track record. But Mike, you may be able to add
more color.
<A - Michael Scarpelli>: Yeah. I think Fed has -- it's a huge opportunity in the federal government. I will say Q1 is
generally not a big quarter with the federal. We pretty much were right on plan where we expected. But it's not a big
number as you know. Q3 will be the big Fed quarter for us and we have a good pipeline of opportunities for, in
particular, Q3.
<Q - Michael Turits>: Great. And then my follow-up, Michael, there's another question on duration. You got -- you
explained this quarter's greater duration at five-year prepaid. But three things around duration, one, especially with
those multiyear prepaid, any pressure increase that we should be aware of for discounting there?
And then secondly, there's been a countervailing trend, I think in the industry towards shorter billing duration, and in
some cases, less than a year. So obviously, it net out this quarter. But is that increasingly if that you're aware of?
<A - Michael Scarpelli>: So for this one customer in particular, that was a five-year prepay, there was no discount to
get them to prepay. That was -- they want -- they insisted on doing it, not us. Because they want to capitalize that
amount and treat it as CapEx. So we allowed them to do that. I don't disagree that there is more pressure on shorter
billings for customers, especially as you deal more with MSPs where their customers are paying them monthly. But our
pricing is all based upon 12 months billing in advance.
And so if customers are going to push for shorter billing terms, they're going to end up paying for it with less discount.
And there's absolutely no incentive, by the way, for our reps today to bring in multiple years in advance from a
customer. We removed that a while ago.
<Q - Michael Turits>: Great. Mike, thanks very much. Thanks, John.
<A>: Okay.

Operator
Thank you. Our next question will come from the line of Rob Owens, Pacific Crest Securities. Please proceed.
<Q - Rob Owens>: Hi. Thanks for taking my question. So Mike, just to be clear on that, as we look at forward billings
expectations and how we ramp our models, we shouldn't see an increase to long-term deferred? You had just kind of
the one customer here and then another specific event that happened during the fourth quarter. But as we move
forward, the growth should really be in the short-term.
<A - Michael Scarpelli>: We really forecast the growth all to be in short-term because many of these multiyear
billings in advance, we find out about them last minute. They're very hard to forecast. And we give you guys full
transparency when they do occur, telling you.
<Q - Rob Owens>: Great, thanks for that.,Thanks for the clarification there. Number two, if I look at your top 20 new
deals and the success you're seeing with multi-products and 16 of the top 20 was three or more, is there any change in
the selling motion that's affording you the success? Are partners contributing to this? Is this doing anything to sales
cycles? Would just love more color.
<A>: Yeah. I haven't seen any noticeable change in sales cycles yet. I will say, as we mentioned, partners now touch
62% of our ACV. So, obviously, they're helping. It's really hard to give you a, to say our ACV ex percent of our ACV

Page 10 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

is specifically caused by our partners. As we've talked in the past, these are self-reported numbers. So, I really don't
know how good those partner influenced metrics are that we give you. All I know is this is definitely not hurting us.
<Q - Rob Owens>: Okay. Thanks.

Operator
Thank you. Our next question will come from the line of Jesse Hulsing with Goldman Sachs. Please proceed.
<Q - Jesse Hulsing>: Thank you. John, congratulations. I have a question about, I guess, your strategy or, I guess, your
vision that's may be starting to formulate after you've talked to customers for the IT department, and I guess the
addressable wallet there. It sounds like you see a lot of opportunity expanding outside of IT. But I'm wondering what
adjacencies or what opportunities you see within the IT department?
<A - John J. Donahoe>: Well, what's interesting is I see an evolution of the IT department itself. And you sort of see
that midstream. Interestingly, I've seen this on the boards I sit on with the CIOs and I saw this over the last couple of
weeks that you see the CIOs increasingly being drawn to BV, almost the Chief Transformation Officer and that these
companies recognize that technology can help transform how they operate, right?
And the goal of every company is to minimize the resources consumed in the running of the company and maximize
the resources devoted to innovation and your end customers. And so because technology can really help reduce
complexity, simplify, automate and empower employees to be more customer facing, the CIO is often the most
technology literate senior executive. And so they're being called on to drive what mild, what we would have called
business process reengineering, technology-enabled business process reengineering, across the enterprise.
And so, while on one hand, we report HR product, customer support product, security product, you see the CIOs or IT
touching these because they're going after them as workflows. And CIOs have workflow capability. And increasingly, I
think in the spectrum of larger companies, they're looking for the CEO to play that role.
The other thing that's I think, sort of acting as early kerosene on this trend is just the movement toward intelligent
automation, machine learning, deep learning where data and analytics can help automate these processes and help you
go from being reactive and responsive to being more predictive and addressing the root cause and remediating it.
And the center of where that knowledge often is going to reside inside the enterprise. So who you're not going to
build machine learning capability in every department. You're going to say, all right, where's our machine learning?
See, you often have a big data analytics group, you're going to have machine learning or what we call intelligent
automation group. And I think that's going to reside in IT. So, I see an expanding role of IT in many of these
enterprises.
<Q - Jesse Hulsing>: Got it. And then a quick follow-up for Mike that he kind of touches on at that last point, how was
the re-platforming of DxContinuum going? And have you guys put more thought to how you'll embed that into your
platform? And I guess price? Do you see opportunity for a new SKU or a price uplift for kind of intelligent
capabilities?
<A - Michael Scarpelli>: So as you know, we just bought DxContinuum earlier this year. Our plan is that this will be
coming out with our Kingston release, which is the end second half of 2017 towards the end of the year. We're still
working on pricing on that. So stay tuned.
<A - John J. Donahoe>: But what's interesting and what I've come to really respect is I would call the ServiceNow
approached this, we bought DxContinuum and the first step is to rewrite it into the platform. And so it's part of the
platform. It's embedded in the platform, so that all customers can capitalize it and take advantage of it, including all of
our products.
And then second, instead of it just being machine learning-as-a-service or AI-as-a-service, we picked four specific use
cases where there's clear need and are applying it to the used cases so that when it gets launched, when it gets

Page 11 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

announced, acknowledged and then launched, our customers will be able to use that immediately on real world
problems, that they're facing, within the context of our existing platform, within the context of our existing products.
And so I have a lot of respect for the way that this trend of taking these acquisitions and re-platforming them, rewriting
them into the platforms because as you see, that our customers are going to be able to benefit from it quickly.
<Q - Jesse Hulsing>: Got it. Helpful. Thanks guys.

Operator
Thank you. Our next question will come from the line of Greg McDowell with JMP Securities. Please proceed.
<Q - Greg McDowell>: Great. Thank you very much. Hi, John, hi, Mike. John, I want to ask about your first couple of
months, maybe from a different angle. Is there anything you've heard or learned that has made you, maybe rethink
some of your original assumptions before joining ServiceNow? Or any of any areas of may be the original operating
plan that you've discovered? And whether talking to customers or talking to employees need a little fine tuning?
Thanks.
<A - John J. Donahoe>: Well, it's been three weeks. I know we announced it 2 months ago, I only started 3 weeks
ago.
<Q - Greg McDowell>: Of course.
<A - John J. Donahoe>: But Greg, we had a board meeting yesterday. I'll just be honest. I said to the board, I'm
thrilled. I just and I'm not just saying it, I said it to them that sure, there's a lot of there is a lot of opportunities to
mature and grow and expand as we more naturally deal with the success that the company's had, absolutely. But the
two things that I appreciate which are the two things that are really hard to you can learn to scale, you can learn to go
global, you can learn to evolve. But it's the core of innovation is the core innovation capability here. The quality of
the platform, the core innovation capability, I think, is real. And that was a real question for me, listening to these
customers and they validated that.
And then again, great credit to Frank and Mike and the historical culture here. There's no arrogance in this culture. This
culture wants to win. They're willing to change. It's not caught up in its ways just because we've had success doing it.
And so there's a real focus on, all right, what do we need to do to get to $4 billion, right? What do we need to do to get
to $4 billion? Right? What do we need to do? What do we need to evolve? What do we need to change? And so with
the product and the culture being quite healthy then, everything else is manageable.
Do we need to allocate more resource in one country or another, and probably we do? Do we need to be more
systematic in our leadership developments? Probably we do. Do we need to continue to evolve our post sale coverage
of our customers? We probably do. But all of those things are things other people have done before. And we can draw
from best practice. The things that are hard to do when you don't have them are the innovation and the culture. And I'm
very appreciative of those two things.
<Q - Greg McDowell>: That's helpful. Thanks.

Operator
Thank you. Our next question will come from the line of Richard Davis of Canaccord. Please proceed.
<Q - Richard Davis>: Hi. Very quickly, you kind of touched on this. But some of the companies that we track have
faced a little bit of capacity constraint. That's kind of a good news, bad news on the professional services side of the
house, simply because there's been a lot of consolidation. Have you seen any of that? And that's really the only question
I had. Thanks.
<A>: And Richard, do you mean our own professional services organization or...

Page 12 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

<Q - Richard Davis>: No, partners. Partners.

<A>: Partners. I don't know, Mike, have we...
<A - Michael P. Scarpelli>: I would say I have read this comment from some of our bigger partners and from some of
our salespeople. Kind of number one concerns from partners is finding people that are trained on ServiceNow already
because they're in such high demand. So that means they have to hire people and do all the training themselves where
they'd rather find some people especially as they wanted to go into new geos and start practices, because they're finding
they have to have people close to where their customers are. Because customers are asking that. But we've been hearing
that same thing for the last five years, quite frankly.
<Q - Richard Davis>: Got it.
<A - Michael P. Scarpelli>: So we're very focused internally here on training our partners and we will get better at that
over time as well too, as well as our training our customers.
<Q - Richard Davis>: Thank you so much.

Operator
Thank you. Our next question will come from the line of Derrick Wood with Cowen. Please proceed.
<Q - Derrick Wood>: Thanks and great job on the quarter. I wanted to ask about the customer service side of the
fence. We're hearing, you show up more in RFPs and Mike, I know when you entered the market 18 months ago, you
gave some figures, I think out of the gate, there were a handful of customers, a couple of quarters later, you had a
couple dozen. I'm just curious what is this can this become a bigger volume business, or is it still kind of lumpy?
And is the focus kind of upper mid-market or G2K, or both? Just a little more color around how activities been trending
in this area.
<A - Michael P. Scarpelli>: What I would say is this is a market that our commercial guys are excited about and
they're able to do big deals. We've done a number of big deals in the commercial segment, but, as well, we are seeing
G2K customers buy our CSM product. So I think it's applicable across the board.
<Q - Derrick Wood>: Okay. And from a volume standpoint, is it still kind of early in terms of getting ramping up
volume versus where it was a year ago?
<A - Michael P. Scarpelli>: Obviously, it's been growing year-over-year. We had a very good Q1 without we
actually did close to one deal was close to $1 million. And that was a commercial account that we sold that into, I'll
say, in Q2. We closed a very nice deal with the G2K already in Japan. So we're pretty excited about that product. But
I'm no more excited about that product than I am about HR security ops. All of these products standalone can be $1
billion revenue businesses one day. Now that's quite a ways off. But I do feel pretty positive about those all three
businesses.
<Q - Derrick Wood>: Great. And Mike, you took up free cash flow margin guidance from 24% to 25% for the year.
Was this based on the strong Q1 and strong multiyear payment cash? Or there are other elements driving this?
<A - Michael Scarpelli>: Mainly through the strong Q1. And we're going to talk more about free cash flow and the
puts and takes at our Analyst Day.
<Q - Derrick Wood>: Great. Thanks.

Operator
Thank you. Our next question will come from the line of Phil Winslow with Wells Fargo. Please proceed.

Page 13 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

<Q - Philip Winslow>: Hi, guys. Thanks, guys for taking my question and I want to pass along my congratulations as
well, John. A question actually for both of you guys on just the balance there that you're doing or how you sort of
focusing on the sales force and go-to-market efforts because they're continuing to add your G2K customers. But also if
you look at the rest of the slides, your ACV per customer is going up and obviously, the customers with multiple
products that percentage is increasing. So how are you balancing just the, call it, the ability to upsell into existing ones
and grow ARR that way, relative to bringing on that new?
<A - Michael Scarpelli>: I'll answer that one, Phil. First of all, I want to clarify it. 73% of our customers are now have
bought multiple products, not 93. And what I would say is the way we balance that is as we talked about in January of
2015, our whole go-to-market where we segmented our sales force between commercial and enterprise, but we further
segmented it between account executives and client account managers and directors.
The client account managers and directors are really focused on our existing customers and going back into those
existing customers and making sure they renew, they buy more of their existing product, but also, that's where we
target our new products going to them. And our client account executives are focused on lending those new clients.
And what's been very helpful is now having more product in their bag when they go into a customer, if they realize a
customer isn't ready for an ITSM replacement right now, because this is not a priority for that department, we can now
sell something else and could potentially do an HR replacement to begin or a new HR implementation because many
times, we are replacing what was being done in e-mail and we're seeing that, same thing with customer service.
So that's our go-to-market. What I would say is 70% to 75% of our net new ACV is really coming from our installed
base of customers versus new customers. And we just think over time, that's going to become a bigger and bigger piece
of our business as our installed base gets bigger.
<A - John J. Donahoe>: Phil, building off something with what Mike just said and something he said earlier on the
question about additional Y2K. I was struck. I spent a lot of times with sales reps the last couple of weeks and riding
around with them. And a number of them that said, two years ago, I was covering 21 accounts. Now we get to focus on
three. It's sort of the benefits of scale.
The benefits of scale that allows that kind of focus on Y2K account which, whether it's not yet a customer and we have
cases where there's reps, as Mike said, it's a long sales cycle, who were assigned to Y2K, that may not generate revenue
for a year. And -- or if they're just covering existing customers. And so the benefits of scale are noted. As we get larger,
that coverage gets easier. Is that Y2K?
<A>: Yes.
<A>: Sorry about that.
<Q - Philip Winslow>: No, worry. I was with you. All right. Great.
<A>: A little bit in the past, I guess...
<Q - Philip Winslow>: Thanks, guys.
<A>: ...one of the acronyms.

Operator
Thank you. Our next question will come from the line of Kash Rangan with Bank of America Merrill Lynch. Please
proceed.
<Q - Kash Rangan>: Hey, guys. You did certainly take me back on a 1998 June nuclear winter with your Y2K
comment. I thought I was 20 years younger for a moment.
<A>: Yeah, me too.

Page 14 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

<Q - Kash Rangan>: There's one question for John, and one for Mike. John, I mean, you had a bit of a different
background. As you pointed out, not so much enterprise tech, more consumer tech and management consulting. As you
look at that, typically enterprise tech companies, you there are enterprise people that are CEOs and certainly, you
have a very unique background. How should we think about what are the things that you would be applying very
uniquely based on your eBay and management consulting experience that is particularly asserted to ServiceNow and
given its evolution?
And one for Mike. Mike, sorry to ask this, but how should we think about ASC 606 as to the additional level of
disclosures? Any potential changes to your direct practices? Thank you so much.
<A>: Kash, on the first, I'll just highlight a couple of things. And to be clear, I had the benefit of joining a company that
has enormous enterprise experience and expertise. And I think I bring two or three things. One is I was a CEO. I know
what it's like to try to lead a large global enterprises, and I know the fundamental challenge or issue we're trying to
address, which is how do you help an enterprise deal with all the complexity of the technology is brought and turn
technology to an asset, so that the enterprise can focus on where they want to focus, which is the things that drive value
for them, which is innovating and delivering for their own customers. And so in dialogues with our customers already, I
feel like I can relate to what the C-suite is looking for from our platform and others.
Second, I spent 20 years at Bain and spent a lot of time talking to CEOs about business transformation. That's in
essence what Bain did. It didn't do the technology portion of the business transformation. But the kind of
transformation that we're involved in, our platform is one piece. But the workflow redesign that has to go with it is an
important piece. And this is again a source of differentiation versus some of the other technology platforms.
If you just kind of automated the process, that doesn't help anyone. And so the way our clients are getting value out of
our platform is not just the technology, but also the opportunity to redesign the processes, redesigned the workflow so
that you can simplify, streamline, automate. And my Bain experience I think is sort of in talking to some of our
partners, I sort of been on that side of the table at one stage of my career.
And then, the third area that might be something I referred to earlier, which is consumer internet is quite good at
delivering user experience. And I think enterprise is behind on delivering comparable user experience. And while
ServiceNow has done a nice job with our service portal, there's ample opportunity to significantly improve the user
experience, both for employees and for fulfillers, that IT professionals or others that are administrators of our product.
And so CJ decide who's running product technologies made this his number one priority, and I'll be spending a lot of
time and attention on that as well.
<A>: And then Kash, on your question on 606. First of all, we will be spending a little bit of time at our Financial
Analyst Day talking about the impact of 606. You will also see, when we file our Q, which will get filed next week, we
will be putting disclosures with a range of the potential impact. We will be adopting that full retroactive, starting with
the 2016 year. In terms of and we will be doing that starting in Q1 2018.
As you know, that really only impacts us at a revenue line for our on-prem customers, or customers who have the right
to go on-prem without significant penalty. The revenue impact in 2016 on $1.4 billion, if we had done that, would have
been somewhere between $22 million to $27 million on the revenue side. And then you know, there are commissions
today, we defer and amortize them over the contract period that gets changed under 606. The impact of that is it's going
to push out roughly $23 million to $26 million in expense over a longer period of time. Net-net on an operating margin
basis, we'd have a pick up of somewhere between $40 million to $50 million in all of 2016, if we had adopted it
January 1.
On the disclosure side, we will be disclosing quarterly, which required on the backlog and deferred revenue and then
how that backlog is going to roll off into revenue over the next 12 months. And that also, you're required to disclose the
impact of how much of your revenue came off your balance sheet from the beginning of the quarter, which we'll talk
more about at our Financial Analyst Day.
<Q - Kash Rangan>: And certainly here at Bank of America, we look forward to better user experience relative to our
Legacy, ITSM. Wishing you good luck, John and Mike.

Page 15 of 16
Company Name: ServiceNow Inc Market Cap: 15,274.56 Bloomberg Estimates - EPS
Company Ticker: NOW US Current PX: 90.92 Current Quarter: 0.221
Date: 2017-04-26 YTD Change($): +16.58 Current Year: 1.075
Event Description: Q1 2017 Earnings Call YTD Change(%): +22.303 Bloomberg Estimates - Sales
Current Quarter: 451.222
Current Year: 1836.774

<A - Michael P. Scarpelli>: Maybe you can help them become a customer.

Operator
Thank you. Ladies and gentlemen, this all the time we have for questions today. So now, I'll be handing the call back
over to Mr. Mike Scarpelli, Chief Financial Officer, for closing comments and remarks. Sir?

Michael P. Scarpelli
Thank you very much. And I apologize for the analyst who had questions and we didn't get a chance to answer them.
But as a reminder, a replay of this call will be available as a webcast in the Investors section of our website. Thanks for
joining us today.

John J. Donahoe
Thanks.

Operator
Ladies and gentlemen, thank you for your participation on today's conference. This does conclude the program and you
may all disconnect. Everybody, have a wonderful day.

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