ServiceNow Inc at UBS Global Technology and AI Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Karl Keirstead - UBS Equities - Analyst : I wish UBS would hit that mark. If it did, I probably wouldn't be here a year from now. But on the quarter, maybe to start, you could comment a little bit on how the environment felt for you, Gina. The numbers were good. And I think if we all reflect on the results across the software space in the third quarter, they felt okay. No blowups. The beats were pretty good. The tones were pretty good. Does it feel like maybe things are modestly improving at all or pretty similar? What do you think? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 10:35PM, NOW.N - ServiceNow Inc at UBS Global Technology and AI Conference

Question: Karl Keirstead - UBS Equities - Analyst : Okay. Got it. Okay. I recall a comment that you made on the last earnings call about the fourth quarter, Gina, where you were -- this was ahead of the US election where you were adding a little extra prudence as you put it, uncertain about which way it would go, and therefore, how your clients would react. I know it's only been literally a couple of weeks. But any early observations on whether that uncertainty has manifested itself in good or bad things?

Question: Karl Keirstead - UBS Equities - Analyst : Okay. But still, that's nice to hear. Can we stick to the theme of postelection optimism and in particular, initiatives in the federal government over the next several years to get more efficient, cut costs, automate because ostensibly, Gina, that should be good for a company like yours. So can you remind us the portion of your revenue mix that comes from federal government and how you and the leadership team in that vertical are looking at that opportunity over the next few years?

Question: Karl Keirstead - UBS Equities - Analyst : And Gina, in terms of your ability to go after that big Fed opportunity, is there any reason to be worried about the issue that popped up on your 2Q call that necessitated some leadership changes? Is that in the rearview mirror, a nonfactor when it comes to ServiceNow executing on that opportunity?

Question: Karl Keirstead - UBS Equities - Analyst : Okay. Good to hear. Can I flip to AI? It seems to be the topic du jour.

Question: Karl Keirstead - UBS Equities - Analyst : Okay. So I'll start with a very broad question, and that is you can count on one hand the number of software companies that are really monetizing AI. It's a disappointingly short list. The good thing is that you're on that list obviously.

Question: Karl Keirstead - UBS Equities - Analyst : You and Microsoft really. It's a very -- I should say, a couple of fingers. So one obvious question, and maybe I'm teeing you up to brag a little bit, is why ServiceNow. Do you have more amazing engineers? Do you have more amazing salespeople? What is it that's enabling you to monetize your AI product while everyone else except Microsoft seems to be struggling?

Question: Karl Keirstead - UBS Equities - Analyst : Can I add one more to this list of reasons why maybe you're monetizing it more so than others? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 10:35PM, NOW.N - ServiceNow Inc at UBS Global Technology and AI Conference

Question: Karl Keirstead - UBS Equities - Analyst : I'll hypothesize here.

Question: Karl Keirstead - UBS Equities - Analyst : One thing that struck me, Gina, is that when I talk to big enterprises about where they're pointing AI, like what the use cases are, I've been struck by the number that describe pointing AI at some internal function or internal business process that they're trying to automate with AI as opposed to pointing AI externally. So it feels to me like the bulk of activity is, frankly, an internal business workflow automation. And that's what ServiceNow does. So you're just in the right end market where a lot of the activity is occurring. I think you probably would agree with that, and you essentially said so in your answers. But that's an answer that's on my mind. I take it you agree.

Question: Karl Keirstead - UBS Equities - Analyst : Yeah. You'll follow that.

Question: Karl Keirstead - UBS Equities - Analyst : It's shifting a little bit?

Question: Karl Keirstead - UBS Equities - Analyst : And when we translate that to numbers, Gina, you shared with the audience a minute ago the deal size metrics that you gave on the 3Q call. We can sum up those numbers. And given that you're not identifying less than $1 million deals, we can loosely get to $100 million or so. And on a $10 billion business, we're obviously talking a point of growth. But clearly, next year's growth will also be impacted by deals that you signed in the December and March quarters. So you can get to, I think, 1 or 2 points of revenue contribution next year. Is that a reasonable framework?

Question: Karl Keirstead - UBS Equities - Analyst : And what does the AI product road map look like, Gina? So you've got the Pro Plus SKU. On the last couple of calls, you've been quite -- it seems deliberate in talking about the Now Assist product. But it seems to me there's an opportunity to add AI products. So without giving away the trade secrets, where is it all headed?

Question: Karl Keirstead - UBS Equities - Analyst : And when you're selling that vision to customers, Gina, are you bumping into the I'm just going to build it myself. I'm just going to DIY it. And I'm curious because Marc Benioff seems to be talking a whole lot more about the DIY trend than Bill, and I'm wondering whether you're seeing it as much as others.

Question: Karl Keirstead - UBS Equities - Analyst : It's a good perspective. Okay. Thanks for that. Maybe we'll pivot away from AI because ServiceNow does more things than just AI. You do have a core business, so let's make sure we talk about that a little bit.

Question: Karl Keirstead - UBS Equities - Analyst : So on the core, I've always, I'll admit, been a little worried over the years that, at some point in time, you're going to get maxed out on IT spend.

Question: Karl Keirstead - UBS Equities - Analyst : Yeah. That every company seems to already use ServiceNow and yet you keep growing the core. So I'm sure part of it is that there's a Pro SKU mix that's helping out, but like we're not seeing the end of that runway in terms of penetration. So do you mind commenting on that?

Question: Karl Keirstead - UBS Equities - Analyst : And it's still growing 20%, 25%.

Question: Karl Keirstead - UBS Equities - Analyst : Got it. Let's talk about one other thing you mentioned on the last earnings call that I thought was intriguing. You made a comment that 2025 is a larger renewal year for ServiceNow. And I'm wondering how do we interpret that? Could that have any change on the quarterly cadence of your cRPO number? Is it actually an underappreciated positive because, upon renewal, you've got just a larger upsell opportunity? Can you talk about that, what you meant to just say? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 10:35PM, NOW.N - ServiceNow Inc at UBS Global Technology and AI Conference

Question: Karl Keirstead - UBS Equities - Analyst : Okay. That's helpful. And then maybe the last one for me is you made a big hire last quarter, hiring Amit from Google Cloud, who was an extraordinarily successful executive. What is he doing at ServiceNow? What's been his priorities over the last couple of months since he arrived? And what are his big priorities into 2025?

Question: Karl Keirstead - UBS Equities - Analyst : Okay. Well, congrats on the success you've been having, all the best for the holidays and next year. And Darren, Gina, thanks for attending our event today. Appreciate it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 10:35PM, NOW.N - ServiceNow Inc at UBS Global Technology and AI Conference