“Finally, we expect diluted weighted average outstanding shares of 203 million.”

In context

“Gina Mastantuono (CFO): Thank you, Bill. In Q2, we beat the high end of both our constant currency subscription revenue growth and operating margin guidance while maintaining our best-in-class renewal rate at 99%. Our business remains strong. Our opportunity is greater than ever. However, as Bill highlighted, our customers are feeling the effects of the macro environment. So what are we doing? What ServiceNow always does. We're putting our customers front and center to deliver a great experience so they can retain their customers, to drive productivity so they can bend the curve on the bottom line, to reinvent their business model, so they can innovate to win and come out of this moment stronger than ever. We're continuing to invest in our powerful go-to-market and incredible R&D organization to drive future growth while keeping both hands on the wheel and being disciplined with spend. We're leaning into our people path our commitment to our amazing employees so they can do their best work and we can fulfill our purpose together. This is what the ServiceNow culture is all about. Turning to our Q2 results. Subscription revenues were $1.658 billion, growing 29.5% year-over-year in constant currency. This reflects an over 300 basis point acceleration in growth year-over-year. RPO ended the quarter at approximately $11.5 billion, representing 27% year-over-year constant currency growth. Current RPO is approximately $5.75 billion, representing 27% year-over-year constant currency growth. At the end of June, we started to see customers elevate larger spend decisions to the C-suite, resulting in elongated deal cycles. We've already closed several of those deals in July. As Bill noted, this access to the C-suite has resulted in even greater exposure to the capabilities of the Now Platform. Our renewal and net expansion rates remain very strong. Our renewal rate was 99% in Q2 for all regions demonstrating the resilience of our business. The Now Platform remains a mission-critical part of our customers' operations. We finished the quarter with 1,463 customers paying us over $1 million in ACV, up 22% year-over-year. Our largest customers continue to expand with us. We have now more than 100 customers paying us over $10 million in ACV, up more than 50% year-over-year. From an industry perspective, technology, media, and telecom led all other verticals, growing net new ACV 100% year-over-year and our Better Together go-to-market positioning continues to resonate as we closed 54 deals greater than $1 million in net new ACV, with 16 of our top 20 deals containing five or more products. Turning to profitability. Operating margin was 23%, one point above our guidance, driven by operating efficiencies, partially offset by FX headwinds. Our free cash flow margin was 16%. We ended the quarter with a healthy balance sheet, including $5.4 billion in cash and investments. Together these results continue to demonstrate our ability to drive a strong balance of growth and profitability. Before I move to guidance, let me give you some context as to how we're thinking about the months ahead. While our business remains resilient, we do expect the elongated deal cycles that we experienced in the last couple of weeks of June to persist for the remainder of the year. We have factored that into our updated guidance. Additionally, which I know is no surprise to any of you, we've continued to see an incremental strengthening of the US dollar, resulting in further FX headwinds for the second half of the year. We expect the total FX impact to be a $220 million headwind for 2022 subscription revenues and a $180 million headwind for Q3 cRPO. We have a well-diversified customer base with over 80% of our business in large global enterprises. As a result, we expect to sustain our best-in-class renewal rates. Over 85% of our new business comes from existing customers, which drives our robust net expansion and predictable growth. We also continue to see a very strong pipeline. At our recent Knowledge event, which some of you attended in Q2, we drove a 40% increase in pipeline year-over-year. We're confident that we're appropriately factoring in the macro trends as we see them today and will continue to be transparent as the remainder of the year unfolds. With that in mind, let's turn to our 2022 outlook. Primarily to reflect the incremental $87 million headwind we're seeing from FX since the end of March, we now expect subscription revenues between $6.915 billion and $6.925 billion, representing 24% year-over-year growth. That's 28% growth on a constant currency basis, in line with the original outlook that we provided in January. We continue to expect subscription gross margin of 86%, up 100 basis points year-over-year. We continue to expect an operating margin of 25%, as we currently plan to offset an approximate one point impact from FX with operational efficiencies and disciplined spend management. We will continue to monitor FX rates over the next couple of quarters. We now expect free cash flow margin of 30%, reflecting slightly lower collection as we expect to provide greater payment flexibility to support our customers when they need us most in this current environment. Finally, we expect diluted weighted average outstanding shares of 203 million. For Q3, we expect subscription revenues between $1.75 billion and $1.755 billion, representing 23% year-over-year growth, inclusive of a 450 basis point FX headwind. On a constant currency basis, we expect subscription revenue growth to be approximately 27.5%. We expect cRPO growth of 20% year-over-year or 23.5% on a constant currency basis. As I've discussed in prior quarters, this reflects about two points of headwind due to our larger than average customer cohort that renews in Q4. Excluding this headwind, our constant currency cRPO growth would be 25.5%. We expect an operating margin of 25%, and we expect 23 million GAAP diluted weighted average outstanding shares for the quarter. Finally, we remain very confident in achieving our 2024 and 2026 subscription revenue target of $11 billion plus and $16 billion plus that we provided at our Analyst Day in May. Our long-term trajectory has not changed. In conclusion, ServiceNow has established itself as an enduring platform. Our execution is proven and we continue to lean into our great opportunity with operational rigor. We're accelerating our development cycles with our September Tokyo release, to launch the powerful new products that our customers need now. We're doubling down and expanding our go-to-market programs for customers, including our top 250 key accounts to help them recognize value with greater business agility. We're being prudent with OpEx, but remain bullish on hiring go-to-market resources and the critical innovation roles necessary for future growth. And as always, we will remain disciplined, as we evaluate our investments to ensure we generate the greatest ROI possible. These actions will enable ServiceNow to continue delivering strong growth and profitability on our way towards our future targets. We remain ever confident in our journey towards becoming the defining enterprise software company of the 21st century. Before moving on to Q&A, I just want to thank all of our employees around the world for their incredible dedication and commitment. It's your relentless focus on our customers' needs that makes ServiceNow strong. With that, I'll open it up for Q&A.”