“We expect these customers to ultimately renew upon contract expirations, providing opportunities to drive further expansion throughout 2023.”

In context

“Gina Mastantuono (CFO): Thank you, Bill, and happy New Year to all of you who are listening in. Q4 was another great quarter of execution. We exceeded our subscription revenue guidance and drove strong renewal and expansion rates. Our operating and free cash flow margins also exceeded our outlook as disciplined cost management drove tailwinds to profitability. In Q4, subscription revenues were $1.86 billion, growing 27.5% year-over-year in constant currency, exceeding the high end of our guidance range by 50 basis points. RPO ended the year at approximately $14 billion, representing 25% year-over-year constant currency growth. Current RPO was approximately $6.94 billion, representing 22% year-over-year growth versus our guidance, primarily driven by favorable FX movements in the quarter. On a constant currency basis, growth was 25.5%. While constant currency cRPO growth came in just shy of our guidance of 26%, we actually outperformed our target for net new ACV and renewal ACV for contracts expiring in the quarter. The delta came from fewer early 2023 renewals than is typical in the fourth quarter. Given our strong renewal rates, which remain the best-in-class at 98% in Q4, this is only a timing issue. We expect these customers to ultimately renew upon contract expirations, providing opportunities to drive further expansion throughout 2023. The timing of early renewals does not impact 2023 subscription revenue growth, only RPO. Net new ACV drives incremental revenue growth, and there, we exceeded our forecast. Our larger-than-average Q4 customer cohort not only renewed at a very strong rate but also net expansion remained robust. What's more, the strength in net new ACV wasn’t limited to existing customers. New customer net new ACV grew over 30%. We ended the quarter with 1,637 customers paying us over $1 million in ACV, up 22% year-over-year. From an industry perspective, retail, hospitality, and transportation and logistics saw net new ACV growth of well over 100% year-over-year. Government remained strong, growing more than 50% year-over-year. Manufacturing and financial services also saw healthy double-digit growth. We closed 126 deals greater than $1 million in net new ACV in the quarter, including 2 of our top 5 largest ever. In addition, we saw 100% increases in the number of both $5 million plus and $10 million plus net new ACV deals. More and more customers are seeing the true power of the ServiceNow portfolio as a unified platform, leading to more multiproduct deals in Q4, with 5 of our top 10 deals containing 10 or more products. Turning to profitability. Operating margin was 28%, 200 basis points above our guidance, driven by disciplined spend management and less-than-expected FX headwinds. Our free cash flow margin was 53%, up 650 basis points year-over-year. For full year 2022, operating margin was 26%, 100 basis points above our guidance, and free cash flow margin was 30%, also 100 basis points above our guidance. Total free cash flow for 2022 was a robust $2.2 billion. We ended the year with a healthy balance sheet, including $6.4 billion in cash and investments. Together, these results continue to demonstrate our ability to drive a strong balance of world-class growth and profitability. Before I move to guidance, I want to give a brief update on the trends we are seeing. Heading into 2023, we believe we have prudently factored the evolving macro crosswinds into our guidance. Overall, the demand environment remains healthy; deals getting done, the market opportunity is growing, the ecosystem is expanding, and our renewal and net expansion rates ended the year strong, with our pipeline being robust. With that in mind, let's turn to our 2023 outlook. We expect subscription revenues between $8.44 billion and $8.5 billion, representing 22.5% to 23.5% year-over-year growth on both a reported and constant currency basis. We expect subscription gross margin of 84%, reflecting the expected diminishing impact of the change in useful life of our data center equipment, as well as investments to accelerate customer time to value as part of our impact offering and higher inflation. We expect operating margin of 26%, with sales and marketing efficiencies offsetting headwinds from gross margins. We expect free cash flow margin of 30%. And we expect GAAP diluted weighted average outstanding shares of 206 million. For Q1, we expect subscription revenues between $1.99 billion and $2 billion, representing 25% to 25.5% year-over-year growth on a constant currency basis, excluding a 300 basis point FX headwind. We expect cRPO growth of 24% on a constant currency basis, excluding 300 basis points of FX headwind. We expect an operating margin of 24%, and we expect 204 million GAAP diluted weighted average outstanding shares for the quarter. In conclusion, we had a strong Q4, capping a resilient year. As we enter 2023, the macro challenges many enterprises face underscore a point we have made consistently: the technology strategy has become the business strategy. Digital technologies are growth-stimulating deflationary forces. They power new business models while accelerating productivity and reducing costs. Our unique ability to drive business model transformation while delivering efficiency gains has created durable demand for the Now Platform. Our investment strategy is laser-focused on our customers' most pressing issues, and that continuous net new innovation translates into net new business for ServiceNow. We are well-positioned for 2023 and remain on our way to becoming the defining enterprise software company of the 21st century. Finally, I'm extremely proud of our team's performance this year. Bill and I can't thank our employees enough for their continued hard work and dedication. With that, I'll open it up for Q&A.”