“Finally, we expect GAAP diluted weighted average outstanding shares of 208 million.”

In context

“Gina Mastantuono (CFO): Thank you, Bill. Happy New Year to all of you who are listening in. Q4 was another exceptional quarter to conclude what has been a phenomenal year. Once again, we exceeded our topline growth and operating margin guidance metrics, showcasing our team's relentless focus on execution. ServiceNow's agility in responding to enterprise needs has solidified our position as the trusted intelligent platform for driving digital transformation. In Q4, subscription revenues were $2.365 billion, growing 25.5% year-over-year in constant currency, exceeding the high end of our guidance range by 200 basis points. We closed out 2023 with $8.68 billion in subscription revenues, also representing 25.5% constant currency growth, all organic at a scale that hasn't been accomplished by any other enterprise software company. RPO ended the quarter at approximately $18 billion, representing an acceleration to 27.5% year-over-year constant currency growth. Current RPO was $8.6 billion, representing 23% year-over-year constant currency growth, a 200 basis point beat versus our guidance. From an industry perspective, energy and utilities, business and consumer services, and education were particularly robust in the quarter. Government continued to show impressive growth and Telecom, Media, and Technology also saw strength. As Bill noted, I'm pleased to announce that customer workflows crossed $1 billion in ACV in Q4 following our Creator Workflows, which hit that momentous milestone in just Q3. We now have three workflow categories generating over $1 billion in ACV, highlighting the breadth of our portfolio. Our renewal rate was a best-in-class 99% in Q4, continuing to demonstrate the strategic relevance of the Now platform as it remains a mission-critical part of our customers' operations. We ended the year with over 8,100 customers, with our focus on landing the right new customers continuing to bear fruit as large new logo growth accelerated for the fourth consecutive quarter. We ended Q4 with 1,897 customers paying us over $1 million in ACV. We closed 168 deals greater than $1 million in net new ACV in the quarter, a 33% increase year-over-year that includes five deals over $10 million. For the full year 2023, we saw an approximate 30% increase in deals greater than $1 million in net new ACV. In Q4, our Gen AI products drove the largest net new ACV contribution for our first full quarter of any of our new product family releases ever, including our original Pro SKU. Turning to profitability, non-GAAP operating margin exceeded 29%, approximately 200 basis points above our guidance, driven by the topline outperformance and disciplined spend management. Our free cash flow margin was 55%, up 250 basis points year-over-year. For the full year 2023, operating margin was 28% and free cash flow margin was 30%. Total free cash flow for 2023 was a robust $2.7 billion. We ended the year with a healthy balance sheet, including $8.1 billion in cash and investments. In Q4, we repurchased 400,000 shares as part of our share repurchase program with the primary objective of managing the impact of dilution. As of the end of the quarter, we have $962 million remaining of the original $1.5 billion authorization. Together, these results continue to demonstrate our ability to drive a strong balance of world-class growth, profitability, and shareholder value. Moving to our guidance. We are raising our 2024 outlook to reflect the strong momentum with which we exited 2023. This partially reflects the early success we've seen with our Gen AI products as those investments are accelerating the build of our already robust pipeline with customers lining up to be first movers in this next wave of business transformation. As always, we continue to be prudent around our assumptions for incremental customer budgets and the macro cost in our guidance. With that in mind, let's turn to 2024 guidance. We are raising our subscription revenue outlook by $165 million at the midpoint to a range of $10.555 billion to $10.575 billion, representing 21.5% to 22% year-over-year growth or 21.5% on a constant currency basis. We expect subscription gross margin of 84.5%, reflecting investments in our data centers and emerging growth opportunities, offset by a 100 basis point benefit from a change in useful life of our data center equipment from four to five years as a result of an assessment completed earlier this month. We're also raising our full year operating margin target from 28% to 29%, driven by continued operating expense efficiencies. We expect a free cash flow margin of 31%, up 50 basis points year-over-year, overcoming an incremental point of cash tax headwinds. Finally, we expect GAAP diluted weighted average outstanding shares of 208 million. For Q1, we expect subscription revenues between $2.510 billion and $2.515 billion, representing 24% to 24.5% year-over-year growth or 23.5% to 24% on a constant currency basis. We expect current RPO growth of 20% on both a reported and constant currency basis. This reflects the tremendous strength of our federal business, which has resulted in a higher mix of 12-month contracts that will create a negative 150 basis point impact to Q1 current RPO growth. We expect that these contracts will renew in Q3 as ServiceNow's federal contract renewal rates are 99%. We expect an operating margin of 29%. Finally, we expect 208 million GAAP diluted weighted average outstanding shares for the quarter. In summary, ServiceNow's Q4 outperformance is another example of the strength of our platform and our people. This team's amazing accomplishments in 2023 set the stage for continued success in 2024. ServiceNow is positioned as the intelligent platform for end-to-end digital transformation, gaining momentum throughout the year. Leaders are shifting their investments into proven strategic platforms that leverage the power of AI to deliver growth across the top and bottom lines, with customers prioritizing quick time to value that the Now Platform delivers. The accelerating pace of investment in workflow automation and interest in Gen AI positions us well on our journey to become the defining enterprise software company of the 21st century. Bill, CJ, and I would like to extend our gratitude to all our employees worldwide for their outstanding contributions to ServiceNow's success this past year. 2023 was a remarkable year, and we look forward to an even more exciting 2024. With that, I'll open it up for Q&A.”