ServiceNow, Inc. (NOW) Earnings Call Transcript & Summary

Excellent. Thank you, everyone, for joining us this morning. My name is Keith Weiss. I run the U.S. software research group here at Morgan Stanley. And we're very pleased to have with us both CEO and CFO from ServiceNow, Bill McDermott and Jill Mastantuono?

Gina.

Gina. Yes.

Close.

Gina. I was focusing so much on the last name.

On the last name. I know. I know.

I practiced all weekend. Before we get started, I do have to read a brief disclosure. Please note that all-important disclosures, including personal holding disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at www.morganstanley.com\researchdisclosures or at the registration desk.

So thank you both for joining us. I think with a new CEO and new CFO on board, I think a great way to kick it off is, maybe with Bill first. What got you so excited about ServiceNow, to come over and take this role? You were leading a big organization before. There's a lot of opportunity ahead of you. What made you so excited about ServiceNow and what they can do over the next 3, 5, 10 years?

Well, I was, first of all, Keith, excited about the 17-year run at SAP and 10 as SAP's CEO, and transforming that company was a great joy in my personal and professional life. So I want to give a big salute to my friends at SAP. Coming into ServiceNow, I saw a company that had immense, immense potential. Fred Luddy, when he invented ServiceNow, did so with the intent to really have a purpose around making work, work better for people, taking complex business processes, composing them in workflows in a natively architected cloud that could really scale organizations. And he did a wonderful job. Frank Slootman, the first CEO, helped grow Fred's vision fast. And then John Donahoe, wonderful personal friend of mine, did a very good job of building out the culture and really getting the organization ready for its next big run. I come in, what am I so excited about? If you look at the potential, 2/3 of our business right now are in the Americas, which means there's lots of room to grow in Asia. Obviously, Japan, South Korea, Latin America, the Middle East, lots of growth in Europe. So geographically, we have a huge opportunity. If you think about industries, we've talked a little bit about banking and telco, and we announced a couple of partnerships recently that will help us scale there. But there are many more industries. And finally, I think about the personas in the enterprise. We have become the standard for IT service management, asset management, operations management and business management in the cloud. But if you look at the employee service delivery opportunities and you look at customer service management and you look at new businesses, financial close, operations, security, it's limitless. The world is a complex place. ServiceNow makes it simple.

Got it. And then same question to you, Gina. When a new CFO joins an organization, to me, I think there's some noise -- fascinating opportunity because the CFO sees the company as close as -- the closest analog is like an analyst or an investor looking at the company. You were CFO at Ingram Micro, again, had a great position there. Why made ServiceNow such an exciting opportunity for you? What's kind of the investment case that you made in coming over to be CFO of ServiceNow?

Sure. Thanks for the question. Obviously, who wouldn't jump at the opportunity to work with Bill, right? So that was just a no-brainer from my perspective. This is just a dream job. I love Ingram Micro, and the folks there are near and dear to my heart. So making a move, I really had to think about that closely. And what did I see? Not only a strong leader and an amazing leader but an incredible opportunity for this company to grow and to be part of that. From an investor perspective, really thinking about the business model, it's beautiful. We have world-class growth rates with world-class margins. Who wouldn't want to be a part of that and really help drive it to the next level? And so I was really excited to come and scale this business from the $4 billion opportunity that's right now to the $10 billion opportunity that we see not far away.

Got it. It's a great segue, I mean, so your predecessor, John Donahoe, laid out a vision for the company to reach $10 billion in annual revenues. Then he handed it off for you to fill out and actually execute to that vision. Can you help us understand that road map a little bit better? Is -- how do we get there? Sort of where do those dollars come from? Is it doing more with your existing customers? Is it going further, fuel from the enterprise? Is it like -- what's the construct of getting to $10 billion?

Sure. Well, first of all, I fully signed up for all of John's commitments. I would have made the same ones. I wouldn't have done anything different. And in many ways, I look at this as a business continuity scenario as opposed to a transformation or a change scenario. So first of all, all great companies have a great core business. And if I think about the core business of ServiceNow, it started out in IT and obviously has really spread its wings in IT. The TAM is huge. And if I just look at the core, if you think about machine learning, AI, advanced operations, asset management, it is incredible what we still have left to go. We are underpenetrated in our existing accounts, and there's many new ones that we're still yet to get in the core. As one example, you might have noticed, we did a few M&A moves on tuck-ins like Loom, which strengthened our platform in AI and operations. This also enabled us to hire new talent because they see that this platform, it's so solid. What I love about the new talent is it's coming from wonderful companies like Google. It's coming from places like Pinterest and obviously, Microsoft Azure. And we're also seeing folks coming in from a CSM, customer service management perspective, from good companies like Salesforce. So they really want to be here, and then I said, well, I know I wanted to be here -- Gina wanted to be here. What are they excited about? We have a near 100% renewal rate with our existing customers. So the loyalty effect and the net present value of those cloud economics is incredible. Let's go one step further. I believe that we have the ability to spread the perimeter swiftly with the employee, with the customer as 2 giant growth shoots. One of them, if I think about employee service delivery, think about moments that matter: persons going on maternity leave, a person's onboarding as a new hire, a person's offboarding, a person has a problem with their tools or something's going on in the facility. We don't just manage in 1 domain. We cross-functionally manage workflows across an end-to-end digital transformation agenda. Next, on customer service management. If you think about the opportunity, think of it in 3 pieces. One, engagement. How do I engage my customers on a multichannel strategy basis? Two, how do I manage operations with each of my customers? And three, many of my customers require a field service capability where I need to align the right technician with the right part and the right supply chain and also the right predictive level of analytics to make sure the experience is world-class. A recent company, that is in the media business and has nearly 30 million of their consumers streaming, learned that, wow, why wouldn't I just want to do all 3 of those things with 1 company? Because it's integrated into 1 consistent workflow. So they chose us in a heated, competitive battle. And we're learning that not only these businesses over $200 million in the cloud but they're well on their way to $1 billion in the cloud. And that's the key, Keith. We want new businesses that can be $1 billion in the cloud within 3 to 5 years. And we have many on-deck initiatives that are also going on.

Got it. And as you expand from -- like you said, from the core, ServiceNow has done an amazing job for the CIO, right? Has become a real partner of the CIO, helping them to organize, create efficiencies and optimize their IT department. So you have that strong advocate. As you go outside the IT department and you're selling into the head of HR, you're going into the CFO's office and trying to sell into the CFO, they have other vendors that they've been working with that have been helping them on their domain and now perhaps seen as more of the domain expert, work as the domain expert in HCM, if you will, or SAPs, the domain expert when it comes to the CFO's office. How do you get that domain expertise in ServiceNow? And so both from your perspective in terms of distribution and marketing and how expensive is that going to be? Can you sustain the same outstanding margins that ServiceNow has? How's that when you have to sort of invest in those core domains?

Would you like me to start and then have Gina go through the financial picture? Okay. Well, first of all, it doesn't hurt to have a Rolodex that stretches across the world. Whether it's heads of state or CEOs and major Fortune 2000 companies in 25 distinctly different industries, from sports, media and entertainment, all the way through to health care, regulated industries and so forth. So we obviously have a vision for the C-suite. And ServiceNow has the ability with our workflow to extend those relationships. Let me give you a couple of heuristics you might find interesting. No matter what the weather conditions are in the economy, ServiceNow, in a year 1 scenario, can give the customer 5x back on whatever they've invested in our equivalent ACV. So if you could quintuple your return on that investment and you could do that in year 1, like, why wouldn't you, right? That makes total sense. The second thing is the biggest challenge in most companies today is getting teams to work cross-functionally because these business processes go across various domains. I gave you an employee service delivery scenario. I gave you some customer service management, but it's also in IT, because IT doesn't just support the business anymore. IT is actually the business. And very often, IT has become software, and software is now the new digital offering for most companies that are going to succeed in this environment. There's 3 things you should lock in on that every customer and every CEO wants. One, they know they have to digitally transform their business. There's no debate on that. If you think about what they've been doing with systems of record is they've been optimizing as much as they can this whole digitalization move. But they really need to digitally transform, which means rethinking the way the work is done altogether for the sole purpose of: one, winning the talent war. How do I provide great employee experiences so my folks want to work from my company and no one else's, and I can attract people to help me fulfill my growth ambition; two, customer experience. We all know that behind every great experience is a great workflow. Without the great workflow, there is no great experience. Workflow has become the big idea; and finally, as I think about all of that, everybody's smart out there, and they're going to look at the financial implications. So if you take a Vodafone, hey, 25% improvement in customer SAP, not too bad. You look at productivity improvements in the 40s and the 50% ranges in the way they run their business. You look at Roche, digitally transforming across their whole enterprise on ServiceNow. I like Epicor, if you look at how they've used us and the benefits that they've gotten on their business. It's just mind-boggling in terms of productivity and happiness of their people and customers. And if I think about something like -- even something like the University of Utah. They're basically building net new applications on top of the platform for things like employee rewards. And guess what? They don't need somebody that's an engineer to code it. This is a low-code, in some cases, no-code platform. So it's coming at you fast, and it's what the market needs for these important times. And Gina, I'm sure, has some thoughts on the margin.

Sure. So as we talked earlier in the quarter, both CSM and HR have reached over $200 million in annual run rate revenue. We've been able to do this, new buying centers from both, and we've been able to do this while keeping our world-class margin structure. And so how are we able to do this? A couple of ways. So first of all, on IT, we usually land the customers small and then they continue to buy. And so the cost of the incremental revenue is less. Then on from a renewal perspective, right, cost of renewals are definitely less than the cost of new business because we pay commissions on renewals at a lower rate than new sales. As we continue to see leverage in our core base, we're able to use some of those dollars to reinvest in these new areas. We will continue to do that, and we will continue to leverage our base to invest in these new areas and continue to deliver these world-class margins.

One thing that Gina is 100% right on. If you think about what's different about ServiceNow, I just got off of -- and Gina did half of this trip with me. We were on a 3-continent trip over 11 days, and we met literally hundreds of customers and partners and thousands and thousands of employees. In fact, we've met every single employee in the company personally in the first 100 days, which is pretty nice. What the prevailing learning is this: the culture here is special. The customer satisfaction. I cannot find a single customer, go on channel checks, that doesn't love the platform. That has never happened to me in my career. Usually, I go with high-level executives, and they're waiting for me with a to-do list. We want you to do this, and something, that's the first half an hour, and then we get to talk about where we're going. This half an hour starts with what's new, what more can you do for me? We love the platform. And something that's kind of interesting, to be completely candid, as I'm going into CEO meetings, the CEO is saying, my IT people, they tell me they love ServiceNow. But you guys haven't called on me. I haven't mentioned. And I want to meet you, and I want to know directionally where you're headed. And the #1 thing they are really interested in out there, because if you look at Gartner's data, 80% of the CRM opportunity in the world is based upon legacy and homegrown systems. So they're all real interested because they know workflow is the big idea and how they can reorient the workflow around greater customer satisfaction, retention and Net Promoter Score because that's what their Board of Directors is looking at. And they can't actually get over how impactful ServiceNow is once we show them the product.

Great. Can you just touch a little bit about sort of the role that partners are going to play in getting that domain expertise? On the last earnings call, you talked about some new announcements with Accenture and Deloitte, going into areas like telco and financial services. And it seems to me this is something that you pull from your experience at SAP, which is having really strong partnerships. To what degree can you leverage those big systems integrators to get that kind of domain expertise, the knowledge of the customer, to help sort of know which workflows to automate and how to properly automate those workflows from a vertical-specific partner perspective?

Sure. Well, here's the real learning here. And Gina and I have spent a lot of time with the partners. I'm going to give you something with the partners, they're all very smart business people, and they're all a little bit concerned that the systems of record may have sort of gone through their last big upgrade cycle. So they're like always looking for what the next big thing is. They're smart, and they're watching their pipelines. So what we've done a good job on as a company, is we've trained and certified the partners that might be doing implementation work on ServiceNow. But we really haven't expanded the boundaries with the business partners or the sellers that actually sell the platform into their clients and recommend it, with the exception of the IT space. So now I've had every large SI partner. Name a brand, they've come to see us in Santa Clara. And they come in very exciting. I have a feeling we could build a $1 billion business together. To which, once the meeting's over they leave and say, at least $5 billion, no question. And that is the dream. If you go to Sydney or Australia, it was incredible because 1 of the really most renowned brands in the SI space had a 19 ranking. They were 19 in Sydney. When they heard this and we educated them with the data, they said, this cannot be. We have got to change this paradigm immediately. Who do we go on an M&A tear with ServiceNow? We have to be there. And I said, that's a zero-sum game for us. What we need you to do is hire 5,000 people, train them, certify them, get them on the street, on the business partner level and the integration level. But here is the real issue: customers, especially in times where there are all-weather challenges to be considered, will go for the cloud. And the last thing on the list that they will not invest in, is cloud-based solutions with great returns on invested capital and fast time to value. So they're already seeing headlines and different things going on, so they're swaying more and more their investment appetite towards ServiceNow because this is a winner. Gina, I think you've seen similar.

Oh, absolutely. The partners and the partner ecosystem is incredibly important. And if you think about how we scale from $4 billion to $10 billion, they will be a big part of that growth. Internationally, they're extremely important for us. If you think about going into markets where we don't exist, working with these partners more broadly will help us grow even faster. And so it's something that ServiceNow is doing before we joined. And we're able to amplify and accelerate those efforts now, which is extremely exciting for us.

Got it. I wanted to dig down into sort of the opportunities -- dig further in IT and then sort of the opportunities outside of the IT department. Before we go there, just one kind of high-level demand question. You guys just got off of a multi-continent tour, talking to a lot of your customers. How are your customers feeling about their overall IT budgets heading into 2020? Is it -- what type of investment year is it more broadly? And then I'd be remiss if I didn't bring in sort of COVID-19 into the discussion. Are you seeing any impacts on sort of those spending plans? And anybody tapping the brakes as it comes to the disruptions that are taking place globally right now?

I personally was in a meeting with 19 CEOs in Asia. I asked them that exact question, to which they replied, the last thing that we would cut, among any of the opportunities to cut, would be things that contribute to true digital transformation. And then they put a little caveat on that. And the things that can drive me immediate value, immediate business value will be the things that are at the top of the list. The things that are large-scale projects that will take multiyear implementation efforts with some level of risk. Those go down lower on the list, not because they don't want to do them. It's just because the appetite for that risk is not as great as the desire to digitally transform in the cloud and get there fast, fast, fast. I saw this very clearly in 2008. And when the cloud really soared, is when the business owners in the line of business, not just the CIO and IT, came to the realization that to move companies forward, it had to go to the cloud. It had to have a fast fuse to value, and the projects had to be super successful. So I think our brand equity and our customer satisfaction and loyalty just puts us at the top of everyone's list, and especially after they see how the product works and they reference us because everybody loves ServiceNow. Gina?

And I would just add to that, that we actually have some customers using the ServiceNow platform already during this difficult time to manage all of the employees, right? Where are they? They're working from home. Being able to communicate with them, FAQs about what the policies are and how they should be interacting. And so our products are exactly in the suite of how we can really enable companies to be successful and continue to do well during this challenging environment.

Got it. So digging down into the IT opportunity. On the most recent quarter, it seemed like you guys had a -- almost a step-up in terms of the level of success you saw in terms of selling in IT operations management, IT asset management into the existing customer base. Any catalyst for that? Anything that's sort of, in terms of the sales motion, in terms of the maturity of those products that enable that step-up, number one. And number two, how much more room is there to go? How penetrated are you guys with that broader asset management, operations management tools?

Sure. Well, I'll start and then Gina will give you some of the statistics. But if you think about ITSM, think of it a standards form, and that's a standard. And because of that, you think about assets. There's billions available to managing assets better in companies, and we have the secret sauce where we can do the MRI on an enterprise and give a C-level executive a great picture on the waste, the lack of utilization. And it puts them in a much better position to think about how they manage their portfolio. Think about operations management, just the moves that we've made with machine learning and AI and the hires that we've made to strengthen that core platform. I like to think of it in many ways as a Netflix model. The stronger that platform becomes, the more loyalty you get with the existing base but the more new people want to drive subscriptions into ServiceNow. Let me just also zoom out for a second, right? It's like assets, operations, business management, ITSM. We have just introduced, and we're about to make some very interesting announcements on just how awesome this platform and this product is. We have a product called ITSM Pro, and this gives the customer many of these automated, innovative goodies, where the workflow and the process determination is done by the computer in support of the human to drive immense levels of productivity. We're only 10%, actually a little less than 10% penetrated on this. But what we've learned is the customers that choose it are more likely to spend 30-plus percent more on the IT core platform itself with ServiceNow.

Yes. And I would just add. So as Bill talked about, we are less than 10% penetrated in our current customer base. We're also seeing the ability to land new customers with ITSM Pro. With the AI and ML capabilities, the value proposition for this tool is readily apparent. We're seeing 20% to 30% uplift on the pricing versus our core base ITSM product. And on top of it, we're really seeing the value add. People are more likely to expand past ITSM into ITOM and ITAM as well. And so the tailwinds that we see with respect to ITSM Pro going forward are enormous.

Got it. On the -- as we think about sort of how big ServiceNow can get within sort of the IT organization, are there natural areas of expansion, of like areas that you should be in, like I don't know, performance monitoring or developer workflows or incident response management or RPA? Like, are there other natural extensions within the IT department that we should think about? Or is the current ITSM, IT asset management, ITOM, is pretty much the portfolio you're going to be looking to go forward with?

Yes. I mean there's always the option of doing many things. So far, we have chosen the partnership route because that's very healthy for the ecosystem. And the partners realize the CMDB capability of the Now Platform, and they, too, recognize the cooperation with ServiceNow as a lead point in their growth strategy. So, so far, there's been plenty of economic benefits both ways. Of course, you continue to watch that as you go in forward. But so far, we've got plenty to do with our own strategy and the growth that's in front of us is not so much a matter of, wow, like where do we go, for growth? It's a matter of Gina and I and the leadership team saying there are so many options. Why don't we narrow it down to the 3 or 4 that matter the most, so we can do it with the greatest level of efficiency, margin expansion, free cash flow expansion so we're telling the complete shareholder picture. So partners so far, there could be other options available in the future. But things are very healthy.

Got it. Last one on IT and we will shift outside of the IT department on employee and customer workflows. Is there -- is the bigger opportunity in expanding ITSM and then sort of the broader portfolio for ServiceNow in going down market into more mid-market customers? Or is it the bigger opportunity getting the existing enterprise guys to buy more from you guys?

Well, the bigger opportunity in the short run is continuing to expand with larger companies, because, as Gina said we're still very underpenetrated with the large ones and the efficiency and the leverage there is still massive. So that's where most companies wish they could be. However, having said that, we are doing other things within the go-to-market to frame out our commercial business, which is growing extremely fast, and that is below the very large in the large enterprise. Think of it more as the geographic expansion with account development reps, with inside sales and getting consistent motions with low touch or no touch around the world. We've also done things to simplify the customers' adoption of the Now Platform, where you took out some of the confusion on pricing and other matters, so they're encouraged to adopt it and develop on to create new innovation for their businesses. When I think about customer service management in more than 1,300 customers out there, many of those wonderful business cases were actually done on the Now Platform by the customers themselves. Who would want to discourage that? Gina, what do you think?

I completely agree. We are very focused on the breadth of our customer base, right? And so the opportunity remains large, while certainly IT is our most penetrated, there's so much room for growth. There's still plenty of new customers to go after at the enterprise. But our commercial business is growing in double digits and doing extremely well. And so we're focused on both, and we will continue to drive not only the IT penetration but also, we're landing a lot of these new customers with HR and CSM also. I was at 2 financial service customers last week that we landed with HR. And they are so excited about what we're able to do to help transform the employee experience inside the organization. And what's happening is the IT is seeing what they're doing and they're raising their hands saying, I want to go next. And so it's a fantastic opportunity for us, and we're focused on both the larger as well as some of the smaller ones as well.

Great. Bill, can I play devil's advocate a little bit here. In -- ServiceNow has done extraordinarily well in the core IT department, albeit though with competitors that were slow to move to the cloud, right? Some of those core competitors are still kind of struggling to get there. And your sales guys have done extremely well selling into the IT department, which is more technical sale that they're very comfortable with against not a great competitive field. Now you're going outside the IT world. You're going into HCM, competing against Workday, which is born in the cloud vendors. You're going into CSM and competing against Salesforce, which is a very aggressive sales force, and has been in the cloud, obviously, since inception. And you're asking your guys to up-level their game and start talking to the CEOs. It seems like you're asking a lot of your sales guys. How do you ensure that they're up to the challenge, if you will, of a tougher competitive set on 1 side, in terms of cloud-ready guys who are there already and also up-leveling their game to talk to the CEO? Because you have a great Rolodex, but you need your entire sales force to be working at that level.

Absolutely right. So first of all, in order to be very, very clear here, we are not competing with these IT systems of record, which include Workday and Salesforce. We do something very different than they do. Let me give you an example. There's a well-known agency in the United States government that has 75,000 employees. They also have 75 different HR systems of record. So when you think about taking all of that complexity and standardizing on 1 portal to managing the knowledge and the cases and truly creating a mobile consumer-grade application where everyone's life becomes a little easier and a little simpler, we can bring that to full value in less than 4 or 5 months. An alternative on the system of record side would take years. It's a very different game we're playing with customer service management as an example. You take companies such as, in the media industry or you take a health care company where we're managing 50 million operational records in the mid-office. You're touching not just the sales engagement layer, but you're really touching finance, you're touching legal, you're touching IT, you're touching engineering, you're touching risk, you're touching security, all in 1 workflow. And finally, we have many companies out there today, that when they do have to make a visit, they need to understand in a predictive way, what are the parts I need? What is the intelligent people that know how to do this job specifically? How do I make sure that I can predict and prevent? But when I do have to do something, it has an incredible experience attached to it? That's a different thing than Salesforce does. What they do, they're good at. What Workday does, they're good at. We have no quarrel with either one of them. What we do is entirely different. We had 1 company that had 15 different CRM systems. Many of them were home grown. We had 25 different portals in 1 company that we're running these CRM maneuvers. We had 1 company in the fintech space where I was dealing with the CEO, and she told me, Bill, you can't even believe this. As they upgrade to new versions of their system of record, which was designed for the sales side of the equation, my order management and my legal department have to constantly reboot the system because they're being told to go to a new version, and they never even learn the old version because that's not what they do. So what I need is a workflow that goes across these domains. So all they have to do is look at their role in the process, click, yes, no, maybe an action or 2, and be done with it. We have one large financial services company, where we take -- let's take something like procurement, even with a large ERP-type system. You might have a procurement application even in the cloud tied to a financial services application on-premise. Well, does anyone actually review these expense reports to approve them? No. But are they in agony knowing every day they come into the office, and they turn on their computer or they look at their mobile, they have this many expenses to approve? So we actually did some research. What percent's actually even real? It's less than 5%. And let me tell you, that person has a lot of time on their hands. So now with machine learning, and the application workflow of ServiceNow, all that stuff is remediated using AI. And only the exceptions would ever hit an executive's desktop. So we're dealing with workflow that's going across multiple domains. And I go on record as saying, our quarrel is not with the systems of record. The system of innovation is also the system of engagement. It's also the system of action. And this is where it's at for the 21st century enterprise. And that's why I've said since day 1, ServiceNow will be the defining enterprise software company of the 21st century, just because the world has changed. You can no longer build a process or a product in the engineering department and tell the world, this is how you will work. The world will tell you how the world will work. And they want the agility, silicon-level agility in the cloud to design the workflow the way they want it, not the way you told them it should be done. That was 20th century. That's old school. This is the new world. So the conversations we have at the C-level is real simple. The CEO says, my people will like that. I want them satisfied. The more satisfied they are, the happier the Board is with me. And I want my customers to be raving fans, because the more the service is there for the customer, the higher the renewal rate, the Net Promoter Score, same account revenue growth and the loyalty effect, especially if it's cloud-based. It's driving things quickly to get results for my company. So I'm serious. This whole thing has now been flipped upside down and everything is from the user, in; not engineering, out.

Got it. 15 seconds left. So 2 quick-fire questions. For Bill, 2 smaller technology tuck-in acquisitions since you've come on board. Is that what we should be expecting more of on a going-forward basis versus anything game changing? And then for Gina, free cash flow margins at ServiceNow have been spectacular and really nice, up onto the right trajectory. Should investors expect more of that to come in the years ahead? Is there more room for free cash flow to expand?

Yes. Well, first of all, we care. Gina, myself, the leadership team with ServiceNow, we really care deeply about our employees, our customers and our shareholders. And we are going to build a masterpiece. So I want you to have a high degree of trust and confidence that every decision we make will be done with incredible care and a meticulous level of attention to detail. Right now, our growth story is organic, tuck-ins to strengthen the platform are probably what you should expect. And no, we don't see anything sizable that you should be factoring into the way you think about the valuation model of ServiceNow. It's a continued growth trajectory.

And on the margin perspective, we are -- we remain highly focused on growth. As Bill talked about before, we will become the defining enterprise software company in the 21st century. But we're not only focused on growth. We are also focused and we want to be the best-managed software company. What do I mean by that? Continued world-class margins. We will continue to invest behind growth. We'll do it in a disciplined manner. We talked about the leverage that we see in the model already. And so we absolutely believe that we can continue to give margin expansion as we continue to grow as fast as we expect.

Excellent. Gina, Bill, thank you very much for joining us. It's been a great conversation.

Thank you very much for having us. Appreciate you all.

Thank, Keith. Thank you. Thank you.

Thanks a lot, Keith.