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

Please welcome ServiceNow's Chief Executive Officer, Bill McDermott; and Chief Strategy Officer, Nick Tzitzon.

Thanks for coming.

So nice to be back in person. Any words of welcome you want to offer to this crowd before this party go on?

I warmly welcome you to Las Vegas. Thank you for your interest in ServiceNow. We couldn't be more excited or more positive on where this company is going. So let's get it on.

There's a surplus of masks now that they're not required on flights. I think they should give them out when you walk into a Las Vegas Casino because it actually could be quite useful. Have you walked the halls at all?

I tried to avoid it, I get in last night and missed the casinos, Nick.

It's been 2 years, and I think it was a fairly fast reminder of Las Vegas and all that it represents. So good to see you back live and in person. So we're going to do some Q&A, obviously, at the end of the presentation, really looking forward to engaging with you. I thought we'd simulate a little bit of that with Bill just to get things going. So Bill, I think we would be remiss not to start with the macro. I mean one thing that I've taken away from every earnings call is that the market is really waiting for ServiceNow and for you personally to size up what's going on in the world. So if you look at this slide, you look at all the things that are happening that might call into question the viability of a business. What's your reaction to what you're seeing?

I think the most important thing is ServiceNow has established itself as an enduring platform that is solving the problems that exist in this 21st century economy and capitalizing on the opportunities. And the slide says it all. We're at a crossroad in the case of ServiceNow, where the secular tailwinds for digital transformation are perfectly intersecting with the macro crosswinds. And when those 2 forces come together at once, we will not be denied. The growth tailwinds that we have promised the capital markets are actually accelerating Nick. And so what's going on out there? I just got done with 2.5 weeks in Europe. Digital transformation, let's level set this market. According to IDC is a $10.7 trillion market by 2025. I'm unaware of another market that's ever been this significant. Our market, our TAM, is $200 billion in our core business. So we're just getting started, if you look at the big picture. Digital transformation and this idea of the smartphone ruling the world is undeniable and it's uncontrollable, and the power is in the hands of the people. And that is what businesses have to accommodate as they rethink their business models and transform. They're clearly seeing the old way of upgrading the 20th century technologies is not getting them there. And that's why they have to technology accelerate in the technologies that are making the difference. So it was a big debate 2 years ago. I remember having it. Is AI going to take jobs away? What about AI? It's not a matter of taking jobs away. It's a matter of enriching the jobs that exist and increasing productivity. -- and closing the gap because digital skills are at such a global shortage. So this talent war is absolutely on in every corner of the global economy. You've got to get great people into the business. So Nick, I can tell you right now, companies that give a great employee experience, won't be looking at all the red ink in the boardrooms and companies that fail to take advantage of the experience they're giving their employees or their customers are going to really regret not investing now. Finally, I want to close out on this because no one's covering it. There's going to be 750 million net new applications built in the enterprise in the next 3 years. Think about this for a second. That's more applications than have been developed in the world in the last half century, okay? So if you've got a low-code platform that's a standard you're going to do pretty well. And finally, look at the ESG situation. Everybody wants net 0. Everybody wants diversity, equity and inclusion. Everybody wants a company that has global risk and compliance under control and every Board demands that. There is only one platform out there though that ties together all of these disparate systems and gives you one common view of the enterprise, so you can run a great business. So that's what's going on out there, and it's accelerating, not decelerating, no matter the headlines.

Let me ask you a quick follow-up. Again, just from the perspective of our audience today. People will say, "Hey, it's a high inflation environment. There's massive supply chain disruption. You have said repeatedly that enterprise software is a unique business and a unique business model. You say it's an all-weather business." Put a little bit of meat on that bone.

Well, let's go for inflation. I'll give you example. I'm with one very large CPG customer in Europe. They're dealing with the Ukrainian war. They have employees in Russia and Ukraine. They're paying employees in Russia through the end of the year, even though they're not getting any revenue there. Obviously, the people that are in Ukraine are doing their job out of bunkers. They're having a difficult time in China because China is closed down, plus turning its back on the West. So now they've got all kinds of inflation and pricing problems. How are they going to get out of that? Well, in certain markets, you can pass on a higher price. The U.S. is one example, but you can't do it in Europe, and you're probably not going to get away with it in South America. So their answer is how do I digitally transform and get much more productivity per employee because I can't get too many more employees because I'm dealing with inflation, digital transformation? Let's go supply chain. We had global supply chains. Now we'll go on regional supply chains, in some cases, local supply chains. Do you really think these businesses have the time to rip and replace supply chain and ERP systems to accommodate an environment that's changed on them so rapidly. Of course, not. So they need change and they need it fast. BMW, how do I do with 4,000 different suppliers and have a control to have a digital transformation to accommodate this move to regional and local so I can meet my customer requirements? The global labor shortage. Make a bit this way. Europe in the next 30 years will be 50 million digital skills short in the global -- in the European marketplace. So how do you accommodate that? You have to digitally transform the way work itself is done. And cybersecurity, if you look at the top issue on every CEO's mind, it is clearly cybersecurity. But the problem is not a shortage of investing for cybersecurity, everyone continues to do that. But they need 1 dashboard where they can see the operations in their entirety. They can have the dashboards. They can look at the threats, and they know how to deal with it. And that's where we come in so strong, and the team will tell you a lot about that today. And look, I'm very proud of the management team of ServiceNow. I want to get that out there today. So you'll see a team that I'm incredibly proud of. When you think about the engineering success of this company and what CJ Desai has done, Gina as CFO, great engineers like Pablo and Amy giving user experience and security ops and reinventing the way companies observe their business and again to see that in living color today, and we're building a great team. And that's why we leaned into COVID, and we did it in record time. So first, it was emergency response, then it was bringing people back safely. And now it is, we'll deal with anything, including this new mapping exercise because everybody wants to give their employees a chance to map their own life in this hybrid workforce, and they want to be able to do that very easily. I book a conference room. I know exactly what it can do. I got my workspace carved out, and I know that I'm in a safe environment because ServiceNow enables that. So all of these things are happening at once. So maybe it was great invention by Fred Luddy, when he put ServiceNow on the map. Maybe it's continued excellence in engineering, but I know one thing, every single employee of ServiceNow is focused on being the defining enterprise software company of the 21st century, building great software and executing on behalf of our customers. And we don't get swayed by the headlines, we're into business execution.

So in the universe of things you're going to cover today, I want this one to be a brief question because I do think part of this is reiterating what make ServiceNow unique in your view? Is there any number of different ways you could interpret some of these results? What do you think is most important to call out?

Well, I think this, you've got important decisions to make important portfolios to run and you're going to be highly selective in terms of where you place your bets. And I just want to call out the fact that I'm unaware of another enterprise software company operating at the Rule of 60, where you have 30% revenue growth, 32% free cash flow margin growth, and you've done amazing for the annual shareholder returns over a steady period of time. I think about the customer and the market momentum, including the ecosystem, and I say to myself, this company, given any quarter, we either renew at 98% or 99%, okay? When we land, we expand, that's why 125% is a net expansion rate. We normally don't disclose that, but I wanted to give you some information today so you can operate with it. We've got 1,500 partners, and everybody wants to partner with ServiceNow. And we're penetrated 80% of the Fortune 500. Next year, it will be 90%, and the next year after that it will be 97%. And right now, we have nearly 1,350 customers that are spending $1 million or more with ServiceNow. And Gina is going to tell you how we're just getting warmed up with deals at $5 million and $10 million plus. And CJ will tell you with great confidence big mega deals that we're working with customers all over the world because they want to transform their business. But here's the part that I want to focus on. I want to focus on culture because the magic of ServiceNow is in the culture and the people and the commitment to excellence. We have 18,000-plus people right now in the company. That is about 10,000 net adds. And just before the pandemic hit, the pandemic and now has 10,000 net add employees. Now keep in mind, we're only hiring 1% of the applicants, which is about Stanford University's rate of bringing students into the school. So we're hiring 9s and 10s. And you say, how can this continue? I heard there's a global labor shortage, yes. One of the great phone calls I got was from a tech company, Board member saying, there's no boomerang with ServiceNow, Bill? So what do you mean? So yes, you get them in your company, but we can never get them out because they're so happy there. What are you guys doing? It's called culture. It's called passion. It's called commitment, and this place has it. And that's why it's one of the great companies to work for. It's an admired company. We're proud of the accolades, but I want to go on record of saying this complacency is not in the choice. When you come to ServiceNow, it's about performance. It's about your absolute best and we create an environment that enables that, but we don't get swayed by the accolades. We're doing well, but we know we can even do better, and that's where we're going.

I feel like you're just starting to get warmed up. So let's just amp this up to the next level. We're making some news today. I mean, just last year, really, for the first time, we put out the time line around 10 B plus by '24 and 15 B plus by 26. Today, we're making an adjustment, what do you want to say about it?

I want to, first of all, say keep in mind, ServiceNow was the first company in the enterprise software space that went to $5 billion organically, and that's cloud revenue, purely organically. We told you last year that we would do $10 billion by 2024, and then we bolted on $15 billion by 2026. We had never disclosed that. But I said, "Why don't we have secrets? Let's tell it like it is." So today, we unveiled yet another commitment to the world and the capital markets that we're increasing our midterm guidance by an extra $1 billion in revenue by 2024. Now it's $11 billion by 2024. And I do want to accentuate the plus sign, okay? Because the plus sign is there not by accident. We didn't make a mistake on the slide. It's there for a reason. And the reason is we expect fully to do this. And we also expect fully to do better than that. That is our expectation. But want to give you something you can count on, that $16 billion plus by 2026, and yes, we'll get it right out in front of all the questions. How are you going to get there? I'll tell you how we're going to get there, organic innovation. And you're like, well, no one's ever done it before. Yes, that's exactly why the market's ready for someone to do it because somebody has to clean up the mess that's been created in the last half century, and this platform is perfectly tailored to doing just that. So consider this the commitment, $16 billion by 2026, and yes, there's a plus sign on it.

$16 billion plus. So we don't mean this as a competitive slide, but just to build on what you're talking about. In a recent Gartner note, there was talk about who is really emerging as the key platforms and who are the tool companies, so platforms versus tools? That's the....

Well, first of all, if you make it to this slide, you're running a fantastic company. So these are great brands. We deeply admire them all. And I think underneath those brands, you have a lot of legacy infrastructure and legacy software providers that didn't make the slide. So we only chose the best for the slide. But the point on the slide is to basically say that no company has ever hit these revenue thresholds in the time frame that we are committing them and certainly, some of the companies only got there slightly under us through a lot of M&A. Now there's nothing wrong with M&A. But the big question I give to you now is can that platform be agile enough? Can it be fast enough? Do the engineers, and considering they're very hard to hire and they're very smart people, do they want to consolidate the past? Or do they want to innovate the future? And I'm betting that they want to innovate the future because I've seen both sides of that equation. So when a really good company there, they are wonderful corporations. We integrate with all of them. I think you've got legacy, you've got the in-betweeners and then you've got the hyperscaler clouds like Azure, GCP, AWS, ServiceNow, and if you want to add another one, you'd add Salesforce. And that's basically the cloud companies that are the standard bearers of platforms that companies are investing in, in the global economy. And I have confirmed this with every customer visit I've made, and I visited a lot of CEOs.

Let's change gears a little bit. There is talk about on the question of how, and obviously, CJ is going to cover a lot of the how Pablo is going to be up for talking to some customers. Gina is going to cover a lot of the how. But when you look at this, and I've heard you say these exact words, "we are not opportunity constrained." What do you want the audience to know here about these strategic priorities for the business?

We're a platform company. and we intend to expand as a platform company. We're making a bold move into industries. You'll see how we have built on our financial services, our public sector, our telco amazing, media, entertainment, manufacturing. CJ is going to talk about this. You'll see that we've made a bold move into ERP workflows. We started with procurement. It's going so well. We're going to have to expand beyond that. We're now in supply chain and manufacturing and shop floor conversations. By the way, the last time I thought about the ERP industry, it was a $400 billion TAM. So assuming we penetrate that and help that industry, you could just see the perimeter expanding its ServiceNow in unique and profound ways and Lightstep. Lightstep, you're going to see an announcement from Pablo on what we've done with security operations, what we've done with Air on a direct-to-consumer level and how observability with a great UX that spans the entire enterprise is ServiceNow's. And we're the only one that's doing it the way we're doing it. So we got a great chance to take that marketplace. Accelerate customer adoption. I chose these 2 brands. for a very specific reason, I met with BT last week, Harming, terrific Digital Officer; Philip, great CEO. They're joined at the hip in digital transformation, but they don't want to do it the old way. they realized that they've already made those capital investments in the heavy solutions of the 20th century. They want to automate above them and digitally transform. They're increasing their speed with ServiceNow by 20x. They've consolidated a number of platforms into ServiceNow and they're saving multiples of millions. It's in the press release as they put out if you want to read it. JPMorgan Chase had a great shareholder Day yesterday. Congratulations to Jamie, great CEO; and Lori Beer, great digital leader, and they too have joined at the hip. And they are consolidating multiple applications onto ServiceNow, saving multiples of millions and proudly announcing it. So you're seeing a theme here. The theme is great CEOs that understand digital transformation is the only way forward are tightly coupling their strategy with terrific digital officers that really do help them drive the companies forward. And these are companies that are investing because they know. And this was a great quote that I shared in earnings. A CEO said, "if I fail to invest in the short term, I'll slip back in the midterm and I won't be around for the long term." So that's the playbook. And Disney yesterday, I got to throw one out there at Disney, what a great brand, what a great company. Think about a company, no theme parks, no cinemas in the heart of COVID. They drive Disney+. Now it's a sensation. They're gaining tremendous market share. We're honored to help them with that. But also yesterday, they consolidated all of these 12 complex employee portals to one ServiceNow. One of the employees who was there, 31 year said, 31 years, he's there. This is my favorite employee portal I've ever used. And when you hear Amy Lokey talk about the UX and our San Diego release, you'll feel it. It's palpable, how passionate we are about design and the UX. Now we're going to broaden the market presence, okay? GDP, Japan, third largest, we're a start-up. We got a lot of work to do in ANZ, and India is a giant development center for our company with some of the biggest partners in the world. These are areas we're going to go for, okay? Germany is a marketplace that is a bellwether in Europe. The customers that work with us in Germany absolutely love us. BASF was one of the great meetings that I had there, but it certainly wasn't limited to just that I mean I think about Lufthansa completely rethinking their business on the ServiceNow platform. It's pretty amazing. So Germany, we're going for Germany in a big way. Federal, and the whole focus on government running like a best-run business. It's a sensation here. We have our great executive, Kevin Haverty, really putting attention on that with Pablo Stern. You'll get to see Pablo interview some customers later. He's hitting the ground running on solutions and scale and obviously, the U.K. and Canada. And needless to say, Nick, I don't want to limit it to this because I could go Middle East and other places. But these are core markets where we're investing expanding the perimeter with partners, and we're going to grow fast. Now in terms of the partner ecosystem, we have a great relationship with Microsoft. I tip my cat to Satya and all the things we've done with Azure. Our security clearance is top shelf in the United States, and that will help us in government will also help Azure. And if you look at all these great partners from KPMG, EY, Deloitte and Accenture, all of them have either $1 billion or multiples of billions planned for their ServiceNow business globally. And out of the top 10 partners globally, 7 already have billion plans and the other 3 will by next year. So this is like scale, spreading out the perimeter, going for new geographies, accelerating customers and their value journey. And of course, letting the platform do the work with great innovators that are passionate about what they do for a living. I am excited because we are not short on opportunities. We are just short on making sure we communicate and we get the word out there in the marketplace that there is a whole new way to digitally transform your company. And the people that are least likely to want the customer to know that are the people that benefited the most from the 20th century business models. So it's time for change.

Almost like we planned it. So I don't want you to unpack this entire slide because we don't have time for that, and we're going to cover a lot of it. But when you came to ServiceNow, there were questions, like what do you see here that the market doesn't understand? And this was -- you and CJ partnered up on this, what jumps out at you in terms of the architecture of ServiceNow, what makes it different? What makes it so poised for growth.

This is the platform for digital business, the platform for digital business. And what's happening now is companies have made extensive investments in their 20th Century technologies. We have to make them work. We have to improve the UX. We have to improve people's ability to automate what they thought they already automated, but they realized the world changed. So that's 1 aspect of it. And when I think about customer workflows, and Hermine, for example, over BT, she sees a direct connection to her consumer and the ServiceNow platform without anything else in the way where you could be highly predictive incredibly driven for customer satisfaction, not only in the front office engagement, but in the mid-office operations and the back office because the IT content that's in the ServiceNow platform can deliver the promise think about modernizing call centers and turning people over at a single-digit rate instead of 40% and 50%, as an example. So customer direct-to-consumer, predictive very out in front of customer satisfaction and loyalty, employee workflows. I want to make a comment here, is amazing. You actually can't make this stuff up. If you look at the retention issues the companies have had in the last couple of years, it might be important to recognize since you never met them when you hired them, onboarding them properly is probably a good idea. And the systems of record that are sunk in the cement of these companies don't do that. So do I have my phone? Do I have my computer? Do I know where I'm going? Are you training me? Are you managing my cases? Can I have a frictionless environment here where I could do everything on my iPhone instead of calling up somebody in the HR department and waiting on hold for an hour? And by the way, another thing that's pretty interesting, I actually had a conversation with a CEO in Europe that said, Bill, I got to start offboarding these employees properly. I still have the old employees that already left the company, mixed up in my database and in my data, is that a risk probably risk? So we can help you with that. And then technology workflows, we're super excited about Ben and Lightstep. I want to acknowledge that. This is going to come quick. But the technology workflows, you're going to get a big dose of that today on an end-to-end usability and execution level from what I would call the engineering floor to the cash register and everything in between. And then creator. I mean it's amazing. I'm getting the word out there. The management team is getting the word out there. People are building innovation onto the Now Platform that's transforming their companies, and they're doing it at a record clip. And that, to me, is such a sensation. When you could tell a CEO, you've got an idea, it pops in the boardroom. And 24 hours later, somebody who's a business analyst, not even an engineer writes the workflow for you and get it out and you execute, fantastic. So Think about this 1 architecture, this 1-data model that does all foundation configuration and intelligence and incidentally cross-functionally works with all the other market participants. So what's not to like? And I think there's 1 call out that I'd also like to give you, it's called the idea that our great engineering team has built RPA, has built process mine, has built AI operations and all of that is in that platform right now. We've done some other things outside the platform that will lead to future growth. But inside the platform, ready for business, it's all there today.

So before we bring CJ up, just one last thought, I think the market has noticed a distinctly different feel in terms of how ServiceNow articulate it story, you've said defining enterprise software company in the 21st century before we continue with the program, what's the important red thread for them to keep in mind as they hear all of the information we're presented today?

The world works with ServiceNow is absolutely the vision we have for this brand. And I think that it's not an easy thing to do for an enterprise company to be brand-led, but we are. We also recognize great companies build great products. And we're building the innovation into the platform to be a generational winner. Great companies also provide a great service. One of the things you'll hear about is ServiceNow impact. We're on the Now Platform. All the conversations from chat to text to e-mail -- all the conversations between our customers, our partners and the ServiceNow colleagues takes place on ServiceNow. We've digitized the whole experience in the presale to the post sale, where you can actually see the value delivery as a CEO or a Chief Digital Officer on your phone, and that's game change. And I don't know of any other company that's done that. Now we also have to build a great team. I'm so proud of this team. That is what really gets me excited every single day to see the ServiceNow team and the culture expanding. And finally, great companies draw ecosystem partners to the party. We're open for business, and our partners know our word is our bond. If we say something, we do it. If we make a mistake, we fix it. We are good for it. Our word is good for it. And the customers know it and the partners know it. And that's why when I came here, I came here with a dream, and the dream was real clear. I had the opportunity to present our great Board member, Sue Bostrom. She's here today Chair of the Nominating and Governance Committee, so I know she could hold me to account. We had a simple 5-point plan built on one dream, and that dream was to be the defining enterprise software company of the 21st century, and we will be the defining enterprise software company of the 21st century. I guarantee it.

Well, Bill, why don't we bring out our Chief Operating Officer, CJ Desai. I thought it might be a nice way for him to owe me one. If introducing him, you said something nice about him. So CJ, why don't you come up here and take this over so we can continue with the program and make up the time I lost by letting it go along. Bill, what do you want the crowd to know about our COO here?

Come on CJ. I want you to know that the man runs a great, great product, innovation and development organization. That will come out and live in color with the examples you see today. The man also understands our customer and deeply cares about our customer. So what's happening on Main Street is clear to him and what we need to do to develop the next-generation products and solutions because he's personally engaged in the process. And now with his expanded role as Chief Operating Officer, the build-out of industry is a huge future frontier for the company. So all that just says, "You're a great guy, and you're doing a great job."

Thank you.

So I want to thank you.

Thank you.

Give it up for CJ Desai. Go get them, brother.

All right. With that introduction, let me first start. I always say this, when I joined this company in 2016 and even today, we are a platform company. And why do I say that all the time? The reason is very simple. A lot of our customers, including some of our investors and partners, think that we are an ITSM company that is expanding in other areas. Well, that's just not true. If you talk to Fred, Fred will say we are a platform company. He wanted to create a platform that provides all the building blocks so you can create amazing purpose-built applications for any use case and the work that gets done on this platform can be in a department, in the company, in the region or cuts across continents. That was the idea. And for me, even 5 years ago, and I will say today, I get so excited on what this platform can do and how many applications we can create for our customers where the pain points exists. So that's really, really cool about this platform. And this platform specifically can be a system of record, system of action or system of intelligence. That's how flexible, extensible and scalable this platform is. In terms of ServiceNow's elements, spending time with customers it is extremely clear that we are very focused on C-suite agenda. I do a lot of calls. My team does a lot of calls, Bill and everyone, Pablo Stern and others do these calls. And I'll just give you an example, yesterday with 1 of the large telcos, telco is an industry we are focused on, we have a great team focused on telco as an industry. And I'm with the CTO and his team, and he puts this big diagram of usage of ServiceNow, and he says CJ, we are using you for IT, of course, but now we are using you on the network side, and that matters a lot because you are now in our core business. And you know what I'm solving for, and I said, what are you solving for?" And he says, "Well, I'm solving for is best-in-class experience for our business customers and direct-to-consumer customers. That's what we are solving for." ServiceNow will be the platform across the enterprise on the technology side and the network side, which is their core business. And then 1 of his direct report, very senior, super smart member of the team puts up this other diagram where they have these other building blocks of service now being used for HR, for asset management, for specific things around field service and what the potential exists for ServiceNow in that particular corporation, which is a very large corporation. So ServiceNow being the platform at the highest level in the C-suite across the department and just expanding the parameter of the platform constantly is really, really rewarding. Now I'll also tell you that the reason customers choose ServiceNow is that it is a 1 platform. and single architecture, single data model, process mining, Bill just touched on it, is built in, machine learning built-in, RPA built-in. These are not islands of platform. This the platform. And here is what happens, okay? Large health care organization, they switched from a particular point solution, which focuses on teams. They have many islands of those teams, and they said, we need a platform, we need a platform for tracking our software development cycle, for our agile planning and everything else. And this is where we really shine. And a pharmaceutical industry, last year, our employee workflow at one of the largest pharmaceutical companies, they implemented ServiceNow in 4 months. And the CTO said, that is the fastest implementation of any enterprise software done at that particular company. Why is that? Because what do you see on the right side. When you have a single platform, higher speed to value, minimal complexity, minimal integration efforts, yes, you have to integrate with existing systems and so on and lower total cost of ownership. These are the outcomes that we're striving for, whether it's operational excellence, to really, really bring our productivity, technology excellence, of course, we do that. Services are secure, digital reliant performance, that's our job. That's our core of the core, but also delivering great employee experience and for our customers, delivering great customer experience. Bill talked about this, this just made my day yesterday when at JPMorgan Investor Day; Lori Beer, phenomenal, phenomenal CTO for Jamie, talking about the systems where they are getting the value. She could have with her budget picked any platform. And we didn't even know about this, and she picked ServiceNow. And you see here, system consolidation, employee experience, cost in this environment, who doesn't want that? Who doesn't want to improve their profitability while improving great experience. This was in their Investor Day yesterday afternoon. Now I'm very fortunate that I have an amazing team, domain experts, great engineers, great designers, great industry folks who really understand their area of expertise and build on ServiceNow platform. So when you look at this chart, look at the bottom, which is the platform. As Bill said, we will continue to innovate on the platform. The unit economics, when we try to innovate here, are just phenomenal. Sometimes we can create an app in just a matter of few weeks. Sometimes a version 1.0 for a brand-new thing could be just 2 scrum teams, somewhere between 8 to 16 people, and can create an app where we decide that we want to go after that particular use case. This innovation velocity on the platform and on our products that we sell, which is on the top, for our horizontal and vertical product is unprecedented. And that is because of the platform and a great team that we have at ServiceNow. This level of innovation and when we showed this to our customers, they look at it like, wow, CJ, I didn't even know that we -- you have a purpose-built application for area X or area Y or you did process mining in the platform for ServiceNow data. And this just makes me so proud of ServiceNow team and what they have done here on continue to accelerate on a rapid basis as we have gone through the pandemic. Bill talked about $200 billion TAM. I was here last year when we said it's $175 billion by 2024. Why did we increase the TAM? Simple reasons, we have, based on the previous chart, new growth vectors: prebuilt solution for telco, health care, manufacturing, media, technology, banking, insurance, prebuilt solution. This is not a veneer that we just put on this and say, okay, now you have an industry solution, it's an actual purpose-built solution. Enterprise Asset Management, Pablo will talk about it. Observability, Bill touched on, but these new growth vectors is the reason that we are increasing our TAM for 2024. Now our workflows have continued to expand at an enterprise level, just not the IT department. We group our products by these workflows based on the key stakeholders they are serving. So if they're serving technology teams, this technology workflow. If their workflow is serving employee team, it's employee workflow products. Customers, and you get the idea if they are creators or developers is creator workflow. This is so powerful when you actually look at the persona that we serve. You look at these personas here, and these are just top 2 or 3, I haven't put like specifically a particular team in a department of a company that we also serve when you look at our product portfolio. But these personas are so critical, yes, we are expanding beyond IT and you'll hear from Pablo on that on technology workflows, but customer service, field service, customer operations by industry. In employee, we are now doing HR, legal, so General Counsel and facilities, which could report into the CFO. And then for creator could be the IT developers or citizen developers, doesn't matter, or process owners who want to digitize something. Now I'm going to go through 3 workflows here, and Pablo is going to cover technology workflow in details. This is a massive TAM. This particular segment of the market continues to grow. The bar on customer experience continue to raise and it is no longer about customer engagement. Have you tried to change an address with a financial services corporation? You know what happens? They have 32 systems behind the scene that your address needs to be updated, and I guarantee you some of your statements, tax statements will still go to your old address. Because it is no longer about the engagement layer, you have to actually carry through the work across all the systems from a customer workflow standpoint. Number of digital products that get created, Disney+ did not exist in 2017. I mean think about that, right? And then you have digital front end to physical products, routers, this that, what you use at home, that are also getting created. Massive TAM. We are very focused on delivering good, great customer experience as digitization grows on the physical assets or new digital assets that our customers create. And we have many, many examples across many industries on what we are doing on customer workflows. Employee workflows, I'll tell you this, pre-pandemic, every CEO talked about earnings per share, talked about customer Net Promoter Score, very few talked about employee Net Promoter Score. Employees are top of mind. They were top of mind during the pandemic and their top of mind even now. With the war on talent, skill shortage and others, we focus on hybrid workforce preboarding, onboarding, employee engagement, employee communication and when an employee tries to transfer or the moments that matter or a paternity leave, the number of departments and workflows that have to come together is just exponential. So ServiceNow workflows, we work with all the HCM systems. Customers ask me, CJ, how do you think about all these systems of record? "Hey, that's great. but those are systems of record, not system of action." They don't have the platform created for workflows, and that's what we do. So it's a very easy conversation for us when we speak to the CHRO or sometimes CIO. And Workplace Service Delivery is one of our fastest-growing products even post pandemic because of the work that we are doing in that area that Bill touched on quickly. And then creator workflows, here is what I would say, tech companies are struggling to hire engineers. If tech companies are struggling to hire engineers, whereas every company is trying to digitize their own products or services or create new products, there are just not enough engineers in the world. So how can we make it easy for our customers to have a platform where not only they can build something easily but also integrate with other systems easily. If those systems don't have APIs, they can use RPA. If they want to use machine learning for a task that gets repeated many times, they can use that. And by the way, if they want to do constant process improvement, they can look at process mining. We are the only platform for automation, where you have all these technologies built into a single platform. And I can tell you when I see the competitive landscape, I tell my team, it's like 31 flavors of Baskin-Robbins. Everybody says they are low court, no court, et cetera. But when you look at, hey, I can create an app, I can integrate with systems. And by the way, I have all these technologies at my disposal to be able to truly automate a business process. That's what creator workflows does for our customers. So Bill talked about this, 1 code base, 1 architecture, 1 platform, but we do want to announce a couple of things, which he already did, but I'm going to go in a little bit more details. So first of all, we are introducing new ERP workflows. We are not sure exactly from a category perspective where we would fit in because right now, we report on the 4 workflows. Our first product that when GA was in March in our San Diego release around procurement service management. Indirect procurement, people calling in into procurement department, employees calling in on where things stand, that is a big mess in procurement department. Chief Procurement Officer will tell you, there are still a lot of pain points. You have mailboxes, you have spreadsheets, you have just manual texting, "hey, where does this particular purchase rack sit?" This is what we are going to streamline with our procurement service management offering. It's already out. And when I look at the pipeline that is building for this year gives me very encouraging conviction that this is something that the pain points exist and we can solve that. And we'll work with SAP and all other ERP vendors in this space. The next product, supplier onboarding, managing suppliers, collaboration of suppliers and then when you have an issue with supplier, how do you do case management around supply? This is what we are going to do. So we will have a product for supplier life cycle management coming out in Q3 as in this year. and that's a brand-new product that we are going to launch. And then we have things in process around accounts payable. So super excited about this brand-new category. This is a buying center we are clearly not familiar with in the past. Our customers have led us to here. They have used ServiceNow for procurement case management or supplier case management. We are going to productize this, we'll make the integration super simple, and really pumped up about this particular new category of products that you'll see from ServiceNow as we make progress in individual areas. And then Bill talked about impact. This was also built on our platform. We care about our customers' success. Most people say, we truly care. And we want them to get value out of ServiceNow. So how can we help them accelerate the value by providing expert services, best practices, peer benchmark, higher level of technical support? These are the things that we have bundled in a very elegant way for our impact offering. This offering came out this year. And so far, it has been received extremely well by our customer base. So 2 new things, even though I said 1 new thing, ERP workflows which has multiple things underneath it and impact. Now it took us a while to put all of this on single piece of paper. And there is a lot of work that went behind this slide. So let me just touch on it. Number one, I would have some of you ask me, CJ, how much your workflows are penetrated by what account? And I said, first of all, that's the wrong way to look at that, and it's a wrong question to ask. Why? Each workflow have multiple products, each product has good, better, best. So when you think of a combination, it's 4 times 20 times 3. And then you look at it and say, okay, for that particular customer, where do we really stand? So when we land into an account, our opportunities to expand, still massive TAM out there. Of course, our products have to be awesome. They have to deliver value. But when I think about expansion, it just gives me so much excitement when I look at this particular 4 times 20 times 3. These are 20 big product categories like an ITSM standard, Pro, Enterprise. Number two, industries, I touched on industries. Financial Services is a broad category: banking, insurance -- my team tells me, banking, insurance, wealth management. We are horizontally penetrated in some, but not really when you look at the entire IT workflow portfolio or technology workflow, Similarly, employee workflow and then the entire line of business. For banking, what can we do around payments? For insurance company, what can we do around claims? They may have their systems of record, but ServiceNow has a role to play. Same thing with telco, same thing with media, same thing with technology, health care and life sciences, broad category, pharmaceuticals, payers, providers, manufacturing, massive category, right? And we are creating purpose-built products, even public sector, we just launched a product that can be applicable for citizen services to cities, states, municipalities, provinces, countries or multiple countries or regions. So these are the areas that we are going to focus our innovation on when it comes to our vertical products. And again, I've made many mistakes in past life when it comes about vertical products. These are still built on the platform. You can upgrade them, and we are not customizing it too much so that our customers can leverage it. Our growth geographies, of course, these are the 5 big growth geographies as we look at our future expansion to $11 billion plus or $16 billion plus. And then last but not the least is some of you ask me always new customer acquisition. And when we look at our target segment, the number is around 15% we are penetrated. So the corporations or based on the revenue size or number of employees side where ServiceNow can be a platform play. We are currently 15% penetrated. So you look at the new logos here, you look at the geographies, and of course, they are not mutually exclusive. You look at the workflow expansion and you look at target industries, the possibilities are endless. This cloud footprint, I had used this few years ago, and as we continue to expand for not only our new logos, but with the regulations that's coming in, in every single region such as EU or maybe specific to India, our team have done an incredible job going from San Diego to Switzerland, to Singapore, to Sydney and everything in between. And this is just phenomenal as we continue to expand. You look at the new logo slide, and we have penetrated 15%. This is absolutely necessary for our great sales team to expand ServiceNow's footprint as we move forward. Our ecosystem, Bill touched on it. This is very, very important. I'm going to start from the left and go to the right. Public sector, big area of focus for us. We have new offerings, very strong presence in U.S. federal across DoD, intelligence community as well as federal civilian. And I was with a large DoD agency a couple of weeks ago, and ServiceNow is the platform. And they said, "we are barely using you. We currently only use you for ITSM and ITOM, and we haven't even turned on ITSM Pro. That's what they want to consider now from an expansion standpoint. But CJ, we need asset management, we need security -- cybersecurity in this current environment is even a higher risk and how can ServiceNow help?" So public sector, super important to ServiceNow's future. Even though we are doing well in U.S. federal, the expansion possibilities are endless. We did Australia IRAP. We are just launching -- or launched this week ServiceNow Protected Platform for European Union based on their data privacy requirements. Integrations, Pablo will touch on this. When I started with ServiceNow, people asked me, "okay, CJ, we are moving our workloads to Azure, GCP as well as AWS, do you still have a role to play?" Absolutely. Who cares whether your workload was in your data center or Azure. When we look at your assets, they could be in Azure. You still need security posture for your asset in Azure or AWS. You still need to know where your assets exist that you are responsible for, including your application portfolio, including your cost. We have 1,200 customers who use us for public cloud footprint from a visibility standpoint and just understanding the real estate and that data sits in our CMDB, 1,200. And it's a good mix between AWS, Azure and GCP, and all of those are growing. And we have a role to play, it's basically visibility and orchestration. Similarly, on partnership, one of the best partnerships we have done from a technology standpoint is with Microsoft Teams. And Microsoft Teams wherever our customers want to use it as a front end to ServiceNow, great, use it as a front end, whether you want it for your IT agents or your employees to get things done, and that's a best-in-class partnership we have with Microsoft, which Satya even highlights in his keynotes. And then, of course, our system integrators, many of them are here or all of them are here. And then our store is an area where we release pretty frequently our applications. So we have 2 major releases alphabetically, but we do store releases pretty much every month, every quarter, depending on the products, maturity and demand from the market. And 90-plus percent of our customers have downloaded something from our store and actually used it. So they know that it exists there, and this is the innovation that moves pretty fast. So I can tell you that, first of all, really proud of the team on how they have executed on innovation, adding fundamental building blocks in the platform itself, whether it's process mining or whether it's machine learning or whether it's RPA and continue to innovate on our platform. In terms of products, just unbelievable set of products, which give you very faster time to value. This one large pharmaceutical chain for the vaccine requirements last year rolled out the entire product for 1 site in 1.5 weeks, okay? So ServiceNow, purpose-built products do deliver value, and our portfolio continues to expand. But when I look at geography, when I look at the expansion opportunities in existing accounts between our products, workflows and the packages, and when I look at how customers continue to get value out of our platform, it just makes me really excited to be at this company. So with that, I am going to announce an amazing leader who runs our core of the core technology workflow, he is an engineer by profession, please welcome Pablo Stern to tell you more about technology workflows.

Hi, everybody. I'm really excited to be here on behalf of the engineers, the product managers, the designers and the ServiceNow team that's building a lot of the innovation I'm going to talk about today. And it really excites me because not only are they building a lot of innovation, but that innovation is translating into customer value and it's customer-led innovation, our customers are leading us in this direction. Now what you'll see is we're going to start referring to this portfolio as technology workflows, and that's a deliberate change. Many of you have been with ServiceNow for some time are familiar with IT workflows. And as you heard CJ said earlier, customers have started taking the IT workflow portfolio that was in the back office in serving front office use cases like that telecom example that he gave. And this is coming up repeatedly with our customers, whether it's the infrastructure from a technology perspective or as we're serving customer-facing, revenue-generating opportunities with Lightstep and some of the observability solutions that we have. Now in the conversation today, I want you to walk away with 3 things. First, is the opportunity that we have within the core of IT as companies continue to invest and grow in trying to drive that digital transformation. Second is as companies are evolving their technology landscape, when we go back to the slide? Here we go. On the technology side, more and more of that opportunity really is presented as customers are trying to drive workflows for technologists that span across the enterprise, and they're looking to some of the technology that was really born out of the IT organization. And then we've seen a lot of success as we've gone into the operating teams. We saw that with our risk business as they went from IT into enterprise, and I'll talk a little bit about that, and there's a lot of future opportunity there for the rest of this portfolio. Now if I start in the core, for those of you that will be here tomorrow, what you're going to hear us talk about is this concept of service operations. And service operations brings together the 2 largest products in our portfolio, IT Service Management and IT Operations Management. IT Service Management is where an employee is looking to IT to help with a problem. They've got to reset a password, a service is down and they're trying to understand when it's going to come back up. And then the Operations Management side is a command center that looks at the entire state, all the systems and services and understands by visibility and health where those services are and where they need to drive remediation around those. And if you look at the ServiceNow portfolio from 2 decades ago, we started both of these layers. And what we announced in San Diego in our March release was the third leg of that stool. We announced unification of the experience layer so that now if you're an agent, you can collaborate with your IT operations team or your site reliability solution, we were 24th in that market. Today, we're #1 by market share by more than double the next largest player. So the innovation is increasing and accelerating and customers are responding to that. Now in the past, we've also talked to you about our emerging businesses. For an IT organization, you need to drive planning, you need to understand the assets that you have. You want to have a view of your security posture and drive security remediation and more proactive security or you're driving IT risk. We're on the cusp of having 4 $200 million businesses that are growing incredibly rapidly and have exceeded all my expectations in the time I've been here as year-over-year, we continue to accelerate that growth. Now part of that is also because if you look at this portfolio, we are investing. And the innovation is continuing to increase. And so over the last few years, we've added more and more capabilities across this portfolio. And what I wanted to do is show you a little bit of that experience as an agent using the San Diego platform. So if you're an agent, you will quickly be able to -- when you start your day, understand which incidents you have, any learnings that are in front of you or your team pinpoint them. And this is the thing that's really, really cool. As the agent drills into that issue, they came from that single pane of glass, quickly collaborate, get assistance for machine learning, bringing another team member or an IT operator to work through an issue together and drive that resolution for the customer, driving higher value work, driving more automation and ultimately helping the employees get their answer and get on with their day. Now CJ mentioned that a little bit earlier. One of the things, if you look at our portfolio, we are seeing that cloud acceleration, that transition into cloud. In the last 4 years, we've brought a lot of capabilities to bear for cloud, integrating into the public cloud platforms, understanding in real time, the systems and services you have, the health of those services, where the cost for those services are, governance and risk around your cloud environment. And our customers are responding. In the enterprise, we now have 1,200 customers that are using us for public cloud use cases. And that's not just for virtual servers. That includes PaaS devices, microservices and Kubernetes infrastructure that is being run in the cloud. But what's really cool about this number is that number has doubled in the last 18 months. And so what we're seeing is we're seeing our customers accelerate because as CJ mentioned earlier, the use cases of understanding what you have of the visibility of the health of those services, it doesn't matter if you're in a physical data center or if you're in the cloud, it matters in both. And many of you probably heard many years of, hey, I don't know if I need this in the cloud. I don't know as I move into a cloud, if I actually need to understand what I have, but our customers are showing us that they do, and we're seeing that in the growth of these workloads. The other conversation that I have with customers often centers around the shift as they're trying to adopt agile DevOps practices, and they have their developer pipelines and they're trying to move fast, but they want to innovate with confidence. And so with ServiceNow, we brought together in our portfolio, DevOps capabilities that integrate into these platforms so that as development teams working in their terminal, in their environments are working on driving that quick innovation for -- to be able to drive actions around those issues to drive quick remediation. So we still have a lot of opportunity to grow as we extend broadly across technology, and this has really driven a lot of the shift from what we used to refer to an IT or close to really expansively look at all technologies that we're serving at the enterprise. And if you look at the Lightstep experience, what has traditionally been a siloed experience with multiple views as you're looking across dashboards and different back-end systems. The Lightstep team has really brought this together from a unified perspective and is unique in doing so at the scale that a true cloud customer needs in a microservice distributed environment. Now the last thing that I wanted to spend some time on is extending outside of your traditional technologists. As you look at operating teams, as you look at lines of business, they have a lot of the same needs that technologists have had for some time. And if you look at our IT risk portfolio, which you've had in the market for almost a decade, one of the things that we had our customers pull us into was enterprise risk, moving from the IT and the CISO organization to the Chief Risk Officer. And over the last couple of years, we've really broadened out that portfolio, bringing enterprise risk capabilities such as business continuity and privacy and also really brought a consumerized experience for nontechnologists. And what we see today is that 3/4 of our $1 million-plus deals customers within the risk portfolio are enterprise risk customers. They're using us across the enterprise for enterprise use cases. And that conversation was a conversation that I had with some of our customers who are using our IT Business Management portfolio, our planning solution for the program management teams in IT and took that solution and brought it into the enterprise. And we're using it for a strategic program management office or an enterprise team to run their planning. And what those teams would tell me is, we love the product. It works really well, but we're not IT. Why are you calling this IT Business Management. And so last quarter, we rebranded after a couple of years of deliberate thought and evolving that portfolio and bringing new experiences into that portfolio to strategic portfolio management in recognition of the fact that we are serving not only IT teams as they drive planning, but the entire enterprise as they're trying to plan. And in that portfolio, we're going to continue to drive innovation, such as goals and OKRs for some of those nontechnology teams. The third area that, again, is a simple parlay as we think about where we served IT, and we're now able to extend to their use cases is our IT asset management platform. We've had tremendous success as we've driven software asset management and hardware asset management within our customer base, using our workflows and the understanding of those devices to understand what you have, what you're using, where your entitlements are and the full life cycle of your IT assets. And our customers have asked us, well, I have different device types. So your plant operations and you're running a manufacturing floor and you want to understand what is my exposure for vulnerabilities for some of those devices. That seems like a pretty analogous case to what an IT operations team is doing from a hardware asset perspective, and it truly is. Or if you're a hospital and you've got medical devices, and you want to understand the inventory of those assets and the life cycle depreciation around those assets, that's really another device use case. And so later this year, we'll be bringing out our enterprise asset management capabilities to help some of the teams outside of IT as they're trying to manage some of those assets. And so as an example, CJ mentioned field service management that field service team that may be out on site, helping a customer with a piece of hardware that needs to be returned, can check back not only in the personal stock room, but back in the warehouse to see which assets are there to see if they can help solve and help that customer solve their problems. Again, core use cases that we've built out and serve within IT that are clearly transitive to other use cases across the enterprise. And then the fourth emerging product where, again, we started in IT was around security. And we help, from a security perspective, understand for the devices you have, vulnerabilities and what the perimeter and exposure that you have around the security of that estate -- and customers are asking for us to take these capabilities and bring them onto the manufacturing floor, bringing them to their OT devices. And so at the end of last year, we brought out some of those capabilities, and we're seeing a strong response from the market as we're looking to take a lot of the same use cases out to the manufacturing floor or to other places where they have non-IT devices. So I hope you see that the expansion really from an adjacency perspective, where we started from an IT has given us this opportunity to really grow towards other technology use cases. But as companies are digitally transforming, takes us into some of the operating functions which historically have not been where we've served. And one of the key things in that has been driving a new experience for those personas because as an IT knowledge worker, you may be okay working with an experience that is very technology-centric, but that does not parlay to the teams that are outside of IT. So as you can see here, if you're a risk team and you're looking at your exposures from a document perspective and on the legal side and maybe you're going into your retail shop and you want to understand what the risks are for things such as an earthquake, you can quickly get that right from a more consumerized experience than we've had in the past. And that's been one of the big poles that is allowing us to extend these capabilities broadly into the enterprise. And the really, really cool thing for me in all this is it's customer-led planning. I talked about how our customers took us from IT into the enterprise. And that led the innovation, some of the new capabilities we're bringing out. Or from a Lightstep perspective, as we look at some of our customers that are using us for their entire customer-facing revenue-generating applications like Zalando, so they can stay up and say running through Black Friday and some of the big commerce events, they can do that all from this unified platform, or as you'll hear about tomorrow, companies like Microsoft that are using our service operations platform to drive self-service to over 180,000 employees because they can drive both the automation and leverage machine learning to take actions for those employees so that their teams are spending time on higher value work and those employees are getting what they need and getting on with their day. So with that, I'm very proud to bring on stage my friend and the Head of our product experience, Amy Lokey.

Thank you, Pablo. Hi, everyone. I'm thrilled to be with you here today. And we have so many exciting product innovations happening. We saw a peak with Pablo's presentation. I feel like I'm the luckiest person here because I get to share with you a lot more of what's happening with our product experience. And I'm so proud to represent an incredibly talented team of designers, researchers and more who contribute to these incredible innovations in our product. So what's really exciting to me to be here today is that I get to share with you how product design and experience drives material business outcomes. So I think you all understand this. But at a very basic level, people use ServiceNow to get work done and great experience design, making sure that, that happens effectively, efficiently and gracefully. And that means we're unlocking the power of this incredible platform, and we're unleashing the full potential of the people who are using it. And here's how that translates into real business value. So high-end consumer-grade design drives affinity. It drives net promotion and the enthusiasm that helps us acquire new customers. Improved efficiency and productivity, it drives revenue, retention, renewal, ML, AI and our low-code tools drive innovation, automation and then also expansion throughout the enterprise. So to put it very simply, we help businesses and people be much more productive. And when that happens, everybody wins. In the San Diego release, we were so excited to launch a massive modernization of the platform user experience, and we call that the next experience. We rebuilt the platform from the ground up. We streamlined navigation. We've modernized the visual aesthetics, and we created countless productivity-boosting experiences. So here's an example of the old home stream that people landed on when they log into our platform. And then this is a new one. So it improved our customers' ability to realize value from the platform through increased productivity for their teams and then more engaging and delightful experiences for their employees and customers. We modernized our entire ecosystem and our customers love it. These are real quotes. They clearly indicate a level of enthusiasm that fuels brand loyalty and the longevity of these customer relationships. And since we built all of these upgrades in at the platform level, that means every product, every business, every experience lifts. We're lifting every product and the people who use them. So let's look at a few of our recent experiences and the innovations that we're launching in our key business areas. So technology workflows, which Pablo was just talking about. So we know they benefit multiple end-users across the company. They improve efficiency and they improve the effectiveness of the internal support teams, and they improve the everyday work experience and effectiveness of all the employees. So at scale, these efficiencies save millions of dollars for our customers, and they contribute to employee satisfaction, morale and retention. So Pablo showed you the service operations workspace, which we're really excited about. I'm going to take you through the employee perspective of what these experiences look like. So we've probably all been through this where you order a new laptop, and it's a very complicated workflow that goes throughout a large enterprise. It involves many different touch points and processes in the enterprise. While with our investments in NLU technology and chat experiences, even a very vague input like dev laptop, it delivers an accurate and an actionable result. So we've designed these chatbot flows to feel very personal for the employee. It's very targeted. We know the equipment they already have. We can get them right to what they need. And it reduces the overhead for the support teams because this is automated. So once the laptop is ordered, the bot even stays engaged and helps the employee with additional tasks they might need to do, like updating an e-mail distribution list. So most chatbots that we see out there are primarily informational. They might take you to a help page. What's differentiated about this is it's executional. You can complete an end-to-end task, get your work done right here in a conversational experience. So let's go deeper on employee experience, looking at our employee workflows. We know that enterprise software is no longer just about enabling business processes, although we do that quite well. It's also about creating value for the people who consume what that process delivers. So those are customers, their employees, their vendors, their leaders. Our newly upgraded employee center, which we touched on earlier, is that one-stop shop that delivers any kind of service or resource or assistance that an employee might need. These are like those Disney+ employees for the Disney customers using that one-stop shop. And it doesn't just look good. We make it incredibly simple to support the more modern way of working. So things like reserving an office space like a hotel desk, we make it incredibly easy, whether you're on mobile or desktop to do a consumer-grade reservation. And then we've also got augmented experiences that help people find their way to a location that might feel unfamiliar in their office space. So there are very tangible benefits here in terms of time and resources and efficiency, but there's also these intangibles that lead to bigger wins. So employee satisfaction and sentiment about their work and their affinity for the products and the experiences they get to use while they work. So let's look a little bit more about what we're developing for customer workflows. We know that customer operations and customer service, it can be a tough job. As a customer service agent, you have to process a huge volume of issues. You're usually measured on how fast you complete these issues or tickets. And then you're also required to present an incredible brand experience for those customers on the other side. We want to build their loyalty. We want to make sure that they continue to use these products. And on top of all that, for many industries, especially finance industry, customer service is also the frontline for stopping losses due to fraud or theft. So here's an example of a smart and efficient customer-focused workflow. Using our document intelligence, we can take any document, any image, any attachment or PDF, and we could automatically scan and summarize it and extract the most relevant data right here in the case record. This enables a really fast analysis of the transaction in question and without any manual data entry enables the agent to get all the information that they need to help process or create a decision. This saves time and money, and it builds trust and loyalty with the cardholder. Behind the scenes of this customer workflow, as I think we mentioned CJ mentioned earlier, is our process optimization. So this ensures that the process is maximized for efficiency. Using this kind of data visualization, we can help people quickly see the bottlenecks, understand where things might be an opportunity to speed up. And our customers basically can turn on the gas as they see a process that needs to move faster in their business. So last but certainly not least, our creator workflows. And as CJ was talking about earlier, we had built a lot of great workflow experiences on our platform, and we deliver those in an out-of-box fashion to our customers, but we also let our customers create their own in our App Engine Studio. So when I open up an app in our low-code environment called App Engine Studio, I can use a product called Flow Designer. It presents a really visual intuitive layout of exactly what the process is. So I can see it right where I need to go to potentially build on a process or modify it and do things now like adding an RPA bot, which will help automate really tedious work for my employees. I can build an end-to-end solution here that solves every possible business need. The next experience is all about elevating our technology and making sure it's paying dividends for the people that use these solutions and the businesses that buy them. The payout for our customers is that higher productivity from their teams, rewarding employee experiences, technology services that are reliable, stable and efficient and customer service that is real time and builds loyalty to their brand. These experiences are what drive the top and bottom line and make our customers want to use ServiceNow to run their business. And the last thing I'll leave you with is enterprise design no longer has to feel stagy or stuffy. It can also be beautiful and delightful to use. And we're really proud of experiences like our dark mode, which help people use our product in a mode that they enjoy most, and it looks stunning. So we're really proud of this. CJ, Pablo and I were thrilled to be here with you today to share these experiences in everything that's still ahead on our road map. And we hope you're feeling some of that excitement, too. So with that, I want to thank you for your attention. We're going to give you all a short break for 15 minutes. Thank you for hearing about how beautiful and powerful enterprise software can also create huge business impact. So thank you very much, and then we'll see you back here in about 15 minutes. [Break]

Ladies and gentlemen, please welcome Chief Commercial Officer for ServiceNow, Paul Smith.

And welcome back. It is fantastic to have this opportunity to spend some time with all of you this afternoon and also to share some insight from how our customers are using and innovating on the ServiceNOW platform. Now I joined ServiceNow a little under 2 years ago, initially as the President of our Europe, Middle East and Africa business and then at the end of January, taking responsibility for the global sales organization. Prior to that, I spent the better part of 9 years of Salesforce going through a lot of the changes that happened to that organization in that time period. And here's what attracted me to ServiceNow. And it was primarily 2 things, right? Bill earlier mentioned the incredible culture, truly collaborative, win as a team and a very human business. But the piece as well, it was very, very, very specific to me when I came here was the whole platform and architecture piece that we covered earlier on. So I spent a lot of time before I join ServiceNow speaking to customers and trying to get some insight from them myself 2 things came across. First is they are all very happy. So that's good. And then the second, that thread around one platform, one architecture, one data model, that came across just incredibly clearly around how these organizations were using ServiceNow to very quickly solve critical business problems and very quickly get to value. And that is why I'm really excited about this session and the opportunity to hear directly from some of our customers and unpack some of what Bill, CJ, Pablo and Amy, were talking about and see how that's coming together in a real-life scenario. So I am very, very, very grateful to be joined by 2 phenomenal executives from a couple of organizations that you know very, very well indeed, KPMG, UC Irvine, Aaron Purcell, Head of Enterprise Architecture and then Stephen Whelan, Executive Director of People Services. These 2 are driving true, true transformation in their organizations. Very fortunate to have them with us today. So please give them a very, very warm welcome. Aaron and Stephen, please come and join me. Well, firstly, thank you very, very much for joining for being here. So actually being at the whole knowledge 2022 event here in Las Vegas and spending the 2 days with us and also for joining us with our Financial Analyst Day here. So welcome.

Absolutely. Thanks for having us.

Looking forward to it. Thank you.

So look, I think most people know your organizations very, very well, but it would be great if you could share some insight in terms of your specific role in the organization, a little bit about what you're doing. And perhaps, Aaron, if we can kick off with you, that would be fantastic.

Sure. So today, we represent the U.S. member firm, it's about 30,000-plus folks. But ultimately, the U.S. is kind of leading the way for global. And what we're doing with KPMG is we're on that ITSM to enterprise service management journey. It's really helped us in accelerating our digital transformation. This one platform has allowed us to be able to centralize a lot of the what we call single point solutions on the single platform. We're about 18 months in. We think, overall, this will lead us to about a 2-year, 3-year journey, but ultimately achieve the objectives we're after to really try to drive the utilization we're targeting for future.

Awesome. Thank you, Aaron. And Stephen, perhaps if I can get you to do the same.

Yes, would be happy to. Hello. Good afternoon, everyone. My name is Stephen Whelan, Executive Director of People Services at the University of California, Irvine, and really, that's a shared service center team that supports our Tier 0, Tier 1, Tier 2 benefits, HRS and analytics and reporting. But what we're most proud of is bringing in ServiceNow in January of 2020. We actually centralized our entire enterprise, which includes a medical center, health sciences and a campus. We created our first -- in the first of its kind in our environment, in our area, using a centralized phone number, e-mail address and platform for our 24,000 employees to interact with.

Amazing. Thank you. And so let's dive in. I'm keeping one eye on the time there. So I'm actually going to go to you first, Stephen, because you started your journey with ServiceNow in January 2020. So you just kind of got everything lined up, ready to go. And then obviously, COVID pandemic came along. You had to make a very, very fast pivot to how you're going to use the -- Now Platform. So tell me, how does that look like? And what did you trust and Now Platform to do in that kind of scenario?

Yes, I think it's a great question. Obviously, when we first implemented ServiceNow and myself and my colleagues pitched this as the most scalable solution at our fingertips and then 2 months after go-live, we are really tested. And even in the January, February of our go-live, we are learning more and more. It was a huge massive project for University of California, Irvine. Then the pandemic hit, and we had this platform and really it was a logical transition even though we're so new in our steps in managing this new environment of 24,000 employees in one place, we said, well, let's expand it quickly and almost in real time. In certain services, we turned on in 24 hours. And we're talking in March in 2020. And really, oftentimes, we had to leverage the team and the platform just to be an intake because there were so many things that were undecided at the time at the university in the state in the country in the world, but we wanted to create an avenue where people and actually included parents and students back where we could collect their concerns and address these unknowns. And as our strategic communications committee and our Chancellor who oversees all of UCI, these decisions we made as we learn more and we worked with the CDC. We can then have an avenue to get back to those customers, employees, parents, students and really give them the information as near real time as possible. And that began in March and still continues to this date. We still have a COVID response team. And their services keep growing. And in fact, we're the leading -- in our university we're the leading point of contact for information regarding the pandemic.

And what I love about that is you kind of made the business case in January. You have to kind of stand behind the platform anyway, and then all of a sudden, you've now really got a snow behind the platform, right? So...

And there was a bit -- I was right. I was a little concerned. But ultimately, what we knew with ServiceNow and what we saw in the presentations I had a strong feeling that was going to be scalable for our needs, but it was such a sigh of relief, a, that we worked with ServiceNow before the pandemic. And then also, it's as scalable as we thought, and we leveraged it to our capacity anyway.

Awesome. Thank you. And Aaron, very similar, right? You used ServiceNow to streamline a lot of business processes. When we were speaking earlier, you were saying you're using ServiceNow for true experienced transformation, not just the technology program or a technology transformation. Tell me what do you mean by that?

Yes, as part of our digital transformation strategy, we really didn't want to have a technology transformation. We wanted to have a true digital transformation, transforming processes, experience, et cetera. We really looked at it from kind of a 3-layered approach. We started with thinking of the systems of experience than systems of action, systems of record. When we look at systems of experience, we wanted to unify the experience. We represent professionals who need to be working with our customers. We want them to spend as little time as possible with our enterprise system, so they can get back out and service our customers. So we want to simplify that experience. We also wanted to bring system of action to the experience. Today, if you think about a lot of the portals and different experiences inside of an organization, a lot of it's content, a lot of it's campaign management, et cetera. What we really wanted to do is drive pacing to the employees so they could take action on things that were worthy of their time and then quickly get on to servicing our customers. The other piece for us is that we really wanted to centralize the system of action into a single workflow so that we could get scale, we get reusability. We could really make it where we have fewer integrations, all we have to really worry about is the system of experience taking all the right actions and then making sure the systems are record or current. So that's really what we were trying to do with service. Now I have quite frankly been successful so far in [indiscernible].

And doing that at a massive scale. So I've got to ask this question because everyone in the audience is always interested in competition. I'm going to stick with you, Aaron. So talk me through it first in terms of what you were trying to accomplish there, you could have done and made some different technology choices, but ultimately, you chose ServiceNow. So what led you to make that choice?

Yes, there's really 3 things. We did, to your point, look at a variety of different low-code application platforms already different BPM or process flow solutions. And ServiceNow stick out to us for a couple of reasons. Number one, the prebuild nature. We've already seen return on that. We just recently went live with Legal Service Delivery. And what that aloud us...

LSD. Brilliant [indiscernible].

LSD exactly. You can't make that up. But anyway, we went live with that and we went live about 2 months ago. The key for us there with this prebuilt nature is it allows us to adopt best practices out of the box utilization. And ultimately, we spent time with our legal counsel organizations who had responsibility for developing those processes. But we came to a point where they leverage those out-of-the-box practices. It allowed us to achieve realization of our vision faster. We didn't spend a lot of time going through process transformation conversations. So ultimately, we really find that prebuilt nature of ServiceNow is critical for us. The other key piece for us is that we really saw ServiceNow is that journey from IT service management to enterprise service management. We already had a pretty strong IT service management base. So we are looking to leverage that expertise and skill sets to be able to extend it and scale it out. We didn't have to go to the market if we bought a new product. We didn't have to build our knowledge from the ground up. So those are really some of the key reasons why we picked ServiceNow in our decision.

Fantastic. And I'm very glad you did. So Stephen, same to you as well, again, faced with all these choices back up January 2020, what made you go with ServiceNow.

I'll start with the simple one. I'm here because of the partnership. I don't assume we're getting any better rate, which is good for showing up. The partnership stood out to us initially. But ultimately, we're looking at building an enterprise-wide solution across all UCI that included those distinct as I mentioned, medical center campus. And it's overwhelming. And it was overwhelming in the sense that we also weren't alone. We had to gain stakeholder interest from across departments that weren't reporting under HR. And the ServiceNow team, not only would they built a strong relationship, a strong understanding of what we're trying to accomplish. But when they pitch the HRSD, they weren't trying to split the item. They were showing exactly how and only how the HRSD could work. And it's a box. It's a huge box and never been disappointed with this box and it's continuing to expand. But that one is over. I would say the last thing is during that same conversation or a series of conversations, I work for the state and my boss reminds me all the time. And that means that we can't always bring in who we want to bring in and when we want to bring them. We're focused on education and medical and research and often HR isn't the top priority if other things are working. But the ServiceNow team, we did a lot of due diligence on one, can this work outside and what we're thinking today. And they gave us a lot of confidence in that. And then also during that relationship sessions, they also showed the simplicity overseas, I shouldn't say that the ability for us to support this application, not with third-party consultants, but with qualified people in-house. And that was a huge winner for me because we love this platform. Everyone -- a lot of people thought, oh, we'll get this and we're done. And I think the project team including myself realize this is just the beginning. So to be able to have that confidence that we can expand this on our own, especially with things that are reasonable to do was a huge winner for us. And I can say over the last 2 years, including the COVID support we've done, we've added probably 60 services. We've done it all in-house. It's nothing revolutionary, but at the same time, it's true to our hopes and expectations that we can maintain this with our strong support with internal IT, strong support of my team, which is about is absolutely amazing, but it all worked out as we had hoped in better. And that's a pleasant result.

It's fantastically you've been able to be self-sufficient in that way. [indiscernible] in really good stead. So thank you, Stephen. Coming back to you, Aaron. In one of our earlier conversations, we were talking about creator and low-code, no-code and you don't call it citizen development. You've got a different phrase for it, but effectively trying to unlock the productivity and creativity within the organization. So tell us a little bit about your plans for ServiceNow in that regard.

Sure. So we're actually in the midst of our journey. We actually coined the phrase distributed development. We're distributing the development out into our business. We are a federated IT by design organization. We have a centralized IT organization, which I'm a part of, but we also have sanctioned IT sitting inside of each of our 3 lines of business, advisory, tax and audit. And so ultimately, what we wanted to do is create a platform experience that allowed us to let that development take place in a distributed manner, but still create reusability, sharing of innovation and ultimately allow us to have some guard controls. We have some bit of governance around it. The other piece for us is that we have found that with the capabilities inside of ServiceNow like the automated testing framework and just the maturity of the model itself. It really allows us to be able to move that distributed development to more of a pro-development like experience, while we're still able to push out the sanction, and we try to make sure they're sanctioned developers, the training and they have the appropriate insights -- so ultimately, it gives us a way with which we can meet the speed of the market without necessarily having to have that centralized IT support.

Yes. So you're using creative work closing or trying to govern that basically between getting the productivity lift you want without it being completely free for all.

Absolutely correct.

Yes. Awesome. Amazing. And then Stephen, so I wouldn't say that word's exactly normal, but it is more normal than it was during the depths of the pandemic. So you obviously went through that phase. You really, really accomplished a lot for your business in terms of bringing together 400 different centers around. What comes next for UC Irvine?

It's a great question. It's so exciting. Actually, the last 2 months, we were picked up 2 years ago. We started talking about what do we want to do after we went live. One thing we learned from the pandemic but again, suspected, we created all of these working well tools. If it was clear to come back to work, if it was about compliance related to certain things, if it was -- you're working well. And what we designed using a security model was a click of a button. We've shown these managers, these dashboards, I should say, central decentralized and centralized HR units. And that click gave them the exposure to ServiceNow and great reviews, but it's not a broad audience. So I would like to see us look at the manager dashboard. I would love to incorporate document management and putting that manager dashboard in their hands. So it's the first thing you look at and it's the last thing you look at in the day, and it's all in one shot. I think for the medical center, understandably, they have very little time. They're looking at something and they're going to their 10, 12 hours shipped. We can't take too much time. We can't connect to many different systems. So I think that would be something that I would really take pride in taking us to the next step.

Yes. What's really interesting here and this is completely unscripted, but you're both converging on a similar path here, right, in terms of you're turning the traditional Internet into more of a system of action, you're bringing some of the traditional document management and turning that into something that you can master in your management dashboard using service now and turn that into action as well.

Multiple [indiscernible].

Yes. So very, very. So Aaron, I think final I'm looking at the time here, I think it might be the final question, but let's see. So you're also looking at a few interesting advancements taking ServiceNow perhaps out to the front office, but also you've recently become a customer Celonis as well. And I know you're looking at some of the synergy between ServiceNow and Celonis. So perhaps you can share some insights on that.

Yes, absolutely. We just recently signed a deal with Celonis about 1.5 months, 2 months ago. We see -- we did a POC or a pilot earlier this year, and we're just elated by the value. But we also -- one of our pilots as a ServiceNow. We were able to easily create connectors to connect Celonis into ServiceNow. And we did it for a couple of reasons. When we understand how easy it was to connect. But number two is we wanted to see how we could use Celonis to feed into ServiceNow. We really call it the automation of process automation, being able to work with our customers, work with our clients, internal customers, sit down with them and mine out how they do things today. We saw about 40%, 50% error rate when we sat down with a business owner and said describe your process, the accuracy of what they describe versus what really happens. So with a tool like Celonis, it allows us to mine directly out of the activity log. And then we can sit down and conduct conversations around what the process is today, how do we optimize it, decrease variance, improve throughput, et cetera. But the key for us is we want to take that and then immediately feed that into ServiceNow into some of the creative workflows and be able also to take, hopefully, over time, the knowledge from the prebuilt process flows like what's at risk today, HR, et cetera, and be able to overlay those process flows and what we've mined out so we could focus on the delta move away from having a full bottoms-up conversation on process transformation and really hone in on the ability to identify what process changes we need to make so that we can immediately shift that into the new workflow capabilities. We feel like this will help accelerate by, if not weeks, months, our ability to transform either manual processes or legacy processes into a digital experience that we've talked about.

Fantastic. Well, we've got 2 future directions there that you both outlined. So when we next come back for our next financial Analyst Day, we'll see whether we've actually gone and executed those with you. So that will be great. We're going to -- we're out of time now. So I just wanted to say a massive, massive thank you for joining us here and for sharing your story. It's a fantastic insight. Thank you very much. Please, everyone, big round of applause. Okay. Thank you both. And again, just a wonderful opportunity to share directly from our customers how they are using and innovating on the Now Platform. I now also have the pleasure of introducing our next speaker, someone you know very, very well indeed. Please give a very warm welcome to our amazing CFO, Gina Mastantuono. Gina, please come on up.

Great to be here in person. Thank you all for traveling to Vegas to be here, and I hope you really enjoyed those customer stories. I know I did. But not taking a step back, I'm going to pull together everything you've heard today, and I hope you're as excited about ServiceNow's future as I am. We have a tremendous opportunity in front of us and a strong track record of success. Now let's just take a look. Our growth rate over the past 4 years has been impressive. From 2017 to 2021, we grew at a CAGR of 34%. We're sustaining organic growth at unprecedented scale. And I can't help but emphasize that last point enough. In software, we're used to seeing 30% or higher growth, but that's at smaller companies or boosted by M&A. To put it in perspective, we've added $1.3 billion of organic growth just last year. Let me repeat that, $1.3 billion of organic growth, remarkable. And the durability of our top line strength is validated by our robust remaining performance obligations, which is essentially our total backlog. This provides further visibility into our future growth. We have $11.5 billion of RPO with half of that current setting us up well to deliver against our guidance of constant currency subscription revenue growth to accelerate in 2022 and putting us well on our way to $16 billion and beyond. Our ability to deliver strong results exemplifies the resiliency of our business and the mission-critical nature of the Now Platform, the breadth of our product offering, our geographic reach, provide us a diverse array of opportunities for growth. So what gives us the confidence to expect revenues to triple by 2026? Well, we have plenty of runway to land new logos. With over 7,400 enterprise customers, we're just scratching the surface. According to CapIQ, there's about 50,000 companies with over 1,000 employees and $100 million in revenue worldwide, and that excludes China. What's more, with our expanding product suite, which helps us to build these deeper new customer relationships. In 2021, we saw more than 20% of our new logos coming from nontechnology workflows. And as we talked about last year, the expanded breadth of our product portfolio, along with our focus on solution selling in the C-suite has allowed us to land larger and larger deals with new customers. You may recall at our Analyst Day last year, we noted that from 2016 to 2020, we saw a 30% increase in the average number of products sold to new customers. Fast forward to today, in 2021, we saw another 30% increase in just 1 year. Over the last 4 years, that represents 55% growth with a similar uplift in ACV. More products in each of our deals translates into larger ACV. You've also heard about the fact that we've evolved our strategy to focus on the right customers, not just a lot of them. Customers that have growth potential for the long term. That expansion motion is a core component of our durable growth engine. It's predictable and it's reliable because it's with customers that know the Now Platform and the value that they can get from it. It's customers that our sales people already have deep relationships with. So when events like the pandemic strike, we don't need to rely on hunting for net new logos. We have a foundation of enterprise customers who are still early in our journey with us. And the more they get to know us, the deeper the relationship grows. In 2021, 88% of our new business came from existing customers, and we continue to see a net expansion rate of over 125%. And perhaps more telling of how much our customers love our platform, over 2/3 of existing customers spent incremental dollars with us in 2021. Because of these characteristics, we have great visibility into our future top line growth. Many of you have seen these customer cohort charts in our IR deck. They offer us valuable information that help us accurately forecast cross-sell and upsell patterns. Our older cohort continues to drive strong growth. For example, a customer who spend $100,000 with us in 2010 is now spending $2.2 million with us today. That's 22x where they started from and represents annual growth of 176%. So now let's double-click into a couple of customers to see how that expansion motion has evolved over time. The following examples are with customers of comparable size, about 50,000 to 75,000 employees and are representative of the overall average annual growth for our 2013 and 2019 cohorts. Starting with the 2013 cohort. We take a look at the customer journey of a large telco company. After initially landing with ITSM and ITOM in a 1 million ACV deal, we've seen a steady progression of expansion into app engine, security, risk, SPM, then an upsell into Pro, followed by the adoption of ITAM, CSM and HR. Today, that customer does $10 million of ACV and uses 10 of our products with plenty of room still for future growth. Looking at our more recent 2019 cohort. We look at a public sector customer that when immediately should jump out at you is the size and breadth of the initial land. We landed with 6 products, including 2 Pro SKUs with a total ACV of about $4 million. In just 3 years, this customer has already caught up to the 2013 cohort, leveraging 9 of our products for an ACV of $10 million. So what does this tell us? This shows that we're really selling a comprehensive digital platform solution and not just point products. And it's paying off with strong renewal rates and expansion rates. You've seen this in our deal sizes. We grew our 1 million-plus deals by about 40% in 2021, which is helping to drive a 3x increase in the number of customers over $1 million in the past 4 years. We now have 1,345 customers paying us over $1 million annually, and our largest customers are growing even faster. From 2017 to 2021, we've seen our 10 million-plus customer count grow at a CAGR of 95%. And they're not anywhere near their full potential. As we mentioned earlier, our portfolio of products is still very underpenetrated even within our current customer base. And that includes our core technology workflows, which some erroneously view as nearing full potential -- sorry, full penetration. The reality is that over the last 4 years, our emerging technology products have grown with a CAGR north of 50%. And the penetration of these products, including ITOM, security, risk and SPM is still below 20%. If you add to that light step, which makes us relevant in the observability market and with new buying personas, there's plenty of growth opportunity ahead. We also believe we have a massive opportunity to cross-sell our newer workflows. Only 10% of our customers are using all 4 workflows today. And as CJ noted earlier, we're continuing to innovate and expand our product suite to further deepen our customer relationships with the introduction of our AI-powered experiences, including chatbots, process mining, workforce optimization. We've also created premium SKUs that allow us to upsell our existing customer base into higher value, higher price point offerings. The adoption of our Pro SKU continues to drive healthy growth within ITSM. Customers see tremendous value in the offering as the realized price uplift remained steady at 25% and the Pro-SKU is now penetrated in 30% of our existing ITSM customers. Furthermore, 60% of ITSM new customer ACV comes from the Pro SKU. So our new customers see the volume in this premium offering as well. In addition, our industry SKUs are already exhibiting strong potential. For instance, our telco SKU has done well since the launch just in 2020, as nearly 1/2 of the top 20 G2K telco companies are currently using our solution. And with only 13% penetration among our overall telco customers, we see a lot of runway ahead. What's more, the average deal size is about 2.5x a traditional CSM deal. With the majority of business coming from existing customers, we see strong sales and marketing leverage from enterprises that expand with ServiceNow. And with the one platform model, it's easy for customers to add capabilities all on one architecture. These customers understand the power of creating cross-functional workflows throughout the enterprise, all on one platform, driving greater productivity, efficiency and better experiences. As a result, sales cycles get shorter over time, leading to better rep productivity. Over the past 4 years, we've seen a 43% increase in sales rep productivity, including a 16% year-over-year in 2021 alone. Our sales teams are clearly doing a great job. This has led to increasing sales efficiency as we scale beyond $1 billion in revenue to $2 billion, $4 billion and now over $5 billion in revenue. So switching gears slightly now to further reduce the friction in our buying process, we introduced the Now Buying Program back at the end of 2019. The combined capabilities of the Now Platform are just better together. They deliver even more value than the sum of their parts. So the Now Buying Program helps customers realize those synergies quicker by simplifying the buying process and providing greater usage flexibility, all while improving business impact. It's still early innings, but we're seeing real success. Since inception, the Now Buying Program deals delivered twice the ACV growth versus overall 1 million-plus deals with comparable price performance. That's important. -- comparable price performance. Also, what's more NPS scores for those customers are 14 points higher versus the overall company Together, the efficiency of the -- Now Platform and our land and expand growth engine have driven a business model with inherent margin expansion, which allows us to heavily reinvest in R&D to expand our total addressable market, even while continuing to deliver strong profitability. From 2017 to 2021, our operating profit grew at 43% CAGR. Margins have expanded from 18% in 2017 to 25% in 2021. And we expect to hold them in '22 despite COVID-related savings fading. And nonoperating profitability has dropped down into robust free cash flow generation. In that same period, we've seen free cash flow grow at a CAGR of 40%. In 2021, we generated nearly $2 billion of free cash flow with 32% free cash flow margins. That's amazing when you also consider we grew subscription revenues at 30% to over $5.5 billion. Combined, that equates to a revenue growth and free cash flow rule of over 60. And as you can see from this chart, ServiceNow generates an unmatched combination of organic growth and profits. In 2022, we expect that momentum to continue with subscription revenues at 28.5% and Q2 current RPO at 28%. Paired with strong free cash flow generation of over $2 billion, driven by a 31% free cash flow margin. You've also seen that discipline with our share dilution, which was at the low end of our peer group at 1.6% in 2021. And over time, we expect our stock-based comp to further decline as a percentage of revenue. No other software company has achieved now scale, size and profitability profile organically. You've heard CJ and Bill talk about our investments in product and go-to-market and talent to ensure continuous outperformance. We're seeding future growth through innovation, scaling our go-to-market reach and ensuring we have the best and brightest talent. We have a disciplined investment philosophy with a focus on R&D as well as productivity and efficiency to drive scale. This enables prudent reinvestment in strategic priorities to sustain strong growth over the long term. So while our top line growth and profitability targets are ever important, it's also important that we get there the right way. Profits and purpose are not mutually exclusive. We're able to run this extraordinary business with ESG as a strategic imperative. ESG connects to business strategy in a way that's good for the planet, good for people and good for profits. We recognize that ESG ties to enterprise value creation and financial performance over the long term, which is why we're embedding it in our strategy, our solutions and our culture. So driven by ServiceNow's overarching purpose to make the world work better for everyone, our ESG strategy centers on 3 main pillars: sustaining our planet, creating equitable opportunity and acting with integrity, all supported by the Now Platform and solutions, which is the force multiplier that helps our customers in their ESG journeys. In our environment pillar, we're focused on accelerating decarbonization and engaging our suppliers as we continue in our commitment to net 0 by 2030. In our social pillar, creating equitable opportunity, we're focused on our continued commitment to our employees and the recruitment and advancement of a diverse slate of talent as well as ensuring we have a positive impact in the communities in which we live and operate through community investment and volunteerism. And last, but certainly not least, we continue to drive our strong security, data privacy, ethics, business continuity programs as well as enhanced disclosures as part of our governance pillar. And let's not forget, it's all underpinned by the ServiceNow platform and solutions that not only help activate our own ESG journey, but also enable our customers to accelerate their ESG strategies, goals and successes. Last month, on April 22 Earth Day, we published our second annual Global Impact Report. I hope many of you have seen it already. If not, it's on our website, please take a look. A few highlights from 2021. We launched our ESG management solution, and we were actually customer 0 as we pulled all the information we needed to put our Global Impact Report together from disparate systems across the enterprise. And what's more, we were able to ensure the reporting was accurate and auditable. We achieved 100% renewable electricity and carbon neutrality. We increased diverse representation for women in leadership, black or African American and Hispanic or Latinx. We fully distributed our $100 million racial equity fund to communities across the country. And we tied executive compensation to environmental and DE&I targets. And as we look forward to 2022, we've made several new commitments. We'll continue to deliver additional product solutions that help our customers and empower them on their ESG journeys. We'll be providing our customers with a carbon-neutral cloud by the end of the year. And we set a goal of employing 15% of underrepresented groups by 2025. Okay. I know you're all waiting. Now to the numbers. The investments we have made are bearing fruit ahead of plan. And as a result, we're updating our long-range targets. For full year 2024, we're raising our subscription revenues target from $10 billion to $11 billion plus. We're raising our non-GAAP operating margin from 26.5% to 27%. And we're achieving this all while maintaining our expectation of 2 points of free cash flow margin expansion over the next 2 years to 33% by 2024. We now expect 200 customers to be paying us over $10 million in ACV, up from 140 just last year at our Analyst Day, as those customer cohorts continue to grow at over 30% CAGR over the next few years. From a workflow perspective, we continue to expect our Customer, Creator and Employee Workflows to become the majority of net new ACV as we reach $11 billion, with Creative Workflows contributing 20% and customer and Employee Workflows contributing 35% of the mix. And we continue to expect to yield net new ACV mix to diversify, with over 40% coming from EMEA and APJ in 2024. Longer term, you'll recall that at our Analyst Day last year, we announced a target to achieve $15 billion in revenue by 2026. Since then, ServiceNow has continued to outperform, and our strategic initiatives have gained further momentum. ServiceNow is creating product experiences that people at work love. We have an innovative scalable, secure platform to digitize workflows across the enterprise with great user experiences. We're engaging customers with a world-class go-to-market, and we're force multiplying that reach with industry and partner ecosystems. And as a result, we're raising that target by $1 billion today to $16 billion plus by 2024. So to sum it all up, we have an incredible opportunity in front of us with plenty of customer white space to go after. Our durability of growth, the efficiency of our land-and-expand motion and the inherent profitability of our one platform model, all contribute to our continued confidence in this incredible business and in the increase in our targets that you've heard today. So on behalf of the ServiceNow team, I want to thank you all for joining us today. And with that, I want to invite my team back on stage and open it up for Q&A. Thank you.

[Operator Instructions] And we have your first question here with Alex Zukin in the front row.

Alex Zukin with Wolfe Research. First, I just want to say thank you. This was a masterclass in Analyst Days. Truly, it was synced, it was to the point, and it was, I think, pretty clear. I want to ask a question. One of the things that you guys mentioned today was you're going from powering a company's technology and infrastructure to actually being a part of their product. And in the cohort slides, you talked about, I think, landing larger than you've been. You even mentioned telcos, the deal size was 2.5x, the CSM deal. So what -- how important is that to that pathway to $16 billion? How much in terms of the end product of your customers do you expect to be? And where -- I think you mentioned a telco example, but if there are any other ones that resonate would be super interesting.

All right. I'll start. Alex, I was expecting first question from you. I had a bet on it. Thank you. So here is what I would say that when we create specific product content from data model, workflow and integration perspective, what Gina showed in her slide is absolutely true. So telco is a big opportunity because telco is a technology company at the end of the day. Media companies are becoming technology companies, and tech companies are also technology companies. So super important is the simple answer that as we scale like telco, we are now on the network side in many of the telcos, including some of the stats that Gina showed. On banking, that's where we want to land on the line of business. They do now HR as well. But in general, they're important.

Michael Turrin with Wells Fargo. So Gina, you stepped through it pretty quickly, but the increase in sales efficiency to more than 5x from 3.5 in the past couple of years stands out. Is that a function of scale? And we're getting questions just around the ability to sustain efficiency gains as we go into potentially a period where demand is a little tougher or some pockets of the market aren't quite the same. So what are some of the things you've learned in 2021 to drive those improvements. And if we think about driving further improvements into the future, what can you take advantage of there?

Yes. I think it's a great question. And absolutely, scale is a big part of it, right? That's 100% a big issue. You've also seen the 5.1 in 2021. We absolutely had COVID savings in there as well. And I've talked a lot about the fact that we believe 100% that we are going to operate in a different operating model post-COVID. We will reinvest some of the dollars. Some T&E is going to come back. Travel is going to come back. But as we scale, the incredible part of our business is that we're able to really drive these efficiencies on sales and marketing, and we'll continue to see it. Will it come down slightly from 2021? Perhaps, as some of those COVID-related savings fade. But oh my goodness, the efficiency that we're able to get from our model and with Paul leading the charge from a sales and go-to-market, I have no doubt that we'll be able to see real improvement and continued success there for sure.

Phil Winslow, Crédit Suisse. Just a question on the employee and Customer Workflows. This went from -- I think it was 24% to 28% and the guidance was the 35% of the mix of the business. So I guess a question for you, Gina. When you look at that breakdown there, are you seeing more momentum in the -- over the time you think of the customer or the employee side? And then a question for Bill. When you talk to customers, why are they choosing ServiceNow for those 2 workflows, those newer ones versus the traditional technology ones?

I'll start with, we're seeing really incredible success still in both customer as well as employee. And so we don't break it out, but they are both growing at very strong rates. We talked in the past about the size of those businesses, and we'll tell you today that customer is at over 600, creators at over 650 now with employee at 500. So the growth rates that you've seen even over the past year have been pretty significant, and it's been across the board. And you've heard, customer experience and employee experience are more important than ever. And so we are very well positioned to take advantage of that trend and to really help our customers as they lean in to both customer and employee experience.

Yes, Phil, I think Gina said it right. We're in the experience economy right now. If you can't give people a great experience, you can't retain them, you can't drive productivity, and you can't bend the curve on how your company actually runs its operations. People have to do more with less. And the current macro is only going to feed that cycle. On the customer side, a lot has been done on the engagement layer of CRM. And there are many participants in that. But not a lot has been done to connect the mid-office and the back-office, which is where ServiceNow is particularly strong. And I gave an example today just on call centers as one example. Any company you walk into 30%, 40%, 50% turnover, I mean, come on, how do you run a company like that? So there's obviously something missing there. And I can cite one very large utility company based in Rome that wants to completely rethink that with AI operations and ServiceNow's platform to basically have 95% of the cases solved by ServiceNow and the intelligence of that platform so that people get to do high-quality work. Again, it's not just the experience that you ultimately deliver to the customer, but it's also given the people and experience that they're proud of. And you can't give the customer a 3-star Michelin experience if you don't first give it to your people. And that's what CEOs are thinking about.

Tyler Radke from Citi. I have to complement your jacket choice, Gina. It goes really well.

I'm glad you noted, Tyler. Thank you.

Yes, absolutely. So 2 questions, maybe 1 first for CJ and then another for Bill. So CJ, obviously, you talked about a lot of really interesting new products that you're releasing. Can you just talk about how the competitive displacements, who those vendors might be today and how they've changed? Obviously, in the old world, you were kind of displacing the on-prem ITSM product. So who are you displacing now as you're doing these larger platform deals? And then for Bill, just on the M&A environment, clearly, we're not seeing so much green in the market lately. So what would it take for you to kind of adjust your posture? And are there interesting opportunities that you're looking at?

Yes. So the way I think about it, just philosophically, where we are a system of record, which we are in ITSM, which we are in ITOM, we are in risk, sometimes we are in customer service, depending on the segment of the market, we are absolutely displacing our competitors and they are not the same few that you thought of, like, say, 5 years ago. That has changed. When it comes to telco, core banking and other places where we have penetrated, it's typically homegrown solution as well besides some legacy systems. And as we are going to Workplace Service Delivery and others, which are the new growth vectors, we are also still displacing legacy. So it's a combination based on whether we are a system of record, which we are in ITSM, ITOM, risk or customer service management and field service management, we are displacing some of the top competitors that are out there right now. And when we go after a line of business in telco, typically it's a homegrown solution or some legacy vendors that maybe they're on-prem when the telco wants to move to the cloud.

And just adding something to CJ's answer there, sorry, Bill, before handing over to you. Often it's an additive as well, right? It's not a replacement, it's additive. So I'm thinking back to a conversation with a well-known U.K. bank that you and I had only just recently. And they were about to go and finalize the decision on what was going to be their human capital management solution, flavor A or flavor B. And their message to us very, very clearly was, well, it doesn't really matter whether we go with A or B, and you can probably guess who A or B were, because in each case, we're going to be putting service management in front of it as the system of engagement, that beautiful employee experience layer. So it wasn't displacement. It was like this is happening in our business, and we're going to add ServiceNow to it to get the maximum value out of it.

And that's a great point, Paul, because the other important conversation that goes on very often -- because a lot of decision-makers want innovation without disruption. And with ServiceNow, you can do exactly what Paul and CJ said without necessarily disrupting the infrastructure that you, in some cases, have worked very hard to build. But it doesn't take the customer long to realize, once they have consolidated to this automation platform called ServiceNow, they have lots of different options and many of them not only include consolidating systems, but taking millions and millions and millions of cost out. So that's an important point. In terms of on the M&A situation, I really want to make this point. I'm so proud of this management team. And Alex, your kind remarks today really inspire me because on this stage, I'm just honored to run with this team. And we believe so strongly in what we're doing on the product side, on the sales and solutions and service delivery side, and obviously, you can see the handle that Gina has on the business, and that is true with all the reports to this management team. People know what they're doing. So we're in a great situation here. We have several billion in cash now. As Gina's slide pointed out clearly, we'll spin off several billion in cash again and again in the coming years. And before you know it, there'll be $10 billion sitting there. And I want to communicate something right from the heart, because this question is going to be on your minds. We are going to do it organically in terms of the projections that we gave you. But we're also very aware of what's happening in the market. And if there was something that was in the interest of the customer, because it was a breakthrough technology and we could work it with the Now Platform, as we've proven our engineering team is the best in the world, it's not like we would shy away from something that was accretive to the whole story. But you have to remember, when you're operating at the Rule of 60, the bar is really high for what you would put in front of your shareholders as an intelligent move because almost anything out there is dilutive to either the revenue or the margin. So it better be a great technical breakthrough and better in combination with what we have really take us to a new place. So I think you should walk away from that answer saying, these guys get it, they want to do the right thing, the smart thing, and it's good for our shareholders to know as that cash position builds we'll all have optionality. And we're on the same team. We're working this together. It's not like you have one idea of ServiceNow, and we have a different one. We're thinking like a shareholder thinks, as we think about the strategy and the executional opportunities of the company, very important. And we talk about this on a regular basis. I can tell you it's amazing how many people want to have conversations with us about almost anything these days. And that's also another thing you should keep in mind, because these post-IPO companies that had revenue on, but not so much on the profitability, you're not as interested in selecting them as you once were. So I think that retains our people and keeps them committed to our mission, but it also just increases the value and the perimeter of value in the ServiceNow franchise. So I mean it's all going in the right direction.

I think Kash had a question. We've got the mic here.

Kash Rangan from Goldman Sachs. Bill and team, congratulations on a fantastic Analyst Day. I think it's your first in-person Analyst Day since you joined ServiceNow. So great to see the energy, as you promised, on the earnings conference call, electrifying. I have a question for you, Bill, and one for Gina. Bill, when you look at the ERP market, you -- I think you're one of the few people in the world that understands that market inside out. You've done a great job creating a CSM workflow market out of the CRM market. You created an Employee Workflow market out of the HCM market. Now you're sitting on the next big -- I think you characterized it as a $400 billion TAM. What is that you see, based on the patent recognition from your prior operating history, that could be the next -- so when are we going to see Gina talk about that as being the next $500 million, $600 million run rate kind of thing? What is the unique opening that ServiceNow has that makes you qualified to go after that market? I'll pause to get to Gina.

Well, Kash, first of all, thank you very much. And yes, it's great be in-person with everybody. And thank you very much for making the trip and for the interest that you've taken in our company. We don't take that lightly, and we're going to work very hard for you. In terms of what I see happening, CJ talked about procurement and the procurement component of ERP. If you noticed, there once was a time where the business network in the procurement channel was kind of the big idea, where it's like, wow, the real value is not in the financial system or the procurement features and functionality, it was really in accessing the business network. If you notice, lately, those procurement clouds aren't growing and the market caps are reflecting that. What's happening? Well, the customer is basically saying I need to automate what I thought I once automated. So they can keep the financial system that they have on a list of 100 things Gina wants to do, that's ranked like 99th on her list of things I want to do is change the financial system. But...

What's wrong with that?

Yes. But to make everything super user-friendly, to automate the way we work, to automate the way we look at data, to think about the cross-functional nature of looking at how business flows, to be smarter and the procurement decisions we make. Gina talked about ESG and the smart network that we want to do business with. We want to do business with people that follow our DEI concepts, and we don't want to do business with people that don't. Doesn't make them bad people. We just don't want to buy from them. So all of this is being hyper-automated on the ServiceNow platform. And that's the world I see. So as there are different components of business processes that involve people, whether they're in a network or they're work in the enterprise or its inter-enterprise or intra-enterprise the way to look at it, it can be workflow, and it could be automated in the workflow. So there's a very big chemicals company in Germany that is very focused on the ERP system they have, and they've had it for a long time. It's a great ERP system. But all the work now has to be automated for people. And they're not interested in going and forced marches or tying up their resources in the way they used to. They want to rethink everything. And that's also true of a very large telecommunications company in the U.K. And I can go on with an airlines company in Germany and so forth. So think about it as software and people is always going to come to a modern platform now. And the smart ones -- and Kash, one -- I'll give you an example. One CEO is there with the chief digital person, and they went down the old route. And as we're going through this conversation, the CEO lost all color in his skin. He just looked like, "I'm trapped. I went for that. I didn't know about this." Then there's another meeting where they know about this and they chose to wrap that up in a good bowl, but automate above it, and they looked like they're the winning hand. And that's what's going on out there. Our biggest challenge and the thing we have to do and the reason why we have to be evangelist about this is we need to make people aware that digital transformation isn't doing what you used to do because we all know how it works, right? If you always do what you always did, you're going to get what you always got. So we got to get the word out there, and you guys can give us a hand with that.

And Gina, a question for you. Your -- the Rule of 60, the margin, right, what is driving that enormous increase in sales productivity? Maybe Paul can opine on that as well? And as you look at your long-term margins, are you assuming sales productivity to go up at all? Because if it did go up at the rate that it did, you would be in the Adobe class of operating margins of 45% plus. Not to put too much in your long-term forecast, but give us a bit of your insight.

So first of all, I think it's important to realize that the increase that you've seen since 2019 to 2021 has a lot -- so scale is in there, for sure, but that huge increase has a lot to do with COVID, right, and a lot of the COVID-related savings that were with us in 2020 and '21. That being said, if you exclude those, you see real progression, just not that big hockey stick. So you're not going to see, nor do we have planned big hockey stick improvement in sales efficiencies. But you will absolutely see continued sales efficiencies as we continue to grow and scale to $11 billion and then $16 billion. I've given you strong guidance on margins through 2024. Past 2024, I'm not giving guidance on margins. But what I would tell you is that we have a best-in-class margin structure today and a history of a focus on growth and profitability and a really strong balance. And you should expect this management team to continue thinking similarly even past 2024.

And I think just adding to that, Gina, I think from a sales perceive, I've certainly committed to you some year-on-year margin improvements and productivity improvements and how the sales team is going to perform. Some of what we're seeing as well is just as you reach critical mass in a particular market, you just start to unlock more in terms of the appropriate application of specialist resources, verticalization and so forth that naturally will yield to lead to an increase in sales productivity. And we're going to be continuing to do that in new markets. And you saw Bill and CJ's comments earlier about Japan and Australia, New Zealand and so on and so forth. I think the other thing as well is, as the surface area of the product portfolio has broadened, it allows us to land more meaningfully in terms of some of the new logos and some of the bigger deals that we're driving. And that just means that your productivity per sales head, because they have effectively a broader portfolio to go and communicate and sell and solve bigger business problems with better outcomes in our customers, that will naturally lead to an increase in productivity as well.

Kirk Materne with Evercore. Bill, you've talked to a lot of CEOs over the last, I don't know, 2 weeks, 2 months, I guess, over the -- since you've joined. Can you just talk about how they're thinking about ServiceNow today in terms of prioritization of spend? Obviously, everybody is worried about the macro, but it sounds like from what you're hearing, if things were to get worse, you're in a better position to take share from a wallet perspective. Could you just add a little color on that? And then for CJ and Paul, I was actually just curious, you guys have built out a great product portfolio. One of the challenges for a lot of companies, when you have newer products, is getting sales attention on those products because sometimes they don't move the needle much from an ARR perspective. How do you make sure that the newer products get the right amount of sales attention so that they don't get sort of abandoned before they get to critical mass?

Kirk, thank you very much for the question. I have to tell you, one of the fun meetings that I had in 2019 when I first began, we won a 100-day tour around the world to meet our biggest customers and every employee in-person. I got lucky because that was just before COVID, 100 days before COVID. And I would sit down with the CEO, and they would say, "I don't know anything about your company, but I know you do some things in IT. My IT people think it really works well." That was a standard meeting. Now the meeting is, "My people are really happy. They really like your people. And you're solving important problems namely," and they'll go at this "Now I have visibility into the people and the experience that they're having." And they like that. CEOs love that. And they don't care about a system of record, those are there. What they care about is that they get new hires, they get them super-happy, super-productive, enculturated into the firm, and they have a frictionless mobile experience with one portal, and they can articulate this now. The CEOs can articulate this. They are very good at understanding the customer relationship and the challenges and predictive things, things that get in front of problems, especially in the manufacturing sense, "Wow, I can predict. I can have a fleet of things out there, and those things can connect into a platform and my people in the operating jobs tell me that you guys are really good at that." I had one bank CEO tell me, "We're trying to modernize 5,000 applications." Instead, now they can tell me, "Well, probably we'll never get there, but we can start building some new ones that are for my high net worth clients and so forth." They are understanding the platform. Is it 100%? No. But it's at least 1/3 now, where they don't know everything, but they know enough to realize we're an enterprise platform. We're an enterprise company. We're not functionally beholden only to one department. We are now playing ball at the big league table in the enterprise. And that, to me, is all we needed. We needed that gateway to be an enterprise platform and be regarded as a really good company with really good people that their people really like. And I tell you this, if you prove me wrong, give me a call, I haven't found a customer yet that doesn't love ServiceNow, not one. You can't find one that doesn't love the platform. They really love it. So we go in with really good momentum. And we walk out of those conversations with next steps and action plans, and we're rolling. So it's really getting better by the day. In terms of the wallet share, again, this digital transformation is on and customers are not going to turn it off. So you've got to be at the relevancy table to make sure, proportionately, you're getting your fair share on the wallet. And I would say I am not at all worried about that one iota as long as we create awareness. Once they consider us when we go into the table to get the funds, we always get them because why? Why do we always get the money? Because we have such a fast ROI. That is the key to this whole thing. We're not talking years. We're not even talking multiple months. Sometimes, we're talking days and weeks and a few months when you're dealing with a really big problem that you solve. But that's what they want, fast ROI. So anything within a 0 to 12 month is in the ballpark, anything within 0 to 6 months, they sign. You prove the business case I go with you. And then we back it up with impact, right, Paul, and we're off and running. And then these 2 gentlemen on either side of Gina and I work together like hand and glove, and everybody else from engineering in the go-to-market like that, too. And the customers see it, they feel it. So that's a big thing. We're going to get a much larger share. And I think in the early days when you were just focused on one thing and doing it really well, it's great. But the deal size is small. So as Paul said, the deal sizes are expanding by the day. And we're now at big tables. I mean I want to give you one example. We sat at one table in the U.K. that had an $80 billion budget. And we're the protagonist in how to solve massive problems and rethink an incredibly complex system. We're at that table. We're hosting that meeting. Were we there 2 years ago?

Yes. We were not there 2 years ago.

Okay.

I think on your question related to product portfolio and the focus from the sales team, I'll let Paul comment on the sales teams. But 5 years ago plus when I started here, and Gina mentioned Customer Workflow, Employee Workflow, Creator Workflow, those were tiny. And the same question was asked, outside of IT, can ServiceNow execute? We have world-class go-to-market teams. That doesn't mean it's easy. It takes a lot to execute on these new products. Pablo talked about 4 specific products north of $200 million. Two of them did not exist when I started here. That just tells you that when we put focus -- and the most important piece is, is it a real problem that we are solving for our customers? And is that a priority for that customer? Once you do that, our sales teams, they go in, they find out and they make sure that customer is aware and purchases the solution. So I don't worry about it. Paul?

No. I think similar. I think 2 things. So one is, there's a steel thread that connects all of the product solutions. So it's not like there's a massive context shift required in the mind of -- in our sales team in terms of what they're talking about with the customer. Because fundamentally, they're solving the same problem, connecting back-office, middle-office, front-office and creating beautiful experiences, whether it's internal, external, solving supply chain issues and so forth. I think the other thing is CJ's team has done a beautiful job of making sure that these new products that we introduce are natural adjacencies to what we already have, right? So it's not like, again, a product -- a rep going, "Hey, what's this new acquisition? How the hell do I process this?" It's like I'm just thinking now to a sales team managing an oil major, they have the core account plan. And then it's a very easy add-on, Workplace Service Delivery, Legal Service Delivery. And so it becomes a natural evolving road map.

Michael Turits from KeyBanc. So you've mentioned telco a few times a successful customer and sector outside of IT. So what has enabled you to get in, in the telco space so well beyond IT into their core business? And what are the other adjacent sectors that might fit that same model?

I can dig it. So one of the things that we see in telco is that a strong connection between the CIO and the individual running the network. So network is the business, obviously, for telco. Any telco is serving B2B customers as well as direct-to-consumer. So B2B and D2C. But when you look at fundamentally behind the scene, it's still the core technology platform that they have, which they want to transform, modernize, move to cloud, et cetera. So what has worked for ServiceNow is seeing the power of CMDB and what we have done in IT, from mean time to resolution and many other things from an efficiency perspective and productivity standpoint while improving the employee experience, we are just extending that on the network side while delivering better customer experience for B2B customers or for direct-to-consumer as well as having the network inventory in our CMDB. So that's why the example that I shared in my opening remarks is, with this large telco, they are actually more focused on ServiceNow on the network side, which is massive, like orders of magnitude bigger than their IT footprint, and they said that's where we want to use ServiceNow to deliver better customer experience. So being a technology company as in telco and having a lot of these homegrown solutions in the past that they need to modernize, move to cloud, they feel that ServiceNow is a perfect extension with the data model, logic and integrations we have built.

[indiscernible]

So you can extend that to? I would say that you can definitely extend that sometimes in the health care. So health care, specifically on providers, they use us for IT. But now how can we do direct to patient experience better? We are in the early innings. We see that with providers -- sorry, payers, if you think about payers, they are processing lots and lots of claims, and they're like, wow, ServiceNow was my work router for IT? How can I just extend that for claims processing and do case management from a payer stand -- some of the largest payers use ServiceNow from a customer service standpoint. So I think specifically within health care and the payer segment is another adjacency that I'm excited about.

I think Brad is next.

Brad Zelnick, Deutsche Bank. Very clear message. And I think most people associate ServiceNow with very large enterprise, where you have a ton of success, so many great logos. I think you said 23 customers paying you $20 million or more, which is extremely significant. But you also, Gina, in your presentation, you talked about a target market opportunity with 50,000 businesses outside of China with over 1,000 employees. Can you perhaps talk, maybe from a product perspective and a go-to-market perspective, how much of the forward targets 2024, 2026 depend upon penetrating down market? Do you aspire to be there because at the same time, you talk about focusing on the right customers? So just how important is the mid-market for ServiceNow?

Yes. So I'll start on the product standpoint. First of all, Gina had key stack in their 1,000 employees or $100 million plus in revenue, where they can truly benefit from a platform versus a cheap point solution. In that customer base, if they say, hey, we are comparing you to this low-end solution or some team-based product, I say you are talking to the wrong company. Because our entire value add is on a single platform that will give you big efficiencies from that standpoint. And I'm really proud of Paul's U.S. commercial team that serves that segment, and they always crush it with having that platform story and always executing and delivering great numbers for ServiceNow, not only from new logo, but an ACV standpoint. So our product, I would say we still focus on platform as a leverage, and then you can use IT Service Management, where we are world class, IT Operations Management or customer service or HR, and I can go through the entire portfolio. But it is a super important segment from a future perspective, both lending new logo, but also expanding as those companies that are small today like Zoom 5 years ago versus Zoom today, it's a large company, but that was a commercial segment company.

Yes. I mean, look, I think CJ nailed it all there, right, in terms of -- it's a very important segment. And actually great that you mentioned that U.S. commercial business because they had the most successful quarter ever in Q1 this year, right? That business just continues to go from strength to strength. They...

And they've had. They continue. Every quarter, they continue to have their best quarter.

So they reaccelerated their net new ACV growth. So -- and then also, I'm thinking it was maybe one of Pablo's slides that had Zalando up as a logo, exactly the same as Zoom, that wasn't a massive company a few years ago, but growing incredibly fast in with a lot of complexity. And so there are -- firstly, I think within that 1,000-plus segment, there's a ton of value that we can provide to the vast majority of those organizations. And within that, you have the fintechs, the technology companies, the ones with incredibly high growth ambition, where we are really well set up to help them on that growth journey. Again, like CJ said, whether that's with customer success management, employee experience, onboarding tons of new employees. So yes, it's a fundamental part of the -- certainly my strategy going forward.

But I think in answering the question also, correct me if you guys differ on that, if we focus on the top 2,000 and did a fantastic job with them, we would far exceed our $16 billion plus. So when you think about Gina's 50,000, the other 48,000 is all upside for you.

I think Karl had a question next.

Yes, great. Karl Keirstead, UBS. I'd love to address the macro, the demand environment. I think all of you on stage have been through downturns before, certainly the COVID crisis, but most of you probably 2008, 2009. So you've learned a little bit over your careers about what a downturn playbook should look like. So I guess my question to you is, assuming we're entering a downturn now where deals are going to get tougher for ServiceNow to close, I'd like to understand what your downturn playbook looks like and if you're starting to exercise it. So Bill and Paul, are you starting to get the sales teams to change the message a little bit to reflect the new reality? Gina, are you scrutinizing new hires a little bit more and just gently starting to tap the brakes? I don't think it would be a big negative if you acknowledge that the environment is tough. I think everyone in this room acknowledges that it is. I think what we'd love to hear is confidence that ServiceNow can navigate the reality better than your peers. So I'd love to understand what your playbook is.

I'll start it. I mean it's a great question, first of all. I remember September of 2008 like it was yesterday, because I was running a business where I saw EUR 1 billion in pipeline disappear overnight. So it was a very serious thunderbolt. And the recovery was okay, but it really took till the end of 2009 before things normalized. But in that time frame, if you remember, the big idea was the cloud, because the centralized decision-making for heavy on-premise solutions dried up. And the CEO then empowered the management team to do point solutions that were cloud-based with a fast return on invested capital. And that forced the big players to not only accelerate to the cloud but also go on a buying spree to get into the cloud. Fast forward now to ServiceNow's environment, we are born in the cloud. Besides the incredible user experience, which differentiates us greatly, the rapid time to value or that ROI cycle is our core competency. So yes, I agree that decisions will be more carefully scrutinized. And we had one that was in the auto manufacturing industry as an example that we expected to close in March, and we got the feedback that "It's the winning solution. We totally want to go with you. We instituted a new procedure within the managing Board, where the CFO is going to stack rank the things that are have-to-haves to must-dos." Now we were at the top of that list incidentally, and that business has since come in. So what I think you could potentially see is deals getting more heavily scrutinized and higher levels of authority actually getting involved in the decision-making process, which is something we understand very well. We also understand that we needed to operate at the C-suite level, so in front of things as opposed to being surprised by them. We also put impact into our business model. An impact really is taking the presale, sale and post-sale process in alignment with the financial goals of the company and what they're trying to achieve, which is mission-critical. Because you're basically saying at the point of sale, "I got you. I got you fast. And now we have a system where we're going to record this together and chase this together, all in real time." So while there may be conditions that will get a little tougher, I feel that compared to anybody, this franchise is better prepared to deal with them. Now on the hiring side, just for the record, what I really like about our situation is we're getting people, people want to be here. But certainly, as we watch things, we watch things in real time. We're preferring engineering and people that actually do the coding. And in sales, we prefer people that actually have a quota. And we're trying to keep the company very agile in the middle of the management hierarchy and in jobs that support people that even make or sell software. And that's just the kind of way we operate because if you look at engineering as a percentage of our headcount and compare it to any of the participants that compete against us, you'll see we put more into the R&D as a percent of revenue. And you'll see that the R&D machine continues. On the sales side, you'll see we're leaner than the others because we prefer people to carry a quota. I just give you a rough outline. And I also want you to know, on my iPhone, I'll be happy to show it to you, I drive them crazy with this. We have something called the CEO dashboard. Where, thanks to the great engineers and the AI professionals in our company, I see everything in real time, and so do they. And we can, on a moment-by-moment basis, track the flow of the business and the pipeline itself and the way the pipeline is behaving against prior year actuals and other things in real time. So if we have to adjust, we're prepared to do that. But I can also tell you the pipeline right now and the flow looks exactly as we told you it would, in all of our guidance material. So I'm real confident, and it does not -- the environment does not feel like 2008, by the way. This doesn't feel like that. It feels like people are uncertain, just like you've been uncertain in the capital markets, where is inflation going to land, how does that correlate with the interest rate. And people want to get that firmed up. And then the supply chain situation on a global basis has been very difficult, particularly in Europe with the Ukraine war situation. So other than that, the behavior on digital transformation and the investment cycles that we're having with our customers, all things are green.

And the only thing that I would add to that is similar to what Bill says, the macros are not happening in isolation. There's so much else going on, the war for talent, the new hybrid distributed workforce that customers that we're talking to every single day know that if they pause on their digital transformation efforts, they're not going to come out of this as well as they could. And so very different than what we've seen in the past. And the other thing I would just add is, look at what we did as a management team in 2020 when COVID hit. We were very, very prescriptive about how we manage that situation, very focused. We grew our headcount even then by 26%, very focused on R&D engineering and go-to-market. So that when things opened up again, we were very well positioned. And look what happened as a result. So you'll see us do the same playbook. We'll be very focused. We will able -- the great thing about the business model is, as Bill said, we can react very, very quickly to changing environments.

Yes. And Gina, one point I would make, though, to underscore the great question. Commodity things and commodity tech and postponable decisions that would have been normally made in the normal course of things, they're going to get moved down on the list.

Raimo had a question.

Raimo Lenschow from Barclays. Gina, you kind of talked a little bit about the challenge you're going to have -- or not a challenger -- the treatment by adding like $1.3 billion in new business. And as you grow, you're going to keep adding more. And in that respect, CJ, a question for you there. Can you talk a little bit about the adjacencies in terms of going from the 4 pillars that you talked about towards more like adjacent areas like observability, process mining and some things like that in terms of the opportunity and how that fits into the platform and how you make sure that kind of is still a consistent message?

Sure. So I think, as I shared, 4 workflows, start with technology employer, Employee, Customer and Creator. So let's just take an example of technology because you asked about observability. Technology portfolio is pretty wide. So I'm going to list it on purpose. They're ITSM, ITOM, IT asset management, you have strategic portfolio management. You have security, 2 products within security. You have digital risk and enterprise risk and observability. This is all within the CIO buying center and sometimes CTO, depending on the industry we deal with. When you look at what some of the things that Gina shared, there are very few customers who use that entire portfolio. There are some what use that entire portfolio just within technology. So that's where we see that as long as we have the best products, we are going to win market share, and the CIO or the CTO or a Chief Digital Officer will expand just within technology workflow, and that's where the go-to-market team is focused on that specific segment in there. So there are multiple adjacencies within the workflow. Similarly for employee, you have HR, legal workplace, customer service will service by line of business. And then you have in creator -- in Creator Workflow, we have something called Automation Engine, which combines RPA and other technologies. A lot of our competitors have brought something for that. We've built it in the platform itself. Process mining, our process mining is world-class, built in the platform, whether you have ITSM, data, CSM, some of the things that Amy showed, that's our in-build process mining that we did in NowX. So we look at specifically horizontal platform technologies where we are process mining or RPA, and we monetize via ITSM Standard, ITSM Pro, ITSM Enterprise. That's why come back to the same message, 4 workflows, 20 large product categories, good, better, best. So you have 4x20x3 just in the existing install rate. Because with the adjacencies in mind that Paul talked about not going completely to the left wheel to say we are going to solve your manufacturing logistics problem, no, we are not going to solve that.

I think Brad has a question.

Great. Brad Sills from BofA Securities. One of the things that stood out for me early on with the Analyst Day, Bill, was your comment that you have 80% of the Fortune 500, and there's a path to getting to 97% in fairly short order. I guess what's held back some of these larger Fortune 500 organizations? And what gives you that confidence that here and now with the stack that you have, the progress you've made with the platform, you'll be able to convert the remaining 500?

Yes. Thank you, Brad. And it's awareness for one thing. It's important that you don't just enter in one dimension of a company. So the evolution of ServiceNow, you've now seen it play out where we became an enterprise platform as opposed to a company that is selling a very good IT solution, but into one buying center. And in that case, you're stuck with one relationship plan. And if it doesn't work out, well, 8 out of 10 times that worked out, but the other 2 didn't. Now we can come in, in so many different ways. We can come in with creator. We can solve your problem with Customer Service Management. We can lean in on the employee experience and the employee experience is really a natural because it was so good at it. And it's just catching fire everywhere. And the talent war is so pervasive. And inflation and supply chain challenges and the lack of digital skills in the world to fuel digitally led companies is making CEO sit back and say, "I've got to get this one right." And the Board expects the CEO to get that one right. And then obviously, when you think about IT and the service management, operations management, asset management, the plethora of things we can do, including observability, where we can even come in direct to consumer with the [ Air ] product, do some things on observability that we weren't even doing a year ago, there's just so many dimensions to it. And the biggest one for me is companies have to be brand-led. You've got to have a great brand to have a great company. The product has been there. The culture and the people have been there. We're expanding the ecosystem. The ecosystem, especially as CJ runs the industry play with Paul, more and more of that is going to be sub-market segments built with industry participants that have large consulting forces in their different geographies, they're going to be pulling ServiceNow in. So it's not just ServiceNow pushing, which is the world we came from. It's a good world. But if you want to be the defining enterprise software company in the 21st century, you've got to do what we're doing now.

I think something to add to that, Bill, as well is we haven't been in an opportunity-constrained environment, right? And where we focus, we win. And so I don't think I've ever encountered a situation in my 2 years here, where when we haven't -- when we really truly focused on understanding our company's business problems, we've mobilized the team. We've gone and executed. They ultimately end up becoming a customer of ServiceNow. And so honestly, a lot of what I see of that 20% of the Fortune 500 that isn't yet a significant customer of ServiceNow, I genuinely might have a sales team that is doing really well on this customer over here, and they haven't necessarily focused on one of those 20% over there. But I'm very focused on that now. And so the focus is going to be there. And when we focus, we would.

And by the way, Paul is doing a great job. He did a great job in Europe. He is doing a great job, taking us to that solution, services and business impact ServiceNow. And I'm like so happy with the way things are going, obviously at this table, but also at the table in the field and the various functions of the company, because everyone wants those 20%, not just us. So the focus is on execution. It's all about execution now. The product is there, the team is there, the will is there. Let's go get it. And then I think the brand is really coming through. How do you like the way the brand is coming through, Gina, you wore the brand fantastically today. I mean, come one, you were there 2 years ago, right? You see what's happening here.

All right. I think we have time for one last question. I think Samad has the mic.

Samad Samana from Jefferies. Sorry to be the last person between you and meeting customers or happy hour. But maybe, Gina, just a quick one for you. Was there any change in the guidance methodology for the long-term targets when you set in this year versus maybe prior years? Or any factors you changed just as I think about Karl's question around the playbook?

No, there's been no change in our methodology at all. It literally is outperformance, just being there and more momentum than we even thought even just a year ago. And so no change. We feel great about it. There's no M&A considered, any big M&A in those numbers. It's just continued outperformance from the incredible team that we have across the globe.

Very helpful. And then, Bill, maybe just a follow-up for you. You guys have done amazing with large customers. I'm curious, when you think about the largest customer that ServiceNow has, what are they doing besides just product adoption that's philosophically different than maybe the customers that are earlier in their journey with you? What are they doing or thinking about that your other customers of similar size, whether it's revenue, that they could be that big with you as well?

I think they're thinking about platforms, too. So what you're seeing now, and I led into this with one of the slides where I was very polite about the market participants and the cloud platforms that I felt are the future. And I actually called them out today. And those decision-makers now, instead of letting every department kind of do its own thing, they're starting to standardize on platforms that they believe have the sustenance, the innovation, the staying power, where they can build a partnership, they can absolutely go through a product road map and a future design road map to build out their dreams. And there are going to be a handful of them. And I already told you the hyperscalers. I told you where we fit in that and maybe one other one. And then there's going to be the betweeners, and then there's going to be the legacy players. They're going to want the legacy players to probably clean it up a little bit. The betweeners will do what they're doing. And then the innovators on top are going to be the ones that they're going to bet on to change the world and lead their digital transformation journey. And I really want you to know that example I gave you, the one CEO with the Chief Digital Officer and all the skin just went flush, went gray, when he realized that he was going down the old path, and he had already committed to it. It's like so many hundreds of millions tied up in it, "Mike, this is the path." So we had to leave that meeting, and he literally looked at his chief digital person like "You let me down, man" because if this guy is even half right, we're in trouble. And they basically came back and said, "how -- what one thing can we do? Because I'm so budget-constrained, but I believe in the story." So it's going to be platforms and they're going to lock and load on these standards, and that's what's going to happen across the global economy. And it's going to happen faster than people think. I think it's going to -- we talked about the tailwinds, and we also talked about the cross-winds. If you've ever been in a good storm and those winds are blowing, lawn chairs are flying, umbrellas are heading into the air, it's like that's what's happening right now. So it's not like they're going to decelerate, they're actually going to accelerate, but they're going to do it with fewer companies.

All righty. That concludes our day. Thank you all for joining us, both here and abroad. Those of you in-person, we have drinks at [ terrace ]. So if you don't mind letting these folks get over there, we can all have our follow-up conversations over there.

Thank you very, very much. It was great today. Thank you.

Thank you. Thanks a lot.