Q4 2019 Earnings Call
For 2019 service now earnings conference call at this time, all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask the question during the session, we'll need to press star one on your telephone.
You require any further assistance. Please press star zero. Thank you I would now like to hand, the conference over to your speaker today weeks, the banks Vice President of Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us for service now sports corridor in full year 2019 earnings conference call.
On the call with me today, or Bill Mcdermott, our president and Chief Executive Officer.
That's it you know our chief financial Officer during today's call. We will review, our fourth quarter and full year, 2019 result, and discuss our financial guidance for the first quarter of 2020 and guidance for the full year 2020.
We'd like to point out that the company reported non-GAAP result, in addition to and not as a substitute for or superior to financial measures calculated in accordance with God.
All financial figures, we will discuss today, our non-GAAP , except for revenue net income and remaining reporting obligations to see the reconciliations between these non-GAAP and GAAP results. Please refer to our press release filed earlier today, our investor presentation and for prior quarters previously filed press releases.
All of which are posted investors Dot service now dotcom.
A replay of today's call will also be posted on the website.
We may make forward looking statements on this conference call, which are subject to risks uncertainties and assumption.
Please refer to the press release and risk factors in our SEC filings, including our most recent Form 10-Q , and our Form 10-K that will be filed for the year ended December 31st 2018 for information on risks and uncertainties that may cause actual results to differ materially from those set forth in such forward looking statement.
Before I pass it onto Bill. Please note our financial Analyst day will be held on Monday May force in Orlando in conjunction with our annual users conference knowledge 2020.
In person attendance will be limited so interested please send an email to <unk> IR at service now dot com or those who cannot join a person we will hold the webcast to be in bench accessible on our IR website.
Service that was also pleased to announce that we will be participating in the upcoming Goldman Sachs Technology Internet Internet Conference and Morgan Stanley TMT conference with that I would like now to turn the call over to Bill. Thank you very much lesa and good afternoon, everyone. Welcome to our Q4 earnings call as you've already seen from our earnings release.
We finished 2019 very strong beating the high end of our guidance for Q4.
Let me to share a few observations, we had 76 deals greater than $1 million in the core.
Our performance underscores the strength of our core I see workflows, we had 16 I TSM deals topping a million dollars. That's our biggest number ever and we signed our largest I Tam deal ever with the U.S. Department of Veterans Affairs.
She is where digital transformation begins and we are a powerful strategic partner for C. I always all over the world see I always a struggling with fragmented legacy technology instead of delivering the experience is their employees and customers really need.
All right to work flows provide a single platform from planning to operations to service management.
Modernizing I T, enabling high performing services with modern experiences that is enabling us to not only enhance the core of how I see works, but also extend the perimeter of ice he itself. We're doing this across the entire enterprise and that's driving.
Momentum in our vast portfolio of products, including our fast growing HR and see a sound products.
Customers are realizing the strategic value of combining service now I see workflows with everything from HR C. S. M security GRC financial close and Dev ops to deliver greater value across the entire enterprise.
And best of all everything is powered by the now platform one platform one day to model one architecture.
There's a very deep sense of pride in engineering here and service now and that distinguishes us any enterprise software industry and it shows in the results we landed nine HR deals greater than a million our largest number yet within a quarter.
And then see assume we now have over 1000 customers using our technology to deliver better experiences for their customers.
In most companies customer service systems are set up only to answer questions not to solve problems. This is why customer service agents rarely get into the root cause of the problem that really frustrates customers.
Service now CFM product companies can drive end to end resolution instead of solving problems and an AD hoc way. They can now focus on delivering great experiences.
And great experiences drive powerful employee engagement.
Here's customer loyalty and significant productivity gains.
This is what every CEO and every company we talk to this is what they want.
Global content companies and the telecommunications media in technology industry, you see they needed one solution with one platform to serve their customers.
Using our work flow and integration capabilities. They are now consolidating or customer related prophecies into streamlined workflows.
In Latin America, we expanded our relationship with one of the Regents largest banks.
The seeing tremendous returns on their initial service now investment bank is implementing the now platform and out I.T. workload products across its entire employee base, replacing more than 10 silo legacy systems.
Earlier, I mentioned, our largest ice ham deal ever which was part of a bigger I.T. portfolio deal with the United States Department of Veterans Affairs.
Service now is the core of the V.A., It's enterprise service desk, which supports more than half a million fulltime employees and contractors with our I emptied portfolio and the cross functional capabilities of the now platform. The V.A. is streamlining process.
Seeds, saving time, and money, improving productivity and better managing technology assets and of course delivering better experiences.
Bristol Myers squid purchased three I see products, plus H.R. to enable a world class Onboarding experience for all employees.
In a competitive sales process, Bristol Myers square of recognized that our cross functional enterprise capabilities are exactly what was needed to accelerate productivity.
Juice, new hire turnover and when the war for talent.
In a strategic see sweet when.
Broach the world's largest biotech company has signed an agreement with service now to support it's digital transformation strategy.
Service now will be the global solution for service project and portfolio management across the entire Roach group.
This strategic partnership will help rose transform its internal business processes end to end simplifying and improving the user experience. This will enable rose scientists and researchers to work in a more agile way. So they can readable, they're focused on their business, which is creating.
Innovative healthcare solutions.
These customer examples demonstrate the enterprise value that service now delivers our customers know that's behind every great experience is a great <unk>.
The power of the now platform combined with the quality of R.I.T. employee and customer work flow products are expanding our addressable market traumatically.
Digital transformation is the biggest opportunity of our time and service now is exceptionally well positioned to seize this opportunity to compete and two when.
We are a game changer company for our customers and shareholders the opportunity to scale service now is right in front of us and we have our sights set on achieving 10 billion in revenue and beyond to continue driving how growth we're focused on five clear.
Priorities the 2020 they include.
One.
Being a trusted innovator for the C. sweep.
This starts with our brand, making every c. Sweet leader aware service now and what we can do for them. You may have noticed we launched our new brand campaign across all channels. This week, we are receiving rave reviews I personally love our brand, it's so human personal and inviting.
We'll keep it going.
Number two.
Engaging customers with the World class go to market machine.
Company already has a strong go to market organization and we are now taking it to the next level I'm a three we will force multiply service now with a strong industry and partner Eco system.
The eco system is going to become more strategic and more powerful our partners telling me. They see service now as the cross platform integration engine of the modern enterprise.
Going after industry verticals and building strong partner relationships will force multiply service now's coverage by 10, X.S.L. happen across Geos industries and across buying centers as you saw Monday.
We announced our new industry solutions strategy, and our expanded partnerships with the Lloyd in banking and Accenture and telecommunications.
Before we're creating product experiences that people at work will love.
And now platform is service now secret sauce.
We are a platform company in fact, we are the platform of platforms and we are committed to excellence.
Delivering an innovative.
<unk> secure highly available platform and products that digitize workflows and deliver crate experiences.
Over five teamwork as you all know teamwork does make the dreamwork and it happens with trust collaboration and communication at mass scale.
Culture is our ultimate competitive advantage, all 10371 and growing service now colleagues are committed to our purpose of making the world the work work better for people.
Service now is hungry and humble and we have an unwavering focus on serving our customers.
So honored to have been added to the S. and P. 500 and to be recognized this month by fortune as one of the world's most admired companies.
The strength of our team and our culture is the culmination of the Great leadership service now has benefited from for the past 15 years.
Starting without founder Fred Bloody and incredible man and product visionary.
To Frank Slootman.
Who successfully scale Fred's vision.
And a big heartfelt. Thank you to migrate personal friend, John Donahoe, who set a rock solid foundation for the future.
I'm truly fired up to leave the next phase the service Now's journey as we scale to 10 billion in revenue and beyond we will accomplish this by delivering exceptional business value to our customers will do so across every geography.
<unk> industry and of course every buying center.
We will continue to create were flows that deliver great employee and customer experiences.
It is our dream to become defining enterprise software company of the 21st century.
This is the limitless opportunity I saw in service now it is why I chose to come here and in my first three months a C.E.O. my belief is only become deeper my commitment stronger and my passion grader.
Before closing I want to thank our outstanding Global Finance organization.
Supporting a C.E.O. and see if old transition his team demonstrated extraordinary commitment.
Which leads to me to my final note.
We now have a world class CFO and Gina asking Gina to join our team was absolutely. The best first decision I could have made as CEO I'm thrilled that she is here I'm excited about this team in this company and I cannot wait to deliver on our dreams for all of you. Thank you.
And now all turn the call over to Gina Gina over to you.
Thank you fail to this day kind way.
She told me dive into our financial results and guidance and I'd like to express my personal excitement and selling bell and the entire service now team I'm incredibly impressed by the product portfolio a focus on our customers success extraordinary talent and the hungry and humble culture that child's us to deliver.
World class outcomes for our customers and strong results for our shareholders.
I could not be more impressed by what the company has accomplished over the past it's 10 years.
Coming a strategic partner to the world's largest enterprise it as they digitally transform their businesses.
Even though we've already come so far fired out by the enormous opportunities still in front of that.
I'm confident that we have the products that talent and the passion to reach a 10 billion revenue aspiration and more importantly to make the world of work work better for people.
I'm completely aligned with bell on a five priorities, which I believe will enable us to reach a 10 billion revenues go and together we are committed to driving <unk>.
Along with disciplined investment as me scale to get there.
Now, let's change our financial results.
We delivered in other outstanding keys for an full year and we had a lot of momentum as the begin the new year.
Q for subscription routing is the 899 million representing 35% you're on the aircraft.
<unk> for subscription billing, where 1.298 billion, representing 36% via grass.
And our first quarter ever exceeding 1 billion in subscription <unk>.
And they don't mentioned a strong top line performance, let's check in my 76, new transactions greater than $1 million.
Largest quarterly number ever representing 49 pressed that you are the aircraft.
We now have more than 6200 customers.
Which 892 of them are doing more than $1 million a business with us annually, representing 32% you know every year class.
And our new rate for the core to continue to be strong at 97%.
Remaining performance obligations are P.L. ended the here at approximately 6.6 billion, representing 34% you every year crowd.
Hi, RPL with approximately 3.3 billion representing 34% your vehicle.
These outstanding was else continue to demonstrate a strong product portfolio.
Our focus on building teeth customer relationships and our commitment to enabling customers digital transformations.
Moving on to profitability.
Q for operating margin was 22% and three cast a margin was 36%.
The full year 2019, operating margin was 21% and free castle margin was 28%.
Additionally, I would like to know that accused poured gas net income favorably impacted by 574 million dollar one time income tax benefit from the release of the evaluation allowance and I'd just for attacks assets F. identity.
We have indicated in our recent quarterly financial reports that we believe that suit our international expansion and improved operating margins, we could potentially could claim that that evaluation allowance on these departure tax assets with no longer be necessary.
[noise], we reached that conclusion in Q4 .
As a result, we are recording gaffe net income 599 million and 627 million the queue for 2019 and full year 2019, respectively.
This is a one time benefit and will impact the comparison in future quarters.
Importantly, excluding the impact of this one time benefit 2019 without first full year gap profitability.
Now, let's turn to guidance.
The key one's 2020, we expect subscription wrapping his between 975 million and 980 million representing 32% your vehicle.
We expect subscription dealings between 1.0 for over a million and one point O., four 5 billion, representing 28% to 29% you're a vehicle.
We expect a 22% operating margin and 195 million diluted waded outstanding shares the corridor.
For the full year 2020, we expect subscription revenue is between 4.22 billion and 4.24 billion, representing 30% you every year class.
We expect subscription billings between 4.85 billion, a 4.8 to 5 billion, representing 27% year over year class.
We expect 2020 subscription gross margin of 86%.
Operating margin of 22%.
Free castle margin at 29% and 196 million diluted weighted average chairs.
You know very pleased with al Q4, and full year 29 team itself and we are excited to continue on momentum into 2020.
We're also extremely proud their athletes 2020 subscription revenue guidance of 4.2 billion exceeds the 4 billion total revenue target that was set back in 2015.
I would like to conclude by expressing my sincere appreciation the my predecessor, Mike Scott Pelley.
Mikes time and service now he built outstanding relationships with our employees.
Our customers and shareholders and I'm, inheriting a well managed and super talented organization.
I look forward to meeting all of you at the upcoming conferences and our financial analysts day in May.
Operate What'd you. Please open alliance the questions.
At this time, if you'd like to ask a question. Please press star at them and number one on your telephone keypad. Your first question comes from cash Man you would think of America. Please go ahead you plan is open.
Alright, Thank you very much congratulations team and build that messaging and the positioning of service now is exceedingly brilliantly clear so congratulation some that by Christopher as as a listen to prepare comments.
It appears that service. So it's so firmly pivoting towards being more of an applications provider away from being just purely eye to your talk more H.R.C.S.M. et cetera.
How do you go about organizing the go to marketing strategy, but given that you round or the biggest applications companies in the word what are some of the experiences from that.
Role that you can bring to bear a service snow barks at a different chapter on its way to being a temporary don't remember company congratulations.
Oh, Thank you very much cash I really appreciate you kind remarks need the most important thing I wanted to convey is on business continuity.
Stability.
And scale are the things that I'm most in front of right now we have an excellent team.
The go to market has been well thought through.
And the team itself is highly stable and we intend to keep it that way.
There are no plans to make coverage changes what we have is what we want.
What we will do is we will take a boulder position on the role that this incredible system of engagement. This system of action cold work flow can take in the modern.
Workplace.
If you think about the problems that customers are having today they have many systems of record.
And unfortunately, when they try to think about how people work and how people want to work they don't have the work flow.
That enables a team to really set on a course of executing a simple business process.
With service now that all changes and you can see the impact that we've had on the employee with employee service delivery you can see the impact that we've had on customer service management.
And many other big companies in the World today are figuring this out pretty quickly. So we will go to market as we are today in the various geography is we can expand our footprint. We clearly are going to focus on industries, such as banking and tell call a reference but you partner. Examples you know, we're doing very well unread.
Related you can see that and the public sector in the United States you can see that in Australia, where we're bringing in large deals and I'm really encouraged right now with what we're doing and buying centers because as you know cash to expand as an end to end solution provider in the enterprise the backbone is I.T.
Which is unique to service now because every company wants to be a tech company actually every every coffee would ideally like to be a software company, but it all starts with that check back home.
And we can carry that we've proven at the H.R., we've proven to to customer service management, we can improve it with the C.O., we can prove it with the risk and compliance folks and of course, we can also now prove it was Ceos and I'm in particular excited about that because the rolodex that I.
Have has been calling on me asking me for new and innovative ways to help them either take cost out with better work flow or bring in more revenue and growth because they can manage their business more effectively so good news for a shareholder no territory changes no disruption it's only on.
<unk> value add for growth.
Exciting congratulations at best wishes.
Thank you so much cash.
You know next question comes from Michael turrets with Raymond James. Please go Heck Your line is open.
Hey.
Graduations welcomed.
<unk>, So I wonder if you could talk about some of the director though.
Might be thinking in terms of the platform. You said. This is the strength is is is the single platform.
<unk>.
Thoughts about how you might expand over time in areas like data monitoring.
Various how're you conceptualize that would would be helpful relative.
Oh sure. Thank you so much Michael well first of all you know the platform is very unique in the sense that as you mentioned this one architecture. One data model. This is a really a pristine platform that some fully integrated on our own code base in fact, even.
When emanating moves took place they were replatformed onto the now platform. So we have a really really very very clean company here and as an example, even in the talk in emanating moves that we made it was all about strengthening and making the platform.
Even more robust for our customers for example in natural language capabilities or N.A.I. operations business continuity, it's all strengthening the argument of that strong platform.
We have to make that an easy platform to consume for business analysts and technologist alike. So that's one aspect of the growth strategy and the other is to build applications on top of that platform. You know I was working with one C.E.O. was very interested in having a rewards program built on the platform.
But he wanted to do it in a couple of days or a week as opposed to years and he didn't want to team a consultants to have to do it you wanted his own business analyst people to do it and of course, we were able to do that form and a few days on the now platform. So think of it as expandable on many dimensions.
If you think about technology people you think about analysts if you think about business people, they're all gonna Bill.
Magic word flows on this magic platform to create immense productivity and growth in their digital transformation strategy. The other thing is kind of interesting as you know cash mention the kind of system a record players that are in the marketplace and one of the very large systems integrated.
Told me and I did mention that my remarks that we view this as this unbelievable cross platform integration engine for the modern enterprise because there's so many disconnected work clothes and prophecies that this can be the glue that puts it all together so all those dimed.
<unk> spell growth, we've actually even simplify that we've made the consumption of it easier pricing of it easier and we just left or all companies sales kick off meeting in Las Vegas, and people are more fired up than ever before about the growth prospects on the platform.
Tibial thank you.
Thank you very much my.
Your next question comes from Jennifer, though with U.B.S.P.'s go ahead through line is open.
Hi, Thanks for taking my question I'm sitting in for 10, <unk> I wanted to dig a little more <unk> industry solution announcement that you made a couple of days ago. I was curious if there would be more product. They let for the the word to use cases.
And also outside apart not a foot sort sort of and then I'll go to market motion is being put in place.
Yeah. So you know one thing is kind of interesting just on the partners in general.
We have had numerous meetings with C.E.O.'s and chairman.
Of the largest partner firms in the world in fact, they've been very kind, they've actually you can come to Santa Clara.
And most of them come in with very robust ideas on what's possible and none of them have left without at least adding a billion to the numerators. What they think is absolutely achievable would service now.
So some of these investments are in industries.
For example think about work clothes that are industry based on that are focused on specific domains of the industry or the subvertical and then think about how that could be personalized to the various persona is and the operation again, the now platform comes.
Signing through here because of its capabilities and B.I.T. backbone and the nature of connecting work clothes across various buying centers and they're very interested in the industry. The sub industry vertical and the buying center approach and we're trying to do very good job of giving.
Partners the ability to innovate co innovate with us in the customer and to grow and we're doing this across all the geography uses a world or we might have a certain part in a certain geography and a certain industry and we could be very specific but again, it's all about grow it's all about opportunity.
It's all about honesty open collaboration and and real trust with departments and the good news is they all know me. So they know we don't break promises around here, which is very helpful.
And if I could add a follow up it on to study reset acquisition of loom systems.
Does this acquisition signal you intend to move into complimentary segments like a it'd be <unk> and some other infrastructure segment.
Yeah, I mean first first of all you know regarding regarding Loon right. So this is really extending our core. So if you think I.T. service management 90 operations management. This is essentially on giving service now customers the ability.
To prevent and resolve icy issues before they actually become problems right. So I'm tea departments today want to proactively pinpoint unresolved operational issues. They don't want problems they want predictive analytics.
The other thing is if you look at Gardner and I do a value very much what they say you know they they thought it was a very very giant step forward and really making R.I.T.S.M. platform you know that.
That AI operations engine of the enterprise and we received a lot of positive commentary.
But we also made moves as you know with natural language capabilities in business continuity and we're doing this all with the intends to strengthening the platform, but our core is our core.
Gave you an outline of our strategy and for now we'll we'll leave it at that.
Great. Thank you.
Thank you.
Next question comes from <unk>. Please go ahead you line is open.
Okay. Thank you very much horsepower <unk> bolt on your first quarter involved one and a way to hit it on to the park I think his assets personal hey, nice to meet you I'm first still you mentioned that you were growing quite sizable in H.R.M.C. I found on what she's really nice to hear what I was wondering.
You can give us some color around calibrate icon is getting and even in a large you can see it growing as you start to integrate lean been having such technologies given how big the Tam is and then I have a follow up to g. that when you're finished.
Yeah. So I'm I think it's very very good question actually so if you look at if you look at this company first of all let's just baseline the company. If you take a look at some of the data I saw from Morgan Stanley as an example, if you adjust to automate.
Kind as a manual or pay for based processes in the enterprise you'd have the Tam in the United States alone have more than 225 billion.
If you think about that on an international level, you can climb up to 400 billion pretty quickly. So all these businesses can be really really big businesses and we don't think of any business right now in terms that are less than a billion.
So as you think about our mentality and just running the company. If we look at something it's got a billion dollars tag on it and I, Tom what I'm impressed with this in particular is it's growing so fast so in each year that you think of US you know it'll much more than doubled.
So anything that you know much more than the holes within a year gets a super excited we're also seeing very large deals in the court or we close five that were bigger than a million.
Essentially within the I've, Tom category 15 at the top 20 deals that we did have I'm Tom in the building materials. So this <unk>. This one could be a biggie.
Alright. Thank you that's very helpful. Good to hear on T. The nice to meet you in welcome. We were really curious about your new Verticalization strategy and I know touch on is a bit on the call, but we've really season must be a critical to thinking points <unk> very large industry busy.
Since we're set offenders in the pilot.
I was wondering how long we should expect the ramp have your new vertical practices to take and maybe we should even expect somebody to small or concurrent rising excellent x. amount of along with this means things even congrats.
Sure. Thank you, so much and and I'm looking forward to meet meeting you it as well parts that so first of all to reiterate looked at what bills that industries are critical to our growth in the vertical strategy is something that way to stay focused on we do not expect however to be adding huge overlay.
Height of sales folks to out the organization. So we do not expect that it'd be a huge increase and sales and marketing as the per cent us out as a set of wrapping it we do expect that we will invest here.
Smartly and disciplined and we do expect that with the material and with all work flow product that this will ramp.
But the my timing perspective, we we we have and model bat out, but it's something that we have a thought focused on the are investing but we do not expect to see significantly higher investment as a percentage of revenues to total sales and marketing.
Alright, Thank you very much.
Thank you Sarah.
Next question time from Brad Stelmakh with Credit Suisse. Please go ahead do line is okay.
Great. Thank you so much and I Echo my congratulations on a stellar queue for.
<unk> and Bill if I can start out with a question for you now that you've had some time in the cockpit flying the plane and we've seen you're standing in front of giant dream Big signs in the Wall Street Journal full page had what are the biggest positive and negative surprises so far relative to what you intend to accomplish and specifically.
Company culture with teamwork senior your fifth priority this year and I imagine every year ahead, it's something that we all know is very enduring for any company. What are your observations on service Now's culture, and perhaps how can you improve upon it to take things for the next level.
But it's a really great question right. Thank you very much a few very kind words first I'd like to acknowledge you know Fred Lovey, because you know our founder did in an amazing job of not only building a platform with the customers interest in mind.
And a true empathy for the customer, but that became a pervasive culture. In this company everybody shows an enormous empathy for the customer regardless of the department that they serve within the company. So that is really positive.
And I mention on my two predecessors in my remarks, I give Frank Slootman, a lot of credit for taking Fred's invention and scaling that at an important time in the company's history.
And I give migrated friend, John Donahoe amazing accolades for the job, but he did and scaling it yet again host Frank to get it to where it is at this point and my job is to take it now and scale it should be the defining enterprise software.
Company, the 21st century, and I intend to do just that as we go for 10 billion in way beyond So what did I pick up along the way number one culture culture culture.
This culture is amazing it's exciting.
It's humble.
And it always wants to keep getting better nobody here is looking for a Pat on the back for too long they want to know what they could do to get better I love that the second thing is the customers Love US I mean, it's amazing not only in the loyalty rates that you see which is the best in the business, but literally.
I went to several cities met so many customers I'm now going on a world tour will hit three continents and the next 11 days and I'll see many many more customers. In addition, I will have at that point then touched every single person personally in the company, which is cool because that's more than 10300.
People and what you find is the customers.
This company and the products work and we do what we said we do they just want us to keep doing more and in fact, one of the things that I learned.
And that I think I can help bring to the equation cause you asked me for observations where I could also.
<unk> find something that wasn't perfect or add some value. It's really in this maneuver to the C. sweet.
Because if you meet the C.E.O.s I'm very used to meeting them. They would say I have at a call from service now, but that's after I just got done meeting with the C.I.O. with a C.O. well and they told me how much. They love service now so I think we can really brought in the parameter with the buying centers I think the expansion G. agree.
Graphically is still there for US you know this big opportunity in the Middle East, we have plenty of opportunities to expand in Europe Latin America still young you know Japan's a big market for us and we're just going into Korea, and a big way. So all of that is there and more so I would say of all the things I've ever seen.
So impressed with the culture.
We are getting better having an incredibly loyal customer base and now we're moving to the C. sweet and industry and buying center and we're doing that with the eco system and mine.
Because I think is an amazing force multiplier that come service Now's way with the expansion of our partners and being a good partner is essential to being a defining enterprise software companies 21st century. So that is kind of were ongoing and finally, please let me say one thing on behalf of.
My colleagues the engineering Pride in this company.
The focus on products.
When I talked to C.J. or I talked to anybody on the p. for even when we get in front of the board of directors were talking product, we're showing demos. We're looking at the next generation of what's possible where rethinking the way work is done and enterprises, because we know people have so much to improve.
On but we do that not with power points not with big slide shows, but we do this with product.
Bill. Thanks, so much for your thoughtful answer I'm, a big fan of the wave winters Dream and look forward to your continued success. Thanks again.
<unk>. Thank you very much Brad thank you.
You know next question <unk> tweets with Morgan Stanley . Please go ahead you line is open.
Hi. This is you know did thing for Keith wife grass on on a really strong to 20 my team doing your stuff you much in the momentum your skin around C.S. and they charge, but when I sort of look up your top 20 deals with striking to me is sort of the the the number of.
I'd like to deals across I guess asset management I keep business management all over the top 20 top 20 quit because what it gives a sense about the I keep portfolio overall in terms of the durability of growth that you're seeing in the I.T. side going into going into fiscal year two.
2020.
<unk> absolutely. So first of all on key thank you very much for noticing that because I like you.
I have never seen a truly great company that doesn't have a great core.
And we're proud of the core we'd like who we are very much here and if you look at kind of the path of this 14 at the top 20 deals included three or more I.T. products in the sale.
<unk> is really on fire means 16 deals were a million or more in the quarter with I.C.S.M. and 17 is the top 20 deals included I see yourself.
We talked about I, Tom earlier and of course, I've time, I made comments of it I mean, like we're growing out of business like 51% and and a quarter. So it's going extremely well we had five icon deals that were greater than and a million and no 15 at the top.
The 15 or 20, <unk>, so <unk>, but I'd say to myself you know what about ice him I I mentioned as you know the veteran affairs situation and you know we close to deals that we're very very sizable in the ice hand categories. So what's the point of all that.
The point of all of this is our solutions are better together.
And everything pivots from that back home I T core.
And when we carry that backbone I'm t. core into the other domains of the enterprise everything gets better and that's why you know I even explained to other enterprise software companies that are systems of record out there. We just make you better because what we do in our core emulates the costs.
All the buying centers on an end to end work flow level and that just makes all of the partners that we have whether they're technology partners or systems integration partners that much stronger growth in front of us with I.T.S.M. Perot.
And all the value add that we're putting into the platform will keep this company's core growing solid for years and years and years to calm.
That's very encouraging if I could two one quick follow up if I may you mention yours, though about the portions of partners in the ecosystem going for you know calling out. The recent you know strengthening of that partnership with eccentric <unk> you can hit upon Microsoft, though that's another strategic partners that.
<unk> partnership that was fine on this summer around federal but you know what do you see a sort of the partnership opportunities, but join opera opportunities with Microsoft going forward in terms of strengthening that ecosystem play.
Right right, well actually you know and July we announced a new partnership.
Microsoft in which will be hosting service now instances the manager and the initial focus there is on public sector in the U.S., specifically, but also Australia. So we believe or they're highly regulated industries global they could also benefit from this focus.
But of course, it's it's early days I consider sightsee their personal friend I consider as you're an amazing platform and Microsoft a a great company I can tell you the I'm convinced we'll do big things there.
I'm also convinced that you know my phone has been literally ringing off the hook with other very large companies that want to do more with service now. So you know where we're open for business <unk> opening for partnerships and you know my advice to the partners out there is you know.
Don't waste too much time, we're on a move.
Great. Thank you though.
Thank you.
Your next question comes from struggling with J.P. Morgan. Please go ahead to line is open.
Yeah, Thanks high guys and you're prepared remarks to the tenants that you pointed out we're kind of brand marketing and that go to market machine I'm. Just curious how we translate that into what we should think about as the marketing spend for 2020 and the sales count hiring for 2020.
Sure maybe I'll start Big picture and then you know genome show would love to add some value to their so.
We're at the point now where we're investing in engineers and obviously, we're investing and channels that grow our company and we're trying to keep it as lane as we can on the G.N.A. side and let our great workload technology cheap a simple keep us highly productive. So you know the margin expansion story can obviously.
<unk> be there, but we've been adding head count commensurate with with growth and we're not going to get head count in front of growth. So that's you know just kind of big picture. It's it's a pretty disciplined company and we're going to keep it that way for example, you know as I look at.
You know margin leverage and how we can improve I think about keeping the <unk> company simple and simple things like well it'd be a good company now we got unbelievable customer loyalty had only make a frictionless company possible for our customers. So.
Newell's the smooth.
Of selling cross cell is simple and everybody in the company no matter what job and as we can look at the revenue per employee score card and say, we keep getting better and in particular, we'd like to see that in sales. So for example, you're very aware of what we do with very large enterprises in large enterprises.
And how we covered our commercial space, what we're doing more and more with account development interrupts to drive pipeline, we're doing more and more on the inside sales level. So we can have a better return on investment with sales head count and really drive on not just loyalty, but net new logos, which remains very strong.
Focus for this year, so how on us to get the top line and make sure while we're doing it the revenue per employee scorecard keeps going up.
And I'll just add to that you know we will continue to invest in the right places, but it's a very disciplined approach 10 best thing from a sales and marketing perspective, we will absolutely it's back to see some leverage found productivity in south well in spelling bee investing in other areas also invest in France.
Overall perspective, we expect some my bridge and obviously, we've got it to the total overall align margin for the year.
Got it and then maybe one quick follow up a renewal reached 97 per cent still very very high but it it took down a little bit compared to last several quarters were there any one time items or the things that we should look at that impacted in the corridor.
No I'd say, let's say, 97% rinella rate remains in <unk>, leading embarrassed John we're really proud of that the most common reasons by a customized does that mean, new is usually through emanating consolidation, we're not seeing more customers she's not terrific needed because of anything with respect.
Type thing or lack of value at all.
Got it thank you.
Your next question comes from Tom Roderick with people. Please go ahead you line is open.
Yeah. Thank you for taking my questions and a again congratulations both you got a great start to your respect your 10 years Bill would love your perspective, given your unique background here with respect to the back office and thinking about the integration points with financials E.R.P. more broadly sort of south had.
A nice product in the market for under a year now for clothes management would love. Your your take on sort of where that product is in terms of readiness and your thoughts on where this company can go next in the back office, how do you think about that thank you.
Yeah, well. Thank thank you very much time, so first of all I want to acknowledge that.
The systems of record that are out there need not worry about service now not being in a good friend and a good partner I think there's there's plenty of acknowledgement that customers have made substantial investments in these systems of record and we respect that Foley and we feel very strongly that what we do.
With work flow and the end to end nature of that you really add significant value actually to the system of record. So specifically you know there was a very large airline that I called up on and they were trying to do some very unique things, which if they were going through an upgrade cycle.
On a back off a system of record it would've been a very time consuming endeavour, but it was something that was mission critical it was a real system of action. They needed we were able to provide that unless I'm 30 days. So that's just adding value to the system. That's already there not taking anything away from it.
Important as it relates to the financial close product.
We have to have Wiener on that and focus on that it is an outstanding product. We have a very large pipeline for that and we intend to pursue that vigorously in the marketplace.
Yeah.
But fun to play dates in terms of the map on that though.
Fantastic fill a a quick follow what I'd just on the on the V.A.D.L. I think we've gotten accustomed to the third quarter the September quarter being very strong federal but it seemed like the demand to sort of casing itself out over the course of the year can you just talk a little bit more about how how the the federal and broader public sector opportunity a shape.
Now that the product portfolio continues to get wider and wider.
Yeah, I think this is going to be a huge opportunity. The word is going around pretty quickly because what's happening is these leaders are very important departments are capital constrained.
And when they look at their operating expenses and the fact that they have so much legacy.
And so much and efficiency and it's not like I'm, telling a secret everybody knows that and they shout that from the mountain tops. So the question is what platform what company can go in there.
With a very limited time to value and a very affordable solution to truly make a massive difference you know I spend a day and a half there in December and in Washington, and visited many of the agencies One agency who has 75.
Thousand people are also has 75 legacy systems that was designed to do one thing.
I'm, probably they could have gotten away with 74. So we went in there with a work flow solution that literally acted as the enterprise portal to aggregate data from the system of record put it on a mobile platform with a gorgeous user case, where people by job type you know could click.
Twice and achieve their mission and it was so stunning it was a huge cost savings and no matter what time of year, you would propose something I transformational someone's going to say where do I sign.
Fantastic. Thank you for the detail appreciate it.
Thank you very much time.
Next question comes from some out some on us some Jeffries. Please go ahead two lines open.
Hi, Thanks for taking my questions and has as others that sad congrats on a strong start to your tenure in service now and close to the year. So maybe she didn't want for you I I just I'm curious you know Mike and provided in the past recently just the dollar based that expansion rate I'm curious if that's.
Metric day, Yeah, now that you're in the raw you plan on given that going forward and maybe just how that looked in the fourth quarter and then just to follow up for Bell.
So we will be providing expansion rate analysts day in may and it was very strong and keep <unk>.
Okay, Great and then you know Bill I know I know you've touched on this as the cause gone on and I think but I think emanate has been something that people I've thought a lot of bad though when it gets just out of curiosity was there any contribution to 2020, yeah numbers friend or the two small deals that you guys just announced and then I guess as.
Tell to that how should we think about the emanate philosophy <unk> mirror, what you what we've seen in terms of smaller toxins are how should we think about bigger deal. Thanks again, putting my question is.
<unk>. Thank you very much for your question first of all there was a zero zero contribution from any of the small talk ends to the revenue numbers that gene and I reported to you today zero.
Secondly, the company has benefited and will continue to benefit from organic growth. There is a very large runway in front of us or organic growth.
When you consider the unique platform that we have its ability now to move throughout the globe and then to industry is a new buying centers.
Has so much runway on an organic basis. So therefore, the talk and strategy something that adds technology and values to the customer relationship creates a large remote for our best in class platform is the kind of thing that you should expect at this stage there are no large deals.
That are on the table and if we were to consider something of that nature I give you my word I would spend enormous amount of time.
The committee on that with our strategy folks with our engineering folks and we would pressure test that with finance and look at that from every single angle before we actually even seriously considered so we are really an organic growth company with small talk and says are preferred option at this stage.
And it wouldn't change unless there was something dramatically interesting that were greatly benefit our customers in shareholders and at this time, they're on nothing of that kind on the table.
Great I appreciate gets busy me into that you're in a thank you.
Pleasure.
It was last question comes from <unk> with our B.C. capital markets. Please go ahead. Your line is open.
Hi, This is doing rider on Fralix things for squeeze immune here and take my question Bill and thinking about this yes I'm segment clearly from the 200 million dollar figure you mentioned and you're prepared remarks, you guys are seeing success. There when we consider a service now is evolving vision mission in this category, what's the right way for us to think about how you guys Super charged up.
Probably segment in G.S.M., and then just given the different competitive environment relative to other parts of your portfolio. How should we think about the company's growth prospects Cynthia somewhere Broadway. Thanks.
I. Thank you very much still and I'm really excited about C.S. I'm excited about it because you know I like swimming, a big bonds and that's a big Tam.
What we are extremely good at is you know they think of it. This way is really three layers.
Within customer service management that matter to the customer one is the engagement layer. You know do you know who I am and can you have a multi channel strategy around creating value with me.
Second is really huge operational things that go on in the mid and the back office as it relates to work flow in providing the customer an excellent service. For example, we work with one healthcare agency. This quarter that had 50 million claims that we're managing or them with service manager.
But.
On a on the service management layer. If you think about field service for example, there's a a a high tech company that has thousands of field service personnel and the feel that are working with the now platform on a mobile level with a gorgeous user experience so they're technicians.
Can get the job done and what I see especially with large workforces, especially if they're not extremely digital.
They really benefit from how simple and consumer grade and mobile our application is so think of US as field service with service management more broadly because we can get to the root causes of things like no. Other company can that's what our platform is built to do.
Think of operations, where you have unique levels of complexity in the mid in the back office, where we can bring real value to that and on the engagement layer. You know this you know a lot going on in the media industry and you know there's one example, where we have 20 million users engaging us and we actually had 100.
<unk> concurrent users touching on our one of our applications within the first five minutes that they went lie.
So we scale. So we can do engagement other people are there too.
We could do operations like no one else and we can do service management like no one else.
All we can do all three.
My opinion.
The folks that are doing engagement should try to team up with service now because and the operations in the service management side. We're the best we can do at all so you're probably better off partnering with US if you haven't any doubts about what you should do with service now.
But it's all the time, we have for questions <unk> centrist the closing remarks.
Closing remarks, I disliked the sank everybody for joining us.
Exceptionally proud of the 10300 plus professionals the service now for the job that they did.
I'd like to thank Jane and for her leadership and I'd like to thank especially migrated friend John Donahoe for the wonderful hand off that he gave me and coming into the company for the board support, especially our founder and I would just like to thank all of you the confidence that you've done demonstrating in our company.
We're just getting warmed up or fired up we're ready to go.
<unk> conference call. Thank you very much for joining us we know disconnect.
Oh.