ServiceNow Inc (NOW) — Q2 2021 Earnings Call Transcript

Good afternoon, and thank you for joining us for ServiceNow’s second quarter 2021 earnings conference call. Joining me are Bill McDermott, our President and Chief Executive Officer; and Gina Mastantuono, our Chief Financial Officer. During today’s call, we will review our second quarter 2021 financial results and discuss our financial guidance for the third quarter of 2021 and full year 2021. Before we get started, we want to emphasize that some of the information discussed on this call, particularly our guidance is based on information as of July 28, 2021, and contains forward-looking statements that involve risk, uncertainties and assumptions, including those related to the continued impact of COVID-19 on our business and global economic conditions. The guidance we will provide today is based on our assumptions as to the macroeconomic environment in which we will be operating. Those assumptions are based on the facts we know today. Many of these assumptions relate to matters that are beyond our control and changing rapidly, including, but not limited to, the timeframes for and severity of social distancing and other mitigation requirements. The continued impact of COVID-19 on customers’ purchasing decisions and the length of our sales cycle, particularly for customers in certain industries. Please refer to the press release and the Risk Factors and MD&A sections of our SEC filings, including our most recent 10-Q and our 10-K filed for fiscal year 2020 for information regarding such risks, uncertainties and assumptions that may cause actual results to differ materially from those set forth in such forward-looking statements. We would also like to point out that the company presents non-GAAP measures in addition to and not as a substitute for financial measures calculated in accordance with GAAP. All financial figures we will discuss today are non-GAAP except for revenues, remaining performance obligations or RPO and current RPO or cRPO. To see the reconciliation between these non-GAAP and GAAP results, please refer to our press release filed earlier today and our investor presentation. These and all prior press releases and investor presentations are posted at investors.servicenow.com. A replay of today’s call will also be posted on the website. With that, I would now like to turn the call over to Bill.

Thank you, Lisa, and good afternoon, everyone. Welcome to our Q2 earnings call. Our team delivered an outstanding quarter, significantly exceeding our guidance across all metrics. Subscription revenues increased by 31%, and subscription billings rose by 30%. Operating margin was 25%, and we closed 51 deals worth over $1 million, marking a 28% increase year-over-year. Free cash flow for the first half of the year grew by 34% compared to last year, showcasing an exceptional performance from our team. We have strong momentum, which is reflected in our increased full-year guidance. Gina will provide further details shortly. The global economy is recovering rapidly, at the fastest pace seen in 80 years, while the enterprise digital transformation market is anticipated to grow nearly three times faster than GDP in 2021. Business leaders globally face critical moments as business models have permanently changed due to the pandemic, which has accelerated the need for digital solutions. We are well-positioned to take advantage of this significant trend, offering customers innovative solutions to address major challenges like vaccine management, ESG initiatives, and the dynamics of hybrid work. Regardless of the challenge, workflows are streamlined with ServiceNow. We’ve created a new market that builds on customers’ investments in their systems. Our Now Platform delivers workflow automation, enhancing the consumer experience for our customers and enabling disparate systems across organizations to function cohesively, leading to greater efficiency and productivity. ServiceNow acts as the command center for digital transformation across all businesses and industries. The strength of the Now Platform enables this with a unified data model, architecture, and platform for improved workflows. For instance, a prominent German automobile manufacturer is tackling significant logistical hurdles in maintaining production targets, processing 30 million parts daily to over 4,000 suppliers across Europe and Mexico. To navigate this complexity, ServiceNow offers a single connected supply chain technology platform, analyzing 300,000 data points monthly to optimize value chain performance. This illustrates the potency of the Now Platform. Let’s discuss our achievements in our core ServiceNow portfolio, starting with IT workflows. We are recognized for optimizing IT services and operations, with our core IT workflows remaining robust. ITSM appeared in 16 of our top 20 deals, and ITOM was included in 15, with six deals exceeding $1 million each. Our AI-enabled service operations have garnered significant customer interest, yielding major wins with companies like Travelers and Walgreens Boots Alliance. The Maritime and Port Authority of Singapore is also collaborating with ServiceNow to enhance its digital transformation initiatives, aiming to position Singapore as a leading global port. MPA will utilize the Now Platform for automation and improved productivity and employee experience. In the realm of employee workflows, we enhance employee experiences that boost productivity anywhere and anytime, fostering company loyalty. The Now Platform provides a system of action for key events like onboarding and parental leave. Employee workflows were part of 13 of our top 20 deals, with six surpassing $1 million. For example, Asahi is working to expand growth while reinforcing ESG projects to create sustainable value. They selected the Now Platform to enhance employee experiences through a centralized point of contact. They sought standardized HR processes and necessary integrations for their workflows. Our customer workflows are reshaping service paradigms by offering interconnected experiences that enhance operational speed, agility, transparency, and convenience, all while working with current systems. Customer workflows appeared in 10 of our top 20 deals, with four over $1 million. We now have over 2,000 clients using customer service management, including Deutsche Telekom, which is using ServiceNow’s telecommunications solution to streamline order management and establish itself as the leading B2B telco provider. The Now Platform will centralize the order management process, providing a 360-degree view of orders and inventory, ensuring a seamless experience for DT’s employees and customers. With creative workflows, we enhance software development across enterprises, equipping users with low-code tools for rapid application and experience creation. IDC estimates that more than 500 million apps will be developed by 2023, matching the total from the previous 40 years. For example, Airbus quickly built a tracking application using ServiceNow’s low-code app engine, allowing employees to access real-time information on factory equipment, resulting in a 20% reduction in manufacturing transportation incidents. In Q2, creative workflows were part of 18 of our top 20 deals. Nokia opted for ServiceNow’s creative workflows to create custom apps more efficiently and cost-effectively than on other platforms. These instances demonstrate the added value created by the combined capabilities of workflows on the Now Platform. Our Now buying program has helped clients realize these synergies rapidly by simplifying the purchasing process and enhancing usage flexibility. We are also expanding our client and alliance ecosystem, establishing an enterprise agreement with Deloitte through the Now buying program to improve employee experiences and operational efficiency. Furthermore, we recently announced our integration with Microsoft Windows 365, allowing users to access cloud PCs directly through Microsoft Teams regardless of their location in a hybrid work environment. In conclusion, I am immensely proud of our team’s dedication to addressing the world’s greatest challenges. Our engineering team is exceptional, and our go-to-market organization excels. Our mission to enhance work experiences resonates deeply. It has been a privilege to facilitate vaccinations for millions and contribute to the safe reopening of workplaces. We are actively engaging with leaders to tackle society’s most pressing issues, improve lives, and provide better services to citizens globally. We are continually improving and aiming to become an influential enterprise software company in the 21st century. I look forward to your questions, but first, I’ll hand it over to our Chief Financial Officer, Gina.

Thank you, Bill. Q2 was a tremendous quarter with strong beats across our top line and profitability guidance metrics. The team demonstrated exceptional execution and we saw strong demand across all regions and workflows. Q2 subscription revenues were $1.33 billion, $35 million above the high end of our guidance range and growing 31% year-over-year inclusive of a 450 basis points tailwind from FX. Remaining performance obligation or RPO ended the quarter at approximately $9.5 billion, representing 35% year-over-year growth. Current RPO was approximately $4.7 billion, representing 34% year-over-year growth against our guidance. Currency provided a 300 basis point tailwind year-over-year. Q2 subscription billings totaled $1.328 billion representing 30% year-over-year growth by $73 million against the high end of our guidance; FX and duration were 500 basis points of tailwind year-over-year. We saw growth across all our industry categories, financial services and manufacturing were particularly strong globally driven by investments in business continuity. Industries impacted by COVID, including retail and hospitality, also showed signs of recovery with strong net new ACV growth in the quarter. The Now platform remains a mission-critical part of our customers' operations, reflected by our strong 97% renewal rate. The stickiness of our customer base has served as a solid foundation for us to build upon with our land and expand growth strategy. This was evident in the continued growth in our average customer spend this quarter. As of the end of Q2, we had 1,201 customers paying over $1 million in ACV, a 25% year-over-year increase. This included 62 customers paying us over $10 million in ACV. Overall, we closed 51 deals greater than $1 million net new ACV in the quarter. We’re also seeing robust net new ACV growth from new customers with the average deal size growing over 50% year-over-year. Going to market with a solutions sales approach to deliver the full capabilities of the portfolio instead of selling point products continues to drive more multiproduct deals. In Q2, 18 of our top 20 deals included three or more products. Turning to profitability, operating margin was 25%, three points above our guidance driven by the strong revenue beat, G&A cost saving, and some marketing spend that was pushed into the second half of the year. Our free cash flow margin was 19%. Together, these results show the power of our business model and our ability to drive a balance of growth and profitability. To navigate the post-COVID economy and the new era of work, businesses are investing in digital transformation to unlock new levels of innovation, agility and productivity. We’ve heard from Bill; the macro trends driving digital transformation represent significant opportunity for ServiceNow. Our Knowledge 2021 event in May included two amazing weeks of keynote speeches, panels and discussions that brought together experts and thought leaders from every industry across 141 countries to focus on these topics. This year, we released new solutions, including our manufacturing and healthcare industry products, showcasing the power and endless possibilities achievable through ServiceNow workflows. The response from customers has been fantastic. The pipeline generated per attending account was up 45% year-over-year. Together, the macro tailwinds and interest generated from Knowledge has accelerated pipeline growth for the second half of 2021. Furthermore, our coverage ratio today continues to remain ahead of a year ago. As a result, we are raising guidance for the full year. We’re raising our subscription revenues outlook by $73 million at the midpoint to a range of $5.53 billion to $5.54 billion, representing 29% year-over-year growth, including a 250 basis point FX tailwind. We are raising our subscription billings outlook by $123 million at the midpoint to a range of $6.315 billion to $6.325 billion, representing 27% year-over-year growth. Excluding early customer payments in 2020, our normalized subscription billings growth outlook for the year would be 31% at the midpoint. Growth includes that tailwind and FX duration of 200 basis points. We continue to expect a 2021 subscription gross margin of 85% and we are raising our full-year 2021 operating margin from 23.5% to 24.5%. This reflects the increase in our top-line growth, more efficient marketing spend, and some continued lower G&A expenses related to COVID. We are raising our full-year 2021 free cash margin by one point from 30% to 31%. I note that, from a seasonality perspective, we expect 40% of our total free cash flow in Q4. Lastly, we expect diluted weighted average outstanding shares of 202 million. For Q3, we expect subscription revenues between $1.4 billion and $1.405 billion, representing 28% to 29% year-over-year growth, including a 150 basis point FX tailwind. We expect cRPO growth of 30% year-over-year, including a 150 basis point FX tailwind. We expect subscription billings between $1.32 billion and $1.325 billion, representing 22% to 23% year-over-year growth. Growth includes the net tailwind from FX and duration of 50 basis points. As a reminder, looking at billings on a four-quarter rolling basis will help normalize the quarterly seasonality and changes in customer invoicing terms. On that basis, our Q3 subscription billings guidance would represent 31% year-over-year growth. We expect an operating margin of 23%, and 202 million diluted weighted average outstanding shares for the quarter. In conclusion, digital transformation is accelerating across the globe, and ServiceNow is at the epicenter of that opportunity. ServiceNow is a digital fabric that stitches together existing systems of record, collapsing silos to connect fragmented processes. We are the platform company for digital business, and we are well on our way to becoming a $15 billion revenue company. I’m extremely proud of our team’s performance this quarter, and Bill and I can’t thank our employees enough for their hard work and incredible dedication. And with that, I’ll open it up for Q&A.

Hey, congrats on a very strong second quarter. Bill, can you talk a little bit to the growing pipeline that you kind of mentioned here on the call? Just talk a little bit about sales cycles, I would assume that’s helping you this year, but also kind of sets the foundation for next year. Just any color there would be nice. Thank you.

Sure. Thank you very much, Raimo, for the question. First, I’d like to recognize our outstanding IT leadership, as well as our incredible focus on analytics in the company, because we really run the company on the ServiceNow platform. And whatever other systems even exist in the company, I couldn’t pick out of a lineup, because the only thing we look at is the Now Platform. I can tell you that the pipeline is incredibly robust and it has substantially grown. Our sales leader is extremely positive on the second half of the year as is our engineering leader, and the unity in the company around performing right now is really strong. So you can take Gina’s value and the raise that she just put in front of the capital markets to heart, because we looked at every detail and everywhere we could with our own information. It’s very, very strong. In terms of the sales cycles, I think the sales cycles are moving quicker. The notoriety of the brand is resonating as the digital transformation control tower. IT is the stronghold on so many things now, because if you want to give the employees a great experience that you want to provide to the customers unmatched service or you want to unify IT and business around creating these new workflows, which is necessary, because there aren’t enough developers to develop all the applications that are required. Everybody can agree on the Now platform, and that seems to be unifying organizations between IT and business and accelerating our sales cycles and enlarging our deal sizes.

Perfect. Thank you. And then any early feedback from the customers around Lightstep, because that’s obviously expanding your TAM quite a bit, what has been the early feedback from the customer base. Thank you.

Yes, I’d really like to thank Ben and his team for their trust in ServiceNow, and Pablo and CJ and our great engineering team for the work that they’re doing together. What we think is that ServiceNow’s proven capabilities combined with Lightstep’s observability technology will really help organizations seamlessly connect. That’s the big deal, seamlessly connect the insights and that data to form the necessary patterns in that data, and then action them into the workflow which enables people, process, and technology to truly deliver great experiences for the customers and the employees. What differentiates us uniquely is this is one pane of glass. It’s one user experience, and it is not just the developer operations; you’ll also see business executives align on this as well. That’s going to help organizations seamlessly connect their digital experiences across the enterprise. Again, the platform I can’t stress enough, the Now platform is the glue that’s tying it all together.

Thank you. Well done.

Hey guys, great. Thanks for taking my questions and congrats from me as well. Bill, you talked about the power of the platform with a really consumer-grade interface, but also I think the simplifying buying process and new ELAs is really powerful and you called out Deloitte. I guess I wanted to double-click on that a bit and really the importance of this simplifying buying process and how you see that benefiting really new account acquisition as well as expansion.

Yes, absolutely Matt. The main thing is speed, right? We’re in a market that is very robust. Digital transformation is really hot and we are that signature brand. The more quickly we can evolve the upgrade process and the net new deals to get customers live, that’s really what it’s all about. I want you to rest assured that from finance to legal to the way we execute the sales motions in the field and also enable our ecosystem, that whole value chain is right now pedal to the metal. So when you think about the Now buying program, we’re looking at larger rapidly expanding customers and making it easier for them to grow with us. This includes simplifying the buying process as you rightly point out, using flexibility so they can easily upgrade to higher tiers of product innovation. Our innovators are just amazing here. Every time you turn around, the next release is a new breakthrough. ITSM Pro and enterprise are doing terrific, and this is enabling customers to try things as well. And exchange or adopt products at their will, giving them a forward look at where we’re going with our roadmaps. When they see the innovation powered ServiceNow, that actually buys them in very quickly. We’ve done a really good job on the industry domain expertise in the company, but also on aligning all the value that we have to the platform and ensuring that the customer understands the value they realize. So as they step into bigger relationships with us, we can predict those expansions and those pricing tiers and the integrated customer success support and value. They can carry that into the boardroom with great confidence and say, this is what ServiceNow is doing to deliver for you. I was really excited when I saw the Telia article that went out today, where they were talking about retiring 75 legacy systems that they standardized on the Now platform. It’s just really good for the customer and good for our folks too to get the customer to value fast.

Makes sense. Maybe just a quick one for Gina. Last quarter, you talked about net new ACV acceleration, and I guess maybe I can assume based on your increased guidance what the answer is. Be curious if you have any thoughts on net new ACV.

Yes. So I talked about net new ACV accelerating in 2021 versus 2020. We have definitely seen that happening across the board and with our strong beat in Q2, the acceleration that we’re seeing is actually greater than initially anticipated.

Great to hear. Thanks a lot, guys.

Thank you, Matt.

Thank you very much and hearty congratulations on another spectacular quarter. I couldn’t help but notice that the net new ACV contribution from your core IT business – workflow business was up very sharply, curious to get your thoughts on what’s happening in that segment of the market. And Bill, I also noticed that the headcount in sales and marketing also went up pretty significantly. Can you just talk about the implications of the increase in net new business coming from your core business, coupled with what seems to be a pretty significant increase in sales and marketing, which I guess is a positive. But I just want to understand the implications of these two observations. Thank you so much, and congrats.

Well, thank you very much Kash. In terms of the core business, the core is becoming more and more relevant as these enterprises try to separate away from the old world of islands of automation and point solution buying and dealing with fragmented systems, processes and silos. The core of the core, of course, is our ITX portfolio, which is resonating with our customers. They can do all the things they want to do on one platform. To the extent they want to leverage other technologies they’ve already invested in, of course, we’re very accommodating to that, because our great engineers have built all out-of-the-box integrations to the biggest systems in the world. It’s kind of started with the core and now it’s moving across the enterprise with great speed, and all the businesses have done great. In fact, all the geos are ahead of their operating plans and they’re all doing really, really well in every geography and every industry; it’s amazing. The immediate impact of our innovation core is seen as we expand the perimeter to employee and customer service management. Our great sales leadership sees the opportunity and they see the hockey stick building in the pipeline. We’re trying to get ahead of that with the coverage model. We are hiring ahead. We see a great hockey stick in the pipeline, and I have tremendous confidence in our sales leadership all over the world.

Thank you, brilliant. Thank you so much.

Thank you, Kash.

Hey guys, thanks for taking the question. So I want to ask a similar question regarding the ELA cycle and the deals that you talked about. Can you comment on how common that is for your pipeline right now versus maybe in previous years and give us a sense for the kind of magnitude of upsell that is possible when customers move at an accelerated pace to these enterprise buying activities.

Thank you very much, Alex. The good news is, it’s early – it’s a very, very small part of our results and a very, very small part of our pipeline. So the upside for this initiative is quite dramatic. Enterprise solution selling across all the geos and all the industries, truly establishing a relationship plan with the customers at the C level is quite convincing. We want partnerships; we want design partnerships to last three to five years, aligning to the future roadmap, so we can deliver a lot of value to the customers.

I would add Alex that while it’s still small, the current expansion that we’re having with our customers undergoing this buying process is pretty significant. So we’re really happy with it.

Perfect. And then just maybe one follow-up for you, Gina. If you look at the guidance on a constant currency basis, can you give us a sense, just, I mean, clearly Q3 is a big federal quarter, and everything we’ve heard indicates that federal pipeline is quite robust. Can you give us some puts and takes around the guardrails or the conservatism in the guidance that takes that strong federal pipeline into account?

Yes, great question. We absolutely are expecting another strong federal quarter this year. But if you remember, on a quarterly basis, there's a lot of seasonality built into billing. And as we’ve shared in the past, there are a couple of drivers impacting the growth rate, which is really a function of renewal invoice timing, and not a function of business performance. One particular item in Q3 is that some of our larger customers have requested a change in their invoicing frequency, which is more pronounced this quarter. That’s resulting in a temporary headwind to the year-over-year growth. One of the reasons why I talked about the four-quarter rolling number; and if you look at the four-quarter rolling basis for Q3 with this guide, it implies 31% year-over-year growth. We absolutely expect a strong federal quarter and also expect continued acceleration in net new and feel really good about Q3 as well as the full year increase in billings guidance.

If I could build on Gina’s outstanding commentary, there are many big opportunities in the back end of the year, particularly in federal. We are seeing large programs and enterprise solutions, focusing on business continuity, cybersecurity, and vaccine management, which continues to be a significant workflow challenge for the government. The government is looking at digital transformation as a way to help operations run like a business, and that’s exciting.

Thanks very much for taking the question. Bill, should we construe the strong Q2 results in your bullish pipeline commentary to mean that you’ve clearly begun to benefit more from the economy reopening? How do you see that playing out over the back half of the year?

Thank you very much, Gregg. Certainly, I think it’s beginning to show in the results. Part of my belief is that as the economy opens up even more, it can only benefit ServiceNow even more. Our team across all functions has stayed focused on the customer, and now as the economies open up and people are back in the office, it’s bound to help our story resonate even further. We all learned from COVID what’s essential in terms of travel and accommodating personal meetings; as well as the tools that can scale even faster. It’s the combination of these forces that will lift ServiceNow to new heights.

That’s great. Thanks, Bill. And then just one for Gina, I think your subscription gross margins are a bit lower than they’ve been in a while. Is there anything that you would call out there?

Yes, the margins have been impacted versus the prior year due to increased investment in our data centers and customer support to serve customers affected by the new data residency regulations, as well as our customers who require additional security measures. These are the big ticket items impacting our margin, as anticipated.

Perfect. Thank you.

Perfect. Thank you very much for taking my question and congrats on the quarter. I want to start off maybe with the new customers. Clearly, it seems like there’s strong traction there and your platform is broader than it used to be many years ago. I’m wondering how many of your new customers are coming from outside your core IT workflows in HR and customer service management. Are you seeing traction there from new customers or was that mostly a point of expansion from existing customers?

That’s a really good question, Arjun. ServiceNow has hired some of the best people in the world in creative workflows, customer service management, and employee experience. We have built big businesses within our company in these categories. Therefore, it’s not unusual to see a customer begin with us on the employee experience side. Many customers today have systems of record that can accommodate a one-stop shop for all the hybrid work needs of a workforce that’s going to be everywhere, and we serve that need exceptionally with our consumer-grade UX on mobile. You see our amazing partnerships with Microsoft and others creating a lot of market interest. Yes, we are seeing new deals beginning with employee experience and the same thing on customer service management. We are in a direct-to-consumer digital-first world, and the Now Platform is uniquely advantaged for that. We’ve seen new deals starting with the creator and customer and employee, not just IT. That’s a new frontier.

I’m really pleased with our new customer growth. We talked about in the script about five new customers this quarter, each over $1 million, and that’s across several different industries. All these five customers purchased five or more products. While IT certainly continues to be a high percentage of our new logos, we’re seeing a greater percentage of business coming from TSM, app engine, and HR. We’re really pleased with the progress.

Absolutely.

Perfect. That’s great to hear. And one more, if I can follow-up on Gregg’s question about reopening. I’m curious if the delta variant or any impact from that is coming up in your conversations with customers and whether this is something that you’re factoring, if you’re factoring that into guidance at all at this point or if it’s still too early to bake in any impact from verticals on that front?

Yes. Yes, it’s a great question. Our greatest concern is always for the health and wellbeing of our people, and our hearts go out to all those affected. We are definitely having conversations with customers regarding this. That said, our business model is extremely resilient and predictable. We have a very robust backlog exiting Q2 at $9.5 billion. Our pipeline continues to look really strong, and our coverage ratio is better than the same time last year. I feel extremely confident in our guide. The acceleration in digital transformation as the hybrid environment continues is strong.

Thank you.

Excellent. Thank you guys for taking the question and congratulations on a really nice quarter as well. I want to ask a kind of a higher level question. One of the investor debates going on right now is the relative strength in the market of back-office applications versus front-office applications, with most investors thinking the focal point is on the front office. You guys see both sides of the equation. So Bill, can you give us some indication of whether there’s relatively more strength in the front office or back office, or how you’re seeing that market environment right now?

That’s a really important question. It’s neither a back nor front office world anymore. It is both, and that’s the big change in the enterprise. The Now Platform is a uniquely competitive advantage for us and for our customers because it ties the front and the back together. That’s the big realization enterprises have made. The Now Platform is positioning itself as the platform for digital business, providing what’s necessary for both sides.

Got it. And if I think of one last one, it kind of dovetails with what you’re talking about in terms of working well with other market participants. I’ve always thought of your ITSM solution as kind of the backbone within the IT department, which everybody integrates into. One of these major integrations has been the observability vendors, but now you’re starting to emerge as more of a competitor and observability. How do you balance being that good partner as the backbone within IT, but also starting to compete in the observability space?

It’s very important to acknowledge that it’s not about competing with other participants in the market. It’s about innovating on the Now Platform and giving the customer as much innovation as we possibly can. We want to ensure that they can conduct their business processes and workflows on the Now Platform. To the extent there are functionalities or investments in other participants on the market, we’re happy to integrate and accentuate that functionality into our Now Workflow. The customer gets the best of both worlds. Many customers want functional capabilities, as they focus on reliance and performance. In effect, we are creating a solution that works for them all.

All right. Many thanks, Bill.

Thank you very much for the question, Keith.

Yes. Thanks for the question. Bill, last quarter you talked about the EMEA business, I think you said it was on fire. It’s nice to see the uptick in EMEA as a percentage of revenue. Curious how that’s evolved this quarter. There’s kind of some mixed trends over there as it relates to reopening. But just wanted to see if you’re seeing that momentum carry into Q2 and your thoughts for the back half of the year.

EMEA is doing fabulous. One of the big changes we’ve made in EMEA was to strengthen our leadership within significant countries. Every country in Europe has its own unique culture and business motions, and you need to be strong with leadership in all of the geographies. We’re able to attract and retain the very best people in the enterprise software industry. As a result, EMEA is ahead of its half-year operating plan, which is a strong sign.

I would just add that EMEA performed well; we had really strong performance across all regions: Americas and APJ as well. We’re really feeling good from a geographic perspective that we’re hitting on all cylinders.

Great. And just as making a quick follow-up. I think you talked about Creator workflows being 18 in the top 20 deals, which was more than both ITSM and ITOM, but it did a down tick from 20% of net new ACV to 14% this quarter. I was curious if there’s anything to call out there, whether it was just smaller creator deal sizes, or just the IPPs were so strong this quarter. Thanks.

Yes. Yes. I’ll take that. Platform had a very strong quarter, and you’re right—17 of our top 20 deals included one over $1 million. In Q1, we closed some seven-figure, multiple seven-figure Creator workflow deals, which were unusually large. So we’ve returned to a more normalized run rate of 14%, which is what we’ve typically seen. I know back at our financial Analyst Day in May, we talked about the expectation for creative workflows to become 20% of net new ACV by 2024. We’re well on our way and doing extremely well in that trajectory.

I think you did a great job, Gina. I’d also like to acknowledge all of our regional leaders and our engineering teams for their tireless work in building the most innovative platform in the world. I’m so bullish on creative workflows, and I truly believe that the new motion in the enterprise is not going to be in separate endeavors of innovation. It’s about unifying innovation across the board. Companies will insist on enterprise coherence and security with proper business process alignment. CEOs are very involved in digital transformation; they're set on digital-first initiatives, and they want to ensure their enterprises align with successful platforms.

Yes. Thanks. Hi guys. Just one question from my side—you mentioned the improvement in the hardest hit industries from the pandemic. I’m curious, what are these industries prioritizing in terms of their spend with ServiceNow and how durable do you expect that spending to be moving forward?

Yes, great question. We’re really pleased with the trajectory there, and they are returning to more normalized spending habits. The areas that I can call out are really around business resilience and how do they ensure that they are extremely well-positioned as we come out of this pandemic to help their employees be more productive in a hybrid world while ensuring that their operations are as resilient as possible. This is reflected throughout our IT, whether it’s ITOM and ITAM or ITBM; risk and security solutions are doing very well too. We feel optimistic about the durability of this spending.

I’d like to build on Gina’s comments, Sterling, by saying that the speed of digital business right now is faster than any of us could have imagined. Everyone is talking about seamless customer experiences. Having a seamless customer experience requires the alignment of the value chain across the entire enterprise to earn that customer loyalty. In many of these companies, middle-office operations are highly manual, and the data is quite fragmented. We’re able to organize the data, focus it, and put it into a cohesive workflow, enabling better business process alignment and resilience, while fostering direct-to-consumer relationships. That’s driving our conversations right now.

Understood. Thank you.

Thank you.