Alex Zukin: Hey guys. Thanks for taking the question. Congrats on a solid quarter. Maybe, Bill, can you talk a little bit about the macro from two different respects? One being are you starting to kind of settle into this new longer sales cycle, customers making you pitch ROI every time, everywhere? And you’re getting ready to kind of anniversary this in June, meaning it’s a sense of like a stabilization or a new normal? And then maybe just comment on the demand environment vis-à-vis U.S. versus international because it does feel a little bit different depending on which geo you’re in.
Bill McDermott: Thank you very much for the question, Alex, and it’s a really good question. It is absolutely clear to everybody that our customers are operating in a complex environment. And the environment they’re operating differs by industry, but all of them have a set of challenges that they’re dealing with. So we have completely retooled the go-to-market machine in acknowledgment of our customers’ challenges. So we’re able to go in with content and thought leadership that’s very specific to their industry. We have tremendous insight and depth in what’s going on specifically with their business. We have excellent outside-in protocols and real detailed account plans and relationship plans. And obviously, at the end of the day all of the sales that happen in this environment has to be backed by an unbreakable business case, not just a business case, an unbreakable one.
And we have built that resilience into the go-to-market machine, and I’m extremely proud of our sales leadership in this company, and that goes for all the executives that report to me on the P4, but also the regional leaders and our feet on the street, I believe to be the best in the business. So that’s one thing. The demand environment, there is no shortage of demand. The whole idea here is to educate our customers on the art of the possible and make sure that we align business and IT. So the business executives are participating in this conversation because leaving them out shrinks the size of the deal, and that’s why Gina is telling you the ACV is growing, including a new business, gives you a good signal that we are really educated and know what we’re doing.
But also by aligning the entire executive team, you de-risk the last-minute surprise or the last-minute push because you have multiple executives pushing for the ServiceNow brand as an answer to their problems. So I would say the demand environment, there’s no shortage of it; you just have to understand how to manage it. But our coverage today and we manage all this on ServiceNow on a CEO dashboard, is better than ever.
Gina Mastantuono: And I would just add from a geo perspective, demand pretty strong across the board. Americas had a strong quarter in Q1 with particular strength in health care and life sciences and state, local and education. We’ve focused verticalization strategy. That’s really driven some strong momentum there. So we feel really good about results in Americas as well as demand. The number of million-dollar deals increased over 30% year-over-year, so that’s great news. EMEA had a really strong Q1 as well. U.K.I, strong demand, great momentum. Central Europe continued to outperform. Renewal rates continue to be strong at 99% in EMEA despite the macro. So again, strong durable demand across the board. And then from an Asia Pac perspective, selling into the C-suite has been working well and really helping to drive larger transformational deals.
We landed seven $1 million-plus deals in APAC in Q1. So really strong demand across the board from a geography perspective as well, Alex.
Alex Zukin: Thank you, guys. Your unfair advantage is very clear.
Bill McDermott: Thank you very much Alex.
Gina Mastantuono: Thank you, Alex.
Operator: Our next question comes from the line of Michael Turrin from Wells Fargo. Please proceed.
Michael Turrin: Hey. Great guys. Thanks. Good afternoon. I appreciate the strong set of results for Q1. The 2Q guide for cRPO suggests growth down a bit from what you just delivered, Gina. You’ve talked about prudence over the past several quarters. Can you maybe step through what you’re factoring into Q2 for cRPO? How much is seasonality versus anything more specific to this year? And any update you can provide just around the change in early renewal dynamics you saw last quarter, I think is also a useful context? Thank you.
Gina Mastantuono: Yes. Great question. So from an overarching perspective, as I said before the durable demand that we’re seeing has really kept our business resilient. So strong Q1 cRPO. The Q2 guide, if you remember, beginning in Q2 of last year is when the macro headwinds really started to hit us. And so we’ve seen muted growth in the past couple of quarters as a result, which is driving a little bit of a decel in Q2. The other thing, as you rightly recall, I’m absolutely continuing to remain prudent in our guided assumptions given the uncertainty in the macro environment. And so again, feel really good about the guide. It’s a strong guide given the current uncertainty. But those are kind of a couple of the things that are going into the number.
With respect to early renewals, what I’ll say is that early renewals actually exceeded our forecast slightly this quarter. And so as I talked about at the end of Q4, we really factored in some prudent assumptions with respect to early renewals given the current macro, and basically they are lining up as expected.
Michael Turrin: Very helpful. Thank you.
Gina Mastantuono: Thank you, Michael.
Operator: Our next question comes from the line of Derrick Wood from Cowen. Please proceed.
Derrick Wood: Great. I’ll add my congrats and thanks for taking my question. Bill, I wanted to ask about the Microsoft partnership and the co-sell agreement. I think you guys announced that a year ago. I imagine you’ve been laying some groundwork. Can you just give an update as to how that partnership is trending? What kind of dividends you see in 2023 and what you may be looking to do around generative AI with them?
Bill McDermott: Yes, absolutely. Those conversations, Derrick, are very active. As you know, we’re very proud of our relationship with Microsoft. Also, a big tip of the cap to Microsoft and Satya and his team for an outstanding quarter; I was very, very happy to see that for them. And at the end of the day, we continue to help accelerate Azure adoption for our mutual customers, which is opening additional addressable market for ServiceNow, particularly with ITOM and ITAM. I agree with you 100% that CJ can give you an update on what we’re doing in the area of generative AI. But I think that that work is in flight and in progress, and we think that’s a big opportunity for both companies to work closely together. CJ?
CJ Desai: Absolutely. So here’s what I would say, Derrick, is at the highest level when we think about our partnership with Microsoft certain products such as our ITOM product, which is your visibility into Azure and overall our product set that allows you to consume public cloud services is going in the right direction. Our footprint of ITOM with Azure Cloud continues to expand. So that’s number one. From a go-to-market standpoint, whether it’s in U.S. Federal Cloud with our IL-5 certification just going live on Microsoft Azure cloud or the Australian government certification, we have had some recent wins in Australia and a few other geographies, where our go-to-market teams are working really well together. We will share more on generative AI with Microsoft, but we absolutely plan to leverage open AI as well as Microsoft Azure capabilities when it comes to how ServiceNow use cases will work in conjunction with open AI and Microsoft Azure.
Derrick Wood: Great. Look forward to knowledge. Thanks.
Bill McDermott: Thank you, Derrick.
Operator: Our next question comes from the line of Sterling Auty from MoffettNathanson. Please proceed.
