Gina Mastantuono: A great point, Mark. And certainly, I think you’re seeing a little bit of both. And what I keep telling folks is the fact that we are not having to rely on early renewals as much as we’ve done in the past, shows the resilience and the strength and the power of the Now Platform. But yes, I also think that in this market, people are holding on to cash a little bit longer. And that’s not altogether surprising either.
William McDermott: And Mark, one thing I would just build on what Gina is saying, and for every investor out there, when you don’t need to rely on early renewals, that means you have a competitive advantage with your technology. It also means that you’re able to preserve your pricing power as you go into the renewal cycles on the normal terms. So this is actually a super healthy thing, and that’s why the guide for 2023 was above all the consensus estimates that you guys have.
Operator: The next map to Kash Rangan at Goldman Sachs.
Kasthuri Rangan: I would think that in a time of inflationary environments that people would want to get rid of cash and preserve the purchasing power. But anyways, a little counterintuitive. That was not my question anyway. So congratulations, first of all, Bill, CJ and Gina. I will spare you. I’ll give you some time off and not ask your questions, so you can test your voice. Bill, one thing that occurs to me is that you’ve scaled a very successful technology company before. So what are the patterns that you see at this point in the evolution of ServiceNow there on be so many things that you could be doing from differently, from a go-to-market perspective, verticalizing the product, expanded distribution partnerships with resellers potentially.
There’s so much innovation. I look at the number of products that you have, it’s mind blowing. Almost complex. How do you ensure that this all does not get in the way of your mission to build the defining enterprise software company of the 21st century? How do you make these catalysts and tailwinds and make sure that nothing gets in the way since you’ve especially seen this pattern play out and you’ve successfully done this before?
William McDermott: Yes, absolutely. Yes, Kash, as I said, we’ve been through this movie before, and I’d like to show. So here’s the situation. We’re keeping it real simple for 22,000 of our closest friends within ServiceNow and for our partners. We have the end-to-end platform for digital transformation. That platform is applicable to each industry and every persona within the enterprise. And we are going to expand that across the world. And you saw the move we made with Japan. Our ambitions are going to India, to the Middle East and many other places. So end-to-end platform, by industry, persona and geo, and we kept it very simple for our colleagues and also our partners. We focused on net new innovation. We will build the future.
We have the best engineering leader and the best engineering team in the industry, hard stop. We have an incredible go-to-market machine, and we’re betting on ourselves. So we’re going to keep a real simple around net new innovation and net new ACV. That’s it. And with a loyal customer base that will remain ever loyal with many upsells, cross-sells and same account revenue growth, if you get new business on top of that because you’re building the best product in the world, you’re going to have the defining enterprise software company in the 21st century.
Operator: We go next now to Peter Weed at Bernstein.
Peter Weed: And congratulations on the performance, particularly on the net new ACV. In fact, that’s what I’d love to help — a little bit help unpacking that because obviously, it’s including both new logos and expansion. And I think we heard last quarter and correct me if I’m wrong, that new customer acquisition had slowed relative to, say, Q2 where I think for new revenue, you had talked about maybe 10% of growth was coming from new customers. When you look forward now and looking forward to next year and the revenue growth, are you seeing most of that growth coming from existing customers relative to what you would have normally done with new customers, I guess, is part of the question. And then the other side of the question is it appears that NRR declined by about 300 basis points quarter-over-quarter and in your guide, it would anticipate continuing decline in NRR by probably another 300 basis points to hit your guide.
What is really creating that weakness in the kind of the renewal NRR relative to recent quarters that have been pretty consistently at or above 130%?
Gina Mastantuono: Peter, I’ll take the first question. So clearly, we’re thrilled with the net new ACV growth that we’re seeing, and not only are our expansion rates strong within the quarter and for the full year in 2022, we were really, really pleased to see that new customer, net new ACV grew over 30% year-over-year despite the headwinds. And we’ve talked about this in the past. We’ve really evolved our focus away from the number and the volume of new customers to landing the right new customers that can land with us and expand with us over time. And so the fact that these new lands are growing is testament to the platform, a testament to the breadth of products on the platform. And so as we think about 2023 and beyond, we absolutely expect to continue to see very strong expansion rates as well as good new logo growth.
But again, it’s about not the volume of those new logos, but the quality. And really, you can see that in our results. With respect to your comment on NRR declining by 300 basis points, that’s not what we’re seeing. I’m not sure what math you’re doing, but I’m sure that off-line, Darren can talk you through it. But our net retention rate and expansion rate remains very strong in Q4 and for the whole year in 2022.
Operator: We go next to now to Keith Weiss at Morgan Stanley.
