Keith Weiss: And very nice end to the year with that new business growth there. Gina, I wanted to dig in on gross margins a little bit. I’m still trying to wrap my head around a 200 basis point decline. We haven’t seen 80% subscription gross margins in ServiceNow since 2016, if I’m looking on my model correctly, I believe. You told us last year at this time that there’s still an incremental 50 basis points of tailwind that you can get from the accounting change on useful life. So there’s somewhere a 250 basis point offset that’s driving down gross margins. Can you help us understand what that is, a little bit better? What’s that added expense that had such a weight on gross margin heading into FY ’23?
Gina Mastantuono: Yes. Great question, Keith. So first of all, your math is a little off, right? So we had in 2021, we had 85% gross margin, and then this year, 86%. And we talked about that 100 basis points being the change in depreciation life of our assets. And we’ve said that 100 basis points was going to come down to 50, right? So you take 86, you come off to 50, that gives you 85.5. And so what you’re seeing, what I tried to call out in my script is, number one, we are seeing impacts of inflation, right, not surprising, and we’ve talked about. But also, we are also investing heavily in ensuring that our customers are getting to success in getting to implementation much faster with respect to our impact products. And so very conscious investment decisions being made there, offset by sales and marketing efficiencies that you’ve come to expect from us, which is why the operating margin guide remains absolutely where you would have expected to be because we’re making investments in cost of sales to get our customers to implementation as a value faster, offset by the sales and marketing efficiencies.
Operator: We’ll take our next question now from Alex Zukin at Wolfe Research.
Aleksandr Zukin: Congrats, CJ. Congrats guys on a solid quarter. I guess, we’re all trying to unpack, I think, 2 metrics that would be very, very helpful from the quarter itself. So apologies for the more financial-oriented question. But Gina, can you quantify the renewal headwind from the — from the smaller early renewals? And can you comment on the net retention rate itself? Was it still 125 for the full year? Because when you take a step back, it looks like the cRPO guide for Q1 is a lot stronger than where people thought it would be, which implies that maybe that renewal headwind becomes a tailwind if you get those renewals or maybe you’ve got them already in the quarter. And the guide for the full year, to your point, is I think, a lot stronger than what people realize. So we’re all trying to kind of piece together that — those 2 dynamics and questions.
Gina Mastantuono: I won’t quantify the exact renewal headwind. But what I would say is that if not for the early renewals, we would have beat our cRPO guide. And with respect to the NRR, while we don’t comment on exact numbers, it was absolutely consistent and relatively close to the 125 that you quote.
Aleksandr Zukin: Perfect. Super helpful. And I guess maybe a technical one or a product-oriented one for you, Bill or CJ. With respect to some of the other new areas of innovation that you’re bringing to bear, particularly in industries going forward. Can you maybe highlight some early anecdotes and examples of kind of some of the larger customer wins and verticals that give you confidence to kind of pour gas on the fire there?
CJ Desai: Absolutely. So great to hear from you, Alex. I would say one of the products that we verticalized pretty early on was in the telco media and tech. — back in — started building that in 2019, seeing very strong traction, everything from order management to mid office to back office in telcos. And that product line which was created for that industry is now at top 10 telcos and continue to win market share and displace multiple systems, whether it’s a telco company or a media company. Similarly, the public sector, we created a product for public sector as well as health care that is seeing strong traction as well. And overall, between the new products, horizontal products like we have done in the world of ERP on procure to pay or supplier life cycle management, combined that with some of these new industry products, we are winning 7-figure deals, sometimes much larger and having massive traction in that specific where customers are actually going live in 3 to 4 months.
William McDermott: Thank you, Alex. By the way, CJ had one go live yesterday with 50,000 agents, and we were in the board room together as we were watching the go live and it was flawless. So that’s a customer service management example of one of the most prestigious brands in the world. So you can count on our customer service management business to continue to rock the house. So we’re ready to go. And by the way, I don’t get caught up in the cRPO thing because it’s only a forecasting based on prior year assumptions, has nothing to do with what actually happened. The net new business was fantastic. And all those renewals are sitting for us in 2023. And obviously, because we’re delivering business value and impact, it is sitting there for us at the right pricing structure. So it’s actually a super good thing from a shareholder value creation perspective.
Operator: We can go next now to Brad Reback at Stifel.
Brad Reback: Bill, last week, you spoke pretty adamantly about continuing to hire. Hiring net new downtick a little bit here in 4Q versus the previous few quarters. Maybe you can give us an idea of what the plan is for this year.
William McDermott: Yes. Thank you very much, Brad. As Gina said, we’re going to be very intentional about how we manage the headcount in the corporation. We are protecting this house as a primary objective. And we have invested very heavily now for the last 3.5 years, for sure, on headcount. And we have what we need. Where we are investing, and we’ll continue to invest, primarily will be coders, people that actually write the code and also people that are actually responsible for the customer relationship and carry a coder. So we’re going to be very, very intentional. And I’m really super because we’re in great shape on our workforce. We are really happy workforce. Our retention rates are better than ever. The Glassdoor ranking speaks to some of that.
So what we are finding is because of our intentionality, we’re getting 9s and 10s in here, and the people we are choosing to hire come from a pool of thousands and thousands and only the best get to go to ServiceNow. And I think that’s going to build an even stronger ServiceNow going forward. So no problem with the workforce. Everything is about driving innovation or net new ACV, net new innovation, net new ACV. That’s the ball game.
Gina Mastantuono: If I could just add, we’re entering 2023, and Bill alluded to this earlier, we’re entering 2023 with significantly more ramp reps than we entered into ’22. So that growth. Yes, we might have had a little bit of a slowdown in hiring in Q4, but that was not on coder-bearing sales or engineering. We’re entering 2023 from a ramp rep perspective, very strong, which gives us confidence not only with the pipeline we’re seeing, but with the productivity that we’ll get out of those ramp ups.
