Great. Thank you everyone for joining. I'm Derrick Wood, Senior Analyst covering enterprise software at TD Cowen. We have CJ Desai, President and COO of ServiceNow. Thanks for coming. Thank you for having me. And just a reminder, start next week, and we appreciate your support. With that, let's dive in. I think we're fortunate to have you here 'cause you guys are such an important part of the software stack. You have such strong relationships in the G2K. So you have a pretty good sense of, you know, spending behavior and what you're seeing in the market today. We've had a lot of turbulence around macro. How are you guys feeling about kind of budget spend this year in software, and particularly around your applications? So I would say, Derrick, that ServiceNow has always believed, now for many, many years, in outcome-based selling, right? So we always sell with outcomes in mind, which is around automation, efficiency, and so on. So even if you look at 2022 and 2023, ServiceNow growth has outpaced IT budget growth or overall GDP growth, whichever growth numbers you wanna look at. And even in 2024, we continue to, y ou look at our Q1 numbers, we grew 25% on $2.5 billion sub revenue. So we continue to do well, given our position from a software stack perspective, which is around workflow automation. AI is an enhancer or a multiplier to productivity. So I would say the environment is pretty much the same, but we are positioned correctly. We are always serving our clients for efficiency and automation, and also consolidation of tools, with AI now productivity. So we are at the right place, despite what's happening with IT budgets. Yeah, and being over 20% growth, I think it's pretty clear you're gaining wallet share in different areas, and, and you mentioned vendor consolidation has been a trend for you guys that you've been able to capitalize on. For 2+ years now. Yeah. Yeah. Okay. So you feel good about enterprise spend budgets for you guys this year. There were some questions on kind of federal budget availability and kinda coming out of the last federal cycle. Has that kinda cleared? I mean, as you're going into the kinda Q3 big budget flush, how do you feel about budget availability there? So first of all, ServiceNow, you know, I've been here 7+ years, and when we think about public sector overall, that is combination of federal, state, and local. So you should think about. Mm. Federal agencies, whether it's in the U.S. or U.K., of course, the big states or provinces in Canada, and of course, many, many cities or local governments. So ServiceNow platform is ideally suited, Derrick, for all of those types of things, because our platform, you can modify for any use case, like an import/export form, or things that you would have not an app for, which ServiceNow is pretty awesome in federal. Now, coming back to your question about U.S. federal, so U.S. federal is definitely a very important sub-vertical within the public sector. Very big vertical, but we also do really well in U.K. federal or Australia federal and many others. So I would say with U.S. federal, our opportunity is still remains quite untapped. Mm-hmm. We have done really, really well in 2023, and we have been releasing those numbers to our investors on how well we have done across agencies and Department of Defense. Even in 2024, Q1 was our best Q1 with U.S. federal. So overall, going into 2024, and if, you know, your question is related to, say, potentially election year and so on, we did not see any change when administration changed in 2020, and it continued with the new administration on the digitization of the government, including DoD and so on. So we expect the same, that government agencies are still very focused on digitization, efficiency, manual processes being workflowed, and so on. Yeah. Okay. We'll get into generative AI in a second, but taking that out, as you, m aybe just give us a little summary of what you saw in Q1 and kinda your pipeline. Just like, are there certain verticals or use cases? Y ou guys are so diversified, this may be a tough question, but. No. Anything that stands out in terms of where you're seeing particularly strong demand? So I would say, public sector, for us in Q1, besides federal, state and local, did do well, right? So that's just one piece. Second, we also saw significant strength in what we call TMT, so which is telecom, media, tech. Mm. Some people call it CMT, but we call it TMT. So TMT was very strong for us in Q1, including global telcos and where we saw strength. And then when we look at PCs, you know, subsegments within healthcare, whether we look at certain parts of banking, insurance, we did really well. Our business is very global in nature, except China. We do not do business in China, but we are concentrated in five industries, and pretty much the performance was in line with the overall growth of ServiceNow. Okay. Now moving into generative AI, we're gonna talk more about Pro Plus. But, stepping back, there's a lot of investors are asking questions: Where is funding coming from? Where do budgets for new generative AI use cases come from? You've been asked this, but just, you know, give us a sense for what you see. Yeah. I get asked this all the time. I know you asked a post-sell side call as well. Here is what I would tell you. This is first time. So if you remember the cloud transition in the first decade of this century, there was still, you had to convince people to either move to SaaS or either move to infrastructure as a service, and so on, in the first part of the decade of this century. When you look at this year, 2023 to, or 2024, you just see this demand coming from customers rather than software vendors telling them. Of course, it's our job to tell them how we are leveraging AI, why is this good for them, why they will get value out of their software investment. But we are, for the first time, they are seeing, now consistently, I want to say last three, four quarters, where customers are asking us a lot more question, "CJ, put your generative AI strategy on a page. Tell me how we can leverage generative AI for ITSM use cases," and so on. And then, from what I'm seeing, there is absolutely budget allocated for AI. It is very hard for me to tell you, given the number of transactions we have done on our Pro Plus SKU now eight months, right? We released it on September 29. That I can tell you the pattern that, hey, they took money from here and put it here. But there are a lot of customers where we saw there was an incremental budget for AI, and they said, "We are leaning in, and we are gonna go." There are some customers who said, "Hey, the guys who went, how are they seeing the results? And now we are gonna go." And of course, there are always going to be customers who are gonna trail. So from my perspective, definitely incremental budget that we have seen this year for AI. Yeah. ServiceNow and Microsoft, I would say, if you look at most of the surveys, we come usually at the top because we are about productivity and efficiency. Yeah. And I think in your last cycle, that was really around machine learning, that was a maybe tougher sell because it wasn't as visible, as tangible. Yeah. And so you really had to push. You're saying now you're getting demand coming to you. Absolutely. Because people know they want and need to invest in it. I spoke just today to two large financial services customers. Both are CIO/CTO reporting to the CEO, and these are large names that all of you will know. And they both said, o ne of them is going to buy our Pro Plus SKU for ITSM in June, and the other is doing the pilot and seeing good results, but they may purchase in Q3. Mm-hmm. So this level of, even because financial services, you know, regulatory heavy, they have to show all the compliance with regs and so on, on machine learning models, but they are also leaning in. And last quarter, in Q1, we announced it, that one of the most regulated banks went with Pro Plus SKU as well. Okay. Now, you mentioned Microsoft, and I think what we hear about Copilot, companies tend to go very small with a trial just to understand the value and use case, and it may be a 3,000-person company, may have 50 seats or something. What are you seeing, like, the initial adoption out of your base? Do you start that small? Do you start with, like, all our ITSM workloads or all our, you know, CSM workloads in the Field Service Management and, you know, take a use case and then go by that? Like, what's the approach? So first of all, we have enabled the products that you called out, like IT Service Management or Customer Service or our HR Service Delivery product or our Creator product. We have Pro Plus SKUs for all of them now. So when you think about the product, IT Service Management, the buyer is CIO. When you think about our HR product, the buyer is CHRO as well as Head of Global Business Services. When you think our Customer Service is Chief Customer Officer. So first of all, we have to convince each of these buyers, there is no. The only buyer who would cut across all those would be the CEO. Yeah. We are not gonna sell to the CEO. I mean, we'll tell the CEO what our vision is, but so we have to convince each one of these buyers. So far, for ServiceNow, and now we do have volume of customers in last eight months, what we have seen is they have gone for all seats of ITSM or all seats of CSM, of those who have bought, right? Those who have bought. Now, there are a few customers this quarter, just two, who said, "CJ, we really like to do a proper pilot before we buy." When they did the pilot, though, they saw the results, they immediately saw some efficiency gains, and they said, "We are still gonna buy for the entire corporation." I still have not seen the phenomenon that you called out. Mm-hmm. With Copilot, where we are gonna do out of 3,000 people company, X% only right now, and eventually figure out if we roll it out. So far for ServiceNow, it has been enterprise-wide for ITSM. Right. Or for CSM. Yeah. Yeah. And so if you may see more pilots, which, I mean, it may, maybe you don't have enough use case examples, but, how long do pilots typically take? So one of the best things that engineering teams did on Pro Plus is that Pro Plus is literally you turn on a switch, and the configuration is less than 15 minutes. So it is not one of those things that system integrator heavy to implement, or it takes a long time to implement. So turning on Pro Plus, I'll tell you, one of the large global life sciences company that bought in Q1, went live in four days. So I just want you to know that this is not a long run or create your own model, you need data scientists to figure out, tune it. The way we have done is a zero-shot model. You turn it on for ITSM, and you start just using it for ITSM, whatever use cases we have enabled for ITSM. So the time to value, or what I call it, speed to value, on Pro Plus is very high, because you immediately start getting results. Then they will tell us, "Hey, here is what we are seeing. CJ, do we need to fine-tune anything? How about hallucination rate?" And we work with them to figure that out. So overall, speed is fine. On your question on pilots, not really. I'm not seeing a lot. People get it. Mm. Like, what generative AI can do? Mm. Okay, it can summarize really well, it can generate code for you, it can edit ServiceNow code for you, it can create a workflow for you. So there is not a lot of things where people are like, "I'm going to run a multi-week pilot." Even this large telecommunications company in the U.K. or Europe, yesterday, their CTO, she said, "Yep, got it. We rolled it out. Let's go, and let's figure it out how we transform our customer service function." Okay. So you there, you don't need to go through much of a fine-tuning process to get value out of the gate? It's a zero-shot model. Yeah, exactly. But you can improve it over time with fine-tuning as the? Correct, but we do that behind the scenes. Yeah. We are not putting that. In the old machine learning technologies. Yeah. Your customers trying to fine-tune. Yeah. The model for them. Huh. This time we are saying, for this ITSM use case, we have a small language model for this ITSM use case that summarizes a long IT incident, and we may fine-tune it. Mm-hmm. But customers don't need to touch it. It's still zero-shot for them. Okay. Now, are you seeing people jump to new use cases yet, if you started in ITSM, and then, you know, moving to other parts of the portfolio? Yeah. So, so far, we are seeing ITSM, CSM, HR, and Creator. Mm-hmm. Are the things. So we are now releasing, we just released for our Strategic Portfolio Management, where you can create user stories, and it helps project management better on SPM. It's still early days. Mm. ITOM, we released it in March. We had a large multimillion-dollar transaction on ITOM Pro Plus, and ITOM is a significant business for us. So, so far, it is moving in the right direction for us. Yeah. And value realization, you guys reiterated at the Analyst Day, you're seeing the pricing that you originally expected, which I think is close to a 30% uplift. So I guess, what are the challenges that, you know, you need to kind of hand-hold customers on? You know, whether it's cost, or value delivery, or, you know, hallucination, security risk, what are the biggest challenges you overcome? So, Derrick, I will say, it's a very insightful question in the sense that, I'll give you an example. A large financial services firm based in New York, New Jersey area, the CIO straight up told me that he needs to show the results not only to his manager, but to the board every quarter, on how much generative AI is improving productivity improvement. Not just for ServiceNow, but whatever other generative AI projects they have. So the challenge, Derrick, that we find, which is an opportunity for us that we can always do a better job of: "How, CJ, do I articulate the value? I turn on ITSM Pro Plus, I'm already seeing IT staff being more productive. Now, tell me, how do I put that on one pager that I can show to my CFO, my CEO, and also potentially to my board, on how AI is really helping us becoming more productive?" So that articulation of value is where we are actually working with customers, more than the hallucination rates and all that. They get it, okay. It's 90%+ of the time gives the right answer, and if it doesn't give the right answer, then you can say, "I won't accept that," you know, answer that generative AI may have generated for them. But then they want to know, "Hey, is this? Should I do user survey? How much time it saved? Mm. Or should I look at Mean Time to Resolution, KPI improvement, and that's what I show, that before Gen AI this, after GenAI that? Mm-hmm. That's what I will show to my executive management team." That's where really we are working. It's not about the technology. Now, how do you articulate the value to your stakeholders? Okay. Okay. You mentioned the productivity gains that you get out of Pro Plus. That brings about the question on the P x Q discussion that we've had, and that you've had, I'm sure, many a times. And it kind of, i t certainly has been more topical recently by investors. And coming out of last week, you know, a big back office vendor talked about some slower headcount growth than some verticals. But so how do you, t he concerns that maybe seat growth will slow because of productivity gains from generative AI, how do you push back that that's not gonna be an issue for you guys? Yeah. So first of all, I would say we have been on this productivity train, for ServiceNow specifically, on ITSM Pro and CSM Pro since 2018. So when we launched ITSM Pro and CSM Pro in 2018, the exact same question was asked in 2018, 2019, 2020, then they stopped asking the question. We got 25% uplift on the price. Mm. Which is great. That ITSM Pro, now over five years, has consistently given us 25% price uplift. Mm. And we still have, as we revealed at Financial Analyst Day, 45% of our install base is on Pro or higher SKUs. We still have 55% left on standard, and Gina walked through that entire math on how much time do we have for both Pro as well as Pro Plus. So we have now consistently proven that we have gotten price gain on ITSM Pro. ITSM Pro Plus is early innings because it's. Mm. Only two quarters and two months, so we are getting 30%, as we revealed it three weeks ago, and we'll see, hopefully, that continues to play out. Now, on your question on. That's the P side. Yeah. Yeah. Now, question on Q: So on ITSM Pro, people are like, "Got it, CJ, you have 25% increase." What we saw interesting with Q is that Q has gone up 10% on renewal. Hmm. Then I asked my team: Why is that, right? It's almost a little counterintuitive that maybe you keep the same staff, but you pay more because they have a higher workload, and so on. What we find is, where ServiceNow plays, the digital properties for a bank or a healthcare company or government, the number of digital assets you have continues to increase. So the volume that hits ServiceNow, the workflows. Mm. Continues to increase. When the volume continues to increase, even if your current staff is more productive, you actually need more people. So where we play, versus the back office vendor and whoever you talked about, where we play is very different than where they play on the employee headcount, and so on. Ours is very related to digitization effort at a government or a healthcare company. With 25% pricing growth and a 10% seat growth on renewal, those are phenomenal numbers. So I don't want to predict anything. I, y ou know, we have revealed that in two quarters and two months, we are up 30% on the Pro Plus price realization. And Derrick, the way I look at this is very simple. I am. Right now, when you have a 30% uplift, you get certain tokens with it. Mm. And if you continue to use it more, then we now charge you for additional token tranches. So it's P x Q + T. Hmm. T tranches. So if people are getting more and more productive with Generative AI, that P. There'll be a new use. Is gonna make up for. Hmm. Whatever deterioration we may see in Q, but so far. Yeah. We have not seen deterioration in Q. So you're not making a prediction on that. What about a prediction on the adoption curve? You know, you got to about 40% within ITSM on the Pro side, five years later. Do you think you can see that on the Pro Plus in five years? I forgot how Gina answered that question. I know, this question was asked. I would say, so far, when you really compare apples to apples, Pro Plus is faster than Pro. Just two quarters, two months in, Pro Plus is faster than Pro. But, you know, anybody with. Yeah. Math and stats background, that does not constitute a trend, so I need still some more time. But right now, I am feeling pretty positive about the adoption of Pro Plus. And even customers, like today, when the CIO asked me, and I gave him example of other customers who have rolled out ITSM Pro Plus, he said, "CJ, I'm gonna talk to them. I don't need to do the pilot, and if the reference checks are great on the productivity improvement, we are gonna move forward." So I think this time, customers are taking us there compared to our Pro journey. So if you ask me, my gut feel tells me it should be a little higher. Mm-hmm. But I want to wait and reserve that judgment. When you say it's tracking higher, are you talking about the net new ARR dollars or? Yes. Yeah. Okay. Yes. All right. Good. So, maybe just kind of pivoting a little bit with some of the other new products you guys are playing in. The finance and supply chain, I don't think that was really brought up much in the analyst day. You, you made a bigger launch about it a year ago. Anything that, a nd then we'll go into, you said, you know, you're kind of making a push into the front office. Sure. So those are the two things I wanted to hit. Yeah. But maybe starting on the finance supply chain side. So at the highest level for our portfolio, GenAI is great, and we are really optimistic on GenAI, but our portfolio and new products continue to increase for ServiceNow. That is the reason, as you know, we have been able to keep up these kind of growth rates organically. To keep growth rates on a $10 billion run rate at 25%, you are seeing some of the high flyers from 2021 cannot do that with 1/4 of our revenue. Right. So that is because ServiceNow is a very innovative company, and we continue to ship these new products. I'll touch on all three. Number one, I would say, when I think about Finance and Supply Chain Workflows, it is beating the internal projections that we had, and some of the iconic companies in the world are going live. Mm. On what we used to call ERP workflow. Mm-hmm. But procurement-related use cases, Supplier Lifecycle Management-related use cases, supplier onboarding-related use cases, we just released an Accounts Payable product. So we are innovating within that category, and that category is growing triple-digit right now, but it's a small number. Okay. So right now, the, y ou know, Gina, myself, Bill, we always look at three- to five-year projection. It is currently staying ahead of those projections for now, albeit a smaller number. So feel very good about the product, the position we play, you know, we work, we integrate with all big ERP firms. Mm. Like SAP, Oracle, and so on. Customers understand that this is not we are trying to come and say, "You have to replace your ERP system." So overall, yes, we launched it, you're right, at the Financial Analyst Day in 2023. This time we didn't mention it, but it's going well. Okay. The two products, in addition to Finance and Supply Chain Workflows, that we released recently, about a year ago, was OT. And OT, you think about everybody that manufactures something. So anybody that manufactures something has operational things. I don't want to confuse that with IoT. Mm-hmm. Which is Internet of Things. This is like, think about life sciences company that is creating some kind of medicine, a manufacturing plant for that. Oil and gas company that is, has lots and lots of assets, which are in the line of production of oil. You can think about auto company, you can think about transportation and logistics company. Mm-hmm. So these are the companies you can think about, classic manufacturing company of industrial goods. We believe, so number one, that OT is ten years behind on digital transformation compared to IT, right? Everybody understood how to connect laptops, and phones, and all of these things, and Bluetooth, and so on. We have those phones and laptops, but OT Service Management, there are actually more OT assets than IT assets in the world. So if you do OT Service Management, OT Asset Discovery, OT Asset Lifecycle Management, Derrick, you know this, we said it's a $5 billion. Mm. Additional TAM for ServiceNow. Maybe that TAM is a little understated. Mm. But I would rather it be understated, because changes in OT, when you are in a production line for a consumer goods manufacturer, you need to be very careful what technology. Right. Parts you insert in it. So that's why we are a little conservative, but that's a big opportunity for ServiceNow. Right. We want to do for OT what we did for IT, with service management, operations management, asset management, security. Good tagline there. Yeah. Uh. That's not the intent, but that's good. And then the last thing you asked about is front office. So we did customer service. We started with mid office, back office, with customer service in 2015, and then we eventually moved to the engagement layer. We are seeing that on the revenue workflows, there is still a lot of middle office work that gets in, changes in the order, changes in the fulfillment quantity, and all that. So there is this. There are these manual workflows that goes between the sales rep to the back office department. So we launched our product in Washington, D.C. release, which was in March, called Sales and Order Management. So CPQ, a lot of these type of capabilities that we want to help the mid-office person. Mm. Help out the front office person with those workflows, initially targeted at B2B segment. Yeah. That's a pretty big greenfield. A lot of that's still manual labor. That is correct. You know, there's been some CPQ. Some people may call it revenue workflows. Yeah. Whatever, yeah. Yeah. But there's a lot of manual work that goes on. Okay. I know we only have a couple minutes left. Any questions in the audience? Okay, on that last point that you announced. I was at the Genesys Conference a couple weeks ago. Oh. And, I. John Ball was there. John Ball was there, I saw him, and I know that. And I talked to him the week before at your conference, and Genesys was presenting there. But anything you'd highlight in terms of how to think about that partnership opportunity, and how ServiceNow can work with CCaaS-type vendors? So first of all, CCaaS, as a space, has been going through their own transformation, going from on-prem to cloud, which Genesys is doing a great job. And for those customers who are large customers of Genesys, they have really good presence in G2K, they have very good presence in Fortune 500. ServiceNow is a completely complementary and workflow solution. So when you think about customer service rep or somebody who is doing middle office type of work, we believe this is a great opportunity for our service cloud, as in customer service and field service management offerings, what we call customer workflow, that we can partner with Genesys. Really good integration, really good company to work with. So as they are transitioning to cloud, which they have done a nice job. Mm-hmm. We can work, and it's an end for our customers. Some of the initial customer feedback, who are large Genesys customers, they're like: "This is a no-brainer, that I use ServiceNow for customer service and Genesys for call center. Okay, great. We're almost out of time, but I did want to get this question in on just the SI partnership channel, which I know is very important for you guys. When I was on the floor a few weeks ago, it sounded like there's been some changes. I think you're trying to go deeper with fewer customers, and you have this kind of vision to get to 1 million certified consultants on the ServiceNow ecosystem. Just, and then you'd highlight in terms of what's new and different in getting to that goal? Yeah. Below our partner community, they are obviously help us sometimes sourcing a new logo. Mm. Or expanding a use case. And we partner with all the large ones, including the Indian multinationals who are in that space. One of the biggest challenges that they have asked for is, one, we are a very innovative company, so we come up with new products that we just talked about on a regular basis. How can they be certified faster? Mm-hmm. And so we announced a Rise Up program last year in 2023, with the goal of making it easy to, for them to be certified, and then keeping up to date with ServiceNow innovation. And that's a race with no finish line. Right. That will continue to expand our ecosystem, because 95%+ implementations of ServiceNow are done by our partner community. Yeah. Well, the feedback was, whatever you guys have done, it's helping accelerate onboarding and getting more people trained in the ecosystem. On the ServiceNow, yeah. So I think you're doing a good job. Well, thank you, very much, CJ.