Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2020 ServiceNow Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Vice President of Investor Relations, Lisa Banks. Thank you. Please go ahead.

Good afternoon. And thank you for joining us for ServiceNow’s first quarter 2020 earnings conference call. Consistent with while we are operating globally, our call today is work-from-home. 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 first quarter 2020 results and discuss our financial guidance for the second quarter of 2020 and full year 2020. Before, we get started, we want to emphasize that some of the information discussed on this conference call, particularly our guidance is based on information as of April 29, 2020, and contains forward-looking statements that involve risks, uncertainties, assumptions, including those related to the impacts of COVID-19 on our business and global economic conditions. The forward-looking 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 as we know them today. Many of these assumptions relate to the 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 impact of COVID-19 on our customers’ purchasing ability and the length of our sales cycles, particularly for customers in certain industries. Significant changes in the future could cause us the modify our guidance higher or lower. Please refer to the press release and risk factors and MD&A in our SEC filings, including our most recent 10-K and our 10-Q that will be filed for Q1 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’d also like to point out that the Company reports non-GAAP results in addition to and not as a substitute for, or superior to financial measures calculated in accordance with GAAP. All financial figures we will discuss today are non-GAAP except for revenues, net income and remaining performance obligations. To see the reconciliation between these non-GAAP and GAAP results, please refer to our press release filed earlier today, our investor presentation and for prior quarters, previously filed press releases, all of which are posted at investors.servicenow.com. A replay of today’s call will also be posted on the website. Please note that due to the short-term uncertainty of the ongoing COVID-19 crisis, we have decided to postpone our financial Analyst Day for a future date. We expect it will occur in the second half of the year, so we can provide more visibility into 2021 and the longer term operating environment. With that, I would now like to turn the call over to Bill.

Thank you, Lisa. And good afternoon, everyone. Welcome to our Q1 earnings call. Let me begin by extending my hope that you and your loved ones are healthy and safe. We wish a speedy recovery for anyone affected by COVID-19, and of course, our hearts go out to those who tragically lost a loved one. For the millions of people economically impacted, we’re doing our part to support those in need and to get the world working again. We are truly in this together. Here are the key takeaways I’ll reinforce in today’s remarks. First, ServiceNow is a unique platform, a very strong company. We are well-positioned in this seminal moment. Next, digital transformation was a business imperative pre-COVID with $7.4 trillion of projected spend over the next three years. Post-COVID, digital transformation will accelerate, and ServiceNow is the workflow standard for digital transformation. And most important, the Now Platform, the platform of platforms has become the standard for workflow design experiences. As the COVID-19 pandemic spread around the world in Q1, ServiceNow focused on protecting the health and safety of our employees, serving our customers and supporting our communities. Leadership, by example, has never been more important. We never stopped pushing. We will not slow down. You’ve seen our earnings release. We delivered a strong Q1, beating guidance and consensus. We have shown we can deliver. In March, as the pandemic was being felt everywhere in the world, our more than 11,000 employees seamlessly transitioned to a work-from-home environment. I’m so incredibly proud of how ServiceNow employees adjusted. Our team focused, they executed, they delivered. Employees feel motivated, inspired and proud. After shifting to work-from-home, we held our biggest all-hands company meeting ever, a live global digital event, where we laid out our plans to support each other and…

Thank you, Bill. We had a strong Q1, continuing the momentum coming out of 2019. We exceeded the high end of our guidance for subscription revenues and subscription billings and we delivered another strong quarter of operating profit and free cash flow. Q1 subscription revenues were $995 million, representing 36% year-over-year constant currency growth. Q1 subscription billings were $1.055 billion, representing 32% year-over-year adjusted growth. Remaining performance obligations, RPO, ended the quarter at approximately $6.6 billion, representing 32% year-over-year constant currency growth. And current RPO was approximately $3.3 billion, representing 33% year-over-year constant currency growth. Our renewal rate remained best-in-class at 97%. The strong top-line performance during this quarter is driven by continued expansion of our existing customers. We also continued to see strength in adding new customers. We closed three new customers that are paying greater than $1 million in ACV. Our cohort of customers paying us more than $1 million annually continues to grow significantly, up 30% year-over-year. We now have 933 customers paying us more than $1 million in ACV. We saw strong profitability in Q1 with operating margin at 24%, driven by our strong revenue performance, and less travel expenses due to the current work-from-home environment. Our free cash flow margin was 39%, benefiting from a seasonally high amount of collections from our strong Q4 billings. Our first quarter results demonstrate our position as a trusted innovator and partner to help our customers digitally transform. Before I move to guidance, I want to briefly discuss the impact of COVID-19 on our business. Many of our customers are now operating in some very challenging circumstances. In response, companies, especially those in highly effective industries such as transportation, hospitality, retail [Technical Difficulty] may reevaluate how they’re spending their dollars. CIO surveys and our own conversations with customers suggest…

[Operator Instructions] Your first question comes from the line of Alex Zukin with RBC Capital Markets. Your line is open.

Hey, guys. Thank you for taking my question, and congrats on a good quarter. Bill, I guess, you gave us some great insight on the kinds of customer conversations you’re having right now. Given where you sit and kind of how you’re driving these conversations forward, can you give us a real time look at the pace of business closing right now, in April? You talked about the fast start playbook. Can you just help us understand what you’re facing right now and how you’re pivoting the message, given the breadth and flexibility of the portfolio? And then, I’ve got a quick follow-up.

Alex, it’s a great question. As you know, the in-process measures of what companies do in times of crisis cannot be overstated in their importance, and you’re in a race against the clock in terms of how you execute. Having been through a few cycles in my career, like this, it was clear to me that we had to immediately jump in on the COVID response actions we took with the four apps, to work-from-home initiative, the all-hands communication to get people rallied around our customer, and then also, along with our leadership team, galvanize the Company around a Q2 playbook that really sold into what the customer needed in the face of a market crisis. Gina did a great job telling you about the market dynamic that we handle mainly high end customers and the Fortune 500, and 80% of them are in industries that of course feel some effects of COVID, but it’s the 20% that feel the greatest shocks of COVID. So, the stage is set for ServiceNow to perform well. What I’m seeing in the trenches as it relates to April is a continuation to what Gina and I told you about March. From the linearity basis, March closed as we would expect March to close and April has actually started faster than April did last year. So, on a year-over-year basis, our pipeline is bigger than it was last April. And what we actually have in the door is on a percentage basis higher than we had last April. And the forecast is not shaky, it is very solid when you talk to our sales leader, the executives that reporting to him, and you participate in the daily conversations in the trenches, like I do with people that run companies and run government entities. So, right now, things are going very well at ServiceNow.

Perfect. And then, maybe just one follow-up for Gina. You mentioned payment terms or DSOs and investors right now I think are close to scrutinizing customer churn, dollar churn, contract flexibility, payment terms. So, maybe what are you seeing right now from customers, particularly in that 20% of industries that are impacted? And how does that inform some of your visibility and confidence around the guidance for subscription billings, current RPO, and any other factors?

Sure. Well, I’ll say that we’ve not had any customers at this point that are unable to make payments. And so, our customer base remains very healthy. That being said, we have provided some flexibility and extended payment terms. So, a portion of our company, of our customers and those that are the ones that we’re talking about in the highly effected industries. But so far, it’s not [Technical Difficulty] customer base. We don’t anticipate that payment deferrals or adjusted payment terms will have a meaningful impact on revenue or billing. It is why we have [Technical Difficulty] our cash flow margin guidance flat, even though we’re increasing operating margin by a 100 basis points. We do feel like there’ll be a little bit that will push into early ‘21, but for the most part, we feel very comfortable in our guide on free cash flow and bill.

Your next question comes from the line of Brad Zelnick with Credit Suisse.

Bill, if I can. Can you elaborate on how you’re adapting your go-to-market strategy during these crazy times? Clearly, your value prop only becomes more appealing as the entire world pivots to digital. But, how has the field priorities changed, if at all, as it relates to new logo versus expansion business?

One of the new logos, Brad, that I mentioned was Merck. And there were quite a few on new logos in Q1. But, here’s a big thing. It might be a little counterintuitive actually, but one of my goals, as I told you in the last earnings call, was to be the trusted innovator for the C-suite and actually to elevate the level of contact that ServiceNow utilized in the marketplace. Right now, C level executives and CEOs in particular are easier to get to than they ever have been, because they’re in their home office, and they’re looking for a good phone call or a good Zoom, and in ServiceNow, they’re finding one. So, what we’re doing is we’re aligning the presale, especially on the value drivers that are important to a customer in their specific industry, in their specific persona. And on an outside-in basis, we’re studying very carefully, especially in the COVID environment, what we can do to help them. We schedule our team to essentially do -- in a physical world we had what we called executive briefing center meetings. Now, we’re in a virtual world. We simply have the same executive briefing center meeting. Only, we can have many more of them because we don’t have the wear and tear or the difficulty of getting calendars aligned because people have time on their hands for things that are mission critical and things that can give them immediate time to value and the priorities that they care about. And as I said, Brad, they care a lot about protecting the revenue they already have. Obviously, everyone wants to grow, but job one is protect what have. And then, this business continuity thing, we can’t overstate it. For example, there is -- one very large consulting company…

Thanks very much. It’s all very, very helpful, Bill. Maybe just quickly for Gina. I think, you mentioned slowing down on hiring. How has the hiring plan evolved since the beginning of the year? And have you noticed that it has gotten easier over the last several weeks or a month or so to find talent?

Yes. I would say that -- what I talked about slowing hiring and we talked consistently about G&A now and into the back half. We will continue to aggressively hire [Technical Difficulty]. And in fact, [Technical Difficulty] today have been [Technical Difficulty] hiring in some of those areas. And so, we have really not seen a slowdown to date in our ability to hire and attract really strong talent, which is great. I think, what we’re trying to do is be really thoughtful about hiring [Technical Difficulty] continue to hire for the critical [Technical Difficulty]. I want to make sure that we are well positioned to whether this short-term storm here.

Awesome. Thank you so much.

Hey, Brad. I just want to give you and everyone else on the call a little color. Right? To build on what Gina is saying, we’re hiring 9s and 10s. And just to net it out, this is a brand destination that’s super successful and talented people now know about. One example is our Chief AI Officer, Vijay Narayana. Keep in mind, this guy has 15 patents. He ran data science solutions at Microsoft and engineering at Pinterest. We have the ability to attract the very, very best people in the market. And he was getting offers from everybody. And he chose ServiceNow. So, we are -- as we bring in engineers, as we bring in talented go-to-market people, we’re also making sure that they’re 9s and 10s. We’re not interested in 8s and below. We’ll leave that to the open market to rationalize.

Your next question comes from the line of Sarah Hindlian with Macquarie. Your line is open.

Thank you so much, Bill and Gina, especially for providing us an outlook. I think, we all understand it’s very challenging, given what we’re seeing right now. And sharing your process with us was extremely helpful. And I wanted to ask you a few questions. My first one is for you, Bill. We are hearing a lot about some of our companies. Now, granted, they have far more SMB exposure than you do, but really working ahead of time on the renewals side. And I was wondering if ServiceNow is pulling together a renewals team or some kind of prioritized focus on making sure that some of those distressed customers come through even under potential contract extensions. And then, I have a follow-up for Gina.

Absolutely. Sarah, first of all, thank you very much for the question. We really want everybody to know that this Company is all about driving long-term customer loyalty. The sustenance of these customer relationships is everything in the cloud economics sense, but even more, it’s everything in the sense of the ServiceNow culture. We have presale, sale, post-sale customer support, our consulting and partner ecosystem aligned in a value chain. We do this by industry, we also segment it by persona. In the 20% of our customer installed base, most affected by COVID-19, we have a cross-functional team that also includes legal, finance, presale, sale, and post-sale involved in the process. So, we do all we can to make our customers successful. We haven’t had a single down sell. We have been flexible on cash where we need it to be, which Gina’s stated. But, we’re also looking at things that are win-win in the orientation. So, even if COVID were even worse than it is today, we expect it’ll get better, but even if it was worse, we find that customers are realizing that the Now Platform is it keep the lights on technology in these companies, it is a have to have. And therefore, nobody has disputed whether or not they need to renew. It’s just simply a consequence of can we help them get through this very difficult time. So, keep that in mind. The loyalty effect is getting even stronger because customers really are relying on the platform even more. And as I look at the root causes to why companies win and lose, customers have to love that product in good times and bad, and be willing to stick with that product because they really believe it’s essential to their future. And that has been the case in every engagement, even the ones where customers needed our help the most.

Awesome, Bill. Thank you. That was extremely helpful. I appreciate it, very thorough. And Gina, I just wanted to follow up with a fairly simple question, but an interesting one, especially given the depth of working down on guidance. The fiscal year outlook, the way you’ve cut numbers, was better than I was hearing and definitely a relief to me. And you walked through how you were building the model. I’m wondering if there’s some maybe primary, one particular driver. I know, being the customer success platform is relevant. But, are you potentially also seeing or expecting to see a continued boost from enabling IT operations in a very-distributed perimeter, in a work-from-home environment? And is that the primary driver of the revenue build or is it as mathematical as you’ve outlined?

I think that as IT becomes the business now, IT ops is going to be super important. But that’s not the only place where we continue to see strength. And so, we did a very bottoms-up, deep dive and we did extensive scenario planning for our pipeline coverage, our conversion, our renewal rate et cetera. And so, it’s really about whether or not, from our original guide, we’re just thinking that some of our customers in these highly impacted industries. We believe our renewal rates will stay strong. But, as we think about net new and digital priorities, some of them may be delayed. So, that’s really where we’re focused on when we’ve brought down the guide. We absolutely believe that we’ll be able to maintain our strong renewal rate. We believe that digital transformation will remain, a big priority, as Bill has talked about. So, we feel very confident right now with our current guidance.

One thing and I think everybody will be interested to know this. It’s kind of your question, but it’s probably on everyone’s mind. Why is it that we have such confidence? It’s really because the customers telling us they have confidence in us. So, take the Department of Home Affairs in Australia. What they are doing is basically integrating the outdated underperforming, old solutions into -- in integrated platform. And that is helping them simplify their environment, drop down costs and improve productivity. The State of California as an example is a perfect one, because they went for a cloud first initiative. And that’s all about getting stakeholders, vendors and partner agencies to cooperate. And that’s why they chose ServiceNow customer service management. So, what you’re seeing here is a recognition that the integrated nature of the platform, what the platform can do, and how it’s so simple now to plug the processes into something that’s modern, cloud and on the move versus the thing they’re bogged down by in the old 20th century tech. So, we’re feeling good.

Your next question comes from the line of Samad Samana with Jeffries.

Maybe the first question, and I know you guys have touched on it a little bit. But as you think about customers, with everybody working remotely, I know you’ve talked about the sales motion. But, how about in terms of implementation? Are those cycles moving at the same speed as before? Are they move being more quickly, and maybe what the puts in takes around the ability to do a full implementation from a remote perspective?

Yes. That’s actually a good question, Samad. I know initially, probably people had concerns as to how viable that was. But the reality is, it is very viable. And that’s in fact what’s happening. Not only can ServiceNow virtually implement the system but so too can the ServiceNow ecosystem. And initially, there may have been some training that was required with certain partners on how to do that but our substantial partners absolutely know how to do that. And that is the manner in which ServiceNow is being implemented. It’s done virtually by ServiceNow as well as our ecosystem partners, not an issue whatsoever.

And then, maybe one more on just the go-to-market with the T&E being down with the events moving virtual, coming out of this and it’s tough to answer but it seems like maybe the customer acquisition costs may just structurally come down over time. How do you think about that as those of us that are thinking beyond this crisis, eventually abating? Do you think that it’ll just allow customers to be acquired more efficiently just going forward? Thanks again for taking my questions, and wish everybody well.

Well, Samad, I wish you well too. And I’d tell you are asking some great questions here. Because who would have thought that ITSM Pro could have been implemented by our partners in 21 days or less, remotely, pretty cool. And then who would have thought we would have canceled our Knowledge event in Orlando, which has been the physical event of the year, the epicenter of the ServiceNow story where we expected to have 25,000 people physically in Orlando. We already have 50,000 registered and signed up for our event, our Knowledge event in a virtual environment. And yesterday, our Head of Marketing and Communications who is leading this event and doing a great job I might add, told me that his anticipated headcount now for the event is over 100,000. You’re on a good point here. We might very well learn that companies that are digitally transformed and attracting others who want to be digitally transformed, might actually get some brand recognition power from this and actually a lower cost of sale because of the bandwagon effect. And the second part is our motion on a virtual basis of coordinating all of the pre and post-sale layers I discussed is becoming far more refined than it was in the prior highly physical, high-touch world. So, we might still be able to deliver high value, but do so at a higher volume, in which case, you can lower cost of sales, get more deals and more flow through to the bottom line. I wouldn’t rule it out. I’ll put it to you that way.

Your next question comes from the line Kirk Materne with Evercore ISI.

Yes. Thanks very much. And I’ll add my congrats on the quarter and glad everyone is doing well. I guess, Bill, just to start with you, obviously, you all are standing out in what is a very difficult economic period. I mean the answer seems somewhat self -- or somewhat obvious, but when you are talking to CFOs, I think when we go out and care about things like CapEx spend, obviously budgets are under a lot more pressure. People are really focused on their bottom-line maybe more so than ever and nervous about their own outcome. So, are you just getting the sense that you’re consolidating wallet share within the IT organization or the organization in general? Are you tapping into new line of business spend that perhaps you weren’t before this happened? Because, I think what stands out is, not only do you have a good quarter, but actually your business seems to be doing really well through a month, and I think that will be pretty unique when we hear from everyone else. So, could you just talk about how you all are maybe just consolidating spend amongst your customers at this point time? Thanks.

Yes, sure. Well, Kirk, I want to thank you very much for the question. It’s a really, really smart question because I start every meeting off with the C level executives or heads of government that we’re speaking with regularly, daily in fact, on this concept of behind every great experience is a great workflow. And the Now Platform is a platform of platforms. You heard me say that when I first came into the Company. But digital workflows are becoming substantially important assets within every company. And what we see happening here is we see that the great experiences that every CEO wants for their employees and customers includes mobile web and conversational tools. We see clearly that the IT workflow is also essential to enable employee workflow, customer workflow, and then anything they want to uniquely customize they can use the App Engine on our platform to do it. And having this one platform with one data model and one architecture with by the way no debt, because of how well ServiceNow engineering has been handled for the last 15 years, you’re able to really streamline, eliminate a lot of waste in these companies. And what I see happening is companies are telling me, why would I want to double down on a system of record when I can take the data from the system of record and put it into a new workflow where by the way with the Orlando Now Platform, they can apply machine learning and AI and get the real analytics that they need to drive employee experiences customer experiences. So, it’s actually such a great return on investment. I haven’t seen one scenario yet where I can’t go to a C-level executive and say you ordered this from me today, I gave you…

Okay. That’s really helpful. And just one really quick one for Gina. So, Gina, in your cash flow guidance for the full year, have you made any sort of assumptions around sort of invoicing duration changing at all? It sounded like outside of that 20% of the customer base, you haven’t seen any real need to think that way versus trying to get a sense on sort of how you are modeling on that front? Thanks.

Yes. As I said earlier, the real issue that we’ve seen, and it hasn’t been tremendous, given that only 20% of our business is with customers in the heavily impacted industries. We are not seeing any real issue with respect to sort of invoicing duration or timing.

Your next question comes from the line of Jennifer Lowe with UBS.

Maybe just to quickly follow up on the last questions and the earlier one. Gina, you’ve mentioned a couple of times that 20% is industries most directly impacted by the current crisis, 80% is less impacted. But, as we think about sort of the assumptions feeding into guidance, is the assumption that that impact remains relatively contained in that 20% with relatively little sort of downstream effects on the other 80% of large corporations, or are you assuming that there’s some further disruption? I’m just trying to sort of quantify -- or to the extent that’s possible, just think about what happened if things expand beyond the industries that are currently impacted directly?

So, basically, not only, only 20% of our business in the heavily impacted industries, 80% of our business is Fortune 500. And so, we are not as exposed to smaller SMB type of business. And so, our guide does reflect some lower expectations from what we normally would see our growth on a net new ACV. The bulk of that we believe will come from companies in the more heavily impacted but some as some of these companies still May delay some of their speeding and they look for, we definitely incorporated some of that as well.

And earlier there was the mention that the guidance assumes things continue to stay difficult for a couple more quarters, but also April, there was some positive momentum on the pipeline front, and things like that. And we’re seeing press about industry is starting to reopen maybe a little earlier than had been feared. So, if we think about the sensitivity potentially on the more positive side, what are sort of the KPIs that you’re looking at in your own business to get that forward look on how things are trending? And if we do start to see things open up a bit sooner, does that get us back to sort of what the guys might have been previously or is there going to be just business that you don’t think comes back? How do we frame out what the upside could look like?

No, I think that there’s definitely potential upside, if the economy opens up more broadly sooner, right? We think that and we’ve talked about, we are very well positioned once the economy opened up, digital transformation is more imperative than ever. And our customers are really engaging with us like never before. And so, there certainly would be upside in my eyes, if the market opened up sooner. As you know, we are very, very Q4 weighted, and we’re also within each quarter very last month weighted. So, as we look at the actual conversion of the pipe, we talked about pipeline being stronger than ever. Our current conversion rates are higher than normal. And so, we are very well positioned if the economy opens up more broadly to potentially be in a position to have more opportunity versus the current guidance, if that helps.

Yes. That’s great. Thank you so much.

Your next question comes from the line of Raimo Lenschow with Barclays. Your line is open.

Hey. Thanks for squeezing me in and hope you guys all stay healthy. Quick question, Bill, on digital transformation. So, that can mean a lot of things for a lot of people, but also for ServiceNow. Can you talk a little bit about how you’re kind of tilting your sales approach here in terms of different subgroups, especially in the -- when times are a little bit tougher, people look for a quick ROI, like how have you changed the sales approach over the last few weeks to kind of still do digital transformation, but take advantage of maybe faster projects and faster time to money? And then, Gina, quickly on gross margins this quarter, they were at record levels for subscription. Was anything special in there or what drove that?

Raimo, I’ll start this off. As you’ll remember from 2008, the world was feeling very good in September of 2008 about things until the crisis hit on the financial level. That was pretty substantial. And that was when cloud solutions that offered OpEx first CapEx and fast time to value really became the ultimate move for the enterprise. Because the power moved across the management team, the CEO basically said, do what you have to do to get the job done, do it on your budget, and CapEx slowed and cloud took over as the pervasive computing theme of the 21st century at that moment. In our case, we’re already a pure play born in the cloud market leader. So, what do you do? We essentially wrote a playbook with five main plays that do what you said, take our platform and our market leading solutions and shape them in a way that gives customers what they need fast. So, digitally scaling your operations quickly and efficiently as an example combines our CSM, our ITSM Pro, and our mobile capabilities and our ITOM capabilities in one out of the box pre-packaged solution that’s ready to run. If you want to reduce your technology debt, we have our SAM, Software Asset Management, the Cloud Insights and application management tool out of the box ready to run. If you want to ensure resilience for your critical business operations, we have governance risk compliance, IT operations and security operations out of the box ready to run. And we do this for the employees. We also do this when you’re building any workflow. So, for the employees, you want the right digital experience from anywhere. You listen to any CEO on the business council calls, and that’s what they want. You need the right…

Thank you.

And on your question with gross margins, we did see higher gross margins in the quarter of about 87%. That was really driven by a greater mix of self-hosted revenue during the quarter. We expect that our guidance for the full year, that’ll be more normalized at 86%.

Your next question comes from the line of Phil Winslow with Wells Fargo. Your line is open.

Hey. Thanks guys, for taking my question, and congrats on a great quarter. And above all, glad to hear that all of you are healthy and I hope the same for your families and your team. Bill, question for you first. Obviously, as you mentioned, you’ve seen a lot of downturns like this in past over the course of your career. And frankly you’ve actually sold a lot of different software products, HR, financial, CRM, obviously now ITOM and ITSM. Would you talk to you executives, how you think the focus sort of within these segments has changed and priorities versus maybe a past downturns? And then, I just have one follow-up for you, Gina.

Phil, I think -- and first of all, thank you for your question and safety and wellness to your family. Please give everybody my best, Phil. Executives today are very keen on digital transformation. You can’t go to any meeting where a CEO among CEOs isn’t in some way trying to digitize their company and trying to make sure that digital transformation is at the top of their to do list because they know, if they’re not digitally transform and their competitors are, they’re going to get wiped out. So, this is where the action is. We’re in the sweet spot. And we don’t have to sort of explain that. Now ServiceNow is hitting the main stage with the biggest companies in tech. And we have a very prized position, because the problem with systems of record and the technologies of the past is they do one thing well in a specific domain. It’s not that that’s unimportant, but those investments have been made. So, the CEOs that I talk to, want us to help make those investments work better. And that’s where the platform of platforms comes in. Because we’re so well positioned to take all the investments they’ve already made and enable them to do what they want done, which is to create workflows and inspire their people and provide outstanding service to their customers. And Phil, one of the big learnings in CRM as an example, the engagement layer has been well-penetrated. We all understand SFA, we all understand marketing, we all understand upsell, cross-sell engagement. But what hasn’t been done so well is mid-office operations, how does a healthcare provider take care of 50 million claims and make sure things are done well for each and every constituent, or it could be making sure on field service level for example, deep analytics and machine learning is applied to understand how things can be corrected remotely. But, when you do have to manage an incident, it’s done with the right person, the right tool set, the right training with the right preparation. So, when they do activate a resolution process, the productivity curve goes way up the customer satisfaction, loyalty effect hits. Now, you’ve also seen virtual agent on the platform where we can handle 50 million plus consumers at any one given time on the internet. So, it’s really evolved, and ServiceNow is leading in digital transformation. And workflow is hitting mainstream awareness, which is a new curve for CEOs, and they like it.

And then, when you think about the sales and marketing line, obviously, we saw a pretty significant jump in headcount this quarter. One of the things that you’ve talked about is needing more distribution for broadening product set. So, I guess to jump off for Bill and Gina, how you think about just headcount there in that line going forward as you balance sort of the long-term growth potential, but also maybe near-term productivity?

Yes. Maybe what I could do is just start off and then I’ll let Gina pick it up. So, here’s the deal. We have the platform of platforms. You know, we are doing fantastic in ITSM, there’s no question about all the solutions in that portfolio. Employee is taking off like a rocket and continues to grow. Incidentally, we’re very supportive of the systems of record out there. And that’s also helpful to the customer. Because we hide all the complexity and make the user experience great. On CSM, as I mentioned to you, we can handle the engagement layer, the mid-office, or the field service layer, like no one in the market. But, if there’s someone already entrenched in a certain account, we have no quarrel with that. We just make everything that they do work better. And then, there’s of course the App Engine. What I see as our priority is to make sure we align the value chain by industry and persona in every geography, and we go-to-market with tremendous consistency and meticulous attention to detail in the presale sale, post-sale customer support, service and ecosystem. And that motion is completely aligned. And now, I think the virtual environment is the best way to do it at mass scale, quite frankly. I think, we all learned that in this crisis. Now, in the past, we would invent a new product or a new line, and then have to have a specialist sales force to support. I think more and more, we’re going to be able to do that with our core sales professionals, because we’re finding a new level of expertise in pre shaping these things, in training on these things, and aligning the value chain. So, over time, I think we’ll get more done with less, as opposed to every time we want more, we have to add more. And that’s the mentality we’re putting into this. That’s why we’re only hiring 10s maybe 9s that have high potential. Gina?

Thanks, Bill. Yes. I would just say that you’re right. We have strong growth in our sales and marketing headcount in Q1. It was the strongest sales hiring quarter ever. And we continue to invest aggressively in our long-term growth in both sales and marketing as well as R&D. I would also say that we’ve also seen strong productivity, which tells us we’re getting good yield on a hiring investment made and affords us the ability to maintain these aggressive targets. So, we feel good, we will continue to invest here and continue to drive the long-term growth trajectory of the business.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.