Summary
ServiceNow, Inc. filed its 10-K for the period ending December 30, 2012, showcasing strong revenue growth driven primarily by its subscription services. The company experienced a significant increase in total revenues, growing by 90% year-over-year, largely attributed to adding new customers and expanding offerings to existing ones. While operating expenses also rose considerably due to investments in sales, marketing, and R&D, the company's strategic shift towards a time-and-materials model for professional services began to improve its gross profit margins in that segment. As a newly public company in 2012, ServiceNow is navigating the complexities of public company compliance and investing heavily in growth initiatives, including expanding its sales force and cloud infrastructure. Despite incurring net losses, the company's robust customer growth, high renewal rates, and increasing average revenue per customer indicate positive underlying business momentum. Investors should note the company's significant investments in growth, its focus on expanding its platform and service offerings, and the ongoing efforts to strengthen internal controls.
Financial Highlights
51 data points| Revenue | $243.71M |
| Cost of Revenue | $104.01M |
| Gross Profit | $139.70M |
| R&D Expenses | $39.33M |
| Operating Expenses | $177.29M |
| Operating Income | -$37.58M |
| Net Income | -$37.35M |
| EPS (Basic) | $-0.10 |
| EPS (Diluted) | $-0.10 |
| Shares Outstanding (Basic) | 369.54M |
| Shares Outstanding (Diluted) | 369.54M |
Key Highlights
- 1Revenue Growth: Total revenues increased by 90% year-over-year, reaching $243.7 million for the year ended December 31, 2012, primarily driven by subscription revenues.
- 2Customer Acquisition and Retention: Total customers grew by 55% to 1,512, with a strong renewal rate of 97% for both 2011 and 2012.
- 3Improving Professional Services Margins: The shift to a time-and-materials pricing model for professional services led to a significant improvement in gross profit percentage, moving from -30% in 2011 to -4% in 2012.
- 4Investment in Growth: Significant increases in Sales & Marketing and Research & Development expenses reflect substantial investment in expanding the sales force, marketing programs, and developing new technologies.
- 5Internal Control Remediation Efforts: The company acknowledges historical material weaknesses in internal controls and details efforts made to remediate them, while also noting ongoing work to fully document and test these controls.
- 6Public Company Transition: ServiceNow is actively managing the costs and compliance requirements associated with being a public company, including increased legal, accounting, and administrative expenses.
- 7Strategic Infrastructure Investments: Investments in data center capacity and cloud infrastructure are ongoing to support customer growth and enhance service scalability and reliability.