Summary
ServiceNow, Inc. (NOW) in its 2016 10-K filing for the fiscal year ended December 31, 2015, demonstrates robust revenue growth, exceeding $1 billion for the first time, primarily driven by its subscription services. The company continues to invest heavily in research and development, sales, and marketing to expand its offerings and global reach. Despite significant revenue growth, ServiceNow reported a net loss, largely attributed to substantial investments in growth initiatives and increasing stock-based compensation. The company highlights strong customer retention and growth in enterprise and IT Operations Management solutions, alongside ongoing investments in expanding into new market categories. Key risks identified include increasing competition, the potential for declining sales prices, and ongoing intellectual property litigation.
Financial Highlights
51 data pointsBeta
Financial Statements
Beta
| Revenue | $1.01B |
| Cost of Revenue | $329.41M |
| Gross Profit | $676.07M |
| R&D Expenses | $217.39M |
| Operating Expenses | $842.43M |
| Operating Income | -$166.37M |
| Interest Expense | $31.10M |
| Net Income | -$198.43M |
| EPS (Basic) | $-0.25 |
| Shares Outstanding (Basic) | 778.53M |
Key Highlights
- 1Total revenues surpassed $1 billion for the fiscal year 2015, marking significant growth from $682.6 million in 2014 and $424.7 million in 2013.
- 2Subscription revenues are the primary driver of growth, accounting for 84% of total revenues in 2015, with strong performance in both Enterprise Service Management and IT Operations Management solutions.
- 3The company experienced a net loss of $198.4 million in 2015, an increase from $179.4 million in 2014, attributed to significant investments in R&D, sales & marketing, and increased stock-based compensation.
- 4Customer base expanded to approximately 3,000 enterprise customers by the end of 2015, with 638 Global 2000 customers, indicating strong market penetration.
- 5Operating expenses, particularly sales & marketing and R&D, increased significantly to support growth, with sales & marketing representing 50% of revenue and R&D at 22%.
- 6ServiceNow maintains a high customer renewal rate (98% in 2015) and a substantial upsell rate (38% in 2015), indicating customer satisfaction and expansion opportunities.
- 7The company is facing ongoing intellectual property litigation with Hewlett-Packard (now HPE) and BMC Software, with no certainty of favorable outcomes, posing a potential risk to financial results.
Frequently Asked Questions
ServiceNow achieved significant revenue growth, crossing the $1 billion mark for the first time, reaching $1,005.5 million in total revenues for the year ended December 31, 2015. This was primarily driven by subscription revenues, which grew by 50% year-over-year. However, the company reported a net loss of $198.4 million, an increase from the prior year, due to substantial investments in sales, marketing, research and development, and increased stock-based compensation expenses.
ServiceNow's growth is driven by its expanding suite of cloud-based service management solutions, including Enterprise Service Management and IT Operations Management. Key growth strategies include enhancing existing solutions, expanding into new categories (like security and customer service), growing its customer base through direct sales and channel partners, extending relationships with existing customers via upsells and renewals, and international expansion. The company also emphasizes its extensible platform to encourage custom application development by customers and partners.
ServiceNow faces several key risks. These include intense competition leading to potential pricing pressures, the need to successfully penetrate new markets with limited operating history, risks associated with international expansion, and the potential impact of intellectual property litigation. The company also notes the risk that its revenue growth rate may continue to decline and that it expects to continue incurring GAAP losses due to ongoing investments. Additionally, cybersecurity threats and service disruptions are highlighted as significant risks.
ServiceNow generated $315.1 million in net cash from operating activities in 2015 and had $801.3 million in cash and cash equivalents and short-term investments at year-end. The company continues to invest heavily in growth, which contributes to its net losses. Management expects to continue incurring GAAP losses in future periods due to ongoing investments and non-cash charges. The company's strategy focuses on long-term growth, with profitability expected to improve as the business scales and investments mature.