01—Abstract
Summary
Summary of the 10-K filed February 28, 2018. Cited figures are marked; the original filing is the authoritative source.
ServiceNow, Inc. (NOW) demonstrated robust revenue growth in its 2017 fiscal year, reporting total revenues of $1.93 billiona, a significant increase of 39% year-over-year.
This growth was primarily driven by its subscription services, which accounted for 90% of total revenues. The company continued to expand its customer base, serving over 4,400 enterprise customers, including more than 40% of the Global 2000, with strong renewal rates nearing 97%. Despite robust revenue growth, the company reported a net loss of $149.1 millionb for the year, an improvement from the prior year's net loss of $451.8 million, largely due to a significant legal settlement expense in 2016.
Management highlighted substantial investments in sales and marketing (49% of revenue) and research and development (19% of revenue) to fuel future growth and platform expansion into areas beyond IT, such as customer service and human resources. Financially, ServiceNow ended the year with a strong liquidity position, holding $2.17 billionc in cash, cash equivalents, and investments. The company also noted the upcoming adoption of new revenue recognition standards (Topic 606) in 2018, which is expected to impact the timing of revenue and expense recognition, particularly for on-premises offerings.
The company continued to strengthen its management team with a new CEO appointment in 2017. Key risks identified include intense competition, cybersecurity threats, the ability to innovate and adapt to technological changes, and reliance on key personnel.
02—Key points
Key Highlights
- Total revenues reached $1.93 billion in fiscal year 2017, a 39% increase year-over-year.
- Subscription revenues grew 42% to $1.74 billion, representing 90% of total revenues.
- The company served over 4,400 enterprise customers, with more than 40% of the Global 2000 as clients.
- Renewal rates remained high at 97% for the year ended December 31, 2017.
- Net loss improved significantly to $149.1 million from $451.8 million in the prior year, impacted by a large legal settlement in 2016.
- Significant investments were made in sales and marketing (49% of revenue) and R&D (19% of revenue) to support growth.
- The company ended the year with a strong cash position of $2.17 billion, indicating healthy liquidity.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2018, ServiceNow lost $0.01.
- Revenue$2.61B100.0%
- Cost of revenue−$622.7M23.9%
- Gross profit$1.99B76.1%
- Operating costs−$2.03B77.8%
- Operating income−$42.4M1.6%
- Interest, other & tax$15.7M0.6%
- Net income−$26.7M1.0%
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 28, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $2.61B$1.93B | +35.0% |
| Cost of Revenue | $622.66M$499.86M | +24.6% |
| Gross Profit | $1.99B$1.42B | +40.0% |
| R&D Expenses | $529.50M$377.52M | +40.3% |
| Operating Expenses | $2.03B$1.48B | +36.8% |
| Operating Income | -$42.43M-$64.40M | +34.1% |
| Interest Expense | $52.73M$53.39M | −1.2% |
| Net Income | -$26.70M-$116.85M | +77.1% |
| EPS (Basic) | $-0.03$-0.14 | +77.9% |
| EPS (Diluted) | $-0.03$-0.14 | +77.9% |
| Shares Outstanding (Basic) | 889.23M855.88M | +3.9% |
| Shares Outstanding (Diluted) | 889.23M855.88M | +3.9% |
05—Questions
Frequently Asked Questions
What was ServiceNow's primary revenue driver in 2017?
ServiceNow's primary revenue driver was its subscription services, which accounted for 90% of its total revenues in 2017, generating $1.74 billion.
How did ServiceNow's profitability change in 2017 compared to 2016?
ServiceNow significantly improved its profitability in 2017, reducing its net loss to $149.1 million from $451.8 million in 2016. This improvement was largely due to the absence of a large legal settlement expense, which impacted the 2016 results.
What is ServiceNow's strategy for future growth?
ServiceNow's growth strategy involves continued investment in expanding its platform beyond IT to areas like customer service and human resources, enhancing its cloud computing solutions, and growing its sales and marketing efforts globally. The company also focuses on innovation in emerging technologies and aims to increase penetration in international markets.
What are the key financial risks highlighted by ServiceNow in this filing?
Key financial risks highlighted include the decline in revenue growth rate, potential for future GAAP losses due to ongoing investments, impact of cybersecurity events, the need to accurately predict and respond to rapid technological and market changes, potential implementation delays or failures, disruptions in services, and foreign currency exchange rate fluctuations. The company also noted the upcoming adoption of new revenue recognition standards (Topic 606) which could impact reporting.
06—Continue