10-KPeriod: FY2018

ServiceNow, Inc. Annual Report, Year Ended Dec 31, 2018

Filed February 27, 2019For Securities:NOW

Summary

ServiceNow, Inc.'s 2018 10-K filing details a strong year of revenue growth, primarily driven by its subscription services, which now represent 93% of total revenues. The company experienced a 36% increase in total revenues to $2.61 billion, demonstrating continued demand for its enterprise cloud computing services that automate digital workflows across various departments. While the company reported a net loss of $26.7 million for the year, this represents a significant improvement from the previous year's loss of $116.8 million. This narrowing loss is attributed to revenue growth outpacing expense increases, particularly in sales and marketing, research and development, and general administrative functions. The company continues to invest heavily in expanding its platform and global reach, indicated by a substantial increase in headcount. Investors should note the company's ongoing commitment to reinvesting in growth, leading to continued operating expenses, and the potential for future revenue growth through customer acquisition and expansion.

Key Highlights

  • 1Total revenues increased by 36% to $2.61 billion in 2018, primarily driven by subscription revenues which grew 39% year-over-year.
  • 2The company reported a net loss of $26.7 million, a significant improvement from the $116.8 million net loss in 2017.
  • 3Subscription revenue constituted 93% of total revenue in 2018, highlighting the company's core business model.
  • 4Sales and marketing expenses increased by 34% to $1.20 billion, reflecting continued investment in customer acquisition and market expansion.
  • 5Research and development expenses increased by 40% to $529.5 million, indicating ongoing investment in product development and innovation.
  • 6The company ended 2018 with $2.08 billion in cash, cash equivalents, and investments, providing a strong liquidity position.
  • 7ServiceNow served approximately 5,400 enterprise customers as of December 31, 2018, with no single customer accounting for more than 10% of revenue.

Frequently Asked Questions

ServiceNow's primary source of revenue is subscription fees for its cloud-based workflow automation platform. In 2018, subscription revenues grew by 39% year-over-year to $2.42 billion, and represented 93% of total revenues, indicating strong customer adoption and expansion.

For the year ended December 31, 2018, ServiceNow reported a net loss of $26.7 million. While still reporting a net loss on a GAAP basis, this is a significant improvement compared to the $116.8 million net loss reported in 2017. This trend suggests the company is moving towards profitability as its revenue growth outpaces its operating expenses.

ServiceNow is heavily investing in its future growth through increased spending on sales and marketing (up 34% to $1.20 billion) and research and development (up 40% to $529.5 million). This is also reflected in a significant increase in employee headcount, which grew to 8,154 by the end of 2018, indicating a focus on expanding its sales force, R&D capabilities, and overall operational capacity to support more customers globally.

ServiceNow operates in a highly competitive market with large, established enterprise software vendors, emerging cloud vendors, and in-house solutions. Key risks identified include intense competition leading to pricing pressures, the need to innovate and respond quickly to technological changes, potential cybersecurity breaches, and the reliance on successful customer implementations. The company also faces risks related to international market expansion and the management of global operations.