01—Abstract
Summary
Summary of the 10-K filed February 20, 2020. Cited figures are marked; the original filing is the authoritative source.
ServiceNow, Inc.'s 2019 10-K filing highlights a year of robust revenue growth, with total revenues reaching $3.46 billiona, a 33% increase year-over-year.
The company continues to expand its customer base, particularly among large enterprises, with over 6,200 customers by the end of 2019, and no single customer accounting for more than 10% of revenue, indicating a diversified customer base. The core business remains subscription-based, demonstrating strong customer retention with a renewal rate of 98%. Financially, ServiceNow has transitioned to profitability, reporting net income of $626.7 millionb for 2019, a significant improvement from a net loss in the prior year, partly due to a substantial income tax benefit.
The company also generated strong operating cash flow of $1.2 billionc, underscoring its operational strength and ability to fund growth initiatives. Despite a competitive market, ServiceNow's investment in research and development and its comprehensive platform strategy, encompassing IT, employee, and customer workflows, position it for continued expansion.
02—Key points
Key Highlights
- Strong Revenue Growth: Total revenues increased by 33% year-over-year to $3.46 billion in 2019.
- Growing Enterprise Customer Base: The company served approximately 6,200 enterprise customers by year-end 2019, with revenue diversified across many clients.
- Return to Profitability: ServiceNow reported a net income of $626.7 million in 2019, a significant turnaround from a net loss in 2018.
- Healthy Cash Flow Generation: Operating cash flow was robust at $1.2 billion for the year ended December 31, 2019.
- High Customer Retention: The renewal rate remained strong at 98%, indicating customer satisfaction and loyalty.
- Significant Investment in R&D: The company continued to invest heavily in research and development to enhance its platform and expand its offerings.
- Strategic Focus on Digital Workflows: ServiceNow's platform enables IT, Employee, and Customer workflows, supporting broad digital transformation initiatives for its clients.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, ServiceNow, Inc. kept $0.18.
- Revenue$3.46B100.0%
- Cost of revenue−$796.0M23.0%
- Gross profit$2.66B77.0%
- Operating costs−$2.62B75.8%
- Operating income$42.0M1.2%
- Interest, other & tax$584.7M16.9%
- Net income$626.7M18.1%
Where FY2019 revenue went
$3.46B- Other operating costs: $1.87B, 54% of revenue
- Cost of revenue: $796.0M, 23% of revenue
- R&D: $749.0M, 22% of revenue
- Operating income: $42.0M, 1.2% of revenue
Kept 1.2% as operating incomeOperating income $42.0M · 1.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 20, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $3.46B$2.61B | +32.6% |
| Cost of Revenue | $796.00M$622.66M | +27.8% |
| Gross Profit | $2.66B$1.99B | +34.1% |
| R&D Expenses | $749.00M$529.50M | +41.5% |
| Operating Expenses | $2.62B$2.03B | +29.3% |
| Operating Income | $42.00M-$42.43M | +199.0% |
| Interest Expense | $33.00M$52.73M | −37.4% |
| Net Income | $626.70M-$26.70M | +2446.8% |
| EPS (Basic) | $0.67$-0.03 | +2340.0% |
| EPS (Diluted) | $0.64$-0.03 | +2220.0% |
| Shares Outstanding (Basic) | 932.33M889.23M | +4.8% |
| Shares Outstanding (Diluted) | 986.12M889.23M | +10.9% |
05—Questions
Frequently Asked Questions
What is ServiceNow's primary business model?
ServiceNow's primary business model is a subscription-based software-as-a-service (SaaS) offering delivered via the internet. Customers pay recurring fees for access to the Now Platform and its various workflow applications, which automate processes across IT, employee, and customer service functions.
How diversified is ServiceNow's customer base?
ServiceNow has a highly diversified customer base. As of December 31, 2019, the company had approximately 6,200 enterprise customers across a wide range of industries, and importantly, no single customer accounted for more than 10% of its revenues for any of the periods presented.
What was ServiceNow's financial performance in 2019?
In 2019, ServiceNow demonstrated strong financial performance, with total revenues of $3.46 billion, an increase of 33% year-over-year. The company achieved profitability, reporting a net income of $626.7 million, a significant improvement from a net loss in 2018. Operating cash flow was also strong at $1.2 billion.
What are the key risks highlighted in the filing?
Key risks identified include intense competition in the enterprise cloud solutions market, potential adverse effects from evolving privacy laws and data regulations (like GDPR and CCPA), the need to keep pace with rapid technological advancements, cybersecurity threats, reliance on its partner ecosystem, and risks associated with international market expansion and foreign currency fluctuations.
06—Continue