ServiceNow, Inc. Quarterly Report for Q1 Ended Mar 31, 2014

Summary

ServiceNow, Inc. (NOW) reported strong revenue growth in the first quarter of 2014, with total revenues increasing by 62% year-over-year to $139.1 million. Subscription revenues, the primary revenue driver, surged by 64% to $117.4 million, reflecting successful upsells, renewals, and a growing customer base, which expanded by 34% to 2,195 customers. Despite the robust top-line performance and a high customer renewal rate of 97%, the company continued to invest heavily in growth, leading to an operating loss of $36.2 million for the quarter, a widening from the previous year's loss of $12.9 million. This increased loss is largely attributable to significant investments in sales and marketing (up 82%) and research and development (up 94%), as well as a substantial increase in stock-based compensation expenses across all departments.

Key Highlights

• 1Total revenues grew 62% year-over-year to $139.1 million, driven by a 64% increase in subscription revenue to $117.4 million.
• 2Customer base expanded by 34% to 2,195 customers as of March 31, 2014.
• 3Customer renewal rate remained strong at 97%.
• 4Operating expenses increased significantly, particularly sales & marketing (up 82%) and R&D (up 94%), reflecting ongoing investment in growth.
• 5The company reported a net loss of $43.3 million, an increase from $13.4 million in the prior year, due to the substantial operating expense growth.
• 6Cash provided by operating activities was $24.2 million, an improvement from $15.0 million in the prior year, indicating positive cash generation despite net loss.
• 7ServiceNow issued $575 million in 0% convertible senior notes in November 2013, which has led to increased amortization of debt discount and issuance costs impacting interest expense.

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