What was the primary driver of revenue growth in this quarter?

The primary driver of revenue growth was the strong performance of subscription revenues, which increased by 43% year-over-year to $318.9 million. This indicates sustained demand for ServiceNow's core cloud-based service management solutions.

What caused the company to report a net loss, despite revenue growth?

While revenue growth was strong, the company reported a net loss due to ongoing significant investments in sales and marketing, as well as research and development, which are crucial for long-term expansion. Additionally, a substantial one-time charge of $270 million for legal settlements during the nine-month period significantly impacted overall profitability.

How is the company managing its cash flow?

For the nine months ended September 30, 2016, the company reported net cash provided by operating activities of $27.2 million. However, this was significantly impacted by the $267.5 million cash paid for legal settlements. Excluding purchases of property and equipment, free cash flow was negative $56.9 million for the nine months, primarily due to the settlement payment.

What is the outlook for customer acquisition and retention?

Customer acquisition remains strong, with the number of customers having an Annual Contract Value (ACV) greater than $1 million increasing to 301 from 203 year-over-year. The company also reported a high renewal rate of 99% for the third quarter, indicating strong customer retention.

NOW 10-Q Quarterly Report Q3 FY2016 — Revenue, Net Income, EPS

Summary

ServiceNow, Inc. (NOW) reported its third-quarter results for the period ending September 30, 2016. The company demonstrated robust revenue growth, with total revenues increasing by 37% year-over-year to $357.7 million for the quarter. This growth was primarily driven by a significant 43% increase in subscription revenues, highlighting the continued strong demand for its core cloud-based service management solutions. Despite the strong revenue performance, the company reported a net loss of $36.3 million for the quarter, an improvement from the $41.0 million net loss in the prior year's comparable quarter. A significant factor impacting the nine-month results was a $270 million charge for legal settlements, which materially impacted profitability. The company continued to invest heavily in sales and marketing, and research and development, reflecting its commitment to long-term growth. Investors should note the company's ongoing investments in growth initiatives and the impact of the one-time legal settlement charge on its net income.

Financial Highlights

49 data points

Beta

Revenue

$357.66M

0.7% Gross Margin

Net Income

-$36.26M

-0.1% Net Margin

EPS (Diluted)

$-0.04

Total Assets

$1.81B

Cash & Equivalents

$325.07M

Free Cash Flow

$65.53M

Financial Statements

Beta

Revenue	$357.66M
Cost of Revenue	$102.84M
Gross Profit	$254.82M
R&D Expenses	$75.02M
Operating Expenses	$281.59M
Operating Income	-$26.77M
Interest Expense	$8.39M
Net Income	-$36.26M
EPS (Basic)	$-0.04
Shares Outstanding (Basic)	826.89M

Key Highlights

1Total revenues grew 37% year-over-year to $357.7 million in Q3 2016.
2Subscription revenues, the primary revenue driver, increased by 43% year-over-year to $318.9 million.
3Net loss for the quarter was $36.3 million, an improvement from $41.0 million in Q3 2015.
4The nine-month period was significantly impacted by a $270 million charge for legal settlements.
5Customer acquisition remains strong, with customers having an Annual Contract Value (ACV) greater than $1 million increasing to 301 from 203 year-over-year.
6Sales and marketing expenses increased by 41% year-over-year, indicating continued investment in growth.
7The company maintained a high renewal rate of 99% for the third quarter.

ServiceNow, Inc. Quarterly Report for Q3 Ended Sep 30, 2016

Summary

Financial Highlights

Key Highlights

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