10-QPeriod: Q3 FY2017

ServiceNow, Inc. Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 6, 2017For Securities:NOW

Summary

ServiceNow, Inc. reported strong revenue growth in the third quarter of 2017, driven primarily by its subscription services. Total revenues increased by 39% year-over-year, reaching $498.2 million, with subscription revenues up 43% to $455.4 million. The company continues to expand its customer base, notably increasing the number of customers with an Annual Contract Value (ACV) greater than $1 million by 32% to 436. While the company is investing heavily in sales and marketing and research and development, leading to a net loss of $24.2 million for the quarter, it also demonstrated significant improvement in cash flow from operations, which rose to $458.0 million for the first nine months of the year. The company's liquidity remains strong with substantial cash and investments.

Financial Highlights

52 data points
Beta

Revenue

$498.17M

73.2% Gross Margin

Net Income

-$22.18M

-4.5% Net Margin

EPS (Diluted)

$-0.03

Total Assets

$3.07B

Cash & Equivalents

$1.10B

Free Cash Flow

$95.07M

Financial Statements
Beta
Revenue$498.17M
Cost of Revenue$127.49M
Gross Profit$364.89M
R&D Expenses$98.47M
Operating Expenses$368.80M
Operating Income-$3.91M
Interest Expense$16.57M
Net Income-$22.18M
EPS (Basic)$-0.03
EPS (Diluted)$-0.03
Shares Outstanding (Basic)859.42M
Shares Outstanding (Diluted)859.42M

Key Highlights

  • 1Total revenues grew 39% year-over-year to $498.2 million for the three months ended September 30, 2017.
  • 2Subscription revenues, the primary revenue driver, increased 43% year-over-year to $455.4 million.
  • 3The number of customers with an Annual Contract Value (ACV) greater than $1 million increased by 32% to 436.
  • 4Cash flow from operating activities was strong, totaling $458.0 million for the first nine months of 2017, a significant increase from $27.2 million in the prior year.
  • 5The company reported a net loss of $24.2 million for the quarter, a decrease from $36.3 million in the same period last year, indicating improving profitability.
  • 6Sales and marketing expenses increased by 36% to $227.0 million, reflecting continued investment in growth.

Frequently Asked Questions

ServiceNow reported total revenues of $498.2 million for the three months ended September 30, 2017, a 39% increase compared to $357.7 million in the same period of the prior year. Subscription revenues, which are the main growth driver, increased by 43% to $455.4 million.

ServiceNow reported a net loss of $24.2 million for the three months ended September 30, 2017, which is an improvement from a net loss of $36.3 million in the same period of the prior year. While the company is currently incurring GAAP losses, this trend indicates a move towards improved profitability driven by strong revenue growth and operational efficiencies.

The company demonstrated robust cash flow generation. For the nine months ended September 30, 2017, net cash provided by operating activities was $458.0 million, a substantial increase from $27.2 million in the comparable period of 2016. This strong operating cash flow, combined with cash and cash equivalents and investments totaling over $2.1 billion, indicates a healthy liquidity position.

The primary growth driver is subscription revenue, fueled by an increasing customer base and upsells to existing customers. The company specifically highlighted a 32% increase in customers with an Annual Contract Value (ACV) greater than $1 million, reaching 436, and a strong G2K customer count of 815. Investments in sales and marketing, research and development, and expansion into new product areas also contribute to its growth strategy.