Summary
ServiceNow, Inc. (NOW) reported its financial results for the second quarter and first half of 2018. The company experienced strong revenue growth, particularly in subscription revenue, which increased by 45% year-over-year for the quarter and 43% for the first half. This growth was driven by increased purchases from existing customers and a growing customer base. Despite the revenue growth, ServiceNow continued to operate at a net loss, though the loss narrowed compared to the prior year. This is attributed to significant investments in sales and marketing, research and development, and general administrative expenses, as well as increased stock-based compensation. The adoption of Topic 606 (ASC 606) for revenue recognition, implemented retrospectively, had a significant impact on prior period financial statements, particularly regarding the timing of revenue recognition for on-premises offerings and the capitalization and amortization of deferred commissions. The company also reported a favorable impact on billings and a reduction in net loss due to the adoption of Topic 606 and gains from marketable equity securities. From a liquidity perspective, ServiceNow maintained a healthy cash and cash equivalents balance. The company generated positive cash flow from operations, which was sufficient to cover investing and financing activities, including a significant repayment of convertible senior notes during the period. The company expects its current resources to be sufficient to meet liquidity needs for at least the next 12 months.
Financial Highlights
50 data points| Revenue | $631.06M |
| Cost of Revenue | $153.16M |
| Gross Profit | $477.89M |
| R&D Expenses | $127.92M |
| Operating Expenses | $509.88M |
| Operating Income | -$31.99M |
| Interest Expense | $15.50M |
| Net Income | -$52.75M |
| EPS (Basic) | $-0.06 |
| Shares Outstanding (Basic) | 886.72M |
Key Highlights
- 1Total revenues increased by 41% year-over-year to $631.1 million for the second quarter of 2018, driven by a 45% increase in subscription revenues.
- 2For the first six months of 2018, total revenues grew by 39% year-over-year to $1.22 billion, with subscription revenues up 43%.
- 3The company reported a net loss of $52.7 million for the second quarter of 2018, a decrease from the $55.8 million net loss in the same period of 2017, indicating a narrowing of losses.
- 4Operating expenses, particularly in sales and marketing (up 40% year-over-year) and research and development (up 42% year-over-year), increased significantly as the company continued to invest in growth.
- 5ServiceNow adopted ASC 606, "Revenue from Contracts with Customers," retrospectively, which impacted prior period financial statements, particularly regarding deferred commissions and on-premises revenue recognition.
- 6Billings, a key non-GAAP metric, increased by 34% year-over-year to $665.9 million for the second quarter of 2018.
- 7The company maintained strong operating cash flow, generating $376.0 million for the first six months of 2018, an increase from $316.3 million in the prior year.