ServiceNow, Inc. Quarterly Report for Q1 Ended Mar 31, 2020

Summary

ServiceNow, Inc. (NOW) reported strong financial performance for the first quarter of 2020, ending March 31, 2020. Total revenues surged by 33% year-over-year to $1.046 billion, primarily driven by a 34% increase in subscription revenues, which now constitute 95% of total revenue. The company demonstrated significant operational leverage, with total cost of revenues increasing by a lower 20%, leading to a gross profit margin of 79%, up from 76% in the prior year. Despite increased operating expenses, particularly in sales & marketing and research & development, the company successfully transitioned from a net loss in the first quarter of 2019 to a net income of $48.2 million in the current quarter. This improvement is also reflected in the diluted earnings per share, which rose to $0.24 from a loss of $0.01. The company also highlighted robust operating cash flow growth of 36%, reaching $491.6 million, and a strong remaining performance obligation (RPO) of $6.6 billion, indicating substantial future revenue potential. The company also completed two strategic acquisitions, Loom Systems Ltd. and Passage AI, to enhance its artificial intelligence capabilities.

Key Highlights

• 1Total revenues increased by 33% year-over-year to $1.046 billion.
• 2Subscription revenue, the primary revenue driver, grew by 34% to $994.7 million.
• 3Gross profit margin improved to 79% from 76% in the prior year.
• 4The company achieved profitability, reporting a net income of $48.2 million, a significant improvement from a net loss of $1.5 million in the prior year.
• 5Diluted earnings per share improved to $0.24 from a loss of $0.01.
• 6Operating cash flow increased by 36% to $491.6 million.
• 7Remaining Performance Obligations (RPO) stood at $6.6 billion, indicating strong future revenue visibility.

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