10-QPeriod: Q2 FY2020

ServiceNow, Inc. Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 30, 2020For Securities:NOW

Summary

ServiceNow, Inc. (NOW) reported strong financial performance for the second quarter and the first half of 2020, demonstrating resilience amidst the COVID-19 pandemic. Total revenues grew by 28% year-over-year to $1.07 billion for the quarter and 30% to $2.12 billion for the first half. Subscription revenues, the company's core business, saw robust growth of 30% and 32% respectively, underscoring the continued demand for their digital workflow solutions. The company also showed significant improvement in profitability, with income from operations turning positive at $62.3 million for the quarter, compared to a loss in the prior year, and net income reaching $40.8 million. Key financial highlights include a substantial increase in remaining performance obligations (RPO) to $7.0 billion, indicating strong future revenue visibility. Free cash flow also saw significant growth, increasing by 31% to $666 million for the first half. Despite the broader economic uncertainties, ServiceNow's solid execution, strong customer retention (97% renewal rate), and continued investment in sales and marketing, R&D, and general and administrative functions position it well for sustained growth.

Financial Highlights

51 data points
Beta

Revenue

$1.07B

78.2% Gross Margin

Net Income

$40.77M

3.8% Net Margin

EPS (Diluted)

$0.04

Total Assets

$6.52B

Cash & Equivalents

$841.00M

Free Cash Flow

$257.00M

Financial Statements
Beta
Revenue$1.07B
Cost of Revenue$233.00M
Gross Profit$838.00M
R&D Expenses$245.00M
Operating Expenses$775.00M
Operating Income$63.00M
Interest Expense$8.00M
Net Income$40.77M
EPS (Basic)$0.04
EPS (Diluted)$0.04
Shares Outstanding (Basic)956.60M
Shares Outstanding (Diluted)1.01B

Key Highlights

  • 1Total revenues increased 28% year-over-year to $1.07 billion for Q2 2020, and 30% for the first half to $2.12 billion.
  • 2Subscription revenues grew by 30% in Q2 2020 and 32% in the first half, reflecting sustained demand for core offerings.
  • 3Company achieved positive operating income of $62.3 million in Q2 2020, a significant improvement from a loss in the prior year period.
  • 4Remaining Performance Obligations (RPO) stood at $7.0 billion as of June 30, 2020, indicating strong future revenue visibility.
  • 5Free cash flow increased by 31% to $666 million for the first six months of 2020.
  • 6Customer renewal rate remained high at 97% for both the three and six-month periods ended June 30, 2020.
  • 7Investments in Sales & Marketing and R&D continue, with expenses increasing by 8% and 34% respectively year-over-year for Q2, reflecting continued focus on growth and innovation.

Frequently Asked Questions

ServiceNow reported a strong second quarter in 2020 with total revenues of $1.07 billion, an increase of 28% compared to the same period in 2019. The company also achieved positive income from operations of $62.3 million and a net income of $40.8 million, a significant turnaround from a net loss in the prior year's quarter.

The company's future revenue outlook appears strong, as evidenced by the Remaining Performance Obligations (RPO) of $7.0 billion as of June 30, 2020. Of this amount, approximately 51% is expected to be recognized as revenue over the next 12 months, indicating robust forward visibility.

ServiceNow acknowledged the COVID-19 pandemic's impact, noting potential effects on customer demand, sales cycles, and collections. However, the company's subscription-based model provided relative predictability. Management actions included releasing emergency response and safe workplace apps, shifting to virtual events, and implementing remote work policies. While revenue and earnings were relatively predictable, the full impact on future results remains uncertain and continues to be monitored.

As of June 30, 2020, ServiceNow had $2.3 billion in cash and cash equivalents and short-term investments. For the first six months of 2020, the company generated $860 million in net cash from operating activities, and its free cash flow increased by 31% to $666 million, demonstrating strong cash generation capabilities.