10-QPeriod: Q3 FY2020

ServiceNow, Inc. Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 29, 2020For Securities:NOW

Summary

ServiceNow, Inc. (NOW) reported strong financial performance for the third quarter and first nine months of 2020. Total revenues grew by 30% year-over-year for both periods, reaching $1.15 billion and $3.27 billion, respectively. This growth was primarily driven by its subscription services, which saw a 31% increase in the third quarter and a 32% increase in the nine-month period. The company also demonstrated improved profitability, with total gross profit increasing significantly and gross profit margin remaining robust at 78% for both periods. Operationally, ServiceNow continued to expand its customer base, notably increasing the number of customers with Annual Contract Value (ACV) greater than $1 million by 25% year-over-year. The company also maintained a high renewal rate of 98% for the third quarter. Despite increased operating expenses, particularly in sales & marketing and R&D, which are key investments for future growth, ServiceNow generated substantial free cash flow of $815.7 million for the nine-month period, a 30% increase from the prior year. The company ended the quarter with a strong liquidity position, including $3.0 billion in cash, cash equivalents, and short-term investments.

Financial Highlights

52 data points
Beta

Revenue

$1.15B

78.1% Gross Margin

Net Income

$12.86M

1.1% Net Margin

EPS (Diluted)

$0.01

Total Assets

$7.71B

Cash & Equivalents

$1.35B

Free Cash Flow

$150.00M

Financial Statements
Beta
Revenue$1.15B
Cost of Revenue$252.00M
Gross Profit$900.00M
R&D Expenses$268.00M
Operating Expenses$831.00M
Operating Income$69.00M
Interest Expense$8.00M
Net Income$12.86M
EPS (Basic)$0.01
EPS (Diluted)$0.01
Shares Outstanding (Basic)966.18M
Shares Outstanding (Diluted)1.01B

Key Highlights

  • 1Total revenues increased by 30% year-over-year to $1.15 billion for Q3 2020 and $3.27 billion for the first nine months of 2020.
  • 2Subscription revenues, the primary revenue driver, grew by 31% and 32% for the respective periods.
  • 3The number of customers with Annual Contract Value (ACV) greater than $1 million increased by 25% year-over-year to 1,012.
  • 4Operating expenses increased, reflecting continued investment in sales, marketing, and research & development to support growth.
  • 5Free cash flow generation was strong, reaching $815.7 million for the first nine months of 2020, up 30% year-over-year.
  • 6The company maintained a high renewal rate of 98% for Q3 2020.
  • 7ServiceNow ended the period with a robust liquidity position of $3.0 billion in cash and cash equivalents and short-term investments.

Frequently Asked Questions

ServiceNow's total revenues increased by 30% year-over-year in the third quarter of 2020, reaching $1.15 billion, up from $885.8 million in the third quarter of 2019. This growth was primarily driven by a 31% increase in subscription revenues.

ServiceNow expects subscription revenues to increase in absolute dollars for the full year 2020, driven by customer acquisition and increased usage. Subscription revenues are expected to remain relatively flat as a percentage of total revenues compared to 2019, consistently representing around 95% of total revenues.

ServiceNow has seen significant growth in its customer base, especially among larger clients. The number of customers with an Annual Contract Value (ACV) greater than $1 million increased by 25% year-over-year, reaching 1,012 as of September 30, 2020.

ServiceNow generated strong free cash flow, amounting to $815.7 million for the first nine months of 2020, a 30% increase from the prior year. This strong cash flow, combined with existing cash reserves, provides ample liquidity to fund operations, including investments in growth, capital expenditures, and debt service obligations.