10-QPeriod: Q1 FY2023

ServiceNow, Inc. Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 27, 2023For Securities:NOW

Summary

ServiceNow, Inc. reported a strong first quarter for 2023, demonstrating significant revenue growth and improved profitability. Total revenues increased by 22% year-over-year to $2.1 billion, primarily driven by a 24% surge in subscription revenue, which now constitutes 97% of total revenue. This highlights the company's successful transition to a subscription-based model and the continued demand for its workflow automation solutions. Despite increased operating expenses, particularly in sales and marketing and research and development, the company managed to double its income from operations to $144 million, resulting in a diluted EPS of $0.73, up from $0.37 in the prior year. The company's balance sheet remains robust, with total assets growing to $13.6 billion. ServiceNow maintained a strong cash position and generated substantial operating cash flow of $902 million. Importantly, Remaining Performance Obligations (RPO) increased by 22% to $14.0 billion, indicating a strong pipeline of future revenue, with approximately 50% expected to be recognized in the next twelve months. The company also saw a significant increase in interest income, reflecting higher prevailing interest rates on its investments.

Financial Highlights

50 data points
Beta

Revenue

$2.10B

79.1% Gross Margin

Net Income

$150.00M

7.2% Net Margin

EPS (Diluted)

$0.15

Total Assets

$13.61B

Cash & Equivalents

$1.85B

Free Cash Flow

$737.00M

Financial Statements
Beta
Revenue$2.10B
Cost of Revenue$438.00M
Gross Profit$1.66B
R&D Expenses$492.00M
Operating Expenses$1.51B
Operating Income$144.00M
Net Income$150.00M
EPS (Basic)$0.15
EPS (Diluted)$0.15
Shares Outstanding (Basic)1.02B
Shares Outstanding (Diluted)1.02B

Key Highlights

  • 1Total revenues grew 22% year-over-year to $2.1 billion.
  • 2Subscription revenues increased 24% year-over-year to $2.02 billion, representing 97% of total revenues.
  • 3Income from operations more than doubled to $144 million, up from $87 million in Q1 2022.
  • 4Diluted Earnings Per Share (EPS) rose to $0.73 from $0.37 in the prior year's first quarter.
  • 5Remaining Performance Obligations (RPO) increased by 22% to $14.0 billion, signaling a strong future revenue outlook.
  • 6Operating cash flow remained strong at $902 million.
  • 7Number of customers with Annual Contract Value (ACV) greater than $1 million increased by 20% to 1,682.

Frequently Asked Questions

ServiceNow reported total revenues of $2.096 billion for the first quarter ended March 31, 2023, a 22% increase compared to $1.722 billion in the same period last year. Subscription revenues, the primary driver of growth, increased by 24% to $2.024 billion.

ServiceNow showed significant improvement in profitability. Income from operations increased to $144 million from $87 million in the prior year's first quarter. Net income more than doubled to $150 million, leading to a diluted EPS of $0.73, up from $0.37 in Q1 2022.

ServiceNow's RPO, representing contracted revenue not yet recognized, grew 22% year-over-year to $14.0 billion as of March 31, 2023. Approximately 50% of this RPO is expected to be recognized as revenue over the next 12 months, indicating a strong and predictable revenue pipeline.

ServiceNow reported strong liquidity, with cash and cash equivalents, short-term, and long-term investments totaling $7.2 billion as of March 31, 2023. The company generated $902 million in operating cash flow during the quarter. Interest income also significantly increased to $60 million, reflecting higher interest rates on its investment portfolio.