10-QPeriod: Q3 FY2024

ServiceNow, Inc. Quarterly Report for Q3 Ended Sep 30, 2024

Filed October 24, 2024For Securities:NOW

Summary

ServiceNow, Inc. reported strong financial performance for the third quarter of fiscal year 2024, demonstrating robust revenue growth and improved profitability. Total revenues increased by 22% year-over-year to $2.8 billion, primarily driven by a 23% surge in subscription revenues, which now constitute 97% of total revenue. This growth reflects continued demand for ServiceNow's workflow automation solutions across technology and customer service sectors. The company also showcased significant operational efficiency gains, with a slight expansion in gross profit margin to 79% and controlled operating expense growth. Income from operations grew by an impressive 81% year-over-year, translating to a diluted earnings per share of $2.07, up from $1.17 in the prior year. ServiceNow's strong cash generation capabilities are evident in the 48% year-over-year increase in free cash flow to $2.1 billion for the first nine months of the year, underscoring its financial health and ability to reinvest in growth initiatives.

Financial Highlights

52 data points
Beta

Revenue

$2.80B

79.1% Gross Margin

Net Income

$432.00M

15.4% Net Margin

EPS (Diluted)

$0.41

Total Assets

$18.43B

Cash & Equivalents

$1.89B

Free Cash Flow

$469.00M

Financial Statements
Beta
Revenue$2.80B
Cost of Revenue$584.00M
Gross Profit$2.21B
R&D Expenses$626.00M
Operating Expenses$1.79B
Operating Income$418.00M
Net Income$432.00M
EPS (Basic)$0.42
EPS (Diluted)$0.41
Shares Outstanding (Basic)1.03B
Shares Outstanding (Diluted)1.04B

Key Highlights

  • 1Total revenues grew 22% year-over-year to $2.8 billion for the third quarter, driven by strong subscription revenue growth.
  • 2Subscription revenues, the core of the business, increased by 23% year-over-year to $2.7 billion.
  • 3Income from operations saw substantial growth of 81% year-over-year, reaching $418 million.
  • 4Diluted earnings per share (EPS) increased significantly to $2.07, up from $1.17 in the prior year's comparable quarter.
  • 5Remaining Performance Obligations (RPO) grew by 36% year-over-year to $19.5 billion, indicating strong future revenue visibility.
  • 6Free cash flow demonstrated robust growth, increasing by 48% year-over-year to $2.1 billion for the first nine months of the fiscal year.
  • 7The number of customers with an Annual Contract Value (ACV) greater than $1 million increased by 14% year-over-year to 2,020.

Frequently Asked Questions

ServiceNow's primary revenue driver is its Subscription revenue, which accounted for 97% of total revenues in the third quarter of fiscal year 2024. Subscription revenues grew by 23% year-over-year, reaching $2.7 billion, indicating strong and consistent demand for its platform and workflow solutions.

ServiceNow is demonstrating good operational leverage. While revenues grew by 22%, operating expenses grew at a slower pace, leading to significant growth in operating income. Sales and marketing expenses grew by 18%, R&D by 14%, and G&A by 6% for the quarter, all trailing revenue growth, allowing for an 81% increase in income from operations.

ServiceNow's RPO increased by 36% year-over-year to $19.5 billion as of September 30, 2024. Approximately 48% of this RPO is expected to be recognized as revenue in the next 12 months (cRPO), providing strong visibility into near-term revenue and demonstrating continued customer commitment and expansion.

ServiceNow continues to generate strong cash flows. Net cash provided by operating activities increased significantly by 47% year-over-year to $2.6 billion for the first nine months of the year. Free cash flow grew by 48% to $2.1 billion for the same period. The company is using this cash for strategic investments in property and equipment, share repurchases, and to manage its equity award programs.