ServiceNow Grows Through Addition Of Capital-Efficient Startups

According to researchers, the global IT Service Management applications market is expected to grow at nearly 10% annually to $2.8 billion by 2022 from $2.6 billion in 2017. ServiceNow (NYSE: NOW) is the leading vendor in the market followed by Atlassian Software. ServiceNow’s market share is estimated to have grown by 42% in 2017.

ServiceNow’s Financials

ServiceNow recently reported an impressive first quarter. Revenues for the quarter grew 30% over the year to $715.4 million but missed the market’s expectations of $717.8 million. It ended the quarter with a net income of $7 million, compared with a net loss of $17.3 million reported a year ago. Adjusted diluted EPS came in at $0.77, significantly ahead of the market’s forecast of $0.64 for the quarter. The earnings also reported an impressive growth over the previous year’s EPS of $0.43. This was the fourth consecutive quarter that the company surpassed consensus EPS estimates.

By segment, subscription revenues, adjusted for constant currency, grew 35% to $673.6 million, ahead of the management’s guided range of $664-$669 million. On an adjusted basis, professional services and other revenues grew 2% to $50.1 million.

Total billings grew 39% over the year to $1.02 billion. This was the first quarter ever that ServiceNow exceeded the billion dollar mark for its billings. Non-GAAP adjusted subscription billings grew 39% to $958.9 million and Professional services and other billings grew 30% to $61.9 million.

ServiceNow ended the year with revenues growing 35% over the year to $2.6 billion with an EPS of $2.49.

For the current quarter, ServiceNow forecast subscription billings of $736-$741 million. It expects its subscription revenues to come in at $3.256-$3.276 billion for the quarter. The market is looking for revenues of $762.92 million in total revenues with an EPS of $0.67 for the current quarter and revenues of $3.36 billion with an EPS of $3.11 for the current fiscal. ServiceNow is targeting revenues of more than $4 billion by the year 2020.

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