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ServiceNow (NOW) Q4 Earnings & Revenues Surpass Estimates

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ServiceNow (NOW - Free Report) reported fourth-quarter 2021 adjusted earnings of $1.46 per share, which beat the Zacks Consensus Estimate by 2.1% and improved 24.8% year over year.

Revenues of $1.61 billion surpassed the consensus mark by 0.8% and increased 29.1% year over year. After adjusting for forex, revenues of $1.63 billion surged 30% year over year.

Subscription revenues improved 29% year over year to $1.52 billion. After adjusting for forex, subscription revenues increased 30% year over year to $1.54 billion.

Professional services and other revenues increased 38% year over year to $91 million. After adjusting for forex, professional services and other revenues climbed at the same rate on a year-over-year basis.
 

ServiceNow, Inc. Price, Consensus and EPS Surprise

ServiceNow, Inc. Price, Consensus and EPS Surprise

ServiceNow, Inc. price-consensus-eps-surprise-chart | ServiceNow, Inc. Quote

 

ServiceNow has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation. The company now has 1,359 total customers with more than $1 million in annual contract value, representing 25.3% year-over-year growth in customers.

During the reported quarter, ServiceNow closed 135 transactions with more than $1 million in net new annual contract value, representing 52% year-over-year growth.

Billing Details

Total billings, on a non-GAAP basis, rose 33% year over year to $2.53 billion. After adjusting for forex, total billings increased 33% year over year to $2.55 billion.

Subscription billings of $2.42 billion advanced 32% year over year. After adjusting for forex, subscription billings were $2.43 billion, up 33%.

Professional services and other billings increased 43% to $113 million. After adjusting for forex, professional services and other billings climbed at the same rate on a year-over-year basis.

Operating Details

In the fourth quarter, non-GAAP gross margin was 81.1%, which contracted 40 basis points (bps) on a year-over-year basis.

Subscription gross margin of 85% contracted 10 bps year over year. Professional services and other gross margin were 15.4% compared with year-ago quarter’s figure of 16.7%.

Total operating expenses, on a non-GAAP basis, were $942 million in the reported quarter, up 26.8% year over year. As a percentage of revenues, operating expenses declined 110 bps on a year-over-year basis.

ServiceNow’s non-GAAP operating margin expanded 70 bps on a year-over-year basis to 22.7%.

Balance Sheet & Cash Flow

As of Dec 31, 2021, ServiceNow had cash and cash equivalents, and short-term investments of $3.30 billion compared with $3.03 billion as of Sep 30, 2021.

During the reported quarter, cash from operations was $844 million compared with $320 million in the previous quarter.

ServiceNow generated free cash flow of $744 million in the quarter, up from $228 million reported in the prior quarter.

At the end of the fourth quarter, remaining performance obligations or RPO were $9.7 billion, surging 34% year over year.

Guidance

For first-quarter 2022, non-GAAP subscription revenues are projected between $1.610 billion and $1.615 billion, which suggests an improvement of 25% year over year.

ServiceNow expects non-GAAP operating margin to be 25%.

For 2022, ServiceNow expects non-GAAP subscription revenues to be $7.020-$7.040 billion, which suggests a rise of 26% from the year-ago reported figure.

ServiceNow continues to expect non-GAAP gross margin to be 86% and non-GAAP operating margin to be 25%. Moreover, non-GAAP free cash flow margin is expected to be 31%.

Zacks Rank & Stocks to Consider

Currently, ServiceNow has a Zacks Rank #4 (Sell).

ServiceNow shares have underperformed the Zacks Computer & Technology sector in the past year. While NOW shares have declined 6.2%, Computer & Technology sector returned 4.5%.

Littelfuse (LFUS - Free Report) , NETGEAR (NTGR - Free Report) and Mandiant are some better-ranked stocks that investors can consider in the broader sector. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Littelfuse shares have outperformed the Zacks Computer & Technology sector in the past year. Littelfuse returned 5.1% compared with sector’s rise of 4.5%.

LFUS is set to report fourth-quarter 2021 on Feb 1, 2022.

NETGEAR shares have underperformed the Zacks Computer & Technology sector in the past year. NETGEAR shares are down 39.9%.

NTGR is set to report fourth-quarter 2021 results on Feb 2.

Mandiant shares are down 31.9% in the past year.

MNDT is set to report fourth-quarter 2021 results on Feb 8.


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