ServiceNow beats Q4 expectations on 30% revenue growth

ServiceNow Inc. delivered its fourth quarter financial results today, beating expectations on earnings and revenue as it closed on a significant number of large transactions. The company also promoted a number of its senior executives as its stock gained almost 10% in extended trading.

ServiceNow reported earnings before certain costs such as stock compensation of $1.49 per share on revenue of $1.629 billion in the quarter, up 30% from a year ago. That was better than expected, with Wall Street modeling earnings of just $1.43 per share on sales of $1.6 billion.

During the quarter, the company said it closed on 135 transactions with over $1 million in net new annual contract value, up 52% from a year ago. ServiceNow said it now counts 1,359 customers with over $1 million in ACV, up 25% from the same period last year.

ServiceNow President and Chief Executive Bill McDermott (pictured) said the company “beat the high end of expectations” with its fourth quarter results, adding that customer demand is “stronger than ever”.

“Our unique culture has made us one of the best places to work,” McDermott added. “We are growing like a fast-moving startup with the profitability of a global market leader.”

ServiceNow’s growth was evident in its subscription revenue too, which rose 29% from a year ago to $1.523 billion. Further, it reported remaining performance obligations of $5.7 billion in the quarter, up 29%. RPO represents the total future performance obligations arising from the company’s contractual relationships. More specifically, it is the sum of the invoiced amount and the future amounts not yet invoiced for a contract with a customer.

ServiceNow sells software that’s used by enterprise’s information technology departments to track and manage the services they provide. Its platform also provides administrative and workflow management tools, and in more recent times it has expanded from that core business to provide human resources, customer service management and IT security tools.

The company has been so successful that it’s credited with helping to popularize workflow as a concept. It is hugely ambitious too, aiming to do more than $15 billion in annual revenue by 2026.

ServiceNow’s chief financial officer Gina Mastantuono said today the company remains on track to hit that target.

“The company is firing on all cylinders and we enter 2022 with tremendous momentum,” she said. “We expect constant currency subscription revenue growth to accelerate year-over-year in Q1, setting us up for another strong year and putting us well on our way to becoming a $15 billion plus revenue company.”

It still has some way to go though. For the full 2021 fiscal year, ServiceNow reported revenue of $5.831 billion, up 28% from the previous year.

Still, McDermott told MarketWatch in an interview he had reason to be confident in ServiceNow’s future growth prospects.

“In this macro environment of a Great Resignation, supply-chain disruption and inflation, digital technologies are a growth-stimulating deflationary force,” he said. “These results show that ServiceNow’s business model is set to flourish in any economic environment.”

In its executive reshuffle, ServiceNow said it’s promoting Chief Product and Engineering Officer Chirantan “CJ” Desai to become its new chief operating officer. As COO, Desai’s expanded responsibilities will include industry and solution sales, with the goal of accelerating customer adoption of the company’s suite of products.

Elsewhere, the company said its chief revenue officer Kevin Haverty has been promoted to a new strategic role as senior advisor to McDermott. Meanwhile, ServiceNow’s president of Europe, Middle East and Africa, Paul Smith, was appointed as its new chief commercial officer. Finally, ServiceNow said it will hire former Salesforce.com Inc. and Coca-Cola Co. executive Ulrik Nehammer as its new president of EMEA.

For the next quarter, ServiceNow said it’s forecast subscription revenue of between $1.61 billion and $1.615 billion. The midpoint of that forecast is ahead of Wall Street’s projection of $1.62 billion in subscription revenue.

Photo: World Economic Forum/Flickr