“Firing On All Cylinders,” Aims For $15 Billion By 2026

A record number of transactions over $1 million along with tremendous revenue growth and rising profitability in fiscal 2021 have set ServiceNow up for a bright future, the chairman and CEO said Wednesday. ServiceNow CEO Bill McDermott to financial analysts.

McDermott, in prepared remarks on an analyst call to discuss the company’s fiscal fourth quarter 2021 results, said ServiceNow is uniquely positioned for growth.

“We are growing as a fast-moving startup with the profitability of a global market leader,” he said. “We are on a clear growth trajectory to over $15 billion by 2026. While our strong cash position preserves optionality, we are not dependent on mergers and acquisitions for growth. While rising interest rates defy others, ServiceNow’s business model is designed to thrive in any economic environment.

[Related: These Were ServiceNow’s Top 6 Highest Compensated Executives In 2020]

McDermott’s optimism centers on growth across multiple indices, including fiscal fourth quarter 2021 subscription revenue growth of 30%, current remaining performance bond growth of 32%, cash flow growth of 32%, adjusted subscription billing growth of 33%, operating margin of 23% and a renewal rate of 99%.

The company also closed a record 135 deals over $1 million, which McDermott said was up 50% from a year ago.

“There has long been a benchmark of the ‘rule of 40’ for high-performing software vendors,” he said, referring to a rule of thumb that the combined growth rate and profit margin of a software publisher must exceed 40%. “These results demonstrate that ServiceNow works beyond the ‘rule of 60’. The company expands across all geographies, industries and buyer personas. »

ServiceNow does business in what McDermott called a sustained demand environment. He said the environment is characterized by structural challenges faced by all sectors across all geographies, including supply chain disruption, inflation, etc.

“These points underscore that we have consistently pushed this technology strategy to become the business strategy,” he said. “Digital technologies are a deflationary force driving growth. They power new business models, accelerating productivity while reducing costs. Eighty-five percent of CEOs will maintain or increase technology budgets this year. »

Customers have responded by implementing several ServiceNow technologies, McDermott said. Among the company’s top 20 deals in the fourth fiscal quarter, ServiceNow IT service management was in 16, IT operations management in 18, business workflow human resources service delivery employees in 11, customer service management in 13, and creator workflows in 19.

The digital opportunity continues to expand for ServiceNow, McDermott said.

“Already in 2022, we are reaching important milestones on our long-term roadmap,” he said. “We are launching a new state-of-the-art solution, ServiceNow Impact. Leaders need a command center to navigate a fully connected world. ServiceNow Impact includes an intuitive consumer mobile app that visualizes the value of transformational investments in real time on their device. As this experience accelerates user adoption, we anticipate a significant halo effect with broader consumption of our growing solution portfolio. »

To address the scale of ServiceNow’s growing business, McDermott unveiled several significant changes to its leadership team.

ServiceNow has promoted Chirantan “CJ” Desai to COO. Desai, who most recently served as the company’s chief product and engineering officer, is now responsible for solutions industries and sales in addition to product, design and engineering, he said. declared.

Kevin Haverty, CRO of ServiceNow, has been promoted to a new strategic role as Senior Advisor to the CEO where he will be responsible for expanding the company’s public sector business and mentoring early career service professionals. ‘business.

Paul Smith, president of ServiceNow’s Europe, Middle East and Africa business, has been promoted to Chief Commercial Officer where he will oversee regional sales teams as well as sales enablement and sales operations.

The company has also brought on Karen Pavlin as its new head of diversity, equity and inclusion. She previously held the same position at Accenture.

“As our market opportunities expand, we promote strong leaders for scale,” he said.

Looking ahead, ServiceNow’s ambition is to be the defining enterprise software company of the 21st century, McDermott said.

“ServiceNow’s 2021 results and strong guidance for 2022 demonstrates our unwavering confidence in this goal,” he said. “Our performance should leave no doubt: we are performing on all cylinders, and we will continue to do so. The world is looking for market leaders to build a new way of creating economic, inclusive and sustainable value. And ServiceNow keeps its promises. That’s why we adopt the brand, motto and maxim “The world works with ServiceNow”.

For its fiscal 2021 fourth quarter, which ended Dec. 31, ServiceNow reported revenue of $1.61 billion, up 29% from the $1.25 billion the company reported for its fourth fiscal quarter 2020. This includes subscription revenue of $1.52 billion, compared to $1.18 last year. billion, and professional services and other income of $91 million, up from $66 million last year.

ServiceNow also reported fiscal fourth quarter 2021 GAAP net income of $26 million, or 13 cents per share, up from $17 million a year ago, or 8 cents per share.

Net income on a non-GAAP basis for the quarter was $296 million, or $1.49 per share, up from $235 million a year ago, or $1.20 per share .

For the full fiscal year 2021, ServiceNow reported revenue of $5.90 billion, up 30% from the $4.52 billion the company reported last year. That revenue included subscription revenue of $5.57 billion, up 30% from last year, and professional services and other revenue of $323 million, up 39%.

On a GAAP basis, ServiceNow reported net income of $230 million, or $1.16 per share, up from $119 million, or 61 cents per share, reported last year. On a non-GAAP basis, the company reported net income of $1.20 billion, or $6.07 per share, compared to $926 million a year ago, or $4.79 per share.

Looking forward, ServiceNow expects fiscal first quarter 2022 subscription revenue to grow approximately 25% over its fiscal first quarter 2021 revenue, while subscription revenue for the entire he year 2022 should increase by 26% compared to 2021.

ServiceNow stock price fell 2.15% during the trading day to $484.42. However, after the company released its financial statements after the close of trading, the stock price jumped to well over $530 in after-hours trading.

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