“We are building the best platform for digital business in the enterprise today.”. This is what ServiceNow CEO, Bill McDermott, has to say about his company’s strong returns with 28% of subscription revenues for FY 2021, and their non-gap subscription billings are up 25%.
ServiceNow, Inc. (NYSE: NOW) is a Platform-as-a-Service (PaaS) provider, that focuses on technical management support, processes, and arranges customer service requests. The company allows its customers to develop, manage, and run different applications with ease and lesser hassle. ServiceNow, Inc. currently has a $108.97 billion market capitalization. It was able to deliver a 58.67% return for the past 12 months and settled at $588.56 per share at the closing of February 1st, 2021.
According to their Q4 results, ServiceNow’s subscription revenue amounted to $1.184 billion, representing 32% YoY growth. Its operating margins were 22% and the company successfully accumulated $17 million worth of net income. There are 1,093 total customers with over $1 million annual contract value and their renewal rate is up with a spectacular 99%.
“Everything is moving into the cloud, and business models have to innovate to serve their customers in this new environment. All of those forces are core competencies of service now and that’s why we’re growing faster than everybody else. That’s why our customers love us.”, said McDermott regarding the massive growth they’re experiencing right now that was heavily influenced by the pandemic since more people got little to no choice but to use digital platforms in order to continuously operate.
“We were very strong before Covid hit. Actually, Covid accelerated digital transformation so if you think about the world’s GDP, growth in the world is actually down, yet digital transformation and the spending in digital transformation is way up”. McDermott also mentioned one of their customers, St. Jude Hospital, as one of the success stories he enjoyed for the Q4 2020. Because they had to work remotely in order to save children’s lives, and since NOW’s platform enabled them to take everything remotely, they were able to streamline their operations and deliver success in a span of just 30 days. “The point is, we can pivot so quickly in any environment, pre-Covid, Covid, and more of a hybrid world after Covid which is why we’re growing faster than all the other ones.”, marked McDermott while adding that he sees some re-ordering of the enterprise participants and that the services now will definitely continue to be the market leader even after the pandemic.
Talking about the difference-maker for the company in 2021, Bill McDermott responded by saying, “Take AT&T, PayPal, Nike, BP, USAA, these are all customers we announced as references in the quarter and what they all want to do is they want to deliver great employee experiences because they’re hiring people they never even met. They have to train them and bring them up to full productivity really fast.”. McDermott added that these companies also need to service their customers in a frictionless environment where the customer gets streaming services as an example, that they can subscribe to and have an incredible customer experience. He mentioned that in order to achieve all of these, they’ve needed to use virtual agents and AI technologies to simplify the customer experience.
“Our competitive advantage is the platform itself.”. Accordingly, ServiceNow has one platform on the best architectural foundations, and that they are doing everything ‘organically’. On a year-over-year basis, the company had 2 major product releases, together with 70% more functionality that was delivered to their customers. “There’s nobody that’s growing at more than 30% on a YoY basis at 25% operating margins with $1.5 billion in free cash flow, all spending off from organic innovation, great engineering, exceptional go-to-market in customer care. That’s why our customers are the most loyal in the business. This is sustainable and that’s why we were bullish when we came into the forecast and we remain bullish.”, he concluded.
