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ServiceNow Expects Strong Sales Throughout 2020

'ServiceNow is strong in all industries across the Fortune 500 and we are confident in our opportunities, our ongoing customer demand, our solutions and in the strong pipeline we see in our business,' says CEO Bill McDermott.

ServiceNow delivered a strong first quarter even as the global coronavirus pandemic widened, with year-over-year sales up 33 percent and guidance suggesting more double-digit revenue growth ahead.

“Q1 results reinforce the strength of our portfolio,” CEO Bill McDermott told investors. “Hear this: Eighteen of our top 20 deals with companies such as Merck, Humana and Siemens included three or more products. This included our second largest customer transaction ever, which was signed with a Fortune 50-leading U.S. insurance company.”

First-quarter revenue came in at $1.04 billion, compared with $788.9 million in the year-ago quarter. For the period ended March 31, the company’s net income of $48.2 million translated to an earnings per share of 25 cents.

ServiceNow did warn that its customers have exposure to industries that have suffered downturns, so it expects those uncertainties to impact earnings going forward for the remainder of the year.

“We have provided some flexibility, and extended payment terms to a portion of our customers and those are the ones I was talking about in highly affected industries,” ServiceNow CFO Gina Mastantuono told investors. “So far, it has not been a significant portion of our customer base. We don’t anticipate that payment deferrals or adjusted payment terms will have a meaningful impact on revenue or billing.”

While no ServiceNow customer has yet asked for help with payments, Mastantuono said the company has kept its projections for free cash flow flat to anticipate working with those in hard-hit industries.

“Even as I say that, please keep in mind that ServiceNow is strong in all industries across the Fortune 500 and we are confident in our opportunities, our ongoing customer demand, our solutions and in the strong pipeline we see in our business,” McDermott said.

For the second quarter, ServiceNow is forecasting subscription revenue between $995 million and $1 billion, for 29 percent to 30 percent year-over-year growth. For the full-year 2020, it expects subscription revenue to land between $4.12 billion and $4.14 billion, representing 28 pecent to 29 percent year-over-year growth, in terms of constant currency.

“I’m talking to many CEOs and C-Suite leaders worldwide,” McDermott said. “Here’s what they’re telling me: In crisis, they are focused on protecting revenue, ensuring business continuity and driving productivity. They want an enterprise workflow platform that delivers ROI in 12 months or less. The good news is, fast time to value is a ServiceNow core strength. The ServiceNow advantage is one architecture. One data mode. One platform. This give us the strategic authority to be the clear choice for all customers across IT, employee and customer workflows across geographies, industries and personas.”

McDermott said companies including Accenture, Deloitte, DXC Technology, KPMG and others have stepped up to support shared customers during the pandemic. He also said ServiceNow has created a “Q2 Fast Start Playbook” to focus the company on its priorities as it heads into the next 90 days.

“It includes five key messages: digitally scale operations quickly and efficiently; reduce technology debt, and there’s a lot of it out there; ensure resilience for critical business operations; deliver employees the right digital experience from anywhere; and create new workflows fast. Each one of these priorities drives great employee and customer experiences.”

McDermott said the company’s messages and solutions are “resonating with every sector and every geography around the world.”

“We never stop pushing,” he said. “We will not slow down.”

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