ServiceNow, Inc. reports 117% EBITDA growth in 2018 and 36.0% Revenue growth
01/30/2019 • About ServiceNow, Inc. (
$NOW) • By InTwits
ServiceNow, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- ServiceNow, Inc. is a fast growth stock: 2018 revenue growth was 36.0%, 5 year revenue CAGR was 43.8% at 2018 ROIC -2.2%
- ServiceNow, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 was 21.9% while average EBITDA Margin was -5.2% for the sames years
- ServiceNow, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.1%. At the same time it's a lot of higher than industry average of 3.1%.
- CAPEX is quite volatile: $224m in 2018, $151m in 2017, $106m in 2016, $87m in 2015, $54m in 2014
- The company has unprofitable business model: ROIC is -2.2%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.9x while industry average is -1.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
ServiceNow, Inc.'s Revenue jumped on 36.0%. Revenue growth showed slowdown in 18Q4 - it was 30.3% YoY. Revenue decline was accelerating on average at -5.9 pp per annum in 2014-2018. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.9 pp from 32.3% to 34.2% in 2018.
Gross Margin increased on 2.2 pp from 73.9% to 76.1% in 2018. Gross Margin grew at 3.2 pp per annum in the last 5 years. SG&A as a % of Revenue showed almost no change in 2018. SG&A as a % of Revenue followed a declining trend at -1.8 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018.
Net Income margin increased on 5.1 pp from -6.1% to -1.0% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 8.6%. The company's CAPEX/Revenue showed almost no change from 2015 to 2018. Average CAPEX/Revenue for the last three years was 8.0%. To secure its fast growth ServiceNow, Inc. made large investments to CAPEX (209% of EBITDA).
Accounts receivable as a % of Revenue decreased slightly on 0.75 pp from 22.8% to 22.0% in 2018. Accounts payable as a % of Revenue decreased slightly on 1.5 pp from 6.4% to 4.9% in 2018.
ServiceNow, Inc. has spent
$37m on M&A in 2018 which accounts for 1.4% of revenue.
Return on investment
The company operates at negative ROIC (-2.2%) and ROE (-2.8%). ROIC increased on 2.2 pp from -4.4% to -2.2% in 2018. ROE surged on 17.2 pp from -20.0% to -2.8% in 2018.
Leverage (Debt)
Debt level is 0.9x Net Debt / EBITDA and 6.2x Debt / EBITDA. Net Debt / EBITDA dropped on 8.1x from 9.0x to 0.9x in 2018. Debt dropped on 43.6% while cash dropped on 22.1%.
The company has no short term refinancing risk: short term debt is zero.
Average interest expence charged on company's debt was 8.0% in 2018.
Management team
The company's CEO John J Donahoe II is a founder and has spent 2 years with the company. CEO total compensation was
$16,682,644 in 2018 which included
$750,000 salary. Michael P Scarpelli "Mike" is a the company's CFO. Michael P Scarpelli "Mike" has spent 8 years at the company.
At the end of financial year the company had 0.82% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 8,154 employees. The number of employees jumped on 31.1%. Average revenue per employee in 2018 was
$319,943 and it increased on 3.8%.
Financial and operational results
FY ended 12/31/2018
ServiceNow, Inc. ($NOW) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 683 | 1,005 | 1,391 | 1,918 | 2,609 | 36.0% |
| Gross Profit | 434 | 676 | 992 | 1,419 | 1,986 | 40.0% |
| SG&A | 437 | 625 | 859 | 1,106 | 1,499 | 35.6% |
| EBITDA | -110 | -106 | -340 | 49 | 107 | 116.6% |
| EBIT | -152 | -166 | -423 | -64 | -42 | |
| Interest expence | 29 | 31 | 33 | 53 | 53 | -1.2% |
| Tax | 4 | 5 | 2 | 3 | -12 | -458.1% |
| Net Income | -179 | -198 | -452 | -117 | -27 | |
| Stock Based Compensation | 152 | 258 | 318 | 394 | 544 | 38.1% |
Balance Sheet
|
|---|
| Cash | 252 | 412 | 401 | 726 | 566 | -22.1% |
| Accounts Receivable | 159 | 203 | 323 | 437 | 575 | 31.5% |
| Accounts Payable | 18 | 37 | 38 | 32 | 31 | -4.3% |
| Short Term Debt | 0 | 0 | 0 | 543 | 0 | -100.0% |
| Long Term Debt | 443 | 475 | 508 | 630 | 662 | 5.0% |
Cash flow
|
|---|
| Capex | 54 | 87 | 106 | 151 | 224 | 49.1% |
| Acquisitions | 100 | 1 | 34 | 58 | 37 | -35.7% |
Ratios
|
|---|
| Revenue growth | 60.7% | 47.3% | 38.3% | 38.0% | 36.0% | |
| EBITDA growth | 193.9% | -3.4% | 220.5% | -114.6% | 116.6% | |
|
|---|
| Gross Margin | 63.6% | 67.2% | 71.3% | 73.9% | 76.1% | 2.2% |
| EBITDA Margin | -16.1% | -10.5% | -24.4% | 2.6% | 4.1% | 1.5% |
| EBIT Margin | -22.2% | -16.5% | -30.4% | -3.4% | -1.6% | 1.7% |
| SG&A, % of revenue | 64.1% | 62.2% | 61.8% | 57.6% | 57.5% | -0.2% |
| SBC, % of revenue | 22.3% | 25.6% | 22.8% | 20.5% | 20.9% | 0.3% |
| Net Income Margin | -26.3% | -19.7% | -32.5% | -6.1% | -1.0% | 5.1% |
| CAPEX, % of revenue | 8.0% | 8.7% | 7.6% | 7.8% | 8.6% | 0.8% |
|
|---|
| ROIC | -18.0% | -17.2% | -43.0% | -4.4% | -2.2% | 2.2% |
| ROE | -43.6% | -39.9% | -94.7% | -20.0% | -2.8% | 17.2% |
| Net Debt/EBITDA | | | | 9.0x | 0.9x | -8.1x |
| Interest expence / Average debt | 6.6% | 6.8% | 6.8% | 6.4% | 8.0% | 1.6% |
People
|
|---|
| Insider ownership | 0.8% | 0.8% | 0.8% | 0.8% | 0.8% | 0.0% |
| Employees | 2,826 | 3,686 | 4,801 | 6,222 | 8,154 | 31.1% |
| Revenue/Employee, th. $ | 242 | 273 | 290 | 308 | 320 | 3.8% |
ServiceNow, Inc. ($NOW) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 589 | 631 | 673 | 715 | | 37.4% | 40.8% | 36.7% | 30.3% |
| EBITDA | 13 | 3 | 47 | 43 | | 282.3% | | 86.1% | 39.2% |
| Net Income | 11 | -53 | 8 | 7 | | | | | |
Balance Sheet
|
|---|
| Cash | 683 | 705 | 704 | 566 | | 55.2% | -39.9% | -36.3% | -22.1% |
| Short Term Debt | 517 | 211 | 161 | 0 | | | | | -100.0% |
| Long Term Debt | 638 | 646 | 654 | 662 | | 23.5% | -43.4% | -43.5% | 5.0% |
Ratios
|
|---|
| Gross Margin | 75.7% | 75.7% | 76.5% | 76.5% | | 2.7% | 3.0% | 2.4% | 0.9% |
| EBITDA Margin | 2.2% | 0.5% | 7.0% | 6.1% | | 1.4% | 2.9% | 1.9% | 0.4% |
| Net Income Margin | 1.8% | -8.4% | 1.2% | 1.0% | | 6.8% | 4.1% | 5.8% | 4.1% |
Peers in Systems Software
Below you can find ServiceNow, Inc. benchmarking vs. other companies in Systems Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Advantego Corp ($ADGO) | | | | | 973.8% |
| Solbright Group Inc ($SBRT) | | | 286.4% | 25.4% | 414.0% |
| Duos Technologies Group Inc ($DUOT) | | 61.0% | -9.8% | -36.4% | 210.2% |
| Dell Technologies Inc. ($DVMT) | | | | | 145.7% |
| Finjan Holdings, Inc. ($FNJN) | | -6.2% | 292.3% | 174.6% | 63.0% |
| |
|---|
| Median (48 companies) | | 18.2% | 14.6% | 14.0% | 19.0% |
|---|
| ServiceNow, Inc. ($NOW) | | 47.3% | 38.3% | 38.0% | 36.0% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StrikeForce Technologies Inc ($SFOR) | 97.0% | 96.9% | 98.3% | 95.4% | 94.0% |
| Varonis Systems, Inc. ($VRNS) | 90.2% | 90.6% | 90.5% | 90.4% | 89.8% |
| Check Point Software Technologies Ltd. ($CHKP) | 88.2% | 88.5% | 88.5% | 88.6% | 89.6% |
| Tableau Software, Inc. ($DATA) | 91.0% | 88.7% | 88.0% | 87.1% | 87.7% |
| Attunity Ltd. ($ATTU) | 90.7% | 84.9% | 83.9% | 84.1% | 87.5% |
| |
|---|
| Median (53 companies) | 77.0% | 75.4% | 73.6% | 74.1% | 73.5% |
|---|
| ServiceNow, Inc. ($NOW) | 63.6% | 67.2% | 71.3% | 73.9% | 76.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 54.3% | 52.4% | 49.8% | 50.7% | 48.8% |
| SolarWinds Corporation ($SWI) | | | -8.0% | 44.0% | 44.8% |
| Finjan Holdings, Inc. ($FNJN) | -192.1% | -295.2% | 2.2% | 30.2% | 42.0% |
| Oracle Corporation ($ORCL) | 46.2% | 43.8% | 40.8% | 40.2% | 40.8% |
| CA Inc. ($CA) | 33.9% | 36.7% | 37.2% | 36.1% | 35.3% |
| |
|---|
| Median (47 companies) | 1.0% | -5.0% | -8.0% | -5.4% | -4.7% |
|---|
| ServiceNow, Inc. ($NOW) | -16.1% | -10.5% | -24.4% | 2.6% | 4.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| The Rubicon Project, Inc. ($RUBI) | 15.6% | 11.4% | 12.0% | 26.0% | 16.0% |
| CYREN Ltd. ($CYRN) | 2.4% | 4.4% | 3.2% | 5.8% | 9.2% |
| Qualys, Inc. ($QLYS) | 10.4% | 12.2% | 11.7% | 16.4% | 8.2% |
| Zscaler, Inc. ($ZS) | | 12.5% | 7.8% | 6.5% | 8.0% |
| Marizyme Inc ($MRZM) | | 0.0% | 0.0% | 0.0% | 6.9% |
| |
|---|
| Median (48 companies) | 2.7% | 2.1% | 2.0% | 2.2% | 2.5% |
|---|
| ServiceNow, Inc. ($NOW) | 8.0% | 8.7% | 7.6% | 7.8% | 8.6% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Finjan Holdings, Inc. ($FNJN) | -42.6% | -113.5% | 3.4% | 46.6% | 64.1% |
| Fortinet, Inc. ($FTNT) | 9.2% | 2.1% | 5.3% | 15.0% | 28.0% |
| Check Point Software Technologies Ltd. ($CHKP) | 22.2% | 23.7% | 24.7% | 26.8% | 25.5% |
| MAM Software Group, Inc. ($MAMS) | 13.3% | 19.3% | 21.1% | 24.2% | 25.2% |
| Red Hat, Inc. ($RHT) | 15.1% | 14.1% | 14.2% | 16.4% | 22.4% |
| |
|---|
| Median (56 companies) | 0.0% | 0.0% | 0.0% | -2.9% | -0.9% |
|---|
| ServiceNow, Inc. ($NOW) | -18.0% | -17.2% | -43.0% | -4.4% | -2.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NXT-ID Inc. ($NXTD) | | | | | 9.7x |
| Symantec Corporation ($SYMC) | -3.2x | -1.5x | -5.0x | 10.0x | 4.7x |
| SolarWinds Corporation ($SWI) | | | | 6.2x | 4.1x |
| Oracle Corporation ($ORCL) | 0.4x | 1.2x | 1.6x | 2.4x | 2.4x |
| MAM Software Group, Inc. ($MAMS) | -2.0x | -1.5x | 2.1x | 1.4x | 0.4x |
| |
|---|
| Median (22 companies) | -2.4x | -1.4x | -1.2x | -0.8x | -0.5x |
|---|
| ServiceNow, Inc. ($NOW) | | | | 9.0x | 0.9x |
