ServiceNow beats Q4 estimates with solid growth in large deals
ServiceNow on Wednesday published fourth quarter financial results that beat market expectations, in part thanks a significant number of large transactions. The company also announced a series of executive leadership promotions, including the promotion of Chief Product and Engineering Officer Chirantan "CJ" Desai to chief operating officer (COO).
ServiceNow's Q4 non-GAAP basic earnings per share came to $1.49, while diluted EPS was $1.46. Revenue for the quarter was $1.629 billion, up 30% year-over-year.
Analysts were expecting earnings of $1.43 per share on revenue of $1.6 billion.
During the quarter, ServiceNow closed 135 transactions over $1 million in net new annual contract value, representing 52% year-over-year growth. The company now has 1,359 total customers with more than $1 million in annual contract value, representing 25% year-over-year growth in customers.
"We're growing like a fast-moving startup with the profitability of a global market leader," CEO and President Bill McDermott said on a conference call Wednesday. "We are not opportunity constrained, as our customers' need for digital transformation is ever expanding."
The company is on a "clear growth trajectory" to more than $15 billion in revenue by 2026, he said.
Breaking down ServiceNow's large deals by category: IT service management was included in 16 of the company's top 20 deals in Q4, with 19 over $1 million. IT operations management was in 18 of the top 20, with 21 deals over $1 million. HR service delivery was in 11 of the top 20 deals, with 24 deals over $1 million. Customer service management was in 13 of the top 20 deals, with 10 over $1 million.
Subscription revenues in Q4 totaled $1.523 billion, representing 29% year-over-year growth. Fourth Quarter non-GAAP subscription billings were $2.42 billion, up 33% year-over-year.
The company reported current remaining performance obligations in Q4 of $5.7 billion, an increase of 29%.
For the full 2021 fiscal year, ServiceNow reported basic non-GAAP earnings per share of $6.07 and a diluted EPS of $5.92. Revenue for the full year was $5.813 billion, up 29%.
For the full year, non-GAAP subscription billings were $6.494 billion, up 28% year-over-year.
The company's 2021 operating margin was 25%, and its free cash flow margin was 32%.
In addition to announcing Desai's promotion to COO, ServiceNow said that Chief Revenue Officer Kevin Haverty has been promoted to a new strategic role as senior advisor to the CEO. President of EMEA Paul Smith has been promoted to chief commercial officer. Additionally, on Feb. 1, ServiceNow will bring on former Salesforce and Coca-Cola executive Ulrik Nehammer as its new president of EMEA (Europe, Middle East, Africa).
"As our business continues to accelerate, we are strengthening our leadership team for scale," McDermott said in a statement.
As for the outlook, ServiceNow expects subscription revenues in Q1 between $1.16 billion and $1.615 billion. For the full 2022 fiscal year, it expects subscription revenues between $7 billion and $7.04 billion, representing 26% year-over-year growth.