Cloud-based enterprise applications provider ServiceNow (NYSE: NOW) recently announced its first quarter results. As usual, the company continued to outpace market expectations. In fact, given ServiceNow’s performance, the company was recently qualified as one of the “cloud kings” by analyst Jim Cramer. It has been one of my favorites as well.
ServiceNow saw its revenues grow 37% over the year to $589 million. Adjusted earnings also increased 81% over the year to $0.56 per share. The market was looking for revenues of $573 million and an EPS of $0.37 for the quarter.
By segment, Subscription revenues grew 40% to $543.3 million. Professional services and other segment revenues grew 11% to $45.9 million.
Total billings for the company grew 33% over the year to $689.4 million. Subscription billings grew 33% to $638.4 million, while Professional services and other billings grew 29% to $51 million.
For the current quarter, it expects its non-GAAP subscription revenues adjusted for constant currency to grow to $548-$553 million. It expects subscription revenues for the year to be between $2.34-$2.35 billion. Earlier, it had forecast revenues of $2.31-$2.33 billion for the year. Non-GAAP subscription billings for the year are estimated to grow to $2.76-2.77 billion, ahead of the earlier forecast of $2.74-$2.76 billion.
Last quarter, I had asked ServiceNow’s Board about its acquisition strategy. As expected, the company is leveraging the unprecedented opportunity that the SaaS companies have today, and making acquisitions within the SaaS space.
Continuing with its small acquisition strategy of last year, it recently announced the acquisition of Seattle-based VendorHawk for an undisclosed sum. VendorHawk is a SaaS player whose cloud systems help customers discover, rationalize, and optimize SaaS subscriptions across their organization. It supports its customers by helping them manage spending on more than 36,000 SaaS applications and mapping redundant applications for them. It analyzes application utilization and optimizes SaaS subscriptions for top applications such as Salesforce, Box, and Google G Suite.
ServiceNow plans to leverage VendorHawk’s capabilities to strengthen its Software Asset Management offering. It will integrate VendorHawk within the Now Platform and offer it as part of a ServiceNow Software Asset Management release in 2019. VendorHawk’s financials are not widely known. Prior to the acquisition, it appears to have received a seed funding of $1.3 million. This acquisition speaks to the strategy that many startups ought to follow: get to product market-fit with small amounts of capital, and then seek early exits into the arms of larger firms looking to bring in good products to expand their TAM, up-sell into existing customers, so forth.
Besides acquisitions, ServiceNow is also expanding offerings through tie-ups. It recently announced its partnership with Tenable, a cyber security player, to simplify and accelerate the way organizations understand, manage, and reduce cyber risk. Together, the two companies will help organizations in automatically assessing IT, Cloud, and IoT assets for vulnerabilities and prioritize management of security issues to accelerate remediation.
Questions for ServiceNow’s Board
Earlier this quarter, ServiceNow also announced the launch of an R&D center in Hyderabad, India. The new centre is its first R&D operation in Asia and is capable of housing 1,000 employees. ServiceNow plans to leverage the center to support regional and global clients with specific focus on its next generation AI and machine learning capabilities. As earlier, I would like to know if ServiceNow is scouting the Indian market for acquisitions in the space?
The market is very pleased with ServiceNow. Its stock is currently trading at $168.73 with a market cap of $29.3 billion. It had touched a high of $176.56 in March this year. The stock has climbed from the 52-week low of $93.73 that it was trading at in May last year.