As the COVID-19 pandemic becomes a ‘Vaccine Economy’, investors have become more wary of enterprise software stocks as the huge drive in demand seen over the past year or two has slowed somewhat (as expected). However, workflow vendor ServiceNow is still strong on its growth opportunity, as CEO Bill McDermott told analysts this week that the company’s “organic growth machine is in full flight”.
ServiceNow surpassed the high end of its Q4 guide this week, with revenues reaching $ 1.523 billion, up 30% year-over-year.
McDermott’s confidence was remarkable in announcing the results, where he said:
The truth in our numbers is that we haven’t seen any evidence of unusual demand pull-forward in our business for 2021. It happened in a very linear and coherent way, which is really good to watch from an implementation standpoint.
And as I look at the pipelines, they keep growing, and they do that across platform, employee experience, customer experience, creator experience.
And all of this now really makes ServiceNow one of the truly common platforms for well-managed companies in the 21st century. And I think that includes a very short list of others. We are one of them.
Chief Financial Officer Gina Mastantuono said that in 2021 ServiceNow added more incremental subscription revenue than reported in 2016 – meaning the company added the equivalent of a full 2016 ServiceNow to its top line.
ServiceNow’s full-year revenue rose 28% year-over-year to $ 5.573 billion and the company now holds $ 5 billion in cash.
Dive into detail
Diginomica recently spoke with CEO Bill McDermott about ServiceNow’s strategy for 2022 and beyond, which we suggest marking a ‘new era’ for the company. The ServiceNow platform continues to expand its reach beyond its ITSM roots, with the company’s workflow strategy integrating business functions into what it calls a ‘digital control center’.
Commenting on the results this week, McDermott said:
ServiceNow is uniquely positioned. We are growing like a fast-acting start-up with the profitability of a global market leader. We are on a clear growth trajectory to $ 15 billion plus in 2026.
While rising interest rates are challenging others, ServiceNow’s business model is built to thrive in any economic environment. We are not deterred by opportunity as our customers ’demand for digital innovation continues to grow. Our organic growth machine is in full flight, and our pipeline is stronger than ever. Our 99% renewal rate is one of the few lead indicators for continued performance going forward.
There are structural challenges facing every industry in every geographical region. Great resignation, supply chain disruptions, inflation, to name a few. They emphasize a point we’ve always made, technology strategy has become business strategy.
A CEO I spoke to last week was right. “I have a long list of strategic priorities. Technology isn’t one of them, it runs through all of them.” ServiceNow’s Q4 results clearly confirm the structural incline of this digital economy. As businesses build, deploy, monitor and service technology, our business IT workflow is at the core.
Commenting on potential merger and acquisition opportunities in 2022, McDermott said ServiceNow continues to focus on organic growth. Although the company occasionally engages in small strategic acquisitions, McDermott said he is extremely cautious about using ServiceNow’s engineering capabilities to focus on integration, rather than building a platform for the future.
In Q4, ServiceNow also closed 135 deals worth more than $ 1 million, up 50% year-over-year. ITSM was 16th in its top 20 Q4 deals, with 19 deals worth more than $ 1 million; IT operations management is in 18 of its top 20, with 21 deals worth over $ 1 million; HR service delivery is in 11 of its top 20 deals, with 24 deals worth more than $ 1 million; Customer service management is in 13 of its top 20 deals, with 10 deals worth more than $ 1 million.
McDermott added:
We are seeing growth everywhere for ServiceNow. Our customers now view us as the standard platform for digital innovation. Our engineers continue to leverage the highly innovative, scalable architecture of the platform. Our customer success team has navigated the challenges at COVID without missing a beat.
Our partner ecosystem continues to develop ServiceNow practices with greater promise for long -term growth. Market forces are moving more strongly in our direction.
Our goal is to make the world a better place for everyone. Our ambition is to become the defining enterprise software company of the 21st century. ServiceNow’s results in 2021 and strong guidance for 2022 indicate our unwavering confidence in that goal.
Our performance should leave no doubt, we are implementing on all cylinders, and we will continue to do so.
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