About one month has passed since the last ServiceNow earnings report (now —— Free report). During this period, the stock price rose by approximately 6.4%, outperforming the S&P 500 Index.
Will recent positive trends continue to lead to its next earnings release, or will ServiceNow pull back? Before we delve into the recent reactions of investors and analysts, let’s take a quick look at recent earnings reports to better understand the important drivers.
ServiceNow Q2 earnings and revenue exceed expectations
ServiceNow’s adjusted earnings per share for the second quarter of 2021 was US$1.42, which exceeded the Zacks consensus estimate by 18.3% and increased by 15.4% year-on-year.
Revenue was US$1.41 billion, an increase of 3.9% over the market consensus and a year-on-year increase of 31.6%. After adjusting for foreign exchange, revenue was US$1.36 billion, a year-on-year increase of 27.2%.
Subscription revenue increased by 31% year-on-year to US$1.33 billion. After adjusting for foreign exchange, subscription revenue increased by 27% year-on-year to US$1.29 billion.
Professional services and other revenues increased 41% year-on-year to $79 million. After adjusting for foreign exchange, professional services and other income increased by 36% to 76 million US dollars.
ServiceNow has been benefiting from the increasing adoption of its workflow by companies undergoing digital transformation. The company currently has 1,201 customers with annual contracts worth more than $1 million, and the number of customers has increased by 25% year-on-year.
The company’s expanding partner base is positive. During the reporting quarter, ServiceNow announced its integration with Microsoft’s new Windows 365 solution, allowing users to easily access cloud PCs directly through Microsoft Teams.
Settlement details
Based on non-GAAP calculations, total bills increased by 31.2% year-on-year to US$1.42 billion. After adjusting for foreign exchange, the total bill increased by 26% year-on-year to US$1.36 billion.
The subscription fee of US$1.33 billion increased by 30.5% year-on-year. After adjusting foreign exchange, the subscription fee was US$1.28 billion, an increase of 25%.
Professional services and other bills increased 43.5% to $89 million. After adjusting for foreign exchange, professional services and other bills were $86 million, an increase of 39%.
Business details
In the second quarter, non-GAAP gross profit margin was 85%, a year-on-year decrease of 200 basis points (bps).
The 85% subscription gross profit margin decreased by 200 basis points year-on-year. Professional services and other gross margins were 17%, compared with 14% in the same period last year.
Based on non-GAAP calculations, total operating expenses for the reporting quarter were US$789 million, a year-on-year increase of 33.3%.
ServiceNow’s non-GAAP operating margin decreased by 300 basis points year-on-year to 25%.
Balance sheet and cash flow
As of June 30, 2021, ServiceNow has cash and cash equivalents and short-term investments of US$2.98 billion, compared with US$3.46 billion as of March 31, 2021.
In the reported quarter, operating cash was US$300 million, compared with US$727 million in the previous quarter.
ServiceNow generated free cash flow of US$268 million this quarter, lower than the US$627 million reported in the previous quarter.
As of the end of the second quarter, the remaining performance obligations (RPO) were US$4.7 billion, a year-on-year increase of 34%.
guide
For the third quarter of 2021, non-GAAP subscription fees are expected to be between US$1.32 billion and US$1.325 billion, which means a year-on-year increase of 23%.
ServiceNow expects a non-GAAP operating margin of 23%.
For 2021, ServiceNow expects non-GAAP subscription fees to be between $632 and $6.325 million, which means a 27% increase from the figure reported a year ago.
ServiceNow continues to expect a non-GAAP gross margin of 85% and a non-GAAP operating margin of 24.5%. In addition, the non-GAAP free cash flow margin is expected to be 31%.
How have the estimates changed since then?
In the past month, investors have witnessed an upward trend in valuation reviews.
VGM score
Currently, ServiceNow has a high growth score of A, although it lags far behind C in terms of momentum score. A somewhat similar path was drawn, the stock was assigned a grade of D in terms of value, placing it at the bottom 40% for this investment strategy.
Overall, the total VGM score for this stock is C. If you are not focused on a strategy, then you should be interested in this score.
Appearance
Estimates for the stock are generally on the rise, and the magnitude of these revisions looks promising. It is worth noting that ServiceNow’s Zacks ranks third (holding). We expect that the stock will receive online returns in the next few months.
.
#ServiceNow #earnings #report #continue #August
More from Source