American software and digital workflow firm ServiceNow posted strong sales in Q4’21 thanks to high customer growth and “sustained demand”. The company’s quarterly and annual results exceeded even the high end of the previous quarter of its guidance, on all metrics.
CEO Bill McDermott took the encouraging results as an opportunity to dismiss any suggestions that ServiceNow should look at on mergers and acquisitions for growth. He suggested that M&A is bad for technology integration and not popular with engineers who have to work with them – a tactic that will surely endear him to his former colleagues at SAP, where McDermott oversaw more than 30 taking.
Subscription revenues, which account for approximately 95 percent of total revenue, rose to $ 1.5 billion in Q4’21, up 29 percent YoY. Full -year subscription revenues reached $ 5.6 billion, up 30 percent YoY. Professional services and other revenue rose 38 percent in Q4 and 39 percent for the full year, to $ 91 million and $ 323 million, respectively.
ServiceNow’s net revenue was $ 26 million to $ 1.6 billion in total revenue (up 29 percent) for the quarter, and $ 230 million to $ 5.9 billion (up 30 percent) in revenues for the year.
The Santa Clara, California -based company closed 135 transactions in Q4, with more than $ 1 million in net new annual contract value, representing 52 percent YoY growth. The company now has 1,359 total customers, representing 25 percent annual growth.
“We’re in a sustainable environment of demand here,” CEO Bill McDermott said on the company’s earnings call. McDermott added that ServiceNow expects sales to increase approximately 25 percent YoY to $ 1.6 billion in the quarter ending March 2022.
“The truth in our numbers is 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 something that is good to watch from a implementation perspective.
“And as I look at the pipelines, they keep growing, and they’re doing that across platforms, employee experience, customer experience, creator experience.”
The CEO of ServiceNow said the company is “on a clear growth trajectory to $ 15 billion-plus by 2026.”
McDermott said the growth has been fueled by customers using many of ServiceNow technologies in recent months.
ServiceNow IT Service Management was in 16 of the company’s top 20 deals in the fourth fiscal quarter. Creator Workflows is at 19 of them, IT Operations Management at 18, Customer Service Management at 13, and Employee Workflows human resources service delivery at 11.
“The party is just getting started,” McDermott said in an interview with Bloomberg.
Despite strong sales, the competitive landscape is becoming more harsh, especially as ServiceNow tries to expand its commercial base.
SAP, Salesforce, Atlassian and Workday are among the companies that are fast becoming significant rivals to ServiceNow.
Analysts are increasingly debating the need for a major acquisition, to help ServiceNow increase its market share in areas where it is lagging.
McDermott used the earnings call to exclude anything beyond small strategic acquisitions, such as buying Lightstep in May for an unspecified amount.
ServiceNow will continue to focus on organic growth and “doesn’t have to take technology from anyone or any other company to fulfill our dreams,” he said.
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