Introduction
ServiceNow was founded on a simple premise: to make work flow better.
Its purpose is to make the world work better for everyone. Its intelligent platform, the Now Platform, is a cloud-based solution with embedded artificial intelligence and machine learning capabilities that helps global enterprises across industries, universities and governments unify and digitize their workflows. The Now Platform automates workflows across an entire enterprise by connecting disparate departments, systems and silos in a seamless way to unlock productivity and improve experiences for both employees and customers. Its workflow applications built on the Now Platform are organized along four primary areas: Technology, Customer and Industry, Employee and Creator. The transformation to digital operations, enabled by the Now Platform, increases our customers’ resiliency and security and delivers great experiences and additional value to their C-suite, employees and consumers.
Liquidity and solvency
At December 31, 2023, ServiceNow’ s total assets reached $17.4 billion, an increase of 31%,compared to $13.3 billion at December 31, 2022.
In 2023, ServiceNow’ s current assets were $7.7 billion and current liabilities were $7.37 billion. The current ratio was 1.05.
Many software service companies have a large amount of deferred revenues, and ServiceNow is not an exception.
In 2023, the current portion of ServiceNow’ s deferred revenue reached $5.8 billion.
Therefore, the current ratio is underestimated.
After deducting deferred revenue from current liabilities, the current ratio is 4.9. In 2023, current assets covered current liabilities 4.9 times, which indicated that the liquidity was rather strong.
The renewal rate of ServiceNow’ s products is very high, reaching 98%. This shows that ServiceNow’ s products have a strongly competitive advantage, and the customers are very satisfied, or the customers have high sunk costs.
In 2023, ServiceNow’ s total liabilities were $9.76 billion, with a debt ratio of 56%.
Profitability Analysis
ServiceNow’ s revenues were $9 billion, $7.2 billion, and $5.9 billion in 2023, 2022, and 2021, respectively.
In 2023, ServiceNow’ s revenues increased by 25% year-on-year.
In 2022, ServiceNow’ s revenues increased by 22% year-on-year.
In the past two years, the revenues has grown very rapidly.
The operating profits for ServiceNow reached $76 million, $36 million, and $26 million in 2023, 2022, and 2021, respectively.
We can see that the operating margins are very low.
why?
We believe stock compensation is to blame.
In the cash flow statement, ServiceNow’ s stock compensation were $1.6 billion, $1.4 billion, and $1.13 billion in 2023, 2022, and 2021, respectively.
We can regard operating profit plus stock compensation as adjusted operating profit. Now the adjusted operating profit for ServiceNow was $1.676 billion, $1.436 billion, and $1.156 billion in 2023, 2022, and 2021, respectively.
Cash flow analysis
ServiceNot’ s net cash provided by operating activities was $3.4 billion, $2.7 billion, and $2.2 billion in 2023, 2022, and 2021, respectively.
In 2023, the ratio of net cash provided by operating activities to adjusted operating profit reached 2:1.
The cash flow is very strong.
Summary
ServiceNow’ s operating activities have provided strong cash flow.
ServiceNow’ s market capitalization is $155 billion, and the stock is too expensive.
Disclaimer: The content is for reference only and does not constitute investment advice.
