ServiceNow, Inc. (NYSE: NOW) Q4 2021 Earnings Highlights
Bill McDermott, CEO:
“…ServiceNow has once again delivered results that significantly beat the high end of expectations.Here’s the Q4 rundown in constant currency. Subscription revenue growth was 30%. CRPO growth was 32%. Free cash flow growth was 32%. Adjusted subscription billings growth was an exceptional 33%. Operating margin was 23%, one point over our guidance. We had a record 135 deals over $1 million, which was up 50% year-over-year. There has long been a Rule of 40 benchmark for highly successful software companies. These results demonstrate that ServiceNow operates beyond the Rule of 60. The company is expanding in all geographies, industries and buyer personas. Gina will share the details in a few moments, including our strong 2022 guidance.
ServiceNow is uniquely positioned. We’re growing like a fast-moving start-up with the profitability of a global market leader. We’re on a clear growth trajectory to $15 billion plus by 2026. While our strong cash position preserves optionality, we don’t depend on M&A for growth. While rising interest rates challenge others, ServiceNow’s business model is built to flourish in any economic environment. We are not opportunity constrained as our customers’ need for digital transformation is ever expanding. Our organic growth machine is in full flight, and our pipeline is stronger than ever. Our 99% renewal rate is one of several lead indicators for sustained performance moving forward.
I’d like to thank all of our stakeholders, especially our customers for their steadfast confidence in ServiceNow. I’ll give you the breakdown of our portfolio results, but first, let’s discuss the market dynamics. We’re in a sustained demand environment here. There are structural challenges facing every industry in every geographic region. The great resignation, supply chain disruption, inflation, to name a few. These underscore a point we have made consistently, the technology strategy has become the business strategy.
Digital technologies are growth-stimulating deflationary force. They power new business models, accelerating productivity while reducing costs. 85% of chief executives will sustain or increase technology budgets this year, and that’s according to IDC’s global CEO survey. IDC has increased their forecast for digital transformation, now a $10.7 trillion opportunity through 2025. Gartner forecasts worldwide software spending will increase 12% in 2022. The data shows this is clearly more than a pandemic-induced transformation.
A CEO I spoke to last week said it perfectly. “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 validate the structural incline of this digital economy. As enterprises build, deploy, monitor and service technology, our IT workflow business is at the core. IT service management was in 16 of our top 20 Q4 deals, with 19 deals over $1 million. IT operations management was in 18 of our top 20, with 21 deals over $1 million.
Bell Canada, Canada’s largest telco company, uses IT workflows and IT operations management to enable its operations. Our platform will improve critical dimensions of both asset management and the employee experience. ServiceNow will also be supporting the United States space force to connect its space operators with warfighters across the globe.
The hyper focus on hybrid work continues to propel our employee workflows business. HR service delivery was in 11 of our top 20 deals, with an exciting 24 deals over $1 million. Johnson Controls International, a smart building solutions leader, will use employee workflows to unlock productivity for its 105,000 employees. Together with ServiceNow, they are focused on creating a human-centered approach to the employee experience.
NVIDIA is using employee workflows to support its employee experience transformation. With ServiceNow, NVIDIA will provide its global employees a unified service model to support its mission by providing a frictionless employee experience. CVS Health will also leverage our technology and employee workflows to help deliver a best-in-class colleague experience.
As business integration is key to customer service, our customer workflows business is thriving. Customer service management was in 13 of our top 20 deals, with 10 deals over $1 million. Google Cloud plans to use our customer workflows to enhance its customer support operations. British Telecom chose ServiceNow to address the needs of its next generation of customers. The ServiceNow platform will help BT accelerate the delivery of new services from 36 weeks to three.
Our new industry vertical solutions also continue to gain traction with wins at major brands, including SaaS Institute, Deutsche Telekom and Wellstar. Technology teams alone can’t build the 500 million new applications IDC forecasts by 2023. Our creative workflows business is leading the citizen developer revolution. Our platform solutions were in 19 of our top 20 deals….”