Summary
ServiceNow reported first quarter fiscal 2021 revenue of $1.36 billion, up 30.0% year over year. Gross profit rose 28.9% to $1.061 billion. Operating income nearly doubled, up 98.0% to $97 million. Net income increased 70.9% to $82.44 million. Diluted EPS rose 70.8% to $0.41. Gross margin was 78.0%, down 0.7 percentage points from the prior-year quarter. Operating margin was 7.1%, up 2.4 percentage points. On a non-GAAP basis, income from operations was $372 million, net income was $306 million, and diluted EPS was $1.52. Non-GAAP gross margin was 82%. The margin mix shows operating leverage even as gross margin slipped.
Cash generation remained strong. Operating cash flow rose 47.8% to $727 million. Capital expenditures rose 28.9% to $107 million. Deferred revenue, current portion only, rose 35.2% to $2.994 billion. Remaining performance obligations rose 33.3% to $8.80 billion. Current remaining performance obligations were $4.4 billion, up 33% year over year, or 29% adjusted for constant currency. Total billings rose 30% to $1,435 million. Subscription billings rose 29% to $1,365 million. The company ended the quarter with 1,146 customers with more than $1 million in annual contract value, up 23% year over year. Renewal rate was 97%. Foreign currency rate fluctuations had a favorable impact of $41 million on billings and $39 million on total revenues.
Operational highlights included the Quebec release of the Now Platform, which added low-code Creator Workflow tools. ServiceNow launched Vaccine Administration Management to help orchestrate vaccine distribution, administration, and monitoring. The company acquired Intellibot to add robotic process automation, AI, machine learning, and process mining to the Now Platform. Management also released its Global Impact Report covering environmental, social, and governance initiatives. The company said it doubled features and functionality in its releases over the past 18 months. These product and acquisition moves aim to expand the platform's workflow automation reach.
Guidance context is qualitative. For the full fiscal year 2021, management expects subscription revenues to increase in absolute dollars but remain relatively flat as a percentage of revenue. Cost of subscription revenues is expected to increase in absolute dollars. Subscription gross profit percentage is expected to slightly decrease for the full year. Professional services and other gross loss percentage is expected to decrease. Sales and marketing, research and development, and general and administrative expenses are each expected to increase in absolute dollars but remain relatively flat as a percentage of revenue. Stock-based compensation is expected to increase in absolute dollars but remain relatively flat as a percentage of revenue, and management expects it to decline over time as the company grows. The press release states that forward-looking guidance will be provided on the earnings conference call and webcast.
Risks remain. The COVID-19 pandemic continues to create uncertainty around customer demand, sales cycles, collections, and office reopenings. Foreign currency fluctuations can affect revenue, billings, and RPO. Competition, data security and privacy compliance, and the ability to convert remaining performance obligations into revenue are named risks. The company also faces execution risk from acquisitions and from expanding into larger enterprises and regulated organizations. Management notes that billings and RPO can vary due to contract duration, renewal timing, and foreign exchange rates. ServiceNow's liquidity position includes cash, cash equivalents, short-term investments, and long-term investments, which management expects to be sufficient for at least the next 12 months.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.36B | $1.25B | +8.8% | $1.05B | +30.0% |
| Gross profit | $1.06B | $971.2M | +9.2% | $823.0M | +28.9% |
| Gross margin | 78.0% | 77.7% | +0.3 pp | 78.7% | -0.6 pp |
| Research & development | $314.0M | $284.3M | +10.4% | $226.7M | +38.5% |
| Sales & marketing | $524.0M | $533.9M | -1.8% | $441.2M | +18.8% |
| General & administrative | $126.0M | $135.1M | -6.8% | $105.7M | +19.2% |
| Total operating expenses | $964.0M | $953.3M | +1.1% | $773.6M | +24.6% |
| Operating income (loss) | $97.0M | $17.9M | +441.0% | $49.3M | +96.6% |
| Operating margin | 7.1% | 1.4% | +5.7 pp | 4.7% | +2.4 pp |
| Net income (loss) | $82.0M | $16.6M | +392.6% | $48.2M | +70.0% |
| Net margin | 6.0% | 1.3% | +4.7 pp | 4.6% | +1.4 pp |
| Diluted EPS | $0.41 | $0.08 | +$0.33 | $0.24 | +$0.17 |
Risks
The COVID-19 pandemic continues to create significant global economic uncertainty and could cause curtailed customer demand, reduced customer spend or contract duration, delayed collections, lengthened payment terms, lengthened sales cycles, or increased competition. The extent and duration of the impact on future results remains uncertain.
ServiceNow signs a significantly higher percentage of new and expansion agreements in the fourth quarter, often in the last month or last two weeks of a quarter, and this seasonality could be heightened by COVID-19 impacts on customers and sales cycles. Billings may not reflect actual performance for a reporting period.
An increasing percentage of contracts and billings are in foreign currencies, particularly the Euro and British Pound Sterling, causing variability in RPO and billings. In Q1 2021, foreign currency rate fluctuations had a favorable impact of $41 million on billings and would have made subscription revenues $37 million lower if translated at prior-year rates.
Subscription gross profit percentage was 82% for Q1 2021 compared to 84% for Q1 2020, and ServiceNow expects it to slightly decrease for FY2021 due to incremental costs for customers in regulated markets to move to its public cloud offering and increased support for new and evolving data residency requirements.
The 2022 Notes are convertible at holders' option, and ServiceNow paid cash to settle $34 million in principal during Q1 2021 and repurchased $497 million in aggregate principal. It expects to settle approximately $30 million in principal during Q2 2021 and may receive additional conversion requests, which could affect liquidity depending on settlement method.
ServiceNow maintains a full valuation allowance on U.S. federal and state deferred tax assets, and its effective tax rate was 17% for Q1 2021. It expects the effective tax rate could fluctuate significantly on a quarterly basis and be adversely affected if earnings are lower than anticipated in lower-tax jurisdictions or higher than anticipated in higher-tax jurisdictions.
Stock-based compensation increased 35% to $256 million for Q1 2021 and represented 19% of revenues, driven by additional grants to current and new employees. ServiceNow expects stock-based compensation to continue increasing in absolute dollars for FY2021, and it is inherently difficult to forecast due to stock price fluctuations.
A majority of revenues come from large global enterprise customers, and revenues from the direct sales organization represented 80% of total revenues for Q1 2021. Dependence on large enterprise buying patterns and direct sales execution could amplify the impact of delayed or reduced customer spending.
SaaS KPIs
All quarters →Non-GAAP operating margin
Free cash flow margin
Free cash flow
Renewal rate
Current remaining performance obligations (cRPO)
Remaining performance obligations (RPO)
Subscription Billings
Total Billings
Customers with > $1M Annual Contract Value
Summary, forecast, risks and KPIs are extracted from ServiceNow, Inc.'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.