ServiceNow Expands Its AI Portfolio

ServiceNow (NYSE: NOW) recently reported a strong second quarter that beat estimates. However, the company’s revenue outlook for the third quarter was below analyst estimates.

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ServiceNow’s Financials

Revenues for the second quarter of the year grew 41% over the year to $631.1 million, ahead of the market’s expectations of $618.3 million. Net loss was $52.7 million or $0.30 per share. Adjusted EPS of $0.49 was up 121% and beat analyst estimates of $0.43 for the quarter.

By segment, revenues from subscriptions grew 45% over the year to $585.3 million and professional services revenues were flat at $45.8 million. Subscription billings grew 36% to $616.9 million.

The strong performance in the quarter was driven by 28 deals with net new average contract value of more than $1 million. ServiceNow now has 575 customers with annual contract values of $1 million.

For the third quarter, ServiceNow projected subscription revenues of $610 -$615 million and subscription billings of $648-$653 million compared with the market’s projections of $674 million. It expects to end the current year with subscription revenues of $2.4 -$2.41 billion.

ServiceNow’s Acquisitions

ServiceNow continues to leverage the unprecedented opportunity that the SaaS companies have today and make acquisitions within the SaaS space. This year, it has already announced two acquisitions.

Last quarter, ServiceNow announced the acquisition of Seattle-based VendorHawk for an undisclosed sum. VendorHawk is a SaaS player whose cloud systems help customers discover, rationalize, and optimize SaaS subscriptions across their organization. It supports its customers by helping them manage spending on more than 36,000 SaaS applications and mapping redundant applications for them. It analyzes application utilization and optimizes SaaS subscriptions for top applications such as Salesforce, Box, and Google G Suite.

ServiceNow plans to leverage VendorHawk’s capabilities to strengthen its Software Asset Management offering. It will integrate VendorHawk within the Now Platform and offer it as part of a ServiceNow Software Asset Management release in 2019. VendorHawk’s financials are not widely known. Prior to the acquisition, it had raised seed funding of $1.3 million.

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