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The ServiceNow Rundown: Q2 Beats Estimated Earnings, New York PDI’s, and Empowering Veterans in IT

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Our monthly ServiceNow Rundown serves to get you caught up on all things ServiceNow. In the past, we’ve covered stock options (the highs and the lows), press releases, what the insiders are talking about, new integrations, and trending topics like AI and Machine Learning.

July has seen no shortage of ServiceNow news; we had the Q2 earnings call which had an interesting ripple across the ecosystem, more insights into New York were released, new Gartner Magic Quadrants were released, and they even started promoting their Veterans program again.

Breaking Down Q2 2019 Earnings (Including the After-Hours Stock Dip)

By all accounts, ServiceNow beat their expected earnings during their Q2 earnings call on July 24, 2019.

“We delivered another strong quarter, continuing our focus on driving customer success and enabling digital transformation as a strategic partner to the world’s largest enterprises.” – John Donahoe, CEO, ServiceNow Earnings Call July 24, 2019

Donahoe isn’t wrong – ServiceNow did deliver a strong quarter, with a reported 49% increase in adjusted earnings to 71 cents per share (they were expected to report only 63 cents per share) and an increased revenue of 32% year over year, for a total of $833.9 million. At the end of the call, they even increased their total expected subscription revenue for 2019 to $3.3 billion, ahead of the previously expected revenue of $3.25 billion.

This chart, I’ll admit, it is incredibly boring. Which is actually precisely the point. It demonstrates just how steady and consistent ServiceNow’s top-line growth continues to be. A huge contributing factor to this is that their customer churn is nearly negligible at 1-2% any given quarter. By all measures, ServiceNow’s platform continues to be a high-value opportunity for its customers and investors.

So why, did ServiceNow’s stock drop over 5% in after-hours trading?

A Stock Chart By Any Other Name: Understanding the After-Hours Dip (And Rebound)

Even before the call, there was some financial analyst chatter about the stock being overvalued. But for a high growth company, having a higher valuation is not all that uncommon. At the time of the call, NOW was trading at a forward PE multiple of 69.0x, significantly higher than it’s peers such as Workday (13.4x) and Adobe (13.3x).

So, after the call in after-hours trading, investors were indeed concerned with this high valuation. It’s a catch-22 situation, where, because of their clear high growth and strong value to customers, their price is driven up but without knowing the ServiceNow story and value, on paper, there is a clear fear of high valuation.

As far as we’re concerned though, the ServiceNow growth story is far from over, and the pullback is just an opportunity for investors. With sales expected to reach $4.43 billion in 2020 and their continued strong renewal rate (currently 98%), ServiceNow is here to stay.

Important editors note: these numbers are subject to change after publication and past stock performance is never indicative of future results. Acorio’s reporting of these numbers should not be considered legal or financial advice as the author is not licensed to sell, trade or offer advice on security purchases (sincerely, my boss). 

New York is (Almost) Here

As noted in their Q2 investors call and earnings call, as well as at major events such as Knowledge19 and Future of Works, ServiceNow is slated to release their New York update in September of 2019.

That means developers, admins, and users have 2 months to prepare for the newest release. Luckily, ServiceNow releases its Product Documentation before the actual release launch. But even better than reading the release notes, is using the new version in your Personal Development Instance (PDI). We’re busy preparing our Semi-Annual release guide (check out the last one for Madrid here) and we can’t give any details away yet, but, we recommend looking through the product documentation. Besides giving you a complete upgrade checklist, looking at which parts are highlights in the notes will show you critical new elements ServiceNow is about to roll out.

Serving Our Veterans

The ServiceNow veterans program, initially started in 2018, is looking for its next cohort to begin training. Their program circles around the fact that even in the finest of circumstances, it can be tough to switch from military responsibilities to the everyday civilian life. By providing a 10 week-long full-immersion training program, The Veterans Program looks to empower veterans, along with their partners (whose unemployment is over 16%), to step into IT-related careers.

During the 10 week program, candidates are introduced to ServiceNow is several weeks of comprehensive platform training, including the options to complete the Certified Application Specialist, Certified Application Developer, and Certified Implementation Specialist-IT Service Management certifications. But the program isn’t just for ServiceNow. The main goal of the program is to make sure that these veterans and their spouses can succeed in any IT related field – so several weeks are dedicated to other high demand IT skills as well.

Brian Parks, IT Director, United States Automobile Agency (USAA) discussed the program’s benefits at Knowledge19. He focused on the fact that this program offers an option for veterans who don’t want to go back to traditional brick-and-mortar schools and plus this program replicate the military’s approach. “They hired you upfront; they paid you, put you through perfectly good training with benefits … That’s essentially what we’re doing.”

Here’s what else we’re talking about

Here’s to hoping that that is enough ServiceNow news to get you through the day, but just in case, check out our ServiceNow Insight and Vision Report for insights directly into Customer Service, HR Service Delivery, individual industry verticals and more.

ServiceNow Report

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