There have been a number of stars during the latest earnings season, part of a generally robust performance from the tech sector, says Rob DeFrancesco, editor of Tech-Stock Prospector.
In the software sector, ServiceNow (NOW) — a holding in our Vulture Portfolio — had an exemplary quarter, sending the shares in early May to a new all-time high of $98.19.
The stock has advanced 78% since being added to the portfolio in August 2014 at $55. ServiceNow over the past few years has done an outstanding job transforming itself into a multi-product cloud vendor, while continuing to build share in its core service automation segment.
In the first quarter, 53% of ServiceNow’s new annual contract value (ACV) still came from IT service management (ITSM), while emerging products (focused on automating analytics, HR, security and customer service) represented 34%, up from 25% in Quarter 4 of 2016 and just 17% in the year ago quarter.
New ACV from IT operations management kicked in the remaining 13%. With as much as 75% of net new ACV each quarter coming from existing customers, ServiceNow’s broader portfolio of products is enabling the company to obtain deeper penetration into accounts.
Overall, 73% of customers now license more than one ServiceNow product, vs. 65% a year ago and 50% two years ago. Of the 20 largest deals in the March quarter, 16 of them included three or more products.
The company’s renewal rate is an enviable 97%. ServiceNow continues to steadily expand its base of global 2000 customers, putting it on pace to reach its goal of 1,000 by 2020.
Plenty of ServiceNow’s Quarter 1 metrics were favorable, with revenue growth accelerating 100 basis points sequentially to 36%. Billings of $529.2 million rose 40% and easily topped the high end of the guidance range of $490 million to $495 million.
For the second quarter, the company guided revenue to a range of $458 million to $463 million, above the consensus at the time of $450.8 million. For 2017, top-line growth is expected to come in at 34% to 35%.
