Stock Analysis on Net

ServiceNow Inc. (NYSE:NOW)

Analysis of Income Taxes

Microsoft Excel LibreOffice Calc

Income Tax Expense (Benefit)

ServiceNow Inc., income tax expense (benefit), continuing operations

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Federal —  391  (336) (445) (55)
State 285  204  163  137  135 
Foreign 53,055  15,657  22,204  9,512  5,097 
Current provision 53,340  16,252  22,031  9,204  5,177 
Federal (5,241) (3,481) (2,026) (5,934) (4,462)
State (1,160) (882) (377) (886) (746)
Foreign (16,257) (571,402) (31,948) (2,258) 1,784 
Deferred provision (22,658) (575,765) (34,351) (9,078) (3,424)
Provision for (benefit from) income taxes 30,682  (559,513) (12,320) 126  1,753 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Item Description The company
Current provision Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. ServiceNow Inc. current provision decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.
Deferred provision Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. ServiceNow Inc. deferred provision decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.
Provision for (benefit from) income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. ServiceNow Inc. provision for (benefit from) income taxes decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.

Effective Income Tax Rate (EITR)

ServiceNow Inc., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
U.S. federal statutory income tax rate 21.00% 21.00% 21.00% 34.00% 34.00%
Effective income tax rate 20.57% -832.79% 31.57% -0.08% -0.39%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Item Description The company
Effective income tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. ServiceNow Inc. effective income tax rate decreased from 2018 to 2019 but then increased from 2019 to 2020 not reaching 2018 level.

Components of Deferred Tax Assets and Liabilities

ServiceNow Inc., components of deferred tax assets and liabilities

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net operating loss carryforwards 882,256  734,755  610,314  518,620  640,312 
Credit carryforwards 235,572  171,856  120,594  75,879  50,559 
Lease liability 114,639  108,224  —  —  — 
Depreciation and amortization 635,904  577,599  593,348  —  — 
Other 102,926  96,535  103,917  96,347  91,207 
Deferred tax assets 1,971,297  1,688,969  1,428,173  690,846  782,078 
Valuation allowance (1,128,936) (918,596) (1,337,350) (614,177) (728,870)
Deferred tax assets, less valuation allowance 842,361  770,373  90,823  76,669  53,208 
Right of use asset (105,641) (101,091) —  —  — 
Other (70,805) (73,818) (72,169) (66,083) (42,519)
Deferred tax liabilities (176,446) (174,909) (72,169) (66,083) (42,519)
Net deferred tax assets (liabilities) 665,915  595,464  18,654  10,586  10,689 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Item Description The company
Deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. ServiceNow Inc. deferred tax assets increased from 2018 to 2019 and from 2019 to 2020.
Deferred tax assets, less valuation allowance Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. ServiceNow Inc. deferred tax assets, less valuation allowance increased from 2018 to 2019 and from 2019 to 2020.
Net deferred tax assets (liabilities) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. ServiceNow Inc. net deferred tax assets (liabilities) increased from 2018 to 2019 and from 2019 to 2020.

Adjustments to Financial Statements: Removal of Deferred Taxes

ServiceNow Inc., adjustments to financial statements

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Adjustment to Total Assets
Total assets (as reported) 8,715,057  6,022,430  3,879,140  3,397,904  2,033,767 
Less: Noncurrent deferred tax assets, net 673,111  599,633  20,642  —  — 
Total assets (adjusted) 8,041,946  5,422,797  3,858,498  3,397,904  2,033,767 
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported) 2,834,481  2,127,941  1,111,199  584,132  386,961 
Less: Net deferred tax assets (liabilities) 665,915  595,464  18,654  10,586  10,689 
Stockholders’ equity (adjusted) 2,168,566  1,532,477  1,092,545  573,546  376,272 
Adjustment to Net Income (loss)
Net income (loss) (as reported) 118,503  626,698  (26,704) (149,130) (451,804)
Add: Deferred income tax expense (benefit) (22,658) (575,765) (34,351) (9,078) (3,424)
Net income (loss) (adjusted) 95,845  50,933  (61,055) (158,208) (455,228)

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).


ServiceNow Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

ServiceNow Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net Profit Margin
Reported net profit margin 2.62% 18.11% -1.02% -7.71% -32.49%
Adjusted net profit margin 2.12% 1.47% -2.34% -8.18% -32.74%
Total Asset Turnover
Reported total asset turnover 0.52 0.57 0.67 0.57 0.68
Adjusted total asset turnover 0.56 0.64 0.68 0.57 0.68
Financial Leverage
Reported financial leverage 3.07 2.83 3.49 5.82 5.26
Adjusted financial leverage 3.71 3.54 3.53 5.92 5.41
Return on Equity (ROE)
Reported ROE 4.18% 29.45% -2.40% -25.53% -116.76%
Adjusted ROE 4.42% 3.32% -5.59% -27.58% -120.98%
Return on Assets (ROA)
Reported ROA 1.36% 10.41% -0.69% -4.39% -22.22%
Adjusted ROA 1.19% 0.94% -1.58% -4.66% -22.38%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. ServiceNow Inc. adjusted net profit margin ratio improved from 2018 to 2019 and from 2019 to 2020.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. ServiceNow Inc. adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
ServiceNow Inc. adjusted financial leverage ratio increased from 2018 to 2019 and from 2019 to 2020.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. ServiceNow Inc. adjusted ROE improved from 2018 to 2019 and from 2019 to 2020.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. ServiceNow Inc. adjusted ROA improved from 2018 to 2019 and from 2019 to 2020.

ServiceNow Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss) 118,503  626,698  (26,704) (149,130) (451,804)
Revenues 4,519,484  3,460,437  2,608,816  1,933,026  1,390,513 
Profitability Ratio
Net profit margin1 2.62% 18.11% -1.02% -7.71% -32.49%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss) 95,845  50,933  (61,055) (158,208) (455,228)
Revenues 4,519,484  3,460,437  2,608,816  1,933,026  1,390,513 
Profitability Ratio
Adjusted net profit margin2 2.12% 1.47% -2.34% -8.18% -32.74%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Net profit margin = 100 × Net income (loss) ÷ Revenues
= 100 × 118,503 ÷ 4,519,484 = 2.62%

2 Adjusted net profit margin = 100 × Adjusted net income (loss) ÷ Revenues
= 100 × 95,845 ÷ 4,519,484 = 2.12%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. ServiceNow Inc. adjusted net profit margin ratio improved from 2018 to 2019 and from 2019 to 2020.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in thousands)
Revenues 4,519,484  3,460,437  2,608,816  1,933,026  1,390,513 
Total assets 8,715,057  6,022,430  3,879,140  3,397,904  2,033,767 
Activity Ratio
Total asset turnover1 0.52 0.57 0.67 0.57 0.68
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Revenues 4,519,484  3,460,437  2,608,816  1,933,026  1,390,513 
Adjusted total assets 8,041,946  5,422,797  3,858,498  3,397,904  2,033,767 
Activity Ratio
Adjusted total asset turnover2 0.56 0.64 0.68 0.57 0.68

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= 4,519,484 ÷ 8,715,057 = 0.52

2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= 4,519,484 ÷ 8,041,946 = 0.56

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. ServiceNow Inc. adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in thousands)
Total assets 8,715,057  6,022,430  3,879,140  3,397,904  2,033,767 
Stockholders’ equity 2,834,481  2,127,941  1,111,199  584,132  386,961 
Solvency Ratio
Financial leverage1 3.07 2.83 3.49 5.82 5.26
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted total assets 8,041,946  5,422,797  3,858,498  3,397,904  2,033,767 
Adjusted stockholders’ equity 2,168,566  1,532,477  1,092,545  573,546  376,272 
Solvency Ratio
Adjusted financial leverage2 3.71 3.54 3.53 5.92 5.41

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity
= 8,715,057 ÷ 2,834,481 = 3.07

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 8,041,946 ÷ 2,168,566 = 3.71

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
ServiceNow Inc. adjusted financial leverage ratio increased from 2018 to 2019 and from 2019 to 2020.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss) 118,503  626,698  (26,704) (149,130) (451,804)
Stockholders’ equity 2,834,481  2,127,941  1,111,199  584,132  386,961 
Profitability Ratio
ROE1 4.18% 29.45% -2.40% -25.53% -116.76%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss) 95,845  50,933  (61,055) (158,208) (455,228)
Adjusted stockholders’ equity 2,168,566  1,532,477  1,092,545  573,546  376,272 
Profitability Ratio
Adjusted ROE2 4.42% 3.32% -5.59% -27.58% -120.98%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × 118,503 ÷ 2,834,481 = 4.18%

2 Adjusted ROE = 100 × Adjusted net income (loss) ÷ Adjusted stockholders’ equity
= 100 × 95,845 ÷ 2,168,566 = 4.42%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. ServiceNow Inc. adjusted ROE improved from 2018 to 2019 and from 2019 to 2020.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss) 118,503  626,698  (26,704) (149,130) (451,804)
Total assets 8,715,057  6,022,430  3,879,140  3,397,904  2,033,767 
Profitability Ratio
ROA1 1.36% 10.41% -0.69% -4.39% -22.22%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss) 95,845  50,933  (61,055) (158,208) (455,228)
Adjusted total assets 8,041,946  5,422,797  3,858,498  3,397,904  2,033,767 
Profitability Ratio
Adjusted ROA2 1.19% 0.94% -1.58% -4.66% -22.38%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 ROA = 100 × Net income (loss) ÷ Total assets
= 100 × 118,503 ÷ 8,715,057 = 1.36%

2 Adjusted ROA = 100 × Adjusted net income (loss) ÷ Adjusted total assets
= 100 × 95,845 ÷ 8,041,946 = 1.19%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. ServiceNow Inc. adjusted ROA improved from 2018 to 2019 and from 2019 to 2020.