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Analysis of Income Taxes

Advanced level

Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Adjustments to Financial Statements: Removal of Deferred Taxes
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Income Tax Expense (Benefit)

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

US$ in thousands

	12 months ended:	Dec 31, 2019		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015
	Federal
	State
	Foreign
	Current provision
	Federal
	State
	Foreign
	Deferred provision
	Provision for (benefit from) income taxes

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

Item	Description	The company
Current provision	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	ServiceNow Inc.’s current provision increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.
Deferred provision	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	ServiceNow Inc.’s deferred provision decreased from 2017 to 2018 and from 2018 to 2019.
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.’s provision for (benefit from) income taxes decreased from 2017 to 2018 and from 2018 to 2019.

Effective Income Tax Rate (EITR)

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

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	U.S. federal statutory rate
	Effective income tax rate

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

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.’s effective income tax rate increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Components of Deferred Tax Assets and Liabilities

ServiceNow Inc., components of deferred tax assets and liabilities

US$ in thousands

		Dec 31, 2019		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015
	Net operating loss carryforwards
	Credit carryforwards
	Lease liability
	Depreciation and amortization
	Other
	Deferred tax assets
	Valuation allowance
	Deferred tax assets, less valuation allowance
	Right of use asset
	Other
	Deferred tax liabilities
	Net deferred tax assets (liabilities)

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

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.’s deferred tax assets increased from 2017 to 2018 and from 2018 to 2019.
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.’s deferred tax assets, less valuation allowance increased from 2017 to 2018 and from 2018 to 2019.
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.’s net deferred tax assets (liabilities) increased from 2017 to 2018 and from 2018 to 2019.

Adjustments to Financial Statements: Removal of Deferred Taxes

ServiceNow Inc., adjustments to financial statements

US$ in thousands

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Noncurrent deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Stockholders’ Equity
	Stockholders’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Stockholders’ equity (adjusted)
	Adjustment to Net Income (loss)
	Net income (loss) (as reported)
	Add: Deferred income tax expense (benefit)
	Net income (loss) (adjusted)

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

ServiceNow Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

ServiceNow Inc., adjusted financial ratios

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

Financial ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	ServiceNow Inc.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	ServiceNow Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.
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.’s adjusted financial leverage ratio decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	ServiceNow Inc.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	ServiceNow Inc.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

ServiceNow Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in thousands)
	Net income (loss)
	Revenues
	Profitability Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in thousands)
	Adjusted net income (loss)
	Revenues
	Profitability Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

2019 Calculations

¹ Net profit margin = 100 × Net income (loss) ÷ Revenues
= 100 × ÷ =

² Adjusted net profit margin = 100 × Adjusted net income (loss) ÷ Revenues
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	ServiceNow Inc.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Total Asset Turnover

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in thousands)
	Revenues
	Total assets
	Activity Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in thousands)
	Revenues
	Adjusted total assets
	Activity Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

2019 Calculations

¹ Total asset turnover = Revenues ÷ Total assets
= ÷ =

² Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= ÷ =

Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	ServiceNow Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Adjusted Financial Leverage

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in thousands)
	Total assets
	Stockholders’ equity
	Solvency Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in thousands)
	Adjusted total assets
	Adjusted stockholders’ equity
	Solvency Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

2019 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= ÷ =

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= ÷ =

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.’s adjusted financial leverage ratio decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Adjusted Return on Equity (ROE)

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in thousands)
	Net income (loss)
	Stockholders’ equity
	Profitability Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in thousands)
	Adjusted net income (loss)
	Adjusted stockholders’ equity
	Profitability Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

2019 Calculations

¹ ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × ÷ =

² Adjusted ROE = 100 × Adjusted net income (loss) ÷ Adjusted stockholders’ equity
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	ServiceNow Inc.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in thousands)
	Net income (loss)
	Total assets
	Profitability Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in thousands)
	Adjusted net income (loss)
	Adjusted total assets
	Profitability Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25).

2019 Calculations

¹ ROA = 100 × Net income (loss) ÷ Total assets
= 100 × ÷ =

² Adjusted ROA = 100 × Adjusted net income (loss) ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	ServiceNow Inc.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

	ServiceNow Inc.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

	All companies
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

ServiceNow Inc. (NYSE:NOW)

Analysis of Income Taxes

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Adjustments to Financial Statements: Removal of Deferred Taxes

ServiceNow Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

ServiceNow Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)