ServiceNow Inc. (NYSE:NOW)

The analysis of the quarterly financial data reveals several notable trends and fluctuations in the company's efficiency metrics related to receivables, payables, and working capital management over the observed periods.

Receivables Turnover

The receivables turnover ratio exhibits a cyclical pattern, alternating between higher and lower values across quarters. Peaks typically reach values around 7.5 to 8.4, while troughs drop to approximately 4.2 to 4.9. This variability suggests fluctuations in the company’s effectiveness in collecting receivables, with quicker collections in some quarters and slower in others. Correspondingly, the average receivable collection period inversely mirrors this trend, ranging from roughly 43 to 87 days. Lower turnover ratios coincide with longer collection periods, indicating that the company occasionally experiences delays in converting receivables to cash.

Payables Turnover

The payables turnover ratio demonstrates considerable volatility, with values spanning from as low as approximately 5.6 to as high as around 33.6. Sharp increases in payables turnover occur intermittently, notably in some quarters such as September 2023 and December 2024. These spikes imply periods where the company accelerates payments to suppliers. The average payables payment period also fluctuates significantly, from a high near 65 days to lows around 11 days. Shorter payment periods coincide with higher turnover ratios, reflecting prompt settlements, while longer payables periods correspond to lower turnover, indicating extended credit terms or delayed payments.

Working Capital Turnover

Working capital turnover shows a persistent variability, with pronounced peaks reaching up to approximately 27.9 and troughs down to about 5.6. The variations suggest fluctuations in the efficiency of using working capital to generate revenue. Some quarters display notable surges in turnover ratio, pointing to periods when the company more effectively leverages its current assets and liabilities. The pattern does not exhibit a consistent upward or downward trend but instead alternates in a non-linear fashion.

Overall Observations

The data highlights a pattern of alternating quarters with efficient asset and liability management followed by quarters where efficiency diminishes. The frequent swings in both receivable and payables metrics may indicate seasonality or cyclical business conditions affecting cash flow management. The alignment between lower receivables turnover and longer collection days, as well as the inverse relationship between payables turnover and payment periods, aligns with expected financial behavior. The pronounced variability in working capital turnover further reflects fluctuating operational efficiency.

The revenue figures exhibit a consistent growth trajectory over the observed periods. Starting from 1,360 million USD at the end of March 2021, revenues progressively increase, reaching 3,407 million USD by the end of September 2025. This demonstrates a steady expansion of the company’s sales or service income across nearly five years, highlighting sustained market demand and potentially effective business strategies.

Accounts receivable, net also show increasing values but with noticeable fluctuations. Initial values rise from 645 million USD in March 2021 to a peak of 1,725 million USD in December 2021, then decrease and rise again intermittently within subsequent periods—with notably high values during year-end quarters such as December 2023 and December 2024. These fluctuations suggest seasonal or billing cycle effects, or variations in credit sales and collections practices. The increasing trend, particularly toward the later periods, may indicate expanding customer bases or longer collection periods.

The receivables turnover ratio exhibits a pattern of regular declines at year-end quarters, contrasted by recoveries in the subsequent quarters. Generally, this ratio remains within a range of approximately 4.2 to 8.4 times annually. Higher turnover ratios indicate efficient collection practices and faster conversion of receivables into cash, while lower ratios reflect slower collection. The decline during year-end periods corresponds with the peaks observed in accounts receivable, confirming seasonal impacts on cash collection cycles. Despite these temporary dips, turnover ratios largely maintain healthy levels throughout the periods.

Revenue Growth

Continuous, steady increase over time with no signs of stagnation or decline.

Accounts Receivable

Overall upward trend with significant seasonal fluctuations, particularly spikes at year-end.

Receivables Turnover

Fluctuates seasonally, dipping at year-end quarters due to higher receivables, but remaining relatively strong, indicating overall efficient credit management.

In summary, the company demonstrates robust revenue growth accompanied by a growing accounts receivable balance that fluctuates with seasonal patterns. The receivables turnover ratios suggest generally effective collection processes, though the cyclical declines call for close monitoring of working capital management around year-end periods.

The analysis of the financial data reveals several notable trends across different periods. The cost of revenues demonstrates a consistent upward trajectory from the beginning of the observed period to the latest quarter. Starting at 299 million USD, it increases steadily, reaching 774 million USD by the final quarter, indicating an ongoing rise in the expenses directly associated with the production of goods or services.

Accounts payable, however, exhibits a more fluctuating pattern. Initially, values decrease from 109 million USD to 64 million USD, then show volatility with peaks and troughs throughout the timeline. Significant spikes appear notably in several quarters, such as around mid-2022 and early 2024. These fluctuations suggest variability in the company’s payment schedule or procurement patterns, potentially reflecting changes in supplier terms or operational demands.

The payables turnover ratio, which measures the frequency of accounts payable being paid during the period, also fluctuates markedly. Early quarters show higher turnover ratios, notably reaching a peak at 26.38 and 33.63 during certain intervals, while other periods see lower ratios below 10. This variability corresponds inversely with changes in accounts payable, where lower payables often coincide with higher turnover ratios, indicating faster payment cycles, and higher payables correspond with lower turnover ratios, suggesting slower payments.

Cost of Revenues

Consistently increased across all quarters, nearly tripling over the full timeline.

Accounts Payable

Displayed volatility with alternating increases and decreases, highlighting variable payment practices or supplier agreements.

Payables Turnover Ratio

Varied widely in correlation to accounts payable levels, indicating changing efficiency in settling payables.

Overall, the data suggests growing operational scale reflected in rising cost of revenues, accompanied by fluctuating management of accounts payable, which impacts the payables turnover ratio. The irregular payment patterns may warrant further examination to understand their implications for cash flow management and supplier relationships.

Working Capital Trends

Working capital exhibits notable volatility over the analyzed quarters. Initial values start moderately high but demonstrate significant fluctuations throughout the periods. Periods such as December 2021 and September 2022 see peaks exceeding 1 billion US dollars, while other quarters reflect sharp declines approaching or dipping below 400 million US dollars. This pattern indicates considerable variability in the company’s short-term liquidity position during the timeframe.

Revenue Trends

Revenues show a consistent and steady upward trajectory across all quarters. Starting from approximately 1.36 billion US dollars in the earliest period, revenues increase regularly to reach levels exceeding 3.4 billion US dollars by the end of the observation window. This steady growth trend highlights robust top-line expansion over the years.

Working Capital Turnover Ratio Analysis

The working capital turnover ratio fluctuates significantly, illustrating variations in how efficiently the company utilizes its working capital to generate sales. Early periods reveal high turnover ratios exceeding 20, indicative of strong utilization efficiency, but alternate with much lower values near 6 to 7. Toward the later periods, there is a general pattern of increasing turnover ratios again, with peaks approaching or surpassing 25, suggesting improved efficiency in certain quarters. The volatility in this ratio is reflective of irregular changes in either working capital or revenue growth rates and points to management's varying effectiveness in working capital deployment.

Overall Financial Insights

While revenues consistently increase, suggesting solid business growth, the irregular working capital levels combined with fluctuating turnover ratios indicate potential challenges or strategic decisions impacting liquidity and operational efficiency in the short term. The company appears capable of generating increasing sales volumes relative to its working capital in certain cycles, but the inconsistency calls for monitoring to optimize cash conversion and resource utilization.

Receivables Turnover

The receivables turnover ratio demonstrates a recurring pattern of fluctuation over the analyzed quarters. The ratio generally remains around 7 to 8 during most quarters but experiences significant drops near the end of each year, with values around 4 to 5 in December quarters of 2021, 2022, and 2023. This cyclical decrease indicates that during these periods, the company collects its receivables more slowly. Outside these periods, the turnover ratio recovers, sometimes reaching levels above 8, mainly noted in the latter part of 2024 and early 2025.

Average Receivable Collection Period

The average collection period also follows a cyclical trend that inversely correlates with the receivables turnover ratio. The number of days for collection significantly increases at the end of the calendar years, peaking at 86 to 87 days in December 2021 and 2022, and slightly lower at 83 days in December 2023. In other quarters, the collection period stays between 43 and 56 days, with the lowest values observed in early 2025, indicating a faster collection cycle during these times.

Insights and Overall Trends

There is a clear seasonal pattern affecting receivables management, likely related to year-end operations or business cycles that delay collection. The recurring end-of-year decline in turnover and increase in collection days might suggest challenges in closing accounts or slower payments from clients during this period. However, the company adjusts well in other quarters, maintaining consistent and relatively efficient receivables turnover and collection periods. The data in the most recent periods show some improvement, with higher turnover ratios and shorter collection days, suggesting enhanced operational efficiency or better credit management strategies have been implemented.

The analysis of the payables turnover ratio over the observed periods reveals significant fluctuations. Initially, the ratio improved from 9.75 to 19.64 between the first quarter of 2021 and the third quarter of the same year, indicating a faster rate of paying off suppliers. However, this was followed by a decline to 5.6 in the second quarter of 2022, suggesting slower payments during that time. Subsequent quarters saw irregular movements with notable peaks, such as 26.38 in the third quarter of 2023 and an all-time high of 33.63 in the fourth quarter of 2024, alternating with sharp declines. This trend reflects inconsistency in the company's payment practices across quarters.

Correspondingly, the average payables payment period, expressed in days, exhibits an inverse relationship with the payables turnover ratio. The period decreased from 37 days in the first quarter of 2021 to 19 days in the third quarter of 2021, consistent with the increasing turnover ratio. Then, the payment period extended to a maximum of 65 days in the second quarter of 2022, aligning with the lowest turnover ratio during that period. Similar variations can be observed thereafter, with the payment period shortening to as low as 11 days in the fourth quarter of 2024 and expanding again to 47 days in the second quarter of 2025.

The alternating pattern in the payables metrics suggests that the company experiences variable payment cycles possibly influenced by operational or seasonal factors. These volatility patterns imply a lack of consistency in managing accounts payable, which could affect supplier relationships and liquidity management. Notably, periods with extremely high turnover ratios and extremely short payment periods may indicate aggressive payment practices, while low turnover ratios and extended payment periods imply slower payments.

Payables Turnover Ratio

Displayed significant volatility with initial improvement, mid-term decline, and later irregular peaks and troughs.

The highest turnover observed was 33.63 in late 2024, and the lowest was 5.6 in mid-2022.

Average Payables Payment Period (Days)

Inversely correlated with the turnover ratio, fluctuating between 11 days and 65 days across quarters.

Periods of extended payment coincide with low turnover ratios and vice versa.

Overall, the patterns in payables turnover and payment period denote uneven payment behavior over the quarters, potentially necessitating a review of payment policies to achieve greater consistency and optimize working capital management.