ServiceNow Inc. (NYSE:NOW)

Receivables turnover

The receivables turnover ratio exhibits a recurring cyclical pattern over the observed periods. Values tend to be lower in the first quarter of each year, generally around 4.2 to 4.9, and rise significantly in the following quarters, often exceeding 7. This indicates a seasonal fluctuation where collections slow down early in the year and accelerate thereafter. Over the entire timeframe, there is no clear trend of consistent improvement or decline; rather, the ratio oscillates between lower and higher levels periodically, with the highest recorded turnover reaching approximately 8.44.

Payables turnover

The payables turnover ratio demonstrates considerable volatility across the quarters. Early in the dataset, values are notably high, for example 28.83, followed by a sharp decline in subsequent quarters to single-digit figures. Mid-period quarters show fluctuations between about 5.6 and 19.64, with spikes like 26.38 and 33.63 occurring irregularly in later periods. This irregular pattern suggests varying payment practices, potentially influenced by operational or strategic decisions affecting the timing of payables settlement. No consistent directional trend is observed, highlighting variability in supplier payment speed over time.

Working capital turnover

The working capital turnover ratio displays a fluctuating but generally elevated level when compared to the other ratios. The values span a wide range, starting around 5.6 and rising sharply to peaks exceeding 27 in certain quarters. Peaks tend to appear irregularly, with notable highs like 21.77 and 27.96 occurring sporadically without a clear cyclical pattern. This indicates periods of more intensive use of working capital to generate sales followed by slowdowns, reflecting changing efficiency in managing current assets relative to sales revenue.

Average receivable collection period

The average receivable collection period inversely mirrors the receivables turnover pattern, with longer collection periods clustered in the first quarter of each year, typically above 80 days, and shorter periods in subsequent quarters, often dropping to the mid-40s. This recurring seasonal variation suggests customer payments tend to be slower at the start of the year and faster in other quarters. The range remains relatively stable within these seasonal bands without a significant long-term trend toward faster or slower collections.

Average payables payment period

The average payables payment period is characterized by wide fluctuations without a discernible seasonal pattern. Values range extensively from as low as 11 days to as high as 65 days. Earlier quarters show quicker payment periods, which increase markedly in some mid-year quarters, indicating delayed payments. The irregular movement in days payable indicates an inconsistent approach to managing payment terms with suppliers over time, reflecting possible adaptation to liquidity conditions or negotiating strategies.

Revenue Trends

Revenues exhibited a consistent upward trajectory from March 31, 2020, to March 31, 2025. Starting at $1,046 million, revenues increased steadily every quarter, reaching $3,088 million by the end of the period under review. This reflects strong growth momentum and positive sales performance over the five-year span.

Accounts Receivable, Net

The accounts receivable balance showed notable fluctuations throughout the timeframe. Initial values hovered around $600 million to $1 billion, with periodic sharp increases in the fourth quarters of several years, notably December 31, 2020, December 31, 2021, and December 31, 2022, where balances reached as high as $1,725 million and $2,036 million by December 31, 2023. This pattern may reflect seasonal variations or changes in billing cycles. Generally, while accounts receivable increased in absolute terms alongside revenues, the variability suggests varying collection periods or credit terms.

Receivables Turnover Ratio

The receivables turnover ratio demonstrated a recurring seasonal pattern. The ratio peaked in the middle quarters of each year (Q2 and Q3), typically ranging from approximately 6.5 to 8.4, indicating a faster collection of receivables during these periods. Conversely, a noticeable dip occurred in the first and fourth quarters, with turnover ratios declining to around 4.2 to 4.9. This cyclical pattern suggests fluctuations in credit management efficiency or customer payment behaviors linked to seasonal factors.

Overall Insights

The company experienced robust revenue growth over the period, more than doubling its quarterly revenues. However, accounts receivable balances increased irregularly, with pronounced spikes in certain quarters, potentially indicating episodic delays or extensions in receivables collection. The receivables turnover ratio’s seasonal fluctuations reinforce this observation, reflecting periodic variations in payment cycles or credit policy implementation. Monitoring these trends will be essential for managing working capital and ensuring continuous cash flow efficiency.

The data reflects several key trends in ServiceNow Inc.'s financial metrics over the analyzed periods.

Cost of Revenues

The cost of revenues demonstrates a consistent upward trajectory from March 31, 2020, through March 31, 2025. Starting at $223 million in early 2020, the cost increases steadily each quarter, reaching $651 million by the end of the observed period. This consistent rise suggests expanding operational activity or increased expenses associated with revenue generation over time.

Accounts Payable

Accounts payable shows notable volatility throughout the timeframe. Initial values in 2020 were relatively modest, fluctuating before rising significantly to peaks such as $265 million in mid-2022 and $309 million by the first quarter of 2025. Between these peaks, substantial decreases are also observed, for example, drops to $69 million in mid-2023 and $68 million in the first quarter of 2025. This irregular pattern may indicate fluctuations in payment cycles, purchasing volumes, or changes in supplier terms.

Payables Turnover Ratio

The payables turnover ratio exhibits considerable variability, with values ranging from a high of 33.63 to lows near 5.6 during the period. Higher ratios generally correspond to quicker payment of accounts payable relative to the cost of goods sold. Peaks, such as 33.63 in late 2024, suggest periods of rapid settlement of payables, while lower values indicate slower payment patterns. These fluctuations likely reflect changes in working capital management strategies or operational cash flow cycles.

Overall, the data indicates sustained growth in costs associated with revenue generation, combined with irregular but significant changes in accounts payable and its turnover. This combination might suggest evolving vendor relationships and payment practices in response to the company’s expanding scale and operational demands.

The analysis of the quarterly financial data reveals significant variability in working capital and revenues over the observed periods, accompanied by fluctuations in working capital turnover ratios indicating changing efficiency in asset utilization.

Working Capital

Working capital exhibits a highly irregular pattern throughout the quarters analyzed. Starting at US$85 million in March 2020, it sharply increased to US$1.131 billion by September 2020, then fell to lower levels before showing further cyclical rises and dips. Notably, values tend to peak every few quarters, reaching above US$900 million multiple times but also descending to lows around US$300-400 million. This volatility suggests variations in current assets and liabilities management or seasonality effects impacting cash, receivables, and payables.

Revenues

Revenues demonstrate a consistent upward trend over the entire period, advancing from approximately US$1.046 billion in March 2020 to over US$3.088 billion by March 2025. This steady increase reflects sustained growth in sales or service income, with no evident decline or quarters with revenue contraction, indicating successful market expansion or product demand escalation.

Working Capital Turnover

The working capital turnover ratio, calculable only from December 2020 onwards, shows considerable fluctuation. Initial values are around 5.7, then rising sharply to peaks such as 21.76 and 27.96, interspersed with periods of lower turnover near 6 to 7. These sharp swings suggest that the efficiency of generating revenues from working capital is inconsistent, potentially reflecting changes in operational efficiency, payment cycles, or inventory management. Dramatic spikes in turnover suggest periods where revenues greatly outpaced working capital levels, while dips indicate the opposite.

Overall Insights

Overall, the data indicates robust revenue growth alongside volatile working capital levels, resulting in fluctuating efficiency in using working capital to support sales. While rising revenues are a positive sign, the variable working capital and turnover ratios may warrant further examination to understand liquidity management, cash conversion cycles, and potential risks related to working capital adequacy. Stabilizing working capital and improving turnover consistency could enhance operational stability and financial health.

The receivables turnover ratio exhibits a clear seasonal pattern over the analyzed periods. The ratio tends to be lower during the first quarter of each year, ranging roughly between 4.2 and 4.9, indicating slower collection activity. In contrast, it substantially increases in the second through fourth quarters, achieving values between approximately 6.5 and 8.4. This cyclical behavior suggests that the company experiences more efficient receivables collection in quarters outside the first one, possibly due to business cycle or operational factors.

Correspondingly, the average receivable collection period, measured in days, demonstrates an inverse seasonal trend. It consistently peaks in the first quarter of each year, with values near or above 80 days, indicating longer times to collect receivables during these periods. For the remaining quarters, the collection period shortens to a range between approximately 43 and 56 days, reflecting quicker collection efforts. The alternating pattern between higher collection days in the initial quarter and lower values later in the year confirms the cyclical nature observed in the turnover ratio.

Overall, the data suggest that the company’s management of accounts receivable follows a predictable annual cycle. The fluctuation could be influenced by customer payment behaviors, billing timing, or company policies linked to seasonal business dynamics. This consistent pattern may provide opportunities for optimizing cash flow management by anticipating slower collection periods and adjusting financial strategies accordingly.

The payables turnover ratio and average payables payment period display significant fluctuations over the periods analyzed, indicating variability in the company's management of its accounts payable.

Payables Turnover Ratio

The payables turnover ratio shows a wide variance from period to period. Starting from a high of 28.83 at the earliest recorded point, it declines sharply to 9.75 and then gradually increases and decreases in alternating fashion. Notably, the ratio experiences lows around 5.6 to 7.86 in mid-2022 and rises to a peak of 33.63 in early 2025 before again falling to 7.83. This pattern suggests fluctuating efficiency in paying off suppliers, potentially influenced by operational or strategic factors across quarters.

Average Payables Payment Period

The average payables payment period shows an inverse relationship with the payables turnover ratio as expected. The number of days taken to pay suppliers ranges from a low of 13 days to highs exceeding 60 days in certain quarters (such as 65 and 64 days in late 2021 and early 2022). Periods with longer payment durations correspond with lower turnover ratios, indicating slower payments to suppliers. Conversely, shorter payment periods correspond with increased turnover ratios, reflecting faster payments.

Overall, the data reflects variability in supplier payment practices, indicating that the company adjusts its payment policies or is influenced by external or internal factors on a quarterly basis. The significant swings in the turnover ratio coupled with the corresponding changes in payment days suggest a dynamic approach to managing payables rather than a fixed steady-state strategy.