ServiceNow Inc. (NYSE:NOW)

The short-term operating activity ratios exhibit varied trends over the observed period. Generally, fluctuations are present across all metrics, with some notable shifts occurring between 2022 and 2025. A significant outlier is observed in the final period for Working Capital Turnover, which requires further investigation.

Receivables Turnover

Receivables turnover generally remained within a range of approximately 6.87 to 8.44 throughout the period, with a noticeable dip to 4.20 and 4.41 in late 2022 and early 2023 respectively. The ratio appears to recover in subsequent periods, peaking at 8.44 in early 2025 before declining again to 5.05 by the end of the observed timeframe. This suggests potential inconsistencies in the speed of collecting receivables, particularly in late 2022 and early 2023.

Payables Turnover

Payables turnover demonstrates substantial volatility. It began at 8.57, decreased significantly to 5.60 and 5.74, then increased dramatically to 26.38 and 15.25 in the third and fourth quarters of 2023. This pattern continued into 2024, with further fluctuations, before settling around 14.62 in the final period. These swings indicate considerable changes in the company’s payment practices or supplier terms.

Working Capital Turnover

Working capital turnover shows a generally increasing trend, although with significant quarterly variations. The ratio moved from 10.61 to 6.63 in 2022, then increased to 21.77 in late 2023. The final period exhibits an exceptionally high value of 474.21, which is a substantial deviation from prior performance and warrants detailed scrutiny to determine the underlying cause. This could be due to a significant reduction in working capital, or an error in calculation.

Average Receivable Collection Period

The average receivable collection period generally remained stable between 43 and 53 days, except for a notable increase to 87 days in late 2022 and 83 days in early 2023. This aligns with the observed decrease in receivables turnover during those periods, suggesting a slowdown in collecting payments from customers. The period then returned to a more typical range.

Average Payables Payment Period

The average payables payment period fluctuated considerably. It began at 43 days, increased to 65 days in mid-2022, and then decreased sharply to 14 days in the third quarter of 2023. The period then increased again, stabilizing around 25-30 days in the final periods. These changes suggest shifts in the company’s negotiation power with suppliers or deliberate changes in payment strategies.

In summary, the operating activity ratios indicate a dynamic financial environment. While some ratios demonstrate relative stability, others exhibit significant fluctuations, particularly payables turnover and working capital turnover. The outlier in working capital turnover in the final period requires immediate investigation. The observed trends suggest potential changes in credit policies, supplier relationships, and overall working capital management.

The receivables turnover ratio exhibits considerable fluctuation over the observed period, spanning from March 31, 2022, to December 31, 2025. Initial values indicate a relatively stable turnover, followed by a significant decline, and subsequent periods of recovery and renewed decline.

Initial Stability (Mar 31, 2022 – Sep 30, 2022)

The receivables turnover ratio remained relatively consistent, fluctuating between 7.59 and 7.74. This suggests a stable collection period and efficient management of accounts receivable during this timeframe. Revenues increased steadily during this period, while accounts receivable also increased, but at a slower pace, maintaining the turnover ratio.

Significant Decline (Dec 31, 2022)

A substantial decrease in the receivables turnover ratio to 4.20 is observed. This coincides with a significant increase in accounts receivable, substantially outpacing revenue growth. This suggests a lengthening of the collection period, potentially due to changes in credit terms, customer payment behavior, or issues with collection efforts.

Partial Recovery & Subsequent Decline (Mar 31, 2023 – Sep 30, 2023)

The ratio partially recovered to between 6.87 and 7.33, indicating some improvement in collection efficiency. However, this improvement was not sustained. A subsequent decline to 4.41 is noted by December 31, 2023, mirroring the pattern observed in the prior year-end, with accounts receivable increasing at a faster rate than revenues.

Fluctuations and Recent Trends (Mar 31, 2024 – Dec 31, 2025)

The period from March 31, 2024, through December 31, 2025, demonstrates continued volatility. The ratio increased to 8.00 by September 30, 2024, before falling to 4.90 by December 31, 2024. The most recent data, through December 31, 2025, shows a further decline to 5.05. This suggests ongoing challenges in consistently managing the receivables collection process, despite overall revenue growth. Accounts receivable have increased significantly in the latest periods, contributing to the lower turnover ratio.

Overall, the receivables turnover ratio demonstrates a pattern of initial stability, followed by recurring declines at year-end. This pattern warrants further investigation to identify the underlying causes and implement strategies to improve collection efficiency and optimize working capital management.

The accounts payable turnover ratio exhibits considerable fluctuation throughout the observed period, spanning from March 31, 2022, to December 31, 2025. Initial values indicate a relatively healthy turnover, which then experiences periods of both increase and decrease. A detailed examination reveals distinct patterns and potential areas of interest.

Initial Period (Mar 31, 2022 – Dec 31, 2022)

The payables turnover ratio begins at 8.57, decreases to 5.60, recovers to 7.86, and then declines again to 5.74. This initial period suggests some inconsistency in the timing of payments to suppliers. The decrease from the first to second quarter could indicate an increase in credit terms taken or a build-up of payables. The subsequent recovery and decline suggest a cyclical pattern or responsiveness to changes in purchasing volume and supplier arrangements.

Significant Increase (Mar 31, 2023 – Dec 31, 2023)

A notable increase is observed, beginning with a value of 7.20 and peaking at 33.63. This substantial rise suggests a significant acceleration in the rate at which the company pays its suppliers. The increase from 7.20 to 10.08, then to 26.38, and finally to 33.63 indicates a deliberate strategy to reduce outstanding payables, potentially to take advantage of early payment discounts or to improve supplier relationships. This period coincides with increasing cost of revenues.

Subsequent Fluctuations (Mar 31, 2024 – Dec 31, 2025)

Following the peak, the ratio experiences a decline to 7.83, followed by increases to 12.27, 19.04, and finally settling at 14.62. This period demonstrates continued volatility, though generally at higher levels than the initial period. The fluctuations may be attributable to seasonal variations in purchasing activity, changes in supplier payment terms, or adjustments in working capital management. The ratio remains elevated compared to the initial quarters, suggesting a sustained, though not constant, emphasis on quicker payments.

Correlation with Cost of Revenues

A general positive correlation appears to exist between cost of revenues and payables turnover. As cost of revenues increases, the payables turnover tends to rise, indicating that increased purchasing activity is often accompanied by faster payments to suppliers. However, this relationship is not always consistent, and other factors likely influence the ratio.

In summary, the payables turnover ratio demonstrates a dynamic pattern over the analyzed timeframe. While initial periods show some inconsistency, a clear trend towards increased turnover emerges, particularly from March 2023 onwards. This suggests a potential shift in the company’s approach to managing its supplier relationships and working capital, though continued fluctuations warrant ongoing monitoring.

The working capital turnover ratio exhibits considerable fluctuation over the observed period, spanning from March 31, 2022, to December 31, 2025. Initial values indicate a relatively efficient utilization of working capital, followed by periods of both improvement and decline. A significant upward trend is then observed towards the end of the period, culminating in a notably high ratio in the final quarter.

Initial Period (Mar 31, 2022 – Dec 31, 2022)

The ratio begins at 10.61 and demonstrates initial strength, peaking at 11.21 before declining to 6.63 in September 2022. It recovers to 11.16 by the end of 2022, suggesting a cyclical pattern or responsiveness to seasonal factors. Revenues consistently increased throughout this period, while working capital experienced both increases and decreases.

2023 Performance

The ratio in 2023 shows a generally improving trend, moving from 7.83 in March to 21.77 by December. This coincides with consistent revenue growth throughout the year. Working capital decreased significantly throughout the year, contributing to the increased turnover ratio. The largest increase in the ratio occurs in the latter half of the year.

2024 and Early 2025

The ratio experiences a substantial peak in the first quarter of 2024, reaching 27.96. It then declines to 11.73 in June 2024, followed by a moderate increase to 13.25 by the end of the year. The first half of 2025 shows further increases, culminating in an exceptionally high ratio of 474.21 in December 2025. This dramatic increase is likely attributable to a significant decrease in working capital combined with continued revenue growth.

Working Capital and Revenue Relationship

Generally, an increasing working capital turnover ratio suggests the company is generating more revenue with each dollar invested in working capital. However, the extremely high value in December 2025 warrants further investigation. A substantial decrease in working capital, as observed in the final quarter, could indicate aggressive cash management, reduced investment in short-term assets, or potentially, constraints on operational capacity. Revenues also increased in the final quarter, but not at a rate commensurate with the increase in the turnover ratio.

Overall, the working capital turnover ratio demonstrates a dynamic pattern. While generally positive trends are observed, the significant increase in the final quarter requires further scrutiny to determine its underlying causes and potential implications for the company’s operational efficiency and financial health.

The average receivable collection period exhibited fluctuations over the observed timeframe. Generally, the period remained relatively stable in the first half of the period analyzed, then experienced increases, followed by periods of stabilization and further increases.

Overall Trend

The average receivable collection period demonstrated a pattern of relative stability punctuated by periods of significant increase. The period generally ranged between 43 and 56 days, with notable deviations occurring in the fourth quarters of 2022, 2023, and 2025.

Initial Period (Mar 31, 2022 – Dec 31, 2022)

From March 31, 2022, to December 31, 2022, the average collection period remained consistently between 47 and 48 days, with a notable increase to 87 days in the fourth quarter of 2022. This suggests a potential slowdown in collections during that specific period.

Subsequent Period (Mar 31, 2023 – Dec 31, 2024)

The period from March 31, 2023, to December 31, 2024, showed a collection period fluctuating between 46 and 83 days. An increase to 83 days was observed in the fourth quarter of 2023, followed by a decrease to 46 days in the third quarter of 2024, and then an increase to 74 days in the fourth quarter of 2024. This indicates continued variability in collection efficiency.

Latest Period (Mar 31, 2025 – Dec 31, 2025)

The most recent period, from March 31, 2025, to December 31, 2025, showed a collection period of 43 days in the first quarter, increasing to 72 days in the fourth quarter. This suggests a potential emerging trend of slower collections towards the end of the year.

The increases observed in the fourth quarters of 2022, 2023, and 2025 warrant further investigation to determine the underlying causes. These could include changes in credit terms, customer payment behavior, or internal collection processes.

The average payables payment period exhibited considerable fluctuation throughout the observed period, spanning from March 31, 2022, to December 31, 2025. An initial period of relative stability is followed by significant volatility, then a return to more moderate levels.

Initial Period (Mar 31, 2022 – Dec 31, 2022)

The average payables payment period began at 43 days and generally increased, reaching 65 days in June 2022 before decreasing to 64 days by the end of the year. This suggests a potential lengthening of the time taken to settle obligations to suppliers during the first half of 2022, followed by a slight improvement in the latter half.

Volatility and Reduction (Mar 31, 2023 – Dec 31, 2023)

A substantial decrease in the average payables payment period is observed starting in March 2023, falling to a low of 14 days in September 2023. This indicates a significantly accelerated rate of payment to suppliers. The period then increased to 24 days by December 2023, but remained substantially lower than the levels seen in 2022.

Recent Trend (Mar 31, 2024 – Dec 31, 2025)

The average payables payment period experienced further fluctuations, increasing to 52 days in June 2024, then decreasing to 11 days in December 2024. The period then increased again, reaching 25 days by December 2025. This recent period demonstrates continued variability, but generally remains within a range lower than the initial period observed in 2022. The most recent value suggests a moderate increase in payment time compared to the low point in late 2024.

Overall, the company demonstrated an ability to significantly alter its payment practices to suppliers, as evidenced by the wide range in the average payables payment period. The reasons for these changes would require further investigation, but could be related to changes in supplier agreements, cash flow management strategies, or broader economic conditions.