Analysis Of ServiceNow’s Gekkobrain Acquisition

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Earlier last week, ServiceNow (NYSE:NOW) reported its third quarter results that continued to outpace market expectations. Its results showed momentum across the entire portfolio. ServiceNow continued to expand its market reach through partnerships and the recent Gekkobrain acquisition.

ServiceNow’s Financials

For the third quarter of the year, ServiceNow’s revenues grew 31% to $1.51 billion, ahead of the market’s forecast by 2.3%. EPS of $1.55 was also slightly ahead of the market’s estimates of $1.39.

By segment, subscription revenues grew 31% to $1.43 billion and professional and other services revenues grew 39% to $85 million.

Its growth was impressive across the entire portfolio. ITSM was in 18 of the top 20 deals, IT Operations Management had 10 deals over $1 million in ACV. Meanwhile Customer Service Management was included in 12 of the top 20 deals in the quarter of which 8 deals were of more than $1 million ACV. Its Employee service was included in 13 of the top 20 deals and Creator (App Engine) was included in 18 of the top 20 deals. The company added 64 customers generating over $1 million in ACV, growing 25% over the year.

ServiceNow expects subscription revenues of $1.515-$1.52 billion for the fourth quarter and $5.565-$5.57 billion for the current year. The market was looking for an EPS of $1.48 on $1.59 billion in revenues for the current quarter and an EPS of $5.81 on $5.84 billion in revenues for the current fiscal year.

ServiceNow’s Gekkobrain Acquisition

Recently, ServiceNow announced its acquisition of Denmark-based Gekkobrain. Founded in 2016, Gekkobrain is a custom code adaptation tool that finds, analyzes, highlights, and estimates issues in custom code and modules prior to generating a project plan with recommended sprints. The acquisition will extend the power of ServiceNow Creator Workflows and App Engine to assist organizations with identifying and understanding custom code in ERP deployments and business processes.

With Gekkobrain, ServiceNow will be able to extend Creator Workflows and App Engine capabilities to allow organizations to identify and understand custom code in their ERP deployments and the business processes they support. The?expansion of the low-code capabilities of App Engine will help organizations rapidly and cost-effectively modernize their ERP systems by seamlessly identifying, automating, and customizing workflows to reduce the risk and cost traditionally associated with ERP software migrations . Terms of the acquisition were not disclosed.

ServiceNow also announced the expansion of its partnership with KPMG to deliver environmental, social, and governance (ESG) focused solutions and services that extend KPMG offerings and help companies to revolutionize risk management, resilience processes, and operations. KPMG is ServiceNow’s lead launch and design partner for their new integrated ESG solution and will also work with ServiceNow to help companies provide visibility and transparency across ESG programs and initiatives. The two will work together to focus on two technology solutions – the first solution will provide organizations with supply chain transparency, and the second solution will integrate ESG projects, data, and governance to help them manage their ESG commitments and compliance.

Its stock is currently trading at $697.76 with a market capitalization of $138.2 billion. It hit a 52-week high of $698.43 earlier this month and a 52-week low of $448.27 in May.

Disclosure:?All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

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