ServiceNow Expands Its AI Portfolio

Summary

• During the second quarter in May, ServiceNow announced plans to acquire Parlo to expand its AI capabilities.
• Silicon Valley-based Parlo is an AI platform that trains algorithms for conversational machines.
• ServiceNow will integrate Parlo's natural language understanding technology called Broca into its Now platform for business process automation.

ServiceNow (NYSE:NOW) recently reported a strong second quarter that beat estimates. However, the company's revenue outlook for the third quarter was below analyst estimates.

ServiceNow's Financials

Revenues for the second quarter of the year grew 41% over the year to $631.1 million, ahead of the market's expectations of $618.3 million. Net loss was $52.7 million or $0.30 per share. Adjusted EPS of $0.49 was up 121% and beat analyst estimates of $0.43 for the quarter.

By segment, revenues from subscriptions grew 45% over the year to $585.3 million and professional services revenues were flat at $45.8 million. Subscription billings grew 36% to $616.9 million.

The strong performance in the quarter was driven by 28 deals with net new average contract value of more than $1 million. ServiceNow has 575 customers with annual contract values of $1 million.

For the third quarter, ServiceNow projected subscription revenues of $610 -$615 million and subscription billings of $648-$653 million compared with the market's projections of $674 million. It expects to end the current year with subscription revenues of $2.4 -$2.41 billion.

ServiceNow's Acquisitions

ServiceNow continues to leverage the unprecedented opportunity that the SaaS companies have today and make acquisitions within the SaaS space. This year, it already announced two acquisitions.

Last quarter, ServiceNow announced the acquisition of Seattle-based VendorHawk for an undisclosed sum. VendorHawk is a SaaS player whose cloud systems help customers discover, rationalize, and optimize SaaS subscriptions across their organization. It supports its customers by helping them manage spending on more than 36,000 SaaS applications and mapping redundant applications for them. It analyzes application utilization and optimizes SaaS subscriptions for top applications such as Salesforce, Box, and Google G Suite.

ServiceNow plans to leverage VendorHawk's capabilities to strengthen its Software Asset Management offering. It will integrate VendorHawk within the Now Platform and offer it as part of a ServiceNow Software Asset Management release in 2019. VendorHawk's financials are not widely known. Prior to the acquisition, it had raised seed funding of $1.3 million.

ServiceNow's intelligent automation capabilities help improve agent-employee and customer interactions with more human-like conversations, drive complex actions to resolution quickly thorough intelligent agents, automate filling out forms and prioritizing service tickets, and make it faster and easier for partners and customers to develop intelligent apps using the Now Platform.

During the second quarter in May, ServiceNow announced its plans to acquire Parlo to expand its AI capabilities. Silicon Valley-based Parlo is an AI platform that trains algorithms for conversational machines. Financial details of the deal were not disclosed. ServiceNow will integrate Parlo's natural language understanding technology called Broca into its Now platform for business process automation. Broca will enable the Now platform to understand the nuances of conversational language. Parlo's financials are not widely known. Prior to the acquisition, it had received a seed funding of $3.1 million.

Its stock is currently trading at $180.88 with a market cap of $31.6 billion. It had touched a 52-week high of $194.81 last month before its results. It hit a 52-week low of $103 in August last year.