ServiceNow Inc. (NYSE:NOW)

The financial data reveals fluctuating patterns in key operational efficiency metrics over the examined quarters. The analysis focuses on four ratios: receivables turnover, payables turnover, working capital turnover, average receivable collection period, and average payables payment period.

Receivables Turnover

The receivables turnover ratio exhibits a cyclical pattern with alternating peaks and troughs. Initially, the ratio increased sharply from 4.48 to 7.49, followed by moderate decreases and subsequent rebounds. Notably, there is a pattern where lower values around 4.2 to 4.9 alternate with higher spikes ranging approximately between 6.5 and 8.4. This oscillation suggests variability in the efficiency of collecting receivables, with periodic improvements followed by slower collection intervals.

Payables Turnover

The payables turnover ratio shows considerable volatility without a consistent trend. It started from a high level of 28.83, dropped steeply to below 10, and then oscillated between roughly 5.6 and 33.63. The wide range indicates fluctuating management of payables, sometimes turning over payables quickly and at other times more slowly. This inconsistency might reflect shifting payment strategies or changing supplier terms.

Working Capital Turnover

Working capital turnover experienced substantial variance, with values ranging from approximately 5.6 to almost 28. Early on, the ratio was around 5.76 and 5.62, then peaked sharply to 16.31 and 21.76 in subsequent quarters. The metric later displayed oscillations but generally maintained higher values above 10 in many periods, indicating periods of efficient use of working capital. However, the intermittent drops to as low as around 6.6 suggest occasional declines in the effectiveness of working capital utilization.

Average Receivable Collection Period

The average number of days to collect receivables shows an inverse pattern to receivables turnover, with values oscillating between roughly 43 and 87 days. Periods of higher collection days correspond to lower receivables turnover figures and vice versa. This confirms the cyclical pattern observed in receivables turnover, indicating the company’s varying speed in collecting outstanding receivables over the quarters.

Average Payables Payment Period

The average payment period for payables exhibits irregular fluctuations between approximately 11 and 65 days. Unlike receivables, there is no clear trend of increasing or decreasing payment duration. Instead, the data points reveal inconsistent management of payables timing. Notable are quarters with payment duration above 50 days alternating with much lower periods near a couple of weeks, signaling reactive payment strategies or shifts in creditor negotiation dynamics.

Overall, the data suggests that the operational efficiency ratios are characterized by volatility, with alternating periods of higher and lower performance in both receivables and payables management. Working capital turnover displays sporadic gains in efficiency, but also notable declines. The alternating patterns in collection and payment periods indicate variability in cash flow cycle management rather than steady improvement or deterioration over time.

The revenue figures demonstrate a consistent upward trend across the reported periods. Beginning at approximately 1,046 million USD in the first quarter of 2020, revenues steadily increased each quarter, reaching over 3,215 million USD by the second quarter of 2025. This reflects a more than threefold increase over five years, indicative of substantial and sustained growth.

Accounts receivable, net, exhibits notable fluctuations across the periods. Starting at 615 million USD in the first quarter of 2020, it showed periods of sharp increases, notably rising to 1,009 million USD by the last quarter of 2020 and again to 1,725 million USD in the last quarter of 2022. These peaks correspond with seasonal or cyclical changes, as the receivables tend to spike in the fourth quarter of each year before declining in the following quarters. This pattern suggests a recurring buildup of receivables at year-end, potentially related to billing cycles or customer payment behavior.

The receivables turnover ratio further clarifies the efficiency in collecting receivables. The ratio varies between highs above 7.7 and lows around 4.2 to 4.5 across different quarters, demonstrating marked seasonal variability. Higher turnover ratios occur generally in the first three quarters of each year, indicating faster collection of receivables during these periods. Conversely, turnover dips in the fourth quarters, aligning with the increases in accounts receivable, suggesting slower collection during those times. Overall, the turnover ratio remains within a range that indicates a relatively consistent but seasonally influenced collection cycle.

In summary, the financial data reveals strong revenue growth accompanied by recurring seasonal fluctuations in accounts receivable and receivables turnover. These seasonal trends imply regular variations in cash collections corresponding with year-end periods, which could be a focus area for improving working capital management despite the overall positive revenue momentum.

Cost of Revenues

The cost of revenues shows a clear upward trend over the examined periods. Starting at $223 million in March 2020, there is a consistent quarterly increase, reaching $724 million by June 2025. This growth trajectory suggests expanding operations or increasing production costs over time. The increments, while steady, show some acceleration in later years, particularly from 2023 onwards, indicating a possible increase in scale or input cost inflation.

Accounts Payable

Accounts payable exhibits significant volatility across periods. Initial values fluctuate moderately from $74 million in March 2020 to $34 million in December 2020, then spike to $166 million in March 2022, and again experience wide swings thereafter. Peaks such as $296 million in June 2024 and troughs like $68 million in June 2025 indicate irregular payment cycles or changes in supplier credit terms. The lack of a consistent trend suggests episodic fluctuations in short-term liabilities or management of payables.

Payables Turnover Ratio

The payables turnover ratio presents a highly variable pattern throughout the reported quarters. Recorded ratios begin at 28.83 in December 2020, drop to a low of 5.6 in June 2022, and peak again at 33.63 in March 2025. This inconsistency mirrors the changes observed in accounts payable, indicating fluctuating efficiency in managing payable accounts. Higher turnover typically indicates faster payment to suppliers, while lower values suggest lengthened payment periods. The data illustrates recurrent cycles of alternating payment speed and perhaps shifting strategic supplier relationship management.

Overall Insights

The financial data reveals a company experiencing growth in cost structures, potentially driven by increased revenue-generating activities. However, cash management, as implied by accounts payable and turnover ratios, is less stable, pointing to possible challenges in vendor payment timing or negotiating credit terms. The irregularity in payables and turnover ratios calls for attention to working capital policies to optimize cash flow management in line with expansion.

The financial data reveals several key trends over the observed periods.

Working Capital

The working capital exhibits variability across the quarters, with values fluctuating between a low of 271 million US$ (December 2020) and a high of 1131 million US$ (September 2020). There is no consistent upward or downward trend; instead, the data shows a cyclical pattern with periodic increases and decreases. For instance, after reaching 1131 million US$ in September 2020, working capital decreases to 271 million US$ by December 2020, then again rises and falls in subsequent quarters. The periods from March 2024 to December 2024 show relatively high working capital levels, peaking at 1012 million US$ in March 2025, before an apparent decline to 780 million US$ by June 2025.

Revenues

Revenues show a clear and consistent growth trend throughout the entire period. Starting at 1046 million US$ in March 2020, revenues steadily increase each quarter without interruption, reaching 3215 million US$ by June 2025. The growth appears relatively stable, with approximate quarter-over-quarter increases that suggest a strong and sustained expansion in sales or service income.

Working Capital Turnover Ratio

This ratio, available from December 2020 onwards, fluctuates significantly through the periods. The values alternate between higher and lower extremes, ranging from a low of 5.62 to a high of 27.96. Notably, high ratios indicate efficient use of working capital relative to the revenue generated during some quarters (e.g., 27.96 in September 2024). The ratio does not follow a clear directional trend but instead reflects volatility, possibly indicating varying operational efficiency or changes in the company’s working capital management over these quarters.

In summary, while revenue shows robust and continuous growth, working capital does not follow a consistent trajectory, displaying fluctuations that may require further investigation. The working capital turnover ratio's volatility suggests varying efficiency in using working capital to support revenue generation during different periods, which might imply changing operational conditions or strategy adjustments.

The analysis of receivables turnover and average receivable collection period over the reported periods reveals a recurring seasonal pattern, consistent fluctuations, and a moderate stability in collections efficiency.

Receivables Turnover

The receivables turnover ratio exhibits a pronounced cyclical pattern within each year. Generally, the ratio is lower in the first quarter (March 31) and increases substantially in the subsequent quarter (June 30). This pattern repeats annually, indicating a seasonal effect on the speed of receivables collection. The ratio fluctuates between lows around 4.2 to 4.9 and peaks mostly between approximately 6.5 to 8.4.

Over the observed timeframe, no clear long-term upward or downward trend is evident. Peaks remain relatively stable, indicating consistent capability in converting receivables into cash during peak quarters. However, the dips each first quarter suggest some recurring slowdown in collection efficiency seasonally at the start of each year.

Average Receivable Collection Period

The collection period in days shows an inverse pattern to the receivables turnover, which aligns with expectations. Periods with lower turnover correspond to higher average days outstanding, and vice versa.

The cycle features longer collection periods in the first quarter, often above 80 days, followed by sharp improvements in the second quarter with periods dropping to mid-40 days or high-40 days. This pattern repeats annually, confirming a seasonal dynamic affecting the timing of receivables collection.

There is no significant evidence of a sustained improvement or deterioration over the observed time span. The collection days remain within a relatively narrow band, indicating consistent management practices and no notable changes in credit policy or customer payment behavior.

In summary, both the receivables turnover ratio and the average collection period demonstrate a stable seasonal pattern with first quarters consistently showing slower collection and subsequent quarters recovering. The overall consistency in the peaks and troughs suggests steady operational control over receivables with no marked changes in efficiency across the years analyzed.

The payables turnover ratio exhibits noticeable fluctuations across the observed periods. Initially, the ratio starts from a high value of 28.83, then significantly declines to a range between approximately 5.6 and 19.64, showing volatility throughout the subsequent quarters. Notably, there are peaks such as 26.38 in December 2023 and 33.63 in March 2025, interspersed with troughs, including values around 5.74 to 7.86 in late 2022 and mid-2025. This volatility suggests variability in payment frequency to suppliers over the analyzed periods.

In terms of the average payables payment period, measured in number of days, the data reveals a corresponding inverse relationship to the turnover ratio. The payment period initially is low at 13 days, then increases substantially, reaching peaks of 65 and 64 days in September 2022 and December 2022 respectively. Following this peak, there is a general decline towards the end of 2023 to about 14 days, although the period again shows variability, increasing to intermediate levels around 41 to 52 days in late 2024 before declining. The longest payment periods coincide with the lowest turnovers, reflecting the expected negative correlation between these two metrics.

Overall, the observed data reflects a pattern of cyclical variations in the company's payables management. Periods of quicker payments are alternated with intervals of extended payment cycles. This pattern may indicate changing operational strategies or liquidity conditions affecting the timing of payments to suppliers. The significant swings in both metrics suggest that accounts payable management may require closer monitoring to maintain stability and optimize cash flow.