Veeva Announces Fiscal 2024 First Quarter Results

May 31, 2023

Total Revenues of $526.3M, up 4% Year Over Year;
Subscription Services Revenues of $414.5M, up 3% Year Over Year

PLEASANTON, Calif., May 31, 2023 /PRNewswire/ -- Veeva Systems Inc. (NYSE: VEEV), a leading provider of industry cloud solutions for the global life sciences industry, today announced results for its first quarter ended April 30, 2023.

"It was a strong start to the year for Veeva and we are executing well on our goal to power the most critical functions for the life sciences industry," said CEO Peter Gassner. "We announced a number of new innovations, connected the industry at Veeva Commercial Summit, and continued progress in key areas across commercial and R&D."

Fiscal 2024 First Quarter Results:

  • Revenues: Total revenues for the first quarter were $526.3 million, up from $505.1 million one year ago, an increase of 4% year over year. Subscription services revenues for the first quarter were $414.5 million, up from $402.6 million one year ago, an increase of 3% year over year.
  • Operating Income and Non-GAAP Operating Income (1): First quarter operating income was $61.5 million, compared to $127.7 million one year ago, a decrease of 52% year over year. Non-GAAP operating income for the first quarter was $157.0 million, compared to $199.6 million one year ago, a decrease of 21% year over year.
  • Net Income and Non-GAAP Net Income (1): First quarter net income was $131.5 million, compared to $100.1 million one year ago, an increase of 31% year over year. Non-GAAP net income for the first quarter was $147.9 million, compared to $159.8 million one year ago, a decrease of 7% year over year.
  • Net Income per Share and Non-GAAP Net Income per Share (1): For the first quarter, fully diluted net income per share was $0.81, compared to $0.62 one year ago, while non-GAAP fully diluted net income per share was $0.91, compared to $0.99 one year ago.
  • Customer Contracting Change: The previously announced customer contracting change that standardized termination for convenience (TFC) rights in our master subscription agreements went into effect on February 1, 2023. This resulted in a change in the timing of revenue for certain customer contracts to which a TFC right was added and reduced revenues, operating income and non-GAAP operating income, and net income and non-GAAP net income in the first quarter.

"We started the year strong and delivered financial results that exceeded our guidance on all metrics," said CFO Brent Bowman. "We see momentum in multiple product categories, which positions us well to deliver durable and profitable growth through 2025 and beyond."

Recent Highlights:

  • Leading in Commercial with Product Excellence and Innovation — Veeva is helping the life sciences industry achieve commercial excellence through software, data, and services. Veeva's commercial leadership and proven customer success drove 11 Veeva CRM wins and five Veeva Compass wins in the quarter. In May, the company brought the industry together for Veeva Commercial Summit in Boston, one of the largest commercial life sciences gatherings in the world. Showcasing innovation to advance the industry, Veeva announced what's coming in Vault CRM — including CRM Bot, a generative AI application for Vault CRM — and announced two new Veeva Compass offerings.
  • Continued Strength and Growing Opportunity in Veeva Development Cloud — Progress to establish Veeva Development Cloud as the operating system for product development continued in the quarter. Product excellence and customer success are fueling expansion as more than 400 customers have now selected applications in more than one of the five Development Cloud product suites.
  • Expanding Quality Leadership — Offering a unified suite of applications to connect quality and manufacturing processes, Veeva Vault Quality is becoming the preferred choice among the life sciences industry, fueling another strong quarter with 26 wins. Veeva is building momentum for the large opportunity ahead, with more than 275 customers now using both Vault QualityDocs and Vault QMS, including 10 of the top 20 pharmas.

Financial Outlook:

Veeva is providing guidance for its fiscal second quarter ending July 31, 2023 as follows:

  • Total revenues between $580 and $582 million.
  • Non-GAAP operating income between $199 and $201 million(2).
  • Non-GAAP fully diluted net income per share between $1.12 and $1.13(2).

Veeva is providing updated guidance for its fiscal year ending January 31, 2024 as follows:

  • Total revenues between $2,360 and $2,370 million.
  • Non-GAAP operating income of about $810 million(2).
  • Non-GAAP fully diluted net income per share of approximately $4.59(2).

Veeva is reiterating guidance for its fiscal year ending January 31, 2025 for the following metrics:

  • Total revenues of at least $2,800 million.
  • Non-GAAP operating income of at least $1,000 million(2).

Conference Call Information

Prepared remarks and an investor presentation providing additional information and analysis can be found on Veeva's investor relations website at ir.veeva.com. Veeva will host a Q&A conference call at 2:00 p.m. PT today, May 31, 2023, and a replay of the call will be available on Veeva's investor relations website.

What:

Veeva Systems Fiscal 2024 First Quarter Results Conference Call

When:

Wednesday, May 31, 2023

Time:

2:00 p.m. PT (5:00 p.m. ET)

Online Registration:

https://conferencingportals.com/event/badXudFz



Webcast:

ir.veeva.com

____________

(1) This press release uses non-GAAP financial metrics that are adjusted for the impact of various GAAP items. See the section titled "Non-GAAP Financial Measures" and the tables entitled "Reconciliation of GAAP to Non-GAAP Financial Measures" below for details.

(2) Veeva is not able, at this time, to provide GAAP targets for operating income and fully diluted net income per share for the second fiscal quarter ending July 31, 2023, the fiscal year ending January 31, 2024, or the fiscal year ending January 31, 2025, because of the difficulty of estimating certain items excluded from non-GAAP operating income and non-GAAP fully diluted net income per share that cannot be reasonably predicted, such as charges related to stock-based compensation expense. The effect of these excluded items may be significant.

About Veeva Systems

Veeva is the global leader in cloud software for the life sciences industry. Committed to innovation, product excellence, and customer success, Veeva serves more than 1,000 customers, ranging from the world's largest pharmaceutical companies to emerging biotechs. As a Public Benefit Corporation, Veeva is committed to balancing the interests of all stakeholders, including customers, employees, shareholders and the industries it serves. For more information, visit veeva.com.

Veeva uses its ir.veeva.com website as a means of disclosing material non-public information, announcing upcoming investor conferences, and for complying with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website in addition to following our press releases, SEC filings, and public conference calls and webcasts.

Forward-looking Statements

This release contains forward-looking statements regarding Veeva's expected future performance and, in particular, includes quotes from management and guidance, provided as of May 31, 2023, about Veeva's expected future financial results. Estimating guidance accurately for future periods is difficult. It involves assumptions and internal estimates that may prove to be incorrect and is based on plans that may change. Hence, there is a significant risk that actual results could differ materially from the guidance we have provided in this release and we have no obligation to update such guidance. There are also numerous risks that have the potential to negatively impact our financial performance, including issues related to the security or performance of our products, competitive factors, customer decisions and priorities, events that impact the life sciences industry, general macroeconomic and geopolitical events (including inflationary pressures, changes in interest rates, currency exchange fluctuations, and impacts related to Russia's invasion of Ukraine), and issues that impact our ability to hire, retain and adequately compensate talented employees. We have summarized what we believe are the principal risks to our business in a section titled "Summary of Risk Factors" on pages 9 and 10 in our filing on Form 10-K for the fiscal year ended January 31, 2023 which you can find here. Additional details on the risks and uncertainties that may impact our business can be found in the same filing on Form 10-K and in our subsequent SEC filings, which you can access at sec.gov. We recommend that you familiarize yourself with these risks and uncertainties before making an investment decision.

Investor Relations Contact:
Gunnar Hansen
Veeva Systems Inc.
267-460-5839
ir@veeva.com

Media Contact:
Maria Scurry
Veeva Systems Inc.
781-366-7617
pr@veeva.com

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



April 30,
2023


January 31,
2023

Assets




Current assets:




Cash and cash equivalents

$      1,093,634


$         886,465

Short-term investments

2,521,268


2,216,163

Accounts receivable, net

412,940


703,055

Unbilled accounts receivable

38,070


82,174

Prepaid expenses and other current assets

122,222


81,456

Total current assets

4,188,134


3,969,313

Property and equipment, net

50,059


49,817

Deferred costs, net

23,166


31,825

Lease right-of-use assets

52,178


55,336

Goodwill

439,877


439,877

Intangible assets, net

77,731


82,476

Deferred income taxes

156,375


136,697

Other long-term assets

35,850


38,955

Total assets

$      5,023,370


$      4,804,296





Liabilities and stockholders' equity




Current liabilities:




Accounts payable

$           44,404


$           41,678

Accrued compensation and benefits

44,358


44,282

Accrued expenses and other current liabilities

32,269


35,306

Income tax payable

4,617


4,946

Deferred revenue

869,920


869,285

Lease liabilities

10,734


11,306

Total current liabilities

1,006,302


1,006,803

Deferred income taxes

1,407


1,492

Lease liabilities, noncurrent

47,494


49,670

Other long-term liabilities

25,104


30,079

Total liabilities

1,080,307


1,088,044

Stockholders' equity:




Class A common stock

2


2

Class B common stock


Additional paid-in capital

1,622,547


1,532,627

Accumulated other comprehensive loss

(25,759)


(31,129)

Retained earnings

2,346,273


2,214,752

Total stockholders' equity

3,943,063


3,716,252

Total liabilities and stockholders' equity

$      5,023,370


$      4,804,296

 

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)



Three months ended April 30,


2023


2022

Revenues:




Subscription services(3)

$         414,546


$         402,632

Professional services and other(4)

111,779


102,470

Total revenues

526,325


505,102

Cost of revenues (5):




Cost of subscription services

67,575


58,953

Cost of professional services and other

99,088


80,562

Total cost of revenues

166,663


139,515

Gross profit

359,662


365,587

Operating expenses (5):




Research and development

146,960


113,475

Sales and marketing

88,503


76,115

General and administrative

62,669


48,325

Total operating expenses

298,132


237,915

Operating income

61,530


127,672

Other income, net

30,248


2,709

Income before income taxes

91,778


130,381

Income tax (benefit) provision

(39,743)


30,266

Net income

$         131,521


$         100,115

Net income per share:




Basic

$               0.82


$               0.65

Diluted

$               0.81


$               0.62

Weighted-average shares used to compute net income per share:




Basic

159,852


154,514

Diluted

162,521


161,928

Other comprehensive income:




Net change in unrealized loss on available-for-sale investments

$             5,428


$          (10,999)

Net change in cumulative foreign currency translation loss

(58)


(1,254)

Comprehensive income

$         136,891


$           87,862





(3) Includes subscription services revenues from the following product areas:




Veeva Commercial Solutions

$         239,324


$         227,724

Veeva R&D Solutions

175,222


174,908

Total subscription services

$         414,546


$         402,632





(4) Includes professional services and other revenues from the following product areas:




Veeva Commercial Solutions

$           44,864


$           43,321

Veeva R&D Solutions

66,915


59,149

Total professional services and other

$         111,779


$         102,470





(5) Includes stock-based compensation as follows:




Cost of revenues:




Cost of subscription services

1,505


1,277

Cost of professional services and other

12,722


9,990

Research and development

38,906


25,823

Sales and marketing

20,135


16,893

General and administrative

17,451


13,151

Total stock-based compensation

$           90,719


$           67,134

 

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



Three months ended April 30,


2023


2022

Cash flows from operating activities




Net income

$         131,521


$         100,115

Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

7,549


7,058

Reduction of operating lease right-of-use assets

3,060


2,948

(Accretion) amortization of discount on short-term investments

(3,407)


1,056

Stock-based compensation

90,719


67,134

Amortization of deferred costs

5,052


5,993

Deferred income taxes

(21,514)


(32,432)

 Loss (gain) on foreign currency from mark-to-market derivative

180


(582)

Bad debt expense (recovery)

155


(25)

Changes in operating assets and liabilities:




Accounts receivable

289,960


301,482

Unbilled accounts receivable

44,104


1,295

Deferred costs

3,607


(3,079)

Other current and long-term assets

(36,298)


(7,563)

Accounts payable

1,955


5,121

Accrued expenses and other current liabilities

(3,344)


(2,336)

Income taxes payable

(329)


43,223

Deferred revenue

(1,221)


(7,471)

Operating lease liabilities

(2,693)


(2,031)

Other long-term liabilities

(3,120)


1,121

Net cash provided by operating activities

505,936


481,027

Cash flows from investing activities




Purchases of short-term investments

(612,492)


(572,344)

Maturities and sales of short-term investments

318,056


196,190

Long-term assets

(2,958)


(2,333)

Net cash used in investing activities

(297,394)


(378,487)

Cash flows from financing activities




Proceeds from exercise of common stock options

15,233


16,291

Taxes paid related to net share settlement of equity awards

(16,625)


(14,999)

Net cash (used in) provided by financing activities

(1,392)


1,292

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

19


(1,874)

Net change in cash, cash equivalents, and restricted cash

207,169


101,958

Cash, cash equivalents, and restricted cash at beginning of period

889,650


1,141,225

Cash, cash equivalents, and restricted cash at end of period

$      1,096,819


$      1,243,183





Supplemental disclosures of other cash flow information:




Excess tax benefits from employee stock plans

$           62,089


$             4,907

 

Non-GAAP Financial Measures

In Veeva's public disclosures, Veeva has provided non-GAAP measures, which it defines as financial information that has not been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. In addition to its GAAP measures, Veeva uses these non-GAAP financial measures internally for budgeting and resource allocation purposes and in analyzing its financial results. For the reasons set forth below, Veeva believes that excluding the following items provides information that is helpful in understanding its operating results, evaluating its future prospects, comparing its financial results across accounting periods, and comparing its financial results to its peers, many of which provide similar non-GAAP financial measures.

  • Excess tax benefits. Excess tax benefits from employee stock plans are dependent on previously agreed-upon equity grants to our employees, vesting of those grants, stock price, and exercise behavior of our employees, which can fluctuate from quarter to quarter. For example, excess tax benefits for the quarters ended January 31 and April 30, 2023 were higher than normal primarily due to our Chief Executive Officer's exercise of stock options in connection with a previously announced trading plan.  Because these fluctuations are not directly related to our business operations, Veeva excludes excess tax benefits for its internal management reporting processes. Veeva management also finds it useful to exclude excess tax benefits when assessing the level of cash provided by operating activities. Given the nature of the excess tax benefits, Veeva believes excluding it allows investors to make meaningful comparisons between our operating cash flows from quarter to quarter and those of other companies.
  • Stock-based compensation expenses. Veeva excludes stock-based compensation expenses primarily because they are non-cash expenses that Veeva excludes from its internal management reporting processes. Veeva's management also finds it useful to exclude these expenses when they assess the appropriate level of various operating expenses and resource allocations when budgeting, planning and forecasting future periods. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use, Veeva believes excluding stock-based compensation expenses allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies.
  • Amortization of purchased intangibles. Veeva incurs amortization expense for purchased intangible assets in connection with acquisitions of certain businesses and technologies. Amortization of intangible assets is a non-cash expense and is inconsistent in amount and frequency because it is significantly affected by the timing, size of acquisitions and the inherent subjective nature of purchase price allocations. Because these costs have already been incurred and cannot be recovered, and are non-cash expenses, Veeva excludes these expenses for its internal management reporting processes. Veeva's management also finds it useful to exclude these charges when assessing the appropriate level of various operating expenses and resource allocations when budgeting, planning and forecasting future periods. Investors should note that the use of intangible assets contributed to Veeva's revenues earned during the periods presented and will contribute to Veeva's future period revenues as well.
  • Income tax effects on the difference between GAAP and non-GAAP costs and expenses. The income tax effects that are excluded relate to the imputed tax impact on the difference between GAAP and non-GAAP costs and expenses due to stock-based compensation and purchased intangibles for GAAP and non-GAAP measures.

There are limitations to using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures provided by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by Veeva's management about which items are adjusted to calculate its non-GAAP financial measures. Veeva compensates for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in its public disclosures.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Veeva encourages its investors and others to review its financial information in its entirety, not to rely on any single financial measure to evaluate its business, and to view its non-GAAP financial measures in conjunction with the most directly comparable GAAP financial measures. A reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables below.

 

VEEVA SYSTEMS INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Dollars in thousands)

(Unaudited)


The following tables reconcile the specific items excluded from GAAP metrics in the calculation of non-GAAP metrics for the periods shown below:


Reconciliation of Net Cash Provided by Operating Activities (GAAP basis to non-GAAP basis)

Three months ended April 30,


2023


2022

Net cash provided by operating activities on a GAAP basis

$      505,936


$      481,027

Excess tax benefits from employee stock plans

(62,089)


(4,907)

Net cash provided by operating activities on a non-GAAP basis

$      443,847


$      476,120

Net cash used in investing activities on a GAAP basis

$    (297,394)


$    (378,487)

Net cash (used in) provided by financing activities on a GAAP basis

$        (1,392)


$          1,292





Reconciliation of Financial Measures (GAAP basis to non-GAAP basis)

Three months ended April 30,


2023


2022

Cost of subscription services revenues on a GAAP basis

$        67,575


$        58,953

Stock-based compensation expense

(1,505)


(1,277)

Amortization of purchased intangibles

(1,090)


(1,090)

Cost of subscription services revenues on a non-GAAP basis

$        64,980


$        56,586





Gross margin on subscription services revenues on a GAAP basis

83.7 %


85.4 %

Stock-based compensation expense

0.4


0.3

Amortization of purchased intangibles

0.2


0.3

Gross margin on subscription services revenues on a non-GAAP basis

84.3 %


86.0 %





Cost of professional services and other revenues on a GAAP basis

$        99,088


$        80,562

Stock-based compensation expense

(12,722)


(9,990)

Amortization of purchased intangibles

(134)


(134)

Cost of professional services and other revenues on a non-GAAP basis

$        86,232


$        70,438





Gross margin on professional services and other revenues on a GAAP basis

11.4 %


21.4 %

Stock-based compensation expense

11.4


9.8

Amortization of purchased intangibles

0.2


0.1

Gross margin on professional services and other revenues on a non-GAAP basis

23.0 %


31.3 %





Gross profit on a GAAP basis

$      359,662


$      365,587

Stock-based compensation expense

14,227


11,267

Amortization of purchased intangibles

1,224


1,224

Gross profit on a non-GAAP basis

$      375,113


$      378,078





Gross margin on total revenues on a GAAP basis

68.3 %


72.4 %

Stock-based compensation expense

2.7


2.2

Amortization of purchased intangibles

0.3


0.2

Gross margin on total revenues on a non-GAAP basis

71.3 %


74.8 %





Research and development expense on a GAAP basis

$      146,960


$      113,475

Stock-based compensation expense

(38,906)


(25,823)

Amortization of purchased intangibles

(28)


(28)

Research and development expense on a non-GAAP basis

$      108,026


$        87,624










Three months ended April 30,


2023


2022





Sales and marketing expense on a GAAP basis

$        88,503


$        76,115

Stock-based compensation expense

(20,135)


(16,893)

Amortization of purchased intangibles

(3,439)


(3,439)

Sales and marketing expense on a non-GAAP basis

$        64,929


$        55,783





General and administrative expense on a GAAP basis

$        62,669


$        48,325

Stock-based compensation expense

(17,451)


(13,151)

Amortization of purchased intangibles

(55)


(55)

General and administrative expense on a non-GAAP basis

$        45,163


$        35,119





Operating expense on a GAAP basis

$      298,132


$      237,915

Stock-based compensation expense

(76,492)


(55,867)

Amortization of purchased intangibles

(3,522)


(3,522)

Operating expense on a non-GAAP basis

$      218,118


$      178,526





Operating income on a GAAP basis

$        61,530


$      127,672

Stock-based compensation expense

90,719


67,134

Amortization of purchased intangibles

4,746


4,746

Operating income on a non-GAAP basis

$      156,995


$      199,552





Operating margin on a GAAP basis

11.7 %


25.3 %

Stock-based compensation expense

17.2


13.3

Amortization of purchased intangibles

0.9


0.9

Operating margin on a non-GAAP basis

29.8 %


39.5 %





Net income on a GAAP basis

$      131,521


$      100,115

Stock-based compensation expense

90,719


67,134

Amortization of purchased intangibles

4,746


4,746

Income tax effect on non-GAAP adjustments(6)

(79,064)


(12,209)

Net income on a non-GAAP basis

$      147,922


$      159,786





Diluted net income per share on a GAAP basis

$            0.81


$            0.62

Stock-based compensation expense

0.56


0.41

Amortization of purchased intangibles

0.03


0.03

Income tax effect on non-GAAP adjustments(6)

(0.49)


(0.07)

Diluted net income per share on a non-GAAP basis

$            0.91


$            0.99

________________

(6) 

For the three months April 30, 2023 and 2022, management used an estimated annual effective non-GAAP tax rate of 21.0%.

 

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SOURCE Veeva Systems