Veeva Announces Fiscal 2020 First Quarter Results

BusinessWire

5 years ago

Total Revenues of $244.8M, up 25% Year-over-year;
Subscription
Services Revenues of $198.1M, up 27% Year-over-year

PLEASANTON, Calif.–(BUSINESS WIRE)–lt;a href="https://twitter.com/hashtag/LifeSciences?src=hash" target="_blank"gt;#LifeScienceslt;/agt;–Veeva Systems Inc. (NYSE: VEEV), a leading provider of industry cloud
solutions for the global life sciences industry, today announced results
for its fiscal first quarter ended April 30, 2019.

“It was a great start to the year. The team’s focus on customer success
and product excellence continues to drive Veeva’s outstanding results,”
said CEO Peter Gassner. “We are expanding our position as one of the
most trusted partners to the industry by consistently bringing new
innovations to market that have the greatest customer impact.”

Fiscal 2020 First Quarter Results:

Revenues: Total revenues for the first quarter were $244.8
million, up from $195.5 million one year ago, an increase of 25%
year-over-year. Subscription services revenues for the first quarter
were $198.1 million, up from $156.0 million one year ago, an increase
of 27% year-over-year.
Operating Income and Non-GAAP Operating Income⁽¹⁾:
First quarter operating income was $71.2 million, compared to
$44.0 million one year ago, an increase of 62% year-over-year.
Non-GAAP operating income for the first quarter was $93.5 million,
compared to $62.9 million one year ago, an increase of 49%
year-over-year.
Net Income and Non-GAAP Net Income⁽¹⁾: First quarter
net income was $73.4 million, compared to $44.3 million one year ago,
an increase of 66% year-over-year. Non-GAAP net income for the first
quarter was $78.7 million, compared to $51.4 million one year ago, an
increase of 53% 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
$0.47, compared to $0.29 one year ago, while non-GAAP fully diluted
net income per share was $0.50, compared to $0.33 one year ago.

“Our outperformance in Veeva Commercial Cloud and Veeva Vault allowed us
to post another strong quarter of growth and profitability,” said CFO
Tim Cabral. “These results enabled us to meaningfully raise fiscal 2020
guidance across all metrics.”

Recent Highlights:

Commercial Innovation Continues with New AI-driven Applications
— Veeva released its new AI application, Veeva
Andi, that delivers insights and next best action suggestions
right in Veeva CRM. The company also
announced it is embedding AI in Veeva CRM with Approved Notes and
in Veeva Vault PromoMats with Auto Claims Linking.
Top 20 Pharma Selects Veeva Vault CDMS — The company won
its first enterprise-wide deal with a top 20 pharma. The customer
chose Vault CDMS as its global standard for EDC, coding, data
cleaning, and reporting.

Industry is Moving to Veeva Vault — Veeva added 47 new Vault
customers in Q1, a quarterly record. There were also a number of
significant expansions with existing customers, including a top 20
pharma that standardized on Vault eTMF, Vault Submissions, and Vault
Submissions Archive based upon the success of their Vault QualityDocs
implementation for more than 50,000 users.

Financial Outlook:

Veeva is providing guidance for its fiscal second quarter ending July
31, 2019 as follows:

Total revenues between $259 and $260 million.
Non-GAAP operating income between $94 and $95 million⁽²⁾.
Non-GAAP fully diluted net income per share between $0.48 and $0.49⁽²⁾.

Veeva is providing guidance for its fiscal year ending January 31, 2020
as follows:

Total revenues between $1,045 and $1,050 million.
Non-GAAP operating income between $385 and $390 million⁽²⁾.
Non-GAAP fully diluted net income per share between $2.01 and $2.03⁽²⁾.

Conference Call Information:

What:			Veeva’s Fiscal 2020 First Quarter Results Conference Call
When:			Wednesday, May 29, 2019
Time:			1:30 p.m. PT (4:30 p.m. ET)
Live Call:			1-833-235-5654, domestic
			1-647-689-4160, international
			Conference ID 399 8705
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, 2019 or fiscal year ending January
31, 2020 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 Systems Inc. is the leader in cloud-based software for the global
life sciences industry. Committed to innovation, product excellence, and
customer success, Veeva serves more than 750 customers, ranging from the
world’s largest pharmaceutical companies to emerging biotechs. Veeva is
headquartered in the San Francisco Bay Area, with offices throughout
North America, Europe, Asia, and Latin America. For more information,
visit veeva.com.

Forward-looking Statements

This release contains forward-looking statements, including the
quotations from management, the statements in “Financial Outlook,” and
other statements regarding Veeva’s future performance, market growth,
the benefits from the use of Veeva’s solutions, our strategies, and
general business conditions. Any forward-looking statements contained in
this press release are based upon Veeva’s historical performance and its
current plans, estimates and expectations and are not a representation
that such plans, estimates, or expectations will be achieved. These
forward-looking statements represent Veeva’s expectations as of the date
of this press announcement. Subsequent events may cause these
expectations to change, and Veeva disclaims any obligation to update the
forward-looking statements in the future. These forward-looking
statements are subject to known and unknown risks and uncertainties that
may cause actual results to differ materially, including (i) breaches in
our security measures or unauthorized access to our customers’ data; (ii) our
expectation that the future growth rate of our revenues will decline;
(iii) fluctuation of our results, which may make
period-to-period comparisons less meaningful; (iv) competitive factors,
including but not limited to pricing pressures, consolidation among our
competitors, entry of new competitors, the launch of new products and
marketing initiatives by our existing competitors, and difficulty
securing rights to access, host or integrate with complementary third
party products or data used by our customers; (v) the rate of adoption
of our newer solutions and the results of our efforts to sustain or
expand the use and adoption of our more established applications, like
Veeva CRM; (vi) loss of one or more customers, particularly any of our
large customers; (vii) system unavailability, system performance
problems, or loss of data due to disruptions or other problems with our
computing infrastructure; (viii) our ability to attract and retain
highly skilled employees and manage our growth effectively; (ix) failure
to sustain the level of profitability we have achieved in the past as
our costs increase; (x) adverse changes in economic, regulatory, or
market conditions, particularly in the life sciences industry, including
as a result of customer mergers; (xi) a decline in new subscriptions
that may not be immediately reflected in our operating results due to
the ratable recognition of our subscription revenue; and (xii) pending,
threatened, or future legal proceedings and related expenses.

Additional risks and uncertainties that could affect Veeva’s financial
results are included under the captions, “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in the company’s filing on Form 10-K for the period ended
January 31, 2019. This is available on the company’s website at veeva.com
under the Investors section and on the SEC’s website at sec.gov.
Further information on potential risks that could affect actual results
will be included in other filings Veeva makes with the SEC from time to
time.


VEEVA SYSTEMS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)

	April 30,		January 31,
	2019		2019
Assets
Current assets:
Cash and cash equivalents	$	748,158	$	550,971
Short-term investments		581,490		539,190
Accounts receivable, net		164,108		303,465
Unbilled accounts receivable		23,366		18,122
Prepaid expenses and other current assets		20,729		21,666
Total current assets		1,537,851		1,433,414
Property and equipment, net⁽³⁾		55,266		54,966
Deferred costs, net		30,621		30,869
Lease right-of-use assets⁽³⁾		15,495		—
Goodwill		95,804		95,804
Intangible assets, net		22,951		24,521
Deferred income taxes, noncurrent		6,494		5,938
Other long-term assets		11,622		8,254
Total assets	$	1,776,104	$	1,653,766

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	8,361	$	9,110
Accrued compensation and benefits		15,372		15,324
Accrued expenses and other current liabilities		15,037		16,145
Income tax payable		4,039		4,086
Deferred revenue		363,943		356,357
Lease liabilities⁽³⁾		5,835		—
Total current liabilities		412,587		401,022
Deferred income taxes, noncurrent		7,300		6,095
Lease liabilities, noncurrent⁽³⁾		13,435		—
Other long-term liabilities		7,679		8,900
Total liabilities		441,001		416,017
Stockholders’ equity:
Class A common stock		1		1
Class B common stock		—		—
Additional paid-in capital		641,925		617,623
Accumulated other comprehensive income		1,188		928
Retained earnings⁽³⁾		691,989		619,197
Total stockholders’ equity		1,335,103		1,237,749
Total liabilities and stockholders’ equity	$	1,776,104	$	1,653,766

__________

⁽³⁾ The Company adopted ASU 2016-02, “Leases” (Topic 842)
using the modified retrospective method as of February 1, 2019 and
elected the transition option that allows the Company not to restate the
comparative periods in their financial statements in the year of
adoption.


VEEVA SYSTEMS INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands, except per share data) (Unaudited)

	Three months ended April 30,
	2019			2018
Revenues:
Subscription services	$	198,115		$	156,003
Professional services and other		46,637			39,544
Total revenues		244,752			195,547
Cost of revenues⁽⁴⁾:
Cost of subscription services		30,378			29,913
Cost of professional services and other		35,125			30,242
Total cost of revenues		65,503			60,155
Gross profit		179,249			135,392
Operating expenses⁽⁴⁾:
Research and development		44,973			37,197
Sales and marketing		39,617			34,385
General and administrative		23,490			19,854
Total operating expenses		108,080			91,436
Operating income		71,169			43,956
Other income, net		6,161			2,139
Income before income taxes		77,330			46,095
Provision for income taxes		3,881			1,785
Net income	$	73,449		$	44,310

Net income attributable to common stockholders, basic and diluted:	$	73,449		$	44,310

Net income per share attributable to common stockholders:
Basic	$	0.50		$	0.31
Diluted	$	0.47		$	0.29

Weighted-average shares used to compute net income per share attributable to common stockholders:
Basic		146,708			142,777
Diluted		157,910			154,935
Other comprehensive income (loss):
Net change in unrealized gains on available-for- sale investments	$	962		$	305
Net change in cumulative foreign currency translation loss		(702	)		(809	)
Comprehensive income	$	73,709		$	43,806
__________
⁽⁴⁾ Includes stock-based compensation as follows:

Cost of revenues:
Cost of subscription services	$	385		$	345
Cost of professional services and other		2,978			2,328
Research and development		6,325			4,667
Sales and marketing		5,152			4,088
General and administrative		5,916			5,583
Total stock-based compensation	$	20,756		$	17,011


VEEVA SYSTEMS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

	Three months ended April 30,
	2019			2018
Cash flows from operating activities
Net income	$	73,449		$	44,310
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,438			3,596
Accretion of discount on short-term investments		(1,178	)		(179	)
Stock-based compensation		20,756			17,011
Amortization of deferred costs		4,849			4,519
Deferred income taxes		418			(50	)
(Gain) Loss on foreign currency from mark-to-market derivative		(80	)		23
Bad debt expense (recovery)		(153	)		236
Changes in operating assets and liabilities:
Accounts receivable		139,510			69,592
Unbilled accounts receivable		(5,244	)		(4,287	)
Deferred costs		(4,601	)		(3,551	)
Income taxes		338			(2,496	)
Other current and long-term assets		(2,759	)		(713	)
Accounts payable		(416	)		1,981
Accrued expenses and other current liabilities		(759	)		(2,564	)
Deferred revenue		7,914			22,650
Lease liabilities		(1,629	)		—
Other long-term liabilities		436			507
Net cash provided by operating activities		236,289			150,585
Cash flows from investing activities
Purchases of short-term investments		(228,894	)		(193,162	)
Maturities and sales of short-term investments		188,965			176,544
Purchases of property and equipment		(1,194	)		(709	)
Capitalized internal-use software development costs		(419	)		(230	)
Net cash used in investing activities		(41,542	)		(17,557	)
Cash flows from financing activities
Reduction of lease liabilities – finance leases		(249	)		—
Proceeds from exercise of common stock options		3,391			7,839
Net cash provided by financing activities		3,142			7,839
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(702	)		(811	)
Net change in cash, cash equivalents, and restricted cash		197,187			140,056
Cash, cash equivalents, and restricted cash at beginning of period		552,178			321,387
Cash, cash equivalents, and restricted cash at end of period	$	749,365		$	461,443

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 from its non-GAAP financial measures 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.

Stock-based compensation expenses. Veeva excludes stock-based
compensation expenses from its non-GAAP measures 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 under FASB ASC
Topic 718, 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.
Deferred compensation associated with the Zinc Ahead business
acquisition. The Zinc Ahead share purchase agreement, as revised,
called for share purchase consideration to be deferred and paid at a
rate of one-third of the deferred consideration amount per year to
certain former Zinc Ahead employee shareholders and option holders who
remain employed with Veeva on each deferred consideration payment
date. In accordance with GAAP, these payments are being accounted for
as deferred compensation and the expense is recognized over the
requisite service period. Veeva’s management views this deferred
compensation expense as an unusual acquisition cost associated with
the Zinc Ahead acquisition and finds it useful to exclude it in order
to assess the appropriate level of various operating expenses to
assist in budgeting, planning and forecasting future periods. Veeva
believes excluding this deferred compensation expense from its
non-GAAP measures may allow investors to make more meaningful
comparisons between its recurring operating results and those of other
companies.

Income tax effects on the difference between GAAP and non-GAAP costs
and expenses. The income tax effects that are excluded from the
non-GAAP measures relate to the imputed tax impact on the difference
between GAAP and non-GAAP costs and expenses due to stock-based
compensation, purchased intangibles, and deferred compensation
associated with the Zinc Ahead business acquisition 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.

Beginning with the fiscal quarter ended April 30, 2019, Veeva no longer
excludes the effects of capitalization of internal-use software
development expenses and the subsequent amortization of the capitalized
expenses in its non-GAAP financial measures. Prior periods have been
adjusted to reflect this change, and the effect of this change is not
material for any period previously presented.

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.

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


VEEVA SYSTEMS INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Dollars in thousands) (Unaudited)

	Three months ended April 30,
	2019			2018
Cost of subscription services revenues on a GAAP basis	$	30,378		$	29,913
Stock-based compensation expense		(385	)		(345	)
Amortization of purchased intangibles		(667	)		(901	)
Cost of subscription services revenues on a non-GAAP basis	$	29,326		$	28,667

Gross margin on subscription services revenues on a GAAP basis		84.7	%		80.8	%
Stock-based compensation expense		0.2			0.2
Amortization of purchased intangibles		0.3			0.6
Gross margin on subscription services revenues on a non- GAAP basis		85.2	%		81.6	%

Cost of professional services and other revenues on a GAAP basis	$	35,125		$	30,242
Stock-based compensation expense		(2,978	)		(2,328	)
Deferred compensation associated with Zinc Ahead acquisition		—			(5	)
Cost of professional services and other revenues on a non- GAAP basis	$	32,147		$	27,909

Gross margin on professional services and other revenues on a GAAP basis		24.7	%		23.5	%
Stock-based compensation expense		6.4			5.9
Gross margin on professional services and other revenues on a non-GAAP basis		31.1	%		29.4	%

Gross profit on a GAAP basis	$	179,249		$	135,392
Stock-based compensation expense		3,363			2,673
Amortization of purchased intangibles		667			901
Deferred compensation associated with Zinc Ahead acquisition		—			5
Gross profit on a non-GAAP basis	$	183,279		$	138,971

Gross margin on total revenues on a GAAP basis		73.2	%		69.2	%
Stock-based compensation expense		1.4			1.4
Amortization of purchased intangibles		0.3			0.5
Gross margin on total revenues on a non-GAAP basis		74.9	%		71.1	%

Research and development expense on a GAAP basis	$	44,973		$	37,197
Stock-based compensation expense		(6,325	)		(4,667	)
Deferred compensation associated with Zinc Ahead acquisition		—			(109	)
Research and development expense on a non-GAAP basis	$	38,648		$	32,421

Sales and marketing expense on a GAAP basis	$	39,617		$	34,385
Stock-based compensation expense		(5,152	)		(4,088	)
Amortization of purchased intangibles		(903	)		(947	)
Deferred compensation associated with Zinc Ahead acquisition		—			(15	)
Sales and marketing expense on a non-GAAP basis	$	33,562		$	29,335

General and administrative expense on a GAAP basis	$	23,490		$	19,854
Stock-based compensation expense		(5,916	)		(5,583	)
Deferred compensation associated with Zinc Ahead acquisition		—			—
General and administrative expense on a non-GAAP basis	$	17,574		$	14,271


VEEVA SYSTEMS INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued) (Dollars in thousands, except per share data) (Unaudited)

	Three months ended April 30,
	2019			2018
Operating expense on a GAAP basis	$	108,080		$	91,436
Stock-based compensation expense		(17,393	)		(14,338	)
Amortization of purchased intangibles		(903	)		(947	)
Deferred compensation associated with Zinc Ahead acquisition		—			(124	)
Operating expense on a non-GAAP basis	$	89,784		$	76,027

Operating income on a GAAP basis	$	71,169		$	43,956
Stock-based compensation expense		20,756			17,011
Amortization of purchased intangibles		1,570			1,848
Deferred compensation associated with Zinc Ahead acquisition		—			129
Operating income on a non-GAAP basis	$	93,495		$	62,944

Operating margin on a GAAP basis		29.1	%		22.5	%
Stock-based compensation expense		8.5			8.7
Amortization of purchased intangibles		0.6			0.9
Deferred compensation associated with Zinc Ahead acquisition		—			0.1
Operating margin on a non-GAAP basis		38.2	%		32.2	%

Net income on a GAAP basis	$	73,449		$	44,310
Stock-based compensation expense		20,756			17,011
Amortization of purchased intangibles		1,570			1,848
Deferred compensation associated with Zinc Ahead acquisition		—			129
Income tax effect on non-GAAP adjustments⁽¹⁾		(17,047	)		(11,882	)
Net income on a non-GAAP basis	$	78,728		$	51,416

Diluted net income per share on a GAAP basis	$	0.47		$	0.29
Stock-based compensation expense		0.13			0.11
Amortization of purchased intangibles		0.01			0.01
Deferred compensation associated with Zinc Ahead acquisition		—			—
Income tax effect on non-GAAP adjustments⁽¹⁾		(0.11	)		(0.08	)
Diluted net income per share on a non-GAAP basis	$	0.50		$	0.33

Contacts

Investor Relations Contact:
Rick Lund
Veeva Systems Inc.
925-271-9816
ir@veeva.com

Media Contact:
Roger Villareal
Veeva Systems Inc.
925-264-8885
pr@veeva.com

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