Veeva Announces Fiscal 2014 Third Quarter Results

Total Revenues of $55.0M, up 54% Year-over-year; Subscription Services Revenues of $38.9M, up 95% Year-over-year

PLEASANTON, Calif.--()--Veeva Systems Inc. (NYSE: VEEV), a leading provider of industry cloud solutions for the life sciences industry, today announced results for its fiscal third quarter ended October 31, 2013.

Fiscal 2014 Third Quarter Results:

  • Revenues: Total revenues for the third quarter were $55.0 million, up from $35.8 million one year ago, an increase of 54% year-over-year. Subscription services revenues were $38.9 million, up from $20.0 million one year ago, an increase of 95% year-over-year.
  • Net income and non-GAAP net income1: Third quarter net income was $6.5 million, compared to $5.7 million one year ago, an increase of 13% year-over-year. Non-GAAP net income for the third quarter was $8.3 million, compared to $6.0 million one year ago, an increase of 40% year-over-year.
  • Net income per share and non-GAAP net income per share1: For the third quarter, fully diluted net income per share was $0.05, while non-GAAP fully diluted net income per share was $0.06.

“There are tremendous opportunities to move life sciences companies from legacy applications to the cloud,” said chief executive officer Peter Gassner. “Our results demonstrate strong demand for industry cloud solutions and are a result of our focus on customer success. The combination of these factors drove top-line revenue growth and strong profitability.”

“We were pleased with the continued momentum in subscription services revenues, which increased 95% year-over-year,” said CFO Tim Cabral. “While making significant investments this quarter, we demonstrated the leverage in our business. Gross margins increased over 5 percentage points compared to last year, operating margin was 18.2% and non-GAAP operating margin was 22.7%.”

Recent Highlights:

  • Veeva Network Released – Veeva Network, the industry’s first complete, cloud-based customer master solution, became generally available in October. The company’s newest product line, Veeva Network combines healthcare provider and organization data with software and data stewardship services in one solution that is seamlessly integrated with Veeva CRM.
  • CRM Market Leadership – In its 2013 Life Sciences CRM Software Vendor Assessment, IDC Health Insights named Veeva a CRM leader.
  • 50th Veeva Vault Customer – Veeva surpassed 50 customers for its regulated content management product line.
  • Initial Public Offering – On October 16, 2013, Veeva became a public company, adding $216 million to its cash balance for the quarter, and listed its Class A common shares on the New York Stock Exchange.

Financial Outlook:

Veeva is providing guidance for the fourth quarter of fiscal 2014 as follows:

  • Total revenues between $57 and $58 million, an increase of 43% to 46% on a year-over-year basis. This implies full fiscal year revenues of approximately $204 to $205 million representing annual growth of 58% to 59%.
  • Non-GAAP fully diluted net income per share between $0.05 and $0.06.

Conference Call Information

What:     Veeva Systems’ Fiscal 2014 Third Quarter Results Conference Call
When: Thursday, December 5, 2013
Time: 1:30 p.m. PT (4:30 p.m. ET)

Live Call:

1-866-270-1533, domestic
1-412-317-0797, international

Webcast:

ir.veeva.com

 

1 Non-GAAP net income and non-GAAP fully diluted net income per share exclude stock-based compensation expense, amortization of purchased intangibles, and the tax effect of these excluded expenses. See the sections titled, “Non-GAAP Financial Measures” and the tables entitled “Reconciliation of GAAP to Non-GAAP Financial Measures” below for details.

About Veeva

Veeva is a leader in cloud-based software for the global life sciences industry. Committed to innovation, product excellence and customer success, Veeva has over 170 customers, ranging from the world’s largest pharmaceutical companies to emerging biotechs. Founded in 2007, Veeva is headquartered in the San Francisco Bay Area, with offices in Philadelphia, Barcelona, Budapest, London, Paris, Beijing, Shanghai, Osaka, Tokyo, Sydney, and Singapore. For more information, visit www.veeva.com.

Investor Relations Contact
Rick Lund
925-271-9816
ir@veeva.com

Media Contact
Jeff Seedman
310-330-6994
pr@veeva.com

Forward-looking Statements

This release contains forward-looking statements, including statements regarding Veeva's future financial performance, market growth, the demand for and benefits from the use of Veeva's solutions, 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) adverse changes in general economic or market conditions, particularly in the life sciences industry; (ii) delays or reductions in information technology spending, particularly in the life sciences industry; (iii) dependence on revenues from our Veeva CRM solution, and the rate of adoption of our new products; (iv) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors and new applications and marketing initiatives by our competitors; (v) our ability to manage our growth effectively; (vi) our limited operating history, which makes it difficult to predict future results; (vii) the development of the market for enterprise cloud services, particularly in the life sciences industry; (viii) acceptance of our applications and services by customers, including renewals of existing subscriptions and purchases of subscriptions for additional users and solutions; (ix) breaches in our security measures or unauthorized access to our customers’ data; (x) our expectation that the future growth rate of our revenues will decline, and that as our costs increase, we may not be able to generate sufficient revenues to sustain the level of profitability we have achieved in the past or achieve profitability in the future; (xi) loss of one or more key customers; (xii) dependence on our agreement with salesforce.com to provide our Veeva CRM solution to our customers; and (xiii) changes in sales that may not be immediately reflected in our results due to our subscription model.

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 registration statement on Form S-1 filed with the SEC on October 15, 2013, which is available on the company’s website at www.veeva.com under the Investors section and on the SEC’s website at www.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.

Copyright © 2013 Veeva Systems Inc. All rights reserved. Veeva and the Veeva logo are registered trademarks of Veeva Systems Inc. Veeva Systems Inc. owns other registered and unregistered trademarks.

 
VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
               
October 31, January 31,
2013 2013(2)
Assets (Unaudited)
Current assets:
Cash and cash equivalents

 

$

257,141

 

$

31,890

Short-term investments 16,242 14,276
Accounts receivable, net 48,603 37,094
Deferred income taxes 1,721 1,169
Income tax receivable 106 1,111
Note receivable–related party — 253
Other current assets   4,635   1,097
Total current assets 328,448 86,890
Property and equipment, net 2,319 1,379
Capitalized internal-use software, net 1,629 880
Goodwill 4,709 —
Intangible assets, net 6,964 —
Other long-term assets   1,220   671
Total assets

 

$

345,289

 

$

89,820

 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable

 

$

2,436

 

$

3,340

Accrued expenses 14,108 6,981
Income tax payable 195 5,183
Deferred revenue   53,514   38,785
Total current liabilities 70,253 54,289
Deferred income taxes, noncurrent 2,508 441
Other long-term liabilities   1,882   1,124
Total liabilities   74,643   55,854
Commitments and contingencies
Stockholders’ equity:
Series A convertible preferred stock — 2,996
Series B convertible preferred stock — 3,937
Preferred stock — —
Common stock — —
Class A common stock — —
Class B common stock 1 —
Additional paid-in capital 228,339 2,101
Accumulated other comprehensive income 11 5
Retained earnings   42,295   24,927
Total stockholders’ equity   270,646   33,966
Total liabilities and stockholders’ equity

 

$

345,289

 

$

89,820

 
(2) Amounts as of January 31, 2013 were derived from the January 31, 2013 audited financial statements.
 

 
VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
                           
Three Months Ended October 31, Nine Months Ended October 31,
2013 2012 2013 2012
Revenues: (Unaudited)
Subscription services

 

$

38,935

 

$

19,969

 

$

100,935

 

$

49,171

Professional services and other   16,044   15,827   46,413   40,589
Total revenues   54,979   35,796   147,348   89,760
Cost of revenues(3):
Cost of subscription services 9,511 5,160 24,409 12,909
Cost of professional services and other   11,881   10,696   33,835   27,346
Total cost of revenues   21,392   15,856   58,244   40,255
Gross profit   33,587   19,940   89,104   49,505
Operating expenses(3):
Research and development 6,585 3,605 18,469 9,946
Sales and marketing 11,467 5,316 28,739 13,304
General and administrative   5,550   2,235   13,900   5,584
Total operating expenses   23,602   11,156   61,108   28,834
Operating income 9,985 8,784 27,996 20,671
Other income (expense), net   125   74   (439)   (337)
Income before income taxes 10,110 8,858 27,557 20,334
Provision for income taxes   3,585   3,109   10,189   7,235
Net income

 

$

6,525

 

$

5,749

 

$

17,368

 

$

13,099

 
Net income attributable to Class A and Class B common stockholders:
Basic

 

$

2,339

 

$

1,062

 

$

4,613

 

$

2,331

Diluted

 

$

6,387

 

$

1,062

 

$

16,937

 

$

2,331

Net income per share attributable to Class A and Class B common stockholders:
Basic

 

$

0.07

 

$

0.05

 

$

0.16

 

$

0.12

Diluted

 

$

0.05

 

$

0.03

 

$

0.13

 

$

0.08

Weighted-average shares used to compute earnings per share attributable to Class A and Class B common stockholders:

Basic   35,802   20,743   28,519   19,834
Diluted   131,963   30,369   129,601   29,160
Other comprehensive income:
Net change in unrealized gains on available-for-sale investments

 

$

8

 

$

—

 

 

$

6

 

 

$

—

Comprehensive income

 

$

6,533

 

$

5,749

 

$

17,374

 

 

$

13,099

 
(3) Includes stock-based compensation as follows:
Cost of revenues:
Cost of subscription services

 

$

49

 

$

1

 

$

58

 

$

2

Cost of professional services and other 230 30 458 81
Research and development 429 65 895 155
Sales and marketing 488 34 970 97
General and administrative 890 51 1,655 155
 

 
VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
                Three Months Ended October 31,     Nine Months Ended October 31,
2013     2012 2013     2012
(Unaudited)
Cash flows from operating activities
Net income

 

$

6,525

 

$

5,749

 

$

17,368

 

$

13,099

Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 774 174 1,552 536
Amortization of premiums on short-term investments 98 23 276 23
Stock-based compensation 2,086 181 4,036 490
Deferred income taxes (86) (192) (259) (447)
Bad debt expense (303) 123 (21) 345
Changes in operating assets and liabilities:
Accounts receivable (9,417) (7,196) (9,852) (8,849)
Income taxes (1,750) 2,541 (5,733) 3,379
Other current and non-current assets (1,224) (335) (2,117) (243)
Accounts payable 1,157 332 (946) 176
Accrued expenses 1,720 3,018 5,859 3,840
Deferred revenue 5,254 5,049 14,607 11,656
Long-term liabilities   433   249   758   (193)
Net cash provided by operating activities   5,267   9,716   25,528   23,812
Cash flows from investing activities
Purchases of short-term investments (4,315) (9,888) (7,086) (9,888)
Maturities and sales of investments 2,250 — 4,850 —
Purchases of property and equipment (460) (262) (1,561) (716)
Acquisitions, net of cash acquired — — (12,149) —
Payments for capitalized internal-use software (720) (257) (1,013) (590)
Proceeds from (issuance of) note receivable–related party — — 253 (2)
Payments for restricted cash and deposits   (5)   (64)   (2)   (359)
Net cash used in investing activities   (3,250)   (10,471)   (16,708)   (11,555)
Cash flows from financing activities
Proceeds from early exercise of common stock options 158 197 225 423
Proceeds from exercise of common stock options 95 37 472 78
Net proceeds from initial public offering   216,263   —   215,734   —
Net cash provided by financing activities   216,516   234   216,431   501
Net change in cash and cash equivalents 218,533 (521) 225,251 12,758
Cash and cash equivalents at beginning of period   38,608   30,159   31,890   16,880
Cash and cash equivalents at end of period

 

$

257,141

 

$

29,638

 

$

257,141

 

$

29,638

 

Non-GAAP Financial Measures

Veeva has provided in this release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. This information includes non-GAAP net income, non-GAAP fully diluted net income per share, and non-GAAP operating margin. Veeva uses these non-GAAP financial measures internally for budgeting and resource allocation purposes and in analyzing its financial results. Veeva believes they are useful to investors, as a supplement to GAAP measures, as a means to evaluate period-to-period comparisons, in evaluating Veeva's ongoing operating results and trends and in comparing its financial measures with other companies in Veeva's industry, many of which present similar non-GAAP financial measures to investors. The non-GAAP measures exclude expenses associated with stock-based compensation, amortization of purchased intangibles, and the tax effect of these excluded expenses.

As described above, Veeva may exclude the following items from its non-GAAP measures:

  • Stock-based compensation expenses. Veeva excludes stock-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses and management finds it useful to exclude certain non-cash charges to assess the appropriate level of various operating expenses to assist in 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 of acquisition-related purchased intangible assets in connection with acquisitions of certain businesses and technologies. Amortization of intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of acquisitions. Management finds it useful to exclude these variable charges to assess the appropriate level of various operating expenses to assist in budgeting, planning and forecasting future periods. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of purchased intangible assets will recur in future periods.
  • 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 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 in 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 used 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 management about which charges are excluded from the 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 our 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. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measure and not to rely on any single financial measure to evaluate our business. A reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables below.

Veeva is not able to provide GAAP targets for its fourth quarter fully diluted net income per share at this time because of the difficulty of estimating certain items that are excluded from non-GAAP fully diluted net income per share, such as charges related to stock-based compensation expense and amortization of acquisition related intangibles, the effect of which may be significant.

                 
Veeva Systems Inc.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands)
 
Three Months Ended October 31,
2013 2012
(Unaudited)
Cost of subscription services revenues on a GAAP basis

 

$

9,511

 

$

5,160

Stock-based compensation expense (49) (1)
Amortization of purchased intangibles   (353)   —
Cost of subscription services revenues on a non-GAAP basis

 

$

9,109

 

$

5,159

 
Gross margin on subscription services revenues on a GAAP basis 75.6

%

 

74.2 %
Stock-based compensation expense 0.1 —
Amortization of purchased intangibles   0.9   —
Gross margin on subscription services revenues on a non-GAAP basis   76.6

%

 

  74.2 %
 
Cost of professional services and other revenues on a GAAP basis

 

$

11,881

 

$

10,696

Stock-based compensation expense (230) (30)
Amortization of purchased intangibles   (17)   —
Cost of professional services and other revenues on a non-GAAP basis

 

$

11,634

 

$

10,666

 
Gross margin on professional services and other revenues on a GAAP basis 25.9

%

 

32.4 %
Stock-based compensation expense 1.5 0.2
Amortization of purchased intangibles   0.1   —
Gross margin on professional services and other revenues on a non-GAAP basis   27.5

%

 

  32.6 %
 
Gross profit on a GAAP basis

 

$

33,587

 

$

19,940

Stock-based compensation expense 279 31
Amortization of purchased intangibles   370   —
Gross profit on a non-GAAP basis

 

$

34,236

 

$

19,971

 
Gross margin on total revenues on a GAAP basis 61.1

%

 

55.7 %
Stock-based compensation expense 0.5 0.1
Amortization of purchased intangibles   0.7   —
Gross margin on total revenues on a non-GAAP basis   62.3

%

 

  55.8 %
 
Research and development expense on a GAAP basis

 

$

6,585

 

$

3,605

Stock-based compensation expense   (429)   (65)
Research and development expense on a non-GAAP basis

 

$

6,156

 

$

3,540

 
Sales and marketing expense on a GAAP basis

 

$

11,467

 

$

5,316

Stock-based compensation expense (488) (34)
Amortization of purchased intangibles   (43)   —
Sales and marketing expense on a non-GAAP basis

 

$

10,936

 

$

5,282

 
General and administrative expense on a GAAP basis

 

$

5,550

 

$

2,235

Stock-based compensation expense   (890)   (51)
General and administrative expense on a non-GAAP basis

 

$

4,660

 

$

2,184

 
Operating expense on a GAAP basis

 

$

23,602

 

$

11,156

Stock-based compensation expense (1,807) (150)
Amortization of purchased intangibles   (43)   —
Operating expense on a non-GAAP basis

 

$

21,752

 

$

11,006

 
Operating income on a GAAP basis

 

$

9,985

 

$

8,784

Stock-based compensation expense 2,086 181
Amortization of purchased intangibles   413   —
Operating income on a non-GAAP basis

 

$

12,484

 

$

8,965

 
Operating margin on a GAAP basis 18.2

%

 

24.5 %
Stock-based compensation expense 3.8 0.5
Amortization of purchased intangibles   0.7   —
Operating margin on a non-GAAP basis   22.7

%

 

  25.0 %
 
Net income on a GAAP basis

 

$

6,525

 

$

5,749

Stock-based compensation expense 2,086 181
Amortization of purchased intangibles 413 —
Income tax effect on non-GAAP adjustments   (706)   24
Net income on a non-GAAP basis

 

$

8,318

 

$

5,954

 
Diluted net income per share on a GAAP basis

 

$

0.05

 

$

0.03

Stock-based compensation expense: 0.02 0.01
Amortization of purchased intangibles:

—

—
Income tax effect on non-GAAP adjustments (0.01)

—

Impact of assumed conversion of preferred stock(4)

 

—

  0.01
Diluted net income per share on a non-GAAP basis

 

$

0.06

 

$

0.05

 

4 In computing the fully diluted shares for non-GAAP purposes, the 85,000,000 shares of convertible preferred stock that was issued and outstanding as of October 31, 2012 were assumed to be converted to common shares.

Contacts

Veeva Systems Inc.
Investor Relations
Rick Lund, 925-271-9816
ir@veeva.com
or
Media
Jeff Seedman, 310-330-6994
pr@veeva.com

Contacts

Veeva Systems Inc.
Investor Relations
Rick Lund, 925-271-9816
ir@veeva.com
or
Media
Jeff Seedman, 310-330-6994
pr@veeva.com