Upgrade to SI Premium - Free Trial

Veeva Announces Fiscal 2016 Third Quarter Results

November 24, 2015 4:03 PM

Total Revenues of $106.9M, up 28% Year-over-year;

Subscription Services Revenue of $81.7M, up 33% Year-over-year

PLEASANTON, Calif.--(BUSINESS WIRE)-- Veeva Systems Inc. (NYSE: VEEV), a leading provider of industry cloud solutions for life sciences, today announced results for its fiscal third quarter ended October 31, 2015.

“We had great execution in the third quarter, fueled by solid growth in our existing markets and significant traction in major new areas. We’re seeing the real benefit of an expanding solution set that addresses multiple large markets,” said CEO Peter Gassner. "Through customer success, product excellence, and strategic solutions spanning R&D to commercial, it's clear Veeva is becoming the go-to vendor for the life sciences industry.”

Fiscal 2016 Third Quarter Results:

“For the first time, our non-CRM offerings accounted for more than 25% of total revenues in the quarter. Our success across the board stems from the reputation we've developed for exceptional quality and consistent delivery,” said CFO Tim Cabral. "We are executing well and setting up for the tremendous opportunity that lies ahead.”

Recent Highlights:

Financial Outlook:

Veeva is providing guidance for its fiscal fourth quarter ending January 31, 2016 as follows:

This fourth quarter guidance implies the following results for Veeva’s fiscal year ending January 31, 2016:

Conference Call Information:

What: Veeva’s Fiscal 2016 Third Quarter Results Conference Call
When: Tuesday, November 24, 2015
Time: 1:30 p.m. PT (4:30 p.m. ET)
Live Call: 1-877-201-0168, domestic
1-647-788-4901, international
Conference ID 6506 7916
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 sections titled “Non-GAAP Financial Measures” and the tables entitled “Reconciliation of GAAP to Non-GAAP Financial Measures” below for details.

About Veeva Systems

Veeva Systems Inc. is a leader in cloud-based software for the global life sciences industry. Committed to innovation, product excellence, and customer success, Veeva has more than 375 customers, ranging from the world's largest pharmaceutical companies to emerging biotechs. Veeva is headquartered in the San Francisco Bay Area, with offices in Europe, Asia, and Latin America. For more information, visit www.veeva.com.

Forward-looking Statements

This release contains forward-looking statements, including statements regarding Veeva's future financial outlook and financial 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) our limited operating history, which makes it difficult to predict future results;(ii) 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; (iii) breaches in our security measures, unauthorized access to our customers’ data, or system availability or performance problems associated with our data centers or computing infrastructure; (iv) dependence on revenues from our Veeva CRM solution, and the rate of adoption of our new products; (v) acceptance of our applications and services by customers, including renewals of existing subscriptions and purchases of subscriptions for additional users and solutions; (vi) our ability to integrate the Zinc Ahead business, retain Zinc Ahead customers and achieve the expected results from our acquisition of Zinc Ahead; (vii) loss of one or more key customers; (viii) adverse changes in general economic or market conditions, particularly in the life sciences industry; (ix) delays or reductions in information technology spending, particularly in the life sciences industry, including as a result of mergers in the life sciences industry; (x) the development of the market for enterprise cloud services, particularly in the life sciences industry; (xi) competitive factors, including but not limited to pricing pressures, industry consolidation, difficulty securing rights to access, host or integrate with complementary third party products or data used by our customers, entry of new competitors and new applications and marketing initiatives by our competitors; (xii) our ability to manage our growth effectively; and (xiii) changes in sales that may not be immediately reflected in our results due to the ratable recognition of our subscription revenue.

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-Q for the period ended July 31, 2015. This is available on the company’s website at http://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.

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

October 31,

January 31,
2015 2015
Assets
Current assets:
Cash and cash equivalents $ 108,594 $ 129,253
Short-term investments 230,874 268,620
Accounts receivable, net 75,301 92,661
Deferred income taxes 5,124 4,815
Prepaid expenses and other current assets 7,445 6,488
Total current assets 427,338 501,837
Property and equipment, net 47,434 28,203
Capitalized internal-use software, net 871 1,240
Goodwill 93,059 4,850
Intangible assets, net 50,953 4,904
Other long-term assets 5,378 3,856
Total assets $ 625,033 $ 544,890
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 7,211 $ 3,886
Accrued compensation and benefits 9,928 6,497
Accrued expenses and other liabilities 11,584 8,939
Income tax payable 5,607 3,241
Deferred revenue 102,053 112,960
Total current liabilities 136,383 135,523
Deferred income taxes, noncurrent 11,719 170
Other long-term liabilities 2,953 2,364
Total liabilities 151,055 138,057
Stockholders’ equity:
Class A common stock 1
Class B common stock 1
Additional paid-in capital 348,157 317,881
Accumulated other comprehensive income (loss) 25 26
Retained earnings 125,795 88,925
Total stockholders’ equity 473,978 406,833
Total liabilities and stockholders’ equity $ 625,033 $ 544,890

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

For the three months endedOctober 31,

For the nine months endedOctober 31,

2015 2014 2015 2014
Revenues:
Subscription services $ 81,736 $ 61,435 $ 225,910 $ 166,528
Professional services and other 25,185 22,390 69,041 59,682
Total revenues 106,921 83,825 294,951 226,210
Cost of revenues(2):
Cost of subscription services 18,273 14,409 50,965 39,795
Cost of professional services and other 18,739 16,007 51,505 44,707
Total cost of revenues 37,012 30,416 102,470 84,502
Gross profit 69,909 53,409 192,481 141,708
Operating expenses(2):
Research and development 17,667 10,635 45,879 29,414
Sales and marketing 20,345 14,251 53,898 40,875
General and administrative 11,797 8,582 29,326 22,136
Total operating expenses 49,809 33,468 129,103 92,425
Operating income 20,100 19,941 63,378 49,283
Other income (expense), net 110 (989 ) 428 (1,120 )
Income before income taxes 20,210 18,952 63,806 48,163
Provision for income taxes 9,728 8,694 26,936 21,106
Net income $ 10,482 $ 10,258 $ 36,870 $ 27,057
Net income attributable to common stockholders, basic and diluted: $ 10,473 $ 10,198 $ 36,832 $ 26,851

Net income per share attributable to common stockholders:

Basic $ 0.08 $ 0.08 $ 0.28 $ 0.21
Diluted $ 0.07 $ 0.07 $ 0.25 $ 0.19

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

Basic 132,413 129,212 131,731 126,836
Diluted 145,063 144,289 144,909 144,082
Other comprehensive income (loss):
Net change in unrealized losses on available-for-sale investments $ (34 ) $ 97 $ (113 ) $ 29
Net change in cumulative foreign currency translation gain (loss) 79 (15 ) 112 (72 )
Comprehensive income $ 10,527 $ 10,340 $ 36,869 $ 27,014

________________

(2) Includes stock-based compensation as follows:

Cost of revenues:
Cost of subscription services $ 149 $ 74 $ 396 $ 181
Cost of professional services and other 1,042 549 2,757 1,711
Research and development 2,021 942 5,047 2,703
Sales and marketing 1,933 754 4,808 2,290
General and administrative 1,547 1,266 4,094 3,356
Total stock-based compensation $ 6,692 $ 3,585 $ 17,102 $ 10,241

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

For the three months endedOctober 31,

For the nine months endedOctober 31,

2015 2014 2015 2014
Cash flows from operating activities
Net income $ 10,482 $ 10,258 $ 36,870 $ 27,057

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

Depreciation and amortization

2,481

1,022 4,849 2,943
Amortization of premiums on short-term investments 693 611 2,206 1,344
Stock-based compensation 6,691 3,585 17,101 10,241

Deferred income taxes

(308

)

(76

)

(308

)

(76

)

Bad debt expense (35 ) (28 ) 203 41
Changes in operating assets and liabilities:
Accounts receivable (2,689 ) 16,684 22,842 13,151
Income taxes 2,758 769 2,601 (2,189 )
Other current and long-term assets 6,266 (2,294 ) 739 (3,644 )
Accounts payable 1,074 354 874 56
Accrued expenses and other current liabilities 3,300 4,017 3,637 2,791
Deferred revenue (11,567 ) (635 ) (15,415 ) 17,288
Other long-term liabilities 589 (11 ) 509 (9 )
Net cash provided by operating activities 19,735 34,256 76,708 68,994
Cash flows from investing activities
Purchases of short-term investments (94,195 ) (103,836 ) (262,110 ) (333,728 )
Maturities and sales of short-term investments 180,785 52,677 297,537 97,307
Purchases of property and equipment (4,556 ) (790 ) (19,048 ) (26,072 )
Acquisitions, net of cash acquired (116,189 ) (126,183 )
Purchases of intangible assets (568 )
Capitalized internal-use software development costs (81 ) (194 ) (301 )
Changes in restricted cash and deposits 8 3 9
Net cash used in investing activities (34,155 ) (52,022 ) (110,563 ) (262,785 )
Cash flows from financing activities
Proceeds from early exercise of common stock options 10
Proceeds from exercise of common stock options 1,368 2,102 4,138 4,314
Net proceeds from offerings 34,495
Proceeds from Employee Stock Purchase Plan 5,951
Restricted stock units acquired to settle employee tax withholding liability (6 )
Excess tax benefits from employee stock plans 1,817 7,698 8,968 18,731
Net cash provided by financing activities 3,185 9,800 13,110 63,491
Effect of exchange rate changes on cash and cash equivalents 53 (15 ) 86 (72 )
Net change in cash and cash equivalents (11,182 ) (7,981 ) (20,659 ) (130,372 )
Cash and cash equivalents at beginning of period 119,776 140,116 129,253 262,507
Cash and cash equivalents at end of period $ 108,594 $ 132,135 $ 108,594 $ 132,135

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 primarily includes non-GAAP net income, non-GAAP fully diluted net income per share, non-GAAP operating income, 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 these measures 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. These non-GAAP measures are adjusted for the impact of expenses associated with stock-based compensation, amortization of purchased intangibles, capitalization of expenses associated with development of internal-use software and the subsequent amortization of the capitalized expenses, and the tax effect of all of these non-GAAP adjustments.

As described above, Veeva may exclude the following items from its 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 items are adjusted to calculate our 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, at this time, to provide GAAP targets for operating income and fully diluted net income per share for the fourth quarter and full year of its fiscal year ending January 31, 2016 because of the difficulty of estimating certain items that are excluded from non-GAAP operating income and non-GAAP fully diluted net income per share, such as charges related to stock-based compensation expense, capitalization of internal-use software development expenses and the subsequent amortization of the capitalized expenses and amortization of acquisition-related intangibles, the effect of which may be significant.

The following table reconciles the specific items excluded from GAAP net income in the calculation of non-GAAP net income and non-GAAP net income per share for the periods shown below:

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

For the three months endedOctober 31,

For the nine months endedOctober 31,

2015 2014 2015 2014
Cost of subscription services revenues on a GAAP basis $ 18,273 $ 14,409 $ 50,965 $ 39,795
Stock-based compensation expense (149 ) (74 ) (396 ) (181 )
Amortization of purchased intangibles (760 ) (369 ) (1,697 ) (1,108 )
Amortization of internal-use software (207 ) (216 ) (587 ) (632 )
Cost of subscription services revenues on a non-GAAP basis $ 17,157 $ 13,750 $ 48,285 $ 37,874
Gross margin on subscription services revenues on a GAAP basis 77.6 % 76.5 % 77.4 % 76.1 %
Stock-based compensation expense 0.2 0.1 0.2 0.1
Amortization of purchased intangibles 0.9 0.6 0.7 0.7
Amortization of internal-use software 0.3 0.4 0.3 0.4
Gross margin on subscription services revenues on a non-GAAP basis 79.0 % 77.6 % 78.6 % 77.3 %
Cost of professional services and other revenues on a GAAP basis $ 18,739 $ 16,007 $ 51,505 $ 44,707
Stock-based compensation expense (1,042 ) (549 ) (2,757 ) (1,711 )
Cost of professional services and other revenues on a non-GAAP basis $ 17,697 $ 15,458 $ 48,748 $ 42,996
Gross margin on professional services and other revenues on a GAAP basis 25.6 % 28.5 % 25.4 % 25.1 %
Stock-based compensation expense 4.1 2.5 4.0 2.9
Gross margin on professional services and other revenues on a non-GAAP basis 29.7 % 31.0 % 29.4 % 28.0 %
Gross profit on a GAAP basis $ 69,909 $ 53,409 $ 192,481 $ 141,708
Stock-based compensation expense 1,191 623 3,153 1,892
Amortization of purchased intangibles 760 369 1,697 1,108
Amortization of internal-use software 207 216 587 632
Gross profit on a non-GAAP basis $ 72,067 $ 54,617 $ 197,918 $ 145,340
Gross margin on total revenues on a GAAP basis 65.4 % 63.7 % 65.3 % 62.6 %
Stock-based compensation expense 1.1 0.8 1.0 0.9
Amortization of purchased intangibles 0.7 0.4 0.6 0.5
Amortization of internal-use software 0.2 0.3 0.2 0.3
Gross margin on total revenues on a non-GAAP basis 67.4 % 65.2 % 67.1 % 64.3 %
Research and development expense on a GAAP basis $ 17,667 $ 10,635 $ 45,879 $ 29,414
Stock-based compensation expense (2,021 ) (942 ) (5,047 ) (2,703 )
Capitalization of internal-use software 80 194 300
Research and development expense on a non-GAAP basis $ 15,646 $ 9,773 $ 41,026 $ 27,011
Sales and marketing expense on a GAAP basis $ 20,345 $ 14,251 $ 53,898 $ 40,875
Stock-based compensation expense (1,933 ) (754 ) (4,808 ) (2,290 )
Amortization of purchased intangibles (393 ) (43 ) (545 ) (129 )
Sales and marketing expense on a non-GAAP basis $ 18,019 $ 13,454 $ 48,545 $ 38,456
General and administrative expense on a GAAP basis $ 11,797 $ 8,582 $ 29,326 $ 22,136
Stock-based compensation expense (1,547 ) (1,266 ) (4,094 ) (3,356 )
General and administrative expense on a non-GAAP basis $ 10,250 $ 7,316 $ 25,232 $ 18,780

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

For the three months endedOctober 31,

For the nine months endedOctober 31,

2015 2014 2015 2014
Operating expense on a GAAP basis $ 49,809 $ 33,468 $ 129,103 $ 92,425
Stock-based compensation expense (5,501 ) (2,962 ) (13,949 ) (8,349 )
Amortization of purchased intangibles (393 ) (43 ) (545 ) (129 )
Capitalization of internal-use software 80 194 300
Operating expense on a non-GAAP basis $ 43,915 $ 30,543 $ 114,803 $ 84,247
Operating income on a GAAP basis $ 20,100 $ 19,941 $ 63,378 $ 49,283
Stock-based compensation expense 6,692 3,585 17,102 10,241
Amortization of purchased intangibles 1,153 412 2,242 1,237
Capitalization of internal-use software (80 ) (194 ) (300 )
Amortization of internal-use software 207 216 587 632
Operating income on a non-GAAP basis $ 28,152 $ 24,074 $ 83,115 $ 61,093
Operating margin on a GAAP basis 18.8 % 23.8 % 21.5 % 21.8 %
Stock-based compensation expense 6.2 4.3 5.8 4.5
Amortization of purchased intangibles 1.1 0.5 0.8 0.5
Capitalization of internal-use software (0.1 ) (0.1 ) (0.1 )
Amortization of internal-use software 0.2 0.2 0.2 0.3
Operating margin on a non-GAAP basis 26.3 % 28.7 % 28.2 % 27.0 %
Net income on a GAAP basis $ 10,482 $ 10,258 $ 36,870 $ 27,057
Stock-based compensation expense 6,692 3,585 17,102 10,241
Amortization of purchased intangibles 1,153 412 2,242 1,237
Capitalization of internal-use software (80 ) (194 ) (300 )
Amortization of internal-use software 207 216 587 632
Income tax effect on non-GAAP adjustments (1,629 ) (713 ) (4,376 ) (2,450 )
Net income on a non-GAAP basis $ 16,905 $ 13,678 $ 52,231 $ 36,417
Net income allocated to participating securities on a GAAP basis $ (9 ) $ (60 ) $ (38 ) $ (206 )
Net income allocated to participating securities from non-GAAP adjustments (6 ) (20 ) (15 ) (71 )
Net income allocated to participating securities on a non-GAAP basis (15 ) (80 ) (53 ) (277 )
Net income attributable to common stockholders on a non-GAAP basis $ 16,890 $ 13,598 $ 52,178 $ 36,140
Diluted net income per share on a GAAP basis $ 0.07 $ 0.07 $ 0.25 $ 0.19
Stock-based compensation expense 0.05 0.02 0.12 0.07
Amortization of purchased intangibles 0.01 0.02 0.01
Capitalization of internal-use software
Amortization of internal-use software
Income tax effect on non-GAAP adjustments (0.01 ) (0.03 ) (0.02 )
Diluted net income per share on a non-GAAP basis $ 0.12 $ 0.09 $ 0.36 $ 0.25

Veeva Systems Inc.

Investor Relations Contact:

Rick Lund, 925-271-9816

[email protected]

Media Contact:

Lisa Barbadora, 610-420-3413

[email protected]

Source: Veeva Systems Inc.

Categories

Press Releases

Next Articles