VEEVA SYSTEMS INC Q1 FY2022 earnings

Veeva Systems closed the quarter ended April 30, 2021 with total revenues of $433.6 million, up 28.6% from $337.1 million one year earlier. Gross profit rose 31.0% to $317.4 million, lifting gross margin to 73.2% from 71.9%. Operating income of $128.4 million was up 46.7%, and operating margin expanded to 29.6% from 26.0%. Net income of $115.6 million increased 33.5%, and diluted EPS came in at $0.71 versus $0.54.

The non-GAAP picture looked much the same. Non-GAAP operating income was $181.4 million, up 40% from $129.7 million, and non-GAAP net income was $146.9 million. Non-GAAP fully diluted net income per share moved to $0.91 from $0.66 a year earlier. The gap between the two sets of numbers is mostly stock-based compensation and purchased intangible amortization, which management strips out.

Cash generation was the standout. Operating cash flow for the quarter was $478.4 million, up 69.5% from $282.2 million, which Veeva tied to increased sales and the collections behind them. The first quarter is seasonally the strongest for cash inflows because of annual subscription billings and related collections. Deferred revenue, current portion, stood at $608.7 million, up 29.4% from $470.3 million a year earlier. Cash, cash equivalents and short-term investments totaled $2.2 billion at April 30, 2021.

Growth kept coming from new logos as well as existing accounts. Veeva added a record 59 new customers in the quarter and now serves more than 1,000 customers in total. Vault Quality had an outstanding quarter with record bookings for the Veeva Vault Quality Suite, and the company signed its sixth Vault QMS win with a top 20 pharmaceutical company, that customer's first Veeva Development Cloud application. The product push continued with the industry's first Quality Reference Model, built on experience from more than 300 Vault QualityDocs deployments. Vault accounted for 51% of subscription services revenues and 53% of total revenues in the quarter, with Commercial Cloud taking the rest. The filing repeats that Vault's share is expected to keep rising.

Guidance covers both the next quarter and the full fiscal year. For the fiscal second quarter ending July 31, 2021, Veeva guides non-GAAP operating income of $175 million to $177 million and non-GAAP fully diluted net income per share of $0.85 to $0.86. For the fiscal year ending January 31, 2022, the outlook calls for non-GAAP operating income of about $710 million and non-GAAP fully diluted net income per share of approximately $3.49. The company does not give GAAP targets for operating income or per-share earnings because items such as stock-based compensation are hard to estimate.

The biggest risk in the filing is structural. Veeva expects life sciences companies to reduce sales representative headcount by roughly 10% over the next one to two years, which could pressure demand for Veeva CRM and other Commercial Cloud applications. Management also expects the growth rate of total revenues and subscription services revenues to decline in the future, while spending on hiring, research and development, and sales capacity keeps climbing, so operating expenses should rise in absolute dollars and slightly as a share of revenue. Travel and entertainment costs are expected to start rising again in the second half of the fiscal year.

Other items worth watching include COVID-19 disruption to customer spending, travel and events, competition and pricing pressure, consolidation among life sciences customers, the loss of a large customer, and security or data breaches. Veeva also carries a remaining salesforce.com purchase commitment of $35 million that must be met by September 1, 2025 under an agreement requiring minimum orders of $500 million, and the company converted to a Delaware public benefit corporation on February 1, 2021, which changes how directors weigh stakeholder interests.