Summary
Veeva Systems reported FY2024 second-quarter total revenue of $590.2 million, up 10.5% year over year. Gross profit was $421.2 million, up 10.1%, while gross margin slipped to 71.4%, down 0.2 percentage points. Operating income rose 2.9% to $104.0 million, but operating margin fell to 17.6%, down 1.3 percentage points. Net income climbed 23.2% to $111.6 million, and diluted EPS was $0.68, up 21.4% year over year. Current deferred revenue was $836.5 million, up 22.2% from a year earlier.
Non-GAAP measures were stronger. Non-GAAP operating income was $211.9 million, up 5% year over year, and non-GAAP net income was $198.0 million, up 19%. Non-GAAP diluted EPS was $1.21, up from $1.03 one year ago. Operating cash flow was $265.0 million, up 183.8% year over year. The increase was primarily due to the timing of cash paid for income taxes and increased sales and related cash collections, partly offset by higher operating expenses from headcount growth. For the six months ended July 31, 2023, operating cash flow was $771.0 million, up 34.2%. The year-to-date income statement is less upbeat: revenue rose 7.4% to $1.12 billion, but operating income fell 27.6% to $165.6 million and operating margin dropped 7.2 percentage points to 14.8%. Net income still rose 27.5% to $243.1 million, and diluted EPS was $1.49, up 27.4%.
Guidance points to steady expansion in profitability. For the fiscal third quarter ending October 31, 2023, Veeva guided non-GAAP operating income of $223 million to $225 million and non-GAAP diluted EPS of $1.26 to $1.27. For the full fiscal year ending January 31, 2024, it guided non-GAAP operating income of about $820 million and non-GAAP diluted EPS of approximately $4.68. For the full fiscal year ending January 31, 2025, it reiterated non-GAAP operating income of at least $1,000 million. The company also gave revenue guidance for the third quarter and both fiscal years. It does not provide GAAP targets for operating income or fully diluted net income per share, largely because items such as stock-based compensation are hard to estimate.
The termination for convenience change is the main technical drag. It went into effect on February 1, 2023, standardizing TFC rights in master subscription agreements. Veeva said the change reduced second-quarter revenue, operating income, non-GAAP operating income, net income, and non-GAAP net income. It will also reduce revenue for the fiscal year ending January 31, 2024. Starting in the fiscal year ending January 31, 2025, revenue recognized from those orders should generally match the amount invoiced for the relevant term. Management also added an annual inflation adjustment for new or renewal orders after April 1, 2023, set at the lower of 4% or the Consumer Price Index, and does not expect a significant revenue impact for the fiscal year ending January 31, 2024.
Operationally, Veeva announced its first Vault CRM customer win and now plans general availability in April 2024, when it becomes the go-forward product for new customers. Vault Clinical has more than 500 customers, including 85 that selected applications from both Vault Clinical Operations and Vault Clinical Data Management. Spending remains heavy: research and development expense rose 17% in the quarter, driven by a $23 million increase in employee compensation-related costs, including a $6 million rise in stock-based compensation.
The main risks are product performance, security and privacy issues, competition, customer decisions and priorities, life sciences industry events, macroeconomic and geopolitical pressure (inflation, interest rates, currency, regulations, and the war in Ukraine), and hiring and retention. Management also flagged expected additional reductions in life sciences sales representatives through the end of the fiscal year ending January 31, 2024, after most of a roughly 10% reduction was completed by the end of the fiscal year ended January 31, 2023. Those cuts could hurt Veeva CRM and other Commercial Solutions. Cash flow faces a tax-related headwind: Veeva expects operating cash flow to be substantially less in future quarters of the fiscal year ending January 31, 2024, and about $90 million lower for the fiscal year because of tax payments tied to the capitalization and amortization of R&D expenditures.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $590.2M | $526.3M | +12.1% | $534.2M | +10.5% |
| Gross profit | $421.2M | $359.7M | +17.1% | $382.5M | +10.1% |
| Gross margin | 71.4% | 68.3% | +3.0 pp | 71.6% | -0.3 pp |
| Research & development | $157.2M | $147.0M | +7.0% | $134.0M | +17.3% |
| Sales & marketing | $97.0M | $88.5M | +9.6% | $89.6M | +8.2% |
| General & administrative | $62.9M | $62.7M | +0.4% | $57.8M | +8.8% |
| Total operating expenses | $317.2M | $298.1M | +6.4% | $281.5M | +12.7% |
| Operating income (loss) | $104.0M | $61.5M | +69.1% | $101.1M | +2.9% |
| Operating margin | 17.6% | 11.7% | +5.9 pp | 18.9% | -1.3 pp |
| Net income (loss) | $111.6M | $131.5M | -15.1% | $90.6M | +23.2% |
| Net margin | 18.9% | 25.0% | -6.1 pp | 17.0% | +1.9 pp |
| Diluted EPS | $0.68 | $0.81 | -$0.13 | $0.56 | +$0.12 |
| Customers | 993 | 993 | ±0.0% | 861 | +15.3% |
Risks
Veeva announced the first sale of Vault CRM to an early adopter in August 2023 and intends general availability in April 2024, while all existing CRM customers must migrate from the Salesforce platform to Veeva Vault by September 1, 2030. Delays, migration disruptions, or customers choosing competitor CRM solutions could materially harm revenue and brand.
Since February 1, 2023, master subscription agreements governing multi-year orders generally include a termination for convenience right for customers. MD&A states this changes the timing of revenue recognition and will reduce revenue for the fiscal year ending January 31, 2024.
Operating margin declined to 14.8% for the six months ended July 31, 2023 from 22.0% in the prior-year period, and operating income for the same year-to-date period was down 27.6%. MD&A expects operating margin to decrease in the fiscal year ending January 31, 2024 due to higher operating expenses and the termination-for-convenience revenue impact.
MD&A expects total revenue and subscription services revenue growth rates for the fiscal year ending January 31, 2024 to decline compared to the prior fiscal year. Over the longer term, Veeva says revenue growth rates are likely to fluctuate and may decline.
Nearly all revenue comes from life sciences customers, and Veeva expects additional reductions in life sciences sales representatives through the end of the fiscal year ending January 31, 2024. Consolidation, drug pricing reforms such as the Inflation Reduction Act, and reduced early-stage funding could further reduce demand.
On May 1, 2023, Salesforce terminated certain competition restrictions, so Salesforce is no longer prohibited from promoting competing CRM products or developing a product that competes with Veeva CRM. Competitors may also gain advantage through better use of evolving AI technologies or more favorable pricing terms.
IQVIA restricts customers from uploading its healthcare professional, healthcare organization, and prescription drug data to Veeva Network and Veeva Nitro, and has stated it will deny new IQVIA data types in Veeva applications. This has negatively affected sales and adoption of Veeva Network and transitions to Veeva OpenData.
New customer sales cycles may span 12 months or longer, and Veeva has experienced increased project scrutiny for certain potential projects since the quarter ended July 31, 2022. Lengthening sales cycles or unsuccessful sales investments would harm operating results and growth.
Top 10 customers accounted for 29% of total revenues in the fiscal year ended January 31, 2023. Loss, non-renewal, or consolidation of key customers could slow revenue growth or cause revenues to decline.
Certain Veeva CRM customers in China had their data transfer approval requests denied by the Cyberspace Administration of China, and Veeva expects such customers may implement a CRM solution that does not transfer data outside China over the next twelve months. Approximately 3% of total revenue is attributable to China.
Veeva has been defending trade secret misappropriation claims from IQVIA since January 2017 and is in active litigation with IQVIA and Medidata. MD&A expects general and administrative expenses to increase in part due to fees associated with ongoing litigation.
The Tax Cuts and Jobs Act requirement to capitalize and amortize research and development expenditures is expected to reduce operating cash flow by approximately $90 million in the fiscal year ending January 31, 2024. Excess tax benefits from equity compensation also create volatility in the effective tax rate.
Competition for highly skilled employees is intense, and global compensation increases in the annual review process that took place in the fiscal quarter ended April 30, 2022 were higher than previous years. Declines in the perceived value of equity awards could impair Veeva's ability to recruit and retain employees.
Inflationary pressures, changes in interest rates, financial sector volatility, recession concerns, currency exchange fluctuations, and the Russian invasion of Ukraine may disrupt the life sciences industry and reduce customer IT spending. Veeva says its stock price has declined significantly in recent periods and may remain volatile.
SaaS KPIs
All quarters →Total Customers
Non-GAAP Operating Margin
Non-GAAP Operating Income
Non-GAAP subscription services gross margin
Summary, forecast, risks and KPIs are extracted from VEEVA SYSTEMS INC's SEC filings for Q2 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.