Summary
Veeva Systems reported fiscal 2021 third quarter total revenues of $377.5 million, up 34.4% from $280.9 million in the prior-year quarter. Net income was $96.96 million, up 17.9%. Diluted earnings per share were $0.60, up 15.4% from $0.52. Operating income came in at $101.3 million, up 25.4%. Nine-month revenue reached $1.07 billion, up 34.8%, and diluted earnings per share for the year to date were $1.73, up from $1.49.
Gross margin slipped to 72.7% from 73.9%, down 1.2 percentage points. Operating margin fell to 26.8% from 28.8%, down 1.9 percentage points. Management tied the compression to the Crossix and Physicians World businesses acquired in November 2019, which carry lower gross margins than the core products. Operating expenses grew in research and development, sales and marketing, and general and administrative, partially offset by lower travel and marketing program spend. On a non-GAAP basis, operating income was $155.5 million against $111.6 million a year earlier, up 39%, and non-GAAP net income was $125.6 million against $95.4 million, up 32%. Non-GAAP diluted earnings per share of $0.78 compared with $0.60.
Operating cash flow for the quarter was $95.4 million, up 55.1% from $61.5 million in the prior-year quarter. For the nine months, operating cash flow was $482.9 million, up 21.2%. Current deferred revenue was $331.17 million as of October 31, 2020, up 32.1% year over year. The first quarter of the fiscal year is seasonally the strongest for cash inflows, and the company expects operating cash flow to be substantially lower in the fiscal quarter ending January 31, 2021.
Veeva signed a record 19 new CRM customers in the quarter. Roughly 700 clinical research sites ran trials with remote monitoring through Veeva SiteVault. A top 20 pharmaceutical company selected multiple Veeva Development Cloud applications as its enterprise standard for clinical operations, regulatory, and quality. Vault CTMS posted record bookings, and 85 companies, including six top 20 pharmas, have now standardized on the product.
The outlook rests on non-GAAP targets. Guidance for the fiscal fourth quarter ending January 31, 2021 includes non-GAAP operating income between $136 million and $138 million and non-GAAP diluted earnings per share between $0.67 and $0.68. For the full fiscal year ending January 31, 2021, the company guided to non-GAAP operating income of $566 million to $568 million and non-GAAP diluted earnings per share of $2.83 to $2.84. For the full fiscal year ending January 31, 2022, management pointed to a non-GAAP operating margin of roughly 37%. Veeva does not provide GAAP targets for these measures because items such as stock-based compensation cannot be reasonably predicted.
The risk list is mostly commercial. Veeva expects life sciences companies to cut sales representative headcount by roughly 10% over the coming year, a shift that could soften demand for Veeva CRM and other Commercial Cloud applications. Customers have had free use of Veeva CRM Engage Meeting through December 31, 2020, and some are expected to stop using it once the free period ends. Crossix and Physicians World remain more exposed to COVID-19 disruption than the rest of the portfolio, and integrating them while retaining their customers is not assured. The subscription services revenue retention rate was 121% for the fiscal year ended January 31, 2020, and management has said the growth rate of total revenues and subscription services revenues will decline in the future. Named risks also include security breaches, pricing pressure and competitor consolidation, customer concentration, and the proposed conversion to a Delaware public benefit corporation, which faces a stockholder vote on January 13, 2021. A remaining salesforce.com purchase commitment of $78 million is due by September 1, 2025.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $377.5M | $353.7M | +6.7% | $280.9M | +34.4% |
| Gross profit | $274.5M | $256.5M | +7.0% | $207.6M | +32.2% |
| Gross margin | 72.7% | 72.5% | +0.2 pp | 73.9% | -1.2 pp |
| Research & development | $80.0M | $70.1M | +14.2% | $52.6M | +52.1% |
| Sales & marketing | $58.0M | $59.2M | -2.0% | $45.5M | +27.4% |
| General & administrative | $35.2M | $37.2M | -5.2% | $28.7M | +22.8% |
| Total operating expenses | $173.2M | $166.4M | +4.1% | $126.8M | +36.6% |
| Operating income (loss) | $101.3M | $90.1M | +12.5% | $80.8M | +25.4% |
| Operating margin | 26.8% | 25.5% | +1.4 pp | 28.8% | -1.9 pp |
| Net income (loss) | $97.0M | $93.6M | +3.6% | $82.2M | +17.9% |
| Net margin | 25.7% | 26.4% | -0.8 pp | 29.3% | -3.6 pp |
| Diluted EPS | $0.60 | $0.58 | +$0.02 | $0.52 | +$0.08 |
| Customers | 625 | 625 | ±0.0% | — | — |
Risks
COVID-19 has negatively impacted the Crossix and Physicians World businesses, and sales to pre-commercial life sciences companies, contract research organizations, medical device and cosmetics companies have been and may continue to be negatively impacted. Veeva CRM Engage Meeting is free through December 31, 2020 and some customers are expected to discontinue use after the free period.
On the December 1, 2020 earnings call, the company indicated it expects life sciences companies to reduce the number of sales representatives they employ by roughly 10% over the coming year. This could negatively impact sales of Veeva CRM and other Commercial Cloud applications in particular.
A significant Veeva CRM customer recently launched a project to implement IQVIA's competitive software offering for portions of its CRM users, and the scope of that deployment may expand. IQVIA has also restricted customers from uploading its data to Veeva Network Customer Master, Veeva Nitro, Veeva Andi, Veeva MedComms, and certain other Veeva applications, which has negatively affected sales and customer adoption.
Top 10 customers accounted for 36% of total revenues in the fiscal year ended January 31, 2020, and nearly all revenues are generated from life sciences industry customers. Loss, non-renewal, or consolidation among key customers could slow revenue growth or cause revenues to decline.
Increasingly complex data protection and privacy rules include GDPR, CCPA and CPRA, LGPD, the invalidated EU-U.S. Privacy Shield, and data localization or health data certification requirements such as French HDS. Compliance could require additional investment and reduce demand for Veeva's cloud and data products.
Crossix and Physicians World have lower gross margins than Veeva's core products and services, and total gross margin declined to 72.7% in FY2021 Q3 from 73.9% in FY2020 Q3. Integration difficulties and failure to retain acquired customers or key employees could adversely affect the business.
Veeva has been defending trade secret misappropriation claims from Medidata and IQVIA since January 2017 and may face future intellectual property claims. Such litigation could require substantial damages or royalties, prevent Veeva from offering services, or divert management attention.
Competition for sales, marketing, and engineering talent is intense, and Veeva appointed Brent Bowman as CFO on September 1, 2020 following Timothy Cabral's planned retirement. Declines in the perceived value of equity awards or changes to compensation structure could impair recruiting and retention.
Stockholders are asked to approve conversion to a Delaware public benefit corporation at a special meeting scheduled for January 13, 2021. Directors would be required to balance stockholder financial interests with other interests, creating legal uncertainty and potential decisions that do not maximize short-term stockholder value.
SaaS KPIs
All quarters →Total Customers
Non-GAAP Operating Margin
Summary, forecast, risks and KPIs are extracted from VEEVA SYSTEMS INC's SEC filings for Q3 FY2021 (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.