News, Awards & Press

    Veeva Announces Fiscal 2019 Third Quarter Results

    Total Revenues of $224.7M, up 27% Year-over-year

    Subscription Services Revenues of $178.2M, up 25% Year-over-year

    PLEASANTON, CA — November 28, 2018 — Veeva Systems Inc. (NYSE: VEEV), a leading provider of industry cloud solutions for the global life sciences industry, today announced results for its fiscal third quarter ended October 31, 2018. All results, including prior periods, and guidance reflect the new revenue recognition standard ASC 606.

    “We executed well across all areas of the business, expanding our leadership with Veeva Commercial Cloud and Veeva Vault,” said CEO Peter Gassner. “Our focus on innovation and customer success coupled with our consistent execution sets us up for a great finish to the year and establishes a strong foundation for next year and beyond.”

    Fiscal 2019 Third Quarter Results:

    • Revenues: Total revenues for the third quarter were $224.7 million, up from $177.0 million one year ago, an increase of 27% year-over-year. Subscription services revenues for the third quarter were $178.2 million, up from $142.8 million one year ago, an increase of 25% year-over-year.
    • Operating Income and Non-GAAP Operating Income
      (1):Third quarter operating income was $63.1 million, compared to $42.5 million one year ago, an increase of 48% year-over-year. Non-GAAP operating income for the third quarter was $84.4 million, compared to $58.4 million one year ago, an increase of 45% year-over-year.
    • Net Income and Non-GAAP Net Income
      (1): Third quarter net income was $64.1 million, compared to $34.9 million one year ago, an increase of 83% year-over-year. Non-GAAP net income for the third quarter was $70.3 million, compared to $38.9 million one year ago, an increase of 81% year-over-year.
    • Net Income per Share and Non-GAAP Net Income per Share
      (1):For the third quarter, fully diluted net income per share was $0.41, compared to $0.23 one year ago, while non-GAAP fully diluted net income per share was $0.45, compared to $0.25 one year ago.

    “We are pleased to report our results came in well above guidance for the quarter, as we continued to deliver a unique combination of growth and profitability,” said CFO Tim Cabral. “Looking to next year, we expect to hit $1 billion in total revenue, significantly ahead of our original plan.”

    Recent Highlights:

    • Strategic Wins for Vault Clinical — The company had its first Veeva Vault CTMS win with a top 20 pharmaceutical company, who will deploy globally. Another leading CRO chose Veeva Vault eTMF, the third top 7 CRO to standardize on the product.
    • Veeva Extends Leadership in CRM Across All Segments — A top 10 pharmaceutical company added more than 5,000 Veeva CRM users across multiple regions as part of its global expansion. Additionally, a major consumer health company selected multichannel Veeva CRM for 40 markets. Momentum also continued in SMB, with Veeva adding 31 new customers since the start of the fiscal year.
    • Top 50 Pharma Goes Global with Veeva OpenData — Veeva signed a top 50 pharmaceutical company to implement Veeva OpenData globally. In addition, a top 20 selected Veeva OpenData for the U.S.
    • Continued Enterprise Progress in Vault RIM — In the quarter, a top 20 pharmaceutical company chose Vault RIM for its global regulatory operations, the sixth top 20 to select Veeva regulatory solutions.

    Financial Outlook:

    Veeva is providing guidance for its fiscal fourth quarter ending January 31, 2019 as follows:

    • Total revenues between $226 and $227 million.
    • Non-GAAP operating income between $77 and $78 million(2).
    • Non-GAAP fully diluted net income per share of $0.40(2).

    Veeva is providing guidance for its fiscal year ending January 31, 2019 as follows:

    • Total revenues between $855.8 and $856.8 million.
    • Non-GAAP operating income between $298.6 and $299.6 million(2).
    • Non-GAAP fully diluted net income per share of $1.58(2).

    Conference Call Information:

    What:         Veeva’s Fiscal 2019 Third Quarter Results Conference Call
    When:         Wednesday, November 28, 2018
    Time:         1:30 p.m. PT (4:30 p.m. ET)
    Live Call:         1-833-235-5654, domestic
              1-647-689-4160, international
              Conference ID 498 9800
    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 section titled “Non-GAAP Financial Measures” and the tables entitled “Reconciliation of GAAP to Non-GAAP Financial Measures” below for details.

    (2) Veeva is not able, at this time, to provide GAAP targets for operating income and fully diluted net income per share for the fourth fiscal quarter ending January 31, 2019 or fiscal year ending January 31, 2019 because of the difficulty of estimating certain items excluded from non-GAAP operating income and non-GAAP fully diluted net income per share that cannot be reasonably predicted, such as charges related to stock-based compensation expense, capitalization of internal-use software development expenses and the subsequent amortization of the capitalized expenses. The effect of these excluded items may be significant.

    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 675 customers, ranging from the world’s largest pharmaceutical companies to emerging biotechs. Veeva is headquartered in the San Francisco Bay Area, with offices throughout North America, Europe, Asia, and Latin America. For more information, visit veeva.com.

    Forward-looking Statements

    This release contains forward-looking statements, including the quotations from management, the statements in “Financial Outlook,” and other statements regarding Veeva’s future 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) breaches in our security measures or unauthorized access to our customers’ data; (ii) our expectation that the future growth rate of our revenues will decline; (iii) fluctuation of our results, which may make period-to-period comparisons less meaningful; (iv) competitive factors, including but not limited to pricing pressures, consolidation among our competitors, entry of new competitors, the launch of new products and marketing initiatives by our existing competitors, and difficulty securing rights to access, host or integrate with complementary third party products or data used by our customers; (v) the rate of adoption of our newer solutions and the results of our efforts to sustain or expand the use and adoption of our more established applications, like Veeva CRM; (vi) loss of one or more customers, particularly any of our large customers; (vii) system unavailability, system performance problems, or loss of data due to disruptions or other problems with our computing infrastructure; (viii) failure to sustain the level of profitability we have achieved in the past as our costs increase; (ix) adverse changes in economic, regulatory, or market conditions, particularly in the life sciences industry, including as a result of customer mergers; (x) our ability to attract and retain highly skilled employees and manage our growth effectively; (xi) a decline in new subscriptions that may not be immediately reflected in our operating results due to the ratable recognition of our subscription revenue; and (xii) pending, threatened, or future legal proceedings and related expenses.

    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, 2018. This is available on the company’s website at veeva.com under the Investors section and on the SEC’s website at 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,
          2018   2018
              *As adjusted
    Assets                
    Current assets:                
    Cash and cash equivalents     $ 467,643     $ 320,183
    Short-term investments       584,283       441,779
    Accounts receivable, net       90,053       224,668
    Unbilled accounts receivable       19,989       13,348
    Prepaid expenses and other current assets       21,226       12,443
    Total current assets       1,183,194       1,012,421
    Property and equipment, net       53,614       52,284
    Deferred costs, net       28,035       30,306
    Goodwill       95,804       95,804
    Intangible assets, net       26,188       31,490
    Deferred income taxes, noncurrent       3,468       2,222
    Other long-term assets       6,978       5,806
    Total assets     $ 1,397,281     $ 1,230,333
                     
    Liabilities and stockholders’ equity                
    Current liabilities:                
    Accounts payable     $ 10,859     $ 6,944
    Accrued compensation and benefits       14,515       17,054
    Accrued expenses and other current liabilities       12,091       13,152
    Income tax payable       3,092       2,080
    Deferred revenue       196,159       266,939
    Total current liabilities       236,716       306,169
    Deferred income taxes, noncurrent       14,143       10,949
    Other long-term liabilities       8,117       6,977
    Total liabilities       258,976       324,095
    Stockholders’ equity:                
    Class A common stock       1       1
    Class B common stock            
    Additional paid-in capital       591,497       515,272
    Accumulated other comprehensive income       (1,239 )     1,600
    Retained earnings       548,046       389,365
    Total stockholders’ equity       1,138,305       906,238

    Total liabilities and stockholders’ equity

        $ 1,397,281     $ 1,230,333

    __________

    * Prior-period information has been restated for the adoption of ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606), and ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” both of which were adopted on February 1, 2018.

     

    VEEVA SYSTEMS INC.
    CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    (In thousands, except per share data)
    (Unaudited)

         

    Three months ended
    October 31,

     

    Nine months ended
    October 31,

          2018   2017   2018   2017
             

    *As adjusted

         

    *As adjusted

    Revenues:                          
    Subscription services     $ 178,214     $ 142,802     $ 503,809     $ 407,483  
    Professional services and other       46,517       34,206       126,078       97,092  
    Total revenues       224,731       177,008       629,887       504,575  
    Cost of revenues (3):                          
    Cost of subscription services       28,335       27,758       87,394       80,696  
    Cost of professional services and other       33,039       25,476       93,361       71,815  
    Total cost of revenues       61,374       53,234       180,755       152,511  
    Gross profit       163,357       123,774       449,132       352,064  
    Operating expenses (3):                          
    Research and development       40,001       34,035       116,024       95,024  
    Sales and marketing       37,699       31,892       110,306       94,103  
    General and administrative       22,563       15,352       62,934       43,512  
    Total operating expenses       100,263       81,279       289,264       232,639  
    Operating income       63,094       42,495       159,868       119,425  
    Other income, net       4,606       1,359       10,087       4,808  
    Income before income taxes       67,700       43,854       169,955       124,233  
    Provision for income taxes       3,615       8,929       11,274       13,710  
    Net income     $ 64,085     $ 34,925     $ 158,681     $ 110,523  
                               
    Net income attributable to common stockholders, basic and diluted:     $ 64,085     $ 34,925     $ 158,681     $ 110,523  
                               
    Net income per share attributable to common stockholders:                      
    Basic     $ 0.44     $ 0.25     $ 1.10     $ 0.79  
    Diluted     $ 0.41     $ 0.23     $ 1.02     $ 0.72  
                               
    Weighted-average shares used to compute net income per share

    attributable to common stockholders:

                         
    Basic       144,737       140,857       143,765       139,858  
    Diluted       156,025       154,256       155,706       153,409  
    Other comprehensive income (loss):                          
    Net change in unrealized gains (losses) on available-for-sale investments     $ 33     $ (243 )   $ 695     $ (315 )
    Net change in cumulative foreign currency translation gain (loss)       (1,153 )     (6 )     (3,534 )     1,226  
    Comprehensive income     $ 62,965     $ 34,676     $ 155,842     $ 111,434  

    __________

                             

    (3) Includes stock-based compensation as follows:

                             
                               
    Cost of revenues:                              
    Cost of subscription services     $ 405       $ 377       $ 1,166     $ 1,095  
    Cost of professional services and other       2,782         2,288         7,767       6,110  
    Research and development       5,820         4,765         16,282       12,916  
    Sales and marketing       4,825         4,130         13,743       12,150  
    General and administrative       6,086         2,458         17,689       6,915  
    Total stock-based compensation     $ 19,918       $ 14,018       $ 56,647     $ 39,186  

    __________

    * Prior-period information has been restated for the adoption of ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606), which was adopted on February 1, 2018.

     

    VEEVA SYSTEMS INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    (In thousands)
    (Unaudited)

         

    Three months ended
    October 31,

     

    Nine months ended
    October 31,

          2018   2017   2018   2017
             

    *As adjusted

         

    *As adjusted

    Cash flows from operating activities                                  
    Net income     $ 64,085     $ 34,925     $ 158,681     $ 110,523  
    Adjustments to reconcile net income to net cash provided by operating activities:                                  
    Depreciation and amortization       3,383       3,601       10,477       10,621  
    Amortization of premiums (accretion of discount) on short-term investments       (848 )     365       (1,380 )     1,207  
    Stock-based compensation       19,918       14,018       56,647       39,186  
    Amortization of deferred costs       4,595       4,203       13,697       12,338  
    Deferred income taxes       1,824       (44 )     2,642       (987 )
    (Gain) Loss on foreign currency from market-to-market derivative       (19 )     (134 )     (182 )     119  
    Bad debt expense (recovery)       84       (63 )     262       (269 )
    Changes in operating assets and liabilities:                                  
    Accounts receivable       21,658       23,323       134,353       110,472  
    Unbilled accounts receivable       (5,212 )     (4,852 )     (6,641 )     (5,331 )
    Deferred costs       (4,504 )     (4,170 )     (11,426 )     (11,933 )
    Income taxes       1,029       6,125       525       4,063  
    Other current and long-term assets       (6,018 )     (390 )     (9,527 )     (1,550 )
    Accounts payable       2,982       1,473       3,520       1,717  
    Accrued expenses and other current liabilities       406       1,405       (3,698 )     1,949  
    Deferred revenue       (62,860 )     (47,735 )     (70,616 )     (42,574 )
    Other long-term liabilities       1,053       184       1,620       2,450  
    Net cash provided by operating activities       41,556       32,234       278,954       232,001  
    Cash flows from investing activities                                  
    Purchases of short-term investments       (214,839 )     (207,268 )     (589,070 )     (350,719 )
    Maturities and sales of short-term investments       130,137       74,806       447,947       203,183  
    Purchases of property and equipment       (4,163 )     (1,635 )     (5,558 )     (8,130 )
    Capitalized internal-use software development costs       (495 )     (301 )     (1,009 )     (1,334 )
    Net cash used in investing activities       (89,360 )     (134,398 )     (147,690 )     (157,000 )
    Cash flows from financing activities                                  
    Proceeds from exercise of common stock options       4,867       3,747       19,728       17,163  
    Net cash provided by financing activities       4,867       3,747       19,728       17,163  
    Effect of exchange rate changes on cash, cash equivalents, and restricted cash       (1,154 )     (12 )     (3,530 )     1,228  
    Net change in cash, cash equivalents, and restricted cash       (44,091 )     (98,429 )     147,462       93,392  
    Cash, cash equivalents, and restricted cash at beginning of period       512,940       410,428       321,387       218,607  
    Cash, cash equivalents, and restricted cash at end of period     $ 468,849     $ 311,999     $ 468,849     $ 311,999  

    __________

    * Prior-period information has been restated for the adoption of ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606), and ASU 2016-18, “Statement of Cash Flows, Restricted Cash,” both of which were adopted on February 1, 2018.

    Non-GAAP Financial Measures

    In Veeva’s public disclosures, Veeva has provided non-GAAP measures, which it defines as financial information that has not been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. In addition to its GAAP measures, Veeva uses these non-GAAP financial measures internally for budgeting and resource allocation purposes and in analyzing its financial results. For the reasons set forth below, Veeva believes that excluding the following items from its non-GAAP financial measures provides information that is helpful in understanding its operating results, evaluating its future prospects, comparing its financial results across accounting periods, and comparing its financial results to its peers, many of which provide similar non-GAAP financial measures.

    • Stock-based compensation expenses. Veeva excludes stock-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses that Veeva excludes from its internal management reporting processes. Veeva’s management also finds it useful to exclude these expenses when they assess the appropriate level of various operating expenses and resource allocations when 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 expense for purchased intangible assets in connection with acquisitions of certain businesses and technologies. Amortization of intangible assets is a non-cash expense and is inconsistent in amount and frequency because it is significantly affected by the timing, size of acquisitions and the inherent subjective nature of purchase price allocations. Because these costs have already been incurred and cannot be recovered, and are non-cash expenses, Veeva excludes these expenses for its internal management reporting processes. Veeva’s management also finds it useful to exclude these charges when assessing the appropriate level of various operating expenses and resource allocations when budgeting, planning and forecasting future periods. Investors should note that the use of intangible assets contributed to Veeva’s revenues earned during the periods presented and will contribute to Veeva’s future period revenues as well.
    • Capitalization of internal-use software development expenses and the subsequent amortization of the capitalized expenses. Veeva capitalizes certain costs incurred for the development of computer software for internal use and then amortizes those costs over the estimated useful life. Capitalization and amortization of software development costs can vary significantly depending on the timing of products reaching technological feasibility and being made generally available. Veeva’s internal management reporting processes exclude both the capitalization of software (which would otherwise result in a reduction in net research and development operating expenses) and the amortization of capitalized software (which would otherwise result in an increase in cost of subscription revenues) when preparing budgets, plans and reviewing internal performance. Moreover, because of the variety of approaches taken and the subjective assumptions made by other companies in this area, Veeva believes that excluding the effects of capitalized software costs allows investors to make more meaningful comparisons between our operating results and those of other companies.
    • Deferred compensation associated with the Zinc Ahead business acquisition. The Zinc Ahead share purchase agreement, as revised, called for share purchase consideration to be deferred and paid at a rate of one-third of the deferred consideration amount per year to certain former Zinc Ahead employee shareholders and option holders who remain employed with Veeva on each deferred consideration payment date. In accordance with GAAP, these payments are being accounted for as deferred compensation and the expense is recognized over the requisite service period. Veeva’s management views this deferred compensation expense as an unusual acquisition cost associated with the Zinc Ahead acquisition and finds it useful to exclude it in order to assess the appropriate level of various operating expenses to assist in budgeting, planning and forecasting future periods. Veeva believes excluding this deferred compensation expense from its non-GAAP measures may allow investors to make more meaningful comparisons between its recurring operating results and those of other companies.
    • 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 imputed tax impact on the difference between GAAP and non-GAAP costs and expenses due to stock-based compensation, purchased intangibles, capitalized internal-use software, and deferred compensation associated with the Zinc Ahead business acquisition for GAAP and non-GAAP measures.

    There are limitations to 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 provided 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 Veeva’s management about which items are adjusted to calculate its 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 its 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. Veeva encourages its investors and others to review its financial information in its entirety, not to rely on any single financial measure to evaluate its business, and to view its non-GAAP financial measures in conjunction with the most directly comparable GAAP financial measures. A reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables below.

    The following tables reconcile the specific items excluded from GAAP metrics in the calculation of non-GAAP metrics for the periods shown below:

     

    VEEVA SYSTEMS INC.
    RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

    (Dollars in thousands)
    (Unaudited)

         

    Three months ended
    October 31,

     

    Nine months ended
    October 31,

          2018   2017   2018   2017
             

    *As adjusted

         

    *As adjusted

    Cost of subscription services revenues on a GAAP basis     $ 28,335     $ 27,758     $ 87,394     $ 80,696  
    Stock-based compensation expense       (405 )     (377 )     (1,166 )     (1,095 )
    Amortization of purchased intangibles       (690 )     (923 )     (2,397 )     (2,987 )
    Amortization of internal-use software       (148 )     (173 )     (458 )     (453 )
    Cost of subscription services revenues on a non-GAAP basis     $ 27,092     $ 26,285     $ 83,373     $ 76,161  
                                       
    Gross margin on subscription services revenues on a GAAP basis       84.1 %     80.6 %     82.7 %     80.2 %
    Stock-based compensation expense       0.2       0.3       0.2       0.3  
    Amortization of purchased intangibles       0.4       0.6       0.5       0.7  
    Amortization of internal-use software       0.1       0.1       0.1       0.1  
    Gross margin on subscription services revenues on a non-GAAP basis       84.8 %     81.6 %     83.5 %     81.3 %
                                       
    Cost of professional services and other revenues on a GAAP basis     $ 33,039     $ 25,476     $ 93,361     $ 71,815  
    Stock-based compensation expense       (2,782 )     (2,288 )     (7,767 )     (6,110 )
    Deferred compensation associated with Zinc Ahead acquisition       (4 )     (5 )     (14 )     (16 )
    Cost of professional services and other revenues on a non-GAAP basis     $ 30,253     $ 23,183     $ 85,580     $ 65,689  
                                       
    Gross margin on professional services and other revenues on a GAAP basis       29.0 %     25.5 %     25.9 %     26.0 %
    Stock-based compensation expense       6.0       6.7       6.2       6.3  
    Gross margin on professional services and other revenues on a non-GAAP basis       35.0 %     32.2 %     32.1 %     32.3 %
                                       
    Gross profit on a GAAP basis     $ 163,357     $ 123,774     $ 449,132     $ 352,064  
    Stock-based compensation expense       3,187       2,665       8,933       7,205  
    Amortization of purchased intangibles       690       923       2,397       2,987  
    Amortization of internal-use software       148       173       458       453  
    Deferred compensation associated with Zinc Ahead acquisition       4       5       14       16  
    Gross profit on a non-GAAP basis     $ 167,386     $ 127,540     $ 460,934     $ 362,725  
                                       
    Gross margin on total revenues on a GAAP basis       72.7 %     69.9 %     71.3 %     69.8 %
    Stock-based compensation expense       1.4       1.6       1.4       1.4  
    Amortization of purchased intangibles       0.3       0.5       0.4       0.6  
    Amortization of internal-use software       0.1       0.1       0.1       0.1  
    Gross margin on total revenues on a non-GAAP basis       74.5 %     72.1 %     73.2 %     71.9 %
                                       
    Research and development expense on a GAAP basis     $ 40,001     $ 34,035     $ 116,024     $ 95,024  
    Stock-based compensation expense       (5,820 )     (4,765 )     (16,282 )     (12,916 )
    Capitalization of internal-use software       494       300       1,008       1,333  
    Deferred compensation associated with Zinc Ahead acquisition       (71 )     (109 )     (289 )     (327 )
    Research and development expense on a non-GAAP basis     $ 34,604     $ 29,461     $ 100,461     $ 83,114  
                                       
    Sales and marketing expense on a GAAP basis     $ 37,699     $ 31,892     $ 110,306     $ 94,103  
    Stock-based compensation expense       (4,825 )     (4,130 )     (13,743 )     (12,150 )
    Amortization of purchased intangibles       (977 )     (978 )     (2,901 )     (2,902 )
    Deferred compensation associated with Zinc Ahead acquisition       (10 )     (13 )     (40 )     (43 )
    Sales and marketing expense on a non-GAAP basis     $ 31,887     $ 26,771     $ 93,622     $ 79,008  
                                       
    General and administrative expense on a GAAP basis     $ 22,563     $ 15,352     $ 62,934     $ 43,512  
    Stock-based compensation expense       (6,086 )     (2,458 )     (17,689 )     (6,915 )
    Deferred compensation associated with Zinc Ahead acquisition             (4 )           (12 )
    General and administrative expense on a non-GAAP basis     $ 16,477     $ 12,890     $ 45,245     $ 36,585  

    __________

    * Prior-period information has been restated for the adoption of ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606), which was adopted on February 1, 2018.

     

    VEEVA SYSTEMS INC.
    RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued)

    (Dollars in thousands, except per share data)
    (Unaudited)

         

    Three months ended
    October 31,

     

    Nine months ended
    October 31,

          2018   2017   2018   2017
             

    *As adjusted

         

    *As adjusted

    Operating expense on a GAAP basis     $ 100,263     $ 81,279     $ 289,264     $ 232,639  
    Stock-based compensation expense       (16,731 )     (11,353 )     (47,714 )     (31,981 )
    Amortization of purchased intangibles       (977 )     (978 )     (2,901 )     (2,902 )
    Capitalization of internal-use software       494       300       1,008       1,333  
    Deferred compensation associated with Zinc Ahead acquisition       (81 )     (126 )     (329 )     (382 )
    Operating expense on a non-GAAP basis     $ 82,968     $ 69,122     $ 239,328     $ 198,707  
                                       
    Operating income on a GAAP basis     $ 63,094     $ 42,495     $ 159,868     $ 119,425  
    Stock-based compensation expense       19,918       14,018       56,647       39,186  
    Amortization of purchased intangibles       1,667       1,901       5,298       5,889  
    Capitalization of internal-use software       (494 )     (300 )     (1,008 )     (1,333 )
    Amortization of internal-use software       148       173       458       453  
    Deferred compensation associated with Zinc Ahead acquisition       85       131       343       398  
    Operating income on a non-GAAP basis     $ 84,418     $ 58,418     $ 221,606     $ 164,018  
                                       
    Operating margin on a GAAP basis       28.1 %     24.0 %     25.4 %     23.7 %
    Stock-based compensation expense       8.9       7.9       9.0       7.7  
    Amortization of purchased intangibles       0.7       1.1       0.8       1.2  
    Capitalization of internal-use software       (0.2 )     (0.2 )     (0.2 )     (0.3 )
    Amortization of internal-use software       0.1       0.1       0.1       0.1  
    Deferred compensation associated with Zinc Ahead acquisition             0.1       0.1       0.1  
    Operating margin on a non-GAAP basis       37.6 %     33.0 %     35.2 %     32.5 %
                                       
    Net income on a GAAP basis     $ 64,085     $ 34,925     $ 158,681     $ 110,523  
    Stock-based compensation expense       19,918       14,018       56,647       39,186  
    Amortization of purchased intangibles       1,667       1,901       5,298       5,889  
    Capitalization of internal-use software       (494 )     (300 )     (1,008 )     (1,333 )
    Amortization of internal-use software       148       173       458       453  
    Deferred compensation associated with Zinc Ahead acquisition       85       131       343       398  
    Income tax effect on non-GAAP adjustments(1)       (15,080 )     (11,993 )     (37,382 )     (45,379 )
    Net income on a non-GAAP basis     $ 70,329     $ 38,855     $ 183,037     $ 109,737  
                                       
    Diluted net income per share on a GAAP basis     $ 0.41     $ 0.23     $ 1.02     $ 0.72  
    Stock-based compensation expense       0.13       0.09       0.36       0.26  
    Amortization of purchased intangibles       0.01       0.01       0.04       0.04  
    Capitalization of internal-use software                         (0.01 )
    Amortization of internal-use software                          
    Deferred compensation associated with Zinc Ahead acquisition                          
    Income tax effect on non-GAAP adjustments(1)       (0.10 )     (0.08 )     (0.24 )     (0.29 )
    Diluted net income per share on a non-GAAP basis     $ 0.45     $ 0.25     $ 1.18     $ 0.72  

    __________

    * Prior-period information has been restated for the adoption of ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606), which was adopted on February 1, 2018.

    (1) For the three and nine months ended October 31, 2018, management used an estimated annual effective non-GAAP tax rate of 21.0%. In the same period last year, management used an estimated annual effective non-GAAP tax rate of 35.0%.

     

    Investor Relations Contact:
    Veeva Systems Inc.
    Rick Lund, 925-271-9816
    ir@veeva.com

    Media Contact:
    Veeva Systems Inc.
    Roger Villareal, 925-264-8885
    pr@veeva.com

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