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    Veeva Announces Fiscal 2020 Third Quarter Results

    Download PDFTotal Revenues of $280.9M, up 25% Year-over-year;
    Subscription Services Revenues of $226.8M, up 27% Year-over-year

    PLEASANTON, CA — November 26, 2019 — 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, 2019.

    “It was a very exciting quarter. We delivered great results, significantly expanded in new and existing areas, and welcomed Crossix and Physicians World to the Veeva team,” said CEO Peter Gassner. “Our focus on innovation, customer success, and ability to execute across multiple large markets sets us up for strong growth well into the future.”

    Fiscal 2020 Third Quarter Results:

    • Revenues: Total revenues for the third quarter were $280.9 million, up from $224.7 million one year ago, an increase of 25% year-over-year. Subscription services revenues for the third quarter were $226.8 million, up from $178.2 million one year ago, an increase of 27% year-over-year.
    • Operating Income and Non-GAAP Operating Income
      (1): Third quarter operating income was $80.8 million, compared to $63.1 million one year ago, an increase of 28% year-over-year. Non-GAAP operating income for the third quarter was $111.6 million, compared to $84.8 million one year ago, an increase of 32% year-over-year.
    • Net Income and Non-GAAP Net Income
      (1): Third quarter net income was $82.2 million, compared to $64.1 million one year ago, an increase of 28% year-over-year. Non-GAAP net income for the third quarter was $95.4 million, compared to $70.6 million one year ago, an increase of 35% 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 $0.52, compared to $0.41 one year ago, while non-GAAP fully diluted net income per share was $0.60, compared to $0.45 one year ago.

    “Our outperformance in both Veeva Commercial Cloud and Veeva Vault reflects the tremendous opportunity we have in life sciences,” said CFO Tim Cabral. “We’re continuing our investments to drive customer success and long-term growth in our aim to become the most strategic partner to the industry.”

    Recent Highlights:

    • Veeva Acquires Crossix and Physicians World — The company recently closed two acquisitions, adding new solutions to Veeva Commercial Cloud. Crossix, the leader in privacy-safe patient data and analytics, provides complementary solutions and enables expansion into new areas. With the acquisition of Physicians World, a trusted provider of events services, Veeva addresses the industry’s growing demand for world-class events management software and services, all from one vendor.
    • Customer Success in Commercial Cloud Drives Market Share Gains — Veeva continued to expand its Commercial Cloud business with key wins. A top 50 pharma selected Veeva CRM for their European markets based upon their success in the U.S. Another top 50 pharma selected Veeva OpenData in the U.S. to improve field force effectiveness.
    • Veeva Development Cloud Adoption Deepens —In the quarter, a top 20 pharma selected Veeva Vault QualityDocs as their enterprise standard, marking the first Veeva R&D application for this long-standing Commercial Cloud customer. The quarter also saw a major milestone with Veeva Vault CDMS now rolling out in a large-scale Phase 3 trial for more than 12,000 patients across 700 sites and 32 countries.

    Financial Outlook:

    Veeva is providing guidance for its fiscal fourth quarter ending January 31, 2020 as follows:

    • Total revenues between $296 and $299 million.
    • Non-GAAP operating income between $100 and $101 million(2).
    • Non-GAAP fully diluted net income per share between $0.51 and $0.52(2).

    Veeva is providing guidance for its fiscal year ending January 31, 2020 as follows:

    • Total revenues between $1,088 and $1,091 million.
    • Non-GAAP operating income between $409 and $410 million(2).
    • Non-GAAP fully diluted net income per share between $2.16 and $2.17(2).

    The guidance above reflects the impact from the acquisitions of Crossix and Physicians World to Veeva’s fiscal fourth quarter and fiscal year ending January 31, 2020 as follows:

    • Subscription revenue between $10 and 11 million(3).
    • Services revenue between $3 and 4 million.
    • Total revenues between $13 and $15 million(3).
    • Non-GAAP operating loss of $6 million(2).
    • Calculated billings of ~$30 million.

    Conference Call Information:

    What:

     

    Veeva’s Fiscal 2020 Third Quarter Results Conference Call

    When:

     

    Tuesday, November 26, 2019

    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 637 9736

    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, 2020 or fiscal year ending January 31, 2020 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. The effect of these excluded items may be significant.

    (3) Revenue associated with Crossix and Physicians World includes purchase accounting adjustments.

    About Veeva Systems

    Veeva Systems Inc. is the leader in cloud-based software for the global life sciences industry. Committed to innovation, product excellence, and customer success, Veeva serves more than 800 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.

    Veeva uses its ir.veeva.com website as a means of disclosing material non-public information, announcing upcoming investor conferences and for complying with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website in addition to following our press releases, SEC filings and public conference calls and webcasts.

    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) our ability to integrate Crossix Systems Inc. and Physicians World LLC into our business and achieve the expected benefits of the acquisitions; (vii) loss of one or more customers, particularly any of our large customers; (viii) system unavailability, system performance problems, or loss of data due to disruptions or other problems with our computing infrastructure; (ix) our ability to attract and retain highly skilled employees and manage our growth effectively; (x) failure to sustain the level of profitability we have achieved in the past as our costs increase; (xi) adverse changes in economic, regulatory, or market conditions, particularly in the life sciences industry, including as a result of customer mergers; (xii) 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 (xiii) 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, 2019. 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.

    ® 2019 Veeva Systems Inc. All rights reserved. Veeva and the Veeva logo are trademarks of Veeva Systems Inc. Veeva Systems Inc. owns other registered and unregistered trademarks.

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

     

     

    October 31,
    2019

     

    January 31,
    2019

    Assets

     

     

     

    Current assets:

     

     

     

    Cash and cash equivalents

    $

    892,581

     

     

    $

    550,971

     

    Short-term investments

    602,407

     

     

    539,190

     

    Accounts receivable, net

    116,874

     

     

    303,465

     

    Unbilled accounts receivable

    30,899

     

     

    18,122

     

    Prepaid expenses and other current assets

    15,360

     

     

    21,666

     

    Total current assets

    1,658,121

     

     

    1,433,414

     

    Property and equipment, net(3)

    53,290

     

     

    54,966

     

    Deferred costs, net

    29,873

     

     

    30,869

     

    Lease right-of-use assets(3)

    24,055

     

     

     

    Goodwill

    95,804

     

     

    95,804

     

    Intangible assets, net

    19,948

     

     

    24,521

     

    Deferred income taxes, noncurrent

    6,455

     

     

    5,938

     

    Other long-term assets

    12,895

     

     

    8,254

     

    Total assets

    $

    1,900,441

     

     

    $

    1,653,766

     

     

     

     

     

    Liabilities and stockholders equity

     

     

     

    Current liabilities:

     

     

     

    Accounts payable

    $

    9,914

     

     

    $

    9,110

     

    Accrued compensation and benefits

    15,977

     

     

    15,324

     

    Accrued expenses and other current liabilities

    15,707

     

     

    16,145

     

    Income tax payable

    7,195

     

     

    4,086

     

    Deferred revenue

    250,674

     

     

    356,357

     

    Lease liabilities(3)

    7,430

     

     

     

    Total current liabilities

    306,897

     

     

    401,022

     

    Deferred income taxes, noncurrent

    9,042

     

     

    6,095

     

    Lease liabilities, noncurrent(3)

    19,882

     

     

     

    Other long-term liabilities

    6,055

     

     

    8,900

     

    Total liabilities

    341,876

     

     

    416,017

     

    Stockholders’ equity:

     

     

     

    Class A common stock

    1

     

     

    1

     

    Class B common stock

     

     

     

    Additional paid-in capital

    704,915

     

     

    617,623

     

    Accumulated other comprehensive income

    173

     

     

    928

     

    Retained earnings(3)

    853,476

     

     

    619,197

     

    Total stockholders’ equity

    1,558,565

     

     

    1,237,749

     

    Total liabilities and stockholders equity

    $

    1,900,441

     

     

    $

    1,653,766

     

    _______________________

    (3)

     

    The Company adopted ASU 2016-02, “Leases” (Topic 842) using the modified retrospective method as of February 1, 2019 and elected the transition option that allows the Company not to restate the comparative periods in their financial statements in the year of adoption.

    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,

     

    2019

     

    2018

     

    2019

     

    2018

    Revenues:

     

     

     

     

     

     

     

    Subscription services

    $

    226,760

     

     

    $

    178,214

     

     

    $

    642,187

     

     

    $

    503,809

     

    Professional services and other

    54,161

     

     

    46,517

     

     

    150,386

     

     

    126,078

     

    Total revenues

    280,921

     

     

    224,731

     

     

    792,573

     

     

    629,887

     

    Cost of revenues
    (4):

     

     

     

     

     

     

     

    Cost of subscription services

    31,964

     

     

    28,335

     

     

    93,822

     

     

    87,394

     

    Cost of professional services and other

    41,365

     

     

    33,039

     

     

    115,228

     

     

    93,361

     

    Total cost of revenues

    73,329

     

     

    61,374

     

     

    209,050

     

     

    180,755

     

    Gross profit

    207,592

     

     

    163,357

     

     

    583,523

     

     

    449,132

     

    Operating expenses
    (4):

     

     

     

     

     

     

     

    Research and development

    52,575

     

     

    40,001

     

     

    148,694

     

     

    116,024

     

    Sales and marketing

    45,524

     

     

    37,699

     

     

    130,962

     

     

    110,306

     

    General and administrative

    28,693

     

     

    22,563

     

     

    78,042

     

     

    62,934

     

    Total operating expenses

    126,792

     

     

    100,263

     

     

    357,698

     

     

    289,264

     

    Operating income

    80,800

     

     

    63,094

     

     

    225,825

     

     

    159,868

     

    Other income, net

    9,141

     

     

    4,606

     

     

    22,634

     

     

    10,087

     

    Income before income taxes

    89,941

     

     

    67,700

     

     

    248,459

     

     

    169,955

     

    Provision for income taxes

    7,696

     

     

    3,615

     

     

    13,523

     

     

    11,274

     

    Net income

    $

    82,245

     

     

    $

    64,085

     

     

    $

    234,936

     

     

    $

    158,681

     

     

     

     

     

     

     

     

     

    Net income per share:

     

     

     

     

     

     

     

    Basic

    $

    0.56

     

     

    $

    0.44

     

     

    $

    1.59

     

     

    $

    1.10

     

    Diluted

    $

    0.52

     

     

    $

    0.41

     

     

    $

    1.49

     

     

    $

    1.02

     

     

     

     

     

     

     

     

     

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

     

     

     

     

     

     

     

    Basic

    148,157

     

     

    144,737

     

     

    147,467

     

     

    143,765

     

    Diluted

    158,750

     

     

    156,025

     

     

    158,124

     

     

    155,706

     

    Other comprehensive income:

     

     

     

     

     

     

     

    Net change in unrealized gains on available-for-sale investments

    $

    753

     

     

    $

    33

     

     

    $

    2,176

     

     

    $

    695

     

    Net change in cumulative foreign currency translation loss

    (487

    )

     

    (1,153

    )

     

    (2,931

    )

     

    (3,534

    )

    Comprehensive income

    $

    82,511

     

     

    $

    62,965

     

     

    $

    234,181

     

     

    $

    155,842

     

    _______________________

    (4) Includes stock-based compensation as follows:

                 
                   

    Cost of revenues:

     

     

     

     

     

     

     

    Cost of subscription services

    $

    560

     

     

    $

    405

     

     

    $

    1,528

     

     

    $

    1,166

     

    Cost of professional services and other

    4,825

     

     

    2,782

     

     

    12,261

     

     

    7,767

     

    Research and development

    9,899

     

     

    5,820

     

     

    25,732

     

     

    16,282

     

    Sales and marketing

    6,882

     

     

    4,825

     

     

    19,207

     

     

    13,743

     

    General and administrative

    7,155

     

     

    6,086

     

     

    19,719

     

     

    17,689

     

    Total stock-based compensation

    $

    29,321

     

     

    $

    19,918

     

     

    $

    78,447

     

     

    $

    56,647

     

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

     

     

    Three months ended
    October 31,

     

    Nine months ended
    October 31,

     

    2019

     

    2018

     

    2019

     

    2018

    Cash flows from operating activities

     

     

     

     

     

     

     

    Net income

    $

    82,245

     

     

    $

    64,085

     

     

    $

    234,936

     

     

    $

    158,681

     

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

     

     

     

     

     

     

     

    Depreciation and amortization

    5,643

     

     

    3,383

     

     

    16,642

     

     

    10,477

     

    Accretion of discount on short-term investments

    (722

    )

     

    (848

    )

     

    (2,996

    )

     

    (1,380

    )

    Stock-based compensation

    29,321

     

     

    19,918

     

     

    78,447

     

     

    56,647

     

    Amortization of deferred costs

    4,832

     

     

    4,595

     

     

    14,524

     

     

    13,697

     

    Deferred income taxes

    432

     

     

    1,824

     

     

    1,771

     

     

    2,642

     

    Gain on foreign currency from mark-to-market derivative

    (74

    )

     

    (19

    )

     

    (112

    )

     

    (182

    )

    Bad debt expense (recovery)

    270

     

     

    84

     

     

    (42

    )

     

    262

     

    Changes in operating assets and liabilities:

     

     

     

     

     

     

     

    Accounts receivable

    28,319

     

     

    21,658

     

     

    186,633

     

     

    134,353

     

    Unbilled accounts receivable

    (9,515

    )

     

    (5,212

    )

     

    (12,777

    )

     

    (6,641

    )

    Deferred costs

    (4,500

    )

     

    (4,504

    )

     

    (13,528

    )

     

    (11,426

    )

    Income taxes payable

    3,909

     

     

    1,029

     

     

    4,858

     

     

    525

     

    Other current and long-term assets

    5,610

     

     

    (6,018

    )

     

    1,513

     

     

    (9,527

    )

    Accounts payable

    1,253

     

     

    2,982

     

     

    1,216

     

     

    3,520

     

    Accrued expenses and other current liabilities

    (1,682

    )

     

    406

     

     

    231

     

     

    (3,698

    )

    Deferred revenue

    (78,326

    )

     

    (62,860

    )

     

    (105,637

    )

     

    (70,616

    )

    Lease liabilities

    (1,625

    )

     

     

     

    (5,143

    )

     

     

    Other long-term liabilities

    (3,886

    )

     

    1,053

     

     

    (2,270

    )

     

    1,620

     

    Net cash provided by operating activities

    61,504

     

     

    41,556

     

     

    398,266

     

     

    278,954

     

    Cash flows from investing activities

     

     

     

     

     

     

     

    Purchases of short-term investments

    (190,695

    )

     

    (214,839

    )

     

    (628,784

    )

     

    (589,070

    )

    Maturities and sales of short-term investments

    194,661

     

     

    130,137

     

     

    571,398

     

     

    447,947

     

    Purchases of property and equipment

    (881

    )

     

    (4,163

    )

     

    (3,167

    )

     

    (5,558

    )

    Capitalized internal-use software development costs

    (356

    )

     

    (495

    )

     

    (1,061

    )

     

    (1,009

    )

    Net cash provided by (used in) investing activities

    2,729

     

     

    (89,360

    )

     

    (61,614

    )

     

    (147,690

    )

    Cash flows from financing activities

     

     

     

     

     

     

     

    Reduction of lease liabilities – finance leases

    (241

    )

     

     

     

    (729

    )

     

     

    Proceeds from exercise of common stock options

    1,607

     

     

    4,867

     

     

    8,618

     

     

    19,728

     

    Net cash provided by financing activities

    1,366

     

     

    4,867

     

     

    7,889

     

     

    19,728

     

    Effect of exchange rate changes on cash, cash equivalents, and restricted cash

    (487

    )

     

    (1,154

    )

     

    (2,931

    )

     

    (3,530

    )

    Net change in cash, cash equivalents, and restricted cash

    65,112

     

     

    (44,091

    )

     

    341,610

     

     

    147,462

     

    Cash, cash equivalents, and restricted cash at beginning of period

    828,676

     

     

    512,940

     

     

    552,178

     

     

    321,387

     

    Cash, cash equivalents, and restricted cash at end of period

    $

    893,788

     

     

    $

    468,849

     

     

    $

    893,788

     

     

    $

    468,849

     

    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 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 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.
    • 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 border 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 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 relate to the imputed tax impact on the difference between GAAP and non-GAAP costs and expenses due to stock-based compensation, purchased intangibles, 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.

    Beginning with the fiscal quarter ended April 30, 2019, Veeva no longer excludes the effects of capitalization of internal-use software development expenses and the subsequent amortization of the capitalized expenses in its non-GAAP financial measures. Prior periods have been adjusted to reflect this change, and the effect of this change is not material for any period previously presented.

    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.

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

     

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

     

     

    Three months ended

    October 31,

     

    Nine months ended

    October 31,

     

    2019

     

    2018

     

    2019

     

    2018

    Cost of subscription services revenues on a GAAP basis

    $

    31,964

     

     

    $

    28,335

     

     

    $

    93,822

     

     

    $

    87,394

     

    Stock-based compensation expense

    (560

    )

     

    (405

    )

     

    (1,528

    )

     

    (1,166

    )

    Amortization of purchased intangibles

    (688

    )

     

    (690

    )

     

    (2,043

    )

     

    (2,397

    )

    Cost of subscription services revenues on a non-GAAP basis

    $

    30,716

     

     

    $

    27,240

     

     

    $

    90,251

     

     

    $

    83,831

     

     

     

     

     

     

     

     

     

    Gross margin on subscription services revenues on a GAAP basis

    85.9

    %

     

    84.1

    %

     

    85.4

    %

     

    82.7

    %

    Stock-based compensation expense

    0.2

     

     

    0.2

     

     

    0.2

     

     

    0.2

     

    Amortization of purchased intangibles

    0.4

     

     

    0.4

     

     

    0.3

     

     

    0.5

     

    Gross margin on subscription services revenues on a non-GAAP basis

    86.5

    %

     

    84.7

    %

     

    85.9

    %

     

    83.4

    %

     

     

     

     

     

     

     

     

    Cost of professional services and other revenues on a GAAP basis

    $

    41,365

     

     

    $

    33,039

     

     

    $

    115,228

     

     

    $

    93,361

     

    Stock-based compensation expense

    (4,825

    )

     

    (2,782

    )

     

    (12,261

    )

     

    (7,767

    )

    Deferred compensation associated with Zinc Ahead acquisition

     

     

    (4

    )

     

     

     

    (14

    )

    Cost of professional services and other revenues on a non-GAAP basis

    $

    36,540

     

     

    $

    30,253

     

     

    $

    102,967

     

     

    $

    85,580

     

     

     

     

     

     

     

     

     

    Gross margin on professional services and other revenues on a GAAP basis

    23.6

    %

     

    29.0

    %

     

    23.4

    %

     

    25.9

    %

    Stock-based compensation expense

    8.9

     

     

    6.0

     

     

    8.2

     

     

    6.2

     

    Gross margin on professional services and other revenues on a non-GAAP basis

    32.5

    %

     

    35.0

    %

     

    31.6

    %

     

    32.1

    %

     

     

     

     

     

     

     

     

    Gross profit on a GAAP basis

    $

    207,592

     

     

    $

    163,357

     

     

    $

    583,523

     

     

    $

    449,132

     

    Stock-based compensation expense

    5,385

     

     

    3,187

     

     

    13,789

     

     

    8,933

     

    Amortization of purchased intangibles

    688

     

     

    690

     

     

    2,043

     

     

    2,397

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

    4

     

     

     

     

    14

     

    Gross profit on a non-GAAP basis

    $

    213,665

     

     

    $

    167,238

     

     

    $

    599,355

     

     

    $

    460,476

     

     

     

     

     

     

     

     

     

    Gross margin on total revenues on a GAAP basis

    73.9

    %

     

    72.7

    %

     

    73.6

    %

     

    71.3

    %

    Stock-based compensation expense

    1.9

     

     

    1.4

     

     

    1.7

     

     

    1.4

     

    Amortization of purchased intangibles

    0.3

     

     

    0.3

     

     

    0.3

     

     

    0.4

     

    Gross margin on total revenues on a non-GAAP basis

    76.1

    %

     

    74.4

    %

     

    75.6

    %

     

    73.1

    %

     

     

     

     

     

     

     

     

    Research and development expense on a GAAP basis

    $

    52,575

     

     

    $

    40,001

     

     

    $

    148,694

     

     

    $

    116,024

     

    Stock-based compensation expense

    (9,899

    )

     

    (5,820

    )

     

    (25,732

    )

     

    (16,282

    )

    Deferred compensation associated with Zinc Ahead acquisition

     

     

    (71

    )

     

     

     

    (289

    )

    Research and development expense on a non-GAAP basis

    $

    42,676

     

     

    $

    34,110

     

     

    $

    122,962

     

     

    $

    99,453

     

     

     

     

     

     

     

     

     

    Sales and marketing expense on a GAAP basis

    $

    45,524

     

     

    $

    37,699

     

     

    $

    130,962

     

     

    $

    110,306

     

    Stock-based compensation expense

    (6,882

    )

     

    (4,825

    )

     

    (19,207

    )

     

    (13,743

    )

    Amortization of purchased intangibles

    (802

    )

     

    (977

    )

     

    (2,530

    )

     

    (2,901

    )

    Deferred compensation associated with Zinc Ahead acquisition

     

     

    (10

    )

     

     

     

    (40

    )

    Sales and marketing expense on a non-GAAP basis

    $

    37,840

     

     

    $

    31,887

     

     

    $

    109,225

     

     

    $

    93,622

     

     

     

     

     

     

     

     

     

    General and administrative expense on a GAAP basis

    $

    28,693

     

     

    $

    22,563

     

     

    $

    78,042

     

     

    $

    62,934

     

    Stock-based compensation expense

    (7,155

    )

     

    (6,086

    )

     

    (19,719

    )

     

    (17,689

    )

    General and administrative expense on a non-GAAP basis

    $

    21,538

     

     

    $

    16,477

     

     

    $

    58,323

     

     

    $

    45,245

     

     

     

     

     

     

     

     

     

    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,

     

    2019

     

    2018

     

    2019

     

    2018

    Operating expense on a GAAP basis

    $

    126,792

     

     

    $

    100,263

     

     

    $

    357,698

     

     

    $

    289,264

     

    Stock-based compensation expense

    (23,936

    )

     

    (16,731

    )

     

    (64,658

    )

     

    (47,714

    )

    Amortization of purchased intangibles

    (802

    )

     

    (977

    )

     

    (2,530

    )

     

    (2,901

    )

    Deferred compensation associated with Zinc Ahead acquisition

     

     

    (81

    )

     

     

     

    (329

    )

    Operating expense on a non-GAAP basis

    $

    102,054

     

     

    $

    82,474

     

     

    $

    290,510

     

     

    $

    238,320

     

     

     

     

     

     

     

     

     

    Operating income on a GAAP basis

    $

    80,800

     

     

    $

    63,094

     

     

    $

    225,825

     

     

    $

    159,868

     

    Stock-based compensation expense

    29,321

     

     

    19,918

     

     

    78,447

     

     

    56,647

     

    Amortization of purchased intangibles

    1,490

     

     

    1,667

     

     

    4,573

     

     

    5,298

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

    85

     

     

     

     

    343

     

    Operating income on a non-GAAP basis

    $

    111,611

     

     

    $

    84,764

     

     

    $

    308,845

     

     

    $

    222,156

     

     

     

     

     

     

     

     

     

    Operating margin on a GAAP basis

    28.8

    %

     

    28.1

    %

     

    28.5

    %

     

    25.4

    %

    Stock-based compensation expense

    10.4

     

     

    8.9

     

     

    9.9

     

     

    9.0

     

    Amortization of purchased intangibles

    0.5

     

     

    0.7

     

     

    0.6

     

     

    0.8

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

     

     

     

     

    0.1

     

    Operating margin on a non-GAAP basis

    39.7

    %

     

    37.7

    %

     

    39.0

    %

     

    35.3

    %

     

     

     

     

     

     

     

     

    Net income on a GAAP basis

    $

    82,245

     

     

    $

    64,085

     

     

    $

    234,936

     

     

    $

    158,681

     

    Stock-based compensation expense

    29,321

     

     

    19,918

     

     

    78,447

     

     

    56,647

     

    Amortization of purchased intangibles

    1,490

     

     

    1,667

     

     

    4,573

     

     

    5,298

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

    85

     

     

     

     

    343

     

    Income tax effect on non-GAAP adjustments(1)

    (17,662

    )

     

    (15,153

    )

     

    (56,088

    )

     

    (37,497

    )

    Net income on a non-GAAP basis

    $

    95,394

     

     

    $

    70,602

     

     

    $

    261,868

     

     

    $

    183,472

     

     

     

     

     

     

     

     

     

    Diluted net income per share on a GAAP basis

    $

    0.52

     

     

    $

    0.41

     

     

    $

    1.49

     

     

    $

    1.02

     

    Stock-based compensation expense

    0.18

     

     

    0.13

     

     

    0.50

     

     

    0.36

     

    Amortization of purchased intangibles

    0.01

     

     

    0.01

     

     

    0.02

     

     

    0.03

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

     

     

     

     

     

    Income tax effect on non-GAAP adjustments(1)

    (0.11

    )

     

    (0.10

    )

     

    (0.35

    )

     

    (0.23

    )

    Diluted net income per share on a non-GAAP basis

    $

    0.60

     

     

    $

    0.45

     

     

    $

    1.66

     

     

    $

    1.18

     

    ________________________

    (1)

     

    For the three and nine months ended October 31, 2019 and 2018, management used an estimated annual effective non-GAAP tax rate of 21.0%.

     

    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