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    News, Awards & Press

    Veeva Announces Fiscal 2021 Third Quarter Results

    Download PDFTotal Revenues of $377.5 million, up 34% Year-over-year;
    Subscription Services Revenues of $302.9 million, up 34% Year-over-year

    PLEASANTON, CA — December 1, 2020 — 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, 2020.

    “Our customers are delivering innovations that will have positive, lasting impacts on human health,” said CEO Peter Gassner. “We are proud to work with these amazing companies, providing solutions that streamline drug development and enable them to support healthcare providers on the front lines.”

    Fiscal 2021 Third Quarter Results:

    • Revenues: Total revenues for the third quarter were $377.5 million, up from $280.9 million one year ago, an increase of 34% year-over-year. Subscription services revenues for the third quarter were $302.9 million, up from $226.8 million one year ago, an increase of 34% year-over-year.
    • Operating Income and Non-GAAP Operating Income(1):Third quarter operating income was $101.3 million, compared to $80.8 million one year ago, an increase of 25% year-over-year. Non-GAAP operating income for the third quarter was $155.5 million, compared to $111.6 million one year ago, an increase of 39% year-over-year.
    • Net Income and Non-GAAP Net Income(1): Third quarter net income was $97.0 million, compared to $82.2 million one year ago, an increase of 18% year-over-year. Non-GAAP net income for the third quarter was $125.6 million, compared to $95.4 million one year ago, an increase of 32% 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 $0.60, compared to $0.52 one year ago, while non-GAAP fully diluted net income per share was $0.78, compared to $0.60 one year ago.

    “I am very pleased with our financial outperformance in the quarter, which was a direct result of our strong vision and focused execution,” said CFO Brent Bowman. “As we look to the opportunities ahead, we plan to continue investing aggressively to hit our 2025 targets and drive a long runway of growth beyond.”

    Recent Highlights:

    • Veeva Leads Digital Transformation in Life Sciences helping customers define new strategies in development and commercial. For example, it is now working with an innovative biopharma on their digital-first commercial launch strategy utilizing the full Veeva Commercial Cloud suite, including Data Cloud, Veeva Link, MyVeeva for Doctors, and Business Consulting. Digital transformation also fueled Veeva’s expanding leadership in core CRM, where it saw a record increase of 19 new CRM customers in the quarter. On the development side, new digital capabilities like remote monitoring in Veeva SiteVault have enabled clinical trials to continue for roughly 700 clinical research sites and will improve ongoing trial execution.
    • New Top 20 Win, Veeva Development Cloud Emerging as Industry Standard — More companies are adopting a growing range of products across Veeva Development Cloud. In Q3, a top 20 pharma selected multiple Development Cloud applications as their enterprise standard to streamline clinical operations, regulatory, and quality processes globally. The company’s move to unify on Veeva Vault will help increase efficiency and drive compliance.
    • Veeva Vault CTMS Adoption Accelerates as Companies Unify Clinical Operations —Vault CTMS posted record new bookings in the quarter as 85 companies, including six top 20 pharmas, have now standardized on Vault CTMS in just over three years. Customer success, product excellence, and the ability to unify clinical operations are driving this rapid growth. Companies are looking for a modern CTMS solution, seamlessly integrated with eTMF, on a single cloud platform.

    Financial Outlook:

    Veeva is providing guidance for its fiscal fourth quarter ending January 31, 2021 as follows:

    • Total revenues between $378 and $380 million.
    • Non-GAAP operating income between $136 and $138 million(2).
    • Non-GAAP fully diluted net income per share between $0.67 and $0.68(2).

    Veeva is providing guidance for its fiscal year ending January 31, 2021 as follows:

    • Total revenues between $1,446 and $1,448 million.
    • Non-GAAP operating income between $566 and $568 million(2).
    • Non-GAAP fully diluted net income per share between $2.83 and $2.84(2).

    Veeva is providing guidance for its fiscal year ending January 31, 2022 as follows:

    • Total revenues between $1,700 and $1,720 million.
    • Subscription services revenues between $1,390 and $1,400 million.
    • Non-GAAP operating margin of roughly 37%(3).

    Conference Call Information

    What:

     

    Veeva’s Fiscal 2021 Third Quarter Results Conference Call

    When:

     

    Tuesday, December 1, 2020

    Time:

     

    1:30 p.m. PT (4:30 p.m. ET)

    Online Registration:

     

    www.directeventreg.com
    Conference ID 3283186

    Webcast:

     


    ir.veeva.com

    Investor Presentation Details

    An investor presentation providing additional information and analysis can be found at 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, 2021 or fiscal year ending January 31, 2021 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) Veeva is not able, at this time, to provide GAAP targets for operating margin for the fiscal year ending January 31, 2022 because of the difficulty of estimating certain items excluded from non-GAAP operating income that cannot be reasonably predicted, such as charges related to stock-based compensation expense. The effect of these excluded items may be significant.

    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 950 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, outlook, and guidance and the assumptions underlying those statements, 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) the impact of the COVID-19 pandemic (including the impact to the life sciences industry, impact on general economic conditions, and government responses, restrictions, and actions related to the pandemic); (ii) breaches in our security measures or unauthorized access to our customers’ data; (iii) our expectation that the future growth rate of our revenues will decline; (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) fluctuation of our results, which may make period-to-period comparisons less meaningful; (vii) our ability to integrate Crossix Solutions Inc. and Physicians World, LLC into our business and achieve the expected benefits of the acquisitions, including as a result of the impact of the COVID-19 pandemic on these businesses; (viii) loss of one or more customers, particularly any of our large customers; (ix) system unavailability, system performance problems, or loss of data due to disruptions or other problems with our computing infrastructure; (x) our ability to attract and retain highly skilled employees and manage our growth effectively; (xi) failure to sustain the level of profitability we have achieved in the past as our costs increase; (xii) adverse changes in the life sciences industry, including as a result of customer mergers; (xiii) adverse changes in economic, regulatory, international trade relations, or market conditions, including with respect to natural disasters or actual or threatened public health emergencies; (xiv) a decline in new subscriptions that may not be immediately reflected in our operating results due to the ratable recognition of our subscription revenue; (xv) pending, threatened, or future legal proceedings and related expenses; and (xvi) our potential conversion to a Delaware public benefit corporation, including the expected impact, benefits, and risks of such a conversion.

    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, 2020. 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.

       

    October 31,


    2020

     

     

     

    January 31,


    2020

     

     

    Assets

     

     

     

     

     

     

     

     

    Current assets:

     

     

     

     

     

     

     

     

    Cash and cash equivalents

     

    $

    634,265

     

     

    $

    476,733

     

    Short-term investments

     

    956,167

     

     

    610,015

     

    Accounts receivable, net

     

    183,435

     

     

    389,690

     

    Unbilled accounts receivable

     

    53,235

     

     

    32,817

     

    Prepaid expenses and other current assets

     

    25,895

     

     

    21,869

     

    Total current assets

     

    1,852,997

     

     

    1,531,124

     

    Property and equipment, net

     

    54,352

     

     

    54,752

     

    Deferred costs, net

     

    35,472

     

     

    35,585

     

    Lease right-of-use assets

     

    52,824

     

     

    49,132

     

    Goodwill

     

    436,029

     

     

    438,529

     

    Intangible assets, net

     

    119,165

     

     

    134,601

     

    Deferred income taxes, noncurrent

     

    15,689

     

     

    11,870

     

    Other long-term assets

     

    17,113

     

     

    16,184

     

    Total assets

     

    $

    2,583,641

     

     

    $

    2,271,777

     

     

     

     

     

     

    Liabilities and stockholders equity

     

     

     

     

    Current liabilities:

     

     

     

     

    Accounts payable

     

    $

    21,324

     

     

    $

    19,420

     

    Accrued compensation and benefits

     

    28,906

     

     

    25,619

     

    Accrued expenses and other current liabilities

     

    22,391

     

     

    21,620

     

    Income tax payable

     

    2,555

     

     

    5,613

     

    Deferred revenue

     

    331,166

     

     

    468,887

     

    Lease liabilities

     

    11,050

     

     

    10,013

     

    Total current liabilities

     

    417,392

     

     

    551,172

     

    Deferred income taxes, noncurrent

     

    1,004

     

     

    2,417

     

    Lease liabilities, noncurrent

     

    47,965

     

     

    44,815

     

    Other long-term liabilities

     

    10,901

     

     

    7,779

     

    Total liabilities

     

    477,262

     

     

    606,183

     

    Stockholders’ equity:

     

     

     

     

    Class A common stock

     

    2

     

     

    1

     

    Class B common stock

     

     

     

     

    Additional paid-in capital

     

    906,137

     

     

    745,475

     

    Accumulated other comprehensive income

     

    3,502

     

     

    460

     

    Retained earnings

     

    1,196,738

     

     

    919,658

     

    Total stockholders’ equity

     

    2,106,379

     

     

    1,665,594

     

    Total liabilities and stockholders equity

     

    $

    2,583,641

     

     

    $

    2,271,777

     

     

    VEEVA SYSTEMS INC.
    CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    (In thousands, except per share data)
    (Unaudited)

     

     

     

    Three months ended
    October31,

     

    Six months ended
    October31,

     

     

    2020

     

    2019

     

    2020

     

    2019

    Revenues:

     

     

     

     

     

     

     

     

    Subscription services(4)

     

    $

    302,938

     

     

    $

    226,760

     

     

    $

    856,675

     

    $

    642,187

     

    Professional services and other(5)

     

    74,581

     

     

    54,161

     

     

    211,633

     

    150,386

     

    Total revenues

     

    377,519

     

     

    280,921

     

     

    1,068,308

     

    792,573

     

    Cost of revenues(3):

     

     

     

     

     

     

     

     

    Cost of subscription services

     

    45,845

     

     

    31,964

     

     

    132,457

     

    93,822

     

    Cost of professional services and other

     

    57,152

     

     

    41,365

     

     

    162,624

     

    115,228

     

    Total cost of revenues

     

    102,997

     

     

    73,329

     

     

    295,081

     

    209,050

     

    Gross profit

     

    274,522

     

     

    207,592

     

     

    773,227

     

    583,523

     

    Operating expenses
    (3):

     

     

     

     

     

     

     

     

    Research and development

     

    79,992

     

     

    52,575

     

     

    212,282

     

    148,694

     

    Sales and marketing

     

    57,982

     

     

    45,524

     

     

    172,909

     

    130,962

     

    General and administrative

     

    35,243

     

     

    28,693

     

     

    109,085

     

    78,042

     

    Total operating expenses

     

    173,217

     

     

    126,792

     

     

    494,276

     

    357,698

     

    Operating income

     

    101,305

     

     

    80,800

     

     

    278,951

     

    225,825

     

    Other income, net

     

    3,455

     

     

    9,141

     

     

    9,750

     

    22,634

     

    Income before income taxes

     

    104,760

     

     

    89,941

     

     

    288,701

     

    248,459

     

    Provision for (benefit from) income taxes

     

    7,801

       

    7,696

     

     

    11,621

     

    13,523

     

    Net income

     

    $

    96,959

     

     

    $

    82,245

     

     

    $

    277,080

     

    $

    234,936

     

     

     

     

     

     

     

     

     

     

    Net income per share:

     

     

     

     

     

     

     

     

    Basic

     

    $

    0.64

     

     

    $

    0.56

     

     

    $

    1.84

     

    $

    1.59

     

    Diluted

     

    $

    0.60

     

     

    $

    0.52

     

     

    $

    1.73

     

    $

    1.49

     

     

     

     

     

     

     

     

     

     

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

     

     

     

     

     

     

     

     

    Basic

     

    150,993

     

     

    148,157

     

     

    150,322

     

    147,467

     

    Diluted

     

    161,711

     

     

    158,750

     

     

    160,517

     

    158,124

     

    Other comprehensive income:

     

     

     

     

     

     

     

     

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

     

    $ (1,230)

     

     

    753

     

     

    1,198

     

    2,176

     

    Net change in cumulative foreign currency translation loss

     

       (1,438)

     

     

    (487)

     

     

    1,844

     

    (2,931)

     

    Comprehensive income

     

    $

    94,291

     

     

    $

    82,511

     

     

    $

    280,122

     

    $

    234,181

     

     

     

     

     

     

     

     

     

     

    (3) Includes stock-based compensation as follows:

     

     

     

     

     

     

     

     

    Cost of revenues:

     

     

     

     

     

     

     

     

    Cost of subscription services

     

    $

    1,149

     

     

    $

    560

     

     

    $

    3,700

     

    $

    1,528

     

    Cost of professional services and other

     

    7,510

     

     

    4,825

     

     

    19,902

     

    12,261

     

    Research and development

     

    17,685

     

     

    9,899

     

     

    45,523

     

    25,732

     

    Sales and marketing

     

    10,711

     

     

    6,882

     

     

    30,089

     

    19,207

     

    General and administrative

     

    11,918

     

     

    7,155

     

     

    36,032

     

    19,719

     

    Total stock-based compensation

     

    $

    48,973

     

     

    $

    29,321

     

     

    $

    135,246

     

    $

    78,447

     

     

     

     

     

     

     

     

     

     

    (4) Includes subscription services revenues from the following product areas:

     

     

     

     

     

     

     

     

    Veeva Commercial Cloud

     

    $

    152,466

     

     

    $

    115,201

     

     

    $

    439,858

     

    $

    333,591

     

    Veeva Vault

     

    150,472

     

     

    111,559

     

     

    416,817

     

    308,596

     

    Total subscription services

     

    $

    302,938

     

     

    $

    226,760

     

     

    $

    856,675

     

    $

    642,187

     

     

     

     

     

     

     

     

     

     

    (5) Includes professional services revenues from the following product areas:

     

     

     

     

     

     

     

     

    Veeva Commercial Cloud

     

    $

    29,115

     

     

    $

    18,589

     

     

    $

    83,109

     

    $

    52,381

     

    Veeva Vault

     

    45,466

     

     

    35,572

     

     

    128,524

     

    98,005

     

    Total professional services

     

    $

    74,581

     

     

    $

    54,161

     

     

    $

    211,633

     

    $

    150,386

     

     

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

     

     

     

    Three months ended


    October 31,

     

    Nine months ended


    October 31,

     

     

    2020

     

    2019

     

    2020

     

    2019

    Cash flows from operating activities

     

     

     

     

     

     

     

     

    Net income

     

    $

    96,959

     

     

    $

    82,245

     

     

    $

    277,080

     

     

    $

    234,936

     

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

     

     

     

     

     

     

     

     

    Depreciation and amortization

     

    7,525

     

     

    3,845

     

     

    22,720

     

     

    11,626

     

    Reduction of operating lease right-of-use assets

     

    3,322

     

     

    1,798

     

     

    9,411

     

     

    5,016

     

    Accretion of discount on short-term investments

     

    1,203

     

     

    (722)

     

     

    1,688

     

     

    (2,996

    )

    Stock-based compensation

     

    48,973

     

     

    29,321

     

     

    135,246

     

     

    78,447

     

    Amortization of deferred costs

     

    5,350

     

     

    4,832

     

     

    15,425

     

     

    14,524

     

    Deferred income taxes

     

    (1,894

    )

     

    432

     

     

    (3,532

    )

     

    1,771

     

    (Gain) Loss on foreign currency from mark-to-market derivative

      19

     

     

    74

     

      14

     

     

    (112

    )

    Bad debt (expense) recovery

     

    (181)

     

     

    270

       

    (60)

     

     

    (42

    )

    Changes in operating assets and liabilities:

     

     

     

     

     

     

     

     

    Accounts receivable

     

    37,448

     

     

    28,319

     

     

    206,214

     

     

    186,633

     

    Unbilled accounts receivable

     

    (16,585)

     

     

    (9,515)

     

     

    (20,418

    )

     

    (12,777

    )

    Deferred costs

     

    (6,177

    )

     

    (4,500

    )

     

    (15,312

    )

     

    (13,528

    )

    Income taxes payable

     

    4,538

     

     

    3,909

     

     

    (453

    )

     

    4,858

     

    Other current and long-term assets

     

    8,195

     

     

    5,610

       

    (2,937

    )

     

    1,513

     

    Accounts payable

     

    3,060

     

     

    1,253

     

     

    (456

    )

     

    1,216

     

    Accrued expenses and other current liabilities

     

    1,541

     

     

    (1,682)

     

     

    4,357

     

     

    231

     

    Deferred revenue

     

    (90,291

    )

     

    (78,326

    )

     

    (137,980

    )

     

    (105,637

    )

    Operating lease liabilities

     

    (3,229

    )

     

    (1,625

    )

     

    (8,496

    )

     

    (5,143

    )

    Other long-term liabilities

     

    (4,373)

     

     

    3,886)

     

     

    384

     

     

    (2,270)

     

    Net cash provided by operating activities

     

    95,403

     

     

    61,504

     

     

    482,895

     

     

    398,266

     

    Cash flows from investing activities

     

     

     

     

     

     

     

     

    Purchases of short-term investments

     

    (417,898

    )

     

    (190,695

    )

     

    (874,465

    )

     

    (628,784

    )

    Maturities and sales of short-term investments

     

    158,628

     

     

    194,661

     

     

    528,194

     

     

    571,398

     

    Long-term assets

     

    (3,316

    )

     

    (1,237

    )

     

    (8,456

    )

     

    (4,228

    )

    Net cash used in investing activities

     

    (262,586

    )

     

    2,729

     

     

    (354,727

    )

     

    (61,614

    )

    Cash flows from financing activities

     

     

     

     

     

     

     

     

    Reduction of lease liabilities – finance leases

     

    79

     

     

    (241

    )

     

    (420

    )

     

    (729

    )

    Proceeds from exercise of common stock options

     

    6,186

     

     

    1,607

     

     

    25,245

     

     

    8,618

     

    Net cash provided by financing activities

     

    6,265

     

     

    1,366

     

     

    24,825

     

     

    7,889

     

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

     

    (599)

     

     

    (487

    )

     

    2,683

     

     

    (2,931

    )

    Net change in cash, cash equivalents, and restricted cash

     

    (161,517)

     

     

    65,112

     

     

    155,676

     

     

    341,610

     

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

     

    796,990

     

     

    828,676

     

     

    479,797

     

     

    552,178

     

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

     

    $

    635,473

     

     

    $

    893,788

     

     

    $

    635,473

     

     

    $

    893,788

     

     

     

     

     

     

     

     

     

     

    Supplemental disclosures of other cash flow information:

     

     

     

     

     

     

     

     

    Excess tax benefits from employee stock plans

     

    $

    17,329

     

     

    $

    8,931

     

     

    $

    59,067

     

     

    $

    39,509

     

    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.
    • 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 and purchased intangibles 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.

    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,

     

     

    2020

     

    2019

     

    2020

     

    2019

    Cost of subscription services revenues on a GAAP basis

     

    $

    45,845

     

     

     

    $

    31,964

     

     

     

    $

    132,457

     

     

     

    $

    93,822

     

     

    Stock-based compensation expense

     

    (1,149

    )

     

     

    (560

    )

     

     

    (3,700

    )

     

     

    (1,528

    )

     

    Amortization of purchased intangibles

     

    (1,174

    )

     

     

    (688

    )

     

     

    (3,942

    )

     

     

    (2,043

    )

     

    Cost of subscription services revenues on a non-GAAP basis

     

    $

    43,522

     

     

     

    $

    30,716

     

     

     

    $

    124,815

     

     

     

    $

    90,251

     

     

     

     

     

     

     

     

     

     

     

    Gross margin on subscription services revenues on a GAAP basis

     

    84.9

     

    %

     

    85.9

     

    %

     

    84.5

     

    %

     

    85.4

     

    %

    Stock-based compensation expense

     

    0.4

     

     

     

    0.2

     

     

     

    0.4

     

     

     

    0.2

     

     

    Amortization of purchased intangibles

     

    0.4

     

     

     

    0.4

     

     

     

    0.5

     

     

     

    0.3

     

     

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

     

    85.7

     

    %

     

    86.5

     

    %

     

    85.4

     

    %

     

    85.9

     

    %

     

     

     

     

     

     

     

     

     

    Cost of professional services and other revenues on a GAAP basis

     

    $

    57,152

     

     

     

    $

    41,365

     

     

     

    $

    162,624

     

     

     

    $

    115,228

     

     

    Stock-based compensation expense

     

    (7,510

    )

     

     

    (4,825

    )

     

     

    (19,902

    )

     

     

    (12,261

    )

     

    Amortization of purchased intangibles

     

    (138

    )

     

     

     

     

     

    (411

    )

     

     

     

     

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

     

    $

    49,504

     

     

     

    $

    36,540

     

     

     

    $

    142,311

     

     

     

    $

    102,967

     

     

     

     

     

     

     

     

     

     

     

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

     

    23.4

     

    %

     

    23.6

     

    %

     

    23.2

     

    %

     

    23.4

     

    %

    Stock-based compensation expense

     

    10.1

     

     

     

    8.9

     

     

     

    9.4

     

     

     

    8.2

     

     

    Amortization of purchased intangibles

     

    0.2

     

     

     

     

     

     

    0.2

     

     

     

     

     

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

     

    33.7

     

    %

     

    32.5

     

    %

     

    32.8

     

    %

     

    31.6

     

    %

     

     

     

     

     

     

     

     

     

    Gross profit on a GAAP basis

     

    $

    274,522

     

     

     

    $

    207,592

     

     

     

    $

    773,227

     

     

     

    $

    583,523

     

     

    Stock-based compensation expense

     

    8,659

     

     

     

    5,385

     

     

     

    23,602

     

     

     

    13,789

     

     

    Amortization of purchased intangibles

     

    1,312

     

     

     

    688

     

     

     

    4,353

     

     

     

    2,043

     

     

    Gross profit on a non-GAAP basis

     

    $

    284,493

     

     

     

    $

    213,665

     

     

     

    $

    801,182

     

     

     

    $

    599,355

     

     

     

     

     

     

     

     

     

     

     

    Gross margin on total revenues on a GAAP basis

     

    72.7

     

    %

     

    73.9

     

    %

     

    72.4

     

    %

     

    73.6

     

    %

    Stock-based compensation expense

     

    2.3

     

     

     

    1.9

     

     

     

    2.2

     

     

     

    1.7

     

     

    Amortization of purchased intangibles

     

    0.3

     

     

     

    0.3

     

     

     

    0.3

     

     

     

    0.3

     

     

    Gross margin on total revenues on a non-GAAP basis

     

    75.3

     

    %

     

    76.1

     

    %

     

    74.9

     

    %

     

    75.6

     

    %

     

     

     

     

     

     

     

     

     

    Research and development expense on a GAAP basis

     

    $

    79,992

     

     

     

    $

    52,575

     

     

     

    $

    212,282

     

     

     

    $

    148,694

     

     

    Stock-based compensation expense

     

    (17,685

    )

     

     

    (9,899

    )

     

     

    (45,523

    )

     

     

    (25,732

    )

     

    Amortization of purchased intangibles

     

    (29

    )

     

     

     

     

     

    (86

    )

     

     

     

     

    Research and development expense on a non-GAAP basis

     

    $

    62,278

     

     

     

    $

    42,676

     

     

     

    $

    166,673

     

     

     

    $

    122,962

     

     

     

     

     

     

     

     

     

     

     

    Sales and marketing expense on a GAAP basis

     

    $

    57,982

     

     

     

    $

    45,524

     

     

     

    $

    172,909

     

     

     

    $

    130,962

     

     

    Stock-based compensation expense

     

    (10,711

    )

     

     

    (6,882

    )

     

     

    (30,089

    )

     

     

    (19,207

    )

     

    Amortization of purchased intangibles

     

    (3,858

    )

     

     

    (802

    )

     

     

    (10,828

    )

     

     

    (2,530

    )

     

    Sales and marketing expense on a non-GAAP basis

     

    $

    43,413

     

     

     

    $

    37,840

     

     

     

    $

    131,992

     

     

     

    $

    109,225

     

     

     

     

     

     

     

     

     

     

     

    General and administrative expense on a GAAP basis

     

    $

    35,243

     

     

     

    $

    28,693

     

     

     

    $

    109,085

     

     

     

    $

    78,042

     

     

    Stock-based compensation expense

     

    (11,918

    )

     

     

    (7,155

    )

     

     

    (36,032

    )

     

     

    (19,719

    )

     

    Amortization of purchased intangibles

     

    (57

    )

     

     

     

     

     

    (170

    )

     

     

     

     

    General and administrative expense on a non-GAAP basis

     

    $

    23,268

     

     

     

    $

    21,538

     

     

     

    $

    72,883

     

     

     

    $

    58,323

     

     

     

     

     

     

     

     

     

     

     

    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,

     

     

    2020

     

    2019

     

    2020

     

    2019

    Operating expense on a GAAP basis

     

    $

    173,217

     

     

     

    $

    126,792

     

     

     

    $

    494,276

     

     

     

    $

    357,698

     

     

    Stock-based compensation expense

     

    (40,314

    )

     

     

    (23,936

    )

     

     

    (111,644

    )

     

     

    (64,658

    )

     

    Amortization of purchased intangibles

     

    (3,944

    )

     

     

    (802

    )

     

     

    (11,084

    )

     

     

    (2,530

    )

     

    Operating expense on a non-GAAP basis

     

    $

    128,959

     

     

     

    $

    102,054

     

     

     

    $

    371,548

     

     

     

    $

    290,510

     

     

     

     

     

     

     

     

     

     

     

    Operating income on a GAAP basis

     

    $

    101,305

     

     

     

    $

    80,800

     

     

     

    $

    278,951

     

     

     

    $

    225,825

     

     

    Stock-based compensation expense

     

    48,973

     

     

     

    29,321

     

     

     

    135,246

     

     

     

    78,447

     

     

    Amortization of purchased intangibles

     

    5,256

     

     

     

    1,490

     

     

     

    15,437

     

     

     

    4,573

     

     

    Operating income on a non-GAAP basis

     

    $

    155,534

     

     

     

    $

    111,611

     

     

     

    $

    429,634

     

     

     

    $

    308,845

     

     

     

     

     

     

     

     

     

     

     

    Operating margin on a GAAP basis

     

    26.8

     

    %

     

    28.8

     

    %

     

    26.1

     

    %

     

    28.5

     

    %

    Stock-based compensation expense

     

    13.0

     

     

     

    10.4

     

     

     

    12.7

     

     

     

    9.9

     

     

    Amortization of purchased intangibles

     

    1.4

     

     

     

    0.5

     

     

     

    1.4

     

     

     

    0.6

     

     

    Operating margin on a non-GAAP basis

     

    41.2

     

    %

     

    39.7

     

    %

     

    40.2

     

    %

     

    39.0

     

    %

     

     

     

     

     

     

     

     

     

    Net income on a GAAP basis

     

    $

    96,959

     

     

     

    $

    82,245

     

     

     

    $

    277,080

     

     

     

    $

    234,936

     

     

    Stock-based compensation expense

     

    48,973

     

     

     

    29,321

     

     

     

    135,246

     

     

     

    78,447

     

     

    Amortization of purchased intangibles

     

    5,256

     

     

     

    1,490

     

     

     

    15,437

     

     

     

    4,573

     

     

    Income tax effect on non-GAAP adjustments(1)

     

    (25,587

    )

     

     

    (17,662

    )

     

     

    (80,650

    )

     

     

    (56,088

    )

     

    Net income on a non-GAAP basis

     

    $

    125,601

     

     

     

    $

    95,394

     

     

     

    $

    347,113

     

     

     

    $

    261,868

     

     

     

     

     

     

     

     

     

     

     

    Diluted net income per share on a GAAP basis

     

    $

    0.60

     

     

     

    $

    0.52

     

     

     

    $

    1.73

     

     

     

    $

    1.49

     

     

    Stock-based compensation expense

     

    0.30

     

     

     

    0.18

     

     

     

    0.84

     

     

     

    0.50

     

     

    Amortization of purchased intangibles

     

    0.03

     

     

     

    0.01

     

     

     

    0.10

     

     

     

    0.02

     

     

    Income tax effect on non-GAAP adjustments(1)

     

    (0.15

    )

     

     

    (0.11

    )

     

     

    (0.51

    )

     

     

    (0.35

    )

     

    Diluted net income per share on a non-GAAP basis

     

    $

    0.78

     

     

     

    $

    0.60

     

     

     

    $

    2.16

     

     

     

    $

    1.66

     

     

    ________________________

    (1)

     

    For the three and nine months ended October 31, 2020 and 2019, management used an estimated annual effective non-GAAP tax rate of 21.0%.

     

    Investor Relations Contact:
    Veeva Systems Inc.
    Ato Garrett, 925-271-4204
    ir@veeva.com

    Media Contact:
    Veeva Systems Inc.
    Roger Villareal, 925-264-8885
    pr@veeva.com4,858