News, Awards & Press

    Veeva Announces Fourth Quarter and Fiscal Year 2020 Results

    Download PDFFiscal Year 2020 Total Revenues of $1,104.1M, up 28% Year-over-year;Q4 Total Revenues of $311.5M, up 34% Year-over-year

    Fiscal Year 2020 Subscription Services Revenues of $896.3M, up 29% Year-over-year;Q4 Subscription Services Revenues of $254.1M, up 33% Year-over-year

    PLEASANTON, CA — March 3, 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 fourth quarter ended January 31, 2020. All results in the current period and guidance reflect the impact from our recently acquired businesses.

    “The past year was an exceptional one for Veeva. We focused on customer success and accelerated our pace of innovation in established and new markets,” said CEO Peter Gassner. “We have set ourselves up well from a product, operating model, and team perspective to execute on the major opportunities ahead.”

    Fiscal 2020 Fourth Quarter Results:

    • Revenues: Total revenues for the fourth quarter were $311.5 million, up from $232.3 million one year ago, an increase of 34% year-over-year. Subscription services revenues for the fourth quarter were $254.1 million, up from $190.7 million one year ago, an increase of 33% year-over-year.
    • Operating Income and Non-GAAP Operating Income
      (1): Fourth quarter operating income was $60.4 million, compared to $63.0 million one year ago, a decrease of 4% year-over-year. Non-GAAP operating income for the fourth quarter was $103.4 million, compared to $84.4 million one year ago, an increase of 22% year-over-year.
    • Net Income and Non-GAAP Net Income
      (1): Fourth quarter net income was $66.2 million, compared to $71.2 million one year ago, a decrease of 7% year-over-year. Non-GAAP net income for the fourth quarter was $85.5 million, compared to $71.2 million one year ago, an increase of 20% year-over-year.
    • Net Income per Share and Non-GAAP Net Income per Share
      (1): For the fourth quarter, fully diluted net income per share was $0.42, compared to $0.45 one year ago, while non-GAAP fully diluted net income per share was $0.54, compared to $0.45 one year ago.

    Fiscal Year 2020 Results:

    • Revenues: Total revenues for the fiscal year ended January 31, 2020 were $1,104.1 million, up from $862.2 million one year ago, an increase of 28% year-over-year. Subscription services revenues were $896.3 million, up from $694.5 million one year ago, an increase of 29% year-over-year.
    • Operating Income and Non-GAAP Operating Income
      (1): Fiscal year 2020 operating income was $286.2 million, compared to $222.9 million one year ago, an increase of 28% year-over-year. Non-GAAP operating income for the fiscal year 2020 was $412.2 million, compared to $306.6 million one year ago, an increase of 34% year-over-year.
    • Net Income and Non-GAAP Net Income
      (1): Fiscal year 2020 net income was $301.1 million, compared to $229.8 million one year ago, an increase of 31% year-over-year. Non-GAAP net income for fiscal year 2020 was $347.4 million, compared to $254.7 million one year ago, an increase of 36% year-over-year.
    • Net Income per Share and Non-GAAP Net Income per Share
      (1): For fiscal year 2020, fully diluted net income per share was $1.90, compared to $1.47 one year ago, while non-GAAP fully diluted net income per share was $2.19, compared to $1.63 one year ago.

    “Q4 capped off a year of consistent outperformance driven by strong execution in Commercial Cloud and Vault,” said CFO Tim Cabral. “Our leadership is fueled by a track record of identifying and bringing great cloud solutions to large, underserved markets and a relentless focus on customer success.”

    Recent Highlights:

    • Customer Success and Product Excellence Drive Customer Growth and Expansion —Subscription revenue retention was 121% for the year(2) and customer count grew to 861, up from 719 the year prior. Veeva Commercial Cloud grew to 390 customers, up from 335, as Veeva continued to expand its leadership position. Veeva Vault ended the year with 715 customers, having established new relationships with 141 companies that are just starting with their first Vault product(3).
    • Record Quarter and Year for Veeva Commercial Cloud — Veeva extended its leadership in commercial, expanding market share and adding new products and capabilities in the year. Veeva Commercial Cloud and Veeva CRM bookings increased over last year and the pace of new CRM customer wins also accelerated as the company added 53 new customers. Q4 marked the company’s largest commercial SMB win to date, a seven-figure deal to expand CRM and add five Commercial Cloud applications.
    • Veeva Vault Strength Fuels Long-term Opportunity — Veeva Vault Platform is proving to be a unique and powerful asset, enabling rapid innovation and expansion in new and existing markets. The company introduced Veeva Vault Safety in the year and now has 14 early adopters. Continued innovation also fueled momentum in Vault CDMS, which has supported more than 60 clinical studies to date. Overall, Vault showed strength across all markets in the quarter and year. For example, Veeva Vault RIM exited the year with more than 200 customers and had its best quarter ever with enterprise wins at a top 20 and a top 50 pharma.

    Financial Outlook:

    Veeva is providing guidance for its fiscal first quarter ending April 30, 2020 as follows:

    • Total revenues between $327 and $328 million.
    • Non-GAAP operating income between $117 and $118 million(4).
    • Non-GAAP fully diluted net income per share between $0.59 and $0.60(4).

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

    • Total revenues between $1,400 and $1,405 million.
    • Non-GAAP operating income of roughly $500 million(4).
    • Non-GAAP fully diluted net income per share of about $2.50(4).

    Conference Call Information:

    What:

    Veeva’s Fiscal 2020 Fourth Quarter and Full Year Results Conference Call

    When:

    Tuesday, March 3, 2020

    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 477 5017

    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) We calculate our annual subscription services revenue retention rate for a particular fiscal year by dividing (i) annualized subscription revenue as of the last day of that fiscal year from those customers that were also customers as of the last day of the prior fiscal year by (ii) the annualized subscription revenue from all customers as of the last day of the prior fiscal year. Annualized subscription revenue is calculated by multiplying the daily subscription revenue recognized on the last day of the fiscal year by 365. This calculation includes the impact on our revenues from customer non-renewals, deployments of additional users or decreases in users, deployments of additional solutions or discontinued use of solutions by our customers, and price changes for our solutions.

    (3) The combined customer counts for Veeva Commercial Cloud and Veeva Vault exceed the total customer count in each year because some customers subscribe to products in both areas. Veeva Commercial Cloud customers are those customers that have at least one of the following products: Veeva CRM, Veeva CLM, Veeva CRM Approved Email, Veeva CRM Engage, Veeva Align, Veeva CRM Events Management, Veeva Nitro, Veeva Andi, Veeva OpenData, Veeva Oncology Link, and Veeva Network Customer Master. Veeva Vault customers are those customers that have at least one Vault product. Note that net new customers from Crossix and Physicians World are included in Veeva Commercial Cloud.

    (4) Veeva is not able, at this time, to provide GAAP targets for operating income and fully diluted net income per share for the first fiscal quarter ending April 30, 2020 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.

    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 850 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 the life sciences industry, including as a result of customer mergers; (xii) adverse changes in economic, regulatory, or market conditions, including with respect to natural disasters or actual or threatened public health emergencies; (xiii) 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 (xiv) 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 October 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.

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

           
     

    January 31,
    2020

     

    January 31,
    2019

    Assets

     

     

     

    Current assets:

     

     

     

    Cash and cash equivalents

    $

    476,733

     

     

    $

    550,971

     

    Short-term investments

    610,015

     

     

    539,190

     

    Accounts receivable, net

    389,690

     

     

    303,465

     

    Unbilled accounts receivable

    32,817

     

     

    18,122

     

    Prepaid expenses and other current assets

    21,869

     

     

    21,666

     

    Total current assets

    1,531,124

     

     

    1,433,414

     

    Property and equipment, net(5)

    54,752

     

     

    54,966

     

    Deferred costs, net

    35,585

     

     

    30,869

     

    Lease right-of-use assets(5)

    49,132

     

     

     

    Goodwill

    438,529

     

     

    95,804

     

    Intangible assets, net

    134,601

     

     

    24,521

     

    Deferred income taxes, noncurrent

    11,870

     

     

    5,938

     

    Other long-term assets

    16,184

     

     

    8,254

     

    Total assets

    $

    2,271,777

     

     

    $

    1,653,766

     

     

     

     

     

    Liabilities and stockholders equity

     

     

     

    Current liabilities:

     

     

     

    Accounts payable

    $

    19,420

     

     

    $

    9,110

     

    Accrued compensation and benefits

    25,619

     

     

    15,324

     

    Accrued expenses and other current liabilities

    21,620

     

     

    16,145

     

    Income tax payable

    5,613

     

     

    4,086

     

    Deferred revenue

    468,887

     

     

    356,357

     

    Lease liabilities(5)

    10,013

     

     

     

    Total current liabilities

    551,172

     

     

    401,022

     

    Deferred income taxes, noncurrent

    2,417

     

     

    6,095

     

    Lease liabilities, noncurrent(5)

    44,815

     

     

     

    Other long-term liabilities

    7,779

     

     

    8,900

     

    Total liabilities

    606,183

     

     

    416,017

     

    Stockholders’ equity:

     

     

     

    Class A common stock

    1

     

     

    1

     

    Class B common stock

     

     

     

    Additional paid-in capital

    745,475

     

     

    617,623

     

    Accumulated other comprehensive income

    460

     

     

    928

     

    Retained earnings(5)

    919,658

     

     

    619,197

     

    Total stockholders’ equity

    1,665,594

     

     

    1,237,749

     

    Total liabilities and stockholders equity

    $

    2,271,777

     

     

    $

    1,653,766

     

    _______________________

    (5)

     

    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
    January 31,

     

    Fiscal year ended
    January 31,

     

    2020

     

    2019

     

    2020

     

    2019

    Revenues:

     

     

     

     

     

     

     

    Subscription services

    $

    254,107

     

     

    $

    190,658

     

     

    $

    896,294

     

     

    $

    694,467

     

    Professional services and other

    57,401

     

     

    41,665

     

     

    207,787

     

     

    167,743

     

    Total revenues

    311,508

     

     

    232,323

     

     

    1,104,081

     

     

    862,210

     

    Cost of revenues
    (6):

     

     

     

     

     

     

     

    Cost of subscription services

    42,506

     

     

    29,615

     

     

    136,328

     

     

    117,009

     

    Cost of professional services and other

    51,813

     

     

    34,911

     

     

    167,041

     

     

    128,272

     

    Total cost of revenues

    94,319

     

     

    64,526

     

     

    303,369

     

     

    245,281

     

    Gross profit

    217,189

     

     

    167,797

     

     

    800,712

     

     

    616,929

     

    Operating expenses
    (6):

     

     

     

     

     

     

     

    Research and development

    61,201

     

     

    42,759

     

     

    209,895

     

     

    158,783

     

    Sales and marketing

    59,369

     

     

    38,561

     

     

    190,331

     

     

    148,867

     

    General and administrative

    36,225

     

     

    23,479

     

     

    114,267

     

     

    86,413

     

    Total operating expenses

    156,795

     

     

    104,799

     

     

    514,493

     

     

    394,063

     

    Operating income

    60,394

     

     

    62,998

     

     

    286,219

     

     

    222,866

     

    Other income, net

    4,844

     

     

    5,690

     

     

    27,478

     

     

    15,777

     

    Income before income taxes

    65,238

     

     

    68,688

     

     

    313,697

     

     

    238,643

     

    Provision for income taxes

    (944

    )

     

    (2,463

    )

     

    12,579

     

     

    8,811

     

    Net income

    $

    66,182

     

     

    $

    71,151

     

     

    $

    301,118

     

     

    $

    229,832

     

     

     

     

     

     

     

     

     

    Net income per share:

     

     

     

     

     

     

     

    Basic

    $

    0.44

     

     

    $

    0.49

     

     

    $

    2.03

     

     

    $

    1.59

     

    Diluted

    $

    0.42

     

     

    $

    0.45

     

     

    $

    1.90

     

     

    $

    1.47

     

     

     

     

     

     

     

     

     

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

     

     

     

     

     

     

     

    Basic

    148,773

     

     

    145,667

     

     

    147,796

     

     

    144,244

     

    Diluted

    158,792

     

     

    156,935

     

     

    158,296

     

     

    156,117

     

    Other comprehensive income:

     

     

     

     

     

     

     

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

    $

    212

     

     

    $

    714

     

     

    $

    2,388

     

     

    $

    1,409

     

    Net change in cumulative foreign currency translation loss

    74

     

     

    1,453

     

     

    (2,857

    )

     

    (2,081

    )

    Comprehensive income

    $

    66,468

     

     

    $

    73,318

     

     

    $

    300,649

     

     

    $

    229,160

     

    _______________________

     

     

     

     

     

     

     

    (6) Includes stock-based compensation as follows:

                 
                   

    Cost of revenues:

     

     

     

     

     

     

     

    Cost of subscription services

    $

    1,110

     

     

    $

    387

     

     

    $

    2,638

     

     

    $

    1,553

     

    Cost of professional services and other

    5,257

     

     

    2,808

     

     

    17,518

     

     

    10,575

     

    Research and development

    11,269

     

     

    5,856

     

     

    37,001

     

     

    22,138

     

    Sales and marketing

    8,330

     

     

    4,638

     

     

    27,537

     

     

    18,381

     

    General and administrative

    11,493

     

     

    6,089

     

     

    31,212

     

     

    23,778

     

    Total stock-based compensation

    $

    37,459

     

     

    $

    19,778

     

     

    $

    115,906

     

     

    $

    76,425

     

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

           

     

    Three months ended
    January 31,

     

    Fiscal year ended
    January 31,

     

    2020

     

    2019

     

    2020

     

    2019

    Cash flows from operating activities

     

     

     

     

     

     

     

    Net income

    $

    66,182

     

     

    $

    71,151

     

     

    $

    301,118

     

     

    $

    229,832

     

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

     

     

     

     

     

     

     

    Depreciation and amortization

    11,183

     

     

    3,954

     

     

    27,825

     

     

    14,071

     

    Accretion of discount on short-term investments

    (278

    )

     

    (1,051

    )

     

    (3,274

    )

     

    (2,431

    )

    Stock-based compensation

    37,459

     

     

    19,778

     

     

    115,906

     

     

    76,425

     

    Amortization of deferred costs

    5,997

     

     

    4,681

     

     

    20,521

     

     

    18,378

     

    Deferred income taxes

    (8,434

    )

     

    (10,733

    )

     

    (6,663

    )

     

    (8,091

    )

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

    (8

    )

     

    5

     

     

    (120

    )

     

    (177

    )

    Bad debt expense (recovery)

    286

     

     

    (64

    )

     

    244

     

     

    198

     

    Changes in operating assets and liabilities:

     

     

     

     

     

     

     

    Accounts receivable

    (242,164

    )

     

    (213,348

    )

     

    (55,531

    )

     

    (78,995

    )

    Unbilled accounts receivable

    (1,778

    )

     

    1,867

     

     

    (14,555

    )

     

    (4,774

    )

    Deferred costs

    (11,709

    )

     

    (7,515

    )

     

    (25,237

    )

     

    (18,941

    )

    Income taxes payable

    (3,727

    )

     

    112

     

     

    1,131

     

     

    637

     

    Other current and long-term assets

    (4,213

    )

     

    (1,035

    )

     

    (2,700

    )

     

    (10,562

    )

    Accounts payable

    1,597

     

     

    (1,698

    )

     

    2,813

     

     

    1,822

     

    Accrued expenses and other current liabilities

    (15,461

    )

     

    4,661

     

     

    (15,230

    )

     

    963

     

    Deferred revenue

    203,390

     

     

    160,032

     

     

    97,753

     

     

    89,416

     

    Lease liabilities

    (2,337

    )

     

     

     

    (7,480

    )

     

     

    Other long-term liabilities

    3,124

     

     

    1,436

     

     

    854

     

     

    3,056

     

    Net cash provided by operating activities

    39,109

     

     

    31,873

     

     

    437,375

     

     

    310,827

     

    Cash flows from investing activities

     

     

     

     

     

     

     

    Purchases of short-term investments

    (123,734

    )

     

    (137,309

    )

     

    (752,518

    )

     

    (726,379

    )

    Maturities and sales of short-term investments

    116,693

     

     

    184,382

     

     

    688,091

     

     

    632,329

     

    Property and equipment

    54

     

     

    (2,882

    )

     

    (3,113

    )

     

    (8,440

    )

    Acquisitions, net of cash and restricted cash acquired

    (448,162

    )

     

     

     

    (448,162

    )

     

     

    Capitalized internal-use software development costs

    (147

    )

     

    (370

    )

     

    (1,208

    )

     

    (1,379

    )

    Net cash provided by (used in) investing activities

    (455,296

    )

     

    43,821

     

     

    (516,910

    )

     

    (103,869

    )

    Cash flows from financing activities

     

     

     

     

     

     

     

    Reduction of lease liabilities – finance leases

    (255

    )

     

     

     

    (984

    )

     

     

    Proceeds from exercise of common stock options

    2,376

     

     

    6,182

     

     

    10,994

     

     

    25,910

     

    Net cash provided by financing activities

    2,121

     

     

    6,182

     

     

    10,010

     

     

    25,910

     

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

    75

     

     

    1,453

     

     

    (2,856

    )

     

    (2,077

    )

    Net change in cash, cash equivalents, and restricted cash

    (413,991

    )

     

    83,329

     

     

    (72,381

    )

     

    230,791

     

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

    893,788

     

     

    468,849

     

     

    552,178

     

     

    321,387

     

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

    $

    479,797

     

     

    $

    552,178

       

    $

    479,797

       

    $

    552,178

     

    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 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 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
    January 31,

     

    Fiscal year ended
    January 31,

     

    2020

     

    2019

     

    2020

     

    2019

    Cost of subscription services revenues on a GAAP basis

    $

    42,506

     

     

    $

    29,615

     

     

    $

    136,328

     

     

    $

    117,009

     

    Stock-based compensation expense

    (1,110

    )

     

    (387

    )

     

    (2,638

    )

     

    (1,553

    )

    Amortization of purchased intangibles

    (1,864

    )

     

    (690

    )

     

    (3,907

    )

     

    (3,087

    )

    Cost of subscription services revenues on a non-GAAP basis

    $

    39,532

     

     

    $

    28,538

     

     

    $

    129,783

     

     

    $

    112,369

     

     

     

     

     

     

     

     

     

    Gross margin on subscription services revenues on a GAAP basis

    83.3

    %

     

    84.5

    %

     

    84.8

    %

     

    83.2

    %

    Stock-based compensation expense

    0.4

     

     

    0.2

     

     

    0.3

     

     

    0.2

     

    Amortization of purchased intangibles

    0.7

     

     

    0.3

     

     

    0.4

     

     

    0.4

     

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

    84.4

    %

     

    85.0

    %

     

    85.5

    %

     

    83.8

    %

     

     

     

     

     

     

     

     

    Cost of professional services and other revenues on a GAAP basis

    $

    51,813

     

     

    $

    34,911

     

     

    $

    167,041

     

     

    $

    128,272

     

    Stock-based compensation expense

    (5,257

    )

     

    (2,808

    )

     

    (17,518

    )

     

    (10,575

    )

    Amortization of purchased intangibles

    (129

    )

     

     

     

    (129

    )

     

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

     

     

     

     

    (14

    )

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

    $

    46,427

     

     

    $

    32,103

     

     

    $

    149,394

     

     

    $

    117,683

     

     

     

     

     

     

     

     

     

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

    9.7

    %

     

    16.2

    %

     

    19.6

    %

     

    23.5

    %

    Stock-based compensation expense

    9.4

     

     

    6.7

     

     

    8.5

     

     

    6.3

     

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

    19.1

    %

     

    22.9

    %

     

    28.1

    %

     

    29.8

    %

     

     

     

     

     

     

     

     

    Gross profit on a GAAP basis

    $

    217,189

     

     

    $

    167,797

     

     

    $

    800,712

     

     

    $

    616,929

     

    Stock-based compensation expense

    6,367

     

     

    3,195

     

     

    20,156

     

     

    12,128

     

    Amortization of purchased intangibles

    1,993

     

     

    690

     

     

    4,036

     

     

    3,087

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

     

     

     

     

    14

     

    Gross profit on a non-GAAP basis

    $

    225,549

     

     

    $

    171,682

     

     

    $

    824,904

     

     

    $

    632,158

     

     

     

     

     

     

     

     

     

    Gross margin on total revenues on a GAAP basis

    69.7

    %

     

    72.2

    %

     

    72.5

    %

     

    71.6

    %

    Stock-based compensation expense

    2.0

     

     

    1.4

     

     

    1.8

     

     

    1.4

     

    Amortization of purchased intangibles

    0.7

     

     

    0.3

     

     

    0.4

     

     

    0.3

     

    Gross margin on total revenues on a non-GAAP basis

    72.4

    %

     

    73.9

    %

     

    74.7

    %

     

    73.3

    %

     

     

     

     

     

     

     

     

    Research and development expense on a GAAP basis

    $

    61,201

     

     

    $

    42,759

     

     

    $

    209,895

     

     

    $

    158,783

     

    Stock-based compensation expense

    (11,269

    )

     

    (5,856

    )

     

    (37,001

    )

     

    (22,138

    )

    Amortization of purchased intangibles

    (29

    )

     

     

     

    (29

    )

     

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

     

     

     

     

    (289

    )

    Research and development expense on a non-GAAP basis

    $

    49,903

     

     

    $

    36,903

     

     

    $

    172,865

     

     

    $

    136,356

     

     

     

     

     

     

     

     

     

    Sales and marketing expense on a GAAP basis

    $

    59,369

     

     

    $

    38,561

     

     

    $

    190,331

     

     

    $

    148,867

     

    Stock-based compensation expense

    (8,330

    )

     

    (4,638

    )

     

    (27,537

    )

     

    (18,381

    )

    Amortization of purchased intangibles

    (3,468

    )

     

    (977

    )

     

    (5,998

    )

     

    (3,878

    )

    Deferred compensation associated with Zinc Ahead acquisition

     

     

     

     

     

     

    (40

    )

    Sales and marketing expense on a non-GAAP basis

    $

    47,571

     

     

    $

    32,946

     

     

    $

    156,796

     

     

    $

    126,568

     

     

     

     

     

     

     

     

     

    General and administrative expense on a GAAP basis

    $

    36,225

     

     

    $

    23,479

     

     

    $

    114,267

     

     

    $

    86,413

     

    Stock-based compensation expense

    (11,493

    )

     

    (6,089

    )

     

    (31,212

    )

     

    (23,778

    )

    Amortization of purchased intangibles

    (57

    )

     

     

     

    (57

    )

     

     

    General and administrative expense on a non-GAAP basis

    $

    24,675

     

     

    $

    17,390

     

     

    $

    82,998

     

     

    $

    62,635

     

     

     

     

     

     

     

     

     

    VEEVA SYSTEMS INC.
    RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued)
    (Dollars in thousands, except per share data)
    (Unaudited)

     

     

     

     

     

     

     

     

     

    Three months ended
    January 31,

     

    Fiscal year ended
    January 31,

     

    2020

     

    2019

     

    2020

     

    2019

    Operating expense on a GAAP basis

    $

    156,795

     

     

    $

    104,799

     

     

    $

    514,493

     

     

    $

    394,063

     

    Stock-based compensation expense

    (31,092

    )

     

    (16,583

    )

     

    (95,750

    )

     

    (64,297

    )

    Amortization of purchased intangibles

    (3,554

    )

     

    (977

    )

     

    (6,084

    )

     

    (3,878

    )

    Deferred compensation associated with Zinc Ahead acquisition

     

     

     

     

     

     

    (329

    )

    Operating expense on a non-GAAP basis

    $

    122,149

     

     

    $

    87,239

     

     

    $

    412,659

     

     

    $

    325,559

     

     

     

     

     

     

     

     

     

    Operating income on a GAAP basis

    $

    60,394

     

     

    $

    62,998

     

     

    $

    286,219

     

     

    $

    222,866

     

    Stock-based compensation expense

    37,459

     

     

    19,778

     

     

    115,906

     

     

    76,425

     

    Amortization of purchased intangibles

    5,547

     

     

    1,667

     

     

    10,120

     

     

    6,965

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

     

     

     

     

    343

     

    Operating income on a non-GAAP basis

    $

    103,400

     

     

    $

    84,443

     

     

    $

    412,245

     

     

    $

    306,599

     

     

     

     

     

     

     

     

     

    Operating margin on a GAAP basis

    19.4

    %

     

    27.1

    %

     

    25.9

    %

     

    25.8

    %

    Stock-based compensation expense

    12.0

     

     

    8.5

     

     

    10.5

     

     

    8.9

     

    Amortization of purchased intangibles

    1.8

     

     

    0.7

     

     

    0.9

     

     

    0.9

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

     

     

     

     

     

    Operating margin on a non-GAAP basis

    33.2

    %

     

    36.3

    %

     

    37.3

    %

     

    35.6

    %

     

     

     

     

     

     

     

     

    Net income on a GAAP basis

    $

    66,182

     

     

    $

    71,151

     

     

    $

    301,118

     

     

    $

    229,832

     

    Stock-based compensation expense

    37,459

     

     

    19,778

     

     

    115,906

     

     

    76,425

     

    Amortization of purchased intangibles

    5,547

     

     

    1,667

     

     

    10,120

     

     

    6,965

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

     

     

     

     

    343

     

    Income tax effect on non-GAAP adjustments(1)

    (23,675

    )

     

    (21,391

    )

     

    (79,763

    )

     

    (58,888

    )

    Net income on a non-GAAP basis

    $

    85,513

     

     

    $

    71,205

     

     

    $

    347,381

     

     

    $

    254,677

     

     

     

     

     

     

     

     

     

    Diluted net income per share on a GAAP basis

    $

    0.42

     

     

    $

    0.45

     

     

    $

    1.90

     

     

    $

    1.47

     

    Stock-based compensation expense

    0.24

     

     

    0.13

     

     

    0.73

     

     

    0.49

     

    Amortization of purchased intangibles

    0.03

     

     

    0.01

     

     

    0.06

     

     

    0.05

     

    Deferred compensation associated with Zinc Ahead acquisition

     

     

     

     

     

     

     

    Income tax effect on non-GAAP adjustments(1)

    (0.15

    )

     

    (0.14

    )

     

    (0.50

    )

     

    (0.38

    )

    Diluted net income per share on a non-GAAP basis

    $

    0.54

     

     

    $

    0.45

     

     

    $

    2.19

     

     

    $

    1.63

     

    ________________________

    (1)

     

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

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

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