Veeva Systems (VEEV) Beats Q1 Earnings, Revenues Estimates

Headquartered in Pleasanton, CA, Veeva Systems Inc. (NYSE:VEEV) reported first-quarter fiscal 2018, adjusted earnings of 14 cents per share, ending Apr 30, 2017. The company’s earnings beat the Zacks Consensus Estimate of 12 cents and the year-ago figure of 11 cents.

Total revenues in the reported quarter were $157.9 million, up from $119.8 million in the year-ago quarter, projecting an increase of 32% year over year. This was well ahead of the Zacks Consensus Estimate of $152.0 million.

Stock Performance

Year to date, Veeva Systems’ shares have increased roughly 51.70% comparing favorably with the Zacks categorized Internet Software sub-industry’s addition of 18.07%. The current level is above the S&P 500’s return of 9.03% in the same time frame.

Veeva Systems Inc. Price, Consensus and EPS Surprise

Veeva Systems Inc. Price, Consensus and EPS Surprise | Veeva Systems Inc. Quote

Quarter Highlights

Subscription services revenues were $127.3 million, up from $96.0 million in the year-ago quarter, increasing by 33% year-over-year.

Professional services revenues increased almost 29% to $30.6 million, primarily owing to strong adoption of the Vault platform.

In the first quarter, the company witnessed a number of registrations in the Veeva Commercial Cloud platform around the world. Veeva has many core CRM projects on track with large pharma companies around the globe.

In the reported quarter, Veeva made significant progress across various fields and geographies, courtesy of products like Veeva Network, Veeva Align, Veeva OpenData, and Veeva CRM Approved Email.

Coming to the Vault platform, the company’s bookings accounted for more than half of the total bookings in the quarter. In the cloud platform, Veeva gained significant market traction with Zinc Ahead.

The adoption of Vault QualityDocs and Vault QMS is also on the rise. Veeva gained considerable traction in the market with eight of the top 20 pharmaceuticals companies being standardized on the Vault eTMF platform. Veeva announced its entry into the clinical data management space with two new solutions – Veeva Vault EDC and Veeva Vault eSource.

Margin Details

Gross margin at Veeva expanded 300 basis points (bps) to 71.0% in the reported quarter, owing to favorable revenue mix (higher percentage of subscription revenues). The company reported a surge of 200 bps in subscription gross margin, totaling almost 81%.

Balance Sheet

Veeva ended the reported quarter with nearly $663.9 million in cash and short-term investments versus $519.0 million at the end of the sequential quarter. Calculated billings totaled $182 million in the quarter which was ahead of management’s guidance of $175 million, courtesy of impressive sales performance and strong services revenue.

Guidance

For fiscal 2018, ending Jan 31, 2018, total revenues are anticipated in the band of $665.0 and $669.0 million. Adjusted operating income is likely to be between $191.0 million and $195.0 million. Adjusted earnings are forecasted between 82 cents and 84 cents.

For second-quarter fiscal 2017 ending on Jul 31, 2017, Veeva expects total revenues in the range of $163.0–$164.0 million. Meanwhile, adjusted operating income is expected between $46.0 million and $47.0 million. Adjusted earnings are forecasted at around 20 cents per share.

Our Take

We are upbeat about Veeva’s product launches and the industry focused approach. The growing global demand for cloud-based and vault applications also boost opportunities for the company.

Veeva has strengthened the recurring part of its revenue mix by marking a significant growth in subscription revenues, which were well ahead of service revenues.

Moreover, the new launches are highly encouraging in our view, as they are likely to fortify the company’s position and enhance its growth prospects over the long haul.

Zacks Rank & Key Picks

Currently, Veeva has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector are Luminex Corp. (NASDAQ:LMNX) , Inogen, Inc. (NASDAQ:INGN) and Edwards Lifesciences, Inc. (NYSE:EW) . Luminex and Inogen boast a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Luminex has an expected long-term adjusted earnings growth of almost 16.3%. The stock roughly added 7.0% over the last three months.

Inogen has a long-term expected earnings growth rate of 17.5%. The stock has a solid one-year return of around 82%.

Edwards Lifesciences has an expected long-term adjusted earnings growth of almost 16% (last 3–5 years of actual earnings). The stock added roughly 14.8% over the last three months.

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