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Veeva Announces Fourth Quarter and Fiscal Year 2019 Results

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Fiscal Year 2019 Total Revenues of $862.2M, up 25% Year-over-year;
Q4
Total Revenues of $232.3M, up 25% Year-over-year

Fiscal Year 2019 Subscription Services Revenues of $694.5M, up 24%
Year-over-year;

Q4 Subscription Services Revenues of
$190.7M, up 25% Year-over-year

PLEASANTON, Calif.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/hashtag/LifeSciences?src=hash” target=”_blank”gt;#LifeScienceslt;/agt;–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 and full year ended January 31, 2019. All
results, including prior periods, and guidance reflect the new revenue
recognition standard ASC 606.

“It was a great finish to another remarkable year,” said CEO Peter
Gassner. “Our focus on innovation, customer success, and consistent
execution sets the stage for strong organic growth for Veeva over the
long-term.”

Fiscal 2019 Fourth Quarter Results:

  • Revenues: Total revenues for the fourth quarter were $232.3
    million, up from $186.0 million one year ago, an increase of 25%
    year-over-year. Subscription services revenues for the fourth quarter
    were $190.7 million, up from $152.0 million one year ago, an increase
    of 25% year-over-year.
  • Operating Income and Non-GAAP Operating Income(1):
    Fourth quarter operating income was $63.0 million, compared to
    $38.5 million one year ago, an increase of 64% year-over-year.
    Non-GAAP operating income for the fourth quarter was $84.3 million,
    compared to $55.2 million one year ago, an increase of 53%
    year-over-year.
  • Net Income and Non-GAAP Net Income(1): Fourth
    quarter net income was $71.2 million, compared to $40.7 million one
    year ago, an increase of 75% year-over-year. Non-GAAP net income for
    the fourth quarter was $71.1 million, compared to $37.8 million one
    year ago, an increase of 88% 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
    $0.45, compared to $0.26 one year ago, while non-GAAP fully diluted
    net income per share was $0.45, compared to $0.24 one year ago.

Fiscal Year 2019 Results:

  • Revenues: Total revenues for the fiscal year ended January 31,
    2019 were $862.2 million, up from $690.6 million one year ago, an
    increase of 25% year-over-year. Subscription services revenues were
    $694.5 million, up from $559.4 million one year ago, an increase of
    24% year-over-year.
  • Operating Income and Non-GAAP Operating Income(1):
    Fiscal year 2019 operating income was $222.9 million, compared to
    $157.9 million one year ago, an increase of 41% year-over-year.
    Non-GAAP operating income for fiscal year 2019 was $305.9 million,
    compared to $219.2 million one year ago, an increase of 40%
    year-over-year.
  • Net Income and Non-GAAP Net Income(1): Fiscal year
    2019 net income was $229.8 million, compared to $151.2 million one
    year ago, an increase of 52% year-over-year. Non-GAAP net income for
    fiscal year 2019 was $254.1 million, compared to $147.6 million one
    year ago, an increase of 72% year-over-year.
  • Net Income per Share and Non-GAAP Net Income per Share(1):
    For fiscal year 2019, fully diluted net income per share was
    $1.47, compared to $0.98 one year ago, while non-GAAP fully diluted
    net income per share was $1.63, compared to $0.96 one year ago.

“We had an outstanding quarter with strong top and bottom line results
that exceeded our guidance,” said CFO Tim Cabral. “Veeva Commercial
Cloud had one of its best quarters ever and Veeva Vault set a new
bookings record. This outperformance fuels our outlook for strong growth
and profitability in the coming year.”

Recent Highlights:

  • Growing Customer Base and Continued Customer Success Subscription
    revenue retention was 122% for the year as customers deepened their
    relationship with Veeva(2). Annual customer count grew to
    715, up from 625. This included 332 Veeva Commercial Cloud customers,
    up from 311, and 572 Veeva Vault customers, up from 449 a year ago(3).
  • Key Wins Close Out a Record Year for Veeva Vault Clinical
    Veeva Vault eTMF had a record year and momentum continued across all
    segments. Since Q3, two top 20 pharmas and a top seven CRO have
    selected Vault eTMF as their enterprise standard. Veeva Vault CTMS
    ended the quarter with 34 customers, doubling year over year.
  • Increasing Market Share in Veeva Commercial Cloud — Share
    increased with more enterprise expansions and SMB wins in Q4. This
    included a Veeva CRM win in Europe at a top 50 pharma, making Veeva
    its global standard. In addition, two top 10 pharmas are expanding
    with Veeva CRM Engage Meeting into major regions. Veeva also added 15
    new SMB CRM customers in the quarter for a total of 46 in the year.

Financial Outlook:

Veeva is providing guidance for its fiscal first quarter ending April
30, 2019 as follows:

  • Total revenues between $238 and $239 million.
  • Non-GAAP operating income between $85 and $86 million(4).
  • Non-GAAP fully diluted net income per share between $0.44 and $0.45(4).

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

  • Total revenues between $1,025 and $1,030 million.
  • Non-GAAP operating income between $365 and $370 million(4).
  • Non-GAAP fully diluted net income per share between $1.91 and $1.94(4).

Conference Call Information:

   
What: Veeva’s Fiscal 2019 Fourth Quarter and Full Year Results Conference
Call
When: Tuesday, February 26, 2019
Time: 1:30 p.m. PT (4:30 p.m. ET)
Live Call: 1-833-235-5654, domestic
1-647-689-4160, international
Conference ID 107 3019
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 taking the committed annual
revenue as of the last day of the fiscal quarter. 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
OpenData, Veeva Oncology Link, Veeva Network Customer Master and Veeva
Network Product Master. Veeva Vault customers are those customers that
have at least one Vault product.

(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, 2019 or fiscal year ending January
31, 2020 because of the difficulty of estimating certain items excluded
from non-GAAP operating income and non-GAAP fully diluted net income per
share that cannot be reasonably predicted, such as charges related to
stock-based compensation expense, capitalization of internal-use
software development expenses and the subsequent amortization of the
capitalized expenses. The effect of these excluded items may be
significant.

About Veeva Systems

Veeva Systems Inc. is a leader in cloud-based software for the global
life sciences industry. Committed to innovation, product excellence, and
customer success, Veeva has more than 700 customers, ranging from the
world’s largest pharmaceutical companies to emerging biotechs. Veeva is
headquartered in the San Francisco Bay Area, with offices throughout
North America, Europe, Asia, and Latin America. For more information,
visit veeva.com.

Forward-looking Statements

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

Additional risks and uncertainties that could affect Veeva’s financial
results are included under the captions, “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in the company’s filing on Form 10-Q for the period ended
October 31, 2018. This is available on the company’s website at veeva.com
under the Investors section and on the SEC’s website at sec.gov.
Further information on potential risks that could affect actual results
will be included in other filings Veeva makes with the SEC from time to
time.

 

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 
  January 31,     January 31,
2019 2018
    *As adjusted
Assets
Current assets:
Cash and cash equivalents $ 550,971 $ 320,183
Short-term investments 539,190 441,779
Accounts receivable, net 303,465 224,668
Unbilled accounts receivable 18,122 13,348
Prepaid expenses and other current assets   21,666   12,443
Total current assets 1,433,414 1,012,421
Property and equipment, net 54,966 52,284
Deferred costs, net 30,869 30,306
Goodwill 95,804 95,804
Intangible assets, net 24,521 31,490
Deferred income taxes, noncurrent 5,938 2,222
Other long-term assets   8,254   5,806
Total assets $ 1,653,766 $ 1,230,333
 

Liabilities and stockholders’ equity

Current liabilities:
Accounts payable $ 9,110 $ 6,944
Accrued compensation and benefits 15,324 17,054
Accrued expenses and other current liabilities 16,145 13,152
Income tax payable 4,086 2,080
Deferred revenue   356,357   266,939
Total current liabilities 401,022 306,169
Deferred income taxes, noncurrent 6,095 10,949
Other long-term liabilities   8,900   6,977
Total liabilities   416,017   324,095
Stockholders’ equity:
Class A common stock 1 1
Class B common stock
Additional paid-in capital 617,623 515,272
Accumulated other comprehensive income 928 1,600
Retained earnings   619,197   389,365
Total stockholders’ equity   1,237,749   906,238

Total liabilities and stockholders’ equity

$ 1,653,766 $ 1,230,333

__________

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

 

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)

 
 

Three months ended
January 31,

 

Fiscal year ended
January 31,

2019   2018 2019   2018
   

*As adjusted

    *As adjusted
Revenues:
Subscription services $ 190,658 $ 151,951 $ 694,467 $ 559,434
Professional services and other   41,665   34,033   167,743   131,125
Total revenues   232,323   185,984   862,210   690,559

Cost of revenues(5):

Cost of subscription services 29,615 29,769 117,009 110,465
Cost of professional services and other   34,911   29,142   128,272   100,957
Total cost of revenues   64,526   58,911   245,281   211,422
Gross profit   167,797   127,073   616,929   479,137

Operating expenses(5):

Research and development 42,759 36,993 158,783 132,017
Sales and marketing 38,561 34,678 148,867 128,781
General and administrative   23,479   16,898   86,413   60,410
Total operating expenses   104,799   88,569   394,063   321,208
Operating income 62,998 38,504 222,866 157,929
Other income, net   5,690   3,034   15,777   7,842
Income before income taxes 68,688 41,538 238,643 165,771

Provision for (benefit from) income taxes

  (2,463 )   884   8,811   14,594

Net income

$ 71,151 $ 40,654 $ 229,832 $ 151,177
 

Net income attributable to common stockholders, basic and
diluted:

$ 71,151 $ 40,654 $ 229,832 $ 151,177
 

Net income per share attributable to common stockholders:

Basic $ 0.49 $ 0.29 $ 1.59 $ 1.08
Diluted $ 0.45 $ 0.26 $ 1.47 $ 0.98
 

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

Basic   145,667   141,652   144,244   140,311

Diluted

  156,935   154,467   156,117   153,681

Other comprehensive income (loss):

Net change in unrealized gains (losses) on available-for-sale
investments

$ 714 $ (1,283 ) $ 1,409 $ (1,598 )

Net change in cumulative foreign currency translation gain (loss)

  1,453   1,860   (2,081 )   3,086

Comprehensive income

$ 73,318 $ 41,231 $ 229,160 $ 152,665

__________

 

(5) Includes stock-based compensation as follows:

 

Cost of revenues:

 

 

 

 

Cost of subscription services

$

387

$

353

$

1,553

$

1,448

Cost of professional services and other

2,808

2,366

10,575

8,476

Research and development

5,856

4,866

22,138

17,782

Sales and marketing

4,638

4,138

18,381

16,288

General and administrative

 

6,089

 

3,140

 

23,778

 

10,055

Total stock-based compensation

$

19,778

$

14,863

$

76,425

$

54,049

__________

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

 

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
 

Three months ended
January 31,

 

 

Fiscal year ended
January 31,

 

2019   2018 2019   2018
    *As adjusted     *As adjusted
Cash flows from operating activities
Net income $ 71,151 $ 40,654 $ 229,832 $ 151,177

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

Depreciation and amortization 3,594 3,656 14,071 14,277

Amortization of premiums (accretion of discount) on short-term
investments

(1,051 ) 182 (2,431 ) 1,389
Stock-based compensation 19,778 14,863 76,425 54,049
Amortization of deferred costs 4,681 4,309 18,378 16,647
Deferred income taxes (10,733 ) 2,196 (8,091 ) 1,209

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

5 146 (177 ) 265
Bad debt expense (recovery) (64 ) 27 198 (242 )

Changes in operating assets and liabilities:

Accounts receivable (213,348 ) (158,271 ) (78,995 ) (47,799 )
Unbilled accounts receivable 1,867 1,002 (4,774 ) (4,329 )
Deferred costs (7,515 ) (6,862 ) (18,941 ) (18,795 )
Income taxes 112 (6,583 ) 637 (2,520 )
Other current and long-term assets (1,035 ) (943 ) (10,562 ) (2,493 )
Accounts payable (1,698 ) (321 ) 1,822 1,396

Accrued expenses and other current liabilities

4,661 5,200 963 7,149
Deferred revenue 160,032 100,814 89,416 58,240
Other long-term liabilities   1,436   1,368   3,056   3,818

Net cash provided by operating activities

  31,873   1,437   310,827   233,438

Cash flows from investing activities

Purchases of short-term investments (137,309 ) (87,139 ) (726,379 ) (437,858 )
Maturities and sales of short-term investments 184,382 91,522 632,329 294,705
Purchases of property and equipment (2,882 ) (1,503 ) (8,440 ) (9,633 )
Capitalized internal-use software development costs   (370 )   (400 )   (1,379 )   (1,734 )

Net cash used in investing activities

  43,821   2,480   (103,869 )   (154,520 )

Cash flows from financing activities

Proceeds from exercise of common stock options

  6,182   3,610   25,910   20,773
Net cash provided by financing activities   6,182   3,610   25,910   20,773

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

1,453 1,861 (2,077 ) 3,089

Net change in cash, cash equivalents, and restricted cash

83,329 9,388 230,791 102,780

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

  468,849   311,999   321,387   218,607

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

$ 552,178 $ 321,387 $ 552,178 $ 321,387

__________

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

Non-GAAP Financial Measures

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

  • Stock-based compensation expenses. Veeva excludes stock-based
    compensation expenses from its non-GAAP measures primarily because
    they are non-cash expenses that Veeva excludes from its internal
    management reporting processes. Veeva’s management also finds it
    useful to exclude these expenses when they assess the appropriate
    level of various operating expenses and resource allocations when
    budgeting, planning and forecasting future periods. Moreover, because
    of varying available valuation methodologies, subjective assumptions
    and the variety of award types that companies can use under FASB ASC
    Topic 718, Veeva believes excluding stock-based compensation expenses
    allows investors to make meaningful comparisons between our recurring
    core business operating results and those of other companies.
  • Amortization of purchased intangibles. Veeva incurs amortization
    expense for purchased intangible assets in connection with
    acquisitions of certain businesses and technologies. Amortization of
    intangible assets is a non-cash expense and is inconsistent in amount
    and frequency because it is significantly affected by the timing, size
    of acquisitions and the inherent subjective nature of purchase price
    allocations. Because these costs have already been incurred and cannot
    be recovered, and are non-cash expenses, Veeva excludes these expenses
    for its internal management reporting processes. Veeva’s management
    also finds it useful to exclude these charges when assessing the
    appropriate level of various operating expenses and resource
    allocations when budgeting, planning and forecasting future periods.
    Investors should note that the use of intangible assets contributed to
    Veeva’s revenues earned during the periods presented and will
    contribute to Veeva’s future period revenues as well.
  • Capitalization of internal-use software development expenses and the
    subsequent amortization of the capitalized expenses. Veeva capitalizes
    certain costs incurred for the development of computer software for
    internal use and then amortizes those costs over the estimated useful
    life. Capitalization and amortization of software development costs
    can vary significantly depending on the timing of products reaching
    technological feasibility and being made generally available. Veeva’s
    internal management reporting processes exclude both the
    capitalization of software (which would otherwise result in a
    reduction in net research and development operating expenses) and the
    amortization of capitalized software (which would otherwise result in
    an increase in cost of subscription revenues) when preparing budgets,
    plans and reviewing internal performance. Moreover, because of the
    variety of approaches taken and the subjective assumptions made by
    other companies in this area, Veeva believes that excluding the
    effects of capitalized software costs allows investors to make more
    meaningful comparisons between our operating results and those of
    other companies.
  • Deferred compensation associated with the Zinc Ahead business
    acquisition. The Zinc Ahead share purchase agreement, as revised,
    called for share purchase consideration to be deferred and paid at a
    rate of one-third of the deferred consideration amount per year to
    certain former Zinc Ahead employee shareholders and option holders who
    remain employed with Veeva on each deferred consideration payment
    date. In accordance with GAAP, these payments are being accounted for
    as deferred compensation and the expense is recognized over the
    requisite service period. Veeva’s management views this deferred
    compensation expense as an unusual acquisition cost associated with
    the Zinc Ahead acquisition and finds it useful to exclude it in order
    to assess the appropriate level of various operating expenses to
    assist in budgeting, planning and forecasting future periods. Veeva
    believes excluding this deferred compensation expense from its
    non-GAAP measures may allow investors to make more meaningful
    comparisons between its recurring operating results and those of other
    companies.
  • Income tax effects on the difference between GAAP and non-GAAP costs
    and expenses. The income tax effects that are excluded from the
    non-GAAP measures relate to the imputed tax impact on the difference
    between GAAP and non-GAAP costs and expenses due to stock-based
    compensation, purchased intangibles, capitalized internal-use
    software, and deferred compensation associated with the Zinc Ahead
    business acquisition for GAAP and non-GAAP measures.

Contacts

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

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