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Veeva Systems (VEEV) Beats on Q2 Earnings, Revises FY23 View

Veeva Systems, Inc. VEEV reported adjusted earnings per share (EPS) of $1.03 in the second quarter of fiscal 2023, reflecting an improvement of 9.6% from the year-ago EPS of 94 cents. Adjusted EPS surpassed the Zacks Consensus Estimate by 1.9%.

GAAP EPS in the fiscal second quarter was 56 cents, down by 16.4% from the year-ago EPS of 67 cents.

Revenues

For the quarter, the company’s revenues totaled $534.2 million, outpacing the Zacks Consensus Estimate by 0.7%. On a year-over-year basis, the top line improved by 17.3%.

The second-quarter top line was driven by Veeva Systems’ robust segmental performances.

Segmental Details

Veeva Systems derives revenues from two operating segments — Subscription services; and Professional services and other.

In the fiscal second quarter, Subscription services revenues improved 16.9% from the year-ago quarter to $428.6 million.

Professional services and other revenues were up 18.4% year over year to $105.6 million, primarily resulting from continued strong demand for professional services related to Veeva Systems’ Research and Development (R&D) Solutions and sustained contribution from Veeva Business Consulting.

Veeva Systems Inc. Price, Consensus and EPS Surprise

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

Veeva Systems Inc. price-consensus-eps-surprise-chart | Veeva Systems Inc. Quote

Margin Details

In the quarter under review, Veeva Systems’ gross profit rose 14.7% to $382.5 million. Gross margin contracted 159 basis points (bps) to 71.6%.

Meanwhile, sales and marketing expenses rose 24.8% to $89.6 million. R&D expenses went up 41.2% year over year to $134 million, while general and administrative expenses climbed 37.1% year over year to $57.8 million. Total operating expenses of $281.5 million increased 34.8% year over year.

Operating profit totaled $101.1 million, which declined 18.9% from the prior-year quarter. Operating margin in the second quarter contracted a huge 843 bps to 18.9%.

Financial Position

The company exited second-quarter fiscal 2023 with cash and cash equivalents, and short-term investments of $2.92 billion compared with $2.84 billion at the end of fiscal first quarter.

Cumulative net cash provided by operating activities at the end of second-quarter fiscal 2023 was $574.4 million compared with $597.5 million in the year-ago period.

Guidance

Veeva Systems has provided its financial outlook for fiscal 2023 third quarter and revised its estimates for the full fiscal year.

For the third quarter of fiscal 2023, the company expects total revenues to be $545-$547 million. The Zacks Consensus Estimate for the same is currently pegged at $557.3 million.

Subscription revenues are estimated to be approximately $439 million in the fiscal third quarter.

Adjusted EPS is projected to be $1.07-$1.08. The Zacks Consensus Estimate for the metric is pegged at $1.07, which matches the lower end of the company-provided outlook.

Veeva Systems now expects its revenues for fiscal year 2023 to be within $2,140-$2,145 million, lowered from its earlier-provided outlook range of $2,165-$2,175 million. The Zacks Consensus Estimate for the same is currently pegged at $2.17 billion.

Subscription services revenues are now expected to be $1.725 billion, down from the earlier projections of $1.745 billion for fiscal 2023. This consists of Commercial Solutions’ subscription revenues of around $938 million (down from $955 million) and R&D Solutions’ subscription revenues of approximately $787 million (down from $790 million).

Adjusted EPS for the year is expected to be $4.17, up from its earlier projection of $4.16. The Zacks Consensus Estimate for the metric is pegged at $4.14.

Our Take

Veeva Systems exited the second quarter of fiscal 2023 with better-than-expected results. Uptick in the overall top line and robust performances by both segments during the quarter is impressive. The company continues to benefit from its flagship Vault platform, which is encouraging. Veeva Systems’ continued strength in its Commercial Solutions, with new SMB customer additions and further international CRM expansions in Asia and Latin America, looks promising.

Robust adoption of Veeva Systems’ products like Vault PromoMats and Veeva Link for Key People and positive feedback for its Veeva Compass auger well for the company. New customer wins in its R&D Solutions’ Vault Quality and sustained strength in clinical operations are encouraging as well.

On the flip side, rising operating costs putting pressure on the margins during the quarter is a headwind. Management’s expectations of macroeconomic uncertainties and softening in Crossix revenue growth resulting from tightening of advertising budgets raise apprehension.

Zacks Rank and Stocks to Consider

Veeva Systems currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space that have announced quarterly results are McKesson Corporation MCK, AMN Healthcare Services, Inc. AMN and ShockWave Medical, Inc. SWAV.

McKesson, carrying a Zacks Rank #2 (Buy), reported first-quarter fiscal 2023 adjusted EPS of $5.83, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $67.2 billion outpaced the consensus mark by 5.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McKesson has an estimated long-term growth rate of 9.9%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 13%.

AMN Healthcare, sporting a Zacks Rank #1, reported second-quarter 2022 adjusted EPS of $3.31, which beat the Zacks Consensus Estimate by 11.8%. Revenues of $1.43 billion outpaced the consensus mark by 4.8%.

AMN Healthcare has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed estimates in all the trailing four quarters, the average being 15.7%.

ShockWave Medical reported second-quarter 2022 EPS of 68 cents, which surpassed the Zacks Consensus Estimate by 58.1%. Second-quarter revenues of $120.7 million outpaced the Zacks Consensus Estimate by 12.6%. It currently flaunts a Zacks Rank #1.

ShockWave Medical has an estimated growth rate of 33.1% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average being 180.1%.


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