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Veeva Systems (VEEV) Q2 Earnings, Revenues Top; View Up

Shares of Veeva Systems Inc. VEEV surged 5.2% in afterhours trading following the company’s impressive second-quarter fiscal 2017 results. Veeva reported adjusted earnings of 15 cents per share (considering stock-based compensation as a regular expense) in the quarter, a 20.9% increase on a year-over-year basis. The Zacks Consensus Estimate for the second quarter earnings stands at 8 cents per share.

The year-over-year earnings upside was primarily driven by a strong 34% surge in revenues, which totaled $131 million, well ahead of the Zacks Consensus Estimate of $125 million.

Quarter Highlights

Subscription revenues rose 39.8% year over year to $105.2 million, driven by growth across product lines. Professional services revenues increased 14.5% to $26.1 million, primarily owing to strong adoption of the Vault platform.

Veeva Systems Inc. - Earnings Surprise | FindTheBest

In the reported quarter, Veeva Systems marked significant presence in the markets with its high-end cloud innovation technology. The company also introduced four products – Veeva Vault CTMS and Veeva Vault PromoMats DAM (in the Veeva Vault platform) and Veeva CRM Engage Meeting and Veeva CRM Engage Webinar (in the Veeva Commercial Cloud platform).

Coming to the Vault platform, the company closed three seven-figure Vault fields in the just-reported quarter and gained 34 customers. In the cloud platform, Veeva is successfully capturing market share with its new partner Zinc Ahead.

Notably, Quality Management System (QMS) has signed four deals under the Vault platform in the reported quarter. Moreover, the seven-figure Vault PromoMats deal with the ‘top 10 pharma’ is a significant development for the company.

A glimpse at the commercial cloud performance in the reported quarter reveals that Veeva had an impressive quarter with respect to multichannel CRM with the top 20 global pharmas. In fact, the recently introduced CRM add-ons have paved way for new customer additions in the Veeva CRM events management platform. Notably, the company now has more than 10 events customers in six countries.

Margin Details

Gross margin at Veeva Systems expanded 250 basis points (bps) to 70.2% in the reported quarter, driven by favorable revenue mix (higher percentage of subscription revenues).The company reported a 70 bps surge in the subscription gross margin totaling 79.5%.

VEEVA SYSTEMS-A Price, Consensus and EPS Surprise


VEEVA SYSTEMS-A Price, Consensus and EPS Surprise | VEEVA SYSTEMS-A Quote

However, the strong gross margin expansion was fully offset by higher operating expenses. Adjusted operating expenses, as a percentage of revenues, was 42.2% as compared with 38.6% in the year-ago quarter. Notably, operating margin contracted 120 bps in the quarter to 28%.

Calculated billings totaled $127 million, up 62% on a year-over-year basis, better than management’s guidance of $110 million.


For fiscal 2017, total revenues are anticipated in the band of $525.0 million to $528.0 million, up from the previous guidance of $516--$520 million. Based on the strong second-quarter results, Veeva Systems now believes that it will be able to achieve the projected billings growth range of 25% to 26% for the fiscal.

Adjusted operating income is likely to be between $138 million and $140 million, up from the previous guidance of $127 million to $131 million. Adjusted earnings are forecasted between 60 cents and 61 cents, up from the earlier guided range of 55 cents to 57 cents.

For the third-quarter fiscal 2017, Veeva Systems expects total revenues in the range of $134.5–$136.0 million. Meanwhile, adjusted operating income is expected between $36.5 million and $37.5 million. Adjusted earnings are projected in the band of 15 cents to 16 cents per share. For the third quarter, management expects calculated billings of roughly $100 million.

Our Take

Veeva Systems 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.

Key Picks

Veeva Systems currently has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector are Natus Medical Inc BABY, Masimo Corporation MASI and NuVasive Inc NUVA. Notably, all the three stocks sport a Zacks Rank #1 (Strong Buy).

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