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Veeva Systems (VEEV) Q3 Earnings, Revenues Top; View Up

Zacks

Headquartered in Pleasanton, CA, Veeva Systems Inc. VEEV reported third-quarter 2017 adjusted earnings of 15 cents per share, an 87.5% increase on a year-over-year basis. The Zacks Consensus Estimate for earnings was 10 cents per share.

The upside in earnings was primarily driven by a 34% surge in revenues, which totaled $142.8 million, well ahead of the Zacks Consensus Estimate of $136 million.

The stock currently has a long-term expected growth rate of 24.24% and represents a solid one-year return of 51.9%. In the last quarter, Veeva registered a positive earnings surprise of 12.5%.


Quarter Highlights

Subscription revenues rose 39% year over year to $142.8 million, driven by growth across product lines.

Professional services revenues increased almost 16% to $29.2 million, primarily owing to strong adoption of the Vault platform.

In the third quarter, the company witnessed a number of registrations in the Veeva Commercial Cloud platform around the world. Additionally, 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 a 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. Notably, these systems are expected to be available by Apr 2017 and Dec 2017, respectively.

Margin Details

Gross margin at Veeva expanded 400 basis points (bps) to 71.4% in the reported quarter, driven by favorable revenue mix (higher percentage of subscription revenues). The company reported a 100 bps surge in subscription gross margin, totaling almost 80%.

VEEVA SYSTEMS-A Price, Consensus and EPS Surprise

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

Adjusted operating expenses, as a percentage of revenues, was 38.2% as compared with 41.1% in the year-ago quarter. As a percentage of revenues, selling and marketing (S&M) and general and administrative (G&A) expenses contracted 20 and 330 bps, respectively. However, research and development (R&D) expenses rose 60 bps on a year-over-year basis in the reported quarter.

Balance Sheet

Veeva ended the third quarter with nearly $511 million in cash and short-term investments. Notably, calculated billings totaled $103 million in the quarter which was ahead of managements guided range, courtesy of impressive sales performance and strong services revenue.

Guidance

For fiscal 2017, total revenues are anticipated in the band of $538.9 and $539.9 million, up from the previous guidance of $525.0 million to $528.0 million.

Based on the strong third-quarter results, Veeva now believes that it will be able to achieve the projected billings growth range of 27%, up from the previous guidance of 25% to 26%.

Veeva expects to exit the year with an operating margin of roughly 28%. Meanwhile, operating cash flow is projected in the band of $130 million to $135 million for 2017.

Adjusted operating income is likely to be between $153.7 million and $154.7 million, up from the previous guidance of $138 million and $140 million.

Adjusted earnings are forecasted between 60 cents and 61 cents, up from the earlier range of 55 cents to 57 cents.

For fourth-quarter 2017, Veeva expects total revenues in the range of $145.0–$146.0 million. Meanwhile, adjusted operating income is expected between $40.0 million and $41.0 million. Adjusted earnings are forecasted at around 17 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 space include Cogentix Medical, Inc. CGNT, CryoLife Inc. CRY and IDEXX Laboratories, Inc. IDXX. Notably, IDEXX Laboratories and Cogentix sport a Zacks Rank #1 (Strong Buy) while CryoLife has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cogentix Medical registered a positive earnings surprise of 100% in the last reported quarter. Notably, the company has a solid one-year return of roughly 53.5%.

CryoLife has a stellar one-year return of roughly 80.9%. In the last reported quarter, the company registered an impressive earnings surprise of 225%.

IDEXX Laboratories represents a solid one-year return of almost 73.7%. The company has a long-term expected growth rate of almost 14.96%.

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