Veeva Systems (NYSE:VEEV) Exceeds Q3 Expectations

Adam Hejl /
2022/12/01 4:11 pm EST

Healthcare software provider Veeva Systems (NASDAQ:VEEV) beat analyst expectations in Q3 FY2023 quarter, with revenue up 16% year on year to $552.3 million. The company expects that next quarter's revenue would be around $552 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Veeva Systems made a GAAP profit of $108.4 million, improving on its profit of $105.8 million, in the same quarter last year.

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Veeva Systems (VEEV) Q3 FY2023 Highlights:

  • Revenue: $552.3 million vs analyst estimates of $546 million (1.15% beat)
  • EPS (non-GAAP): $1.13 vs analyst estimates of $1.07 (5.3% beat)
  • Revenue guidance for Q4 2023 is $552 million at the midpoint, below analyst estimates of $556.9 million
  • Free cash flow of $137 million, up 49.4% from previous quarter
  • Gross Margin (GAAP): 72.1%, in line with same quarter last year

"Consistent execution and strong innovation have us tracking a year ahead of our 2025 targets and set up for significant growth toward 2030 and beyond," said CEO Peter Gassner.

Built on top of Salesforce as one of the first vertical-focused cloud platforms, Veeva (NYSE:VEEV) provides data and customer relationship management (CRM) software for organizations in the life sciences industry.

The coronavirus pandemic has underscored the importance of high-quality health infrastructure in times of crisis. Coupled with intense competition between drugmakers and the growing volume of data in the health care sector, demand for data management solutions in the healthcare space is expected to remain strong in the years ahead.

Sales Growth

As you can see below, Veeva Systems's revenue growth has been strong over the last two years, growing from quarterly revenue of $377.5 million in Q3 FY2021, to $552.3 million.

Veeva Systems Total Revenue

This quarter, Veeva Systems's quarterly revenue was once again up 16% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $18.1 million in Q3, compared to $29.1 million in Q2 2023. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Veeva Systems is expecting revenue to grow 13.6% year on year to $552 million, slowing down from the 22.3% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 14.1% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Cash Is King

If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Veeva Systems's free cash flow came in at $137 million in Q3, up 23.8% year on year.

Veeva Systems Free Cash Flow

Veeva Systems has generated $757.6 million in free cash flow over the last twelve months, an impressive 36.4% of revenues. This robust FCF margin is a result of Veeva Systems asset lite business model, scale advantages, and strong competitive positioning, and provides it the option to return capital to shareholders while still having plenty of cash to invest in the business.

Key Takeaways from Veeva Systems's Q3 Results

Sporting a market capitalization of $29.5 billion, more than $3.02 billion in cash and with positive free cash flow over the last twelve months, we're confident that Veeva Systems has the resources it needs to pursue a high growth business strategy.

Veeva Systems topped analysts’ revenue expectations this quarter, even if just narrowly. And we were glad to see storng free cash flow. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter slightly missed analysts' expectations. Overall, this quarter's results were mixed. The company is down 4.01% on the results and currently trades at $184 per share.

Veeva Systems may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.