Veeva Systems (NYSE:VEEV) Q2 Sales Beat Estimates, Gross Margin Improves

Radek Strnad /
2023/08/30 4:11 pm EDT

Healthcare software provider Veeva Systems (NASDAQ:VEEV) reported Q2 FY2024 results topping analysts' expectations, with revenue up 10.5% year on year to $590.2 million. The company also expects next quarter's revenue to be around $615 million, slightly below analysts' estimates. Turning to EPS, Veeva Systems made a non-GAAP profit of $1.21 per share, improving from its profit of $1.03 per share in the same quarter last year.

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Veeva Systems (VEEV) Q2 FY2024 Highlights:

  • Revenue: $590.2 million vs analyst estimates of $582.1 million (1.39% beat)
  • EPS (non-GAAP): $1.21 vs analyst estimates of $1.13 (7.3% beat)
  • Revenue Guidance for Q3 2024 is $615 million at the midpoint, below analyst estimates of $617.1 million
  • The company slightly raised its revenue guidance for the full year, and it now stands at $2.37 billion at the midpoint
  • Free Cash Flow of $255.4 million, down 49.2% from the previous quarter
  • Gross Margin (GAAP): 71.4%, in line with the same quarter last year

"We had a great quarter with progress across the board that was particularly significant in CRM and clinical," 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 mediocre over the last two years, growing from $455.6 million in Q2 FY2022 to $590.2 million this quarter.

Veeva Systems Total Revenue

This quarter, Veeva Systems's quarterly revenue was once again up 10.5% year on year. On top of that, its revenue increased $63.9 million quarter on quarter, a strong improvement from the $37.1 million decrease in Q1 2024. This is a sign of acceleration of growth and very nice to see indeed.

Next quarter's guidance suggests that Veeva Systems is expecting revenue to grow 11.3% year on year to $615 million, slowing down from the 16% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 16.9% over the next 12 months before the earnings results announcement.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Veeva Systems's free cash flow came in at $255.4 million in Q2, up 178% year on year.

Veeva Systems Free Cash Flow

Veeva Systems has generated $955 million in free cash flow over the last 12 months, an eye-popping 43.6% of revenue. This robust FCF margin stems from its asset-lite business model, scale advantages, and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.

Key Takeaways from Veeva Systems's Q2 Results

Sporting a market capitalization of $30.9 billion, more than $3.87 billion in cash on hand, and positive free cash flow over the last 12 months, we believe that Veeva Systems is attractively positioned to invest in growth.

We were impressed by Veeva Systems's strong gross margin improvement this quarter. We were also happy that its revenue narrowly outperformed Wall Street's estimates. On the other hand, its revenue guidance for next quarter missed analysts' expectations, although non-GAAP operating profit guidance exceeded expectations. Full year guidance was also slightly raised and is a bit ahead of Wall Street analysts' estimates. Overall, the results were fine with no major surprises good or bad. The stock is up 1.26% after reporting and currently trades at $195 per share.

So should you invest in Veeva Systems right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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