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Veeva Systems (NYSE:VEEV) Reports Q2 In Line With Expectations But Stock Drops On Weak Guidance


Petr Huřťák /
2022/08/31 4:25 pm EDT
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Healthcare software provider Veeva Systems (NASDAQ:VEEV) reported results in line with analyst expectations in Q2 FY2023 quarter, with revenue up 17.2% year on year to $534.2 million. However, guidance for the next quarter was less impressive, coming in at $546 million at the midpoint, being 2.24% below analyst estimates. Veeva Systems made a GAAP profit of $90.6 million, down on its profit of $108.8 million, in the same quarter last year.

Is now the time to buy Veeva Systems? Access our full analysis of the earnings results here, it's free.

Veeva Systems (VEEV) Q2 FY2023 Highlights:

  • Revenue: $534.2 million vs analyst estimates of $530.7 million (small beat)
  • EPS (non-GAAP): $1.03 vs analyst estimates of $1.01 (1.94% beat)
  • Revenue guidance for Q3 2023 is $546 million at the midpoint, below analyst estimates of $558.5 million
  • The company dropped revenue guidance for the full year, from $2.17 billion to $2.14 billion at the midpoint, a 1.26% decrease
  • Free cash flow of $91.7 million, down 80.8% from previous quarter
  • Gross Margin (GAAP): 71.6%, down from 73.2% same quarter last year

"Our innovation engine is delivering more value to our customers than ever as we continue making progress with established and newly launched products in commercial and R&D," 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 year, growing from quarterly revenue of $455.5 million, to $534.2 million.

Veeva Systems Total Revenue

This quarter, Veeva Systems's quarterly revenue was once again up 17.2% year on year. We can see that the company increased revenue by $29.1 million quarter on quarter. That's a solid improvement on the $19.6 million increase in Q1 2023, so shareholders should appreciate the re-acceleration of growth.

Guidance for the next quarter indicates Veeva Systems is expecting revenue to grow 14.6% year on year to $546 million, slowing down from the 26.1% 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 17.5% 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 follow 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 $91.7 million in Q2, down 22.9% year on year.

Veeva Systems Free Cash Flow

Veeva Systems has generated $733.5 million in free cash flow over the last twelve months, an impressive 36.6% 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 Q2 Results

Sporting a market capitalization of $31.3 billion, more than $2.91 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.

It was unfortunate to see that Veeva Systems's revenue guidance for the full year missed analysts' expectations and overall this quarter's results were not the best we've seen from Veeva Systems. The company is down 8.29% on the results and currently trades at $182.9 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.