Veeva Systems (NYSE:VEEV) Reports Q3 In Line With Expectations

Petr Huřťák /
2023/12/06 4:09 pm EST

Healthcare software provider Veeva Systems (NASDAQ:VEEV) reported results in line with analysts' expectations in Q3 FY2024, with revenue up 11.6% year on year to $616.5 million. On the other hand, the company's full-year revenue guidance of $2.35 billion at the midpoint came in slightly below analysts' estimates. It made a non-GAAP profit of $1.34 per share, improving from its profit of $1.13 per share in the same quarter last year.

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Veeva Systems (VEEV) Q3 FY2024 Highlights:

  • Revenue: $616.5 million vs analyst estimates of $616.1 million (small beat)
  • EPS (non-GAAP): $1.34 vs analyst estimates of $1.29 (3.7% beat)
  • Revenue Guidance for Q4 2024 is $621 million at the midpoint, slightly below what analysts were expecting
  • Free Cash Flow of $76.69 million, down 70% from the previous quarter
  • Gross Margin (GAAP): 72.8%, in line with the same quarter last year

"It was another strong quarter as we advance the industry toward more efficient and effective ways of working, from drug development through commercialization," 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.

Healthcare And Life Sciences Software

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 $476.1 million in Q3 FY2022 to $616.5 million this quarter.

Veeva Systems Total Revenue

This quarter, Veeva Systems's quarterly revenue was once again up 11.6% year on year. However, its growth did slow down compared to last quarter as the company's revenue increased by just $26.28 million in Q3 compared to $63.9 million in Q2 2024. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter, Veeva Systems is guiding for a 9.3% year-on-year revenue decline to $621 million, a further deceleration from the 16% year-on-year decrease it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 15.6% over the next 12 months before the earnings results announcement.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the 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 $76.69 million in Q3, down 44% year on year.

Veeva Systems Free Cash Flow

Veeva Systems has generated $894.6 million in free cash flow over the last 12 months, an eye-popping 40.5% 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 Q3 Results

With a market capitalization of $28.59 billion, a $3.94 billion cash balance, and positive free cash flow over the last 12 months, we're confident that Veeva Systems has the resources needed to pursue a high-growth business strategy.

It was great to see Veeva Systems improve its gross margin this quarter. That stood out as a positive in these results. On the other hand, its revenue guidance for next quarter very sligthly missed analysts' expectations. Overall, this was an ok quarter for Veeva Systems. The stock is flat after reporting and currently trades at $178.01 per share.

Veeva Systems may not have had the best quarter, but does that create an opportunity to invest 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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