Veeva Systems's (NYSE:VEEV) Q1 Sales Top Estimates But Gross Margin Drops

Radek Strnad /
2023/05/31 4:08 pm EDT

Healthcare software provider Veeva Systems (NASDAQ:VEEV) reported Q1 FY2024 results that beat analyst expectations, with revenue up 4.2% year on year to $526.3 million. The company expects that next quarter's revenue would be around $581 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Veeva Systems made a GAAP profit of $131.5 million, improving on its profit of $100.1 million, in the same quarter last year.

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Veeva Systems (VEEV) Q1 FY2024 Highlights:

  • Revenue: $526.3 million vs analyst estimates of $517.3 million (1.74% beat)
  • EPS (non-GAAP): $0.91 vs analyst estimates of $0.80 (13.5% beat)
  • Revenue guidance for Q2 2024 is $581 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed revenue guidance for the full year, at $2.37 billion at the midpoint
  • Free cash flow of $503 million, up from $59.5 million in previous quarter
  • Gross Margin (GAAP): 68.3%, down from 72.4% same quarter last year

"It was a strong start to the year for Veeva and we are executing well on our goal to power the most critical functions for the life sciences industry," 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 solid over the last two years, growing from quarterly revenue of $433.6 million in Q1 FY2022, to $526.3 million.

Veeva Systems Total Revenue

Veeva Systems's quarterly revenue was only up 4.2% year on year, which might disappoint some shareholders. But the revenue actually decreased by $37.1 million in Q1, compared to $11 million increase in Q4 2023. We'd like to see revenue increase each quarter, but a one-off fluctuation is usually not concerning and the management is guiding for growth to rebound in the next quarter.

Guidance for the next quarter indicates Veeva Systems is expecting revenue to grow 8.76% year on year to $581 million, slowing down from the 17.3% 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 14.7% 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 $503 million in Q1, up 5.07% year on year.

Veeva Systems Free Cash Flow

Veeva Systems has generated $791.2 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 Q1 Results

Sporting a market capitalization of $26.2 billion, more than $3.61 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. Strong free cash flow was another positive. On the other hand, it was less good to see the pretty significant deterioration in gross margin and revenue declined in absolute numbers. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 3.3% on the results and currently trades at $171.1 per share.

Should you invest in Veeva Systems 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.

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