2194

Veeva Systems (NYSE:VEEV) Q1 Sales Beat Estimates


Full Report / June 23, 2022
Add to Watchlist

Healthcare software provider Veeva Systems (NASDAQ:VEEV) reported Q1 FY2023 results beating Wall St's expectations, with revenue up 16.4% year on year to $505.1 million. The company expects that next quarter's revenue would be around $530 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Veeva Systems made a GAAP profit of $100.1 million, down on its profit of $115.5 million, in the same quarter last year.

Veeva Systems (VEEV) Q1 FY2023 Highlights:

  • Revenue: $505.1 million vs analyst estimates of $495.8 million (1.85% beat)
  • EPS (non-GAAP): $0.99 vs analyst estimates of $0.92 (7.34% beat)
  • Revenue guidance for Q2 2023 is $530 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed revenue guidance for the full year, at $2.17 billion at the midpoint
  • Free cash flow of $478.6 million, up from $50.1 million in previous quarter
  • Gross Margin (GAAP): 72.3%, down from 73.2% same quarter last year

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.

It was built as a cloud software platform that enables the sales reps of pharmaceutical companies to manage interactions with healthcare professionals. The platform took off around the time the iPad was launched as the portable device made it easier for pharmaceutical salespeople to keep track of doctor visits and other clinical information.

Veeva was founded by former Salesforce executive Peter Gassner, who saw the opportunity to develop a CRM solution for the healthcare space. The company has since expanded its offerings to meet growing trends in the healthcare sector. While the CRM product remains the biggest revenue driver, it also offers Veeva Vault, a data and content management software for managing drug development and clinical trials. Today, Veeva is investing in modern cloud-based products like Nitro, which is a data warehouse for 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.

Veeva is competing with companies like IQVIA, Dassault Systèmes, OpenText Corporation (NASDAQ: OTEX), and Oracle Corporation (NYSE:ORCL).

Sales Growth

As you can see below, Veeva Systems's revenue growth has been strong over the last year, growing from quarterly revenue of $433.5 million, to $505.1 million.

Veeva Systems Total Revenue

This quarter, Veeva Systems's quarterly revenue was once again up 16.4% year on year. We can see that the company increased revenue by $19.6 million quarter on quarter. That's a solid improvement on the $9.38 million increase in Q4 2022, so shareholders should appreciate the acceleration of growth.

Guidance for the next quarter indicates Veeva Systems is expecting revenue to grow 16.3% year on year to $530 million, slowing down from the 28.8% 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 17.3% over the next twelve months.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Veeva Systems's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 72.3% in Q1.

Veeva Systems Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.72 left to spend on developing new products, marketing & sales and the general administrative overhead. This is around the lower average of what we typically see in SaaS businesses. Gross margin has a major impact on a company’s ability to invest in developing new products and sales & marketing, which may ultimately determine the winner in a competitive market so it is important to track.

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 $478.6 million in Q1, roughly the same as last year.

Veeva Systems Free Cash Flow

Veeva Systems has generated $760.7 million in free cash flow over the last twelve months, an impressive 39.5% 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 $26.3 billion, more than $2.83 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. That feature of these results really stood out as a positive. On the other hand, revenue growth is overall a bit slower these days. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company currently trades at $187.6 per share.

Is Now The Time?

When considering Veeva Systems, investors should take into account its valuation and business qualities, as well as what happened in the latest quarter. We think Veeva Systems is a solid business. Its revenue growth has been solid. On top of that, its bountiful generation of free cash flow empowers it to invest in growth initiatives, and its very efficient customer acquisition hints at the potential for strong profitability.

Veeva Systems's price to sales ratio based on the next twelve months is 12.1x, suggesting that the market is expecting more steady growth, relative to the hottest tech stocks. There are definitely things to like about Veeva Systems and looking at the tech landscape right now, it seems that it doesn't trade at an unreasonable price point.

The Wall St analysts covering the company had a one year price target of $255.7 per share right before these results, implying that they saw upside in buying Veeva Systems even in the short term.

To get the best start with StockStory check out our most recent Stock picks, and then sign up to our earnings alerts by adding companies to your watchlist here. We typically have the quarterly earnings results analyzed within seconds from the data being released, and especially for the companies reporting pre-market, this often gives investors the chance to react to the results before the market has fully absorbed the information.