Veeva Systems (VEEV)

Healthcare software provider Veeva Systems (NASDAQ:VEEV) reported Q4 CY2024 results topping the market’s revenue expectations, with sales up 14.3% year on year to $720.9 million. The company expects next quarter’s revenue to be around $727.5 million, close to analysts’ estimates. Its non-GAAP profit of $1.74 per share was 10.1% above analysts’ consensus estimates.

Company Overview

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.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, Veeva Systems grew its sales at a 14.1% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Veeva Systems.

This quarter, Veeva Systems reported year-on-year revenue growth of 14.3%, and its $720.9 million of revenue exceeded Wall Street’s estimates by 3.1%. Company management is currently guiding for a 11.9% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 11.4% over the next 12 months, a slight deceleration versus the last three years. Despite the slowdown, this projection is above average for the sector and implies the market sees some success for its newer products and services.

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Veeva Systems’s billings punched in at $1.26 billion in Q4, and over the last four quarters, its growth slightly outpaced the sector as it averaged 12.6% year-on-year increases. This alternate topline metric grew slower than total sales, meaning the company recognizes revenue faster than it collects cash - a headwind for its liquidity that could also signal a slowdown in future revenue growth.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Veeva Systems is extremely efficient at acquiring new customers, and its CAC payback period checked in at 17.9 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.

What makes the software-as-a-service model so attractive is that once the software is developed, it usually doesn’t cost much to provide it as an ongoing service. These minimal costs can include servers, licenses, and certain personnel.

Veeva Systems’s gross margin is good for a software business and points to its solid unit economics, competitive products and services, and lack of meaningful pricing pressure. As you can see below, it averaged an impressive 74.5% gross margin over the last year. That means for every $100 in revenue, roughly $74.53 was left to spend on selling, marketing, and R&D.

In Q4, Veeva Systems produced a 74.9% gross profit margin, marking a 2.5 percentage point increase from 72.4% in the same quarter last year. Veeva Systems’s full-year margin has also been trending up over the past 12 months, increasing by 3.2 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as servers).

Veeva Systems has been a well-oiled machine over the last year. It demonstrated elite profitability for a software business, boasting an average operating margin of 25.2%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Veeva Systems’s operating margin rose by 7 percentage points over the last year, as its sales growth gave it operating leverage.

In Q4, Veeva Systems generated an operating profit margin of 26.1%, up 4.7 percentage points year on year. The increase was encouraging, and since its operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as marketing, R&D, and administrative overhead.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Veeva Systems has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the software sector, averaging an eye-popping 38.9% over the last year.

Veeva Systems’s free cash flow clocked in at $64.82 million in Q4, equivalent to a 9% margin. This result was good as its margin was 1.1 percentage points higher than in the same quarter last year, but we note it was lower than its one-year cash profitability. Nevertheless, we wouldn’t read too much into a single quarter because investment needs can be seasonal, causing short-term swings. Long-term trends are more important.

Over the next year, analysts’ consensus estimates show they’re expecting Veeva Systems’s free cash flow margin of 38.9% for the last 12 months to remain the same.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Veeva Systems is a profitable, well-capitalized company with $5.15 billion of cash and $75.78 million of debt on its balance sheet. This $5.07 billion net cash position is 13.2% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was encouraging to see Veeva Systems beat analysts’ revenue and adjusted operating profit expectations this quarter. Looking ahead, while full-year revenue guidance was just in line with Wall Street’s estimates, full-year operating profit guidance was above. Overall, this was a solid quarter. The stock traded up 7.8% to $237 immediately following the results.

Updated: May 16, 2025 at 10:13 PM EDT

Before deciding whether to buy Veeva Systems or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

There are a lot of things to like about Veeva Systems. Although its revenue growth was uninspiring over the last three years and analysts expect growth to slow over the next 12 months, its bountiful generation of free cash flow empowers it to invest in growth initiatives. Plus, Veeva Systems’s impressive operating margins show it has a highly efficient business model.

Veeva Systems’s price-to-sales ratio based on the next 12 months is 13.2x. When scanning the software space, Veeva Systems trades at a fair valuation. If you trust the business and its direction, this is an ideal time to buy.

Wall Street analysts have a consensus one-year price target of $262.35 on the company (compared to the current share price of $240.70), implying they see 9% upside in buying Veeva Systems in the short term.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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