01—Abstract
Summary
Summary of the 10-K filed March 31, 2016. Cited figures are marked; the original filing is the authoritative source.
Veeva Systems Inc. (VEEV) reported total revenues of $409.2 milliona for the fiscal year ended January 31, 2016, up from $313.2 million, with subscription services revenues of $316.3 million (up from $233.1 million) making up 77% of total revenues.
Operating income was $78.6 millionb and net income was $54.5 million, compared with $70.0 million and $40.4 million in fiscal 2015. Non-GAAP net income was $74.5 million, and the company stated that it expects revenue growth to slightly decline in future periods. Operating expenses rose to 46.0% of revenues from 40.6%, and management expects operating expenses to increase in absolute dollars and as a percentage of revenue, which may slightly reduce operating margin.
The company acquired Zinc Ahead in September 2015 for approximately $119.9 millionc in cash, plus $10.0 million in deferred compensation, and acquired Qforma CrowdLink for $9.8 million. Cash, cash equivalents and short-term investments totaled $346.2 million at January 31, 2016, and operating cash flow was $80.2 million. The 10-K disclosed a material weakness in internal control over financial reporting related to the review of inputs used to value acquired intangible assets, and KPMG's report on internal control was adverse.
Investors should also note the dual-class structure, under which Class B holders controlled about 84.1% of voting power, and a Section 16(b) short-swing profit lawsuit filed on the company's behalf against Criterion Capital defendants. Customer count rose to 400 from 276, and the subscription services revenue retention rate was 125%, down from 138% in the prior year. Commitments to salesforce.com total $500 milliond over the agreement term through September 1, 2025, including true-up payments.
02—Key points
Key Highlights
- Total revenues rose to $409.2 million in fiscal 2016 from $313.2 million in fiscal 2015; subscription services revenues were $316.3 million, 77% of total revenues.
- Net income increased to $54.5 million (diluted EPS $0.38) from $40.4 million (diluted EPS $0.28); operating income was $78.6 million versus $70.0 million.
- Customer count reached 400 as of January 31, 2016, up from 276; subscription services revenue retention rate declined to 125% from 138%.
- Acquired Zinc Ahead for approximately $119.9 million in cash (plus $10.0 million deferred compensation) and Qforma CrowdLink for $9.8 million in cash during fiscal 2016.
- Cash, cash equivalents and short-term investments totaled $346.2 million; operating cash flow was $80.2 million.
- Management identified a material weakness in internal control over financial reporting related to valuation inputs for acquired intangible assets; KPMG issued an adverse opinion on internal control.
- Class B common stock (ten votes per share) held about 84.1% of voting power as of January 31, 2016, concentrating control with executives, directors and affiliates.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Veeva Systems kept $0.13.
- Revenue$409.2M100.0%
- Cost of revenue−$142.2M34.8%
- Gross profit$267.0M65.2%
- Operating costs−$188.4M46.0%
- Operating income$78.6M19.2%
- Interest, other & tax−$24.1M5.9%
- Net income$54.5M13.3%
Where FY2016 revenue went
$409.2M- Cost of revenue: $142.2M, 35% of revenue
- Other operating costs: $122.4M, 30% of revenue
- R&D: $66.0M, 16% of revenue
- Net income: $54.5M, 13% of revenue
- Interest, other & tax: $24.1M, 5.9% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed March 31, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $409.22M$313.22M | +30.6% |
| Cost of Revenue | $142.21M$115.66M | +23.0% |
| Gross Profit | $267.01M$197.56M | +35.1% |
| R&D Expenses | $65.98M$41.16M | +60.3% |
| Operating Expenses | $188.42M$127.60M | +47.7% |
| Operating Income | $78.59M$69.97M | +12.3% |
| Net Income | $54.46M$40.38M | +34.9% |
| EPS (Basic) | $0.41$0.31 | +32.3% |
| EPS (Diluted) | $0.38$0.28 | +35.7% |
| Shares Outstanding (Basic) | 132.02M127.71M | +3.4% |
| Shares Outstanding (Diluted) | 144.98M144.20M | +0.5% |
05—Questions
Frequently Asked Questions
How fast is Veeva's revenue growing, and what does management expect going forward?
Total revenues grew 31% in fiscal 2016 to $409.2 million, and subscription services revenues grew 36% to $316.3 million. Management expects the growth rate of total revenues and subscription services revenues to slightly decline in future periods.
What drove the change in profitability in fiscal 2016?
Gross profit rose to $267.0 million (65.2% of revenues) from $197.6 million (63.0%), and operating income rose to $78.6 million from $70.0 million. Operating expenses increased to 46.0% of revenues from 40.6%, and management expects operating expenses to rise in absolute dollars and as a percentage of revenue in the near term, which may slightly decrease operating margin.
What acquisitions did Veeva complete and what did they cost?
Veeva acquired Zinc Ahead, a commercial content management provider, on September 29, 2015 for approximately $119.9 million in cash, plus $10.0 million payable over three years to employees who remain employed. It also acquired the key opinion leader business of Qforma CrowdLink on March 31, 2015 for $9.8 million in cash.
What risks did the filing disclose about internal controls and ownership?
The filing disclosed a material weakness related to management's review of inputs used to value acquired intangible assets, and management concluded internal control over financial reporting was not effective as of January 31, 2016. Separately, Class B shares held about 84.1% of voting power, allowing those holders to control matters submitted to stockholders until October 15, 2023.
06—Continue