01—Abstract
Summary
Summary of the 10-K filed March 30, 2017. Cited figures are marked; the original filing is the authoritative source.
Veeva Systems Inc. (VEEV) reported total revenues of $544.0 milliona for the fiscal year ended January 31, 2017, up 33% from $409.2 million, with subscription services revenues of $434.3 million (up 37%) making up 80% of total revenues.
Net income was $68.8 millionb, compared with $54.5 million in the prior year, and operating income was $108.0 million. The company served 517 customers as of January 31, 2017, up from 400 a year earlier, and its subscription services revenue retention rate was 127%. Management expects the growth rate of total and subscription revenues to decline in future periods, and operating expenses are expected to rise as a percentage of revenue, which could slightly reduce operating margin.
The balance sheet remained strong, with cash, cash equivalents and short-term investments of $518.9 millionc and no debt disclosed in the filing. Operating cash flow was $144.0 million. Stockholders' equity rose to $653.0 million.
Class B shares carry ten votes each, and holders of Class B stock held approximately 76.7% of voting power as of January 31, 2017, so control remains concentrated. The filing also details several pending legal matters. Quintiles IMS sued Veeva in January 2017 alleging trade secret theft, and Veeva countersued in March 2017 under antitrust laws seeking damages exceeding $200 milliond.
Medidata filed a trade secret complaint in January 2017, and Veeva has moved to compel arbitration. Management believes IMS's and Medidata's claims lack merit but cannot estimate a range of loss. A separate Section 16(b) short-swing profits action brought on Veeva's behalf is also pending.
02—Key points
Key Highlights
- Total revenues rose 33% to $544.0 million in fiscal 2017, with subscription services revenues up 37% to $434.3 million, representing 80% of total revenues.
- Net income was $68.8 million (diluted EPS $0.47) versus $54.5 million the prior year; operating income was $108.0 million.
- Customer count grew to 517 as of January 31, 2017, from 400 a year earlier; subscription services revenue retention rate was 127%.
- Cash, cash equivalents and short-term investments totaled $518.9 million at fiscal year-end; operating cash flow was $144.0 million.
- Management expects revenue growth rates to decline in future periods and expects operating expenses to increase as a percentage of revenue.
- Pending litigation includes an IMS trade secret suit, Veeva's $200 million-plus antitrust counterclaims against IMS, and a Medidata trade secret complaint; the company does not estimate potential losses.
- Class B shares with ten votes each gave holders about 76.7% of voting power, concentrating control with executives, directors and their affiliates.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Veeva Systems kept $0.14.
- Revenue$550.5M100.0%
- Cost of revenue−$173.7M31.5%
- Gross profit$376.9M68.5%
- Operating costs−$256.2M46.5%
- Operating income$120.7M21.9%
- Interest, other & tax−$43.1M7.8%
- Net income$77.6M14.1%
Where FY2017 revenue went
$550.5M- Cost of revenue: $173.7M, 32% of revenue
- Other operating costs: $159.4M, 29% of revenue
- R&D: $96.7M, 18% of revenue
- Net income: $77.6M, 14% of revenue
- Interest, other & tax: $43.1M, 7.8% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed March 30, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $550.54M$409.22M | +34.5% |
| Cost of Revenue | $173.68M$142.21M | +22.1% |
| Gross Profit | $376.86M$267.01M | +41.1% |
| R&D Expenses | $96.74M$65.98M | +46.6% |
| Operating Expenses | $256.17M$188.42M | +36.0% |
| Operating Income | $120.69M$78.59M | +53.6% |
| Net Income | $77.57M$54.46M | +42.4% |
| EPS (Basic) | $0.57$0.41 | +39.0% |
| EPS (Diluted) | $0.53$0.38 | +39.5% |
| Shares Outstanding (Basic) | 135.70M132.02M | +2.8% |
| Shares Outstanding (Diluted) | 147.58M144.98M | +1.8% |
05—Questions
Frequently Asked Questions
How fast is Veeva growing and is that expected to continue?
Total revenues grew 33% in fiscal 2017 (from $409.2 million to $544.0 million) and 31% in fiscal 2016. The company states that it expects the growth rate of total revenues and subscription services revenues to decline in future periods.
Is the company profitable and how strong is its balance sheet?
Net income was $68.8 million in fiscal 2017, up from $54.5 million. Cash, cash equivalents and short-term investments totaled $518.9 million, and total stockholders' equity was $653.0 million at January 31, 2017. The filing discloses no outstanding debt.
How concentrated is Veeva's customer base and revenue?
The top 10 customers accounted for 45% of total revenues in fiscal 2017, down from 50% in fiscal 2016 and 54% in fiscal 2015. No single customer exceeded 10% of total revenues in any of the three years.
What are the main legal risks investors should watch?
Quintiles IMS alleges trade secret theft and seeks unspecified damages, and Veeva has countersued for antitrust violations seeking more than $200 million. Medidata alleges Veeva induced former employees to breach agreements and misappropriate trade secrets, and Veeva is seeking to compel arbitration. The company says it cannot estimate the amount or range of any loss.
Who controls voting power at Veeva?
Class B common stock carries ten votes per share versus one vote for Class A. As of January 31, 2017, Class B holders, including executive officers and directors and their affiliates, held about 76.7% of voting power, which will persist until October 15, 2023 or an earlier conversion trigger.
06—Continue