01—Abstract
Summary
Summary of the 10-K filed March 28, 2019. Cited figures are marked; the original filing is the authoritative source.
Veeva Systems Inc. reported fiscal 2019 (year ended January 31, 2019) total revenues of $862.2 milliona, up from $690.6 million, with subscription services revenues of $694.5 million, up from $559.4 million.
Operating income rose to $222.9 millionb from $157.9 million, and net income reached $229.8 million, or $1.47 per diluted share, compared with $151.2 million, or $0.98 per diluted share, in the prior year. The company attributes much of the profit improvement to its effective tax rate falling to 3.7% from 8.8%, driven by excess tax benefits from equity compensation and tax credits, so the net income increase is not solely operating in nature. Non-GAAP operating income was $305.9 million, and cash, cash equivalents and short-term investments totaled $1.1 billion at year end.
The filing states that management expects the growth rate of total revenues and subscription services revenues to decline in future periods. Veeva Vault solutions contributed a growing share of results, accounting for 47%c of total revenues versus 53% from Veeva Commercial Cloud. The company's subscription services revenue retention rate was 122% in fiscal 2019, compared with 121% in fiscal 2018.
Customer count rose to 719 from 625, and the top 10 customers accounted for 39% of total revenues. Key risks disclosed include ongoing litigation with competitors IQVIA and Medidata over trade secret and non-compete claims, dependence on salesforce.com and Amazon Web Services for hosting, a minimum order commitment of $500 milliond to salesforce.com through September 2025 with $216.4 million remaining, and a dual-class share structure in which Class B holders controlled approximately 61.6% of voting power as of January 31, 2019.
02—Key points
Key Highlights
- Total revenues grew 25% to $862.2 million; subscription services revenues grew 24% to $694.5 million.
- Net income rose to $229.8 million ($1.47 diluted EPS) from $151.2 million ($0.98), with the effective tax rate falling to 3.7% from 8.8%.
- Operating income increased to $222.9 million from $157.9 million; non-GAAP operating income was $305.9 million.
- Veeva Vault revenues were $404.6 million in total (subscription plus professional services), versus $272.6 million in fiscal 2018.
- Subscription services revenue retention rate was 122%, compared with 121% in fiscal 2018 and 127% in fiscal 2017.
- Management expects the growth rate of total and subscription revenues to decline in future periods.
- Cash, cash equivalents and short-term investments totaled $1.1 billion at January 31, 2019, with no debt disclosed in the balance sheet.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Veeva Systems kept $0.27.
- Revenue$862.2M100.0%
- Cost of revenue−$245.3M28.4%
- Gross profit$616.9M71.6%
- Operating costs−$394.1M45.7%
- Operating income$222.9M25.8%
- Interest, other & tax$7.0M0.8%
- Net income$229.8M26.7%
Where FY2019 revenue went
$862.2M- Cost of revenue: $245.3M, 28% of revenue
- Other operating costs: $235.3M, 27% of revenue
- Operating income: $222.9M, 26% of revenue
- R&D: $158.8M, 18% of revenue
Kept 26% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed March 28, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $862.21M$690.56M | +24.9% |
| Cost of Revenue | $245.28M$211.44M | +16.0% |
| Gross Profit | $616.93M$479.14M | +28.8% |
| R&D Expenses | $158.78M$132.02M | +20.3% |
| Operating Expenses | $394.06M$321.21M | +22.7% |
| Operating Income | $222.87M$157.93M | +41.1% |
| Net Income | $229.83M$151.18M | +52.0% |
| EPS (Basic) | $1.59$1.08 | +47.2% |
| EPS (Diluted) | $1.47$0.98 | +50.0% |
| Shares Outstanding (Basic) | 144.24M140.31M | +2.8% |
| Shares Outstanding (Diluted) | 156.12M153.68M | +1.6% |
05—Questions
Frequently Asked Questions
How did Veeva perform financially in fiscal 2019?
Total revenues were $862.2 million, up from $690.6 million, and net income was $229.8 million, up from $151.2 million. Operating income rose to $222.9 million from $157.9 million, and operating margin was 25.8% of revenue, compared with 23.0% the prior year.
What drove the increase in net income?
Higher operating income contributed, but the filing states that the effective tax rate decreased to 3.7% from 8.8%, mainly due to the federal rate reduction under the Tax Act, increased tax credits, and $45.8 million of excess tax benefits related to equity compensation recognized in the provision for income taxes.
Is Veeva's growth expected to continue at its current pace?
The filing states that management expects the growth rate of total revenues and subscription services revenues to decline in future periods. It also expects operating expenses to increase in absolute dollars and, in the near term, to grow slightly as a percentage of revenue.
What are the main legal and contractual risks?
Veeva is litigating with IQVIA and Medidata, with IQVIA's claims against Veeva alleging trade secret misappropriation and Veeva's counterclaims seeking more than $200 million in damages. Veeva also has a minimum order commitment of $500 million to salesforce.com through September 1, 2025, with $216.4 million remaining as of January 31, 2019.
How concentrated is Veeva's ownership and voting control?
Holders of Class B common stock, which carries ten votes per share, held approximately 61.6% of the voting power as of January 31, 2019, including executive officers, directors and their affiliates. The filing states they will control matters submitted to stockholders until October 15, 2023.
06—Continue