01—Abstract
Summary
Summary of the 10-K filed March 30, 2023. Cited figures are marked; the original filing is the authoritative source.
Veeva Systems Inc. reported fiscal year ended January 31, 2023 total revenues of $2,155 milliona, up from $1,851 million, with subscription services revenues of $1,733 million and professional services and other revenues of $422 million.
Net income was $488 millionb, compared with $427 million the prior year, and diluted net income per share was $3.00. Operating income declined to $459 million from $505 million, as operating expenses rose to $1,087 million from $842 million, driven largely by research and development headcount growth and higher compensation costs. Other income, net increased to $50 million, and the effective tax rate fell to 4.2% from 16.6%, primarily due to excess tax benefits from stock-based compensation.
The filing signals slower growth ahead. Management expects total revenue and subscription services growth to decline in fiscal 2024, partly due to a change in multi-year subscription agreements that adds termination-for-convenience rights effective February 1, 2023, and it expects operating margin to decrease. The company also disclosed that it intends to migrate its CRM applications off the Salesforce platform to its own Veeva Vault platform, with the Salesforce agreement not being renewed after September 1, 2025.
Cash, cash equivalents and short-term investments totaled $3.1 billionc at year end, and cash provided by operating activities was $780 million. Litigation remains significant.
Veeva is in ongoing disputes with IQVIA, including trade secret claims against it and Veeva's own antitrust counterclaims seeking damages exceeding $200 milliond, and it also faces a pending appeal in the Medidata matter and the Mednet trade secret case. The company is a Delaware public benefit corporation, and its dual-class structure gives Class B holders about 50.3% of voting power until October 15, 2023, when the classes are scheduled to convert.
02—Key points
Key Highlights
- Total revenues of $2,155 million, up 16% from $1,851 million; subscription services were 80% of total revenues.
- Net income of $488 million, or $3.00 per diluted share, versus $427 million ($2.63 per diluted share) the prior year.
- Operating income fell to $459 million from $505 million as total operating expenses rose 29% to $1,087 million, led by research and development ($520 million, up 36%).
- Effective tax rate dropped to 4.2% from 16.6%, with excess tax benefits from stock-based compensation of $94 million.
- Management expects revenue growth and operating margin to decline in fiscal 2024 due to termination-for-convenience rights added to multi-year master subscription agreements effective February 1, 2023.
- Plans to migrate CRM applications from the Salesforce platform to Veeva Vault, with the Salesforce agreement not being renewed after its September 1, 2025 term.
- Cash, cash equivalents and short-term investments of $3.1 billion; operating cash flow of $780 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Veeva Systems kept $0.23.
- Revenue$2.16B100.0%
- Cost of revenue−$609.4M28.3%
- Gross profit$1.55B71.7%
- Operating costs−$1.09B50.4%
- Operating income$459.1M21.3%
- Interest, other & tax$28.6M1.3%
- Net income$487.7M22.6%
Where FY2023 revenue went
$2.16B- Cost of revenue: $609.4M, 28% of revenue
- Other operating costs: $566.3M, 26% of revenue
- R&D: $520.3M, 24% of revenue
- Operating income: $459.1M, 21% of revenue
Kept 21% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed March 30, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $2.16B$1.85B | +16.4% |
| Cost of Revenue | $609.40M$503.68M | +21.0% |
| Gross Profit | $1.55B$1.35B | +14.7% |
| R&D Expenses | $520.28M$382.04M | +36.2% |
| Operating Expenses | $1.09B$841.60M | +29.1% |
| Operating Income | $459.09M$505.50M | −9.2% |
| Net Income | $487.71M$427.39M | +14.1% |
| EPS (Basic) | $3.14$2.79 | +12.5% |
| EPS (Diluted) | $3.00$2.63 | +14.1% |
| Shares Outstanding (Basic) | 155.38M153.25M | +1.4% |
| Shares Outstanding (Diluted) | 162.44M162.28M | +0.1% |
05—Questions
Frequently Asked Questions
How did Veeva perform financially in fiscal 2023?
Total revenues rose 16% to $2,155 million and net income rose to $488 million from $427 million. Operating income, however, declined to $459 million from $505 million because operating expenses grew faster than revenue, mainly from headcount and compensation increases.
What is the outlook for fiscal 2024?
Management expects the growth rates of total revenues and subscription services revenues to decline. It also expects operating margin and gross margin to decrease, reflecting the new termination-for-convenience rights in multi-year subscription agreements and higher operating expenses, including stock-based compensation.
Why is Veeva moving off the Salesforce platform?
The filing says Veeva does not intend to renew its agreement with Salesforce, Inc., which expires September 1, 2025, and plans to migrate its multichannel CRM applications to its own Veeva Vault platform. Early adopters are expected in 2024 and all customers in 2025, with migration required by September 1, 2030. The filing warns this could cause customer disruption and loss of customers to competitors.
What are the main legal risks disclosed?
The most significant matters are the IQVIA litigation, in which IQVIA alleges trade secret misappropriation and Veeva's counterclaims seek over $200 million in damages, plus the Medidata appeal and the Mednet trade secret case. The filing states that Veeva cannot estimate the amount or range of potential loss from these matters.
Who controls voting power at Veeva?
As of January 31, 2023, founder and CEO Peter Gassner held approximately 44.9% of voting power, and Class B common stock holders collectively held about 50.3%. This dual-class structure gives Class B holders control over stockholder matters until October 15, 2023.
06—Continue