01—Abstract
Summary
Summary of the 10-Q filed December 7, 2023. Cited figures are marked; the original filing is the authoritative source.
Veeva Systems Inc. filed this Form 10-Q for the quarter ended October 31, 2023.
For the three months ended October 31, 2023, total revenues were $616.5 milliona, up from $552.4 million, with subscription services revenues of $494.9 million and professional services and other revenues of $121.6 million. Operating income was $128.5 million versus $121.4 million a year earlier, and net income was $135.2 million, or $0.83 per diluted share, compared with $108.5 million and $0.67 per diluted share. For the nine months, total revenues were $1.73 billion and net income was $378.3 million.
Cash, cash equivalents and short-term investments totaled $3.9 billionb as of October 31, 2023, and net cash provided by operating activities was $853.6 million for the nine months. The filing states that the company expects its total revenue and subscription services revenue growth rates to decline in the fiscal year ending January 31, 2024, because of a change to master subscription agreements for multi-year orders that added termination-for-convenience rights effective February 1, 2023. Management also expects operating margin to decrease in that fiscal year, citing higher operating expenses from headcount growth and the reduction in revenue from the contracting change.
Other income, net, is expected to keep rising on higher interest rates, and cash flows from operations are expected to be reduced by approximately $90 millionc due to R&D capitalization requirements under the Tax Cuts and Jobs Act. The filing also details significant litigation, including the IQVIA antitrust and trade secret matters and the Medidata appeal, with oral argument on the Medidata appeal set for January 11, 2024.
Management states it cannot estimate the amount or range of loss in these matters. The company also disclosed plans to migrate its CRM applications from the Salesforce platform to its Veeva Vault platform and not to renew the Salesforce agreement when it expires on September 1, 2025.
02—Key points
Key Highlights
- Total revenues for the three months ended October 31, 2023 were $616.5 million, up 12% from $552.4 million; subscription services revenues were $494.9 million.
- Net income for the three months ended October 31, 2023 was $135.2 million ($0.83 diluted EPS), compared with $108.5 million ($0.67 diluted EPS) a year earlier.
- Other income, net rose to $42.2 million for the quarter from $12.5 million, driven primarily by higher interest income.
- Cash, cash equivalents and short-term investments totaled $3.9 billion as of October 31, 2023.
- Management expects total and subscription revenue growth to decline in fiscal 2024 because of the termination-for-convenience change in multi-year master subscription agreements effective February 1, 2023.
- Management expects operating margin to decrease in fiscal 2024 as operating expenses rise with headcount growth.
- Class B common stock converted to Class A common stock on October 15, 2023, and authorized common shares were reduced from 1,000,000,000 to 810,000,000.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Veeva Systems kept $0.22.
- Revenue$616.5M100.0%
- Cost of revenue−$167.7M27.2%
- Gross profit$448.8M72.8%
- Operating costs−$320.3M52.0%
- Operating income$128.5M20.8%
- Interest, other & tax$6.7M1.1%
- Net income$135.2M21.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed December 7, 2023Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $616.50M$552.35M | +11.6% |
| Cost of Revenue | $167.68M$153.91M | +9.0% |
| Gross Profit | $448.82M$398.44M | +12.6% |
| R&D Expenses | $161.28M$130.26M | +23.8% |
| Operating Expenses | $320.33M$277.04M | +15.6% |
| Operating Income | $128.49M$121.40M | +5.8% |
| Net Income | $135.16M$108.46M | +24.6% |
| EPS (Basic) | $0.84$0.70 | +20.0% |
| EPS (Diluted) | $0.83$0.67 | +23.9% |
| Shares Outstanding (Basic) | 160.77M155.39M | +3.5% |
| Shares Outstanding (Diluted) | 163.76M162.29M | +0.9% |
05—Questions
Frequently Asked Questions
How did Veeva's revenue and profitability trend in the quarter ended October 31, 2023?
Total revenues rose to $616.5 million from $552.4 million, and operating income rose to $128.5 million from $121.4 million. Net income increased to $135.2 million from $108.5 million, helped by other income, net of $42.2 million, and an income tax provision of $35.5 million.
Why does the company expect revenue growth to slow in fiscal 2024?
The filing attributes the expected slowdown to a contracting change in master subscription agreements governing multi-year orders. Since February 1, 2023, these agreements generally include a customer termination-for-convenience right, which changes the timing of revenue recognition and reduces fiscal 2024 revenue. The company says revenue growth is expected to accelerate in fiscal 2025 in part because of this reduction.
What are the main legal risks disclosed in the filing?
The most significant matters are the IQVIA litigation, in which IQVIA alleges trade secret misappropriation and Veeva counterclaims for antitrust violations seeking damages exceeding $200 million, and the Medidata appeal, with oral argument set for January 11, 2024. Management states it cannot predict the outcomes or make a meaningful estimate of potential losses, and no liability has been accrued for certain contingent fee arrangements.
How much cash does the company have and what cash flow pressures are expected?
As of October 31, 2023, cash, cash equivalents and short-term investments totaled $3.9 billion, of which $61 million was held outside the United States. Net cash provided by operating activities was $853.6 million for the nine months. The company expects operating cash flows to be reduced by approximately $90 million in fiscal 2024 due to tax payments related to R&D expenditure capitalization under the Tax Cuts and Jobs Act of 2017.
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