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Veeva Systems (VEEV) Q2 Earnings Beat Estimates, '22 View Up

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Veeva Systems, Inc. (VEEV - Free Report) reported adjusted earnings per share (“EPS”) of 94 cents in the second quarter of fiscal 2022, reflecting an improvement of 30.6% from the year-ago EPS of 72 cents. Adjusted EPS surpassed the Zacks Consensus Estimate by 9.3%.

GAAP EPS in the second quarter was 67 cents, up by 15.5% from the year-ago EPS of 58 cents.

Revenues

For the quarter, the company’s revenues totaled $455.6 million, outpacing the Zacks Consensus Estimate by 0.9%. On a year-over-year basis, the top line improved 28.8%.

The second-quarter top line was driven by continued strength in Veeva Development Cloud.

Segmental Details

Veeva Systems derives revenues from two operating segments — Subscription services, and Professional services and other.

In the fiscal second quarter, Subscription services revenues improved 29.3% from the year-ago quarter to $366.4 million on the back of record bookings in the previous two quarters.

Professional services and other revenues were up 27% year over year to $89.2 million, primarily resulting from continued strong demand for Veeva Development Cloud services.

Veeva Systems Inc. Price, Consensus and EPS Surprise

Veeva Systems Inc. Price, Consensus and EPS Surprise

Veeva Systems Inc. price-consensus-eps-surprise-chart | Veeva Systems Inc. Quote

Margin Details

In the quarter under review, Veeva Systems’ gross profit rose 30% to $333.5 million. Gross margin expanded 68 basis points (bps) to 73.2%.

Meanwhile, sales and marketing expenses rose 21.3% to $71.8 million. Research and development expenses went up 35.5% year over year to $94.9 million, while general and administrative expenses climbed 13.5% year over year to $42.2 million. Total operating expenses of $208.9 million increased 25.5% year over year.

Operating profit totaled $124.6 million, which surged 38.3% from the prior-year quarter. Operating margin in the second quarter expanded 188 bps to 27.4%.

Financial Position

The company exited the fiscal 2022 second quarter with cash and cash equivalents, and short-term investments of $2.26 billion compared with $2.15 billion at the end of fiscal 2022 first quarter.

Cumulative net cash provided by operating activities at the end of the second quarter of fiscal 2022 was $597.5 million compared with $387.5 million in the year-ago period.

Guidance

On the back of its fiscal second-quarter performance, Veeva Systems has provided its financial outlook for fiscal third quarter and has also upped its full-year projections.

For the third quarter of fiscal 2022, the company expects total revenues in the range of $464 million-$466 million. The Zacks Consensus Estimate for the same is currently pegged at $459.4 million.

Adjusted EPS is projected to lie within 87-88 cents. The Zacks Consensus Estimate for the metric is pegged at 86 cents.

For fiscal 2022, revenues are expected in the range of $1,830 million-$1,835 million (up from the previously issued guidance range of $1,815 million-$1,825 million). The Zacks Consensus Estimate for the same is currently pegged at $1.82 billion.

Adjusted EPS for the year is expected to be $3.57, up from the previously provided estimate of $3.49. The Zacks Consensus Estimate for the same currently stands at $3.49.

Our Take

Veeva Systems exited the second quarter of fiscal 2022 with better-than-expected results. Both of its segments performed impressively during the quarter. The company continues to benefit from its flagship Vault platform, which is encouraging. Revenue uptick in Veeva Commercial Cloud with 21 new Veeva CRM customer wins and good traction with Veeva CRM add-ons (Crossix, and Veeva Link) looks impressive.

Strength in Veeva Systems’ data business and Veeva OpenData raises our optimism. Steady adoption of Veeva Systems’ products is encouraging as well. Expansion of both margins also bodes well. A raised guidance for the fiscal year is a major positive.

On the flip side, reduced Veeva CRM seats by few enterprise customers for their field forces during the quarter is worrying. According to Veeva Systems, its transition from CRM to the full Commercial Cloud of software, data and consulting has been slowed down by IQVIA Holdings Inc.’s (IQV - Free Report) anti-competitive practices, thus raising our apprehensions. Rising operating costs during the quarter is another headwind.

Zacks Rank and Key Picks

Veeva Systems currently carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the broader medical space that have announced their quarterly results are Encompass Health Corporation (EHC - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) .

Encompass Health, carrying a Zacks Rank #2 (Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #2.