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Veeva Systems (VEEV) Beats on Q1 Earnings, Ups FY24 Outlook

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Veeva Systems, Inc. (VEEV - Free Report) reported adjusted earnings per share (EPS) of 91 cents for the first quarter of fiscal 2024, reflecting a decline of 8.1% from the year-ago EPS of 99 cents. Adjusted EPS surpassed the Zacks Consensus Estimate by 15.2%.

GAAP EPS in the fiscal first quarter was 81 cents, up 30.6% from the year-ago period’s 62 cents.

Revenues

For the quarter, the company’s revenues totaled $526.3 million, outpacing the Zacks Consensus Estimate by 2.1%. On a year-over-year basis, the top line improved 4.2%.

The fiscal first quarter top line was driven by Veeva Systems’ robust segmental performances.

Segmental Details

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

In the fiscal first quarter, Subscription services revenues improved 2.9% from the year-ago quarter to $414.5 million. Our projection for fiscal first-quarter revenues was $405 million.

Professional services and other revenues were up 9.1% year over year to $111.8 million, primarily resulting from continued strength in Research and Development (R&D) Solutions services and Veeva Business Consulting.

Our projection for fiscal first-quarter revenues was $110.1 million.

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 declined 1.6% to $359.7 million. The gross margin contracted 404 basis points (bps) to 68.3%.

We had projected 68.6% of gross margin for the fiscal first quarter.

Sales and marketing expenses rose 16.3% to $88.5 million. R&D expenses went up 29.5% year over year to $146.9 million, while general and administrative expenses climbed 29.7% year over year to $62.7 million. Total operating expenses of $298.1 million increased 25.3% year over year.

Operating profit totaled $61.5 million, which declined 51.8% from the prior-year quarter. The operating margin in the fiscal first quarter contracted a huge 1359 bps to 11.7%.

We had projected 10.5% of operating margin for the fiscal first quarter.

Financial Position

The company exited first-quarter fiscal 2024 with cash and cash equivalents and short-term investments of $3.61 billion compared with $3.10 billion at the end of fiscal 2023.

Net cash provided by operating activities at the end of first-quarter fiscal 2024 was $505.9 million compared with $481 million in the year-ago period.

Guidance

Veeva Systems has upped its financial outlook for fiscal 2024 and provided its estimates for the second quarter of fiscal 2024.

For the second quarter of fiscal 2024, the company expects total revenues to be between $580 million and $582 million. The Zacks Consensus Estimate for the same is currently pegged at $577.7 million.

Subscription revenues are estimated to be approximately $465 million in the fiscal second quarter.

Adjusted EPS is projected to be between $1.12 and $1.13. The Zacks Consensus Estimate for the metric is pegged at $1.05.

Veeva Systems expects revenues for fiscal 2024 to be between $2,360 and $2,370 million, up from the earlier outlook of $2,350-$2,360 million. The Zacks Consensus Estimate for the same is currently pegged at $2.35 billion.

Subscription revenues are expected to be $1.890 billion, up from the earlier projection of $1.88 billion. This consists of Commercial Solutions’ subscription revenues of around $980 million (up from the prior projection of $972 million) and R&D Solutions’ subscription revenues of approximately $910 million (up from the prior projection of $908 million).

Adjusted EPS for the year is expected to be $4.59, up from the previous outlook of $4.33. The Zacks Consensus Estimate for the metric is pegged at $4.32.

Our Take

Veeva Systems exited the first quarter of fiscal 2024 with better-than-expected results. The uptick in the overall top line and robust performances by both segments during the quarter are impressive. The company continues to benefit from its flagship Vault platform, which is encouraging. Veeva Systems’ continued strength in its Commercial Solutions, with new SMB customer additions and expansions in Veeva Commercial Cloud, looks promising.

Veeva Systems registered great traction in newer areas, including Veeva Vault Safety, Veeva Link, and Veeva Compass, which augurs well. The continued progress in clinical data management with Enterprise and CRO opportunities raises our optimism.

On the flip side, decline in adjusted EPS in the reported quarter is disappointing. Rising operating costs putting pressure on the margins during the quarter were another concern.

Zacks Rank and Key Picks

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

Some better-ranked stocks in the broader medical space that have announced quarterly results are Hologic, Inc. (HOLX - Free Report) , Merit Medical Systems, Inc. (MMSI - Free Report) and Boston Scientific Corporation (BSX - Free Report) .

Hologic, carrying a Zacks Rank of 2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of $1.06, beating the Zacks Consensus Estimate by 20.5%. Revenues of $ $1.03 billion outpaced the consensus mark by 6.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hologic has an estimated growth rate of 5.1% for fiscal 2024. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average being 27.3%.

Merit Medical reported first-quarter 2023 adjusted EPS of 64 cents, beating the Zacks Consensus Estimate by 16.4%. Revenues of $297.6 million surpassed the Zacks Consensus Estimate by 5.9%. It currently carries a Zacks Rank #2.

Merit Medical has a long-term estimated growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.

Boston Scientific reported first-quarter 2023 adjusted EPS of 47 cents, beating the Zacks Consensus Estimate by 9.3%. Revenues of $3.39 billion surpassed the Zacks Consensus Estimate by 7.6%. It currently carries a Zacks Rank #2.

Boston Scientific has a long-term estimated growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed in the other two, the average surprise being 1.9%.

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