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Veeva Systems (VEEV) Beats Q1 Earnings Estimates, Raises View

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Veeva Systems Inc. (VEEV - Free Report) reported first-quarter fiscal 2019 adjusted earnings of 33 cents per share. The bottom line beat the Zacks Consensus Estimate by 3 cents and improved 43.5% from the year-ago quarter’s figure.

Total revenues were $195.5 million in the first quarter, up 22.4% year over year. Moreover, the top line surpassed the Zacks Consensus Estimate of $189.2 million. Veeva System’s strong growth in subscription revenues segment drove the metric.

Veeva Systems outperformed its industry on a year-to-date basis. The company’s shares have gained 9.5% comparing favorably with the industry’s rise of 5.9%. The current level is also higher than the S&P 500 index’s return of just 2%.

The stock has a Zacks Rank #3 (Hold).

Segmental Details

First-quarter subscription service revenues were $156 million, up 20.8% year over year. The upside was backed by stronger-than-expected bookings in the quarter under review.

Subscription gross margin was 80.8%, expanding roughly 100 basis points (bps) year over year. Per the company, momentum in product lines, especially the Veeva Vault, continue to drive growth.

Professional service revenues rose almost 29.1% to $34 million. In the quarter under review, services gross margin was 23.5%, down from 220 bps in the prior-year quarter.

Veeva Systems Inc. Price, Consensus and EPS Surprise

 

Margin Details

Gross profit in the reported quarter increased 22.1% year over year to $135.4 million. Gross margin at Veeva Systems contracted 20 bps to 69.2% in the reported quarter.

Operating income was $44 million in the reported quarter, up 13.1% from the year-ago quarter’s level. However, operating margin contracted 180 bps to 22.5% from the year-ago quarter’s figure. Rising operating expenses has kept the operating margin under pressure in the quarter. In this regard, operating expenses increased 26.9% in the reported quarter to $91.4 million.

Research and development expenses increased 31.4% to $37.2 million. Sales and marketing expenses rose 14.1% to $34.4 million. General and administrative expenses increased 46.2% to $19.9 million.

Guidance

The company provided financial guidance for the second quarter of fiscal 2019. Total revenues are expected in the range of $203-$204 million. The Zacks Consensus Estimate is pegged at $198.9 million, which is below the guidance.     Adjusted operating income is expected between $64 million and $65 million. Adjusted earnings per share are expected in the band of 33-34 cents. The Zacks Consensus Estimate is pegged at 32 cents, which is below the guidance.

For the fiscal, total revenues are anticipated in the band of $826-$830 million, up from the previous range of $815-$820 million. The Zacks Consensus Estimate is pegged at $819.2 million, which lies within the guidance. Adjusted earnings are projected between $1.36 and $1.38, up from the previous range of $1.30-$1.33. The Zacks Consensus Estimate for the metric is pegged at $1.32, which lies within the guidance.

In Conclusion

Veeva Systems exited the first quarter of fiscal 2019 on a solid note, beating the Zacks Consensus Estimate on both the counts. Solid performance in Subscription revenues has been a key catalyst. Further, in a bid to replace the simple custom-made data warehouses with a unique industry-specific data model, Veeva Systems recently introduced Veeva Nitro — a new model of commercial data warehouse for Life Sciences. We are encouraged by Veeva Systems’ consistent efforts in product innovation and launches through R&D. Growing global demand for cloud-based vault applications also boost opportunities.

On the flip side, high expenses on the operational side are causing a drag on the company’s margins, partially dampening its revenues. Furthermore, intense competition and a saturating life sciences market are key concerns. Volatility in foreign currency exchange rate is a headwind.

Q1 Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space which reported solid earnings this season are Boston Scientific Corporation (BSX - Free Report) , Varian Medical Systems, Inc (VAR - Free Report) and Intuitive Surgical, Inc (ISRG - Free Report) .

Intuitive Surgical reported adjusted earnings of $2.44 per share, which surpassed the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, which beat the Zacks Consensus Estimate by 10.6%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Varian Medical reported second-quarter fiscal 2018 adjusted earnings of $1.15 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings improved 27.8% on a year-over-year basis. The stock has a Zacks Rank #2 (Buy).

Boston Scientific posted adjusted earnings per share of 33 cents in the first quarter of 2018, up 13.8% from the year-ago quarter’s tally. Earnings also surpassed the Zacks Consensus Estimate of 31 cents. The stock has a Zacks Rank #2.

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