Veeva Systems Inc. VEEV reported adjusted earnings of 9 cents per share in the first quarter of fiscal 2016, a penny ahead of the Zacks Consensus Estimate and up 80% from the year-ago quarter. The upside was driven by robust revenue growth, lower operating expenses and margin expansion.
However, shares plunged 8.62% ($2.50) to $26.50 in after-hours trading following the results.
Quarter Details
Total revenue surged 34.8% on a year-over-year basis to almost $90 million, slightly ahead of the Zacks Consensus Estimate of $88 million and management’s guided range of $87–$88 million.
Subscription revenues soared roughly 42% year over year to $69 million, driven by growth across product lines. Professional services revenues increased 15.5% to $21 million, primarily owing to strong adoption of the Vault product.
On a geographical basis, 56% of the total revenue was generated from North America. Meanwhile, first-quarter billings increased 19% year over year to $88 million. During the quarter, drug giant GlaxoSmithKline GSK selected the company as its multichannel CRM partner.
Veeva appointed Alan Mateo as executive vice president of global sales in mid-April. Mateo has over 30 years of experience in enterprise resource planning (ERP) systems that include deployments at Corning GLW, Pfizer PFE, Bausch & Lomb, and Bayer.
Adjusted gross margin expanded 330 basis points (bps) to 64.4%, primarily attributable to significant growth in subscription gross margin (up 180 bps). The subscription gross margin strength was driven by robust performance by the Vault, Network and CRM add-on products.
Adjusted sales and marketing expenses, as a percentage of revenues, contracted 200 bps to 17.2%. Meanwhile, adjusted research and development expenses increased 60 bps to 14.4%, while adjusted general and administrative expenses decreased 10 bps to 9.5%.
Adjusted operating expenses, as a percentage of revenues, contracted 140 bps on a year-over-year basis to 41.1%.
Adjusted operating margin expanded 450 bps to 23.9%, driven by strong top-line growth and the subsequent expansion of gross margin.
Cash and cash equivalents, as of Apr 30, 2015, stood at $107.6 million compared with $129.3 million as of Jan 31, 2015.
Product Update
During the quarter, Veeva announced Vault Registrations, a solution that will manage product registration data worldwide, and Vault SubmissionsArchive, a system for storing a complete history of regulatory submissions.
Both these products are set to release in the first quarter of calendar 2016 and will be part of Veeva’s regulatory information management (RIM) suite that also includes Vault Submissions.
Veeva also announced the availability of the Veeva Network Provider Database in Europe. This is expected to provide life sciences companies with access to accurate healthcare professional (HCP), healthcare organization (HCO) and affiliations data. We believe that these new initiatives will boost Veeva’s top line in the European region.
Acquisition
Veeva acquired Qforma CrowdLink, a leading global solution provider for key opinion leader (KOL) data and services for life sciences’ brand, medical, and market access teams, for $10 million in cash. Management expects $1 million of revenue contribution from the buyout for the rest of fiscal 2016.
Guidance
Veeva expects total revenue in the range of $95–$96 million for the second quarter of fiscal 2016. Non-GAAP operating income is expected between $26.5 million and $27.5 million. Non-GAAP earnings are likely to stand at 11 cents per share.
For fiscal 2016, total revenue is expected in the band of $393–$397 million, up from $390–$395 million guided earlier. Veeva forecasts subscription revenues growth of over 30% for the full year.
Meanwhile, non-GAAP operating income is projected in the $107–$111 million range, up from $103–$108 million guided earlier. Earnings are anticipated between 45 cents and 46 cents, up from previous outlook of 43 cents to 45 cents.
Veeva forecasts billings to grow at least 5% in the second quarter and approximately 15% in fiscal year 2016.
Management expects foreign exchange volatility to impact revenues by $2 million to $2.5 million in the second quarter. For 2016, the negative affect is expected to be roughly $6 million to $7 million, about $1 million higher than its prior expectation.
Our Take
Veeva’s CRM platform continues to experience healthy growth and the non-CRM products are also starting to contribute to the overall business. We believe Veeva vault – the cloud-based content management solution – holds substantial long-term prospects.
However, foreign exchange volatility and higher level of hiring are expected to remain overhangs on the stock in the near term.
Zacks Rank
Currently, Veeva Systems carries a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment