Veeva Systems (NYSE:VEEV) Beats Q2 Sales Targets, Gross Margin Improves
Healthcare software provider Veeva Systems (NASDAQ:VEEV) reported results ahead of analysts’ expectations in Q2 CY2024, with revenue up 14.6% year on year to $676.2 million. The company expects next quarter’s revenue to be around $683.5 million, in line with analysts’ estimates. It made a non-GAAP profit of $1.62 per share, improving from its profit of $1.21 per share in the same quarter last year.
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Veeva Systems (VEEV) Q2 CY2024 Highlights:
- Revenue: $676.2 million vs analyst estimates of $667.8 million (1.2% beat)
- Adjusted Operating Income: $279.8 million vs analyst estimates of $266.1 million (5.1% beat)
- EPS (non-GAAP): $1.62 vs analyst estimates of $1.53 (5.6% beat)
- The company slightly lifted its revenue guidance for the full year to $2.71 billion at the midpoint from $2.71 billion
- EPS (non-GAAP) guidance for the full year is $6.22 at the midpoint, roughly in line with what analysts were expecting
- Gross Margin (GAAP): 74.8%, up from 71.4% in the same quarter last year
- Free Cash Flow Margin: 13.3%, down from 116% in the previous quarter
- Market Capitalization: $32.37 billion
"It was another quarter of great execution, with major product advances in clinical and CRM that position us well for the industry cloud opportunity we see ahead," said CEO Peter Gassner.
Built on top of Salesforce as one of the first vertical-focused cloud platforms, Veeva (NYSE:VEEV) provides data and customer relationship management (CRM) software for organizations in the life sciences industry.
Healthcare And Life Sciences Software
The coronavirus pandemic has underscored the importance of high-quality health infrastructure in times of crisis. Coupled with intense competition between drugmakers and the growing volume of data in the health care sector, demand for data management solutions in the healthcare space is expected to remain strong in the years ahead.
Sales Growth
As you can see below, Veeva Systems’s 15.7% annualized revenue growth over the last three years has been sluggish, and its sales came in at $676.2 million this quarter.
This quarter, Veeva Systems’s quarterly revenue was once again up 14.6% year on year. We can see that Veeva Systems’s revenue increased by $25.84 million quarter on quarter, which is a solid improvement from the $19.73 million increase in Q1 CY2024. This re-acceleration of growth was a great sign.
Next quarter’s guidance suggests that Veeva Systems is expecting revenue to grow 10.9% year on year to $683.5 million, in line with the 11.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 11.3% over the next 12 months before the earnings results announcement.
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Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Veeva Systems has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the software sector, averaging an eye-popping 37.8% over the last year.
Veeva Systems’s free cash flow clocked in at $89.82 million in Q2, equivalent to a 13.3% margin. The company’s cash profitability regressed as it was 30 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.
Over the next year, analysts predict Veeva Systems’s cash conversion will improve. Their consensus estimates imply its free cash flow margin of 37.8% for the last 12 months will increase to 40.7%, giving it more optionality.
Key Takeaways from Veeva Systems’s Q2 Results
It was great to see Veeva Systems revenue and operating profit beat expectations. Additionally, its gross margin improved this quarter compared to the same quarter last year. Finally, the company raised its full year revenue guidance, showing that topline momentum is strong. On the other hand, its revenue guidance for next quarter underwhelmed. While it wasn't a perfect quarter, it was a pretty solid one. The stock traded up 3.5% to $206.50 immediately after reporting.
So should you invest in Veeva Systems right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
