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Veeva Systems Q2 Earnings & Revenues Beat, Operating Margin Up Y/Y
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Veeva Systems, Inc. (VEEV - Free Report) reported adjusted earnings per share (EPS) of $1.62 for the second quarter of fiscal 2025, which increased 33.1% from the year-ago figure of $1.21. Adjusted EPS surpassed the Zacks Consensus Estimate by 5.88%.
GAAP EPS in the fiscal second quarter was $1.04, up 52.9% from the year-ago period’s 68 cents.
VEEV’s Revenue Details
For the quarter under review, the company’s revenues totaled $676.3 million, outpacing the Zacks Consensus Estimate by 1.34%. On a year-over-year basis, the top line improved 14.6%.
The fiscal second-quarter top line was driven by Veeva Systems’ robust segmental performance.
Segmental Analysis of VEEV
Veeva Systems derives revenues from two operating segments — Subscription services and Professional services and other.
In the fiscal second quarter, Subscription services revenues improved 19.3% from the year-ago quarter to $561.3 million. Per management, this uptick was driven by both its established and newer solutions. Our projection for fiscal second-quarter revenues was $553.8 million.
Professional services and other revenues were down 3.9% year over year to $114.9 million. Our projection for fiscal second-quarter revenues was $112.8 million.
Q2 Margin Performance by VEEV
In the quarter under review, Veeva Systems’ gross profit improved 20.1% to $505.8 million. The gross margin expanded 340 basis points (bps) to 74.8%. We had projected 71.1% of gross margin for the fiscal second quarter.
Sales and marketing expenses rose 4.7% to $101.5 million. Research and development (R&D) expenses went up 12.2% year over year to $176.4 million, while general and administrative expenses declined 2.5% to $61.4 million. Total operating expenses of $339.3 million increased 6.9% year over year.
Operating profit totaled $166.5 million, which increased 60% from the prior-year quarter. The operating margin in the fiscal second quarter expanded a huge 700 bps to 24.6%. We had projected a 22.7% operating margin for the fiscal second quarter.
VEEV’s Financial Position
The company exited second-quarter fiscal 2025 with cash and cash equivalents and short-term investments of $4.89 billion compared with $4.77 billion at the fiscal first-quarter end.
Cumulative net cash provided by operating activities at the end of the quarter was $856.4 million compared with $770.9 million a year ago.
Guidance Provided by VEEV
Veeva Systems has revised its financial outlook for fiscal 2025 and provided its estimates for the third quarter of fiscal 2025.
For the fiscal third quarter, the company expects total revenues between $682 million and $685 million. The Zacks Consensus Estimate is currently pegged at $681.3 million.
Subscription revenues and Professional services and other revenues are estimated to be approximately $571 million and $111 million-$114 million, respectively, for the fiscal third quarter.
For the fiscal third quarter, adjusted EPS is projected to be between $1.57 and $1.58. The Zacks Consensus Estimate is pegged at $1.54.
Veeva Systems now expects revenues for fiscal 2025 between $2,704 million and $2,710 million compared with the earlier outlook of $2,700 million and $2,710 million. The Zacks Consensus Estimate is currently pegged at $2.71 billion.
For fiscal 2025, Subscription revenues are now expected to be $2,257 million, higher than the previous outlook of $2,245 million. This consists of Commercial Solutions’ subscription revenues of around $1,090 million (up from the prior outlook of $1,080 million) and R&D Solutions’ subscription revenues of approximately $1,167 million (higher than the previous outlook of $1,165 million).
Professional services and other revenues for fiscal 2025 are now expected to be between $447 million and 453 million, lower than the earlier guidance of $455 million and $465 million.
Adjusted EPS for fiscal 2025 is now expected to be $6.22, up from the previous guidance of $6.16. The Zacks Consensus Estimate is pegged at $6.15.
Our Take on Veeva’s Q2 Results
Veeva Systems exited the second quarter of fiscal 2025 with better-than-expected results. The uptick in the overall top line and bottom line and robust performance by the Subscription services segment during the quarter were impressive.
Per management, the new release of Veeva Site Connect added significant capabilities to streamline and simplify the clinical trial process for sites and biopharma sponsors. Site Connect is gaining momentum, including a win with its seventh top 20 biopharma. Also, in clinical, Veeva Clinical Database (CDB), a major innovation in clinical data, has been selected by seven top 20 biopharmas to reduce manual query work and increase speed and efficiency in trials.
Per management, in the fiscal second quarter, a top 20 biopharma, with only one prior Veeva Development Cloud product standardized on the full Vault RIM Suite for regulatory and Vault CTMS for clinical. Veeva also made major progress with emerging biotechs and added 12 Vault Basics customers in the quarter following its April release.
On the flip side, lower Professional services and other segment revenues, along with lower guidance of the same for fiscal 2025 raise our apprehension. It also sounded cautious on the earnings call about the persistent overall macroeconomic challenges and uncertainties resulting from inflation, higher interest rates, global conflicts and political instability, among others. This does not bode well for the stock.
Veeva Systems Inc. Price, Consensus and EPS Surprise
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 41.1% compared with the industry's 34.8% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 3.7% so far this year compared with the industry’s 10.2% rise.
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 24.1% so far this year compared with the industry’s 11.9% growth.
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Veeva Systems Q2 Earnings & Revenues Beat, Operating Margin Up Y/Y
Veeva Systems, Inc. (VEEV - Free Report) reported adjusted earnings per share (EPS) of $1.62 for the second quarter of fiscal 2025, which increased 33.1% from the year-ago figure of $1.21. Adjusted EPS surpassed the Zacks Consensus Estimate by 5.88%.
GAAP EPS in the fiscal second quarter was $1.04, up 52.9% from the year-ago period’s 68 cents.
VEEV’s Revenue Details
For the quarter under review, the company’s revenues totaled $676.3 million, outpacing the Zacks Consensus Estimate by 1.34%. On a year-over-year basis, the top line improved 14.6%.
The fiscal second-quarter top line was driven by Veeva Systems’ robust segmental performance.
Segmental Analysis of VEEV
Veeva Systems derives revenues from two operating segments — Subscription services and Professional services and other.
In the fiscal second quarter, Subscription services revenues improved 19.3% from the year-ago quarter to $561.3 million. Per management, this uptick was driven by both its established and newer solutions. Our projection for fiscal second-quarter revenues was $553.8 million.
Professional services and other revenues were down 3.9% year over year to $114.9 million. Our projection for fiscal second-quarter revenues was $112.8 million.
Q2 Margin Performance by VEEV
In the quarter under review, Veeva Systems’ gross profit improved 20.1% to $505.8 million. The gross margin expanded 340 basis points (bps) to 74.8%. We had projected 71.1% of gross margin for the fiscal second quarter.
Sales and marketing expenses rose 4.7% to $101.5 million. Research and development (R&D) expenses went up 12.2% year over year to $176.4 million, while general and administrative expenses declined 2.5% to $61.4 million. Total operating expenses of $339.3 million increased 6.9% year over year.
Operating profit totaled $166.5 million, which increased 60% from the prior-year quarter. The operating margin in the fiscal second quarter expanded a huge 700 bps to 24.6%. We had projected a 22.7% operating margin for the fiscal second quarter.
VEEV’s Financial Position
The company exited second-quarter fiscal 2025 with cash and cash equivalents and short-term investments of $4.89 billion compared with $4.77 billion at the fiscal first-quarter end.
Cumulative net cash provided by operating activities at the end of the quarter was $856.4 million compared with $770.9 million a year ago.
Guidance Provided by VEEV
Veeva Systems has revised its financial outlook for fiscal 2025 and provided its estimates for the third quarter of fiscal 2025.
For the fiscal third quarter, the company expects total revenues between $682 million and $685 million. The Zacks Consensus Estimate is currently pegged at $681.3 million.
Subscription revenues and Professional services and other revenues are estimated to be approximately $571 million and $111 million-$114 million, respectively, for the fiscal third quarter.
For the fiscal third quarter, adjusted EPS is projected to be between $1.57 and $1.58. The Zacks Consensus Estimate is pegged at $1.54.
Veeva Systems now expects revenues for fiscal 2025 between $2,704 million and $2,710 million compared with the earlier outlook of $2,700 million and $2,710 million. The Zacks Consensus Estimate is currently pegged at $2.71 billion.
For fiscal 2025, Subscription revenues are now expected to be $2,257 million, higher than the previous outlook of $2,245 million. This consists of Commercial Solutions’ subscription revenues of around $1,090 million (up from the prior outlook of $1,080 million) and R&D Solutions’ subscription revenues of approximately $1,167 million (higher than the previous outlook of $1,165 million).
Professional services and other revenues for fiscal 2025 are now expected to be between $447 million and 453 million, lower than the earlier guidance of $455 million and $465 million.
Adjusted EPS for fiscal 2025 is now expected to be $6.22, up from the previous guidance of $6.16. The Zacks Consensus Estimate is pegged at $6.15.
Our Take on Veeva’s Q2 Results
Veeva Systems exited the second quarter of fiscal 2025 with better-than-expected results. The uptick in the overall top line and bottom line and robust performance by the Subscription services segment during the quarter were impressive.
Per management, the new release of Veeva Site Connect added significant capabilities to streamline and simplify the clinical trial process for sites and biopharma sponsors. Site Connect is gaining momentum, including a win with its seventh top 20 biopharma. Also, in clinical, Veeva Clinical Database (CDB), a major innovation in clinical data, has been selected by seven top 20 biopharmas to reduce manual query work and increase speed and efficiency in trials.
Per management, in the fiscal second quarter, a top 20 biopharma, with only one prior Veeva Development Cloud product standardized on the full Vault RIM Suite for regulatory and Vault CTMS for clinical. Veeva also made major progress with emerging biotechs and added 12 Vault Basics customers in the quarter following its April release.
On the flip side, lower Professional services and other segment revenues, along with lower guidance of the same for fiscal 2025 raise our apprehension. It also sounded cautious on the earnings call about the persistent overall macroeconomic challenges and uncertainties resulting from inflation, higher interest rates, global conflicts and political instability, among others. This does not bode well for the stock.
Veeva Systems Inc. Price, Consensus and EPS Surprise
Veeva Systems Inc. price-consensus-eps-surprise-chart | Veeva Systems Inc. Quote
Zacks Rank and Stocks to Consider
VEEV carries a Zacks Rank #4 (Sell) at present.
Some better-ranked stocks in the broader medical space are Universal Health Service (UHS - Free Report) , Quest Diagnostics (DGX - Free Report) and ABM Industries (ABM - Free Report) . While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 41.1% compared with the industry's 34.8% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 3.7% so far this year compared with the industry’s 10.2% rise.
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 24.1% so far this year compared with the industry’s 11.9% growth.