Veeva(VEEV) - 2024 Q4 - Annual Report

PART I This part details the company's business operations, associated risks, and foundational corporate information ITEM 1. BUSINESS Veeva provides industry cloud solutions for global life sciences, operating as a Public Benefit Corporation - Veeva is the leading provider of industry cloud solutions for the global life sciences industry, covering R&D and commercial functions[19] - Became a Delaware Public Benefit Corporation (PBC) on February 1, 2021, with a public benefit purpose to enhance industry productivity and create high-quality employment[23] Key Business Metrics | Metric | Value | | :----- | :---- | | Total Customers (as of Jan 31, 2024) | 1,432 | | Employees Worldwide (as of Jan 31, 2024) | 7,172 (up 428 YoY) | | Global Employee Population Self-Identified as Female | 44% | | U.S. Workforce Self-Identified as Underrepresented Racial/Ethnic Groups | 42% | Overview Introduces Veeva's mission, industry cloud solutions, and public benefit corporation status - Veeva provides industry cloud solutions (software, data, consulting) for global life sciences, supporting R&D and commercial functions to accelerate product development, improve marketing, and ensure regulatory compliance[19] - The company's goal is to be the most strategic technology partner to the life sciences industry, focusing on customer success and rapid adaptation to regulatory changes[20][21] - Veeva became a Delaware Public Benefit Corporation (PBC) on February 1, 2021, committing to a public benefit purpose beyond just stockholder financial returns, balancing interests of stockholders, stakeholders, and its public benefit purpose[23] Our Industry Cloud Solutions for Life Sciences Details Veeva's specialized cloud offerings for R&D, commercial, and data management within the life sciences sector - Veeva's solutions for life sciences are categorized into Veeva Development Cloud, Veeva Commercial Cloud, and Veeva Data Cloud, addressing strategic needs in commercial and R&D operations[24] - Veeva Development Cloud includes application suites for clinical, regulatory, quality, and safety functions, built on the proprietary Veeva Vault platform for content and data management[25] - Veeva Commercial Cloud offers software and analytics for sales, marketing, and medical affairs, including Veeva CRM (migrating to Vault CRM by April 2024), Veeva Vault Medical, Veeva Vault PromoMats, and Veeva Crossix[28] - Veeva Data Cloud provides connected reference data (OpenData), deep data (Link applications), and transaction data (Compass) to enhance efficiency and precision in clinical and commercial operations[29][32] Our Cloud Solutions for the Consumer Products Industries Veeva extends its content and data management solutions to consumer products industries - Veeva extends its content and data management solutions to consumer products industries, offering Veeva QualityOne, Veeva RegulatoryOne, and Veeva Claims for compliant process and content management[22][29] Professional Services and Support Veeva offers comprehensive professional services and support, complemented by global systems integrator partners - Veeva offers professional services, including implementation, solution design, system management, data migration, training, and managed services, leveraging industry expertise[30][33] - Global systems integrator partners like Accenture, Cognizant, and TCS also deliver implementation and support services[31] Veeva Business Consulting Veeva Business Consulting provides strategic advice for commercial and R&D functions - Veeva Business Consulting provides strategic consulting services, distinct from professional services, focusing on commercial strategy (e.g., digital engagement, field optimization) and R&D (e.g., process efficiency, time-to-market)[32][34] Our Customers Veeva serves a diverse customer base across life sciences and consumer products industries - As of January 31, 2024, Veeva served 1,432 customers across the life sciences industry (pharmaceutical, biotech, MedTech, CROs) and consumer products, ranging from large global enterprises to emerging growth companies[35] Our Human Capital Resources Veeva's human capital strategy focuses on attracting and retaining talent through compensation and benefits Employee Demographics | Metric | Value (as of Jan 31, 2024) | | :----- | :------------------------- | | Total Employees Worldwide | 7,172 (up 428 YoY) | | Global Employee Population Self-Identified as Female | 44% | | U.S. Workforce Self-Identified as Underrepresented Racial/Ethnic Groups | 42% | - Veeva compensates employees with base salary and equity, offers comprehensive benefits, and does not require non-compete agreements, believing this helps attract and retain talent despite intense competition[38] Research and Development The R&D organization drives innovation by developing new solutions and enhancing existing ones - The R&D organization focuses on developing new solutions, functionality, and core technologies, and enhancing existing solutions based on customer feedback and needs[39] Sales and Marketing Veeva utilizes a direct sales organization segmented by function and customer size - Veeva sells solutions through a direct sales organization, segmented by R&D and commercial functions, and further by customer size (large global vs. smaller life sciences companies), with product-specific and industry-specific teams[40] Technology Infrastructure and Operations Veeva's robust global infrastructure ensures secure and reliable cloud solution delivery - Products are hosted in data centers globally (US, UK, EU, Japan, South Korea, Australia, Brazil, China for China-specific products), utilizing third-party providers like Salesforce, Inc. (for Veeva CRM) and Amazon Web Services (for Veeva Vault applications)[41] - Infrastructure includes advanced physical security, redundant systems, disaster recovery measures, and continuous monitoring to minimize service interruptions and data loss[42] - Solutions are generally based on multitenant architectures, securely partitioning customer data while sharing common solution versions[43] Quality and Compliance Program Veeva maintains an ISO9001 certified quality management system for regulatory compliance - Veeva maintains an ISO9001 certified quality management system for its cloud software, ensuring compliance with life sciences regulations (e.g., 21 CFR 820.75, 21 CFR 211.68, 21 CFR 11, EU Annex 11, ICH E6(R2))[44] - Robust audit trail tracking, compliant electronic signature capture, data encryption, and secure access controls are integral to these offerings[44] Privacy Program Veeva's privacy program ensures compliance with global data protection regulations - Veeva's data privacy program aligns with EU GDPR, UK GDPR, CCPA, and HIPAA, led by a Chief Privacy Officer[45] - The program focuses on policies, procedures, agreements, documentation, lawful data acquisition/processing, breach notification, and employee training[45] Competition Veeva operates in a highly competitive and evolving global market for cloud solutions - Veeva operates in a highly competitive, rapidly evolving global market, competing with cloud-based solutions from providers like IQVIA (for Commercial Cloud and Data Cloud), Dassault Systèmes, OpenText, Oracle, Honeywell, and Salesforce (which plans its own life sciences CRM)[46][47][48] - Competitive factors include customer satisfaction, regulatory compliance, domain expertise, ease of use, solution breadth, technology platform, customization, cost of ownership, innovation, and integration capabilities[52][53] - Competitors may have advantages such as longer operating histories, greater resources, stronger brand recognition, and larger intellectual property portfolios[51] Intellectual Property Veeva protects its intellectual property through various legal mechanisms and faces associated risks - Veeva protects its intellectual property through patents, trade secrets, copyrights, trademarks, and contractual protections, with ongoing efforts to expand its patent portfolio[54] Intellectual Property Portfolio | IP Type | Count (as of Jan 31, 2024) | | :------ | :------------------------- | | Issued U.S. patents | 74 | | Issued international patents | 13 | | U.S. and international pending patent applications | 90 | - The company faces risks of unauthorized use of its technology and potential litigation from competitors or non-practicing entities regarding infringement or misappropriation of intellectual property[55][56] Corporate Information Veeva's corporate website and investor relations information are publicly available - Veeva's website is veeva.com, and investor information, including SEC filings, is available at ir.veeva.com[57] ITEM 1A. RISK FACTORS Investing in Veeva's common stock involves significant risks, including cybersecurity breaches, intense market competition, and the complex CRM migration - Key risks include cybersecurity breaches, intense competition, challenges in adopting newer solutions, customer concentration (top 10 customers accounted for 28% of FY2024 revenue), and the migration of Veeva CRM to Vault CRM[61][73][77] - The company is highly dependent on the life sciences industry, making it vulnerable to regulatory changes (e.g., drug pricing), industry consolidation, funding environment shifts, and market practice changes[100][101][102] - International operations (41% of FY2024 revenue from outside North America) expose Veeva to risks like data privacy laws, geopolitical instability, and currency fluctuations[80][81] - As a Public Benefit Corporation (PBC), Veeva's directors must balance stockholder interests with those of other stakeholders and its public benefit purpose, which may lead to decisions not maximizing short-term stockholder value and potential legal uncertainty[162][164][165] Summary of Risk Factors This section summarizes the principal risks that could impact Veeva's business and financial performance - Summarized risks include security breaches, intense competition, challenges in new solution adoption, customer concentration, CRM migration risks, reliance on the life sciences industry, fluctuating revenue growth, macroeconomic/geopolitical factors, talent retention difficulties, reliance on third-party data/infrastructure providers, and changing regulations[61] Risks Related to Our Business Veeva faces various business-specific risks, including cybersecurity, competition, and operational challenges - Security breaches or unauthorized access to customer data could lead to reduced solution use, significant liabilities, and reputational damage, with risks potentially elevated by geopolitical tensions[63][64][66] - The markets are highly competitive, with rivals like IQVIA and Salesforce, Inc. (planning a life sciences CRM), potentially leading to reduced sales, margins, or market position if Veeva cannot compete effectively[67][68][71] - Failure to successfully adopt newer solutions or achieve market acceptance in a timely manner could adversely affect revenue growth and operating results[72] - Revenue is concentrated, with the top 10 customers accounting for 28% of total revenues in FY2024; loss or non-renewal by key customers could significantly impact revenue growth and reputation[73] - The planned migration of Veeva CRM customers to Vault CRM (built on Veeva Vault platform) by April 2024 is complex and could cause business disruptions, customer loss to competitors, or adverse effects on operating results[77] - Long and unpredictable sales cycles, especially for new applications or markets, require considerable investment without guaranteed sales, potentially harming operating results and growth[78][79] - International sales (41% of FY2024 total revenues from outside North America) expose Veeva to regulatory, economic, and political risks, including data privacy laws, staffing difficulties, and currency fluctuations[80][81] - Difficulty attracting and retaining highly skilled employees, intense competition for talent, and the impact of the 'Work Anywhere' policy could adversely affect business and growth prospects[85][87][88] - Catastrophic events (natural disasters, public health emergencies, cyber-attacks, armed conflicts) could disrupt operations, cause system interruptions, data loss, and harm operating results[89][90] - Acquisitions or investments in other companies/technologies could divert management attention, dilute stockholders, disrupt operations, and may not yield anticipated benefits[91][92] - Substantial market penetration of Veeva CRM means sustaining or increasing its use is critical; reductions in user subscriptions or non-renewals could negatively impact Commercial Solutions revenues[94] - Changes in senior management or key personnel, particularly the CEO, could negatively affect business strategy execution[95] - Customer dissatisfaction with professional or technical support services could diminish demand, reduce revenues, and lead to liabilities[96][97] - Publicly provided market size estimates (TAM) may be inaccurate, and there's no assurance Veeva will serve a significant portion of the estimated market[98][99] Risks Related to the Principal Industry We Serve Veeva's reliance on the life sciences industry exposes it to sector-specific regulatory and market risks - Nearly all revenues come from the life sciences industry, making Veeva vulnerable to factors affecting this sector, including changing regulatory environments (e.g., drug pricing legislation like the Inflation Reduction Act), industry consolidation, funding reductions for early-stage companies, and shifts in market conditions/practices (e.g., digital sales channels)[100][101][102] - Failure to comply with complex global laws and regulations (e.g., electronic records, drug sample tracking, health data processing, Physician Payments Sunshine Act) could lessen demand for solutions or subject Veeva to significant claims and losses[103][104][105][107] - Increasingly complex privacy, data protection, and cybersecurity regulations (EU GDPR, UK GDPR, CCPA, HIPAA, China's PIPL, Washington's My Health My Data Act) are burdensome, may reduce demand, and non-compliance could lead to significant liabilities and fines[108][109][110][111][112][115] - Data localization obligations and cross-border data transfer restrictions, particularly in China, could limit Veeva's ability to offer CRM solutions or impact performance in those regions[110] Risks Related to Our Reliance on Third Parties Veeva's operations depend on third-party data, infrastructure, and software providers, introducing various risks - Reliance on third-party providers of healthcare professional and prescription drug sales data (e.g., IQVIA) means restrictions on data uploads to Veeva solutions could decrease demand and negatively impact business[116] - Dependence on third-party computing infrastructure (Salesforce, Inc., Amazon Web Services) for cloud solutions means any disruption in their services could adversely affect Veeva's business and lead to liability[117][118][119] - Veeva is dependent on Salesforce, Inc.'s platform for multichannel CRM applications but plans to migrate to Vault CRM; the agreement with Salesforce, Inc. limits sales to new customers and existing customer expansion after September 1, 2025, and terminates after September 1, 2030[120][121][122][123][124] - Reliance on third-party licensed software and open-source software components introduces risks of errors, security vulnerabilities, inability to maintain licenses, increased costs, or potential requirements to release proprietary source code[127][128] Risks Related to Our Financial Performance, How We Contract with Customers, and the Financial Position of Our Business Veeva's financial performance is subject to revenue fluctuations, expense increases, and accounting complexities - Historical revenue growth rates (10% in FY2024, 16% in FY2023) are not indicative of future performance and may fluctuate or decline due to macroeconomic conditions, contracting changes, and foreign currency exchange[129] - Operating results may fluctuate, and failure to meet guidance or analyst expectations could cause stock price decline[130] - Dependence on customer subscription renewals and additional solution purchases; non-renewal, lower fees, or early termination could harm business and operating results[131][133][134] - Future expenses are expected to increase due to investments in R&D, infrastructure, sales/marketing, legal proceedings, and international expansion, potentially impacting profitability[135] - Professional services revenues and gross margins are volatile due to project requirements, complexity, and customer choices to use third parties[136][137] - Subscription services revenue recognition ratably over the term makes it difficult to evaluate future financial performance, as declines in new subscriptions may not immediately affect reported results[138][139] - Changes in master subscription agreements to include termination for convenience rights (effective Feb 1, 2023) impacted revenue recognition timing and reduced unbilled revenue and FY2024 revenue[143] - Deferred revenue and changes in deferred revenue may not accurately indicate future financial results due to billing cycles, expansion order terms, and changes in renewal dates/payment terms[144][145] - Foreign currency fluctuations, particularly in EUR, JPY, CAD, GBP, CNY, and HUF, may negatively impact financial results, revenues, and expenses when translated to USD[146] - Taxing authorities may assert uncollected sales/use/VAT taxes, and unanticipated changes in effective tax rates or new tax rules (e.g., Tax Cuts and Jobs Act of 2017, OECD Pillar Two) could harm future results[148][149][150][151][152] - Inability to implement and maintain effective internal controls over financial reporting could lead to investor loss of confidence and material misstatements[154][155] - Broad discretion in using cash balances, potential ineffective use, and exposure to financial market volatility could adversely affect business and financial condition[156][157] Risks Related to Our Intellectual Property Veeva faces risks of intellectual property infringement claims and challenges in protecting its own IP - Veeva faces risks of lawsuits from third parties (including competitors like IQVIA) for alleged infringement or misappropriation of proprietary rights, which could result in significant expenses, damages, or restrictions on services[158] - Failure to adequately protect intellectual property rights (patents, trade secrets, copyrights, trademarks) could impair the ability to protect proprietary technology and brand, potentially leading to unauthorized disclosure or use[159][160] Risks Related to Our Status as a Public Benefit Corporation, Our ESG Disclosures, and Ownership of Our Common Stock Veeva's PBC status, ESG reporting, and stock ownership entail unique legal and market risks - As a Delaware Public Benefit Corporation (PBC), directors must balance stockholder financial interests with stakeholder interests and public benefit purpose, which may not maximize short-term stockholder value and could lead to legal uncertainty or litigation[162][164][165] - Evolving expectations and disclosure requirements for ESG matters expose Veeva to risks impacting brand, reputation, customer/employee relationships, and potential increased compliance costs or enforcement actions[168][169][170] - The common stock price has been and is expected to remain volatile due to macroeconomic factors, geopolitical instability, company performance relative to expectations, and other market-specific factors[171][172][173] - Veeva does not intend to pay dividends in the foreseeable future, limiting stockholder returns to changes in common stock value[174] - Provisions in the certificate of incorporation, bylaws, and Delaware law could discourage, delay, or prevent a change in control or management, potentially depressing the stock price[175][176] - Bylaw provisions for exclusive forums for certain disputes may limit stockholders' ability to choose a favorable judicial forum, potentially increasing costs or discouraging lawsuits[177][178][179] ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments to report - No unresolved staff comments[180] ITEM 1C. CYBERSECURITY Veeva maintains robust cybersecurity measures, overseen by a Board Cybersecurity Committee and led by an EVP of Internal Operations and CISO - A Board of Directors' Cybersecurity Committee, chaired by a director with cybersecurity expertise, oversees Veeva's cybersecurity and privacy programs[182] - Day-to-day cybersecurity and technology risk management is led by the EVP of Internal Operations and the Chief Information Security Officer (CISO), with security experts embedded in product development teams[183][184] - Veeva maintains a comprehensive Information Security Management System (ISMS) certified to ISO 9001:2015, ISO/IEC 27001:2013, and ISO 27018 for privacy controls[185][186] - Critical ISMS elements include operational monitoring, vulnerability/penetration testing (annual by third parties), role-based security training, and disaster recovery/business continuity planning[186] - Potentially material cybersecurity incidents are escalated to a management response team for timely determination of materiality and reporting[186] - Cybersecurity risks have not materially affected and are not reasonably likely to materially affect Veeva's business strategy, results of operations, or financial condition[187] - A Supplier Management Program assesses and audits suppliers for cybersecurity risks and quality standards[187] ITEM 2. PROPERTIES Veeva owns its corporate headquarters in Pleasanton, California, and leases offices globally - Veeva owns its corporate headquarters in Pleasanton, California, housing principal executive, product development, engineering, marketing, finance, and legal organizations[188] - The company leases offices in North America, Europe, Asia Pacific, and Latin America, with plans to expand facilities capacity in certain field locations in FY2025 and beyond[189] ITEM 3. LEGAL PROCEEDINGS Veeva is involved in several legal proceedings, primarily antitrust and trade secret claims with IQVIA - Veeva is involved in ongoing litigation with IQVIA concerning alleged trade secret misappropriation (IQVIA's claim) and IQVIA's alleged abuse of monopoly power to exclude Veeva OpenData and Veeva Network (Veeva's counterclaims)[190][402][403] - Veeva also filed a lawsuit against IQVIA (Veeva Nitro Action) alleging anticompetitive conduct regarding Veeva Nitro and other applications, seeking injunctive relief and monetary damages[407][409][410] - The company has settled non-compete related claims with Sparta Systems (February 2023) and Medidata (January 2024)[193][413] - A trial date for the IQVIA litigation matters is set for February 10, 2025, with ongoing discussions about bifurcating claims[412] - Veeva is also defending against a Mednet Solutions, Inc. lawsuit alleging improper access to computer systems and trade secret misappropriation by a former Mednet employee now at Veeva[414][415][416] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to Veeva Systems Inc - Not applicable[195] PART II This part covers Veeva's common stock market, financial performance, and related disclosures ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Veeva's common stock is listed on the NYSE, with no issuer purchases of equity securities during the fiscal year - Veeva's common stock is listed on the New York Stock Exchange (NYSE) under the symbol 'VEEV'[197] - As of January 31, 2024, there were 21 holders of record for the common stock[198] - No purchases of equity securities were made by the issuer or affiliated purchasers during the reported period[199] - No recent sales of unregistered securities[200] Cumulative Total Return (Indexed to $100 at Jan 31, 2019) | Index | 2019 | 2020 | Jan 31, 2021 | 2022 | 2023 | 2024 | | :-------------------------- | :----- | :----- | :----------- | :----- | :----- | :----- | | Veeva Systems Inc. | 100.00 | 134.43 | 253.48 | 216.89 | 156.38 | 190.18 | | S&P 500 | 100.00 | 121.68 | 142.67 | 175.90 | 161.45 | 195.06 | | S&P 1500 Application Software Index | 100.00 | 133.60 | 176.27 | 195.48 | 158.36 | 238.99 | ITEM 6. [RESERVED] This item is reserved and contains no information ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Veeva reported $2,364 million in total revenues for FY2024, a 10% increase year-over-year, with strong liquidity Key Financial Highlights (FY2024 vs. FY2023) | Metric | FY2024 (in millions) | FY2023 (in millions) | % Change | | :-------------------------- | :------------------- | :------------------- | :------- | | Total Revenues | $2,364 | $2,155 | 10% | | Subscription Services Revenues | $1,902 | $1,733 | 10% | | Professional Services and Other Revenues | $462 | $422 | 9% | | Net Income | $526 | $488 | 8% | | Operating Income | $429 | $459 | -7% | | Other Income, Net | $159 | $50 | 217% | | Provision for Income Taxes | $62 | $21 | 191% | | Effective Tax Rate | 10.6% | 4.2% | +6.4 pp | | Net Cash Provided by Operating Activities | $911 | $780 | 17% | - Revenue growth in FY2024 was negatively impacted by macroeconomic conditions, lower funding for early-stage life sciences companies, increased scrutiny for projects, a contracting change in master subscription agreements affecting revenue recognition timing, and foreign currency fluctuations[129][233] - R&D Solutions revenues are expected to continue increasing as a percentage of both subscription services and total revenues in the future[209] - As of January 31, 2024, cash, cash equivalents, and short-term investments totaled $4.0 billion, with $137 million held outside the U.S., providing strong liquidity[255] Overview Veeva, a leading cloud solutions provider for life sciences, reported $2,364 million in FY2024 total revenues - Veeva is a leading provider of industry cloud solutions for the global life sciences industry, offering cloud software, data, analytics, professional services, and business consulting[207] - Solutions are grouped into Veeva Development Cloud, Veeva Commercial Cloud, and Veeva Data Cloud, addressing R&D and commercial operations[208] Financial and Customer Overview | Metric | FY2024 | FY2023 | FY2022 | | :-------------------------- | :----- | :----- | :----- | | Total Revenues (in millions) | $2,364 | $2,155 | $1,851 | | YoY Growth | 10% | 16% | 26% | | Subscription Services Revenues (in millions) | $1,902 | $1,733 | $1,484 | | YoY Growth | 10% | 17% | 26% | | Net Income (in millions) | $526 | $488 | $427 | | Total Customers | 1,432 | 1,388 | 1,205 | | Commercial Solutions Customers | 693 | 684 | 653 | | R&D Solutions Customers | 1,078 | 1,025 | 860 | - R&D Solutions revenues are expected to increase as a percentage of both subscription services and total revenues in the future[209] Components of Results of Operations Veeva's revenues are primarily from subscription services, with detailed cost and expense components - Revenues are primarily from subscription services (80% of total revenues in FY2024) and professional services (20% of total revenues in FY2024)[212] - Subscription services revenues are recognized ratably over the non-cancellable term, while professional services are mostly time and materials-based, recognized over time[218][220] - A change in master subscription agreements since February 1, 2023, to include termination for convenience rights, impacted the timing of revenue recognition for multi-year orders, reducing FY2024 revenue[216] - Deferred costs (sales commissions) are amortized over a three-year period of benefit[215][315] - Cost of subscription services includes computing infrastructure, personnel, data acquisition, and allocated overhead; cost of professional services primarily includes employee-related expenses and subcontractors[221][222] - Operating expenses include R&D (employee-related, consulting, infrastructure), Sales and Marketing (employee-related, commissions, marketing programs, amortization of intangibles), and General and Administrative (executive, finance, legal, HR, other administrative)[223][224][225] Results of Operations This section presents a detailed breakdown of Veeva's consolidated financial performance for recent fiscal years Consolidated Statements of Comprehensive Income Data (in thousands) | Metric | FY2024 | FY2023 | | :---------------------------------- | :------- | :------- | | Revenues: | | | | Subscription services | $1,901,593 | $1,733,002 | | Professional services and other | $462,080 | $422,058 | | Total revenues | $2,363,673 | $2,155,060 | | Cost of revenues: | | | | Cost of subscription services | $290,577 | $257,635 | | Cost of professional services and other | $386,714 | $351,770 | | Total cost of revenues | $677,291 | $609,405 | | Gross profit | $1,686,382 | $1,545,655 | | Operating expenses: | | | | Research and development | $629,031 | $520,278 | | Sales and marketing | $381,472 | $348,691 | | General and administrative | $246,545 | $217,595 | | Total operating expenses | $1,257,048 | $1,086,564 | | Operating income | $429,334 | $459,091 | | Other income, net | $158,689 | $50,005 | | Income before income taxes | $588,023 | $509,096 | | Provision for income taxes | $62,318 | $21,390 | | Net income | $525,705 | $487,706 | Stock-based Compensation (in thousands) | Category | FY2024 | FY2023 | | :-------------------------- | :------- | :------- | | Cost of subscription services | $6,483 | $6,257 | | Cost of professional services and other | $53,237 | $50,341 | | Research and development | $172,876 | $141,571 | | Sales and marketing | $90,865 | $87,509 | | General and administrative | $70,272 | $66,229 | | Total stock-based compensation | $393,733 | $351,907 | Revenues Veeva's total revenues increased by 10% in FY2024, driven by subscription and professional services growth Revenue Breakdown (FY2024 vs. FY2023) | Revenue Type | FY2024 (in thousands) | FY2023 (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :------- | | Subscription services | $1,901,593 | $1,733,002 | 10% | | Professional services and other | $462,080 | $422,058 | 9% | | Total revenues | $2,363,673 | $2,155,060 | 10% | | Subscription services (% of total) | 80% | 80% | | | Professional services and other (% of total) | 20% | 20% | | - Subscription services revenue increased by $169 million, with R&D Solutions contributing $119 million and Commercial Solutions $50 million[231] - Professional services and other revenues increased by $40 million, driven by new and expanding customer deployments, particularly in R&D solutions, and increased demand for business consulting[232] - Geographic mix of subscription services revenues in FY2024: North America 58% (up from 57%), Europe 27% (down from 28%), Asia Pacific 15% (unchanged)[231] - Geographic mix of professional services revenues in FY2024: North America 61% (down from 64%), Europe 32% (up from 29%), Asia Pacific 7% (unchanged)[232] - The introduction of termination for convenience rights in multi-year master subscription agreements since February 1, 2023, changed revenue recognition timing and reduced FY2024 revenue[233] Cost of Revenue and Gross Margin Total gross margin decreased by 1 percentage point to 71% in FY2024 due to increased costs Cost of Revenue and Gross Margin (FY2024 vs. FY2023) | Metric | FY2024 (in thousands) | FY2023 (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :------- | | Cost of subscription services | $290,577 | $257,635 | 13% | | Cost of professional services and other | $386,714 | $351,770 | 10% | | Total cost of revenues | $677,291 | $609,405 | 11% | | Subscription services gross margin | 85% | 85% | | | Professional services and other gross margin | 16% | 17% | -1 pp | | Total gross margin | 71% | 72% | -1 pp | | Gross profit | $1,686,382 | $1,545,655 | 9% | - Increase in cost of subscription services by $33 million was primarily due to a $12 million increase in computing infrastructure costs (mainly Amazon Web Services) and a $7 million increase in data solution delivery costs[234][235] - Cost of professional services and other increased by $35 million, mainly due to employee compensation-related costs from merit increases and investment in professional services resources[236] Operating Expenses Operating expenses are projected to increase in FY2025, primarily due to employee compensation - Operating expenses are expected to increase in FY2025, primarily due to employee compensation-related costs[237] Research and Development R&D expenses increased by 21% in FY2024, driven by headcount expansion for product development | Metric | FY2024 (in thousands) | FY2023 (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :------- | | Research and development | $629,031 | $520,278 | 21% | | Percentage of total revenues | 27% | 24% | +3 pp | - R&D expenses increased by $109 million, primarily due to a $102 million increase in employee compensation-related costs driven by headcount expansion to support product development[238] - R&D expenses are expected to increase in FY2025 due to continued investment in product offerings and employee compensation[239] Sales and Marketing Sales and marketing expenses increased by 9% in FY2024, mainly due to headcount growth | Metric | FY2024 (in thousands) | FY2023 (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :------- | | Sales and marketing | $381,472 | $348,691 | 9% | | Percentage of total revenues | 16% | 16% | 0 pp | - Sales and marketing expenses increased by $33 million, mainly due to a $22 million increase in employee compensation-related costs from headcount growth to support sales and marketing efforts[240] - Sales and marketing expenses are expected to increase in FY2025 due to employee compensation and increased marketing program costs related to events[241] General and Administrative General and administrative expenses increased by 13% in FY2024, primarily due to headcount growth | Metric | FY2024 (in thousands) | FY2023 (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :------- | | General and administrative | $246,545 | $217,595 | 13% | | Percentage of total revenues | 10% | 10% | 0 pp | - General and administrative expenses increased by $29 million, primarily due to a $15 million increase in employee compensation-related costs from headcount growth[243] - General and administrative expenses are expected to continue increasing in FY2025 due to employee compensation-related costs[243] Other Income, Net Other income, net, significantly increased by 217% in FY2024, driven by higher interest income | Metric | FY2024 (in thousands) | FY2023 (in thousands) | % Change | | :---------------- | :-------------------- | :-------------------- | :------- | | Other income, net | $158,689 | $50,005 | 217% | - Other income, net, increased by $109 million, primarily due to an $87 million increase in interest income and a $22 million decrease in accretion of discounts on investments[244] Foreign Currency Foreign currency fluctuations, particularly in major currencies, impact Veeva's financial results - Veeva experiences foreign currency fluctuations from re-measurement of foreign currency balances, particularly in EUR, JPY, CAD, GBP, CNY, and HUF, impacting operating results and cash flows[245] - Changes in exchange rates negatively affected revenues in USD for FY2024 and FY2023, and may continue to do so in FY2025[146][245] Provision for Income Taxes The effective tax rate increased to 10.6% in FY2024, primarily due to decreased excess tax benefits | Metric | FY2024 (in thousands) | FY2023 (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :------- | | Income before income taxes | $588,023 | $509,096 | 16% | | Provision for income taxes | $62,318 | $21,390 | 191% | | Effective tax rate | 10.6% | 4.2% | +6.4 pp | - The effective tax rate increased from 4.2% in FY2023 to 10.6% in FY2024, primarily due to a decrease in excess tax benefits, partially offset by the release of tax reserves for uncertain tax positions[247] - Excess tax benefits from employee stock plans decreased from $94 million in FY2023 to $74 million in FY2024, mainly due to a smaller amount of stock option exercises by the CEO[248] Non-GAAP Financial Measures Veeva provides non-GAAP financial measures to offer additional insights into its operating performance - Veeva provides non-GAAP financial measures (excluding excess tax benefits, stock-based compensation, and amortization of purchased intangibles) to help understand operating results, evaluate future prospects, and compare financial results[249][250] Non-GAAP Reconciliation (FY2024 vs. FY2023) | Metric | FY2024 (in thousands) | FY2023 (in thousands) | | :------------------------------------------ | :-------------------- | :-------------------- | | Net cash provided by operating activities (GAAP) | $911,339 | $780,470 | | Excess tax benefits from employee stock plans | $(71,049) | $(82,009) | | Net cash provided by operating activities (non-GAAP) | $840,290 | $698,461 | | Operating income (GAAP) | $429,334 | $459,091 | | Stock-based compensation expense | $393,733 | $351,907 | | Amortization of purchased intangibles | $19,459 | $19,464 | | Operating income (non-GAAP) | $842,526 | $830,462 | | Net income (GAAP) | $525,705 | $487,706 | | Stock-based compensation expense | $393,733 | $351,907 | | Amortization of purchased intangibles | $19,459 | $19,464 | | Income tax effect on non-GAAP adjustments | $(147,937) | $(163,508) | | Net income (non-GAAP) | $790,960 | $695,569 | | Diluted net income per share (GAAP) | $3.22 | $3.00 | | Diluted net income per share (non-GAAP) | $4.84 | $4.28 | Liquidity and Capital Resources Veeva maintains strong liquidity with $4.0 billion in cash and investments as of January 31, 2024 Cash Flow Summary (in thousands) | Metric | FY2024 | FY2023 | FY2022 | | :-------------------------------- | :------- | :------- | :------- | | Net cash provided by operating activities | $911,339 | $780,470 | $764,463 | | Net cash used in investing activities | $(1,076,351) | $(1,007,683) | $(346,152) | | Net cash used in financing activities | $(16,188) | $(19,376) | $(4,140) | | Net change in cash and cash equivalents | $(182,980) | $(251,575) | $409,514 | - As of January 31, 2024, cash, cash equivalents, and short-term investments totaled $4.0 billion, with $137 million held outside the U.S.[255] - Veeva expects existing liquidity and operating cash flows to be sufficient for working capital and capital expenditures for at least the next 12 months[258] Cash Flows from Operating Activities Net cash from operating activities increased by $131 million in FY2024 due to sales growth and lower tax payments - Net cash provided by operating activities increased by $131 million to $911 million in FY2024, primarily due to increased sales and cash collections, and a decrease in cash paid for income taxes, partially offset by larger operating expenses[262] - The first fiscal quarter is seasonally strongest for cash inflows due to annual subscription billings[260] - Cash payments for income taxes related to the Tax Cuts and Jobs Act of 2017 (requiring R&D capitalization) are expected to reduce operating cash flows in FY2025 and future periods[262] Cash Flows from Investing Activities Net cash used in investing activities increased by $69 million in FY2024, mainly due to increased investment purchases - Net cash used in investing activities increased by $69 million to $1,076 million in FY2024, primarily due to a net increase in purchases of investments[264] - Primary uses of cash for investing activities include purchases of marketable securities (net of maturities) and capital assets[263] Cash Flows from Financing Activities Net cash used in financing activities decreased by $3 million in FY2024, influenced by stock option exercises and RSU settlements - Net cash used in financing activities decreased by $3 million to $16 million in FY2024, mainly due to a $19 million decrease in proceeds from stock option exercises, partially offset by a $16 million increase in taxes paid for net share settlement of RSUs[266] - Since June 2021, Veeva funds withholding taxes on RSU awards via net share settlement[265] Critical Accounting Policies and Estimates Veeva's critical accounting policies involve significant judgment, particularly in revenue recognition and business combinations - Critical accounting policies involve significant judgment and complexity, including revenue recognition (standalone selling price for multiple performance obligations) and business combinations (valuation of acquired tangible and intangible assets)[268][270][271] Quantitative and Qualitative Disclosures About Market Risk Veeva is exposed to foreign currency and interest rate risks, which are actively managed - Veeva is exposed to foreign currency exchange risk, particularly for EUR, JPY, CAD, GBP, CNY, and HUF, which impacted FY2024 revenues in USD[272] - The company engages in hedging foreign currency transactions to mitigate risk[273] - Interest rate sensitivity affects its $4.0 billion cash, cash equivalents, and short-term investments; a 100-basis point increase in interest rates would reduce the investment portfolio's market value by $43 million as of January 31, 2024[274][275][277] ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents Veeva's audited consolidated financial statements and related notes for recent fiscal years - KPMG LLP issued an unqualified opinion on Veeva's consolidated financial statements and the effectiveness of internal control over financial reporting as of January 31, 2024[281][282] - The audit identified the evaluation of the sufficiency of audit evidence over revenue as a critical audit matter due to multiple service offerings and IT applications involved in revenue recognition[288][289][290] Consolidated Balance Sheets (in thousands) | Asset/Liability | Jan 31, 2024 | Jan 31, 2023 | | :------------------------------------------ | :----------- | :----------- | | Assets: | | | | Cash and cash equivalents | $703,487 | $886,465 | | Short-term investments | $3,324,269 | $2,216,163 | | Accounts receivable, net | $852,172 | $703,055 | | Total current assets | $5,003,211 | $3,969,313 | | Property and equipment, net | $58,532 | $49,817 | | Goodwill | $439,877 | $439,877 | | Intangible assets, net | $63,017 | $82,476 | | Total assets | $5,910,920 | $4,804,296 | | Liabilities & Stockholders' Equity: | | | | Deferred revenue | $1,049,761 | $869,285 | | Total current liabilities | $1,178,883 | $1,006,803 | | Total liabilities | $1,266,096 | $1,088,044 | | Total stockholders' equity | $4,644,824 | $3,716,252 | | Total liabilities and stockholders' equity | $5,910,920 | $4,804,296 | Consolidated Statements of Comprehensive Income (in thousands) | Metric | FY2024 | FY2023 | FY2022 | | :------------------------------------------ | :------- | :------- | :------- | | Total revenues | $2,363,673 | $2,155,060 | $1,850,777 | | Gross profit | $1,686,382 | $1,545,655 | $1,347,099 | | Operating income | $429,334 | $459,091 | $505,496 | | Net income | $525,705 | $487,706 | $427,390 | | Diluted net income per share | $3.22 | $3.00 | $2.63 | | Comprehensive income | $546,197 | $468,535 | $414,440 | Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | FY2024 | FY2023 | FY2022 | | :------------------------------------------ | :------- | :------- | :------- | | Net cash provided by operating activities | $911,339 | $780,470 | $764,463 | | Net cash used in investing activities | $(1,076,351) | $(1,007,683) | $(346,152) | | Net cash used in financing activities | $(16,188) | $(19,376) | $(4,140) | | Net change in cash, cash equivalents, and restricted cash | $(182,980) | $(251,575) | $409,514 | | Cash, cash equivalents, and restricted cash at end of period | $706,670 | $889,650 | $1,141,225 | Report of Independent Registered Public Accounting Firm KPMG LLP issued an unqualified opinion on Veeva's financial statements and internal controls - KPMG LLP provided an unqualified opinion on Veeva's consolidated financial statements and internal control over financial reporting as of January 31, 2024[281][282] - The critical audit matter identified was the evaluation of the sufficiency of audit evidence over revenue, due to the multiple service offerings and IT applications involved in the revenue recognition processes[288][289][290] Consolidated Balance Sheets This section presents Veeva's financial position, detailing assets, liabilities, and stockholders' equity Consolidated Balance Sheets (in thousands) | Asset/Liability | Jan 31, 2024 | Jan 31, 2023 | | :------------------------------------------ | :----------- | :----------- | | Assets: | | | | Cash and cash equivalents | $703,487 | $886,465 | | Short-term investments | $3,324,269 | $2,216,163 | | Accounts receivable, net | $852,172 | $703,055 | | Unbilled accounts receivable | $36,365 | $82,174 | | Prepaid expenses and other current assets | $86,918 | $81,456 | | Total current assets | $5,003,211 | $3,969,313 | | Property and equipment, net | $58,532 | $49,817 | | Deferred costs, net | $23,916 | $31,825 | | Lease right-of-use assets | $45,602 | $55,336 | | Goodwill | $439,877 | $439,877 | | Intangible assets, net | $63,017 | $82,476 | | Deferred income taxes | $233,463 | $136,697 | | Other long-term assets | $43,302 | $38,955 | | Total assets | $5,910,920 | $4,804,296 | | Liabilities & Stockholders' Equity: | | | | Accounts payable | $31,513 | $41,678 | | Accrued compensation and benefits | $43,433 | $44,282 | | Accrued expenses and other current liabilities | $32,980 | $35,306 | | Income tax payable | $11,862 | $4,946 | | Deferred revenue | $1,049,761 | $869,285 | | Lease liabilities | $9,334 | $11,306 | | Total current liabilities | $1,178,883 | $1,006,803 | | Deferred income taxes (noncurrent) | $2,052 | $1,492 | | Lease liabilities, noncurrent | $46,441 | $49,670 | | Other long-term liabilities | $38,720 | $30,079 | | Total liabilities | $1,266,096 | $1,088,044 | | Additional paid-in capital | $1,915,002 | $1,532,627 | | Accumulated other comprehensive loss | $(10,637) | $(31,129) | | Retained earnings | $2,740,457 | $2,214,752 | | Total stockholders' equity | $4,644,824 | $3,716,252 | | Total liabilities and stockholders' equity | $5,910,920 | $4,804,296 | Consolidated Statements of Comprehensive Income This section details Veeva's revenues, expenses, and net income over the past three fiscal years Consolidated Statements of Comprehensive Income (in thousands, except per share data) | Metric | FY2024 | FY2023 | FY2022 | | :------------------------------------------ | :------- | :------- | :------- | | Revenues: | | | | | Subscription services | $1,901,593 | $1,733,002 | $1,483,976 | | Professional services and other | $462,080 | $422,058 | $366,801 | | Total revenues | $2,363,673 | $2,155,060 | $1,850,777 | | Cost of revenues: | | | | | Cost of subscription services | $290,577 | $257,635 | $224,911 | | Cost of professional services and other | $386,714 | $351,770 | $278,767 | | Total cost of revenues | $677,291 | $609,405 | $503,678 | | Gross profit | $1,686,382 | $1,545,655 | $1,347,099 | | Operating expenses: | | | | | Research and development | $629,031 | $520,278 | $382,035 | | Sales and marketing | $381,472 | $348,691 | $288,061 | | General and administrative | $246,545 | $217,595 | $171,507 | | Total operating expenses | $1,257,048 | $1,086,564 | $841,603 | | Operating income | $429,334 | $459,091 | $505,496 | | Other income, net | $158,689 | $50,005 | $6,815 | | Income before income taxes | $588,023 | $509,096 | $512,311 | | Provision for income taxes | $62,318 | $21,390 | $84,921 | | Net income | $525,705 | $487,706 | $427,390 | | Net income per share: | | | | | Basic | $3.27 | $3.14 | $2.79 | | Diluted | $3.22 | $3.00 | $2.63 | | Weighted-average shares used to compute net income per share: | | | | | Basic | 160,532 | 155,385 | 153,251 | | Diluted | 163,486 | 162,437 | 162,277 | | Other comprehensive income: | | | | | Net change in unrealized gain (loss) on available-for-sale investments, net of tax | $22,038 | $(14,854) | $(9,872) | | Net change in cumulative foreign currency translation loss | $(1,546) | $(4,317) | $(3,078) | | Comprehensive income | $546,197 | $468,535 | $414,440 | Consolidated Statements of Stockholders' Equity This section outlines changes in Veeva's stockholders' equity over the past three fiscal years Consolidated Statements of Stockholders' Equity (in thousands, except share data) | Metric | Jan 31, 2024 | Jan 31, 2023 | Jan 31, 2022 | | :------------------------------------------ | :----------- | :----------- | :----------- | | Total stockholders' equity | $4,644,824 | $3,716,252 | $2,911,637 | | Additional paid-in capital | $1,915,002 | $1,532,627 | $1,196,547 | | Retained earnings | $2,740,457 | $2,214,752 | $1,727,046 | | Accumulated other comprehensive loss | $(10,637) | $(31,129) | $(11,958) | | Stock-based compensation expense | $399,513 | $356,080 | $235,737 | | Net income | $525,705 | $487,706 | $427,390 | Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | FY2024 | FY2023 | FY2022 | | :------------------------------------------ | :------- | :------- | :------- | | Net cash provided by operating activities | $911,339 | $780,470 | $764,463 | | Net cash used in investing activities | $(1,076,351) | $(1,007,683) | $(346,152) | | Net cash used in financing activities | $(16,188) | $(19,376) | $(4,140) | | Effect of exchange rate changes on cash, cash equivalents, and restricted cash | $(1,780) | $(4,986) | $(4,657) | | Net change in cash, cash equivalents, and restricted cash | $(182,980) | $(251,575) | $409,514 | | Cash, cash equivalents, and restricted cash at beginning of period | $889,650 | $1,141,225 | $731,711 | | Cash, cash equivalents, and restricted cash at end of period | $706,670 | $889,650 | $1,141,225 | | Cash paid for income taxes, net of refunds | $134,473 | $167,952 | $58,627 | | Excess tax benefits from employee stock plans | $71,049 | $82,009 | $56,172 | Note 1. Summary of Business and Significant Accounting Policies This note outlines Veeva's business, GAAP compliance, and key accounting policies - Veeva provides cloud solutions (software, data, analytics, professional services, business consulting) for the global life sciences industry, covering R&D and commercial functions, and also serves consumer product and chemical industries[307] - Financial statements are prepared in accordance with GAAP, requiring estimates and assumptions for various items including standalone selling prices, deferred tax assets, and stock-based awards[308][309] - Veeva operates in a single operating and reportable segment, with the CEO reviewing consolidated financial information for resource allocation and performance evaluation[310] - Revenue recognition follows a five-step process, with subscription services recognized ratably over the non-cancellable term and professional services primarily on a time and materials basis[311][312][313] - Deferred costs, mainly sales commissions, are amortized over a three-year period[315] - The company's financial instruments are subject to credit risk concentrations, primarily in cash, cash equivalents, short-term investments, and trade accounts receivable, with no collateral required from customers[316][317][318] - Short-term investments are classified as available-for-sale and recorded at fair value, with unrealized gains/losses in OCI[321][322] - Property and equipment are depreciated using the straight-line method over estimated useful lives (e.g., building 30 years, equipment 3 years)[324] - Operating leases are recognized on the balance sheet as right-of-use assets and liabilities, with short-term leases (one year or less) expensed as incurred[325][326][327] - Internal-use software development costs are capitalized during the development phase and amortized over three years[328] - Goodwill is evaluated for impairment at least annually at the entity level, with no impairment charges in the periods presented[329][330] - Intangible assets (existing technology, customer relationships, trade names, data supplier relationships) are amortized on a straight-line basis over their economic lives[331] - Stock-based compensation expense for options and RSUs is recognized based on fair value at grant date over the service period[335] - Income taxes are accounted for under the asset and liability method, with deferred tax assets and liabilities recognized for temporary differences[339] - Recently adopted accounting pronouncements include ASU 2021-08 (Business Combinations) and ASU 2020-04/2022-06 (Reference Rate Reform), with no material impact on FY2024 financial statements[345][346] - New accounting pronouncements issued but not yet adopted include ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures), effective for fiscal years beginning February 1, 2024, and February 1, 2025, respectively[347][348] Note 2. Short-Term Investments This note details Veeva's short-term investments, classified as available-for-sale securities Short-Term Investments (Available-for-Sale, in thousands) | Investment Type | Jan 31, 2024 (Fair Value) | Jan 31, 2023 (Fair Value) | | :-------------------------- | :------------------------ | :------------------------ | | Certificates of deposits | $94,283 | $37,963 | | Asset-backed securities | $606,981 | $442,958 | | Commercial paper | $144,245 | $154,525 | | Corporate notes and bonds | $1,585,029 | $1,207,964 | | Foreign government bonds | $50,206 | $24,151 | | Municipal securities | $79,474 | N/A |