Business Wire | Dec 1, 2020 04:05PM EST

Veeva Announces Fiscal 2021 Third Quarter Results

Dec. 01, 2020

PLEASANTON, Calif.--(BUSINESS WIRE)--Dec. 01, 2020--Veeva Systems Inc. (NYSE: VEEV), a leading provider of industry cloud solutions for the global life sciences industry, today announced results for its fiscal third quarter ended October 31, 2020.

"Our customers are delivering innovations that will have positive, lasting impacts on human health," said CEO Peter Gassner. "We are proud to work with these amazing companies, providing solutions that streamline drug development and enable them to support healthcare providers on the front lines."

Fiscal 2021 Third Quarter Results:

* Revenues: Total revenues for the third quarter were $377.5 million, up from $280.9 million one year ago, an increase of 34% year-over-year. Subscription services revenues for the third quarter were $302.9 million, up from $226.8 million one year ago, an increase of 34% year-over-year. * Operating Income and Non-GAAP Operating Income(1): Third quarter operating income was $101.3 million, compared to $80.8 million one year ago, an increase of 25% year-over-year. Non-GAAP operating income for the third quarter was $155.5 million, compared to $111.6 million one year ago, an increase of 39% year-over-year. * Net Income and Non-GAAP Net Income(1): Third quarter net income was $97.0 million, compared to $82.2 million one year ago, an increase of 18% year-over-year. Non-GAAP net income for the third quarter was $125.6 million, compared to $95.4 million one year ago, an increase of 32% year-over-year. * Net Income per Share and Non-GAAP Net Income per Share(1): For the third quarter, fully diluted net income per share was $0.60, compared to $0.52 one year ago, while non-GAAP fully diluted net income per share was $0.78, compared to $0.60 one year ago.

"I am very pleased with our financial outperformance in the quarter, which was a direct result of our strong vision and focused execution," said CFO Brent Bowman. "As we look to the opportunities ahead, we plan to continue investing aggressively to hit our 2025 targets and drive a long runway of growth beyond."

Recent Highlights:

* Veeva Leads Digital Transformation in Life Sciences helping customers define new strategies in development and commercial. For example, it is now working with an innovative biopharma on their digital-first commercial launch strategy utilizing the full Veeva Commercial Cloud suite, including Data Cloud, Veeva Link, MyVeeva for Doctors, and Business Consulting. Digital transformation also fueled Veeva's expanding leadership in core CRM, where it saw a record increase of 19 new CRM customers in the quarter. On the development side, new digital capabilities like remote monitoring in Veeva SiteVault have enabled clinical trials to continue for roughly 700 clinical research sites and will improve ongoing trial execution.

* New Top 20 Win, Veeva Development Cloud Emerging as Industry Standard - More companies are adopting a growing range of products across Veeva Development Cloud. In Q3, a top 20 pharma selected multiple Development Cloud applications as their enterprise standard to streamline clinical operations, regulatory, and quality processes globally. The company's move to unify on Veeva Vault will help increase efficiency and drive compliance.

* Veeva Vault CTMS Adoption Accelerates as Companies Unify Clinical Operations - Vault CTMS posted record new bookings in the quarter as 85 companies, including six top 20 pharmas, have now standardized on Vault CTMS in just over three years. Customer success, product excellence, and the ability to unify clinical operations are driving this rapid growth. Companies are looking for a modern CTMS solution, seamlessly integrated with eTMF, on a single cloud platform.

Financial Outlook:

Veeva is providing guidance for its fiscal fourth quarter ending January 31, 2021 as follows:

* Total revenues between $378 and $380 million. * Non-GAAP operating income between $136 and $138 million(2). * Non-GAAP fully diluted net income per share between $0.67 and $0.68(2).

Veeva is providing guidance for its fiscal year ending January 31, 2021 as follows:

* Total revenues between $1,446 and $1,448 million. * Non-GAAP operating income between $566 and $568 million(2). * Non-GAAP fully diluted net income per share between $2.83 and $2.84(2).

Veeva is providing guidance for its fiscal year ending January 31, 2022 as follows:

* Total revenues between $1,700 and $1,720 million. * Subscription services revenues between $1,390 and $1,400 million. * Non-GAAP operating margin of roughly 37%(3).

Conference Call Information

What: Veeva's Fiscal 2021 Third Quarter Results Conference Call

When: Tuesday, December 1, 2020

Time: 1:30 p.m. PT (4:30 p.m. ET)

Online Registration: www.directeventreg.com

Conference ID 3283186

Webcast: ir.veeva.com

Investor Presentation Details

An investor presentation providing additional information and analysis can be found at ir.veeva.com.

___________

(1) This press release uses non-GAAP financial metrics that are adjusted for the impact of various GAAP items. See the section titled "Non-GAAP Financial Measures" and the tables entitled "Reconciliation of GAAP to Non-GAAP Financial Measures" below for details.

(2) Veeva is not able, at this time, to provide GAAP targets for operating income and fully diluted net income per share for the fourth fiscal quarter ending January 31, 2021 or fiscal year ending January 31, 2021 because of the difficulty of estimating certain items excluded from non-GAAP operating income and non-GAAP fully diluted net income per share that cannot be reasonably predicted, such as charges related to stock-based compensation expense. The effect of these excluded items may be significant.

(3) Veeva is not able, at this time, to provide GAAP targets for operating margin for the fiscal year ending January 31, 2022 because of the difficulty of estimating certain items excluded from non-GAAP operating income that cannot be reasonably predicted, such as charges related to stock-based compensation expense. The effect of these excluded items may be significant.

About Veeva Systems

Veeva Systems Inc. is the leader in cloud-based software for the global life sciences industry. Committed to innovation, product excellence, and customer success, Veeva serves more than 950 customers, ranging from the world's largest pharmaceutical companies to emerging biotechs. Veeva is headquartered in the San Francisco Bay Area, with offices throughout North America, Europe, Asia, and Latin America. For more information, visit veeva.com.

Veeva uses its ir.veeva.com website as a means of disclosing material non-public information, announcing upcoming investor conferences, and for complying with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website in addition to following our press releases, SEC filings, and public conference calls and webcasts.

Forward-looking Statements

This release contains forward-looking statements, including the quotations from management, the statements in "Financial Outlook," and other statements regarding Veeva's future performance, outlook, and guidance and the assumptions underlying those statements, market growth, the benefits from the use of Veeva's solutions, our strategies, and general business conditions. Any forward-looking statements contained in this press release are based upon Veeva's historical performance and its current plans, estimates, and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent Veeva's expectations as of the date of this press announcement. Subsequent events may cause these expectations to change, and Veeva disclaims any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially, including (i) the impact of the COVID-19 pandemic (including the impact to the life sciences industry, impact on general economic conditions, and government responses, restrictions, and actions related to the pandemic); (ii) breaches in our security measures or unauthorized access to our customers' data; (iii) our expectation that the future growth rate of our revenues will decline; (iv) competitive factors, including but not limited to pricing pressures, consolidation among our competitors, entry of new competitors, the launch of new products and marketing initiatives by our existing competitors, and difficulty securing rights to access, host or integrate with complementary third party products or data used by our customers; (v) the rate of adoption of our newer solutions and the results of our efforts to sustain or expand the use and adoption of our more established applications, like Veeva CRM; (vi) fluctuation of our results, which may make period-to-period comparisons less meaningful; (vii) our ability to integrate Crossix Solutions Inc. and Physicians World, LLC into our business and achieve the expected benefits of the acquisitions, including as a result of the impact of the COVID-19 pandemic on these businesses; (viii) loss of one or more customers, particularly any of our large customers; (ix) system unavailability, system performance problems, or loss of data due to disruptions or other problems with our computing infrastructure; (x) our ability to attract and retain highly skilled employees and manage our growth effectively; (xi) failure to sustain the level of profitability we have achieved in the past as our costs increase; (xii) adverse changes in the life sciences industry, including as a result of customer mergers; (xiii) adverse changes in economic, regulatory, international trade relations, or market conditions, including with respect to natural disasters or actual or threatened public health emergencies; (xiv) a decline in new subscriptions that may not be immediately reflected in our operating results due to the ratable recognition of our subscription revenue; (xv) pending, threatened, or future legal proceedings and related expenses; and (xvi) our potential conversion to a Delaware public benefit corporation, including the expected impact, benefits, and risks of such a conversion.

Additional risks and uncertainties that could affect Veeva's financial results are included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the company's filing on Form 10-Q for the period ended July 31, 2020. This is available on the company's website at veeva.com under the Investors section and on the SEC's website at sec.gov. Further information on potential risks that could affect actual results will be included in other filings Veeva makes with the SEC from time to time.

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

October 31, January 31, 2020 2020

Assets

Current assets:

Cash and cash equivalents $ 634,265 $ 476,733

Short-term investments 956,167 610,015

Accounts receivable, net 183,435 389,690

Unbilled accounts receivable 53,235 32,817

Prepaid expenses and other current assets 25,895 21,869

Total current assets 1,852,997 1,531,124

Property and equipment, net 54,352 54,752

Deferred costs, net 35,472 35,585

Lease right-of-use assets 52,824 49,132

Goodwill 436,029 438,529

Intangible assets, net 119,165 134,601

Deferred income taxes, noncurrent 15,689 11,870

Other long-term assets 17,113 16,184

Total assets $ 2,583,641 $ 2,271,777



Liabilities and stockholders' equity

Current liabilities:

Accounts payable $ 21,324 $ 19,420

Accrued compensation and benefits 28,906 25,619

Accrued expenses and other current liabilities 22,391 21,620

Income tax payable 2,555 5,613

Deferred revenue 331,166 468,887

Lease liabilities 11,050 10,013

Total current liabilities 417,392 551,172

Deferred income taxes, noncurrent 1,004 2,417

Lease liabilities, noncurrent 47,965 44,815

Other long-term liabilities 10,901 7,779

Total liabilities 477,262 606,183

Stockholders' equity:

Class A common stock 2 1

Class B common stock - -

Additional paid-in capital 906,137 745,475

Accumulated other comprehensive income 3,502 460

Retained earnings 1,196,738 919,658

Total stockholders' equity 2,106,379 1,665,594

Total liabilities and stockholders' equity $ 2,583,641 $ 2,271,777

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)

Three months endedOctober 31,

Nine months endedOctober 31,

2020

2019

2020

2019

Revenues:

Subscription services(4)

$

302,938

$

226,760

$

856,675

$

642,187

Professional services and other(5)

74,581

54,161

211,633

150,386

Total revenues

377,519

280,921

1,068,308

792,573

Cost of revenues(3):

Cost of subscription services

45,845

31,964

132,457

93,822

Cost of professional services and other

57,152

41,365

162,624

115,228

Total cost of revenues

102,997

73,329

295,081

209,050

Gross profit

274,522

207,592

773,227

583,523

Operating expenses(3):

Research and development

79,992

52,575

212,282

148,694

Sales and marketing

57,982

45,524

172,909

130,962

General and administrative

35,243

28,693

109,085

78,042

Total operating expenses

173,217

126,792

494,276

357,698

Operating income

101,305

80,800

278,951

225,825

Other income, net

3,455

9,141

9,750

22,634

Income before income taxes

104,760

89,941

288,701

248,459

Provision for income taxes

7,801

7,696

11,621

13,523

Net income

$

96,959

$

82,245

$

277,080

$

234,936

Net income per share:

Basic

$

0.64

$

0.56

$

1.84

$

1.59

Diluted

$

0.60

$

0.52

$

1.73

$

1.49

Weighted-average shares used to compute net income per share:

Basic

150,993

148,157

150,322

147,467

Diluted

161,711

158,750

160,517

158,124

Other comprehensive income:

Net change in unrealized gains on available-for-sale investments

$

(1,230

)

$

753

$

1,198

$

2,176

Net change in cumulative foreign currency translation loss

(1,438

)

(487

)

1,844

(2,931

)

Comprehensive income

$

94,291

$

82,511

$

280,122

$

234,181

(3) Includes stock-based compensation as follows:

Cost of revenues:

Cost of subscription services

$

1,149

$

560

$

3,700

$

1,528

Cost of professional services and other

7,510

4,825

19,902

12,261

Research and development

17,685

9,899

45,523

25,732

Sales and marketing

10,711

6,882

30,089

19,207

General and administrative

11,918

7,155

36,032

19,719

Total stock-based compensation

$

48,973

$

29,321

$

135,246

$

78,447

(4) Includes subscription services revenues from the following product areas:

Veeva Commercial Cloud

$

152,466

$

115,201

$

439,858

$

333,591

Veeva Vault

150,472

111,559

416,817

308,596

Total subscription services

$

302,938

$

226,760

$

856,675

$

642,187

(5) Includes professional services and other revenues from the following product areas:

Veeva Commercial Cloud

$

29,115

$

18,589

$

83,109

$

52,381

Veeva Vault

45,466

35,572

128,524

98,005

Total professional services and other

$

74,581

$

54,161

$

211,633

$

150,386

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)

Three months ended Nine months ended October 31, October 31,

2020 2019 2020 2019

Revenues:

Subscription services^(4) $ 302,938 $ 226,760 $ 856,675 $ 642,187

Professional services and 74,581 54,161 211,633 150,386 other^(5)

Total revenues 377,519 280,921 1,068,308 792,573

Cost of revenues^(3):

Cost of subscription services 45,845 31,964 132,457 93,822

Cost of professional services 57,152 41,365 162,624 115,228 and other

Total cost of revenues 102,997 73,329 295,081 209,050

Gross profit 274,522 207,592 773,227 583,523

Operating expenses^(3):

Research and development 79,992 52,575 212,282 148,694

Sales and marketing 57,982 45,524 172,909 130,962

General and administrative 35,243 28,693 109,085 78,042

Total operating expenses 173,217 126,792 494,276 357,698

Operating income 101,305 80,800 278,951 225,825

Other income, net 3,455 9,141 9,750 22,634

Income before income taxes 104,760 89,941 288,701 248,459

Provision for income taxes 7,801 7,696 11,621 13,523

Net income $ 96,959 $ 82,245 $ 277,080 $ 234,936



Net income per share:

Basic $ 0.64 $ 0.56 $ 1.84 $ 1.59

Diluted $ 0.60 $ 0.52 $ 1.73 $ 1.49



Weighted-average shares usedto compute net income per share:

Basic 150,993 148,157 150,322 147,467

Diluted 161,711 158,750 160,517 158,124

Other comprehensive income:

Net change in unrealizedgains on available-for-sale $ (1,230 ) $ 753 $ 1,198 $ 2,176 investments

Net change in cumulativeforeign currency translation (1,438 ) (487 ) 1,844 (2,931 )loss

Comprehensive income $ 94,291 $ 82,511 $ 280,122 $ 234,181



^(3) Includes stock-based compensation as follows:

Cost of revenues:

Cost of subscription services $ 1,149 $ 560 $ 3,700 $ 1,528

Cost of professional services 7,510 4,825 19,902 12,261 and other

Research and development 17,685 9,899 45,523 25,732

Sales and marketing 10,711 6,882 30,089 19,207

General and administrative 11,918 7,155 36,032 19,719

Total stock-based $ 48,973 $ 29,321 $ 135,246 $ 78,447 compensation



^(4) Includes subscriptionservices revenues from the following product areas:

Veeva Commercial Cloud $ 152,466 $ 115,201 $ 439,858 $ 333,591

Veeva Vault 150,472 111,559 416,817 308,596

Total subscription services $ 302,938 $ 226,760 $ 856,675 $ 642,187



^(5) Includes professionalservices and other revenues from the following productareas:

Veeva Commercial Cloud $ 29,115 $ 18,589 $ 83,109 $ 52,381

Veeva Vault 45,466 35,572 128,524 98,005

Total professional services $ 74,581 $ 54,161 $ 211,633 $ 150,386 and other

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three months endedOctober 31,

Nine months endedOctober 31,

2020

2019

2020

2019

Cash flows from operating activities

Net income

$

96,959

$

82,245

$

277,080

$

234,936

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

7,525

3,845

22,720

11,626

Reduction of operating lease right-of-use assets

3,322

1,798

9,411

5,016

Accretion of discount on short-term investments

1,203

(722

)

1,688

(2,996

)

Stock-based compensation

48,973

29,321

135,246

78,447

Amortization of deferred costs

5,350

4,832

15,425

14,524

Deferred income taxes

(1,894

)

432

(3,532

)

1,771

Loss (Gain) on foreign currency from mark-to-market derivative

19

(74

)

14

(112

)

Bad debt (expense) recovery

(181

)

270

(60

)

(42

)

Changes in operating assets and liabilities:

Accounts receivable

37,448

28,319

206,214

186,633

Unbilled accounts receivable

(16,585

)

(9,515

)

(20,418

)

(12,777

)

Deferred costs

(6,177

)

(4,500

)

(15,312

)

(13,528

)

Income taxes payable

4,538

3,909

(453

)

4,858

Other current and long-term assets

8,195

5,610

(2,937

)

1,513

Accounts payable

3,060

1,253

(456

)

1,216

Accrued expenses and other current liabilities

1,541

(1,682

)

4,357

231

Deferred revenue

(90,291

)

(78,326

)

(137,980

)

(105,637

)

Operating lease liabilities

(3,229

)

(1,625

)

(8,496

)

(5,143

)

Other long-term liabilities

(4,373

)

(3,886

)

384

(2,270

)

Net cash provided by operating activities

95,403

61,504

482,895

398,266

Cash flows from investing activities

Purchases of short-term investments

(417,898

)

(190,695

)

(874,465

)

(628,784

)

Maturities and sales of short-term investments

158,628

194,661

528,194

571,398

Long-term assets

(3,316

)

(1,237

)

(8,456

)

(4,228

)

Net cash (used in) provided by investing activities

(262,586

)

2,729

(354,727

)

(61,614

)

Cash flows from financing activities

Reduction of lease liabilities - finance leases

79

(241

)

(420

)

(729

)

Proceeds from exercise of common stock options

6,186

1,607

25,245

8,618

Net cash provided by financing activities

6,265

1,366

24,825

7,889

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

(599

)

(487

)

2,683

(2,931

)

Net change in cash, cash equivalents, and restricted cash

(161,517

)

65,112

155,676

341,610

Cash, cash equivalents, and restricted cash at beginning of period

796,990

828,676

479,797

552,178

Cash, cash equivalents, and restricted cash at end of period

$

635,473

$

893,788

$

635,473

$

893,788

Supplemental disclosures of other cash flow information:

Excess tax benefits from employee stock plans

$

17,329

$

8,931

$

59,067

$

39,509

Non-GAAP Financial Measures

In Veeva's public disclosures, Veeva has provided non-GAAP measures, which it defines as financial information that has not been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. In addition to its GAAP measures, Veeva uses these non-GAAP financial measures internally for budgeting and resource allocation purposes and in analyzing its financial results. For the reasons set forth below, Veeva believes that excluding the following items provides information that is helpful in understanding its operating results, evaluating its future prospects, comparing its financial results across accounting periods, and comparing its financial results to its peers, many of which provide similar non-GAAP financial measures.

* Stock-based compensation expenses. Veeva excludes stock-based compensation expenses primarily because they are non-cash expenses that Veeva excludes from its internal management reporting processes. Veeva's management also finds it useful to exclude these expenses when they assess the appropriate level of various operating expenses and resource allocations when budgeting, planning and forecasting future periods. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, Veeva believes excluding stock-based compensation expenses allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies. * Amortization of purchased intangibles. Veeva incurs amortization expense for purchased intangible assets in connection with acquisitions of certain businesses and technologies. Amortization of intangible assets is a non-cash expense and is inconsistent in amount and frequency because it is significantly affected by the timing, size of acquisitions and the inherent subjective nature of purchase price allocations. Because these costs have already been incurred and cannot be recovered, and are non-cash expenses, Veeva excludes these expenses for its internal management reporting processes. Veeva's management also finds it useful to exclude these charges when assessing the appropriate level of various operating expenses and resource allocations when budgeting, planning and forecasting future periods. Investors should note that the use of intangible assets contributed to Veeva's revenues earned during the periods presented and will contribute to Veeva's future period revenues as well. * Income tax effects on the difference between GAAP and non-GAAP costs and expenses. The income tax effects that are excluded relate to the imputed tax impact on the difference between GAAP and non-GAAP costs and expenses due to stock-based compensation and purchased intangibles for GAAP and non-GAAP measures.

There are limitations to using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures provided by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by Veeva's management about which items are adjusted to calculate its non-GAAP financial measures. Veeva compensates for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in its public disclosures.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Veeva encourages its investors and others to review its financial information in its entirety, not to rely on any single financial measure to evaluate its business, and to view its non-GAAP financial measures in conjunction with the most directly comparable GAAP financial measures. A reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables below.

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three months ended Nine months ended October 31, October 31,

2020 2019 2020 2019

Cash flows from operating activities

Net income $ 96,959 $ 82,245 $ 277,080 $ 234,936

Adjustments to reconcilenet income to net cash provided by operatingactivities:

Depreciation and 7,525 3,845 22,720 11,626 amortization

Reduction of operating 3,322 1,798 9,411 5,016 lease right-of-use assets

Accretion of discount on 1,203 (722 ) 1,688 (2,996 )short-term investments

Stock-based compensation 48,973 29,321 135,246 78,447

Amortization of deferred 5,350 4,832 15,425 14,524 costs

Deferred income taxes (1,894 ) 432 (3,532 ) 1,771

Loss (Gain) on foreigncurrency from 19 (74 ) 14 (112 )mark-to-market derivative

Bad debt (expense) recovery (181 ) 270 (60 ) (42 )

Changes in operating assets and liabilities:

Accounts receivable 37,448 28,319 206,214 186,633

Unbilled accounts (16,585 ) (9,515 ) (20,418 ) (12,777 )receivable

Deferred costs (6,177 ) (4,500 ) (15,312 ) (13,528 )

Income taxes payable 4,538 3,909 (453 ) 4,858

Other current and long-term 8,195 5,610 (2,937 ) 1,513 assets

Accounts payable 3,060 1,253 (456 ) 1,216

Accrued expenses and other 1,541 (1,682 ) 4,357 231 current liabilities

Deferred revenue (90,291 ) (78,326 ) (137,980 ) (105,637 )

Operating lease liabilities (3,229 ) (1,625 ) (8,496 ) (5,143 )

Other long-term liabilities (4,373 ) (3,886 ) 384 (2,270 )

Net cash provided by 95,403 61,504 482,895 398,266 operating activities

Cash flows from investing activities

Purchases of short-term (417,898 ) (190,695 ) (874,465 ) (628,784 )investments

Maturities and sales of 158,628 194,661 528,194 571,398 short-term investments

Long-term assets (3,316 ) (1,237 ) (8,456 ) (4,228 )

Net cash (used in) provided (262,586 ) 2,729 (354,727 ) (61,614 )by investing activities

Cash flows from financing activities

Reduction of leaseliabilities - finance 79 (241 ) (420 ) (729 )leases

Proceeds from exercise of 6,186 1,607 25,245 8,618 common stock options

Net cash provided by 6,265 1,366 24,825 7,889 financing activities

Effect of exchange ratechanges on cash, cash (599 ) (487 ) 2,683 (2,931 )equivalents, and restrictedcash

Net change in cash, cashequivalents, and restricted (161,517 ) 65,112 155,676 341,610 cash

Cash, cash equivalents, andrestricted cash at 796,990 828,676 479,797 552,178 beginning of period

Cash, cash equivalents, andrestricted cash at end of $ 635,473 $ 893,788 $ 635,473 $ 893,788 period



Supplemental disclosures ofother cash flow information:

Excess tax benefits from $ 17,329 $ 8,931 $ 59,067 $ 39,509 employee stock plans

Non-GAAP Financial Measures

In Veeva's public disclosures, Veeva has provided non-GAAP measures, which it defines as financial information that has not been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. In addition to its GAAP measures, Veeva uses these non-GAAP financial measures internally for budgeting and resource allocation purposes and in analyzing its financial results. For the reasons set forth below, Veeva believes that excluding the following items provides information that is helpful in understanding its operating results, evaluating its future prospects, comparing its financial results across accounting periods, and comparing its financial results to its peers, many of which provide similar non-GAAP financial measures.

* Stock-based compensation expenses. Veeva excludes stock-based compensation expenses primarily because they are non-cash expenses that Veeva excludes from its internal management reporting processes. Veeva's management also finds it useful to exclude these expenses when they assess the appropriate level of various operating expenses and resource allocations when budgeting, planning and forecasting future periods. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, Veeva believes excluding stock-based compensation expenses allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies. * Amortization of purchased intangibles. Veeva incurs amortization expense for purchased intangible assets in connection with acquisitions of certain businesses and technologies. Amortization of intangible assets is a non-cash expense and is inconsistent in amount and frequency because it is significantly affected by the timing, size of acquisitions and the inherent subjective nature of purchase price allocations. Because these costs have already been incurred and cannot be recovered, and are non-cash expenses, Veeva excludes these expenses for its internal management reporting processes. Veeva's management also finds it useful to exclude these charges when assessing the appropriate level of various operating expenses and resource allocations when budgeting, planning and forecasting future periods. Investors should note that the use of intangible assets contributed to Veeva's revenues earned during the periods presented and will contribute to Veeva's future period revenues as well. * Income tax effects on the difference between GAAP and non-GAAP costs and expenses. The income tax effects that are excluded relate to the imputed tax impact on the difference between GAAP and non-GAAP costs and expenses due to stock-based compensation and purchased intangibles for GAAP and non-GAAP measures.

There are limitations to using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures provided by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by Veeva's management about which items are adjusted to calculate its non-GAAP financial measures. Veeva compensates for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in its public disclosures.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Veeva encourages its investors and others to review its financial information in its entirety, not to rely on any single financial measure to evaluate its business, and to view its non-GAAP financial measures in conjunction with the most directly comparable GAAP financial measures. A reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables below.

VEEVA SYSTEMS INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Dollars in thousands)

(Unaudited)

The following tables reconcile the specific items excluded from GAAP metrics inthe calculation of non-GAAP metrics for the periods shown below:

Three months ended Nine months ended October 31, October 31,

2020 2019 2020 2019

Cost ofsubscription $ 45,845 $ 31,964 $ 132,457 $ 93,822 services revenueson a GAAP basis

Stock-basedcompensation (1,149 ) (560 ) (3,700 ) (1,528 ) expense

Amortization ofpurchased (1,174 ) (688 ) (3,942 ) (2,043 ) intangibles

Cost ofsubscription $ 43,522 $ 30,716 $ 124,815 $ 90,251 services revenueson a non-GAAP basis



Gross margin onsubscription 84.9 % 85.9 % 84.5 % 85.4 %services revenueson a GAAP basis

Stock-basedcompensation 0.4 0.2 0.4 0.2 expense

Amortization ofpurchased 0.4 0.4 0.5 0.3 intangibles

Gross margin onsubscription 85.7 % 86.5 % 85.4 % 85.9 %services revenueson a non-GAAP basis



Cost ofprofessionalservices and other $ 57,152 $ 41,365 $ 162,624 $ 115,228 revenues on a GAAPbasis

Stock-basedcompensation (7,510 ) (4,825 ) (19,902 ) (12,261 ) expense

Amortization ofpurchased (138 ) - (411 ) - intangibles

Cost ofprofessionalservices and other $ 49,504 $ 36,540 $ 142,311 $ 102,967 revenues on anon-GAAP basis



Gross margin onprofessionalservices and other 23.4 % 23.6 % 23.2 % 23.4 %revenues on a GAAPbasis

Stock-basedcompensation 10.1 8.9 9.4 8.2 expense

Amortization ofpurchased 0.2 - 0.2 - intangibles

Gross margin onprofessionalservices and other 33.7 % 32.5 % 32.8 % 31.6 %revenues on anon-GAAP basis



Gross profit on a $ 274,522 $ 207,592 $ 773,227 $ 583,523 GAAP basis

Stock-basedcompensation 8,659 5,385 23,602 13,789 expense

Amortization ofpurchased 1,312 688 4,353 2,043 intangibles

Gross profit on a $ 284,493 $ 213,665 $ 801,182 $ 599,355 non-GAAP basis



Gross margin ontotal revenues on a 72.7 % 73.9 % 72.4 % 73.6 %GAAP basis

Stock-basedcompensation 2.3 1.9 2.2 1.7 expense

Amortization ofpurchased 0.3 0.3 0.3 0.3 intangibles

Gross margin ontotal revenues on a 75.3 % 76.1 % 74.9 % 75.6 %non-GAAP basis



Research anddevelopment expense $ 79,992 $ 52,575 $ 212,282 $ 148,694 on a GAAP basis

Stock-basedcompensation (17,685 ) (9,899 ) (45,523 ) (25,732 ) expense

Amortization ofpurchased (29 ) - (86 ) - intangibles

Research anddevelopment expense $ 62,278 $ 42,676 $ 166,673 $ 122,962 on a non-GAAP basis



Sales and marketingexpense on a GAAP $ 57,982 $ 45,524 $ 172,909 $ 130,962 basis

Stock-basedcompensation (10,711 ) (6,882 ) (30,089 ) (19,207 ) expense

Amortization ofpurchased (3,858 ) (802 ) (10,828 ) (2,530 ) intangibles

Sales and marketingexpense on a $ 43,413 $ 37,840 $ 131,992 $ 109,225 non-GAAP basis



General andadministrative $ 35,243 $ 28,693 $ 109,085 $ 78,042 expense on a GAAPbasis

Stock-basedcompensation (11,918 ) (7,155 ) (36,032 ) (19,719 ) expense

Amortization ofpurchased (57 ) - (170 ) - intangibles

General andadministrative $ 23,268 $ 21,538 $ 72,883 $ 58,323 expense on anon-GAAP basis



VEEVA SYSTEMS INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued)

(Dollars in thousands, except per share data)

(Unaudited)

Three months ended Nine months ended October 31, October 31,

2020 2019 2020 2019

Operating expense $ 173,217 $ 126,792 $ 494,276 $ 357,698 on a GAAP basis

Stock-basedcompensation (40,314 ) (23,936 ) (111,644 ) (64,658 ) expense

Amortization ofpurchased (3,944 ) (802 ) (11,084 ) (2,530 ) intangibles

Operating expense $ 128,959 $ 102,054 $ 371,548 $ 290,510 on a non-GAAP basis



Operating income on $ 101,305 $ 80,800 $ 278,951 $ 225,825 a GAAP basis

Stock-basedcompensation 48,973 29,321 135,246 78,447 expense

Amortization ofpurchased 5,256 1,490 15,437 4,573 intangibles

Operating income on $ 155,534 $ 111,611 $ 429,634 $ 308,845 a non-GAAP basis



Operating margin on 26.8 % 28.8 % 26.1 % 28.5 %a GAAP basis

Stock-basedcompensation 13.0 10.4 12.7 9.9 expense

Amortization ofpurchased 1.4 0.5 1.4 0.6 intangibles

Operating margin on 41.2 % 39.7 % 40.2 % 39.0 %a non-GAAP basis



Net income on a $ 96,959 $ 82,245 $ 277,080 $ 234,936 GAAP basis

Stock-basedcompensation 48,973 29,321 135,246 78,447 expense

Amortization ofpurchased 5,256 1,490 15,437 4,573 intangibles

Income tax effecton non-GAAP (25,587 ) (17,662 ) (80,650 ) (56,088 ) adjustments^(1)

Net income on a $ 125,601 $ 95,394 $ 347,113 $ 261,868 non-GAAP basis



Diluted net incomeper share on a GAAP $ 0.60 $ 0.52 $ 1.73 $ 1.49 basis

Stock-basedcompensation 0.30 0.18 0.84 0.50 expense

Amortization ofpurchased 0.03 0.01 0.10 0.02 intangibles

Income tax effecton non-GAAP (0.15 ) (0.11 ) (0.51 ) (0.35 ) adjustments^(1)

Diluted net incomeper share on a $ 0.78 $ 0.60 $ 2.16 $ 1.66 non-GAAP basis

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^ For the three and nine months ended October 31, 2020 and 2019, management(1) used an estimated annual effective non-GAAP tax rate of 21.0%.

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CONTACT: Investor Relations Contact: Ato Garrett Veeva Systems Inc. 925-271-4204 ir@veeva.com

CONTACT: Media Contact: Roger Villareal Veeva Systems Inc. 925-264-8885 pr@veeva.com