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Thursday, December 5, 2013

Veeva (VEEV) announces first earnings since IPO (5 Dec 2013)

** daily chart before earnings release **

Veeva Systems delivered in its earnings-report debut.

The maker of software for biotech and other life sciences companies late Thursday posted fiscal Q3 earnings and revenue that beat analyst views. It was its first quarterly report since its October IPO.

Its outlook for the current quarter also exceeded estimates.

Veeva (VEEV) stock was up 4.5% in after-hours trading, after it released its results and after the stock had risen 2.1% in the regular session to 40.98. The initial offering priced at $20 and closed its first day Oct. 16 at 37.16, up 85%. It peaked at 49 on Oct. 21.

Veeva competes with Oracle (ORCL) and others in providing customer relationship management software to help pharmaceutical and biotech firms better navigate the rigorous process in getting their drugs through clinical trials and the government approval process and onto the mass market.

The company delivers its software via the Internet cloud as a subscription service.
Its sole focus on the drug market boosts its growth, says Tom Roderick, an analyst for Stifel Nicolaus.
"Their ability to navigate through the regulatory nuances of the industry is why their product has become the standard," Roderick told IBD.

For the quarter ended Oct. 31, Veeva reported earnings per share minus items of 6 cents, where analysts polled by Thomson Reuters had expected 5 cents. Net EPS rose to 5 cents from 3 cents in the year-earlier quarter.

Revenue climbed 54% to $55 million, beating analyst views of $50.2 million. Veeva's sales and marketing costs jumped even more, 116%, to $11.4 million.

For the current quarter, Veeva expects EPS ex items of 5-6 cents, where analysts estimate 5 cents.
The company expects revenue of $57 million to $58 million, up 43% to 46%. Analysts had modeled $53.6 million.

The life science industry is shifting from legacy software to the cloud, to better deal with competitive and regulatory pressures, Veeva CEO Peter Gassner said on a conference call with analysts.

"Our growth and profitability are indicators of the strong demand for our industry cloud solutions," Gassner said. "We are at the very beginning of a major technology replacement cycle."

Veeva said Q3 software subscription revenue jumped 95% to $38.9 million. Revenue from professional services and related items rose just 1.3%, to $16 million.

Much of Veeva's business comes at the expense of software rivals Oracle and Cegedim, says Roderick. France-based Cegedim is traded on the Paris exchange.

"If you look at the success of the company to date, it's largely been based upon rip and replacements of existing CRM systems," Roderick said. "You are seeing a pretty big global rollout in front of some big license deployments."

Veeva's services revenue saw scant growth because consultant partners such as Accenture (ACN) are getting much of that work, Roderick says.

"That has been the function of some big projects that have been moving from the license phase, and some bigger partners along the lines of Accenture and other systems integrators taking a big chunk of that work," he said.

Veeva's software-as-a-service model, in which companies pay only for the software they use, helps control costs, Roderick says. Even with the big rise, marketing costs stayed modest, he says.

"The beauty is you don't need 500 sales reps to sell globally," he said. "There are 200 customers that really matter and maybe you need 100 to 200 sales reps. They have been able to cover the market with much lighter sales and marketing costs."

Research and development costs in Q3 rose 83% to $6.58 million.

R&D spending will rise as the firm adds collaboration software and content management, where its competitors will include the likes of EMC (EMC), Microsoft (MSFT) and OpenText (OTEX), Roderick says.

"It's not going to happen overnight, but those are the second and third acts that are required (for future growth)," he said.

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