Veeva Systems, Inc. VEEV reported adjusted earnings per share (EPS) of 97 cents in the third quarter of fiscal 2022, reflecting an improvement of 24.4% from the year-ago EPS of 78 cents. Adjusted EPS surpassed the Zacks Consensus Estimate by 10.2%.

GAAP EPS in the fiscal third quarter was 65 cents, up by 8.3% from the year-ago EPS of 60 cents.

Revenues

For the quarter, the company’s revenues totaled $476.1 million, outpacing the Zacks Consensus Estimate by 2.3%. On a year-over-year basis, the top line improved 26.1%.

The third-quarter top line was driven by Veeva Systems’ robust segmental performances.

Segmental Details

Veeva Systems derives revenues from two operating segments — Subscription services, and Professional services and other.

In the fiscal third quarter, Subscription services revenues improved 25.7% from the year-ago quarter to $380.7 million, primarily driven by the company’s more established products such as Vault QualityDocs, Vault eTMF and Vault Submissions.

Professional services and other revenues were up 27.9% year over year to $95.4 million, primarily resulting from continued strong demand for services related to Veeva Systems’ research and development (R&D) solutions, increased demand from SMB customers and business consulting momentum.

Veeva Systems Inc. Price, Consensus and EPS Surprise

Veeva Systems Inc. price-consensus-eps-surprise-chart | Veeva Systems Inc. Quote

Margin Details

In the quarter under review, Veeva Systems’ gross profit rose 26.2% to $346.5 million. Gross margin expanded 7 basis points (bps) to 72.8%.

Meanwhile, sales and marketing expenses rose 24.9% to $72.4 million. R&D expenses went up 23.3% year over year to $98.6 million, while general and administrative expenses climbed 21.4% year over year to $42.8 million. Total operating expenses of $213.8 million increased 23.5% year over year.

Operating profit totaled $132.7 million, which surged 30.9% from the prior-year quarter. Operating margin in the third quarter expanded 104 bps to 27.9%.

Financial Position

The company exited the fiscal 2022 third quarter with cash and cash equivalents, and short-term investments of $2.35 billion compared with $2.26 billion at the end of fiscal 2022 second quarter.

Cumulative net cash provided by operating activities at the end of the third quarter of fiscal 2022 was $710.4 million compared with $482.9 million in the year-ago period.

Guidance

Veeva Systems has provided its financial outlook for fiscal 2022 fourth quarter and upped its estimates for the full year. It has also initiated its fiscal 2023 financial projections.

For the fourth quarter of fiscal 2022, the company expects total revenues in the range of $478-$480 million. The Zacks Consensus Estimate for the same is currently pegged at $479.9 million.

Subscription revenues are estimated to be approximately $394 million in the fiscal fourth quarter.

Adjusted EPS is projected to be 88 cents. The Zacks Consensus Estimate for the metric is pegged at 85 cents.

For fiscal 2022, revenues are expected in the range of $1,843 million-$1,845 million (up from the previously issued guidance range of $1,830 million-$1,835 million). The Zacks Consensus Estimate for the same is currently pegged at $1.83 billion.

Subscription revenues are estimated to be approximately $1.482 billion in the fiscal year.

Adjusted EPS for the year is expected to be $3.69, up from the previously provided estimate of $3.57, which is in line with the Zacks Consensus Estimate.

Veeva Systems expects its revenues for fiscal year 2023 to be in the range of $2,150 million-$2,170 million. The Zacks Consensus Estimate for the same is currently pegged at $2.18 billion.

Subscription services revenues are projected to lie between $1,735 million-$1,745 million for fiscal 2023.

Our Take

Veeva Systems exited the third quarter of fiscal 2022 with better-than-expected results. Both of its segments performed impressively during the quarter. The company continues to benefit from its flagship Vault platform, which is encouraging. Veeva Commercial Cloud won seven 7-figure deals in core Veeva CRM, Veeva Crossix analytics and Veeva Link, which look impressive. Veeva Systems added 15 SMB customers and had some significant enterprise expansions, which auger well for the company. The company witnessed good strength in the international market as well, including wins for two large field forces in Asia, thereby raising our optimism on the stock.

Steady adoption of Veeva Systems’ products is encouraging as well. Expansion of both margins also bodes well. A raised guidance for the fiscal year is a major positive.

On the flip side, rising operating costs during the quarter is a headwind.

Zacks Rank and Key Picks

Veeva Systems currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space that have announced quarterly results are AmerisourceBergen Corporation ABC, Thermo Fisher Scientific Inc. TMO and AMN Healthcare Services AMN.

AmerisourceBergen, carrying a Zacks Rank #2 (Buy), reported fourth-quarter fiscal 2021 adjusted EPS of $2.39, which beat the Zacks Consensus Estimate by 1.3%. Revenues of $58.91 billion outpaced the consensus mark by 3.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AmerisourceBergen has an estimated long-term growth rate of 11.3%. The company surpassed estimates in the trailing four quarters, the average surprise being 5.48%.

Thermo Fisher reported third-quarter 2021 adjusted EPS of $5.76, which surpassed the Zacks Consensus Estimate by 23.3%. Third-quarter revenues of $9.33 billion outpaced the Zacks Consensus Estimate by 12%. It currently carries a Zacks Rank #2.

Thermo Fisher has an estimated long-term growth rate of 14%. The company surpassed estimates in the trailing four quarters, the average surprise being 9.02%.

AMN Healthcare reported third-quarter 2021 adjusted EPS of $1.73, which surpassed the Zacks Consensus Estimate by 29.1%. Third-quarter revenues of $877.8 million outpaced the Zacks Consensus Estimate by 12.3%. It currently sports a Zacks Rank #1.

AMN Healthcare has an estimated long-term growth rate of 16.2%. The company surpassed estimates in the trailing four quarters, the average surprise being 19.51%.

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