Company Quick10K Filing
Veeva Systems
Price107.39 EPS1
Shares156 P/E73
MCap16,765 P/FCF54
Net Debt-552 EBIT239
TEV16,213 TEV/EBIT68
TTM 2019-10-31, in MM, except price, ratios
10-Q 2020-04-30 Filed 2020-06-04
10-K 2020-01-31 Filed 2020-03-30
10-Q 2019-10-31 Filed 2019-12-05
10-Q 2019-07-31 Filed 2019-09-05
10-Q 2019-04-30 Filed 2019-06-06
10-K 2019-01-31 Filed 2019-03-28
10-Q 2018-10-31 Filed 2018-12-07
10-Q 2018-07-31 Filed 2018-09-06
10-Q 2018-04-30 Filed 2018-06-07
10-K 2018-01-31 Filed 2018-03-30
10-Q 2017-10-31 Filed 2017-12-06
10-Q 2017-07-31 Filed 2017-09-07
10-Q 2017-04-30 Filed 2017-06-08
10-K 2017-01-31 Filed 2017-03-30
10-Q 2016-10-31 Filed 2016-12-08
10-Q 2016-07-31 Filed 2016-09-08
10-Q 2016-04-30 Filed 2016-06-08
10-K 2016-01-31 Filed 2016-03-31
10-Q 2015-10-31 Filed 2015-12-10
10-Q 2015-07-31 Filed 2015-09-04
10-Q 2015-04-30 Filed 2015-06-04
10-K 2015-01-31 Filed 2015-04-01
10-Q 2014-10-31 Filed 2014-12-11
10-Q 2014-07-31 Filed 2014-09-11
10-Q 2014-04-30 Filed 2014-06-06
S-1 2014-03-18 Public Filing
10-K 2014-01-31 Filed 2014-03-18
10-Q 2013-10-31 Filed 2013-12-13
S-1 2013-09-11 Public Filing
8-K 2020-06-08
8-K 2020-05-28
8-K 2020-03-03
8-K 2019-11-26
8-K 2019-11-01
8-K 2019-09-25
8-K 2019-08-27
8-K 2019-08-16
8-K 2019-06-20
8-K 2019-05-29
8-K 2019-04-01
8-K 2019-03-19
8-K 2019-02-26
8-K 2019-02-26
8-K 2019-02-22
8-K 2018-11-28
8-K 2018-08-23
8-K 2018-06-13
8-K 2018-06-07
8-K 2018-05-24
8-K 2018-02-27
8-K 2018-01-10

VEEV 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements.
Note 1. Summary of Business and Significant Accounting Policies
Note 2. Acquisitions
Note 3. Short - Term Investments
Note 4. Deferred Costs
Note 5. Property and Equipment, Net
Note 6. Goodwill and Intangible Assets
Note 7. Accrued Expenses
Note 8. Fair Value Measurements
Note 9. Income Taxes
Note 10. Deferred Revenue and Performance Obligations
Note 11. Leases
Note 12. Stockholders' Equity
Note 13. Net Income per Share
Note 14. Commitments and Contingencies
Note 15. Revenues By Product
Note 16. Information About Geographic Areas
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-10.1 veev-20200430xexx101.htm
EX-31.1 veev-20200430xexx311.htm
EX-31.2 veev-20200430xexx312.htm
EX-32.1 veev-20200430xexx321.htm
EX-32.2 veev-20200430xexx322.htm

Veeva Systems Earnings 2020-04-30

Balance SheetIncome StatementCash Flow
1.71.41.00.70.30.02012201420172020
Assets, Equity
0.30.20.20.10.10.02012201420172020
Rev, G Profit, Net Income
0.30.20.10.0-0.1-0.22012201420172020
Ops, Inv, Fin

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________________
FORM 10-Q
____________________________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .
Commission File Number: 001-36121
____________________________________________________________________________________
Veeva Systems Inc.
(Exact name of registrant as specified in its charter)
____________________________________________________________________________________
Delaware
 
20-8235463
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
4280 Hacienda Drive
Pleasanton, California, 94588
(Address of principal executive offices)
(Registrant’s telephone number, including area code) (925452-6500
(Former name, former address and former fiscal year, if changed since last report) N/A
____________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Class A Common Stock,
par value $0.00001 per share
 
VEEV
 
The New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
 
 
 
 
Non-accelerated filer
Smaller reporting company
 
 
 
 
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ☒    No  ☐  
As of May 31, 2020, there were 134,987,963 shares of the Registrant’s Class A common stock outstanding and 15,158,728 shares of the Registrant’s Class B common stock outstanding.
 



VEEVA SYSTEMS INC.
FORM 10-Q
TABLE OF CONTENTS
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2
Veeva Systems Inc. | Form 10-Q


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations and expenses, business strategies and plans, trends, market sizing, competitive position, industry environment, potential growth opportunities and product capabilities, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “aim,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “goal,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “strive,” “will,” “would” or similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks, uncertainties and other factors—including those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report—that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward looking statements are based on our current views and expectations and are subject to various risks and uncertainties, including those related to the impact of COVID-19 on our business, the life sciences industry, and global economic conditions. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
As used in this report, the terms “Veeva,” “Registrant,” “we,” “us,” and “our” mean Veeva Systems Inc. and its subsidiaries unless the context indicates otherwise.

Veeva Systems Inc. | Form 10-Q
3


PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS.
VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares and par value)
 
April 30,
2020
 
January 31,
2020
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
720,776

 
$
476,733

Short-term investments
660,199

 
610,015

Accounts receivable, net of allowance for doubtful accounts of $192 and $617,
respectively
235,923

 
389,690

Unbilled accounts receivable
37,269

 
32,817

Prepaid expenses and other current assets
21,105

 
21,869

Total current assets
1,675,272

 
1,531,124

Property and equipment, net
52,886

 
54,752

Deferred costs, net
34,176

 
35,585

Lease right-of-use assets
46,923

 
49,132

Goodwill
438,529

 
438,529

Intangible assets, net
129,403

 
134,601

Deferred income taxes, noncurrent
11,701

 
11,870

Other long-term assets
15,729

 
16,184

Total assets
$
2,404,619

 
$
2,271,777

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
15,041

 
$
19,420

Accrued compensation and benefits
27,064

 
25,619

Accrued expenses and other current liabilities
23,405

 
21,620

Income tax payable
4,441

 
5,613

Deferred revenue
470,262

 
468,887

Lease liabilities
10,127

 
10,013

Total current liabilities
550,340

 
551,172

Deferred income taxes, noncurrent
1,673

 
2,417

Lease liabilities, noncurrent
42,430

 
44,815

Other long-term liabilities
9,140

 
7,779

Total liabilities
603,583

 
606,183

Commitments and contingencies (Note 14)


 


Stockholders’ equity:
 
 
 
Class A common stock, $0.00001 par value; 800,000,000 shares authorized,
134,844,536 and 133,892,725 issued and outstanding at April 30, 2020 and January 31, 2020,
respectively
2

 
1

Class B common stock, $0.00001 par value; 190,000,000 shares authorized,
15,185,511 and 15,202,858 issued and outstanding at April 30, 2020 and January 31, 2020,
respectively

 

Additional paid-in capital
792,660

 
745,475

Accumulated other comprehensive income
2,146

 
460

Retained earnings
1,006,228

 
919,658

Total stockholders’ equity
1,801,036

 
1,665,594

Total liabilities and stockholders’ equity
$
2,404,619

 
$
2,271,777

 
 
 
 
See Notes to Condensed Consolidated Financial Statements.

4
Veeva Systems Inc. | Form 10-Q


VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
 
Three months ended
April 30,
2020
 
2019
(Unaudited)
Revenues:
 
 
 
Subscription services
$
270,235

 
$
198,115

Professional services and other
66,871

 
46,637

Total revenues
337,106

 
244,752

Cost of revenues(1):
 
 
 
Cost of subscription services
43,212

 
30,378

Cost of professional services and other
51,668

 
35,125

Total cost of revenues
94,880

 
65,503

Gross profit
242,226

 
179,249

Operating expenses(1):
 
 
 
Research and development
62,237

 
44,973

Sales and marketing
55,755

 
39,617

General and administrative
36,669

 
23,490

Total operating expenses
154,661

 
108,080

Operating income
87,565

 
71,169

Other income, net
3,414

 
6,161

Income before income taxes
90,979

 
77,330

Provision for income taxes
4,409

 
3,881

Net income
$
86,570

 
$
73,449

Net income, basic and diluted
$
86,570

 
$
73,449

Net income per share:
 
 
 
Basic
$
0.58

 
$
0.50

Diluted
$
0.54

 
$
0.47

Weighted-average shares used to compute net income per share:
 
 
 
Basic
149,541

 
146,708

Diluted
159,474

 
157,910

Other comprehensive income:
 
 
 
Net change in unrealized gain on available-for-sale investments
$
1,297

 
$
962

Net change in cumulative foreign currency translation loss
389

 
(702
)
Comprehensive income
$
88,256

 
$
73,709

 
 
 
 
_________________________________________________________
(1)
Includes stock-based compensation as follows:
Cost of revenues:
 
 
 
Cost of subscription services
$
1,019

 
$
385

Cost of professional services and other
5,074

 
2,978

Research and development
11,401

 
6,325

Sales and marketing
8,192

 
5,152

General and administrative
11,221

 
5,916

Total stock-based compensation
$
36,907

 
$
20,756

 
 
 
 

See Notes to Condensed Consolidated Financial Statements.

Veeva Systems Inc. | Form 10-Q
5


VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
 
Three months ended April 30, 2020
 
Class A & B
common stock
 
Additional
paid-in
capital
 
Retained
earnings
 
Accumulated
other
comprehensive
income
 
Total
stockholders’
equity
 
Shares
 
Amount
 
 
 
 
 
(Unaudited)
Balance at January 31, 2020
149,095,583

 
$
1

 
$
745,475

 
$
919,658

 
$
460

 
$
1,665,594

Issuance of common stock upon exercise of stock options
645,515

 
1

 
10,278

 

 

 
10,279

Issuance of common stock upon vesting of restricted stock units
288,949

 

 

 

 

 

Stock-based compensation expense

 

 
36,907

 

 

 
36,907

Other comprehensive income

 

 

 

 
1,686

 
1,686

Net income

 

 

 
86,570

 

 
86,570

Balance at April 30, 2020
150,030,047

 
$
2

 
$
792,660

 
$
1,006,228

 
$
2,146

 
$
1,801,036

 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended April 30, 2019
 
Class A & B
common stock
 
Additional
paid-in
capital
 
Retained
earnings
 
Accumulated
other
comprehensive
income
 
Total
stockholders’
equity
 
Shares
 
Amount
 
 
 
 
 
(Unaudited)
Balance at January 31, 2019
146,190,079

 
$
1

 
$
617,623

 
$
619,197

 
$
928

 
$
1,237,749

Cumulative effect adjustment for Topic 842 adoption(1)

 
$

 
$

 
$
(657
)
 
$

 
(657
)
Issuance of common stock upon exercise of stock options
526,054

 

 
3,439

 

 

 
3,439

Issuance of common stock upon vesting of restricted stock units
314,331

 

 

 

 

 

Stock-based compensation expense

 

 
20,863

 

 

 
20,863

Other comprehensive income

 

 

 

 
260

 
260

Net income

 

 

 
73,449

 

 
73,449

Balance at April 30, 2019
147,030,464

 
$
1

 
$
641,925

 
$
691,989

 
$
1,188

 
$
1,335,103

 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.
_________________________________________________________
(1)
We adopted ASU 2016-02, “Leases” (Topic 842) using the modified retrospective method as of February 1, 2019 and elected the transition option that allows us not to restate the comparative periods in our financial statements in the year of adoption.

6
Veeva Systems Inc. | Form 10-Q


VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Three months ended
April 30,
2020
 
2019
(Unaudited)
Cash flows from operating activities
 
 
 
Net income
$
86,570

 
$
73,449

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
7,878

 
3,900

Reduction of operating lease right-of-use assets
2,997

 
1,538

Accretion of discount on short-term investments
(11
)
 
(1,178
)
Stock-based compensation
36,907

 
20,756

Amortization of deferred costs
4,751

 
4,849

Deferred income taxes
(1,134
)
 
418

(Gain) Loss on foreign currency from mark-to-market derivative
93

 
(80
)
Bad debt recovery
(393
)
 
(153
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
154,160

 
139,510

Unbilled accounts receivable
(4,452
)
 
(5,244
)
Deferred costs
(3,342
)
 
(4,601
)
Income taxes payable
(1,850
)
 
338

Prepaid expenses and other current and long-term assets
551

 
(2,759
)
Accounts payable
(4,430
)
 
(416
)
Accrued expenses and other current liabilities
2,691

 
(759
)
Deferred revenue
1,477

 
7,914

Operating lease liabilities
(2,811
)
 
(1,629
)
Other long-term liabilities
2,520

 
436

Net cash provided by operating activities
282,172

 
236,289

Cash flows from investing activities
 
 
 
Purchases of short-term investments
(188,818
)
 
(228,894
)
Maturities and sales of short-term investments
140,342

 
188,965

Property and equipment
267

 
(1,194
)
Capitalized internal-use software development costs

 
(419
)
Net cash used in investing activities
(48,209
)
 
(41,542
)
Cash flows from financing activities
 
 
 
Reduction of lease liabilities - finance leases
(248
)
 
(249
)
Proceeds from exercise of common stock options
9,781

 
3,391

Net cash provided by financing activities
9,533

 
3,142

Effect of exchange rate changes on cash, cash equivalents, and restricted cash
548

 
(702
)
Net change in cash, cash equivalents, and restricted cash
244,044

 
197,187

Cash, cash equivalents, and restricted cash at beginning of period
479,797

 
552,178

Cash, cash equivalents, and restricted cash at end of period
$
723,841

 
$
749,365

 
 
 
 
Cash, cash equivalents, and restricted cash at end of period:
 
 
 
Cash and cash equivalents
$
720,776

 
$
748,158

Restricted cash included in other long-term assets
3,065

 
1,207

Total cash, cash equivalents, and restricted cash at end of period
$
723,841

 
$
749,365

 
 
 
 
Supplemental disclosures of other cash flow information:
 
 
 
Cash paid for income taxes, net of refunds
$
5,866

 
$
2,383

Excess tax benefits from employee stock plans
$
19,615

 
$
13,552

Non-cash investing and financing activities:
 
 
 
Changes in accounts payable and accrued expenses related to property and equipment purchases
$
590

 
$
(634
)
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.

Veeva Systems Inc. | Form 10-Q
7


VEEVA SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Business and Significant Accounting Policies
Description of Business
Veeva is the leading provider of industry cloud solutions for the global life sciences industry. We were founded in 2007 on the premise that industry-specific cloud solutions could best address the operating challenges and regulatory requirements of life sciences companies. Our solutions are designed to meet the unique needs of our customers and their most strategic business functions-from research and development (R&D) to commercialization. Our solutions are designed to help life sciences companies develop and bring products to market faster and more efficiently, market and sell more effectively, and maintain compliance with government regulations. Our commercial solutions help life sciences companies achieve better, more intelligent engagement with healthcare professionals and healthcare organizations across multiple communication channels, and plan and execute more effective media and marketing campaigns. Our R&D solutions for the clinical, regulatory, quality, and safety functions help life sciences companies streamline their end-to-end product development processes to increase operational efficiency and maintain regulatory compliance throughout the product life cycle. We also bring the benefits of our content and data management solutions to a set of customers outside of life sciences in three regulated industries: consumer goods, chemicals, and cosmetics. Our fiscal year end is January 31.
Principles of Consolidation and Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting and include the accounts of our wholly-owned subsidiaries after elimination of intercompany accounts and transactions. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed on March 30, 2020. Except for the change in certain policies upon adoption of the accounting standards in Fiscal 2021, there have been no changes to our significant accounting policies described in the annual report that have had a material impact on our condensed consolidated financial statements and related notes.
The condensed consolidated balance sheet as of January 31, 2020 included herein was derived from the audited financial statements as of that date. These unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly our financial position, results of operations, comprehensive income, and cash flows for the interim periods but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending January 31, 2021 or any other period.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the condensed consolidated financial statements and the notes thereto. These estimates are based on information available as of the date of the condensed consolidated financial statements. On a regular basis, management evaluates these estimates and assumptions. Items subject to such estimates and assumptions include, but are not limited to:
the standalone selling price for each distinct performance obligation included in customer contracts with multiple performance obligations;
the determination of the period of benefit for amortization of deferred costs; and
the fair value of assets acquired and liabilities assumed for business combinations.
As future events cannot be determined with precision, actual results could differ significantly from those estimates.

8
Veeva Systems Inc. | Form 10-Q


Revenue Recognition
We derive our revenues primarily from subscription services and professional services. Subscription services revenues consist of fees from customers accessing our cloud-based software solutions and subscription or license fees for our data solutions. Professional services and other revenues consist primarily of fees from implementation services, configuration, data services, training, and managed services related to our solutions. Revenues are recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We determine revenue recognition through the following steps:
Identification of the contract, or contracts, with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, we satisfy a performance obligation.
Our subscription services agreements are generally non-cancelable during the term, although customers typically have the right to terminate their agreements for cause in the event of material breach.
Subscription Services Revenues
Subscription services revenues are recognized ratably over the respective non-cancelable subscription term because of the continuous transfer of control to the customer. Our subscription arrangements are considered service contracts, and the customer does not have the right to take possession of the software.
Professional Services and Other Revenues
The majority of our professional services arrangements are billed on a time and materials basis and revenues are recognized over time based on time incurred and contractually agreed upon rates. Certain professional services revenues are billed on a fixed fee basis and revenues are typically recognized over time as the services are delivered based on time incurred. Data services and training revenues are generally recognized as the services are performed.
Contracts with Multiple Performance Obligations
Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately when they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including other groupings such as customer type and geography.
Unbilled Accounts Receivable
Unbilled accounts receivable consists of (i) a receivable primarily for the revenue recognized for professional services performed but not yet billed, which were $21 million and $18 million as of April 30, 2020 and January 31, 2020, respectively and (ii) a contract asset primarily for revenue recognized from non-cancelable, multi-year orders in which fees increase annually but for which we are not contractually able to invoice until a future period, which were $17 million and $15 million as of April 30, 2020 and January 31, 2020, respectively.

Veeva Systems Inc. | Form 10-Q
9


New Accounting Pronouncements Adopted in Fiscal 2021
Cloud Computing Arrangements
In August 2018, the FASB issued ASU No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (Topic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new standard requires capitalized costs to be amortized on a straight-line basis generally over the term of the arrangement, and the financial statement presentation for these capitalized costs would be the same as that of the fees related to the hosting arrangements. We adopted this standard on a prospective basis as of February 1, 2020 and it did not have a material impact on our condensed consolidated financial statements.
Credit Losses
In June 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-13, including subsequent amendments, regarding “Measurement of Credit Losses on Financial Instruments (Topic 326), which modifies the accounting methodology for most financial instruments. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. For trade receivables and other financial assets, we are required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Additionally, any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. We adopted this standard on a modified retrospective basis as of February 1, 2020. The adoption of this standard did not result in any cumulative effect adjustment on our condensed consolidated financial statements.
Note 2. Acquisitions
Crossix
On November 1, 2019, we acquired 100% ownership of Crossix in exchange for total consideration of $428 million, which includes the impact of adjustments to purchase price associated with the cash and net working capital of the acquired entity at close. In addition, we granted certain Crossix employees equity retention awards valued at approximately $120 million in the aggregate, which will be expensed as share-based compensation over the remaining service period. Crossix brings Veeva additional depth in patient data and data analytics, and we are integrating Crossix with our Veeva CRM and OpenData products.
The following unaudited pro forma information presents the combined results of operations for the periods presented as if the acquisition had been completed on February 1, 2019, the beginning of the comparable prior annual reporting period. The unaudited pro forma results include the amortization associated with estimates for the purchased intangible assets and stock-based compensation expense associated with the retention awards granted.
The unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies or the effect of the incremental costs incurred in integrating the two companies. Accordingly, these unaudited pro forma results are presented for information purpose only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations (in thousands):
 
Three months ended April 30, 2019
 
(Unaudited)
Pro forma revenues
$
260,351

Pro forma net income
$
67,818

Pro forma net income per share:
 
     Basic
$
0.46

     Diluted
$
0.43

 
 


10
Veeva Systems Inc. | Form 10-Q


Physicians World
On November 7, 2019, we completed our acquisition of Physicians World in exchange for total cash consideration of $41 million, which includes the impact of adjustments to purchase price associated with the cash and net working capital of the acquired entity at close. In addition, we granted certain Physicians World employees equity retention awards valued at approximately $15 million in the aggregate. Acquiring Physicians World makes it easier for our customers to get industry leading cloud software and services from a single vendor.
Pro forma results of operations have not been presented for the three months ended April 30, 2019 because the effect of this acquisition was not material to our condensed consolidated financial statements.
Note 3. Short-Term Investments
At April 30, 2020, short-term investments consisted of the following (in thousands):
 
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair
value
Available-for-sale securities:
 
 
 
 
 
 
 
Certificates of deposits
$
11,600

 
$
38

 
$
(55
)
 
$
11,583

Asset-backed securities
104,406

 
476

 
(162
)
 
104,720

Commercial paper
37,028

 
47

 
(24
)
 
37,051

Corporate notes and bonds
270,889

 
2,283

 
(410
)
 
272,762

Foreign government bonds
4,803

 
32

 
(35
)
 
4,800

U.S. agency obligations
4,999

 
3

 

 
5,002

U.S. treasury securities
222,201

 
2,080

 

 
224,281

Total available-for-sale securities
$
655,926

 
$
4,959

 
$
(686
)
 
$
660,199

 
 
 
 
 
 
 
 
At January 31, 2020, short-term investments consisted of the following (in thousands):
 
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair
value
Available-for-sale securities:
 
 
 
 
 
 
 
Certificates of deposits
$
3,500

 
$
3

 
$

 
$
3,503

Asset-backed securities
100,419

 
396

 
(1
)
 
100,814

Commercial paper
19,965

 
5

 
(1
)
 
19,969

Corporate notes and bonds
234,664

 
1,552

 
(2
)
 
236,214

Foreign government bonds
3,397

 
10

 

 
3,407

U.S. treasury securities
245,509

 
599

 

 
246,108

Total available-for-sale securities
$
607,454

 
$
2,565

 
$
(4
)
 
$
610,015

 
 
 
 
 
 
 
 
The following table summarizes the estimated fair value of our short-term investments, designated as available-for-sale and classified by the contractual maturity date of the securities as of the dates shown (in thousands):
 
April 30,
2020
 
January 31,
2020
Due in one year or less
$
282,638

 
$
247,592

Due in greater than one year
377,561

 
362,423

Total
$
660,199

 
$
610,015

 
 
 
 


Veeva Systems Inc. | Form 10-Q
11


The following table shows the fair values of these available-for-sale securities, some of which have been in an unrealized loss position for more than 12 months, aggregated by investment category as of April 30, 2020 (in thousands):
 
Fair
value
 
Gross
unrealized
losses
Certificates of deposits
$
7,945

 
$
(55
)
Asset-backed securities
19,765

 
(162
)
Commercial paper
10,609

 
(24
)
Corporate notes and bonds
56,364

 
(410
)
Foreign government bonds
3,545

 
(35
)
 
 
 
 
The following table shows the fair values of these available-for-sale securities, some of which have been in an unrealized loss position for more than 12 months, aggregated by investment category as of January 31, 2020 (in thousands):
 
Fair
value
 
Gross
unrealized
losses
Asset-backed securities

$
2,623

 
$
(1
)
Commercial paper
5,589

 
(1
)
Corporate notes and bonds
9,105

 
(2
)
 
 
 
 

We have not recorded an allowance for credit losses, as we believe any such losses would be immaterial based on the the high credit quality of our investments. We intend to hold our securities to maturity and it is unlikely that they would be sold before their cost bases are recovered.
Note 4. Deferred Costs
Deferred costs, which consist primarily of deferred sales commissions, were $34 million and $36 million as of April 30, 2020 and January 31, 2020, respectively. Amortization expense for the deferred costs included in sales and marketing expenses in the condensed consolidated statements of comprehensive income was $5 million for both the three months ended April 30, 2020 and 2019. There have been no impairment losses recorded in relation to the costs capitalized for any period presented.
Note 5. Property and Equipment, Net
Property and equipment, net consists of the following as of the dates shown (in thousands):
 
April 30,
2020
 
January 31,
2020
Land
$
3,040

 
$
3,040

Building
20,984

 
20,984

Land improvements and building improvements
22,392

 
22,392

Equipment and computers
10,871

 
11,066

Furniture and fixtures
12,807

 
12,849

Leasehold improvements
9,369

 
9,385

Construction in progress
645

 
386

 
80,108

 
80,102

Less accumulated depreciation
(27,222
)
 
(25,350
)
Total property and equipment, net
$
52,886

 
$
54,752

 
 
 
 

Total depreciation expense was $2 million for both the three months ended April 30, 2020 and 2019. Land is not depreciated.
Note 6. Goodwill and Intangible Assets
Goodwill as of April 30, 2020 and January 31, 2020 was $439 million for both periods presented.
The following schedule presents the details of intangible assets as of April 30, 2020 (dollar amounts in thousands):
 
April 30, 2020
Gross
carrying
amount
 
Accumulated
amortization
 
Net
 
Remaining
useful life
(in years)
Existing technology
$
26,380

 
$
(5,737
)
 
20,643

 
5.5
Customer relationships
111,443

 
(20,272
)
 
91,171

 
8.7
Trade name/Trademarks
13,900

 
(1,426
)
 
12,474

 
4.4
Other intangibles
22,947

 
(17,832
)
 
5,115

 
5.3
 
$
174,670

 
$
(45,267
)
 
129,403

 

 
 
 
 
 
 
 
 
The following schedule presents the details of intangible assets as of January 31, 2020 (dollar amounts in thousands):
 
January 31, 2020
Gross
carrying
amount
 
Accumulated
amortization
 
Net
 
Remaining
useful life
(in years)
Existing technology
$
26,380

 
$
(4,808
)
 
21,572

 
5.8
Customer relationships
111,443

 
(17,575
)
 
93,868

 
9.0
Trade name/Trademarks
13,900

 
(720
)
 
13,180

 
4.7
Other intangibles
22,947

 
(16,966
)
 
5,981

 
5.0
 
$
174,670

 
$
(40,069
)
 
134,601

 
 
 
 
 
 
 
 
 
 

Amortization expense associated with intangible assets was $5 million and $2 million for the three months ended April 30, 2020 and 2019, respectively.

12
Veeva Systems Inc. | Form 10-Q


As of April 30, 2020, the estimated amortization expense for intangible assets, for the next five years and thereafter is as follows (in thousands):
 
Period
Estimated
amortization
expense
 
 
 
Remaining for Fiscal 2021
$
14,396

 
Fiscal 2022
18,397

 
Fiscal 2023
18,342

 
Fiscal 2024
18,160

 
Fiscal 2025
17,417

 
Thereafter
42,691

 
Total
$
129,403

 
 

Note 7. Accrued Expenses
Accrued expenses consisted of the following as of the dates shown (in thousands):
 
April 30,
2020
 
January 31,
2020
Accrued commissions
$
5,868

 
$
8,951

Accrued bonus
3,853

 
4,329

Accrued vacation
4,960

 
3,921

Payroll tax payable
10,236

 
7,353

Accrued other compensation and benefits
2,147

 
1,065

Total accrued compensation and benefits
$
27,064

 
$
25,619

Accrued fees payable to salesforce.com
6,059

 
5,787

Marketing event accruals
3,945

 
1,132

Taxes payable
3,452

 
4,914

Accrued third-party professional services subcontractors' fees
1,429

 
1,338

Other accrued expenses
8,520

 
8,449

Total accrued expenses and other current liabilities
$
23,405

 
$
21,620

 
 
 
 

Note 8. Fair Value Measurements
The carrying amounts of accounts receivable and other current assets, accounts payable and accrued liabilities approximate their fair value due to their short-term nature.
Financial assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:
Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Financial assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires management to make judgments and considers factors specific to the asset or liability.

Veeva Systems Inc. | Form 10-Q
13


The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of April 30, 2020 (in thousands):
 
Level 1
 
Level 2
 
Total
Assets
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
Money market funds
$
307,042

 
$

 
$
307,042

Certificates of deposits

 
150,000

 
150,000

Commercial paper

 
7,496

 
7,496

Corporate notes and bonds

 
2,229

 
2,229

Short-term investments:
 
 
 
 
 
Certificates of deposits

 
11,583

 
11,583

Asset-backed securities

 
104,720

 
104,720

Commercial paper

 
37,051

 
37,051

Corporate notes and bonds

 
272,761

 
272,761

Foreign government bonds

 
4,800

 
4,800