Company Quick10K Filing
Veeva Systems
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 159 $23,190
10-Q 2019-12-05 Quarter: 2019-10-31
10-Q 2019-09-05 Quarter: 2019-07-31
10-Q 2019-06-06 Quarter: 2019-04-30
10-K 2019-03-28 Annual: 2019-01-31
10-Q 2018-12-07 Quarter: 2018-10-31
10-Q 2018-09-06 Quarter: 2018-07-31
10-Q 2018-06-07 Quarter: 2018-04-30
10-K 2018-03-30 Annual: 2018-01-31
10-Q 2017-12-06 Quarter: 2017-10-31
10-Q 2017-09-07 Quarter: 2017-07-31
10-Q 2017-06-08 Quarter: 2017-04-30
10-K 2017-03-30 Annual: 2017-01-31
10-Q 2016-12-08 Quarter: 2016-10-31
10-Q 2016-09-08 Quarter: 2016-07-31
10-Q 2016-06-08 Quarter: 2016-04-30
10-K 2016-03-31 Annual: 2016-01-31
10-Q 2015-12-10 Quarter: 2015-10-31
10-K 2015-04-01 Annual: 2015-01-31
10-Q 2014-12-11 Quarter: 2014-10-31
10-Q 2014-06-06 Quarter: 2014-04-30
10-K 2014-03-18 Annual: 2014-01-31
10-Q 2013-12-13 Quarter: 2013-10-31
8-K 2019-11-26 Earnings, Exhibits
8-K 2019-11-01 M&A, Exhibits
8-K 2019-09-25 Enter Agreement, Regulation FD, Exhibits
8-K 2019-08-27 Earnings, Officers, Exhibits
8-K 2019-08-16 Officers, Exhibits
8-K 2019-06-20 Shareholder Vote
8-K 2019-05-29 Earnings, Exhibits
8-K 2019-04-01 Officers, Exhibits
8-K 2019-03-19 Officers
8-K 2019-02-26 Earnings, Exhibits
8-K 2019-02-26 Regulation FD
8-K 2019-02-22 Officers, Exhibits
8-K 2018-11-28 Earnings, Exhibits
8-K 2018-08-23 Earnings, Exhibits
8-K 2018-06-13 Shareholder Vote, Other Events, Exhibits
8-K 2018-06-07 Regulation FD, Exhibits
8-K 2018-05-24 Earnings, Exhibits
8-K 2018-02-27 Earnings, Regulation FD, Exhibits
8-K 2018-01-10 Officers
VEEV 2019-10-31
Part I. Financial Information
Item 1. Financial Statements.
Note 1. Summary of Business and Significant Accounting Policies
Note 2. Short-Term Investments
Note 3. Deferred Costs
Note 4. Property and Equipment, Net
Note 5. Intangible Assets
Note 6. Accrued Expenses
Note 7. Fair Value Measurements
Note 8. Income Taxes
Note 9. Deferred Revenue and Performance Obligations
Note 10. Leases
Note 11. Stockholders' Equity
Note 12. Net Income per Share
Note 13. Commitments and Contingencies
Note 14. Revenues By Product
Note 15. Information About Geographic Areas
Note 16. Subsequent Events
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-31.1 veev-20191031xexx311.htm
EX-31.2 veev-20191031xexx312.htm
EX-32.1 veev-20191031xexx321.htm
EX-32.2 veev-20191031xexx322.htm

Veeva Systems Earnings 2019-10-31

VEEV 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
SQ 30,173 4,654 3,470 3,923 1,595 -53 25 30,429 41% 1,214.1 -1%
EA 29,643 9,749 3,264 5,022 3,728 2,147 2,439 26,110 74% 10.7 22%
VEEV 23,190 1,860 415 969 707 288 321 22,362 73% 69.7 15%
SNPS 21,200 6,153 2,214 3,305 2,577 626 692 20,637 78% 29.8 10%
CDNS 19,514 2,612 1,182 2,304 0 426 645 18,880 0% 29.3 16%
TWLO 17,757 5,109 812 881 476 -203 -141 17,222 54% -122.3 -4%
SPLK 17,377 4,488 3,054 1,422 1,667 0 132 15,705 117% 119.4 0%
ANSS 17,172 3,513 696 1,391 1,239 438 565 16,541 89% 29.3 12%
CHKP 16,409 5,828 2,056 0 0 0 0 16,105 0%
SSNC 15,642 16,141 11,295 4,389 1,860 318 1,193 22,411 42% 18.8 2%

Document
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Table of Contents

 
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 October 31, 2019
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 November 30, 2019, there were 132,212,846 shares of the Registrant’s Class A common stock outstanding and 16,373,842 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

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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 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, including those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report. 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,” the “Company,” “Registrant,” “we,” “us,” and “our” mean Veeva Systems Inc. and its subsidiaries unless the context indicates otherwise.

Veeva Systems Inc. | Form 10-Q
3

Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS.
VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares and par value)
 
October 31,
2019
 
January 31,
2019
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
892,581

 
$
550,971

Short-term investments
602,407

 
539,190

Accounts receivable, net of allowance for doubtful accounts of $367 and $468,
respectively
116,874

 
303,465

Unbilled accounts receivable
30,899

 
18,122

Prepaid expenses and other current assets
15,360

 
21,666

Total current assets
1,658,121

 
1,433,414

Property and equipment, net(1)
53,290

 
54,966

Deferred costs, net
29,873

 
30,869

Lease right-of-use assets(1)
24,055

 

Goodwill
95,804

 
95,804

Intangible assets, net
19,948

 
24,521

Deferred income taxes, noncurrent
6,455

 
5,938

Other long-term assets
12,895

 
8,254

Total assets
$
1,900,441

 
$
1,653,766

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
9,914

 
$
9,110

Accrued compensation and benefits
15,977

 
15,324

Accrued expenses and other current liabilities
15,707

 
16,145

Income tax payable
7,195

 
4,086

Deferred revenue
250,674

 
356,357

Lease liabilities(1)
7,430

 

Total current liabilities
306,897

 
401,022

Deferred income taxes, noncurrent
9,042

 
6,095

Lease liabilities, noncurrent(1)
19,882

 

Other long-term liabilities
6,055

 
8,900

Total liabilities
341,876

 
416,017

Commitments and contingencies (Note 13)


 


Stockholders’ equity:
 
 
 
Class A common stock, $0.00001 par value; 800,000,000 shares authorized,
131,955,372 and 125,980,019 issued and outstanding at October 31, 2019 and January 31, 2019,
respectively
1

 
1

Class B common stock, $0.00001 par value; 190,000,000 shares authorized,
16,405,449 and 20,210,060 issued and outstanding at October 31, 2019 and January 31, 2019,
respectively

 

Additional paid-in capital
704,915

 
617,623

Accumulated other comprehensive income
173

 
928

Retained earnings(1)
853,476

 
619,197

Total stockholders’ equity
1,558,565

 
1,237,749

Total liabilities and stockholders’ equity
$
1,900,441

 
$
1,653,766

 
 
 
 
See Notes to Condensed Consolidated Financial Statements.
_________________________________________________________
(1)
We adopted Accounting Standards Update (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.

4
Veeva Systems Inc. | Form 10-Q

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VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
 
Three months ended
October 31,
 
Nine months ended
October 31,
2019
 
2018
 
2019
 
2018
(Unaudited)
Revenues:
 
 
 
 
 
 
 
Subscription services
$
226,760

 
$
178,214

 
$
642,187

 
$
503,809

Professional services and other
54,161

 
46,517

 
150,386

 
126,078

Total revenues
280,921

 
224,731

 
792,573

 
629,887

Cost of revenues(1):
 
 
 
 
 
 
 
Cost of subscription services
31,964

 
28,335

 
93,822

 
87,394

Cost of professional services and other
41,365

 
33,039

 
115,228

 
93,361

Total cost of revenues
73,329

 
61,374

 
209,050

 
180,755

Gross profit
207,592

 
163,357

 
583,523

 
449,132

Operating expenses(1):
 
 
 
 
 
 
 
Research and development
52,575

 
40,001

 
148,694

 
116,024

Sales and marketing
45,524

 
37,699

 
130,962

 
110,306

General and administrative
28,693

 
22,563

 
78,042

 
62,934

Total operating expenses
126,792

 
100,263

 
357,698

 
289,264

Operating income
80,800

 
63,094

 
225,825

 
159,868

Other income, net
9,141

 
4,606

 
22,634

 
10,087

Income before income taxes
89,941

 
67,700

 
248,459

 
169,955

Provision for income taxes
7,696

 
3,615

 
13,523

 
11,274

Net income
$
82,245

 
$
64,085

 
$
234,936

 
$
158,681

Net income, basic and diluted
$
82,245

 
$
64,085

 
$
234,936

 
$
158,681

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.56

 
$
0.44

 
$
1.59

 
$
1.10

Diluted
$
0.52

 
$
0.41

 
$
1.49

 
$
1.02

Weighted-average shares used to compute net income per share:
 
 
 
 
 
 
 
Basic
148,157

 
144,737

 
147,467

 
143,765

Diluted
158,750

 
156,025

 
158,124

 
155,706

Other comprehensive income:
 
 
 
 
 
 
 
Net change in unrealized gain on available-for-sale investments
$
753

 
$
33

 
$
2,176

 
$
695

Net change in cumulative foreign currency translation loss
(487
)
 
(1,153
)
 
(2,931
)
 
(3,534
)
Comprehensive income
$
82,511

 
$
62,965

 
$
234,181

 
$
155,842

 
 
 
 
 
 
 
 
_________________________________________________________
(1)
Includes stock-based compensation as follows:
Cost of revenues:
 
 
 
 
 
 
 
Cost of subscription services
$
560

 
$
405

 
$
1,528

 
$
1,166

Cost of professional services and other
4,825

 
2,782

 
12,261

 
7,767

Research and development
9,899

 
5,820

 
25,732

 
16,282

Sales and marketing
6,882

 
4,825

 
19,207

 
13,743

General and administrative
7,155

 
6,086

 
19,719

 
17,689

Total stock-based compensation
$
29,321

 
$
19,918

 
$
78,447

 
$
56,647

 
 
 
 
 
 
 
 

See Notes to Condensed Consolidated Financial Statements.

Veeva Systems Inc. | Form 10-Q
5

Table of Contents

VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
 
Three months ended October 31, 2019
 
Three months ended October 31, 2018
 
Class A & B
common stock
 
Additional
paid-in
capital
 
Retained
earnings
 
Accumulated
other
comprehensive
income
 
Total
stockholders’
equity
 
Class A & B
common stock
 
Additional
paid-in
capital
 
Retained
earnings
 
Accumulated
other
comprehensive
income
 
Total
stockholders’
equity
 
Shares
 
Amount
 
 
 
 
 
Shares
 
Amount
 
 
 
 
 
(Unaudited)
Balances at beginning of period
147,848,634

 
$
1

 
$
673,878

 
$
771,231

 
$
(93
)
 
$
1,445,017

 
144,144,488

 
$
1

 
$
566,533

 
$
483,961

 
$
(119
)
 
$
1,050,376

Cumulative effect adjustment for Topic 842 adoption(1)

 
$

 
$

 
$

 
$

 

 

 

 
$

 
$

 
$

 
$

Issuance of common stock upon
exercise of stock options
211,154

 

 
1,588

 

 

 
1,588

 
599,655

 

 
4,923

 

 

 
$
4,923

Issuance of common stock upon vesting of
restricted stock units
301,033

 

 

 

 

 

 
324,274

 

 

 

 

 
$

Stock-based compensation expense

 

 
29,449

 

 

 
29,449

 

 

 
20,041

 

 

 
$
20,041

Other comprehensive income

 

 

 

 
266

 
266

 

 

 

 

 
(1,120
)
 
$
(1,120
)
Net income

 

 

 
82,245

 

 
82,245

 

 

 

 
64,085

 

 
$
64,085

Balances at end of period
148,360,821

 
$
1

 
$
704,915

 
$
853,476

 
$
173

 
$
1,558,565

 
145,068,417

 
$
1

 
$
591,497

 
$
548,046

 
$
(1,239
)
 
$
1,138,305

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended October 31, 2019
 
Nine months ended October 31, 2018
 
Class A & B
common stock
 
Additional
paid-in
capital
 
Retained
earnings
 
Accumulated
other
comprehensive
income
 
Total
stockholders’
equity
 
Class A & B
common stock
 
Additional
paid-in
capital
 
Retained
earnings
 
Accumulated
other
comprehensive
income
 
Total
stockholders’
equity
 
Shares
 
Amount
 
 
 
 
 
Shares
 
Amount
 
 
 
 
 
(Unaudited)
Balances at beginning of period
146,190,079

 
$
1

 
$
617,623

 
$
619,197

 
$
928

 
$
1,237,749

 
142,069,396

 
$
1

 
$
515,272

 
$
389,365

 
$
1,600

 
$
906,238

Cumulative effect adjustment for Topic 842 adoption(1)

 
$

 
$

 
$
(657
)
 
$

 
(657
)
 

 
$

 
$

 
$

 
$

 
$

Issuance of common stock upon
exercise of stock options
1,225,746

 

 
8,503

 

 

 
8,503

 
2,012,604

 

 
19,293

 

 

 
$
19,293

Issuance of common stock upon vesting of
restricted stock units
944,996

 

 

 

 

 

 
986,417

 

 

 

 

 
$

Stock-based compensation expense

 

 
78,789

 

 

 
78,789

 

 

 
56,932

 

 

 
$
56,932

Other comprehensive income

 

 

 

 
(755
)
 
(755
)
 

 

 

 

 
(2,839
)
 
$
(2,839
)
Net income

 

 

 
234,936

 

 
234,936

 

 

 

 
158,681

 

 
$
158,681

Balances at end of period
148,360,821

 
$
1

 
$
704,915

 
$
853,476

 
$
173

 
$
1,558,565

 
145,068,417

 
$
1

 
$
591,497

 
$
548,046

 
$
(1,239
)
 
$
1,138,305

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

Table of Contents

VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Three months ended
October 31,
 
Nine months ended
October 31,
2019
 
2018
 
2019
 
2018
(Unaudited)
Cash flows from operating activities
 
 
 
 
 
 
 
Net income
$
82,245

 
$
64,085

 
$
234,936

 
$
158,681

Adjustments to reconcile net income to net cash provided by
operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
5,643

 
3,383

 
16,642

 
10,477

Accretion of discount on short-term investments
(722
)
 
(848
)
 
(2,996
)
 
(1,380
)
Stock-based compensation
29,321

 
19,918

 
78,447

 
56,647

Amortization of deferred costs
4,832

 
4,595

 
14,524

 
13,697

Deferred income taxes
432

 
1,824

 
1,771

 
2,642

Gain on foreign currency from mark-to-market derivative
(74
)
 
(19
)
 
(112
)
 
(182
)
Bad debt expense (recovery)
270

 
84

 
(42
)
 
262

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
28,319

 
21,658

 
186,633

 
134,353

Unbilled accounts receivable
(9,515
)
 
(5,212
)
 
(12,777
)
 
(6,641
)
Deferred costs
(4,500
)
 
(4,504
)
 
(13,528
)
 
(11,426
)
Income taxes payable
3,909

 
1,029

 
4,858

 
525

Prepaid expenses and other current and long-term assets
5,610

 
(6,018
)
 
1,513

 
(9,527
)
Accounts payable
1,253

 
2,982

 
1,216

 
3,520

Accrued expenses and other current liabilities
(1,682
)
 
406

 
231

 
(3,698
)
Deferred revenue
(78,326
)
 
(62,860
)
 
(105,637
)
 
(70,616
)
Lease liabilities
(1,625
)
 

 
(5,143
)
 

Other long-term liabilities
(3,886
)
 
1,053

 
(2,270
)
 
1,620

Net cash provided by operating activities
61,504

 
41,556

 
398,266

 
278,954

Cash flows from investing activities
 
 
 
 
 
 
 
Purchases of short-term investments
(190,695
)
 
(214,839
)
 
(628,784
)
 
(589,070
)
Maturities and sales of short-term investments
194,661

 
130,137

 
571,398

 
447,947

Purchases of property and equipment
(881
)
 
(4,163
)
 
(3,167
)
 
(5,558
)
Capitalized internal-use software development costs
(356
)
 
(495
)
 
(1,061
)
 
(1,009
)
Net cash provided by (used in) investing activities
2,729

 
(89,360
)
 
(61,614
)
 
(147,690
)
Cash flows from financing activities
 
 
 
 
 
 
 
Reduction of lease liabilities - finance leases
(241
)
 

 
(729
)
 

Proceeds from exercise of common stock options
1,607

 
4,867

 
8,618

 
19,728

Net cash provided by financing activities
1,366

 
4,867

 
7,889

 
19,728

Effect of exchange rate changes on cash, cash equivalents, and restricted
cash
(487
)
 
(1,154
)
 
(2,931
)
 
(3,530
)
Net change in cash, cash equivalents, and restricted cash
65,112

 
(44,091
)
 
341,610

 
147,462

Cash, cash equivalents, and restricted cash at beginning of period
828,676

 
512,940

 
552,178

 
321,387

Cash, cash equivalents, and restricted cash at end of period
$
893,788

 
$
468,849

 
$
893,788

 
$
468,849

 
 
 
 
 
 
 
 
Cash, cash equivalents, and restricted cash at end of period:
 
 
 
 
 
 
 
Cash and cash equivalents
$
892,581

 
$
467,643

 
$
892,581

 
$
467,643

Restricted cash included in other long-term assets
1,207

 
1,206

 
1,207

 
1,206

Total cash, cash equivalents, and restricted cash at end of period
$
893,788

 
$
468,849

 
$
893,788

 
$
468,849

 
 
 
 
 
 
 
 
Supplemental disclosures of other cash flow information:
 
 
 
 
 
 
 
Cash paid for income taxes, net of refunds
$
1,739

 
$
6,697

 
$
5,004

 
$
17,268

Excess tax benefits from employee stock plans
$
8,931

 
$
12,006

 
$
39,509

 
$
31,032

Non-cash investing and financing activities:
 
 
 
 
 
 
 
Changes in accounts payable and accrued expenses
related to property and equipment purchases
$
109

 
$
314

 
$
(428
)
 
$
493

 
 
 
 
 
 
 
 
See Notes to Condensed Consolidated Financial Statements.

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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. Veeva is also offering its content and data management solutions to companies in other regulated industries, primarily consumer packaged 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, 2019, filed on March 28, 2019. 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, 2019 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, 2020 or any other period.
Effective February 1, 2019, we adopted the requirements of ASU 2016-02, “Leases” (Topic 842) as discussed in this note.
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 valuation of short-term investments and the determination of other-than-temporary impairments;
the realizability of deferred income tax assets and liabilities; and
the fair value of our stock-based awards.
As future events cannot be determined with precision, actual results could differ significantly from those estimates.

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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 based on the proportion of total services performed. 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 is a contract asset related to the delivery of our subscription services and professional services for which the related billings will occur in a future period. Unbilled accounts receivable consists of (i) revenue recognized for professional services performed but not yet billed and (ii) 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.
Deferred Costs
Deferred costs include sales commissions associated with obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit that we have determined to be three years. We determined the period of benefit by taking into consideration our customer contracts, our technology and other factors. Amortization expense is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations.

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Deferred Revenue
Deferred revenue is a contract liability primarily related to billings or payments received in advance of revenue recognition from our subscription services and, to a lesser extent, professional services and other revenues described above. Deferred revenue is recognized as revenue as we satisfy our performance obligations. We generally invoice our customers in annual or quarterly installments for subscription services. Accordingly, the deferred revenue balance does not generally represent the total contract value of a subscription arrangement. Revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent, which is included in other long-term liabilities on the condensed consolidated balance sheet.
Certain Risks and Concentrations of Credit Risk
Our revenues are derived from subscription services, professional services and other services delivered primarily to the life sciences industry. We operate in markets that are highly competitive and rapidly changing. Significant technological changes, shifting customer needs, the emergence of competitive products or services with new capabilities, and other factors could negatively impact our operating results.
Our financial instruments that potentially subject us to concentration of credit risk consist primarily of cash and cash equivalents, short-term investments and trade accounts receivable. Our cash equivalents and short-term investments are held by established financial institutions. We have established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. Deposits in these financial institutions may significantly exceed federally insured limits.
We do not require collateral from our customers and generally require payment within 30 days to 60 days of billing. We periodically evaluate the collectibility of our accounts receivable and provide an allowance for doubtful accounts as necessary, based on historical experience. Historically, losses related to lack of collectibility have not been material.
The following customers individually exceeded 10% of total accounts receivable as of the dates shown:  
 
October 31,
2019
January 31,
2019
Customer 1
*
17%
Customer 2
*
10%
 
 
 
_________________________________________________________
*
Does not exceed 10%.
No single customer represented over 10% of total revenues in the condensed consolidated statements of comprehensive income for the three and nine months ended October 31, 2019 and 2018.
New Accounting Pronouncements Adopted in Fiscal 2020
Statement of Stockholders’ Equity
In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that have become redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The final rule was effective November 5, 2018. As required by the SEC, we are presenting this analysis in this Form 10-Q for the three and nine months ended October 31, 2019 and 2018.

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Leases
In February 2016, the FASB issued Topic 842, which requires lessees to record most leases on their balance sheets but recognize the expenses on their statements of comprehensive income in a manner similar to current accounting rules. Topic 842 states that a lessee should recognize a lease liability for the obligation to make lease payments and a right-of-use (ROU) asset for the right to use the underlying asset for the lease term. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. We have adopted this new standard in the first quarter of fiscal 2020 on February 1, 2019 using the effective date as our date of initial application. We adopted Topic 842 using the modified retrospective method as of February 1, 2019 with an immaterial amount of cumulative effect adjustment recorded to our retained earnings as of February 1, 2019. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before February 1, 2019.
The new standard provides a number of optional practical expedients in transition. We elected the ‘package of practical expedients,’ which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs. The new standard also provides practical expedients for an entity’s ongoing accounting. We have elected the short-term lease recognition exemption for all of our leases. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We did not apply the practical expedient for our office leases, which would have allowed us to combine lease and non-lease components for all of our office leases. However, we have applied the practical expedient for equipment leases, which has allowed us to combine lease and non-lease components for all of our equipment leases.
The most significant impact was the recognition of ROU assets and lease liabilities on our balance sheet. Adoption of Topic 842 had no material impact to our condensed consolidated statement of comprehensive income and no material impact to cash provided by or used in operating, financing or investing activities on our condensed consolidated statement of cash flows.
Intangibles and Goodwill
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment” (Topic 350), which eliminates Step 2 from the goodwill impairment test. Under Topic 350, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. Topic 350 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted for impairment tests performed on testing dates after January 1, 2017. Topic 350 is to be applied on a prospective basis. We early adopted this new standard during the fiscal quarter ended October 31, 2019, and it did not have an impact on our consolidated financial statements.
Fair Value Measurement
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (Topic 820), which modifies the disclosure requirements on fair value measurements. The ASU removes the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. The standard is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted. We early adopted this new standard during the fiscal quarter ended July 31, 2019. Because we do not have such transfers or Level 3 financial assets, this standard does not apply to our current disclosures, and it did not impact our previously reported financial statements for periods ended on or prior to July 31, 2019.

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Note 2. Short-Term Investments
At October 31, 2019, 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

 
$
5

 
$

 
$
3,505

Asset-backed securities
84,092

 
262

 
(6
)
 
84,348

Commercial paper
24,604

 
4

 
(2
)
 
24,606

Corporate notes and bonds
218,314

 
1,437

 
(26
)
 
219,725

Foreign government bonds
1,500

 

 

 
1,500

U.S. agency obligations
3,000

 

 

 
3,000

U.S. treasury securities