Veeva Systems (VEEV) Q2 FY1/2025 Earnings Review

Last updated on Sep 8, 2024

Summary

Veeva continues to deliver strong performance despite several headwinds.
TTM revenue growth and EBITDA margins have both improved.
Stock appears to be under accumulation at current levels.
Read on for detailed financial and technical analysis, as well as ratings.

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Braving the Macro Headwinds

By Abhishek Singh

Veeva posted another strong quarter.

Revenue Growth for Q2 FY1/2025 vs the previous year’s quarter is 15%. Revenue Growth for Q1 FY1/2025 vs previous year’s quarter was 24%.
TTM (Trailing Twelve Months) revenue growth increased by 100 basis point to 15%.
TTM EBITDA margins increased to 40%; however, TTM Cash Flow margins showed 8% decline.
The balance sheet remains strong with $4.9 billion in cash.

Note: the decline in Q2 vs Q1 numbers for percentage revenue growth and FCF margin may appear drastic. We explain further in the Fundamental Analysis section why that is not the case.

*Source: Company SEC Filings, YCharts.com and Cestrian Analysis*

Subscription revenue in Q2 increased by 19% year-over-year, whereas the professional services revenue declined by 4% year-over-year.

We previously discussed Veeva’s revenue streams in detail (read here). As a reminder, subscriptions revenue is the fees collected from customers accessing cloud-based software solutions and data solutions, while professional services revenue comes from fees related to implementing these solutions, along with training and business consulting services. Professional services revenue is expected to continue to face headwinds (macroeconomic factors, global conflicts, and a generally depressed Pharma/Biotech sector), as evident from lowered forecast for this revenue stream next quarter.

Pharma/Biotech stocks may see a temporary boost due to impending interest rate cuts. However, to really know what is going on beneath the surface in this sector, one should also consider recent layoffs (click here to read more) and the significant impact of the Inflation Reduction Act. For instance, the release of new prices for the first 10 drugs selected for the Medicare drug price negotiation program reveals a substantial reduction in list prices, ranging from 38% to 79% (click here to read more). Veeva’s performance in face of these headwinds is impressive. Its strong execution in the subscription segment continues to offset the decline in professional services revenue.

Read on for the financial detail, valuation, our stock chart and rating! Any paid subscription here gets you the full note.