Added more Veeva Systems

Last Thursday, Veeva Systems (NYSE: VEEV) reported a good set of 1Q2025 earnings.

While the revenue is up by 24% YoY in numbers, it is only 13% up after accounting one-time impact related to the standardization of termination for convenience (TFC) rights.

This TFC rights started from 1 Feb 2023. And if I understand correctly, it is about how they deal with multi-year contract, with customers basically paying a lower revenue in the initial years.

I do not know how they measure the one-time impact, so I will just take that their guidance as accurate.

“As a reminder, TFC standardization impacts the timing of revenue recognition but is not expected to impact the total revenue contribution over the term of the orders. Further, we do not expect an impact to billings or cash flow.”
Ex-CFO Brent Bowman, 4Q2023 prepared remarks

Based on what was shared in earlier earnings, TFC affects only the timing of revenue recognition, so things should smoothen out in time to come.

It lowered its FY2025 revenue guidance to US$2.7 billion, about US$30 million lower than previous guidance (1% lower). CEO Peter Gassner attributed this to challenging macro conditions, and also large enterprises needing to work through their plans for AI.

Market did not like what they hear, and its price plunged by more than 10% on Friday.

“Now those core systems, when we get that type of impact, it will delay a project, but it won’t stop it because these core systems are things you need, you can delay them, but all that does is create somewhat of a pent-up demand.“
– CEO Peter Gassner, 1Q2025 earnings call

To me, the guidance is a non-issue, given that it is a timing issue and eventually the customers will still make the purchase.

Hence, I decided to take this opportunity to add some shares on Friday, bringing my average price to US$226. Similar to my earlier buys (Adding to Potential Multibaggers) in the week, I am not expecting a quick return. I am gunning for a significant return in 3 to 5 years time.

Long Runway to Grow Into

The transition from Veeva CRM (using Salesforce platform) to Vault CRM (Veeva proprietary) in the coming next five years does result in some uncertainties.

I do think that most of their existing customers will stay with Veeva but it’s just that when they will transit. Also, I do not think it will take five years. I think three years are more than sufficient to do the migration.

Besides the CRM business (under Veeva Commercial Cloud) which it has high penetration, what is more interesting is their growth opportunties in the Veeva Development Cloud and Veeva Data Cloud categories.

The products under these categories have room for further development and they can capture more market share.

The question is “Can they grow into it?”

“Looking at the bigger picture, the business is very durable and there is no change to our long-term opportunity. Our competitive positioning, innovation engine, and industry partnership remain as strong as ever.”
– CEO Peter Gassner, 1Q2025 prepared remarks

While I do not have any insight into the industry, I think being a well established player in the life science industry, Veeva possesses a good chance.

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