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I first reviewed Veeva Systems (VEEV) in my December 26, 2023 post at which time I indicated I had placed it on my 'Watch List'. The last time I reviewed it, however, was in this March 21, 2024 post at which time I disclosed my decision to initiate a position in the FFJ Portfolio.
I subsequently wrote brief posts on April 9, 2024 and April 22, 2024 merely to disclose the purchase of additional shares.
While I acquired an additional 100 shares on May 30 @ $193.61 thus bringing my exposure to 400 shares, I did not write a post specifically disclosing this purchase. I disclosed this purchase in my FFJ Portfolio - May 2024 Report.
VEEV has now reported its Q2 and YTD2025 results on August 28 thus prompting me to revisit this holding.
Business Overview
VEEV is the leading provider of industry cloud solutions for the global life sciences industry. Its offerings span cloud software, data, and business consulting and are designed to meet customers' unique needs and their most strategic business functions ranging from R&D through commercialization. These solutions 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.
The best way to learn about the company is to review the company's website and Part 1 in the most recent Form 10-K found in the SEC Filings section of the company's website.
Security Ownership of Certain Beneficial Owners and Management
I want to ensure that senior management's interests are aligned with that of shareholders. In this regard, I look at a company's Proxy Statement.
The value of Peter Gassner's (Founder and CEO) share ownership is in the billions. That is 'skin in the game'.
Financial Review
Q2 and YTD2025 Results (VEEV has a January 31 FYE)
Material related to the Q2 2025 earnings release is accessible here.
Operating Cash Flow (OCF), Free Cash Flow (FCF), and CAPEX
In FY2019 - FY2024 and the first half of FY2025
- OCF was (in millions of $ approx.) 311, 437, 551, 764.5, 780.5, 911.3 and 856.4.
- CAPEX was (in millions of $ approx.) 10, 4.3, 8.7, 14.2, 13.5, 26.2, and 11.5.
- FCF was (in millions of $ approx.) 301, 432.7, 542.3, 750.3, 767, 885.1, and 845.
VEEV's annual OCF track record has grown substantially over the past few years.
FY2025 Outlook
The following reflects VEEV's FY2025 guidance when it released its Q4 and FY2024 results on February 29, 2024.
The FY2025 guidance was subsequently revised with the release of Q1 2025 results on May 30, 2024.
The most current guidance is as follows.
Risk Assessment
VEEV has no debt to rate.
At the end of Q2, VEEV had ~$1.166B in cash and cash equivalents and ~$3.719B in short-term investments.
Its total liabilities were ~$1.146B of which ~$0.956B was deferred revenue; deferred revenue represents funds received from clients in advance in services being provided.
The ~$0.190B in liabilities other than the deferred revenue is offset by ~$4.885B in cash and cash equivalents and short-term investments.
VEEV satisfies my risk-averse investor profile.
Dividends and Dividend Yield
VEEV does not distribute a dividend.
The weighted average number of diluted shares outstanding (in millions rounded) in FY2021 - 2024 is 160.7, 162.2, 162.4, and 163.5. In Q2 2025 this was ~$164.6.
VEEV typically does not repurchase shares to offset the shares it issues annually as part of its employee compensation structure.
Valuation
When I wrote my April 22 post, VEEV's forward adjusted diluted PE levels using the current broker estimates and my ~$197.96 purchase price were:
- FY2025 - 24 brokers - mean of $6.15 and low/high of $6.05 - $6.19. Using the mean estimate, the forward adjusted diluted PE is ~32.2.
- FY2026 - 21 brokers - mean of $6.81 and low/high of $6.23 - $7.09. Using the mean estimate, the forward adjusted diluted PE is ~29.1.
- FY2027 - 8 brokers - mean of $7.65 and low/high of $7.04 - $8.30. Using the mean estimate, the forward adjusted diluted PE is ~25.9.
I purchased additional shares on May 30 @ $193.61 so the forward adjusted diluted PE levels were just marginally superior.
VEEV's share price has surged ~$18.50 following the release of Q2 2025 earnings and shares now trade at ~$218 as I compose this post the morning of August 29. In the first half of FY2025, VEEV generated $2.02 and $3.13 of GAAP EPS and non-GAAP EPS; $1.24 of this variance is stock-based compensation expense and ($0.22) is the income tax effect on non-GAAP adjustments.
Management's FY2025 adjusted diluted EPS guidance has recently been increased to ~$6.22 from the prior ~$6.16 giving us a forward adjusted diluted PE of~35.
Using the current adjusted diluted EPS broker estimates, the forward adjusted diluted PE levels are:
- FY2025 - 27 brokers - mean of $6.14 and low/high of $4.29 - $6.33. Using the mean estimate, the forward adjusted diluted PE is ~35.5.
- FY2026 - 27 brokers - mean of $6.76 and low/high of $6.17 - $7.21. Using the mean estimate, the forward adjusted diluted PE is ~32.2.
- FY2027 - 17 brokers - mean of $7.43 and low/high of $6.22 - $8.40. Using the mean estimate, the forward adjusted diluted PE is ~29.3.
In the first half of FY2025, VEEV has generated ~$0.845B of FCF which is just shy of the ~$0.885B it generated in FY2024. In addition, VEEV's FY2025 OCF guidance is ~$1.03B.
VEEV's OCF and FCF are generally very similar because VEEV's annual CAPEX is negligible; the money reinvested in the company is in the form of R&D and not CAPEX. The R&D expenses, however, impact net earnings from operations which is the top line in the Consolidated Statement of cash Flows.
For current purposes, let's be conservative and use ~$0.985B of FCF in FY2025 FCF.
The diluted weighted average shares outstanding in FY2024 was 163.486 million and in Q2 2025 it had risen to 164.564 million. Let's be conservative and estimate 165 million as being the weighted average for FY2025.
Divide ~$0.985B by 165 million and we get ~$5.97 of FCF/share. Divide the current ~$218 share price by ~$5.97 and the forward P/FCF is ~36.5.
Final Thoughts
My final thoughts are the same as in prior posts. I like its:
- dominant position in its industry;
- exceptionally strong Balance Sheet;
- strong profitability, FCF, and recurring revenue; and
- growth prospects.
A ~$18.50 share price surge following the release of Q2 and YTD2025 results strikes me as irrational. I do not, therefore, intend to immediately add to my exposure but will monitor VEEV's share price behavior with the intent to add to my exposure if its FY2025 valuation retraces to the low 30s.
I wish you much success on your journey to financial freedom!
Note: Please send any feedback, corrections, or questions to [email protected].
Disclosure: I am long VEEV.
Disclaimer: I do not know your circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your own research and due diligence. Consult your financial advisor about your specific situation.
I wrote this article myself and it expresses my own opinions. I do not receive compensation for it and have no business relationship with any company mentioned in this article.
