Veeva Earnings: CRM Gains Users Against Difficult Backdrop and R&D Continues Robust Performance

Wide-moat Veeva VEEV reported better-than-expected second-quarter results. Total sales were up 10.5% year over year as strong performance from R&D solutions continues to lift the company’s top line. Management raised the lower end of its total sales guidance by $5 million due to a more favorable full-year expectation of commercial business but that was already baked into our assumptions. We maintain our fair value estimate of $275 per share.

Commercial solutions, which is where Veeva’s CRM and a number of Vault data products sit, was up 3.6% year over year. A difficult macroenvironment from limited funding in the biotech industry and high interest rates continues to pose challenges for the segment, hence the tepid level of growth compared with its historical performance. Despite these hurdles, Veeva still managed to win new customers and we attribute this to the company’s resilience and importance in the industry. Veeva also announced that it recorded a first customer win for its Vault CRM (Veeva’s traditional CRM but on the Vault platform). The company noted that the early adopter is likely to go live during the fourth quarter and reiterated April 2024 as the planned date for the general release of the Vault CRM with most customer migrations to take place by 2028. We expect the transition to be seamless from the customers’ perspective and do not anticipate any major operational or financial hurdles for Veeva during the process.

R&D solutions, composed of clinical, regulatory, safety, and quality Vault applications, was up 18.2% thanks to a broad-based adoption across the development cloud. Strong momentum gained from major advancements with top 20 pharmas, several new customer wins, and a strong ramp-up in headcount to support further growth helped Veeva realize robust performance in the segment. We view this part of Veeva’s business as a key driver for future growth due to its wide array of offered services and a significant portion of an untapped market.