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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 April 30, 2022
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
____________________________________________________________________________________
veev-20220430_g1.jpg
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) (925) 452-6500
(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  ☒
As of June 1, 2022, there were 140,081,514 shares of the Registrant’s Class A common stock outstanding and 14,765,491 shares of the Registrant’s Class B common stock outstanding.


VEEVA SYSTEMS INC.
FORM 10-Q
TABLE OF CONTENTS
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 Veeva Systems Inc. | Form 10-Q
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report on Form 10-Q 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 are based on our current views and expectations and involve known and unknown risks, uncertainties and other factors—including those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report—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. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Any forward-looking statements in this report are made only as of the date of this report. 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,” “Registrant,” “the Company,” “we,” “us,” and “our” mean Veeva Systems Inc. and its subsidiaries unless the context indicates otherwise.
Veeva Systems Inc. | Form 10-Q
3
PART I. FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS.
VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares and par value)
(Unaudited)
April 30,
2022		 January 31,
2022
Assets
Current assets:
Cash and cash equivalents $ 1,239,998  $ 1,138,040 
Short-term investments 1,598,555  1,238,064 
Accounts receivable, net of allowance for doubtful accounts of $448 and $473, respectively
 329,677  631,134 
Unbilled accounts receivable 61,971  63,266 
Prepaid expenses and other current assets 45,094  36,679 
Total current assets 3,275,295  3,107,183 
Property and equipment, net 53,816  54,495 
Deferred costs, net 30,192  33,106 
Lease right-of-use assets 48,887  49,640 
Goodwill 439,877  439,877 
Intangible assets, net 97,194  101,940 
Deferred income taxes 40,674  5,097 
Other long-term assets 25,287  25,127 
Total assets $ 4,011,222  $ 3,816,465 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 25,404  $ 20,348 
Accrued compensation and benefits 33,214  33,834 
Accrued expenses and other current liabilities 33,931  36,109 
Income tax payable 50,984  7,761 
Deferred revenue 723,721  731,746 
Lease liabilities 11,606  10,981 
Total current liabilities 878,860  840,779 
Deferred income taxes 1,725  2,216 
Lease liabilities, noncurrent 42,462  43,607 
Other long-term liabilities 19,900  18,226 
Total liabilities 942,947  904,828 
Commitments and contingencies (note 13)
Stockholders’ equity:
Class A common stock, $0.00001 par value; 800,000,000 shares authorized, 140,032,529 and 139,432,822 issued and outstanding at April 30, 2022 and January 31, 2022, respectively
 2  2 
Class B common stock, $0.00001 par value; 190,000,000 shares authorized, 14,765,431 and 14,763,775 issued and outstanding at April 30, 2022 and January 31, 2022, respectively
 —  — 
Additional paid-in capital 1,265,323  1,196,547 
Accumulated other comprehensive loss (24,211) (11,958)
Retained earnings 1,827,161  1,727,046 
Total stockholders’ equity 3,068,275  2,911,637 
Total liabilities and stockholders’ equity $ 4,011,222  $ 3,816,465 
See Notes to Condensed Consolidated Financial Statements.
4
 Veeva Systems Inc. | Form 10-Q
VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended April 30,
2022 2021
Revenues:
Subscription services $ 402,632  $ 341,119 
Professional services and other 102,470  92,454 
Total revenues 505,102  433,573 
Cost of revenues(1):
Cost of subscription services 58,953  51,217 
Cost of professional services and other 80,562  64,919 
Total cost of revenues 139,515  116,136 
Gross profit 365,587  317,437 
Operating expenses(1):
Research and development 113,475  83,226 
Sales and marketing 76,115  64,610 
General and administrative 48,325  41,155 
Total operating expenses 237,915  188,991 
Operating income 127,672  128,446 
Other income, net 2,709  4,564 
Income before income taxes 130,381  133,010 
Provision for income taxes 30,266  17,443 
Net income $ 100,115  $ 115,567 
Net income per share:
Basic $ 0.65  $ 0.76 
Diluted $ 0.62  $ 0.71 
Weighted-average shares used to compute net income per share:
Basic 154,514  152,444 
Diluted 161,928  162,213 
Other comprehensive income:
Net change in unrealized loss on available-for-sale investments $ (10,999) $ (1,086)
Net change in cumulative foreign currency translation loss (1,254) (2,213)
Comprehensive income $ 87,862  $ 112,268 
(1) Includes stock-based compensation as follows:
Cost of revenues:
Cost of subscription services $ 1,277  $ 906 
Cost of professional services and other 9,990  7,422 
Research and development 25,823  16,837 
Sales and marketing 16,893  11,555 
General and administrative 13,151  11,769 
Total stock-based compensation $ 67,134  $ 48,489 
See Notes to Condensed Consolidated Financial Statements.
Veeva Systems Inc. | Form 10-Q
5
VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
Three months ended April 30, 2022
Class A & B
common stock		 Additional
paid-in
capital		 Retained
earnings		 Accumulated
other
comprehensive
loss		 Total
stockholders’
equity
Shares Amount
Balances at beginning of period 154,196,597  $ 2  $ 1,196,547  $ 1,727,046  $ (11,958) $ 2,911,637 
Issuance of common stock upon exercise of stock options 482,436  —  16,291  —  —  16,291 
Issuance of common stock upon vesting of restricted stock units 185,800  —  —  —  —  — 
Shares withheld related to net share settlement (66,873) —  (14,910) —  —  (14,910)
Stock-based compensation expense —  —  67,395  —  —  67,395 
Change in other comprehensive loss —  —  —  —  (12,253) (12,253)
Net income —  —  —  100,115  —  100,115 
Balances at end of period 154,797,960  $ 2  $ 1,265,323  $ 1,827,161  $ (24,211) $ 3,068,275 
Three months ended April 30, 2021
Class A & B
common stock		 Additional
paid-in
capital		 Retained
earnings		 Accumulated
other
comprehensive
income (loss)		 Total
stockholders’
equity
Shares Amount
Balances at beginning of period 152,056,808  $ 2  $ 965,670  $ 1,299,656  $ 992  $ 2,266,320 
Issuance of common stock upon exercise of stock options 485,037  —  17,600  —  —  17,600 
Issuance of common stock upon vesting of restricted stock units 258,511  —  —  —  —  — 
Stock-based compensation expense —  —  48,793  —  —  48,793 
Change in other comprehensive loss —  —  —  —  (3,296) (3,296)
Net income —  —  —  115,567  —  115,567 
Balances at end of period 152,800,356  $ 2  $ 1,032,063  $ 1,415,223  $ (2,304) $ 2,444,984 
See Notes to Condensed Consolidated Financial Statements.

6
 Veeva Systems Inc. | Form 10-Q
VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended April 30,
2022 2021
Cash flows from operating activities
Net income $ 100,115  $ 115,567 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,058  6,628 
Reduction of operating lease right-of-use assets 2,948  2,827 
Amortization of discount on short-term investments 1,056  1,542 
Stock-based compensation 67,134  48,489 
Amortization of deferred costs 5,993  6,355 
Deferred income taxes (32,432) 5,242 
(Gain) loss on foreign currency from mark-to-market derivative (582) 431 
Bad debt (recovery) expense (25) 159 
Changes in operating assets and liabilities:
Accounts receivable 301,482  301,732 
Unbilled accounts receivable 1,295  (4,161)
Deferred costs (3,079) (4,290)
Prepaid expenses and other current and long-term assets (7,563) 2,737 
Accounts payable 5,121  (6,794)
Accrued expenses and other current liabilities (2,336) 6,967 
Income taxes payable 43,223  3,709 
Deferred revenue (7,471) (8,176)
Operating lease liabilities (2,031) (2,748)
Other long-term liabilities 1,121  2,169 
Net cash provided by operating activities 481,027  478,385 
Cash flows from investing activities
Purchases of short-term investments (572,344) (256,938)
Maturities and sales of short-term investments 196,190  221,645 
Long-term assets (2,333) (2,656)
Net cash used in investing activities (378,487) (37,949)
Cash flows from financing activities
Changes in lease liabilities - finance leases —  (286)
Proceeds from exercise of common stock options 16,291  17,091 
Taxes paid related to net share settlement of equity awards (14,999) — 
Net cash provided by financing activities 1,292  16,805 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (1,874) (2,765)
Net change in cash, cash equivalents, and restricted cash 101,958  454,476 
Cash, cash equivalents, and restricted cash at beginning of period 1,141,225  731,712 
Cash, cash equivalents, and restricted cash at end of period $ 1,243,183  $ 1,186,188 
Cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents $ 1,239,998  $ 1,184,980 
Restricted cash included in other long-term assets 3,185  1,208 
Total cash, cash equivalents, and restricted cash at end of period $ 1,243,183  $ 1,186,188 
Supplemental disclosures of other cash flow information:
Cash paid for income taxes, net of refunds $ 18,189  $ 5,133 
Excess tax benefits from employee stock plans $ 4,907  $ 17,451 
Non-cash investing activities:
Changes in accounts payable and accrued expenses related to property and
     equipment purchases
 $ (438) $ 806 
See Notes to Condensed Consolidated Financial Statements.
Veeva Systems Inc. | Form 10-Q
7
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 offerings span cloud software, data, analytics, professional services, and business consulting and 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 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. Our Commercial Solutions help life sciences companies achieve better, more intelligent engagement with healthcare professionals and healthcare organizations across multiple communication channels, and plan and execute more effective media and marketing campaigns. Our R&D Solutions for the clinical, quality, regulatory, and safety functions help life sciences companies streamline their end-to-end product development processes to increase operational efficiency and maintain regulatory compliance throughout the product life cycle. We also bring the benefits of our content and data management solutions to a set of customers outside of life sciences in the consumer product and chemical industries. 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, 2022, filed on March 30, 2022. 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 unaudited condensed consolidated balance sheet as of January 31, 2022 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, 2023 or any other period.
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 determination of the period of benefit for amortization of deferred costs;
•the realizability of deferred income tax assets and liabilities;
•the fair value of our stock-based awards.
As future events cannot be determined with precision, actual results could differ significantly from those estimates.
8
 Veeva Systems Inc. | Form 10-Q
Note 2. Short-Term Investments
At April 30, 2022, 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 $ 63,710  $ 13  $ (69) $ 63,654 
Asset-backed securities 239,639  6  (3,465) 236,180 
Commercial paper 151,341  14  (93) 151,262 
Corporate notes and bonds 802,603  58  (15,100) 787,561 
Foreign government bonds 24,521  4  (425) 24,100 
U.S. agency obligations 27,982  10  (622) 27,370 
U.S. treasury securities 312,468  20  (4,060) 308,428 
Total available-for-sale securities $ 1,622,264  $ 125  $ (23,834) $ 1,598,555 
At January 31, 2022, 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 $ 13,500  $ —  $ (15) $ 13,485 
Asset-backed securities 191,676  45  (1,432) 190,289 
Commercial paper 29,432  —  (2) 29,430 
Corporate notes and bonds 669,489  276  (5,856) 663,909 
Foreign government bonds 24,577  13  (179) 24,411 
U.S. agency obligations 27,978  12  (254) 27,736 
U.S. treasury securities 290,513  46  (1,755) 288,804 
Total available-for-sale securities $ 1,247,165  $ 392  $ (9,493) $ 1,238,064 
The following table summarizes the estimated fair value of our short-term investments, designated as available-for-sale and classified by the contractual maturity date of the securities as of the dates shown (in thousands):
April 30,
2022		 January 31,
2022
Due in one year or less $ 666,232  $ 457,948 
Due in greater than one year 932,323  780,116 
Total $ 1,598,555  $ 1,238,064 
We have not recorded an allowance for credit losses, as we believe any such losses would be immaterial based on the high credit quality of our investments. We intend to hold our securities to maturity and it is more likely than not that we will hold these securities until recovery of the cost basis.
Veeva Systems Inc. | Form 10-Q
9
The following table shows the fair values of available-for-sale securities which were in an unrealized loss position, aggregated by investment category, as of April 30, 2022 (in thousands):
Held for less than 12 months
Fair
value		 Gross
unrealized
losses
Certificates of deposits $ 33,641  $ (69)
Asset-backed securities 227,959  (3,465)
Commercial paper 112,904  (93)
Corporate notes and bonds 730,194  (15,100)
Foreign government bonds 20,516  (425)
U.S. agency obligations 24,360  (622)
U.S. treasury securities 270,888  (4,060)
The following table shows the fair values of available-for-sale securities which were in an unrealized loss position, aggregated by investment category, as of January 31, 2022 (in thousands):
Held for less than 12 months
Fair
value
Gross
unrealized
losses
Certificates of deposits $ 5,985  $ (15)
Asset-backed securities 177,056  (1,432)
Commercial paper 17,190  (2)
Corporate notes and bonds 571,099  (5,856)
Foreign government bonds 19,594  (179)
U.S. agency obligations 24,725  (254)
U.S. treasury securities 247,509  (1,756)
Asset values and gross unrealized losses of available-for-sale securities held for more than 12 months as of April 30, 2022 and January 31, 2022 were immaterial.
Note 3. Deferred Costs
Deferred costs, which consist of deferred sales commissions, were $30 million and $33 million as of April 30, 2022 and January 31, 2022, respectively. Amortization expense for the deferred costs included in sales and marketing expenses in the condensed consolidated statements of comprehensive income was $6 million for each of the three months ended April 30, 2022 and 2021. There have been no impairment losses recorded in relation to the costs capitalized for any period presented.
Note 4. Property and Equipment, Net
Property and equipment, net consists of the following as of the dates shown (in thousands):
April 30,
2022		 January 31,
2022
Land $ 3,040  $ 3,040 
Building 20,984  20,984 
Land improvements and building improvements 22,392  22,392 
Equipment and computers 2,246  3,581 
Furniture and fixtures 15,480  15,040 
Leasehold improvements 19,704  19,002 
Construction in progress 325  730 
84,171  84,769 
Less accumulated depreciation (30,355) (30,274)
Total property and equipment, net $ 53,816  $ 54,495 
10
 Veeva Systems Inc. | Form 10-Q
Total depreciation expense was $2 million for each of the three months ended April 30, 2022 and 2021. Land is not depreciated.
Note 5. Goodwill and Intangible Assets
Goodwill was $440 million as of April 30, 2022 and January 31, 2022.
The following schedule presents the details of intangible assets as of April 30, 2022 (dollar amounts in thousands):
April 30, 2022
Gross
carrying
amount
Accumulated
amortization
Net
Remaining
useful life
(in years)
Existing technology $ 28,580  $ (13,219) $ 15,361  3.7
Customer relationships 113,157  (41,624) 71,533  6.8
Trade name/trademarks 13,900  (7,289) 6,611  2.5
Other intangibles 21,405  (17,716) 3,689  3.6
$ 177,042  $ (79,848) $ 97,194 
The following schedule presents the details of intangible assets as of January 31, 2022 (dollar amounts in thousands):
January 31, 2022
Gross
carrying
amount		 Accumulated
amortization		 Net Remaining
useful life
(in years)
Existing technology $ 28,580  $ (12,187) $ 16,393  3.9
Customer relationships 113,157  (38,829) 74,328  7.0
Trade name/trademarks 13,900  (6,645) 7,255  2.8
Other intangibles 21,405  (17,441) 3,964  3.8
$ 177,042  $ (75,102) $ 101,940 
Amortization expense associated with intangible assets was $5 million for the three months ended April 30, 2022, and $4 million for the three months ended April 30, 2021.
As of April 30, 2022, the estimated amortization expense for intangible assets was as follows (in thousands):
Fiscal Year Estimated
amortization
expense
Remaining for 2023 $ 14,717 
2024 19,459 
2025 18,557 
2026 14,147 
2027 8,922 
Thereafter 21,392 
Total $ 97,194 
 
Veeva Systems Inc. | Form 10-Q
11
Note 6. Accrued Expenses
Accrued expenses consisted of the following as of the dates shown (in thousands):
April 30,
2022		 January 31,
2022
Accrued commissions $ 6,445  $ 8,556 
Accrued bonus 3,245  4,677 
Accrued vacation (1)
 6,728  5,546 
Payroll tax payable 10,031  9,487 
Accrued other compensation and benefits 6,765  5,568 
Total accrued compensation and benefits $ 33,214  $ 33,834 
Accrued fees payable to salesforce.com 6,672  $ 6,521 
Taxes payable 8,252  9,743 
Accrued third-party professional services subcontractors' fees 2,326  1,961 
Other accrued expenses 16,681  17,884 
Total accrued expenses and other current liabilities $ 33,931  $ 36,109 
(1) Represents accrued vacation primarily for international employees. Vacation does not accrue for most U.S. employees.
Note 7. Fair Value Measurements
The carrying amounts of accounts receivable and other current assets, accounts payable, and accrued liabilities approximate their fair value due to their short-term nature.
Financial assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:
Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Financial assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires management to make judgments and considers factors specific to the asset or liability.
12
 Veeva Systems Inc. | Form 10-Q
The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of April 30, 2022 (in thousands):
Level 1
Level 2
Total
Assets
Cash equivalents:
Money market funds $ 521,734  $ —  $ 521,734 
Certificates of deposit —  12,000  12,000 
U.S. treasury securities —  69,960  69,960 
Commercial paper —  59,043  59,043 
Corporate notes and bonds —  6,846  6,846 
Asset-backed securities —  2,545  2,545 
Short-term investments:
Certificates of deposit —  63,654  63,654 
Asset-backed securities —  236,180  236,180 
Commercial paper —  151,262  151,262 
Corporate notes and bonds —  787,561  787,561 
Foreign government bonds —  24,100  24,100 
U.S. agency obligations —  27,370  27,370 
U.S. treasury securities —  308,428  308,428 
Foreign currency derivative contracts —  1,804  1,804 
Total financial assets $ 521,734  $ 1,750,753  $ 2,272,487 
The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of January 31, 2022 (in thousands):
Level 1
Level 2
Total
Assets
Cash equivalents:
Money market funds $ 428,411  $ —  $ 428,411 
Corporate notes and bonds —  5,853  5,853 
Asset-backed securities —  2,568  2,568 
Short-term investments:
Certificates of deposit —  13,485  13,485 
Asset-backed securities —  190,289  190,289 
Commercial paper —  29,430  29,430 
Corporate notes and bonds —  663,909  663,909 
Foreign government bonds —  24,411  24,411 
U.S. agency obligations —  27,736  27,736 
U.S. treasury securities —  288,804  288,804 
Foreign currency derivative contracts —  1,222  1,222 
Total financial assets $ 428,411  $ 1,247,707  $ 1,676,118 
We determine the fair value of our security holdings based on pricing from our service providers and market prices from industry-standard independent data providers. The valuation techniques used to measure the fair value of financial instruments having Level 2 inputs were derived from non-binding consensus prices that are corroborated by observable market data or quoted market prices for similar instruments. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs).
Veeva Systems Inc. | Form 10-Q
13
Balance Sheet Hedges
We enter into foreign currency forward contracts in order to hedge our foreign currency exposure. These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore, we account for them at fair value with changes in the fair value recorded as a component of other income, net in our condensed consolidated statements of comprehensive income. Cash flows from such forward contracts are classified as operating activities. We recognized realized foreign currency gains of $4 million and $1 million for the three months ended April 30, 2022 and 2021, respectively.
The fair value of our outstanding derivative instruments is summarized below (in thousands): 
April 30,
2022		 January 31,
2022
Notional amount of foreign currency derivative contracts $ 64,483  $ 87,097 
Fair value of foreign currency derivative contracts 62,680  85,876 
Details on outstanding balance sheet hedges are presented below as of the date shown below (in thousands): 
Derivatives not designated as hedging instruments
Balance sheet location
 April 30,
2022		 January 31,
2022
Derivative Assets
Foreign currency derivative contracts Prepaid expenses and other current assets $ 1,804  $ 1,222 
Note 8. Income Taxes
For the three months ended April 30, 2022 and 2021, our effective tax rates were 23.2% and 13.1%, respectively. During the three months ended April 30, 2022, as compared to the prior year period, our effective tax rate increased primarily due to a reduction in excess tax benefits related to equity compensation. We recognized excess tax benefits in our provision for income taxes of $5 million and $17 million for the three months ended April 30, 2022 and 2021, respectively.
Note 9. Deferred Revenue, Performance Obligations, and Unbilled Accounts Receivable
Of the beginning deferred revenue balance for the respective periods, we recognized $294 million of subscription services revenue during the three months ended April 30, 2022, and $249 million for the three months ended April 30, 2021, respectively. Professional services revenue recognized in the same periods from deferred revenue balances at the beginning of the respective periods was immaterial.
Transaction Price Allocated to the Remaining Performance Obligations
Transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenues in future periods. We applied the practical expedient in accordance with ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606) to exclude the amounts related to professional services contracts as these contracts generally have a remaining duration of one year or less.
As of April 30, 2022, approximately $1,493 million of revenue is expected to be recognized from remaining performance obligations for subscription services contracts. We expect to recognize revenue on approximately 77% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.
Unbilled Accounts Receivable
Unbilled accounts receivable consists of (i) a receivable primarily for the revenue recognized for professional services performed but not yet billed, which were $32 million and $28 million as of April 30, 2022 and January 31, 2022, respectively, and (ii) a contract asset primarily for 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, which were $30 million and $36 million as of April 30, 2022 and January 31, 2022, respectively.
14
 Veeva Systems Inc. | Form 10-Q
Note 10. Leases
We have operating leases for our corporate offices. Our leases have various expiration dates through 2030, some of which include options to extend the leases for up to nine years. Additionally, we are the sublessor for certain office space. Our sublease income for the three months ended April 30, 2022 and 2021 was immaterial.
For each of the three months ended April 30, 2022 and 2021, our operating lease expense was $3 million.
Supplemental cash flow information related to leases was as follows (in thousands):
Three months ended April 30,
2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 2,566  $ 3,303 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 1,599  243 
Supplemental balance sheet information related to leases was as follows (in thousands, except lease term and discount rate):
April 30, 2022 January 31, 2022
Operating Leases
Lease right-of-use assets $ 48,887  $ 49,640 
Lease liabilities $ 11,606  $ 10,981 
Lease liabilities, noncurrent 42,462  43,607 
Total operating lease liabilities $ 54,068  $ 54,588 
Weighted Average Remaining Lease Term 6.0 years 6.0 years
Weighted Average Discount Rate 3.7  % 3.7  %
As of April 30, 2022, remaining maturities of operating lease liabilities are as follows (in thousands):
Fiscal Year
Remaining for 2023 $ 10,013 
2024 12,346 
2025 9,138 
2026 7,360 
2027 6,475 
Thereafter 15,010 
Total lease payments 60,342 
Less imputed interest (6,274)
Total $ 54,068 

Veeva Systems Inc. | Form 10-Q
15
Note 11. Stockholders’ Equity
Stock Option Activity
A summary of stock option activity for the three months ended April 30, 2022 is as follows: 
Number
of shares
Weighted
average
exercise
price
Weighted
average
remaining
contractual
term (in years)
 Aggregate
intrinsic
value (in millions)
Options outstanding at January 31, 2022 12,090,522  $ 77.89  4.6 $ 1,964 
Options granted 3,023,597  207.34 
Options exercised (482,436) 33.77 
Options forfeited/cancelled (99,109) 208.79 
Options outstanding at April 30, 2022 14,532,574  $ 105.40  5.6 $ 1,296 
Options vested and exercisable at April 30, 2022 7,627,254  $ 47.63  3.1 $ 1,048 
Options vested and exercisable at April 30, 2022 and expected to vest thereafter 14,532,574  $ 105.40  5.6 $ 1,296 
The options granted during the three months ended April 30, 2022 were predominantly made in connection with our annual performance review cycle. The weighted average grant-date fair value of options granted was $88.82 per option for the three months ended April 30, 2022.
As of April 30, 2022, there was $463 million in unrecognized compensation cost related to unvested stock options granted under the 2012 Equity Incentive Plan and 2013 Equity Incentive Plan. This cost is expected to be recognized over a weighted average period of 3.1 years.
As of April 30, 2022, we had authorized and unissued shares of common stock sufficient to satisfy exercises of stock options.
The total intrinsic value of options exercised was approximately $83 million for the three months ended April 30, 2022.
Stock Option Valuation Assumptions
The following table presents the weighted-average assumptions used to estimate the grant date fair value of options granted during the periods presented:

Three months ended April 30,
2022 2021
Volatility 37% - 38% 39%
Expected term (in years) 6.00 - 7.00 6.25
Risk-free interest rate 1.86% - 2.82% 0.68% - 1.07%
Dividend yield —% —%
Restricted Stock Units
A summary of restricted stock unit (RSU) activity for the three months ended April 30, 2022 is as follows:
Unreleased restricted
stock units
Weighted 
average grant
date fair value
Balance at January 31, 2022 619,388  $ 175.23 
RSUs granted 1,400,529  207.30 
RSUs vested (185,800) 213.36 
RSUs forfeited/cancelled (21,990) 192.94 
Balance at April 30, 2022 1,812,127  195.90 
16
 Veeva Systems Inc. | Form 10-Q
As of April 30, 2022, there was a total of $334 million in unrecognized compensation cost related to unvested RSUs. This cost is expected to be recognized over a weighted-average period of approximately 2.3 years. The total intrinsic value of RSUs vested was $41 million for the three months ended April 30, 2022.
Note 12. Net Income per Share
Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period.
Diluted net income per share is computed by dividing net income by the weighted-average shares outstanding, including potentially dilutive shares of common equivalents outstanding during the period. The dilutive effect of potential shares of common stock are determined using the treasury stock method.
The computation of fully diluted net income per share of Class A common stock assumes the conversion from Class B common stock, while the fully diluted net income per share of Class B common stock does not assume the conversion of those shares.
The numerators and denominators of the basic and diluted net income per share computations for our common stock are calculated as follows (in thousands, except per share data):
Three months ended April 30,
2022 2021
Class A Class B
Class A
Class B
Basic
Numerator
Net income, basic $ 90,548  $ 9,567  $ 104,319  $ 11,248 
Denominator
Weighted average shares used in computing net income per share, basic 139,749  14,765  137,607  14,837 
Net income per share, basic $ 0.65  $ 0.65  $ 0.76  $ 0.76 
Diluted
Numerator
Net income, basic $ 90,548  $ 9,567  $ 104,319  $ 11,248 
Reallocation as a result of conversion of Class B to Class A common stock:
Net income, basic 9,567  —  11,248  — 
Reallocation of net income to Class B common stock —  4,146  —  6,282 
Net income, diluted $ 100,115  $ 13,713  $ 115,567  $ 17,530 
Denominator
Number of shares used for basic net income per share computation 139,749  14,765  137,607  14,837 
Conversion of Class B to Class A common stock 14,765  —  14,837  — 
Effect of potentially dilutive common shares 7,414  7,414  9,769  9,769 
Weighted average shares used in computing net income per share, diluted 161,928  22,179  162,213  24,606 
Net income per share, diluted $ 0.62  $ 0.62  $ 0.71  $ 0.71 
Potential common share equivalents excluded where the inclusion would be anti-dilutive are as follows:
Three months ended April 30,
2022 2021
Options and awards to purchase shares not included in the computation of diluted net income per share because their inclusion would be anti-dilutive 2,295,241  348,495 
Note 13. Commitments and Contingencies
Litigation
IQVIA Litigation Matters
Veeva OpenData and Veeva Network Action.
On January 10, 2017, IQVIA Inc. (formerly Quintiles IMS Incorporated) and IMS Software Services, Ltd. (collectively, “IQVIA”) filed a complaint against us in the U.S. District Court for the District of New Jersey (IQVIA Inc. v. Veeva Systems Inc. (No. 2:17-cv-00177)) (OpenData and Network Action). In the complaint, IQVIA alleges that we used
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unauthorized access to proprietary IQVIA data to improve our software and data products and that our software is designed to steal IQVIA trade secrets. IQVIA further alleges that we have intentionally gained unauthorized access to IQVIA proprietary information to gain an unfair advantage in marketing our products and that we have made false statements concerning IQVIA’s conduct and our data security capabilities. IQVIA asserts claims under both federal and state misappropriation of trade secret laws, federal false advertising law, and common law claims for unjust enrichment, tortious interference, and unfair trade practices. The complaint seeks declaratory and injunctive relief and unspecified monetary damages.
On March 13, 2017, we filed our answer denying IQVIA's claims and filed counterclaims. Our counterclaims allege that IQVIA, as the dominant provider of data for life sciences companies, has abused monopoly power to exclude Veeva OpenData and Veeva Network from their respective markets. The counterclaims allege that IQVIA has engaged in various tactics to prevent customers from using our applications and has deliberately raised costs and increased the difficulty of attempting to switch from IQVIA data to our data products. As amended, our counterclaims assert federal and state antitrust claims, as well as claims under California’s Unfair Practices Act and common law claims for intentional interference with contractual relations, intentional interference with prospective economic advantage, and negligent misrepresentation. The counterclaims seek injunctive relief, monetary damages exceeding $200 million, and attorneys’ fees. On October 3, 2018, the court denied IQVIA’s motion to dismiss our antitrust claims.
On February 18, 2020, IQVIA filed a motion for sanctions against Veeva, seeking default judgment and dismissal and, in the alternative, an adverse inference at trial related to discovery disputes. On May 7, 2021, the special master appointed to oversee litigation discovery ruled against IQVIA’s request for default judgment and dismissal and ruled in IQVIA’s favor with respect to certain other matters, including recommending to the trial judge that a permissive adverse inference instruction be issued to the jury with respect to certain documents that were not preserved by Veeva. Should the trial judge accept the recommendation, the jury would be permitted, but not required, to infer that certain evidence not preserved by Veeva would have been unfavorable to Veeva, if the jury first concludes that Veeva controlled the evidence, that the evidence was relevant, and that Veeva should have preserved the evidence. The jury is also likely to be instructed that it may also consider whether the non-preserved evidence was duplicative of other evidence produced by Veeva and whether Veeva’s conduct was reasonable in light of all circumstances. Veeva was also ordered to pay IQVIA’s fees and expenses incurred in connection with portions of its sanctions motion. On June 4, 2021, we appealed the special master’s ruling and IQVIA’s fee award to the federal district court judge.
Fact discovery is largely complete and we expect to complete expert discovery by November 15, 2022. While it is not possible at this time to predict with any degree of certainty the ultimate outcome of this action, and we are unable to make a meaningful estimate of the amount or range of gain or loss, if any, that could result from the OpenData and Network Action, we believe that IQVIA’s claims lack merit and that our counterclaims warrant injunctive relief and monetary damages for Veeva.
Veeva Nitro Action.
On July 17, 2019, IQVIA filed a lawsuit in the U.S. District Court for the District of New Jersey (IQVIA Inc. v. Veeva Systems Inc. (No. 2:19-cv-15517)) (IQVIA Declaratory Action) seeking a declaratory judgment that IQVIA is not liable to Veeva for disallowing use of IQVIA’s data products in Veeva Nitro or any later-introduced Veeva software products. The IQVIA Declaratory Action does not seek any monetary relief.
On July 18, 2019, we filed a lawsuit against IQVIA in the U.S. District Court for the Northern District of California (Veeva Systems Inc. v. IQVIA Inc. (No. 3:19-cv-04137)) (Veeva Nitro Action), alleging that IQVIA engaged in anticompetitive conduct as to Veeva Nitro. Our complaint asserts federal and state antitrust claims, as well as claims under California’s Unfair Competition Law and common law claims for intentional interference with contractual relations and intentional interference with prospective economic advantage. The complaint seeks injunctive relief and monetary damages. IQVIA filed its answer and affirmative defenses on September 5, 2019.
On September 26, 2019, the Northern District of California transferred the Veeva Nitro Action to the District of New Jersey (Veeva Systems Inc. v. IQVIA Inc. (No. 2:19-cv-18558)).
On March 24, 2020, we amended our complaint in the Veeva Nitro Action to include allegations of IQVIA’s anticompetitive conduct as to additional Veeva software applications, such as Veeva Andi, Veeva Align, and Veeva Vault MedComms; additional examples of IQVIA’s monopolistic behavior against Veeva Nitro; IQVIA’s unlawful
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access of Veeva’s proprietary software products; and a request for declaratory relief. IQVIA answered the amended complaint on May 22, 2020.
On August 21, 2020, the District of New Jersey consolidated the Veeva Nitro Action and IQVIA Declaratory Action, and stayed both actions pending conclusion of the OpenData and Network Action. On September 21, 2021, the court lifted the stay. We expect to complete fact discovery by June 30, 2022, and to complete expert discovery by November 15, 2022.
While it is not possible at this time to predict with any degree of certainty the ultimate outcome of this action, we believe that our claims warrant injunctive and declaratory relief and monetary damages for Veeva and against IQVIA.
Fee Arrangements Related to the IQVIA Litigation Matters. We have entered into partial contingency fee arrangements with certain law firms representing us in the IQVIA litigations. Pursuant to those arrangements, such law firms are entitled to an agreed portion of any damages we recover from IQVIA (Contingency Fees) or may be entitled to payment of additional fees from us based on the achievement of certain outcomes (Success Fees). While it is reasonably possible that we may incur such Success Fees, we are unable to make an estimate of any such liability and have not accrued any liability related to Success Fees at this time.
Medidata Litigation Matter
On January 26, 2017, Medidata Solutions, Inc. filed a complaint in the U.S. District Court for the Southern District of New York (Medidata Solutions, Inc. v. Veeva Systems Inc. et al. (No. 1:17-cv-00589)) against us and five individual Veeva employees who previously worked for Medidata (“Individual Employees”). The complaint alleged that we induced and conspired with the Individual Employees to breach their employment agreements, including non-compete and confidentiality provisions, and to misappropriate Medidata’s confidential and trade secret information. The complaint sought declaratory and injunctive relief, unspecified monetary damages, and attorneys’ fees. Medidata has since amended its complaint twice, asserting the same claims with additional factual allegations, and has voluntarily dismissed the Individual Defendants without prejudice.
Fact discovery is now completed. On April 24, 2020, Medidata filed a motion for partial summary judgment on its claims for trade secret misappropriation as well as several of Veeva’s affirmative defenses. On May 15, 2020, we filed a motion for summary judgment on all of Medidata’s claims. On February 9, 2021, the court issued its ruling granting summary judgment in favor of Veeva as to certain of Medidata's claims and in favor of Medidata as to certain of Veeva's affirmative defenses. The trial in this matter is currently set for July 18, 2022. While it is not possible at this time to predict with any degree of certainty the ultimate outcome of this action, and we are unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome, we believe that Medidata’s claims lack merit.
Other Litigation Matters
From time to time, we may be involved in other legal proceedings and subject to claims incident to the ordinary course of business. Although the results of such legal proceedings and claims cannot be predicted with certainty, we believe we are not currently a party to any other legal proceedings, the outcome of which, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial position. Regardless of the outcome, such proceedings can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.
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Note 14. Revenues by Product
We group our revenues into two product areas: Commercial Solutions and R&D Solutions. Commercial Solutions revenues consist of revenues from our Veeva Commercial Cloud, Veeva Data Cloud and Veeva Claims solutions. R&D Solutions consist of revenues from our Veeva Development Cloud, Veeva RegulatoryOne, and Veeva QualityOne solutions.
Total revenues consist of the following (in thousands):
Three months ended April 30,
2022 2021
Subscription services
Commercial Solutions(1)
 $ 227,724  $ 207,845 
R&D Solutions(1)
 174,908  133,274 
Total subscription services $ 402,632  $ 341,119 
Professional services
Commercial Solutions(1)
 $ 43,321  $ 43,598 
R&D Solutions(1)
 59,149  48,856 
Total professional services $ 102,470  $ 92,454 
Total revenues $ 505,102  $ 433,573 
(1) Certain prior period product revenues have been adjusted to match current period presentation.
Note 15. Information about Geographic Areas
We track and allocate revenues by principal geographic area rather than by individual country, which makes it impractical to disclose revenues for the United States or other specific foreign countries. We measure subscription services revenue primarily by the estimated location of the end users in each geographic area for our Commercial Solutions and primarily by the estimated location of usage in each geographic area for our R&D Solutions. We measure professional services revenue primarily by the location of the resources performing the professional services.
Total revenues by geographic area were as follows for the periods shown below (in thousands):
Three months ended April 30,
2022 2021
Revenues by geography
North America $ 294,771  $ 246,300 
Europe 138,962  121,304 
Asia Pacific 57,713  53,632 
Middle East, Africa, and Latin America 13,656  12,337 
Total revenues $ 505,102  $ 433,573 
Long-lived assets by geographic area are as follows as of the periods shown below (in thousands):
April 30,
2022		 January 31,
2022
Long-lived assets by geography
North America $ 44,890  $ 45,625 
Europe 5,968  6,135 
Asia Pacific 1,293  1,335 
Middle East, Africa, and Latin America $ 1,665  1,400 
Total long-lived assets $ 53,816  $ 54,495 
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 Veeva Systems Inc. | Form 10-Q
ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report. In addition to historical condensed consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”
Overview
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 offerings span cloud software, data, analytics, professional services, and business consulting and are designed to meet the unique needs of our customers and their most strategic business functions—from research and development to commercialization. Our 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. For a more detailed description of our business and products as of January 31, 2022, please see our Annual Report on Form 10-K for the fiscal year ended January 31, 2022 filed on March 30, 2022.
In April 2022 we announced that our solutions will be grouped into three major product categories going forward—Veeva Commercial Cloud, Veeva Data Cloud, and Veeva Development Cloud. We also announced that our data offerings previously offered under the Veeva Data Cloud brand are now offered under the Veeva Compass brand. Veeva Data Cloud is now comprised of the following solutions formerly categorized as Commercial Cloud offerings: Veeva Compass, Veeva Link, and Veeva OpenData. For financial reporting purposes, revenues associated with our Veeva Commercial Cloud, Veeva Data Cloud and Veeva Claims solutions are classified as “Commercial Solutions” revenues, and revenues associated with our Veeva Development Cloud, Veeva RegulatoryOne, and Veeva QualityOne solutions are classified as “R&D Solutions” revenues.
In our fiscal year ended January 31, 2022, we derived approximately 59% and 41% of our subscription services revenues and 56% and 44% of our total revenues from our Commercial Solutions and R&D Solutions, respectively. For the three months ended April 30, 2022, we derived approximately 57% and 43% of our subscription services revenues and 54% and 46% of our total revenues from our Commercial Solutions and R&D Solutions, respectively. The contribution of subscription services revenues and total revenues associated with our R&D Solutions are expected to continue to increase as a percentage of subscription services revenues and total revenues in the future. We also offer certain of our R&D Solutions to industries outside the life sciences industry primarily in North America and Europe.
For our fiscal years ended January 31, 2022, 2021, and 2020, our total revenues were $1,851 million, $1,465 million, and $1,104 million, respectively, representing year-over-year growth in total revenues of 26% in our fiscal year ended January 31, 2022 and 33% in our fiscal year ended January 30, 2021. For our fiscal years ended January 31, 2022, 2021, and 2020, our subscription services revenues were $1,484 million, $1,179 million, and $896 million, respectively, representing year-over-year growth in subscription services revenues of 26% in our fiscal year ended January 31, 2022, and 32% in our fiscal year ended January 30, 2021. Please note that our total revenues and subscription services revenues for our fiscal year ended January 31, 2020 only included revenue contribution from the acquired Crossix and Physicians World businesses in the fourth quarter of that fiscal year. We expect the growth rate of our total revenues and subscription services revenues to decline compared to the prior fiscal year. We generated net income of $427 million, $380 million, and $301 million for our fiscal years ended January 31, 2022, 2021, and 2020, respectively.
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As of January 31, 2022, 2021, and 2020, we served 1205, 993, and 861 customers, respectively. As of January 31, 2022, 2021, and 2020, we had 653, 572, and 523 Commercial Solutions customers, respectively, and 860, 664, and 538 R&D Solutions customers, respectively. These customer count totals are net of customer attrition during each period. The combined customer counts for Commercial Solutions and R&D Solutions exceed the total customer count in each year because some customers subscribe to products in both areas. Commercial Solutions consist of our cloud software, data, and analytics products built specifically to more efficiently and effectively commercialize our customers’ products. R&D Solutions consist of our clinical, quality, regulatory, and safety products. Many of our applications for R&D are used by smaller, earlier stage, pre-commercial companies, some of which may not reach the commercialization stage. Thus, the potential number of R&D Solutions customers is higher than the potential number of Commercial Solutions customers.
For the three months ended April 30, 2022 and 2021, our total revenues were $505 million and $434 million, respectively, representing year-over-year growth in total revenues of 16%. For the three months ended April 30, 2022 and 2021, our subscription services revenues were $403 million and $341 million, respectively, representing year-over-year growth in subscription services revenues of 18%. We generated net income of $100 million and $116 million for the three months ended April 30, 2022 and 2021, respectively.
Our Conversion to PBC
On February 1, 2021, we became a Delaware public benefit corporation (PBC), and we amended our certificate of incorporation to include the following public benefit purpose: “to provide products and services that are intended to help make the industries we serve more productive, and to create high-quality employment opportunities in the communities in which we operate.” When making decisions, our directors have a fiduciary duty to balance the financial interests of stockholders, the best interests of other stakeholders materially affected by our conduct (including customers, employees, partners, and the communities in which we operate), and the pursuit of our public benefit purpose. For more information on our conversion to a PBC and associated risks, see “Risk Factors.”
The Continuing Impact of the COVID-19 Pandemic
The worldwide outbreak of COVID-19 has had and continues to have a widespread and unpredictable worldwide impact on our business operations, the life sciences industry, healthcare systems, financial markets, and the global economy. While the impact of COVID-19 on our operational and financial performance has not been materially negative to date, the future impact is uncertain and will depend on future developments, including the duration and spread of the outbreak, government responses to the pandemic, the rate of vaccinations, the impact on our customers, the impact on our employees, the extent of further adverse impacts to the economy, and the scale and pace of economic recovery and resumption of normal business activities, including the rollout of COVID-19 vaccines globally, the lifting of restrictions on movement, and the results of outbreaks and variants, all of which cannot be predicted with certainty.
Certain impacts of the COVID-19 pandemic and resulting changes in business practice may be enduring over the long term and may result in significant changes in business practice within the technology industry, the life sciences industry, and the world economy generally. For example, while we have resumed certain in-person customer, employee, and industry events, some of our customers continue to have travel and in-person meeting restrictions that limit our ability to conduct business in person and we cannot predict how long such limitations will remain in effect. Further, the extent to which remote work will remain common practice or become increasingly prevalent after the COVID-19 pandemic ends is not certain and may have significant impacts on hiring practices, management practices, expense structures and investments, and other aspects of our business and the businesses of our customers. We have adopted a permanent “Work Anywhere” policy, which generally gives employees the flexibility to work in an office or at home on any given day, with certain job-specific restrictions. We believe this program is beneficial to our business but we have limited experience with the program. Similarly, the extent to which virtual meetings and interactions continue to be used or preferred in lieu of in-person interactions may significantly change business practices for us and our customers, and, in turn, may impact demand for our products and services. For example, if our customers reduce sales representatives in response to an increasing preference for virtual meetings with doctors, demand for our core CRM application may decline. In the quarter ended October 31, 2020, we disclosed that we expected life sciences companies to reduce the number of sales representatives that they employ by roughly 10%. We currently expect most of these reductions to take place during our fiscal year ending January 31, 2023, with some reductions still occurring in our fiscal year ending January 31, 2024. Such reductions could negatively impact sales of our solutions, including Veeva CRM and certain of our other Commercial Solutions, but
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we cannot be certain such reductions will happen or of the timing or magnitude of such reductions. At the same time, demand for our products that enable virtual interactions with doctors and clinical trial participants may increase. We cannot accurately predict how such changes may impact Veeva's results over the long term.
Impacts of the Russian Invasion of Ukraine
We are closely monitoring the impact of the Russian invasion of Ukraine and its global impacts. While the conflict is still evolving and the outcome remains highly uncertain, we do not believe the Russian invasion will have a material impact on our business and results of operations. We do not currently have office locations or employees in Russia and our revenues from sales to Russian entities were limited. However, if the conflict continues or worsens, leading to greater disruptions and uncertainty within the life sciences industry or global economy, our business and results of operations could be negatively impacted.
Key Factors Affecting Our Performance
Investment in Growth. We have invested and intend to continue to invest aggressively in expanding the breadth and depth of our product portfolio, including through acquisitions. We expect to continue to invest in research and development to expand existing solutions and build new solutions; in sales and marketing to promote our solutions to new and existing customers and in existing and expanded geographies and industries; in professional services and business consulting to help ensure customer success; and in other operational and administrative functions to support our expected growth. We expect that our headcount will increase as a result of these investments. We also expect our total operating expenses will continue to increase over time, which could have a negative impact on our operating margin.
Adoption of Our Solutions by Existing and New Customers. Most of our customers initially deploy our solutions to a limited number of end users within a division or geography and may only initially deploy a limited set of our available solutions. Our future growth is dependent upon our existing customers’ continued success and their renewals of subscriptions to our solutions, expanded deployment of our solutions within their organizations, and their purchase of subscriptions to additional solutions. Our growth is also dependent on the adoption of our solutions by new customers.
Subscription Services Revenue Retention Rate. A key factor to our success is the renewal and expansion of our existing subscription agreements with our customers. We calculate our annual subscription services revenue retention rate for a particular fiscal year by dividing (i) annualized subscription revenue as of the last day of that fiscal year from those customers that were also customers as of the last day of the prior fiscal year by (ii) the annualized subscription revenue from all customers as of the last day of the prior fiscal year. Annualized subscription revenue is calculated by multiplying the daily subscription revenue recognized on the last day of the fiscal year by 365. This calculation includes the impact on our revenues from customer non-renewals, deployments of additional users or decreases in users, deployments of additional solutions or discontinued use of solutions by our customers, and price changes for our solutions. Historically, the impact of price changes on our subscription services revenue retention rate has been minimal. For our fiscal years ended January 31, 2022, 2021, and 2020, our subscription services revenue retention rate was 119%, 124%, and 121%, respectively.
Components of Results of Operations
Revenues
We derive our revenues primarily from subscription services fees and professional services fees. Subscription services revenues consist of fees from customers accessing our cloud-based software solutions and 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 and services related to our Veeva Business Consulting offering. For the three months ended April 30, 2022, subscription services revenues constituted 80% of total revenues and professional services and other revenues constituted 20% of total revenues.
We generally enter into master subscription agreements with our customers and count each distinct master subscription agreement that has not been terminated or expired and that has orders for which we have recognized revenue in the quarter as a distinct customer for purposes of determining our total number of current customers as of the end of that quarter. We generally enter into a single master subscription agreement with each customer, although in some instances, affiliated legal entities within the same corporate family may enter into separate master
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subscription agreements. Conversely, affiliated legal entities that maintain distinct master service agreements may choose to consolidate their orders under a single master service agreement, and, in that circumstance, our customer count would decrease. Divisions, subsidiaries, and operating units of our customers often place distinct orders for our subscription services under the same master subscription agreement, and we do not count such distinct orders as new customers for purposes of determining our total customer count. For purposes of determining customers of Veeva Crossix that do not contract under a master subscription agreement, we count each entity that has a statement of work or services agreement and a recurring known payment obligation as a distinct customer if such entity is not otherwise a customer of ours. For Veeva Crossix, we do not count as distinct customers agencies contracting with us on behalf of brands within life sciences companies.
New subscription orders for our core Veeva CRM application generally have a one-year term. If a customer adds end users or additional Commercial Solutions to an existing order for our core Veeva CRM application, such additional orders will generally be coterminous with the anniversary date of the core Veeva CRM order, and as a result, orders for additional end users or additional Commercial Solutions will commonly have an initial term of less than one year.
Particularly with respect to our R&D Solutions, we have entered into a number of orders with multi-year terms. The fees associated with such orders are typically not based on the number of end-users and typically escalate over the term of such orders at a pre-agreed rate to account for, among other factors, implementation and adoption timing and planned increased usage by the customer. There are timing differences between billings and revenue recognition with respect to certain of our multi-year orders with escalating fees which will result in fluctuations in deferred revenue and unbilled accounts receivable balances. For instance, when the amounts we are entitled to invoice in any period pursuant to multi-year orders with escalating fees are less than the revenue recognized in accordance with relevant accounting standards, we will accrue an unbilled accounts receivable balance (a contract asset) related to such orders. In the same scenario, the net deferred revenue we would record in connection with such orders will be less because we will be recognizing more revenue than we bill earlier in the term of such multi-year orders.
Our subscription orders are generally billed at the beginning of the subscription period in annual or quarterly increments, which means the annualized value of such orders may not be completely reflected in deferred revenue at any single point in time. Also, particularly with respect to orders for our Commercial Solutions, because the term of orders for additional end users or applications is commonly less than one year, the annualized value of such orders may not be completely reflected in deferred revenue at any single point in time. We have also agreed from time to time, and may agree in the future, to allow customers to change the renewal dates of their orders to, for example, align more closely with a customer’s annual budget process or to align with the renewal dates of other orders placed by other entities within the same corporate control group, or to change payment terms from annual to quarterly, or vice versa. Such changes typically result in an order of less than one year as necessary to align all orders to the desired renewal date and, thus, may result in a lesser increase to deferred revenue than if the adjustment had not occurred. Additionally, changes in renewal dates may change the fiscal quarter in which deferred revenue associated with a particular order is booked. Accordingly, we do not believe that changes on a quarterly basis in deferred revenue, unbilled accounts receivable, or calculated billings, a metric commonly cited by financial analysts, are accurate indicators of future revenues for any given period of time. We define the term calculated billings for any period to mean revenue for the period plus the change in deferred revenue from the immediately preceding period minus the change in unbilled accounts receivable (contract asset) from the immediately preceding period.
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 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. Our agreements typically provide that orders will automatically renew unless notice of non-renewal is provided in advance. Subscription services revenues are affected primarily by the number of customers, the scope of the subscription purchased by each customer (for example, the number of end users or other subscription usage metric) and the number of solutions subscribed to by each customer.

We utilize our own personnel to perform our professional services and business consulting engagements with customers. In certain cases, we may utilize third-party subcontractors to perform professional services engagements. 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 and business consulting arrangements are billed on a fixed fee basis and revenues are
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typically recognized over time as the services are delivered based on time incurred. Data services and training revenues are generally recognized as the services are performed. Professional services revenues are affected primarily by our customers’ demands for implementation services, configuration, data services, training, speakers bureau logistics, and managed services in connection with our solutions. Our business consulting revenues are affected primarily by our customers’ demands for services related to a particular customer success initiative, strategic analysis, or business process change, and not a cloud software implementation.
Allocated Overhead
We accumulate certain costs such as building depreciation, office rent, utilities, and other facilities costs and allocate them across the various departments based on headcount. We refer to these costs as “allocated overhead.”
Cost of Revenues
Cost of subscription services revenues for all of our solutions consists of expenses related to our computing infrastructure provided by third parties, including salesforce.com and Amazon Web Services, personnel related costs associated with hosting our subscription services and providing support, including our data stewards, data acquisition and third-party contractor costs related to the development of our data products, expenses associated with computer equipment and software, and allocated overhead. We intend to continue to invest additional resources in our subscription services to enhance our product offerings and increase our delivery capacity. We may add or expand computing infrastructure capacity in the future, migrate to new computing infrastructure service providers, make additional investments in the availability and security of our solutions, and make continued investments in data sources.
Cost of professional services and other revenues consists primarily of employee-related expenses associated with providing these services. The cost of providing professional services is significantly higher as a percentage of the related revenues than for our subscription services due to the direct labor costs and costs of third-party subcontractors.
Operating Expenses
Research and Development. Research and development expenses consist primarily of employee-related expenses, third-party consulting fees, hosted infrastructure costs, and allocated overhead. We continue to focus our research and development efforts on adding new features and applications and increasing the functionality and enhancing the ease of use of our cloud-based applications.
Sales and Marketing. Sales and marketing expenses consist primarily of employee-related expenses, sales commissions, marketing program costs, amortization expense associated with purchased intangibles related to our customer contracts, customer relationships and brand development, travel-related expenses and allocated overhead. Marketing program costs include advertising, customer events, corporate communications, brand awareness, and product marketing activities. Sales commissions are costs of obtaining new customer contracts and are capitalized and then amortized over a period of benefit that we have determined to be three years.
General and Administrative. General and administrative expenses consist of employee-related expenses for our executive, finance and accounting, legal, employee success, management information systems personnel, and other administrative employees. In addition, general and administrative expenses include fees related to third-party legal counsel, fees related to third-party accounting, tax and audit services, other corporate expenses, and allocated overhead.
Other Income, Net
Other income, net, consists primarily of transaction gains or losses on foreign currency, net of hedging costs, interest income, and amortization of premiums paid on investments.
Provision for Income Taxes
Provision for income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions. See note 8 of the notes to our condensed consolidated financial statements.
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Recent Accounting Pronouncements
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides accounting relief from the future impact of the cessation of the London Interbank Offered Rate (“LIBOR”) by, among other things, providing optional expedients to treat contract modifications resulting from such reference rate reform as a continuation of the existing contract and for hedging relationships to not be de-designated as a result of such changes provided certain criteria are met. The guidance is effective beginning on March 12, 2020, and the amendments apply prospectively through December 31, 2022. We are currently in the process of incorporating fallback language in negotiated contracts and incorporating non-LIBOR reference rate and/or fallback language in new contracts to prepare for these changes. We do not expect the adoption of ASU 2020-04 to have a material impact on our condensed consolidated financial statements.
Business Combinations
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with Topic 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. Under current GAAP, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date. The new standard is effective for our fiscal year beginning on February 1, 2023, with early adoption permitted. We are currently evaluating the accounting, transition, and disclosure requirements of this standard.
Results of Operations
The following tables set forth selected condensed consolidated statements of operations data and such data as a percentage of total revenues for each of the periods indicated:
Three months ended April 30,
2022 2021
(in thousands)
Consolidated Statements of Comprehensive Income Data:
Revenues:
Subscription services $ 402,632  $ 341,119 
Professional services and other 102,470  92,454 
Total revenues 505,102  433,573 
Cost of revenues(1):
Cost of subscription services 58,953  51,217 
Cost of professional services and other 80,562  64,919 
Total cost of revenues 139,515  116,136 
Gross profit 365,587  317,437 
Operating expenses(1):
Research and development 113,475  83,226 
Sales and marketing 76,115  64,610 
General and administrative 48,325  41,155 
Total operating expenses 237,915  188,991 
Operating income 127,672  128,446 
Other income, net 2,709  4,564 
Income before income taxes 130,381  133,010 
Provision for income taxes 30,266  17,443 
Net income $ 100,115  $ 115,567 
(1) Includes stock-based compensation as follows:
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 Veeva Systems Inc. | Form 10-Q
Cost of revenues:
Cost of subscription services $ 1,277  $ 906 
Cost of professional services and other 9,990  7,422 
Research and development 25,823  16,837 
Sales and marketing 16,893  11,555 
General and administrative 13,151  11,769 
Total stock-based compensation $ 67,134  $ 48,489 
Revenues
Three months ended April 30,
2022 2021 % Change
(dollars in thousands)
Revenues:
Subscription services $ 402,632  $ 341,119  18%
Professional services and other 102,470  92,454  11%
Total revenues $ 505,102  $ 433,573  16%
Percentage of revenues:
Subscription services 80  % 79  %
Professional services and other 20  21 
Total revenues 100  % 100  %
Total revenues for the three months ended April 30, 2022 increased $72 million, of which $62 million was from growth in subscription services revenues. The increase in subscription services revenues consisted of $42 million of subscription services revenue attributable to R&D Solutions and $20 million of subscription services revenue attributable to Commercial Solutions. The geographic mix of subscription services revenues was 57% from North America, 28% from Europe, and 15% from other locations, primarily Asia Pacific, for the three months ended April 30, 2022, as compared to 56% from North America, 27% from Europe, and 17% from other locations, primarily Asia Pacific, for the three months ended April 30, 2021.
Professional services and other revenues for the three months ended April 30, 2022 increased $10 million. The increase was primarily due to new customers requesting implementation and deployment related professional services and existing customers requesting professional services related to expanding deployments or the deployment of newly purchased solutions. The increased demand for professional services and the resulting increase in professional services revenues was weighted heavily towards implementation and deployments of our R&D Solutions. Demand for our Veeva Business Consulting services also contributed to the growth for the period. The geographic mix of professional services and other revenues was 65% from North America, 28% from Europe, and 7% from Asia Pacific for the three months ended April 30, 2022, as compared to 59% from North America, 33% from Europe, and 8% from Asia Pacific for the three months ended April 30, 2021.
Over time, we expect the proportion of our total revenues from professional services to decrease.
Costs and Expenses
Note that in response to unusual inflationary pressure and the demand environment for skilled employees, we increased salaries for the majority of our employees by 5% effective September 1, 2021. Further, in light of the labor market conditions and inflationary pressure, our compensation increases in connection with our annual compensation review process, which took place in our fiscal quarter ended April 30, 2022, were higher than
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previous years. These compensation changes are likely to increase our employee-related expenses going forward, which impact all of the cost and expense categories discussed below.
Cost of Revenue and Gross Margin
Three months ended April 30,
2022 2021 % Change
(dollars in thousands)
Cost of revenues:
Cost of subscription services $ 58,953  $ 51,217  15%
Cost of professional services and other 80,562  64,919  24%
Total cost of revenues $ 139,515  $ 116,136  20%
Gross margin percentage:
Subscription services 85  % 85  %
Professional services and other 21  % 30  %
Total gross margin percentage 72  % 73  %
Gross profit $ 365,587  $ 317,437  15%
Cost of revenues for the three months ended April 30, 2022 increased $23 million, of which $8 million was an increase in cost of subscription services. The increase in cost of subscription services was primarily due to increases of $3 million in computing infrastructure costs, which was driven by an increase in the number of end users of our subscription services, $2 million in employee compensation-related costs, and $1 million in third-party contractor costs related to the development of our data products. We expect cost of subscription services to increase in absolute dollars in the near term due to increased usage of our subscription services and increased data costs related to our Veeva Compass offering.
Cost of professional services and other for the three months ended April 30, 2022 increased $16 million, primarily due to a $13 million increase in employee compensation-related costs (which includes an increase of $3 million in stock-based compensation). We expect cost of professional services and other to increase in absolute dollars in the near term as we add personnel to our global professional services organization and Veeva Business Consulting, and as a result of compensation increases as part of our continued investment in our existing employees.
Gross margin for the three months ended April 30, 2022 and 2021 was 72% and 73%, respectively. The slight decrease compared to the prior period was due to lower gross margin for our professional services in the quarter ended April 30, 2022, as compared to the same period in the prior fiscal year.
Operating Expenses and Operating Margin
Operating expenses include research and development, sales and marketing, and general and administrative expenses. As we continue to invest in our growth through hiring, we expect operating expenses and stock-based compensation to increase in absolute dollars and to slightly increase as a percentage of revenue in the future.
Research and Development
Three months ended April 30,
2022 2021 % Change
(dollars in thousands)
Research and development $ 113,475  $ 83,226  36%
Percentage of total revenues 22  % 19  %
Research and development expenses for the three months ended April 30, 2022 increased $30 million, primarily due to an increase of $26 million in employee compensation-related costs (which includes an increase of $9 million in stock-based compensation) and an increase of $3 million in technology infrastructure costs. The increase in employee compensation-related costs is primarily driven by the increase in headcount and total compensation during the period. The expansion of our headcount and compensation increases in research and development is to support development work for the increased number of products that we offer or may offer in the future.
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We expect research and development expenses to increase in absolute dollars in fiscal 2023, primarily due to compensation increases as part of our investment in our existing employees, and continued investment in our product offerings.
Sales and Marketing
Three months ended April 30,
2022 2021 % Change
(dollars in thousands)
Sales and marketing 76,115  64,610  18%
Percentage of total revenues 15  % 15  %
Sales and marketing expenses for the three months ended April 30, 2022 increased $12 million, primarily due to an increase of $11 million in employee compensation-related costs (which includes an increase of $5 million in stock-based compensation). The increase in employee compensation-related costs is primarily driven by the increase in headcount and total compensation during the period.
We expect sales and marketing expenses to grow in absolute dollars in the future, primarily due to employee-related expenses as we increase our headcount to support our sales and marketing efforts associated with our product offerings, the impact of changes to our sales compensation plans, our continued expansion of our sales capacity across all our solutions, and as a result of compensation increases as part of our continued investment in our existing employees. Additionally, we expect travel and entertainment costs to start to increase in the fiscal year ending January 31, 2023.
General and Administrative
Three months ended April 30,
2022 2021 % Change
(dollars in thousands)
General and administrative $ 48,325  $ 41,155  17%
Percentage of total revenues 10  % 9  %
General and administrative expenses for the three months ended April 30, 2022 increased $7 million, primarily due to an increase of $5 million in employee compensation-related costs (which includes an increase of $1 million in stock-based compensation) and an increase of $2 million in professional services. The increase in employee compensation-related costs is primarily driven by the increase in headcount and total compensation during the period.
We expect general and administrative expenses to continue to grow in absolute dollars in the future as a result of compensation increases as part of our continued investment in our existing employees, investments in our information technology infrastructure, and third-party fees, including fees associated with on-going litigation.
Other Income, Net
Three months ended April 30,
2022 2021 % Change
(dollars in thousands)
Other income, net $ 2,709  $ 4,564  (41)%
Other income, net, for the three months ended April 30, 2022 decreased $2 million, primarily due to a decrease of $2 million in foreign currency gains.
We continue to experience foreign currency fluctuations primarily due to the impact resulting from the periodic re-measurement of our foreign currency balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. Our results of operations are subject to fluctuations due to
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changes in foreign currency exchange rates, particularly changes in the Euro, Japanese Yen, Canadian Dollar, British Pound Sterling, Hungarian Forint, and Chinese Yuan. We may continue to experience favorable or adverse foreign currency impacts due to volatility in these currencies.
Provision for Income Taxes
Three months ended April 30,
2022 2021 % Change
(dollars in thousands)
Income before income taxes $ 130,381  $ 133,010  (2)%
Provision for income taxes $ 30,266  $ 17,443  74%
Effective tax rate 23.2  % 13.1  %
The provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due primarily to state taxes, tax credits, equity compensation, and foreign income subject to taxation in the United States. Future tax rates could be affected by changes in tax laws and regulations or by rulings in tax related litigation, as may be applicable. We will continue to identify and analyze other applicable changes in tax laws in the United States and abroad.
For the three months ended April 30, 2022 and 2021, our effective tax rates were 23.2% and 13.1%, respectively. During the three months ended April 30, 2022 as compared to the prior year period, our effective tax rate increased primarily due to a reduction in excess tax benefits related to equity compensation. We recognized excess tax benefits in our provision for income taxes of $5 million and $17 million for the three months ended April 30, 2022 and 2021, respectively.
Non-GAAP Financial Measures
In our public disclosures, we have provided non-GAAP measures, which we define as financial information that has not been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. In addition to our GAAP measures, we use these non-GAAP financial measures internally for budgeting and resource allocation purposes and in analyzing our financial results.
For the reasons set forth below, we believe that excluding the following items provides information that is helpful in understanding our operating results, evaluating our future prospects, comparing our financial results across accounting periods, and comparing our financial results to our peers, many of which provide similar non-GAAP financial measures.
•Excess tax benefits. Excess tax benefits from employee stock plans are dependent on previously agreed-upon equity grants to our employees, vesting of those grants, stock price, and exercise behavior of our employees, which can fluctuate from quarter to quarter. Because these fluctuations are not directly related to our business operations, we exclude excess tax benefits for our internal management reporting processes. Our management also finds it useful to exclude excess tax benefits when assessing the level of cash provided by operating activities. Given the nature of the excess tax benefits, we believe excluding it allows investors to make meaningful comparisons between our operating cash flows from quarter to quarter and those of other companies.
•Stock-based compensation expenses. We exclude stock-based compensation expenses primarily because they are non-cash expenses that we exclude from our internal management reporting processes. We also find it useful to exclude these expenses when we assess the appropriate level of various operating expenses and resource allocations when budgeting, planning, and forecasting future periods. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use, we believe excluding stock-based compensation expenses allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies.
•Amortization of purchased intangibles. We incur amortization expense for purchased intangible assets in connection with acquisitions of certain businesses and technologies. Amortization of intangible assets is a non-cash expense and is inconsistent in amount and frequency because it is significantly affected
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 Veeva Systems Inc. | Form 10-Q
by the timing, size of acquisitions, and the inherent subjective nature of purchase price allocations. Because these costs have already been incurred and cannot be recovered, and are non-cash expenses, we exclude these expenses for internal management reporting processes. We also find it useful to exclude these charges when assessing the appropriate level of various operating expenses and resource allocations when budgeting, planning, and forecasting future periods. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well.
•Income tax effects on the difference between GAAP and non-GAAP costs and expenses. The income tax effects that are excluded relate to the imputed tax impact on the difference between GAAP and non-GAAP costs and expenses due to stock-based compensation and purchased intangibles for GAAP and non-GAAP measures.
Limitations on the Use of Non-GAAP Financial Measures
There are limitations to using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures provided by other companies.
The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which items are adjusted to calculate our non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in our public disclosures.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure to evaluate our business, and to view our non-GAAP financial measures in conjunction with the most directly comparable GAAP financial measures.
The following table reconciles the specific items excluded from GAAP metrics in the calculation of non-GAAP metrics for the periods shown below:
Three months ended April 30,
2022 2021
(in thousands)
Net cash provided by operating activities on a GAAP basis 481,027  478,385 
Excess tax benefits from employee stock plans (4,907) (17,451)
Net cash provided by operating activities on a non-GAAP basis $ 476,120  $ 460,934 
Operating income on a GAAP basis $ 127,672  $ 128,446 
Stock-based compensation expense 67,134  48,489 
Amortization of purchased intangibles 4,746  4,429 
Operating income on a non-GAAP basis $ 199,552  $ 181,364 
Net income on a GAAP basis $ 100,115  $ 115,567 
Stock-based compensation expense 67,134  48,489 
Amortization of purchased intangibles 4,746  4,429 
Income tax effect on non-GAAP adjustments(1)
 (12,209) (21,602)
Net income on a non-GAAP basis $ 159,786  $ 146,883 
Diluted net income per share on a GAAP basis $ 0.62  $ 0.71 
Stock-based compensation expense 0.41  0.30 
Amortization of purchased intangibles 0.03  0.03 
Income tax effect on non-GAAP adjustments(1)
 (0.07) (0.13)
Diluted net income per share on a non-GAAP basis $ 0.99  $ 0.91 
(1) For the three months ended April 30, 2022 and 2021, we used an estimated annual effective non-GAAP tax rate of 21%.
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Liquidity and Capital Resources
Three months ended April 30,
2022 2021
(in thousands)
Net cash provided by operating activities $ 481,027  $ 478,385 
Net cash used in investing activities (378,487) (37,949)
Net cash provided by financing activities 1,292  16,805 
Effect of exchange rate changes on cash and cash equivalents (1,874) (2,765)
Net change in cash and cash equivalents $ 101,958  $ 454,476 
Our principal sources of liquidity continue to be comprised of our cash, cash equivalents, and short-term investments, as well as cash flows generated from our operations. As of April 30, 2022, our cash, cash equivalents, and short-term investments totaled $2.8 billion, of which $68 million represented cash and cash equivalents held outside of the United States.
Our primary use of cash is payment of our operating costs, which consist primarily of employee-related expenses, such as compensation and benefits, investments in our information technology infrastructure, and general operating expenses for marketing, facilities, and overhead costs. Long-term cash requirements for items other than normal operating expenses could include the following: the acquisition of businesses, software products, or technologies complementary to our business; and capital expenditures, including the purchase and implementation of internal-use software applications.
Our non-U.S. cash and cash equivalents have been earmarked for indefinite reinvestment in our operations outside the United States, except in certain designated jurisdictions that have an immaterial impact to our financial statements. As of April 30, 2022, we have not recorded any taxes, such as withholding taxes, associated with the foreign earnings that are indefinitely reinvested outside of the United States. We believe our U.S. sources of cash and liquidity are sufficient to meet our business needs in the United States and do not expect that we will need to repatriate additional funds we have designated as indefinitely reinvested outside the United States. Under currently enacted tax laws, should our plans change and we were to choose to repatriate some or all of the funds we have designated as indefinitely reinvested outside the United States, such amounts may be subject to certain jurisdictional taxes.
We have financed our operations primarily through cash generated from operations. We believe our existing cash, cash equivalents, and short-term investments generated from operations will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, subscription renewal activity, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the ongoing investments in technology infrastructure, the introduction of new and enhanced solutions, and the continuing market acceptance of our solutions. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, and intellectual property rights. We may be required to seek additional equity or debt financing for those arrangements or for other reasons. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely affected.
Cash Flows from Operating Activities
Our largest source of operating cash inflows is cash collections from our customers for subscription services. We also generate significant cash flows from our professional services arrangements. The first quarter of our fiscal year is seasonally the strongest quarter for cash inflows due to the timing of our annual subscription billings and related collections. Our primary uses of cash from operating activities are for employee-related expenditures, expenses related to our computing infrastructure (including salesforce.com and Amazon Web Services), building infrastructure costs (including leases for office space), fees for third-party legal counsel and accounting services, and data acquisition costs. Note that our net income reflects the impact of excess tax benefits related to equity compensation.
Net cash provided by operating activities was $481 million for the three months ended April 30, 2022 compared to $478 million provided by operating activities for the three months ended April 30, 2021. The $3 million increase was
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 Veeva Systems Inc. | Form 10-Q
primarily due to increased sales and the related cash collections. These increases were partially offset by larger operating expenses due to increases in headcount.
The cash flows from operating activities for the three months ended April 30, 2022 represent a significant portion of the cash flows from operating activities that we expect during our fiscal year ending January 31, 2023. As a result, we expect cash flows from operating activities to be substantially less in future quarterly periods during this fiscal year.
Our future cash flows from operating activities may be materially impacted as a result of the Tax Cuts and Jobs Act of 2017. The Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years. Although Congress is considering legislation that would defer the requirement to later years, we have no assurance that the provision will be so deferred, repealed or otherwise modified. If the requirement is not modified, it will materially reduce our cash flows beginning in the second quarter of fiscal 2023.
Cash Flows from Investing Activities
The cash flows from investing activities primarily relate to cash used for the purchase of marketable securities, net of maturities. We also use cash to invest in capital assets to support our growth.
Net cash used in investing activities was $378 million for the three months ended April 30, 2022 compared to $38 million used in investment activities for the three months ended April 30, 2021. The $341 million increase in cash used in investing activities was mainly due to the net increase in purchases of investments.
Cash Flows from Financing Activities
The cash flows from financing activities relate primarily to stock option exercises and taxes paid on behalf of employees related to the net share settlement of RSUs. In June 2021, we began funding withholding taxes due on employee RSU awards by net share settlement, rather than our previous approach of requiring employees to either sell shares of our Class A common stock or pay the withholding taxes in cash to cover taxes due upon vesting of such awards.
Net cash provided by financing activities was $1 million for the three months ended April 30, 2022 compared to $17 million provided by financing activities for the three months ended April 30, 2021.The $16 million decrease is primarily related to $15 million of cash used to pay employee taxes related to the net share settlement of RSUs.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP). In the preparation of these condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs, and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies and estimates during the three months ended April 30, 2022 as compared to the those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022.
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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Foreign currency exchange risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, Japanese Yen, Canadian Dollar, British Pound Sterling, Hungarian Forint, and Chinese Yuan, and may be adversely affected in the future due to changes in foreign currency exchange rates. For example, changes in exchange rates negatively affected our revenues as expressed in U.S. dollars for the quarter ended April 30, 2022, and we expect our revenues as expressed in U.S. dollars to be negatively affected by changes in exchange rates for our fiscal year ending January 31, 2023 as well.
We have experienced and will continue to experience foreign currency fluctuations in our net income primarily due to the periodic re-measurement of monetary account balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. We engage in the hedging of our foreign currency transactions as described in note 7 of the notes to our condensed consolidated financial statements and may, in the future, hedge selected significant transactions or net monetary exposure positions denominated in currencies other than the U.S. dollar. Realized and unrealized foreign currency gains, primarily resulting from foreign currency hedges offset by the re-measurement of monetary account balances, were immaterial for the three months ended April 30, 2022 and $2 million for the three months ended April 30, 2021.
Interest rate sensitivity
We had cash, cash equivalents and short-term investments totaling $2.8 billion as of April 30, 2022. This amount was held primarily in demand deposit accounts, money market funds, U.S. treasury securities and agency obligations, corporate notes and bonds, asset-backed securities, commercial paper, foreign government bonds, and agency mortgage-backed securities. The cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes.
Our cash equivalents and our portfolio of marketable securities are subject to market risk due to changes in interest rates, which could affect our results of operations. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our marketable securities as “available for sale,” no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary. Our fixed-income portfolio is subject to interest rate risk.
An immediate increase of 100-basis points in interest rates would have resulted in a $15 million market value reduction in our investment portfolio as of April 30, 2022. An immediate decrease of 100-basis points in interest rates would have increased the market value by $15 million as of April 30, 2022. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur. Fluctuations in the value of our investment securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive income, and are realized only if we sell the underlying securities.
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ITEM 4.    CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of April 30, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities