Veeva: A 'Very Alive' Web-Based Application Vendor

| About: Veeva Systems (VEEV)

Summary

Veeva has developed a leading market position in sales of CRM solutions to the life sciences space.

The company's agreement with Salesforce which makes Veeva its preferred partner for CRM solutions in the life cycle space has been a huge success for both companies.

The company has dramatically broadened its product line through the introduction of a set of content management solutions based on its Vault platform.

Vault products which should be 30% of revenues this year are growing at 10% rates.

The company has started to invest prodigiously in order to enhance new product delivery and to broaden its sales force to tackle the opportunities of a larger product footprint.

Just how alive has Veeva become

OK, I had to look this one up. My recollection of Latin words is adequate for the most part for the purposes at hand, but this one stumped me. Veeva actually means "alive" in Latin although one could also use Viva. I assume that when the founders of this rapidly growing vendor of web-based applications were looking for a name, this seemed to be something catchy as well as something appropriate.

But the subject at hand is Veeva and the outlook for its shares rather than the origin of its name. At the moment, Veeva (NYSE:VEEV) is about as alive as companies get to be. I suppose if I had to anthropomorphize the company, I would say that it ought to be best compared to the accomplishments of Lebron James and what he did to Stephen Curry in Game 7. (Cavaliers vs. Golden State). Really! But pick your own rockstar and Veeva is something like that.

Veeva derives 29% of its revenues from its European region and an additional 16% of sales from its Asia/Pacific region. Are there deals in the Veeva forecast that won't close because of Brexit? I imagine that there will probably be deals that do not close in the next 5 weeks (till the end of this company's fiscal quarter on 7/31) because of Brexit. How many and of what size are really impossible to determine. And it should be remembered that Veeva's customers are in the life sciences space which is thought to be non-cyclical or at the least not totally responsive to Black Swans like Brexit. People are still going to need clinical tests and those tests need to be correlated and analyzed regardless of British trade practices or adherence to the Schengen Treaty. Of equal significance, this is a subscription revenue company. The effect will be more on bookings than on revenue. The company still mainly sells tools to help pharma companies manage their sales force effectively and optimize the sales process. Brexit or not, people will still get sick and Pharma companies will still have to manage large sales forces and Veeva has a solution that does that. I suppose that if I were a bond trader I might be quaking. Writing about Veeva in the context of the Brexit vote - well somehow the British exit from the EU doesn't seem seminal.

The investment issue, or so it seems to me is entirely a function of how Veeva expands its product footprint and broadens its TAM. The company is already the leader in CRM for the life science space and it clearly needs new worlds to conquer.

That is almost inevitably the case for all young, fast growing software companies. In this case, the founders of this company have far deeper domain expertise in their target industry and the kind of experience that gives them insight regarding how IT can solve problems in life sciences space. Will VEEV solve what might become its growth problem through its suite of new products based on its Vault platform? My guess is that it will, my guess is that growth rates will not continue to decline and my guess is that this will ensure that Veeva can sustain its valuations and produce positive Alpha for investors.

Veeva, at least to me, is one of those exceptions that prove the rule that it is just about impossible to achieve GAAP profitability and hyper-growth simultaneously. In the company's 2016 fiscal year (ended 1/31/16), the company's GAAP operating margins of 19% was down a bit from the 22% GAAP operating margins in the prior fiscal year, but certainly good enough. GAAP operating margins did fall to 15% in the Q1 of the current fiscal year from 23% last year. The company has started to ramp both R&D and S&M expenditures as it pivots to its new world. I imagine that GAAP margins will be under pressure but I think that there is runway under the circumstances for non-GAAP margins to rise marginally.

Veeva's significant level of profitability at its current scale has likely had much to do with its ability to minimize sales and marketing spend when compared to other SaaS companies. On a GAAP basis, S&M spend was 23% of revenues last quarter compared to spend ratios of well over 50% on S&M for many other comparable vendors with SaaS revenue models. S&M was actually only 17% of revenues in the year-earlier period.

The increase in the spend ratio had something to do with the Zinc Ahead acquisition as I will detail later. On a non-GAAP basis, S&M spend was just 22% of revenues last quarter, still up visibly over Q1 in fiscal 2016. I believe that a significant component of the cost leverage that Veeva has achieved in this metric is a function of the sales it makes through and with Salesforce (NYSE:CRM) as part of the OEM arrangement between the two companies. The relationship with CRM and the fact that this company is the preferred supplier of CRM solutions in the health care space for Salesforce has given the company enormous credibility. That credibility has translated into Veeva being able to close very large deals with gold-standard health sciences companies at a stage in Veeva's development where those kind of relationships would otherwise have been unlikely.

I imagine that as Vault becomes an increasing contributor to revenues, the sales and marketing expense ratio will tend to float up a bit as the partnership with Salesforce doesn't cover that product. On the other hand, gross margins are likely to rise as Veeva will not have to pay CRM for the costs associated with using its platform.

The company increased its operating cash flow from $18 million in Q1 2015 to $41 million in Q1 fiscal 2016. And then in this year's Q1, operating cash flow ballooned - more than doubling to $109 million, which was 91.5% of Q1 revenues. Most of the cash flow was driven by a very significant fall in A/R balances coupled with a significant increase in deferred revenues. I will write about that drop in A/Rs later in the article, but suffice to say that things are even livelier at Veeva than is apparent from just the reported number. For fiscal year 2016 as a whole, operating cash flow increased by 19% and the operating cash flow margin was 19.6%. I will discuss the why's of Veeva's performance over the last year below - but I think it is safe to say that the company is very much alive. Depending on one's opinion, Brexit is either a tragedy, or a non-event, or something in between. I think Brexit is unlikely to have a significant impact on the outlook for Veeva except conceivably in the level of bookings the company reports for Q2 - although the CFO had already issued very cautious guidance for that metric entirely unrelated to any Brexit impact.

The company's shares have been strong performers thus far this year and they are not particularly cheap if one does a traditional valuation model. The company's shares are up 21% since the start of the year. More recently, the shares increased by 15% in the wake of the company's Q1 earning release on May 26, 2016. The shares appreciated by 8% in the few days after the prior earnings release on March 1st. The shares are sitting just a bit below their all-time high reached on the day of the company's IPO on October 21, 2013.

Comparable share price moves for the IGV software index have been 1% YTD, 3% since May 26th and negative 1% in the week after March 1st. For what it is worth, the IGV is actually up 34% since October 21, 2013 and stands now within 4% of its all-time high set just before the Brexit vote.

As I have written in the pas,t no one likes to recommend shares that are essentially at an all-time high within a group that is at an all-time high. The shares did decline by 2% on Friday in the wake of the Brexit vote, but that was far less than the 5% decline experienced by the IGV. Readers will have a wide range of opinions regarding the course of the economy, the stock market and the market for tech stocks in the wake of the Brexit vote. I have no intention of getting into that debate. There have been far more than enough articles regarding Brexit on this site and elsewhere for me to have any chance at value-add in that discussion.

VEEV shares are obviously going to be influenced by trends in the broader market. They had a deep dive at the start of the year prior to the 2/9 reversal. As I shall discuss below, my belief is that the company is reasonably likely to significantly beat what I think to be very conservative guidance for fiscal Q2 which will end 7/31. Should Q2 prove to be a beat, management will likely have no choice but to raise expectations, since it did so only grudgingly in the wake of Q1 results. So there will be a catalyst, I expect in the form of earnings in mid-August. VEEV, in my mind, is a long-term holding that should produce positive alpha over a span of years, but in the shorter term, investors might wish to scale into a position prior to the next earnings report.

Veeva: the poster child of Salesforce

Veeva is not one of the better-known software companies. It is only followed by 11 analysts at this point despite its growth and relative size. It has one of the more interesting relationships in today's software world with Salesforce.com. That it has been able to retain that relationship despite notionally being in the same market says something both for the technology of the two quasi-competitors as well as the maturity of both management teams who have wisely forborne attempting to cut each other up in what could have been a very competitive market.

Veeva has been the subject of a series of articles by SA contributor Vince Martin that have chronicled his evolution from having a bearish bias to making a bullish case for the company's shares. I think it is always interesting to see how a fellow contributor as Vince ultimately reaches the same conclusion. My goal in this article is to chronicle the rise of Veeva and to explore its current business outlook. At the moment, as outlined above, this is one of, if not the most profitable of Cloud software companies. That doesn't necessarily make it cheap on some of the more traditional valuation metrics. The company made about $12 million on a GAAP basis last year, which was down quite a bit from the GAAP profits of the prior year. There is a special circumstance that brought about the decline that I will outline below.

The company has a current enterprise value of about $4.3 billion. Current year sales are estimated by the consensus of 10 analysts to reach about $520 million. So that is an EV/S of more than 8.2X. Its P/E on the current consensus forecast for this year is about 62X - on a non-GAAP earnings estimate. This company has a significant history of beating prior consensus forecasts substantially. Indeed, the last 4 quarters beat the prior consensus forecast by amounts ranging from 9% to 36%. My guess is that the trend, in terms of beating estimates, will continue unabated for some distance into the future.

As mentioned above, this company had an extraordinary Q1 in terms of the relationship of operating cash flow to revenue. Given that so much of the cash flow was a product of declining receivables, it is basically impossible for the Q1 result to be anything other than an outlier. The company's CapEx has been and remains negligible.

The company actually generated an operating cash flow of $147 million for the 12 months that ended on 4/30/16. Taking a conservative approach to free cash generation for the balance of the year, perhaps suggests free cash flow will be flat with that $147 million figure. That is a free cash flow yield of 3.4%. Despite GAAP profitability, there is nothing particularly cheap about Veeva shares. It is either a hyper growth stock whose growth will continue at strong levels into the future or nothing. There isn't very much in between.

Veeva is a relatively new creation and has an absolutely staggering first decade (well almost - that happens next year). The company was founded in 2007 by Peter Gassner and Matt Wallach. Currently, Mr. Gassner as CEO is responsible for strategic directions while Mat Wallach as President/COO is responsible for worldwide field operations.

Peter Gassner is a veteran of Salesforce where he was Senior VP of Technology. Prior to CRM, Peter was with PeopleSoft, one of the pioneers in application software of its era where he led a large team that developed a pioneering application development program called PeopleTools. He started at IBM (NYSE:IBM) where he was a developer in the database field.

Matt Wallach held various executive roles at small healthcare technology companies. Prior to that, Matt was the GM of the Pharma & Biotech division of Siebel Systems, the earliest of the major CRM vendors where he was general manager.

So, the founders of Veeva actually have had loads of background in the very specific space in which they founded Veeva and in which they still operate. They barely had to move to establish their business. The company has remained focused on the life science industry since it started. It has always used a cloud native architecture (multi-threaded) on which to build its products and it started by building its products on the Salesforce platform. The company initially sold CRM software that was tailored for the specific requirements of the health sciences vertical including Pharma & Biotech but also including Consumer Health and Animal Health.

The Veeva CRM solution was built on the Salesforce Force.Com platform. For Veeva, the partnership has been a way of leveraging its R&D investment while deriving some significant credibility advantages and also being able to partner with particular accounts in specific situations. There would be little way, I think that Veeva would have been able to replicate the scalability, flexibility and collaboration capabilities that are inherent in the Salesforce platform, at least in the shorter term. For Salesforce, the benefits are revenue and the credibility of that company's Force.com platform as a vehicle for other potential partners. Recently, the Force.Com platform, or what Salesforce calls its App Cloud. The App Cloud, at least in percentage growth terms, is the fastest growing of the 5 clouds that CRM offers.

The agreement between Salesforce and Veeva that is currently in effect runs through 2025. Minimum commitments under the agreement are $50 million a year. There are two 5-year periods and Veeva is required to "true-up" and to pay Salesforce the difference between the minimum commitment and the amount of billings that CRM has received. The agreement makes Veeva the preferred provider of healthcare CRM solutions for Salesforce and essentially is one of exclusivity in the life sciences space for both parties. My own checks suggest that the partnership has been amicable with few disputes and hardly any friction between the two vendors according industry commentary.

Some additional legs under the stool:

A couple of years ago, Veeva introduced what is essentially its own development platform it calls "Vault." The Vault is more or less a content management system that has been purpose built for the life sciences industry. Veeva calls its Vault a "Single source of Truth" which is a catch phrase but actually explains part of the functionality that is being offered. At this point, the vault has a variety of apps that are built on it and that address various components of the health science space and various requirements in clinical evaluations. The big advantages Vault has over other content management systems such as those offered by OpenText (NASDAQ:OTEX) or by IBM or by EMC/Documentum (NYSE:EMC) and many others competitors is that it was built specifically for the life science industry, so users do not require heavy customization and that it is a cloud native application which is a much easier architecture to sell in today's world.

The products that have been and will be built on the Vault are of huge importance for the future growth of Veeva. Veeva's percentage growth has declined over the years, partially because of the law of large numbers. But beyond that, the overall market for Life Science CRM is finite and penetration rates have significantly grown over the years. That being said, Veeva CRM still contributed about 70% of this company's revenues in the last reported quarter.

But going forward, it is the newer solutions built on the vault that are going to have to carry much of the growth load in coming years as the percentage growth of Veeva CRM inexorably slows. Current guidance is for Veeva's CRM business to achieve 15% growth during fiscal '17 while Vault products achieve 100% + growth. It would appear that in Q1, both segments outperformed their targets in Q1. The math of the situation strongly suggests that it will be the Vault platform and the applications built on top of it, that will become the main growth drivers for Veeva over the next few years.

Right now, the consensus forecast for Veeva revenue growth has it slowing to 27% for the current fiscal year and falling further to growth of 21% in fiscal '18. One wonders how serious that later number may be. I really wonder that people would want to pay current valuations for the shares of a company that might only grow 21% next year or that has a P/E of 47X based on fiscal '18 earnings. I really do not believe that investors have it in their minds that they are paying that level of valuation for that level of growth.

Management is quite aware of the issue of slowing growth. In its 10k filing this year, it has a caption, "We expect the future growth rate of our revenues to decline. In our fiscal years ended January 31 2014, 2015, and 2016 our total revenues grew by 62% 49% and 31% respectively as compared to total revenues from the prior fiscal years. We expect the growth rates of our revenues to decline in future periods which may adversely impact the value of our Class A common stock." Boiler plate, a "safe harbor" type statement or a real expectation? That is really the point on which appropriate valuations hinge. I think it is fair to say that the track record of this company suggests a reasonably consistent trend in beating company guidance. All of the last 4 quarters beat prior earnings expectations; the last two quarters beat the prior consensus earnings expectations by 36%. I think it reasonable to believe that this company will continue to beat the current published consensus of the 11 analysts who cover the company.

The fact is that at this point, Veeva has achieved some level of penetration within just about all of the top 20 customers for its CRM solution in the Life Sciences market. Most surveys show Veeva squarely as the leader in CRM for life sciences. It is hard to go much further than #1 in a space. There are still many replacement deals available for Veeva in the CRM healthcare space and in Q1 the company concluded a 9 year sales process against IMS (NYSE:IMS). IMS is a vendor who has acquired many companies who had developed early life science CRM products.

But still, given the level of penetration this company already has in life science CRM, the market for both Vault and what is called multi-channel CRM will be crucial for the ability of the company to achieve the rate of growth investors are clearly anticipating. I think that there are a few straws that might suggest why it is quite likely that Veeva will be able to execute its pivot successfully and obtain the growth it needs outside of the CRM space.

I think that the first point to note in taking the point of view that % revenue growth is not likely to continue to decline is the massive increase in R&D that has been seen over the last couple of years. In fact, the cost of GAAP R&D increased from $26 million in fiscal 2014 to $66 million last year or 153%. R&D as a percentage of revenues rose from about 12% to 16% over that time frame. Last year, R&D headcount rose 68% and it was up by 41% in the prior year. I think that management is more than aware that it needs to dramatically broaden its product footprint in order to grow and has been investing as heavily as is prudent to bring new products to market. It would, I believe, be more than a bit unusual for a company like this to decide to grow R&D by more than 2.5X in 2 years without some reasonable expectation that the investment would lead to product introductions which will be needed to sustain revenue growth.

Fiscal Q1-17 showed very little evidence, if any, of any kind of growth slowdown. Subscription revenue growth for Q1 fiscal 17 was 39% year over year and total revenue growth was 33% in the same time period. In the year-earlier period, subscription revenue growth was 42% and total growth was 35%. And longer-term guidance has also seen no evidence of any growth slowdown. During the course of the Q1 conference call, CEO Peter Gassner reiterated a revenue run rate target during 2020 of $1 billion. With fiscal '17 revenues targeted to be $518 million at the mid-point, the CAGR to 2020 would have to be about 24% to reach that goal. On the call, Veeva's CFO, Timothy Cabral discussed the 62% growth in billings growth in the quarter. Billings overall, came in at $143 million for the quarter compared to guidance of $125 million. Not much in the way of slowdown to be seen there.

Mr. Cabral forecast $110 million of bookings in the current quarter which would be growth of 14%. In an exercise of masterly understatement, the 62% growth in Q1 bookings has provided management with "increased confidence that we can achieve the top end of our previously guided range of 23%-24% billings growth for the full year."

Company CEO Peter Gassner, discussed in very broad terms the potential for selling the Vault technology outside of the Life Sciences space. His strategy is to take the core applications that are working for Vault and develop solutions for regulated industries in areas that are "adjacent" to Life Sciences. The Quality Assurance set of functionality is perhaps the solution that could be closest to commercialization. I have no idea what the TAM might be for the kinds of things that Vault can do outside of life sciences. The CEO simply called it "a big potential market for Veeva." Whatever it turns out to be, the revenues from outside the life sciences space are supposed to be on top of the $1 billion aspirational goal for 2020.

Just how strong are the new legs?

I think that the record basically speaks for itself. To the extent that it doesn't, my guess is that the company has developed solutions in a space that it knows very well, selling to many of the same customers who have bought the company's CRM products. The company offers cloud native architecture which is more and more appealing to users; most of its competitors offer hybrid cloud solutions which are currently popular but which do not provide all of the potential benefits of the cloud.

The deal to buy Zinc Ahead according to Gartner has made Veeva the leader in what it describes as the commercial content compliance market. Zinc had been Veeva's largest competitor and its Maps product was a global standard for many life sciences companies. Veeva now has the advantage of having Zinc's content compliance offering to marry with its cloud technology - one of those marriages seemingly made in commercial heaven.

Just to mention a couple of the current Vault offering, Clinical Trial Management Systems (CTMS) is a significant marketplace in the life sciences world. Another significant product area is something called e-TMF which stands for electronic trial master file. The FDA nowadays requires a very strict audit trail regarding the data used to support drug discovery applications. E-TMF is considered to be the gold standard in this space. Believe it or not, there are many users who have not yet adopted a paperless trial management system and many others who have yet to purchase a purpose-built, best of breed product.

QMS (Quality Management Systems) may be the largest specific product on the Vault platform. It is, as mentioned above, the product that is most likely to be used by Veeva as its pioneering offering outside of the life sciences space. Again, surprisingly, lots of the market for QMS solutions comes from users who still use paper products of various kinds.

Veeva enjoyed significant success with what it calls its' Vault Registration and Submission Archive in Q1. The company thought that securing 11 customers for the product in its first quarter of sale was sufficiently noteworthy to be mentioned in both the press release and on the conference call. Without the context, it is hard for this writer to measure what has been achieved, but I will just take the company at its word on this one.

While reviews mention many competitors with content management solutions, it is relatively apparent that Veeva has customized solutions to make its highly specific solutions far easier to use and far more useful for the specific life sciences market that it really addresses. For example, product analysts list Microsoft (NASDAQ:MSFT) SharePoint as a competitor, but it has never been customized for the life sciences market. There are users who love IBM File Net or docuShare from Xerox, but none of these are really customized for the life science space. Oracle's (NYSE:ORCL) WebCenter has a relatively low rating from users. But what comes through is not whose has or doesn't have the best content management solution, but amongst the top tier content management players, Veeva has apparently been the single company laser focused on life sciences.

To a greater or lesser extent, it appears that the suite of Veeva Vault solutions is pushing on an open door The company has the only real cloud technology in its market (I mean multi-threading), and while there are many competitors in content management, the specific ways that content management is used by life sciences companies seem to require a specialist vendor such as Veeva, and at this point, there do not appear to be other significant specialist vendors, particularly in the wake of Veeva's purchase of Zinc Ahead. (Probably IMS would disagree with that statement, but I am not going to detain readers with some lengthy competitive analysis of IMS vs. Veeva.)

Veeva Vault, at this juncture would appear to have a very strong moat in terms both of technology and in terms of Veeva's current customer relationships. While the TAM of these new markets isn't necessarily huge, given the size of this company and its execution capabilities, I think the opportunity will be large enough to sustain growth at levels at least consistent with, if not a bit better than investor expectations.

The expansion of Veeva's product suite beyond the bounds of the life science space is obviously impossible to handicap absent a product, or any degree of specificity as to what is going to be sold and who the buyers might be or even when a product introduction might take place. But at this juncture, when the entire venture is all about lagniappe, it really doesn't matter all that much. The company CEO said on the conference call that Veeva has a "small go to market team," and he also said that launching into new spaces would not impact current or expected margins. This company has dramatically expanded its R&D spend in its last two years and that spending is continuing. Development spending rose by more than 70% this past quarter, and the spend ratio for R&D ticked up from about 15% to 18%. I think that entering many new markets will likely have some impact, at least on reported GAAP profitability.

One issue to discuss - or at least mention - is that Veeva's Vault products are primarily sold to the R&D function of life sciences companies. Given that life science companies are bearing political attacks for their pricing, their profitability and so forth, it is possible that over time they may reduce their R&D spending. In response to a conference call question related to the subject, management suggested that the pace of new drug discovery is accelerating and that the macro drivers of demand for Veeva's Vault products are actually improving. The CEO talked about a potential discovery that would lead to an injection to cure blindness. At this juncture, this is more of a risk factor to mention rather than something that might change my recommendation on these shares.

Overall, Veeva's Vault exited the prior year with a revenue run rate of $100 million and total Vault revenues grew by 100% last year. In Q1, it appears that Vault revenues reached $36 million. That is a run rate of $144 million. The growth of Vault in the short term is likely to continue because of both additional products and because of strong sales momentum. The additional legs on the stool look to be in a very strong position as far as one can see.

Can Veeva continue to be that rarest of species - a pure cloud vendor with decent levels of FAP profitability?

Veeva does not forecast GAAP profitability or forecast stock-based comp. As mentioned earlier in this article, stock-based comp increased by 69% year on year in Q1 although it remains at less than 7% of revenues. The increase in stock-based comp has been driven in part by the purchase accounting for the Zinc Ahead acquisition. Part of that transaction involved paying the founders $10 million in deferred comp which is now moving through the GAAP income statement. The economics of the deal were such that the deferred compensation would be more reasonably be accounted for as part of the purchase price. That being said, the Zinc transaction had only a minimal impact in terms of stock-based comp in the recently reported Q1 - the exact amount of the extra cost was 1.2% of revenues.

One measure of costs is hiring. In Q1, the company added 68 employees on a basis of 1474. That is actually quite modest. The hiring was said to be at planned levels, but again, self-evidently, the growth in OpEx is greater than the percentage growth in employment and so far as it goes, noticeably greater than the growth of revenues. While R&D spending showed the greatest percentage growth, S&M spending rose significantly to 22% of total revenues up from 18%. Non-GAAP measures are obviously showing a lower percentage level of spending but the trend is there.

Management spoke on the call of improving non-GAAP margins to 26% by year end. Given the sequential revenue expansion called for in the forecast, that would require some pretty significant deceleration in the growth of OpEx.

My own guess is that as less business as a proportion of revenue comes through the joint Salesforce/Veeva product offerings, gross margins will rise significantly. This will allow the company to fund increases in R&D spending and S&M spending to a degree. Given the current employment situation in the Bay area and just the cost of living in Pleasanton, CA which has enjoyed some remarkable house price appreciation, it is almost inevitable that stock-based comp will rise as a proportion of total spend. Developers and even sales people will not get hired without healthy slugs of stock-based incentives. I think that sets the stage for increasing non-GAAP margins at a slow pace while seeing GAAP margins decline from current levels.

At some point, this company is going to have to decide whether investing in growth, regardless of which bucket in which it is accounted, is more valuable to stakeholders than would be the maintenance of GAAP margins. My guess, just based on the entrepreneurial nature of the two leaders of this company and a recent interview cited above, is that choices, where there are choices, the choices will tend to come down on the side of growth. In my view, the outlook for margins overall is decent, good enough etc. But pivoting to obtain revenue growth from more new product introductions and from moving outside the life science space is not without its costs. In terms of how the stock might work, my outlook is that the trend of margins will be good enough.

Summing Up!

  1. Veeva has become the leading vendor of CRM in the life sciences space.
  2. The company is significantly expanding its footprint beyond CRM, and by the end of this year, something close to 40% of its subscription revenues will be coming from new spaces.
  3. The acquisition of Zinc Ahead provides this company with a market leading position according to observers in the life science content management space.
  4. Most of the other vendors in the space are not focused exclusively on life science and do not have the most modern cloud architectures.
  5. Company management is lead by two executives with long and successful backgrounds in IT for the life science space.
  6. The company's partnership with Salesforce has been and will remain a significant component in this company's success, although an increasing proportion of revenues will come from solutions outside of the ambit of the partnership.
  7. The company indicated on this last conference call that it will develop solutions using a base of its current technology to enter adjacent spaces outside of life sciences.
  8. Overall, I think the company's initiatives in extending Vault within life sciences and in ultimately taking the Vault technology beyond life sciences is likely to maintain growth rates above 25% for several years and that should be adequate to support upside for the shares.

No one is likely to describe the shares of Veeva as value in any traditional sense, now or in the foreseeable future. But they represent a good bet on this management building one of the better IT life science franchises. I think that the company is well positioned and has the execution capabilities to achieve its aspirational ambitions and to produce positive alpha for investors.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in VEEV over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.