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3 Things to Watch in Veeva's First Earnings Report

Source: Veeva. 

For many industries, very basic cloud applications are all that's needed to meet clients' needs. At its core, this is the basic formula that (NYSE: CRM  ) has used to win over thousands of business customers and helped push its stock up a whopping 1,200% since going public in 2004.

But there are other industries where needs are much more specific, and require entirely unique cloud systems. Back when was just ramping up, one of its employees, Peter Gassner, realized this. He left the company to form Veeva Systems (NYSE: VEEV  ) , which aims to meet all of the cloud-based needs of life sciences and pharmaceutical companies.

Veeva has only been publicly traded for a little more than a month. In that time, it has experienced a lot of volatility -- going public at $20, bouncing 145% in just a few days, and now settling in at around $40 per share.

Tomorrow, the company will hold its first earnings release. Here are three keys investors should focus on.

1. The basics: Revenue and earnings expectations
Over the long run, analyst expectations don't mean too much. But Veeva only gets one chance to make a first impression, so a lot of investors are going to be focused on whether the company can match Wall Street's expectations.

In the simplest terms, here's what they are:

Expected Revenue (in millions)

Expected EPS



Source: E*Trade.

While those might seem like small numbers, it's worth noting that Veeva is rare in that it is a cloud-based IPO that is going public while being a profitable company. Rocket Fuel (NASDAQ: FUEL  ) , a data-driven cloud company that uses predictive artificial intelligence to purchase online ads for customers, just went public in September. The company-- also the brainchild of a former employee -- isn't expected to turn a profit until 2015.  Its stock also suffered a major setback in November when earnings came in way below expectations

But there's a lot of potential in unprofitable cloud companies like Rocket Fuel. Last month, Deloitte named Rocket Fuel the fastest growing company in North America.

And to keep things in perspective, revenues of $50.3 million for just one quarter would represent an equivalent to almost all of the revenue the company collected in the first half of 2012.

2. Where's it all coming from?
Another topic worth paying attention to is Veeva's diversity of customers. Take a look at how the company has grown its customer list over the past couple of years.

Source: SEC filings. 

Among those clients are 33 of the 50 largest global pharmaceutical companies.

In order for Veeva to keep up its torrid pace of client additions, don't look for the list to grow by too much. The last number represents the total number of clients on Aug. 31. The end of the quarter for the company occurred on Sept. 30, so there was only one month for the company to rise above 170.

That being said, if the total client list were to add at least seven more companies, it would represent solid progress. If one of those seven were to be a part of the 50 largest global pharmaceutical companies, investors would have a lot to cheer about.

3. The vault
Veeva got its start with its Veeva CRM platform. The product allowed sales representatives the ability to electronically track all sales, as well as present specialized, interactive demonstrations for health care officials.

While that system has been a success, it is Veeva Vault that investors should really keep their eyes on. As the company notes, "Clinical trials remain one of the most expensive and strategically important areas of any life sciences company." Vault is geared specifically toward helping drug companies speed up their data collection for drug approval. The entire process can take years, and there are hundreds of industry-specific, regulatory hurdles that need to be cleared.

Veeva is constantly investing in research and development to guarantee that Vault will make the entire process much more efficient for its customers. It currently collaborates  with Medidata Solutions, a software company that specializes  in developing programs to collect data in the most timely and approved manner.

Historically, the company's CRM product has accounted for 95%  of all revenues. Investors should hope for this percentage to come down over time -- not because CRM is doing poorly, but because the much more valuable Vault is growing faster than all of the other business areas.

Diversify and retire rich
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. Allocating a part of your portfolio to small and growing companies like Veeva is a good idea, but you have to make sure you balance it out with larger stalwarts.

In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. I own two of the stocks myself, and they make up 16% of my real-life holdings. Click here to grab your free copy today.

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Brian Stoffel

Brian Stoffel has been a Fool since 2008, and a financial journalist for the Motley Fool since 2010. He tends to follow the investment strategies of Fool-founder David Gardner, looking for the most innovative companies driving positive change for the future.

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