Peter Gassner is clearly on to something. The former executive at salesforce.com left his well-paying job almost a decade ago to found pharmaceutical cloud specialist Veeva Systems (NYSE:VEEV) and become its CEO. Over the past year, the relatively young company has wowed Wall Street, with shares trading almost 70% higher.
While we here at The Motley Fool won't live and die by a single quarter's earnings, it's worth wondering if Veeva can continue its hot streak of far exceeding expectations. Officially, management expects to report revenue of roughly $126 million with non-GAAP (generally accepted accounting principles) earnings of $0.13 per share on August 30.
While I'm not terribly concerned with meeting these two metrics, there are two other areas that I -- as a current shareholder -- will be watching closely.
Does CRM still have growth left in the tank?
Veeva's bread-and-butter business is providing CRM (or customer relationship management) solutions for drug companies. Over the past few years, this division produced three-quarters of revenue for Veeva. While management declines to break out customer counts and revenue on a quarterly basis, listening to the conference call can still provide enough color to give investors an idea for how this section of the business is faring.
In particular, I will be focusing on two factors. The first is whether or not the customer count continues to grow. All we know for sure is that there were 212 CRM customers at the end of the last fiscal year, and the company added a new Top 20 Pharma company to its client list during the first three months of 2016.
The second factor to listen for is whether or not the CRM add-ons like Approved Email, Events Management, and Align are gaining traction. These add-ons have become popular products to upsell to current customers of the base CRM solutions, and they provide higher margins for Veeva.
How far can Vault really go?
Last quarter, management reported a remarkable new opportunity that surprised many: Veeva's Vault platform was so popular that companies outside of the life-sciences field were starting to ask if they could sign on. Management said that it would be rolling out a small sales force to start exploring possibilities; investors should listen closely to see what progress has been made on this front. While I wouldn't expect any blockbuster deals yet, the potential to expand Vault into new fields remains enormous.
Beyond that expansion, it's of course important to monitor how Vault is doing within the pharmaceutical world. Of particular interest will be the reception of Vault's newest application: Vault QMS (quality management system). Last quarter, Gassner said that "the addition of QMS now doubles our opportunity in the quality space."
Keeping everything in perspective
Veeva is still very much in the growth phase. Investors need to be willing to forgo short-term profits for long-term dominance. Providing services like Veeva does to drug companies is incredibly important: It helps them not only to monitor their sales forces, but also to streamline everything necessary for the drug approval process. That means that switching costs are incredibly high -- as no company would want to go through the headache of transferring all that data and training a workforce on a new platform.
For the time being, total addressable market and steady gains in customer counts are the most important barometers for where this company is headed.