What started as a simple solution to manage the sales force of big pharma companies has transformed into a cloud juggernaut. At least, that's the picture that emerges every quarter when Veeva Systems (VEEV 1.56%) reports earnings.

This year's first quarter was no exception, with the company blowing past expectations and continuing to show strong growth in its now-core Vault offering.

Two scientists working in their lab.

Image source: Getty Images.

There was a lot of positive news to digest from the earnings, announced this week, but one underappreciated figure was probably the most important for long-term investors to understand.

Veeva earnings: The raw numbers

Before we get to that key figure, however, it's important to digest the headline numbers first.


Q1 2016

Q1 2017

Year-Over-Year Growth


$120 million

$158 million










Data source: Veeva Investor Relations.

How was the company able to grow earnings by so much more than revenue? It is simply starting to benefit from the positive word of mouth and advantages of scale that come with offering an established software-as-a-service (SaaS) product.

Spending on research and development (28% growth), sales and marketing (12%), and general and administrative (12%) costs all came in well below the revenue jump.

But perhaps the most important tidbit of information was this: Vault customers with more than one product were up 70% year over year.

Vault is a product that helps drug companies manage all of the data involved with bringing a potential product to market -- including tedious FDA approvals. But there are several sub-products within Vault, including focuses on quality systems, clinical operations, and regulatory hurdles.

The fact that so many more drug companies are signing up for multiple Vault products means that the moat surrounding Veeva's business continues to widen. With each additional product that customers sign up for, they become more loath to switch to a potential rival. That means the recurring revenue that Veeva is capturing -- in the form of cloud-based subscriptions -- is very safe and likely to continue growing.

What management had to say

 Reflecting the optimism surrounding Vault, founder and CEO Peter Gassner said:

The opportunity for Vault continues to increase at a remarkable pace. There are now 14 Vault products... Based on our track record of customer success, more and more customers are looking to Vault as a potential enterprise standard across a range of areas. 

Equally interesting, the company announced last year that it would be offering a tailored product, Vault QualityOne, to businesses outside of the life sciences industry. According to Gassner, that offering is gaining traction:

I'm pleased to share that our momentum continued with early adopter customers... We had an important new win with a top 5 consumer packaged goods company."

If Veeva's solutions really do catch on in heavily regulated industries like consumer packaged goods, chemicals, and manufacturing, there's no telling just how big the total addressable market for Vault could be.

Looking ahead

The company finished by offering up a positive outlook for the quarter and year ahead. The midpoint of revenue expectations for the second quarter shows a 67% year-over-year jump in sales, with a 54% year-over-year jump in non-GAAP earnings. More importantly, management bumped up its expectations for the full fiscal year as well.


Old Forecast (Midpoint)

New Forecast (Midpoint)



$657.5 million

$667 million

$9.5 million





Veeva's fiscal 2018 financial outlook. Data source: Veeva Investor Relations.

Given the company's track record for setting reasonable expectations and then blowing past them, I wouldn't be surprised to see this number continue to trend upward as the year goes along.