Screen Shot

Photo: Veeva Systems.

Veeva Systems (NYSE:VEEV), the cloud computing company that focuses specifically on life sciences and pharmaceutical customers, reported another solid quarter of earnings this week. Shareholders will likely have a lot to be thankful for come Thanksgiving as shares traded 7% higher in after-hours on Tuesday.

Here are the key takeaways.

Veeva Systems results: Just the numbers
I don't spend too much time worrying about whether or not a company matches analysts' estimates. But when management lays out a set of expectations, it's worth checking to see how closely the company performance followed those expectations.

Expected Revenue

Actual Revenue

Expected EPS

Actual EPS

$102.3 Million

$106.9 Million

$0.115

$0.12

Source: SEC filings. Expectations are the midpoint of range provided by management. EPS is non-GAAP.

These numbers represent fairly robust growth from the same quarter in 2014: revenue was up 28% while non-GAAP earnings increased 33%. It's also worth noting that revenue from subscription services -- the sticky, recurring revenue that cloud companies rely on -- grew 33% and accounted for just over three-quarters of all sales for the quarter.

What happened with Veeva this quarter?
Veeva's business can really be split into two categories at this point: CRM and Vault (a third segment, Veeva Network, is still in its infancy). CRM (customer relationship management) is the company's bread and butter, while Vault (a content management platform) represents a major growth opportunity. Here are some important notes on both divisions.

  • For the first time, non-CRM revenue eclipsed 25% of all revenue for the company.
  • Non-CRM revenue grew by over 100% year over year.
  • 34 of the Top 50 Pharmaceutical companies are now using at least one Vault product.
  • Key Vault add-on products have recently been announced or released: Vault Regulatory Information Management (RIM) and Vault Study Start-Up.
  • 56% of all revenue came from North America, 44% from outside North America -- there are still major opportunities abroad.

What management had to say
When it comes to Vault's potential, CEO and co-founder Peter Gassner is unapologetically enthusiastic: "Overall, we believe that the Vault opportunity is at least as big as CRM, and Vault's revenue is on a pace to grow well over 100% this year."

That's important, because when Veeva is able to lock in a customer with its Vault features, the switching costs for using another cloud provider that focuses on clinical trial management become incredibly high.

Gassner also quipped that he "believe[s] Veeva Vault is on a path to becoming the de facto standard in the regulated content management market for life sciences. Legacy on-premise players are losing relevance. Our solutions are not just well positioned as an alternative, but are seen as a better approach to managing regulated content."

If Veeva's Vault truly does become the industry standard -- and there's little reason to doubt that it could -- it would be a huge win for the company.

Looking forward
Seasonally, the fourth quarter is usually one of the company's weakest, and guidance provided by management reflected that trend. Revenue is expected to come in at a midpoint of $110 million -- which would represent growth of 26% from the same quarter in 2014. Non-GAAP EPS are expected to come in at $0.10 -- which would actually represent a contraction from last year's $0.12 per share during the fourth quarter.

Overall, Veeva's stock isn't cheap: it trades for 60 times trailing earnings and 70 times free cash flow. But the company has earned those multiples based on its ability to produce.

Brian Stoffel owns shares of Veeva Systems. The Motley Fool owns shares of and recommends Veeva Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.