Veeva Systems Inc. (NYSE: VEEV) reported a 58% jump in earnings for the second quarter of 2020 as higher subscription services revenue drove the top line higher. The results exceeded analysts’ expectations. Further, the company guided third-quarter earnings and revenue above the Street’s view.
In addition, the company said its finance chief Tim Cabral, is retiring in 2020 after a 30-year career and 10 years at Veeva. A search for his replacement is underway and Cabral will be staying till smooth transition takes place.
Net income soared by 58% to $79.2 million or $0.50 per share. Adjusted earnings climbed by 41% to $0.55 per share. Total revenues increased by 27% to $266.9 million helped by a 28% growth in subscription services revenue. The top line primarily comes from the fees from customers accessing cloud-based software solutions and subscription or license fees for data solutions.
Looking ahead into the third quarter, Veeva expects revenues in the range of $274 million to $275 million and adjusted earnings in the range of $0.54 to $0.55 per share. For the full year 2020, the company lifted its revenue outlook to the range of $1.062 billion to $1.065 billion from the previous range of $1.045 billion to $1.05 billion, and its adjusted earnings guidance to the range of $2.11 to $2.13 per share from the prior range of $2.01 to $2.03 per share.
In addition, the company expects the growth rate of its total revenues and subscription revenues to decline in future periods, which may adversely impact the value of its class A common stock. This is due to the loss of one or more of key customers or their failure to renew or expand user subscriptions as the company’s revenues are relatively concentrated within a small number of key customers.
The revenues are likely to be decline if cloud-based solutions do not continue to achieve more widespread adoption in the life sciences industry or there is a reduction in demand for cloud-based solutions. The company’s business will be impacted by the failure of developing widespread brand awareness cost-effectively.
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The loss of finance chief Tim Cabral is seen as an adverse effect on the company’s business. The continued service of the senior management team has remained a large part of the company’s success. The retirement is seen as a loophole in the company’s policies as Veeva does not have employment agreements with members of its senior management team or other key personnel.
The security breach remained fatal for the company as significant liabilities are incurred due to customers reducing the use of or stop using its services. The demand for the company’s solutions is likely to be negatively impacted by a security breach of another significant provider of cloud-based solutions. The business depends on the company’s ability to satisfy its customers.