Item 1. FINANCIAL STATEMENTS.

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Item 1. FINANCIAL STATEMENTS.

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except number of shares and par value)

(Unaudited)


	October 31, 2021		January 31, 2021

Assets
Current assets:
Cash and cash equivalents	$	1,149,946	$	730,504
Short-term investments	1,201,541		933,122
Accounts receivable, net of allowance for doubtful accounts of $396 and $193, respectively	211,046		564,387
Unbilled accounts receivable	67,970		47,206
Prepaid expenses and other current assets	29,292		35,607
Total current assets	2,659,795		2,310,826
Property and equipment, net	53,463		53,650
Deferred costs, net	34,091		42,072
Lease right-of-use assets	50,499		56,917
Goodwill	437,261		436,029
Intangible assets, net	102,559		114,595
Deferred income taxes	4,884		14,100
Other long-term assets	24,934		17,878
Total assets	$	3,367,486	$	3,046,067
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	25,605	$	23,253
Accrued compensation and benefits	32,116		30,410
Accrued expenses and other current liabilities	36,131		30,982
Income tax payable	14,477		2,590
Deferred revenue	417,755		616,992
Lease liabilities	10,803		11,725
Total current liabilities	536,887		715,952
Deferred income taxes	1,941		1,835
Lease liabilities, noncurrent	45,237		51,393
Other long-term liabilities	14,060		10,567
Total liabilities	598,125		779,747
Commitments and contingencies (note 13)
Stockholders’ equity:
Class A common stock, $0.00001 par value; 800,000,000 shares authorized, 138,914,395 and 137,062,817 issued and outstanding at October 31, 2021 and January 31, 2021, respectively	2		2
Class B common stock, $0.00001 par value; 190,000,000 shares authorized, 14,758,023 and 14,993,991 issued and outstanding at October 31, 2021 and January 31, 2021, respectively	—		—
Additional paid-in capital	1,145,147		965,670
Accumulated other comprehensive income (loss)	(5,738)		992
Retained earnings	1,629,950		1,299,656
Total stockholders’ equity	2,769,361		2,266,320
Total liabilities and stockholders’ equity	$	3,367,486	$	3,046,067

See Notes to Condensed Consolidated Financial Statements.


4			Veeva Systems Inc. \| Form 10-Q

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)


	Three months ended October 31,				Nine months ended October 31,
	2021		2020		2021		2020


Revenues:
Subscription services	$	380,738	$	302,938	$	1,088,293	$	856,675
Professional services and other	95,373		74,581		276,985		211,633
Total revenues	476,111		377,519		1,365,278		1,068,308
Cost of revenues(1):
Cost of subscription services	59,648		45,845		164,774		132,457
Cost of professional services and other	69,916		57,152		203,023		162,624
Total cost of revenues	129,564		102,997		367,797		295,081
Gross profit	346,547		274,522		997,481		773,227
Operating expenses(1):
Research and development	98,635		79,992		276,760		212,282
Sales and marketing	72,423		57,982		208,822		172,909
General and administrative	42,781		35,243		126,121		109,085
Total operating expenses	213,839		173,217		611,703		494,276
Operating income	132,708		101,305		385,778		278,951
Other income, net	824		3,455		7,054		9,750
Income before income taxes	133,532		104,760		392,832		288,701
Provision for income taxes	27,663		7,801		62,538		11,621
Net income	$	105,869	$	96,959	$	330,294	$	277,080
Net income per share:
Basic	$	0.69	$	0.64	$	2.16	$	1.84
Diluted	$	0.65	$	0.60	$	2.03	$	1.73
Weighted-average shares used to compute net income per share:
Basic	153,514		150,993		153,020		150,322
Diluted	163,034		161,711		162,663		160,517
Other comprehensive income:
Net change in unrealized gain (loss) on available-for-sale investments	$	(2,741)	$	(1,230)	$	(4,044)	$	1,198
Net change in cumulative foreign currency translation gain (loss)	(308)		(1,438)		(2,686)		1,844
Comprehensive income	$	102,820	$	94,291	$	323,564	$	280,122


(1) Includes stock-based compensation as follows:
Cost of revenues:
Cost of subscription services	$	1,292	$	1,149	$	3,514	$	3,700
Cost of professional services and other	9,616		7,510		26,579		19,902
Research and development	22,311		17,685		61,463		45,523
Sales and marketing	15,102		10,711		41,772		30,089
General and administrative	13,724		11,918		39,591		36,032
Total stock-based compensation	$	62,045	$	48,973	$	172,919	$	135,246

See Notes to Condensed Consolidated Financial Statements.


Veeva Systems Inc. \| Form 10-Q			5

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)


	Three months ended October 31, 2021											Three months ended October 31, 2020
	Class A & B common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Total stockholders’ equity		Class A & B common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Total stockholders’ equity
	Shares	Amount						Shares		Amount


Balances at beginning of period	153,358,259	$	2	$	1,098,703	$	1,524,081	$	(2,689)	$	2,620,097	150,739,850	$	2	$	850,776	$	1,099,779	$	6,170	$	1,956,727

Issuance of common stock upon exercise of stock options	185,148	—		5,368		—		—		5,368		300,999	—		6,180		—		—		6,180
Issuance of common stock upon vesting of restricted stock units	197,998	—		—		—		—		—		242,679	—		—		—		—		—
Shares withheld related to net share settlement	(68,987)	—		(21,239)		—		—		(21,239)		—	—		—		—		—		—
Stock-based compensation expense	—	—		62,315		—		—		62,315		—	—		49,181		—		—		49,181
Change in other comprehensive loss	—	—		—		—		(3,049)		(3,049)		—	—		—		—		(2,668)		(2,668)
Net income	—	—		—		105,869		—		105,869		—	—		—		96,959		—		96,959
Balances at end of period	153,672,418	$	2	$	1,145,147	$	1,629,950	$	(5,738)	$	2,769,361	151,283,528	$	2	$	906,137	$	1,196,738	$	3,502	$	2,106,379


	Nine months ended October 31, 2021											Nine months ended October 31, 2020
	Class A & B common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Total stockholders’ equity		Class A & B common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Total stockholders’ equity
	Shares	Amount						Shares		Amount


Balances at beginning of period	152,056,808	$	2	$	965,670	$	1,299,656	$	992	$	2,266,320	149,095,583	$	1	$	745,475	$	919,658	$	460	$	1,665,594
Issuance of common stock upon exercise of stock options	1,074,939			43,310		—		—		43,310		1,407,370	1		25,208		—		—		25,209
Issuance of common stock upon vesting of restricted stock units	663,283	—		—		—		—		—		780,575	—		—		—		—		—
Shares withheld related to net share settlement	(122,612)	—		(37,624)		—		—		(37,624)		—	—		—		—		—		—
Stock-based compensation expense	—	—		173,791		—		—		173,791		—	—		135,454		—		—		135,454
Change in other comprehensive income (loss)	—	—		—		—		(6,730)		(6,730)		—	—		—		—		3,042		3,042
Net income	—	—		—		330,294		—		330,294		—	—		—		277,080		—		277,080
Balances at end of period	153,672,418	$	2	$	1,145,147	$	1,629,950	$	(5,738)	$	2,769,361	151,283,528	$	2	$	906,137	$	1,196,738	$	3,502	$	2,106,379

See Notes to Condensed Consolidated Financial Statements.


6			Veeva Systems Inc. \| Form 10-Q

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three months ended October 31,						Nine months ended October 31,
2021			2020			2021			2020

Cash flows from operating activities
Net income	$	105,869		$	96,959		$	330,294		$	277,080
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,899			7,525			20,407			22,720
Reduction of operating lease right-of-use assets	2,855			3,322			8,556			9,411
Accretion of discount on short-term investments	1,574			1,203			4,859			1,688
Stock-based compensation	62,045			48,973			172,919			135,246
Amortization of deferred costs	6,597			5,350			19,426			15,425
Deferred income taxes	(2,021)			(1,894)			10,174			(3,532)
Loss (gain) on foreign currency from mark-to-market derivative	(65)			19			368			14
Bad debt (recovery) expense	58			(181)			195			(60)
Changes in operating assets and liabilities:
Accounts receivable	72,147			37,448			352,470			206,214
Unbilled accounts receivable	(16,870)			(16,585)			(20,764)			(20,418)
Deferred costs	(3,353)			(6,177)			(11,445)			(15,312)
Prepaid expenses and other current and long-term assets	4,407			8,195			3,278			(2,937)
Accounts payable	4,028			3,060			2,265			(456)
Accrued expenses and other current liabilities	(537)			1,541			8,646			4,357
Income taxes payable	12,010			4,538			11,993			(453)
Deferred revenue	(141,083)			(90,291)			(199,042)			(137,980)
Operating lease liabilities	(2,941)			(3,229)			(8,602)			(8,496)
Other long-term liabilities	1,340			(4,373)			4,412			384
Net cash provided by operating activities	112,959			95,403			710,409			482,895
Cash flows from investing activities
Purchases of short-term investments	(256,008)			(417,898)			(935,626)			(874,465)
Maturities and sales of short-term investments	248,093			158,628			657,062			528,194
Acquisitions, net of cash acquired	—			—			(2,133)			—
Long-term assets	(2,314)			(3,316)			(10,295)			(8,456)
Net cash used in investing activities	(10,229)			(262,586)			(290,992)			(354,727)
Cash flows from financing activities
Changes in lease liabilities - finance leases	—			79			(384)			(420)
Proceeds from exercise of common stock options	5,368			6,186			43,310			25,245
Taxes paid related to net share settlement of equity awards	(21,414)			—			(36,510)			—
Net cash (used in) provided by financing activities	(16,046)			6,265			6,416			24,825
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(1,469)			(599)			(4,414)			2,683
Net change in cash, cash equivalents, and restricted cash	85,215			(161,517)			421,419			155,676
Cash, cash equivalents, and restricted cash at beginning of period	1,067,916			796,990			731,712			479,797
Cash, cash equivalents, and restricted cash at end of period	$	1,153,131		$	635,473		$	1,153,131		$	635,473

Cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents	$	1,149,946		$	634,265		$	1,149,946		$	634,265
Restricted cash included in other long-term assets	3,185			1,208			3,185			1,208
Total cash, cash equivalents, and restricted cash at end of period	$	1,153,131		$	635,473		$	1,153,131		$	635,473

Supplemental disclosures of other cash flow information:
Cash paid for income taxes, net of refunds	$	14,167		$	2,198		$	34,668		$	17,153
Excess tax benefits from employee stock plans	$	10,404		$	17,329		$	45,464		$	59,067
Non-cash investing activities:
Changes in accounts payable and accrued expenses related to property and equipment purchases	$	(223)		$	697		$	(2,024)		$	1,471

See Notes to Condensed Consolidated Financial Statements.


Veeva Systems Inc. \| Form 10-Q			7

VEEVA SYSTEMS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Summary of Business and Significant Accounting Policies

Description of Business

Veeva is the leading provider of industry cloud solutions for the global life sciences industry. We were founded in 2007 on the premise that industry-specific cloud solutions could best address the operating challenges and regulatory requirements of life sciences companies. Our offerings span cloud software, data, analytics, professional services, and business consulting and are designed to meet the unique needs of our customers and their most strategic business functions—from research and development (R&D) to commercialization. Our solutions help life sciences companies develop and bring products to market faster and more efficiently, market and sell more effectively, and maintain compliance with government regulations. Our Commercial Solutions help life sciences companies achieve better, more intelligent engagement with healthcare professionals and healthcare organizations across multiple communication channels, and plan and execute more effective media and marketing campaigns. Our R&D Solutions for the clinical, quality, regulatory, and safety functions help life sciences companies streamline their end-to-end product development processes to increase operational efficiency and maintain regulatory compliance throughout the product life cycle. We also bring the benefits of our content and data management solutions to a set of customers outside of life sciences in other regulated industries, including, for example, consumer goods, chemicals, and cosmetics. Our fiscal year end is January 31.

Principles of Consolidation and Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting and include the accounts of our wholly-owned subsidiaries after elimination of intercompany accounts and transactions. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed on March 30, 2021. There have been no changes to our significant accounting policies described in the annual report that have had a material impact on our condensed consolidated financial statements and related notes.

The unaudited condensed consolidated balance sheet as of January 31, 2021 included herein was derived from the audited financial statements as of that date. These unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly our financial position, results of operations, comprehensive income, and cash flows for the interim periods but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending January 31, 2022 or any other period.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the condensed consolidated financial statements and the notes thereto. These estimates are based on information available as of the date of the condensed consolidated financial statements. On a regular basis, management evaluates these estimates and assumptions. Items subject to such estimates and assumptions include, but are not limited to:

the standalone selling price for each distinct performance obligation included in customer contracts with multiple performance obligations;
the determination of the period of benefit for amortization of deferred costs;
the fair value of our stock-based awards.

As future events cannot be determined with precision, actual results could differ significantly from those estimates.


8			Veeva Systems Inc. \| Form 10-Q

New Accounting Pronouncements Adopted in Fiscal 2022

Income Taxes

In December 2019, the Financial Accounting Standards Board (FASB) issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” which simplifies accounting guidance for certain tax matters. We adopted this standard effective February 1, 2021. The adoption of this new standard did not have a material impact on our condensed consolidated financial statements.

Note 2. Short-Term Investments

At October 31, 2021, short-term investments consisted of the following (in thousands):


	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Available-for-sale securities:
Certificates of deposits	$	16,750	$	10	$	—	$	16,760
Asset-backed securities	190,558		152		(458)		190,252
Commercial paper	47,375		8		—		47,383
Corporate notes and bonds	642,377		809		(1,609)		641,577
Foreign government bonds	26,625		23		(57)		26,591
U.S. agency obligations	27,974		14		(50)		27,938
U.S. treasury securities	251,320		117		(397)		251,040
Total available-for-sale securities	$	1,202,979	$	1,133	$	(2,571)	$	1,201,541

At January 31, 2021, short-term investments consisted of the following (in thousands):


	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Available-for-sale securities:
Certificates of deposits	$	17,350	$	15	$	(1)	$	17,364
Asset-backed securities	125,833		745		(2)		126,576
Commercial paper	57,390		8		(2)		57,396
Corporate notes and bonds	428,710		2,360		(23)		431,047
Foreign government bonds	31,855		45		(2)		31,898
U.S. agency obligations	52,756		119		—		52,875
U.S. treasury securities	215,379		587		—		215,966
Total available-for-sale securities	$	929,273	$	3,879	$	(30)	$	933,122

The following table summarizes the estimated fair value of our short-term investments, designated as available-for-sale and classified by the contractual maturity date of the securities as of the dates shown (in thousands):


	October 31, 2021		January 31, 2021
Due in one year or less	$	378,075	$	428,155
Due in one to five years	823,466		504,967
Total	$	1,201,541	$	933,122

We have not recorded an allowance for credit losses, as we believe any such losses would be immaterial based on the high credit quality of our investments. We intend to hold our securities to maturity and it is more likely than not we will hold these securities until recovery of the cost basis.


Veeva Systems Inc. \| Form 10-Q			9

The following table shows the fair values of available-for-sale securities which were in an unrealized loss position, aggregated by investment category, as of October 31, 2021 (in thousands):


	Held for less than 12 months
	Fair value	Gross unrealized losses

Asset-backed securities	132,390	(458)
Commercial paper	5,809	—
Corporate notes and bonds	448,241	(1,609)
Foreign government bonds	16,687	(57)
U.S. agency obligations	24,924	(50)
U.S. treasury securities	207,733	(397)

The following table shows the fair values of available-for-sale securities which were in an unrealized loss position, aggregated by investment category, as of January 31, 2021 (in thousands):


	Held for less than 12 months
	Fair value		Gross unrealized losses

Certificates of deposits	$	3,749	$	(2)
Asset-backed securities	3,318		(1)
Commercial paper	17,626		(2)
Corporate notes and bonds	29,558		(23)
Foreign government bonds	2,679		(2)

Asset values and gross unrealized losses of available-for-sale securities held for more than 12 months as of October 31, 2021 and January 31, 2021 were immaterial. There was no allowance for credit losses recorded as of October 31, 2021 and January 31, 2021.

Note 3. Deferred Costs

Deferred costs, which consist of deferred sales commissions, were $34 million and $42 million as of October 31, 2021 and January 31, 2021, respectively. Amortization expense for the deferred costs included in sales and marketing expenses in the condensed consolidated statements of comprehensive income was $7 million and $19 million for the three and nine months ended October 31, 2021, respectively, and $5 million and $15 million for the three and nine months ended October 31, 2020, respectively. There have been no impairment losses recorded in relation to the costs capitalized for any period presented.

Note 4. Property and Equipment, Net

Property and equipment, net consists of the following as of the dates shown (in thousands):


	October 31, 2021		January 31, 2021
Land	$	3,040	$	3,040
Building	20,984		20,984
Land improvements and building improvements	22,392		22,392
Equipment and computers	4,157		8,847
Furniture and fixtures	14,211		13,452
Leasehold improvements	16,499		13,945
Construction in progress	1,508		606
	82,791		83,266
Less accumulated depreciation	(29,328)		(29,616)
Total property and equipment, net	$	53,463	$	53,650


10			Veeva Systems Inc. \| Form 10-Q

Total depreciation expense was $2 million and $5 million for the three and nine months ended October 31, 2021, respectively, and $2 million and $7 million for the three and nine months ended October 31, 2020, respectively. Land is not depreciated.

Note 5. Goodwill and Intangible Assets

Goodwill was $437 million as of October 31, 2021 and $436 million as of January 31, 2021.

The following schedule presents the details of intangible assets as of October 31, 2021 (dollar amounts in thousands):


	October 31, 2021
Gross carrying amount			Accumulated amortization			Net			Remaining useful life (in years)
Existing technology	$	26,180		$	(11,171)		$	15,009		4.0
Customer relationships	111,357			(35,976)			75,381			7.3
Trade name/trademarks	13,900			(5,980)			7,920			3.0
Other intangibles	21,405			(17,156)			4,249			5.1
	$	172,842		$	(70,283)		$	102,559

The following schedule presents the details of intangible assets as of January 31, 2021 (dollar amounts in thousands):


	January 31, 2021
Gross carrying amount			Accumulated amortization			Net			Remaining useful life (in years)
Existing technology	$	26,180		$	(8,367)		$	17,813		4.8
Customer relationships	110,643			(27,741)			82,902			8.0
Trade name/trademarks	13,900			(4,005)			9,895			3.8
Other intangibles	20,453			(16,468)			3,985			5.1
	$	171,176		$	(56,581)		$	114,595

Amortization expense associated with intangible assets was $5 million and $14 million for the three and nine months ended October 31, 2021, respectively, and $5 million and $15 million for the three and nine months ended October 31, 2020, respectively.

As of October 31, 2021, the estimated amortization expense for intangible assets was as follows (in thousands):


Fiscal Year	Estimated amortization expense
Remaining for 2022	$	4,694
2023	18,623
2024	18,619
2025	17,717
2026	13,309
Thereafter	29,597
Total	$	102,559


Veeva Systems Inc. \| Form 10-Q			11

Note 6. Accrued Expenses

Accrued expenses consisted of the following as of the dates shown (in thousands):


	October 31, 2021		January 31, 2021
Accrued commissions	$	7,253	$	7,498
Accrued bonus	4,523		4,134
Accrued vacation (1)	5,688		4,716
Payroll tax payable	8,821		10,250
Accrued other compensation and benefits	5,831		3,812
Total accrued compensation and benefits	$	32,116	$	30,410
Accrued fees payable to salesforce.com	6,605		$	6,381

Taxes payable	12,397		13,598
Accrued third-party professional services subcontractors' fees	1,562		1,515
Other accrued expenses	15,567		9,488
Total accrued expenses and other current liabilities	$	36,131	$	30,982

(1) Represents accrued vacation primarily for international employees. Vacation does not accrue for most U.S. employees.

Note 7. Fair Value Measurements

The carrying amounts of accounts receivable and other current assets, accounts payable, and accrued liabilities approximate their fair value due to their short-term nature.

Financial assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Financial assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires management to make judgments and considers factors specific to the asset or liability.


12			Veeva Systems Inc. \| Form 10-Q

The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of October 31, 2021 (in thousands):


	Level 1		Level 2		Total
Assets
Cash equivalents:
Money market funds	$	477,352	$	—	$	477,352
U.S. treasury securities	—		20,499		20,499

Corporate notes and bonds	—		5,855		5,855
Short-term investments:
Certificates of deposits	—		16,760		16,760
Asset-backed securities	—		190,252		190,252
Commercial paper	—		47,383		47,383
Corporate notes and bonds	—		641,577		641,577
Foreign government bonds	—		26,591		26,591
U.S. agency obligations	—		27,938		27,938
U.S. treasury securities	—		251,040		251,040
Foreign currency derivative contracts	—		72		72
Total financial assets	$	477,352	$	1,227,967	$	1,705,319
Liabilities
Foreign currency derivative contracts	$	—	$	34	$	34
Total financial liabilities	$	—	$	34	$	34

The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of January 31, 2021 (in thousands):


	Level 1		Level 2		Total
Assets
Cash equivalents:
Money market funds	$	259,937	$	—	$	259,937
U.S. treasury securities	—		15,520		15,520
Short-term investments:
Certificates of deposits	—		17,364		17,364
Asset-backed securities	—		126,576		126,576
Commercial paper	—		57,396		57,396
Corporate notes and bonds	—		431,047		431,047
Foreign government bonds	—		31,898		31,898
U.S. agency obligations	—		52,875		52,875
U.S. treasury securities	—		215,966		215,966
Foreign currency derivative contracts	—		440		440
Total	$	259,937	$	949,082	$	1,209,019
Liabilities
Foreign currency derivative contracts	$	—	$	72	$	72
Total	$	—	$	72	$	72

We determine the fair value of our security holdings based on pricing from our service providers and market prices from industry-standard independent data providers. The valuation techniques used to measure the fair value of financial instruments having Level 2 inputs were derived from non-binding consensus prices that are corroborated by observable market data or quoted market prices for similar instruments. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs).


Veeva Systems Inc. \| Form 10-Q			13

Balance Sheet Hedges

We enter into foreign currency forward contracts in order to hedge our foreign currency exposure. We account for derivative instruments at fair value with changes in the fair value recorded as a component of other income, net in our condensed consolidated statements of comprehensive income. Cash flows from such forward contracts are classified as operating activities. Foreign currency gains or losses for the three and nine months ended October 31, 2021 and 2020 were not material for any of the periods.

The fair value of our outstanding derivative instruments is summarized below (in thousands):


	October 31, 2021		January 31, 2021
Notional amount of foreign currency derivative contracts	$	10,142	$	52,516
Fair value of foreign currency derivative contracts	10,104		52,148

Details on outstanding balance sheet hedges are presented below as of the date shown below (in thousands):


Derivatives not designated as hedging instruments	Balance sheet location	October 31, 2021		January 31, 2021
Derivative Assets
Foreign currency derivative contracts	Prepaid expenses and other current assets	$	72	$	440
Derivative Liabilities
Foreign currency derivative contracts	Accrued expenses	$	34	$	72

Note 8. Income Taxes

For the three months ended October 31, 2021 and 2020, our effective tax rates were 20.7% and 7.4%, respectively. During the three months ended October 31, 2021, as compared to the prior year period, our effective tax rate increased primarily due to a reduction in excess tax benefits related to equity compensation and an increase in valuation allowance within certain jurisdictions. We recognized such excess tax benefits in our provision for income taxes of $10 million and $17 million for the three months ended October 31, 2021 and 2020, respectively.

For the nine months ended October 31, 2021 and 2020, our effective tax rates were 15.9% and 4.0%, respectively. During the nine months ended October 31, 2021, as compared to the prior year period, our effective tax rate increased primarily due to a reduction in excess tax benefits related to equity compensation and an increase in valuation allowance within certain jurisdictions. We recognized such excess tax benefits in our provision for income taxes of $45 million and $59 million for the nine months ended October 31, 2021 and 2020, respectively.

Note 9. Deferred Revenue, Performance Obligations, and Unbilled Accounts Receivable

Of the beginning deferred revenue balance for the respective periods, we recognized $296 million and $535 million of subscription services revenue during the three and nine months ended October 31, 2021, respectively, and $232 million and $409 million for the three and nine months ended October 31, 2020, respectively. Professional services revenue recognized in the same periods from deferred revenue balances at the beginning of the respective periods was immaterial.

Transaction Price Allocated to the Remaining Performance Obligations

Transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and recognized as revenues in future periods. We applied the practical expedient in accordance with ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606) to exclude the amounts related to professional services contracts as these contracts generally have a remaining duration of one year or less.

As of October 31, 2021, approximately $1,037 million of revenue is expected to be recognized from remaining performance obligations for subscription services contracts. We expect to recognize revenue on approximately 73% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.


14			Veeva Systems Inc. \| Form 10-Q

Unbilled Accounts Receivable

Unbilled accounts receivable consists of (i) a receivable primarily for the revenue recognized for professional services performed but not yet billed, which were $30 million and $20 million as of October 31, 2021 and January 31, 2021, respectively, and (ii) a contract asset primarily for revenue recognized from non-cancelable, multi-year orders in which fees increase annually but for which we are not contractually able to invoice until a future period, which were $38 million and $27 million as of October 31, 2021 and January 31, 2021, respectively.

Note 10. Leases

We have operating leases for corporate offices. Our leases have various expiration dates through 2030, some of which include options to extend the leases for up to nine years. Additionally, we are the sublessor for certain office space. Our sublease income for the three and nine months ended October 31, 2021 and 2020 was immaterial.

For each of the three months ended October 31, 2021 and 2020, our operating lease expense was $3 million. For each of the nine months ended October 31, 2021 and 2020, our operating lease expense was $10 million and $9 million, respectively.

Supplemental cash flow information related to leases was as follows (in thousands):


	Nine months ended October 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	10,288	$	8,149
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	2,135		8,937

Supplemental balance sheet information related to leases was as follows (in thousands, except lease term and discount rate):


	October 31, 2021			January 31, 2021
Operating Leases
Lease right-of-use assets	$	50,499		$	56,917
Lease liabilities	$	10,803		$	11,347
Lease liabilities, noncurrent	45,237			51,393
Total operating lease liabilities	$	56,040		$	62,740
Weighted Average Remaining Lease Term	6.3 years			6.7 years
Weighted Average Discount Rate	3.8		%	3.8		%

As of October 31, 2021, remaining maturities of operating lease liabilities are as follows (in thousands):


Fiscal Year
Remaining for 2022	$	3,354
2023	11,555
2024	11,404
2025	8,490
2026	7,326
Thereafter	21,128
Total lease payments	63,257
Less imputed interest	7,217
Total	$	56,040


Veeva Systems Inc. \| Form 10-Q			15

Note 11. Stockholders’ Equity

Stock Option Activity

A summary of stock option activity for the nine months ended October 31, 2021 is as follows:


	Number of shares	Weighted average exercise price		Weighted average remaining contractual term (in years)	Aggregate intrinsic value (in millions)
Options outstanding at January 31, 2021	12,761,289	$	57.48	5.0	$	2,794
Options granted	1,081,518	278.07
Options exercised	(1,074,939)	40.29
Options forfeited/cancelled	(267,795)	166.28
Options outstanding at October 31, 2021	12,500,073	$	75.71	4.8	$	3,016
Options vested and exercisable at October 31, 2021	7,197,020	$	28.82	2.8	$	2,074
Options vested and exercisable at October 31, 2021 and expected to vest thereafter	12,500,073	$	75.71	4.8	$	3,016

The options granted during the nine months ended October 31, 2021 were predominantly made in connection with our annual performance review cycle. The weighted average grant-date fair value of options granted was $117.20 and $108.90 per option for the three and nine months ended October 31, 2021, respectively.

As of October 31, 2021, there was $250 million in unrecognized compensation cost related to unvested stock options granted under the 2012 Equity Incentive Plan and 2013 Equity Incentive Plan. This cost is expected to be recognized over a weighted average period of 2.8 years.

As of October 31, 2021, we had authorized and unissued shares of common stock sufficient to satisfy exercises of stock options.

The total intrinsic value of options exercised was approximately $52 million and $267 million for the three and nine months ended October 31, 2021, respectively.

Stock-Based Compensation

The following table presents the weighted-average assumptions used to estimate the grant date fair value of options granted during the periods presented:


	Three months ended October 31,										Nine months ended October 31,
	2021					2020					2021					2020
Volatility	37%					39%		-	40%		37%		-	39%		39%		-	41%
Expected term (in years)	6.25					6.25					6.25					6.25		-	7.25
Risk-free interest rate	0.90	%	-	1.30	%	0.33	%	-	0.45	%	0.68	%	-	1.30	%	0.33	%	-	1.43	%
Dividend yield	—%					—%					—%					—%

Restricted Stock Units

A summary of restricted stock unit (RSU) activity for the nine months ended October 31, 2021 is as follows:


	Unreleased restricted stock units	Weighted average grant date fair value
Balance at January 31, 2021	1,032,215	$	121.98
RSUs granted	442,514	280.61
RSUs vested	(663,283)	164.02
RSUs forfeited/cancelled	(57,443)	177.20
Balance at October 31, 2021	754,003	173.86


16			Veeva Systems Inc. \| Form 10-Q

As of October 31, 2021, there was a total of $113 million in unrecognized compensation cost related to unvested RSUs. This cost is expected to be recognized over a weighted-average period of approximately 1.1 years. The total intrinsic value of RSUs vested was $61 million and $195 million for the three and nine months ended October 31, 2021, respectively.

Note 12. Net Income per Share

Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income per share is computed by dividing net income by the weighted-average shares outstanding, including potentially dilutive shares of common equivalents outstanding during the period. The dilutive effect of potential shares of common stock are determined using the treasury stock method.

The computation of fully diluted net income per share of Class A common stock assumes the conversion from Class B common stock, while the fully diluted net income per share of Class B common stock does not assume the conversion of those shares.

The numerators and denominators of the basic and diluted net income per share computations for our common stock are calculated as follows (in thousands, except per share data):


	Three months ended October 31,												Nine months ended October 31,
2021						2020						2021						2020
Class A			Class B			Class A			Class B			Class A			Class B			Class A			Class B
Basic
Numerator
Net income, basic	$	95,691		$	10,178		$	87,262		$	9,697		$	298,379		$	31,915		$	249,155		$	27,925
Denominator
Weighted average shares used in computing net income per share, basic	138,755			14,759			135,892			15,101			138,234			14,786			135,172			15,150
Net income per share, basic	$	0.69		$	0.69		$	0.64		$	0.64		$	2.16		$	2.16		$	1.84		$	1.84
Diluted
Numerator
Net income, basic	$	95,691		$	10,178		$	87,262		$	9,697		$	298,379		$	31,915		$	249,155		$	27,925
Reallocation as a result of conversion of Class B to Class A common stock:
Net income, basic	10,178			—			9,697			—			31,915			—			27,925			—
Reallocation of net income to Class B common stock	—			5,588			—			5,784			—			17,690			—			15,825
Net income, diluted	$	105,869		$	15,766		$	96,959		$	15,481		$	330,294		$	49,605		$	277,080		$	43,750
Denominator
Number of shares used for basic net income per share computation	138,755			14,759			135,892			15,101			138,234			14,786			135,172			15,150
Conversion of Class B to Class A common stock	14,759			—			15,101			—			14,786			—			15,150			—
Effect of potentially dilutive common shares	9,520			9,520			10,718			10,718			9,643			9,643			10,195			10,195
Weighted average shares used in computing net income per share, diluted	163,034			24,279			161,711			25,819			162,663			24,429			160,517			25,345
Net income per share, diluted	$	0.65		$	0.65		$	0.60		$	0.60		$	2.03		$	2.03		$	1.73		$	1.73

Potential common share equivalents excluded where the inclusion would be anti-dilutive are as follows:


	Three months ended October 31,				Nine months ended October 31,
2021		2020		2021		2020
Options and awards to purchase shares not included in the computation of diluted net income per share because their inclusion would be anti-dilutive	1,105,478		85,099		869,044		997,236


Veeva Systems Inc. \| Form 10-Q			17

Note 13. Commitments and Contingencies

Litigation

IQVIA Litigation Matters

Veeva OpenData and Veeva Network Action.

On January 10, 2017, IQVIA Inc. (formerly Quintiles IMS Incorporated) and IMS Software Services, Ltd. (collectively, “IQVIA”) filed a complaint against us in the U.S. District Court for the District of New Jersey (IQVIA Inc. v. Veeva Systems Inc. (No. 2:17-cv-00177)) (OpenData and Network Action). In the complaint, IQVIA alleges that we used unauthorized access to proprietary IQVIA data to improve our software and data products and that our software is designed to steal IQVIA trade secrets. IQVIA further alleges that we have intentionally gained unauthorized access to IQVIA proprietary information to gain an unfair advantage in marketing our products and that we have made false statements concerning IQVIA’s conduct and our data security capabilities. IQVIA asserts claims under both federal and state misappropriation of trade secret laws, federal false advertising law, and common law claims for unjust enrichment, tortious interference, and unfair trade practices. The complaint seeks declaratory and injunctive relief and unspecified monetary damages.

On March 13, 2017, we filed our answer denying IQVIA's claims and filed counterclaims. Our counterclaims allege that IQVIA, as the dominant provider of data for life sciences companies, has abused monopoly power to exclude Veeva OpenData and Veeva Network from their respective markets. The counterclaims allege that IQVIA has engaged in various tactics to prevent customers from using our applications and has deliberately raised costs and increased the difficulty of attempting to switch from IQVIA data to our data products. As amended, our counterclaims assert federal and state antitrust claims, as well as claims under California’s Unfair Practices Act and common law claims for intentional interference with contractual relations, intentional interference with prospective economic advantage, and negligent misrepresentation. The counterclaims seek injunctive relief, monetary damages exceeding $200 million, and attorneys’ fees. On October 3, 2018, the court denied IQVIA’s motion to dismiss our antitrust claims.

On February 18, 2020, IQVIA filed a motion for sanctions against Veeva, seeking default judgment and dismissal and, in the alternative, an adverse inference at trial related to discovery disputes. On May 7, 2021, the special master appointed to oversee litigation discovery ruled against IQVIA’s request for default judgment and dismissal and ruled in IQVIA’s favor with respect to certain other matters, including recommending to the trial judge that a permissive adverse inference instruction be issued to the jury with respect to certain documents that were not preserved by Veeva. Should the trial judge accept the recommendation, the jury would be permitted, but not required, to infer that certain evidence not preserved by Veeva would have been unfavorable to Veeva, if the jury first concludes that Veeva controlled the evidence, that the evidence was relevant, and that Veeva should have preserved the evidence. The jury is also likely to be instructed that it may also consider whether the non-preserved evidence was duplicative of other evidence produced by Veeva and whether Veeva’s conduct was reasonable in light of all circumstances. Veeva was also ordered to pay IQVIA’s fees and expenses incurred in connection with portions of its sanctions motion. On June 4, 2021, we appealed the special master’s ruling and IQVIA’s fee award to the federal district court judge.

Fact discovery is largely complete and expert discovery is scheduled to conclude on September 8, 2022.

While it is not possible at this time to predict with any degree of certainty the ultimate outcome of this action, and we are unable to make a meaningful estimate of the amount or range of gain or loss, if any, that could result from the OpenData and Network Action, we believe that IQVIA’s claims lack merit and that our counterclaims warrant injunctive relief and monetary damages for Veeva.

Veeva Nitro Action.

On July 17, 2019, IQVIA filed a lawsuit in the U.S. District Court for the District of New Jersey (IQVIA Inc. v. Veeva Systems Inc. (No. 2:19-cv-15517)) (IQVIA Declaratory Action) seeking a declaratory judgment that IQVIA is not liable to Veeva for disallowing use of IQVIA’s data products in Veeva Nitro or any later-introduced Veeva software products. The IQVIA Declaratory Action does not seek any monetary relief.

On July 18, 2019, we filed a lawsuit against IQVIA in the U.S. District Court for the Northern District of California (Veeva Systems Inc. v. IQVIA Inc. (No. 3:19-cv-04137)) (Veeva Nitro Action), alleging that IQVIA engaged in anticompetitive conduct as to Veeva Nitro. Our complaint asserts federal and state antitrust claims, as well as claims under California’s Unfair Competition Law and common law claims for intentional interference with


18			Veeva Systems Inc. \| Form 10-Q

contractual relations and intentional interference with prospective economic advantage. The complaint seeks injunctive relief and monetary damages. IQVIA filed its answer and affirmative defenses on September 5, 2019.

On September 26, 2019, the Northern District of California transferred the Veeva Nitro Action to the District of New Jersey (Veeva Systems Inc. v. IQVIA Inc. (No. 2:19-cv-18558)).

On March 24, 2020, we amended our complaint in the Veeva Nitro Action to include allegations of IQVIA’s anticompetitive conduct as to additional Veeva software applications, such as Veeva Andi, Veeva Align, and Veeva Vault MedComms; additional examples of IQVIA’s monopolistic behavior against Veeva Nitro; IQVIA’s unlawful access of Veeva’s proprietary software products; and a request for declaratory relief. IQVIA answered the amended complaint on May 22, 2020.

On August 21, 2020, the District of New Jersey consolidated the Veeva Nitro Action and IQVIA Declaratory Action, and stayed both actions pending conclusion of the OpenData and Network Action. On September 21, 2021, the court lifted the stay and, on November 8, 2021, entered a pretrial scheduling order that set the close of fact discovery for April 22, 2022, and the close of expert discovery for September 8, 2022.

While it is not possible at this time to predict with any degree of certainty the ultimate outcome of this action, we believe that our claims warrant injunctive and declaratory relief and monetary damages for Veeva and against IQVIA.

Fee Arrangements Related to the IQVIA Litigation Matters. We have entered into partial contingency fee arrangements with certain law firms representing us in the IQVIA litigations. Pursuant to those arrangements, such law firms are entitled to an agreed portion of any damages we recover from IQVIA (Contingency Fees) or may be entitled to payment of additional fees from us based on the achievement of certain outcomes (Success Fees). While it is reasonably possible that we may incur such Success Fees, we are unable to make an estimate of any such liability and have not accrued any liability related to Success Fees at this time.

Medidata Litigation Matter

On January 26, 2017, Medidata Solutions, Inc. filed a complaint in the U.S. District Court for the Southern District of New York (Medidata Solutions, Inc. v. Veeva Systems Inc. et al. (No. 1:17-cv-00589)) against us and five individual Veeva employees who previously worked for Medidata (“Individual Employees”). The complaint alleged that we induced and conspired with the Individual Employees to breach their employment agreements, including non-compete and confidentiality provisions, and to misappropriate Medidata’s confidential and trade secret information. The complaint sought declaratory and injunctive relief, unspecified monetary damages, and attorneys’ fees. Medidata has since amended its complaint twice, asserting the same claims with additional factual allegations, and has voluntarily dismissed the Individual Defendants without prejudice.

Fact discovery is now completed. On April 24, 2020, Medidata filed a motion for partial summary judgment on its claims for trade secret misappropriation as well as several of Veeva’s affirmative defenses. On May 15, 2020, we filed a motion for summary judgment on all of Medidata’s claims. On February 9, 2021, the court issued its ruling granting summary judgment in favor of Veeva as to certain of Medidata's claims and in favor of Medidata as to certain of Veeva's affirmative defenses. A trial date has not been set. While it is not possible at this time to predict with any degree of certainty the ultimate outcome of this action, and we are unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome, we believe that Medidata’s claims lack merit.

Other Litigation Matters

From time to time, we may be involved in other legal proceedings and subject to claims incident to the ordinary course of business. Although the results of such legal proceedings and claims cannot be predicted with certainty, we believe we are not currently a party to any other legal proceedings, the outcome of which, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial position. Regardless of the outcome, such proceedings can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.


Veeva Systems Inc. \| Form 10-Q			19

Value-Added Reseller Agreement

We have a value-added reseller agreement with salesforce.com, inc. for our use of the Salesforce1 Platform in combination with our developed technology to deliver certain of our multichannel CRM applications, including hosting infrastructure and data center operations provided by salesforce.com. The agreement, as amended, requires that we meet minimum order commitments of $500 million over the term of the agreement, which ends on September 1, 2025, including “true-up” payments if the orders we place with salesforce.com have not equaled or exceeded the following aggregate amounts within the timeframes indicated: (i) $250 million for the period from March 1, 2014 to September 1, 2020 and (ii) the full amount of $500 million by September 1, 2025. We have met all minimum order commitments as of October 31, 2021.

Note 14. Revenues by Product

Prior to the fiscal quarter ended October 31, 2021, we grouped our revenues into two product areas: Commercial Cloud and Vault. During the fiscal quarter ended October 31, 2021, we changed the product areas under which we group revenues to Commercial Solutions and R&D Solutions to better align with how we manage our business and to reflect the principal functions served by our products. Commercial Solutions consist of our cloud software, data, and analytics products built specifically to more efficiently and effectively commercialize our customers’ products. R&D Solutions consist of our clinical, quality, regulatory, and safety products. Specifically, revenues attributable to Vault PromoMats and Vault MedComms, applications used for commercial operations, are now reflected in Commercial Solutions.

The prior period revenue balances in the table below have been adjusted to reflect the current period presentation of our product areas. There were no changes to the aggregate amounts reported within our condensed consolidated statements of comprehensive income.

Total revenues consist of the following (in thousands):


	Three months ended October 31,				Nine months ended October 31,
	2021		2020		2021		2020
Subscription services
Commercial Solutions	$	223,183	$	189,874	$	649,156	$	547,341
R&D Solutions	157,555		113,064		439,137		309,334
Total subscription services	$	380,738	$	302,938	$	1,088,293	$	856,675
Professional services
Commercial Solutions	$	41,675	$	36,613	$	124,241	$	104,859
R&D Solutions	53,698		37,968		152,744		106,774
Total professional services	$	95,373	$	74,581	$	276,985	$	211,633
Total revenues	$	476,111	$	377,519	$	1,365,278	$	1,068,308

Note 15. Information about Geographic Areas

We track and allocate revenues by principal geographic area rather than by individual country, which makes it impractical to disclose revenues for the United States or other specific foreign countries. We measure subscription services revenue primarily by the estimated location of the end users in each geographic area for our Commercial Solutions and primarily by the estimated location of usage in each geographic area for our R&D Solutions. We measure professional services revenue primarily by the location of the resources performing the professional services.


20			Veeva Systems Inc. \| Form 10-Q

Total revenues by geographic area were as follows for the periods shown below (in thousands):


	Three months ended October 31,				Nine months ended October 31,
	2021		2020		2021		2020
Revenues by geography
North America	$	277,165	$	218,110	$	782,590	$	614,101
Europe	128,032		102,440		376,885		290,257
Asia Pacific	57,837		46,178		167,319		133,039
Middle East, Africa, and Latin America	13,077		10,791		38,484		30,911
Total revenues	$	476,111	$	377,519	$	1,365,278	$	1,068,308

Long-lived assets by geographic area are as follows as of the periods shown below (in thousands):


	October 31, 2021		January 31, 2021
Long-lived assets by geography
North America	$	45,702	$	46,285
Europe	5,285		5,525
Asia Pacific	1,368		1,359
Middle East, Africa, and Latin America	$	1,108	481
Total long-lived assets	$	53,463	$	53,650


Veeva Systems Inc. \| Form 10-Q			21

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