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)


	April 30, 2022		January 31, 2022

Assets
Current assets:
Cash and cash equivalents	$	1,239,998	$	1,138,040
Short-term investments	1,598,555		1,238,064
Accounts receivable, net of allowance for doubtful accounts of $448 and $473, respectively	329,677		631,134
Unbilled accounts receivable	61,971		63,266
Prepaid expenses and other current assets	45,094		36,679
Total current assets	3,275,295		3,107,183
Property and equipment, net	53,816		54,495
Deferred costs, net	30,192		33,106
Lease right-of-use assets	48,887		49,640
Goodwill	439,877		439,877
Intangible assets, net	97,194		101,940
Deferred income taxes	40,674		5,097
Other long-term assets	25,287		25,127
Total assets	$	4,011,222	$	3,816,465
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	25,404	$	20,348
Accrued compensation and benefits	33,214		33,834
Accrued expenses and other current liabilities	33,931		36,109
Income tax payable	50,984		7,761
Deferred revenue	723,721		731,746
Lease liabilities	11,606		10,981
Total current liabilities	878,860		840,779
Deferred income taxes	1,725		2,216
Lease liabilities, noncurrent	42,462		43,607
Other long-term liabilities	19,900		18,226
Total liabilities	942,947		904,828
Commitments and contingencies (note 13)
Stockholders’ equity:
Class A common stock, $0.00001 par value; 800,000,000 shares authorized, 140,032,529 and 139,432,822 issued and outstanding at April 30, 2022 and January 31, 2022, respectively	2		2
Class B common stock, $0.00001 par value; 190,000,000 shares authorized, 14,765,431 and 14,763,775 issued and outstanding at April 30, 2022 and January 31, 2022, respectively	—		—
Additional paid-in capital	1,265,323		1,196,547
Accumulated other comprehensive loss	(24,211)		(11,958)
Retained earnings	1,827,161		1,727,046
Total stockholders’ equity	3,068,275		2,911,637
Total liabilities and stockholders’ equity	$	4,011,222	$	3,816,465

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 April 30,
	2022		2021


Revenues:
Subscription services	$	402,632	$	341,119
Professional services and other	102,470		92,454
Total revenues	505,102		433,573
Cost of revenues(1):
Cost of subscription services	58,953		51,217
Cost of professional services and other	80,562		64,919
Total cost of revenues	139,515		116,136
Gross profit	365,587		317,437
Operating expenses(1):
Research and development	113,475		83,226
Sales and marketing	76,115		64,610
General and administrative	48,325		41,155
Total operating expenses	237,915		188,991
Operating income	127,672		128,446
Other income, net	2,709		4,564
Income before income taxes	130,381		133,010
Provision for income taxes	30,266		17,443
Net income	$	100,115	$	115,567
Net income per share:
Basic	$	0.65	$	0.76
Diluted	$	0.62	$	0.71
Weighted-average shares used to compute net income per share:
Basic	154,514		152,444
Diluted	161,928		162,213
Other comprehensive income:
Net change in unrealized loss on available-for-sale investments	$	(10,999)	$	(1,086)
Net change in cumulative foreign currency translation loss	(1,254)		(2,213)
Comprehensive income	$	87,862	$	112,268


(1) Includes stock-based compensation as follows:
Cost of revenues:
Cost of subscription services	$	1,277	$	906
Cost of professional services and other	9,990		7,422
Research and development	25,823		16,837
Sales and marketing	16,893		11,555
General and administrative	13,151		11,769
Total stock-based compensation	$	67,134	$	48,489

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 April 30, 2022
	Class A & B common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Total stockholders’ equity
	Shares	Amount


Balances at beginning of period	154,196,597	$	2	$	1,196,547	$	1,727,046	$	(11,958)	$	2,911,637

Issuance of common stock upon exercise of stock options	482,436	—		16,291		—		—		16,291
Issuance of common stock upon vesting of restricted stock units	185,800	—		—		—		—		—
Shares withheld related to net share settlement	(66,873)	—		(14,910)		—		—		(14,910)
Stock-based compensation expense	—	—		67,395		—		—		67,395
Change in other comprehensive loss	—	—		—		—		(12,253)		(12,253)
Net income	—	—		—		100,115		—		100,115
Balances at end of period	154,797,960	$	2	$	1,265,323	$	1,827,161	$	(24,211)	$	3,068,275


	Three months ended April 30, 2021
	Class A & B common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Total stockholders’ equity
	Shares	Amount


Balances at beginning of period	152,056,808	$	2	$	965,670	$	1,299,656	$	992	$	2,266,320
Issuance of common stock upon exercise of stock options	485,037	—		17,600		—		—		17,600
Issuance of common stock upon vesting of restricted stock units	258,511	—		—		—		—		—

Stock-based compensation expense	—	—		48,793		—		—		48,793
Change in other comprehensive loss	—	—		—		—		(3,296)		(3,296)
Net income	—	—		—		115,567		—		115,567
Balances at end of period	152,800,356	$	2	$	1,032,063	$	1,415,223	$	(2,304)	$	2,444,984

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 April 30,
2022			2021

Cash flows from operating activities
Net income	$	100,115		$	115,567
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,058			6,628
Reduction of operating lease right-of-use assets	2,948			2,827
Amortization of discount on short-term investments	1,056			1,542
Stock-based compensation	67,134			48,489
Amortization of deferred costs	5,993			6,355
Deferred income taxes	(32,432)			5,242
(Gain) loss on foreign currency from mark-to-market derivative	(582)			431
Bad debt (recovery) expense	(25)			159
Changes in operating assets and liabilities:
Accounts receivable	301,482			301,732
Unbilled accounts receivable	1,295			(4,161)
Deferred costs	(3,079)			(4,290)
Prepaid expenses and other current and long-term assets	(7,563)			2,737
Accounts payable	5,121			(6,794)
Accrued expenses and other current liabilities	(2,336)			6,967
Income taxes payable	43,223			3,709
Deferred revenue	(7,471)			(8,176)
Operating lease liabilities	(2,031)			(2,748)
Other long-term liabilities	1,121			2,169
Net cash provided by operating activities	481,027			478,385
Cash flows from investing activities
Purchases of short-term investments	(572,344)			(256,938)
Maturities and sales of short-term investments	196,190			221,645

Long-term assets	(2,333)			(2,656)
Net cash used in investing activities	(378,487)			(37,949)
Cash flows from financing activities
Changes in lease liabilities - finance leases	—			(286)
Proceeds from exercise of common stock options	16,291			17,091
Taxes paid related to net share settlement of equity awards	(14,999)			—
Net cash provided by financing activities	1,292			16,805
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(1,874)			(2,765)
Net change in cash, cash equivalents, and restricted cash	101,958			454,476
Cash, cash equivalents, and restricted cash at beginning of period	1,141,225			731,712
Cash, cash equivalents, and restricted cash at end of period	$	1,243,183		$	1,186,188

Cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents	$	1,239,998		$	1,184,980
Restricted cash included in other long-term assets	3,185			1,208
Total cash, cash equivalents, and restricted cash at end of period	$	1,243,183		$	1,186,188

Supplemental disclosures of other cash flow information:
Cash paid for income taxes, net of refunds	$	18,189		$	5,133
Excess tax benefits from employee stock plans	$	4,907		$	17,451
Non-cash investing activities:
Changes in accounts payable and accrued expenses related to property and equipment purchases	$	(438)		$	806

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 the consumer product and chemical industries. 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, 2022, filed on March 30, 2022. 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, 2022 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, 2023 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 realizability of deferred income tax assets and liabilities;
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

Note 2. Short-Term Investments

At April 30, 2022, 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	$	63,710	$	13	$	(69)	$	63,654
Asset-backed securities	239,639		6		(3,465)		236,180
Commercial paper	151,341		14		(93)		151,262
Corporate notes and bonds	802,603		58		(15,100)		787,561
Foreign government bonds	24,521		4		(425)		24,100
U.S. agency obligations	27,982		10		(622)		27,370
U.S. treasury securities	312,468		20		(4,060)		308,428
Total available-for-sale securities	$	1,622,264	$	125	$	(23,834)	$	1,598,555

At January 31, 2022, 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	$	13,500	$	—	$	(15)	$	13,485
Asset-backed securities	191,676		45		(1,432)		190,289
Commercial paper	29,432		—		(2)		29,430
Corporate notes and bonds	669,489		276		(5,856)		663,909
Foreign government bonds	24,577		13		(179)		24,411
U.S. agency obligations	27,978		12		(254)		27,736
U.S. treasury securities	290,513		46		(1,755)		288,804
Total available-for-sale securities	$	1,247,165	$	392	$	(9,493)	$	1,238,064

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):


	April 30, 2022		January 31, 2022
Due in one year or less	$	666,232	$	457,948
Due in greater than one year	932,323		780,116
Total	$	1,598,555	$	1,238,064

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 that 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 April 30, 2022 (in thousands):


	Held for less than 12 months
	Fair value		Gross unrealized losses
Certificates of deposits	$	33,641	$	(69)
Asset-backed securities	227,959		(3,465)
Commercial paper	112,904		(93)
Corporate notes and bonds	730,194		(15,100)
Foreign government bonds	20,516		(425)
U.S. agency obligations	24,360		(622)
U.S. treasury securities	270,888		(4,060)

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, 2022 (in thousands):


	Held for less than 12 months
	Fair value		Gross unrealized losses

Certificates of deposits	$	5,985	$	(15)
Asset-backed securities	177,056		(1,432)
Commercial paper	17,190		(2)
Corporate notes and bonds	571,099		(5,856)
Foreign government bonds	19,594		(179)
U.S. agency obligations	24,725		(254)
U.S. treasury securities	247,509		(1,756)

Asset values and gross unrealized losses of available-for-sale securities held for more than 12 months as of April 30, 2022 and January 31, 2022 were immaterial.

Note 3. Deferred Costs

Deferred costs, which consist of deferred sales commissions, were $30 million and $33 million as of April 30, 2022 and January 31, 2022, respectively. Amortization expense for the deferred costs included in sales and marketing expenses in the condensed consolidated statements of comprehensive income was $6 million for each of the three months ended April 30, 2022 and 2021. 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):


	April 30, 2022		January 31, 2022
Land	$	3,040	$	3,040
Building	20,984		20,984
Land improvements and building improvements	22,392		22,392
Equipment and computers	2,246		3,581
Furniture and fixtures	15,480		15,040
Leasehold improvements	19,704		19,002
Construction in progress	325		730
	84,171		84,769
Less accumulated depreciation	(30,355)		(30,274)
Total property and equipment, net	$	53,816	$	54,495


10			Veeva Systems Inc. \| Form 10-Q

Total depreciation expense was $2 million for each of the three months ended April 30, 2022 and 2021. Land is not depreciated.

Note 5. Goodwill and Intangible Assets

Goodwill was $440 million as of April 30, 2022 and January 31, 2022.

The following schedule presents the details of intangible assets as of April 30, 2022 (dollar amounts in thousands):


	April 30, 2022
Gross carrying amount			Accumulated amortization			Net			Remaining useful life (in years)
Existing technology	$	28,580		$	(13,219)		$	15,361		3.7
Customer relationships	113,157			(41,624)			71,533			6.8
Trade name/trademarks	13,900			(7,289)			6,611			2.5
Other intangibles	21,405			(17,716)			3,689			3.6
	$	177,042		$	(79,848)		$	97,194

The following schedule presents the details of intangible assets as of January 31, 2022 (dollar amounts in thousands):


	January 31, 2022
Gross carrying amount			Accumulated amortization			Net			Remaining useful life (in years)
Existing technology	$	28,580		$	(12,187)		$	16,393		3.9
Customer relationships	113,157			(38,829)			74,328			7.0
Trade name/trademarks	13,900			(6,645)			7,255			2.8
Other intangibles	21,405			(17,441)			3,964			3.8
	$	177,042		$	(75,102)		$	101,940

Amortization expense associated with intangible assets was $5 million for the three months ended April 30, 2022, and $4 million for the three months ended April 30, 2021.

As of April 30, 2022, the estimated amortization expense for intangible assets was as follows (in thousands):


Fiscal Year	Estimated amortization expense
Remaining for 2023	$	14,717
2024	19,459
2025	18,557
2026	14,147
2027	8,922
Thereafter	21,392
Total	$	97,194


Veeva Systems Inc. \| Form 10-Q			11

Note 6. Accrued Expenses

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


	April 30, 2022		January 31, 2022
Accrued commissions	$	6,445	$	8,556
Accrued bonus	3,245		4,677
Accrued vacation (1)	6,728		5,546
Payroll tax payable	10,031		9,487
Accrued other compensation and benefits	6,765		5,568
Total accrued compensation and benefits	$	33,214	$	33,834
Accrued fees payable to salesforce.com	6,672		$	6,521

Taxes payable	8,252		9,743
Accrued third-party professional services subcontractors' fees	2,326		1,961
Other accrued expenses	16,681		17,884
Total accrued expenses and other current liabilities	$	33,931	$	36,109

(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 April 30, 2022 (in thousands):


	Level 1		Level 2		Total
Assets
Cash equivalents:
Money market funds	$	521,734	$	—	$	521,734
Certificates of deposit	—		12,000		12,000
U.S. treasury securities	—		69,960		69,960
Commercial paper	—		59,043		59,043
Corporate notes and bonds	—		6,846		6,846
Asset-backed securities	—		2,545		2,545
Short-term investments:
Certificates of deposit	—		63,654		63,654
Asset-backed securities	—		236,180		236,180
Commercial paper	—		151,262		151,262
Corporate notes and bonds	—		787,561		787,561
Foreign government bonds	—		24,100		24,100
U.S. agency obligations	—		27,370		27,370
U.S. treasury securities	—		308,428		308,428
Foreign currency derivative contracts	—		1,804		1,804
Total financial assets	$	521,734	$	1,750,753	$	2,272,487

The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of January 31, 2022 (in thousands):


	Level 1		Level 2		Total
Assets
Cash equivalents:
Money market funds	$	428,411	$	—	$	428,411
Corporate notes and bonds	—		5,853		5,853
Asset-backed securities	—		2,568		2,568
Short-term investments:
Certificates of deposit	—		13,485		13,485
Asset-backed securities	—		190,289		190,289
Commercial paper	—		29,430		29,430
Corporate notes and bonds	—		663,909		663,909
Foreign government bonds	—		24,411		24,411
U.S. agency obligations	—		27,736		27,736
U.S. treasury securities	—		288,804		288,804
Foreign currency derivative contracts	—		1,222		1,222
Total financial assets	$	428,411	$	1,247,707	$	1,676,118

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. These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore, we account for them 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. We recognized realized foreign currency gains of $4 million and $1 million for the three months ended April 30, 2022 and 2021, respectively.

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


	April 30, 2022		January 31, 2022
Notional amount of foreign currency derivative contracts	$	64,483	$	87,097
Fair value of foreign currency derivative contracts	62,680		85,876

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	April 30, 2022		January 31, 2022
Derivative Assets
Foreign currency derivative contracts	Prepaid expenses and other current assets	$	1,804	$	1,222

Note 8. Income Taxes

For the three months ended April 30, 2022 and 2021, our effective tax rates were 23.2% and 13.1%, respectively. During the three months ended April 30, 2022, 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. We recognized excess tax benefits in our provision for income taxes of $5 million and $17 million for the three months ended April 30, 2022 and 2021, respectively.

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

Of the beginning deferred revenue balance for the respective periods, we recognized $294 million of subscription services revenue during the three months ended April 30, 2022, and $249 million for the three months ended April 30, 2021, 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 April 30, 2022, approximately $1,493 million of revenue is expected to be recognized from remaining performance obligations for subscription services contracts. We expect to recognize revenue on approximately 77% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

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 $32 million and $28 million as of April 30, 2022 and January 31, 2022, 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 $30 million and $36 million as of April 30, 2022 and January 31, 2022, respectively.


14			Veeva Systems Inc. \| Form 10-Q

Note 10. Leases

We have operating leases for our 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 months ended April 30, 2022 and 2021 was immaterial.

For each of the three months ended April 30, 2022 and 2021, our operating lease expense was $3 million.

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


	Three months ended April 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,566	$	3,303
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	1,599		243

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


	April 30, 2022			January 31, 2022
Operating Leases
Lease right-of-use assets	$	48,887		$	49,640
Lease liabilities	$	11,606		$	10,981
Lease liabilities, noncurrent	42,462			43,607
Total operating lease liabilities	$	54,068		$	54,588
Weighted Average Remaining Lease Term	6.0 years			6.0 years
Weighted Average Discount Rate	3.7		%	3.7		%

As of April 30, 2022, remaining maturities of operating lease liabilities are as follows (in thousands):


Fiscal Year
Remaining for 2023	$	10,013
2024	12,346
2025	9,138
2026	7,360
2027	6,475
Thereafter	15,010
Total lease payments	60,342
Less imputed interest	(6,274)
Total	$	54,068


Veeva Systems Inc. \| Form 10-Q			15

Note 11. Stockholders’ Equity

Stock Option Activity

A summary of stock option activity for the three months ended April 30, 2022 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, 2022	12,090,522	$	77.89	4.6	$	1,964
Options granted	3,023,597	207.34
Options exercised	(482,436)	33.77
Options forfeited/cancelled	(99,109)	208.79
Options outstanding at April 30, 2022	14,532,574	$	105.40	5.6	$	1,296
Options vested and exercisable at April 30, 2022	7,627,254	$	47.63	3.1	$	1,048
Options vested and exercisable at April 30, 2022 and expected to vest thereafter	14,532,574	$	105.40	5.6	$	1,296

The options granted during the three months ended April 30, 2022 were predominantly made in connection with our annual performance review cycle. The weighted average grant-date fair value of options granted was $88.82 per option for the three months ended April 30, 2022.

As of April 30, 2022, there was $463 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 3.1 years.

As of April 30, 2022, 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 $83 million for the three months ended April 30, 2022.

Stock Option Valuation Assumptions

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 April 30,
	2022			2021
Volatility	37%	-	38%	39%
Expected term (in years)	6.00	-	7.00	6.25
Risk-free interest rate	1.86%	-	2.82%	0.68%	-	1.07%
Dividend yield	—%			—%

Restricted Stock Units

A summary of restricted stock unit (RSU) activity for the three months ended April 30, 2022 is as follows:


	Unreleased restricted stock units	Weighted average grant date fair value
Balance at January 31, 2022	619,388	$	175.23
RSUs granted	1,400,529	207.30
RSUs vested	(185,800)	213.36
RSUs forfeited/cancelled	(21,990)	192.94
Balance at April 30, 2022	1,812,127	195.90


16			Veeva Systems Inc. \| Form 10-Q

As of April 30, 2022, there was a total of $334 million in unrecognized compensation cost related to unvested RSUs. This cost is expected to be recognized over a weighted-average period of approximately 2.3 years. The total intrinsic value of RSUs vested was $41 million for the three months ended April 30, 2022.

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 April 30,
2022						2021
Class A			Class B			Class A			Class B
Basic
Numerator
Net income, basic	$	90,548		$	9,567		$	104,319		$	11,248
Denominator
Weighted average shares used in computing net income per share, basic	139,749			14,765			137,607			14,837
Net income per share, basic	$	0.65		$	0.65		$	0.76		$	0.76
Diluted
Numerator
Net income, basic	$	90,548		$	9,567		$	104,319		$	11,248
Reallocation as a result of conversion of Class B to Class A common stock:
Net income, basic	9,567			—			11,248			—
Reallocation of net income to Class B common stock	—			4,146			—			6,282
Net income, diluted	$	100,115		$	13,713		$	115,567		$	17,530
Denominator
Number of shares used for basic net income per share computation	139,749			14,765			137,607			14,837
Conversion of Class B to Class A common stock	14,765			—			14,837			—
Effect of potentially dilutive common shares	7,414			7,414			9,769			9,769
Weighted average shares used in computing net income per share, diluted	161,928			22,179			162,213			24,606
Net income per share, diluted	$	0.62		$	0.62		$	0.71		$	0.71

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


	Three months ended April 30,
2022		2021
Options and awards to purchase shares not included in the computation of diluted net income per share because their inclusion would be anti-dilutive	2,295,241		348,495

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


Veeva Systems Inc. \| Form 10-Q			17

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 we expect to complete expert discovery by November 15, 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 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


18			Veeva Systems Inc. \| Form 10-Q

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. We expect to complete fact discovery by June 30, 2022, and to complete expert discovery by November 15, 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. The trial in this matter is currently set for July 18, 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 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

Note 14. Revenues by Product

We group our revenues into two product areas: Commercial Solutions and R&D Solutions. Commercial Solutions revenues consist of revenues from our Veeva Commercial Cloud, Veeva Data Cloud and Veeva Claims solutions. R&D Solutions consist of revenues from our Veeva Development Cloud, Veeva RegulatoryOne, and Veeva QualityOne solutions.

Total revenues consist of the following (in thousands):


	Three months ended April 30,
	2022		2021
Subscription services
Commercial Solutions(1)	$	227,724	$	207,845
R&D Solutions(1)	174,908		133,274
Total subscription services	$	402,632	$	341,119
Professional services
Commercial Solutions(1)	$	43,321	$	43,598
R&D Solutions(1)	59,149		48,856
Total professional services	$	102,470	$	92,454
Total revenues	$	505,102	$	433,573
(1) Certain prior period product revenues have been adjusted to match current period presentation.

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.

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


	Three months ended April 30,
	2022		2021
Revenues by geography
North America	$	294,771	$	246,300
Europe	138,962		121,304
Asia Pacific	57,713		53,632
Middle East, Africa, and Latin America	13,656		12,337
Total revenues	$	505,102	$	433,573

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


	April 30, 2022		January 31, 2022
Long-lived assets by geography
North America	$	44,890	$	45,625
Europe	5,968		6,135
Asia Pacific	1,293		1,335
Middle East, Africa, and Latin America	$	1,665	1,400
Total long-lived assets	$	53,816	$	54,495


20			Veeva Systems Inc. \| Form 10-Q

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