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, 2022		January 31, 2022

Assets
Current assets:
Cash and cash equivalents	$	865,159	$	1,138,040
Short-term investments	2,157,396		1,238,064
Accounts receivable, net of allowance for doubtful accounts of $1,442 and $473, respectively	242,859		631,134
Unbilled accounts receivable	82,085		63,266
Prepaid expenses and other current assets	38,986		36,679
Total current assets	3,386,485		3,107,183
Property and equipment, net	51,135		54,495
Deferred costs, net	27,875		33,106
Lease right-of-use assets	57,249		49,640
Goodwill	439,877		439,877
Intangible assets, net	87,382		101,940
Deferred income taxes	98,573		5,097
Other long-term assets	34,141		25,127
Total assets	$	4,182,717	$	3,816,465
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	40,926	$	20,348
Accrued compensation and benefits	40,265		33,834
Accrued expenses and other current liabilities	32,860		36,109
Income tax payable	54,466		7,761
Deferred revenue	510,098		731,746
Lease liabilities	11,665		10,981
Total current liabilities	690,280		840,779
Deferred income taxes	1,546		2,216
Lease liabilities, noncurrent	50,225		43,607
Other long-term liabilities	21,874		18,226
Total liabilities	763,925		904,828
Commitments and contingencies (note 13)
Stockholders’ equity:
Class A common stock, $0.00001 par value; 800,000,000 shares authorized, 140,866,593 and 139,432,822 issued and outstanding at October 31, 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 October 31, 2022 and January 31, 2022, respectively	—		—
Additional paid-in capital	1,438,213		1,196,547
Accumulated other comprehensive loss	(45,642)		(11,958)
Retained earnings	2,026,219		1,727,046
Total stockholders’ equity	3,418,792		2,911,637
Total liabilities and stockholders’ equity	$	4,182,717	$	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 October 31,				Nine months ended October 31,
	2022		2021		2022		2021


Revenues:
Subscription services	$	441,569	$	380,738	$	1,272,850	$	1,088,293
Professional services and other	110,782		95,373		318,821		276,985
Total revenues	552,351		476,111		1,591,671		1,365,278
Cost of revenues(1):
Cost of subscription services	65,734		59,648		188,722		164,774
Cost of professional services and other	88,173		69,916		256,369		203,023
Total cost of revenues	153,907		129,564		445,091		367,797
Gross profit	398,444		346,547		1,146,580		997,481
Operating expenses(1):
Research and development	130,257		98,635		377,740		276,760
Sales and marketing	93,910		72,423		259,642		208,822
General and administrative	52,873		42,781		159,030		126,121
Total operating expenses	277,040		213,839		796,412		611,703
Operating income	121,404		132,708		350,168		385,778
Other income, net	12,458		824		23,565		7,054
Income before income taxes	133,862		133,532		373,733		392,832
Provision for income taxes	25,405		27,663		74,560		62,538
Net income	$	108,457	$	105,869	$	299,173	$	330,294
Net income per share:
Basic	$	0.70	$	0.69	$	1.93	$	2.16
Diluted	$	0.67	$	0.65	$	1.84	$	2.03
Weighted-average shares used to compute net income per share:
Basic	155,392		153,514		154,958		153,020
Diluted	162,295		163,034		162,189		162,663
Other comprehensive income:
Net change in unrealized loss on available-for-sale investments	$	(17,499)	$	(2,741)	$	(30,722)	$	(4,044)
Net change in cumulative foreign currency translation loss	(808)		(308)		(2,962)		(2,686)
Comprehensive income	$	90,150	$	102,820	$	265,489	$	323,564


(1) Includes stock-based compensation as follows:
Cost of revenues:
Cost of subscription services	$	1,636	$	1,292	$	4,606	$	3,514
Cost of professional services and other	13,227		9,616		37,035		26,579
Research and development	37,415		22,311		102,139		61,463
Sales and marketing	23,576		15,102		64,500		41,772
General and administrative	17,333		13,724		48,083		39,591
Total stock-based compensation	$	93,187	$	62,045	$	256,363	$	172,919

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, 2022											Three months ended October 31, 2021
	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 loss		Total stockholders’ equity
	Shares	Amount						Shares		Amount


Balances at beginning of period	155,224,674	$	2	$	1,353,502	$	1,917,762	$	(27,335)	$	3,243,931	153,358,259	$	2	$	1,098,703	$	1,524,081	$	(2,689)	$	2,620,097

Issuance of common stock upon exercise of stock options	233,435	—		4,575		—		—		4,575		185,148	—		5,368		—		—		5,368
Issuance of common stock upon vesting of restricted stock units	263,447	—		—		—		—		—		197,998	—		—		—		—		—
Shares withheld related to net share settlement	(89,532)	—		(15,481)		—		—		(15,481)		(68,987)	—		(21,239)		—		—		(21,239)
Stock-based compensation expense	—	—		95,617		—		—		95,617		—	—		62,315		—		—		62,315
Change in other comprehensive loss	—	—		—		—		(18,307)		(18,307)		—	—		—		—		(3,049)		(3,049)
Net income	—	—		—		108,457		—		108,457		—	—		—		105,869		—		105,869
Balances at end of period	155,632,024	$	2	$	1,438,213	$	2,026,219	$	(45,642)	$	3,418,792	153,672,418	$	2	$	1,145,147	$	1,629,950	$	(5,738)	$	2,769,361


	Nine months ended October 31, 2022											Nine months ended October 31, 2021
	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 (loss)		Total stockholders’ equity
	Shares	Amount						Shares		Amount


Balances at beginning of period	154,196,597	$	2	$	1,196,547	$	1,727,046	$	(11,958)	$	2,911,637	152,056,808	$	2	$	965,670	$	1,299,656	$	992	$	2,266,320
Issuance of common stock upon exercise of stock options	978,792	—		30,116		—		—		30,116		1,074,939	—		43,310		—		—		43,310
Issuance of common stock upon vesting of restricted stock units	702,297	—		—		—		—		—		663,283	—		—		—		—		—
Shares withheld related to net share settlement	(245,662)	—		(48,152)		—		—		(48,152)		(122,612)	—		(37,624)		—		—		(37,624)
Stock-based compensation expense	—	—		259,702		—		—		259,702		—	—		173,791		—		—		173,791
Change in other comprehensive loss	—	—		—		—		(33,684)		(33,684)		—	—		—		—		(6,730)		(6,730)
Net income	—	—		—		299,173		—		299,173		—	—		—		330,294		—		330,294
Balances at end of period	155,632,024	$	2	$	1,438,213	$	2,026,219	$	(45,642)	$	3,418,792	153,672,418	$	2	$	1,145,147	$	1,629,950	$	(5,738)	$	2,769,361

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,
2022			2021			2022			2021

Cash flows from operating activities
Net income	$	108,457		$	105,869		$	299,173		$	330,294
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,157			6,899			21,443			20,407
Reduction of operating lease right-of-use assets	3,094			2,855			9,062			8,556
(Accretion) amortization of discount on short-term investments	(1,565)			1,574			(1,016)			4,859
Stock-based compensation	93,187			62,045			256,363			172,919
Amortization of deferred costs	5,378			6,597			17,107			19,426
Deferred income taxes	(31,056)			(2,021)			(84,369)			10,174
Loss (gain) on foreign currency from mark-to-market derivative	7			(65)			1,193			368
Bad debt expense	1,089			58			1,210			195
Changes in operating assets and liabilities:
Accounts receivable	69,272			72,147			387,066			352,470
Unbilled accounts receivable	(4,307)			(16,870)			(18,819)			(20,764)
Deferred costs	(5,376)			(3,353)			(11,876)			(11,445)
Prepaid expenses and other current and long-term assets	7,326			4,407			(3,750)			3,278
Accounts payable	10,002			4,028			20,663			2,265
Accrued expenses and other current liabilities	5,465			(537)			2,654			8,646
Income taxes payable	49,323			12,010			46,705			11,993
Deferred revenue	(174,544)			(141,083)			(222,013)			(199,042)
Operating lease liabilities	(2,624)			(2,941)			(7,736)			(8,602)
Other long-term liabilities	2,375			1,340			4,013			4,412
Net cash provided by operating activities	142,660			112,959			717,073			710,409
Cash flows from investing activities
Purchases of short-term investments	(710,833)			(256,008)			(1,716,250)			(935,626)
Maturities and sales of short-term investments	310,713			248,093			757,434			657,062
Acquisitions, net of cash acquired	—			—			—			(2,133)
Long-term assets	(5,609)			(2,314)			(9,605)			(10,295)
Net cash used in investing activities	(405,729)			(10,229)			(968,421)			(290,992)
Cash flows from financing activities
Changes in lease liabilities - finance leases	—			—			—			(384)
Proceeds from exercise of common stock options	4,575			5,368			30,116			43,310
Taxes paid related to net share settlement of equity awards	(15,118)			(21,414)			(47,251)			(36,510)
Net cash (used in) provided by financing activities	(10,543)			(16,046)			(17,135)			6,416
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(1,475)			(1,469)			(4,398)			(4,414)
Net change in cash, cash equivalents, and restricted cash	(275,087)			85,215			(272,881)			421,419
Cash, cash equivalents, and restricted cash at beginning of period	1,143,431			1,067,916			1,141,225			731,712
Cash, cash equivalents, and restricted cash at end of period	$	868,344		$	1,153,131		$	868,344		$	1,153,131

Cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents	$	865,159		$	1,149,946		$	865,159		$	1,149,946
Restricted cash included in other long-term assets	3,185			3,185			3,185			3,185
Total cash, cash equivalents, and restricted cash at end of period	$	868,344		$	1,153,131		$	868,344		$	1,153,131

Supplemental disclosures of other cash flow information:
Cash paid for income taxes, net of refunds	$	2,936		$	14,167		$	110,708		$	34,668
Excess tax benefits from employee stock plans	$	888		$	10,404		$	5,981		$	45,464
Non-cash investing activities:
Changes in accounts payable and accrued expenses related to property and equipment purchases	$	(17)		$	(223)		$	(458)		$	(2,024)

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;
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 October 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	$	68,951	$	—	$	(233)	$	68,718
Asset-backed securities	425,183		2		(8,584)		416,601
Commercial paper	147,822		—		(1,207)		146,615
Corporate notes and bonds	1,123,950		51		(28,601)		1,095,400
Foreign government bonds	25,714		1		(691)		25,024
U.S. agency obligations	32,992		5		(837)		32,160
U.S. treasury securities	382,388		—		(9,510)		372,878
Total available-for-sale securities	$	2,207,000	$	59	$	(49,663)	$	2,157,396

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):


	October 31, 2022		January 31, 2022
Due in one year or less	$	874,735	$	457,948
Due in greater than one year	1,282,661		780,116
Total	$	2,157,396	$	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 October 31, 2022 (in thousands):


	Less than 12 months				12 months or greater
	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
Certificates of deposits	$	63,717	$	(233)	$	—	$	—
Asset-backed securities	335,172		(5,905)		67,697		(2,679)
Commercial paper	146,615		(1,207)		—		—
Corporate notes and bonds	809,703		(17,598)		258,113		(11,003)
Foreign government bonds	11,222		(186)		11,711		(505)
U.S. agency obligations	11,931		(266)		17,223		(571)
U.S. treasury securities	277,077		(6,320)		95,803		(3,190)

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):


	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)

Gross unrealized losses of available-for-sale securities held for more than 12 months as of January 31, 2022 were immaterial.

Note 3. Deferred Costs

Deferred costs, which consist of deferred sales commissions, were $28 million and $33 million as of October 31, 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 $5 million and $17 million for the three and nine months ended October 31, 2022, respectively, and $7 million and $19 million for the three and nine months ended October 31, 2021, 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, 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	2,125		3,581
Furniture and fixtures	14,674		15,040
Leasehold improvements	19,200		19,002
Construction in progress	130		730
	82,545		84,769
Less accumulated depreciation	(31,410)		(30,274)
Total property and equipment, net	$	51,135	$	54,495


10			Veeva Systems Inc. \| Form 10-Q

Total depreciation expense was $1 million and $5 million for the three and nine months ended October 31, 2022, respectively, and $2 million and $5 million for the three and nine months ended October 31, 2021, respectively. Land is not depreciated.

Note 5. Goodwill and Intangible Assets

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

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


	October 31, 2022
Gross carrying amount			Accumulated amortization			Net			Remaining useful life (in years)
Existing technology	$	28,580		$	(15,351)		$	13,229		3.2
Customer relationships	113,157			(47,404)			65,753			6.3
Trade name/trademarks	13,900			(8,620)			5,280			2.0
Other intangibles	21,405			(18,285)			3,120			3.2
	$	177,042		$	(89,660)		$	87,382

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 and $15 million for the three and nine months ended October 31, 2022, respectively, and $5 million and $14 million for the three and nine months ended October 31, 2021, respectively.

As of October 31, 2022, the estimated amortization expense for intangible assets was as follows (in thousands):


Fiscal Year	Estimated amortization expense
Remaining for 2023	$	4,906
2024	19,459
2025	18,557
2026	14,147
2027	8,922
Thereafter	21,391
Total	$	87,382


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, 2022		January 31, 2022
Accrued commissions	$	8,006	$	8,556
Accrued bonus	3,321		4,677
Accrued vacation (1)	6,068		5,546
Payroll tax payable	14,847		9,487
Accrued other compensation and benefits	8,023		5,568
Total accrued compensation and benefits	$	40,265	$	33,834
Accrued fees payable to Salesforce, Inc.	6,723		$	6,521

Taxes payable	5,596		9,743
Accrued third-party professional services subcontractors' fees	2,409		1,961
Other accrued expenses	18,132		17,884
Total accrued expenses and other current liabilities	$	32,860	$	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 October 31, 2022 (in thousands):


	Level 1		Level 2		Total
Assets
Cash equivalents:
Money market funds	$	117,017	$	—	$	117,017


Commercial paper	—		43,866		43,866
Corporate notes and bonds	—		6,673		6,673

Short-term investments:
Certificates of deposit	—		68,718		68,718
Asset-backed securities	—		416,601		416,601
Commercial paper	—		146,615		146,615
Corporate notes and bonds	—		1,095,400		1,095,400
Foreign government bonds	—		25,024		25,024
U.S. agency obligations	—		32,160		32,160
U.S. treasury securities	—		372,878		372,878
Foreign currency derivative contracts	—		29		29
Total financial assets	$	117,017	$	2,207,964	$	2,324,981

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 $2 million and $10 million for the three and nine months ended October 31, 2022, respectively. Recognized realized foreign currency losses were not material for the three and nine months ended October 31, 2021.

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


	October 31, 2022		January 31, 2022
Notional amount of foreign currency derivative contracts	$	50,039	$	87,097
Fair value of foreign currency derivative contracts	50,685		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	October 31, 2022		January 31, 2022
Derivative Assets
Foreign currency derivative contracts	Prepaid expenses and other current assets	$	29	$	1,222
Derivative Liabilities
Foreign currency derivative contracts	Accrued expenses	$	(675)	$	—

Note 8. Income Taxes

For the three months ended October 31, 2022 and 2021, our effective tax rates were 19.0% and 20.7%, respectively. During the three months ended October 31, 2022, as compared to the prior year period, our effective tax rate decreased primarily due an increase in the foreign derived intangible income deduction and a reduced valuation allowance impact within certain jurisdictions. These increases were partially offset by a reduction in excess tax benefits related to equity compensation. We recognized excess tax benefits in our provision for income taxes of $1 million and $10 million for the three months ended October 31, 2022 and 2021, respectively.

For the nine months ended October 31, 2022 and 2021, our effective tax rates were 20.0% and 15.9%, respectively. During the nine months ended October 31, 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 partially offset by an increase in the foreign derived intangible income deduction. We recognized such excess tax benefits in our provision for income taxes of $10 million and $45 million for the nine months ended October 31, 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 $358 million and $638 million of subscription services revenue during the three and nine months ended October 31, 2022, and $296 million and $535 million for the three and nine months ended October 31, 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,


14			Veeva Systems Inc. \| Form 10-Q

“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, 2022, approximately $1,189 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.

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 $34 million and $28 million as of October 31, 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 $48 million and $36 million as of October 31, 2022 and January 31, 2022, respectively.

Note 10. Leases

We have operating leases for our corporate offices. Our leases have various expiration dates through 2034, 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 each of the three and nine months ended October 31, 2022 and 2021 was immaterial.

For the three months ended October 31, 2022 and 2021, our operating lease expense was $4 million and $3 million, respectively. For the nine months ended October 31, 2022 and 2021, our operating lease expense was $12 million and $10 million, respectively.

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


	Nine months ended October 31,
	2022		2021
Cash paid for operating lease liabilities	$	11,320	$	10,288
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	13,937		2,135

Supplemental balance sheet information related to leases was as follows:


	October 31, 2022		January 31, 2022
Weighted Average Remaining Lease Term	6.8 years		6.0 years
Weighted Average Discount Rate	4.1	%	3.7	%

As of October 31, 2022, remaining maturities of operating lease liabilities are as follows (in thousands):


Fiscal Year
Remaining for 2023	$	3,299
2024	9,405
2025	11,417
2026	9,499
2027	8,496
Thereafter	31,474
Total lease payments	73,590
Less imputed interest	(11,700)
Total	$	61,890


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, 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	3,178,165	206.35
Options exercised	(978,792)	30.59
Options forfeited/cancelled	(362,182)	208.90
Options outstanding at October 31, 2022	13,927,713	$	107.17	5.2	$	1,084
Options vested and exercisable at October 31, 2022	7,527,009	$	50.78	2.8	$	913
Options vested and exercisable at October 31, 2022 and expected to vest thereafter	13,927,713	$	107.17	5.2	$	1,084

The options granted during the nine months ended October 31, 2022 were predominantly made in connection with our annual performance review cycle. The weighted average grant-date fair value of options granted was $85.55 and $88.49 per option for the three and nine months ended October 31, 2022, respectively.

As of October 31, 2022, there was $380 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 2.7 years.

As of October 31, 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 $37 million and $165 million for the three and nine months ended October 31, 2022, respectively.

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 October 31,						Nine months ended October 31,
	2022			2021			2022					2021
Volatility	39%	-	40%	37%			37%		-	40%		37%		-	39%
Expected term (in years)	6.25			6.25			6		-	7		6.25
Risk-free interest rate	2.90%	-	4.20%	0.90%	-	1.30%	1.90	%	-	4.20	%	0.68	%	-	1.30	%
Dividend yield	—%			—%			—%					—%

Restricted Stock Units

A summary of restricted stock unit (RSU) activity for the nine months ended October 31, 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	1,495,425	205.95
RSUs vested	(702,297)	197.62
RSUs forfeited/cancelled	(84,017)	199.28
Balance at October 31, 2022	1,328,499	196.43


16			Veeva Systems Inc. \| Form 10-Q

As of October 31, 2022, there was a total of $221 million in unrecognized compensation cost related to unvested RSUs. This cost is expected to be recognized over a weighted-average period of approximately 2.2 years. The total intrinsic value of RSUs vested was $45 million and $137 million for the three and nine months ended October 31, 2022, 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,
2022						2021						2022						2021
Class A			Class B			Class A			Class B			Class A			Class B			Class A			Class B
Basic
Numerator
Net income, basic	$	98,151		$	10,306		$	95,691		$	10,178		$	270,666		$	28,507		$	298,379		$	31,915
Denominator
Weighted average shares used in computing net income per share, basic	140,626			14,766			138,755			14,759			140,193			14,765			138,234			14,786
Net income per share, basic	$	0.70		$	0.70		$	0.69		$	0.69		$	1.93		$	1.93		$	2.16		$	2.16
Diluted
Numerator
Net income, basic	$	98,151		$	10,306		$	95,691		$	10,178		$	270,666		$	28,507		$	298,379		$	31,915
Reallocation as a result of conversion of Class B to Class A common stock:
Net income, basic	10,306			—			10,178			—			28,507			—			31,915			—
Reallocation of net income to Class B common stock	—			4,175			—			5,588			—			12,067			—			17,690
Net income, diluted	$	108,457		$	14,481		$	105,869		$	15,766		$	299,173		$	40,574		$	330,294		$	49,605
Denominator
Number of shares used for basic net income per share computation	140,626			14,766			138,755			14,759			140,193			14,765			138,234			14,786
Conversion of Class B to Class A common stock	14,766			—			14,759			—			14,765			—			14,786			—
Effect of potentially dilutive common shares	6,903			6,903			9,520			9,520			7,231			7,231			9,643			9,643
Weighted average shares used in computing net income per share, diluted	162,295			21,669			163,034			24,279			162,189			21,996			162,663			24,429
Net income per share, diluted	$	0.67		$	0.67		$	0.65		$	0.65		$	1.84		$	1.84		$	2.03		$	2.03

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,
2022		2021		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	5,022,968		1,105,478		4,363,631		869,044


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)). 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 we expect to complete expert discovery in May 2023. 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. Fact discovery is largely complete and we expect to complete expert discovery in May 2023.

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 or may be entitled to payment of success fees from us based on the achievement of certain outcomes. 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 amended its complaint twice, asserting the same claims with additional factual allegations, and voluntarily dismissed the Individual Defendants without prejudice. The trial began on July 11, 2022. On July 15, 2022, after four days of jury trial, the court granted Veeva’s motion for judgment as a matter of law, thereby resolving the case in favor of Veeva. Medidata moved for reconsideration of the decision on July 29, 2022, which was denied by the court on August 18, 2022. Medidata filed a notice of its intent to appeal in the Second Circuit Court of Appeals on September 16, 2022, which remains pending, but has not yet filed its appeal.

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 October 31,				Nine months ended October 31,
	2022		2021		2022		2021
Subscription services
Commercial Solutions	$	239,276	$	223,183	$	703,356	$	649,156
R&D Solutions	202,293		157,555		569,494		439,137
Total subscription services	$	441,569	$	380,738	$	1,272,850	$	1,088,293
Professional services
Commercial Solutions	$	45,283	$	41,675	$	133,027	$	124,241
R&D Solutions	65,499		53,698		185,794		152,744
Total professional services	$	110,782	$	95,373	$	318,821	$	276,985
Total revenues	$	552,351	$	476,111	$	1,591,671	$	1,365,278

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 October 31,				Nine months ended October 31,
	2022		2021		2022		2021
Revenues by geography
North America	$	321,860	$	277,165	$	925,589	$	782,590
Europe	152,951		128,032		441,719		376,885
Asia Pacific	62,621		57,837		181,286		167,319
Middle East, Africa, and Latin America	14,919		13,077		43,077		38,484
Total revenues	$	552,351	$	476,111	$	1,591,671	$	1,365,278

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


	October 31, 2022		January 31, 2022
Long-lived assets by geography
North America	$	43,069	$	45,625
Europe	5,552		6,135
Asia Pacific	902		1,335
Middle East, Africa, and Latin America	1,612		1,400
Total long-lived assets	$	51,135	$	54,495


20			Veeva Systems Inc. \| Form 10-Q

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