Headquartered in Pleasanton, CA, Veeva Systems Inc.VEEV reported second-quarter fiscal 2018, adjusted earnings of 23 cents per share, ending Jul 31. The company's earnings beat the Zacks Consensus Estimate of 20 cents and the year-ago figure of 15 cents.

Total revenues in the reported quarter were $166.6 million, up from $131.3 million in the year-ago quarter, projecting an increase of 27% year over year. This was well ahead of the Zacks Consensus Estimate of $164.0 million.

Quarter Highlights

Subscription services revenues were $134.3 million, up from $105.2 million in the year-ago quarter, increasing 28% year over year.

Professional services revenues increased almost 23.4% to $32.2 million, primarily owing to strong adoption of the Vault platform.

In the second quarter, the company witnessed a number of registrations in the Veeva Commercial Cloud platform around the world. Veeva Systems has many core CRM projects on track with large pharma companies around the globe.

In the reported quarter, Veeva Systems made significant progress across various fields and geographies, courtesy of products like Veeva Network, Veeva Align, Veeva OpenData and Veeva CRM Approved Email.

Coming to the Vault platform, the company's bookings accounted for more than half of the total in the quarter. In the cloud platform, Veeva Systems gained significant market traction with Zinc Ahead.

The adoption of Vault QualityDocs and Vault QMS is also on the rise. The company gained considerable traction in the market with eight of the top 20 pharmaceuticals companies being standardized on the Vault eTMF platform. Veeva Systems announced its entry into the clinical data management space with two solutions - Veeva Vault EDC and Veeva Vault eSource.

Veeva Systems Inc. Price, Consensus and EPS Surprise

Veeva Systems Inc. Price, Consensus and EPS Surprise | Veeva Systems Inc. Quote

Margin Details

Gross margin at Veeva Systems expanded 200 basis points (bps) to 72.0% in the reported quarter, owing to favorable revenue mix (higher percentage of subscription revenues). The company reported a surge of 200 bps in subscription gross margin, totaling almost 81%.

Balance Sheet

Veeva Systems ended the reported quarter with nearly $724.7 million in cash and short-term investments versus $519.0 million at the end of the sequential quarter. Calculated billings totaled $151 million in the quarter which was ahead of management's guidance of $145 million, courtesy of impressive sales performance and strong services revenue.

Guidance

For fiscal 2018, ending Jan 31, 2018, total revenues are anticipated in the band of $672-$674 million. Adjusted operating income is likely to be between $200.0 million and $202.0 million. Adjusted earnings are forecasted between 86 cents and 87 cents.

For third-quarter fiscal 2017 ending on Oct 31, 2017, Veeva expects total revenues in the range of $171-$172 million. Meanwhile, adjusted operating income is expected between $50 million and $51 million. Adjusted earnings are forecasted between 21 cents and 22 cents.

Our Take

We are upbeat about Veeva Systems' product launches and its industry-focused approach. The growing global demand for cloud-based and vault applications also boost opportunities for the company.

Veeva Systems has strengthened the recurring part of its revenue mix by marking a significant growth in subscription revenues, which were well ahead of service revenues.

Moreover, the new launches are highly encouraging in our view as they are likely to fortify the company's position and enhance its growth prospects over the long haul.

Zacks Rank & Key Picks

Currently, Veeva Systems has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical sector are Edwards Lifesciences Corp. EW , IDEXX Laboratories, Inc. IDXX and Cogentix Medical, Inc. CGNT . Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), while IDEXX Laboratories and Cogentix Medical carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Edwards Lifesciences delivered an average earnings beat of 10.8% over the trailing four quarters.

Cogentix Medical delivered a positive earnings surprise of 200% in the last reported quarter.

IDEXX Laboratories delivered an average earnings beat of 9.3% over the trailing four quarters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.