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Veeva Systems Inc. Is Tanking Today -- but Why?

What happened

Despite the company's good-looking earnings and a bullish guidance, shares of Veeva Systems (NYSE: VEEV), a provider of cloud-based business software to the life sciences industry, fell by 12% as of 11:25 a.m. EDT on Friday.

So what

Here's a review of the headline numbers from the second quarter of fiscal 2018:

  • Revenue jumped 27% to $166.6 million. This figure surpassed Wall Street's expectation of $164 million and was also ahead of management's guidance range.
  • Subscription revenue grew 28% to $134.3 million while professional services revenue grew 23% to $32.2 million.
  • GAAP net income grew 192% to $37.8 million, or $0.25 per share.
  • Non-GAAP (adjusted) net income grew 61% to $22.3 million or $0.23 per share. By contrast, market watchers were only expecting $0.20 in adjusted EPS.
  • Cash balance at quarter's end was $725 million. 

CFO Tim Cabral said this about the quarter:

Turning to its guidance, here's what Veeva is forecasting for the upcoming quarter and full year:

  • Fiscal third-quarter 2018 revenue is expected to land at $171 million to $172 million. Non-GAAP EPS is projected to be between $0.21 and $0.22. Both of these figures are ahead of what Wall Street had anticipated.
  • For the full year, revenue guidance was raised to a new range of $672 million to $674 million. Non-GAAP EPS guidance was also increased to a new range of $0.86 and $0.87. Both of these figures were also comfortably ahead of what market watchers were expecting.

Given the better-than-expected results and an upbeat forecast, I'm left scratching my head as to why the stock is being punished today.

Now what

Here's what CEO Peter Gassner had to say about the quarter:

Furthermore, the company also shared a number of non-financial updates with investors that sounded great:

  • Veeva Vault CTMS, a newly launched product designed to be used during clinical trials, now has seven customers signed up.
  • Veeva Vault eTMF, a tool used to manage inspection readiness, grew its customer count by 31% year over year.
  • A "top 20 biopharmaceutical company" chose Veeva Vault QualityDocs as its enterprise standard. That's the second top 20 customers to do so this year.
  • 10 new Veeva Vault QMS customers were added during the quarter, bringing the total to 30 in less than a year following the product's release.
  • Three top 20 biopharmaceutical companies signed seven-figure deals.

All in all, everything I see from this quarter clearly shows that Veeva's business is firing on all cylinders. While the company's valuation is still quite high, I can't help but think that today's sell-off represents a buying opportunity for a truly great business.

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Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Veeva Systems. The Motley Fool has a disclosure policy.