Veeva Systems Inc. Spoils Shareholders Once Again With a Great Quarter

Data source: Veeva. *Represents non-GAAP figures.

The company's press release didn't mince words when it came to second-quarter performance: "Veeva'squarterly outperformance was fueled by strength across products, geographies, and customers of all sizes."

While it's tough to parse exactly how each segment did -- as the company only provides that data in its annual report -- let's dig in to the hints about how each segment of the company performed .

Strong results from the bread-and-butter CMS offering

Veeva got its start in offering customer management software for drug companies. It is the largest, but likely the slowest-growing, part of the business. In general, it is the cash provided by CMS offerings -- and their high-margin add-ons -- that allows Veeva to develop other offerings like Veeva Vault (more on that below).

For the quarter, the big story with CMS was the fact that the company was able to continue up-selling add-ons to the core CMS solution. In particular, both the Events Management (EM) and Align offerings were gaining traction. Founder and CEO Peter Gassner said that there were now over 10 customers live on EM, while Align had its first customer go live during the previous quarter.

The real growth story: Vault is on fire!

But the real excitement comes from Veeva Vault. In essence, this is the company's solution to help give drug companies one application to track all of the data necessary to navigate the drug approval process, manufacturing, distribution, compliance, and reviews.

According to Gassner: "We closed three seven-figure Vault fields and added 34 new Vault customers. Existing Vault customers expanded at a solid pace as well, and we now have more than 100 customers with multiple Vault applications. That's double the number since this time last year."

Two new Vault products were introduced in the second quarter. ProtoMats Digital Asset Management (DAM) won't be available until December, but it already has a top 10 pharma company signed on to the product. And Vault Clinical Trial Management Systems (CTMS) won't be available until the first quarter of next year, but already has seven top 20 pharma companies signed on to use the product.

That's tremendous momentum for the company moving forward.

Looking ahead

Management said that investors could expect the company to bring in revenue of about $135 million and non-GAAP EPS of $0.16, representing growth of 26% and 33%, respectively. Incidentally, both of those figures are ahead of analyst estimates as well.

After today's pop, shares of Veeva now trade for 99 times trailing non-GAAP earnings and 63 times future earnings. That's not cheap. But its price-to-free cash flow multiple is much more reasonable, sitting at 39. For a company selling a product that's mission-critical and has very high switching costs, that makes the risk/reward much more compelling for investors.

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Brian Stoffel owns shares of Veeva Systems. The Motley Fool owns shares of and recommends Veeva Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.