UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~July 31, 2020~~April 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-36121

Veeva Systems Inc.

(Exact name of registrant as specified in its charter)


Delaware	20-8235463
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

4280 Hacienda Drive

Pleasanton, California, 94588

(Address of principal executive offices)

(Registrant’s telephone number, including area code) (925) 452-6500

(Former name, former address and former fiscal year, if changed since last report) N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A Common Stock,
par value $0.00001 per share

VEEV

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of ~~August~~May 31, ~~2020,~~2021, there were ~~135,725,461~~138,152,712 shares of the Registrant’s Class A common stock outstanding and ~~15,100,951~~14,766,556 shares of the Registrant’s Class B common stock outstanding.

VEEVA SYSTEMS INC.

FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION			4
Item 1.	Financial Statements.	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
	Note 1. Summary of Business and Significant Accounting Policies	8
	Note 2. ~~Acquisitions~~Short-Term Investments	9
	Note 3. Deferred Costs	10
	Note ~~3. Short-Term Investments~~4. Property and Equipment, Net	10
	Note 5. Goodwill and Intangible Assets	11
	Note ~~4. Deferred Costs~~6. Accrued Expenses	12
	Note ~~5. Property and Equipment, Net~~7. Fair Value Measurements	12
	Note ~~6. Goodwill and Intangible Assets~~	13
	~~Note 7. Accrued Expenses~~	14
	~~Note~~ 8. ~~Fair Value Measurements~~Income Taxes	14
	Note 9. Deferred Revenue, Performance Obligations, and Unbilled Accounts Receivable	14
	Note 10. Leases	14
	Note 11. Stockholders’ Equity	15
	Note 12. Net Income ~~Taxes~~per Share	16
	Note ~~10. Deferred Revenue, Performance Obligations,~~13. Commitments and ~~Unbilled Accounts Receivable~~	16
	~~Note 11. Leases~~	17
	~~Note 12. Stockholders’ Equity~~Contingencies	18
	Note ~~13. Net Income per Share~~14. Revenues by Product	19
	~~Note 14. Commitments and Contingencies~~	2120
	Note 15. ~~Revenues by Product~~	23
	~~Note 16.~~ Information about Geographic Areas	2320
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2422
	Overview	2422
	Key Factors Affecting Our Performance	2624
	Components of Results of Operations	2624
	Results of Operations	3027
	Operating Expenses and Operating Margin	3228
	Non-GAAP Financial Measures	3530
	Liquidity and Capital Resources	3632
	Commitments	3834
	Off-Balance Sheet Arrangements	3834
	Critical Accounting Policies and Estimates	3834
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3935
Item 4.	Controls and Procedures.	4036
PART II. OTHER INFORMATION			4137
Item 1.	Legal Proceedings	4137
Item 1A	Risk Factors	4238
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6661
Item 3.	Defaults Upon Senior Securities	6661
Item 4.	Mine Safety Disclosures	6661
Item 5.	Other Information	6661
Item 6.	Exhibits	6762
SIGNATURES			6863


2			Veeva Systems Inc. \| Form 10-Q

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report on Form 10-Q contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations and expenses, business strategies and plans, trends, market sizing, competitive position, industry environment, potential growth opportunities, and product capabilities among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “aim,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “goal,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “strive,” “will,” ~~“would”~~“would,” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors—including those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report—that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward looking statements are based on our current views and expectations and are subject to various risks and uncertainties, including those related to the impact of COVID-19 on our business, the life sciences industry, and global economic conditions. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Any forward-looking ~~statement made by us~~statements in this report ~~speaks~~are made only as of the date ~~on which it is made.~~of this report. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

As used in this report, the terms “Veeva,” “Registrant,” "the Company," “we,” “us,” and “our” mean Veeva Systems Inc. and its subsidiaries unless the context indicates otherwise.


Veeva Systems Inc. \| Form 10-Q			3

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except number of shares and par value)

July 31,
2020 January 31,
2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 795,782 $ 476,733
Short-term investments 699,707 610,015
Accounts receivable, net of allowance for doubtful accounts of $698 and $617,
respectively
220,803 389,690
Unbilled accounts receivable 36,650 32,817
Prepaid expenses and other current assets 32,490 21,869
Total current assets 1,785,432 1,531,124
Property and equipment, net 52,576 54,752
Deferred costs, net 34,645 35,585
Lease right-of-use assets 51,286 49,132
Goodwill 438,529 438,529
Intangible assets, net 124,420 134,601
Deferred income taxes, noncurrent 12,167 11,870
Other long-term assets 17,354 16,184
Total assets $ 2,516,409 $ 2,271,777
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 16,476 $ 19,420
Accrued compensation and benefits 27,494 25,619
Accrued expenses and other current liabilities 22,763 21,620
Income tax payable 2,464 5,613
Deferred revenue 421,167 468,887
Lease liabilities 11,118 10,013
Total current liabilities 501,482 551,172
Deferred income taxes, noncurrent 1,824 2,417
Lease liabilities, noncurrent 46,187 44,815
Other long-term liabilities 10,189 7,779
Total liabilities 559,682 606,183
Commitments and contingencies (Note 14)
Stockholders’ equity:
Class A common stock, $0.00001 par value; 800,000,000 shares authorized,
135,638,899 and 133,892,725 issued and outstanding at July 31, 2020 and January 31, 2020,
respectively
2 1
Class B common stock, $0.00001 par value; 190,000,000 shares authorized,
15,100,951 and 15,202,858 issued and outstanding at July 31, 2020 and January 31, 2020,
respectively
0 0
Additional paid-in capital 850,776 745,475
Accumulated other comprehensive income 6,170 460
Retained earnings 1,099,779 919,658
Total stockholders’ equity 1,956,727 1,665,594
Total liabilities and stockholders’ equity $ 2,516,409 $ 2,271,777
(Unaudited)


	April 30, 2021		January 31, 2021

Assets
Current assets:
Cash and cash equivalents	$	1,184,980	$	730,504
Short-term investments	965,453		933,122
Accounts receivable, net of allowance for doubtful accounts of $358 and $193, respectively	262,327		564,387
Unbilled accounts receivable	51,367		47,206
Prepaid expenses and other current assets	30,939		35,607
Total current assets	2,495,066		2,310,826
Property and equipment, net	52,248		53,650
Deferred costs, net	40,007		42,072
Lease right-of-use assets	53,776		56,917
Goodwill	436,029		436,029
Intangible assets, net	110,166		114,595
Deferred income taxes	13,845		14,100
Other long-term assets	21,012		17,878
Total assets	$	3,222,149	$	3,046,067
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	18,858	$	23,253
Accrued compensation and benefits	31,720		30,410
Accrued expenses and other current liabilities	32,716		30,982
Income tax payable	6,299		2,590
Deferred revenue	608,673		616,992
Lease liabilities	11,280		11,725
Total current liabilities	709,546		715,952
Deferred income taxes	6,488		1,835
Lease liabilities, noncurrent	48,672		51,393
Other long-term liabilities	12,459		10,567
Total liabilities	777,165		779,747
Commitments and contingencies (note 13)	0		0
Stockholders’ equity:
Class A common stock, $0.00001 par value; 800,000,000 shares authorized, 138,022,066 and 137,062,817 issued and outstanding at April 30, 2021 and January 31, 2021, respectively	2		2
Class B common stock, $0.00001 par value; 190,000,000 shares authorized, 14,778,290 and 14,993,991 issued and outstanding at April 30, 2021 and January 31, 2021, respectively	0		0
Additional paid-in capital	1,032,063		965,670
Accumulated other comprehensive income (loss)	(2,304)		992
Retained earnings	1,415,223		1,299,656
Total stockholders’ equity	2,444,984		2,266,320
Total liabilities and stockholders’ equity	$	3,222,149	$	3,046,067

See Notes to Condensed Consolidated Financial Statements.


4			Veeva Systems Inc. \| Form 10-Q

Table of Contents

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)

Three months ended July 31, Six months ended
July 31,
2020 2019 2020 2019
(Unaudited)
Revenues:
Subscription services $ 283,502 $ 217,312 $ 553,737 $ 415,427
Professional services and other 70,181 49,588 137,052 96,225
Total revenues 353,683 266,900 690,789 511,652
Cost of revenues⁽¹⁾:
Cost of subscription services 43,400 31,480 86,612 61,858
Cost of professional services and other 53,804 38,738 105,472 73,863
Total cost of revenues 97,204 70,218 192,084 135,721
Gross profit 256,479 196,682 498,705 375,931
Operating expenses⁽¹⁾:
Research and development 70,053 51,146 132,290 96,119
Sales and marketing 59,172 45,821 114,927 85,438
General and administrative 37,173 25,859 73,842 49,349
Total operating expenses 166,398 122,826 321,059 230,906
Operating income 90,081 73,856 177,646 145,025
Other income, net 2,881 7,332 6,295 13,493
Income before income taxes 92,962 81,188 183,941 158,518
Provision for (benefit from) income taxes (589) 1,946 3,820 5,827
Net income $ 93,551 $ 79,242 $ 180,121 $ 152,691
Net income, basic and diluted $ 93,551 $ 79,242 $ 180,121 $ 152,691
Net income per share:
Basic $ 0.62 $ 0.54 $ 1.20 $ 1.04
Diluted $ 0.58 $ 0.50 $ 1.12 $ 0.96
Weighted-average shares used to compute net income per share:
Basic 150,413 147,510 149,982 147,116
Diluted 160,840 158,675 160,309 158,339
Other comprehensive income:
Net change in unrealized gain on available-for-sale investments $ 1,131 $ 461 $ 2,428 $ 1,423
Net change in cumulative foreign currency translation loss 2,893 (1,742) 3,282 (2,444)
Comprehensive income $ 97,575 $ 77,961 $ 185,831 $ 151,670

~~(1)Includes stock-based compensation as follows:~~(Unaudited)


Cost of revenues:
											Three months ended April 30,
											2021		2020

Revenues:										Revenues:
Subscription services										Subscription services	$	341,119	$	270,235
Professional services and other										Professional services and other	92,454		66,871
Total revenues										Total revenues	433,573		337,106
Cost of revenues(1):										Cost of revenues(1):
Cost of subscription services	Cost of subscription services	$	1,532	$	583	$	2,551	$	968	Cost of subscription services	51,217		43,212
Cost of professional services and other	Cost of professional services and other	7,318		4,458		12,392		7,436		Cost of professional services and other	64,919		51,668
Total cost of revenues										Total cost of revenues	116,136		94,880
Gross profit										Gross profit	317,437		242,226
Operating expenses(1):										Operating expenses(1):
Research and development	Research and development	16,437		9,509		27,838		15,833		Research and development	83,226		62,237
Sales and marketing	Sales and marketing	11,186		7,177		19,378		12,325		Sales and marketing	64,610		55,755
General and administrative	General and administrative	12,893		6,643		24,114		12,564		General and administrative	41,155		36,669
Total stock-based compensation		$	49,366	$	28,370	$	86,273	$	49,126

Total operating expenses										Total operating expenses	188,991		154,661
Operating income										Operating income	128,446		87,565
Other income, net										Other income, net	4,564		3,414
Income before income taxes										Income before income taxes	133,010		90,979
Provision for income taxes										Provision for income taxes	17,443		4,409
Net income										Net income	$	115,567	$	86,570
Net income per share:										Net income per share:
Basic										Basic	$	0.76	$	0.58
Diluted										Diluted	$	0.71	$	0.54
Weighted-average shares used to compute net income per share:										Weighted-average shares used to compute net income per share:
Basic										Basic	152,444		149,541
Diluted										Diluted	162,213		159,474
Other comprehensive income:										Other comprehensive income:
Net change in unrealized gain (loss) on available-for-sale investments										Net change in unrealized gain (loss) on available-for-sale investments	$	(1,086)	$	1,297
Net change in cumulative foreign currency translation gain (loss)										Net change in cumulative foreign currency translation gain (loss)	(2,213)		389
Comprehensive income										Comprehensive income	$	112,268	$	88,256


(1) Includes stock-based compensation as follows:
Cost of revenues:
Cost of subscription services	$	906	$	1,019
Cost of professional services and other	7,422		5,074
Research and development	16,837		11,401
Sales and marketing	11,555		8,192
General and administrative	11,769		11,221
Total stock-based compensation	$	48,489	$	36,907

See Notes to Condensed Consolidated Financial Statements.


Veeva Systems Inc. \| Form 10-Q			5

Table of Contents

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

Three months ended July 31, 2020 Three months ended July 31, 2019
Class A & B
common stock
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income
Total
stockholders’
equity
Class A & B
common stock
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income
Total
stockholders’
equity
Shares Amount Shares Amount
(Unaudited)
Balances at beginning of period 150,030,047 $ 2 $ 792,660 $ 1,006,228 $ 2,146 $ 1,801,036 147,030,464 $ 1 $ 641,925 $ 691,989 $ 1,188 $ 1,335,103
Issuance of common stock upon exercise of stock options 460,856 — 8,750 — — 8,750 488,538 — 3,476 — — 3,476
Issuance of common stock upon vesting of restricted stock units 248,947 — — — — 0 329,632 — — — — 0
Stock-based compensation expense — — 49,366 — — 49,366 — — 28,477 — — 28,477
Other comprehensive income — — — — 4,024 4,024 — — — — (1,281) (1,281)
Net income — — — 93,551 — 93,551 — — — 79,242 — 79,242
Balances at end of period 150,739,850 $ 2 $ 850,776 $ 1,099,779 $ 6,170 $ 1,956,727 147,848,634 $ 1 $ 673,878 $ 771,231 $ (93) $ 1,445,017
(Unaudited)


		Six months ended July 31, 2020																						Six months ended July 31, 2019																				Three months ended April 30, 2021
		Class A & B common stock					Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Total stockholders’ equity	Class A & B common stock						Additional paid-in capital				Retained earnings					Accumulated other comprehensive income			Total stockholders’ equity		Class A & B common stock				Additional paid-in capital	Retained earnings	Accumulated other comprehensive income	Total stockholders’ equity
		Shares	Amount													Shares		Amount																								Accumulated other comprehensive income	Total stockholders’ equity
		(Unaudited)
Balances at beginning of period		149,095,583	$	1	$	745,475	$	919,658	$	460	$	1,665,594	146,190,079	$	1	$	617,623	$	619,197	$	928			$	1,237,749
Cumulative effect adjustment for Topic 842 adoption⁽¹⁾		—	$	—	$	—	$	0	$	—	0		—	$	—	$	—	$	(657)	$	—			(657)

Balances at January 31, 2021																						Balances at January 31, 2021	152,056,808				$	2		$	965,670		$	1,299,656	$	992	$	2,266,320

Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options	1,106,371	1		19,028		—		—		19,029		1,014,592	—		6,915		—		—				6,915		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	Issuance of common stock upon vesting of restricted stock units	537,896	—		—		—		—		0		643,963	—		—		—		—				0		Issuance of common stock upon vesting of restricted stock units		258,511			—			—		—		—	0
Stock-based compensation expense	Stock-based compensation expense	—	—		86,273		—		—		86,273		—	—		49,340		—		—				49,340		Stock-based compensation expense		—			—			48,793		—		—	48,793
Other comprehensive income		—	—		—		—		5,710		5,710		—	—		—		—		(1,021)				(1,021)
Change in other comprehensive income (loss)																						Change in other comprehensive income (loss)	—				—			—			—		(3,296)		(3,296)
Net income	Net income	—	—		—		180,121		—		180,121		—	—		—		152,691		—				152,691		Net income		—			—			—		115,567		—	115,567
Balances at end of period		150,739,850	$	2	$	850,776	$	1,099,779	$	6,170	$	1,956,727	147,848,634	$	1	$	673,878	$	771,231	$	(93)			$	1,445,017
Balances at April 30, 2021																						Balances at April 30, 2021	152,800,356				$	2		$	1,032,063		$	1,415,223	$	(2,304)	$	2,444,984


	Three months ended April 30, 2020
	Class A & B common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Total stockholders’ equity
	Shares	Amount


Balances at January 31, 2020	149,095,583	$	1	$	745,475	$	919,658	$	460	$	1,665,594
Issuance of common stock upon exercise of stock options	645,515	1		10,278		—		—		10,279
Issuance of common stock upon vesting of restricted stock units	288,949	—		—		—		—		0
Stock-based compensation expense	—	—		36,907		—		—		36,907
Change in other comprehensive income (loss)	—	—		—		—		1,686		1,686
Net income	—	—		—		86,570		—		86,570
Balances at April 30, 2020	150,030,047	$	2	$	792,660	$	1,006,228	$	2,146	$	1,801,036

See Notes to Condensed Consolidated Financial Statements.

~~(1)~~We adopted ASU 2016-02, “Leases” (Topic 842) using the modified retrospective method as of February 1, 2019 and elected the transition option that allows us not to restate the comparative periods in our financial statements in the year of adoption.


6			Veeva Systems Inc. \| Form 10-Q

Table of Contents

VEEVA SYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Three months ended July 31, Six months ended
July 31,
2020 2019 2020 2019
(Unaudited)
Cash flows from operating activities
Net income $ 93,551 $ 79,242 $ 180,121 $ 152,691
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,317 3,881 15,195 7,781
Reduction of operating lease right-of-use assets 3,092 1,680 6,089 3,218
Accretion of discount on short-term investments 496 (1,096) 485 (2,274)
Stock-based compensation 49,366 28,370 86,273 49,126
Amortization of deferred costs 5,324 4,843 10,075 9,692
Deferred income taxes (504) 921 (1,638) 1,339
(Gain) Loss on foreign currency from mark-to-market derivative (98) 42 (5) (38)
Bad debt expense (recovery) 514 (159) 121 (312)
Changes in operating assets and liabilities:
Accounts receivable 14,606 18,804 168,766 158,314
Unbilled accounts receivable 619 1,982 (3,833) (3,262)
Deferred costs (5,793) (4,427) (9,135) (9,028)
Income taxes payable (3,141) 611 (4,991) 949
Prepaid expenses and other current and long-term assets (11,683) (1,338) (11,132) (4,097)
Accounts payable 914 379 (3,516) (37)
Accrued expenses and other current liabilities 125 2,672 2,816 1,913
Deferred revenue (49,166) (35,225) (47,689) (27,311)
Operating lease liabilities (2,456) (1,889) (5,267) (3,518)
Other long-term liabilities 2,237 1,180 4,757 1,616
Net cash provided by operating activities 105,320 100,473 387,492 336,762
Cash flows from investing activities
Purchases of short-term investments (267,749) (209,195) (456,567) (438,089)
Maturities and sales of short-term investments 229,224 187,772 369,566 376,737
Long-term assets (5,407) (1,378) (5,140) (2,991)
Net cash used in investing activities (43,932) (22,801) (92,141) (64,343)
Cash flows from financing activities
Reduction of lease liabilities - finance leases (251) (239) (499) (488)
Proceeds from exercise of common stock options 9,278 3,620 19,059 7,011
Net cash provided by financing activities 9,027 3,381 18,560 6,523
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 2,734 (1,742) 3,282 (2,444)
Net change in cash, cash equivalents, and restricted cash 73,149 79,311 317,193 276,498
Cash, cash equivalents, and restricted cash at beginning of period 723,841 749,365 479,797 552,178
Cash, cash equivalents, and restricted cash at end of period $ 796,990 $ 828,676 $ 796,990 $ 828,676
Cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents $ 795,782 $ 827,468 $ 795,782 $ 827,468
Restricted cash included in other long-term assets 1,208 1,208 1,208 1,208
Total cash, cash equivalents, and restricted cash at end of period $ 796,990 $ 828,676 $ 796,990 $ 828,676
Supplemental disclosures of other cash flow information:
Cash paid for income taxes, net of refunds $ 9,089 $ 882 $ 14,955 $ 3,265
Excess tax benefits from employee stock plans $ 22,123 $ 17,026 $ 41,738 $ 30,578
Non-cash investing and financing activities:
Changes in accounts payable and accrued expenses related to property and
equipment purchases
$ 184 $ 97 $ 774 $ (537)
(Unaudited)


	Three months ended April 30,
	2021		2020


Cash flows from operating activities
Net income	$	115,567	$	86,570
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,628		7,878
Reduction of operating lease right-of-use assets	2,827		2,997
Accretion (amortization) of discount on short-term investments	1,542		(11)
Stock-based compensation	48,489		36,907
Amortization of deferred costs	6,355		4,751
Deferred income taxes	5,242		(1,134)
Loss on foreign currency from mark-to-market derivative	431		93
Bad debt (recovery) expense	159		(393)
Changes in operating assets and liabilities:
Accounts receivable	301,732		154,160
Unbilled accounts receivable	(4,161)		(4,452)
Deferred costs	(4,290)		(3,342)
Income taxes payable	3,709		(1,850)
Prepaid expenses and other current and long-term assets	2,737		551
Accounts payable	(6,794)		(4,430)
Accrued expenses and other current liabilities	6,967		2,691
Deferred revenue	(8,176)		1,477
Operating lease liabilities	(2,748)		(2,811)
Other long-term liabilities	2,169		2,520
Net cash provided by operating activities	478,385		282,172
Cash flows from investing activities
Purchases of short-term investments	(256,938)		(188,818)
Maturities and sales of short-term investments	221,645		140,342
Long-term assets	(2,656)		267
Net cash used in investing activities	(37,949)		(48,209)
Cash flows from financing activities
Changes in lease liabilities - finance leases	(286)		(248)
Proceeds from exercise of common stock options	17,091		9,781
Net cash provided by financing activities	16,805		9,533
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(2,765)		548
Net change in cash, cash equivalents, and restricted cash	454,476		244,044
Cash, cash equivalents, and restricted cash at beginning of period	731,712		479,797
Cash, cash equivalents, and restricted cash at end of period	$	1,186,188	$	723,841

Cash, cash equivalents, and restricted cash at end of period:
Cash and cash equivalents	$	1,184,980	$	720,776
Restricted cash included in other long-term assets	1,208		3,065
Total cash, cash equivalents, and restricted cash at end of period	$	1,186,188	$	723,841

Supplemental disclosures of other cash flow information:
Cash paid for income taxes, net of refunds	$	5,133	$	5,866
Excess tax benefits from employee stock plans	$	17,451	$	19,615
Non-cash investing activities:
Changes in accounts payable and accrued expenses related to property and equipment purchases	$	806	$	590

See Notes to Condensed Consolidated Financial Statements.


Veeva Systems Inc. \| Form 10-Q			7

Table of Contents

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 ~~solutions~~offerings span cloud software, data, professional services, and business consulting and are designed to meet the unique needs of our customers and their most strategic business ~~functions-from~~functions—from research and development (R&D) to commercialization. Our solutions ~~are designed to~~ 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, regulatory, quality, 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 3other regulated ~~industries:~~industries, including, for example, consumer goods, chemicals, and cosmetics. 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, ~~2020,~~2021, filed on March 30, ~~2020. Except for the change in certain policies upon adoption of the accounting standards in Fiscal 2021, there~~2021. 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, ~~2020~~2021 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, ~~2021~~2022 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; ~~and~~

•the fair value of ~~assets acquired and liabilities assumed for business combinations.~~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

Table of Contents

~~Revenue Recognition~~

We derive our revenues primarily from subscription services and professional services. Subscription services revenues consist of fees from customers accessing our cloud-based software solutions and fees for our data solutions. Professional services and other revenues consist primarily of fees from implementation services, configuration, data services, training, and managed services related to our solutions. Revenues are recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

~~We determine revenue recognition through the following steps:~~

•~~Identification of the contract, or contracts, with a customer;~~

•~~Identification of the performance obligations in the contract;~~

•~~Determination of the transaction price;~~

•~~Allocation of the transaction price to the performance obligations in the contract; and~~

•~~Recognition of revenue when, or as, we satisfy a performance obligation.~~

~~Our subscription services agreements are generally non-cancelable during the term, although customers typically have the right to terminate their agreements for cause in the event of material breach.~~

~~Subscription Services Revenues~~

~~Professional Services and Other Revenues~~

The majority of our professional services arrangements are billed on a time and materials basis and revenues are recognized over time based on time incurred and contractually agreed upon rates. Certain professional services revenues are billed on a fixed fee basis and revenues are typically recognized over time as the services are delivered based on time incurred. Data services and training revenues are generally recognized as the services are performed.

~~Contracts with Multiple Performance Obligations~~

Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately when they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including other groupings such as customer type and geography.


~~Veeva Systems Inc. \| Form 10-Q~~			9

~~Table of Contents~~

New Accounting Pronouncements Adopted in Fiscal ~~2021~~2022

~~Cloud Computing Arrangements~~Income Taxes

In ~~August 2018,~~December 2019, the ~~FASB~~Financial Accounting Standards Board (FASB) issued ASU No. ~~2018-15, “~~2019-12, "~~Intangibles-Goodwill and Other-Internal-Use Software: Customer’s~~Income Taxes (Topic 740): Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~Income Taxes"~~” (Topic 350-40)~~, which ~~aligns the requirements~~simplifies accounting guidance for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new standard requires capitalized costs to be amortized on a straight-line basis generally over the term of the arrangement, and the financial statement presentation for these capitalized costs would be the same as that of the fees related to the hosting arrangements.certain tax matters. We adopted this standard ~~on a prospective basis as of~~effective February 1, ~~2020 and it~~2021. The adoption of this new standard did not have a material impact on our condensed consolidated financial statements.

~~Credit Losses~~

~~In June 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-13, including subsequent amendments, regarding “Measurement of Credit Losses on Financial Instruments~~”(Topic 326), which modifies the accounting methodology for most financial instruments. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. For trade receivables and other financial assets, we are required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Additionally, any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. We adopted this standard on a modified retrospective basis as of February 1, 2020. The adoption of this standard did not result in any cumulative effect adjustment on our condensed consolidated financial statements.

~~Note 2. Acquisitions~~

~~Crossix~~

On November 1, 2019, we acquired 100% ownership of Crossix in exchange for total consideration of $428 million, which includes the impact of adjustments to purchase price associated with the cash and net working capital of the acquired entity at close. In addition, we granted certain Crossix employees equity retention awards valued at approximately $120 million in the aggregate, which will be expensed as share-based compensation over the remaining service period. Crossix brings Veeva additional depth in patient data and data analytics. Crossix's existing data analytics offerings are complementary to our existing Commercial Cloud offerings, and we are utilizing the Crossix Data Platform to build Veeva Data Cloud, our recently announced longitudinal patient and prescriber data offering.

The following unaudited pro forma information presents the combined results of operations for the periods presented as if the acquisition had been completed on February 1, 2019, the beginning of the comparable prior annual reporting period. The unaudited pro forma results include the amortization associated with estimates for the purchased intangible assets and stock-based compensation expense associated with the retention awards granted.

The unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies or the effect of the incremental costs incurred in integrating the two companies. Accordingly, these unaudited pro forma results are presented for information purpose only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations (in thousands):


10			~~Veeva Systems Inc. \| Form 10-Q~~

~~Table of Contents~~

Three months ended July 31, Six months ended July 31,
2019
(Unaudited)
Pro forma revenues $ 283,263 $ 543,614
Pro forma net income $ 73,423 $ 141,240
Pro forma net income per share:
Basic $ 0.50 $ 0.96
Diluted $ 0.46 $ 0.89

~~Physicians World~~

On November 7, 2019, we completed our acquisition of Physicians World in exchange for total cash consideration of $41 million, which includes the impact of adjustments to purchase price associated with the cash and net working capital of the acquired entity at close. In addition, we granted certain Physicians World employees equity retention awards valued at approximately $15 million in the aggregate. Acquiring Physicians World makes it easier for our customers to get industry leading cloud software and services from a single vendor.

Pro forma results of operations have not been presented for the three and six months ended July 31, 2019 because the effect of this acquisition was not material to our condensed consolidated financial statements.

Note 3.2. Short-Term Investments

At ~~July 31, 2020,~~April 30, 2021, short-term investments consisted of the following (in thousands):


		Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value			Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:
Certificates of deposits	Certificates of deposits	$	10,600	$	54	$	(10)	$	10,644	Certificates of deposits	$	22,350	$	18	$	0	$	22,368
Asset-backed securities	Asset-backed securities	108,437		970		0		109,407		Asset-backed securities	144,412		470		(49)		144,833
Commercial paper	Commercial paper	23,222		57		0		23,279		Commercial paper	59,425		4		(5)		59,424
Corporate notes and bonds	Corporate notes and bonds	254,146		3,272		(29)		257,389		Corporate notes and bonds	535,609		1,743		(209)		537,143
Foreign government bonds	Foreign government bonds	19,079		36		(10)		19,105		Foreign government bonds	32,092		41		(9)		32,124
U.S. agency obligations	U.S. agency obligations	33,160		62		0		33,222		U.S. agency obligations	52,761		78		0		52,839
U.S. treasury securities	U.S. treasury securities	245,328		1,333		0		246,661		U.S. treasury securities	116,374		356		(8)		116,722
Total available-for-sale securities	Total available-for-sale securities	$	693,972	$	5,784	$	(49)	$	699,707	Total available-for-sale securities	$	963,023	$	2,710	$	(280)	$	965,453

At January 31, ~~2020,~~2021, 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 $ 3,500 $ 3 $ 0 $ 3,503
Asset-backed securities 100,419 396 (1) 100,814
Commercial paper 19,965 5 (1) 19,969
Corporate notes and bonds 234,664 1,552 (2) 236,214
Foreign government bonds 3,397 10 0 3,407
U.S. treasury securities 245,509 599 0 246,108
Total available-for-sale securities $ 607,454 $ 2,565 $ (4) $ 610,015


~~Veeva Systems Inc. \| Form 10-Q~~			11

~~Table of Contents~~


	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Available-for-sale securities:
Certificates of deposits	$	17,350	$	15	$	(1)	$	17,364
Asset-backed securities	125,833		745		(2)		126,576
Commercial paper	57,390		8		(2)		57,396
Corporate notes and bonds	428,710		2,360		(23)		431,047
Foreign government bonds	31,855		45		(2)		31,898
U.S. agency obligations	52,756		119		0		52,875
U.S. treasury securities	215,379		587		0		215,966
Total available-for-sale securities	$	929,273	$	3,879	$	(30)	$	933,122

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):

July 31,
2020 January 31,
2020
Due in one year or less $ 304,014 $ 247,592
Due in greater than one year 395,693 362,423
Total $ 699,707 $ 610,015

The following table shows the fair values of these available-for-sale securities, which have been in an unrealized loss position for less than 12 months, aggregated by investment category as of July 31, 2020 (in thousands):

Fair
value
Gross
unrealized
losses
Certificates of deposits $ 5,490 $ (10)
Corporate notes and bonds 23,767 (29)
Foreign government bonds 10,403 (10)

The following table shows the fair values of these available-for-sale securities, some of which have been in an unrealized loss position for more than 12 months, aggregated by investment category as of January 31, 2020 (in thousands):

Fair
value
Gross
unrealized
losses
Asset-backed securities $ 2,623 $ (1)
Commercial paper 5,589 (1)
Corporate notes and bonds 9,105 (2)


	April 30, 2021		January 31, 2021
Due in one year or less	$	356,853	$	428,155
Due in one to five years	608,600		504,967
Total	$	965,453	$	933,122

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 ~~unlikely that they would be sold before their~~more likely than not we will hold these securities until recovery of the cost ~~bases are recovered.~~basis.


Veeva Systems Inc. \| Form 10-Q			9

Table of Contents

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, 2021 (in thousands):


	Held for less than 12 months
	Fair value	Gross unrealized losses

Asset-backed securities	30,844	(49)
Commercial paper	33,342	(5)
Corporate notes and bonds	174,182	(209)
Foreign government bonds	12,097	(9)
U.S. treasury securities	7,479	(8)

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, 2021 (in thousands):


	Held for less than 12 months
	Fair value		Gross unrealized losses

Certificates of deposits	$	3,749	$	(2)
Asset-backed securities	3,318		(1)
Commercial paper	17,626		(2)
Corporate notes and bonds	29,558		(23)
Foreign government bonds	2,679		(2)

Asset values and gross unrealized losses of available-for-sale securities held for more than 12 months as of April 30, 2021 and January 31, 2021 were immaterial. There was no allowance for credit losses recorded as of April 30, 2021 and January 31, 2021.

Note 4.3. Deferred Costs

Deferred costs, which consist primarily of deferred sales commissions, were ~~$35~~$40 million and ~~$36~~$42 million as of ~~July 31, 2020~~April 30, 2021 and January 31, ~~2020,~~2021, respectively. Amortization expense for the deferred costs included in sales and marketing expenses in the condensed consolidated statements of comprehensive income was $5$6 million and ~~$10~~$5 million for the three ~~and six~~ months ended ~~July 31,~~April 30, 2021 and 2020, ~~respectively and $5 million and $10 million for the three and six months ended July 31, 2019,~~ respectively. There have been 0 impairment losses recorded in relation to the costs capitalized for any period presented.

Note 5.4. Property and Equipment, Net

Property and equipment, net consists of the following as of the dates shown (in thousands):


		July 31, 2020		January 31, 2020			April 30, 2021		January 31, 2021
Land	Land	$	3,040	$	3,040	Land	$	3,040	$	3,040
Building	Building	20,984		20,984		Building	20,984		20,984
Land improvements and building improvements	Land improvements and building improvements	22,392		22,392		Land improvements and building improvements	22,392		22,392
Equipment and computers	Equipment and computers	10,922		11,066		Equipment and computers	8,332		8,847
Furniture and fixtures	Furniture and fixtures	12,823		12,849		Furniture and fixtures	13,772		13,452
Leasehold improvements	Leasehold improvements	9,500		9,385		Leasehold improvements	13,857		13,945
Construction in progress	Construction in progress	2,013		386		Construction in progress	483		606
		81,674		80,102			82,860		83,266
Less accumulated depreciation	Less accumulated depreciation	(29,098)		(25,350)		Less accumulated depreciation	(30,612)		(29,616)
Total property and equipment, net	Total property and equipment, net	$	52,576	$	54,752	Total property and equipment, net	$	52,248	$	53,650

Total depreciation expense was $2 million for each of the three months ended April 30, 2021 and 2020. Land is not depreciated.


1210			Veeva Systems Inc. \| Form 10-Q

Table of Contents

Total depreciation expense was $2 million and $4 million for the three and six months ended July 31, 2020, respectively, and $2 million and $4 million for the three and six months ended July 31, 2019, respectively. Land is not depreciated.

Note 6.5. Goodwill and Intangible Assets

Goodwill was $436 million as of ~~July 31, 2020~~both April 30, 2021 and January 31, ~~2020 was $439 million.~~2021.

The following schedule presents the details of intangible assets as of ~~July 31, 2020~~April 30, 2021 (dollar amounts in thousands):


		July 31, 2020																			April 30, 2021
				Gross carrying amount			Accumulated amortization		Net		Remaining useful life (in years)			Gross carrying amount			Accumulated amortization			Net		Remaining useful life (in years)
Existing technology	Existing technology	$	26,180		$	(6,480)		19,700		5.3	Existing technology	$			$	(9,281)		$	16,899		4.5
Customer relationships	Customer relationships	110,643			(22,227)			88,416		8.5	Customer relationships	110,643			(30,414)			80,229			7.8
Trade name/Trademarks		13,900			(2,240)			11,660		4.1
Trade name/trademarks											Trade name/trademarks	13,900			(4,649)			9,251			3.5
Other intangibles	Other intangibles	20,453			(15,809)			4,644		5.3	Other intangibles	20,453			(16,666)			3,787			4.9
		$	171,176		$	(46,756)		124,420				$	171,176		$	(61,010)		$	110,166

The following schedule presents the details of intangible assets as of January 31, ~~2020~~2021 (dollar amounts in thousands):


		January 31, 2020																			January 31, 2021
				Gross carrying amount			Accumulated amortization		Net		Remaining useful life (in years)			Gross carrying amount			Accumulated amortization			Net		Remaining useful life (in years)
Existing technology	Existing technology	$	26,380		$	(4,808)		21,572		5.8	Existing technology	$			$	(8,367)		$	17,813		4.8
Customer relationships	Customer relationships	111,443			(17,575)			93,868		9.0	Customer relationships	110,643			(27,741)			82,902			8.0
Trade name/Trademarks		13,900			(720)			13,180		4.7
Trade name/trademarks											Trade name/trademarks	13,900			(4,005)			9,895			3.8
Other intangibles	Other intangibles	22,947			(16,966)			5,981		5.0	Other intangibles	20,453			(16,468)			3,985			5.1
		$	174,670		$	(40,069)		134,601				$	171,176		$	(56,581)		$	114,595

Amortization expense associated with intangible assets was $5$4 million and ~~$10~~$5 million for the three ~~and six~~ months ended ~~July 31,~~April 30, 2021 and 2020, ~~respectively, and $2 million and $3 million for the three and six months ended July 31, 2019,~~ respectively.

As of ~~July 31, 2020,~~April 30, 2021, the estimated amortization expense for intangible assets, for the next five years and thereafter is as follows (in thousands):


~~Period~~	Estimated amortization expense


~~Remaining for Fiscal 2021~~	$	~~9,826~~
~~Fiscal 2022~~	~~18,163~~
~~Fiscal 2023~~	~~18,163~~
~~Fiscal 2024~~	~~18,160~~
~~Fiscal 2025~~	~~17,417~~
~~Thereafter~~	~~42,691~~
~~Total~~	$	~~124,420~~


Fiscal Year	Estimated amortization expense
Remaining for 2022	$	13,734
2023	18,163
2024	18,160
2025	17,417
2026	13,166
Thereafter	29,526
Total	$	110,166


Veeva Systems Inc. \| Form 10-Q			1311

Table of Contents

Note 7.6. Accrued Expenses

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


		July 31, 2020		January 31, 2020			April 30, 2021		January 31, 2021
Accrued commissions	Accrued commissions	$	5,877	$	8,951	Accrued commissions	$	6,217	$	7,498
Accrued bonus	Accrued bonus	3,922		4,329		Accrued bonus	4,616		4,134
Accrued vacation	Accrued vacation	5,838		3,921		Accrued vacation	6,050		4,716
Payroll tax payable	Payroll tax payable	9,255		7,353		Payroll tax payable	10,128		10,250
Accrued other compensation and benefits	Accrued other compensation and benefits	2,602		1,065		Accrued other compensation and benefits	4,709		3,812
Total accrued compensation and benefits	Total accrued compensation and benefits	$	27,494	$	25,619	Total accrued compensation and benefits	$	31,720	$	30,410
Accrued fees payable to salesforce.com	Accrued fees payable to salesforce.com	6,225		5,787		Accrued fees payable to salesforce.com	6,533		$	6,381
Marketing event accruals		3,500		1,132

Taxes payable	Taxes payable	3,789		4,914		Taxes payable	11,420		13,598
Accrued third-party professional services subcontractors' fees	Accrued third-party professional services subcontractors' fees	1,809		1,338		Accrued third-party professional services subcontractors' fees	1,631		1,515
Other accrued expenses	Other accrued expenses	7,440		8,449		Other accrued expenses	13,132		9,488
Total accrued expenses and other current liabilities	Total accrued expenses and other current liabilities	$	22,763	$	21,620	Total accrued expenses and other current liabilities	$	32,716	$	30,982

Note 8.7. 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.


1412			Veeva Systems Inc. \| Form 10-Q

Table of Contents

The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of ~~July 31, 2020~~April 30, 2021 (in thousands):


		Level 1		Level 2		Total			Level 1		Level 2		Total
Assets	Assets							Assets
Cash equivalents:	Cash equivalents:							Cash equivalents:
Money market funds	Money market funds	$	383,479	$	0	$	383,479	Money market funds	$	626,523	$	0	$	626,523

Commercial paper								Commercial paper	0		22,949		22,949
Corporate notes and bonds	Corporate notes and bonds	0		1,202		1,202		Corporate notes and bonds	0		2,630		2,630
Short-term investments:	Short-term investments:							Short-term investments:
Certificates of deposits	Certificates of deposits	0		10,644		10,644		Certificates of deposits	0		22,368		22,368
Asset-backed securities	Asset-backed securities	0		109,407		109,407		Asset-backed securities	0		144,833		144,833
Commercial paper	Commercial paper	0		23,279		23,279		Commercial paper	0		59,424		59,424
Corporate notes and bonds	Corporate notes and bonds	0		257,389		257,389		Corporate notes and bonds	0		537,143		537,143
Foreign government bonds	Foreign government bonds	0		19,105		19,105		Foreign government bonds	0		32,124		32,124
U.S. agency obligations	U.S. agency obligations	0		33,222		33,222		U.S. agency obligations	0		52,839		52,839
U.S. treasury securities	U.S. treasury securities	0		246,661		246,661		U.S. treasury securities	0		116,722		116,722
Foreign currency derivative contracts	Foreign currency derivative contracts	0		120		120		Foreign currency derivative contracts	0		9		9
Total		$	383,479	$	701,029	$	1,084,508
Liabilities
Foreign currency derivative contracts		0		82		82
Total		$	0	$	82	$	82
Total financial assets								Total financial assets	$	626,523	$	991,041	$	1,617,564

The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of January 31, ~~2020~~2021 (in thousands):


		Level 1		Level 2		Total			Level 1		Level 2		Total
Assets	Assets							Assets
Cash equivalents:	Cash equivalents:							Cash equivalents:
Money market funds	Money market funds	$	24,107	$	0	$	24,107	Money market funds	$	259,937	$	0	$	259,937
Commercial paper		0		1,616		1,616
Corporate notes and bonds		0		2,245		2,245
U.S. treasury securities								U.S. treasury securities	0		15,520		15,520
Short-term investments:	Short-term investments:							Short-term investments:
Certificates of deposits	Certificates of deposits	0		3,503		3,503		Certificates of deposits	0		17,364		17,364
Asset-backed securities	Asset-backed securities	0		100,815		100,815		Asset-backed securities	0		126,576		126,576
Commercial paper	Commercial paper	0		19,969		19,969		Commercial paper	0		57,396		57,396
Corporate notes and bonds	Corporate notes and bonds	0		236,214		236,214		Corporate notes and bonds	0		431,047		431,047
Foreign government bonds	Foreign government bonds	0		3,407		3,407		Foreign government bonds	0		31,898		31,898
U.S. agency obligations								U.S. agency obligations	0		52,875		52,875
U.S. treasury securities	U.S. treasury securities	0		246,107		246,107		U.S. treasury securities	0		215,966		215,966
Foreign currency derivative contracts	Foreign currency derivative contracts	0		75		75		Foreign currency derivative contracts	0		440		440
Total	Total	$	24,107	$	613,951	$	638,058	Total	$	259,937	$	949,082	$	1,209,019
Liabilities	Liabilities							Liabilities
Foreign currency derivative contracts	Foreign currency derivative contracts	0		42		42		Foreign currency derivative contracts	$	0	$	72	$	72
Total	Total	$	0	$	42	$	42	Total	$	0	$	72	$	72

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~~			15

~~Table of Contents~~

Balance Sheet Hedges

We enter into foreign currency forward contracts ~~(the “Forward Contracts”)~~ in order to hedge our foreign currency exposure. We account for derivative instruments 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. ~~The realized~~We recognized foreign currency ~~losses we recognized were~~gains of $1 million for ~~both~~ the three ~~and six~~ months ended ~~July 31, 2020 and 2019.~~April 30, 2021. Foreign currency gains were immaterial for the three months ended April 30, 2020.

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

July 31,
2020 January 31,
2020
Notional amount of foreign currency derivative contracts $ 4,737 $ 7,304
Fair value of foreign currency derivative contracts 4,699 7,271


Veeva Systems Inc. \| Form 10-Q			13

Table of Contents


	April 30, 2021		January 31, 2021
Notional amount of foreign currency derivative contracts	$	28,317	$	52,516
Fair value of foreign currency derivative contracts	28,309		52,148

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

July 31,
2020

January 31,
2020

Derivatives not designated as hedging instruments

Balance sheet location

April 30,
2021

January 31,
2021

Derivative Assets

Foreign currency derivative contracts

Prepaid expenses and other current assets

120

Foreign currency derivative contracts

Prepaid expenses and other current assets

440

Derivative Liabilities

Foreign currency derivative contracts

Accrued expenses

Foreign currency derivative contracts

Accrued expenses

Note 9.8. Income Taxes

For the three months ended ~~July 31,~~April 30, 2021 and 2020, ~~and 2019,~~ our effective tax rates were ~~(0.6)%~~13.1% and ~~2.4%~~4.8%, respectively. During the three months ended ~~July 31, 2020~~April 30, 2021 as compared to the prior year period, our effective tax rate ~~decreased~~increased primarily due to the increase in income before income taxes for the period combined with a decrease in excess tax benefits related to equity compensation. We recognized such excess tax benefits in our provision for income taxes of ~~$22~~$17 million and ~~$17~~$20 million for the three months ended ~~July 31,~~April 30, 2021 and 2020, ~~and 2019,~~ respectively.

For the six months ended July 31, 2020 and 2019, our effective tax rates were 2.1% and 3.7%, respectively. During the six months ended July 31, 2020 as compared to the prior year period, our effective tax rate decreased primarily due to the increase in excess tax benefits related to equity compensation. We recognized such excess tax benefits in our provision for income taxes of $42 million and $31 million for the six months ended July 31, 2020 and 2019, respectively.

In addition, in response to the economic impact of the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), was signed into law on March 27, 2020. We have determined that the CARES Act did not have a material impact on our provision for income taxes for the three and six months ended July 31, 2020, and we do not expect it to have a material impact on our provision for income taxes for the year ending January 31, 2021.

Note ~~10.~~9. Deferred Revenue, Performance Obligations, and Unbilled Accounts Receivable

Of the beginning deferred revenue balance for the respective periods, we recognized ~~$216~~$249 million and ~~$314~~$192 million of subscription services revenue during the three ~~and six~~ months ended ~~July 31,~~April 30, 2021 and 2020, ~~respectively, and $165 million and $239 million of subscription services revenue during the three and six months ended July 31, 2019,~~ 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.


16			~~Veeva Systems Inc. \| Form 10-Q~~

~~Table of Contents~~

As of ~~July 31, 2020,~~April 30, 2021, approximately ~~$844~~$1,244 million of revenue is expected to be recognized from remaining performance obligations for subscription services contracts. We expect to recognize revenue on approximately ~~77%~~75% 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 ~~$20~~$25 million and ~~$18~~$20 million as of ~~July 31, 2020~~April 30, 2021 and January 31, ~~2020,~~2021, 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 ~~$17~~$26 million and ~~$15~~$27 million as of ~~July 31, 2020~~April 30, 2021 and January 31, ~~2020,~~2021, respectively.

Note ~~11.~~10. Leases

We have operating and finance leases for corporate offices ~~data centers,~~ and certain equipment. 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 ~~and six~~ months ended ~~July 31,~~April 30, 2021 and 2020 was immaterial. ~~We did not have any sublease income for~~

For each of the three ~~and six~~ months ended ~~July 31, 2019.~~

~~For the three~~April 30, 2021 and ~~six months ended July 31,~~ 2020, our operating lease expense was $3 ~~million and $6 million, respectively. For the three and six months ended July 31, 2019, our operating lease expense was $2 million and $3 million, respectively.~~million. Our finance lease expense was immaterial for both the three ~~and six~~ months ended ~~July 31, 2020~~April 30, 2021 and ~~2019.~~2020.


14			Veeva Systems Inc. \| Form 10-Q

Table of Contents

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


		Six months ended July 31,							Three months ended April 30,
		2020		2019			2021		2020
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	5,238	$	3,389	Operating cash flows from operating leases	$	3,303	$	2,563
Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:					Right-of-use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	$	6,178	$	5,527	Operating leases	243		306

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

As of July 31, 2020 As of January 31, 2020
Operating Leases
Lease right-of-use-assets $ 51,286 $ 49,132
Lease liabilities $ 10,224 $ 8,960
Lease liabilities, noncurrent 46,187 44,453
Total operating lease liabilities $ 56,411 $ 53,413
Finance Leases
Property and equipment, at cost $ 1,761 $ 1,761
Accumulated depreciation (1,761) (1,320)
Property and equipment, net $ 0 $ 441
Lease liabilities $ 895 $ 1,054
Lease liabilities, noncurrent 0 362
Total finance lease liabilities $ 895 $ 1,416
Weighted Average Remaining Lease Term
Operating leases 6.8 years 7.1 years
Finance leases 0.8 years 1.3 years
Weighted Average Discount Rate
Operating leases 4.1 % 4.3 %
Finance leases 4.3 % 4.3 %


	April 30, 2021			January 31, 2021
Operating Leases
Lease right-of-use assets	$	53,776		$	56,917
Lease liabilities	$	11,184		$	11,347
Lease liabilities, noncurrent	48,672			51,393
Total operating lease liabilities	$	59,856		$	62,740
Weighted Average Remaining Lease Term	6.6 years			6.7 years
Weighted Average Discount Rate	3.8		%	3.8		%


~~Veeva Systems Inc. \| Form 10-Q~~			17

~~Table of Contents~~

As of ~~July 31, 2020,~~April 30, 2021, remaining maturities of operating lease liabilities are as follows (in thousands):

Period Operating leases Finance leases
Remaining for Fiscal 2021 $ 6,147 $ 546
Fiscal 2022 11,574 364
Fiscal 2023 9,481 0
Fiscal 2024 8,553 0
Fiscal 2025 6,192 0
Thereafter 23,203 0
Total lease payments 65,150 910
Less imputed interest (8,739) (15)
Total $ 56,411 $ 895

~~As of July 31, 2020, we have additional operating leases, primarily for office leases, that have not yet commenced and are immaterial.~~


Fiscal Year
Remaining for 2022	$	9,632
2023	11,410
2024	10,641
2025	7,852
2026	6,916
Thereafter	21,606
Total lease payments	68,057
Less imputed interest	(8,201)
Total	$	59,856

Note ~~12.~~11. Stockholders’ Equity

Stock Option Activity

A summary of stock option activity for the ~~six~~three months ended ~~July 31, 2020~~April 30, 2021 is as follows:

Number
of shares
Weighted
average
exercise
price
Weighted
average
remaining
contractual
term (in years)
Aggregate
intrinsic
value
Options outstanding at January 31, 2020 13,448,026 $ 40.64 5.4 $ 1,426,502,005
Options granted 1,330,412 175.20
Options exercised (1,106,371) 17.20
Options forfeited/cancelled (84,729) 97.31
Options outstanding at July 31, 2020 13,587,338 $ 55.20 5.5 $ 2,844,713,778
Options vested and exercisable at July 31, 2020 6,666,508 $ 12.80 3.1 $ 1,678,446,093
Options vested and exercisable at July 31, 2020 and expected to vest thereafter 13,587,338 $ 55.20 5.5 $ 2,844,713,778


	Number of shares	Weighted average exercise price		Weighted average remaining contractual term (in years)	Aggregate intrinsic value (in millions)
Options outstanding at January 31, 2021	12,761,289	$	57.48	5.0	$	2,794
Options granted	1,007,790	276.50
Options exercised	(485,037)	36.29
Options forfeited/cancelled	(105,892)	132.55
Options outstanding at April 30, 2021	13,178,150	$	74.41	5.2	$	2,742
Options vested and exercisable at April 30, 2021	7,195,626	$	27.77	3.2	$	1,833
Options vested and exercisable at April 30, 2021 and expected to vest thereafter	13,178,150	$	74.41	5.2	$	2,742

The options granted during the ~~six~~three months ended ~~July 31, 2020~~April 30, 2021 were predominantly made in connection with our annual performance review cycle. The weighted average grant-date fair value of options granted was ~~$89.80 and $69.62~~$108.50 per option for the three ~~and six~~ months ended ~~July 31, 2020.~~April 30, 2021.


Veeva Systems Inc. \| Form 10-Q			15

Table of Contents

As of ~~July 31, 2020,~~April 30, 2021, there was ~~$251~~$300.1 million in unrecognized compensation cost related to unvested stock options granted under the 2012 Equity Incentive Plan and 2013 Equity Incentive ~~Plan (2013 EIP).~~Plan. This cost is expected to be recognized over a weighted average period of ~~3.6~~3.2 years.

As of ~~July 31, 2020,~~April 30, 2021, 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 ~~$94 million and $185~~$114.6 million for the three ~~and six~~ months ended ~~July 31, 2020, respectively.~~


18			~~Veeva Systems Inc. \| Form 10-Q~~

~~Table of Contents~~

~~Restricted Stock Units~~

~~A summary of restricted stock unit (RSU) activity for the six months ended July 31, 2020 is as follows:~~

Unreleased restricted
stock units
Weighted
average grant
date fair value
Balance at January 31, 2020 1,818,622 $ 95.23
RSUs granted 407,619 175.98
RSUs vested (538,177) 87.39
RSUs forfeited/cancelled (45,837) 89.53
Balance at July 31, 2020 1,642,227 $ 118.01

As of July 31, 2020, there was a total of $170 million in unrecognized compensation cost related to unvested RSUs. This cost is expected to be recognized over a weighted-average period of approximately 2.5 years. The total intrinsic value of RSUs vested was $56 million and $99 million for the three and six months ended July 31, 2020, respectively.April 30, 2021.

Stock-Based Compensation

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
July 31, Six months ended
July 31,
2020 2019 2020 2019
Volatility 40% - 41% 41% 39% - 41% 41%
Expected term (in years) 6.25 - 6.50 6.25 6.25 - 7.25 5.75 - 6.35
Risk-free interest rate 0.39% - 0.57% 1.81% - 2.23% 0.39% - 1.43% 1.81% - 2.52%
Dividend yield 0% 0% 0% 0%


	Three months ended April 30,
	2021				2020
Volatility	39%				39%	-	41%
Expected term (in years)	6.25				6.25	-	7.25
Risk-free interest rate	0.68	%	-	1.07%	0.51%	-	1.43%
Dividend yield	0%				0%

Restricted Stock Units

A summary of restricted stock unit (RSU) activity for the three months ended April 30, 2021 is as follows:


	Unreleased restricted stock units	Weighted average grant date fair value
Balance at January 31, 2021	1,032,215	$	121.98
RSUs granted	394,324	278.17
RSUs vested	(258,511)	135.23
RSUs forfeited/cancelled	(16,277)	138.00
Balance at April 30, 2021	1,151,751	172.24

As of April 30, 2021, there was a total of $185.2 million in unrecognized compensation cost related to unvested RSUs. This cost is expected to be recognized over a weighted-average period of approximately 2.1 years. The total intrinsic value of RSUs vested was $71.5 million for the three months ended April 30, 2021, respectively.

Note ~~13.~~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.


16			Veeva Systems Inc. \| Form 10-Q			19

Table of Contents

The numerators and denominators of the basic and diluted ~~EPS~~net income per share computations for our common stock are calculated as follows (in thousands, except per share data):


		Three months ended July 31,																					Six months ended July 31,																				Three months ended April 30,
				2020									2019									2020											2019									2021		2020
				Class A			Class B			Class A			Class B			Class A			Class B			Class A			Class B			Class A				Class B					Class A				Class B
Basic	Basic																								Basic
Numerator	Numerator																								Numerator
Net income, basic	Net income, basic	$	84,130		$	9,421		$	70,154		$	9,088		$	161,912		$	18,209		$	133,773		$	18,918	Net income, basic	$		104,319			$	11,248				$	77,777			$	8,793
Denominator	Denominator																								Denominator
Weighted average shares used in computing net income per share, basic	Weighted average shares used in computing net income per share, basic	135,266			15,147			130,592			16,918			134,820			15,162			128,888			18,228		Weighted average shares used in computing net income per share, basic	137,607			14,837					134,353				15,188
Net income per share, basic	Net income per share, basic	$	0.62		$	0.62		$	0.54		$	0.54		$	1.20		$	1.20		$	1.04		$	1.04	Net income per share, basic	$	0.76		$	0.76				$	0.58			$	0.58
Diluted	Diluted																								Diluted
Numerator	Numerator																								Numerator
Net income, basic	Net income, basic	$	84,130		$	9,421		$	70,154		$	9,088		$	161,912		$	18,209		$	133,773		$	18,918	Net income, basic	$	104,319		$	11,248				$	77,777			$	8,793
Reallocation as a result of conversion of Class B to Class A common stock:	Reallocation as a result of conversion of Class B to Class A common stock:																								Reallocation as a result of conversion of Class B to Class A common stock:
Net income, basic	Net income, basic	9,421			0			9,088			0			18,209			0			18,918			0		Net income, basic	11,248			0					8,793				0
Reallocation of net income to Class B common stock	Reallocation of net income to Class B common stock	0			5,454			0			4,937			0			10,430			0			9,482		Reallocation of net income to Class B common stock	0			6,282					0				4,844
Net income, diluted	Net income, diluted	$	93,551		$	14,875		$	79,242		$	14,025		$	180,121		$	28,639		$	152,691		$	28,400	Net income, diluted	$	115,567		$	17,530				$	86,570			$	13,637
Denominator	Denominator																								Denominator
Number of shares used for basic EPS computation		135,266			15,147			130,592			16,918			134,820			15,162			128,888			18,228
Number of shares used for basic net income per share computation																									Number of shares used for basic net income per share computation	137,607			14,837					134,353				15,188
Conversion of Class B to Class A common stock	Conversion of Class B to Class A common stock	15,147			0			16,918			0			15,162			0			18,228			0		Conversion of Class B to Class A common stock	14,837			0					15,188				0
Effect of potentially dilutive common shares	Effect of potentially dilutive common shares	10,427			10,427			11,165			11,165			10,327			10,327			11,223			11,223		Effect of potentially dilutive common shares	9,769			9,769					9,933				9,933
Weighted average shares used in computing net income per share, diluted	Weighted average shares used in computing net income per share, diluted	160,840			25,574			158,675			28,083			160,309			25,489			158,339			29,451		Weighted average shares used in computing net income per share, diluted	162,213			24,606					159,474				25,121
Net income per share, diluted	Net income per share, diluted	$	0.58		$	0.58		$	0.50		$	0.50		$	1.12		$	1.12		$	0.96		$	0.96	Net income per share, diluted	$	0.71		$	0.71				$	0.54			$	0.54

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

Three months ended
July 31, Six months ended
July 31,
2020 2019 2020 2019
Options and awards to purchase shares not included in the computation of diluted net income per share because their inclusion would be anti-dilutive 1,220,527 1,328,474 904,570 841,654


	Three months ended April 30,
	2021	2020
Options and awards to purchase shares not included in the computation of diluted net income per share because their inclusion would be anti-dilutive	348,495	2,386,498


20			Veeva Systems Inc. \| Form 10-Q			17

Table of Contents

Note ~~14.~~13. Commitments and Contingencies

Litigation

IQVIA Litigation ~~Matters.~~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~~(OpenData and Network ~~Action”)~~Action). In the complaint, IQVIA alleges that we have 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 ~~counterclaims in the OpenData and Network Action.~~filed counterclaims. Our counterclaims allege that IQVIA, ~~has abused monopoly power~~ as the dominant provider of data ~~products~~ 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 ~~for customers~~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 May 3, 2017, in lieu of filing an answer, IQVIA filed a motion to dismiss our counterclaims.~~ On October 3, 2018, the court denied IQVIA’s motion to dismiss ~~and allowed~~ our antitrust ~~claims to proceed. In addition, on December 3, 2018, we filed an amended answer and counterclaims. IQVIA filed its answer and affirmative defenses on December 21, 2018.~~claims.

On February 18, 2020, IQVIA filed a motion for sanctions against Veeva, seeking default judgment and dismissal and, in the alternative, ~~a negative~~an adverse inference at ~~trial. Veeva responded~~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 ~~motion on May 14, 2020, and further briefing is currently~~trial judge in ~~process. The court has referred~~ the ~~motion~~litigation that a permissive adverse inference instruction be issued to the ~~Special Master appointed~~jury with respect to ~~assist~~Veeva’s failure to preserve certain documents. Such an instruction would likely instruct the jury that it is permitted but not required to infer that certain evidence not preserved by Veeva would have been unfavorable to Veeva if the jury 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 are appealing this ruling and IQVIA’s fee award to the federal district court ~~with~~judge assigned to the case.

Fact discovery is largely complete and ~~pretrial disputes.~~

~~Discovery~~expert discovery is currently in process.

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~~(IQVIA Declaratory ~~Action”)~~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 ~~SaaS~~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~~(Veeva Nitro ~~Action”)~~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


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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.


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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, and stayed both actions pending conclusion of the OpenData and Network Action.

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.~~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 5 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.

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. ~~Briefing on~~On February 9, 2021, the ~~parties’ cross-motions is now complete~~court issued its ruling granting summary judgment in favor of Veeva as to certain of Medidata's claims and ~~we are awaiting a ruling. No~~in favor of Medidata as to certain of Veeva's affirmative defenses. A trial date has been ~~set.~~

set for September 20, 2021. 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.

Value-Added Reseller Agreement


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We have a value-added reseller agreement with salesforce.com, inc. for our use of the Salesforce1 Platform in combination with our developed technology to deliver certain of our multichannel CRM applications, including hosting infrastructure and data center operations provided by salesforce.com. The agreement, as amended, requires that we meet minimum order commitments of $500 million over the term of the agreement, which ends on September 1, 2025, including “true-up” payments if the orders we place with salesforce.com have not equaled or exceeded the following aggregate amounts within the timeframes indicated: (i) $250 million for the period from March 1, 2014 to September 1, 2020 and (ii) the full amount of $500 million by September 1, 2025. We have met our first minimum order requirement commitment of $250 million, and as of ~~July 31, 2020,~~April 30, 2021, we remained obligated to pay fees of at least ~~$99~~$35 million prior to September 1, 2025 in connection with this agreement.


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Note ~~15.~~14. Revenues by Product

Our industry cloud solutions are grouped into 2 key product areas—Veeva Commercial Cloud and Veeva Vault. Veeva Commercial Cloud is a suite of ~~multichannel CRM applications, territory allocation~~software and ~~alignment applications, master data management applications, customer reference and key opinion leader data,~~ data analytics solutions built specifically for life sciences companies to more efficiently and ~~other related services.~~effectively commercialize their products. Veeva Vault is a unified suite of cloud-based, enterprise content and data management applications.

Total revenues consist of the following (in thousands):


		Three months ended July 31,						Six months ended July 31,							Three months ended April 30,
		2020		2019		2020		2019			2021		2020
Subscription services	Subscription services									Subscription services
Veeva Commercial Cloud	Veeva Commercial Cloud	$	144,815	$	112,593	$	287,392	$	218,390	Veeva Commercial Cloud	$	168,458	$	142,577
Veeva Vault	Veeva Vault	138,687		104,719		266,345		197,037		Veeva Vault	172,661		127,658
Total subscription services	Total subscription services	$	283,502	$	217,312	$	553,737	$	415,427	Total subscription services	$	341,119	$	270,235
Professional services	Professional services									Professional services
Veeva Commercial Cloud	Veeva Commercial Cloud	$	26,618	$	16,571	$	53,994	$	33,792	Veeva Commercial Cloud	$	36,026	$	27,376
Veeva Vault	Veeva Vault	43,563		33,017		83,058		62,433		Veeva Vault	56,428		39,495
Total professional services	Total professional services	$	70,181	$	49,588	$	137,052	$	96,225	Total professional services	$	92,454	$	66,871
Total revenues	Total revenues	$	353,683	$	266,900	$	690,789	$	511,652	Total revenues	$	433,573	$	337,106

Note ~~16.~~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 Veeva Commercial Cloud and primarily by the estimated location of usage in each geographic area for Veeva Vault. 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 July 31, Six months ended July 31,
2020 2019 2020 2019
Revenues by geography
North America $ 200,334 $ 145,305 $ 395,991 $ 277,436
Europe 98,395 75,820 187,817 146,194
Asia Pacific 44,569 37,135 86,861 71,503
Rest of world⁽¹⁾
10,385 8,640 20,120 16,519
Total revenues $ 353,683 $ 266,900 $ 690,789 $ 511,652

~~(1)Middle East, Africa, and Latin America~~


	Three months ended April 30,
	2021		2020
Revenues by geography
North America	$	246,300	$	195,657
Europe	121,304		89,422
Asia Pacific	53,632		42,292
Middle East, Africa, and Latin America	12,337		9,735
Total revenues	$	433,573	$	337,106

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

July 31, January 31,
2020
Long-lived assets by geography
North America $ 45,689 $ 51,334
Europe and rest of world 2,881 2,077
Asia Pacific 4,006 1,341
Total long-lived assets $ 52,576 $ 54,752


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	April 30, 2021		January 31, 2021
Long-lived assets by geography
North America	$	45,192	$	46,285
Europe	5,298		5,525
Asia Pacific	1,324		1,359
Middle East, Africa, and Latin America	$	434	481
Total long-lived assets	$	52,248	$	53,650


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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report. In addition to historical condensed consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

Overview

On November 1, 2019, we completed our acquisition of Crossix, a provider of privacy-safe patient data and data analytics. Crossix brings Veeva additional depth in patient data and data analytics. Crossix's existing data analytics offerings are complementary to our existing Commercial Cloud offerings, and we are utilizing the Crossix Data Platform to build Veeva Data Cloud, our recently announced longitudinal patient and prescriber data offering. Further, on November 7, 2019, we completed our acquisition of Physicians World, a provider of speakers bureau services for healthcare professionals. Acquiring Physicians World makes it easier for our customers to get industry leading cloud software and services from a single vendor. While we expect these acquisitions to support the continued growth of our Commercial Cloud solutions, we may encounter difficulties integrating these businesses and we may not retain existing Crossix and Physicians World customers and key Crossix and Physicians World employees to the extent we expect, which could adversely affect our business. Additionally, the legacy businesses of Crossix and Physicians World have been more negatively impacted by COVID-19 than other Veeva product lines and such negative impacts may continue.2021.

In our fiscal year ended January 31, ~~2020,~~2021, we derived approximately ~~52%~~51% and ~~48%~~49% of our subscription services revenues and 49% and 51% of our total revenues from our Veeva Commercial Cloud solutions and Veeva Vault solutions, respectively. For the ~~six~~three months ended ~~July 31, 2020,~~April 30, 2021, we derived approximately ~~52%~~49% and ~~48%~~51% of our subscription services revenues and ~~49%~~47% and ~~51%~~53% of our total revenues from our Veeva Commercial Cloud solutions and Veeva Vault solutions, respectively. The contribution of subscription services revenues and total revenues associated with our Veeva Vault solutions are expected to continue to increase as a percentage of subscription services revenues and total revenues in the future. Please note that revenues attributable to our Crossix and Physicians World businesses are classified under Veeva Commercial Cloud, which will, therefore, impact the mix of revenues between Veeva Commercial Cloud and Veeva Vault. We also offer certain of our Veeva Vault solutions to ~~three~~ industries outside the life sciences industry primarily in North America and Europe.

For our fiscal years ended January 31, 2021, 2020, ~~2019,~~ and ~~2018,~~2019, our total revenues were $1,465 million, $1,104 million ~~$862 million~~ and ~~$691~~$862 million, respectively, representing year-over-year growth in total revenues of ~~28%~~33% in our fiscal year ended January 31, ~~2020~~2021 and ~~25%~~28% in our fiscal year ended January 31, ~~2019.~~2020. For our fiscal years ended January 31, 2021, 2020, ~~2019,~~ and ~~2018,~~2019, our subscription services revenues were $1,179 million, $896 million, ~~$695 million,~~ and ~~$559~~$694 million, respectively, representing year-over-year growth in subscription services revenues of ~~29%~~32% in our fiscal year ended January 31, ~~2020~~2021, and ~~24%~~29% in our fiscal year ended January 31, ~~2019.~~2020. Please note that our total revenues and subscription services revenues for ~~the~~our fiscal year ended January 31, 2020 only included revenue contribution from the acquired Crossix and Physicians World ~~which we acquired early~~businesses in the fourth quarter of ~~the~~that fiscal ~~year ended January 31, 2020.~~year. We expect the growth rate of our total revenues and subscription services revenues to decline in the future. We generated net income of $380 million, $301 million, ~~$230 million,~~ and ~~$151~~$230 million for our fiscal years ended January 31, 2021, 2020, and 2019, ~~and 2018,~~ respectively.


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As of January 31, 2021, 2020, ~~2019,~~ and ~~2018,~~2019, we served 993, 861, ~~719,~~ and ~~625~~719 customers, respectively. As of January 31, 2021, 2020, and 2019, we had 432, 390, and 335 Veeva Commercial Cloud customers, respectively, and 852, 715, and 574 Veeva Vault customers, respectively. The combined customer counts for Veeva Commercial Cloud and Veeva Vault exceed the total customer count in each year because some customers subscribe to products in both areas. Veeva Commercial Cloud customers are those customers that have at least one of the following products: Veeva CRM, Veeva CLM, Veeva CRM Approved Email, Veeva CRM Engage, Veeva Align, Veeva CRM Events Management (including services delivered via Veeva Digital Events), Veeva Nitro, Veeva Andi, Veeva OpenData, Veeva ~~Oncology~~ Link, or Veeva Network Customer ~~Master. Note that net new customers from~~Master, Veeva Crossix, ~~and Physicians World are included in~~or Veeva ~~Commercial Cloud and the associated customer counts for the fiscal year ended January 31, 2020.~~Data Cloud. Veeva Vault customers are those customers that have at least one Vault product. Many of our Veeva Vault applications are used by smaller, earlier stage pre-commercial companies, some of which may not reach the commercialization stage. Thus, the potential number of Veeva Vault customers is significantly higher than the potential number of Veeva Commercial Cloud customers.

For the ~~six~~three months ended ~~July 31,~~April 30, 2021 and 2020, ~~and 2019,~~ our total revenues were ~~$691~~$434 million and ~~$512~~$337 million, respectively, representing ~~period-over-period~~year-over-year growth in total revenues of ~~35%~~29%. For the ~~six~~three months ended ~~July 31,~~April 30,


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2021 and 2020, ~~and 2019,~~ our subscription services revenues were ~~$554~~$341 million and ~~$415~~$270 million, respectively, representing ~~period-over-period~~year-over-year growth in subscription services revenues of ~~33%~~26%. Please note that our total revenues and subscription services revenues for the fiscal year ended January 31, 2020 included revenue contribution from Crossix and Physicians World, which we acquired early in the fourth quarter of the fiscal year ended January 31, 2020. We generated net income of ~~$180~~$116 million and ~~$153~~$87 million for the ~~six~~three months ended ~~July 31,~~April 30, 2021 and 2020, respectively.

Our Conversion to PBC

On February 1, 2021, we became a Delaware public benefit corporation (PBC), and ~~2019, respectively.~~we amended our certificate of incorporation to include the following public benefit purpose: “to provide products and services that are intended to help make the industries we serve more productive, and to create high-quality employment opportunities in the communities in which we operate.” When making decisions, our directors have a fiduciary duty to balance the financial interests of stockholders, the best interests of other stakeholders materially affected by our conduct (including customers, employees, partners, and the communities in which we operate), and the pursuit of our public benefit purpose. For more information on our conversion to a PBC and associated risks, see “Risk Factors.”

Impact of the COVID-19 Pandemic

The ~~World Health Organization has declared the~~worldwide outbreak of COVID-19 ~~which began in December 2019, to be a pandemic. The pandemic~~ has had and continues to have a widespread and unpredictable worldwide impact on our business operations, the life sciences industry, healthcare systems, financial markets, and the global economy. While the impact of COVID-19 on our operational and financial performance has not been materially negative to date, the future impact is uncertain and will depend on future developments, including the duration and spread of the outbreak, government responses to the pandemic, the rate of vaccinations, the impact on our customers, the impact on our employees, the extent of further adverse impacts to the economy, and the scale and pace of economic recovery and resumption of normal business activities, including the rollout of COVID-19 vaccines and the lifting of restrictions on movement, all of which cannot be predicted with certainty.

In response to the COVID-19 outbreak, we ~~have~~ shifted most of our customer, employee, and industry events to virtual-only experiences, ~~for the remainder of our fiscal year ending January 31, 2021.~~and we continue to monitor when larger in-person events should resume. We have ~~also imposed~~begun to lift certain employee travel restrictions and asplan to open most of our U.S. offices in July. At the time of this filing, ~~many~~the substantial majority of ~~our U.S. offices,~~employees continue to work from home, including employees at our corporate headquarters in Pleasanton, California, remain closed with employees working from home. With respect to offices we have opened, we have generally offered employees the option to continue working from home and many employees have chosen to do so.California. Many of our customers have implemented ~~similar~~travel restrictions and remote work measures, which may limit our ability to sell or provide professional services to them ~~over time. Customers may delay or cancel purchasing decisions or professional services projects~~ in ~~light~~the future. Certain of ~~uncertainties to their~~our businesses ~~arising from COVID-19 or renew their subscriptions at lower levels. To date, our Crossix and Physicians World businesses have been~~were negatively impacted by COVID-19 in our fiscal year ended January 31, 2021 and ~~sales to certain other customer segments have been and~~that may continue to be be negatively impacted as well, including sales to pre-commercial life sciences companies, contract research organizations, medical device and cosmetics companies. We are also currently allowing customersfor the use of one of our products, Veeva CRM Engage Meeting, free of charge through December 31, 2020 to facilitate the ability for life sciences personnel to meet remotely with healthcare professionals. We may not receive meaningful revenue from sales of this product in the current fiscal year or thereafter if our customers choose to discontinue use following the end of the free offering period.foreseeable future. We may also experience requests from customers for lengthened payment terms or less favorable billing terms that could adversely impact our financial performance. Such requests to date have not been significant but may increase in the future. Due to our subscription-based business model, the effect of COVID-19, and any impact to our sales efforts, may not be fully reflected in our results of operations until future periods, if at all.

At the same time, COVID-19 has necessitated the adoption of digital communication channels and remote working technology within the life sciences industry at a rapid pace. This transition has accelerated the use and adoption of certain of our applications, including Veeva CRM Engage Meeting and Veeva CRM Approved Email, and that may


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continue in the future with respect to these and other of our Veeva Commercial Cloud and Veeva Vault solutions that enable remote interactions.

Certain impacts of the COVID-19 pandemic and resulting changes in business practice may be enduring over the long term and may result in significant changes in business practice within the technology industry, the life sciences industry, and the world economy generally. For example, the extent to which remote work will remain common practice or become increasingly prevalent after the COVID-19 pandemic ends is not certain and may have significant impacts on hiring practices, management practices, expense structures and investments, and other aspects of our business and the businesses of our customers. Similarly, the extent to which virtual meetings and interactions continue to be used or preferred in lieu of in-person interactions may significantly change business practices for us and our customers, and, in turn, may impact demand for our products and services. For example, if our customers reduce sales representatives in response to an increasing preference for virtual meetings with doctors, demand for our core CRM application may decline. We expect life sciences companies to reduce the number of sales representatives that they employ by roughly 10% over the next one to two years, which could negatively impact sales of our solutions, including Veeva CRM and other Commercial Cloud applications in particular, but we cannot be certain such reductions will happen or of the timing or magnitude of such reductions. At the same time, demand for our products that enable virtual interactions with doctors and clinical trial participants may increase. We cannot accurately predict how such changes may impact Veeva's results over the long term.


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Key Factors Affecting Our Performance

Investment in Growth. We have invested and intend to continue to invest aggressively in expanding the breadth and depth of our product portfolio, including through acquisitions. We expect to continue to invest in research and development to expand existing solutions and build new solutions; in sales and marketing to promote our solutions to new and existing customers and in existing and expanded geographies and industries; in professional services and business consulting to help ensure ~~the success of our customers’ implementations of our solutions;~~customer success; and in other operational and administrative functions to support our expected growth. We expect that our headcount will increase as a result of these investments. We also expect our total operating expenses will continue to increase over time, which could have a negative impact on our operating margin.

Adoption of Our Solutions by Existing and New Customers. Most of our customers initially deploy our solutions to a limited number of end users within a division or geography and may only initially deploy a limited set of our available solutions. Our future growth is dependent upon our existing customers’ continued success and their renewals of subscriptions to our solutions, expanded deployment of our solutions within their organizations, and their purchase of subscriptions to additional solutions. Our growth is also dependent on the adoption of our solutions by new customers.

Subscription Services Revenue Retention Rate. A key factor to our success is the renewal and expansion of our existing subscription agreements with our customers. We calculate our annual subscription services revenue retention rate for a particular fiscal year by dividing (i) annualized subscription revenue as of the last day of that fiscal year from those customers that were also customers as of the last day of the prior fiscal year by (ii) the annualized subscription revenue from all customers as of the last day of the prior fiscal year. Annualized subscription revenue is calculated by multiplying the daily subscription revenue recognized on the last day of the fiscal year by 365. This calculation includes the impact on our revenues from customer non-renewals, deployments of additional users or decreases in users, deployments of additional solutions or discontinued use of solutions by our customers, and price changes for our solutions. Historically, the impact of price changes on our subscription services revenue retention rate has been minimal. For our fiscal years ended January 31, 2021, 2020, ~~2019,~~ and ~~2018,~~2019, our subscription services revenue retention rate was ~~121%~~124%, ~~122%~~121%, and ~~121%~~122%, respectively.

Components of Results of Operations

Revenues

We derive our revenues primarily from subscription services fees and professional services fees. Subscription services revenues consist of fees from customers accessing our cloud-based software solutions and fees for our data solutions. Professional services and other revenues consist primarily of fees from implementation services, configuration, data services, training, and managed services related to our ~~solutions.~~solutions and services related to our Veeva Business Consulting offering. For the ~~six~~three months ended ~~July 31, 2020,~~April 30, 2021, subscription services revenues constituted ~~80%~~79% of total revenues and professional services and other revenues constituted ~~20%~~21% of total revenues.

We generally enter into master subscription agreements with our customers and count each distinct master subscription agreement that has not been terminated or expired and that has orders for which we have recognized


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revenue in the quarter as a distinct customer for purposes of determining our total number of current customers as of the end of that quarter. We generally enter into a single master subscription agreement with each customer, although in some instances, affiliated legal entities within the same corporate family may enter into separate master subscription agreements. Conversely, affiliated legal entities that maintain distinct master service agreements may choose to consolidate their orders under a single master service agreement, and, in that circumstance, our customer count would decrease. Divisions, subsidiaries and operating units of our customers often place distinct orders for our subscription services under the same master subscription agreement, and we do not count such distinct orders as new customers for purposes of determining our total customer count.

For purposes of determining customers of Veeva Crossix that do not contract under a master subscription agreement, we count each entity that has a statement of work or services agreement and a recurring known payment obligation as a distinct customer if such entity is not otherwise a customer of ours. For ~~purposes~~Veeva Crossix, we do not count as distinct customers agencies contracting with us on behalf of ~~determining customers of Physicians World, we count each entity for which we recognize services revenue as a distinct customer if such entity is not otherwise a customer of ours.~~brands within life sciences companies.

New subscription orders for our core Veeva CRM application generally have a one-year term. If a customer adds end users or additional Veeva Commercial Cloud applications to an existing order for our core Veeva CRM application, such additional orders will generally be coterminous with the anniversary date of the core Veeva CRM


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order, and as a result, orders for additional end users or additional Veeva Commercial Cloud applications will commonly have an initial term of less than one year.

With respect to applications other than our core Veeva CRM application and particularly with respect to our Veeva Vault applications, we have entered into a number of orders ~~that are several years in duration, ranging from two to eight years.~~with multi-year terms. The fees associated with such orders are typically not based on the number of end-users and typically escalate over the term of such orders at a pre-agreed rate to account for, among other factors, implementation and adoption timing and planned increased usage by the customer. There are timing differences between billings and revenue recognition with respect to certain of our multi-year orders with escalating fees which will result in fluctuations in deferred revenue and unbilled accounts receivable ~~balances that did not occur prior to our adoption of Topic 606.~~balances. For instance, when the amounts we are entitled to invoice in any period pursuant to multi-year orders with escalating fees are less than the revenue ~~we are required to recognize pursuant to Topic 606,~~recognized in accordance with relevant accounting standards, we will accrue an unbilled accounts receivable balance (a contract asset) related to such orders. In the same scenario, the net deferred revenue we would record in connection with such orders will be less ~~than it would have been prior to the adoption of Topic 606~~ because we will be recognizing more revenue earlier in the term of such multi-year orders.

Our subscription orders are generally billed at the beginning of the subscription period in annual or quarterly increments, which means the annualized value of such orders may not be completely reflected in deferred revenue at any single point in time. Also, particularly with respect to our Veeva Commercial Cloud orders, because the term of orders for additional end users or applications is commonly less than one year, the annualized value of such orders may not be completely reflected in deferred revenue at any single point in time. We have also agreed from time to time, and may agree in the future, to allow customers to change the renewal dates of their orders to, for example, align more closely with a customer’s annual budget process or to align with the renewal dates of other orders placed by other entities within the same corporate control group, or to change payment terms from annual to quarterly, or vice versa. Such changes typically result in an order of less than one year as necessary to align all orders to the desired renewal date and, thus, may result in a lesser increase to deferred revenue than if the adjustment had not occurred. Additionally, changes in renewal dates may change the fiscal quarter in which deferred revenue associated with a particular order is booked. Accordingly, we do not believe that changes on a quarterly basis in deferred revenue, unbilled accounts receivable, or calculated billings, a metric commonly cited by financial analysts, are accurate indicators of future revenues for any given period of time. We define the term calculated billings for any period to mean revenue for the period plus the change in deferred revenue from the immediately preceding period minus the change in unbilled accounts receivable (contract asset) from the immediately preceding period.

Subscription services revenues are recognized ratably over the respective non-cancelable subscription term because of the continuous transfer of control to the customer. Our subscription services agreements are generally non-cancelable during the term, although customers typically have the right to terminate their agreements for cause in the event of material breach. Our agreements typically provide that orders will automatically renew unless notice of non-renewal is provided in advance. Subscription services revenues are affected primarily by the number of customers, the scope of the subscription purchased by each customer (for example, the number of end users or other subscription usage metric) and the number of solutions subscribed to by each customer.


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We utilize our own ~~professional services~~ personnel ~~and, in certain cases, third-party subcontractors~~ to perform our professional services and business consulting engagements with customers. In certain cases, we may utilize third-party subcontractors to perform professional services engagements. The majority of our professional services arrangements are billed on a time and materials basis and revenues are recognized over time based on time incurred and contractually agreed upon rates. Certain professional services ~~revenues~~and business consulting arrangements are billed on a fixed fee basis and revenues are typically recognized over time as the services are delivered based on time incurred. Data services and training revenues are generally recognized as the services are performed. Professional services revenues are affected primarily by our customers’ demands for implementation services, configuration, data services, training, speakers bureau logistics, and managed services in connection with our solutions. Our business consulting revenues are affected primarily by our customers’ demands for services related to a particular customer success initiative, strategic analysis, or business process change, and not a cloud software implementation.

Allocated Overhead

We accumulate certain costs such as building depreciation, office rent, utilities, and other facilities costs and allocate them across the various departments based on headcount. We refer to these costs as “allocated overhead.”


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Cost of Revenues

Cost of subscription services revenues for all of our solutions consists of expenses related to our computing infrastructure provided by third parties, including salesforce.com and Amazon Web Services, personnel related costs associated with hosting our subscription services and providing support, including our data stewards, data acquisition and third-party contractor costs related to the development of our data products, expenses associated with computer equipment and software, allocated overhead, and amortization expense associated with certain purchased intangibles related to our subscription services. We intend to continue to invest additional resources in our subscription services to enhance our product offerings and increase our delivery capacity. We may add or expand computing infrastructure capacity in the future, migrate to new computing infrastructure service providers, make additional investments in the availability and security of our solutions, and make continued investments in data sources.

Cost of professional services and other revenues consists primarily of employee-related expenses associated with providing these services. The cost of providing professional services is significantly higher as a percentage of the related revenues than for our subscription services due to the direct labor costs and costs of third-party subcontractors.

Operating Expenses

Research and Development. Research and development expenses consist primarily of employee-related expenses, third-party consulting fees, and hosted infrastructure costs. We continue to focus our research and development efforts on adding new features and applications and increasing the functionality and enhancing the ease of use of our cloud-based applications.

Sales and Marketing. Sales and marketing expenses consist primarily of employee-related expenses, sales commissions, marketing program costs, amortization expense associated with purchased intangibles related to our customer contracts, customer relationships and brand development, travel-related expenses and allocated overhead. Marketing program costs include advertising, customer events, corporate communications, brand awareness, and product marketing activities. Sales commissions are costs of obtaining new customer contracts and are capitalized and then amortized over a period of benefit that we have determined to be one to three years.

General and Administrative. General and administrative expenses consist of employee-related expenses for our executive, finance and accounting, legal, employee success, management information systems personnel, and other administrative employees. In addition, general and administrative expenses include fees related to third-party legal counsel, fees related to third-party accounting, tax and audit services, other corporate expenses, and allocated overhead.

Other Income, Net

Other income, net, consists primarily of transaction gains or losses on foreign currency, net of hedging costs, interest income, and amortization of premiums paid on investments.


28			~~Veeva Systems Inc. \| Form 10-Q~~

~~Table of Contents~~

Provision for Income Taxes

Provision for income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions. See note 98 of the notes to our condensed consolidated financial statements.

New Accounting Pronouncements Adopted in Fiscal ~~2021~~2022

Refer to note 1 of the notes to our condensed consolidated financial statements for a full description of the recent accounting pronouncements adopted during the ~~fiscal year ending January 31,~~three months ended April 30, 2021.

~~Recent Accounting Pronouncements~~

~~Accounting for Income Taxes~~

~~In December 2019, the FASB issued ASU 2019-12, regarding ASC Topic 740 “Income Taxes~~,” which simplifies certain aspects of accounting for income taxes. The guidance is effective for annual reporting periods beginning after December 15, 2020, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the timing and impact of the adoption of this standard on our consolidated financial statements.


26			Veeva Systems Inc. \| Form 10-Q			29

Table of Contents

Results of Operations

The following tables set forth selected condensed consolidated statements of operations data and such data as a percentage of total revenues for each of the periods indicated:

Three months ended July 31, Six months ended July 31,
2020 2019 2020 2019
(in thousands)
Consolidated Statements of Comprehensive Income Data:
Revenues:
Subscription services $ 283,502 $ 217,312 $ 553,737 $ 415,427
Professional services and other 70,181 49,588 137,052 96,225
Total revenues 353,683 266,900 690,789 511,652
Cost of revenues⁽¹⁾:
Cost of subscription services 43,400 31,480 86,612 61,858
Cost of professional services and other 53,804 38,738 105,472 73,863
Total cost of revenues 97,204 70,218 192,084 135,721
Gross profit 256,479 196,682 498,705 375,931
Operating expenses⁽¹⁾:
Research and development 70,053 51,146 132,290 96,119
Sales and marketing 59,172 45,821 114,927 85,438
General and administrative 37,173 25,859 73,842 49,349
Total operating expenses 166,398 122,826 321,059�� 230,906
Operating income 90,081 73,856 177,646 145,025
Other income, net 2,881 7,332 6,295 13,493
Income before income taxes 92,962 81,188 183,941 158,518
Provision for (benefit from) income taxes (589) 1,946 3,820 5,827
Net income 93,551 79,242 180,121 152,691

~~(1)Includes stock-based compensation as follows:~~


	Three months ended April 30,
	2021		2020

	(in thousands)
Consolidated Statements of Comprehensive Income Data:
Revenues:
Subscription services	$	341,119	$	270,235
Professional services and other	92,454		66,871
Total revenues	433,573		337,106
Cost of revenues(1):
Cost of subscription services	51,217		43,212
Cost of professional services and other	64,919		51,668
Total cost of revenues	116,136		94,880
Gross profit	317,437		242,226
Operating expenses(1):
Research and development	83,226		62,237
Sales and marketing	64,610		55,755
General and administrative	41,155		36,669
Total operating expenses	188,991		154,661
Operating income	128,446		87,565
Other income, net	4,564		3,414
Income before income taxes	133,010		90,979
Provision for income taxes	17,443		4,409
Net income	$	115,567	$	86,570
(1) Includes stock-based compensation as follows:


Cost of revenues:	Cost of revenues:									Cost of revenues:
Cost of subscription services	Cost of subscription services	$	1,532	$	583	$	2,551	$	968	Cost of subscription services	$	906	$	1,019
Cost of professional services and other	Cost of professional services and other	7,318		4,458		12,392		7,436		Cost of professional services and other	7,422		5,074
Research and development	Research and development	16,437		9,509		27,838		15,833		Research and development	16,837		11,401
Sales and marketing	Sales and marketing	11,186		7,177		19,378		12,325		Sales and marketing	11,555		8,192
General and administrative	General and administrative	12,893		6,643		24,114		12,564		General and administrative	11,769		11,221
Total stock-based compensation	Total stock-based compensation	$	49,366	$	28,370	$	86,273	$	49,126	Total stock-based compensation	$	48,489	$	36,907

Revenues


																							Three months ended April 30,
		Three months ended July 31,														Six months ended July 31,												2021		2020	% Change
					2020				2019		% Change				2020				2019				% Change
					(dollars in thousands)																											(dollars in thousands)
Revenues:	Revenues:																					Revenues:
Subscription services	Subscription services	$	283,502			$	217,312			30%		$	553,737			$	415,427			33%	Subscription services		$		$	270,235		26%
Professional services and other	Professional services and other	70,181				49,588				42		137,052				96,225				42	Professional services and other		92,454			66,871			38%
Total revenues	Total revenues	$	353,683			$	266,900			33		$	690,789			$	511,652			35	Total revenues		$	433,573		$	337,106		29%
Percentage of revenues:	Percentage of revenues:																				Percentage of revenues:
Subscription services	Subscription services	80		%		81		%				80		%		81		%			Subscription services		79	%	80		%
Professional services and other	Professional services and other	20				19						20				19					Professional services and other		21		20
Total revenues	Total revenues	100		%		100		%				100		%		100		%			Total revenues		100	%	100		%

Total revenues for the three months ended ~~July 31, 2020~~April 30, 2021 increased ~~$87~~$96 million, of which ~~$66~~$71 million was from growth in subscription services revenues. The increase in subscription services revenues consisted of ~~$34~~$45 million of subscription services revenue attributable to Veeva Vault solutions and ~~$32~~$26 million of subscription services revenue attributable to Veeva Commercial Cloud ~~solutions, which includes the contribution from Crossix.~~solutions. The geographic mix of subscription services revenues was 56%


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~~of subscription services revenues was 56%~~ from North America and 27% from Europe for the three months ended ~~July 31, 2020~~April 30, 2021, as compared to subscription services revenues of ~~53%~~57% from North America and ~~28%~~26% from Europe for the three months ended ~~July 31, 2019.~~April 30, 2020.

Professional services and other revenues for the three months ended ~~July 31, 2020~~April 30, 2021 increased ~~$21~~$26 million. The increase in professional services revenues was due primarily to new customers requesting implementation and ~~deployment related~~deployment-related professional services, ~~and~~ existing customers requesting professional services related to expanding deployments or the deployment of newly purchased solutions, and ~~to a lesser extent, professional services revenues associated with our acquired businesses.~~increased business consulting engagements. The increased demand for professional services and the resulting increase in professional services revenues was weighted heavily towards implementation and deployments of our Veeva Vault ~~solutions.~~solutions, as well as increased demand for our business consulting offering. The geographic mix of professional services and other revenues was ~~61% from North America and 32% from Europe for the three months ended July 31, 2020 as compared to 60% from North America and 31% from Europe for the three months ended July 31, 2019.~~

Total revenues for the six months ended July 31, 2020 increased $179 million, of which $138 million was from growth in subscription services revenues. The increase in subscription services revenues consisted of $69 million of subscription services revenue attributable to Veeva Vault solutions and $69 million of subscription services revenue attributable to Veeva Commercial Cloud solutions, which includes the contribution from Crossix. The geographic mix of subscription services revenues was 56% from North America and 26% from Europe for the six months ended July 31, 2020 as compared to subscription services revenues of 53% from North America and 28% from Europe for the six months ended July 31, 2019.

Professional services and other revenues for the six months ended July 31, 2020 increased $41 million. The increase in professional services revenues was due primarily to new customers requesting implementation and deployment related professional services and existing customers requesting professional services related to expanding deployments or the deployment of newly purchased solutions, and, to a lesser extent, professional services revenues associated with our acquired businesses. The increased demand for professional services and the resulting increase in professional services revenues was weighted heavily towards implementation and deployments of our Veeva Vault solutions. The geographic mix of professional services and other revenues was 62% from North America and 31% from Europe for the six months ended July 31, 2020 as compared to 59% from North America and 33% from Europe for the ~~six~~three months ended ~~July 31, 2019.~~April 30, 2021, as compared to 63% from North America and 30% from Europe for the three months ended April 30, 2020.

Over time, we expect the proportion of our total revenues from professional services to decrease.

Costs and Expenses


																	Three months ended April 30,
		Three months ended July 31,										Six months ended July 31,											2021	2020	% Change
		2020			2019			% Change	2020			2019			% Change
		(dollars in thousands)																								(dollars in thousands)
Cost of revenues:	Cost of revenues:															Cost of revenues:
Cost of subscription services	Cost of subscription services	$	43,400		$	31,480		38%	$	86,612		$	61,858		40%	Cost of subscription services	$	51,217		$	43,212		19%
Cost of professional services and other	Cost of professional services and other	53,804			38,738			39	105,472			73,863			43	Cost of professional services and other	64,919			51,668			26%
Total cost of revenues	Total cost of revenues	$	97,204		$	70,218		38	$	192,084		$	135,721		42	Total cost of revenues	$	116,136		$	94,880		22%
Gross margin percentage:	Gross margin percentage:															Gross margin percentage:
Subscription services	Subscription services	85		%	86		%		84		%	85		%		Subscription services	85		%	84		%
Professional services and other	Professional services and other	23			22				23			23				Professional services and other	30		%	23		%
Total gross margin percentage	Total gross margin percentage	73		%	74		%		72		%	73		%		Total gross margin percentage	73		%	72		%
Gross profit	Gross profit	$	256,479		$	196,682		30%	$	498,705		$	375,931		33%	Gross profit	$	317,437		$	242,226		31%

Cost of revenues for the three months ended ~~July 31, 2020~~April 30, 2021 increased ~~$27~~$21 million, of which ~~$12~~$8 million was ~~related to~~an increase in cost of subscription services. The increase in cost of subscription services was primarily due to an increase of ~~$4 million in data acquisition costs related to the acquired business of Crossix. There was an increase of~~ $3 million in ~~employee compensation-related~~computing infrastructure costs, ~~(includes an increase~~the vast majority of ~~$1 million in stock-based compensation). The increase in employee compensation-related costs is primarily driven~~which was for computing infrastructure provided by ~~the increase in headcount during the period. Additionally, there was~~Amazon Web Services, and an increase of $2 million in fees paid to salesforce.com, which was driven by an increase in the number of end users of our subscription ~~services, and~~services. Additionally, there was an increase of $1 million in ~~computing infrastructure~~costs of third-party contractors related to the development of our data products. There was also an increase of $1 million related to data acquisition costs.


~~Veeva Systems Inc. \| Form 10-Q~~			31

~~Table~~ We expect cost of ~~Contents~~

subscription services to increase in absolute dollars due to increased usage of our subscription services and increased data costs related to our Veeva Data Cloud offering.

Cost of professional services and other for the three months ended ~~July 31, 2020~~April 30, 2021 increased ~~$15~~$13 million, ~~primarily~~ due to a $14 million increase in employee compensation-related costs ~~(includes an increase of $3 million in stock-based compensation). The increase in employee compensation-related costs is primarily driven by the increase in headcount during the period.~~

Gross margin for the three months ended July 31, 2020 and 2019 was 73% and 74%, respectively. The decrease compared to the prior period is largely due to the products and services of our acquired businesses, which have lower gross margins than our core products and services.

Cost of revenues for the six months ended July 31, 2020 increased $56 million, of which $25 million was related to cost of subscription services. The increase in cost of subscription services was primarily due to an increase of $8 million in data acquisition costs related to the acquired business of Crossix. There was an increase of $5 million in employee compensation-related costs (includes(which includes an increase of $2 million in stock-based compensation)~~. The increase~~ that was partially offset by a $1 million decrease in ~~employee compensation-related~~ costs is primarily driven by the increase in headcount during the period. Additionally, there was an increase of $4 million in fees paid to salesforce.com, driven by an increase in the number of end users of our subscription services,related travel and ~~an increase of $3 million in computing infrastructure costs. We expect cost of subscription services revenues to increase in absolute dollars in the near term~~live events due to ~~increased usage of our subscription services.~~

Cost of professional services and other for the six months ended July 31, 2020 increased $32 million, primarily due to a $27 million increase in employee compensation-related costs (includes an increase of $5 million in stock-based compensation).COVID-19. The increase in employee compensation-related costs is primarily driven by the increase in headcount during the period. We expect cost of professional services and other to increase in absolute dollars ~~in the near term~~ as we add personnel to our global professional services organization.

Gross margin for the ~~six~~three months ended ~~July 31,~~April 30, 2021 and 2020 was 73% and ~~2019 was~~ 72% ~~and 73%~~, respectively. The ~~decrease~~increase compared to the prior period is largely due to the ~~products and services~~growth in sales of our ~~acquired businesses,~~Veeva Vault solutions, which have ~~lower~~higher gross margins ~~than our core products and services.~~

We expect gross margin to decrease in the fiscal year ending January 31, 2021 due to the dilutive impact from our acquired businesses, which we expect to be partially offset by growth of our Vault products, which have a higher gross margin profile relativeas compared to our ~~core CRM product.~~Veeva Commercial Cloud solutions.

Operating Expenses and Operating Margin

Operating expenses include research and development, sales and marketing, and general and administrative expenses. As we continue to invest in our growth through hiring, we expect operating expenses and stock-based compensation to increase in absolute dollars and ~~may~~to slightly increase as a percentage of revenue in the near term. We also expect stock-based compensation expense to increase in absolute dollars and as a percentage of revenue through the fiscal year ending January 31, 2021 due to increased headcount and retention equity awards granted to certain employees associated with the acquisitions in November 2019.

~~Research and Development~~

Three months ended July 31, Six months ended
July 31,
2020 2019 % Change 2020 2019 % Change
(dollars in thousands)
Research and development $ 70,053 $ 51,146 37% $ 132,290 $ 96,119 38%
Percentage of total revenues 20 % 19 % 19 % 19 %

Research and development expenses for the three months ended July 31, 2020 increased $19 million, primarily due to an increase of $17 million in employee compensation-related costs (includes an increase of $7 million in stock-based compensation). The increase in employee compensation-related costs is primarily driven by the increase in headcount during the period. The expansion of our headcount in research and development is to support development work for the increased number of products that we offer or may offer in the future.


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Research and Development


	Three months ended April 30,
	2021			2020			% Change

	(dollars in thousands)
Research and development	$	83,226		$	62,237		34%
Percentage of total revenues	19		%	18		%

Research and development expenses for the ~~six~~three months ended ~~July 31, 2020~~April 30, 2021 increased ~~$36~~$21 million, ~~primarily~~ due to an increase of ~~$31~~$21 million in employee compensation-related costs ~~(includes~~(which includes an increase of ~~$12~~$5 million in stock-based compensation). The increase in employee compensation-related costs is primarily driven by the increase in headcount during the period. The expansion of our headcount in research and development is to support development work for the increased number of products that we offer or may offer in the future.

We expect research and development expenses to increase in absolute dollars and ~~may increase~~ as a percentage of revenue in the ~~near term,~~future, primarily due to higher headcount as we continue to invest in our ~~solutions and develop new technologies and as we experience the full impact of additional research and development headcount and expenses associated with our acquired businesses.~~product offerings.

Sales and Marketing


																						Three months ended April 30,
		Three months ended July 31,														Six months ended July 31,										2021	2020	% Change
					2020				2019		% Change				2020				2019		% Change
					(dollars in thousands)																								(dollars in thousands)
Sales and marketing	Sales and marketing	$	59,172			$	45,821			29%		$	114,927			$	85,438			35%	Sales and marketing	64,610		55,755		16%
Percentage of total revenues	Percentage of total revenues	17		%		17		%				17		%		17		%			Percentage of total revenues	15	%	17	%

Sales and marketing expenses for the three months ended ~~July 31, 2020~~April 30, 2021 increased ~~$13~~$9 million, primarily due to an increase of ~~$14~~$12 million in employee compensation-related costs ~~(includes~~(which includes an increase of $4$3 million in stock-based compensation). The increase in employee compensation-related costs is primarily driven by the increase in headcount during the period. This was partially offset by ~~the decrease in travel and entertainment costs of $3 million primarily related to travel and meeting restrictions associated with COVID-19.~~

Sales and marketing expenses for the six months ended July 31, 2020 increased $29 million, primarily due to an increase of $26 million in employee compensation-related costs (includes an increase of $7 million in stock-based compensation). The increase in employee compensation-related costs is primarily driven by the increase in headcount during the period. There was an additional increase of $5 million in amortization of purchased intangibles related to our acquired businesses. This was partially offset by a $3 million decrease in several expense categories related to COVID-19, such as marketing program spend and travel and entertainment ~~costs primarily related to travel and meeting restrictions associated with COVID-19.~~costs.

We expect sales and marketing expenses to continue to grow in absolute dollars in the ~~near term,~~future, primarily due to employee-related expenses as we increase our headcount to support our sales and marketing efforts associated with our ~~newer solutions~~product offerings, the impact of changes to our sales compensation plans, and our continued expansion of our sales capacity across all our ~~solutions,~~solutions. Additionally, we expect travel and ~~as we experience~~entertainment costs to start to increase in the ~~full impact~~second half of ~~additional sales and marketing headcount and expenses associated with our acquired businesses.~~the fiscal year ending January 31, 2022.

General and Administrative


																						Three months ended April 30,
		Three months ended July 31,														Six months ended July 31,												2021	2020	% Change
					2020				2019		% Change				2020				2019		% Change
					(dollars in thousands)																										(dollars in thousands)
General and administrative	General and administrative	$	37,173			$	25,859			44%		$	73,842			$	49,349			50%	General and administrative	$	41,155		$	36,669		12%
Percentage of total revenues	Percentage of total revenues	11		%		10		%				11		%		10		%			Percentage of total revenues	9		%	11		%

General and administrative expenses for the three months ended ~~July 31, 2020~~April 30, 2021 increased ~~$11~~$4 million, primarily due to an increase of ~~$10~~$2 million in employee compensation-related costs ~~(includes~~(which includes an increase of $6$1 million in stock-based compensation). The increase in employee compensation-related costs is primarily driven by the increase in headcount during the period.

~~General~~We expect general and administrative expenses ~~for~~to continue to grow in absolute dollars in the ~~six months ended July 31, 2020 increased $24 million, primarily due to an~~future as a result of employee-related expenses as we increase ~~of $19 million~~our headcount, investments in employee compensation-related costs (includes an increase of $12 million in stock-based compensation). The increase in employee compensation-related costs is primarily driven by the increase in headcount during the period. There was an additional increase of $2 million in professionalinformation technology infrastructure, and third-party fees, ~~primarily related to legal~~including fees associated with ~~litigation activity during the period and accounting professional services costs.~~on-going litigation.

Other Income, Net


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We expect general and administrative expenses to continue to grow in absolute dollars in the near term as a result of employee-related expense as we increase our headcount, and as we continue to invest in our business and infrastructure. Such business and infrastructure costs include increases in third-party fees, particularly in relation to the matters described in note 14 of the notes to our condensed consolidated financial statements, and headcount in our finance, IT, legal, and employee success functions.

~~Other Income, Net~~

Three months ended July 31, Six months ended
July 31,
2020 2019 % Change 2020 2019 % Change
(dollars in thousands)
Other income, net $ 2,881 $ 7,332 (61)% $ 6,295 $ 13,493 (53)%


	Three months ended April 30,
	2021		2020		% Change

	(dollars in thousands)
Other income, net	$	4,564	$	3,414	34%

Other income, net for the three months ended ~~July 31, 2020 decreased $4~~April 30, 2021 increased $1 million, primarily due to $4 million of gains in foreign exchange rate activity, partially offset by a $2 million increase in ~~net~~investment amortization ~~of investments. There was an additional decrease~~expense and a $1 million reduction in interest ~~and other income of $2 million driven by lower interest rates.~~

Other income, net for the six months ended July 31, 2020 decreased $7 million, primarily due to $3 million in net amortization of investments. There was an additional decrease in interest and other income of $3 million driven by lower interest rates.income.

We continue to experience foreign currency fluctuations primarily due to the impact resulting from the periodic re-measurement of our foreign currency balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. Our results of operations are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British Pound Sterling, Japanese Yen and Chinese Yuan. We may continue to experience favorable or adverse foreign currency impacts due to volatility in these currencies.

Provision for ~~(Benefit from)~~ Income Taxes


																	Three months ended April 30,
		Three months ended July 31,										Six months ended July 31,											2021	2020	% Change
		2020			2019			% Change	2020			2019			% Change
		(dollars in thousands)																								(dollars in thousands)
Income before income taxes	Income before income taxes	$	92,962		$	81,188		15%	$	183,941		$	158,518		16%	Income before income taxes	$	133,010		$	90,979		46%
Provision for (benefit from) income taxes		(589)			1,946			(130)%	3,820			5,827			(34)%
Provision for income taxes																Provision for income taxes	$	17,443		$	4,409		296%
Effective tax rate	Effective tax rate	(0.6)		%	2.4		%		2.1		%	3.7		%		Effective tax rate	13.1		%	4.8		%

The provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due primarily to state taxes, tax credits, equity compensation, and foreign income subject to taxation in the United States. Future tax rates could be affected by changes in tax laws and regulations or by rulings in tax related litigation, as may be applicable. We will continue to identify and analyze other applicable changes in tax laws in the United States and abroad.

For the three months ended ~~July 31,~~April 30, 2021 and 2020, ~~and 2019,~~ our effective tax rates were ~~(0.6)%~~13.1% and ~~2.4%~~4.8%, respectively. During the three months ended ~~July 31, 2020~~April 30, 2021 as compared to the prior year period, our effective tax rate ~~decreased~~increased primarily due to the increase in income before income taxes for the period combined with a decrease in excess tax benefits related to equity compensation. We recognized such tax benefits in our provision for income taxes of ~~$22~~$17 million and ~~$17~~$20 million for the three months ended ~~July 31,~~April 30, 2021 and 2020, ~~and 2019,~~ respectively.

For the six months ended July 31, 2020 and 2019, our effective tax rates were 2.1% and 3.7%, respectively. During the six months ended July 31, 2020 as compared to the prior year period, our effective tax rate decreased primarily due to the increase in excess tax benefits related to equity compensation. We recognized such tax benefits in our provision for income taxes of $42 million and $31 million for the six months ended July 31, 2020 and 2019, respectively.


34			~~Veeva Systems Inc. \| Form 10-Q~~

~~Table of Contents~~

Non-GAAP Financial Measures

In our public disclosures, we have provided non-GAAP measures, which we define as financial information that has not been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. In addition to our GAAP measures, we use these non-GAAP financial measures internally for budgeting and resource allocation purposes and in analyzing our financial results.

For the reasons set forth below, we believe that excluding the following items provides information that is helpful in understanding our operating results, evaluating our future prospects, comparing our financial results across accounting periods, and comparing our financial results to our peers, many of which provide similar non-GAAP financial measures.


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•Stock-based compensation expenses. We exclude stock-based compensation expenses primarily because they are non-cash expenses that we exclude from our internal management reporting processes. We also find it useful to exclude these expenses when we assess the appropriate level of various operating expenses and resource allocations when budgeting, planning, and forecasting future periods. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, we believe excluding stock-based compensation expenses allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies.

•Amortization of purchased intangibles. We incur amortization expense for purchased intangible assets in connection with acquisitions of certain businesses and technologies. Amortization of intangible assets is a non-cash expense and is inconsistent in amount and frequency because it is significantly affected by the timing, size of acquisitions, and the inherent subjective nature of purchase price allocations. Because these costs have already been incurred and cannot be recovered, and are non-cash expenses, we exclude these expenses for internal management reporting processes. We also find it useful to exclude these charges when assessing the appropriate level of various operating expenses and resource allocations when budgeting, planning, and forecasting future periods. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well.

•Income tax effects on the difference between GAAP and non-GAAP costs and expenses. The income tax effects that are excluded relate to the imputed tax impact on the difference between GAAP and non-GAAP costs and expenses due to stock-based compensation and purchased intangibles for GAAP and non-GAAP measures.

Limitations on the ~~use~~Use of Non-GAAP ~~financial measures~~Financial Measures

There are limitations to using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures provided by other companies.

The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which items are adjusted to calculate our non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in our public disclosures.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure to evaluate our business, and to view our non-GAAP financial measures in conjunction with the most directly comparable GAAP financial measures.


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Table of Contents

The following table reconciles the specific items excluded from GAAP metrics in the calculation of non-GAAP metrics for the periods shown below:

Three months ended
July 31, Six months ended
July 31,
2020 2019 2020 2019
(in thousands)
Operating income on a GAAP basis $ 90,081 $ 73,856 $ 177,646 $ 145,025
Stock-based compensation expense 49,366 28,370 86,273 49,126
Amortization of purchased intangibles 4,966 1,513 10,181 3,083
Operating income on a non-GAAP basis $ 144,413 $ 103,739 $ 274,100 $ 197,234
Net income on a GAAP basis $ 93,551 $ 79,242 $ 180,121 $ 152,691
Stock-based compensation expense 49,366 28,370 86,273 49,126
Amortization of purchased intangibles 4,966 1,513 10,181 3,083
Income tax effect on non-GAAP adjustments⁽¹⁾
(31,521) (21,379) (55,063) (38,426)
Net income on a non-GAAP basis $ 116,362 $ 87,746 $ 221,512 $ 166,474
Diluted net income per share on a GAAP basis $ 0.58 $ 0.50 $ 1.12 $ 0.96
Stock-based compensation expense 0.31 0.18 0.54 0.31
Amortization of purchased intangibles 0.03 0.01 0.06 0.02
Income tax effect on non-GAAP adjustments⁽¹⁾
(0.20) (0.13) (0.34) (0.24)
Diluted net income per share on a non-GAAP basis $ 0.72 $ 0.55 $ 1.38 $ 1.05

~~(1)For the three and six months ended July 31, 2020 and 2019, we used an estimated annual effective non-GAAP tax rate of 21.0%.~~


	Three months ended April 30,
	2021		2020

	(in thousands)
Operating income on a GAAP basis	$	128,446	$	87,565
Stock-based compensation expense	48,489		36,907
Amortization of purchased intangibles	4,429		5,215
Operating income on a non-GAAP basis	$	181,364	$	129,687
Net income on a GAAP basis	$	115,567	$	86,570
Stock-based compensation expense	48,489		36,907
Amortization of purchased intangibles	4,429		5,215
Income tax effect on non-GAAP adjustments(1)	(21,602)		(23,542)
Net income on a non-GAAP basis	$	146,883	$	105,150
Diluted net income per share on a GAAP basis	$	0.71	$	0.54
Stock-based compensation expense	0.30		0.23
Amortization of purchased intangibles	0.03		0.04
Income tax effect on non-GAAP adjustments(1)	(0.13)		(0.15)
Diluted net income per share on a non-GAAP basis	$	0.91	$	0.66
(1) For the three months ended April 30, 2021 and 2020, we used an estimated annual effective non-GAAP tax rate of 21%

Liquidity and Capital Resources


														Three months ended April 30,
		Three months ended July 31,									Six months ended July 31,							2021	2020
				2020			2019			2020			2019
				(in thousands)																(in thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	105,320		$	100,473		$	387,492		$	336,762	Net cash provided by operating activities	$	478,385	$	282,172
Net cash provided by (used in) investing activities		(43,932)			(22,801)			(92,141)			(64,343)
Net cash used in investing activities													Net cash used in investing activities	(37,949)		(48,209)
Net cash provided by financing activities	Net cash provided by financing activities	9,027			3,381			18,560			6,523		Net cash provided by financing activities	16,805		9,533
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	2,734			(1,742)			3,282			(2,444)		Effect of exchange rate changes on cash and cash equivalents	(2,765)		548
Net change in cash and cash equivalents	Net change in cash and cash equivalents	$	73,149		$	79,311		$	317,193		$	276,498	Net change in cash and cash equivalents	$	454,476	$	244,044

Our principal sources of liquidity continue to be comprised of our cash, cash equivalents, and short-term investments, as well as cash flows generated from our operations. As of ~~July 31, 2020,~~April 30, 2021, our cash, cash equivalents, and short-term investments totaled ~~$1.5~~$2.2 billion, of which ~~$34~~$48 million represented cash and cash equivalents held outside of the United States.

~~Except for certain foreign jurisdictions, our~~Our remaining non-U.S. cash and cash equivalents have been earmarked for indefinite reinvestment in our operations outside the United States, thus no U.S. current or deferred taxes have been accrued. We believe our U.S. sources of cash and liquidity are sufficient to meet our business needs in the United States and do not expect that we will need to repatriate additional funds we have designated as indefinitely reinvested outside the United States. Under currently enacted tax laws, should our plans change and we were to choose to repatriate some or all of the funds we have designated as indefinitely reinvested outside the United States, such amounts may be subject to certain jurisdictional taxes.


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We have financed our operations primarily through cash generated from operations. We believe our existing cash, cash equivalents, and short-term investments generated from operations will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, subscription renewal activity, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the ongoing investments in technology infrastructure, the introduction of new and enhanced solutions, and the continuing market acceptance of our solutions. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, and intellectual property rights. We may be required to seek additional equity or debt financing for those arrangements or for other reasons. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely affected.

Cash Flows from Operating Activities

Our largest source of operating cash inflows is cash collections from our customers for subscription services. We also generate significant cash flows from our professional services arrangements. The first quarter of our fiscal year is seasonally the strongest quarter for cash inflows due to the timing of our annual subscription billings and related collections. Our primary uses of cash from operating activities are for employee-related expenditures, expenses related to our computing infrastructure (including salesforce.com and Amazon Web Services), building infrastructure costs (including leases for office space), fees for third-party legal counsel and accounting services, and marketing program costs. Note that our net income reflects the impact of excess tax benefits related to equity compensation.

Net cash provided by operating activities was ~~$105~~$478 million for the three months ended ~~July 31, 2020~~April 30, 2021 compared to ~~$100~~$282 million provided by operating activities for the three months ended ~~July 31, 2019.~~April 30, 2020. The $196 million increase ~~in operating cash flow~~ was primarily due to increased sales and the related cash ~~collections and an increase in stock-based compensation expense. This was~~collections. These increases were partially offset by a larger ~~decrease in deferred revenue,~~operating expenses due to ~~the timing of renewal billings, and cash used for prepaid expenses and other current and long-term assets.~~

~~Net cash provided by operating activities was $387 million for the six months ended July 31, 2020 compared to $337 million for the six months ended July 31, 2019. The increase~~increases in ~~operating cash flow was primarily due to increased sales and the related cash collections.~~

The cash flows from operating activities for the six months ended July 31, 2020 represent a significant portion of the cash flows from operating activities that we expect for the remainder of the fiscal year ending January 31, 2021. As a result, we expect cash flows from operating activities to be substantially less in future quarterly periods during this fiscal year.headcount.

Cash Flows from Investing Activities

The cash flows from investing activities primarily relate to cash used for the purchase of marketable securities, net of maturities. We also use cash to invest in capital assets to support our growth.

Net cash ~~provided by~~used in investing activities was ~~$44~~$38 million for the three months ended ~~July 31, 2020~~April 30, 2021 compared to ~~$23~~$48 million used in investment activities for the three months ended ~~July 31, 2019.~~April 30, 2020. The ~~increase~~$10 million decrease in cash used in investing activities was mainly due to ~~a $17 million increase~~the decrease in net purchases of ~~investments and a $4 million increase in long-term assets.~~investments.

Net cash provided by investing activities was $92 million for the six months ended July 31, 2020 compared to $64 million for the six months ended July 31, 2019. The increase in cash used in investing activities was mainly due to a $26 million increase in net purchases of investments and a $4 million increase in long-term assets.

Cash Flows from Financing Activities

The cash flows from financing activities relate primarily to stock option exercises.

Net cash provided by financing activities was $9$17 million for the three months ended ~~July 31, 2020~~April 30, 2021 compared to $3$10 million provided by financing activities for the three months ended ~~July 31, 2019,~~April 30, 2020. The $7 million increase in cash provided by financing activities is primarily related to an increase in proceeds from employee stock option exercises ~~due to increased stock option activity~~resulting from a higher aggregate average exercise price during the period.


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Net cash provided by financing activities was $19 million for the six months ended July 31, 2020 compared to $7 million for the six months ended July 31, 2019, primarily related to an increase in proceeds from employee stock option exercises due to increased stock option activity during the period.

Commitments

Our principal commitments consist of obligations for minimum payment commitments to salesforce.com, and leases for office space and data centers. On March 3, 2014, we amended our agreement with salesforce.com. The agreement, as amended, requires that we meet minimum order commitments of $500 million over the term of the agreement, which ends on September 1, 2025, including “true-up” payments if the orders we place with salesforce.com have not equaled or exceeded the following aggregate amounts within the timeframes indicated: (i) $250 million for the period from March 1, 2014 to September 1, 2020 and (ii) the full amount of $500 million by September 1, 2025. We have met our first minimum order commitment of $250 million and have a remaining purchase commitment of ~~$99~~$35 million, as of ~~July 31, 2020,~~April 30, 2021, that must be made by September 1, 2025.

As of ~~July 31, 2020,~~April 30, 2021, the future non-cancelable minimum payments under these commitments were as follows:


																	Payments due by period
		Payments due by period																							Total			Less than 1 year	1-3 Years	3-5 Years	More than 5 years
				Total			Less than 1 year			1-3 Years			3-5 Years			More than 5 years
				(in thousands)																							(in thousands)
Salesforce.com commitments	Salesforce.com commitments	$	99,243		$	6,985		—			—			$	92,258	Salesforce.com commitments	$	35,390	7,380		—		28,010		—
Operating lease obligations	Operating lease obligations	65,150			6,147			21,055			14,745			23,203		Operating lease obligations	68,057		9,632		22,051		14,768		21,606
Finance lease obligations	Finance lease obligations	910			546			364			—			—		Finance lease obligations	96		96		—		—		—
Total	Total	$	165,303		$	13,678		$	21,419		$	14,745		$	115,461	Total	$	103,543	$	17,108	$	22,051	$	42,778	$	21,606

The amounts in the table above are associated with agreements that are enforceable and legally binding, which specify significant terms including payment terms, related services, and the approximate timing of the transaction. Obligations under agreements that we can cancel without a significant penalty are not included in the table.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP). In the preparation of these condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs, and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates during the three months ended ~~July 31, 2020~~April 30, 2021 as compared to the those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2020.~~2021.


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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Foreign currency exchange risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British Pound Sterling, Euro, Japanese Yen, and Chinese Yuan, and may be adversely affected in the future due to changes in foreign currency exchange rates. We continue to experience foreign currency fluctuations primarily due to the periodic re-measurement of our foreign currency monetary account balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. Changes in exchange rates may negatively affect our revenues and other operating results as expressed in U.S. dollars. For the three ~~and six~~ months ended ~~July 31,~~April 30, 2021 and 2020, we had foreign currency gains of $2 million and losses of $1 million, ~~and $3 million, respectively. For the three and six months ended July 31, 2019, we had foreign currency losses of $1 million and $2 million,~~ respectively.

We have experienced and will continue to experience fluctuations in our net income as a result of gains or losses related to revaluing certain current asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. We engage in the hedging of our foreign currency transactions as described in note 87 of the notes to our condensed consolidated financial statements and may, in the future, hedge selected significant transactions or net monetary exposure positions denominated in currencies other than the U.S. dollar.

Interest rate sensitivity

We had cash, cash equivalents and short-term investments totaling ~~$1.5~~$2.2 billion as of ~~July 31, 2020.~~April 30, 2021. This amount was held primarily in demand deposit accounts, money market funds, U.S. treasury securities and agency obligations, corporate notes and bonds, asset-backed securities, commercial paper, foreign government bonds, and agency mortgage-backed securities. The cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes.

Our cash equivalents and our portfolio of marketable securities are subject to market risk due to changes in interest rates, which could affect our results of operations. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our marketable securities as “available for sale,” no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary. Our fixed-income portfolio is subject to interest rate risk.

An immediate increase of 100-basis points in interest rates would have resulted in a $6$11 million market value reduction in our investment portfolio as of ~~July 31, 2020.~~April 30, 2021. An immediate decrease of 100-basis points in interest rates would have increased the market value by $2$4 million as of ~~July 31, 2020.~~April 30, 2021. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur. Fluctuations in the value of our investment securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive income, and are realized only if we sell the underlying securities.


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ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~July 31, 2020.~~April 30, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s (SEC) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Based on our management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~July 31, 2020,~~April 30, 2021, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended ~~July 31, 2020~~April 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been or would be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.


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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may be involved in legal proceedings and subject to claims incident to the ordinary course of business. For information regarding certain current legal proceedings, see note 1413 of the notes to our condensed consolidated financial statements, which is incorporated herein by reference. In addition to the legal proceedings referenced in note 13, we are involved in the following additional legal proceedings which may be material to our business.

California Non-Compete Matter.

On July 17, 2017, we filed a complaint in the Superior Court of the State of California in the County of Alameda against Medidata, IQVIA, and Sparta Systems, Inc. (Veeva Systems Inc. v. Medidata Solutions, Inc., Quintiles IMS Incorporated, IMS Software Services, LTD., and Sparta Systems, Inc., Case No. RG17868081). Our lawsuit seeks declaratory and injunctive relief concerning the use of non-compete, confidentiality, and non-disparagement agreements by these companies. Since the original complaint was filed, there has been extensive motion practice. Medidata and Sparta have appealed the superior court’s decisions finding that the case may proceed, and Veeva has cross-appealed. The court has not ruled on these appeals.

On October 31, 2019, as to Veeva's claims against IQVIA, the trial court's earlier dismissal was reversed by the court of appeals and the case was reassigned to a new trial court judge. On February 26, 2020, IQVIA answered our complaint. ~~The court has not yet held hearings or ruled on these motions.~~

Following the May 5, 2020 dismissal of a lawsuit filed by IQIVA in federal court in Maryland in which IQVIA had asserted that Veeva’s California lawsuit violated the United States Constitution’s Commerce Clause, on May 29, 2020, IQVIA filed an action in state court in Maryland (IQVIA Inc. v. Kahn et al, Case No. 482346-V). The new state court case alleges state law contract and tort claims arising from Veeva’s employment of an employee whom IQVIA contendsDiscovery is its former employee. The allegation concerning violations of the United States Constitution’s Commerce Clause is not alleged in this state court case, although IQVIA may seek a declaration from the Maryland state court that California law does not apply to IQVIA’s restrictive covenants with its employees. Veeva answered the complaint on July 29, 2020 and proceedings are ongoing.

proceeding.

Although the results of 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			4137

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ITEM 1A. RISK FACTORS.

Investing in our Class A common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” together with all of the other information in this report, including our condensed consolidated financial statements and related notes, before investing in our Class A common stock. The risks and uncertainties described below are not the only ones we face. If any of the following risks actually occurs, our business, financial condition, results of operations, and prospects could be materially and adversely affected. In that event, the price of our Class A common stock could decline and you could lose part or all of your investment.

Summary of Risk Factors

The below is a summary of principal risks to our business and risks associated with ownership of our stock. It is only a summary. You should read the more detailed discussion of risks set forth below and elsewhere in this report for a more complete discussion of the risks listed below and other risks.

•If our security measures are breached or unauthorized access to customer data is otherwise obtained, our solutions may be perceived as not being secure, customers may reduce or stop the use of our solutions, and we may incur significant liabilities.

•The markets in which we participate are highly competitive, and if we do not compete effectively, our business and operating results could be adversely affected.

•If our newer solutions are not successfully adopted by new and existing customers, the growth rate of our revenues and operating results will be adversely affected.

•We expect our revenue growth rates to decline in future periods and, as our costs increase, we may not be able to sustain the same level of profitability we have achieved in the past.

•Our revenues are relatively concentrated within a small number of key customers, and the loss of one or more of such key customers could cause our revenues to decline.

•Nearly all of our revenues are generated by sales to customers in the life sciences industry, and factors that adversely affect this industry could also adversely affect us.

•The worldwide outbreak and continuing impact of COVID-19 may negatively impact our business and our stock price.

~~The World Health Organization has declared~~•If the ~~outbreak~~third-party providers of ~~COVID-19, which began~~healthcare professional and healthcare organization data and prescription drug sales data, like IQVIA for instance, do not allow our customers to upload and use such data in ~~December 2019, to be a pandemic. The pandemic has had~~our solutions, the demand for our solutions may decrease, and ~~continues to have a widespread and unpredictable worldwide impact on~~ our business ~~operations,~~may be negatively impacted.

•We rely on third-party providers for computing infrastructure, secure network connectivity, and other technology-related services needed to deliver our cloud solutions, and any disruption in the ~~life sciences industry, healthcare systems, financial markets,~~services provided by them could adversely affect our business and ~~the global economy. While the impact~~subject us to liability.

•Because key and substantial portions of ~~COVID-19~~our multichannel CRM applications are built on ~~our operational and financial performance has not been materially negative~~salesforce.com’s Salesforce Platform, we are dependent upon salesforce.com to ~~date, the future impact is uncertain and will depend on future developments, including the duration and spread of the outbreak, government responses~~provide these solutions to ~~the pandemic, the impact on~~ our customers and we are bound by the impact on our employees, the extent of further adverse impacts to the economy, and the scale and pace of economic recovery and resumption of normal business activities, all of which cannot be predicted with certainty.

~~In response to the COVID-19 outbreak, we have shifted most~~restrictions of our ~~customer, employee,~~agreement with salesforce.com, which limits the markets to which we may sell our Veeva CRM solution.

•We are currently being sued by third parties for alleged misappropriation of trade secrets. We may suffer damages or other harm from these lawsuits and ~~industry events~~we may be sued for infringement or misappropriation of third-party intellectual property in the future.

•Our conversion to ~~virtual-only experiences for~~a PBC may not result in the ~~remainder~~benefits that we anticipate, requires our directors to balance the interest of stockholders with other interests, and may subject us to legal uncertainty and other risks.

•Until its expiration on October 15, 2023, the dual-class structure of our fiscal year ending January 31, 2021. We have also imposed employee travel restrictions and, as of the time of this filing, many of our U.S. offices, including our corporate headquarters in Pleasanton, California, remain closed with employees working from home. With respect to offices we have opened, we have generally offered employees the option to continue working from home and many employees have chosen to do so. Many of our customers have implemented similar measures, which may limit our ability to sell or provide professional services to them over time. Customers may delay or cancel purchasing decisions or professional services projects in light of uncertainties to their businesses arising from COVID-19 or renew their subscriptions at lower levels. To date, our Crossix and Physicians World businesses have been negatively impacted by COVID-19, and sales to certain other customer segments have been and may continue to be negatively impacted as well, including sales to pre-commercial life sciences companies, contract research organizations, medical device and cosmetics companies. We are also currently allowing customers to use one of our products, Veeva CRM Engage Meeting, free of charge through December 31, 2020 to facilitate the ability for life sciences personnel to meet remotely with healthcare professionals. We may not receive meaningful revenue from sales of this product in the current fiscal year or thereafter if our customers choose to discontinue use following the end of the free offering period. We may also experience requests from customers for lengthened payment terms or less favorable billing terms that could adversely impact our financial performance. Such requests to date have not been significant but may increase in the future. Due to our subscription-based business model,common stock has the effect of ~~COVID-19,~~concentrating voting control with certain individuals and ~~any impact to our sales efforts, may not be fully reflected in our results of operations until future periods, if at all.~~

~~Certain impacts of~~their affiliates, which will limit or preclude the COVID-19 pandemic and resulting changes in business practice may be enduring over the long term and may result in significant changes in business practice within the technology industry, the life sciences industry and the world economy generally. For example, the extent to which remote work will remain common practice or become increasingly prevalent after the COVID-19 pandemic ends is not certain and may have significant impacts on hiring practices, management practices, expense structures and investments, and other aspectsability of our ~~business and the businesses of our customers. Similarly, the extent~~investors to which virtual meetings and interactions continue to be used or preferred in lieu of in-person interactions may significantly change business practices for us and our customers, and, in turn, may impact demand for our products and services. For example, if our customers reduce sales representatives in response to an increasing preference for virtual meetings with doctors, demand for our core CRM application may decline. At the same time, demand for our products that enable virtual interactions with doctors and clinical trial participants may increase. We cannot accurately predict how such changes may impact Veeva's results over the long term.

In addition, the stock market has been unusually volatile during certain periods of the COVID-19 pandemic and such volatility may continue. During certain early periods of the COVID-19 pandemic, our stock price declined significantly, and such declines may happen again.

~~Risks Related to Our Business~~influence corporate matters.


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Risks Related to Our Business

If our security measures are breached or unauthorized access to customer data is otherwise obtained, our solutions may be perceived as not being secure, customers may reduce ~~the~~or stop their use of ~~or stop using~~ our solutions, and we may incur significant liabilities.

Our solutions involve the storage and transmission of our customers’ proprietary information (including personal or identifying information regarding their employees and the medical professionals whom their sales personnel contact, and sensitive proprietary data related to the clinical trial, regulatory submission and sales and marketing processes for medical treatments), personal information of medical professionals, personal information (which may include personal health information) of patients and clinical trial participants, and other sensitive information. For example, Veeva Crossix ~~which we acquired in November 2019, provides technology that~~ processes third-party health and non-health data for U.S. patients. ~~As a result, unauthorized~~Unauthorized access or security breaches, as a result of third-party action (e.g., cyber-attacks), employee error, product defect, malfeasance, or otherwise, could result in the loss of information, inappropriate use of or access to information, service interruption, service degradation, outages, service level credits, litigation, indemnity obligations, damage to our reputation, and other liability. We believe our risk of cyber-attack may be elevated during ~~this time~~the COVID-19 outbreak due to an increase in cyber-attack attempts on U.S. businesses ~~generally during the COVID-19 outbreak.~~generally. While we maintain and continue to improve our security measures, we may be unable to adequately anticipate security threats or to implement adequate preventative measures, in part, because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target. Moreover, the detection, prevention, and remediation of known or unknown securities vulnerabilities, including those arising from third-party hardware or software in our supply chain, may result in additional direct or indirect costs and management time. Any or all of these issues could adversely affect our ability to attract new customers, cause existing customers to elect to not renew their subscriptions, result in reputational damage, or subject us to third-party lawsuits, regulatory fines, mandatory disclosures, or other action or liability, which could adversely affect our operating results. Our insurance may not be adequate to cover losses associated with such events, and ~~in any case,~~ such insurance may not cover all of the types of costs, expenses, and losses we could incur to respond to and remediate a security breach. A security breach of another significant provider of cloud-based solutions may also negatively impact the demand for our solutions.

The markets in which we participate are highly competitive, and if we do not compete effectively, our business and operating results could be adversely affected.

The markets for our solutions are highly competitive. In new sales cycles within our largest product categories, we generally compete with other cloud-based solutions from providers that make applications geared toward the life sciences industry. The principal such competitor for our Veeva Commercial Cloud applications is IQVIA Holdings Inc., which offers a CRM application built on the Salesforce1 Platform, various data products, and other applications. AFor example, in 2020, a significant Veeva CRM customer ~~recently~~ launched a project to implement ~~IQVIA's~~IQVIA’s competitive software offering for portions of its CRM users. The scope of that deployment may expand, resulting in further losses of revenue within our Veeva CRM business, or we may lose additional Veeva CRM users or customers in the future. Our data and data analytics products, including Veeva OpenData, Veeva Link, Veeva Crossix, and Veeva Data Cloud, compete with IQVIA and smaller data and data analytics providers. No single vendor offers products that compete with all of our Veeva Vault applications, but IQVIA, ~~Medidata Solutions, Inc. (recently acquired by~~ Dassault Systè~~mes),~~mes, OpenText Corporation, Oracle Corporation, and other smaller application providers offer applications that compete with certain of our Veeva Vault applications. Our Commercial Cloud and Veeva Vault application suites also compete to replace client server-based legacy solutions offered by companies such as Oracle, Microsoft Corporation, and other smaller application providers. Our customers may also choose to use cloud-based applications or platforms that are not life sciences specific—such as Box.com, Amazon Web Services, or Microsoft—for certain of the functions our applications provide. Our ~~data~~business consulting and ~~data analytics products, including our planned and recently announced Data Cloud offering, compete with IQVIA and other smaller data providers. Our~~ professional services offerings compete with a range of professional services firms, including, at times, some of our partners. With the introduction of new technologies, we expect competition to intensify in the future, and we may face competition from new market entrants as well.

Some of our actual and potential competitors have advantages over us, such as longer operating histories, significantly greater financial, technical, marketing or other resources, stronger brand and business recognition, larger intellectual property portfolios, and agreements with a broader set of system integrators and other partners. We also continue to be subject to litigation from our ~~competitors; for~~competitors. For example, as disclosed elsewhere in this report, we are in active litigation with IQVIA and Medidata.


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If our competitors’ products, services, or technologies become more accepted than our solutions, if they are successful in bringing their products or services to market earlier than we are, if their products or services are more


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technologically capable than ours, or if customers replace our solutions with custom-built software, then our revenues could be adversely affected. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses, or a failure to maintain or improve our competitive market position, any of which could adversely affect our business. For all of these reasons, we may not be able to compete favorably against our current and future competitors.

If our newer solutions are not successfully adopted by new and existing customers, the growth rate of our revenues and operating results will be adversely affected.

Our continued growth and profitability will depend on our ability to successfully develop and sell new ~~solutions, including solutions we introduced relatively recently and have limited experience selling.~~solutions. It is uncertain whether these newer solutions will continue to grow as a percentage of revenues at a pace significant enough to support our expected overall growth. For example, we ~~do not~~ have limited experience selling our ~~planned and recently announced~~Veeva Data Cloud offering for longitudinal patient ~~and prescriber~~ data, our MyVeeva for ~~Clinical Trials~~Patients solution that will enable remote patient interactions for clinical trials, or our MyVeeva for Doctors solution that will facilitate more efficient communications between health care ~~practitioners~~professionals and life sciences ~~companies, and we have limited experience selling our products to companies outside the life sciences industry.~~companies. We cannot be certain that we will be successful with respect to newer solutions and markets. It may take us significant time, and we may incur significant expense, to effectively market and sell these solutions, ~~or to~~ develop other new solutions, ~~and~~or make enhancements to our existing solutions. If our newer solutions do not continue to gain traction in the market, or other solutions that we may develop and introduce in the future do not achieve market acceptance in a timely manner, the growth rate of our revenues and operating results will be adversely affected.

Our revenues are relatively concentrated within a small number of key customers, and the loss of one or more of such key customers, or their failure to renew or expand user subscriptions, could slow the growth rate of our revenues or cause our revenues to decline.

In our fiscal years ended January 31, ~~2018,~~2021, 2020, and 2019, ~~and 2020,~~ our top 10 customers accounted for ~~42%~~36%, ~~39%~~36%, and ~~36%~~39%, of our total revenues, respectively. We rely on our reputation and recommendations from key customers in order to promote our solutions to potential customers, which we call ~~"reference~~“reference selling."” The loss of any of our key customers, or a failure of one or more of them to renew or expand user subscriptions for some or all our products, could have a significant impact on the growth rate of our revenues, our reputation, and our ability to obtain new customers. In the event of an acquisition of one of our customers or a business combination between two of our customers, we have in the past and may in the future suffer reductions in user subscriptions or non-renewal of certain or all of their subscription orders. We are also likely to face increasing purchasing scrutiny at the renewal of ~~these~~ large customer subscription orders, which may result in reductions in user subscriptions or increased pricing pressure. The business impact of any of these negative events could be particularly pronounced with respect to our largest customers.

An inability to attract and retain highly skilled employees could adversely affect our business.

To execute our growth plan, we must attract and retain highly ~~qualified~~skilled employees. Competition for these employees is intense, especially with respect to ~~sales and marketing personnel and~~software engineers with high levels of experience in enterprise software and internet-related ~~services.~~services and sales personnel. We have ~~from time to time,~~ experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with the appropriate level of ~~qualifications.~~qualifications, and we have experienced, and we expect to continue to experience, intense recruitment of our employees by competitors and other technology companies. With respect to sales professionals, even if we are successful in attracting highly qualified personnel, it may take six to nine months or longer before they are fully trained and productive. Many of the companies with which we compete for experienced employees have greater resources than we have and may offer compensation packages that are perceived to be better than ours. For example, we offer equity awards to a substantial majority of our job candidates and existing employees as part of their overall compensation package. If the perceived value of our equity awards declines, including as a result of declines in the market price of our Class A common stock or changes in perception about our future prospects, it may adversely affect our ability to recruit and retain highly skilled employees. Additionally, changes in our compensation structure may be negatively received by employees and result in attrition or cause difficulty in the recruiting process. If we fail to attract new employees or fail to retain and motivate our current employees, our business and future growth prospects could be adversely affected.


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Defects or disruptions in our solutions could result in diminished demand for our solutions, a reduction in our revenues, and subject us to substantial liability.

We have from time to time found defects in our solutions, and new defects may be detected in the future. In addition, we have experienced, and may in the future experience, service disruptions, degradations, outages, and other performance problems. These types of problems may be caused by a variety of factors, including human or software errors, viruses, cyber-attacks, fraud, spikes in customer usage, problems associated with our third-party computing infrastructure and network providers, infrastructure changes, and denial of service issues. Service disruptions may result from errors we make in delivering, configuring, or hosting our solutions, or designing, installing, expanding, or maintaining our computing infrastructure. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. It is also possible that such problems could result in losses of customer data.

Since our customers use our solutions for important aspects of their business, any errors, defects, disruptions, service degradations, or other performance problems with our solutions, could hurt our reputation and may damage our customers’ businesses. If that occurs, our customers may delay or withhold payment to us, cancel their agreements with us, elect not to renew, or make service credit claims, warranty claims, or other claims against us, and we could lose future sales. The occurrence of any of these events could result in diminishing demand for our solutions, a reduction of our revenues, an increase in our bad debt expense or in collection cycles for accounts receivable, or could require us to incur the expense of litigation or substantial liability.

We have experienced rapid growth, and if we fail to manage our growth effectively, we may be unable to execute our business plan.

~~Since we were founded, we~~We have experienced rapid growth and expansion of our operations. Our revenues, customer count, product and service offerings, countries of operation, facilities, and computing infrastructure needs have all increased significantly, and we expect them to increase in the future. We have also experienced rapid growth in our employee base. As we continue to grow, both organically and through acquisitions, we must effectively integrate, develop, and motivate an increasing number of employees (an increasing portion of whom are ~~working remotely)~~permanent remote employees), while executing our growth plan and maintaining the beneficial aspects of our culture. Any failure to preserve our culture could negatively affect our future success, including our ability to attract and retain highly qualified employees and to achieve our business objectives.

Our rapid growth has placed, and will continue to place, a significant strain on our management capabilities, administrative and operational infrastructure, facilities, IT, and other resources. We anticipate that additional investments in our ~~facilities~~computing infrastructure and ~~computing infrastructure~~facilities will be required to scale our operations. To effectively manage growth, we must continue ~~to:~~to improve our key business applications, processes, and computing infrastructure; enhance information and communication systems; and ensure that our policies and procedures evolve to reflect our current operations and are appropriately communicated to and observed by ~~employees (an increasing portion of whom are working remotely).~~employees. These enhancements and improvements will require additional investments and allocation of valuable ~~management~~time, effort, and ~~employee time and resources.~~expense. Failure to effectively manage growth could result in difficulty or delays in deploying our solutions, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features or other operational difficulties, and any of these difficulties could adversely impact our business performance and results of operations.

The worldwide outbreak of COVID-19 may negatively impact our business and our stock price.

The worldwide outbreak of COVID-19 has had and continues to have a widespread and unpredictable worldwide impact on our business operations, the life sciences industry, healthcare systems, financial markets, and the global economy. While the impact of COVID-19 on our operational and financial performance has not been materially negative to date, the future impact is uncertain and will depend on future developments, including the duration and spread of the outbreak, government responses to the pandemic, the rate of vaccinations, the impact on our customers, the impact on our employees, the extent of further adverse impacts to the economy, and the scale and pace of economic recovery and resumption of normal business activities, including the rollout of COVID-19 vaccines and the lifting of restrictions on movement, all of which cannot be predicted with certainty.

In response to the COVID-19 outbreak, we shifted most of our customer, employee, and industry events to virtual-only experiences, and we continue to monitor when larger in-person events should resume. We have begun to lift certain employee travel restrictions and plan to open most of our U.S. offices in July. At the time of this filing, the substantial majority of employees continue to work from home, including employees at our corporate headquarters in Pleasanton, California. Many of our customers have implemented travel restrictions and remote work measures, which may limit our ability to sell or provide professional services to them in the future. Certain of our businesses


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were negatively impacted by COVID-19 in our fiscal year ended January 31, 2021 and that may continue for the foreseeable future. We may also experience requests from customers for lengthened payment terms or less favorable billing terms that could adversely impact our financial performance. Such requests to date have not been significant but may increase in the future. Due to our subscription-based business model, the effect of COVID-19, and any impact to our sales efforts, may not be fully reflected in our results of operations until future periods, if at all.

In addition, the stock market has been unusually volatile during certain periods of the COVID-19 pandemic and such volatility may continue. During certain periods of the COVID-19 pandemic, our stock price has declined significantly, and such declines may happen again.

We may acquire other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders, and otherwise disrupt our operations and adversely affect our operating results.

We have in the past acquired and may in the future seek to acquire or invest in businesses, solutions, or technologies that we believe could complement or expand our solutions, enhance our technical capabilities or otherwise offer growth opportunities. For example, in November 2019, we acquired Crossix, a provider of privacy-safe patient data and data analytics, and Physicians World, a provider of speakers bureau services for healthcare professionals. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are ~~consummated.~~completed.

We have limited experience in acquiring other businesses. We may not be able to successfully integrate the acquired personnel, operations, and technologies, or effectively manage the combined business following the


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acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including:

•inability to integrate or benefit from acquired technologies or services in a profitable manner;

•costs, liabilities, or accounting charges associated with the acquisition;

•difficulty integrating the privacy, data security, and accounting systems, operations, and personnel of the acquired business;

•difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;

•difficulty converting the customers of the acquired business onto our solutions and contract terms, including due to disparities in the ~~revenues,~~revenue, licensing, support, or professional services model of the acquired company;

•diversion of management’s attention from other business concerns;

•problems arising from differences in applicable accounting standards or practices of the acquired business (for instance, non-U.S. businesses may not be accustomed to preparing their financial statements in accordance with U.S. GAAP) or difficulty identifying and correcting deficiencies in the internal controls over financial reporting of the acquired business;

•adverse effects to business relationships with our existing business partners and customers as a result of the acquisition;


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•difficulty in retaining key personnel of the acquired business;

•use of substantial portions of our available cash to consummate the acquisition;

•use of resources that are needed in other parts of our business;

•significant changes beyond our control to the worldwide economic environment that could negatively impact our underlying assumptions and expectations for performance of the acquired business, including, for example, the effect of COVID-19 on the Crossix and Physicians World businesses; and

•the possibility of investigation by, or the failure to obtain required approvals from, governmental authorities on a timely basis, if at all, under various regulatory schemes, including competition laws, which could, among other things, delay or prevent us from completing a transaction, subject the transaction to divestiture after the fact, or otherwise restrict our ability to realize the expected financial or strategic goals of the acquisition.

Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if an acquired business fails to meet our expectations, our operating results, business, and financial position may suffer.

Moreover, a significant portion of the purchase price of companies we acquire may be allocated to acquired intangible assets and goodwill, which we must assess for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations. Acquisitions may also result in purchase accounting adjustments, write-offs or restructuring charges, which may negatively affect our results.

Our sales cycles can be long and unpredictable, and our sales efforts require considerable investment of ~~time and expense.~~resources. If our sales cycle lengthens or we invest substantial resources pursuing unsuccessful sales opportunities, our operating results and growth would be harmed.

Our sales process entails planning discussions with prospective customers, analyzing their existing solutions, and identifying how these potential customers could use and benefit from our solutions. The sales cycle for a new customer, from the time of prospect qualification to the completion of the first sale, may span 12 months or longer. ~~We have limited history selling~~Sales cycles for our newer ~~solutions. As a result, our sales cycle for these~~ applications ~~may be~~or in newer markets or industries are also lengthy and difficult to predict. ~~In addition, we have only recently begun selling certain of our Veeva Vault solutions to industries outside life sciences.~~ We spend substantial time, effort, and ~~money~~expense in our sales efforts without any assurance that our efforts will result in the sale of our solutions. In addition, our sales cycle can vary substantially


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from customer to customer because of various factors, including the discretionary nature of potential customers’ purchasing and budget decisions, the announcement or planned introduction of new solutions by us or our competitors, and the purchasing approval processes of potential customers. If our sales cycle lengthens ~~including as a result of the COVID-19 pandemic,~~ or we invest substantial resources pursuing unsuccessful sales opportunities, our operating results and growth would be harmed.

Catastrophic events could disrupt our business and adversely affect our operating results.

Our corporate headquarters are located in Pleasanton, California and our third-party hosted computing infrastructure is located in the United States, the European Union, Japan, and South Korea. The west coast of the United States, ~~and~~ Japan and South Korea each contain active earthquake zones. Additionally, we rely on our network and third-party infrastructure and enterprise applications, internal technology systems, and our website, for our development, marketing, operational support, hosted services, and sales activities. In the event of a major earthquake, hurricane, actual or threatened public health emergency (e.g., COVID-19), or other catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, or terrorist attack, we may be unable to continue our operations at full capacity or at all and may experience system interruptions, reputational harm, delays in our solution development, lengthy interruptions in our services, breaches of data security, loss of key employees, and loss of critical data, all of which could have an adverse effect on our future operating results.

Within Veeva Commercial Cloud, our core Veeva CRM application has achieved substantial market penetration ~~within the sales teams~~ of pharmaceutical and biotechnology companies. If our efforts to sustain or further increase the use and adoption of our core CRM application do not succeed, the growth of our Veeva Commercial Cloud revenues may be negatively impacted.

In our fiscal year ended January 31, ~~2020,~~2021, we derived approximately ~~52%~~51% of our subscription services revenues and approximately 49% of our total revenues from our Veeva Commercial Cloud solutions. In the three months ended ~~July 31, 2020,~~


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April 30, 2021, we derived approximately ~~51%~~49% of our subscription services revenues and approximately ~~48%~~47% of our total revenues from our Veeva Commercial Cloud solutions. A significant percentage of ~~the subscription services revenues for~~ our Veeva Commercial Cloud ~~solutions is~~subscription services revenues are derived from subscriptions for our core CRM ~~application. We~~application, and we have ~~however,~~ realized substantial sales penetration ~~of the available market~~among pharmaceutical and biotechnology companies for our core Veeva CRM ~~application among pharmaceutical and biotechnology companies.~~application. If we are not able to sell additional user subscriptions for our core CRM application, if we fail to renew existing subscriptions for our core CRM application, or if subscription levels for our core CRM application are reduced at renewal (as a result of reductions in sales ~~representative headcount at life sciences companies due to COVID-19~~representatives that use our solutions, change in demand for our solutions, or for other reasons), the growth of our Veeva Commercial Cloud revenues may be negatively impacted. We expect life sciences companies to reduce the number of sales representatives that they employ by roughly 10% over the next one to two years, which could negatively impact sales of Veeva CRM and other Commercial Cloud applications in particular, but we cannot be certain such reductions will happen or of the timing or magnitude of such reductions.

Changes in our senior management team or other key personnel could have a negative effect on our ability to execute our business strategy.

Our success depends in a large part upon the continued service of our senior management team or other key personnel. In particular, our founder and Chief Executive Officer, Peter P. Gassner, is critical to our vision, strategic direction, culture, products, and technology. We do not maintain key-man insurance for Mr. Gassner or any other member of our senior management team. In addition, in the past several years we have ~~recently announced~~experienced changes to our senior leadership team. In February 2019, we announced the retirement of Matthew J. Wallach, our President and co-founder, which was effective June 2019. In August 2019, we announced the planned retirement of our Chief Financial Officer, Timothy S. Cabral, and on September 1, 2020, we appointed his successor, Brent Bowman. In September 2019, Tom Schwenger joined Veeva as President and Chief Operating Officer. Such leadership transitions can be inherently difficult to manage, and an unsuccessful transition may cause disruption to our business. In addition, change in the senior management team may create uncertainty among investors and employees or candidates concerning Veeva’s future direction and performance. Any disruption in our operations or uncertainty around our ability to execute could have an adverse effect on our business, financial condition, or results of operations.

Our business could be adversely affected if our customers are not satisfied with the professional or technical support services provided by us or our ~~partners, or with our technical support services.~~partners.

Our business depends on our ability to satisfy our customers, both with respect to our solutions and the professional services that are performed in connection with the implementation of our solutions, including training our customers' employees on our solutions. Professional services may be performed by us, by a third party, or by a combination of the two. If a customer is not satisfied with the quality of work performed by us or a third party or with the solutions


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delivered, ~~or professional services performed,~~ then we could incur additional costs to address the situation, we may be required to issue credits or refunds for pre-paid amounts related to unused services, the profitability of that work might be impaired, and the customer’s dissatisfaction with our services could damage our ability to expand the number of solutions subscribed to by that customer. Moreover, negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with current and prospective customers.

Once our solutions are deployed, our customers depend on our support organization to resolve technical issues relating to our solutions. We may be unable to ~~respond quickly enough to~~sufficiently accommodate short-term increases in customer demand for technical support ~~services.~~services to our customers' satisfaction. Increased customer demand for our technical support services, without corresponding revenues, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on the reputation of our solutions and business and on positive recommendations from our existing customers. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our solutions to existing and prospective customers, and our business and operating results.

Sales to customers outside the United States or with international operations expose us to risks inherent in international sales.

In our fiscal quarter ended ~~July 31, 2020,~~April 30, 2021, customers outside North America accounted for approximately 43% of our total revenues. A key element of our growth strategy is to further expand our international operations and worldwide customer base. Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States. We have limited operating experience in some international markets, and we cannot assure you that our expansion efforts into ~~other~~additional international markets will be successful. Our experience in the United States and other international markets in which we already have a presence may not be relevant to our ability to expand in other ~~emerging~~ markets. Our


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international expansion efforts may not be successful in creating further demand for our solutions outside of the United States or in effectively selling our solutions in the international markets we enter. In addition, we face risks in doing business internationally that could adversely affect our business, including:

•the need and expense to localize and adapt our solutions for specific countries, including translation into foreign languages, and ensuring that our solutions enable our customers to comply with local ~~life sciences industry~~ laws and regulations;

•data privacy and data sovereignty laws which require that customer data be stored and processed in a designated territory;

•difficulties in staffing and managing foreign ~~operations, including employee laws and regulations;~~operations;

•different pricing environments, longer sales cycles and longer accounts receivable payment cycles, and collections issues;

•new and different sources of competition;

•weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States;

•laws and business practices favoring local competitors;

•compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including those related to employment, tax, privacy and data protection, and ~~anti-bribery laws and regulations;~~anti-bribery;

•increased financial accounting and reporting burdens and complexities;

•restrictions on the transfer of ~~funds;~~

•~~our ability to repatriate~~ funds ~~from abroad~~or difficulties in repatriating funds without adverse tax consequences;

•adverse tax consequences, including the potential for required withholding taxes;

•fluctuations in the exchange rates of foreign currency in which our foreign revenues or expenses may be denominated;

•changes in diplomatic relations and trade policy, including the status of relations between the United States and China, and the implementation of or changes to trade sanctions, tariffs, and ~~embargoes. For example, an executive order issued by the President of the United States on August 6, 2020 could~~embargoes;


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prohibit certain transactions with WeChat, a widely used Chinese mobile application with which certain of our Veeva CRM applications interacts. Further guidance on the types of transactions prohibited by the order is to be issued by the U.S. Secretary of Commerce after the date of this filing. Thus, the order's impact on the ability of our applications to interact with WeChat is currently uncertain;

•public health crises, such as epidemics and pandemics, including COVID-19; and

•unstable regional and economic political conditions in the markets in which we operate.

Some of our business partners also have international operations and are subject to the risks described above. Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks, which could adversely affect our business.

We are subject to governmental export and import controls that could impair our ability to compete in international markets in which our products may not be sold or subject us to liability if we violate the controls.

Our products are subject to U.S. export controls, including the U.S. economic sanctions laws and regulations that prohibit the shipment of certain products and services without the required export authorizations or export to countries, governments, and persons targeted by U.S. sanctions. Under current U.S. export restrictions, our products may not be sold in certain jurisdictions in which certain of our non-U.S. based customers have operations. As a result, such customers may choose to use solutions other than ours. While we take precautions to prevent our products and services from being exported in violation of these laws, we cannot guarantee that the precautions we take will prevent violations of export control and sanctions laws. Violations of U.S. sanctions or export control laws can result in fines or penalties. In the event of criminal knowing and willful violations of these laws, fines and possible incarceration for responsible employees and managers could be imposed.

Our estimate of the market size for our solutions we have provided publicly may prove to be inaccurate, and even if the market size is accurate, we cannot assure you that our business will serve a significant portion of the market.

Our estimate of the market size for our solutions that we have provided publicly, sometimes referred to as total addressable market (TAM), is subject to significant uncertainty and is based on assumptions and estimates, including our internal analysis and industry experience, which may not prove to be accurate. These estimates are, in part, based upon the size of the general application areas ~~in which our solutions are targeted.~~we target. Our ability to serve a significant portion of this estimated market is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. For example, in order to address the entire TAM we have identified, we must continue to enhance and add functionality to our existing solutions and introduce new solutions. Accordingly, even if our estimate of the market size is accurate, we cannot assure you that our business will serve a significant portion of this estimated market for our solutions.

~~If we fail to develop widespread brand awareness cost-effectively, our business may suffer.~~

We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our solutions, attracting new customers, and generating and maintaining profitability. Currently, our brand may be less recognized by the key decision makers at the potential customers for our newer solutions, especially those solutions for companies in industries other than life sciences. Brand promotion activities may not generate customer awareness or increase revenues, and even if they do, any increase in revenues may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses attempting to promote and maintain our brand, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts or to achieve the widespread brand awareness that is critical for broad customer adoption of our solutions.


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Risks Related to the Principal Industry We Serve

Nearly all of our revenues are generated by sales to customers in the life sciences industry, and factors that adversely affect this industry, including mergers within the life sciences industry or regulatory changes, could also adversely affect us.

Nearly all of our sales are to customers in the life sciences industry. Demand for our solutions could be affected by factors that ~~adversely~~ affect the life sciences industry, including:

•The changing regulatory environment of the life sciences ~~industry—~~industry—Changes in regulations could negatively impact the business environment for our life sciences customers. Healthcare laws and regulations are rapidly evolving and may change significantly in the future. In particular, legislation or regulatory changes regarding the pricing of drugs and other healthcare treatments sold by life sciences companies has continued to be a topic of discussion by political leaders and regulators in the United States and elsewhere.

•Consolidation of companies within the life sciences ~~industry—~~industry—Consolidation within the life sciences industry has accelerated in recent years, and this trend could continue. We have in the past, and may in the future, suffer reductions in user subscriptions or non-renewal of customer subscription orders due to industry consolidation. We may not be able to expand sales of our solutions and services to new customers enough to counteract any negative impact of company consolidation on our business. In addition, new companies that result from such consolidation may decide that our solutions are no longer needed because of their own internal processes or alternative solutions. As these companies consolidate, competition to provide solutions and services will become more intense and ~~the importance of~~ establishing relationships with large industry participants will become ~~greater.~~more important. These industry participants may also try to use their market power to negotiate price reductions for our solutions. If consolidation of our larger customers occurs, the combined company may represent a larger percentage of business for us and, as a result, we are likely to rely more significantly on revenue from the combined ~~company’s revenues~~company to continue to achieve growth. In addition, if large life sciences companies merge, it would have the potential to reduce ~~per unit~~per-unit pricing for our solutions for the merged companies or to reduce demand for one or more of our solutions as a result of potential personnel reductions over time.

•Bankruptcy within the life sciences ~~industry—~~industry—Life sciences companies, and in particular ~~our earlier-stage customers~~early-stage companies with pre-commercial treatments in clinical trials, may be unsuccessful and may subsequently declare bankruptcy. If our customers declare bankruptcy or otherwise dissolve, they may terminate their agreements with us or we may not be able to recoup the full payment of fees owed to us.

•Changes in market conditions and practices within the life sciences ~~industry—~~industry—The expiration of key patents, the implications of precision medicine treatments, changes in the practices of prescribing physicians and patients, ~~(including the move to digital means of interaction—from wearables to digital pharmacies, among others),~~ changes with respect to payer relationships, the policies and preferences of healthcare professionals and healthcare organizations with respect to the sales and marketing efforts of life sciences companies, changes in the regulation of the sales and marketing efforts and pricing practices of life sciences companies, and other factors such as the impact of COVID-19, could lead to a significant reduction in sales representatives that use our solutions or otherwise change the demand for our solutions. We expect life sciences companies to reduce the number of sales representatives that they employ by roughly 10% over the next one to two years, which could negatively impact sales of our solutions, including Veeva CRM and other Commercial Cloud applications in particular. We cannot be certain such reductions will happen or of the magnitude of such reductions. Changes in public perception regarding the practices of the life sciences industry may result in political pressure to increase the regulation of life sciences companies in one or more of the areas described above, which may negatively impact demand for our solutions.

•Changes in global economic conditions and changes in the global availability of healthcare treatments provided by the life sciences companies to which we ~~sell—~~sell—Our business depends on the overall economic health of our existing and prospective customers. The purchase of our solutions may involve a significant commitment of capital and other resources. If economic conditions, including the ability to market life sciences products in key markets or the demand for life sciences products globally deteriorates, many of our customers may delay or reduce their IT spending. This could result in reductions in sales of our solutions, longer sales cycles, reductions in subscription duration and value, slower adoption of new ~~technologies,~~product offerings, and increased price competition.


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Accordingly, our operating results and our ability to efficiently provide our solutions to life sciences companies and to grow or maintain our customer base could be adversely affected as a result of these factors and others that affect the life sciences industry generally.


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Our solutions address heavily regulated functions within the life sciences industry, and failure to comply with applicable laws and regulations could lessen the demand for our solutions or subject us to significant claims and losses.

Our customers use our solutions for business activities that are subject to a complex regime of global laws and regulations, including requirements for maintenance of electronic records and electronic signatures, ~~(as set forth in 21 CFR Part 11, EU Annex 11, and Japan PFSB Notification No. 0401022),~~ requirements regarding drug sample tracking and distribution, ~~(as set forth in 21 CFR Part 203, EU Directive 201/83/EC Article 96),~~ requirements regarding system validations, ~~(as set forth in 21 CFR Part 802.75 and 21 CFR Part 211.68),~~ requirements regarding processing of health data, (as set forth in 45 CFR Part 164 of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and Article L.111-8 of the French Public Health Code), requirements regarding GCP regulations (e.g., ICH E6) for those activities formally transferred under 21CFR Section 312.52 or other international transfer of obligation regulations, and other laws and regulations. Our ~~solutions are expected~~customers expect to be ~~capable of~~able to use by our ~~customers~~solutions in ~~compliance~~a manner that is compliant with ~~such laws and regulations.~~the regulations to which they are subject. Our efforts to provide solutions that comply with such laws and regulations are time-consuming and costly and include validation procedures that may delay the release of new versions of our solutions. As these laws and regulations change over time, we may find it difficult to adjust our solutions to comply with such changes.

In addition, many countries and self-regulatory bodies impose requirements regarding payments and transfers of value from life sciences companies to healthcare professionals. For example, our current and prospective customers may be required to comply with the U.S. federal legislation commonly referred to as the Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, and its implementing regulations ~~(“Sunshine Act”)~~(Sunshine Act). The Sunshine Act requires certain manufacturers of drugs, devices, biologics, and medical supplies, ~~that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program,~~ with specific exceptions, to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members.physicians. Our solutions and services targeted at life sciences companies, including, for example, ~~those offered by Physicians World following our November 2019 acquisition,~~Veeva Digital Events, are used by our customers to assist with their reporting obligations under the Sunshine Act. If our solutions and services fail to assist our customers to meet such reporting obligations in a timely and accurate manner, demand for our solutions could decrease, which could adversely affect our business.

As we increase the number of products we offer and the number of countries in which we ~~offer solutions,~~operate, the complexity of adjusting our solutions to comply with legal and regulatory changes will increase. ~~This complexity is exacerbated as emerging countries evolve and enhance their own regulations and regulatory regimens.~~ If we are unable to effectively manage this ~~increase~~increased complexity or if we are not able to provide solutions that can be used in compliance with applicable laws and regulations, customers may be unwilling to use our solutions, and any such non-compliance could result in the termination of our customer agreements or claims arising from such agreements with our customers. Furthermore, we have in the past and may in the future be subject to inspections or audits by government agencies or other regulatory bodies to verify our customers’ compliance with applicable laws, regulations, or GxP principles.

Additionally, any failure of our customers to comply with laws and regulations applicable to the functions for which they use our solutions ~~are used~~ could result in investigations by regulatory authorities, fines, penalties, or claims for substantial damages against our customers that may, in turn, harm our business or reputation. If such failure were allegedly caused by our solutions or services, our customers may make a claim for damages against us, regardless of our responsibility for the failure. We may be subject to investigations and lawsuits that, even if unsuccessful, could divert our resources and our management’s attention and adversely affect our business and customer relationships, and our insurance coverage may not be sufficient to cover such claims against us.

Increasingly complex data protection and privacy regulations are burdensome, may reduce demand for our solutions, and non-compliance may impose significant liabilities.

Our customers use our solutions to collect, use, process, store, and disclose personal data or identifiable information regarding their employees, ~~and the~~ healthcare professionals, ~~with whom our customers have contact,~~ and ~~potentially, personal data~~patients (including potentially sensitive data such as health data) ~~regarding patients maintained by our customers pursuant to clinical, regulatory, or quality processes.~~. In many countries, governmental bodies have adopted ~~are considering adopting,~~ or may adopt laws and regulations regarding the collection, use, processing, storage, and disclosure of personal ~~information,~~data, making compliance an increasingly complex task. ~~Furthermore, our~~


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~~business has expanded into new product areas that now trigger the need to comply with additional requirements such as patient data and digital advertising.~~

For example, in the United States, the U.S. Department of Health and Human Services promulgated privacy and security rules under HIPAA that cover protected health information ~~("PHI")~~(PHI) by limiting use and disclosure and giving individuals the right to access, amend, and seek accounting of their ~~PHI, and limiting most use and disclosures of their PHI to the minimum amount reasonably necessary to accomplish the intended purposes.~~PHI. Certain of our customers may be either business associates or covered entities under HIPAA. For example, while HIPAA ~~does~~generally is not ~~apply~~applicable to pharmaceutical companies, ~~or adverse event reporting,~~ some of our customers ~~may be~~are clinical research sites, such as university hospitals, ~~that conduct research~~and may provide healthcare service as well as ~~provide medical care and do not segregate their IT systems, causing them to fall under the HIPAA regulatory regime. Furthermore, we have expanded our offerings to work more directly with~~ clinical research ~~sites who process PHI. Therefore, we must~~and may be required to comply with HIPAA. Therefore, in


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certain scenarios, HIPAA is applicable to ~~the extent~~PHI that ~~PHI~~ is introduced into our solutions, ~~by our customers~~ and we must maintain a HIPAA compliance program.

Veeva Crossix ~~which we acquired in November 2019,~~ provides ~~technology that creates~~ analytics derived from de-identified third-party health and consumer data on U.S. residents that life sciences companies use for ~~more targeted and effective~~ measurement of their advertising objectives. All PHI processed by Crossix for its measurement services is certified to satisfy HIPAA’s de-identification standard. Certain states have signed into law or are intending to enact laws regarding requirements on de-identified information, and there is some uncertainty regarding those laws' conformity with the HIPAA de-identification standards. Compliance with state laws could require additional investment and management attention and may subject us to significant liabilities if we do not comply appropriately with new and potentially conflicting regulations.

In addition to government regulations, privacy advocates and other key industry players have established or may establish various new, additional, or different policies or self-regulatory standards, such as the prohibition of third-party cookies and other identifiers in ~~May 2020, Crossix became a member of the Network Advertising Initiative (“NAI”), which requires~~certain digital environments that may place additional burdens or resource constraints on us, limit our ability to collect and use certain data, and limit our ability to generate certain analytics. Our customers may expect us to meet voluntary certifications or adhere to other standards established by third parties. Moreover, the ~~NAI’s code~~continuing evolution of ~~conduct. We also adhere to the Digital Advertising Alliance’s Self-Regulatory Principles~~these standards might cause confusion for ~~Online Behavioral Advertising by providing enhanced notice, transparency and control of~~ our digital marketing solutions. The NAI code requires us to publicly disclose all standard health-related audience segments and a representative sample of custom audience segments used for tailored advertising, among other technical controls. Adherence to self-regulatory requirements could necessitate additional investment and management attentioncustomers and may ~~subject us~~have an impact on the solutions we offer, including our data products. If we are unable to ~~consequences for non-compliance which~~maintain these certifications or meet these standards, it could reduce demand for our ~~solutions.~~solutions and adversely affect our business and operating results.

~~California enacted~~Under the California Consumer Privacy Act ~~of 2018 ("CCPA")~~(CCPA) and the California Privacy Rights Act (CPRA), which took effect on January 1, 2020 and has been enforceable since July 1, 2020, and which broadly defines personal information, gives California residents expanded privacy rights and protections, and provides for civil penalties for violations. Wewe are a service provider and business ~~under CCPA~~ for our software solutions and data products, respectively. The implementing regulations came into effect on August 14, 2020. Due to the uncertainty of application of certain provisions, the consequences of the CCPA on our solutions remain unclear. Furthermore, if the California Privacy Rights Act (“CPRA”), a new initiative for the November 2020 ballot, passes, it could significantly amend and expand the CCPA and impact our business. If successful, the CPRA would take effect in January 2023. Several other states have signed into law or are intending to enact laws regarding requirements on personal information. There is also the potential for the U.S. federal government to pass data privacy laws. These regulations and legislative developments have potentially far-reaching consequences and may require us to modify our data management practices and to incur substantial expense in order to comply.

Under the European General Data Protection Regulation ~~("GDPR")~~(GDPR), we act as a data controller for our data products, Veeva OpenData and Veeva Link, and a data processor with respect to our software solutions. Compliance with GDPR and CCPA has and will continue to require valuable management and employee time and resources, and failure to comply with GDPR or CCPA could include severe penalties and could reduce demand for our solutions.

Furthermore, in Brazil, there has been significant uncertainty around the adoption and implementation of a new data privacy legislation known as Lei Geral de Proteção de Dados (or LGPD), but the LGPD's core provisions could take effect soon. Compliance with LGPD has and will continue to require management and employee time and resources, and failure to comply with LGPD could include severe penalties and could reduce demand for our solutions.

Regarding data transfer, the European Court of Justice invalidated the EU-U.S. Privacy Shield Framework ~~on July 16, 2020, which required Veeva to again~~and we now rely solely on the EU Standard Contractual ~~Clauses, often also referred to as Model~~ Clauses to ensure that our European customers have the appropriate legal mechanisms in place for their personal data to be accessed within the United States. ~~This decision~~Management has ~~generated questions for our customers which has required management and employee~~spent considerable time and resources to ~~respond. The status~~respond to customer inquiries as a result of ~~personal data from~~


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the United Kingdom after the Brexit transition period ends on December 31, 2020 is still in question as the on-going discussions between the European Commission and the United Kingdom have not yet determined a workable solution. Such political uncertainty regarding data transfer may require additional management attention and investment depending on the outcomes.

this decision. There is also a trend toward countries enacting data localization or other country specific requirements which ~~are not particularly compatible with the~~could be problematic to cloud computing model. For example, Russia’s localization law (Federal Law No. 242-FZ) requires that the source of data for Russian nationals collected on Russian territory must be stored in Russia. We are also monitoring the impact of China’s cyber security law and its related implementation rules, which are not yet finalized. Depending on the final enacted implementation rules, localization of certain types of data and restrictions on cross-border transfers may apply. In addition, French law requires that services providers be certified in order to host health data (“hébergeurs de données de santé” or “HDS”) under the Article L.111-8 of the French Public Health Code.software providers. Understanding and implementing such country specific certifications on top of our internationally recognized security certifications could require additional investment and management attention and may subject us to significant liabilities if we do not comply with particular requirements. Compliance with global privacy laws has and will continue to require valuable management and employee time and resources, and failure to comply with these regulations could include severe penalties and could reduce demand for our solutions.

Customers expect that our solutions can be used in compliance with ~~such~~data protection and data privacy laws and regulations. The functional and operational requirements and costs of compliance with such laws and regulations may adversely impact our business, and failure to enable our solutions to comply with such laws and regulations could lead to significant fines and penalties imposed by regulators, as well as claims by our customers or third parties. Additionally, all of these domestic and international legislative and regulatory initiatives could adversely affect our customers’ ability or desire to collect, use, process, store, and disclose personal information and health data using our solutions, or to license data products from us, which could reduce demand for our solutions.

Furthermore, the Lei Geral de Proteção de Dados (or LGPD) was recently adopted in Brazil and its core provisions are now in effect. Compliance with LGPD has and will continue to require management and employee time and resources, and failure to comply with LGPD could include severe penalties and could reduce demand for our solutions.

~~If the demand for cloud-based solutions declines, particularly in the life sciences industry, our revenues could decrease and our business could be adversely affected.~~

The continued expansion of the use of cloud-based solutions, particularly in the life sciences industry, depends on a number of factors, including the cost, performance and perceived value associated with cloud-based solutions, as well as the ability of providers of cloud-based solutions to address and maintain security, privacy, and unique regulatory requirements or concerns. If we or other cloud-based solution providers experience security incidents, loss of customer data, disruptions in delivery or other problems, the market for cloud-based solutions in the life sciences industry, including our solutions, may be adversely affected. If cloud-based solutions do not continue to achieve more widespread adoption in the life sciences industry, or there is a widespread reduction in demand for cloud-based solutions, our revenues could decrease and our business could be adversely affected.

Risks Related to ~~our~~Our Reliance on Third Parties

If the third-party providers of healthcare ~~reference~~professional and healthcare organization data and prescription drug sales data do not allow our customers to upload and use such data in our solutions, the demand for our solutions may decrease, and our business may be negatively impacted.

Many of our customers license healthcare professional and healthcare organization data and data regarding the sales of prescription drugs from third parties such as IQVIA. In order for our customers to upload such data to the Veeva CRM, Veeva Network Customer Master, Veeva Nitro, and other Veeva applications, such third-party data providers typically must consent to such uploads and often require that we enter into agreements regarding our obligations with respect to such data, which include confidentiality obligations and intellectual property rights with respect to such third-party data. We have experienced delays and difficulties in our negotiations with such third-party data providers in the past, and we expect to experience difficulties in the future. For instance, IQVIA currently


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will not consent to customers using its healthcare professional or healthcare organization data being uploaded to Veeva Network Customer Master and this has negatively affected sales and customer adoption of Veeva Network Customer Master. To date, IQVIA has also restricted customers from uploading any of its data to Veeva Nitro, Veeva Andi, ~~Veeva MedComms,~~ and certain other Veeva applications. In addition, IQVIA has stated publicly that it will deny all customer requests for use of new IQVIA data types in Veeva applications, including, as examples, real world data, real world evidence, and genomics. Similarly, sales and customer adoption of Veeva OpenData has been negatively impacted by certain restrictions on the use of IQVIA data during customer transitions


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from IQVIA data to Veeva OpenData. If third-party data providers, particularly IQVIA, do not consent to the uploading and use of their data in our solutions, delay consent, or fail to offer reasonable conditions for the upload and use of their data in our solutions, our sales efforts, solution implementations, and productive use of our solutions by customers, which have been harmed by such actions in the past, may continue to be harmed. Restrictions on the ability of our customers to use third-party data in our solutions may also decrease demand for our solutions or may cause customers to consider purchasing solutions that are not subject to the same restrictions. For example, in 2020, it ~~has been~~was reported that a significant Veeva CRM customer ~~recently~~ launched a project to implement ~~IQVIA's~~IQVIA’s competitive software offering for portions of its CRM users, in part as a result of concerns about restrictions imposed by IQVIA for the use of IQVIA data in certain Veeva software applications. If these third-party data limitations persist, our business may be negatively impacted.

We rely on third-party providers—including salesforce.com and Amazon Web Services—for computing infrastructure, secure network connectivity, and other technology-related services needed to deliver our cloud solutions. Any disruption in the services provided by such third-party providers could adversely affect our business and subject us to liability.

Our solutions are hosted from and use computing infrastructure provided by third parties, including salesforce.com with respect to Veeva CRM and certain of our multichannel CRM applications, Amazon Web Services with respect to Veeva Vault applications, Veeva Network applications, and certain other Veeva Commercial Cloud applications, and, to a lesser extent, other computing infrastructure service providers.

We do not own or control the operation of the third-party facilities or equipment used to provide the services described above. Our computing infrastructure service providers have no obligation to renew their agreements with us on commercially reasonable terms or at all. If we are unable to renew these agreements on commercially reasonable terms, ~~or if one of our computing infrastructure service providers is acquired,~~ we may be required to transition to a new provider and we may incur significant costs and possible service interruption in connection with doing so. In addition, such service providers could decide to close their facilities or change or suspend their service offerings without adequate notice to us. Moreover, any financial difficulties, such as bankruptcy, faced by such service providers may have negative effects on our business, the nature and extent of which are difficult to predict. Since we cannot easily switch computing infrastructure service providers, any disruption with respect to our current providers would impact our operations and our business could be adversely impacted.

Problems faced by our computing infrastructure service providers ~~including those operated by salesforce.com or Amazon Web Services,~~ could adversely affect the experience of our customers. For example, salesforce.com and Amazon Web Services have experienced significant service outages in the past and may do so again in the future. Additionally, ~~if we fail~~our failure to manage or react to an increase in customer demand ~~sufficiently, this~~ could have an adverse effect on our business. ~~For example, a~~A rapid expansion of our business or an increase in customer demand could affect our service levels or cause ~~such~~our systems to fail. Our agreements with third-party computing infrastructure service providers may not entitle us to corresponding service level credits to those we offer to our customers. Any changes in third-party service levels at our computing infrastructure service providers or any related disruptions or performance problems with our solutions could ~~adversely affect our reputation and may damage our customers’ stored files,~~ result in lengthy interruptions in our services, damage our customers’ stored files, or result in potential losses of customer ~~data.~~data, any of which could adversely affect our reputation. Interruptions in our services might reduce our revenues, cause us to issue refunds to customers for prepaid and unused subscriptions, subject us to service level credit claims and potential liability, or adversely affect our renewal rates.

Because key and substantial portions of our multichannel CRM applications are built on salesforce.com’s ~~Salesforce1~~Salesforce Platform, we are dependent upon ~~our agreement with~~ salesforce.com to provide these solutions to our customers and we are bound by the restrictions of ~~this~~our agreement with salesforce.com, which limits the ~~companies~~markets to which we may sell our Veeva CRM solution.

Our Veeva CRM application and certain portions of the multichannel CRM applications that complement our Veeva CRM application are developed on or utilize the ~~Salesforce1~~Salesforce Platform of salesforce.com, and we ~~rely on our agreement with salesforce.com to continue to~~are dependent upon the continued use of the ~~Salesforce1~~Salesforce Platform as combined with the proprietary aspects of our multichannel CRM applications.


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Our agreement with salesforce.com expires on September 1, 2025. However, salesforce.com has the right to terminate the agreement in certain circumstances, including in the event of a material breach of the agreement by us, or that salesforce.com is subjected to third-party intellectual property infringement claims based on our solutions (except to the extent based on the ~~Salesforce1~~Salesforce Platform) or our trademarks and we do not remedy such


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infringement in accordance with the agreement. Also, if we are acquired by specified companies, salesforce.com may terminate the agreement upon notice of not less than 12 months. If salesforce.com terminates our agreement under these circumstances, our customers will be unable to access Veeva CRM and certain other of our multichannel CRM applications. A termination of the agreement would cause us to incur significant time and expense to acquire rights to, or develop, a replacement CRM platform, and we may not be successful in these efforts. Even if we were to successfully acquire or develop a replacement CRM platform, some customers may decide not to adopt the replacement platform and may decide to use a different CRM solution. If we were unsuccessful in acquiring or developing a replacement CRM platform or acquired or developed a replacement CRM platform that our customers do not adopt, our business, operating results and brand may be adversely affected.

Also, if either party elects not to renew the agreement at the end of its September 1, 2025 term or if the agreement is terminated by us as a result of salesforce.com’s breach, the agreement provides for a five-year wind-down period in which we would be able to continue providing the ~~Salesforce1~~Salesforce Platform as combined with the proprietary aspects of our solutions to our existing customers but would be limited with respect to the number of additional subscriptions we could sell to our existing customers. After the wind-down period, we would no longer be able to use the ~~Salesforce1~~Salesforce Platform.

Our agreement with salesforce.com provides that we can use the ~~Salesforce1~~Salesforce Platform as combined with our proprietary Veeva CRM application to sell sales automation solutions only to drug makers in the pharmaceutical and biotechnology industries for human and animal treatments, which does not include the medical ~~devices~~device industry or products for non-drug departments of pharmaceutical and biotechnology companies. Sales of the ~~Salesforce1~~Salesforce Platform in combination with our Veeva CRM application to additional industries would require the review and approval of salesforce.com. Our inability to freely sell our Veeva CRM application outside of drug makers in the pharmaceutical and biotechnology industries may adversely impact our growth.

While our agreement with salesforce.com, subject to certain exceptions including pre-existing arrangements, provides that salesforce.com will not position, develop, promote, invest in, or acquire applications directly competitive to the Veeva CRM application for sales automation that directly target drug makers in the pharmaceutical and biotechnology industry or the pharma/biotech industry, our remedy for a breach of this commitment by salesforce.com would be to terminate the agreement, or continue the agreement but be released from our minimum order commitments from the date of salesforce.com’s breach forward. While our agreement with salesforce.com also restricts salesforce.com from competing with us with respect to sales opportunities for sales automation solutions for the ~~pharma/biotech~~pharmaceutical and biotechnology industry unless such competition has been pre-approved by salesforce.com’s senior management based on certain criteria specified in the agreement, and imposes certain limits on salesforce.com from entering into new arrangements after March 3, 2014 that are similar to ours with other parties with respect to sales automation applications for the ~~pharma/biotech~~pharmaceutical and biotechnology industry, it does not restrict a salesforce.com customer’s ability (or the ability of salesforce.com on behalf of a specific salesforce.com customer) to customize or configure the ~~Salesforce1~~Salesforce Platform, and our remedy for a breach of these restrictions by salesforce.com would be to terminate the agreement, or continue the agreement but be released from our minimum order commitments from the date of salesforce.com’s breach forward. Some current or potential customers of ours may choose to build custom solutions using the ~~Salesforce1~~Salesforce Platform rather than buying our solutions.

Also, in 2019, salesforce.com ~~recently~~ announced a strategic partnership with Alibaba, a Chinese company, through which Alibaba will become the exclusive provider of Salesforce in mainland China, Hong Kong, Macau, and Taiwan. The timeframe and exact parameters of changes to salesforce.com offerings in the listed regions has not been announced. Our existing agreement with salesforce.com allows us to sell our CRM solutions to drug makers in the pharmaceutical and biotechnology industries in mainland China, Hong Kong, Macau, and Taiwan, and our right to do so is not impacted by the Alibaba partnership. However, our ability to offer our CRM solutions from data centers located in the listed regions may be limited if salesforce.com does not operate data centers in the listed regions in the future and we do not contract for such data center services from Alibaba. If our inability to offer our CRM solutions from data centers located in the listed regions negatively impacts the performance of our solutions in those regions or causes legal compliance concerns, or if customers in the listed regions prefer their CRM solutions to be hosted from local data centers, our business may be negatively affected.

~~Our agreement with salesforce.com imposes significant financial commitments on us which we may not be able to meet and which could negatively impact our financial results and liquidity in the future.~~

Our Veeva CRM application, and certain portions of the multichannel CRM applications that complement our Veeva CRM application, are developed on and/or utilize the Salesforce1 Platform of salesforce.com. Under our agreement,


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salesforce.com provides the hosting infrastructure and data center for portions of our multichannel CRM applications, as well as the system administration, configuration, reporting, and other platform level functionality. In exchange, we pay salesforce.com a fee. Our agreement with salesforce.com requires that we meet minimum order commitments of $500 million over the term of the agreement, which ends on September 1, 2025, including “true-up” payments if the orders we place with salesforce.com have not equaled or exceeded the following aggregate amounts within the timeframes indicated: (i) $250 million from March 1, 2014 to September 1, 2020 and (ii) the full amount of $500 million by September 1, 2025. See note 14 of the notes to our condensed consolidated financial statements for more information about our on-going minimum fee obligation to salesforce.com. We have met our first minimum order commitment of $250 million and have a remaining purchase commitment of $99 million, as of July 31, 2020, that must be made by September 1, 2025. If we are not able to meet the remaining minimum order commitment, the required true-up payments will negatively impact our margins, cash flows, cash balance and financial condition, and our stock price may decline.

We employ third-party licensed software and software components for use in or with our solutions, and the inability to maintain these licenses or the presence of errors or security vulnerabilities in the software we license could limit the functionality of our products and result in increased costs or reduced service levels, which would adversely affect our business.

In addition to our employment of the ~~Salesforce1~~Salesforce Platform through our agreement with salesforce.com, our solutions incorporate or ~~utilize~~use certain third-party software and software components obtained under licenses from other companies. We also use third-party software and tools in the development process for our solutions to manage and monitor our computing infrastructure, and to provide professional services and support our customers. For example, our Veeva CRM Engage Meeting application ~~utilizes~~uses a purpose-built partner tool from Zoom Video Communications, Inc., which is critical to the application's functionality. We anticipate that we will continue to rely on such third-party software and development tools ~~from third parties~~ in the future. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace. ~~Our use of additional or alternative third-party software would require us to enter into license agreements with third parties.~~ In addition and although we maintain a supplier security evaluation process, if the third-party software we ~~utilize~~use has errors, security vulnerabilities, or otherwise malfunctions, the functionality of our solutions may be negatively impacted, our customers may experience reduced service levels, and our business may suffer.

Our solutions utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could adversely affect our business.

Our solutions include software covered by open source licenses. The terms of various open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our solutions. ByIt is possible under the terms of certain ~~open source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available under~~ open source licenses, if we combine our proprietary software with open source software in a certain ~~manner.~~manner, that we could be required to release the source code of our proprietary software and make our proprietary software available under open source licenses. In the event that portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our solutions, or otherwise be limited in the licensing of our solutions, each of which could reduce or eliminate the value of our ~~solutions and services.~~solutions. In addition to risks related to license requirements, ~~usage~~use of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with ~~usage~~the use of open source software cannot be eliminated and could adversely affect our business.

Risks Related to Our Financial Performance, How We Contract with Customers, and the Financial Position of Our Business

Our historic growth rates of total revenues and subscription services revenues should not be viewed as indicative of our future performance.

While we have experienced significant revenue growth in prior periods, it is not indicative of our future revenue growth. We expect our longer-term revenue growth rate will decline. In our fiscal years ended January 31, ~~2018,~~2021, 2020, and 2019, ~~and 2020,~~ our total revenues grew by ~~25%~~33%, ~~25%~~28%, and ~~28%~~25% respectively, as compared to total revenues from the prior fiscal years. In our fiscal years ended January 31, ~~2018,~~2021, 2020, and 2019, ~~and 2020,~~ our subscription services revenues grew by ~~27%~~32%, ~~24%~~29%, and ~~29%~~24% respectively, as compared to subscription services revenues from the prior fiscal years. Please note that our total revenues and subscription services revenues for the fiscal year ended January 31, 2020 only included revenue contribution from Crossix and Physicians World ~~which we acquired early~~ in the fourth quarter of ~~the~~that fiscal ~~year ended January 31, 2020.~~year. In our fiscal quarter ended ~~July 31, 2020,~~April 30, 2021, our total


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revenues grew by ~~33%~~29% and our subscription services revenues grew by 26% as compared to the same quarterly period last year. Our total revenues and subscription services revenue growth rates have declined in the past, and we expect them to decline again in the future. If we are unable to maintain consistent revenue growth, it may adversely impact our profitability and the value of our Class A common stock.

Our results may fluctuate from period to period, which could prevent us from meeting our own guidance or security analyst or investor expectations.

Our results of operations, including our revenues, gross margin, operating margin, profitability, cash flows, calculated billings, and deferred revenue, as well as other metrics we may report, may vary from period to period for a variety of reasons, including those listed elsewhere in this “Risk Factors” section, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, our quarterly results should not be relied upon as an indication of future performance. Additionally, from time to time, we issue guidance and provide


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commentary regarding our expectations for certain future financial results ~~including revenues, gross margin, operating margin, profitability, cash flows, calculated billings, deferred revenue,~~ and other metrics on both a near-term and long-term basis. Our guidance is based upon a number of assumptions and estimates that are subject to significant business, economic, and competitive uncertainties that are beyond our control and are based upon assumptions about future business and accounting decisions that may change or be wrong. Our guidance may prove to be incorrect, and actual results may differ from our guidance. Fluctuations in our results or failure to achieve our guidance or security analyst or investor expectations, even if not materially, could cause the price of our Class A common stock to decline substantially, and our investors could incur substantial losses.

The majority of our subscription agreements with our customers are for a term of one year. If our existing customers do not renew their subscriptions, ~~annually,~~ or do not buy additional solutions and user subscriptions from us, or renew at lower aggregate fee levels, our business and operating results will suffer.

We derive a significant portion of our revenues from the renewal of existing subscription orders. The majority of our customers’ orders for subscription services have one-year terms. However, more recently and with respect to solutions other than our core ~~sales automation solution~~Veeva CRM application and particularly with respect to certain of our Vault applications, we have entered into a number of orders with ~~terms of up to eight years.~~multi-year terms. Our customers have no obligation to renew their subscriptions ~~for our solutions~~ after their orders expire. Thus, securing the renewal of our subscription orders and selling additional solutions and user subscriptions is critical to our future operating results. Factors that may affect the renewal rate for our solutions and our ability to sell additional solutions and user subscriptions include:

•the price, performance, and functionality of our solutions;

•the effectiveness of our professional services;

•the strength of our business relationships with our customers;

•the availability, price, performance, and functionality of competing solutions and services;

•our ability to develop complementary solutions, applications, and services;

•the stability, performance, and security of our hosting infrastructure and hosting services; and

•the business environment of our customers and, in particular, acquisitions of or business combinations between our customers or other business developments that may result in reductions in user subscriptions.

In addition, our customers may negotiate terms less advantageous to us upon renewal, which could reduce our revenues from these customers. As a customer’s total spend on Veeva solutions increases, we expect purchasing scrutiny at renewal to increase as well, which may result in reductions in user subscriptions or increased pricing pressure. Other factors that are not within our control may contribute to a reduction in our subscription services revenues. For instance, our customers may reduce their number of sales representatives, which would result in a corresponding reduction in the number of user subscriptions needed for some of our solutions and thus a lower aggregate renewal fee, or our customers may discontinue clinical trials for which our solutions are being used. If our customers fail to renew their subscription orders, renew their subscription orders with less favorable terms or at lower fee levels, or fail to purchase new solutions, applications, or professional services from us, our revenues may decline or our future revenues may be constrained.


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As our costs increase, we may not be able to sustain the level of profitability we have achieved in the past.

We expect our future expenses to increase as we continue to invest in and grow our business. We expect to incur significant future expenditures related to:

•developing new solutions and enhancing our existing solutions, including additional data acquisition costs associated with our ~~planned and recently announced~~Veeva Data Cloud ~~product;~~offering and investment in our product development teams;

•improving the technology infrastructure, scalability, availability, security, and support for our solutions;

•~~expanding and deepening our relationships with our existing customer base, including expenditures related to increasing the adoption of our solutions by the R&D departments of life sciences companies;~~

•sales and marketing, including expansion of our direct sales organization and global marketing programs;

•expansion of our professional services organization;

•~~employee compensation, including stock-based compensation;~~

•pending, threatened, or future legal proceedings, certain of which are described in Part II, Item 1. “Legal ~~Proceedings”~~Proceedings” and note 1413 of the notes to our condensed consolidated financial statements, and which we expect to continue to result in significant expense for the foreseeable future;


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•international expansion;

•acquisitions and investments; and

•general operations, IT systems, facilities, and administration, including legal and accounting ~~expenses related to being a public company.~~expenses.

If our efforts to increase revenues and manage our expenses are not successful, or if we incur costs, damages, fines, settlements, or judgments as a result of other risks and uncertainties described in this report, we may not be able to sustain or increase our historical levels of profitability.

Our revenues and gross margin from professional services fees are volatile and may not increase from quarter to quarter or at all.

We derive a significant portion of our revenue from professional services fees. Our professional services revenues fluctuate from quarter to quarter as a result of the requirements, complexity, and timing of our customers’ implementation ~~projects in our professional services arrangements.~~projects. Generally, a customer’s ongoing need for professional services decreases as the implementation and full deployment of ~~such~~our solutions is completed. Our customers may also choose to use third parties rather than us for certain professional services related to our solutions. As a result of these and other factors, our professional services revenues may not increase on a quarterly basis in the future or at all. Additionally, the gross margin generated from professional services fees fluctuates based on a number of factors which may vary from period to period, including the average billable hours worked by our billable professional services personnel, our average hourly rates for professional services and the margin on professional services subcontracted to our third-party systems integrator partners. As a result of these and other factors, the gross margin from our professional services may not increase on a quarterly basis in the future or at all.

Because we recognize subscription services revenues ratably over the term of ~~the~~an order for our subscription services, ~~a significant downturn in our business~~it may ~~not~~ be ~~reflected immediately in our operating results, which increases the difficulty of evaluating~~difficult to evaluate our future financial performance.

We generally recognize subscription services revenues ratably over the term of an order under our subscription agreements. As a result, a substantial majority of our quarterly subscription services revenues are generated from subscription agreements entered into during prior periods. Consequently, a decline in new subscriptions in any quarter may not affect our results of operations in that quarter but could reduce our revenues in future quarters. Additionally, the timing of renewals or non-renewals of a subscription agreement during any quarter may only affect our financial performance in future quarters. For example, the non-renewal of a subscription agreement late in a quarter will have minimal impact on revenues for that quarter but will reduce our revenues in future quarters.

Accordingly, the effect of significant declines in sales and customer acceptance of our solutions may not be reflected in our short-term results of operations, which would make these reported results less indicative of our future financial results. By contrast, a non-renewal occurring early in a quarter may have a significant negative impact on


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revenues for that quarter and we may not be able to offset a decline in revenues due to the non-renewal with revenues from new subscription agreements entered into in the same quarter. ~~In addition, we may be unable to adjust our costs in response to reduced revenues.~~

Additionally, with respect to certain of our multi-year orders in which fees increase from year to year, we ~~may be required to~~ recognize ratably the total contracted revenue for the entire multi-year term of the order. As a result, in the initial year of such orders, we will recognize more revenue than the fees we invoice for the same period, and in the last year of such orders, we will recognize less revenue than the fees we invoice for the same period. Moreover, such multi-year orders could renew at fees greater than the revenue that was recognized in the last year of the order, which could result in fluctuations in our financial results. We may also be exposed to impaired contract assets if, for example, a customer terminated an otherwise non-cancelable multi-year contract for cause. Therefore, our reported results could be less indicative of the actual health of our business at the time revenue is ~~reported and may expose us to impaired contract assets if, for example, a customer terminated an otherwise non-cancelable multi-year contract for cause.~~

Changes in accounting principles may cause previously unanticipated fluctuations in our financial results, and the implementation of such changes may impact our ability to meet our financial reporting obligations.

We prepare our financial statements in accordance with U.S. GAAP which are subject to interpretation or changes by the Financial Accounting Standards Board, or FASB, the Securities and Exchange Commission, or SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. New accounting pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future which may have a significant effect on our financial results. For example, we were required to implement Topic 606 in our fiscal year beginning February 1, 2018 that impacted the timing of revenue recognition and commissions expense for certain of our revenue arrangements. Any difficulties in implementation of changes in accounting principles, including the ability to modify our accounting systems, could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.reported.

Deferred revenue and change in deferred revenue may not be accurate indicators of our future financial results.


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have also agreed from time to time, and may agree in the future, to allow customers to change the renewal dates of their orders to, for example, align more closely with a customer’s annual budget process or to align with the renewal dates of other orders placed by other entities within the same corporate control group, or to change payment terms from annual to quarterly, or vice versa. Such changes typically result in an order of less than one year ~~as necessary~~ to align all orders to the desired renewal date and, thus, may result in a lesser increase to deferred revenue than if the adjustment had not occurred. Additionally, changes in renewal dates may change the fiscal quarter in which deferred revenue associated with a particular order is booked. Accordingly, we do not believe that changes on a quarterly basis in deferred revenue, unbilled accounts receivable, or calculated billings, a metric commonly cited by financial analysts, are accurate indicators of the underlying momentum of our business or future revenues. We believe that our subscription revenue guidance and calculated billings guidance for the full fiscal year are the best indicators of the momentum of our business or future revenues. Please note that we define the term calculated billings for any period to mean revenue for the period plus the change in deferred revenue from the immediately preceding period minus the change in unbilled accounts receivable from the immediately preceding period. However, many companies that provide cloud-based software report changes in deferred revenue or calculated billings as key operating or financial metrics, and it is possible that analysts or investors may view these metrics as important. Thus, any changes in our deferred revenue balances or deferred revenue trends, or in the future, our unbilled accounts receivable balances or trends, could adversely affect the market price of our Class A common stock.


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Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added or similar transactional taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations.

We do not collect sales and use, value added ~~and~~or similar transactional taxes in all jurisdictions in which we have sales ~~and~~but no physical presence, based on our ~~belief~~determination that such taxes are not applicable or that we are not required to collect such taxes with respect to the jurisdiction. Sales and use, value added and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect and remit such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect such taxes in the future. ~~The U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. may increase that risk by increasing states’ ability to assert taxing jurisdiction on out-of-state retailers.~~ Such tax assessments, penalties and interest or future requirements, including based on changes in tax laws, may adversely affect our results of operations. We believe that our financial statements reflect adequate reserves to cover such a contingency, but there can be no assurances in that regard.

Unanticipated changes in our effective tax rate and additional tax liabilities, including as a result of our international operations or implementation of new tax rules, could harm our future results.

We are subject to income taxes in the United States and various foreign jurisdictions (including Australia, Belarus, Belgium, Brazil, Canada, China, France, Germany, Hungary, India, Israel, Italy, Japan, Mexico, Singapore, South Korea, Spain, Switzerland, Thailand, Ukraine, and the United Kingdom) and ourjurisdictions. Our domestic and international tax liabilities are subject to the allocation of expenses in differing jurisdictions and complex transfer pricing regulations administered by taxing authorities in ~~various~~these jurisdictions. Tax rates ~~in the jurisdictions in which we operate~~ may change as a result of factors outside of our control or relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. In addition, changes in tax and trade laws, treaties or regulations, or their interpretation or enforcement, have become more unpredictable and may become more stringent, which could have a material adverse effect on our tax position. Forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be material differences between our forecasted and actual tax rates. Our effective tax rate could be adversely affected by changes in the mix of earnings and losses in countries with differing statutory tax rates, certain non-deductible expenses, the valuation of deferred tax assets and liabilities, adjustments to income taxes upon finalization of tax returns, changes in allowable tax attributes, decision to repatriate non-U.S. earnings for which we have not previously provided for U.S. taxes, and changes in federal, state or international tax laws and accounting principles. IncreasesMoreover, increases in our effective tax rate would reduce our profitability.

Our tax provision could also be impacted by changes in accounting principles and changes in U.S. federal and state or international tax laws applicable to multinational corporations. For example, the Tax Cuts and Jobs Act of 2017 (Tax Act) significantly ~~changes~~changed how the U.S. Department of Treasury imposes income taxes on U.S. corporations. We made significant judgments and assumptions in the interpretation of this new law and in our calculations reflected in our financial statements. The U.S. Department of Treasury, the Internal Revenue Service (IRS), and other standard-setting bodies may issue guidance on how the provisions of the Tax Act will be applied or otherwise administered, and additional accounting guidance or interpretations may be issued in the future that is different from our current interpretation. As a further example, the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. increasing states’ ability to assert taxing jurisdiction on out-of-state retailers could result in certain additional jurisdictions asserting that sales and use and other taxes are applicable, which could result in tax assessments, penalties, and interest, and we may be required to collect such taxes in the future. Furthermore, on June 29, 2020, California Governor Newsom signed Assembly Bill No. 85 as part of the California 2020 Budget Act, which temporarily suspends the use of California net operating losses and imposes a limitation on the amount of business incentive tax credits that may impact our tax liabilities in future periods.

In addition, ~~other countries are considering fundamental~~increases in corporate tax ~~law changes.~~ rates, such as have been proposed by the current U.S. administration, could increase our effective tax rate and have an adverse effect on our results of operations.

Any changes in taxing jurisdictions' administrative interpretations, decisions, policies, and positions could also impact our tax liabilities. The overall tax environment has made it increasingly challenging for multinational corporations to operate with certainty about taxation in many jurisdictions. The Organization for Economic Co-operation and Development, which represents a coalition of member countries, is supporting changes to numerous long-standing tax rules, including changes to the practice of shifting profits among affiliated entities located in


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different tax jurisdictions. Additionally, certain countries in the European Union, as well as India, have enacted or are proposing various forms of non-income based taxes, such as a Digital Service Tax. Generally, such a tax is based on a percentage of gross revenue associated with


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digital service transactions. The increasingly complex global tax environment could have a material adverse effect on our effective tax rate, results of operations, cash flows, and financial condition.

Finally, we have been, and may be in the future, subject to income tax audits throughout the world. We believe our income, employment, and transactional tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles, but an adverse resolution of one or more uncertain tax positions in any period could have a material impact on the results of operations for that period.

Currency exchange fluctuations may negatively impact our financial results.

Some of our international agreements provide for payment denominated in local currencies, and the majority of our local costs are denominated in local currencies. As we continue to expand our operations in countries outside the United States, an increasing proportion of our revenues and expenditures in the future may be denominated in foreign currencies. Fluctuations in the value of the U.S. dollar versus foreign currencies may impact our operating results when translated into U.S. dollars. Thus, our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British Pound Sterling, Japanese Yen, and Chinese Yuan, and may be adversely affected in the future due to changes in foreign currency exchange rates. Changes in exchange rates may negatively affect our revenues, expenses, and other operating results as expressed in U.S. dollars in the future. Further, we have experienced and will continue to experience fluctuations in our net income as a result of transaction gains or losses related to revaluing certain current asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded.

We engage in the hedging of our foreign currency transactions and may, in the future, hedge selected significant transactions or net monetary exposure positions denominated in currencies other than the U.S. dollar. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.

If we are unable to implement and maintain effective internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports.

As a public company, we are required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act) requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and provide a management report on internal controls over financial reporting. The Sarbanes-Oxley Act also requires that our management report on internal controls over financial reporting be attested to by our independent registered public accounting firm.

Many of the internal controls we have implemented pursuant to the Sarbanes-Oxley Act are process controls with respect to which a material weakness may be found whether or not any error has been identified in our reported financial statements. This may be confusing to investors and result in damage to our reputation, which may harm our business. Additionally, the proper design and assessment of internal controls over financial reporting are subject to varying interpretations, and, as a result, application in practice may evolve over time as new guidance is provided by regulatory and governing bodies and as common practices evolve. This could result in continuing uncertainty regarding the proper design and assessment of internal controls over financial reporting and higher costs necessitated by ongoing revisions to internal controls.

We must continue to monitor and assess our internal control over financial reporting. If in the future we have any material weaknesses, we may not detect errors on a timely basis and our financial statements may be materially misstated. Additionally, if in the future we are unable to comply with the requirements ~~of Section 404~~ of the Sarbanes-Oxley Act in a timely manner, are unable to assert that our internal controls over financial reporting are effective, identify material weaknesses in our internal controls over financial reporting, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be adversely affected, and we could become subject to investigations by the ~~stock exchange on which our securities are listed,~~NYSE, the SEC, or other regulatory authorities, which could require additional financial and management resources.


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We have broad discretion in the use of our cash balances and may not use them effectively.

We have broad discretion in the use of our cash balances and may not use them effectively. The failure by our management to apply these funds effectively could adversely affect our business and financial condition. Pending their use, we may invest our cash balances in a manner that does not produce income or that loses value. Our investments may not yield a favorable return to our investors and may negatively impact the price of our Class A common stock.


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Risks Related to Our Intellectual Property

We have been and may in the future be sued by third parties for alleged infringement of their proprietary rights or misappropriation of intellectual property, and we may suffer damages or other harm from such proceedings.

There is considerable patent and other intellectual property development activity in our industry. Our competitors, as well as a number of other entities and individuals including so-called non-practicing entities, or NPEs, may own or claim to own intellectual property relating to our solutions. From time to time, third parties may claim that we are infringing upon their intellectual property rights or that we have misappropriated their intellectual property. For example, since January 2017, we have been defending against assertions of trade secret misappropriation made by our competitors, Medidata and IQVIA, as described in note 1413 of the notes to our condensed consolidated financial statements. As competition in our market grows, the possibility of patent infringement and other intellectual property claims against us increases. In the future, we expect others to claim that our solutions and underlying technology infringe or violate their intellectual property rights. We may be unaware of the intellectual property rights that others may claim cover some or all of our technology or services. Any claims or litigation have caused and in the future could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our services, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify applications, or refund fees, which could be costly. Any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations even if we were to ultimately prevail in such litigation.

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.

Our success and ability to compete depend in part upon our intellectual property. As of ~~July 31, 2020,~~April 30, 2021, we have filed numerous domestic and foreign patent applications and have been issued 2535 U.S. patents and 11 international patents. We also rely on copyright, trade secret and trademark laws, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Negative publicity related to a decision by us to initiate such enforcement actions against a customer or former customer, regardless of its accuracy, may adversely impact our other customer relationships or prospective customer relationships, harm our brand and business and could cause the market price of our Class A common stock to decline. Our failure to secure, protect and enforce our intellectual property rights could adversely affect our brand and our business.

Risks Related to Our Status as a Public Benefit Corporation and Ownership of Our Class A Common Stock

Our conversion to a Delaware public benefit corporation may not result in the benefits that we anticipate, requires our directors to balance the interest of stockholders with other interests, and may subject us to legal uncertainty and other risks.

On February 1, 2021, after approval by our stockholders, we became a Delaware public benefit corporation (PBC). There are a very limited number of publicly traded PBCs, we are the first publicly traded company to convert to a PBC, and we are the largest publicly traded company, as measured by revenue or market capitalization, to operate as a PBC. As a PBC, we have unique legal obligations. We are required to adopt and include in our certificate of incorporation a public benefit purpose that is intended to have positive effects on a category of persons, entities or communities other than stockholder financial interest. Our public benefit purpose is to provide products and services that are intended to help make the industries we serve more productive, and to create high-quality employment opportunities in the communities in which we operate. Further, as a PBC, our Board is required to balance our stockholders' pecuniary (financial) interests, the best interests of those materially affected by our conduct, and pursuit of our public benefit purpose. We have identified those materially affected by our conduct (which we refer to


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as stakeholders) as including our customers, our employees, our partners, and the communities in which we operate.

We believe that operating as a PBC is beneficial to our business and consistent with the long-term interests of stockholders, but the benefits we anticipate from operating as a PBC may not materialize within the timeframe we expect or at all, or there may be negative effects. Further, we may be unable or slow to achieve the public benefits we have identified or we may make balancing determinations that are ultimately harmful to our business or to stockholders, which could adversely affect our reputation, business, financial condition, and results of operations and cause our stock price to decline.

In the event of a conflict between the interests of our stockholders, our stakeholders, and our public benefit purpose, our directors must only make an informed and disinterested decision, and not such that no person of ordinary, sound judgment would approve. Our directors have significant latitude under this standard and there is no guarantee that a conflict would be resolved in favor of our stockholders. This balancing obligation may allow our directors to make decisions that they could not have made pursuant to the fiduciary duties applicable prior to our PBC conversion, and such decisions may not maximize short-term stockholder value. For instance, in a sale of control transaction, our board of directors would be required to consider and balance the factors listed above and might choose to accept an offer that does not maximize short-term stockholder value due to its consideration of other factors.

Further, there is limited legal precedent or guidance regarding how to administer our obligation to balance the interests of stockholders, stakeholders, and the pursuit of our public benefit purpose. While we expect that, in large part, traditional Delaware corporation law principles and the application of those principles in case law—including those related to self-dealing, conflicts of interest, and the application of the business judgment rule—will continue to apply with respect to Delaware PBCs, there is currently limited case law involving PBCs, which may create legal uncertainty or additional litigation risk until additional case law develops. Stockholders of a Delaware PBC (if they, individually or collectively, own at least the lesser of two percent of the company's outstanding shares or shares with a market value of at least $2 million) may file suit to enforce the balancing obligation. Any such lawsuit might be a distraction to our management and board of directors, and could be costly, which may have an adverse impact on our financial condition and results of operations.

As a PBC, we are required to disclose to stockholders a report at least biennially on that includes our assessment of our success in achieving our specific public benefit purpose, and we have committed to providing this report annually and making it publicly available. If we are not timely or are unable to provide this report, or if the report is not viewed favorably, our reputation and status as a public benefit corporation may be harmed.

While we do not view the additional reporting obligations of a PBC to be onerous, Delaware’s PBC statute may be amended in the future to require more explicit or burdensome periodic reporting requirements and that could increase our expenses. In addition, if the public perceives that we are not successful in our public benefit purpose, or that our pursuit of our public benefit purpose is having a negative effect on the financial interests of our stockholders, that perception could negatively affect our reputation, which could adversely affect our business and results of operations.

Our Class A common stock price has been and will likely continue to be volatile.

The trading price of our Class A common stock has been and will likely continue to be volatile for the foreseeable future. In addition, the trading prices of the securities of technology companies have been highly volatile. Accordingly, the market price of our Class A common stock is likely to be subject to wide fluctuations in response to


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numerous factors, many of which are beyond our control. In addition to those risks described in this “Risk Factors” section, other factors could impact the value of our common stock, including:

•fluctuations in the valuation of companies perceived by investors to be comparable to us, such as high-growth or cloud companies, or in valuation metrics, such as our price to revenues ratio;

•overall performance of the stock market;

•changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state or long-term prospects of our business, and how those results compare to securities analyst expectations, including whether those results fail to meet, exceed, or significantly exceed securities analyst expectations;


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•changes in the forward-looking estimates of our financial, operating, or other metrics, how those estimates compare to securities analyst expectations, or changes in recommendations by securities analysts that follow our Class A common stock;

•announcements of customer additions and customer cancellations or delays in customer purchases;

•the net increase in the number of customers, either independently or as compared to published expectations of industry, financial or other analysts that cover us;

•announcements by us or by our competitors of technological innovations, new solutions, enhancements to services, strategic alliances or significant agreements;

•announcements by us or by our competitors of mergers or other strategic acquisitions or rumors of such ~~transactions involving us or our competitors;~~transactions;

•the economy as a whole and market conditions within our industry and the industries of our customers;

•macroeconomic and geopolitical factors and instability and volatility in the global financial markets, including uncertainty surrounding the effects of ~~COVID-19~~COVID-19;

•the operating performance and ~~Brexit;~~market value of other comparable companies;

•securities or industry analysts downgrading our Class A common stock or publishing inaccurate or unfavorable research about our business;

•trading activity by directors, executive officers (in particular our Chief Executive Officer who holds a significant portion of our outstanding common stock), and other significant stockholders, or the perception in the market that the holders of a large number of shares intend to sell their shares;

•~~the operating performance and market value of other comparable companies;~~

•~~changes in legislation relating to our existing or future solutions;~~

•~~securities or industry analysts downgrading our Class A common stock or publishing inaccurate or unfavorable research about our business;~~ and

•any other factors discussed herein.

In addition, if the market for technology stocks or the stock market in general experiences uneven investor confidence, the market price of our Class A common stock could decline for reasons unrelated to our business, operating results or financial condition. The market price of our Class A common stock might also decline in reaction to events that affect other companies within, or outside, our industry even if these events do not directly affect us. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities class action litigation. If we are the subject of such litigation, it could result in substantial costs and a diversion of our management’s attention and resources.

The dual-class structure of our common stock has the effect of concentrating voting control with certain individuals and their affiliates, which will limit or preclude the ability of our investors to influence corporate matters and could depress the market value of our Class A common stock.

Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. As of ~~July 31, 2020,~~April 30, 2021, our founder and Chief Executive Officer, Peter P. Gassner, holds approximately ~~46.1%~~45.9% of the voting power of our outstanding capital stock and holders of our Class B common stock hold approximately ~~52.7%~~51.7% of the voting power of our outstanding capital stock in the aggregate. ~~Because of the ten-to-one voting ratio between our Class B common stock and Class A common stock, the holders~~Holders of our Class B common stock collectively control a ~~substantial~~ majority of the combined voting power of our common stock and, assuming no material sales of such shares, will be able to control ~~all~~ matters submitted to our stockholders for approval until October 15, 2023, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction. This concentrated control will limit or preclude our investors’ ability to influence corporate matters ~~for~~while the ~~foreseeable future.~~dual class structure is in effect. In addition, this may prevent or


~~Veeva Systems Inc. \| Form 10-Q~~			63

~~Table of Contents~~

discourage unsolicited acquisition proposals or offers for our capital stock or may adversely affect the market price of our Class A common stock.

Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. If, for example, our executive officers (including our Chief Executive Officer), employees, directors and their affiliates retain a significant portion of their holdings of Class B common stock for an extended period of time, they could, in the future, continue to control a majority of the combined voting power of our Class A common stock and Class B common stock.

~~In addition,~~ S&P Dow Jones and FTSE Russell have announced changes to their eligibility criteria for inclusion of shares of public companies with multiple classes of stock on certain indices, including the S&P 500. While this has not affected the inclusion of Veeva’s Class A common stock in these indices to date, eligibility criteria of these indices and others may change in the future. In addition, several ~~shareholder~~stockholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual-class structure of our common stock may prevent the inclusion of our Class A common stock in such indices and may cause ~~shareholder~~stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for our Class A common stock. Any actions or publications by ~~shareholder~~stockholder advisory firms or other third-party ratings agencies critical


58			Veeva Systems Inc. \| Form 10-Q

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of our corporate governance practices, capital structure, or other business practices could also adversely affect the value of our Class A common stock.

We do not intend to pay dividends on our capital stock for the foreseeable future, so any returns will be limited to changes in the value of our Class A common stock.

We have never declared or paid any cash dividends on our capital stock. We currently anticipate that we will retain future earnings for the development, operation, and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, our ability to pay cash dividends on our capital stock may be prohibited or limited by the terms of any future debt financing arrangement. Any return to stockholders will therefore be limited to the increase, if any, of the price of our Class A common stock.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause the stock price of our Class A common stock to decline.

In the future, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. We expect to issue securities to employees and directors pursuant to our equity incentive plans. If we sell common stock, convertible securities or other equity securities in subsequent transactions, or common stock is issued pursuant to equity incentive plans, our investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our common stock, including our Class A common.

~~Sales of a substantial number of shares of our common stock in the public market, or the perception that they might occur, could cause the price of our Class A common stock to decline.~~

Sales of a substantial number of shares of our Class A common stock in the public market, or the perception that these sales might occur, could cause the market price of our Class A common stock to decline or make it more difficult for you to sell your common stock at a time and price that you deem appropriate and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales, or the perception that our shares may be available for sale, will have on the prevailing market price of our Class A common stock.

In addition, as of July 31, 2020, we had options outstanding that, if exercised, would result in the issuance of additional shares of Class A or Class B common stock. Our Class B common stock converts into Class A common stock on a one-for-one basis. As of July 31, 2020, we had restricted stock units outstanding which may vest in the future and result in the issuance of additional shares of Class A common stock. Our unexercised stock options and unvested restricted stock units, as of July 31, 2020, are described in note 12 of the notes to our condensed


64			~~Veeva Systems Inc. \| Form 10-Q~~

~~Table of Contents~~

consolidated financial statements. All of the shares of Class A common stock issuable upon the exercise of options (or upon conversion of shares of Class B common stock issued upon the exercise of options) or upon the vesting of restricted stock units have been registered for public resale under the Securities Act of 1933, as amended, or the Securities Act. Accordingly, these shares will be able to be freely sold in the public market upon issuance as permitted by any applicable vesting requirements.

Provisions in our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the market price of our Class A common stock.

Our restated certificate of incorporation and amended and restated bylaws contain provisions that could depress the market price of our Class A common stock by acting to discourage, delay, or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions among other things:

•~~establish a classified board of directors so that not all members of our board are elected at one time;~~

•provide for a dual-class common stock structure until October 15, 2023, which gives our Chief Executive Officer ~~directors, executive officers, greater than 5% stockholders~~and certain of our holders and their respective affiliates the ability to control the outcome of all matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A and Class B common stock;

•permit ~~the~~our board of directors to establish the number of directors;

•provide that directors may only be removed ~~“for cause” and only~~ with the approval of ~~66 2/~~66-2/3% of our stockholders;

•require super-majority voting to amend some provisions in our restated certificate of incorporation and amended and restated bylaws;

•authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;

•eliminate the ability of our stockholders to call special meetings of stockholders;

•require our board of directors to consider and balance our stockholders' pecuniary (financial) interests, the best interests of those materially affected by our conduct, and the pursuit of our public benefit purpose, which may, in turn, allow our board of directors to make a decision about a change of control transaction that does not maximize short-term stockholder value;

•prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

•provide that the board of directors is expressly authorized to make, alter, or repeal our amended and restated bylaws; and

•establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

In addition, Section 203 of the Delaware General Corporation Law may discourage, delay, or prevent a change in control of our company. Section 203 imposes certain restrictions on merger, business combinations, and other transactions between us and holders of 15% or more of our common stock.

Our ~~amended and restated~~ certificate of incorporation ~~provides that the Court of Chancery of the State of Delaware is the~~and bylaws provide for exclusive ~~forum~~forums for ~~substantially all~~certain disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our ~~amended and restated~~ certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law or any action asserting a claim against us that is governed by the internal affairs doctrine. ~~This~~Our bylaws also provide that, unless we


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consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for any action asserting a claim arising pursuant to the Securities Act, such a provision known as a “Federal Forum Provision.” Any person or entity purchasing or otherwise acquiring any interest in our shares of capital stock shall be deemed to have notice of and consented to these provisions.

These choice of forum ~~provision~~provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees and may discourage these types of lawsuits. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation or bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results, and financial condition.


60			Veeva Systems Inc. \| Form 10-Q			65

Table of Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

a)Sales of Unregistered Securities

None.

b)Use of Proceeds from Public Offerings of Common Stock

None.

c)Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.


66			Veeva Systems Inc. \| Form 10-Q			61

Table of Contents

ITEM 6. EXHIBITS.

Exhibits

Exhibit

Number

Exhibit

Number

Exhibit Description

Incorporated by Reference

Exhibit
Number

Exhibit Description

Incorporated by Reference

Filed

Form

File No.

Exhibit

Filing Date

Exhibit
Number

Exhibit Description

File No.

Exhibit

Filing Date

Herewith

3.1

Restated Certificate of Incorporation of Veeva Systems Inc.

8-K

001-36121

3.1

10/22/2013

3.1

Restated Certificate of Incorporation of Veeva Systems Inc.

8-K

001-36121

3.1

2/1/2021

3.2

Bylaws of Veeva Systems Inc.

S-1/A

333-191085

3.4

10/3/2013

3.2

Amended and Restated Bylaws of Veeva Systems Inc.

8-K

001-36121

3.1

3/22/2021

10.1

Offer letter dated April 20 , 20 20 , between Brent Bowman and the Registrant.

8-K

001-36121

10.1

8/31/2020

31.1

Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.1

Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2

Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2

Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1†

Certification of Chief Executive Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.

32.1†

Certification of Chief Executive Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.

32.2†

Certification of Chief Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.

32.2†

Certification of Chief Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.

101.INS

XBRL Instance Document.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Schema Linkbase Document.

101.SCH

XBRL Taxonomy Schema Linkbase Document.

101.CAL

XBRL Taxonomy Calculation Linkbase Document.

101.CAL

XBRL Taxonomy Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Definition Linkbase Document.

101.DEF

XBRL Taxonomy Definition Linkbase Document.

101.LAB

XBRL Taxonomy Labels Linkbase Document.

101.LAB

XBRL Taxonomy Labels Linkbase Document.

101.PRE

XBRL Taxonomy Presentation Linkbase Document.

101.PRE

XBRL Taxonomy Presentation Linkbase Document.

104

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

104

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

† The certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Veeva Systems Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.


62			Veeva Systems Inc. \| Form 10-Q			67

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Veeva Systems Inc.

Dated:

June 4, 2021

By:

/s/ BRENT BOWMAN

Brent Bowman
Chief Financial Officer
(Principal Financial Officer)

~~Dated: September 8, 2020~~

Dated:

June 4, 2021

By:

/s/ MICHELE O’CONNOR

Michele O’Connor
Chief Accounting Officer
(Principal Accounting Officer)

~~Dated: September 8, 2020~~


68			Veeva Systems Inc. \| Form 10-Q			63


	Three months ended July 31, 2020																				Three months ended July 31, 2019
	Class A & B common stock					Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Total stockholders’ equity	Class A & B common stock						Additional paid-in capital		Retained earnings		Accumulated other comprehensive income	Total stockholders’ equity
	Shares	Amount													Shares		Amount
	(Unaudited)
Balances at beginning of period	150,030,047	$	2	$	792,660	$	1,006,228	$	2,146	$	1,801,036	147,030,464	$	1	$	641,925	$	691,989	$	1,188	$	1,335,103
Issuance of common stock upon exercise of stock options	460,856	—		8,750		—		—		8,750		488,538	—		3,476		—		—		3,476
Issuance of common stock upon vesting of restricted stock units	248,947	—		—		—		—		0		329,632	—		—		—		—		0
Stock-based compensation expense	—	—		49,366		—		—		49,366		—	—		28,477		—		—		28,477
Other comprehensive income	—	—		—		—		4,024		4,024		—	—		—		—		(1,281)		(1,281)
Net income	—	—		—		93,551		—		93,551		—	—		—		79,242		—		79,242
Balances at end of period	150,739,850	$	2	$	850,776	$	1,099,779	$	6,170	$	1,956,727	147,848,634	$	1	$	673,878	$	771,231	$	(93)	$	1,445,017


	As of July 31, 2020			As of January 31, 2020
Operating Leases
Lease right-of-use-assets	$	51,286		$	49,132
Lease liabilities	$	10,224		$	8,960
Lease liabilities, noncurrent	46,187			44,453
Total operating lease liabilities	$	56,411		$	53,413
Finance Leases
Property and equipment, at cost	$	1,761		$	1,761
Accumulated depreciation	(1,761)			(1,320)
Property and equipment, net	$	0		$	441
Lease liabilities	$	895		$	1,054
Lease liabilities, noncurrent	0			362
Total finance lease liabilities	$	895		$	1,416
Weighted Average Remaining Lease Term
Operating leases	6.8 years			7.1 years
Finance leases	0.8 years			1.3 years
Weighted Average Discount Rate
Operating leases	4.1		%	4.3		%
Finance leases	4.3		%	4.3		%


Period	Operating leases		Finance leases
Remaining for Fiscal 2021	$	6,147	$	546
Fiscal 2022	11,574		364
Fiscal 2023	9,481		0
Fiscal 2024	8,553		0
Fiscal 2025	6,192		0
Thereafter	23,203		0
Total lease payments	65,150		910
Less imputed interest	(8,739)		(15)
Total	$	56,411	$	895


	Unreleased restricted stock units	Weighted average grant date fair value
Balance at January 31, 2020	1,818,622	$	95.23
RSUs granted	407,619	175.98
RSUs vested	(538,177)	87.39
RSUs forfeited/cancelled	(45,837)	89.53
Balance at July 31, 2020	1,642,227	$	118.01


	July 31,		January 31,
	2020
Long-lived assets by geography
North America	$	45,689	$	51,334
Europe and rest of world	2,881		2,077
Asia Pacific	4,006		1,341
Total long-lived assets	$	52,576	$	54,752