Category: Internet Equity Research
Veeva Systems: Focused on Pharma
Veeva Systems (NYSE: VEEV), a provider of cloud-based sales force and content management software to the bio pharma industry, is a relatively new addition to our Battle Road IPO Review Software coverage. Consensus estimates call for revenue of $276 million and $0.24 in earnings in fiscal year 2015 (ending January 31, 2015).
Based in Pleasanton, CA, Veeva was founded in 2007, and known originally as Verticals onDemand. The company changed its name to Veeva Systems in 2009. Veeva launched its IPO on the NYSE through the issuance of 15 million shares on October 21, 2013, priced at $20.00 per share. The company sold 11.7 million shares, and selling stockholders sold the remainder, as the company raised roughly $216 million, net of bankers’ fees. The transaction was led by Morgan Stanley, Deutsche Bank Securities, Pacific Crest, Stifel, Nicolaus, Wells Fargo, and Canaccord Genuity. Post-IPO, the company sports a $2.7 billion market capitalization.
Veeva serves pharmaceutical and biotech companies with a series of solutions that manage interactions between drug company sales reps and physicians, as well as a content management vault that is utilized by drug companies to manage the content relating to clinical trials, quality management, manufacturing, sales and marketing. Importantly, over 95 percent of sales comes from its CRM product.
Veeva Network, a third product set, was recently introduced in November, and appears to be a data vault which is populated with customer-specific information, and is sold as a subscription to pharma and biotech companies. Roughly 60 percent of revenue comes from North America, with the remainder from overseas markets.
Veeva’s software is sold typically as a one-year subscription, and software accounts for about 70 percent of total sales, while implementation fees account for the remainder. This relatively high level of implementation fees indicate that Veeva’s customers require a fair amount of customization of the base-level product. Software products grew by over 90 percent in the most recent quarter, while services were essentially flat. Gross margins on subscriptions run in the 70 percent plus range, while services margins are in the mid twenties. Veeva’s non-GAAP operating margin was 18 percent in the most recent quarter.
For its CRM product, Veeva tallies the addressable market at roughly 450,000 direct sales reps from the drug, animal science, and consumer health industries. Veeva acknowledges that this number has not changed much in the last several years, but that the company’s opportunity is to replace client server software from the likes of Siebel Systems (now Oracle), as well as homegrown contact management systems that are less robust.
Veeva’s platform is based on Salesforce.com (NYSE: CRM), and it pays royalties to
Salesforce.com for the base level platform on which its software is built. That said, it does compete against Salesforce.com, as some companies prefer Salesforce’s generic functionality and lower sales price. Veeva also competes against Cegedim, a French-based healthcare IT company that offers mobile sales force automation solutions specifically tailored to the bio-pharma business, in part due to its acquisition of Dendrite, a US company. To see how Veeva Systems screens against its software peers within the Battle Road IPO Review Software coverage universe, please contact: info@battleroad.com.
Cvent IPO
Cvent (NYSE: CVT) is a leading provider of cloud-based event and meeting planner software and services. The company provides solutions for event planning, ticketing, email marketing, surveys, as well as budgeting, planning, and sourcing of event venues. Cvent is based in McLean Virginia, and was founded in 1999. Consensus revenue estimates call for $108 million in 2013, followed by $135 million the following year. EPS is expected to be $0.06 in both years. Cvent staged its 5.6 million share IPO on August 9, 2013 on the NYSE. The offering was priced at $21 per share, and was led by five investment banks: Morgan Stanley, Goldman Sachs, Stifel Nicolaus, Pacific Crest, and Needham. Cvent carries a current market cap. exceeding $1.2 billion.
Cvent targets the events and meeting industry, which includes event and meeting planners, as well as the hotels and other venues at which meetings are held. Cvent’s software and services are utilized to plan meetings, conferences, and tradeshows, and customers include a wide range of corporations, Trade Associations, non-profits, government agencies, and education, including universities. The company counts over 6,200 event and meeting planner customers, including Visa, Wal-mart, Proctor and Gamble, Edwards Lifesciences, as well as 4,700 hotels and and other venues, including Hilton, Marriott, and Starwood. With a wide range of software solutions and services targeted to meet the demands for large meetings, Cvent is well-positioned to provide the hand-holding required to ensure a particular meeting’s success. Toward that end 56 percent of its employee base of 1,300 resides in India.
Principal risks to Cvent, include the fact that the company is barely profitable, and may need to rely on accessing the public markets in the future. The company has a relatively low revenue per employee of roughly $100,000, providing less leverage in its business model than other cloud-based software companies, which typically have revenue in excess of $200,000 per employee. This figure is likely to rise if cloud based software, which is currently 70 percent of sales, continues to rise.
To see how Cvent screens against a comparable group of over 40 software IPOs in the last six years, contact info@battleroad.com