Veeva Systems is up more than 500% since this company came public in 2013
and if you like high growth high profits and founder-led businesses
Veeva could be you so here's everything you need to know about this business in five minutes
thanks to stockcard.io for sponsoring today's video Veeva is a $37 billion software as a service
company that trades under the symbol VEEV that's v-e-e-v the company's mission statement is to
assist customers mission to advance human health and well-being not our favorite but believe it
or not this is much better than it used to be that's true now if you want to understand the
company it breaks down into two parts the first is the commercial cloud and you can see the four
areas that the commercial cloud deals with this helps life sciences companies communicate with
their stakeholders after a drug goes public the other side of the company's business was developed
later and that is Veeva vault this is what life sciences companies can use internally to track
everything that a drug needs to go from the idea stage all the way through fda trial Veeva uses a
software as a service business model to sell its products and tools to market the vast majority of
this company's revenue eighty percent comes from that subscription revenue however the company also
derives professional services revenue for about 20% of its total top the company has a net revenue
retention rate of over 120% meaning it does a great job of holding on to existing customers
and getting them to spend at least 20% more every year the company does have to pay up to acquire
new customers but as a percentage of gross profit that number is a very low number which makes this
company's customer acquisition costs fairly low and because this company focuses on the
life sciences industry demand is relatively recession-proof the company does have a weak
network effect because everything is stored on a Veeva cloud it's easier to share information
if you are also on the Veeva cloud again a week but viva's primary mode is at switching costs once
your life sciences company adopts viva's tools and starts to use them it becomes a huge hassle
to switch over to a different provider and because over the last five years Veeva has dominated life
sciences industry it now also benefits from some brand value importantly the company is rolling out
new products and new services and adding new customers all the time that makes us believe
that viva's moat is continuing to strengthen as it grows even though viva has captured a
large section of life sciences market revenue growth has continued to be solid growing at a
31% clip over the past three years since viva is primarily a software as a service businesses its
gross margin is very high at over 72% and because this business is relatively mature it's reached a
stage where it's already producing healthy amounts of both net income and free cash flow as you can
see the balance sheet is also very healthy with lots of cash and no long-term debt and the company
gets solid returns on capital Veeva was founded in 2007 by peter gassner a former salesforce.com
executive who left to found a company that could focus specifically on the life sciences industry
peter gassner is still the ceo running the company today gassner's reviews have improved markedly
over the last five years and the company has also been one of the first publicly traded companies to
transition to being a b corp even today gassner continues to hold a sizable amount of viva stock
owning more than 13% of the company which makes him a multi-billionaire on paper viva has a ton
of optionality within the life sciences industry they roll out new tools that these drug companies
can use on a quarterly basis but the company is also looking outside of life sciences and seeing
if its tools can be used in heavily regulated industries like cosmetics chemicals and consumer
packages while the company has already benefited greatly from operating leverage there is still a
bit of room for it to improve its margins over time however on that basis the vast majority of
the gains are behind the company viva estimates that it's chasing about a $13 billion opportunity
of which it's gathered a sizeable chunk but that could expand markedly if they experience success
outside of life sciences and to achieve that growth viva has not been an acquisitive company
the vast majority of the companies revenue earth has come from organic means viva stock has
absolutely spanked the market since it came public and over the last five years and the company has
consistently outpaced analyst expectations so far viva has not focused on capital returns in any
way but given the company's stage of maturity it's possible that it could start to focus on them soon
the most important risk that investors need to be aware of comes from competition which is at
a medium high level IQVIA and Oracle are two of the names to look out for viva used to have some
serious customer concentrations for investors to watch more recently the company has added so
many customers that that's no longer a big concern however one company does account for more than 10%
of the company's accounts receivable not sales accounts receivable and finally to get a high
quality company like Veeva you need to pay up the stock is valued at about 24 times sales and nearly
45 times free cash flow so how can investors tell if this thesis is on track first keep an eye on
new verticals the company has been targeting a consumer package goods chemicals and cosmetics
industry those are new verticals that the company is having early signs of success second we need to
keep an eye on operating leverage it's already pretty high but we would like to see profits
continue to grow faster than revenue third keep an eye on the company's net dollar retention rate we
want to see viva not only add new customers but keep the existing ones spending more and more
every year importantly it's worth noting that viva only releases this figure on an annual basis so
how did viva score on our investing checklist the answer is excellent on my investing checklist this
company got an 85 that is well well into my high quality business range and on mine the company
got an 11 and a half it's a huge improvement from before and most of those improvements come from
culture improving at the company using the metrics that i'm able to use all right brian both of
us give viva the thumbs up in our portfolio so it's time to head on over to stockcar.io to hold
ourselves accountable i'm in the antifragile portfolio which is your thumbs up portfolio
and i'm going to add it so the ticker symbol here is VEEV we're gonna do a buy decision today's date
is monday january 17th this is a $223 stock so we're going to buy five shares and this scored
an 11 and a half on your framework next we're going to head on over to my portfolio which is the
brian for all the quality checklist we're gonna add a new order and do the exact same thing and
while brian's doing that we want to remind folks that you can not only check out these portfolios
at stockcard.io but you can enter our 2022 contest where you pick five stocks to try and beat the two
of us the best returns will get a thousand dollar prize at the end of the year with smaller prizes
on a quarterly basis we also want to mention with nearly 400 portfolios submitted so far there are
five stocks that stand out as community favorites and they are upstart ticker symbol upst c limited
se tesla tsla mercado libre m-e-l-i and unity software ticker symbol u worth mentioning that
three of those stocks are within r10 that we chose for our portfolios overall both of us clearly
believe that viva is a high quality business that continued to beat the market from here brian's out