8-K

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

August 30, 2016


Veeva Systems Inc.
(Exact name of registrant as specified in its charter)

Delaware	001-36121	20-8235463
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

4280 Hacienda Drive

Pleasanton, California 94588

(Address of principal executive offices, including zip code)

(925) 452-6500

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.          Results of Operations and Financial Condition.

On August 30, 2016, Veeva Systems Inc. issued a press release announcing its results for its second quarter ended July 31, 2016. A copy of the press release is furnished herewith as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information in this Current Report on Form 8-K and the accompanying Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, unless expressly incorporated by reference in such filing.

Item 9.01.          Financial Statements and Exhibits.

(d) Exhibits.

Exhibit
No.	Description
99.1	Press Release titled “Veeva Announces Fiscal 2017 Second Quarter Results,” dated August 30, 2016

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.
By:	/s/ TIMOTHY S. CABRAL
	Timothy S. Cabral
	Chief Financial Officer

Dated:  August 30, 2016

EXHIBIT INDEX

Exhibit
No.	Description
99.1	Press Release titled “Veeva Announces Fiscal 2017 Second Quarter Results,” dated August 30, 2016

EX-99.1

Exhibit 99.1

Veeva Announces Fiscal 2017 Second Quarter Results

Total Revenues of $131.3M, up 34% Year-over-year;

Subscription Services Revenue of $105.2M, up 40% Year-over-year

PLEASANTON, Calif.--(BUSINESS WIRE)--August 30, 2016--Veeva Systems Inc. (NYSE:VEEV), a leading provider of industry cloud solutions for life sciences, today announced results for its fiscal second quarter ended July 31, 2016.

“We’re bringing new industry cloud solutions to market at a rapid pace to address significant customer needs with great cloud technology and truly unified systems,” said CEO Peter Gassner. “It’s this innovation and proven track record of customer success that’s fueling our outperformance and sets us up for a long runway of growth into the future.”

Fiscal 2017 Second Quarter Results:

• Revenues: Total revenues for the second quarter were $131.3 million, up from $98.1 million one year ago, an increase of 34% year-over-year. Subscription services revenues for the second quarter were $105.2 million, up from $75.3 million one year ago, an increase of 40% year-over-year.
• Operating income and non-GAAP operating income⁽¹⁾: Second quarter operating income was $23.8 million, compared to $22.4 million one year ago, an increase of 7% year-over-year. Non-GAAP operating income for the second quarter was $36.7 million, compared to $28.7 million one year ago, an increase of 28% year-over-year.
• Net income and non-GAAP net income⁽¹⁾: Second quarter net income was $13.0 million, compared to $13.4 million one year ago, a decrease of 3% year-over-year. Non-GAAP net income for the second quarter was $22.3 million, compared to $18.2 million one year ago, an increase of 23% year-over-year.
• Net income per share and non-GAAP net income per share⁽¹⁾: For the second quarter, fully diluted net income per share was $0.09, compared to $0.09 one year ago, while non-GAAP fully diluted net income per share was $0.15, compared to $0.13 one year ago.

“Strength and consistency of execution across the business resulted in another great quarter that exceeded our expectations,” said CFO Tim Cabral. “Veeva’s powerful industry cloud model is enabling the company to post high growth and strong profitability while operating across multiple, large markets and rapidly expanding into new ones.”

Recent Highlights:

• Expanding to New Markets, Leading the Way with Cloud Innovation – Veeva continued its rapid pace of cloud innovation, announcing:
  • Two new Veeva Vault™ products: Veeva Vault CTMS™ for clinical and Vault PromoMats DAM™ for commercial content management.
  • Two new Veeva Commercial Cloud™ products: Veeva CRM Engage Meeting™ and Veeva CRM Engage Webinar™ for digital engagement.
• Strength in Every Major Area of the Business – Veeva's quarterly outperformance was fueled by strength across products, geographies, and customers of all sizes. The company announced a record number of new customer wins and one of its best quarters expanding adoption of Veeva Vault and Veeva Commercial Cloud within its existing customer base. Highlights included three seven-figure Vault deals in the quarter.
• Rapid Uptake of New Products – Released in June, Veeva Vault QMS™ got off to a fast start with four customers signed in the second quarter. The latest Veeva CRM™ add-ons, Veeva CRM Events Management™ and Veeva Align™, also saw continued progress with new deals and continued global go-lives in the second quarter.
• Hosted Largest-ever Commercial Event – Veeva hosted record numbers at its eighth annual Commercial Summit. The event was the largest in history with over 1,200 attendees and remains the biggest commercial event of its kind in the life sciences industry.

Financial Outlook:

Veeva is providing guidance for its fiscal third quarter ending October 31, 2016 as follows:

• Total revenues between $134.5 and $136.0 million.
• Non-GAAP operating income between $36.5 and $37.5 million⁽²⁾.
• Non-GAAP fully diluted net income per share between $0.15 and $0.16⁽²⁾.

Veeva is updating guidance for its fiscal year ending January 31, 2017 as follows:

• Total revenues between $525.0 and $528.0 million.
• Non-GAAP operating income between $138.0 and $140.0 million⁽²⁾.
• Non-GAAP fully diluted net income per share between $0.60 and $0.61⁽²⁾.

Conference Call Information:
What:	Veeva’s Fiscal 2017 Second Quarter Results Conference Call
When:	Tuesday August 30, 2016
Time:	1:30 p.m. PT (4:30 p.m. ET)
Live Call:	1-877-201-0168, domestic
	1-647-788-4901, international
	Conference ID 5826 1629
Webcast:	ir.veeva.com

⁽¹⁾ This press release uses non-GAAP financial metrics that are adjusted for the impact of various GAAP items. See the sections titled “Non-GAAP Financial Measures” and the tables entitled “Reconciliation of GAAP to Non-GAAP Financial Measures” below for details.

⁽²⁾ Veeva is not able, at this time, to provide GAAP targets for operating income and fully diluted net income per share for the third fiscal quarter ending October 31, 2016 and fiscal year ending January 31, 2017 because of the difficulty of estimating certain items excluded from non-GAAP operating income and non-GAAP fully diluted net income per share that cannot be reasonably predicted, such as charges related to stock-based compensation expense, capitalization of internal-use software development expenses and the subsequent amortization of the capitalized expenses, and deferred compensation associated with the Zinc Ahead acquisition. The effect of these excluded items may be significant.

About Veeva Systems

Veeva Systems Inc. is a leader in cloud-based software for the global life sciences industry. Committed to innovation, product excellence, and customer success, Veeva has more than 450 customers, ranging from the world's largest pharmaceutical companies to emerging biotechs. Veeva is headquartered in the San Francisco Bay Area, with offices in Europe, Asia, and Latin America. For more information, visit veeva.com.

Forward-looking Statements

This release contains forward-looking statements, including statements regarding Veeva's future financial outlook and financial performance, market growth, the benefits from the use of Veeva's solutions, our strategies, and general business conditions. Any forward-looking statements contained in this press release are based upon Veeva's historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent Veeva's expectations as of the date of this press announcement. Subsequent events may cause these expectations to change, and Veeva disclaims any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially, including (i) historical fluctuation of our quarterly results and our limited operating history, which make it difficult to predict future results; (ii) our expectation that the future growth rate of our revenues will decline, and that as our costs increase, we may not be able to generate sufficient revenues to sustain the level of profitability we have achieved in the past or achieve profitability in the future; (iii) breaches in our security measures or unauthorized access to our customers’ data; (iv) system unavailability, performance problems, or loss of data due to disruptions or other problems with our data center operations or computing infrastructure; (v) dependence on revenues from our Veeva CRM solution, and the rate of adoption of our new products; (vi) acceptance of our applications and services by customers, including renewals of existing subscriptions and purchases of subscriptions for additional users and solutions; (vii) our ability to integrate the Zinc Ahead business, retain Zinc Ahead customers and achieve the expected results from our acquisition of Zinc Ahead; (viii) loss of one or more key customers; (ix) adverse changes in general economic or market conditions, particularly in the life sciences industry; (x) delays or reductions in information technology spending, particularly in the life sciences industry, including as a result of mergers in the life sciences industry; (xi) the development of the market for enterprise cloud services, particularly in the life sciences industry; (xii) competitive factors, including but not limited to pricing pressures, industry consolidation, difficulty securing rights to access, host or integrate with complementary third party products or data used by our customers, entry of new competitors and new applications and marketing initiatives by our competitors; (xiii) our ability to manage our growth effectively; and (xiv) changes in sales that may not be immediately reflected in our results due to the ratable recognition of our subscription revenue.

Additional risks and uncertainties that could affect Veeva’s financial results are included under the captions, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s filing on Form 10-Q for the period ended April 30, 2016. This is available on the company’s website at veeva.com under the Investors section and on the SEC’s website at sec.gov. Further information on potential risks that could affect actual results will be included in other filings Veeva makes with the SEC from time to time.

VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
	July 31,		January 31,
	2016		2016
Assets
Current assets:
Cash and cash equivalents	$	210,365	$	132,179
Short-term investments		269,190		214,024
Accounts receivable, net		88,963		144,798
Prepaid expenses and other current assets		18,575		9,963
Total current assets		587,093		500,964
Property and equipment, net		47,195		47,469
Capitalized internal-use software, net		862		979
Goodwill		95,804		95,804
Intangible assets, net		43,386		47,500
Deferred income taxes, noncurrent		9,402		9,359
Other long-term assets		3,490		3,724
Total assets	$	787,232	$	705,799
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	6,384	$	4,600
Accrued compensation and benefits		12,382		12,451
Accrued expenses and other current liabilities		9,294		11,059
Income tax payable		3,337		750
Deferred revenue		176,718		157,419
Total current liabilities		208,115		186,279
Deferred income taxes, noncurrent		9,870		10,622
Other long-term liabilities		4,139		3,649
Total liabilities		222,124		200,550
Stockholders’ equity:
Class A common stock		1		1
Class B common stock		—		—
Additional paid-in capital		395,386		361,691
Accumulated other comprehensive income		869		172
Retained earnings		168,852		143,385
Total stockholders’ equity		565,108		505,249
Total liabilities and stockholders’ equity	$	787,232	$	705,799

VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)
	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016		2015
Revenues:
Subscription services	$	105,211		$	75,280		$	201,243	$	144,174
Professional services and other		26,136			22,827			49,868		43,856
Total revenues		131,347			98,107			251,111		188,030
Cost of revenues(3):
Cost of subscription services		23,108			16,819			44,853		32,692
Cost of professional services and other		19,087			16,654			38,433		32,766
Total cost of revenues		42,195			33,473			83,286		65,458
Gross profit		89,152			64,634			167,825		122,572
Operating expenses(3):
Research and development		23,563			15,255			45,636		28,212
Sales and marketing		28,908			18,057			55,631		33,553
General and administrative		12,859			8,969			24,930		17,529
Total operating expenses		65,330			42,281			126,197		79,294
Operating income		23,822			22,353			41,628		43,278
Other income (expense), net		(1,362	)		(445	)		1,385		318
Income before income taxes		22,460			21,908			43,013		43,596
Provision for income taxes		9,502			8,502			17,546		17,208
Net income	$	12,958		$	13,406		$	25,467	$	26,388
Net income attributable to common stockholders, basic and diluted:	$	12,957		$	13,390		$	25,465	$	26,357
Net income per share attributable to common stockholders:
Basic	$	0.10		$	0.10		$	0.19	$	0.20
Diluted	$	0.09		$	0.09		$	0.17	$	0.18
Weighted-average shares used to compute net income per share attributable to common stockholders:
Basic		135,126			131,799			134,531		131,455
Diluted		147,155			144,871			146,690		144,870
Other comprehensive income (loss):
Net change in unrealized gains (losses) on available-for-sale investments	$	98		$	(76	)	$	272	$	(79	)
Net change in cumulative foreign currency translation gain (loss)		312			41			425		33
Comprehensive income	$	13,368		$	13,371		$	26,164	$	26,342
(3) Includes stock-based compensation as follows:
Cost of revenues:
Cost of subscription services	$	288		$	136		$	497	$	247
Cost of professional services and other		1,507			973			2,685		1,715
Research and development		2,812			1,643			5,206		3,026
Sales and marketing		3,342			1,755			5,797		2,875
General and administrative		2,065			1,104			3,972		2,547
Total stock-based compensation	$	10,014		$	5,611		$	18,157	$	10,410

VEEVA SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
Cash flows from operating activities
Net income	$	12,958		$	13,406		$	25,467		$	26,388
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,470			1,344			6,875			2,368
Amortization of premiums on short-term investments		469			750			889			1,513
Stock-based compensation		10,014			5,611			18,157			10,410
Deferred income taxes		36			—			(802	)		—
Bad debt expense		90			245			(115	)		238
Changes in operating assets and liabilities:
Accounts receivable		(7,277	)		1,995			55,950			25,531
Income taxes		1,264			(3,019	)		1,644			(157	)
Other current and long-term assets		(9,466	)		(5,560	)		(8,076	)		(5,527	)
Accounts payable		1,805			560			1,871			(200	)
Accrued expenses and other current liabilities		1,800			1,673			(1,105	)		337
Deferred revenue		(4,058	)		(1,651	)		19,299			(3,848	)
Other long-term liabilities		641			(172	)		1,052			(80	)
Net cash provided by operating activities		11,746			15,182			121,106			56,973
Cash flows from investing activities
Purchases of short-term investments		(116,219	)		(67,078	)		(183,959	)		(167,915	)
Maturities and sales of short-term investments		58,151			69,008			128,176			116,752
Purchases of property and equipment		(859	)		(9,782	)		(2,916	)		(14,492	)
Acquisitions, net of cash acquired		—			(7	)		—			(9,994	)
Purchases of intangible assets		—			(568	)		—			(568	)
Capitalized internal-use software development costs		(69	)		(172	)		(209	)		(194	)
Changes in restricted cash and deposits		109			2			103			3
Net cash provided by (used in) investing activities		(58,887	)		(8,597	)		(58,805	)		(76,408	)
Cash flows from financing activities
Proceeds from early exercise of common stock options		—			2			—			10
Proceeds from exercise of common stock options		3,183			1,608			4,528			2,770
Restricted stock units acquired to settle employee tax withholding liability		(11	)		(2	)		(12	)		(6	)
Excess tax benefits from employee stock plans		8,079			3,982			10,940			7,151
Net cash provided by financing activities		11,251			5,590			15,456			9,925
Effect of exchange rate changes on cash and cash equivalents		313			40			429			33
Net change in cash and cash equivalents		(35,577	)		12,215			78,186			(9,477	)
Cash and cash equivalents at beginning of period		245,942			107,561			132,179			129,253
Cash and cash equivalents at end of period	$	210,365		$	119,776		$	210,365		$	119,776

Non-GAAP Financial Measures

Veeva has provided in this release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. This information primarily includes non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP fully diluted net income per share. Veeva uses these non-GAAP financial measures internally for budgeting and resource allocation purposes and in analyzing its financial results. Veeva uses these measures to provide an additional view of operational performance by excluding certain expenses and benefits that are not directly related to performance in any particular period. Veeva believes these measures are useful to investors and reflect its ongoing operating results and trends in a manner that allows for meaningful period-to-period comparisons and analysis of trends in the business in comparing its financial measures with other companies in Veeva's industry, many of which present similar non-GAAP financial measures to investors. These non-GAAP measures are adjusted for the impact of expenses associated with stock-based compensation, amortization of purchased intangibles, capitalization of expenses associated with development of internal-use software and the subsequent amortization of the capitalized expenses, deferred compensation associated with the Zinc Ahead acquisition and the tax effect of all of these non-GAAP adjustments.

As described above, Veeva may exclude the following items from its non-GAAP measures:

• Stock-based compensation expenses. Veeva excludes stock-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses that management finds useful to exclude certain non-cash charges to assess the appropriate level of various operating expenses to assist in 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, Veeva believes 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. Veeva incurs 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 and is significantly affected by the timing and size of acquisitions. Because these costs have already been incurred and cannot be recovered, and are non-cash expenses, management finds it useful to exclude these charges when assessing the appropriate level of various operating expenses to assist in 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. Amortization of purchased intangible assets will recur in future periods.
• Capitalization of internal-use software development expenses and the subsequent amortization of the capitalized expenses. Veeva capitalizes certain costs incurred for the development of computer software for internal use and then amortizes those costs over the estimated useful life. Capitalization and amortization of software development costs can vary significantly depending on the timing of products reaching technological feasibility and being made generally available. Moreover, because of the variety of approaches taken and the subjective assumptions made by other companies in this area, Veeva believes that excluding the effects of capitalized software costs allows investors to make more meaningful comparisons between our operating results and those of other companies.

• Deferred compensation associated with the Zinc Ahead acquisition. The Zinc Ahead share purchase agreement, as revised, called for share purchase consideration to be deferred and paid to certain Zinc Ahead employee shareholders and option holders, who remained employed with Veeva on each deferred consideration payment date, at a rate of one-third of the deferred consideration amount per year. In accordance with GAAP, these payments are being accounted for as deferred compensation and the expense is recognized over the requisite service period. Management views this deferred compensation expense as an unusual acquisition cost associated with the Zinc Ahead acquisition and finds it useful to exclude it in order to assess the appropriate level of various operating expenses to assist in budgeting, planning and forecasting future periods. Veeva believes excluding this deferred compensation expense from our non-GAAP measures may allow investors to make more meaningful comparisons between our recurring operating results and those of other companies.
• Income tax effects on the difference between GAAP and non-GAAP costs and expenses. The income tax effects that are excluded from the non-GAAP measures relate to the tax impact on the difference between GAAP and non-GAAP costs and expenses due to stock-based compensation, purchased intangibles, capitalized internal-use software, and deferred compensation associated with the Zinc Ahead acquisition for GAAP and non-GAAP measures.

There are limitations in 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 used 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. Veeva compensates 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. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measure and not to rely on any single financial measure to evaluate our business. A reconciliation of GAAP to the non-GAAP financial measures has been provided in the tables below.

The following table reconciles the specific items excluded from GAAP net income in the calculation of non-GAAP net income and non-GAAP net income per share for the periods shown below:

VEEVA SYSTEMS INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Dollars in thousands)
(Unaudited)
	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
Cost of subscription services revenues on a GAAP basis	$	23,108		$	16,819		$	44,853		$	32,692
Stock-based compensation expense		(288	)		(136	)		(497	)		(247	)
Amortization of purchased intangibles		(1,084	)		(567	)		(2,181	)		(937	)
Amortization of internal-use software		(185	)		(191	)		(362	)		(380	)
Cost of subscription services revenues on a non-GAAP basis	$	21,551		$	15,925		$	41,813		$	31,128
Gross margin on subscription services revenues on a GAAP basis		78.0	%		77.7	%		77.7	%		77.3	%
Stock-based compensation expense		0.3			0.2			0.2			0.2
Amortization of purchased intangibles		1.0			0.7			1.1			0.6
Amortization of internal-use software		0.2			0.2			0.2			0.3
Gross margin on subscription services revenues on a non-GAAP basis		79.5	%		78.8	%		79.2	%		78.4	%
Cost of professional services and other revenues on a GAAP basis	$	19,087		$	16,654		$	38,433		$	32,766
Stock-based compensation expense		(1,507	)		(973	)		(2,685	)		(1,715	)
Deferred compensation associated with Zinc Ahead acquisition		(8	)		—			(17	)		—
Cost of professional services and other revenues on a non-GAAP basis	$	17,572		$	15,681		$	35,731		$	31,051
Gross margin on professional services and other revenues on a GAAP basis		27.0	%		27.0	%		22.9	%		25.3	%
Stock-based compensation expense		5.8			4.3			5.4			3.9
Deferred compensation associated with Zinc Ahead acquisition		—			—			—			—
Gross margin on professional services and other revenues on a non-GAAP basis		32.8	%		31.3	%		28.3	%		29.2	%
Gross profit on a GAAP basis	$	89,152		$	64,634		$	167,825		$	122,572
Stock-based compensation expense		1,795			1,109			3,182			1,962
Amortization of purchased intangibles		1,084			567			2,181			937
Amortization of internal-use software		185			191			362			380
Deferred compensation associated with Zinc Ahead acquisition		8			—			17			—
Gross profit on a non-GAAP basis	$	92,224		$	66,501		$	173,567		$	125,851
Gross margin on total revenues on a GAAP basis		67.9	%		65.9	%		66.8	%		65.2	%
Stock-based compensation expense		1.4			1.1			1.3			1.0
Amortization of purchased intangibles		0.8			0.6			0.9			0.5
Amortization of internal-use software		0.1			0.2			0.1			0.2
Deferred compensation associated with Zinc Ahead acquisition		—			—			—			—
Gross margin on total revenues on a non-GAAP basis		70.2	%		67.8	%		69.1	%		66.9	%
Research and development expense on a GAAP basis	$	23,563		$	15,255		$	45,636		$	28,212
Stock-based compensation expense		(2,812	)		(1,643	)		(5,206	)		(3,026	)
Capitalization of internal-use software		69			172			209			194
Deferred compensation associated with Zinc Ahead acquisition		(108	)		—			(217	)		—
Research and development expense on a non-GAAP basis	$	20,712		$	13,784		$	40,422		$	25,380
Sales and marketing expense on a GAAP basis	$	28,908		$	18,057		$	55,631		$	33,553
Stock-based compensation expense		(3,342	)		(1,755	)		(5,797	)		(2,875	)
Amortization of purchased intangibles		(975	)		(109	)		(1,929	)		(152	)
Deferred compensation associated with Zinc Ahead acquisition		(18	)		—			(36	)		—
Sales and marketing expense on a non-GAAP basis	$	24,573		$	16,193		$	47,869		$	30,526
General and administrative expense on a GAAP basis	$	12,859		$	8,969		$	24,930		$	17,529
Stock-based compensation expense		(2,065	)		(1,104	)		(3,972	)		(2,547	)
Deferred compensation associated with Zinc Ahead acquisition		(596	)		—			(1,873	)		—
General and administrative expense on a non-GAAP basis	$	10,198		$	7,865		$	19,085		$	14,982

VEEVA SYSTEMS INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued)
(Dollars in thousands, except per share data)
(Unaudited)
	Three Months Ended July 31,						Six Months Ended July 31,
	2016			2015			2016			2015
Operating expense on a GAAP basis	$	65,330		$	42,281		$	126,197		$	79,294
Stock-based compensation expense		(8,219	)		(4,502	)		(14,975	)		(8,448	)
Amortization of purchased intangibles		(975	)		(109	)		(1,929	)		(152	)
Capitalization of internal-use software		69			172			209			194
Deferred compensation associated with Zinc Ahead acquisition		(722	)		—			(2,126	)		—
Operating expense on a non-GAAP basis	$	55,483		$	37,842		$	107,376		$	70,888
Operating income on a GAAP basis	$	23,822		$	22,353		$	41,628		$	43,278
Stock-based compensation expense		10,014			5,611			18,157			10,410
Amortization of purchased intangibles		2,059			676			4,110			1,089
Capitalization of internal-use software		(69	)		(172	)		(209	)		(194	)
Amortization of internal-use software		185			191			362			380
Deferred compensation associated with Zinc Ahead acquisition		730			—			2,143			—
Operating income on a non-GAAP basis	$	36,741		$	28,659		$	66,191		$	54,963
Operating margin on a GAAP basis		18.1	%		22.8	%		16.6	%		23.0	%
Stock-based compensation expense		7.6			5.7			7.2			5.5
Amortization of purchased intangibles		1.6			0.7			1.6			0.6
Capitalization of internal-use software		—			(0.2	)		—			(0.1	)
Amortization of internal-use software		0.1			0.2			0.1			0.2
Deferred compensation associated with Zinc Ahead acquisition		0.6			—			0.9			—
Operating margin on a non-GAAP basis		28.0	%		29.2	%		26.4	%		29.2	%
Net income on a GAAP basis	$	12,958		$	13,406		$	25,467		$	26,388
Stock-based compensation expense		10,014			5,611			18,157			10,410
Amortization of purchased intangibles		2,059			676			4,110			1,089
Capitalization of internal-use software		(69	)		(172	)		(209	)		(194	)
Amortization of internal-use software		185			191			362			380
Deferred compensation associated with Zinc Ahead acquisition		730			—			2,143			—
Income tax effect on non-GAAP adjustments		(3,549	)		(1,534	)		(6,529	)		(2,747	)
Net income on a non-GAAP basis	$	22,328		$	18,178		$	43,501		$	35,326
Net income allocated to participating securities on a GAAP basis	$	(1	)	$	(16	)	$	(2	)	$	(31	)
Net income allocated to participating securities from non-GAAP adjustments		(1	)		(5	)		(1	)		(10	)
Net income allocated to participating securities on a non-GAAP basis		(2	)		(21	)		(3	)		(41	)
Net income attributable to common stockholders on a non-GAAP basis	$	22,326		$	18,157		$	43,498		$	35,285
Diluted net income per share on a GAAP basis	$	0.09		$	0.09		$	0.17		$	0.18
Stock-based compensation expense		0.07			0.04			0.12			0.07
Amortization of purchased intangibles		0.01			0.01			0.03			0.01
Capitalization of internal-use software		—			—			—			—
Amortization of internal-use software		—			—			—			—
Deferred compensation associated with Zinc Ahead acquisition		—			—			0.02			—
Income tax effect on non-GAAP adjustments		(0.02	)		(0.01	)		(0.04	)		(0.02	)
Diluted net income per share on a non-GAAP basis	$	0.15		$	0.13		$	0.30		$	0.24

CONTACT:
Investor Relations Contact:
Veeva Systems Inc.
Rick Lund, 925-271-9816
ir@veeva.com
or
Media Contact:
Veeva Systems Inc.
Roger Villareal, 925-264-8885
pr@veeva.com