Veeva (NYSE: VEEV) recently reported its fourth quarter results that continued to surpass all market expectations. Last December, Veeva had announced plans to shift its CRM platform from Salesforce to Veeva Vault. Analysts are treating the migration as an opportunity for Veeva as it barrels towards its next milestone year.

Veeva’s Financials

Veeva’s Q4 revenues grew 16% to $563.4 million, ahead of the Street’s forecast of $557.1 million. On an adjusted basis, EPS was $1.15, surpassing the Street’s estimates of $1.04

By segment, revenues from subscription services grew 16% to $460.2 million. Professional services revenues grew 14.9% to $103.23 million.

For the year, Veeva reported revenues of $2.155 billion and EPS of $4.28.

This was a milestone year for Veeva as it surpassed the $2 billion revenue threshold. The company continues to expand its footprint in the industry and ended the quarter with 1,388 customers, up 174 from the year ago. Veeva Commercial Solutions ended the year with a total of 684 customers and Veeva R&D Solutions ended the year with a total of 1,025 customers.

For the first quarter, Veeva forecast revenues of $514-$516 million and an adjusted EPS of $0.79-$0.80. The market was looking for revenues of $547.47 million and an EPS of $0.97. Veeva expects to end the current year with revenues of $2.35-$2.36 billion and an EPS of $4.33. The market was looking for revenues of $2.4 billion and an adjusted EPS of $4.46.

Veeva’s Migration from Salesforce

Last quarter, Veeva had announced plans that it would not renew its contract with Salesforce, and instead migrate Veeva CRM to the Vault Platform by 2025. Veeva’s CRM was built on the Salesforce platform, but Veeva has made sure it continued to build a parallel platform as well. Veeva Vault has been designed specifically for the life sciences value chain areas. Most of Veeva applications related to clinical operations, quality, regulatory, safety, are hosted on Veeva Vault while Veeva CRM on Salesforce has been primarily used for customer experience management, multichannel engagements, and real-time insights.

Veeva is targeting revenues of $3 billion by 2025. Its Vault product offering has been growing strongly and while it currently represents a smaller portion of its business, Veeva expects the segment to account for 60% of its revenue by 2025.

Analysts believe that by migrating away from Salesforce, Veeva will be able to offer a better end-to-end customer experience and deliver higher cost optimization to its customers. It is looking to grow into MedTech-focused offerings and tapping into adjacent industries like regulated manufacturers in the areas of consumer products and chemicals that it previously wasn’t allowed to compete in due to its agreement with Salesforce. The move into these industries will help it achieve its revenue goal.

The migration will also help Veeva improve its margins. Veeva does not disclose the amount it spends with Salesforce in its financials. The expense is buried under the $60 million cost of subscription line that also includes spend toward AWS. Reports from a few years ago suggested that Veeva paid 15% of its revenue as the platform royalty fee for Salesforce. The 10-year contract that Veeva had renewed with Salesforce in 2014 required Veeva to pay a minimum of $500 million to Salesforce over the ten-year period. The actual annual payouts are not disclosed, but it still would be a significant fee that Veeva could avoid post the migration. The biggest risk, though, is that by moving away from Salesforce, Veeva could invite Salesforce as one of its big competitors in the longer run.

Veeva’s stock is currently trading at $172.86 with a market capitalization of $26.9 billion. It had peaked to a record high of $232.26 in August last year. It hit a 52-week low of $151.02 in October last year.

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