Veeva
Annual Report 2017

Plain-text annual report

VEEVA SYSTEMS INC. 2017 ANNUAL REPORT & PROXY STATEMENT Dear Fellow Stockholders: May 9, 2017 Please join me and the Board of Directors at our 2017 Annual Meeting of Stockholders on Wednesday, June 21, 2017 at 12:00 p.m. Pacific Time, at our headquarters in Pleasanton, California. Details regarding our Annual Meeting and the business to be conducted at the meeting are described in the attached Notice of 2017 Annual Meeting of Stockholders and Proxy Statement. We are pleased to furnish proxy materials to our stockholders over the Internet. We believe providing these materials electronically expedites stockholder receipt of them and lowers the cost and reduces the environmental impact of our Annual Meeting. We encourage you to read this information carefully. Your vote is important to us. We hope you will vote as soon as possible. You may vote over the Internet, by telephone, by mailing a proxy card (if you have requested one), or in person at the Annual Meeting. Voting over the Internet, by telephone, or by mail will ensure your representation at the Annual Meeting regardless of whether you attend in person. Please review the instructions on the Notice of Internet Availability of Proxy Materials you received in the mail regarding your voting options. Thank you for your ongoing support of Veeva. Very truly yours, Peter P. Gassner Chief Executive Officer and Director P r o x y S t a t e m e n t [THIS PAGE INTENTIONALLY LEFT BLANK] NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS Wednesday, June 21, 2017 12:00 p.m. Pacific Time Veeva Systems Inc. Headquarters 4280 Hacienda Drive, Pleasanton, California 94588 Items of Business (1) Elect for three-year terms the two directors named in the Proxy Statement accompanying this notice to serve as Class I directors until their successors are duly elected and qualified; (2) Approve the material terms of our 2013 Equity Incentive Plan for purposes of Section 162(m) of the Internal Revenue Code; (3) Ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2018; and (4) Transact such other business as may properly come before the meeting. Adjournments and Postponements Any action on the items of business described above may be considered at the Annual Meeting or at any time and date to which the Annual Meeting may be properly adjourned or postponed. P r o x y S t a t e m e n t Record Date You can vote if you were a stockholder of record as of the close of business on May 2, 2017 (the “Record Date”). Voting Your vote is very important. We encourage you to read the Proxy Statement and vote your shares over the Internet, by telephone, by mail, or in person at the Annual Meeting. For specific instructions on how to vote your shares, please see “Frequently Asked Questions and Answers” in the Proxy Statement. On or about May 9, 2017, a Notice of Internet Availability of Proxy Materials (the “Notice”) has been mailed to stockholders of record as of the Record Date. The Notice contains instructions on how to access our Proxy Statement for our 2017 Annual Meeting of Stockholders and our fiscal 2017 Annual Report (together, the proxy materials). The Notice also provides instructions on how to vote and includes instructions on how to receive a paper copy of proxy materials by mail. The proxy materials can be accessed directly at the following Internet address: www.astproxyportal.com/ast/18559. By Order of the Board of Directors, Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 21, 2017: The Notice, Proxy Statement, and 2017 Annual Report to stockholders is available at www.astproxyportal.com/ast/18559. Veeva Systems Inc. | 2017 Proxy Statement Josh Faddis Corporate Secretary May 9, 2017 [THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS PROXY STATEMENT PROXY SUMMARY PROPOSAL ONE: ELECTION OF DIRECTORS Information About Nominees and Incumbent Directors Board and Committee Meeting Attendance Board Committees Compensation Committee Interlocks and Insider Participation Director Compensation CORPORATE GOVERNANCE Board Leadership Structure Board Oversight of Risk Board Composition Director Independence Corporate Governance Policies Stockholder Recommendations for Nominations to the Board Communications with the Board Section 16(a) Beneficial Ownership Reporting Compliance Certain Relationships and Related Party Transactions EXECUTIVE OFFICERS SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT EXECUTIVE COMPENSATION Compensation Discussion and Analysis Executive Summary Executive Compensation Philosophy, Objectives and Components Role of Compensation Committee, Management and Compensation Consultant Peer Group and Competitive Data Principal Elements of Compensation Other Compensation-Related Policies Tax and Accounting Considerations Compensation Committee Report Summary Compensation Table Fiscal 2017 Grants of Plan-Based Awards Outstanding Equity Awards at Fiscal 2017 Year-End Fiscal 2017 Option Exercises and Stock Vested Fiscal 2017 Potential Payments Upon Termination or Change in Control EQUITY COMPENSATION PLAN INFORMATION PROPOSAL TWO: APPROVAL OF THE MATERIAL TERMS OF OUR 2013 EQUITY INCENTIVE PLAN FOR PURPOSES OF SECTION 162(M) OF THE INTERNAL REVENUE CODE Information About the Proposal Plan Summary Summary of Material U.S. Federal Income Tax Considerations Plan Benefits PROPOSAL THREE: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Principal Accounting Fees and Services Pre-Approval of Audit and Non-Audit Services AUDIT COMMITTEE REPORT FREQUENTLY ASKED QUESTIONS AND ANSWERS Annual Meeting Stock Ownership Quorum and Voting Information About the Proxy Materials ADDITIONAL INFORMATION APPENDIX A Page 1 1 3 3 7 7 9 9 11 11 11 11 11 12 12 12 12 13 14 16 19 19 19 19 20 21 23 24 25 26 27 28 29 29 30 31 31 32 37 39 40 40 40 41 42 42 43 43 47 48 A-1 Veeva Systems Inc. | 2017 Proxy Statement P r o x y S t a t e m e n t [THIS PAGE INTENTIONALLY LEFT BLANK] PROXY STATEMENT This Proxy Statement is furnished in connection with solicitation of proxies by the Board of Directors (the “Board”) of Veeva Systems Inc. for use at the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) to be held at 12:00 p.m. Pacific Time on Wednesday, June 21, 2017, and at any postponements or adjournments thereof. The Annual Meeting will be held at our principal executive offices located at 4280 Hacienda Drive, Pleasanton, California 94588. Beginning on or about May 9, 2017, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy materials. As used in this Proxy Statement, the terms “Veeva,” “the Company,” “we,” “us,” and “our” mean Veeva Systems Inc. and its subsidiaries unless the context indicates otherwise. PROXY SUMMARY This proxy summary highlights certain information in this Proxy Statement and does not contain all the information you should consider in voting your shares. Please review the entire Proxy Statement and our 2017 Annual Report carefully before voting. Page references are supplied to help you find further information in this Proxy Statement. Proposals Which Require Your Vote Proposal One Two Elect for three-year terms the two directors named in the Proxy Statement accompanying this notice to serve as Class I directors until their successors are duly elected and qualified Approve the material terms of our 2013 Equity Incentive Plan for purposes of Section 162(m) of the Internal Revenue Code Three Ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2018 Eligibility to Vote (page 43) More Information Board Recommendation Broker Non-Votes Abstentions Votes Required for Approval Page 3 FOR all nominees Will not count in nominee’s favor Will not count in nominee’s favor Plurality of votes voted at the Annual Meeting Page 31 FOR Page 40 FOR Do not impact outcome Do not impact outcome Do not impact outcome Do not impact outcome Majority in voting power of the votes cast Majority in voting power of the votes cast You can vote if you were a stockholder of record as of the close of business on May 2, 2017 (the “Record Date”). How to Vote (page 44) Your vote is important to us. Please exercise your right to vote as soon as possible. You can vote by any of the following methods: Š Internet: www.proxyvote.com until 11:59 p.m. Eastern Time on Tuesday, June 20, 2017; Š Telephone: 1-800-776-9437 until 11:59 p.m. Eastern Time on Tuesday, June 20, 2017; Š Mail: Sign, date, and mail your proxy card; or Š In person: By attending the Annual Meeting. P r o x y S t a t e m e n t Veeva Systems Inc. | 2017 Proxy Statement 1 Proxy Summary Board Nominees (page 3) There are two nominees for election to the Board. Name Paul E. Chamberlain Paul Sekhri Age Veeva Director Since Independent Committee Membership 53 59 2015 2014 Yes Yes Audit Committee Nominating and Governance Committee Corporate Governance (page 11) Executive Compensation (page 19) Since our initial public offering in October 2013, our Board and Compensation Committee have maintained a simple structure for our executive compensation programs. We have paid our named executive officers cash compensation that is below the cash compensation levels paid by our peers, and we have emphasized long-term equity compensation in the form of stock options and restricted stock units (“RSUs”). Our Board and Compensation Committee have adhered to this executive compensation approach because they believe it is effective and is consistent with our compensation philosophy. 2 Veeva Systems Inc. | 2017 Proxy Statement PROPOSAL ONE: ELECTION OF DIRECTORS Our Board unanimously recommends a vote “FOR” each of the Class I nominees. Our Board may establish the authorized number of directors from time to time by resolution. Our Board is currently comprised of six members who are divided into three classes with staggered three-year terms. A director serves in office until his respective successor is duly elected and qualified or until his earlier death or resignation. Our restated certificate of incorporation and amended and restated bylaws that are currently in effect authorize only our Board to fill vacancies on our Board until the next annual meeting of stockholders. Any additional directorships resulting from an increase in the authorized number of directors would be distributed among the three classes so that, as nearly as possible, each class would consist of one-third of the authorized number of directors. Your proxy cannot be voted for a greater number of persons than the number of nominees named in this Proxy Statement. Information About Nominees and Incumbent Directors Nominees for Election at the Annual Meeting (Class I) Two Class I directors have been nominated for election at the Annual Meeting for three-year terms, each expiring in 2020. Upon the recommendation of our Nominating and Governance Committee, our Board has nominated Paul E. Chamberlain and Paul Sekhri for election as Class I directors. Each of them was recommended as a nominee by the Nominating and Governance Committee. The term of office of each person elected as director will continue until such director’s term expires in 2020, or until such director’s successor has been duly elected and qualified. Name Age Principal Occupation and Business Experience Paul E. Chamberlain 53 Mr. Chamberlain has served as a member of our Board since December 2015. Since January 2015, Mr. Chamberlain has operated his own strategic and financial advisory firm, PEC Ventures. From July 1990 to January 2015, Mr. Chamberlain worked at Morgan Stanley, during which time he served as Managing Director for 18 years and as the Co-Head of Global Technology Banking for ten of those years. He also served as a member of the Investment Banking Division’s Operating Committee. Mr. Chamberlain spent the majority of his Morgan Stanley career in the firm’s Menlo Park, California office where he led account teams on financing and strategic transactions for its technology clients. He also serves on the board of directors of ServiceNow, Inc. since October 2016 and TriNet Group, Inc. since December 2015. Mr. Chamberlain earned a Bachelor of Arts in History, magna cum laude, from Princeton University and a Master of Business Administration from Harvard Business School. He serves as Chairperson of the Strategic Advisory Committee of JobTrain, a non-profit organization based in Menlo Park, California that provides vocational and life skills training, and served on its board of directors for over ten years. Mr. Chamberlain currently serves on our Audit Committee. Qualifications Our Board determined that Mr. Chamberlain should serve as a director based on his extensive experience working with high technology and high growth firms and his financial expertise. Veeva Systems Inc. | 2017 Proxy Statement 3 P r o x y S t a t e m e n t Proposal One Name Paul Sekhri Age Principal Occupation and Business Experience 59 Mr. Sekhri has served as a member of our Board since July 2014. Since February 2016, Mr. Sekhri has been Operating Partner at Highline Therapeutics, a biotech incubator launched by Versant Ventures. Concurrently and since February 2015, Mr. Sekhri has been President and CEO of Lycera Corp., a biopharmaceutical company. Prior to joining Lycera, Mr. Sekhri was Senior Vice President, Integrated Care at Sanofi S.A., a multinational pharmaceutical company headquartered in France, from April 2014 to January 2015. From May 2013 to March 2014, Mr. Sekhri was Group Executive Vice President, Global Business Development and Chief Strategy Officer at Teva Pharmaceutical Industries, Ltd., a global pharmaceuticals company focusing on the manufacture of generic and proprietary pharmaceutical products headquartered in Israel. From January 2009 to May 2013, Mr. Sekhri was Operating Partner and Head, Biotech Ops Group at TPG Biotech, the life sciences venture arm of the global private investment firm TPG Capital, where he was responsible for a portfolio of more than 50 life sciences companies. From December 2004 to January 2009, Mr. Sekhri was President and CEO of Cerimon Pharmaceuticals, Inc., a pharmaceutical company focusing on auto-immune diseases and pain management. Mr. Sekhri has served as a director of numerous private and public company boards, including Nivalis Therapeutics, Inc. since February 2016, Pharming N.V. since April 2015, Enumeral Biomedical Holdings, Inc. since December 2014, Tandem Diabetes Care Inc. from May 2012 to May 2013, MacroGenics, Inc. from January 2010 to May 2013 and Intercept Pharmaceuticals, from January 2008 to September 2012. Mr. Sekhri completed post-graduate studies in clinical anatomy and neuroscience at the University of Maryland, School of Medicine and received a Bachelor of Science degree in Zoology from the University of Maryland. Mr. Sekhri currently serves on our Nominating and Governance Committee. Inc. Qualifications Our Board determined that Mr. Sekhri should serve as a director based on his extensive business experience as an executive in the life sciences industry and venture capital experience with respect to the life sciences industry. 4 Veeva Systems Inc. | 2017 Proxy Statement Directors Whose Terms Expire at the 2018 Annual Meeting (Class II) Name Age Principal Occupation and Business Experience Proposal One Timothy C. Barabe Inc. Previously, 64 Mr. Barabe has served as a member of our Board since September 2015. He retired in 2013 as Executive Vice President and Chief from July 2006 until Financial Officer of Affymetrix, March 2010, he was Senior Vice President and Chief Financial Officer of Human Genome Sciences, Inc. Mr. Barabe served as Chief Financial Officer of Regent Medical Limited, a U.K.-based, privately owned, surgical supply company, from 2004 to 2006. He was with Novartis AG from 1982 through August 2004, where he served in a succession of senior executive positions in finance and general management, most recently as the Chief Financial Officer of Sandoz GmbH, the generic pharmaceutical subsidiary of Novartis. Mr. Barabe serves on the board of directors of ArQule, Inc., and Selecta Biosciences, Inc. Mr. Barabe also serves on the board of directors of Vigilant Biosciences, a private medical device company, and Project Open Hand, a non-profit organization. He received his Bachelor of Business Administration degree in Finance from the University of Massachusetts (Amherst) and his Master of Business Administration from the University of Chicago. Mr. Barabe currently serves on our Audit Committee and Nominating and Governance Committee. Inc., Opexa Therapeutics, Qualifications Our Board determined that Mr. Barabe should serve as a director based on his extensive executive experience in the life sciences industry and his experience as a finance executive. Name Age Principal Occupation and Business Experience Gordon Ritter 52 Mr. Ritter has served as a member of our Board since May 2008 and serves as chairman of our Board. Mr. Ritter has been a General Partner at Emergence Capital Partners, a venture capital firm he founded, since June 2002. Prior to founding Emergence, Mr. Ritter was co-founder and Chief Executive Officer of Software As Service, Inc., a web services platform company. Prior to founding Software As Service, Mr. Ritter served as Vice President of the IBM Global Small Business division. Prior to IBM, Mr. Ritter was co-founder and President of Whistle Communications, Inc., an internet appliance and services platform for small and medium-sized businesses, which was acquired by IBM. Before Whistle, Mr. Ritter was co-founder and President of Tribe, Inc., a networking infrastructure company. Prior to Tribe, Mr. Ritter was Vice President of Capital Markets at Credit Suisse First Boston Inc. Mr. Ritter earned a Bachelor of Arts degree in Economics from Princeton University. Mr. Ritter currently serves on our Compensation Committee. Qualifications Our Board determined that Mr. Ritter should serve as a director based on his extensive business experience in the software and web services industries and his experience in venture capital. Veeva Systems Inc. | 2017 Proxy Statement 5 P r o x y S t a t e m e n t Proposal One Directors Whose Terms Expire at the 2019 Annual Meeting (Class III) Name Age Principal Occupation and Business Experience Ronald E.F. Codd 61 Mr. Codd has served as a member of our Board since February 2012. Mr. Codd has been an independent business consultant since April 2002. From January 1999 to April 2002, Mr. Codd served as President, Chief Executive Officer and a director of Momentum Business Applications, Inc., an enterprise software company. From September 1991 to December 1998, Mr. Codd served as Senior Vice President of Finance and Administration and Chief Financial Officer of PeopleSoft, Inc., a provider of enterprise application software. Mr. Codd has served on the board of directors of a number of information technology companies, including FireEye, Inc. since July 2012, Rocket Fuel Inc. since February 2012, since February 2012, ServiceNow, DemandTec, Inc. from February 2007 to February 2012, Data Domain, Inc. from October 2006 to July 2009, Interwoven, Inc. from July 1999 to April 2009 and Agile Software Corporation from August 2003 to July 2007. Mr. Codd holds a Bachelor of Science degree in Accounting from the University of California, Berkeley and a Master of Management in Finance and Management Information Systems degree from the Kellogg Graduate School of Management at Northwestern University. Mr. Codd currently serves on our Audit Committee and Compensation Committee. Inc. Qualifications Our Board determined that Mr. Codd should serve as a director based on his management and software industry experience, including his experience in finance, which gives him a breadth of knowledge and valuable understanding of our industry. 6 Veeva Systems Inc. | 2017 Proxy Statement Name Age Principal Occupation and Business Experience Proposal One Peter P. Gassner 52 Mr. Gassner is one of our founders and has served as our Chief Executive Officer and one of our directors since January 2007. Prior to joining Veeva, Mr. Gassner was Senior Vice President of Technology at salesforce.com, inc., a provider of enterprise cloud computing solutions, from July 2003 to June 2005, where he led the development effort to extend the Salesforce Platform to the enterprise. Prior to his time with salesforce.com, Mr. Gassner was with PeopleSoft from January 1995 to June 2003. At PeopleSoft, he served as Chief Architect and General Manager responsible for development, strategy, marketing and deployment of PeopleTools, the architecture underlying PeopleSoft’s application suite. Mr. Gassner began his career with International Business Machines Corporation (IBM). At IBM, Mr. Gassner conducted research and development on relational database technology, including the DB2 database. Mr. Gassner has served on the board of directors of Guidewire Software, Inc. since June 2015 and Zoom Video Communications, Inc. since November 2015. Mr. Gassner earned a Bachelor of Science degree in Computer Science from Oregon State University. Qualifications Our Board determined that Mr. Gassner should serve as a director based on his position as one of our founders and as our Chief Executive Officer, his extensive experience in general management and software and platform development and his experience in the software industry. P r o x y S t a t e m e n t There are no family relationships among any of our directors or executive officers. Board and Committee Meeting Attendance Our Board met five times during our fiscal year ended January 31, 2017 (“fiscal 2017”). No director attended fewer than 75%, in the aggregate, of the total number of meetings of the Board and the total number of committee meetings of which he was a member during fiscal 2017. It is our policy that directors are invited and encouraged to attend our annual meetings of stockholders. We have scheduled our Annual Meeting on the same day as a regularly scheduled Board meeting in order to facilitate attendance by the members of our Board. Last year, except for Mr. Sekhri, each member of our Board attended our 2016 annual meeting of stockholders. The membership of each standing committee and number of meetings held during fiscal 2017 are identified in the table below. Name Audit Compensation Governance Peter P. Gassner Timothy C. Barabe Paul E. Chamberlain Ronald E.F. Codd Gordon Ritter Paul Sekhri Number of meetings held during fiscal 2017 Board Committees ✓ ✓ Chair 9 ✓ Chair 5 Chair ✓ 2 Our Board has established an Audit Committee, a Compensation Committee and a Nominating and Governance Committee. Our Board and its committees set schedules for meeting throughout the year Veeva Systems Inc. | 2017 Proxy Statement 7 Proposal One and also hold special meetings and act by written consent from time to time, as appropriate. Our Board has delegated various responsibilities and authority to its committees as generally described below. The committees will regularly report on their activities and actions to the full Board. Each member of each committee of our Board qualifies as an independent director in accordance with New York Stock Exchange (“NYSE”) listing standards. Audit Committee The Audit Committee oversees our accounting practices, system of internal controls, audit processes, and financial reporting processes. Among other things, our Audit Committee is responsible for reviewing our disclosure controls and processes, the adequacy and effectiveness of our internal controls, and the performance of our internal audit function. It also discusses the scope and results of the audit with our independent registered public accounting firm, reviews with our management and our independent registered public accounting firm our interim and year-end operating results, and, as appropriate, initiates inquiries into aspects of our financial affairs. Our Audit Committee is responsible for establishing procedures for retention, and treatment of complaints regarding accounting, internal accounting controls, or auditing matters and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. In addition, our Audit Committee has sole and direct responsibility for the appointment, retention, compensation, and oversight of the work of our independent registered public accounting firm, including approving services and fee arrangements. Significant related party transactions will be approved by our Audit Committee before we enter into them, as required by applicable rules and NYSE listing standards. the receipt, The members of our Audit Committee are independent, non-employee members of our Board and can qualify as independent under Rule 10A-3 of the Securities Exchange Act of 1934 (the “Exchange Act’) and related NYSE listing standards, as determined by our Board. Each read and understand fundamental financial statements. Our Board has determined that the service of Mr. Barabe and Mr. Codd on the audit committee of three other public company boards of directors will not impair their ability to serve effectively on our Audit Committee. Our Board has also determined that all members of our Audit Committee qualify as audit committee financial experts within the meaning of regulations of the financial sophistication the Securities and Exchange Commission (the “SEC”) and meet requirements of the NYSE. The designation does not impose on them any duties, obligations or liabilities that are greater than are generally imposed on any other member of our Board. Compensation Committee The purpose of our Compensation Committee is to discharge the responsibilities of our Board relating to executive compensation policies and programs. Among other things, specific responsibilities of our Compensation Committee include evaluating the performance of our Chief Executive Officer and determining our Chief Executive Officer’s compensation. The Compensation Committee also determines the compensation of our other executive officers in consultation with our Chief Executive Officer. In addition, our Compensation Committee administers our stock-based compensation plans, including granting equity awards and approving modifications of such awards. Our Compensation Committee also reviews and approves various other compensation policies and matters and has both the authority to engage its own advisors to assist it in carrying out its function and the responsibility to assess the independence of such advisors in accordance with SEC rules and NYSE listing standards. Our Compensation Committee has delegated to the non-executive equity committee, consisting of our Chief Executive Officer, the authority to approve equity grants within certain guidelines, which include a prohibition on the approval of equity grants to our executive officers. Our Chief Executive Officer, Chief 8 Veeva Systems Inc. | 2017 Proxy Statement Proposal One Financial Officer and General Counsel assist our Compensation Committee in carrying out its functions, although they do not participate in deliberations or decisions with respect to their own compensation. During fiscal 2017, our Compensation Committee engaged the services of Compensia, Inc., a compensation consulting firm, to advise it regarding the amount and types of compensation that we provide to our executives and directors and how our compensation practices compared to the compensation practices of other companies. Compensia reports directly to the Compensation Committee. Compensia does not provide any services to us other than the services provided to the Compensation Committee. Our Compensation Committee believes that Compensia does not have any conflicts of interest in advising the Compensation Committee under applicable SEC rules or NYSE listing standards. The members of our Compensation Committee are “non-employee” directors under Rule 16b-3 of the Exchange Act, “outside directors” under applicable tax rules, and qualify as independent under Rule 10C of the Exchange Act and related NYSE listing standards, as determined by our Board. Nominating and Governance Committee The Nominating and Governance Committee oversees the nomination of directors, including, among other things, identifying, evaluating, and making recommendations of nominees to our Board and evaluates the performance of our Board and individual directors. Our Nominating and Governance Committee is also responsible for reviewing developments in corporate governance practices, evaluating the adequacy of our governance practices, and making recommendations to our Board concerning corporate governance matters. The members of our Nominating and Governance Committee are non-employee members of our Board and are independent under the listing standards of the NYSE applicable to Nominating and Governance Committee members. Compensation Committee Interlocks and Insider Participation During fiscal 2017, our Compensation Committee consisted of Messrs. Codd and Ritter. None of our executive officers serves, or served during fiscal 2017, as a member of the board of directors or compensation committee of any other entity that has or has had one or more executive officers serving as a member of our Board or our Compensation Committee. Director Compensation The following table sets forth information about the compensation of the non-employee members of our Board who served as a director during fiscal 2017. Other than as set forth in the table and described more fully below, during fiscal 2017, we did not pay any fees to, make any equity awards or non-equity awards to or pay any other compensation to the non-employee members of our Board. Mr. Gassner, our Chief Executive Officer, receives no compensation for his service as a director and is not included in the table below. Name Timothy C. Barabe Paul E. Chamberlain Ronald E.F. Codd Gordon Ritter Paul Sekhri (1) Includes the annual retainers paid to each director. Fees Earned or Paid in Cash ($) (1) Stock Awards ($) (2)(3)(4) Total ($) 50,000 50,000 57,083 60,417 47,500 174,988 174,988 212,472 225,000 150,000 224,988 224,988 269,555 285,416 197,500 Veeva Systems Inc. | 2017 Proxy Statement 9 P r o x y S t a t e m e n t Proposal One (2) Represents the aggregate grant date fair value of RSUs and stock options granted to the director during fiscal 2017, computed in accordance with FASB ASC Topic No. 718. See note 10 of the notes to our consolidated financial statements included in our annual report on Form 10-K filed on March 30, 2017 for a discussion of the assumptions made by us in determining the grant date fair values of our equity awards. (3) As of January 31, 2017, the above-listed non-employee directors held outstanding options to purchase shares of our Class A common stock as follows: Mr. Barabe — 0; Mr. Chamberlain — 0; Mr. Codd — 40,000; Mr. Ritter — 40,000; and Mr. Sekhri — 60,000. As of January 31, 2017, Mr. Codd also held an outstanding option to purchase 139,250 shares of Class B common stock which represents the unexercised and vested portion of an option granted in March 2012 for 312,500 shares of Class B common stock. (4) As of January 31, 2017, the above-listed non-employee directors held outstanding RSUs under which the following number of shares of our Class A common stock were issuable upon vesting: Mr. Barabe — 2,584; Mr. Chamberlain — 2,584; Mr. Codd — 3,137; Mr. Ritter — 3,322; and Mr. Sekhri — 2,215. Non-Employee Director Compensation Plan Amended Compensation Plan Effective September 9, 2015 for Messrs. Barabe and Chamberlain and effective at the 2016 annual meeting of stockholders for Messrs. Codd, Ritter and Sekhri, each non-employee member of the Board receives an annual cash retainer of $50,000, paid quarterly. Non-employee members of the Board also receive issuances of RSUs under the 2013 Equity Incentive Plan. On the date of each annual meeting of our stockholders, each non-employee director who is serving on the Board as of such date will be issued RSUs valued at $150,000 of our Class A common stock. In addition, the non-executive chairman or lead independent director will receive an additional issuance of RSUs valued at $50,000 of our Class A common stock. Non-employee members of the Audit Committee and Compensation Committee will be issued RSUs valued at $25,000 and $12,500, respectively, of our Class A common stock with the chairs of those committees issued RSUs valued at $50,000 and $25,000, respectively, of our Class A common stock. Such annual grants vest quarterly over one year and are valued on the grant date. New directors will receive cash and equity compensation on a pro-rated basis to coincide with our annual director compensation period, which begins in the month of our annual meeting of stockholders. Prior Compensation Plan Prior to the amendment of our Non-Employee Director Compensation Plan in September 2015, each non-employee member of our Board received an annual cash retainer of $40,000 paid quarterly and the non-executive chairman or lead independent director received an additional annual cash retainer of $20,000 paid quarterly. Non-employee members of the Audit Committee, Compensation Committee, and Nominating and Governance Committee received an annual cash retainer of $9,000, $7,000, and $4,000, respectively, paid quarterly with the chairs of those committees receiving an annual cash retainer of $20,000, $15,000, and $7,500, respectively, paid quarterly. Additionally, non-employee members of our Board also received grants of non-statutory stock options under the 2013 Equity Incentive Plan both upon joining the Board and on the date of each annual meeting of stockholders. The initial grant would be in an amount and with a vesting scheduled determined by our Board and with an exercise price equal to the fair market value of our Class A common stock on the grant date. The annual grant would be for 20,000 shares of our Class A common stock, vesting in full on the one-year anniversary of the grant date and having an exercise price equal to the fair market value of our Class A common stock on the grant date. We have a policy of reimbursing directors for their reasonable out-of-pocket expenses incurred in attending Board and committee meetings. 10 Veeva Systems Inc. | 2017 Proxy Statement CORPORATE GOVERNANCE Board Leadership Structure Pursuant to our Corporate Governance Principles, our Board may separate or combine the roles of the Chairman of the Board and Chief Executive Officer when and if it deems it advisable and in our best interests and in the best interests of our stockholders to do so. We currently separate the positions of Chairman and Chief Executive Officer. Our Board is currently chaired by Mr. Ritter. Separating the positions of Chief Executive Officer and Chairman allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman to lead our Board in its fundamental role of providing independent advice to, and oversight of, management. Our Board believes that having an independent director serve as Chairman is the appropriate leadership structure for us at this time. Mr. Ritter, as our Chairman, presides over separate regularly scheduled executive session meetings at which only independent directors are present. Our Corporate Governance Principles are posted on the Investors portion of our website at http://ir.veeva.com. Board Oversight of Risk One of the key functions of our Board is informed oversight of our risk management process. In particular, our Board is responsible for monitoring and assessing strategic risk exposure. Our executive officers are responsible for the day-to-day management of the material risks we face. Our Board administers its oversight function directly as a whole, as well as through various standing committees of our Board that address risks inherent in their respective areas of oversight. For example, our Audit Committee is responsible for overseeing the management of risks associated with our financial reporting, accounting and auditing matters, as well as overseeing our internal audit function, which focuses on these and other enterprise risks; our Compensation Committee oversees major risks associated with our compensation policies and programs; and our Nominating and Governance Committee oversees the management of risks associated with director independence, conflicts of interest, composition and organization of our Board, and director succession planning. P r o x y S t a t e m e n t Board Composition Our business affairs are managed under the direction of our Board, which is currently composed of six members. Five of our directors are independent within the meaning of the NYSE listing standards. Our Board is divided into three classes with staggered three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Directors in a particular class will be elected for three-year terms at the annual meeting of stockholders in the year in which their terms expire. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Each director’s term continues until the election and qualification of his or her successor, or the earlier of his or her death, resignation or removal. The classification of our Board may have the effect of delaying or preventing changes in our control or management. Director Independence In addition, Our Class A common stock is listed on the NYSE. The listing standards of this stock exchange the members of a listed company’s board of directors be generally require that a majority of independent. to specified the NYSE require that, subject exceptions, each member of a listed company’s audit, compensation, and nominating and corporate governance committees be independent. Under the listing standards of the NYSE, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. the listing standards of Veeva Systems Inc. | 2017 Proxy Statement 11 Corporate Governance Our Board has determined that none of our non-employee directors has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the listing standards of the NYSE. The independent members of our Board hold separate regularly scheduled executive session meetings at which only independent directors are present. Corporate Governance Policies Our Board has adopted a Code of Conduct that applies to all of our directors, employees, and officers, including our Chief Executive Officer, Chief Financial Officer, and other executive and senior financial officers. The full text of our Code of Conduct is posted on the Investors portion of our website at http:// ir.veeva.com. Each committee of our Board has a written charter approved by our Board. Copies of each charter are also posted on the Investors portion of our website. On an annual basis, our Board, or one of its committees, reviews our Corporate Governance Principles, the written charters for each of the Board’s committees, and our Code of Conduct. We will disclose any future amendments to, or waiver of, our Code of Conduct, on the Investors portion of our website. Stockholder Recommendations for Nominations to the Board Our Nominating and Governance Committee has adopted Policies and Procedures for Director Candidates. Stockholder recommendations for candidates to our Board must be received by December 31st of the year prior to the year in which the recommended candidates will be considered for nomination, must be directed in writing to our principal executive offices, Attention: Corporate Secretary, and must include the candidate’s name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between us and the candidate within the last three years, and evidence of the recommending person’s ownership of our capital stock. Such recommendations must also include a statement from the recommending stockholder in support of the candidate, particularly within the context of the criteria for membership on the Board, including issues of character, judgment, diversity, age, independence, expertise, corporate experience, other commitments and the like, personal references, and an indication of the candidate’s willingness to serve. Communications with the Board Stockholders and other interested parties wishing to communicate with our Board or with an individual member of our Board may do so by writing to the Board or to the particular member of the Board, care of the Corporate Secretary by mail to our principal executive offices, Attention: Corporate Secretary. The envelope should indicate that it contains a stockholder or interested party communication. All such communications will be forwarded to the director or directors to whom the communications are addressed. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires that our executive officers and directors and persons who own more than 10% of our common stock, file reports of ownership and changes of ownership with the SEC. Such directors, executive officers and 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. SEC regulations require us to identify in this Proxy Statement anyone who filed a required report late during the most forms we received, or written representations from reporting persons, we believe that during fiscal 2017, all Section 16(a) filing requirements were satisfied on a timely basis except that each of Messrs. Faddis, Lequient, and Wallach delinquently filed a Form 4, each of which reported one transaction. fiscal year. Based on our review of recent 12 Veeva Systems Inc. | 2017 Proxy Statement Corporate Governance Certain Relationships and Related Party Transactions In addition to the compensation arrangements with our directors and executive officers described elsewhere in this Proxy Statement, the following is a description of each transaction since February 1, 2016 and each currently proposed transaction in which: Š we have been or are to be a participant; Š the amount involved exceeds or will exceed $120,000; and Š any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of or person sharing the household with any of these individuals (other than tenants or employees), had or will have a direct or indirect material interest. Employment Arrangements with Immediate Family Members of Our Executive Officers and Directors Theodore Wallach, a brother of Matthew J. Wallach, our President, has been employed by us since September 2010. Theodore Wallach serves as a senior product manager. During fiscal 2017, Theodore Wallach had total cash compensation of $165,394. Lisa Halsey, a sister-in-law of Timothy S. Cabral, our Chief Financial Officer, has been employed by us since August 2015. Ms. Halsey serves as a director in our employee success team. During fiscal 2017, Ms. Halsey had total cash and other compensation of $125,000. The compensation level for each of Theodore Wallach and Ms. Halsey was comparable to the compensation paid to employees in similar positions that were not related to our executive officers and directors. They were also eligible for equity awards on the same general terms and conditions as applicable to other employees in similar positions who were not related to our executive officers and directors. Indemnification Agreements We have entered into indemnification agreements with our directors, executive officers, and other key employees. The indemnification agreements will provide that we indemnify each of our directors, executive officers, and key employees against expenses incurred by that director, executive officer, or key employee because of his or her status as one of our directors, executive officers, or key employees, to the fullest extent permitted by Delaware law, our Certificate of Incorporation and our Bylaws. In addition, the indemnification agreements provide that, to the fullest extent permitted by Delaware law, we will advance all expenses incurred by our directors, executive officers and other key employees in connection with a legal proceeding. Policies and Procedures for Related Party Transactions Pursuant to our Code of Conduct and Audit Committee charter, any related party transaction or series of transactions with an executive officer, director, or any of such person’s immediate family members or affiliates, in which the amount, either individually or in the aggregate, involved exceeds $120,000 must be presented to our Audit Committee for review, consideration and approval. All of our directors and executive officers are required to report to our Audit Committee any such related party transaction. In approving or rejecting the proposed transactions, our Audit Committee shall consider the relevant facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to the risks, costs and benefits to us, the terms of the transaction, the availability of other sources for comparable services or products and, the impact on a director’s independence. Our Audit Committee shall approve only those transactions that, in light of known circumstances, are not inconsistent with Veeva’s best interests, as our Audit Committee determines in the good faith exercise of its discretion. if applicable, Veeva Systems Inc. | 2017 Proxy Statement 13 P r o x y S t a t e m e n t EXECUTIVE OFFICERS The following table provides information concerning our executive officers as of May 9, 2017. Name Peter P. Gassner Matthew J. Wallach Timothy S. Cabral E. Nitsa Zuppas Alan V. Mateo Jonathan (“Josh”) Faddis Frederic Lequient Age Position(s) 52 44 49 47 55 45 48 Chief Executive Officer and Director President Chief Financial Officer Chief Marketing Officer Executive Vice President, Global Sales Senior Vice President, General Counsel and Corporate Secretary Senior Vice President, Global Customer Services Peter P. Gassner. See biographical Terms Expire at the 2019 Annual Meeting (Class III).” information set forth under “Proposal One — Directors Whose Matthew J. Wallach is one of our founders and has served in various senior executive roles since joining Veeva in March 2007. He currently serves as our President and prior to that served as our Chief Strategy Officer from September 2010 to August 2013. Between April 2005 and March 2007, Mr. Wallach served as Chief Marketing Officer at Health Market Science, Inc., a supplier of healthcare data solutions. From January 2004 to December 2004, Mr. Wallach served as Vice President of Marketing and Product Management at IntelliChem, Inc., a provider of scientific content management solutions. Mr. Wallach was previously the General Manager of the Pharmaceuticals & Biotechnology division at Siebel Systems, Inc., a customer relationship management software company, from August 1998 to December 2003. Mr. Wallach serves on the board of directors of HealthVerity, Inc., a healthcare data company. Mr. Wallach earned a Bachelor of Arts degree in Economics from Yale University and a Master of Business Administration from the Harvard Business School. Timothy S. Cabral has served as our Chief Financial Officer since February 2010. Prior to joining Veeva, Mr. Cabral served as Chief Financial Officer and Chief Operations Officer for Modus Group, LLC, a wireless solutions and services company, from February 2008 to February 2010 and served as Chief Financial Officer and Vice President of Operations for Agistics, Inc., an employee management services company, from March 2005 to June 2007. Mr. Cabral previously spent more than seven years at PeopleSoft, beginning in November 1997, where he held various positions, including Vice President of Products & Technology Finance and Senior Director of Corporate FP&A. Mr. Cabral earned a Bachelor of Science degree in Finance from Santa Clara University and a Master of Business Administration from the Leavey School of Business at Santa Clara University. E. Nitsa Zuppas has served as our Chief Marketing Officer since March 2013. Prior to joining Veeva, Ms. Zuppas served as Chief Marketing Officer for First Virtual Group, a diversified holding company with global interests in real estate, agribusiness, philanthropy, and global financial asset management, and Executive Director of the Siebel Foundation from February 2006 to March 2013. From March 1998 to January 2006, Ms. Zuppas served in a number of executive roles at Siebel Systems, including Director, Product Marketing, Senior Director, Investor Relations, General Manager, Siebel Retail, and Vice President, Marketing. Ms. Zuppas earned a Bachelor of Arts degree in Art History from California State University. Alan V. Mateo has served as our Executive Vice President, Global Sales since April 2015. Prior to joining Veeva, Mr. Mateo served in various executive roles at Medidata Solutions, Inc., a provider of a platform of cloud-based solutions for life sciences, from March 2005 to February 2015, including as Executive Vice President of Field Operations from January 2014 to February 2015. Before Medidata, Mr. Mateo spent 11 years at PeopleSoft, where his responsibilities included product lines sales, sales operations and the integration of JD Edwards into PeopleSoft’s global sales organization. Prior to PeopleSoft, Mr. Mateo was northeast sales director for Red Pepper Software Co., a provider of supply 14 Veeva Systems Inc. | 2017 Proxy Statement Executive Officers chain management planning application software, and a major account executive at JD Edwards. Mr. Mateo earned a Bachelor of Science in both Computer Science and Marketing from Juniata College. Josh Faddis has served as our Senior Vice President since April 2016 and General Counsel since September 2012. Mr. Faddis has also served as our Corporate Secretary since May 2013. Prior to joining Veeva, Mr. Faddis served in various roles at Taleo Corporation, a software-as-a-service provider of human capital management solutions, beginning in June 2001 through April 2012, including Senior Vice President, General Counsel, and Corporate Secretary. Prior to joining Taleo, Mr. Faddis conducted intellectual property and business litigation at Fulbright & Jaworski LLP and served as a Judicial Clerk for the Honorable Justice Craig Enoch, Supreme Court of the State of Texas. Since July 2015, Mr. Faddis has served on the board of directors of 10ThousandWindows, a nonprofit organization focused on helping people, who have survived human trafficking, achieve safe, free, and sustainable employment. Mr. Faddis earned a Bachelor of Science in Agricultural Economics from Texas A&M University, magna cum laude, and a Juris Doctor degree from the Georgetown University Law Center. Frederic Lequient has served as our Senior Vice President, Global Customer Services since February 2016. Prior to joining Veeva, Mr. Lequient served as Vice President, Customer Success at PubMatic, Inc., a marketing automation software platform company, from April 2015 to December 2015. From April 2014 to January 2015, Mr. Lequient served as Senior Vice President, Customer Success at FollowAnalytics, Inc., a provider of a mobile marketing automation and engagement platform. From April 2012 to April 2014, Mr. Lequient served as Group Vice President, Consulting at Oracle Corporation, an enterprise software company. From September 1999 to April 2012, Mr. Lequient served in various roles at Taleo, including as Vice President, Field Solutions and Business Development. Mr. Lequient earned a Bachelor of Engineering in Industrial Engineering from Université de Montréal — Ecole polytechnique de Montréal. P r o x y S t a t e m e n t Veeva Systems Inc. | 2017 Proxy Statement 15 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 31, 2017 for: Š each of our named executive officers; Š each of our directors; Š all of our executive officers and directors as a group; and Š each stockholder known by us to be the beneficial owner of more than 5% of our outstanding shares of Class A common stock or Class B common stock. We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of Class A common stock or Class B common stock that they beneficially own, subject to applicable community property laws. Applicable percentage ownership is based on 106,969,418 shares of Class A common stock and 32,078,514 shares of Class B common stock outstanding at March 31, 2017. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stock subject to options and RSUs held by that person or entity that are currently exercisable or releasable or that will become exercisable or releasable within 60 days of March 31, 2017. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Veeva Systems Inc., 4280 Hacienda Drive, Pleasanton, California 94588. Name of Beneficial Owner Named Executive Officers and Directors: Timothy C. Barabe Timothy S. Cabral (2) Paul E. Chamberlain Ronald E.F. Codd (3) Frank Defesche (4) Josh Faddis (5) Peter P. Gassner (6) Frederic Lequient (7) Alan V. Mateo (8) Gordon Ritter (9) Paul Sekhri (10) E. Nitsa Zuppas (11) All Executive Officers and Directors as a Group (12 persons) (12) 5% Stockholders: T. Rowe Price Associates, Inc. (13) The Vanguard Group (14) Brown Capital Management, LLC (15) Young A. Sohn (16) Emergence Capital Partners II, L.P. (17) Mark Armenante (18) Artisan Partners Limited Partnership (19) 16 Veeva Systems Inc. | 2017 Proxy Statement Shares Beneficially Owned Class A Class B Shares % Shares % % Total Voting Power (1) 6,490 6,973 44,706 4,378 1,074 * — — * * * * — 610,041 — 248,500 5,000 141,499 — — 14,708,333 — — 6,950,000 — 22,799 * * * * * 20,000 29,777 481,223 45,730 54,015 — 1.9 — * * * 43.8 — — 21.7 — * * 1.4 * * * * 33.2 * * 16.4 * * 689,988 * 23,642,236 69.2 52.8 8,586,514 7,558,227 7,176,697 1,293,412 6,540,897 8.0 7.1 6.7 — — — — — 7,343,585 — — 6,950,000 5,144,488 — 1.2 6.1 — — — 22.9 21.7 16.0 — * * * 17.2 16.2 12.3 1.4 Security Ownership of Certain Beneficial Owners and Management * Less than 1 percent. (1) Percentage of total voting power represents voting power with respect to all shares of our Class A and Class B common stock, as a single class. Holders of our Class B common stock are entitled to ten votes per share, and holders of our Class A common stock are entitled to one vote per share. Each share of Class B common stock is convertible, at any time at the option of the holder, into one share of Class A common stock. (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Includes (i) 140,000 shares of Class B common stock held by Mr. Cabral and Julia Cabral as community property, (ii) 71,941 shares of Class B common stock held by the TC 2013 Annuity Trust, (iii) 234,934 shares of Class B common stock held by The Cabral Family Trust dated April 17, 2001, and (iv) 163,166 shares of Class B common stock issuable to Mr. Cabral pursuant to options exercisable within 60 days of March 31, 2017. Includes (i) 4,706 shares of Class A common stock held by Mr. Codd, (ii) 40,000 shares of Class A common stock issuable to Mr. Codd pursuant to options exercisable within 60 days of March 31, 2017, (iii) 114,250 shares of Class B common stock held by the Codd Revocable Trust dated March 6, 1998, and (iv) 134,250 shares of Class B common stock issuable to Mr. Codd pursuant to an option exercisable within 60 days of March 31, 2017. Includes (i) 4,378 shares of Class A common stock held by Mr. Defesche and (ii) 5,000 shares of Class B common stock issuable to Mr. Defesche pursuant to options exercisable within 60 days of March 31, 2017. Includes (i) 1,074 shares of Class A common stock held by Mr. Faddis, (ii) 16,000 shares of Class B common stock held by Mr. Faddis, and (iii) 125,499 shares of Class B common stock issuable to Mr. Faddis pursuant to options exercisable within 60 days of March 31, 2017. Includes (i) 10,000,000 shares of Class B common stock held by Mr. Gassner, (ii) 3,208,333 shares of Class B common stock held by Peter Gassner and Piyajit Gassner as Community Property and (iii) 1,500,000 shares of Class B common stock issuable to Mr. Gassner pursuant to options exercisable within 60 days of March 31, 2017. Includes 20,000 shares of Class A common stock issuable to Mr. Lequient pursuant to an option exercisable within 60 days of March 31, 2017. Includes (i) 6,729 shares of Class A common stock held by Mr. Mateo, (ii) 21,298 shares of Class A common stock issuable to Mr. Mateo pursuant to an option exercisable within 60 days of March 31, 2017, and (iii) 1,750 shares of Class A common stock issuable to Mr. Mateo pursuant to RSUs vesting within 60 days of March 31, 2017. Includes (i) 4,984 shares of Class A common stock held by Mr. Ritter, (ii) 436,239 shares of Class A common stock held by the Ritter-Metzler Revocable Trust dated November 6, 2000, (iii) 40,000 shares of Class A common stock issuable to Mr. Ritter pursuant to an option exercisable within 60 days of March 31, 2017, and (iv) 6,950,000 shares of Class B common stock held by Emergence Capital Partners II, L.P. (ECP II), as reflected in footnote 17 below. Mr. Ritter, a member of our Board, is a member of Emergence GP Partners, LLC (EGP) and has shared voting and dispositive power with regard to the shares directly held by ECP II. Mr. Ritter disclaims beneficial ownership of the securities except to the extent of his pecuniary interest therein. Includes (i) 5,730 shares of Class A common stock held by Mr. Sekhri and (ii) 40,000 shares of Class A common stock issuable to Mr. Sekhri pursuant to an option exercisable within 60 days of March 31, 2017. Includes (i) 12,349 shares of Class A common stock held by Ms. Zuppas, (ii) 41,666 shares of Class A common stock issuable to Ms. Zuppas pursuant to an option exercisable within 60 days of March 31, 2017, and (iii) 22,799 shares of Class B common stock issuable to Ms. Zuppas pursuant to an option exercisable within 60 days of March 31, 2017. (12) Includes (i) 485,274 shares of Class A common stock and (ii) 21,436,651 shares of Class B common stock beneficially owned by our directors and executive officers. (13) Based solely on information reported on a Schedule 13G/A filed with the SEC on February 7, 2017, T. Rowe Price Associates, Inc. has sole voting power over 2,367,130 shares of Class A common stock and sole dispositive power over 8,586,514 shares of Class A common stock. The address of T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202. (14) Based solely on information reported on a Schedule 13G/A filed with the SEC on February 10, 2017, The Vanguard Group has sole voting power over 56,783 shares of Class A common stock, shared voting power over 9,140 shares of Class A common stock, sole dispositive power over 7,496,441 shares of Class A common stock, and shared dispositive power over 61,786 shares of Class A common stock. The subsidiaries included in the report were as follows: Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania, 19355. (15) Based solely on information reported on a Schedule 13G/A filed with the SEC on February 9, 2017, Brown Capital Management, LLC has sole voting power over 4,178,621 shares of Class A common stock and sole dispositive power over 7,176,697 shares of Class A common stock. The address of Brown Capital Management, LLC is 1201 N. Calvert Street, Baltimore, Maryland 21202. Veeva Systems Inc. | 2017 Proxy Statement 17 P r o x y S t a t e m e n t Security Ownership of Certain Beneficial Owners and Management (16) Based solely on information reported on a Schedule 13G/A filed with the SEC on February 13, 2017, Ms. Sohn has sole voting and dispositive power over 7,343,585 shares of Class B common stock. (17) Based solely on information reported on a Schedule 13G/A filed with the SEC on February 6, 2017, consists of 6,950,000 shares of Class B common stock held by ECP II. Additional persons identified in the report were as follows: Emergence Equity Partners II, L.P. (EEP II) and Emergence GP Partners, LLC (EGP). EGP is the sole general partner of EEP II, which is the sole general partner of ECP II. The address of the reporting persons is 160 Bovet Road, Suite 300, San Mateo, California 94402. (18) Based solely on information reported on a Schedule 13G/A filed with the SEC on February 13, 2017, Mr. Armenante has sole voting and dispositive power over 5,144,488 shares of Class B common stock and shared voting and dispositive power over 1,293,412 shares of Class A common stock. (19) Based solely on information reported on a Schedule 13G filed with the SEC on February 3, 2017, Artisan Partners Limited Partnership has shared voting power over 5,857,637 shares of Class A common stock and shared dispositive power over 6,540,897 shares of Class A common stock. Additional person identified in the report were as follows: Artisan Investments GP LLC, Artisan Partners Holdings LP, and Artisan Partners Asset Management Inc. The address of the reporting persons is 875 East Wisconsin Avenue, Suite 800, Milwaukee, Wisconsin 53202. 18 Veeva Systems Inc. | 2017 Proxy Statement COMPENSATION DISCUSSION AND ANALYSIS This Compensation Discussion and Analysis explains our compensation philosophy, policies, and practices for fiscal 2017 for the following individuals, who we refer to in this Compensation Discussion and Analysis and the accompanying compensation tables as our “named executive officers,” or “NEOs:” Name Peter P. Gassner Timothy S. Cabral Frank Defesche Josh Faddis Frederic Lequient Alan V. Mateo E. Nitsa Zuppas Position Chief Executive Officer Chief Financial Officer Senior Vice President and General Manager, Vault QualityOne Senior Vice President, General Counsel and Corporate Secretary Senior Vice President, Global Customer Services Executive Vice President, Global Sales Chief Marketing Officer More detailed information about the compensation provided to our NEOs for fiscal 2017 is set forth in follow this section, as well as the the Summary Compensation Table and other accompanying footnotes and narratives relating to those tables. In March 2016, Mr. Defesche transitioned to his current role at Veeva and ceased to be an executive officer of Veeva. He is included as an NEO in this discussion and accompanying tables for fiscal 2017 pursuant to SEC rules because of his status as an executive officer during a portion of fiscal 2017. tables that Executive Summary Since our initial public offering (“IPO”) in October 2013, our Board and Compensation Committee have maintained a simple structure for our executive compensation programs. We have paid our NEOs cash compensation that is below the cash compensation levels paid by our peers, and we have emphasized long-term equity compensation in the form of stock options and RSUs. Our executive officers have been paid nearly identical annual base salaries since our IPO, and, other than the officer holding the position of Senior Vice President, Global Customer Services, none of our executive officers have been paid short-term cash incentive bonuses. Our Board and Compensation Committee have adhered to this executive compensation approach because they believe it is effective and is consistent with our compensation philosophy as described below. Executive Compensation Philosophy, Objectives and Components We operate in the software/technology industry and face a highly competitive environment for top-level executive talent. It is critical to accomplishing our business objectives that we are able to attract and retain talented executives whose skills and experience enable them to contribute to our long-term success. As such, the principal objectives and philosophy of our executive compensation programs are to attract, fairly compensate, appropriately incentivize, and retain our executives in a manner that aligns their long-term interests with those of our stockholders. In fiscal 2017, the primary components of our compensation programs for our NEOs were base salary and stock options and, with respect to certain NEOs, RSUs. Our Senior Vice President, Global Customer Services was also eligible to receive variable cash compensation. As discussed in more detail below, beginning in our fiscal year ending January 31, 2018 (“fiscal 2018”), none of our executive officers are eligible for variable cash compensation. Role of Compensation Committee, Management and Compensation Consultant Role of Compensation Committee. Our Board has established a Compensation Committee to discharge its responsibilities relating to our executive compensation policies and programs. Our Veeva Systems Inc. | 2017 Proxy Statement 19 P r o x y S t a t e m e n t Executive Compensation Compensation Committee evaluates the performance of our Chief Executive Officer and determines his compensation. The Compensation Committee also determines the compensation of our other executive officers in consultation with our Chief Executive Officer. In making its decisions, our Compensation Committee considers such matters as the members deem appropriate, including our financial and operating performance, the performance of our Class A common stock, factors specific to individual officers such as their individual achievements and retention concerns, our operational goals, and the comparative compensation data described below. From time to time, our Board approves equity grants to our executive officers upon the recommendation of the Compensation Committee, although our Compensation Committee is also authorized to approve such grants. Our Compensation Committee has delegated authority to our Chief Executive Officer to make certain routine equity award grants, as described below. For additional information on the Compensation Committee, see “Board Committees — Compensation Committee” elsewhere in this Proxy Statement. Role of Management. Members of management, including our Chief Executive Officer, Chief Financial Officer, and General Counsel, work with our Compensation Committee and often attend the Compensation Committee meetings. Members of management also make presentations to our Compensation Committee regarding our historical equity grants and the adequacy of the remaining equity pool to achieve retention objectives. Although our Chief Executive Officer participates in the discussion and decisions relating to the compensation of our other executive officers, he does not participate in the decision-making process with respect to his own compensation. Our Chief Executive Officer comprises the Non-Executive Equity Committee, to which our Compensation Committee has delegated authority to make routine equity award grants to newly-hired, non-officer-level employees, as well as promotional and refresh equity award grants to non-officer-level employees, all within certain share parameters established and reviewed from time to time by the Compensation Committee. Role of Compensation Consultant. Our Compensation Committee has the authority to engage its own advisors to assist it in performing its duties, and we pay the fees charged by such advisors. Compensia has been engaged to assist the Compensation Committee in its decision-making process by providing information on competitive market compensation practices, identifying a peer group against which to compare our compensation programs, providing information including market data on our outside director compensation program, and supplying such other information and recommendations as the Compensation Committee may from time to time request. Peer Group and Competitive Data In making compensation decisions for our NEOs for fiscal 2017, our Compensation Committee considered data supplied by Compensia on the compensation of executives at the peer companies listed below. Our Compensation Committee believes it is useful to review this comparative data when evaluating our executive compensation programs and making compensation decisions for our NEOs. While it uses this data as a reference point, the Compensation Committee does not feel it necessary at this stage to mirror the compensation provided by these other companies or to target any specific percentile or range of percentiles for cash, incentive, equity or total compensation for our executive officers relative to these peer companies. 20 Veeva Systems Inc. | 2017 Proxy Statement Executive Compensation the end of At fiscal 2014, Compensia recommended a peer group, which our Compensation Committee accepted. Compensia evaluates our peer group annually, and the only change to peer group since fiscal 2014 is to remove Concur Technologies due to its acquisition by SAP in December 2014. Our Compensation Committee considered the peer group’s compensation practices data for compensation decisions during and with respect to fiscal 2017. The peer group consisted of the following companies, which our Compensation Committee has determined are appropriate based upon industry, revenue, market cap, profitability, and headcount: Aspen Technology Guidewire Software Palo Alto Networks Splunk athenahealth Infoblox (1) CommVaultSystems Medidata Solutions Qlik Technologies (1) ServiceNow Cornerstone OnDemand NetSuite (1) SolarWinds (1) Tableau Software The Ultimate Software Group Workday (1) Infoblox, Netsuite, Qlik Technologies, and SolarWinds have been acquired. However, compensation information was available at the time of Compensia’s evaluation for fiscal 2017 so they were included in our peer group for fiscal 2017 determinations. Principal Elements of Compensation The compensation of our NEOs for fiscal 2017 consisted of base salary and stock options (including stock options granted in prior fiscal years that continued vesting during fiscal 2017) and, with respect to certain NEOs, RSUs and variable cash compensation. The relative proportion of these components have not been dictated by any particular formula, and the mix and amount of compensation elements has been and will continue to be within the discretion and business judgment of our Compensation Committee. With respect to our Chief Executive Officer and our Chief Financial Officer, as well as an additional executive officer and co-founder who is not an NEO for fiscal 2017, our Compensation Committee purposefully emphasized long-term incentive compensation in the form of stock options to align the officers’ long-term interests with those of our stockholders. Prior to completing our IPO in October 2013, our Compensation Committee determined to maintain through the IPO and for some time thereafter a straight-forward executive compensation program for these executives that would continue to foster an ownership mentality by emphasizing long-term equity compensation, in the form of stock options, over cash compensation. We do not currently provide these executive officers any form of compensation other than base salary, which is the same for each of these executives, and the stock options granted prior to our IPO. To date, our Compensation Committee is of the view that this compensation approach is appropriate for these most senior executive officers. Compensation for our other NEOs consists of base salary, stock options, and, with respect to certain NEOs, RSUs. Our Senior Vice President, Global Customer Services was also eligible to receive a cash bonus based on the achievement of profitability goals. Our Compensation Committee has structured these compensation programs to attract new senior executives, provide competitive levels of more liquid and less volatile compensation through base salary and RSUs, continue to foster an ownership mentality and alignment with the long-term interests of stockholders through the use of RSUs and stock options, and encourage the achievement of key operational goals. Base Salary. We provide base salaries to our NEOs to compensate them for services rendered on a day-to-day basis and to provide sufficient fixed cash compensation to allow them to fund their personal and household expenses while remaining focused on their responsibilities to Veeva. Since our IPO, Veeva has maintained a largely flat annual base salary structure for our executive officers. For fiscal year 2017, our Compensation Committee increased the base salary level for most of our executive officers from $275,000 to $300,000. This action was taken after observing that the total Veeva Systems Inc. | 2017 Proxy Statement 21 P r o x y S t a t e m e n t Executive Compensation cash compensation for most of our NEOs fell below the 50th percentile of our peer group, even after factoring in the likely cash equivalent impact of RSUs vesting during the year. The one exception to this policy was Mr. Lequient. Due to the variable cash incentive bonus associated with his role as Senior Vice President, Global Customer Services, Mr. Lequient received a base salary of $275,000. In March 2017, our Compensation Committee increased Mr. Lequient’s annual base salary from $275,000 to $300,000 and eliminated his variable cash incentive bonus in order to standardize the base salaries of all of our executive officers. Therefore, all of our current NEOs have an annual base salary of $300,000 for the remainder of fiscal 2018. Base salaries paid to our NEOs for fiscal 2017 are reflected in the Summary Compensation Table below. We expect that our Compensation Committee will continue to review base salary levels annually and may review them more frequently, for example in connection with a promotion. Annual Cash Incentive Bonuses. With one exception, we have not offered a short-term cash incentive bonus program to our NEOs since our IPO, and our Compensation Committee again determined for fiscal 2017 not to offer such a program. Rather, our Board and Compensation Committee continue to believe that our reliance on equity compensation adequately facilitates the achievement of corporate operational goals and aligns each NEO with long-term stockholder interest. Accordingly, except as described below, none of our NEOs were paid any cash incentive bonus for fiscal 2017. The one exception to our policy of not offering short-term cash incentive bonuses has been for the executive officer in the role of Senior Vice President, Global Customer Services. Our Compensation Committee believed that to be competitive and to provide appropriate incentive to maintain a profitable professional services business, it was advisable to offer annual variable compensation to the executive in this role. For fiscal 2017, Mr. Defesche, who held this position until he was succeeded by Mr. Lequient in March 2016, was paid an aggregate of $32,180 in variable cash compensation, which is equal to 1.0% of global professional services profit for the first quarter of fiscal 2017 (pro rated for his time in the role during the quarter). Global professional services profit for purposes of this variable income, which is calculated by compensation calculation is non-GAAP professional services net excluding professional services income associated with certain new product lines from GAAP professional services net income. Mr. Lequient, who replaced Mr. Defesche in the role of Senior Vice President, Global Customer Services, was paid aggregate cash variable incentive bonuses totaling $138,590 for fiscal 2017, which is equal to 1.0% of global professional services profit for the first quarter of fiscal 2017 (pro rated for his time in the role during the quarter) and 0.55% of global professional services profit for the remainder of fiscal 2017. The global professional services profit for Mr. Lequient’s variable compensation was calculated on the same basis as described above for Mr. Defesche. Information about the variable cash compensation paid to the Senior Vice President, Global Customer Services for fiscal 2017 is included in the Summary Compensation Table below. In March 2017, our Compensation Committee, in consultation with our management, determined that the executive in the Senior Vice President, Global Customer Services role could be adequately incentivized through stock options and RSUs similar to our other NEOs. Therefore, starting in fiscal 2018, the short-term cash incentive bonus for our Senior Vice President, Global Customer Services, currently Mr. Lequient, was suspended. Equity Awards. We grant stock options and RSUs from time to time to employees, including our NEOs, under our stock plans. Stock options allow our executive officers to purchase shares of our common stock at a price per share equal to the fair market value of our common stock on the date of grant. Our options typically have a five-year vesting schedule. Our Compensation Committee believes that options are inherently performance-based because the holder benefits only if our stock price 22 Veeva Systems Inc. | 2017 Proxy Statement Executive Compensation increases following the option grant date, aligning the option holder’s interest closely with those of our stockholders. In addition, our RSU awards provide shares that will be issued upon satisfaction of service period vesting conditions, typically over a four-year vesting schedule. Our Compensation Committee believes that a grant of RSU awards serves as an effective retention tool for our executive officers because unvested awards are forfeited if an executive officer voluntarily leaves us before the awards have vested and because they have a more readily ascertainable cash value and provide greater liquidity than stock options. We believe that the combination of stock options and RSUs in our long-term equity program emphasizes an ownership culture and rewards our executives for growing our business. In keeping with the compensation approach applied to our Chief Executive Officer and Chief Financial Officer described above, our Compensation Committee last granted equity awards to these officers in March 2013 in the form of stock options with longer-than-usual vesting periods (seven and six years, respectively). Information about these stock options can be found in the Outstanding Equity Awards at Fiscal 2017 Year End table below. Neither our Chief Executive Officer nor our Chief Financial Officer has been granted any additional equity awards since 2013. In fiscal 2017, our Compensation Committee granted RSUs to all our NEOs other than our Chief Executive Officer and Chief Financial Officer in order to provide competitive compensation using a more liquid and less volatile means as compared to stock option grants. In fiscal 2017 and in connection with joining Veeva, our Compensation Committee granted Mr. Lequient stock options and RSUs. Details regarding fiscal 2017 equity awards to our NEOs is set forth in the Summary Compensation Table and Fiscal 2017 Grants of Plan-Based Awards table below. Perquisites, Retirement and Other Benefits. We generally do not provide perquisites or other benefits to our NEOs other than those available to employees generally. We have established a 401(k) tax-deferred savings plan, which permits participants, including our NEOs, to make contributions by salary deduction pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”). We are responsible for administrative costs of the 401(k) plan. We may, at our discretion, make matching contributions to the 401(k) plan. However, no employer contributions have been made to date. Severance and Change in Control Benefits. Other than Mr. Faddis, none of our NEOs is currently eligible for any severance or change in control-related benefits. Mr. Faddis’ offer letter with us, negotiated when he was hired in late 2012, provides that if he is terminated without cause or resigns for good reason within 60 days prior to or 18 months following a change in control, then he will vest in all of his then-outstanding equity awards to the same extent as if he had remained employed for an additional 24 months from the date of such termination or resignation. Other Compensation-Related Policies Executive Officer Recoupment Policy We have not adopted a policy on whether we will make retroactive adjustments to any cash or equity- based incentive compensation paid to our NEOs (or others) where the payment was predicated upon the achievement of financial results that were subsequently the subject of a restatement. While we do not currently offer variable compensation based upon achievement of results, our Compensation Committee continues to evaluate the adoption of a recoupment policy pending final SEC rules. In the meantime, we intend to comply with all applicable laws and regulations requiring any adjustments to or recovery of incentive compensation. financial Veeva Systems Inc. | 2017 Proxy Statement 23 P r o x y S t a t e m e n t Executive Compensation Stock Ownership Guidelines; Trading and Hedging Policies Our Corporate Governance Principles encourage our executive officers to own Veeva stock. We do not, however, have stock ownership guidelines for our executive officers that require ownership of a specific amount of Veeva stock because our Compensation Committee believes that the stock and option holdings of our executive officers are sufficient at this time to align their interests with those of our stockholders. However, we continue to evaluate the usefulness and appropriateness of such guidelines from time to time. Our executive officers are subject to our Insider Trading Policy that prohibits, among other things, hedging transactions in Veeva stock, pledging Veeva stock, and holding Veeva stock in a margin account among other restrictions. Compensation Policies and Practices as They Relate to Risk Management Our Compensation Committee has reviewed our compensation-related risks and does not believe that our compensation policies and practices encourage undue or inappropriate risk taking or create risks that are reasonably likely to have a material adverse effect on Veeva, since our straight-forward executive compensation program continues to foster an ownership mentality by emphasizing long-term equity compensation over cash compensation. Tax and Accounting Considerations Deductibility of Executive Compensation Section 162(m) of the Code, will limit the amount that we may deduct from our federal income taxes for remuneration paid to our executive officers to one million dollars per executive officer per year, unless certain requirements are met. Section 162(m) provides an exception from this deduction limitation for certain forms of “performance-based compensation,” as well as for the gain recognized by executive officers upon the exercise of qualifying compensatory stock options. Gain from settlement of restricted stock units and bonus payments to executives may not be tax deductible. While our Compensation Committee is mindful of the benefit to us of the full deductibility of compensation and will consider deductibility when analyzing potential compensation alternatives, our Compensation Committee believes that it should not be constrained by the requirements of Section 162(m) where those requirements would impair flexibility in compensating our executive officers in a manner that can best promote our corporate objectives. Therefore, our Compensation Committee has not adopted a policy that requires that all compensation be deductible. there was no limitation in the deductibility of compensation to our executive officers under Section 162(m). In fiscal 2017, No Gross-Ups of Parachute Payments and Deferred Compensation We did not provide any executive officer, including any NEO, with a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G, 4999, or 409A of the Code during fiscal 2017, and we have not agreed and are not otherwise obligated to provide any NEOs with such a “gross-up” or other reimbursement. Accounting Treatment We account for stock compensation in accordance with the authoritative guidance set forth in ASC Topic 718, which requires companies to measure and recognize the compensation expense for all share- based awards made to employees and directors, including stock options and RSUs, over the period during which the award recipient is required to perform services in exchange for the award (for executive officers, generally the four- or five-year vesting period of the award). We estimate the fair value of stock options granted using the Black-Scholes option-valuation model “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below. 24 Veeva Systems Inc. | 2017 Proxy Statement Executive Compensation Compensation Committee Report (1) The Compensation Committee establishes the compensation programs for our named executive officers. the Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. In connection with such responsibility, the Compensation Committee has In reliance on the review and discussions referred to above, recommended to the Board of Directors that this Compensation Discussion and Analysis be incorporated by reference into the Annual Report on Form 10-K for the year ended January 31, 2017 and included in this Proxy Statement. Gordon Ritter, Chair Ronald E.F. Codd (1) The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Act, or the Exchange Act, other than our Annual Report on Form 10-K, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. P r o x y S t a t e m e n t Veeva Systems Inc. | 2017 Proxy Statement 25 Executive Compensation Summary Compensation Table The following table provides information concerning the compensation paid to our NEOs for fiscal 2017. Name and Principal Position Peter P. Gassner Chief Executive Officer Timothy S. Cabral Chief Financial Officer Frank Defesche (3) Salary ($) 297,917 275,000 275,000 297,917 275,000 275,000 Bonus ($) (1) Stock Awards ($) (2) Option Awards ($) (2) — — — — — — — — — — — — — — — — — — Total ($) 297,917 275,000 275,000 297,917 275,000 275,000 300,000 32,180 785,600 — 1,117,780 Year 2017 2016 2015 2017 2016 2015 2017 Senior Vice President and General Manager, Vault QualityOne 2016 300,000 214,626 210,960 Josh Faddis Senior Vice President, General Counsel and Corporate Secretary Frederic Lequient (4) Senior Vice President, Global Customer Services Alan V. Mateo Executive Vice President, Global Sales E. Nitsa Zuppas Chief Marketing Officer 2017 2016 2015 2017 2017 2016 2017 2016 — — — — 725,586 494,317 480,600 272,917 297,917 275,000 272,917 — 196,400 — 205,600 — — 275,000 138,590 874,440 1,178,040 2,466,070 297,917 221,058 297,917 275,000 — 392,800 — 690,717 — 944,650 6,266,000 7,431,708 — 196,400 — 848,560 — 494,317 — 1,123,560 (1) Messrs. Defesche and Lequient received variable cash compensation as described in “Principal Elements of Compensation—Cash Incentive Bonuses.” (2) The amounts reported in these columns represent the aggregate grant date fair value of RSUs and options to purchase shares of our Class A common stock, as applicable, computed in accordance with FASB ASC Topic No. 718. See note 10 of the notes to our consolidated financial statements included in our annual report on Form 10-K filed on March 30, 2017 for a discussion of the assumptions made by us in determining the grant date fair value of our equity awards. These amounts do not purport to reflect the value that will be recognized by the NEOs upon sale of the underlying securities. (3) Effective March 23, 2016, Mr. Defesche ceased to be an executive officer in the role of Senior Vice President, Global Customer Services. He is included in this table pursuant to SEC rules because he was an executive officer during a portion of fiscal 2017. (4) Mr. Lequient joined Veeva in February 2016 and became an executive officer effective March 23, 2016. 26 Veeva Systems Inc. | 2017 Proxy Statement Executive Compensation Fiscal 2017 Grants of Plan-Based Awards The following table sets forth certain information regarding each plan-based award granted to our NEOs during fiscal 2017. Name Peter P. Gassner Timothy S. Cabral Frank Defesche Josh Faddis Frederic Lequient Alan V. Mateo E. Nitsa Zuppas All Other Stock Awards: Number of Shares of Stock or Units (#) All Other Option Awards: Number of Securities Underlying Options (#) Exercise or Base Price of Option Awards ($/share) Grant Date Fair Value of Stock and Option Awards ($) (1) — — 32,000(2) 8,000(2) 36,000(2) — 16,000(2) 8,000(2) — — — — — — — — — — — — 785,600 196,400 874,440 100,000(3) 25.70 1,178,040 — — — — 392,800 196,400 Grant Date — — 3/23/2016 3/23/2016 2/29/2016 3/3/2016 3/23/2016 3/23/2016 (1) The amounts reported represent the aggregate grant date fair value computed in accordance with FASB ASC Topic No. 718. See note 10 of the notes to our consolidated financial statements included in our annual report on Form 10-K filed on March 30, 2017 for a discussion of the assumptions made by us in determining the grant date fair value of our equity awards. These amounts do not purport to reflect the value that will be recognized by the NEOs upon sale of the underlying securities. (2) RSUs vest quarterly over four years, with 1/16th vesting per quarter, following the vesting commencement date of March 1, 2016. (3) Mr. Lequient’s stock options vest over five years, with 20% of the shares subject to the award vested on March 1, 2017, and 1/20th of the total shares vesting equally on a quarterly basis thereafter. P r o x y S t a t e m e n t Veeva Systems Inc. | 2017 Proxy Statement 27 Executive Compensation Outstanding Equity Awards at Fiscal 2017 Year-End The following table sets forth information regarding all unexercised options and unvested RSUs held by each of our NEOs as of January 31, 2017. The vesting schedule applicable to each outstanding award is described in the footnotes to the table below. Option Awards Number of Securities Underlying Unexercised Options Vested (#) Number of Securities Underlying Unexercised Options Unvested (#) Option Exercise Price ($) Option Expiration Date Stock Awards Number of Shares or Units of Stock that Have Not Vested (#) Market Value of Shares of Stock that Have Not Vested ($) (1) 1,277,777 45,000 86,777 — — — 81,500 — — — — — 66,401 — — 25,466 55,000 — — — 2,055,556(2) — — — — 555,556(2) 122,500(2) — — 50,000(5) 100,000(2) 3.92 0.13 3.92 3.92 — — 1.54 3.92 — — — 25.70 26.99 — — — — 46,666(9) 3.92 45,000(10) 32.26 — — — 100,000(6) 324,999(7) — — — 3/9/2023 2/23/2020 3/9/2023 3/9/2023 — — 9/27/2022 3/9/2023 — — — 3/2/2023 4/30/2025 — — 3/25/2023 3/14/2024 — — — — — 4,500(3) 6,500(4) — — — — 4,500(3) — — — — 190,485 26,000(4) 1,100,580 — — 190,485 275,145 29,250(4) 1,238,153 — — 963,008 550,290 — — 190,485 571,455 275,145 — — 22,750(8) 13,000(4) — — 4,500(3) 13,500(3) 6,500(4) Name Peter P. Gassner Timothy S. Cabral Frank Defesche Josh Faddis Frederic Lequient Alan V. Mateo E. Nitsa Zuppas Grant Date 3/10/2013 2/24/2010 3/10/2013 3/10/2013 3/23/2015 3/23/2016 9/28/2012 3/10/2013 3/25/2015 3/23/2016 2/29/2016 3/3/2016 5/1/2015 5/1/2015 3/23/2016 3/26/2013 3/15/2014 3/25/2015 4/27/2015 3/23/2016 (1) Computed in accordance with SEC rules as the number of unvested RSUs multiplied by the closing market price of our Class A common stock at the end of fiscal 2017, which was $42.33 on January 31, 2017 (the last trading day of fiscal 2017). (2) The stock options vest monthly over a five-year period following the vesting commencement date. The vesting commencement dates for the option grants are February 1 of 2014, 2015, 2016, and 2017 for Messrs. Cabral, Gassner, Defesche, and Faddis, respectively. (3) RSUs vest quarterly over four years, with 1/16th vesting per quarter, following the vesting commencement date of March 1, 2015. (4) RSUs vest quarterly over four years, with 1/16th vesting per quarter, following the vesting commencement date of March 1, 2016. (5) Mr. Faddis’ stock options vest over five years, with 20% of the shares subject to the award vested on September 17, 2013, and 1/60th of the total shares vesting equally on a monthly basis thereafter. (6) Mr. Lequient’s stock options vest over five years, with 20% of the shares subject to the award vested on March 1, 2017, and 1/20th of the total shares vesting equally on a quarterly basis thereafter. (7) Mr. Mateo’s stock options vest over five years, with 20% of the shares subject to the award vested on April 13, 2016, and 1/60th of the total shares vesting equally on a monthly basis thereafter. (8) Mr. Mateo’s RSUs vest quarterly over five years, with 1/20th vesting per quarter, following the vesting commencement date of April 13, 2015. (9) Ms. Zuppas’ stock options vest over five years, with 20% of the shares subject to the award vested on March 18, 2014, and 1/60th of the total shares vesting equally on a monthly basis thereafter. (10) Ms. Zuppas’ stock options vest monthly over a five-year period following the vesting commencement date of April 1, 2014. 28 Veeva Systems Inc. | 2017 Proxy Statement Executive Compensation Fiscal 2017 Option Exercises and Stock Vested The following table shows the number of shares NEOs acquired upon exercise of options and vesting of RSUs during fiscal 2017. Name Peter P. Gassner Timothy S. Cabral Frank Defesche Josh Faddis Frederic Lequient Alan V. Mateo E. Nitsa Zuppas Option Awards Stock Awards Number of Shares Acquired on Exercise (#) Value Realized on Exercise ($) (1) Number of Shares Acquired on Vesting (#) Value Realized on Vesting ($) (2) — 260,000 97,500 87,500 — 108,600 22,868 — 8,524,775 3,408,701 3,801,030 — 1,760,029 700,063 — — 8,000 3,500 6,750 10,000 9,500 — — 306,890 130,280 264,915 371,735 344,510 (1) (2) The value realized is based on the fair market value of our Class A common stock on the date of exercise minus the exercise price. The value realized on vesting is calculated by multiplying the number of RSUs vesting by the fair market value of a share of our Class A common stock on the vesting date. Fiscal 2017 Potential Payments Upon Termination or Change in Control We have entered into offer letters with each of Messrs. Gassner, Cabral, Defesche, Faddis, Lequient, and Mateo and Ms. Zuppas, none of which provide a right to receive severance in the event of a termination of their employment. Other than Mr. Faddis, none of our NEOs is currently eligible for any change in control-related benefits. Mr. Faddis’ offer letter provides that if he is terminated without cause or resigns for good reason within 60 days prior to or 18 months following a change in control, then he will vest in all of his then-outstanding equity awards to the same extent as if he had remained employed for an additional 24 months from the date of such termination or resignation. Assuming Mr. Faddis’ employment was terminated as of January 31, 2017 and such termination was within 60 days prior to or 18 months following our change in control, Mr. Faddis would have been eligible to receive option and RSU acceleration pursuant to his offer letter in the amount of $3,850,511. This value was calculated by multiplying the number of unvested option and RSU shares eligible for acceleration by $42.33, the closing price of our Class A common stock on January 31, 2017, the last trading day of fiscal 2017, or, in the case of his options, by the difference between that price and any applicable exercise price. P r o x y S t a t e m e n t Veeva Systems Inc. | 2017 Proxy Statement 29 EQUITY COMPENSATION PLAN INFORMATION The following table provides information as of January 31, 2017 with respect to the shares of our common stock that may be issued under our existing equity compensation plans. Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, RSUs, Warrants and Rights Equity compensation plans approved by stockholders 19,644,993 Equity compensation plans not approved by stockholders Total — 19,644,993 Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (1) 7.48 — Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (2) 210,213,508(3) — 210,213,508 (1) (2) The weighted average exercise price does not take into account outstanding restricted stock or RSUs. Included in this amount are 4,897,856 shares available for future issuance under the 2013 Employee Stock Purchase Plan (ESPP). (3) On the first business day of each fiscal year during the term of our 2013 Equity Incentive Plan (2013 Plan), commencing on February 1, 2014, the number of authorized shares of our Class A common stock under our 2013 Plan automatically increases by a number of shares of our Class A common stock equal to the least of (i) 5% of the total number of shares of all classes of our common stock issued and outstanding on the last business day of the prior fiscal year, (ii) 13,750,000 shares of our Class A common stock or (iii) a number of shares of our Class A common stock determined by our Board. On the first business day of each fiscal year during the term of our ESPP, commencing on February 1, 2014, the number of authorized shares of our Class A common stock under our ESPP automatically increases by a number of shares of our Class A common stock equal to the least of (i) 1% of the total number of shares of all classes of our common stock issued and outstanding on the last business day of the prior fiscal year, (ii) 2,200,000 shares of our Class A common stock or (iii) a number of shares of our Class A common stock determined by our Board. 30 Veeva Systems Inc. | 2017 Proxy Statement PROPOSAL TWO: APPROVAL OF THE MATERIAL TERMS OF OUR 2013 EQUITY INCENTIVE PLAN FOR PURPOSES OF SECTION 162(m) OF THE INTERNAL REVENUE CODE Our Board unanimously recommends that you vote FOR the approval of the material terms of our 2013 Equity Incentive Plan for purposes of Section 162(m) of the Internal Revenue Code. We are asking stockholders to approve the material terms of our 2013 Equity Incentive Plan (the “Plan”), including the performance goals specified thereunder, for purposes of Section 162(m) of the Code to enable us to continue to grant equity awards that qualify as performance-based compensation and preserve our ability to deduct compensation amounts with respect to certain awards granted under the Plan. As a newly public company, we were exempt from the deduction limitation imposed by Section 162(m) until this meeting of our stockholders. The Plan is intended to provide a single, comprehensive program under which we may structure both equity- and cash-based awards in a manner designed to qualify as “performance-based compensation” under, and thereby avoid the limitations on the deductibility of such compensation imposed by, Section 162(m). We are not proposing any other amendments or modifications to the Plan. Information About the Proposal Under the federal tax laws, a publicly-held company such as Veeva will not be allowed a federal income tax deduction for compensation paid to certain “covered employees” to the extent that the compensation exceeds $1 million in any year. For this purpose, “covered employees” includes a company’s chief executive officer and its three other most highly compensated executive officers (other than the chief financial officer). An exception to this rule is available for compensation that qualifies as imposed on performance-based “performance-based compensation.” Among the conditions compensation is the requirement that such compensation be paid under a plan that has been approved by the company’s stockholders and as to which disclosure of material terms of the performance goals has been made. For purposes of Section 162(m), the material terms required to be disclosed include the employees eligible to receive the compensation, a description of the business criteria on which the performance goal is based, and the maximum amount of compensation that can be paid during a specified period to an employee under the performance goal. With respect to the various awards that may be granted under the Plan, each of these aspects is discussed below. Stockholder approval of the Plan will be deemed to constitute approval of each of these aspects of the Plan for purposes of the stockholder approval requirements of Section 162(m). Our Board believes that approval of the Plan is in our stockholders’ best interests because it links a portion of executive compensation to Company performance, while providing an opportunity to reduce our income tax expense. If our stockholders approve this Proposal Two, then to the extent we grant future cash- and equity-based awards under the Plan that are designed to qualify as performance- based compensation for Section 162(m) purposes to covered employees, the compensation paid under these awards will not be subject to the corporate tax deduction limits of Section 162(m). If our stockholders do not approve this Proposal Two, then we will not be able to offer or pay to our executive officers equity- and cash-based awards that qualify as performance-based compensation for purposes of Section 162(m) under the Plan. Irrespective of whether or not our stockholders approve this Proposal Two, we reserve the right to grant and pay cash and equity awards that are not intended to qualify as performance-based compensation under Section 162(m) to our officers and other key employees outside the scope of the Plan should our Compensation Committee determine in its discretion that it is appropriate to do so. Any such other awards will not be a substitute for payments under the Plan if our stockholders do not approve this Proposal Two, or, having received stockholder approval, if the performance goals applicable to a Plan award are not achieved. If this Proposal Two is approved by our stockholders at our Annual Meeting, we will next need to seek stockholder approval of the material terms of the Plan no later than 2022 in order to enable us to Veeva Systems Inc. | 2017 Proxy Statement 31 P r o x y S t a t e m e n t Proposal Two continue to grant restricted stock, RSU, performance cash and other similar types of awards (excluding stock options and stock appreciation rights) qualifying as performance-based compensation under Section 162(m). Plan Summary The following is a summary of the principal terms and provisions of the Plan, which is included as Appendix A to this Proxy Statement. The following summary does not purport to be a complete description of all provisions of the Plan. To the extent there is a conflict between this summary and the actual terms of the Plan, the actual terms of the Plan will govern. Any stockholder who wishes to obtain a copy of the actual plan may do so upon written request to our principal executive offices, Attention: Corporate Secretary or may access the document from the SEC’s website at www.sec.gov. Background, Purposes, and Eligibility Under the Plan Our Board approved the Plan in August 2013, and our stockholders approved it in September 2013. The Plan is intended to help us secure and retain the services of eligible award recipients, provide incentives for them to exert maximum effort for our success, and provide a means by which they may benefit from increases in the value of our common stock. The Plan provides for the grant of incentive stock options (ISOs), within the meaning of Section 422 of the Code, to our employees, and for the grant of nonstatutory stock options (NSOs), stock appreciation rights, restricted stock awards, RSUs, performance-based stock awards, and other forms of equity compensation to our employees, directors, and consultants (collectively with ISOs and NSOs, Stock Awards). Additionally, the Plan provides for the grant of performance cash awards to our employees, directors, and consultants (together with Stock Awards, “Awards”). As of March 31, 2017, 1,754 employees, six directors, and no consultants are eligible to participate in the Plan. Authorized Shares, Annual Award Limits, and Share Usage Matters The maximum number of shares of our Class A common stock that may be issued under the Plan as of March 31, 2017 was 45,686,328 shares, which includes 25,675,014 shares added to the Plan share reserve pursuant to the annual share refresh provision from 2014 through 2017. The number of shares of our Class A common stock reserved for issuance under the Plan automatically increases on the first business day of each fiscal year during the term of the plan by a number equal to the least of 5% of the shares of all classes of common stock outstanding on the last business day of the prior fiscal year, 13,750,000 shares, or a number of shares determined by our Board. For fiscal 2018, our Board approved an increase to the Plan by a number equal to 4.5% of the shares of all classes of common stock outstanding on January 31, 2017, the last business day of fiscal 2017, which was equal to 6,204,897 shares. Shares subject to previously-granted Stock Awards that are forfeited or expire for any reason without the shares being issued to the participant, that are reacquired by the Company for any reason, or that are withheld by the Company to satisfy the participant’s exercise price or tax withholding obligations shall become available for re-issuance under new Stock Awards. In addition, Stock Awards that are settled in cash rather than stock shall not reduce the number of shares available for grant under the Plan. The Plan places limits on the maximum size of Awards that may be granted to any Plan participant in any fiscal year. A maximum of 6,800,000 shares of Class A common stock subject to stock options or stock appreciation rights, and a maximum of 3,500,000 shares of Class A common stock subject to restricted stock and stock unit awards, may be granted to any one participant during any fiscal year. A maximum of $2,000,000 may be granted as a performance cash award to any one participant during any fiscal year. The maximum number of shares that may be granted under the plan as ISOs is 45,686,328. 32 Veeva Systems Inc. | 2017 Proxy Statement Proposal Two As of March 31, 2017, there were 15,330,299 shares subject to outstanding stock options with a weighted average exercise price of $7.56 per share, 3,333,860 outstanding RSUs, and 2,069,060 shares of our Class A common stock that have been issued upon the exercise of options and vesting of RSUs granted under the Plan. Of the Stock Awards outstanding on March 31, 2017, an aggregate of 4,870,262 and 276,250 stock options and 143,750 and 6,921 RSUs are held by our NEOs and our non-employee Board members, respectively. During fiscal 2017, an aggregate of 100,000 RSUs were granted to our NEOs and 27,686 RSUs to our non-employee Board members. See the Summary Compensation, Grant of Plan-Based Awards and Outstanding Equity at Year-End tables, as well as the Director Compensation section, each located elsewhere in this Proxy Statement, for additional information regarding equity-based awards granted during fiscal 2017. During fiscal 2017, we granted awards under the Plan covering a total of 4,088,058 shares, which equals approximately 3.0% of our common stock outstanding at the end of fiscal 2017. On March 31, 2017, the closing price on the NYSE of our Class A common stock was $51.28 per share. Plan Administration The Plan is administered by our Board who may delegate some or all of its administrative authority and responsibilities to a Board committee or committees. Currently, the Plan is administered in most respects by our Compensation Committee. Awards intended to qualify as performance-based compensation under Section 162(m) must be approved and administered by a committee consists of two or more “outside directors” within the meaning of Section 162(m) of the Code. Our Compensation Committee is currently comprised of two outside directors. P r o x y S t a t e m e n t Veeva Systems Inc. | 2017 Proxy Statement 33 Proposal Two Performance-Based Awards Awards may be made subject to the attainment of performance goals relating to one or more performance criteria, as determined by our Compensation Committee. The applicable performance criteria available under the Plan, which criteria are also the subject of this Proposal Two, that may be used by our Compensation Committee to establish performance goals are as follows (the “Performance Criteria”): Annual contract subscription fee value (net of associated third party royalties/payments or gross) Calculated bookings (i.e., revenue plus change in short term deferred revenue) Bookings (annual or total contract value) Cash flow and free cash flow Cash margin Collections Cash position Committed annual recurring revenue (CARR) Consulting utilization rates Costs of goods sold Customer renewals (measured in terms of revenue or customer count) Customer retention rates from an acquired company, business unit or division Customer satisfaction or customer referenceability DSO Gross margin Internal rate of return Market share Net income after tax Deferred revenue Earnings per share Headcount Margin contribution Net income Net income before tax Net income before interest and tax Net income before interest, tax, depreciation and amortization Operating cash flow Operating income Operating expenses Operating margin Personnel retention or personnel hiring measures Product defect measures Product release timelines Product or research and development related measures Return on assets Return on equity Return on sales Revenue backlog Revenue per employee Stock price Return on capital Return on investment and cash flow return on investment Revenue Revenue conversion from an acquired company, business unit or division Sales results Stock performance Technical system performance measures (e.g., system availability) Technical support incident measures Total stockholder return Working capital To the extent that an Award is not intended to comply with Section 162(m), then our Compensation Committee may select other measures of performance. Performance Goals The attainment of performance goals may be measured solely on a corporate, subsidiary, or business unit basis, or a combination thereof. Performance criteria may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other in a external measure of manner consistent with the Section 162(m) rules, adjust the results under any Performance Criterion to exclude the following events: (1) asset write-downs; (2) litigation, claims, judgments, or settlements; the selected performance criteria. Our Compensation Committee may, 34 Veeva Systems Inc. | 2017 Proxy Statement Proposal Two (3) the effect of changes in tax laws, accounting principles, or other applicable laws or rules affecting reported results; (4) accruals for reorganization and restructuring programs; (5) extraordinary, unusual or non-recurring items; (6) exchange rate effects for non-U.S. dollar denominated net sales and operating earnings; or (7) statutory adjustments to corporate tax rates. In addition, our Compensation Committee has the right to reduce or eliminate the amount payable under any Award. Material Terms of Stock Awards The terms and conditions of the Plan govern the Stock Awards we may grant under the Plan. The following generally describes the material terms and conditions that apply to such Stock Awards. Stock Awards generally may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the applicable laws of descent or distribution. Stock Awards may be exercised, during the lifetime of the participant, only by the participant. Other terms and conditions of each Stock Award are set forth in the individual award agreements. Options and Stock Appreciation Rights (SARs). ISOs may be granted only to employees and NSOs and SARs may be granted to employees, directors, and consultants. No option or SAR will be exercisable after the expiration of ten years from the date of its grant or such shorter period as specified in the award agreement. The exercise or strike price of each option or SAR will be not less than 100% of the fair market value of the common stock subject to the Stock Award on the grant date thereof, subject to certain exceptions. The maximum number of shares subject to stock options and SARs that may be granted to a participant in a single fiscal year is described above under “Authorized Shares, Annual Award Limits, and Share Usage Matters.” Our Compensation Committee determines the methods of payment of the exercise price of an option, which may include cash, shares of common stock that the optionee already owns, a net exercise procedure, or any other form or method consistent with applicable laws, regulations, and rules. Subject to the provisions of the Plan, our Compensation Committee determines the other terms and conditions that apply to options and SARs, which may include vesting conditions. After the termination of a participant’s service, the participant may exercise the vested portion of his or her option for the period of time stated in his or her award agreement. Generally, if termination is due to death or disability, the option will remain exercisable for twelve months. In all other cases, the option will generally remain exercisable for three months following the termination of service. However, in no event may an option be exercised later than the expiration of its term. To date, we have not granted any SARs under the 2013 Plan. Restricted Stock and RSUs. Restricted stock may be issued in consideration for cash, past service, or any other form of legal consideration (including future services) that are acceptable to our Compensation Committee. Shares of common stock awarded under a restricted stock award may be subject to forfeiture conditions in accordance with a vesting schedule or performance objectives (including Performance Criteria) determined by the Compensation Committee. Other terms and conditions, such as transferability restrictions, treatment of dividends, and treatment upon termination of the participant’s service with the Company, may also apply. RSUs are rights to be issued shares of stock in the future upon satisfaction of applicable specified conditions, including vesting or performance conditions. Typically, the participant pays no consideration upon issuance of the shares on settlement of the RSU award. Our Compensation Committee may impose such restrictions on or conditions to the vesting of an RSU award that it deems appropriate or such other restrictions or conditions that may delay the delivery of shares of common stock (or their cash equivalent) subject to an RSU award to a time after the vesting of such RSU award. Our Veeva Systems Inc. | 2017 Proxy Statement 35 P r o x y S t a t e m e n t Proposal Two Compensation Committee determines the other terms applicable to an RSU award, such as settlement terms, treatment of dividends, and treatment upon termination of the participant’s service with the Company. The maximum number of shares subject to restricted stock and RSU awards that may be granted to a participant in a single fiscal year is described above under “Authorized Shares, Annual Award Limits and Share Usage Matters.” Since our IPO, we have not granted any restricted stock. Performance Cash Awards. The Plan permits the granting of performance cash awards, which may be intended to qualify as performance-based compensation under Section 162(m). Such awards, should we choose to grant them in the future, would provide the participant the right to earn a cash incentive bonus upon achievement of specified performance objectives, including the Performance Criteria. The maximum performance cash award that may be granted to a participant in a single fiscal year is described above under “Authorized Shares, Annual Award Limits and Share Usage Matters.” To date, we have not granted any performance cash awards under the Plan. Other Awards. Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, common stock, including the appreciation in value thereof, may be granted under the Plan. Subject to the provisions of the Plan, our Compensation Committee will have sole and complete authority to determine the persons to whom and the time or times at which such other Stock Awards will be granted, the number of shares of our Class A common stock (or the cash equivalent thereof) to be granted pursuant thereto, and all other terms and conditions of such Stock Awards. Changes in Capitalization. In the event that there is a specified type of change in our capital structure without our receipt of consideration, such as a stock split or reverse stock split, proportionate adjustments will automatically be made to the kind and maximum number of shares reserved for issuance under the Plan, the kind and maximum number of shares by which the share reserve may increase automatically each year, the kind and maximum number of shares subject to Stock Awards that can be granted to a participant in a calendar year (as established under the Plan pursuant to Section 162(m)), the kind and maximum number of shares that may be issued upon the exercise of ISOs, the kind and number of shares covered by each outstanding option, SAR, and stock unit and the exercise price applicable to each outstanding option and stock appreciation right, and the repurchase price, if any, applicable to outstanding restricted shares. If there is a declaration of an extraordinary dividend payable in a form other than our Class A common stock in an amount that has a material effect on the price of our Class A common stock, a recapitalization, a spin-off, or a similar occurrence, our Compensation Committee may make such adjustments in outstanding Stock Awards as it deems appropriate, in its sole discretion. If we are a party to a merger, consolidation, or a change in control Corporate Transactions. transaction, all outstanding Stock Awards will be governed by the terms of the definitive transaction agreement. Such treatment may include any of the following actions with respect to each outstanding Stock Award: Š the continuation, assumption, or substitution of a Stock Award by a surviving entity or its parent; Š the cancellation of consideration; the unvested portion of a Stock Award without payment of any Š the cancellation of the vested portion of a Stock Award (and any portion that becomes vested as of the effective time of the transaction) in exchange for a payment equal to the 36 Veeva Systems Inc. | 2017 Proxy Statement Proposal Two excess, if any, of the value that the holder of each share of Class A common stock receives in the transaction over (if applicable) and the exercise price otherwise payable in connection with the Stock Award; or Š the assignment of any reacquisition or repurchase rights held by us in respect of an award of restricted shares to the surviving entity or its parent (with proportionate adjustments made to the price per share to be paid upon exercise of such rights). If we are subject to a merger, consolidation, or change in control transaction before a participant’s service terminates and an outstanding award is not continued, assumed, or substituted, then a participant who is otherwise entitled to vesting acceleration that could be triggered as of a date following the effective time of the transaction as a result of a qualifying termination of service shall be deemed to be vested, as if all triggering events had occurred as of the effective time of the transaction. For this purpose, a change in control transaction includes: Š any person acquiring beneficial ownership of more than 50% of our total voting power; Š the sale or disposition of all or substantially all of our assets; Š any merger or consolidation of us where our voting securities represent 50% or less of the total voting power of the surviving entity or its parent; or Š individuals who are members of our Board cease for any reason to constitute at least a majority of the members of our Board over a period of 12 months. Our Compensation Committee is not obligated to treat all Stock Awards, or portions thereof, in the same manner if there is a change in control. Amendments or Termination. Our Board may, at any time and for any reason, amend or terminate the Plan. If our Board amends the Plan, it does not need stockholder approval of the amendment unless applicable law so requires. If not terminated earlier or extended with the approval of our stockholders, then the Plan will terminate automatically on August 20, 2023 (the tenth anniversary of its adoption by our Board). Summary of Material U.S. Federal Income Tax Considerations The following summary is intended only as a general guide to the material U.S. federal income tax consequences of participation in the Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The to be complete and does not discuss the tax consequences upon a summary does not purport participant’s death or the provisions of the income tax laws of any municipality, state, or foreign country in which the participant may reside. As a result, tax consequences for any particular participant may vary. Stock Options A Plan participant who is granted an ISO does not recognize taxable income at the time the option is granted or upon its exercise, although the exercise is an adjustment item for alternative minimum tax purposes and may subject the participant to the alternative minimum tax. Upon a disposition of the shares more than two years after grant of the option and one year after exercise of the option, any gain or loss is treated as long-term capital gain or loss. If these holding periods are not satisfied, the participant recognizes ordinary income at the time of disposition equal to the difference between the exercise price and the lower of (i) the fair market value of the shares at the date of the option exercise or (ii) the sale price of the shares. Any gain or loss recognized on such a premature disposition of the shares in excess of the amount treated as ordinary income is treated as long-term or short-term capital gain or loss, depending on the holding period. Veeva Systems Inc. | 2017 Proxy Statement 37 P r o x y S t a t e m e n t Proposal Two A participant does not recognize any taxable income at the time he or she is granted an NSO. Upon exercise, the participant recognizes taxable income generally measured by the excess of the then fair market value of the shares over the exercise price. Any taxable income recognized in connection with an option exercise by an employee is subject to tax withholding. Upon a disposition of such shares by the participant, any difference between the sale price and the participant’s exercise price, to the extent not recognized as taxable income as provided above, is treated as long-term or short-term capital gain or loss, depending on the holding period. Unless limited by Section 162(m), we are generally entitled to a deduction in the same amount as the ordinary income recognized by the participant with respect to a stock option. SARs No taxable income is reportable when a SAR is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received and the fair market value of any shares received (and a corresponding tax withholding obligation will apply). Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss. Restricted Stock, RSUs, Performance Units, and Performance Shares A participant generally will not have taxable income at the time an award of restricted stock or RSUs are granted. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the award becomes either (i) freely transferable or (ii) no longer subject to substantial risk of forfeiture (e.g., vested). However, a holder of a restricted stock award may elect to recognize income at the time he or she receives the award in an amount equal to the fair market value of the shares underlying the award less any amount paid for the shares on the date the award is granted (and a corresponding tax withholding obligation will apply). Deductibility of Awards We generally will be entitled to a tax deduction in connection with an Award under the Plan in an the time the participant amount equal recognizes such income (e.g., the exercise of an NSO). In fiscal 2017, there was no limitation in the deductibility of compensation to our executive officers under Section 162(m). to the ordinary income realized by a participant and at We seek stockholder approval of this Proposal Two in order to qualify the Plan as one under which our Compensation Committee may grant awards qualifying as “performance-based compensation” under the Section 162(m) rules. If stockholders approve the Plan at the Annual Meeting, we will have greater flexibility to choose to seek a full income tax deduction for certain Awards granted under the Plan. Section 409A Section 409A of the Code contains requirements applicable to non-qualified deferred compensation arrangements. These include requirements with respect to an individual’s election to defer compensation and the individual’s selection of the timing and form of distribution of the deferred compensation. Section 409A also generally provides that distributions must be made on or following the occurrence of certain events (e.g., the individual’s separation from service, a predetermined date or the individual’s death). Section 409A imposes restrictions on an individual’s ability to change his or her distribution timing or form after the compensation has been deferred. For certain individuals who are officers, Section 409A requires that such individual’s distribution commence no earlier than six months after such officer’s separation from service. 38 Veeva Systems Inc. | 2017 Proxy Statement Proposal Two feature will be subject Awards granted under the Plan with a deferral to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that Award may recognize ordinary income on the amounts deferred under the Award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an Award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. Unless our Compensation Committee decides otherwise, Awards will be administered so that the requirements of Section 409A and not be subject to the tax and interest described above. they will be exempt from or meet Plan Benefits The amount, if any, of equity-based compensation to be awarded to employees (including NEOs), directors, and consultants is determined from time to time by our Compensation Committee in its discretion. The value of such awards derives from the value of our common stock. As such, the amount of Awards to be granted under the Plan is not presently determinable. P r o x y S t a t e m e n t Veeva Systems Inc. | 2017 Proxy Statement 39 PROPOSAL THREE: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Our Board unanimously recommends a vote “FOR” ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2018. Our Audit Committee has appointed the firm of KPMG LLP, independent registered public accountants, to audit our financial statements for the fiscal year ending January 31, 2018. KPMG LLP has audited our financial statements since the fiscal year ended January 31, 2010. Notwithstanding its selection and even if our stockholders ratify the selection, our Audit Committee, in its discretion, may appoint another independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interests of Veeva and its stockholders. At the Annual Meeting, the stockholders are being asked to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2018. Our Audit Committee is submitting the selection of KPMG LLP to our stockholders because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. Representatives of KPMG LLP will be present at the Annual Meeting and they will have an opportunity to make statements and will be available to respond to appropriate questions from stockholders. If this proposal does not receive the affirmative approval of a majority of the votes cast on the proposal, the Audit Committee would reconsider the appointment. Principal Accounting Fees and Services The following table sets forth all fees paid or accrued by us for professional audit services and other services rendered by KPMG LLP during the years ended January 31, 2017 and 2016: Audit Fees (1) Audit-Related Fees (2) Tax Fees (3) All Other Fees Total Fees 2017 2016 $1,633,000 $1,765,060 — — — 10,000 1,500 — $1,633,000 $1,776,560 (1) Audit fees: This category represents fees for professional services provided in connection with the audit of our financial statements, review of our quarterly financial statements, attest services related to Section 404 of the Sarbanes-Oxley Act of 2002, and audit services provided in connection with other regulatory or statutory filings for which we have engaged KPMG LLP. (2) Audit-related fees: This category represents fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” (3) Tax fees: This category consists of tax compliance, tax planning, and tax advice, including foreign tax return preparation and requests for rulings or technical advice from tax authorities. Pre-Approval of Audit and Non-Audit Services Consistent with requirements of the SEC and the Public Company Accounting Oversight Board the appointment, independence, our Audit Committee is responsible for regarding auditor compensation and oversight of the work of our independent registered public accounting firm. In recognition of this responsibility, our Audit Committee (or the chair if such approval is needed on a time urgent basis) generally pre-approves of all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. 40 Veeva Systems Inc. | 2017 Proxy Statement AUDIT COMMITTEE REPORT The information contained in the following report of Veeva’s Audit Committee is not considered to be “soliciting material,” “filed” or incorporated by reference in any past or future filing by us under the Securities Exchange Act of 1934 or the Securities Act of 1933 unless and only to the extent that Veeva specifically incorporates it by reference. Role of the Audit Committee The Audit Committee operates under a written charter adopted by our Board of Directors. Our Audit Committee oversees our accounting practices, system of internal controls, audit processes and financial reporting processes. Among other things, our Audit Committee is responsible for reviewing our disclosure controls and processes and the adequacy and effectiveness of our internal controls. It also discusses the scope and results of the audit with our independent registered public accounting firm, reviews with our management and our independent registered public accounting firm, our interim and year-end operating results and, as appropriate, initiates inquiries into aspects of our financial affairs. Our Audit Committee is responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. In addition, our Audit Committee has sole and direct responsibility for the appointment, retention, compensation and oversight of the work of our independent registered public accounting firm, including approving services and fee arrangements. Significant related party transactions will be approved by our Audit Committee before we enter into them, as required by applicable rules and listing standards. A more detailed description of the functions and responsibilities of the Audit Committee can be found in Veeva’s Audit Committee charter, published on the Investors portion of Veeva’s website at http://ir.veeva.com/. is responsible for our The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. Management reporting process, selection of accounting principles, determination of estimates and compliance with laws, regulations and ethical business conduct. Our independent registered public accounting firm is responsible for expressing an opinion as to the conformity of our consolidated financial statements with generally accepted accounting principles. internal controls, financial Review of Audited Financial Statements for the Fiscal Year Ended January 31, 2017 The Audit Committee has reviewed and discussed with Veeva’s management and KPMG LLP the audited consolidated financial statements of Veeva for the fiscal year ended January 31, 2017. The Audit Committee has also discussed with KPMG LLP the matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board regarding communications between our independent registered public accounting firm and Audit Committee. The Audit Committee has received and reviewed the written disclosures and the letter from KPMG LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with KPMG LLP its independence from us. Based on the activities, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in Veeva’s annual report on Form 10-K for the fiscal year ended January 31, 2017 for filing with the Securities and Exchange Commission. reviews, and discussions referred to above, Submitted by the Audit Committee of the Board of Directors: Ronald E. F. Codd, Chair Timothy Barabe Paul E. Chamberlain Veeva Systems Inc. | 2017 Proxy Statement 41 P r o x y S t a t e m e n t FREQUENTLY ASKED QUESTIONS AND ANSWERS Annual Meeting Q: Why am I receiving these proxy materials? A: Our Board is providing these proxy materials to you in connection with the solicitation of proxies for use at the Annual Meeting to be held on Wednesday, June 21, 2017 at 12:00 p.m. Pacific Time, and at any adjournment or postponement thereof, for the purpose of considering and acting this Proxy Statement and upon the matters described in this Proxy Statement. The Notice, accompanying form of proxy card are being made available to you on or about May 9, 2017. This Proxy Statement includes information that we are required to provide to you under SEC rules and that is designed to assist you in voting your shares. Q: What is included in the proxy materials? A: The proxy materials include: Š This Proxy Statement for the Annual Meeting; Š Our 2017 Annual Report, which consists of our Annual Report on Form 10-K for the fiscal year ended January 31, 2017; and Š The proxy card or a voting instruction form for the Annual Meeting, if you have requested that the proxy materials be mailed to you. Q: How can I get electronic access to the proxy materials? A: The proxy materials are available at www.astproxyportal.com/ast/18559 and at http://ir.veeva.com. You can find directions on how to instruct us to send future proxy materials to you by email at www.astproxyportal.com/ast/18559. Choosing to receive future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the environment. If you choose to receive future proxy materials by email, you will receive an email message next year with instructions containing a link to the proxy materials and a link to the proxy voting website. Your election to receive proxy materials by email will remain in effect until you terminate it. Q: What information is contained in this Proxy Statement? A: The information in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting, the voting process, the compensation of our directors and certain of our executive officers, corporate governance, and certain other required information. Q: Where is the Annual Meeting? A: The Annual Meeting will be held at our principal executive offices located at 4280 Hacienda Drive, Pleasanton, California 94588. The telephone number at that location is (925) 452-6500. Q: Can I attend the Annual Meeting? A: You are invited to attend the Annual Meeting if you were a stockholder of record or a beneficial owner as of the Record Date. Admission will begin at 11:30 a.m. Pacific Time on the date of the Annual Meeting, and you must present valid picture identification such as a driver’s license or passport and, if asked, provide proof of stock ownership as of the Record Date. The use of mobile phones, pagers, recording or photographic equipment, tablets, and/or computers is not permitted at the Annual Meeting. The meeting will begin promptly at 12:00 p.m. Pacific Time. Stockholders may request directions to our principal executive offices in order to attend the Annual Meeting by calling (925) 452-6500 or visiting www.astproxyportal.com/ast/18559. 42 Veeva Systems Inc. | 2017 Proxy Statement Frequently Asked Questions and Answers Stock Ownership Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner? A: Stockholders of record — If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), you are considered, with respect to those shares, the “stockholder of record,” and the Notice was provided to you directly by us. As the stockholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or to vote in person at the Annual Meeting. Beneficial owners — Many Veeva stockholders hold their shares through a broker, trustee, or other nominee, rather than directly in their own name. If your shares are held in a brokerage account or by a bank or another nominee, you are considered the “beneficial owner” of shares held in “street name.” The Notice was forwarded to you by your broker, trustee, or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, trustee, or nominee on how to vote your shares. Beneficial owners are also invited to attend the Annual Meeting. However, since beneficial owners are not stockholders of record, you may not vote your shares in person at the Annual Meeting unless you follow your broker’s procedures for obtaining a legal proxy. If you request a printed copy of the proxy materials by mail, your broker or nominee will provide a voting instruction card for you to use. Quorum and Voting Q: How many shares must be present or represented to conduct business at the Annual Meeting? A: A quorum is the minimum number of shares required to be present at the Annual Meeting for the meeting to be properly held under our Bylaws and Delaware state law. The presence, in person or by proxy, of a majority of the aggregate voting power of the issued and outstanding shares of stock entitled to vote at the meeting will constitute a quorum at the meeting. Except as otherwise expressly provided by our Certificate of Incorporation or Bylaws, the holders of shares of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote or for the consent of the stockholders of Veeva. Each holder of Class A common stock will have the right to one vote per share of Class A common stock and each holder of Class B common stock will have the right to ten votes per share of Class B common stock. A proxy submitted by a stockholder may indicate that the shares represented by the proxy are not being voted (“stockholder withholding”) with respect to a particular matter. Under the General Corporation Law of the State of Delaware, abstentions and broker “non-votes” are counted as present and entitled to vote and are, included for purposes of determining whether a quorum is present at the Annual Meeting. therefore, A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. Q: Who is entitled to vote at the Annual Meeting? A: Holders of record of our common stock at the close of business on the Record Date are entitled to receive notice of and to vote their shares at the Annual Meeting. As of the Record Date, we had Veeva Systems Inc. | 2017 Proxy Statement 43 P r o x y S t a t e m e n t Frequently Asked Questions and Answers 107,415,609 shares of Class A common stock outstanding and 32,023,031 shares of Class B common stock outstanding. In deciding all matters at the Annual Meeting, each holder of Class A common stock of Veeva will be entitled to one vote for each share of Class A common stock held as of the close of business on the Record Date, and each holder of Class B common stock of Veeva will be entitled to ten votes for each share of Class B common stock held as of the close of business on the Record Date. We do not have cumulative voting rights for the election of directors. Q: How can I vote my shares in person at the Annual Meeting? A: Shares held in your name as the stockholder of record may be voted in person at the Annual Meeting. Shares held beneficially in street name may be voted in person at the Annual Meeting only if you obtain a legal proxy from the broker, trustee, or other nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy card, if you have requested one, or follow the voting directions described below, so that your vote will be counted if you later decide not to attend the meeting. Q: How can I vote my shares without attending the Annual Meeting? A: Stockholder of record — If you are a stockholder of record, there are three ways to vote without attending the Annual Meeting: Š Via the Internet — You may vote by proxy via the Internet by following the instructions provided in the Notice or, if you requested printed copies of the proxy materials by mail, by following the instructions provided in the proxy card. Š By Telephone — You may vote by proxy by telephone by following the instructions provided in the Notice or, if you requested printed copies of the proxy materials by mail, by calling the toll-free number found on the proxy card. Š By Mail — If you request printed copies of the proxy materials by mail, you will receive a proxy card, and you may vote by proxy by filling out the proxy card and mailing it in the envelope provided. Beneficial owners — If you are a beneficial owner holding shares through a bank, broker, or other nominee, please refer to your Notice or other information forwarded by your bank or broker to see which voting options are available to you. Q: What proposals will be voted on at the Annual Meeting? A: At the Annual Meeting, stockholders will be asked to vote: (1) To elect the two directors identified in this Proxy Statement to serve as Class I directors until the annual meeting to be held in 2020 and until their successors are duly elected and qualified; (2) To approve the material terms of our 2013 Equity Incentive Plan for purposes of Section 162(m) of the Internal Revenue Code; (3) To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2018; and (4) To transact such other business as may properly come before the Annual Meeting or any adjournment thereof. 44 Veeva Systems Inc. | 2017 Proxy Statement Frequently Asked Questions and Answers Q: What is the voting requirement to approve each of the proposals? A: Proposal One — The election of directors requires a plurality vote of the shares of common stock voted at the meeting. “Plurality” means that the individuals who receive the largest number of votes cast “FOR” are elected as directors. As a result, any shares not voted “FOR” a particular nominee (whether as a result of stockholder withholding or a broker non-vote) will not be counted in such nominee’s favor. Proposal Two — The affirmative vote of a majority in voting power of votes cast affirmatively or negatively is required to approve the material terms of our 2013 Equity Incentive Plan. You may vote “FOR,” “AGAINST,” or “ABSTAIN” on this proposal. Abstentions and broker non-votes will have no effect on the outcome of this proposal. Proposal Three — The affirmative vote of a majority in voting power of votes cast affirmatively or negatively is required to ratify the appointment of KMPG LLP as our independent registered public accounting firm. You may vote “FOR,” “AGAINST,” or “ABSTAIN” on this proposal. Abstentions and broker non-votes will have no effect on the outcome of this proposal. Q: How does the Board recommend that I vote? A: Our Board unanimously recommends that you vote your shares: Š “FOR” the two nominees for election as director listed in Proposal One; Š “FOR” the approval of the material terms of our 2013 Equity Incentive Plan for purposes of Section 162(m) of the Internal Revenue Code; and Š “FOR” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2018. Q: What happens if I do not give specific voting instructions? A: Stockholder of record — If you are a stockholder of record and you: Š Indicate when voting on the Internet or by telephone that you wish to vote as recommended by our Board or Š Sign and return a proxy card without giving specific voting instructions, then the persons named as proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting. Beneficial owners — If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions then, under applicable rules, the organization that holds your shares may generally vote on “routine” matters but cannot vote on “non-routine” matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, that organization will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.” Q: How may my brokerage firm or other intermediary vote my shares if I fail to provide timely directions? A: Brokerage firms and other intermediaries holding shares of common stock in street name for customers are generally required to vote such shares in the manner directed by their customers. Veeva Systems Inc. | 2017 Proxy Statement 45 P r o x y S t a t e m e n t Frequently Asked Questions and Answers In the absence of timely directions, your broker will have discretion to vote your shares on our sole routine matter — the proposal to ratify the appointment of KPMG LLP. Your broker will not have discretion to vote on the following “non-routine” matters absent direction from you: the election of directors and the approval of the material terms of our 2013 Equity Incentive Plan. Please note that brokers may not vote your shares on non-routine matters in the absence of your specific instructions as to how to vote, so we encourage you to provide instructions to your broker regarding the voting of your shares. Q: What happens if additional matters are presented at the Annual Meeting? A: If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place (including, without limitation, for the purpose of soliciting additional proxies), the persons named in the proxy card and acting thereunder will have discretion to vote on those matters in accordance with their best judgment. We do not currently anticipate that any other matters will be raised at the Annual Meeting. Q: Can I change or revoke my vote? A: Subject to any rules your broker, trustee or nominee may have, you may change your proxy instructions at any time before your proxy is voted at the Annual Meeting. If you are a stockholder of record, you may change your vote by (1) filing with our Corporate Secretary, prior to your shares being voted at the Annual Meeting, a written notice of revocation or a duly executed proxy card, in either case dated later than the prior proxy card relating to the same shares, or (2) by attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not by itself revoke a proxy). A stockholder of record that has voted on the Internet or by telephone may also change his or her vote by later making a timely and valid Internet or telephone vote. If you are a beneficial owner of shares held in street name, you may change your vote (1) by submitting new voting instructions to your broker, trustee or other nominee or (2) if you have obtained a legal proxy from the broker, trustee or other nominee that holds your shares giving you the right to vote the shares, by attending the Annual Meeting and voting in person. Any written notice of revocation or subsequent proxy card must be received by our Corporate Secretary prior to the taking of the vote at the Annual Meeting. Such written notice of revocation or subsequent proxy card should be hand delivered to our Corporate Secretary or should be sent so as to be delivered to our principal executive offices, Attention: Corporate Secretary. Q: Who will bear the cost of soliciting votes for the Annual Meeting? A: We will bear all expenses of this solicitation, including the cost of preparing and mailing these proxy materials. We may reimburse brokerage firms, custodians, nominees, fiduciaries, and other persons representing beneficial owners of common stock for their reasonable expenses in forwarding solicitation material to such beneficial owners. Directors, officers, and employees of Veeva may also solicit proxies in person or by other means of communication. Such directors, officers, and employees will not be additionally compensated but may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. We may engage the services of a professional proxy solicitation firm to aid in the solicitation of proxies from certain brokers, bank nominees, and other institutional owners. Our costs for such services, if retained, 46 Veeva Systems Inc. | 2017 Proxy Statement Frequently Asked Questions and Answers will not be significant. If you choose to access the proxy materials and/or vote through the Internet, you are responsible for any Internet access charges you may incur. Q: Is my vote confidential? A: Proxy instructions, ballots, and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Veeva or to third parties, except as necessary to meet applicable legal requirements, to allow for the tabulation of votes and certification of the vote or to facilitate a successful proxy solicitation. Q: Who will serve as inspector of elections? A: The inspector of elections will be a representative from AST. Q: Where can I find the voting results of the Annual Meeting? A: We intend to announce preliminary voting results at the Annual Meeting and will publish final results in a Current Report on Form 8-K within four business days after the Annual Meeting. Information About the Proxy Materials Q: Why did I receive a notice regarding the availability of proxy materials on the Internet instead of a full set of proxy materials? A: In accordance with the rules of the SEC, we have elected to furnish our proxy materials, including this Proxy Statement and our 2017 Annual Report, primarily via the Internet. Beginning on or about May 9, 2017, we mailed to our stockholders a “Notice of Internet Availability of Proxy Materials” that contains notice of the Annual Meeting, and instructions on how to access our proxy materials on the Internet, how to vote at the meeting, and how to request printed copies of the proxy materials and 2017 Annual Report. Stockholders may request to receive all future proxy materials in printed form by mail or electronically by e-mail by following the instructions contained at www.astproxyportal.com/ast/18559. We encourage stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the cost and environmental impact of our annual meetings. Q: What does it mean if multiple members of my household are stockholders but we only received one Notice or full set of proxy materials in the mail? A: We have adopted a procedure called “householding,” which the SEC has approved. Under this procedure, we deliver a single copy of the Notice and, if applicable, the proxy materials to multiple stockholders who share the same address unless we received contrary instructions from one or more of the stockholders. This procedure reduces our printing costs, mailing costs, and fees. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written request, we will deliver promptly a separate copy of the Notice and, if applicable, the proxy materials to any stockholder at a shared address to which we delivered a single copy of any of these documents. To receive a separate copy of the Notice and, if applicable, the proxy materials, stockholders should send their requests to our principal executive offices, Attention: Corporate Secretary. Stockholders who hold shares in street name may contact their brokerage firm, bank, broker-dealer, or other similar organization to request information about householding. Q: What is the mailing address for Veeva’s principal executive offices? A: Our principal executive offices are located at 4280 Hacienda Drive, Pleasanton, California 94588. The telephone number at that location is (925) 452-6500. Veeva Systems Inc. | 2017 Proxy Statement 47 P r o x y S t a t e m e n t ADDITIONAL INFORMATION Stockholder Proposals at Our 2018 Annual Meeting You may submit proposals, including director nominations, for consideration at future stockholder meetings. Requirements for stockholder proposals to be considered for inclusion in our proxy materials. Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at our next annual meeting of stockholders by submitting their proposals in writing to our Corporate Secretary in a timely manner. In order to be included in the proxy statement for the 2018 annual meeting of stockholders, stockholder proposals must be received by our Corporate Secretary no later than January 9, 2018, and must otherwise comply with the requirements of Rule 14a-8 of the Exchange Act. Requirements for stockholder proposals to be brought before an annual meeting. In addition, our Bylaws establish an advance notice procedure for stockholders who wish to present certain matters before an annual meeting of stockholders. In general, nominations for the election of directors may be made by our Board or any committee thereof or any stockholder, who is a stockholder of record on the date of the giving of such notice and on the record date for the determination of stockholders entitled to vote at such meeting, who is entitled to vote at such meeting and who has delivered written notice to our Corporate Secretary no later than the Notice Deadline (as defined below), which notice must contain specified information concerning the nominees and concerning the stockholder proposing such nominations. Our Bylaws also provide that the only business that may be conducted at an annual meeting is business that is (1) specified in the notice of meeting (or any supplement thereto) given by or at the direction of our Board, (2) otherwise properly brought before the meeting by or at the direction of our Board (or any committee thereto), or (3) properly brought before the meeting by a stockholder who has delivered written notice to our Corporate Secretary no later than the Notice Deadline (as defined below). The “Notice Deadline” is defined as that date which is not less than 90 days nor more than 120 days prior to the one-year anniversary of the previous year’s annual meeting of stockholders. As a result, the Notice Deadline for the 2018 annual meeting of stockholders is between February 21, 2018 and March 23, 2018. If a stockholder who has notified us of his or her intention to present a proposal at an annual meeting does not appear to present his or her proposal at such meeting, we need not present the proposal for vote at such meeting. Recommendation of director candidates. You may recommend candidates to our Board for consideration by our Nominating and Governance Committee by following the procedures set forth in “Corporate Governance — Stockholder Recommendations for Nominations to the Board.” Information Requests Any written requests for additional information, a copy of our Bylaws, copies of the proxy materials and 2017 Annual Report, notices of stockholder proposals, recommendations for candidates to our Board, communications to our Board or any other communications should be sent to 4280 Hacienda Drive, Pleasanton, California 94588, Attention: Corporate Secretary. Website Our website address is included in this Proxy Statement for reference only. The information contained on our website is not incorporated by reference into this Proxy Statement. 48 Veeva Systems Inc. | 2017 Proxy Statement Additional Information Other Matters We know of no other matters to be submitted at the Annual Meeting. If any other matters properly come before the Annual Meeting, the persons named on the proxy card will have discretion to vote the shares they represent in accordance with their best judgment. P r o x y S t a t e m e n t Veeva Systems Inc. | 2017 Proxy Statement 49 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX A VEEVA SYSTEMS INC. 2013 EQUITY INCENTIVE PLAN ADOPTED ON AUGUST 21, 2013 ARTICLE 1. INTRODUCTION The Board adopted the Plan to become effective immediately, although no Awards may be granted prior to the IPO Date. The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by (a) encouraging Service Providers to focus on critical long- range corporate objectives, (b) encouraging the attraction and retention of Service Providers with exceptional qualifications and (c) linking Service Providers directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of Options (which may constitute ISOs or NSOs), SARs, Restricted Shares, Stock Units and Performance Cash Awards. ARTICLE 2. ADMINISTRATION 2.1 General. The Plan may be administered by the Board or one or more Committees. Each Committee shall have the authority and be responsible for such functions as have been assigned to it. 2.2 Section 162(m). To the extent an Award is intended to qualify as “performance-based the Plan will be administered by a compensation” within the meaning of Code Section 162(m), Committee of two or more “outside directors” within the meaning of Code Section 162(m). 2.3 Section 16. To the extent desirable to qualify transactions hereunder as exempt under Exchange Act Rule 16b-3, the transactions contemplated hereunder will be approved by the entire Board or a Committee of two or more “non-employee directors” within the meaning of Exchange Act Rule 16b-3. 2.4 Powers of Administrator. Subject to the terms of the Plan, and in the case of a Committee, subject to the specific duties delegated to the Committee, the Administrator shall have the authority to (a) select the Service Providers who are to receive Awards under the Plan, (b) determine the type, number, vesting requirements and other features and conditions of such Awards, (c) determine whether and to what extent any Performance Goals have been attained, (d) interpret the Plan and Awards granted under the Plan, (e) make, amend and rescind rules relating to the Plan and Awards granted under the Plan, including rules relating to sub-plans established for the purposes of satisfying applicable foreign laws or for qualifying for favorable tax treatment under applicable foreign laws, (f) impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a Participant of any Common Shares issued pursuant to an Award, including restrictions under an insider trading policy and restrictions as to the use of a specified brokerage firm for such resales, and (g) make all other decisions relating to the operation of the Plan and Awards granted under the Plan. 2.5 Effect of Administrator’s Decisions. The Administrator’s decisions, determinations and interpretations shall be final and binding on all Participants and any other holders of Awards. 2.6 Governing Law. The Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware (except its choice-of-law provisions). Veeva Systems Inc. | 2017 Proxy Statement Appendix A A-1 P r o x y S t a t e m e n t Appendix A ARTICLE 3. SHARES AVAILABLE FOR GRANTS 3.1 Basic Limitation. Common Shares issued pursuant to the Plan may be authorized but unissued shares or treasury shares. The aggregate number of Common Shares issued under the Plan shall not exceed the sum of (a) the number of Common Shares reserved under the Company’s 2012 Equity Incentive Plan (the “2012 Plan”) that are not issued or subject to outstanding awards under the 2012 Plan on the IPO Date, (b) any Common Shares subject to outstanding options under the 2012 Plan and the Company’s 2007 Stock Plan (collectively, the “Predecessor Plans”) on the IPO Date that subsequently expire or lapse unexercised and Common Shares issued pursuant to awards granted under the Predecessor Plans that are outstanding on the IPO Date and that are subsequently forfeited to or repurchased by the Company and (c) the additional Common Shares described in Sections 3.2 and 3.3; provided, however, that no more than 30,789,290 Common Shares, in the aggregate, shall be added to the Plan pursuant to clauses (a) and (b). The number of Common Shares that are subject to Stock Awards outstanding at any time under the Plan may not exceed the number of Common Shares that then remain available for issuance under the Plan. The numerical limitations in this Section 3.1 shall be subject to adjustment pursuant to Article 9. 3.2 Annual Increase in Shares. As of the first business day of each fiscal year of the Company during the term of the Plan, commencing on February 1, 2014, the aggregate number of Common Shares that may be issued under the Plan shall automatically increase by a number equal to the least of (a) 5% of the total number of shares of all classes of the Company’s common stock actually issued and outstanding on the last business day of the prior fiscal year (excluding any rights to purchase Common Shares that may be outstanding, such as options or warrants), (b) 13,750,000 Common Shares (subject to adjustment pursuant to Article 9), or (c) a number of Common Shares determined by the Board. 3.3 Shares Returned to Reserve. To the extent that Options, SARs or Stock Units are forfeited or expire for any other reason before being exercised or settled in full, the Common Shares subject to such Options, SARs or Stock Units shall again become available for issuance under the Plan. If SARs are exercised or Stock Units are settled, then only the number of Common Shares (if any) actually issued to the Participant upon exercise of such SARs or settlement of such Stock Units, as applicable, shall reduce the number available under Section 3.1 and the balance shall again become available for issuance under the Plan. If Restricted Shares or Common Shares issued upon the exercise of Options are reacquired by the Company pursuant to a forfeiture provision, repurchase right or for any other reason, then such Common Shares shall again become available for issuance under the Plan. Common Shares applied to pay the Exercise Price of Options or to satisfy tax withholding obligations related to any Award shall again become available for issuance under the Plan. To the extent that an Award is settled in cash rather than Common Shares, the cash settlement shall not reduce the number of Shares available for issuance under the Plan. 3.4 Awards Not Reducing Share Reserve in Section 3.1. Any dividend equivalents paid or credited under the Plan with respect to Stock Units shall not be applied against the number of Common Shares that may be issued under the Plan, whether or not such dividend equivalents are converted into Stock Units. In addition, Common Shares subject to Substitute Awards granted by the Company shall not reduce the number of Common Shares that may be issued under Section 3.1, nor shall shares subject to Substitute Awards again be available for Awards under the Plan in the event of any forfeiture, expiration or cash settlement of such Substitute Awards. 3.5 Article 9: Code Section 162(m) and 422 Limits. Subject to adjustment in accordance with (a) The aggregate number of Common Shares subject to Options and SARs that may be granted under this Plan during any fiscal year to any one Participant shall not exceed 6,800,000; A-2 Veeva Systems Inc. | 2017 Proxy Statement Appendix A Appendix A (b) The aggregate number of Common Shares subject to Restricted Share awards and Stock Units that may be granted under this Plan during any fiscal year to any one Participant shall not exceed 3,500,000; (c) No Participant shall be paid more than $2,000,000 in cash in any fiscal year pursuant to Performance Cash Awards granted under the Plan; and (d) No more than 30,789,290 Common Shares plus the additional Common Shares described in Section 3.2 may be issued under the Plan upon the exercise of ISOs. ARTICLE 4. ELIGIBILITY 4.1 Incentive Stock Options. Only Employees who are common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In addition, an Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company or any of its Parents or Subsidiaries shall not be eligible for the grant of an ISO unless the additional requirements set forth in Code Section 422(c)(5) are satisfied. 4.2 Other Awards. Awards other than ISOs may only be granted to Service Providers. ARTICLE 5. OPTIONS 5.1 Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The Stock Option Agreement shall specify whether the Option is intended to be an ISO or an NSO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. 5.2 Number of Shares. Each Stock Option Agreement shall specify the number of Common Shares subject to the Option, which number shall adjust in accordance with Article 9. 5.3 Exercise Price. Each Stock Option Agreement shall specify the Exercise Price, which shall not be less than 100% of the Fair Market Value of a Common Share on the date of grant. The preceding sentence shall not apply to an Option that is a Substitute Award granted in a manner that would satisfy the requirements of Code Section 409A and, if applicable, Code Section 424(a). 5.4 Exercisability and Term. Each Stock Option Agreement shall specify the date or event when all or any installment of the Option is to become vested and/or exercisable. The Stock Option Agreement shall also specify the term of the Option; provided that, except to the extent in no event exceed necessary to comply with applicable foreign law, the term of an Option shall 10 years from the date of grant. A Stock Option Agreement may provide for accelerated vesting and/or exercisability upon certain specified events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s Service. 5.5 Death of Optionee. After an Optionee’s death, any vested and exercisable Options held by such Optionee may be exercised by his or her beneficiary or beneficiaries. Each Optionee may designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Optionee’s death. If no beneficiary was designated or if no designated beneficiary survives the Optionee, then any vested and exercisable Options held by the Optionee may be exercised by his or her estate. Veeva Systems Inc. | 2017 Proxy Statement Appendix A A-3 P r o x y S t a t e m e n t Appendix A 5.6 Modification or Assumption of Options. Within the limitations of the Plan, reprice, extend or assume outstanding options or may accept the the Administrator may modify, cancellation of outstanding options (whether granted by the Company or by another issuer) in return for the grant of new Options for the same or a different number of shares and at the same or a different exercise price or in return for the grant of a different type of Award. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair his or her rights or obligations under such Option. 5.7 Buyout Provisions. The Administrator may at any time (a) offer to buy out for a payment in cash or cash equivalents an Option previously granted or (b) authorize an Optionee to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as the Administrator shall establish. 5.8 Payment for Option Shares. The entire Exercise Price of Common Shares issued upon exercise of Options shall be payable in cash or cash equivalents at the time when such Common Shares are purchased. In addition, the Administrator may, in its sole discretion and to the extent permitted by applicable law, accept payment of all or a portion of the Exercise Price through any one or a combination of the following forms or methods: (a) Subject to any conditions or limitations established by the Administrator, by surrendering, or attesting to the ownership of, Common Shares that are already owned by the Optionee with a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Common Shares as to which such Option will be exercised; (b) By delivering (on a form prescribed by the Company) an irrevocable direction to a securities broker approved by the Company to sell all or part of the Common Shares being purchased under the Plan and to deliver all or part of the sales proceeds to the Company; (c) Subject to such conditions and requirements as the Administrator may impose from time to time, through a net exercise procedure; or (d) Through any other form or method consistent with applicable laws, regulations and rules. ARTICLE 6. STOCK APPRECIATION RIGHTS 6.1 SAR Agreement. Each grant of a SAR under the Plan shall be evidenced by a SAR Agreement between the Optionee and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various SAR Agreements entered into under the Plan need not be identical. 6.2 Number of Shares. Each SAR Agreement shall specify the number of Common Shares to which the SAR pertains, which number shall adjust in accordance with Article 9. 6.3 Exercise Price. Each SAR Agreement shall specify the Exercise Price, which shall in no event be less than 100% of the Fair Market Value of a Common Share on the date of grant. The preceding sentence shall not apply to a SAR that is a Substitute Award granted in a manner that would satisfy the requirements of Code Section 409A. 6.4 Exercisability and Term. Each SAR Agreement shall specify the date when all or any installment of the SAR is to become vested and exercisable. The SAR Agreement shall also specify the term of the SAR; provided that except to the extent necessary to comply with applicable foreign law, the term of a SAR shall not exceed 10 years from the date of grant. A SAR Agreement A-4 Veeva Systems Inc. | 2017 Proxy Statement Appendix A Appendix A may provide for accelerated vesting and exercisability upon certain specified events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s Service. 6.5 Exercise of SARs. Upon exercise of a SAR, the Optionee (or any person having the right to exercise the SAR after his or her death) shall receive from the Company (a) Common Shares, (b) cash or (c) a combination of Common Shares and cash, as the Administrator shall determine. The amount of cash and/or the Fair Market Value of Common Shares received upon exercise of SARs shall, in the aggregate, not exceed the amount by which the Fair Market Value (on the date of surrender) of the Common Shares subject to the SARs exceeds the Exercise Price. If, on the date when a SAR expires, the Exercise Price is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed to be exercised as of such date with respect to such portion. A SAR Agreement may also provide for an automatic exercise of the SAR on an earlier date. 6.6 Death of Optionee. After an Optionee’s death, any vested and exercisable SARs held by such Optionee may be exercised by his or her beneficiary or beneficiaries. Each Optionee may designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Optionee’s death. If no beneficiary was designated or if no designated beneficiary survives the Optionee, then any vested and exercisable SARs held by the Optionee at the time of his or her death may be exercised by his or her estate. 6.7 the Modification or Assumption of SARs. Within the limitations of Administrator may modify, reprice, extend or assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same or a different number of shares and at the same or a different exercise price or in return for the grant of a different type of Award. The foregoing notwithstanding, no modification of a SAR shall, without the consent of the Optionee, impair his or her rights or obligations under such SAR. the Plan, ARTICLE 7. RESTRICTED SHARES 7.1 Restricted Stock Agreement. Each grant of Restricted Shares under the Plan shall be evidenced by a Restricted Stock Agreement between the recipient and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not the various Restricted Stock Agreements entered into under the Plan need not be identical. inconsistent with the Plan. The provisions of 7.2 Payment for Awards. Restricted Shares may be sold or awarded under the Plan for such consideration as the Administrator may determine, limitation) cash, cash equivalents, property, cancellation of other equity awards, full-recourse promissory notes, past services and future services, and such other methods of payment as are permitted by applicable law. including (without 7.3 Vesting Conditions. Each Award of Restricted Shares may or may not be subject to vesting and/or other conditions as the Administrator may determine. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock Agreement. Such conditions, at the Administrator’s discretion, may include one or more Performance Goals. A Restricted Stock Agreement may provide for accelerated vesting upon certain specified events. 7.4 Voting and Dividend Rights. The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the Company’s other stockholders, unless the Administrator otherwise provides. A Restricted Stock Agreement, however, may require that Veeva Systems Inc. | 2017 Proxy Statement Appendix A A-5 P r o x y S t a t e m e n t Appendix A any cash dividends paid on Restricted Shares (a) be accumulated and paid when such Restricted Shares vest, or (b) be invested in additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the shares subject to the Stock Award with respect to which the dividends were paid. In addition, unless the Administrator provides otherwise, if any dividends or other distributions are paid in Common Shares, such Common Shares shall be subject to the same restrictions on transferability and forfeitability as the Restricted Shares with respect to which they were paid. ARTICLE 8. STOCK UNITS 8.1 Stock Unit Agreement. Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement between the recipient and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Stock Unit Agreements entered into under the Plan need not be identical. 8.2 Payment for Awards. To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients. 8.3 Vesting Conditions. Each Award of Stock Units may or may not be subject to in full or in installments, upon vesting, as determined by the Administrator. Vesting shall occur, satisfaction of the Administrator’s discretion, may include one or more Performance Goals. A Stock Unit Agreement may provide for accelerated vesting upon certain specified events. the conditions specified in the Stock Unit Agreement. Such conditions, at 8.4 Voting and Dividend Rights. The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, Stock Units awarded under the Plan may, at the Administrator’s discretion, provide for a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Common Share while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Common Shares, or in a combination of both. Prior to distribution, any dividend equivalents shall be subject to the same conditions and restrictions as the Stock Units to which they attach. 8.5 Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may be made in the form of (a) Common Shares, (b) cash or (c) any combination of both, as determined by the Administrator. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based on predetermined performance factors, including Performance Goals. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Common Shares over a series of trading days. Vested Stock Units shall be settled in such manner and at such time(s) as specified in the Stock Unit Agreement. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Article 9. 8.6 Death of Recipient. Any Stock Units that become payable after the recipient’s death shall be distributed to the recipient’s beneficiary or beneficiaries. Each recipient of Stock Units under the Plan may designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Award recipient’s death. If no beneficiary was designated or if no designated beneficiary survives the Award recipient, then any Stock Units that become payable after the recipient’s death shall be distributed to the recipient’s estate. A-6 Veeva Systems Inc. | 2017 Proxy Statement Appendix A Appendix A 8.7 Modification or Assumption of Stock Units. Within the limitations of the Plan, the the cancellation of Administrator may modify or assume outstanding stock units or may accept outstanding stock units (whether granted by the Company or by another issuer) in return for the grant of new Stock Units for the same or a different number of shares or in return for the grant of a different type of Award. The foregoing notwithstanding, no modification of a Stock Unit shall, without the consent of the Participant, impair his or her rights or obligations under such Stock Unit. 8.8 Creditors’ Rights. A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement. ARTICLE 9. ADJUSTMENTS; DISSOLUTIONS AND LIQUIDATIONS; CORPORATE TRANSACTIONS 9.1 Adjustments. In the event of a subdivision of the outstanding Common Shares, a declaration of a dividend payable in Common Shares, a combination or consolidation of the outstanding Common Shares (by reclassification or otherwise) into a lesser number of Common Shares or any other increase or decrease in the number of issued Common Shares effected without receipt of consideration by the Company, proportionate adjustments shall automatically be made to the following: (a) The number and kind of shares available for issuance under Article 3, including the numerical share limits in Sections 3.1, 3.2 and 3.5; (b) The number and kind of shares covered by each outstanding Option, SAR and Stock Unit; or (c) The Exercise Price applicable to each outstanding Option and SAR, and the repurchase price, if any, applicable to Restricted Shares. In the event of a declaration of an extraordinary dividend payable in a form other than Common Shares in an amount that has a material effect on the price of Common Shares, a recapitalization, a spin-off or a similar occurrence, the Administrator may make such adjustments as it, in its sole discretion, deems appropriate to the foregoing. Any adjustment in the number of shares subject to an Award under this Article 9 shall be rounded down to the nearest whole share, although the Administrator in its sole discretion may make a cash payment in lieu of a fractional share. Except as provided in this Article 9, a Participant shall have no rights by reason of any issuance by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. 9.2 Dissolution or Liquidation. To the extent not previously exercised or settled, Options, SARs and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company. 9.3 Corporate Transactions. In the event that the Company is a party to a merger, consolidation, or a Change in Control (other than one described in Section 14.5(d)), all Common Shares acquired under the Plan and all Awards outstanding on the effective date of the transaction shall be treated in the manner described in the definitive transaction agreement (or, in the event the transaction does not entail a definitive agreement to which the Company is party, in the manner determined by the Administrator, with such determination having final and binding effect on all parties), Veeva Systems Inc. | 2017 Proxy Statement Appendix A A-7 P r o x y S t a t e m e n t Appendix A which agreement or determination need not treat all Awards (or portions thereof) in an identical manner. Unless an Award Agreement provides otherwise, the treatment specified in the transaction agreement or by the Administrator may include (without limitation) one or more of the following with respect to each outstanding Award: (a) The continuation of such outstanding Award by the Company (if the Company is the surviving entity); (b) The assumption of such outstanding Award by the surviving entity or its parent, provided that the assumption of an Option or a SAR shall comply with applicable tax requirements; (c) The substitution by the surviving entity or its parent of an equivalent award for such outstanding Award (including, but not limited to, an award to acquire the same consideration paid to the holders of Common Shares in the transaction), provided that the substitution of an Option or a SAR shall comply with applicable tax requirements; (d) The cancellation of the unvested portion (after taking into account any vesting occurring at or prior to the effective time of the transaction) of any such outstanding Award without payment of any consideration; (e) The cancellation of such Award and a payment to the Participant with respect to each share subject to the portion of the Award that is vested or becomes vested as of the effective time of the transaction equal to the excess of (A) the value, as determined by the Administrator in its absolute discretion, of the property (including cash) received by the holder of a Common Share as a result of the transaction, over (if applicable) (B) the per-share Exercise Price of such Award (such excess, if any, the “Spread”). Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving entity or its parent having a value equal to the Spread. In addition, any escrow, holdback, earn-out or similar provisions in the transaction agreement may apply to such payment to the same extent and in the same manner as such provisions apply to the holders of Common Shares, but only to the extent the application of such provisions does not adversely affect the status of the Award as exempt from Code Section 409A. If the Spread applicable to an Award (whether or not vested) is zero or a negative number, then the Award may be cancelled without making a payment to the Participant. In the event that a Stock Unit is subject to Code Section 409A, the payment described in this clause (e) shall be made on the settlement date specified in the applicable Stock Unit Agreement, provided that settlement may be accelerated in accordance with Treasury Regulation Section 1.409A-3(j)(4); or (f) The assignment of any reacquisition or repurchase rights held by the Company in respect of an Award of Restricted Shares to the surviving entity or its parent, with corresponding proportionate adjustments made to the price per share to be paid upon exercise of any such reacquisition or repurchase rights. If (I) the Company is subject to a transaction described in this Section 9.3 before a Participant’s continuous Service terminates and (II) an outstanding Award is not continued, assumed or substituted in accordance with clause (a), (b) or (c) above, then a Participant who is entitled under an Award agreement, employment agreement or Company policy to vesting acceleration (a “Vesting Arrangement”) that could be triggered as of a date following the effective time of the transaction as a result of a qualifying termination of Service shall be deemed to be vested, to the extent provided in the relevant Vesting Arrangement, as if all triggering events had occurred as of the effective time of the transaction with respect to any such unvested Award that would otherwise terminate at or immediately A-8 Veeva Systems Inc. | 2017 Proxy Statement Appendix A Appendix A prior to the effective time irrespective of whether or not a qualifying Service termination has occurred. It is intended that the previous sentence shall apply to Participants whose Vesting Arrangement provides for “double trigger” vesting acceleration and such Participants could be subjected to a Service termination triggering the acceleration after closing of the transaction at a time when the unvested portion of an Award will no longer exist. Any action taken under this Section 9.3 shall either preserve an Award’s status as exempt from Code Section 409A or comply with Code Section 409A. ARTICLE 10. OTHER AWARDS 10.1 Performance Cash Awards. A Performance Cash Award is a cash award that may be granted subject to the attainment of specified Performance Goals during a Performance Period. A Performance Cash Award may also require the completion of a specified period of continuous Service. The length of the Performance Period, the Performance Goals to be attained during the Performance Period, and the degree to which the Performance Goals have been attained shall be determined conclusively by the Administrator. Each Performance Cash Award shall be set forth in a written agreement or in a resolution duly adopted by the Administrator which shall contain provisions determined by the Administrator and not inconsistent with the Plan. The terms of various Performance Cash Awards need not be identical. 10.2 Awards Under Other Plans. The Company may grant awards under other plans or programs. Such awards may be settled in the form of Common Shares issued under this Plan. Such Common Shares shall be treated for all purposes under the Plan like Common Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Common Shares available under Article 3. ARTICLE 11. LIMITATION ON RIGHTS 11.1 Retention Rights. Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain a Service Provider. The Company and its Parents and Subsidiaries reserve the right to terminate the Service of any Service Provider at any time, with or without cause, subject to applicable laws, the Company’s certificate of incorporation and by-laws and a written employment agreement (if any). 11.2 Stockholders’ Rights. Except as set forth in Sections 7.4 or 8.4 above, a Participant shall have no dividend rights, voting rights or other rights as a stockholder with respect to any Common Shares covered by his or her Award prior to the time when a stock certificate for such Common Shares is issued or, if applicable, the time when he or she becomes entitled to receive such Common Shares by filing any required notice of exercise and paying any required Exercise Price. No adjustment shall be made for cash dividends or other rights for which the record date is prior to such time, except as expressly provided in the Plan. P r o x y S t a t e m e n t 11.3 the Plan notwithstanding, Regulatory Requirements. Any other provision of the obligation of the Company to issue Common Shares under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required. The Company reserves the right to restrict, in whole or in part, the delivery of Common Shares pursuant to any Award prior to the satisfaction of all legal requirements relating to the issuance of such Common Shares, to their registration, qualification or listing or to an exemption from registration, qualification or listing. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed necessary by the Company’s counsel to be necessary to the lawful issuance and sale of any Common Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Common Shares as to which such requisite authority will not have been obtained. Veeva Systems Inc. | 2017 Proxy Statement Appendix A A-9 Appendix A 11.4 Transferability of Awards. The Administrator may, in its sole discretion, permit transfer of an Award in a manner consistent with applicable law. Unless otherwise determined by the Administrator, Awards shall be transferable by a Participant only by (a) beneficiary designation, (b) a will or (c) the laws of descent and distribution. An ISO may only be transferred by will or by the laws of descent and distribution and may be exercised during the lifetime of the Optionee only by the Optionee or by the Optionee’s guardian or legal representative. 11.5 Other Conditions and Restrictions on Common Shares. Any Common Shares issued under the Plan shall be subject to such forfeiture conditions, rights of repurchase, rights of first refusal, other transfer restrictions and such other terms and conditions as the Administrator may determine. Such conditions and restrictions shall be set forth in the applicable Award Agreement and shall apply in addition to any restrictions that may apply to holders of Common Shares generally. In addition, Common Shares issued under the Plan shall be subject to such conditions and restrictions imposed either by applicable law or by Company policy, as adopted from time to time, designed to ensure compliance with applicable law or laws with which the Company determines in its sole discretion to comply including in order to maintain any statutory, regulatory or tax advantage. ARTICLE 12. TAXES 12.1 General. It is a condition to each Award under the Plan that a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any federal, state, local or foreign withholding tax obligations that arise in connection with any Award granted under the Plan. The Company shall not be required to issue any Common Shares or make any cash payment under the Plan unless such obligations are satisfied. 12.2 Share Withholding. To the extent that applicable law subjects a Participant to tax withholding obligations, the Administrator may permit such Participant to satisfy all or part of such obligations by having the Company withhold all or a portion of any Common Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Common Shares that he or she previously acquired. Such Common Shares shall be valued on the date when they are withheld or surrendered. Any payment of taxes by assigning Common Shares to the Company may be subject to restrictions including any restrictions required by SEC, accounting or other rules. 12.3 Section 162(m) Matters (a). The Administrator, in its sole discretion, may determine whether an Award is intended to qualify as “performance-based compensation” within the meaning of Code Section 162(m). The Administrator may grant Awards that are based on Performance Goals but that are not intended to qualify as performance-based compensation. With respect to any Award that is intended to qualify as performance-based compensation, the Administrator shall designate the Performance Goal(s) applicable to, and the formula for calculating the amount payable under, an Award within 90 days following commencement of the applicable Performance Period (or such earlier time as may be required under Code Section 162(m)), and in any event at a time when achievement of the applicable Performance Goal(s) remains substantially uncertain. Prior to the payment of any Award that is intended to constitute performance-based compensation, the Administrator shall certify in writing whether and the extent to which the Performance Goal(s) were achieved for such Performance Period. The Administrator shall have the right to reduce or eliminate (but not to increase) the amount payable under an Award that is intended to constitute performance-based compensation. 12.4 Section 409A Matters. Except as otherwise expressly set forth in an Award Agreement, it is intended that Awards granted under the Plan either be exempt from, or comply with, the requirements of Code Section 409A. To the extent an Award is subject to Code Section 409A (a “409A Award”), the terms of the Plan, the Award and any written agreement governing the Award shall be A-10 Veeva Systems Inc. | 2017 Proxy Statement Appendix A Appendix A interpreted to comply with the requirements of Code Section 409A so that the Award is not subject to tax or interest under Code Section 409A, unless the Administrator expressly provides additional otherwise. A 409A Award shall be subject to such additional rules and requirements as specified by the Administrator from time to time in order for it to comply with the requirements of Code Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from service” to an individual who is considered a “specified employee” (as each term is defined under Code Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the Participant’s separation from service or (ii) the Participant’s death, but only to the extent such delay is necessary to prevent such payment from being subject to Code Section 409A(a)(1). 12.5 Limitation on Liability. Neither the Company nor any person serving as Administrator shall have any liability to a Participant in the event an Award held by the Participant fails to achieve its intended characterization under applicable tax law. P r o x y S t a t e m e n t ARTICLE 13. FUTURE OF THE PLAN 13.1 Term of the Plan. The Plan, as set forth herein, shall become effective on the date of its adoption by the Board, subject to approval of the Company’s stockholders under Section 13.3 below. The Plan shall terminate automatically 10 years after the later of (a) the date when the Board adopted the Plan or (b) the date when the Board approved the most recent increase in the number of Common Shares reserved under Article 3 that was also approved by the Company’s stockholders. 13.2 Amendment or Termination. The Board may, at any time and for any reason, amend or terminate the Plan. No Awards shall be granted under the Plan after the termination thereof. The termination of the Plan, or any amendment thereof, shall not affect any Award previously granted under the Plan. 13.3 Stockholder Approval. To the extent required by applicable law, the Plan will be subject to the approval of the Company’s stockholders within 12 months of its adoption date. An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules. ARTICLE 14. DEFINITIONS 14.1 “Administrator” means the Board or any Committee administering the Plan in accordance with Article 2. 14.2 “Award” means any award granted under the Plan, including as an Option, a SAR, a Restricted Share, a Stock Unit or a Performance Cash Award. 14.3 “Award Agreement” means a Stock Option Agreement, an SAR Agreement, a Restricted Stock Agreement, a Stock Unit Agreement or such other agreement evidencing an Award granted under the Plan. 14.4 14.5 “Board” means the Company’s Board of Directors, as constituted from time to time. “Change in Control” means: (a) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities; (b) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; Veeva Systems Inc. | 2017 Proxy Statement Appendix A A-11 Appendix A (c) (d) The consummation of a merger or consolidation of the Company with or into any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or Individuals who are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board over a period of 12 months; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board. A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction. In addition, if a Change in Control constitutes a payment event with respect to any Award which provides for a deferral of compensation and is subject to Code Section 409A, then notwithstanding anything to the contrary in the Plan or applicable Award Agreement the transaction with respect to such Award must also constitute a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required by Code Section 409A. 14.6 14.7 “Code” means the Internal Revenue Code of 1986, as amended. “Committee” means a committee of one or more members of the Board, or of other individuals satisfying applicable laws, appointed by the Board to administer the Plan. 14.8 “Common Share” means one share of the Class A common stock of the Company. For purposes of Section 3.1, the Common Shares that may be added to the Plan from the Predecessor Plans shall refer to shares of Class B common stock remaining available under the Predecessor Plans or subject to awards granted under the Predecessor Plans; provided, however, that such shares of Class B common stock will become shares of Class A common stock for purposes of Awards granted pursuant to the Plan and that no Awards in respect of Class B common stock shall be granted under this Plan. 14.9 “Company” means Veeva Systems Inc., a Delaware corporation. 14.10 “Consultant” means a consultant or adviser who provides bona fide services to the Company, a Parent or a Subsidiary as an independent contractor and who qualifies as a consultant or advisor under Instruction A.1.(a)(1) of Form S-8 under the Securities Act. 14.11 Subsidiary. “Employee” means a common-law employee of the Company, a Parent or a 14.12 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 14.13 “Exercise Price,” in the case of an Option, means the amount for which one Common Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement. “Exercise Price,” in the case of a SAR, means an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value of one Common Share in determining the amount payable upon exercise of such SAR. A-12 Veeva Systems Inc. | 2017 Proxy Statement Appendix A Appendix A 14.14 “Fair Market Value” means the closing price of a Common Share on any established stock exchange or a national market system on the applicable date or, if the applicable date is not a trading day, on the last trading day prior to the applicable date, as reported in a source that the Administrator deems reliable. If Common Shares are not traded on an established stock exchange or a national market system, the Fair Market Value shall be determined by the Administrator in good faith on such basis as it deems appropriate. The Administrator’s determination shall be conclusive and binding on all persons. 14.15 “IPO Date” means the effective date of the registration statement filed by the Company with the Securities and Exchange Commission for its initial offering of Common Shares to the public. 14.16 “ISO” means an incentive stock option described in Code Section 422(b). 14.17 “NSO” means a stock option not described in Code Sections 422 or 423. 14.18 “Option” means an ISO or NSO granted under the Plan and entitling the holder to purchase Common Shares. 14.19 “Optionee” means an individual or estate holding an Option or SAR. 14.20 “Outside Director” means a member of the Board who is not an Employee. 14.21 “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date. 14.22 “Participant” means an individual or estate holding an Award. 14.23 “Performance Cash Award” means an award of cash granted under Section 10.1 of the Plan. P r o x y S t a t e m e n t 14.24 the performance criteria set “Performance Goal” means a goal established by the Administrator for the applicable Performance Period based on one or more of forth in Appendix A. Depending on the performance criteria used, a Performance Goal may be expressed in terms of overall Company performance or the performance of a business unit, division, Subsidiary or an individual. A Performance Goal may be measured either in absolute terms or relative to the performance of one or more comparable companies or one or more relevant indices. The Administrator may adjust the results under any performance criterion to exclude any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation, claims, judgments or settlements, (c) the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results, (d) accruals for reorganization and restructuring programs, (e) extraordinary, unusual or non-recurring items, (f) exchange rate effects for non-U.S. dollar denominated net sales and operating earnings, or (g) statutory adjustments to corporate tax rates; provided, however, that if an Award is intended to qualify as “performance-based compensation” within the meaning of Code Section 162(m), such adjustment(s) shall only be made to the extent consistent with Code Section 162(m). 14.25 “Performance Period” means a period of time selected by the Administrator over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to a Performance Cash Award or an Award of Restricted Shares or Stock Units that vests based on the achievement of Performance Goals. Performance Periods may be of varying and overlapping duration, at the discretion of the Administrator. Veeva Systems Inc. | 2017 Proxy Statement Appendix A A-13 Appendix A 14.26 “Plan” means this Veeva Systems Inc. 2013 Equity Incentive Plan, as amended from time to time. 14.27 “Restricted Share” means a Common Share awarded under the Plan. 14.28 “Restricted Stock Agreement” means the agreement between the Company and the recipient of a Restricted Share that contains the terms, conditions and restrictions pertaining to such Restricted Share. 14.29 “SAR” means a stock appreciation right granted under the Plan. 14.30 “SAR Agreement” means the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to his or her SAR. 14.31 “Securities Act” means the Securities Act of 1933, as amended. 14.32 “Service” means service as an Employee, Outside Director or Consultant. 14.33 Consultant. “Service Provider” means any individual who is an Employee, Outside Director or 14.34 “Stock Award” means any award of an Option, a SAR, a Restricted Share or a Stock Unit under the Plan. 14.35 “Stock Option Agreement” means the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to his or her Option. 14.36 “Stock Unit” means a bookkeeping entry representing the equivalent of one Common Share, as awarded under the Plan. 14.37 “Stock Unit Agreement” means the agreement between the Company and the recipient of a Stock Unit that contains the terms, conditions and restrictions pertaining to such Stock Unit. 14.38 “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date 14.39 “Substitute Awards” means Awards or Common Shares issued by the Company in assumption of, or substitution or exchange for, Awards previously granted, or the right or obligation to make future awards, in each case by a corporation acquired by the Company with which the Company combines to the extent permitted by NASDAQ Marketplace Rule 5635 or any successor thereto. A-14 Veeva Systems Inc. | 2017 Proxy Statement Appendix A Appendix A APPENDIX A PERFORMANCE CRITERIA The Administrator may establish Performance Goals derived from one or more of the following criteria when it makes Awards of Restricted Shares or Stock Units that vest entirely or in part on the basis of performance or when it makes Performance Cash Awards: Š Annual contract subscription fee value (net of associated third party royalties/payments or gross) Š Calculated bookings (i.e., revenue plus change in short term deferred revenue) Š Cash margin Š Collections Š Consulting utilization rates Š Customer renewals (measured in terms of revenue or customer count) Š Customer satisfaction or customer referenceability Š DSO Š Gross margin Š Internal rate of return Š Market share Š Net income after tax Š Net income before interest and tax Š Operating cash flow Š Operating income Š Personnel retention or personnel hiring measures Š Product release timelines Š Return on assets Š Return on equity Š Return on sales Š Revenue backlog Š Revenue per employee Š Stock price Š Technical system performance measures P r o x y S t a t e m e n t Š Bookings (annual or total contract value) Š Cash flow and free cash flow Š Cash position Š Committed annual recurring revenue (CARR) Š Costs of goods sold Š Customer retention rates from an acquired company, business unit or division Š Deferred revenue Š Earnings per share Š Headcount Š Margin contribution Š Net income Š Net income before tax Š Net income before interest, tax, depreciation and amortization Š Operating expenses Š Operating margin Š Product defect measures Š Product or research and development related measures Š Return on capital Š Return on investment and cash flow return on investment Š Revenue Š Revenue conversion from an acquired company, business unit or division Š Sales results Š Stock performance Š Technical support incident measures Š Working capital (e.g., system availability) Š Total stockholder return Š To the extent that an Award is not intended to comply with Code Section 162(m), other measures of performance selected by the Administrator Veeva Systems Inc. | 2017 Proxy Statement Appendix A A-15 Appendix A Any criteria used may be: Š Measured in absolute terms or on a per share basis Š Measured in terms of growth or as a percentage or percentage change Š Compared to another company or companies (including relative to a peer group or index) Š Measured against the market as a whole and/or according to applicable market indices Š Measured against the performance of the Company as a whole or a segment of the Company or a particular product line, line of business or geography Š Measured on a pre-tax or post-tax basis (if applicable) Š Measured on a GAAP or non-GAAP basis, as established by the administrator in advance. The attainment of performance goals may be measured solely on a corporate, subsidiary or business unit basis, or a combination thereof. Performance criteria may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure of the selected performance criteria. To the extent consistent with Code Section 162(m), the Administrator may adjust the results under any performance criterion to exclude any of the following events that occurs during a performance measurement period: (a) asset write- downs, (b) litigation, claims, judgments or settlements, (c) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (d) accruals for reorganization and restructuring programs and (e) any extraordinary, unusual or non-recurring items. A-16 Veeva Systems Inc. | 2017 Proxy Statement Appendix A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 31, 2017 OR ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number 001-36121 Veeva Systems Inc. (Exact name of Registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 20-8235463 (I.R.S. Employer Identification No.) 4280 Hacienda Drive Pleasanton, California 94588 (Address of principal executive offices) (925) 452-6500 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Class A Common Stock, par value $0.00001 New York Stock Exchange Securities registered pursuant to section 12(g) of the Act: None Indicate by a check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í No ‘ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No Í 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 Í No ‘ Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes Í No ‘ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ‘ F o r m 1 0 - K Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Í Smaller reporting company ‘ Non-accelerated filer ‘ Accelerated filer ‘ Indicate by check mark whether Act). Yes ‘ No Í (Do not check if a smaller reporting company) the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange The aggregate market value of voting stock held by non-affiliates of the Registrant on the last business day of the Registrant’s most recently completed second fiscal quarter, which was July 31, 2016, based on the closing price of $37.99 for shares of the Registrant’s Class A common stock as reported by the New York Stock Exchange, was approximately $4.3 billion. Shares of Class A common stock or Class B common stock held by each executive officer, director, and their affiliated holders have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of March 17, 2017, there were 106,623,787 shares of the Registrant’s Class A common stock outstanding and 32,077,230 shares of the Registrant’s Class B common stock outstanding. Portions of the Registrant’s Proxy Statement for the 2017 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. The proxy statement will be filed by the Registrant with the Securities and Exchange Commission within 120 days after the end of the Registrant’s fiscal year ended January 31, 2017. DOCUMENTS INCORPORATED BY REFERENCE Veeva Systems Inc. | Form 10-K TABLE OF CONTENTS Pursuant to Part IV, Item 16, a summary of Form 10-K content follows, including hyperlinked cross-references (in the EDGAR filing). This allows users to easily locate the corresponding items in this annual report on Form 10-K, where the disclosure is fully presented. The summary does not include certain Part III information that will be incorporated by reference from the Proxy Statement for the 2017 Annual Meeting of Stockholders, which will be filed within 120 days after our fiscal year ended January 31, 2017. Special Note Regarding Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 PART I Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1. 5 Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Item 2. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Item 3. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Item 4. PART II Item 5. Item 6. Item 7. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 MD&A is designed to provide a reader of Veeva’s financial statements with a narrative from the perspective of management. Veeva’s MD&A is presented in ten sections: Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Key Factors Affecting Our Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Components of Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Operating Expenses and Operating Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Non-GAAP Financial Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . 73 Consolidated Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . 75 Item 8. Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . 76 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Note 1. Summary of Business and Significant Accounting Policies . . . . . . . . . . . . . . . . . . 81 Note 2. Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Note 3. Short-Term Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Note 4. Property and Equipment, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Note 5. Intangible Assets and Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Note 6. Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 Note 7. Fair Value Measurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Note 8. Other Income (Expense), Net Note 9. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 2 Veeva Systems Inc. | Form 10-K 99 Note 10. Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 11. Net Income per Share Attributable to Common Stockholders . . . . . . . . . . . . . . 105 Note 12. Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Note 13. Related-Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Note 14. Information about Geographic Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Note 15. 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Note 16. Selected Quarterly Financial Data (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . 110 Change in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 Item 9. PART III Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . 113 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . 113 Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 PART IV F o r m 1 0 - K Veeva Systems Inc. | Form 10-K 3 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This annual report on Form 10-K 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, industry environment, business strategies and plans, 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 “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the negatives of those terms. trends, market sizing, competitive position, Forward-looking statements involve known and unknown risks, uncertainties and other factors 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, including those described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this annual report on Form 10-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Any forward-looking statement made by us in this annual report on Form 10-K speaks only as of the date on which it is made. 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 annual report on Form 10-K, the terms “Veeva,” “Registrant,” “we,” “us,” and “our” mean Veeva Systems Inc. and its subsidiaries unless the context indicates otherwise. 4 Veeva Systems Inc. | Form 10-K ITEM 1. BUSINESS Overview Veeva is a 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 the life sciences industry. Our products are designed to meet the unique needs of life sciences companies for their most strategic business functions — from research and development to commercialization. Our products are designed to help life sciences companies bring products to market faster and more efficiently, market and sell more effectively, and maintain compliance with government regulations. Veeva’s industry cloud solutions provide data, software, and services that address a broad range of needs, including multichannel customer relationship management, content management, master data management, and customer data. Our purpose-built solutions help life sciences companies streamline critical operations and business processes. Specifically, our commercial solutions enable life sciences companies to market and sell their products more effectively to healthcare professionals and healthcare organizations across multiple communication channels, including in-person and digital, while maintaining regulatory compliance. Our research and development solutions largely focus on the clinical, quality and regulatory functions of life sciences companies to help improve the management and pace of new product development while maintaining regulatory compliance. Because of our enterprise technology expertise and industry focus, we gain a unique, in-depth perspective into the needs and best practices of life sciences companies, which allows us to develop targeted new solutions and incorporate highly relevant enhancements into our existing solutions. We currently provide three major releases of our software solutions per year that are included in our subscription and not subject to an additional fee. Our rapid pace of innovation ensures customers have the most current version of software and innovative capabilities to meet their pressing business processes and requirements. Our cloud-based approach promotes greater operational efficiency for our customers by removing fragmented information technology systems and enabling the processes associated with mission- critical functions to be streamlined and modernized. We also help customers improve access to information across a broad ecosystem of internal and external stakeholders, including outsourcing partners. Customer success is a core value, and our focus on it has allowed us to deepen and expand our strategic relationships with customers regardless of size. Our industry cloud approach and multitenant architecture also allow our solutions to adapt more quickly to the market and regulatory changes that are most significant to our customers. We believe we are fast becoming a highly strategic provider to the life sciences industry, marked by a growing customer base that utilizes an increasing number of our solutions. The success of life sciences customers with Veeva solutions has attracted potential new customers in other regulated industries with similar needs. Veeva is now extending its solutions to adjacent industries in North America and Europe, including manufacturing, both process and discrete, and highly regulated services of all types. Our solutions help companies manage critical regulated processes and content efficiently to meet compliance requirements and enable secure collaboration across internal and external stakeholders. Our Industry Cloud Solutions for Life Sciences Our solutions for the life sciences industry focus on two key activities of life sciences companies: sales and marketing and research and development. Veeva Commercial Cloud is a suite of multichannel customer relationship management applications, master data management applications, Veeva Systems Inc. | Form 10-K 5 F o r m 1 0 - K territory allocation and alignment applications and customer reference and key opinion leader data and services. Veeva Vault is our enterprise content management platform and suite of applications for managing both commercial content and research and development content and data, including content and data from the clinical, regulatory and quality functions of life sciences companies. Veeva Commercial Cloud Veeva Commercial Cloud helps companies market and sell their products more effectively. The relationship foundation of Veeva Commercial Cloud is our patented multichannel customer management applications, which allow pharmaceutical and biotechnology companies to target and support sales and marketing to physicians, other healthcare professionals and healthcare organizations across multiple touch points, including in-person, email and online. To support the life sciences industry’s unique commercial business processes and regulatory compliance requirements, we provide applications with highly specialized functionality, such as prescription drug sample management with electronic signature capture, the management of complex affiliations between physicians and the organizations where they work, compliant email and the capture of medical inquiries from physicians. In order to deliver the best possible functionality and user experience and to enable offline use of our applications, we have designed and built applications for each mobile device platform we support, including Apple iPads, Windows mobile devices, Windows-based laptops and tablet PCs. Our multichannel customer relationship management applications as part of Veeva Commercial Cloud include: • Veeva CRM and Veeva Medical CRM enables customer-facing employees, such as pharmaceutical sales representatives, key account managers, and scientific liaisons to manage, integrated track, and optimize interactions with healthcare professionals utilizing a single, solution. As part of Veeva CRM, Veeva CRM Suggestions leverages the power of data science to recommend the next best actions to take with a given customer and the best channel for the recommended action through a dashboard for sales representatives. • Veeva CLM provides closed-loop marketing capabilities for use in in-person interactions with physicians. Veeva CLM allows customers to replace paper-based materials with interactive electronic marketing presentations while controlling the storage, distribution, presentation, and tracking of promotional materials. In addition, through native integration with Veeva Vault, Veeva CLM helps customers ensure that only the latest approved presentations are delivered to physicians, helping to maintain regulatory compliance. • Veeva CRM Approved Email provides for the management, delivery, and tracking of regulatory compliant email communication between sales representatives and their customers. Veeva CRM Approved Email includes capabilities to ensure compliant communications, such as managing physician email opt-in and opt-out. In addition, through native integration with Veeva Vault, Veeva CRM Approved Email helps customers ensure that only the latest approved email templates and documents can be delivered to physicians, helping to ensure regulatory compliance. • Veeva CRM Engage family of applications delivers the ability to interact with physicians online for meetings and webinars and provides closed-loop marketing capabilities for self-directed interactions via the web. • Veeva CRM Engage Meeting enables customer-facing employees to easily conduct compliant online meetings with healthcare professionals. Through Veeva CRM, Veeva CRM Engage Meeting allows reuse of approved closed-loop marketing content. Veeva CRM Engage Meeting allows for a common industry platform for online meetings. Leveraging a single solution to communicate with life sciences companies greatly simplifies accessibility for healthcare professionals, improving their experience and opening a new avenue for digital interaction. 6 Veeva Systems Inc. | Form 10-K • Veeva CRM Engage Webinar enables healthcare professionals to attend events via the web in a compliant way. Veeva CRM Engage Webinar is part of the multichannel Veeva CRM family, enabling full customer view across all channels. The solution is built to work with Veeva CRM Events Management for physical events, enabling better visibility and management of all event types. Native integration with Veeva Vault for content management means that only the latest, approved content is used. We expect Veeva CRM Engage Webinar to be available during our fiscal year ending January 31, 2018. • Veeva CRM Engage for Portals provides closed-loop marketing capabilities for self-directed customer interactions via the web. Through native integration with Veeva Vault, Veeva CRM Engage ensures only the latest, approved materials are delivered to physicians, helping to improve regulatory compliance. • Veeva CRM Events Management enables the planning, management and execution of group meetings with healthcare professionals, and helps life sciences companies track and manage spending in order to meet transparency reporting requirements. • Veeva Align enables life sciences companies to manage the allocation and alignment of sales and marketing resources to customers across all communication channels and define multichannel plans of action. Through native integration with Veeva CRM, Veeva Align allows the storage of historical and future alignments for incentive compensation calculations and automatically updates the active alignment of the field in Veeva CRM. We offer cloud-based solutions for customer master data to help life sciences companies create and maintain complete and accurate master records for individual healthcare professionals and healthcare organizations and for product master data to help life sciences companies create complete and accurate product master records. Our patented master data management solutions as part of Veeva Commercial Cloud include: • Veeva Network Customer Master is an industry-specific, cloud-based customer master software solution that de-duplicates, standardizes and cleanses healthcare professional and organization data from multiple systems and data sources to arrive at a single, consolidated customer master record. Veeva Network Customer Master comes pre-configured with a data model that is specific to life sciences and supports global harmonization as well as country, market and regional data specifications within a single system. Veeva Network Customer free text search and filtering Master also includes an intuitive user capabilities and the ability to track and measure data quality and operating efficiency through key performance indicators. It can be used seamlessly with Veeva OpenData to simplify the process of data delivery to customers and provide bi-directional integration of requests for data enrichment. Additionally, Veeva Network Customer Master can be operated in what we refer to as private mode when proprietary data from third party data providers is uploaded to the Veeva Network Customer Master solution. integration between In private mode, Veeva Network Customer Master and Veeva OpenData is disabled. Veeva Network Customer Master is fully integrated with Veeva CRM in order to make the most up-to-date healthcare professional and healthcare organization data available to sales and marketing users. interface, powerful the bi-directional F o r m 1 0 - K • Veeva Network Product Master de-duplicates, standardizes and cleanses life sciences product data from multiple systems and data sources to arrive at a single, consolidated product master record for enterprise use. With Veeva Network Product Master, brand management teams can easily create product definitions, groupings and hierarchies, helping them to ensure an accurate representation of the parent brand, local trade names, and approved indications in every market. Veeva Network Product Master delivers relevant product data, for consistent worldwide branding, more coordinated product launches, clearer enterprise visibility, and easier compliance reporting. Veeva Network Product Master replaces legacy master data management life sciences systems and toolkits with a business application that is purpose-built for Veeva Systems Inc. | Form 10-K 7 companies. Because it is part of Veeva Network, Veeva Network Product Master enables life sciences companies to see the relationships between healthcare professionals and products for more effective account coverage. Our customer and key opinion leader, or KOL, data solutions and services deliver reliable customer reference and KOL data for life sciences companies enabling customer engagement and compliance and providing a single, global source of stakeholder information for better identification and engagement. Our data solutions and services as part of Veeva Commercial Cloud include: • Veeva OpenData provides healthcare professional and healthcare organization reference data that includes demographic information, license information and status, specialty information, affiliations, and other key data such as digital profiles crucial to customer engagement and compliance. Veeva OpenData Customer Data replaces the need for a number of disparate external data feeds and is continuously updated from government and other authoritative industry sources. We maintain data quality and completeness through rigorous, automated, and steward-led verification. As of March 2017, Veeva OpenData Customer Data is available in 39 countries, and we plan to make it available in additional countries in the future. • Veeva OpenData Data Services further reduce the cost and complexity of managing healthcare professional and healthcare organization reference data by providing fast, responsive maintenance services. Instead of maintaining dedicated in-house data stewards to verify internal updates to data, Veeva OpenData Data Services manages these processes on behalf of our customers, including data quality consulting and enhancements and ongoing maintenance services. • Veeva OpenData Email provides email data to help improve outreach to healthcare professionals through digital channels. Veeva OpenData Email Services delivers a single source of healthcare professional email addresses that are continuously updated with data from trusted industry sources and verified by data stewards. • Veeva KOL Data and Services provide deep profile information for important healthcare professionals and other stakeholders, gleaned from their conference presentations, published research, clinical trials, grants, articles, and social media activity. It also maps their affiliations as well as social media and relationship networks. Veeva Vault Veeva Vault is a cloud-based enterprise content management platform and unified suite of applications for customers across commercial functions, including medical, sales, and marketing, and key research and development including clinical, regulatory, and quality. Veeva Vault functions, consists of 13 business applications and our proprietary Veeva Vault Platform. Veeva Vault includes unified suites of content-centric applications and data-centric applications on a single cloud platform to help customers eliminate internal system silos and streamline end-to-end business processes. Veeva Vault can be deployed as an integrated solution across multiple applications, enabling our customers to manage all their important documents and related data in a single, global system. In addition, the Veeva Vault the Veeva Vault Platform offers key functionality across all applications, such as searching, content viewing and annotation, comprehensive workflow and approvals, electronic signatures, reporting, and open application programming interfaces to allow for integration with other systems. The Veeva Vault Platform also includes a configuration toolset that allows customers to create their own Veeva Vault applications. Veeva Vault applications each include a unique data model, deep functionality, and pre-defined workflows required to support very specific industry processes. The Veeva Vault Platform was built 8 Veeva Systems Inc. | Form 10-K with the rigorous content and information management requirements of the life sciences industry in mind, trail capabilities that record actions and updates enabling customers to manage their highly regulated content and data in a compliant manner. including comprehensive audit Veeva Vault Clinical is the first cloud suite of clinical applications to unify clinical data management and clinical operations. Veeva Vault RIM improves regulatory business operations and compliance by providing a single authoritative source spanning submission documents, published dossiers, health authority interactions, and product registrations. With Veeva Vault Quality, life sciences can seamlessly manage quality processes and content in a single unified solution for greater visibility and control. Veeva Vault applications can be purchased separately or as unified suites of applications. The Veeva Vault applications primarily used by research and development departments of life sciences companies include: Veeva Vault Clinical • Veeva Vault eTMF is an electronic trial master file application that manages the repository of important documents for active and archived clinical trials for improved inspection readiness, visibility, and control. Vault eTMF enables collaboration between the life sciences company sponsoring the trial and outsourced partners, such as contract research organizations. All clinical trial documents are organized in Vault eTMF according to industry accepted guidelines in order to speed the transition from clinical trials to submission for regulatory approval. • Veeva Vault Study Startup enables life sciences companies to more efficiently manage the trials, accelerating time to first patient process of activating investigator sites for clinical enrollment and automating complicated processes while helping to maintain compliance with regulatory requirements and connectivity with Vault eTMF. Veeva Vault Study Startup allows sites, trial sponsors, and contract research organizations to access the same critical operational information, simplifying collaboration, and increasing efficiency. • Veeva Vault CTMS is a clinical trial management application that unifies information and documentation for a single source of truth across clinical operations. With Vault CTMS, trial sponsors, contract research organizations, and investigators can have one source for clinical master data with a single system of record for study, study country, and study site information. Life sciences companies can utilize Vault CTMS to help reduce complexity, increase transparency, and speed time to market. We expect Vault CTMS to be available during the first quarter of our fiscal year ending January 31, 2018. • Veeva Vault EDC is intended to help reduce the cost and complexity of clinical trials. Our unique approach to addressing the entire data ecosystem enables each contributor and consumer to see their role enhanced and simplified through the use of guided intelligence and thoughtful process design. This innovative and integrated approach to clinical data management is designed to improve data speed and quality. We expect Vault EDC to be available in the first half of our fiscal year ending January 31, 2018. • Veeva Vault eSource allows life sciences companies to transform site data collection and management for immediate data quality eliminating wasted time and cost by electronically capturing data at the source. Vault eSource delivers real-time site collaboration across sites, trial sponsors, and contract research organizations. Our differentiated approach to deliver Vault eSource and Vault EDC on the same platform eliminates multiple steps, including data transcription and source data verification. We expect Vault eSource to be available within the next year. Veeva Systems Inc. | Form 10-K 9 F o r m 1 0 - K Veeva Vault RIM • Veeva Vault Registrations enables life sciences companies to manage, track and report product and registration information worldwide, including registration status, variations, health authority questions and commitments and certification requests. With a single, global solution companies can streamline registration management and increase the speed of responses to health authorities. • Veeva Vault Submissions helps life sciences companies gather and organize all the documents and other content that should be included in a regulatory submission to a healthcare authority, such as the FDA. Vault Submissions organizes all content according to industry accepted guidelines, which helps to speed the time to regulatory submission by providing a single place for all researchers, contract research organizations, and other collaboration partners to prepare and manage the entire content life cycle. • Veeva Vault Submissions Archive is an authoritative source for submissions and correspondence that stores published submissions in a secure, globally accessible repository. Easy access and full visibility to submissions and correspondence, worldwide helps to enable faster, more accurate responses to health authorities. • Veeva Vault Submissions Publishing provides an integrated solution for dossier publishing that helps speed the preparation and processing time of regulatory submissions. Vault Submissions Publishing incorporates publishing capabilities within the Vault RIM suite. Users late-stage can cross-document hyperlink during initial authoring rather submission finalization. Our continuous publishing process performs validations and link-testing behind-the-scenes enabling users to identify issues earlier when they are easier to fix. By unifying the end-to-end process, publishing within the Vault RIM Suite offers greater automation, transparency, and speed. We expect Vault Submissions Publishing to be available within the next year. than waiting for Veeva Vault Quality • Veeva Vault QualityDocs enables the creation, review, approval, distribution and management of controlled documents, such as standard operating procedures, or SOPs, manufacturing recipes, and specifications. All life sciences companies that are developing or selling regulated products must have a quality management system in place. Vault QualityDocs provides the document control and management system needed to manage these processes and enable greater compliance, quality, and operational efficiency. • Veeva Vault QMS is a cloud-based quality management solution that provides best practice processes for deviations, internal and external audits, complaints, lab investigations, change controls, corrective and preventative actions, and proactive management initiatives. With a modern consumer web interface, Vault QMS is intuitive, easy to use, and helps to drive higher adoption with minimal ongoing support. The Veeva Vault applications primarily used by the commercial and medical departments of life sciences companies include: • Veeva Vault PromoMats enables life sciences companies to manage the end-to-end process for creation, approval, distribution, expiration, and withdrawal of commercial content across the full digital supply chain. Powerful capabilities such as review and approval, claims tracking, multichannel content distribution, and withdrawal and integrated digital asset management capabilities provide an enterprise, global repository for storing, tagging, searching, and sharing approved digital assets. • Veeva Vault MedComms provides life sciences companies with a single, validated source of medical content across multiple channels and geographies. Medical content is used by life 10 Veeva Systems Inc. | Form 10-K sciences companies for verbal and written communications with healthcare professionals and patients, including approved answers to questions received through a call center or company website. Vault MedComms helps speed the creation, approval, and delivery of medical content for more accurate scientific communications, better visibility, and traceability of medical content and faster response time to medical inquiries. Solutions for Regulated Industries Veeva is now bringing the benefits of Veeva Vault to a new set of customers in process and discrete manufacturing and highly regulated services industries. Veeva Vault was originally built from the ground up as a multitenant cloud application to meet some of the most demanding business and compliance requirements of life sciences companies. We have found that the ability to meet these requirements translates smoothly into many other highly regulated industries. Veeva is focusing on the quality applications market as its initial entry point with Veeva Vault QualityOne. Veeva Vault QualityOne is a unified, cloud solution that offers a global quality management system and document management system in a single application. Veeva Vault QualityOne simplifies the coordination, tracking, and conformance of the end-to quality process by transparently connecting the entire quality ecosystem. The solution provides a regulatory and compliance platform for customers to quickly adapt to new regulations. Professional Services and Support In addition to cloud-based solutions that meet the specific needs of our life sciences customers, we also offer professional services to help customers maximize the value they get from those solutions. The people on these teams have a combination of life sciences industry expertise, project management skills and deep technical acumen that we believe our customers highly value. Our professional services are offered directly to customers or through our systems integrator partners. Our professional services teams work together with our systems integrator partners to deliver projects. We offer professional services in the following areas: • implementation and deployment planning and project management; • requirements analysis, solution design and configuration; • systems environment management and deployment services; • services focused on advancing or transforming business and operating processes related to Veeva solutions; • technical consulting services related to data migration and systems integrations; • training on our solutions; and • ongoing managed services, such as outsourced systems administration. Our professional services teams are organized by specific expertise so that they can provide advice and support for best industry practices in the research and development and commercial departments of our customers. Our global systems integrator partners also deliver implementation and selected support services to customers who wish to utilize them. Our customers include Accenture, Cognizant Technology Solutions, Deloitte Consulting and other life sciences specialty firms. F o r m 1 0 - K Veeva Systems Inc. | Form 10-K 11 Our Customers As of January 31, 2017, we served 517 customers. For an explanation of how we define current customers, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Components of Results of Operations.” We deliver solutions to companies throughout the life sciences industry, including pharmaceuticals, biotechnology, medical products, contract sales organizations, and contract research organizations. Our customers range from the largest global pharmaceutical companies such as Bayer AG, Boehringer Ingelheim GmbH, Eli Lilly and Company, Gilead Sciences, Inc., Merck & Co., Inc., and Novartis International AG, to smaller pharmaceutical and Ironwood biotechnology companies including Alkermes plc, Grupo Ferrer Pharmaceuticals, Inc. and LEO Pharma A/S. For our fiscal years ended January 31, 2015, 2016, and 2017, we did not have any single customer that represented more than 10% of our total revenues. For a summary of our financial information by geographic location, see note 14 of the notes to our consolidated financial statements. Internacional S.A., Our Culture and Employees the life sciences industry works with on its most We have built our company culture on making customers successful and responding to our customers’ needs with speed. It is our aim to be among the few most trusted information technology partners that important data and information technology needs. The deep partnerships we forge with our customers help us shape our offerings to best meet industry needs and allow us to extend those relationships by providing additional solutions across a wide breadth of business areas. With a track record of ongoing, industry leading innovation and a steadfast commitment to our customers’ success we believe we are well positioned to continue to help the industry address a broader range of challenges and opportunities. We also believe our customer success focus provides a strategic advantage in our business development and sales efforts, as customers are strong advocates and refer others to our solutions. We have carefully built our culture by recruiting, selecting and developing employees who are highly focused on delivering success for customers. This is a crucial element of our hiring and evaluation processes throughout all departments. We believe this approach produces high levels of customer success and employee success. We also believe we provide employees a unique opportunity to develop and sell world-class, cloud-based applications and platforms within a specific industry. Historically, software developers had to choose between developing platforms for a broad, but generic set of customers, and building industry-specific solutions with limited further applicability. Our industry cloud approach empowers developers to build important applications and platforms that can become the standard in our industry while enabling sales personnel to sell a growing portfolio of solutions to a focused, deep set of life sciences companies. We believe that this unique opportunity will allow us to continue to attract top talent for our product development and sales efforts. As of January 31, 2017, we employed 1,794 people. We also engage temporary employees and consultants. None of our employees is represented by a labor union. We have not experienced any work stoppages, and we consider our relations with our employees to be very good. Technology Infrastructure and Operations Our solutions utilize a pod-based architecture in multiple data centers that allow for scalability, operational simplicity and security. Our solutions are hosted in data centers located in the United States, the European Union and Japan. We utilize third-parties to provide our data center infrastructure and manage the infrastructure on which our solutions operate. We utilize industry standard hardware and architect our solutions using redundant configurations to minimize service interruptions. We also utilize a highly available domain name service provider to reduce the potential for network-related disruptions. 12 Veeva Systems Inc. | Form 10-K Our technology is based on multitenant architectures that apply common, consistent management practices for all customers using our solutions. We enable multiple customers to share the same version of our solutions while securely partitioning their respective data. Portions of our multichannel customer relationship management applications are built on the Salesforce1 Platform. Our Veeva Vault and Veeva Network solutions are built upon our own proprietary platforms. We built the proprietary portions of our technology stack using recognized open source components. In addition, we use Amazon Web Services, which provides a scalable, distributed computing and storage infrastructure platform, for certain computing and data intensive functions of our solutions, such as analytic reporting, large data set manipulation and primary and redundant storage. We continually monitor our infrastructure for any sign of failure or pending failure, and we take preemptive action to attempt to minimize or prevent downtime. Our data centers employ advanced measures to ensure physical integrity and security, including redundant power and cooling systems, fire and flood prevention mechanisms, continual security coverage, biometric readers at entry points and anonymous exteriors. We also implement various disaster recovery measures, including full replication of hardware and data in our geographically distinct data centers, such that data loss would be minimized in the event of a single data center disaster. All users are authenticated, authorized and validated before they can access our solutions. Users must have a valid user ID and associated password to log on to our solutions. Our configurable security model allows different groups of users to have different levels of access to our solutions. Our solutions’ vulnerability is tested using internal tools prior to release, and we employ a third party to perform penetration and vulnerability tests on our solutions on at least an annual basis. Veeva has designed and implemented an information security management system, or ISMS, that is aligned with our customers’ standards for information security practices. Our ISMS has successfully undergone ISO 27001 certification. We also obtain independent third-party audit opinions related to security and availability annually, such as a Service Organization Controls, or SOC 2, Type II report, and ISO 27001 attestation reports. Sales and Marketing We sell our solutions through our direct sales organization. those solutions once they are approved for use. At a high level, life sciences companies are typically organized by the major functions of research and development for the creation and development of new solutions, and commercial, for the sales and marketing of In large life sciences companies, research and development and commercial business lines may also have separate technology and business decision makers. Accordingly, we market and sell our solutions to align with the distinct characteristics of the research and development buyer and the commercial buyer. In our largest regions, we have distinct research and development and commercial sales teams. Each of these teams is further divided to sell to the largest global pharmaceutical companies and to smaller life sciences companies. We believe the combination of our industry-focus and commitment to customer success provides strategic advantages and allows us to more efficiently market and sell our solutions as compared to horizontal cloud-based companies. We further believe that the marketplace is increasingly recognizing the benefits of cloud based solutions over on premise packaged and custom software solutions, which further enhances our ability to compete with that class of competitors. Our awareness, demand generation and sales cultivation programs are highly targeted to life sciences industry buyers. We believe that we further benefit from word-of-mouth marketing as customers endorse our solutions to their industry peers. This allows us to focus our sales and marketing efforts without the need for a larger number of sales executives. Veeva Systems Inc. | Form 10-K 13 F o r m 1 0 - K Our Relationship with salesforce.com related multichannel customer Veeva CRM and certain of our relationship management applications are developed on or utilize the Salesforce1 Platform of salesforce.com, inc. We are salesforce.com’s preferred and recommended Salesforce1 Platform application provider of sales automation solutions for drug makers in the pharmaceutical and biotechnology industry, or the pharma/ biotech industry. Our agreement provides that, subject to certain exceptions and specified remedies for breach, 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 the pharma/biotech industry. Our agreement with salesforce.com 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 Platform. However, our agreement restricts salesforce.com from competing with us with respect to sales opportunities for sales automation solutions for the pharma/biotech industry unless such competition has been pre-approved by salesforce.com’s senior management based on certain criteria specified in the agreement. Our agreement also imposes certain limits on salesforce.com entering into arrangements similar to ours with other parties with respect to sales automation applications for the pharma/biotech industry. Our agreement allows us to provide our customers with rights to the Salesforce1 Platform Unlimited Edition for use as combined with the proprietary aspects of certain of our multichannel customer relationship management applications, and subject to build additional applications on the Salesforce1 Platform. to salesforce.com’s standard prior review and approval processes, Under our agreement, salesforce.com provides the hosting infrastructure and data center for portions of our multichannel customer relationship management applications, as well as the system administration, configuration, reporting and other platform level functionality. In exchange, we pay salesforce.com a fee. Our current agreement with salesforce.com expires on September 1, 2025 and is renewable for five-year periods upon mutual agreement. We are obligated to meet minimum order commitments of $500 million over the term of the agreement, 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. If either party elects not to renew the agreement 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 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. We believe that we have a mutually beneficial strategic relationship with salesforce.com. 14 Veeva Systems Inc. | Form 10-K Quality and Compliance Our customers use our solutions for business activities that are subject to a complex regime of country and region specific healthcare laws and regulations across the globe. In order to best serve our customers, we must ensure that the data processed by our systems are accurate and secure and that they retain the level of confidentiality and privacy commensurate with the type of information managed. To comply with IT healthcare regulations, industry-specific capabilities must be designed for and embedded in all of our solutions. These capabilities include: robust audit trail tracking, compliant electronic signature capture, data encryption and secure access controls. In addition to design requirements, our solutions must be thoroughly tested to comply with the regulations that apply to electronic record keeping systems for the life sciences industry, which include: Regulation Regulation Description 21 CFR 820.75 U.S. FDA device regulation on system validation 21 CFR 211.68 U.S. FDA pharma GMP regulation on system validation 21 CFR 11 EU Annex 11 21 CFR 203 PFSB Notification, No. 0401022 (Japan) U.S. FDA requirement for maintenance of electronic records EU GMP requirement for maintenance of electronic records Drug sample tracking as required by the Prescription Drug Marketing Act Use of Electromagnetic Records and Electronic Signatures for Approval of, or License for, Drugs Each version of our solutions that are subject to regulations that require companies to maintain certain records and submit information to regulators as part of compliance verification undergoes validation testing against these and other relevant standards. Veeva develops a validation plan, performs installation qualification and operational qualification, and executes the protocols. The results of each independent validation are then reviewed and confirmed in a summary report by our quality and compliance team. As such, we maintain a dedicated team of quality and compliance experts that manages our processes for meeting the requirements of the FDA and other global life sciences this quality and compliance team include three separate regulatory agencies. The functions of domains: • quality systems oversees resource management, document management, computer validation, corrective and preventative action, and general quality oversight; • compliance oversees audit and inspection management, supplier management, and regulatory intelligence; and • the security office oversees information security and security awareness training and security incident response. Veeva has designed and implemented a quality management system (“QMS”) that is aligned with our customers’ regulatory standards for IT compliance. Our QMS is maintained in our own Veeva Vault QualityDocs application. A compliant QMS in the healthcare regulated environment consists of the following: • a comprehensive set of quality policies and procedures; • an independent quality assurance function that oversees development and maintenance of our software; • audit support of our customers’ regulatory obligation to perform due diligence on their suppliers; • computer systems validation aligned with healthcare industry best practices as outlined in published regulatory standards; Veeva Systems Inc. | Form 10-K 15 F o r m 1 0 - K • a resource management program to ensure employees have the requisite demonstrable level of education, experience, and training; • a risk management program to identify product realization and other business risks; and • an information security program to ensure IT controls conform to established standards. With respect to privacy and data protection, we comply with the patient privacy rules under the U.S. Health Insurance Portability and Accountability Act of 1996 that protect medical records and other personal health information by signing business associate agreements when requested by our customers. In the European Union, Veeva is a registered data controller for data used in our Veeva OpenData and Veeva KOL Data solutions and a data processor for our remaining applications, each as defined by the EU Data Protection Directive 95/46/EC. We are in the process of preparing our compliance plan for the General Data Protection Regulation (GDPR) and e-Privacy Regulation reforms, which enter into force on May 25, 2018. In December 2016, we successfully self-certified under the EU-U.S. Privacy Shield framework. Additionally, we routinely execute EU Standard Contractual Clauses, often referred to as Model Clauses, to legally facilitate international transfers of EU personal data. Our quality and compliance team also manages the process of customer audits, which is often a required due diligence step in customer purchase decisions. We believe our approach to quality and compliance reflects our focus on customer success and is a competitive differentiator. Research and Development Our ability to compete depends in large part on our continuous commitment to research and development and our ability to rapidly introduce new applications, features and functionality. Our research and development organization is responsible for the design, development and testing of our solutions and applications. Based on customer feedback and needs, we focus our efforts on developing new solutions functionality, applications and core technologies and further enhancing the usability, functionality, reliability, performance and flexibility of existing solutions and applications. technologies, Research and development expenses were $41.2 million, $66.0 million and $96.8 million for our fiscal years ended January 31, 2015, 2016 and 2017, respectively. Competition The markets for our solutions are global, rapidly evolving, highly competitive and subject to changing regulations, advancing technology and shifting customer needs. The solutions and applications offered by our competitors vary in size, breadth and scope. Our multichannel customer relationship management applications compete with offerings from large global enterprise software vendors, such as Oracle Corporation, and also compete with life sciences-specific customer relationship management providers, such as QuintilesIMS. We also compete with a number of vendors of cloud-based and on-premise customer relationship management applications that address only a portion of the functionality of our customer relationship management solutions. Veeva Vault, our regulated content and information management solutions, competes with offerings from large global content management platform vendors such as Microsoft Corporation, OpenText Corporation and Oracle, and with offerings from life sciences specific providers, such as Medidata Solutions, Inc. and Sparta Technologies Ltd. We also compete with professional services companies that provide solutions on these platforms, such as Computer Sciences Corporation. In the future, providers of horizontal cloud- based storage or file sharing products, such as Box.com or Amazon Web Services, may seek to Inc., PAREXEL International Corporation, BioClinica, 16 Veeva Systems Inc. | Form 10-K compete with our regulated content and information management solutions. In addition, we recently announced that we have begun selling Veeva Vault to companies in process and discrete manufacturing and highly regulated services industries. We have no experience selling certain of our Veeva Vault applications to companies in process and discrete manufacturing and highly regulated services industries, and therefore we anticipate having to compete with many existing solutions, including those listed above, custom-built software developed by third-party vendors or in-house by our potential customers and niche software providers. Our master data management solutions compete with master data software offerings from vendors such as IBM Corporation, Informatica Corporation, and other smaller providers, such as Reltio, Inc.. Our data and data services offerings compete with QuintilesIMS and many other data providers. We may also face competition from custom-built software developed by third-party vendors or developed in-house by our potential customers, or from applications built by our customers or by third parties on behalf of our customers using commercially available software platforms that are provided by third parties. We may also face competition from companies that provide cloud-based solutions in different target or horizontal markets that may develop applications or work with companies that operate in our target markets. 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. In some cases, our competitors are well-established providers of competitive solutions and have long-standing relationships with many of our current and potential customers, including large pharmaceutical and emerging biopharmaceutical companies. Oracle and QuintilesIMS, for example, each have greater name recognition, a much longer operating history, larger marketing budgets and significantly greater resources than we do. Many of our competitors may be able to devote greater resources to the development, promotion and sale of their products and services than we are able. Such competitors may be able to initiate or withstand substantial price competition, and may offer solutions competitive to certain of our solutions on a standalone basis at a lower price or bundled as part of a larger product sale, including the In addition, many of our competitors have established bundling of software solutions and data. marketing relationships, access to larger customer bases and distribution agreements with consultants, system integrators and resellers that we do not have. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their product offerings or resources. In addition, in order to take advantage of customer demand for cloud-based solutions, such competitors may expand their cloud-based solutions through acquisitions and organic development or may seek to partner with other leading cloud providers. For instance, in April 2015, IMS Health Holding, Inc. acquired the information solutions and CRM businesses of Cegedim SA. The combined entity competed with us in a number of product areas, including software solutions, data and data services. Further, in October 2016, IMS Health Holding, Inc. and Quintiles Transnational Holdings Inc., a contract research organization, combined in an all-stock merger of equals to form Quintiles IMS Holdings, Inc., which operates under the name QuintilesIMS. The impact of this transaction on our competitive environment is uncertain but increased competition from QuintilesIMS could negatively impact our business. We believe the principal competitive factors in our market include the following: • level of customer satisfaction; • regulatory compliance verification and functionality; • domain expertise with respect to life sciences; • ease of deployment and use of solutions and applications; Veeva Systems Inc. | Form 10-K 17 F o r m 1 0 - K • breadth and depth of solution and application functionality; • brand awareness and reputation; • modern and adaptive technology platform; • capability for customization, configurability, integration, security, scalability and reliability of applications; • total cost of ownership; • ability to innovate and respond to customer needs rapidly; • size of customer base and level of user adoption; and • ability to integrate with legacy enterprise infrastructures and third-party applications. We believe that we compete favorably on the basis of these factors and that the domain expertise required for developing and deploying successful solutions in the life sciences industry may hinder new entrants that are unable to invest the necessary capital to develop solutions that can address the functionality, requirements and regulatory compliance capabilities needed for the life sciences industry. Our ability to remain competitive will largely depend on our ongoing performance in the areas of solution and application development and customer support. Intellectual Property We rely on a combination of patents, trade secrets, copyrights and trademarks, as well as contractual protections, to establish and protect our intellectual property rights. We have developed a process for seeking patent protection for our technology innovations. To date, we have secured seven U.S. patents and two Japanese patents, which expire between May 2023 and October 2035, and we have 24 pending U.S. patent applications and four pending international patent applications. We plan to continue expanding our patent portfolio. We require our employees, consultants and other third parties to enter into confidentiality and proprietary rights agreements and control access to software, documentation and other proprietary information. Although we rely on our intellectual property rights, as well as contractual protections to establish and protect our proprietary rights, we believe that factors such as the technological and creative skills of our personnel, creation of new features and functionality and frequent enhancements to our applications are essential to establishing and maintaining our technology leadership position as provider of software solutions and applications to the life sciences industry. Despite our efforts to protect our proprietary technology and our intellectual property rights, unauthorized parties may attempt to copy or obtain and use our technology to develop applications with the same functionality as our application. Policing unauthorized use of our technology and intellectual property rights is difficult, and protection of our rights through civil enforcement mechanisms may be expensive and time consuming. Companies in our industry often own a number of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement, misappropriation or other violations of intellectual property or other rights. We are currently engaged in legal proceedings with competitors in which the competitors are asserting trade misappropriation and other claims, and we may face new allegations in the future that we have infringed the patents, trademarks, copyrights, trade secrets and other intellectual property rights of other competitors or non-practicing entities. We expect that we and others in our industry will continue to be subject to third-party infringement claims by competitors as the functionality of applications in different industry segments overlaps, and by non- practicing entities. Any of these third parties might make a claim of infringement against us at any time. 18 Veeva Systems Inc. | Form 10-K Corporate Information We were incorporated in the state of Delaware in January 2007 and changed our name to Veeva Systems Inc. from Verticals onDemand, Inc. in April 2009. Our principal executive offices are located at 4280 Hacienda Drive, Pleasanton, California 94588. Our telephone number is (925) 452-6500. Our website address is http://www.veeva.com. Information contained on our website is not incorporated by reference into this annual report on Form 10-K, and you should not consider information contained on our website to be part of this annual report on Form 10-K or in deciding whether to purchase shares of our Class A common stock. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on the Investors portion of our website at http://ir.veeva.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. 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 annual report on Form 10-K, including our 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. Risks Related to Our Business and Industry Our quarterly results may fluctuate significantly, which make it difficult to predict our future operating results and could prevent us from meeting investor expectations, or our own guidance, and which could adversely impact the value of our Class A common stock. Our quarterly results of operations, including our revenues, gross margin, operating margin, profitability, cash flows and deferred revenue, may vary significantly in the future 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, we issue guidance or provide commentary quarterly regarding our expectations for certain future financial results. Our ability to forecast our future operating results, including revenues, gross margin, operating margin, profitability, cash flows and deferred revenue, is limited given our relatively limited operating history and inability to control future events. Our guidance may prove to be incorrect and actual results may differ materially from our guidance. Fluctuations in our results or failure to achieve our forecasts and guidance may adversely impact the market price of our Class A common stock. F o r m 1 0 - K We expect the future growth rate of our revenues to decline. In our fiscal years ended January 31, 2015, 2016 and 2017, our total revenues grew by 49%, 31% and 33%, respectively, as compared to total revenues from the prior fiscal years. Please note that our total revenues for the fiscal year ended January 31, 2017 included a full year of revenue contribution from the Zinc Ahead business, which we acquired in September 2015. We expect the growth rate of our revenues to decline in future periods, which may adversely impact the value of our Class A common stock. Veeva Systems Inc. | Form 10-K 19 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, enhancing our existing solutions (including adapting certain of our Veeva Vault applications for companies in process and discrete manufacturing and highly regulated services industries) and improving the technology infrastructure, scalability, availability, security and support for our solutions; • expanding and deepening our including expenditures related to increasing the adoption of our solutions by the research and development departments of life sciences companies; relationships with our existing customer base, • sales and marketing, including expansion of our direct sales organization and global marketing programs; • expansion of our professional services organization; • international expansion; • integrating the business and headcount of Zinc Ahead; • employee compensation, including stock based compensation; • further build-out of our new corporate headquarters located in Pleasanton, California; • pending, threatened, or future legal proceedings, certain of which are described in Item 3. “Legal Proceedings” and which we expect to result in significant expense during the fiscal year ending January 31, 2018; and • general operations, IT systems and administration, including legal and accounting expenses related to being a public company. 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 increase or sustain our historical levels of profitability. 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 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, sensitive proprietary data related to the regulatory submission process for new medical treatments, and other sensitive information, which may include personal health information. As a result, unauthorized access or security breaches as a result of third-party action, employee error, malfeasance or otherwise could result in the loss of information, litigation, indemnity obligations, damage to our reputation and other liability. 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, we may be unable to anticipate these techniques or to implement adequate preventative measures. 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 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. 20 Veeva Systems Inc. | Form 10-K 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. relationship management solutions. Veeva Vault, our The markets for our solutions are highly competitive. Our multichannel customer relationship management applications compete with offerings from large global enterprise software vendors, such as Oracle Corporation, and also compete with life sciences-specific customer relationship management providers, such as QuintilesIMS. We also compete with a number of vendors of cloud-based and on- premise customer relationship management applications that address only a portion of the functionality of our customer regulated content and information management solutions, competes with offerings from large global content management platform vendors such as Microsoft Corporation, OpenText Corporation and Oracle, and with offerings from life sciences specific providers, such as Medidata Solutions, Inc., PAREXEL International Corporation, BioClinica, Inc., and Sparta Technologies Ltd. We also compete with professional services companies that provide solutions on these platforms, such as Computer Sciences Corporation. In the future, providers of horizontal cloud-based storage or file sharing products, such as Box.com or Amazon Web Services, may seek to compete with our regulated content and information management solutions. In addition, we have begun selling Veeva Vault to companies in process and discrete manufacturing and highly regulated services industries. We have no experience selling certain of our Veeva Vault applications to companies in process and discrete manufacturing and highly regulated services industries and therefore we anticipate having to compete with many existing solutions, including those listed above, custom-built software developed by third-party vendors or in- house by our potential customers and niche software providers. Our master data management solutions compete with master data software offerings from vendors such as IBM Corporation, Informatica Corporation, and other smaller providers such as Reltio, Inc. Our data and data services offerings compete with QuintilesIMS and many other data providers. We may also face competition from custom-built software developed by third-party vendors or developed in-house by our potential customers, or from applications built by our customers or by third parties on behalf of our customers using commercially available software platforms that are provided by third parties. We may also face competition from companies that provide cloud-based solutions in different target or horizontal markets that may develop applications or work with companies that operate in our target markets. 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. In some cases, our competitors are well-established providers of competitive solutions and have including large long-standing relationships with many of our current and potential customers, pharmaceutical and emerging biopharmaceutical companies. Oracle and QuintilesIMS, for example, each have greater name recognition, a much longer operating history, larger marketing budgets and significantly greater resources than we do. Many of our competitors may be able to devote greater resources to the development, promotion and sale of their products and services than we are able. Such competitors may be able to initiate or withstand substantial price competition, and may offer solutions competitive to certain of our solutions on a standalone basis at a lower price or bundled as part of a larger product sale, including the bundling of software solutions and data. In addition, many of our competitors have established marketing relationships, access to larger customer bases and distribution agreements with consultants, system integrators and resellers that we do not have. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their product offerings or resources. In addition, in order to take advantage of customer demand for cloud-based solutions, such competitors may expand their cloud-based solutions through acquisitions and organic development or may seek to partner with other leading cloud providers. For instance, in April 2015, IMS Health Holding, Inc. acquired the information solutions and CRM businesses of Cegedim SA. The combined entity competed with us in a number of product areas, including software solutions, data and data services. Further, in October 2016, IMS Health Holding, Inc. and Quintiles Transnational Holdings Inc., a contract research organization, combined in an all-stock merger of equals to form Quintiles IMS Veeva Systems Inc. | Form 10-K 21 F o r m 1 0 - K Holdings, Inc., which operates under the name QuintilesIMS. The impact of this transaction on our competitive environment is uncertain but increased competition from QuintilesIMS could negatively impact our business. 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 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. In our fiscal year ended January 31, 2017, we derived approximately 71% of our subscription services revenues and 68% of our total revenues from our Veeva Commercial Cloud solutions. Within Veeva Commercial Cloud, our core Veeva CRM application has achieved substantial penetration within the sales teams of pharmaceutical and biotechnology companies. If our efforts to sustain or further increase the use and adoption of our customer relationship management applications do not succeed, the growth rate of our revenues may decline. In our fiscal year ended January 31, 2017, we derived approximately 71% of our subscription services revenues and 68% of our total revenues from our Veeva Commercial Cloud solutions. We have realized substantial sales penetration of the available market for our core Veeva CRM application among pharmaceutical and biotechnology companies. A critical factor for our continued growth is our ability to sell additional user subscriptions for Veeva CRM and the other applications within Veeva Commercial Cloud to our existing and new customers. Any factor adversely affecting sales of these applications — including substantial penetration of the available market for our core Veeva CRM application, reductions in user subscriptions due to acquisitions of or business combinations between our customers, or increased purchasing scrutiny, which may result in reductions in user subscription or increased pricing pressure, could adversely affect the growth rate of our sales, revenues, operating results, and business. If our newer solutions, including certain Veeva Vault applications, Veeva Network Customer Master, Veeva Network Product Master, Veeva’s data offerings and our newer multichannel customer relationship management applications that complement Veeva CRM, 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 our Veeva Vault applications, Veeva Network Customer Master, Veeva Network Product Master, Veeva’s data offerings and our newer multichannel customer relationship management applications that complement Veeva CRM. These solutions were introduced relatively recently. Although certain Veeva Vault applications have begun to achieve meaningful market acceptance, it is uncertain whether these solutions will continue to grow as a percentage of revenues at a pace significant enough to support our expected growth. For instance, we have recently begun selling Veeva Vault applications to companies in process and discrete manufacturing and highly regulated services industries outside of life sciences, and we have announced our intent to sell new Veeva Vault applications, such as Veeva Vault EDC and Veeva Vault CTMS. We cannot be certain that our initiatives with respect to newer solutions and newer markets for our solutions will be successful. 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 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 may be adversely affected. 22 Veeva Systems Inc. | Form 10-K Our revenues, gross margin and operating 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 the achievement of payment services revenues fluctuate from quarter to quarter as a result of milestones in our professional services arrangements, and the requirements, complexity and timing of our customers’ implementation projects. Generally, a customer’s ongoing need for professional services decreases as the implementation and full deployment of such solutions is completed. In addition, we believe that the implementation projects for some of our newer software solutions will require a lower level of professional services as compared to the implementation projects for our Veeva CRM application. 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 and operating margin generated from professional services fees fluctuates based a number of factors which may be variable from period to period, including the average billable hours worked by our billable professional services personnel, our hourly rates for professional services, and the achievement of payment milestones in a period for which a portion of the associated professional services was delivered in a prior period. As a result of these and other factors, the gross margin and operating margin from our professional services may not increase on a quarterly basis in the future or at all. Our subscription agreements with our customers are typically 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 fee levels, our business and operating results will suffer. We derive a significant portion of our revenues from the renewal of existing subscription orders. Our customers’ orders for subscription services typically have a one-year term. However, more recently and with respect to solutions other than our core sales automation solution, we have begun to enter into orders with terms of up to five years. 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 availability, price, performance and functionality of competing solutions and services; • the effectiveness of our professional 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 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 Veeva Systems Inc. | Form 10-K 23 F o r m 1 0 - K fee, or our customers may discontinue clinical trials for which our solutions were 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 and professional services from us, our revenues may decline or our future revenues may be constrained. 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. total revenues, respectively. We rely on our In our fiscal years ended January 31, 2015, 2016 and 2017, our top 10 customers accounted for 54%, 50% and 45% of our reputation and recommendations from key customers in order to promote our solutions to potential customers. The loss of any of our key customers, or a failure of one or more of them to renew or expand user subscriptions, 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 largest customers or a business combination between two of our largest customers, we may suffer reductions in user subscriptions or non-renewal of our 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 is particularly pronounced as 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 employees. Competition for these employees is intense, especially with respect to sales and marketing personnel and engineers with high levels of experience in enterprise software and internet-related services. 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. 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 instance, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, it may adversely affect our ability to recruit and retain highly skilled employees. 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. 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 generally release updates to our solutions three times per year. These updates may contain undetected errors when first introduced or released. We have from time to time found defects in our solutions, and new errors in our existing solutions may be detected in the future. 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 an increase in collection cycles for accounts receivable, or could require us to increase our warranty provisions or incur the expense of litigation or substantial liability. 24 Veeva Systems Inc. | Form 10-K We depend on data centers and computing infrastructure operated by third parties for our solutions, and any disruption in these operations could adversely affect our business and subject us to liability. Our solutions are hosted from and use computing infrastructure provided from data centers operated by third parties, including salesforce.com, with respect to our solutions related to Veeva CRM, Amazon Web Services, and other providers. We expect to increase our usage of Amazon Web Services over time. We do not control the operation of these facilities or their underlying computing infrastructure. The owners of our non-salesforce.com data centers 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 data center operators is acquired, we may be required to transition to a new providers, and we may incur significant costs and possible service interruption in connection with doing so. In addition, the operators of the data centers 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 the operators of the data centers or any of the service providers with whom we or they contract may have negative effects on our business, the nature and extent of which are difficult to predict. Since we cannot easily switch our data center and computing infrastructure providers, any disruption with respect to our current providers would impact our operations and our business could be adversely impacted. locations, third-party data center Problems faced by our including those operated by salesforce.com, Amazon Web Services, or other providers could adversely affect the experience of our customers. For example, in May 2016, salesforce.com, inc. suffered a significant service outage with respect to a group of servers that hosts the Veeva CRM solution for certain of our Veeva CRM customers, which resulted in unplanned system unavailability and potential data loss. Certain customers claimed service level credits under their contracts with us, and the impact was not material to our financial results for our fiscal year ended January 31, 2017. Amazon Web Services has also and may in the future experience a significant service outages. Additionally, if our data centers, Amazon Web Services or other providers are unable to keep up with our growing needs for capacity, this could have an adverse effect on our business. For example, a rapid expansion of our business could affect the service levels at our data centers or cause such data centers and systems to fail. Any changes in third-party service levels at our data centers, Amazon Web Services or other providers or any disruptions or other performance problems with our solutions could adversely affect our reputation and may damage our customers’ stored files or result in lengthy interruptions in our services or potential losses of customer data. 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. Our agreements with third-party data providers may not entitle us to corresponding service level credits to those we offer to our customers. If we fail to effectively manage our technical operations infrastructure, our existing customers may experience service outages and our new customers may experience delays in the deployment of our solutions. We have experienced significant growth in the number of end users, transactions and data that our operations infrastructure supports. We seek to maintain sufficient excess capacity in our operations infrastructure to meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments. In addition, we need to properly manage our technological operations infrastructure in order to support version control, changes in hardware and software parameters and the evolution of our solutions. However, the provision of new hosting infrastructure requires adequate lead-time. 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 infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in customer Veeva Systems Inc. | Form 10-K 25 F o r m 1 0 - K usage, problems associated with our third-party data center and network providers and denial of service issues. 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. If we do not accurately predict our infrastructure requirements, our existing customers may experience delays in the deployment of our solutions or service outages that may subject us to financial penalties, liabilities and customer losses. For instance, our customer agreements typically provide service level commitments on a quarterly basis. If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our solutions, we may be contractually obligated to provide these customers with service level credits or our customers may terminate their agreements. financial 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 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, and as we continue to grow, we must effectively integrate, develop and motivate a large number of new employees, while executing our growth plan and maintaining the beneficial aspects of our culture. Our rapid growth has placed, and will continue to place, a significant strain on our management capabilities, administrative and operational infrastructure, facilities and other resources. We anticipate that additional investments in our facilities and computing infrastructure will be required to scale our operations. To effectively manage growth, we must continue 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. These enhancements and improvements will require additional investments and allocation of valuable management and employee time and resources. Failure to effectively manage growth could result in difficulty or delays in deploying our solutions, declines in quality or customer satisfaction, increases in these costs, difficulties in introducing new features or other operational difficulties, and any of difficulties could adversely impact our business performance and results of operations. 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. functionality. for portions of our multichannel customer Our Veeva CRM application, and certain portions of the multichannel customer relationship management applications that complement our Veeva CRM application, are developed on and/or utilize the Salesforce1 Platform of salesforce.com. Under our agreement, salesforce.com provides the hosting infrastructure and data center relationship management applications, as well as the system administration, configuration, reporting and other In exchange, we pay salesforce.com a fee. Our agreement with platform level 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. If we are not able to meet the minimum order commitments, the required true-up payments will negatively impact our margins, cash flows, cash balance and financial condition, and our stock price may decline. 26 Veeva Systems Inc. | Form 10-K Substantially 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. Substantially 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 consolidation of companies or bankruptcies within the life sciences industry — Consolidation within the life sciences industry has accelerated in recent years, and this trend could continue. We may lose customers due to industry consolidation, and we may not be able to expand sales of our solutions and services to new customers to replace lost customers. 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 entities consolidate, competition to provide solutions and services to industry participants will become more intense and the importance of establishing relationships with large industry participants will become greater. These industry participants may try to use their market power to negotiate price reductions for our solutions. If consolidation of our larger current 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 the combined company’s revenues to continue to achieve growth. In addition, if large life sciences merge, it would have the potential to reduce 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. Additionally, our customers with potential treatments in clinical trials may be unsuccessful and may subsequently declare bankruptcy. • The changing regulatory environment of the life sciences industry — Changes in regulations could negatively impact the business environment for our life sciences customers or could require us to expend significant resources in order to ensure that our solutions continue to meet the compliance needs of our customers or could prevent our customers from using certain of our solutions or certain functionality of our solutions. Healthcare laws and regulations are rapidly evolving and may change significantly in the future. In particular, legislation has been introduced in the United States that has led to uncertainty as to the future of certain healthcare laws and regulations regarding coverage for healthcare expenses, and legislation or regulatory changes regarding the pricing of healthcare treatments sold by life sciences companies has also recently been a topic of discussion by political leaders and regulators in the United States and elsewhere. • Changes in market conditions and practices within the life sciences industry — The expiration of key patents, changes in the practices of prescribing physicians, changes with respect to payer the policies and preferences of healthcare professionals and healthcare relationships, organizations with respect life sciences companies, to the sales and marketing efforts of changes in the regulation of the sales and marketing efforts and pricing practices of life sciences companies, and other factors could lead to a significant reduction in sales representatives that use our solutions or otherwise change the demand for our solutions. 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 — 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 and increased price competition. Veeva Systems Inc. | Form 10-K 27 F o r m 1 0 - K 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 factors that affect the life sciences industry generally. If the third-party providers of healthcare reference data and prescription drug sales data do not allow our customers to upload and use such data in our solutions, 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 QuintilesIMS. In order for our customers to upload such data to the Veeva CRM and Veeva Network Customer Master solution, such third-party data providers typically must consent to such uploads and often require that we enter into to such data, which include confidentiality agreements regarding our obligations with respect 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, QuintilesIMS currently will not consent to its healthcare professional or healthcare organization data being uploaded to Veeva Network Customer Master. If such third-party data providers 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 such data in our solutions, our sales efforts, solution implementations and productive use of our solutions by customers may be harmed, and our business, in turn, may be negatively impacted. We may be sued by third parties for alleged infringement of their proprietary rights or misappropriation of intellectual property. 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, in 2014, we settled a lawsuit with Prolifiq Software, Inc. in exchange for a license to certain asserted patents, and we are currently defending against assertions of trade secret misappropriation made by our competitors, Medidata and QuintilesIMS, as described in Item 3. “Legal Proceedings.” 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 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. Even if we were to prevail in such a dispute, 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. 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 instance, in 2015, we acquired the 28 Veeva Systems Inc. | Form 10-K key opinion leader business and products of Qforma, Inc., Mederi AG and other affiliated entities through a combination of stock and asset purchases. In 2015, we also acquired Zinc Ahead, a provider of commercial content management solutions. Additionally, 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. 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 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 accounting systems, operations and personnel of the acquired business; • problems arising from differences in applicable accounting standards or practices of the acquired business (for instance, non-U.S. businesses, like the Zinc Ahead business, 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; • 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, licensing, support or professional services model of the acquired company; • diversion of management’s attention from other business concerns; • adverse effects to business relationships with our existing business partners and customers as a result of the acquisition; • difficulty in retaining key personnel of the acquired business; • 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; • use of resources that are needed in other parts of our business; and • use of substantial portions of our available cash to consummate the acquisition. In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, 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. 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. Veeva Systems Inc. | Form 10-K 29 F o r m 1 0 - K 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. laws and regulations, Our customers use our solutions for business activities that are subject to a complex regime of global 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), and other laws and regulations. Our solutions are expected to be capable of use by our customers in compliance with such laws and regulations. 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. For example, on June 23, 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit.” Since a significant proportion of the regulatory framework in the United Kingdom is derived from EU directives and the regulatory regime applicable to our customers with regulations, Brexit could materially affect operations in the United Kingdom. Any such changes to the regulatory regime could have a material adverse effect on the life sciences industry generally and on our ability to adjust our solutions to comply with such changes. As we increase the number of products we offer, the complexity of adjusting our solutions to comply with legal and regulatory changes will increase. If we are unable to effectively manage this increase 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. Additionally, any failure of our customers to comply with laws and regulations applicable to the functions for which our solutions are used could result in fines, penalties or claims for substantial damages against our customers that may 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 to lawsuits that, even if us, regardless of our responsibility for the failure. We may be subject unsuccessful, could divert our resources and our management’s attention and adversely affect our business, and our insurance coverage may not be sufficient to cover such claims against us. Our sales cycles can be long and unpredictable, and our sales efforts require considerable investment of time and expense. 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 can 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 over 12 months or longer. In particular, we have limited history selling certain of our more recently announced Veeva Vault applications, such as Veeva Vault EDC and Veeva Vault CTMS, to the research and development departments of life sciences companies. In addition, we have only recently begun selling certain of our Veeva Vault applications to companies in process and discrete manufacturing and highly regulated services industries. As a result, our sales cycle for these applications may be lengthy and difficult to predict. We spend substantial time, effort and money 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 from customer to customer because of 30 Veeva Systems Inc. | Form 10-K including the discretionary nature of potential customers’ purchasing and budget various factors, 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 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 data centers are located in the United States, the European Union and Japan. The west coast of the United States and Japan each contains 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 or catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our solution development, lengthy interruptions in our services, breaches of data security and loss of critical data, all of which could have an adverse effect on our future operating results. Because key and substantial portions of our multichannel customer relationship management applications are built on salesforce.com’s Salesforce1 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 agreement which limits the companies to which we may sell our Veeva CRM solution. Our Veeva CRM application and certain portions of the multichannel customer relationship management applications that complement our Veeva CRM application are developed on or utilize the Salesforce1 Platform of salesforce.com, inc., and we rely on our agreement with salesforce.com to continue to use the Salesforce1 Platform as combined with the proprietary aspects of our multichannel customer relationship management applications. 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 Platform) or our trademarks and we do not remedy such 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 customer relationship management applications. A termination of the agreement would cause us to incur significant time and expense to acquire rights to, or develop, a replacement customer relationship management platform and we may not be successful in these efforts. Even if we were to successfully acquire or develop a replacement customer relationship management platform, some customers may decide not to adopt the replacement platform and may decide to use a different customer relationship management solution. If we were unsuccessful in acquiring or developing a replacement customer relationship management platform or acquired or developed a replacement customer relationship management 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 Platform as combined with the proprietary aspects of our solutions to our existing customers but would be Veeva Systems Inc. | Form 10-K 31 F o r m 1 0 - K 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 Platform. Our agreement with salesforce.com provides that we can use the Salesforce1 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 industry or products for non-drug departments of pharmaceutical and biotechnology companies. Sales of the Salesforce1 Platform in combination with our Veeva CRM industries would require the review and approval of salesforce.com. Our application to additional 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, 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 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 arrangements similar to ours with other parties with respect to sales automation applications for the pharma/biotech 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 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 Platform rather than buying our solutions. 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 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 Platform through our agreement with salesforce.com, our solutions incorporate or utilize certain third-party software and software components obtained under licenses from other companies. 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, if the third-party software we utilize has errors or otherwise malfunctions, the functionality of our solutions may be negatively impacted and our business may suffer. 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 and store personal data or identifying information regarding their employees and the medical professionals with whom our customers have contact, and, potentially, personal data (including potentially sensitive data such as health information) to clinical, operational or compliance regarding patients maintained by our customers pursuant 32 Veeva Systems Inc. | Form 10-K processes. In this capacity, we act as the data processor. We also collect and sell a database, via our OpenData and KOL Data solutions, for which we are the data controller. In many countries, national and local governmental bodies have adopted, are considering adopting, or may adopt laws and regulations regarding the collection, use, processing, storage and disclosure of personal information obtained from individuals, making compliance a complex task. for instance, In the United States, the U.S. Department of Health and Human Services promulgated patient privacy rules under the Health Insurance Portability and Accountability Act (HIPAA) of 1996, that protect medical records and other personal health information by limiting their use and disclosure, giving individuals the right to access, amend, and seek accounting of their own health information and limiting most use and disclosures of health information to the minimum amount reasonably necessary to accomplish the intended purposes. Operating under one of the world’s strictest data privacy regimes, Veeva is a registered Data Controller and Data Processor under EU Data Protection Directive 95/46/EC. We are in the process of significant data compliance and change management undertaking in order to prepare for the General Data Protection Regulation (GDPR) reform, which will enter into force on May 25, 2018. In light of the Brexit vote, there may be some overlap between the GDPR coming into force and the United Kingdom leaving the European Union; however, the United Kingdom’s Information Commissioner’s Office (ICO) has publicly stated that the UK will adopt GDPR into national law. We currently operate a data center in the United Kingdom that is used to provide our solutions to many of our European customers. Despite the ICO’s statements which decrease this risk, potential regulatory changes regarding the transfer of EU data to the United Kingdom could adversely affect our customers’ ability or desire to collect, use, process and store personal or health-related information using our data center in the United Kingdom, which could reduce demand for our solutions. In addition, we routinely utilize the EU Standard Contractual Clauses, often also referred to as Model Clauses, to ensure that our European customers have adequate assurance of our technical and organization controls on privacy, although this legal mechanism is currently under review by the European Court of Justice. In parallel, we self-certified with the U.S. Department of Commerce under the EU-U.S. Privacy Shield as of December 12, 2016 as a replacement to the now invalid EU-U.S. Safe Harbor framework as another means to legally facilitate international data transfers. Finally, there is also a trend toward countries enacting data localization requirements which are not particularly compatible with the 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. F o r m 1 0 - K Customers expect that our solutions can be used in compliance with such 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 legislative and regulatory initiatives could adversely affect our customers’ ability or desire to collect, use, process and store personal or health-related information using our solutions or to license data products from us, which could reduce demand for our solutions. these domestic and international third parties. Additionally, all of Deferred revenue and change in deferred revenue may not be an accurate indicator of our future financial results. Our subscription orders are generally billed beginning at the subscription commencement date in annual or quarterly increments. Many of our customers, including many of our large customers, are billed on a quarterly basis and therefore a substantial portion of the value of contracts billed on a quarterly basis will not be reflected in our deferred revenue at the end of any given quarter. Also, because the terms of orders for additional end users or solutions are typically coterminus with the Veeva Systems Inc. | Form 10-K 33 anniversary date of the initial order for a related solution, the terms of such orders for additional end users or solutions can be for relatively short periods of time, often less than one year and payment terms may also be quarterly. Therefore, the annualized value of such orders that we enter into with our customers will 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 renewal date adjustment had not occurred. Additionally, if a coterminus order of less than one year renews in the same fiscal year in which it was originally signed and has annual billing terms, the order will generate more deferred revenue in that fiscal year than the annual contract value of that order. Accordingly, we do not believe that change in deferred revenue or calculated billings, a metric commonly cited by financial analysts that is the sum of the change in deferred revenue plus revenue, are accurate indicators of future revenues for any given period of time. 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 could adversely affect the market price of our Class A common stock. Because we recognize subscription services revenues ratably over the term of the order for our subscription services, a significant downturn in our business may not be reflected immediately in our operating results, which increases the difficulty of evaluating 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 revenues for that quarter and we may not be able to offset a decline in revenues due to 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. Our financial results may be adversely affected by changes in accounting principles applicable to us. 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, in May 2014, the FASB issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes most current revenue recognition guidance, including industry-specific guidance. We will be required to implement this new revenue standard for our fiscal year beginning February 1, 2018. We expect that 34 Veeva Systems Inc. | Form 10-K implementation will require a significant amount of time and effort from our finance organization and that we will an incur additional audit fees in connection with implementation. 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. Sales to customers outside the United States or with international operations expose us to risks inherent in international sales. In our fiscal year ended January 31, 2017, sales to customers outside North America, which is primarily measured by the estimated location of the end users for subscription services revenues and the estimated location of the resources performing the services for professional services, accounted for approximately 45% 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 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 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 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; • 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 employment, tax, privacy and data protection and anti-bribery laws and regulations; • increased financial accounting and reporting burdens and complexities; • restrictions on the transfer of funds; • our ability to repatriate funds from abroad 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; Veeva Systems Inc. | Form 10-K 35 F o r m 1 0 - K • changes in trade relations and trade policy, including implementation of or changes to trade sanctions, tariffs, and embargos; 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. If we lose the services of our founder and Chief Executive Officer or other members of our senior management team, we may not be able to execute our business strategy. Our success depends in a large part upon the continued service of our senior management team. 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. We do not have employment agreements with members of our senior management team or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. The loss of our founder and Chief Executive Officer or one or more other members of our senior management team could have an adverse effect on our business. Our business could be adversely affected if our customers are not satisfied with the professional services provided by us or our partners, or with our technical support services. 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. 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 delivered or professional services rendered, 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 issues relating to our solutions. We may be unable to respond quickly enough to technical 36 Veeva Systems Inc. | Form 10-K accommodate short-term increases in customer demand for technical support services. Increased customer demand for our 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. 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. We have filed applications for a number of patents, and currently, we have only six issued U.S. and two Japanese patents. We rely primarily 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 relationships or prospective customer accuracy, may adversely impact our other 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. 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. By 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. 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. In addition to risks related to license requirements, usage 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 of open source software cannot be eliminated and could adversely affect our business. 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 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 or TAM, is subject to significant uncertainty and is based on Veeva Systems Inc. | Form 10-K 37 F o r m 1 0 - K 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. 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 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 and the market price of our Class A common stock could be adversely affected. 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. As disclosed in Item 9B of this annual report on Form 10-K, our management has concluded that our internal control over financial reporting is effective as of January 31, 2017, which report has been attested to by our independent registered public accounting firm. If in the future we have additional 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, the SEC, or other regulatory authorities, which could require additional financial and management resources. 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 similar transactional taxes in all jurisdictions in which we have sales, based on our belief 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 38 Veeva Systems Inc. | Form 10-K and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect 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. Such tax assessments, penalties and interest or future requirements 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, including as a result of our international operations, could harm our future results. tax liabilities are subject We are subject to income taxes in the United States and various foreign jurisdictions (including Australia, Belgium, Brazil, Canada, China, France, Germany, Hungary, India, Israel, Italy, Japan, Singapore, South Korea, Spain, Switzerland, Thailand, Ukraine and the United Kingdom) and our domestic and international to the allocation of expenses in differing jurisdictions and complex transfer pricing regulations administered by taxing authorities in various 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 laws, treaties or regulations, or their interpretation or enforcement, have become more unpredictable and may become more stringent, which could materially adversely affect 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 as a result of acquisitions, the valuation of deferred tax assets and liabilities, adjustments to income taxes upon finalization of tax returns, changes in available tax credits, 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. In addition, because substantially all of our intellectual property resides in the United States and is licensed through our parent U.S. entity, our effective tax rate may be higher than other companies that maintain and license intellectual Increases in our effective tax rate would reduce our property from outside the United States. profitability or in some cases increase our losses. The overall tax environment has made it increasingly challenging for multinational corporations to taxation in many jurisdictions. The Organization for Economic Co- operate with certainty about operation and Development, which represents a coalition of member countries, is supporting changes to numerous long-standing tax, including changes to the practice of shifting profits among affiliated entities located in different tax jurisdictions. Furthermore, a number of countries where we do business, including the United States and many countries in the European Union, are considering changes in relevant tax, accounting and other laws, regulations and interpretations, including changes to tax laws applicable to multinational corporations. 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. In addition, we may be subject to income tax audits by many tax jurisdictions throughout the world. Although we believe our income tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles, 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. 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 Veeva Systems Inc. | Form 10-K 39 F o r m 1 0 - K decision makers at the potential customers for our more recently announced solutions, including Veeva Vault CTMS, Veeva Vault EDC and our 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. We have incurred and will continue to incur significantly increased costs and devote substantial management time as a result of operating as a public company. As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and are required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC and the New York Stock Exchange, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Compliance with these requirements has increased our legal and financial compliance costs and has made some activities more time consuming and costly. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Our management and other personnel may need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we are incurring and expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. Although we have hired additional employees to comply with these requirements, we may need to hire more accounting, legal and financial staff in the future with appropriate public company experience and technical accounting knowledge to meet these requirements. We cannot accurately predict or estimate the amount or timing of additional costs we may incur as a result of becoming a public company. Further, if our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. Additional compensation costs and potential future equity awards may be required to properly liability that goes with public compensate our executives and directors as a result of the personal company status. Any such costs or awards will increase our compensation expenses, which would increase our general and administrative expense and could adversely affect our profitability. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance on reasonable terms. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. 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 40 Veeva Systems Inc. | Form 10-K 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 and 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, particularly in light of the Brexit vote and other recent political developments. Changes in exchange rates may negatively affect our revenues 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 have recently initiated a program during our fiscal year ending January 31, 2018 to 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 the market for cloud-based solutions develops more slowly than we expect or declines, our revenues could decrease and our business could be adversely affected. The market for cloud-based solutions is not as mature as the market for on-premise enterprise software in the life sciences and other regulated industries, and it is uncertain whether cloud-based solutions will sustain high levels of customer demand and market acceptance in these industries. The continued expansion 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 reduction in demand for cloud-based solutions, our revenues could decrease and our business could be adversely affected. F o r m 1 0 - K Risks Related to Ownership of Our Class A Common Stock 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. Since shares of our Class A common stock were sold in our initial public offering in October 2013 at a price of $20.00 per share, our stock price has ranged from $17.11 to $51.48 through March 28, 2017. technology companies in general 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 numerous factors, many of which are beyond our control. In addition to those risks described in this “Risk Factors” section, there are many other risks that could impact the value of our common stock, including: the trading prices of the securities of In addition, • fluctuations in the valuation of companies perceived by investors to be comparable to us or in valuation metrics, such as our price to revenues ratio or price to earnings ratio; • overall performance of the equity markets; Veeva Systems Inc. | Form 10-K 41 • the net increases in the number of customers, either independently or as compared with published expectations of industry, financial or other analysts that cover us; • changes in our other financial, operational or other metrics, regardless of whether we regard those as metrics that reflect the current state of or longer-term prospects of our business; • changes in the estimates of our operating results or changes in recommendations by securities analysts that elect to follow our Class A common stock; • announcements of technological innovations, new solutions or enhancements to services, strategic alliances or significant agreements by us or by our competitors; • announcements by us or by our competitors of mergers or other strategic acquisitions or rumors of such transactions involving us or our competitors; • announcements of customer additions and customer cancellations or delays in customer purchases; • recruitment or departure of key personnel; • the economy as a whole, market conditions in our industry and the industries of our customers; • macroeconomic and geopolitical factors and instability and volatility in the global financial markets; • trading activity by a limited number of stockholders who together beneficially own a majority of our outstanding Class A common stock; • the operating performance and market value of other similar companies; • changes in legislation relating to our existing or future solutions; • the size of our market float; 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 our executive officers (including our Chief Executive Officer) and directors and their affiliates; this will limit or preclude the ability of our investors to influence corporate matters. Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. As of January 31, 2017, stockholders who hold shares of Class B common stock, including our executive officers and directors and their affiliates, together hold approximately 76.7% of the voting power of our outstanding capital stock. Because of the ten-to-one voting ratio between our Class B common stock and Class A common stock, the 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 the foreseeable future. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock or may adversely affect the market price of our Class A common stock. 42 Veeva Systems Inc. | Form 10-K 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. 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 the net proceeds from any future securities offerings 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. 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. F o r m 1 0 - K 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. Veeva Systems Inc. | Form 10-K 43 In addition, as of January 31, 2017, 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 January 31, 2017, 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 January 31, 2017, are described in note 10 of the notes to our condensed 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. If securities or industry analysts do not continue to publish research or if they publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline. If The trading market for our Class A common stock will depend in part on the research and reports industry analysts cease that securities or industry analysts publish about us or our business. coverage of us or additional industry analysts do not initiate coverage of us, the trading price for our Class A common stock may be adversely affected. In addition, the stock prices of many companies in the high technology industry have declined significantly after those companies have failed to meet, or often times significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts. If our financial results fail to meet (or possibly significantly exceed) our announced guidance or the expectations of analysts or public investors, analysts could downgrade our common stock or publish unfavorable research about us. If one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Class A common stock could decrease, which might cause our Class A common stock price and trading volume to decline. Provisions in our restated certificate of incorporation and amended and restated 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, which gives our Chief Executive Officer, directors, executive officers, greater than 5% stockholders 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 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 2/3% of our stockholders; • require super-majority voting to amend some provisions in our restated certificate of incorporation and amended and restated bylaws; 44 Veeva Systems Inc. | Form 10-K • 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; • 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 exclusive forum for substantially all 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 choice of forum provision 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 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. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES We own our Pleasanton, California corporate headquarters, which currently accommodates our principal executive, development, engineering, marketing, business development, employee success, that our corporate information technology and administrative activities. We expect finance, headquarters will support the overall growth of our business for the next few years. legal, We also lease offices in San Francisco and San Carlos, California; Princeton, New Jersey; New York, New York; Hilliard, Ohio; Fort Washington and Radnor, Pennsylvania; Australia; Brazil; Canada; China; France; Germany; Hungary; India Japan; Korea; Mexico; Singapore; Spain; Thailand and the United Kingdom. We expect to expand our facilities capacity in certain field locations during our fiscal year ending January 31, 2018. We may further expand our facilities capacity after January 31, 2018 as our employee base grows. We believe that we will be able to obtain additional space on commercially reasonable terms. Veeva Systems Inc. | Form 10-K 45 F o r m 1 0 - K ITEM 3. LEGAL PROCEEDINGS Criterion Capital Section 16(b) Matter Seeking Disgorgement Short-swing Profits on Behalf of Veeva. On June 24, 2015, a purported stockholder filed a complaint pursuant to Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) in the U.S. District Court for the Southern District of New York against Criterion Capital Management, LLC, Criterion Capital Partners Master Fund, L.P., Criterion Capital Partners Master Fund GP, Ltd., Criterion Horizons Master Fund, L.P., Criterion Horizons Master Fund GP, Ltd., Criterion Vista Master Fund GP, L.P., Christopher H. Lord, David Riley, Tomoko Fortune (the “Criterion Defendants”), and Veeva Systems Inc. as nominal defendant (Greenfield v. Criterion Capital Mgmt., LLC et al. (15-CV-4937)). Thereafter, on August 3, 2015, the case was transferred to the U.S. District Court for the Northern District of California (15-CV- 3583). The action is purportedly brought on behalf of us and alleges that between March and December 2014 and in 2015, the Criterion Defendants purchased and sold our securities which resulted in illicit to disgorgement under the short-swing trading proscriptions in profits that are allegedly subject Section 16(b) of the Exchange Act. Due to the alleged failure by the Criterion Defendants to comply with their reporting obligations under the Exchange Act, the complaint does not specify the precise amount of alleged trades subject to disgorgement, other than estimating that the amount of profits in 2014 subject to disgorgement is “in excess of $10 million.” The complaint seeks disgorgement of any and all short-swing profits on behalf of us, plus attorneys’ fees and expenses. The complaint does not seek damages of any kind from us. On December 9, 2015, the purported stockholder filed an amended complaint. On February 1, 2016, the Criterion Defendants filed a motion to dismiss the amended complaint, which the Court granted in part on July 5, 2016. On July 29, 2016, the purported stockholder filed a second amended complaint. On September 21, 2016, the Criterion Defendants moved to dismiss the second amended complaint and a hearing on the motion to dismiss was held on December 7, 2016. The Court has not yet ruled on the Criterion Defendants’ motion to dismiss. Pursuant to Court order, we are not required to answer the complaint until after the Court has ruled on the Criterion Defendants’ motion to dismiss. We have engaged counsel to monitor the claims against the Criterion Defendants. IMS Litigation Matter. IMS’s Complaint Alleging Theft of Trade Secrets. On January 10, 2017, Quintiles IMS Incorporated and IMS Software Services, Ltd. (collectively, “IMS”) filed a complaint against us in the U.S. District Court for the District of New Jersey (Quintiles IMS Inc. v. Veeva Systems Inc. (No. 2:17- cv-00177)). In the complaint, IMS alleges that we have used unauthorized access to proprietary IMS data to improve our software and data products, and that our software is designed to steal IMS trade secrets. IMS further alleges that we have intentionally gained unauthorized access to IMS proprietary information to gain an unfair advantage in marketing our products, and that we have made false statements concerning IMS’s conduct and our data security capabilities. IMS asserts claims under both federal and state theft 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. 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 IMS’s claims lack merit. We have retained outside counsel, and we have begun vigorously defending ourselves against IMS’s lawsuit. 46 Veeva Systems Inc. | Form 10-K On March 13, 2017, we filed our Answer and Counterclaims to IMS’s complaint, a motion to dismiss all of IMS’s claims except for those asserted under the Lanham Act, and a motion to transfer the case to the U.S. District Court for the Northern District of California under 14 U.S.C. § 1404(a). The Court has not yet ruled on our motion to dismiss or motion to transfer. Discovery has not yet begun, no case management schedule has been set, and no trial date has been set. Veeva’s Counterclaim Complaint Alleging Violations of Federal and State Antitrust Laws. On March 13, 2017, we filed counterclaims in the action instituted by IMS in the U.S. District Court for the District of New Jersey. Our counterclaims allege that IMS has abused monopoly power as the dominant provider of data products for life sciences companies to exclude Veeva OpenData and Veeva Network from their respective markets. The counterclaims allege that IMS has engaged in various tactics to prevent customers from using our applications and has deliberately raised costs and difficulty for customers attempting to switch from IMS to our data products. The 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 and intentional interference with prospective economic advantage. The counterclaims seek injunctive relief, monetary damages exceeding $200 million, and attorneys’ fees. IMS’s responsive pleading is due April 17, 2017. Medidata Litigation 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 five 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. 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. We have retained outside counsel, and we have begun vigorously defending ourselves against Medidata’s lawsuit. On February 21, 2017, we notified Medidata by letter of our intent to compel arbitration and stay the action. On February 21, 2017, Medidata and its subsidiary MDSOL Europe Limited (collectively, “Medidata”) filed a First Amended Complaint asserting the same allegations and claims. On March 1, 2017, Medidata voluntarily dismissed the Individual Defendants without prejudice. On March 3, 2017, we filed a motion to compel the entire matter to private arbitration, which Medidata opposed. The motion is still pending before the Court. 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 Veeva Systems Inc. | Form 10-K 47 F o r m 1 0 - K 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. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 48 Veeva Systems Inc. | Form 10-K PART II. ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Price of Class A Common Stock Our Class A common stock has been listed on the New York Stock Exchange under the symbol “VEEV” since October 16, 2013, the date of our initial public offering (IPO). Prior to that date, there was no public trading market for our Class A common stock. The following table sets forth for the indicated periods the high and low closing sales prices of our Class A common stock as reported by the New York Stock Exchange. Fiscal year ended January 31, 2017 First quarter Second quarter Third quarter Fourth quarter Fiscal year ended January 31, 2016 First quarter Second quarter Third quarter Fourth quarter High Low $27.65 $37.99 $42.06 $47.36 $32.69 $29.00 $26.53 $28.99 $20.61 $26.71 $37.31 $37.54 $24.26 $26.31 $22.83 $23.06 There is no public trading market for our Class B common stock. Dividend Policy We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant. F o r m 1 0 - K Stockholders As of January 31, 2017, we had 18 holders of record of our Class A common stock and 100 holders of record of our Class B common stock. The actual number of holders of Class A common stock is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Recent Sales of Unregistered Securities None. Veeva Systems Inc. | Form 10-K 49 Stock Performance Graph This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act except to the extent we specifically incorporate it by reference into such filing. This chart compares the cumulative total return on our common stock with that of the S&P 500 Index and the S&P 1500 Application Software Index. The chart assumes $100 was invested at the close of market on October 16, 2013, which was our initial trading day, in the Class A common stock of Veeva Systems Inc., the S&P 500 Index and the S&P 1500 Application Software Index, and assumes the reinvestment of any dividends. Our offering price of our Class A common stock in our IPO, which had a closing stock price of $37.16 on October 16, 2013, was $20.00 per share. The stock price performance on the following graph is not necessarily indicative of future stock price performance. COMPARISON OF 39 MONTH CUMULATIVE TOTAL RETURN* Among Veeva Systems Inc., the S&P 500 Index, and S&P 1500 Application Software Index $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 10/16/13 1/14 1/15 1/16 1/17 Veeva Systems Inc. S&P 500 S&P 1500 Application Software Index Veeva Systems Inc. S&P 500 S&P 1500 Application Software Index 10/16/2013 1/31/2014 1/31/2015 1/31/2016 1/31/2017 100.00 100.00 100.00 85.55 106.69 108.05 77.40 121.87 118.44 64.85 121.06 136.00 113.91 145.32 170.39 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data should be read in conjunction with our audited consolidated financial statements and related notes thereto and with Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included elsewhere in this Form 10-K. The consolidated statement of income data for our fiscal years ended January 31, 2017, 2016 and 2015, and the selected consolidated balance sheet data as of January 31, 2017 and 2016 are derived from, and are qualified by reference to, the audited consolidated financial statements and are included in this Form 10-K. The consolidated statement of income data for fiscal years ended January 31, 2014 and 50 Veeva Systems Inc. | Form 10-K 2013 and the consolidated balance sheet data as of January 31, 2015, 2014 and 2013 are derived from audited consolidated financial statements which, are not included in this Form 10-K. Consolidated Statements of Income Data: Revenues: Subscription services Professional services and other Total revenues Cost of revenues(1): Cost of subscription services Cost of professional services and other Total cost of revenues Gross profit Operating expenses(1): Research and development Sales and marketing General and administrative Total operating expenses Operating income Other income (expense), net Income before income taxes Provision for income taxes Net income Fiscal Year Ended January 31, 2017 2016 2015 2014 2013 (in thousands, except share data) $434,316 $316,314 $233,063 $146,621 $ 73,280 109,727 92,907 80,159 63,530 56,268 544,043 409,221 313,222 210,151 129,548 94,386 79,295 71,180 71,034 55,005 60,653 173,681 142,214 115,658 36,199 46,403 82,602 370,362 267,007 197,564 127,549 96,750 116,803 48,841 65,976 80,984 41,458 41,156 56,203 30,239 262,394 188,418 127,598 107,968 78,589 69,966 26,327 41,507 20,411 88,245 39,304 18,852 38,164 57,016 72,532 14,638 19,490 8,371 42,499 30,033 1,667 109,635 40,831 28 (2,780) (804) (940) 78,617 24,157 67,186 26,803 38,500 14,885 29,093 10,310 $ 68,804 $ 54,460 $ 40,383 $ 23,615 $ 18,783 Net income attributable to Class A and Class B common stockholders, basic and diluted $ 68,801 $ 54,413 $ 40,138 $ 10,405 $ 3,480 Net income per share attributable to Class A and Class B common stockholders: Basic Diluted $ $ 0.51 0.47 $ $ 0.41 0.38 $ $ 0.31 0.28 $ $ 0.20 0.15 $ $ 0.17 0.11 Weighted-average shares used to compute earnings per share attributable to Class A and Class B common stockholders: Basic Diluted 135,698 132,020 127,713 51,725 20,887 147,578 144,977 144,204 68,024 30,599 F o r m 1 0 - K (1) Includes stock-based compensation as follows: Cost of revenues: Cost of subscription services Cost of professional services and other Research and development Sales and marketing General and administrative $ 1,109 $ 563 $ 273 $ 6,002 11,937 13,271 8,479 3,858 7,249 6,861 5,727 2,272 3,844 3,221 4,715 $ 118 902 1,700 1,788 2,442 Total stock-based compensation $ 40,798 $ 24,258 $ 14,325 $ 6,950 $ 3 120 238 140 214 715 Veeva Systems Inc. | Form 10-K 51 Consolidated Balance Sheet Data: Cash and cash equivalents Short-term investments Working capital Deferred revenue Total assets Convertible preferred stock Additional paid-in capital Total stockholders’ equity 2017 2016 2015 2014 2013 As of January 31, (in thousands) $217,606 $132,179 $129,253 $262,507 $31,890 301,266 465,081 213,562 917,700 — 440,677 652,978 214,024 314,685 157,419 705,799 — 361,691 505,249 268,620 366,314 112,960 544,890 — 317,881 406,833 25,625 267,115 67,380 370,308 — 231,534 280,096 14,276 32,601 38,785 89,820 6,933 2,101 33,966 ITEM 7. 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 “Selected Consolidated Financial Data” and our consolidated financial statements and notes thereto appearing elsewhere in this annual report on Form 10-K. In addition to historical 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 annual report on Form 10-K, including those set forth under “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” Overview Veeva is a 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 the life sciences industry. Our products are designed to meet the unique needs of life sciences companies for their most strategic business functions—from research and development to commercialization. Our products are designed to help life sciences companies bring products to market faster and more efficiently, market and sell more effectively, and maintain compliance with government regulations. Veeva Commercial Cloud, and in particular Veeva CRM, has made up the vast majority of our revenue historically. In our fiscal year ended January 31, 2017, we derived approximately 71% of our subscription services revenues and 68% of our total revenues from our Veeva Commercial Cloud solutions. The contribution of subscription services revenues and total revenues associated with our Veeva Vault solutions are expected to increase as a percentage of subscription services revenues and total revenues going forward. However, as compared to Veeva CRM, we have less experience selling Veeva Vault and certain applications within Veeva Commercial Cloud, including Veeva Network, our data offerings, and our newer multichannel customer relationship management applications. We are now extending our solutions to adjacent including manufacturing, both process and discrete, and highly regulated services of all types. Although certain of our Veeva Vault applications have begun to achieve meaningful market acceptance within the life sciences industry, to the extent that our more recently introduced solutions do not continue to achieve significant market acceptance, our business and results of operations may be adversely affected. industries in North America and Europe, For our fiscal years ended January 31, 2017, 2016 and 2015, our total revenues were $544.0 million, $409.2 million and $313.2 million, respectively, representing year-over-year growth in total revenues of 33% in fiscal year ended January 31, 2017 and 31% in fiscal year ended January 31, 2016. For our fiscal years ended January 31, 2017, 2016 and 2015, our subscription services revenues were $434.3 million, $316.3 million and $233.1 million, respectively, representing year-over-year 52 Veeva Systems Inc. | Form 10-K growth in subscription services revenues of 37% is fiscal year ended January 31, 2017 and 36% in fiscal year ended January 31, 2016. We expect the growth rate of our total revenues and subscription services revenues to decline in future periods. We generated net income of $68.8 million, $54.5 million and $40.4 million for our fiscal years ended January 31, 2017, 2016 and 2015, respectively. As of January 31, 2017, 2016 and 2015, we served 517, 400 and 276 customers, respectively. Our customer totals for each of our major solutions as of January 31, 2017, were 259 for Veeva CRM, 334 for Veeva Vault, 90 for Veeva OpenData, and 47 for Veeva Network. A single customer may be counted in more than one solution category if the customer has purchased multiple solutions. 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 customers that use our commercial solutions. Additionally, in September 2015, we completed our acquisition of the companies referred to as “Zinc Ahead” in an all-cash transaction. We are incorporating functionality from the Zinc Ahead products into our Veeva Vault PromoMats application. We have begun to and will seek to continue to convert the end users of the Zinc Ahead solutions to our Vault PromoMats application over time. However, we may not retain and convert existing Zinc Ahead customers to our Vault PromoMats application to the extent we previously planned, which could adversely affect our business. Customers who elect to use Zinc Ahead’s Zinc MAPS product will be supported through at least 2020. For a further description of our business and products, see “Business” above. 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. 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 to ensure the success of our customers’ implementations of our solutions; and in other operational and administrative functions to support our expected growth. We anticipate 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, expanded deployment of our solutions within their organizations, 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, 2017, 2016 and 2015, our subscription services revenue retention rate was 127%, 125% and 138%, respectively. Veeva Systems Inc. | Form 10-K 53 F o r m 1 0 - K Mix of Subscription and Professional Services Revenues. We believe our investments in professional services have driven customer success and facilitated the further adoption of our solutions by our customers. During the initial period of deployment by a customer, we generally provide a greater amount of configuration, implementation and training than later in the deployment. At the same time, many of our customers have historically purchased subscriptions for a limited set of their total potential end users or less than full adoption during their initial deployments. As a result of these factors, the proportion of total revenues for a customer associated with professional services is relatively high during the initial deployment period. Over time, we have observed and continue to expect the mix of the total revenues to shift more toward subscription services revenues. As a result, we expect proportion of our total revenues from subscription services to increase over time. 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 subscription or license fees for our data solutions. In addition, our acquired Zinc Ahead business had a limited number of perpetual license agreements with accompanying maintenance and hosting fees. We have included such on-going maintenance and hosting fees in our subscription services revenues. Professional services and other fees from implementation services, configuration, data services, training and managed services related to our solutions. For our fiscal year ended January 31, 2017, subscription services revenues constituted 80% of total revenues and professional services and other revenues constituted 20% of total revenues. revenues consist primarily of We enter into master subscription agreements with our customers and count each distinct master subscription agreement that has not terminated or expired and that has orders for which we have recognized revenue in a 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. 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. With respect to data services customers that have not purchased one of our software solutions, we count as a distinct customer the party to each agreement that has a known and recurring payment obligation. For purposes of determining our total customer count, we count each entity that uses a legacy Zinc Ahead product as a distinct customer if such entity is not otherwise a customer of ours. New subscription orders typically have a one-year term and automatically renew unless notice of cancellation is provided in advance. If a customer adds end users or solutions to an existing order, such additional orders will generally be coterminus with the anniversary date of the initial order, and as a result, orders for additional end users or solutions will commonly have an initial term of less than one year. Subscription orders are generally billed at the beginning of the subscription commencement date in annual or quarterly increments. Because the term of orders for additional end users or solutions is commonly less than one year and payment terms may also be quarterly, the annualized value of such orders that we enter into with our customers will 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 54 Veeva Systems Inc. | Form 10-K if the adjustment had not occurred. Additionally, if a coterminus order of less than one year renews in the same fiscal year in which it was originally signed and has annual billing terms, the order will generate more deferred revenue in that fiscal year than the annual contract value of that order. Accordingly, we do not believe that change in deferred revenue or calculated billings, a metric commonly cited by financial analysts that is the sum of the change in deferred revenue plus revenue, are accurate indicators of future revenues for any given period of time. More recently and with respect to solutions other than our core sales automation solution, we have begun to enter into orders with terms of up to five years. Such multi-year orders are billed in annual or quarterly increments. Subscription services revenues are recognized ratably over the order term beginning when the solution has been provisioned 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. Subscription services revenues are affected primarily by the number of customers, the number of end users (or other subscription usage metric) at each customer that uses our solutions and the number of solutions subscribed to by each customer. in certain cases, We utilize our own professional services personnel and, third-party subcontractors to perform our professional services engagements with customers. Our professional services engagements are primarily billed on a time and materials basis and revenues are typically recognized as the services are rendered. Certain professional services revenues are based on fixed fee arrangements and revenues are recognized based on the proportional performance method. In some cases, the terms of our time and materials and fixed fee arrangements may require that we defer the recognition of revenue until contractual conditions are met. In those circumstances, revenue recognition may be sporadic, based upon the achievement of such contractual conditions. Professional services revenues are affected primarily by our customers’ demands for implementation services, configuration, data services, training and managed services in connection with our solutions. F o r m 1 0 - K With respect to our acquired Zinc Ahead business, we have not established stand-alone value for professional services and, therefore, we account for multiple element arrangements as a combined unit of accounting. As a result, professional services revenues for our Zinc Ahead business, when delivered as part of a multiple-element arrangement, are generally recognized ratably over the term of the associated subscription services. Cost of Revenues Cost of subscription services revenues for all of our solutions consists of expenses related to third- party data centers, personnel related costs associated with hosting our subscription services and providing support, including our data stewards, operating lease expense associated with computer equipment and software and allocated overhead, amortization expense associated with capitalized internal-use software related to our subscription services and amortization expense associated with purchased intangibles related to our subscription services. Cost of subscription services revenues for Veeva CRM and certain of our multichannel customer relationship management applications also include fees paid to salesforce.com, inc. for our use of the Salesforce1 Platform and the associated hosting infrastructure and data center operations that are provided by salesforce.com. We intend to continue to invest additional resources in our subscription services to enhance our product offerings and increase our delivery capacity. For example, we may add or expand third-party data center capacity in the future and continue to make investments in the availability and security of our solutions. The timing of when we incur these additional expenses will affect our cost of revenues in absolute dollars in the affected periods. Cost of professional services and other revenues consists primarily of employee-related expenses associated with providing these services, including salaries, benefits and stock-based compensation expense, the cost of third-party subcontractors, travel costs and allocated overhead. The cost of Veeva Systems Inc. | Form 10-K 55 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 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.” Research and Development. Research and development expenses consist primarily of employee-related expenses and allocated overhead, offset by any internal-use software development costs capitalized during the same period. We continue to focus our research and development efforts on adding new features and applications, 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 acquired customer contracts, customer relationships and brand, travel-related expenses and allocated overhead. Sales commissions and other program spend costs are expensed as incurred. Consequently, the recognition of this expense on our income statement generally precedes the recognition of the related revenue. 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, acquisition-related transaction costs, other corporate expenses and allocated overhead. Other Income (Expense), Net Other income (expense), net consists primarily of transaction gains or losses on foreign currency, interest income and amortization of premiums paid on investments. 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 9 of the notes to our consolidated financial statements. 56 Veeva Systems Inc. | Form 10-K Results of Operations The following tables set forth selected consolidated statements of operations data and such data as a percentage of total revenues for each of the periods indicated: Consolidated Statements of Income Data: Revenues: Subscription services Professional services and other Total revenues Cost of revenues(1): Cost of subscription services Cost of professional services and other Total cost of revenues Gross profit Operating expenses(1): Research and development Sales and marketing General and administrative Total operating expenses Operating income Other income (expense), net Income before income taxes Provision for income taxes Net income (1) Includes stock-based compensation as follows: Cost of revenues: Cost of subscription services Cost of professional services and other Research and development Sales and marketing General and administrative Total stock-based compensation Fiscal Year Ended January 31, 2017 2016 2015 (in thousands) $434,316 $316,314 $233,063 109,727 92,907 80,159 544,043 409,221 313,222 94,386 79,295 71,180 71,034 55,005 60,653 173,681 142,214 115,658 370,362 267,007 197,564 96,750 116,803 48,841 65,976 80,984 41,458 41,156 56,203 30,239 262,394 188,418 127,598 107,968 78,589 69,966 1,667 109,635 40,831 28 (2,780) 78,617 24,157 67,186 26,803 $ 68,804 $ 54,460 $ 40,383 $ 1,109 $ 563 $ 273 6,002 11,937 13,271 8,479 3,858 7,249 6,861 5,727 2,272 3,844 3,221 4,715 $40,798 $24,258 $14,325 F o r m 1 0 - K Veeva Systems Inc. | Form 10-K 57 Fiscal Year Ended January 31, 2017 2016 2015 79.8% 77.3% 74.4% 20.2 100.0 22.7 25.6 100.0 100.0 17.3 14.6 31.9 68.1 17.8 21.5 9.0 48.3 19.8 0.3 20.1 7.5 17.4 17.4 34.8 65.2 16.1 19.8 10.1 46.0 19.2 — 19.2 5.9 17.6 19.4 37.0 63.0 13.1 17.9 9.6 40.6 22.4 (0.9) 21.5 8.6 12.6% 13.3% 12.9% 2017 to 2016 % Change 2016 to 2015 % Change 37% 18 33 36% 16 31 Consolidated Statements of Income Data: Revenues: Subscription services Professional services and other Total revenues Cost of revenues: Cost of subscription services Cost of professional services and other Total cost of revenues Gross profit Operating expenses: Research and development Sales and marketing General and administrative Total operating expenses Operating income Other income (expense), net Income before income taxes Provision for income taxes Net income Revenues Revenues: Subscription services Fiscal Year Ended January 31, 2017 2016 2015 (dollar amounts in thousands) $434,316 $316,314 $233,063 Professional services and other 109,727 92,907 80,159 Total revenues Percentage of revenues: Subscription services Professional services and other Total revenues $544,043 $409,221 $313,222 80% 20 100% 77% 23 100% 74% 26 100% 58 Veeva Systems Inc. | Form 10-K Fiscal 2017 Compared to Fiscal 2016. Total revenues increased $134.8 million, of which $118.0 million was from growth in subscription services revenues. The increase in subscription services revenue consisted of $69.0 million of subscription services revenue attributable to Veeva Vault solutions, including the full year contribution from the acquired Zinc Ahead business, and $49.0 million of subscription services revenue attributable to Veeva Commercial Cloud solutions. The geographic mix of subscription services revenues, which is primarily measured by the estimated location of the end users of our subscription services, was 53% from North America, 30% from Europe and other and 17% from Asia in fiscal year ended January 31, 2017 as compared to subscription services revenues of 53% from North America, 28% from Europe and other and 19% from Asia in fiscal year ended January 31, 2016. Professional services and other revenues increased $16.8 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. The geographic mix of professional services and other revenues, as measured by the estimated location of the resources performing the services, was 60% from North America, 28% from Europe and other and 12% from Asia in fiscal year ended January 31, 2017 as compared to 62% from North America, 27% from Europe and other and 11% from Asia in fiscal year ended January 31, 2016. Subscription services revenues were 80% of total revenues for fiscal year ended January 31, 2017, compared to 77% of total revenues for fiscal year ended January 31, 2016, reflecting the faster growth rate of our subscription services revenues as compared to the growth rate of our professional services and other revenues as our customers have expanded their use of our solutions across new divisions, new geographies, and new products. Existing customers often do not require the same level of professional services for subsequent additions of subscription services compared with the level required for new customers. Fiscal 2016 Compared to Fiscal 2015. Total revenues increased $96.0 million, of which $83.3 million was from subscription services revenues. The increase in subscription services revenue consisted of $37.2 million of subscription services revenue attributable to Veeva Vault solutions and $46.1 million of subscription services revenue attributable to Veeva Commercial Cloud solutions. The acquired Zinc Ahead business contributed $6.0 million in subscription services revenue from September 29, 2015, the date of acquisition, through January 31, 2016. The geographic mix of subscription services revenues, as measured by the estimated location of the end users for subscription services, were 53% from North America, 28% from Europe and other and 19% from Asia in fiscal year ended January 31, 2016 as compared to subscription services revenues of 54% from North America, 26% from Europe and other and 20% from Asia in fiscal year ended January 31, 2015. F o r m 1 0 - K Professional services and other revenues increased $12.7 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. The acquired Zinc Ahead business contributed $0.7 million in professional services and other revenue from September 29, 2015, the date of acquisition, through January 31, 2016. Professional services revenues from North America, as measured by the estimated location of the user for which the services were performed, made up 62% of professional services revenues in fiscal year ended January 31, 2016 and 59% of professional services revenues in fiscal year ended January 31, 2015. This shift in geographic revenue mix was primarily due to the more rapid rate of revenue growth from deployments in North America as compared to the combined rate of revenue growth from deployments in Europe and Asia. Veeva Systems Inc. | Form 10-K 59 Subscription services revenues were 77% of total revenues for fiscal year ended January 31, 2016, compared to 74% of total revenues for fiscal year ended January 31, 2015, reflecting the faster growth rate of our subscription services revenues as compared to the growth rate of our professional services and other revenues as our customers expanded their use of our solutions across new divisions, new geographies, and new products. Over time, we expect the proportion of our total revenues from subscription services to increase. Costs and Expenses Fiscal Year Ended January 31, 2017 2016 2015 2017 to 2016 % Change 2016 to 2015 % Change (dollars in thousands) Cost of revenues: Cost of subscription services $ 94,386 $ 71,180 $ 55,005 Cost of professional services and other 79,295 71,034 60,653 Total cost of revenues $173,681 $142,214 $115,658 33% 12 22 29% 17 23 Gross margin percentage: Subscription services Professional services and other Total gross margin percentage Gross profit Headcount (at period end) 78% 28 68% 77% 24 65% 76% 24 63% $ 370,362 $ 267,007 $ 197,564 623 512 372 39% 22% 35% 38% Fiscal 2017 Compared to Fiscal 2016. Cost of revenues increased $31.5 million, of which $23.2 million was related to cost of subscription services. The increase in cost of subscription services was primarily due to an increase in the number of users of our subscription services, which drove an increase of $7.0 million in fees paid to salesforce.com, a $4.7 million increase in third-party data center costs, and a $3.3 million increase in costs primarily related to third party data stewards for KOL and OpenData products. In addition, we had a 40% increase in the headcount of our subscription services team, which drove a $5.5 million increase in employee compensation-related costs (includes an increase of $0.5 million in stock-based compensation and the full year impact of the headcount from the acquired Zinc Ahead business). We also had a $1.6 million increase in amortization of purchased intangibles primarily as a result of the Zinc Ahead acquisition. We expect cost of subscription services revenues to increase in absolute dollars in the near term as we enter into new orders for our subscription services. Cost of professional services and other revenues increased $8.3 million, primarily due to a 15% increase in headcount of our professional services team, which drove a $10.6 million increase in employee compensation-related costs (includes an increase of $2.2 million in stock-based compensation and the full year impact of the headcount from the acquired Zinc Ahead business). This increase was offset by a decrease of $3.4 million in third-party subcontractor costs. We expect cost of professional services and other revenues to increase as we add personnel to our global professional services organization. Fiscal 2016 Compared to Fiscal 2015. Cost of revenues increased $26.6 million, of which $16.2 million was related to cost of subscription services. The increase in cost of subscription services was primarily due to an increase in the number of users of our subscription services, which drove an increase of $8.5 million in fees paid to salesforce.com, a $2.7 million increase in third-party data center 60 Veeva Systems Inc. | Form 10-K costs, a $2.0 million increase in employee compensation-related costs (includes the impact of an increase of $0.3 million in stock-based compensation and a 49% increase in the headcount of our subscription services team, including headcount from the acquired Zinc Ahead business), and a $1.3 million increase in amortization of purchased intangibles. Cost of professional services and other revenues increased $10.4 million, primarily due to a $7.7 million increase in employee compensation-related costs (includes the impact of an increase of $1.6 million in stock-based compensation and a 34% increase in the headcount of our professional services team, including headcount from the acquired Zinc Ahead business) and an increase of $2.3 million in third-party subcontractor costs. Gross profit as a percentage of total revenues for year ended January 31, 2017, 2016 and 2015 was 68%, 65% and 63%, respectively. The increases compared to the prior periods is largely due to an increase in the proportion of total revenues attributable to subscription services revenues, which have higher gross margins, as compared to professional services and other revenues, as well as the continued growth of our Veeva Vault, Veeva Network master data management solutions, and our newer multichannel customer relationship management applications that compliment Veeva CRM, all of which have slightly higher subscription services gross margins than our core Veeva CRM application. 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 to increase in absolute dollars and as a percentage of revenue for the foreseeable future which could result in a slight decrease in our operating margin. Research and Development Research and development Percentage of total revenues Headcount (at period end) Fiscal Year Ended January 31, 2017 2016 2015 2017 to 2016 % Change 2016 to 2015 % Change (dollars in thousands) $96,750 $65,976 $41,156 47% 18% 16% 13% 607 480 286 26% 60% 68% F o r m 1 0 - K Fiscal 2017 Compared to Fiscal 2016. Research and development expenses increased $30.8 million, primarily due to a 26% increase in headcount during the period, which drove an increase of $27.3 million in employee compensation-related costs (includes an increase of $4.7 million in stock- based compensation and the full year impact of the headcount acquired from the acquired Zinc Ahead business). The expansion of our headcount in this area is to support the increased number of products that are under development. Fiscal 2016 Compared to Fiscal 2015. Research and development expenses increased $24.8 million, primarily due to an increase of $19.5 million in employee compensation-related costs (includes the impact of an increase of $3.4 million in stock-based compensation). Our headcount in research and development increased 68% during the period, including employees from the acquired Zinc Ahead business. The expansion of our headcount is to support the increased number of products that are under development and, to a lesser extent, reflects headcount from the acquired Zinc Ahead business. We also had an increase in facility-related expenses of $1.2 million, primarily the result of the move into our new corporate headquarters, and an increase of $0.9 million in third-party consulting services related to the development of our solution offerings. Veeva Systems Inc. | Form 10-K 61 We expect research and development expenses to increase in absolute dollars in the near term, primarily due to higher headcount as we continue to add research and development personnel and invest in our solutions. Sales and Marketing Sales and marketing Percentage of total revenues Headcount (at period end) Fiscal Year Ended January 31, 2017 2016 2015 2017 to 2016 % Change 2016 to 2015 % Change (dollars in thousands) $116,803 $80,984 $56,203 44% 22% 20% 18% 401 338 200 19% 44% 69% Fiscal 2017 Compared to Fiscal 2016. Sales and marketing expenses increased $35.8 million, primarily due to a 19% increase in headcount, which drove an increase of $29.1 million in employee compensation-related costs (includes an increase of $6.4 million in stock-based compensation and the full-year impact of the headcount from the acquired Zinc Ahead business as well as an increase of $5.5 million in sales commissions). In addition, there was a $2.4 million increase in amortization expense primarily associated with the Zinc Ahead purchased intangibles related to acquired customer contracts, customer relationships and brand as well as a $1.3 million increase in travel-related costs. Fiscal 2016 Compared to Fiscal 2015. Sales and marketing expenses increased $24.8 million, primarily due to an increase of $17.6 million in employee compensation-related costs (includes the impact of an increase of $3.6 million in stock-based compensation, an increase of $3.3 million in sales commissions and a 69% increase in headcount, including headcount from the acquired Zinc Ahead business) The sales and marketing expense also reflects an increase of $2.0 million in marketing program costs, a $1.6 million increase in travel-related costs, and a $1.4 million increase in amortization expense associated with purchased intangibles related to our to customer contracts, customer relationships and brand. We expect sales and marketing expenses to continue to grow in absolute dollars in the near term, primarily due to employee-related expenses as we increase our headcount to support our sales and marketing efforts associated with our newer solutions and our continued expansion of our sales capacity across all our solutions both inside and outside of the life sciences market. General and Administrative General and administrative Percentage of total revenues Headcount (at period end) Fiscal Year Ended January 31, 2017 2016 2015 2017 to 2016 % Change 2016 to 2015 % Change (dollars in thousands) $48,841 $41,458 $30,239 18% 9% 10% 163 144 10% 93 13% 37% 55% Fiscal 2017 Compared to Fiscal 2016. General and administrative expenses increased $7.4 million, primarily due to a 13% increase in headcount which drove an increase of $6.9 million in employee compensation-related costs (includes an increase of $2.8 million in stock-based compensation and the full year impact of the headcount from the acquired Zinc Ahead business), an increase of $1.1 million in deferred compensation associated with the acquired Zinc Ahead business, 62 Veeva Systems Inc. | Form 10-K and an increase of $0.7 million in expense for software subscriptions for internal use. This increase was offset by $2.2 million in one-time transaction costs for the acquired Zinc Ahead business in the prior period. Fiscal 2016 Compared to Fiscal 2015. General and administrative expenses increased $11.2 million, primarily due to increases of $4.8 million in employee compensation-related costs (includes the impact of an increase of $1.0 million in stock-based compensation and a 55% increase in headcount, including headcount from the acquired Zinc Ahead business), $2.3 million in one-time transaction costs for the acquired Zinc Ahead business, $1.2 million in deferred compensation associated with the acquired Zinc Ahead business, an increase of $1.0 million in expense for software subscriptions for internal use, $0.9 million related to the early termination of the lease for our former headquarters building, and an increase of $0.7 million in taxes and licenses, off-set by a decrease of $1.4 million in third-party professional services costs. We expect general and administrative expenses to continue to grow in absolute dollars in the near term, primarily due to higher headcount and additional expenses, such as fees related to third-party legal counsel, particularly in connection with the legal proceedings described in Item 3. “Legal Proceedings,” accounting, tax and audit services, as we continue to invest in our business. Other Income (Expense), Net Fiscal Year Ended January 31, 2017 2016 2015 2017 to 2016 % Change 2016 to 2015 % Change (dollars in thousands) Other income (expense), net $1,667 $28 $(2,780) 5854% -101% Fiscal 2017 Compared to Fiscal 2016. Other income, net increased $1.6 million, primarily due to $0.8 million higher interest income and a decrease of $0.8 million in foreign currency losses. The higher interest income net of investment amortization compared to the prior year period was primarily attributable to our higher cash and investment balances during the current year as well as lower cash and investment balances in the prior year period due to the Zinc Ahead acquisition. We continue to experience foreign currency fluctuations primarily due to the volatility in the value of the U.S. Dollar against the Euro and British Pound Sterling and 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 continued volatility in these currencies. F o r m 1 0 - K Fiscal 2016 Compared to Fiscal 2015. Other income increased $2.8 million, primarily due to a decrease of $2.1 million in foreign currency losses and an increase of $1.1 million in interest income, offset by an increase of $0.4 million in investment amortization. The higher interest income and investment amortization compared to the prior year period was primarily attributable to our higher cash equivalent and investment balances during the year leading up to Zinc Ahead acquisition. Veeva Systems Inc. | Form 10-K 63 Provision for Income Taxes Income before income taxes Provision for income taxes Effective tax rate Fiscal Year Ended January 31, 2017 2016 2015 2017 to 2016 % Change 2016 to 2015 % Change (dollars in thousands) $109,635 $78,617 $67,186 40,831 24,157 26,803 39% 69 17% (10) 37.2% 30.7% 39.9% Our effective tax rate was 37%, 31% and 40% for the years ended January 31, 2017, 2016 and 2015, respectively. Our effective tax rate in all periods is the result of the mix of income earned in various tax jurisdictions that incur a broad range of income tax rates. The provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due primarily to earnings considered as indefinitely reinvested in foreign operations, state taxes, the permanent reenactment of the U.S. research and development tax credit which was signed into law in December 2015, equity compensation and the U.S. domestic production activity deduction. Future effective tax rates could be adversely affected if earnings are lower than anticipated in countries where we have lower statutory tax rates, by unfavorable changes in tax laws and regulations or by adverse rulings in tax related litigation, as may be applicable. Differing tax rates in various jurisdictions could harm our results of operations and financial condition by increasing our overall tax rate. Fiscal 2017 Compared to Fiscal 2016. Our effective tax rate increased 650 basis points primarily due to the absence of a one-time deferred tax asset benefit in the United States of 960 basis points, which was taken in the prior year period related to the Zinc Ahead acquisition, and a 300 basis-point increase associated with the mix of jurisdictional rates from foreign operations. These increases were partially offset by a 570 basis-point decrease from the release of valuation allowances in the same period. Fiscal 2016 Compared to Fiscal 2015. Our effective tax rate decreased 920 basis points, primarily due to a 960 basis-point decrease from a one-time deferred tax asset benefit in the United States related to the Zinc Ahead acquisition, a 250 basis-point decrease from the U.S. research and development credit, a 150 basis-point decrease in U.S. domestic production activity deduction, offset by a 200 basis-point increase of the valuation allowance and a 150 basis-point increase associated with the mix of jurisdictional rates from our foreign operations. 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 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 from our non-GAAP metrics 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. • Stock-based compensation expenses. We exclude stock-based compensation expenses from our non-GAAP measures 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 64 Veeva Systems Inc. | Form 10-K 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. • Capitalization of internal-use software development expenses and the subsequent amortization the capitalized expenses. We capitalize certain costs incurred for the development of of computer software for internal use and then amortize 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. Our internal management reporting processes exclude both the capitalization of software (which would otherwise result in a reduction in net research and development operating expenses) and the amortization of capitalized software (which would otherwise result in an increase in cost of subscription revenues) when preparing budgets, plans and reviewing internal performance. Moreover, because of the variety of approaches taken and the subjective assumptions made by other companies in this area, we believe 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 business acquisition. The Zinc Ahead share purchase agreement, as revised, called for share purchase consideration to be deferred and paid at a rate of one-third of the deferred consideration amount per year to certain former Zinc Ahead employee shareholders and option holders who remain employed with us on each deferred consideration payment date. In accordance with GAAP, these payments are being accounted for as deferred compensation and the expense is recognized over the requisite service period. We view this deferred compensation expense as an unusual acquisition cost associated with the Zinc Ahead acquisition and find 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. We believe 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 imputed 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 business acquisition for GAAP and non-GAAP measures. . Limitations on the use of Non-GAAP 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. Veeva Systems Inc. | Form 10-K 65 F o r m 1 0 - K 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. The following table reconciles the specific items excluded from GAAP metrics in the calculation of non-GAAP metrics for the periods shown below: Operating income on a GAAP basis Stock-based compensation expense Amortization of purchased intangibles Capitalization of internal-use software Amortization of internal-use software Deferred compensation associated with Zinc Ahead acquisition Operating income on a non-GAAP basis Net income on a GAAP basis Stock-based compensation expense Amortization of purchased intangibles Capitalization of internal-use software Amortization of internal-use software Deferred compensation associated with Zinc Ahead acquisition Income tax effect on non-GAAP adjustments Net income on a non-GAAP basis Fiscal Year Ended January 31, 2017 2016 2015 $107,968 $ 78,589 $69,966 40,798 24,258 14,325 8,216 4,308 1,650 (586) 663 (431) 755 2,815 1,120 (413) 818 — $159,874 $108,599 $86,346 $ 68,804 $ 54,460 $40,383 40,798 24,258 14,325 8,216 4,308 1,650 (586) 663 (431) 755 2,815 1,120 (413) 818 — (12,759) (10,017) (3,573) $107,951 $ 74,453 $53,190 Net income allocated to participating securities on a GAAP basis $ (3) $ (47) $ (245) Net income allocated to participating securities from non-GAAP adjustments Net income allocated to participating securities on a non-GAAP basis 1 (2) (18) (65) (77) (322) Net income attributable to common stockholders on a non-GAAP basis $107,949 $ 74,388 $52,868 Diluted net income per share on a GAAP basis Stock-based compensation expense Amortization of purchased intangibles Capitalization of internal-use software Amortization of internal-use software Deferred compensation associated with Zinc Ahead acquisition Income tax effect on non-GAAP adjustments $ $ 0.47 0.27 0.06 — — 0.02 (0.09) 0.38 0.16 0.03 — — 0.01 $ 0.28 0.10 0.01 — 0.01 — (0.07) (0.03) Diluted net income per share on a non-GAAP basis $ 0.73 $ 0.51 $ 0.37 66 Veeva Systems Inc. | Form 10-K Liquidity and Capital Resources Net cash provided by operating activities Net cash used in investing activities Net cash provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net change in cash and cash equivalents Fiscal Year Ended January 31, 2017 2016 2015 (in thousands) $144,011 $ 80,154 $ 67,574 (96,652) (96,683) (272,018) 37,976 19,406 71,262 92 49 (72) $ 85,427 $ 2,926 $(133,254) 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. At January 31, 2017, our cash, cash equivalents and short-term investments totaled $518.9 million, of which $21.6 million represented cash and cash equivalents held outside of the United States. Non-U.S. cash and cash equivalents have been earmarked for indefinite reinvestment in our operations outside the United States, and therefore no U.S. current or deferred taxes have been accrued related to these balances. 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 the funds we have designated as indefinitely reinvested outside the United States. Under current 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 would be subject to U.S. income taxes and applicable non- U.S. income and withholding taxes. the timing and extent of spending to support product development efforts, 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 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. 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. F o r m 1 0 - K On March 31, 2014, we closed a follow-on offering of which 1,390,000 shares of Class A common stock were sold by us, at a public offering price of $26.35 per share. Our proceeds from the offering were $34.5 million after deducting underwriting discounts and commissions and total offering expenses. 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 the fiscal year is seasonally the strongest quarter for cash inflows due to the timing of our billings and collections. Our primary uses of cash from operating activities are for employee-related expenditures, fees to salesforce.com, third-party professional services costs, employee travel costs, and leases for office space. Veeva Systems Inc. | Form 10-K 67 Fiscal 2017 Compared to Fiscal 2016. Net cash provided by operating activities was $144.0 million for the year ended January 31, 2017. Our cash provided by operating activities during the year ended January 31, 2017 primarily reflected our net income of $68.8 million, adjustments for non-cash items of $51.5 million, and the net increase in our operating assets and liabilities of $23.7 million. Non-cash charges included $40.8 million of stock-based compensation expense, $13.8 million of depreciation and amortization expense and $1.9 million of amortization of premiums on short- term investments. The net changes in operating assets and liabilities included an increase of $56.2 million in deferred revenue resulting primarily from increased orders from new and existing customers, which was offset by a decrease of $38.1 million in accounts receivable related to the seasonal nature of our billings and the timing of collections. Fiscal 2016 Compared to Fiscal 2015. Net cash provided by operating activities was $80.1 million for the year ended January 31, 2016. Our cash provided by operating activities during the year ended January 31, 2016 primarily reflected our net income of $54.5 million, adjustments for non- cash items of $29.8 million, and the net decrease in our operating assets and liabilities of $4.2 million. Non-cash charges included $24.3 million of stock-based compensation expense, $8.5 million of depreciation and amortization expense and $2.8 million of amortization of premiums on short-term investments. The net changes in operating assets and liabilities included a $39.4 million increase in deferred revenue resulting primarily from increased orders from new and existing customers and a $5.0 million increase in accrued expenses and other current liabilities. These sources of cash were partially offset by a $46.7 million increase in accounts receivable related to the timing of billings and collections, a $5.9 million increase in our net deferred income taxes, and a $3.4 million increase in our net income tax obligations related to the timing of tax payments. Cash Flows from Investing Activities The cash flows from investing activities primarily relate to cash used for the acquisition of businesses and the purchase of marketable securities, net of maturities. We also use cash to invest in capital assets to support our growth, including the continuing build-out of our corporate headquarters located in Pleasanton, California. Fiscal 2017 Compared to Fiscal 2016. Net cash used in investing activities was $96.7 million for the year ended January 31, 2017 resulting primarily from $314.8 million in purchases of short-term investments and $6.9 million in cash used for purchases of property and equipment to support the growth of our business, including the build-out of our new corporate headquarters. The cash outflows were offset by $225.6 million provided from net maturities of marketable securities. Fiscal 2016 Compared to Fiscal 2015. Net cash used in investing activities was $96.7 million for the year ended January 31, 2016 resulting primarily from $126.2 million used in the acquisition of two businesses (comprised of $116.5 million in cash used to complete the acquisition of Zinc Ahead and $9.7 million in cash used to complete the acquisition of Qforma CrowdLink) and $21.2 million in cash used for purchases of property and equipment primarily for the build-out of our corporate headquarters. The cash outflows were offset by $51.6 million provided from net maturities of marketable securities. We expect the cash flows used in investing activities to increase in the near term as we continue to build-out our corporate headquarters. We expect capital expenditures from the corporate headquarters build-out to be approximately $6.0 million over the next three fiscal quarters. Cash Flows from Financing Activities The cash flows from financing activities relate to excess tax benefits from our stock plans and stock option exercises. 68 Veeva Systems Inc. | Form 10-K Fiscal 2017 Compared to Fiscal 2016. Net cash provided by financing activities was $38.0 million for the year ended January 31, 2017 resulting from $25.6 million in excess tax benefits from our employee stock plans and $12.4 million in proceeds from employee stock option exercises. Fiscal 2016 Compared to Fiscal 2015. Net cash provided by financing activities was $19.5 million for the year ended January 31, 2016 resulting from $13.5 million in excess tax benefits from our employee stock plans and $5.9 million in proceeds from employee stock option exercises. Commitments Our principal commitments primarily consist of obligations for minimum payment commitments to salesforce.com and leases for office space. 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. As of January 31, 2017, the future non-cancelable minimum payments under these commitments were as follows: Purchase commitments Operating lease obligations Total Payments Due by Period Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years (in thousands) $351,399 $5,229 $ — $96,170 $250,000 12,855 3,418 5,934 2,835 668 $364,254 $8,647 $5,934 $99,005 $250,668 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. We anticipate leasing additional office space in various locations around the world to support our growth. In addition, our existing lease agreements often provide us with an option to renew. We expect our future operating lease obligations will increase as we expand our operations. F o r m 1 0 - K 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 limited purposes. facilitating off-balance sheet arrangements or other contractually narrow or Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP). In the preparation of these 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. Veeva Systems Inc. | Form 10-K 69 We believe that of our significant accounting policies, which are described in note 1 of the notes to our consolidated financial statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. Revenue Recognition We consider revenue recognition to be a significant accounting policy. For a description of our application of GAAP to our revenue recognition, see note 1 of the notes to our consolidated financial statements. Stock-Based Compensation We consider compensation expense related to stock-based transactions, including the assumptions used in the determination of the fair value of option awards to be a significant accounting policy. For a description of our assumptions used for our stock-based compensation policy, see note 10 of the notes to our consolidated financial statements. In addition to assumptions used in determining the fair value of each option award, we must also estimate a forfeiture rate to calculate the stock-based compensation expense for our option awards. Our forfeiture rate is based on an analysis of our actual forfeitures. We will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Changes in the estimated forfeiture rate can have a significant impact on our stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the forfeiture rate is revised. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the consolidated financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the consolidated financial statements. We will continue to use judgment in evaluating the assumptions related to our stock-based compensation expense on a prospective basis. As we continue to accumulate additional data related to our common stock, we may have refinements to our estimates, which could materially impact our future stock-based compensation expense. Valuation of Goodwill and Intangible Assets Goodwill and Intangible Assets. When we acquire businesses, we allocate the purchase price to the tangible assets, liabilities and identifiable intangible assets acquired. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair value of acquired assets and assumed liabilities, especially with respect to intangible assets. These estimates are based on information obtained from management of the acquired companies, market participant data, and historical experience. These estimates can include, but are not limited to: • the time and expenses that would be necessary to recreate the asset; • the profit margin a market participant would receive; • cash flows that an asset is expected to generate in the future; and • discount rates. 70 Veeva Systems Inc. | Form 10-K These estimates are inherently uncertain and unpredictable. A change in these estimates could impact our allocation of purchase price to the acquired assets and assumed liabilities. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill based on updated estimate information or facts and circumstances existing as of the acquisition date. Following the earlier of 1) receipt of all necessary information to determine the fair value of assets acquired and liabilities assumed or 2) one year from the acquisition date, any subsequent adjustments are recorded to earnings. New Accounting Pronouncements Adopted in Fiscal 2017 Refer to note 1 of the notes to consolidated financial statements for a full description of recent accounting pronouncements adopted in fiscal year ended January 31, 2017. Pending Accounting Pronouncements Restricted Cash In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force,” which requires that amounts generally described as restricted cash or restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This standard is effective for our interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. We do not anticipate this standard will have a material impact on our consolidated financial statements as we do not have any material restricted cash arrangements. Income Taxes In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory,” which includes a revision of the accounting for the income tax consequences of intra-entity transfers of assets other than inventory to reduce the complexity in accounting standards. This standard is effective for our interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements. F o r m 1 0 - K Stock-Based Compensation In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation: Improvements to Employee Share-Based Payment”. The guidance simplifies the accounting for share- based transactions, including the income tax consequences, classification of awards as either equity or liabilities on the balance sheet, and classification of employee taxes paid on statement of cash flows when an employer withholds shares for tax-withholding purposes. The new standard is effective for interim and annual periods beginning after December 15, 2016, and early adoption is permitted. We adopted this standard on February 1, 2017 and have elected an accounting policy to account for forfeitures when they occur. We expect the cumulative-effect adjustment in retained earnings to be immaterial on the adoption date. Following adoption, the primary impact on our financial statements will be the recognition of excess tax benefits in the provision for income taxes rather than additional paid-in capital, which will likely result in increased volatility in the reported amounts of income tax expense and net income. The actual impact of adopting this standard on the effective tax rate will vary depending on our share price in the public market and stock option exercises during fiscal year ended January 31, 2018. Veeva Systems Inc. | Form 10-K 71 Leases In February 2016, the FASB issued ASU 2016-02, lease arrangements longer than twelve months result in an entity recognizing an asset and liability. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. We are evaluating the impact of this new accounting standard on our consolidated financial statements and expect the adoption to materially increase our long-term assets and liabilities, but have not determined whether we will early adopt. “Leases,” which requires that Financial Instruments In January 2016, the FASB issued ASU 2016-01, “Financial Instruments.” This guidance outlines the classification and measurement of financial instruments. The requirement to disclose the methods and significant assumptions used to estimate fair value is removed. In addition, financial assets and financial liabilities are to be presented separately in the notes to the financial statements, grouped by measurement category and form of financial asset. This standard will be effective for our fiscal year beginning in February 1, 2017, and early adoption is permitted. We do not expect this standard to have a material impact on our consolidated financial statements. Revenue Recognition including industry-specific guidance. The core principle of In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606). This guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, the revenue model requires revenue to be recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014- 09 supersedes the existing revenue recognition guidance in “Revenue Recognition (Topic 605)”. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified (cumulative effect) retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” This update deferred the effective date of ASU 2014-09 for all entities by one year, although companies still have the option to begin applying the new guidance as of the original effective date. In accordance with the deferral, this guidance will be effective for our fiscal year beginning February 1, 2018. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,” which clarifies implementation guidance in ASU 2014-09 on assessing collectibility, noncash consideration, presentation of sales tax and completed contracts and contract modifications at the new standard as of February 1, 2018 and anticipate using the full retrospective transition method. Our ability to adopt using the full retrospective method is dependent upon system readiness for both revenue and commissions and the completion of the analysis of information necessary to restate prior period financial statements. transition. We will adopt the requirements of The expected impact of adoption primarily relates to the deferral of costs to obtain customer contracts, which is comprised of commissions on our subscription services arrangements and the other associated fringe benefits. Such costs are expensed as incurred under the current standard, whereas under the new standard, they will generally be capitalized and amortized over the costs’ associated term of economic benefit. We have not yet determined the term of economic benefit of our costs to obtain customer contracts which will affect our operating margin as well as the classification and magnitude of the deferred costs for each reporting period. Revenue for the majority of our subscription services customer contracts will continue to be recognized over time because of the continuous transfer of control to the customer; however, we 72 Veeva Systems Inc. | Form 10-K to revenue primarily driven by (i) the removal of limitation on expect some impact contingent revenue, which may result in revenue being recognized earlier for certain contracts and (ii) potential changes to our approach to allocating revenue between subscription services and professional services. the current We are continuing to evaluate the effect that the new standard will have on our consolidated financial statements and our preliminary assessments remain subject to change. ITEM 7A. 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 and Japanese Yen, and may be adversely affected in the future due to changes in foreign currency exchange rates, particularly in light of the Brexit vote and other recent political developments. We continue to experience foreign currency fluctuations primarily due to the volatility in the value of the U.S. Dollar against the Euro and British Pound Sterling and 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. Revenues outside of North America as a percentage of revenues were approximately 45%, 45% and 45% in our fiscal years ended January 31, 2017, 2016 and 2015, respectively. Changes in exchange rates may negatively affect our revenues and other operating results as expressed in U.S. dollars. For our fiscal years ended January 31, 2017, 2016 and 2015, our foreign currency loss was $1.0 million, $1.8 million and $3.9 million, respectively. 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 have recently initiated a program during our fiscal year ending January 31, 2018 to 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. Interest rate sensitivity We had cash, cash equivalents and short-term investments totaling $518.9 million as of January 31, 2017. This amount was invested primarily in U.S. agency obligations, U.S. treasury securities, corporate notes and bonds, commercial paper, asset-backed securities, and money market funds. 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 $2.0 million market value reduction in our investment portfolio as of January 31, 2017. All of our investments earn Veeva Systems Inc. | Form 10-K 73 F o r m 1 0 - K less than 100-basis points and as a result, an immediate decrease of 100-basis points in interest rates would have increased the market value by $1.8 million as of January 31, 2017. 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. 74 Veeva Systems Inc. | Form 10-K ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA VEEVA SYSTEMS INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 F o r m 1 0 - K Veeva Systems Inc. | Form 10-K 75 Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Veeva Systems Inc.: We have audited the accompanying consolidated balance sheets of Veeva Systems Inc. and subsidiaries (the Company) as of January 31, 2017 and 2016, and the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended January 31, 2017. We also have audited the Company’s internal control over financial reporting as of January 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item 9A(b). Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Veeva Systems Inc. and subsidiaries as of January 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three-year period ended January 31, 2017, in conformity with U.S. generally accepted accounting principles. Also in our opinion, Veeva Systems Inc. maintained, in all material respects, effective internal control over financial reporting as of January 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO . /s/ KPMG LLP Santa Clara, California March 30, 2017 76 Veeva Systems Inc. | Form 10-K VEEVA SYSTEMS INC. CONSOLIDATED BALANCE SHEETS (In thousands, except number of shares and par value) Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net of allowance for doubtful accounts of $659 and $542, respectively Prepaid expenses and other current assets Total current assets Property and equipment, net Goodwill Intangible assets, net Deferred income taxes, noncurrent Other long-term assets Total assets Liabilities and stockholders’ equity Current liabilities: Accounts payable Accrued compensation and benefits Accrued expenses and other current liabilities Income tax payable Deferred revenue Total current liabilities Deferred income taxes, noncurrent Other long-term liabilities Total liabilities Commitments and contingencies (Note 12) Stockholders’ equity: Class A common stock, $0.00001 par value; 800,000,000 shares authorized, 103,789,544 and 87,359,026 issued and outstanding at January 31, 2017 and 2016, respectively Class B common stock, $0.00001 par value; 190,000,000 shares authorized, 34,097,075 and 46,186,159 issued and outstanding at January 31, 2017 and 2016, respectively Additional paid-in capital Accumulated other comprehensive income Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity January 31, 2017 January 31, 2016 $217,606 $132,179 301,266 182,816 10,177 711,865 49,907 95,804 39,283 16,784 4,057 214,024 144,798 9,963 500,964 47,469 95,804 47,500 9,359 4,703 $917,700 $705,799 $ 5,677 $ 4,600 12,007 12,310 3,228 213,562 246,784 12,974 4,964 12,451 11,059 750 157,419 186,279 10,622 3,649 264,722 200,550 1 — 1 — 440,677 361,691 111 212,189 652,978 172 143,385 505,249 $917,700 $705,799 F o r m 1 0 - K See Notes to Consolidated Financial Statements. Veeva Systems Inc. | Form 10-K 77 VEEVA SYSTEMS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands, except per share data) Revenues: Subscription services Professional services and other Total revenues Cost of revenues(1): Cost of subscription services Cost of professional services and other Total cost of revenues Gross profit Operating expenses(1): Research and development Sales and marketing General and administrative Total operating expenses Operating income Other income (expense), net Income before income taxes Provision for income taxes Net income Net income attributable to Class A and Class B common stockholders, basic and diluted Net income per share attributable to Class A and Class B common stockholders: Basic Diluted Weighted-average shares used to compute net income per share attributable to Class A and Class B common stockholders: Basic Diluted Other comprehensive income (loss): Fiscal Year Ended January 31, 2017 2016 2015 $434,316 $316,314 $233,063 109,727 92,907 80,159 544,043 409,221 313,222 94,386 79,295 71,180 71,034 55,005 60,653 173,681 142,214 115,658 370,362 267,007 197,564 96,750 116,803 48,841 65,976 80,984 41,458 41,156 56,203 30,239 262,394 188,418 127,598 107,968 78,589 69,966 1,667 109,635 40,831 28 (2,780) 78,617 24,157 67,186 26,803 $ 68,804 $ 54,460 $ 40,383 $ 68,801 $ 54,413 $ 40,138 $ $ 0.51 0.47 $ $ 0.41 0.38 $ $ 0.31 0.28 135,698 132,020 127,713 147,578 144,977 144,204 Net change in unrealized gains (losses) on available-for-sale investments $ (153) $ (181) $ Net change in cumulative foreign currency translation gain (loss) 92 327 76 (69) Comprehensive income $ 68,743 $ 54,606 $ 40,390 (1) Includes stock-based compensation as follows: Cost of revenues: Cost of subscription services Cost of professional services and other Research and development Sales and marketing General and administrative Total stock-based compensation $ 1,109 $ 563 $ 273 6,002 11,937 13,271 8,479 3,858 7,249 6,861 5,727 2,272 3,844 3,221 4,715 $ 40,798 $ 24,258 $ 14,325 See Notes to Consolidated Financial Statements. 78 Veeva Systems Inc. | Form 10-K VEEVA SYSTEMS INC. CONSOLIDATED STATEMENTS STOCKHOLDERS’ EQUITY (In thousands, except share data) Balance at January 31, 2014 Issuance of common stock upon exercise of stock options Vesting of early exercised stock options Repurchase of unvested early exercised stock options Issuance of common stock upon vesting of restricted stock units Stock-based compensation expense Issuance of common shares under Employee Stock Purchase Plan Follow-on offering, net of issuance costs Excess tax benefits from employee stock plans Other comprehensive income Net income Issuance of common stock upon exercise of stock options Issuance of common stock upon early exercise of stock options Vesting of early exercised stock options Repurchase of unvested early exercised stock options Issuance of common stock upon vesting of restricted stock units Stock-based compensation expense Excess tax benefits from employee stock plans Other comprehensive income Net income Class A & B Common stock Shares 124,791,545 4,437,349 — Amount 1 — — (16,667) — 115,339 — 350,059 1,390,000 — — — 2,012,497 22,084 — 446,312 — — — — (3,333) — Balance at January 31, 2015 131,067,625 Balance at January 31, 2016 133,545,185 Issuance of common stock upon exercise of stock options 3,369,356 Issuance of common stock upon early exercise of stock options Vesting of early exercised stock options Repurchase of unvested early exercised stock options Issuance of common stock upon vesting of restricted stock units Stock-based compensation expense Excess tax benefits from employee stock plans Other comprehensive loss Net income — — — 972,078 — — — — — — — — — — — 1 — — — — — — — — 1 — — — — — — — — — Additional Paid-in Capital 231,534 Retained Earnings 48,542 5,813 377 — (15) 14,385 5,951 34,495 — — — — — — — — 25,341 — — — 40,383 317,881 88,925 5,898 — 70 — (6) 24,321 — — — — — — 13,527 — — — — 54,460 361,691 143,385 12,443 — 26 — (14) 40,903 — — — — — — — 25,628 — — — 68,804 Accumulated Other Comprehensive Income 19 — — — — — — — — 7 — 26 — — — — — — — 146 — 172 — — — — — — — (61) — Total Stockholders’ Equity 280,096 5,813 377 — (15) 14,385 5,951 34,495 25,341 7 40,383 406,833 5,898 — 70 — (6) 24,321 13,527 146 54,460 505,249 12,443 — 26 — (14) 40,903 25,628 (61) 68,804 F o r m 1 0 - K Balance at January 31, 2017 137,886,619 $ 1 $440,677 $212,189 $111 $652,978 See Notes to Consolidated Financial Statements. Veeva Systems Inc. | Form 10-K 79 VEEVA SYSTEMS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities: $ 68,804 $ 54,460 $ 40,383 Fiscal Year Ended January 31, 2017 2016 2015 Depreciation and amortization Amortization of premiums on short-term investments Stock-based compensation Deferred income taxes Bad debt expense Changes in operating assets and liabilities: Accounts receivable Income taxes Prepaid expenses and other current and long-term assets Accounts payable Accrued expenses and other current liabilities Deferred revenue Other long-term liabilities Net cash provided by operating activities Cash flows from investing activities Purchases of short-term investments Maturities and sales of short-term investments Purchases of property and equipment Acquisitions, net of cash acquired Purchases of intangible assets Capitalized internal-use software development costs Changes in restricted cash and deposits Net cash used in investing activities Cash flows from financing activities Proceeds from early exercise of common stock options Proceeds from exercise of common stock options Net proceeds from offerings Proceeds from Employee Stock Purchase Plan Restricted stock units acquired to settle employee tax withholding liability Excess tax benefits from employee stock plans Net cash provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental disclosures of other cash flow information: Cash paid for income taxes, net of refunds Non-cash investing and financing activities: Changes in accounts payable and accrued expenses related to property and equipment purchases Vesting of early exercised stock options Working capital adjustment, not yet paid 13,825 1,852 40,798 (5,073) 130 (38,148) 911 831 1,113 336 56,208 2,424 8,464 2,804 24,258 (6,264) 201 (46,653) (2,994) 180 (494) 5,042 39,357 1,793 3,929 2,176 14,325 (4,268) 227 (34,455) 3,326 (4,652) 1,290 (754) 45,580 467 144,011 80,154 67,574 (314,847) 225,600 (6,923) (313,357) 364,968 (21,153) — (126,183) (568) — (431) (584) 41 102 (401,955) 156,860 (26,531) — — (413) 21 (96,652) (96,683) (272,018) — 12,362 — — (14) 25,628 37,976 10 5,875 — — (6) 13,527 19,406 — 5,813 34,172 5,951 (15) 25,341 71,262 92 85,427 132,179 $ 217,606 49 2,926 129,253 $ 132,179 (72) (133,254) 262,507 $ 129,253 $ 14,154 $ 19,968 $ 1,515 $ $ $ 460 26 $ $ — $ 334 70 339 $ $ $ 688 377 — See Notes to Consolidated Financial Statements. 80 Veeva Systems Inc. | Form 10-K Note 1. Summary of Business and Significant Accounting Policies Description of Business Veeva is a 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 the life sciences industry. Our products are designed to meet the unique needs of life sciences companies for their most strategic business functions — from research and development to commercialization. Our products are designed to help life sciences companies bring products to market faster and more efficiently, market and sell more effectively, and maintain compliance with government regulations. Veeva’s industry cloud solutions provide data, software, and services that address a broad range of needs, including multichannel customer relationship management, content management, master data management, and customer data. Veeva is now extending its solutions to adjacent industries in North America and Europe, including manufacturing, both process and discrete, and highly regulated services of all types. Our solutions help companies manage critical regulated processes and content efficiently to meet compliance requirements and enable secure collaboration across internal and external stakeholders. Our fiscal year end is January 31. Principles of Consolidation and Basis of Presentation These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP). The consolidated financial statements include accounts of our wholly owned subsidiaries after elimination of intercompany accounts and transactions. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the consolidated financial statements and the notes thereto. These estimates are based on information available as of the date of the consolidated financial statements. On a regular basis, management evaluates these estimates and assumptions. Significant items subject to such estimates and assumptions include, but are not limited to: • • • • • • • the best estimate of selling price of the deliverables included in multiple-deliverable revenue arrangements; the collectibility of our accounts receivable; the fair value of assets acquired and liabilities assumed for business combinations; the valuation of short-term investments and the determination of other-than-temporary impairments; the realizability of deferred income tax assets and liabilities; the fair value of our stock-based awards and related forfeiture rates; and the capitalization and estimated useful life of internal-use software development costs. As future events cannot be determined with precision, actual results could differ significantly from those estimates. Segment Information Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance. We define the term “chief operating decision maker” to be our Chief Executive Officer. Our Chief Executive Officer reviews the financial information presented on a Veeva Systems Inc. | Form 10-K 81 F o r m 1 0 - K consolidated basis for purposes of allocating resources and evaluating our financial performance. Accordingly, we have determined that we operate in a single reportable operating segment. Since we operate in one operating segment, all required financial segment information can be found in the consolidated financial statements. Revenue Recognition 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 subscription or license fees for our data solutions. In addition, our acquired Zinc Ahead business had a limited number of perpetual license agreements with accompanying maintenance and hosting fees. We have included such on-going maintenance and hosting fees in our subscription fees from services revenues. Professional services and other implementation services, configuration, data services, training and managed services related to our solutions. We commence revenue recognition when all of the following conditions are satisfied: revenues consist primarily of • • • • there is persuasive evidence of an arrangement; the service has been or is being provided to the customer; the collection of the fees is reasonably assured; and the amount of fees to be paid by the customer is fixed or determinable. Our subscription services arrangements are generally non-cancelable and do not provide for refunds to customers in the event of cancellations. Subscription Services Revenues Subscription services revenues are recognized ratably over the order term beginning when the solution has been provisioned to the customer. Our subscription arrangements are considered service contracts, and the customer does not have the right to take possession of the software. On-going maintenance and hosting fees for Zinc Ahead perpetual licenses are also recognized ratably over the accompanying maintenance and hosting term. Professional Services and Other Revenues The majority of our professional services arrangements are recognized on a time and materials basis. Professional services revenues recognized on a time and materials basis are measured monthly based on time incurred and contractually agreed upon rates. Certain professional services revenues are based on fixed fee arrangements and revenues are recognized based on the proportional performance method. In some cases, the terms of our time and materials and fixed fee arrangements may require that we defer the recognition of revenue until contractual conditions are met. Data services and training revenues are generally recognized as the services are performed. Multiple Element Arrangements We apply the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2009-13, Multiple — Deliverable Revenue Arrangements, to allocate revenues based on relative best estimated selling price to each unit of accounting in multiple element arrangements, which generally include subscriptions and professional services. Best estimated selling price of each unit of accounting included in a multiple element arrangement is based upon management’s estimate of the selling price of deliverables when vendor specific objective evidence or third-party evidence of selling price is not available. 82 Veeva Systems Inc. | Form 10-K We enter into arrangements with multiple deliverables that generally include our subscription offerings and professional services. For these arrangements we must: (i) determine whether each deliverable has stand-alone value; (ii) determine the estimated selling price of each element using the selling price hierarchy of vendor-specific objective evidence (VSOE) of fair value, third-party evidence (TPE) or best estimated selling price (BESP), as applicable; and (iii) allocate the total price among the various deliverables based on the relative selling price method. In determining whether professional services and other revenues have stand-alone value, we consider the following factors for each consulting agreement: availability of the consulting services from other vendors, the nature of the consulting services and whether the professional services are required in order for the customer to use the subscription services. If stand-alone value cannot be established for a delivered item in a multiple-element arrangement, the delivered item is accounted for as a combined unit of accounting with the undelivered item(s). We have established stand-alone value with respect to all of our offerings except professional services for the acquired Zinc Ahead business. As a result, we account for multiple element arrangements that include Zinc Ahead professional services as a combined unit of accounting and recognize the revenues from such professional services ratably over the term of the associated subscription services. We have determined that we are not able to establish VSOE of fair value or TPE of selling price for any of our deliverables, and accordingly we use BESP for each deliverable in the arrangement. The objective of BESP is to estimate the price at which we would transact a sale of the service deliverables if the services were sold on a stand-alone basis. Revenue allocated to each deliverable is recognized when the basic revenue recognition criteria are met for each deliverable. We determine BESP for our subscription services included in a multiple element arrangement by considering multiple factors including, but not limited to, stated subscription renewal rates offered to the customer to renew the service and other major groupings such as customer type and geography. BESP for professional services considers the discount of actual professional services sold compared to list price, the experience level of the individual performing the service and the estimated location of the resources performing the services for professional services. We allocate consideration proportionately based on established BESP and then recognize the allocated revenue over the respective delivery periods for each element. F o r m 1 0 - K Deferred Revenue Deferred revenue includes amounts billed to customers for which the revenue recognition criteria have not been met. Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from our subscription services, and to a lesser extent, professional services and other revenues described above, and is recognized as the revenue recognition criteria are met. We generally invoice our customers in annual or quarterly installments for the subscription services. Accordingly, the deferred revenue balance does not generally represent the total contract value of a subscription arrangement. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent, which is in other long-term liabilities on the consolidated balance sheet. Veeva Systems Inc. | Form 10-K 83 Certain Risks and Concentrations of Credit Risk Our revenues are derived from subscription services, professional services and other services delivered primarily to the life sciences industry. We operate in markets that are highly competitive and the emergence of rapidly changing. Significant competitive products or services with new capabilities and other factors could negatively impact our operating results. technological changes, shifting customer needs, Our financial instruments that potentially subject us to concentration of credit risk consist primarily of cash and cash equivalents, short-term investments and trade accounts receivable. Our cash equivalents and short-term investments are held in safekeeping by large, credit-worthy financial institutions. We have established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. Deposits in these financial institutions may significantly exceed federally insured limits. We do not require collateral from our customers and generally require payment within 30 to 60 days of billing. We periodically evaluate the collectibility of our accounts receivable and provide an allowance for doubtful accounts as necessary, based on historical experience. Historically, such losses have not been material. The following customers individually exceeded 10% of total accounts receivable as of the dates shown: Customer 1 Customer 2 * Does not exceed 10%. January 31, 2017 January 31, 2016 15% 15 16% 15 In our fiscal years ended January 31, 2017, 2016 and 2015, our top 10 customers accounted for 45%, 50% and 54% of our total revenues, respectively. No single customer represented over 10% of our total revenues for the fiscal years ended January 31, 2017, 2016 or 2015. Cash Equivalents We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. We classify certain restricted cash balances within other long-term assets on the accompanying balance sheets based upon the term of the remaining restrictions. Short-term Investments We classify short-term investments as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. All short-term investments are recorded at estimated fair value. Unrealized gains and losses for available-for-sale securities are included in accumulated other comprehensive income, a component of stockholders’ equity. We evaluate our investments to assess whether those with unrealized loss positions are other than temporarily impaired. We consider impairments to be other than temporary if they are related to deterioration in credit risk or if it is likely we will sell the securities before the recovery of their cost basis. Realized gains and losses and declines in value judged to be other than temporary are determined based on the specific identification method and are reported in other in the consolidated statements of income (expense), net, comprehensive income. Interest, amortization of premiums, and accretion of discount on all short-term investments classified as available for sale are also included as a component of other income (expense), net, in the condensed consolidated statements of comprehensive income. 84 Veeva Systems Inc. | Form 10-K We may sell our short-term investments at any time, without significant penalty, for use in current operations or for other purposes, even if they have not yet reached maturity. As a result, we classify our investments, including securities with maturities beyond 12 months as current assets in the accompanying consolidated balance sheets. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount and do not bear interest. We establish an allowance for doubtful accounts for estimated losses expected in our accounts receivable portfolio. In establishing the required allowance, we use the specific-identification method, and management considers historical losses adjusted to take into account current market conditions and the customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. We review our allowance for doubtful accounts periodically. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Activity related to our allowance for doubtful accounts was as follows (in thousands): Balance at beginning of period Add: charges to costs and expenses Less: (write-offs) Balance at end of period Property and Equipment Fiscal Year Ended January 31, 2017 $542 130 (13) 2016 $413 201 (72) 2015 $ 305 227 (119) $659 $542 $ 413 Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets and commences once the asset is placed in service or ready for its intended use. Construction in progress is related to the construction or development of property (including land) and equipment that have not yet been placed in service for our intended use. The estimated useful lives by asset classification are generally as follows: Asset Classification Land Building Estimated Useful Life Not depreciated 30 years Land and building improvements Shorter of remaining life of building or estimated useful life F o r m 1 0 - K Equipment and computers Furniture and fixtures Leasehold improvements 3 years 5 years Shorter of remaining life of the lease term or estimated useful life Upon sale or retirement of an asset, the cost and related accumulated depreciation are removed from the general ledger and any related gains or losses are reflected in operating expenses. Repairs and maintenance are charged to our statement of comprehensive income as incurred. Veeva Systems Inc. | Form 10-K 85 Internal-Use Software We capitalize certain costs incurred for the development of computer software for internal use. These costs generally relate to the development of our customer relationship management, content and information management and customer master solutions. We capitalize these costs during the development of the project, when it is determined that it is probable that the project will be completed, and the software will be used as intended. Costs related to preliminary project activities, post- implementation activities, training and maintenance are expensed as incurred. Internal-use software is amortized on a straight-line basis over its estimated useful life, generally three years, and the amortization expense is recorded as a component of cost of subscription services. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. To the extent that we change the manner in which we develop and test new features and functionalities related to our solutions, assess the ongoing value of capitalized assets or determine the estimated useful lives over which the costs are amortized, the amount of internal-use software development costs we capitalize and amortize could change in future periods. Goodwill and Intangible Assets Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets acquired in connection with business combinations accounted for using the acquisition method of accounting. Goodwill is not amortized, but instead goodwill is required to be tested for impairment annually and under certain circumstances. We perform such testing of goodwill in the fourth quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we then conduct a two-step test for impairment of goodwill. The first step of the test for goodwill impairment compares the fair value of the applicable reporting unit with its carrying value. If the fair value of a reporting unit is less than the reporting unit’s carrying value, we will perform the second step of the test for impairment of goodwill. During the second step of the test for impairment of goodwill, we will compare the implied fair value of the reporting unit’s goodwill with the carrying value of that goodwill. If the carrying value of the goodwill exceeds the calculated implied fair value, the excess amount will be recognized as an impairment loss. We have one reporting unit and evaluate goodwill for impairment at the entity level. We completed our annual impairment test in our fourth quarter of fiscal year ended January 31, 2017, which did not result in any impairment of the goodwill balance. All other intangible assets associated with purchased intangibles, consisting of existing technology, databases, customer contracts and relationships, software, and brand are stated at cost less accumulated amortization and are amortized on a straight-line basis over their estimated remaining economic lives. Amortization expense related to existing technology, databases and software is included in cost of subscription services. Amortization expense related to customer contracts and relationships and brand are included in sales and marketing expense. Long-Lived Assets Long-lived assets, such as property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, we first compare undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not 86 Veeva Systems Inc. | Form 10-K recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. There were no impairment charges recognized during fiscal years ended January 31, 2017, 2016 and 2015. Business Combinations We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Our estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date. We continue to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to our preliminary estimates to goodwill provided that we are within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of comprehensive income. Stock-based Compensation We recognize compensation expense for all stock-based awards, including stock options and restricted stock units (RSUs), based on the estimate of fair value of the award at the grant date. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model and a single option award approach. This model requires that at the date of grant we determine the fair value of the underlying common stock, the expected term of the award, the expected volatility of the price of our common stock, risk-free interest rates, and expected dividend yield of our common stock. The compensation expense recorded is based on awards ultimately expected to vest and therefore is reduced by estimated forfeitures. Forfeitures are estimated at the time of grant based on an analysis of our actual historical forfeitures, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The compensation expense, net of estimated forfeitures, is recognized using a straight-line basis over the requisite service periods of the awards, which is generally four to nine years. We estimate a forfeiture rate to calculate the stock-based compensation expense for our awards. The fair value of each stock-based payment award and stock purchase right granted under the 2013 Employee Stock Purchase Plan (ESPP) was estimated on the date of grant using the Black- Scholes option pricing model. We recognized stock-based compensation expenses related to our ESPP on a straight-line basis over the offering period, which was seven months. The determination of the grant date fair value of stock based payment awards using an option- pricing model are affected by assumptions regarding a number of other complex and subjective variables, which include our expected stock price volatility over the expected term of the options, stock option exercise and cancellation behaviors, risk-free interest rates and expected dividends. Cost of Revenues F o r m 1 0 - K Cost of subscription services and professional services and other revenues are expensed as incurred. Cost of subscription services revenues primarily consists of expenses related to third-party data centers, personnel related costs associated with hosting our subscription services and providing support, including our data stewards, operating lease expense associated with computer equipment and software and allocated overhead, amortization expense associated with capitalized internal-use software related to our subscription services and amortization expense associated with purchased intangibles related to our subscription services. Cost of subscription services revenues for Veeva CRM and certain of our multichannel customer relationship management applications also include fees paid to salesforce.com, the Salesforce1 Platform and the associated hosting infrastructure and data center operations that are provided by salesforce.com. for our use of inc. Veeva Systems Inc. | Form 10-K 87 Cost of professional services and other revenues primarily consists of employee-related expenses associated with providing these services, including salaries, benefits and stock-based compensation expense, third-party subcontractor costs, travel costs and allocated overhead. Sales Commissions Sales commissions paid for subscriptions are recorded as a component of sales and marketing expenses when earned by our sales team. Commissions are typically earned upon booking of a customer contract. Sales commission expense was $22.0 million, $16.4 million and $13.2 million for the fiscal years ended January 31, 2017, 2016 and 2015, respectively. Advertising Expenses Advertising is expensed as incurred. Advertising expense was $0.2 million, $0.2 million and $0.1 million for the fiscal years ended January 31, 2017, 2016 and 2015, respectively. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We regularly assess the realizability of our deferred tax assets and establish a valuation allowance if it is more-likely-than-not that some or all of our deferred tax assets will not be realized. We evaluate and weigh all available positive and negative evidence such as historic results, future reversals of existing deferred tax liabilities, projected future taxable income, as well as prudent and feasible tax- planning strategies. Generally, more weight is given to objectively verifiable evidence, such as the cumulative loss in recent years. We establish liabilities or reduce assets for uncertain tax positions when we believe certain tax positions are not more likely than not of being sustained if challenged. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. If we determine that a tax position will more likely than not be sustained on audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement with the tax authority. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and may not accurately forecast actual outcomes. Determining whether an uncertain tax position is effectively settled requires judgment. Such a change in status or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision. We recognize interest accrued and penalties related to unrecognized tax benefits in our income tax expense. Other Comprehensive Income Accumulated other comprehensive income is reported as a component of stockholders’ equity and includes unrealized gains and losses on marketable securities that are available-for-sale and foreign currency translation adjustments. 88 Veeva Systems Inc. | Form 10-K Foreign Currency Exchange The functional currency for Brazil, China, India, Japan, Korea and the Zinc subsidiaries in the United Kingdom is their local currency and for all other foreign subsidiaries their functional currency is the U.S. dollar. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars for those entities that do not have U.S. dollars as their functional currency are recorded as part of a separate component of the consolidated statements of comprehensive income. Foreign currency transaction gains and losses are included in the consolidated statements of operations for the period. All assets and liabilities denominated non-functional currency are translated into the functional currency at the exchange rate on the balance sheet date. Revenues and expenses are translated at the average exchange rate during the period. Equity transactions are translated using historical exchange rates. Warranties and Indemnification Our cloud applications are generally warranted to perform materially in accordance with our standard services description documentation. Additionally, our contracts generally include provisions for indemnifying customers against liabilities if our solutions infringe a third party’s intellectual property rights, and we may also incur liabilities if we breach the security and/or confidentiality obligations in our contracts. To date, we have not incurred any material costs, and we have not accrued any liabilities in the accompanying consolidated financial statements, as a result of these obligations. We also entered into service-level agreements with our customers that specify required levels of application uptime and permit customers to receive credits or to terminate their agreements and receive a refund of prepaid amounts related to unused subscription services in the event that we fail to meet required performance levels. As of January 31, 2017, we have not accrued any liabilities related to these agreements in the consolidated financial statements. However, in the year ended January 31, 2017, we experienced a failure to meet defined levels of performance related to the salesforce.com service outage as described in note 12, which resulted in an immaterial amount being claimed and issued. To date, we have not experienced any significant failures to meet defined levels of performance. New Accounting Pronouncements Adopted in Fiscal 2017 Business Combinations In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement- Period Adjustments.” This guidance requires the acquirer to recognize adjustments to provisional amounts identified during the measurement period in the reporting period in which the adjustment amounts are determined. The effect on earnings for changes in depreciation or amortization, or other income effects (if any) as a result of the change to the provisional amounts, calculated as if the accounting had been completed as of the acquisition date, must be recorded in the reporting period in which the adjustment amounts are determined rather than retrospectively. This standard will be applied prospectively to adjustments to provisional amounts that occur after the effective date. We adopted this impact of this on our financial standard beginning on February 1, 2016 and there was no material statements. Cloud Computing Arrangements In April 2015, the FASB issued ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This guidance is intended to help entities evaluate the accounting for fees paid by them in a cloud computing arrangement, primarily to determine whether the arrangement includes a purchase or license of software. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, Veeva Systems Inc. | Form 10-K 89 F o r m 1 0 - K the customer should account for a cloud computing arrangement as a service contract. We adopted this standard beginning on February 1, 2016 and there was no material impact of this on our financial statements. Note 2. Acquisitions Our acquisitions are accounted for as business combinations. In accordance with authoritative guidance on business combination accounting, the assets and liabilities of the acquired companies were recorded as of the acquisition date, at their respective fair values, and are included within our consolidated financial statements. The results of operations related to each company acquired have been included in our consolidated statements of operations from the date of acquisitions. All acquisition-related transaction costs are expensed and reflected in general and administrative expenses on our condensed consolidated statements of comprehensive income for the periods presented. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets and is attributable to the expected operational synergies from the combined company and the industry knowledge and experience of the workforce in place. Goodwill is not deductible for U.S. tax purposes. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the reporting date and are considered preliminary pending finalization of valuation analyses pertaining to intangible assets acquired, liabilities assumed and tax liabilities assumed including calculation of deferred tax assets and liabilities. Changes to amounts recorded as assets or liabilities may result in corresponding adjustments to goodwill during the measurement period (up to one year from the acquisition date). Zinc Ahead On September 29, 2015, we completed our acquisition of Mineral Newco Ltd., the ultimate parent company of Zinc Ahead Ltd, a company organized under the laws of the United Kingdom that is the ultimate parent company of Zinc Ahead Holdings Ltd, Zinc Ahead Ltd, Zinc Ahead Inc., Zinc Ahead PTY LTD and Zinc Ahead (Japan) KK (collectively, “Zinc Ahead”), in an all-cash transaction. Through a share purchase agreement our indirect subsidiary, Veeva U.K. Holdings Limited, acquired all of the share capital of Zinc Ahead. Under the acquisition method of accounting, the total purchase price was allocated to Zinc Ahead’s net tangible and intangible assets based upon their estimated fair values as of September 29, 2015. The total closing consideration for the purchase was approximately $119.9 million in cash. In addition, the agreement, as revised, calls for an amount payable over three years at a rate of one-third per year to employee shareholders and option holders of Zinc Ahead who remain employed with us. The remaining portion of such potential future payments in the amount of $4.8 million as of January 31, 2017 have been accounted for as deferred compensation, and will be recognized over the remaining service period. Zinc Ahead was a provider of commercial content management solutions. We expect this acquisition to support the continued growth of our commercial content management solutions. We have begun to and will seek to continue to convert the end users of the Zinc Ahead solutions to our Veeva Vault PromoMats application. In connection with the Zinc Ahead acquisition, we incurred $2.2 million in acquisition-related transaction costs which were reflected in general and administrative expenses on our condensed consolidated statements of comprehensive income in prior periods. 90 Veeva Systems Inc. | Form 10-K The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands): Purchase price Cash Allocation of purchase price Cash Accounts receivable Other current and non-current assets Deferred tax liabilities, net Other current and non-current liabilities Net liabilities Customer contracts and relationships Software Brand Purchased intangible assets Goodwill Total purchase price Useful Lives of Intangible Assets 10 years 4.5 years 3.5 years Fair Value $119,935 $ 3,107 4,600 5,140 (12,316) (8,730) $ (8,199) $ 31,823 10,063 1,141 $ 43,027 $ 85,107 $119,935 We did not record any in-process research and development in connection with the Zinc Ahead acquisition. Qforma CrowdLink On March 31, 2015, we completed our acquisition of the key opinion leader, or KOL, business and products known as Qforma CrowdLink in an all-cash transaction. We expect this acquisition to support our key opinion leader business. Total purchase price was $9.8 million in cash. There are no contingent cash payments related to this transaction. As of January 31, 2017, we had incurred $0.4 million in acquisition-related transaction costs which are reflected in general and administrative expenses on our consolidated statements of comprehensive income. The assets, liabilities and operating results of Qforma CrowdLink have been reflected in our consolidated financial statements from the date of acquisition and have not been material. F o r m 1 0 - K Through the transaction we acquired the outstanding equity interests of Mederi AG, and the selected other KOL-related business assets and liabilities of Qforma, Inc. and other affiliated entities. Under the acquisition method of accounting, the total purchase price was allocated to Qforma CrowdLink’s net tangible and intangible assets based upon their estimated fair values as of March 31, 2015. Veeva Systems Inc. | Form 10-K 91 The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands): Purchase price Cash Allocation of purchase price Cash Accounts receivable Deferred tax assets, net Other current and non-current assets Other current and non-current liabilities Net assets Database Customer relationships Software Existing technology Purchased intangible assets Goodwill Total purchase price Useful Lives of Intangible Assets Fair Value $9,750 $ 56 1,085 143 50 (731) $ 603 $1,800 800 500 200 $3,300 $5,847 $9,750 5 years 4 years 5 years 5 years We did not record any in-process research and development in connection with the Qforma CrowdLink acquisition. Note 3. Short-Term Investments At January 31, 2017, short-term investments consisted of the following (in thousands): Available-for-sale securities: Asset-backed securities Commercial paper Corporate notes and bonds U.S. agency obligations U.S. treasury securities Total available-for-sale securities Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value $ 20,729 20,567 92,843 87,091 80,277 $301,507 $ 5 4 14 12 4 $39 $ (16) $ 20,718 (1) (101) (51) (111) 20,570 92,756 87,052 80,170 $(280) $301,266 At January 31, 2016, short-term investments consisted of the following (in thousands): Available-for-sale securities: Asset-backed securities Commercial paper Corporate notes and bonds U.S. agency obligations U.S. treasury securities Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value $ 5,456 $ — $ (2) $ 5,454 5,970 38,341 124,626 39,720 — 26 14 4 — (40) (54) (37) 5,970 38,327 124,586 39,687 Total available-for-sale securities $214,113 $ 44 $(133) $214,024 92 Veeva Systems Inc. | Form 10-K 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): Due in one year or less Due in greater than one year Total January 31, 2017 2016 $225,183 $151,214 76,083 62,810 $301,266 $214,024 We have certain available-for-sale securities in a gross unrealized loss position, all of which have been in such position for less than 12 months. We review our debt securities classified as short- term investments on a regular basis to evaluate whether or not any security has experienced an other- than-temporary decline in fair value. We consider factors such as the length of time and extent to which the market value has been less than the cost, the financial position and near-term prospects of the issuer and our intent to sell, or whether it is more likely than not we will be required to sell the investment before recovery of the investment’s amortized-cost basis. If we determine that an other- than-temporary decline exists in one of these securities, the respective investment would be written down to fair value. For debt securities, the portion of the write-down related to credit loss would be recognized to other income, net in our consolidated statements of comprehensive income. Any portion not related to credit loss would be included in accumulated other comprehensive income. There were no impairments considered other-than-temporary as of January 31, 2017 and 2016. The following table shows the fair values and the gross unrealized losses (aggregated by investment category) of our available-for-sale securities which were in gross unrealized loss position as of January 31, 2017 (in thousands): Asset-backed securities Commercial paper Corporate notes and bonds U.S. agency obligations U.S. treasury securities Fair Value Gross Unrealized Losses $14,027 $ (16) 5,694 67,220 40,549 68,704 (1) (101) (51) (111) F o r m 1 0 - K The following table shows the fair values and the gross unrealized losses (aggregated by investment category) of our available-for-sale securities which were in gross unrealized loss position as of January 31, 2016 (in thousands): Asset-backed securities Corporate notes and bonds U.S. agency obligations U.S. treasury securities Fair Value Gross Unrealized Losses $ 2,249 $ (2) 14,296 82,806 33,486 (40) (54) (37) Veeva Systems Inc. | Form 10-K 93 Note 4. Property and Equipment, Net Property and equipment, net consists of the following as of the dates shown (in thousands): Land Building Land improvements and building improvements Equipment and computers Furniture and fixtures Leasehold improvements Construction in progress Less accumulated depreciation Total property and equipment, net January 31, 2017 2016 $ 3,040 $ 3,040 20,984 14,731 7,197 7,322 2,615 2,889 58,778 (8,871) 20,984 14,106 5,910 6,453 1,323 — 51,816 (4,347) $49,907 $47,469 Total depreciation expense was $4.9 million, $3.1 million and $1.4 million for the fiscal years ended January 31, 2017, 2016 and 2015, respectively. Land is not depreciated. Note 5. Intangible Assets and Goodwill The following schedule presents the details of intangible assets as of January 31, 2017 (in thousands): Existing technology Database Customer contracts and relationships Software Brand Gross Carrying Amount $ 3,880 4,939 33,643 10,867 1,141 January 31, 2017 Accumulated Amortization Net $ (2,733) $ 1,147 (3,291) (5,245) (3,481) (437) 1,648 28,398 7,386 704 $54,470 $(15,187) $39,283 Remaining Useful Life (in years) 1.6 2.5 8.5 3.2 2.2 The following schedule presents the details of intangible assets as of January 31, 2016 (in thousands): Existing technology Database Customer contracts and relationships Software Brand Gross Carrying Amount $ 3,880 4,939 33,643 10,867 1,141 January 31, 2016 Accumulated Amortization Net $(1,957) $ 1,923 (2,103) (1,693) (1,106) (111) 2,836 31,950 9,761 1,030 $54,470 $(6,970) $47,500 Remaining Useful Life (in years) 2.6 3.0 9.4 4.2 3.2 Amortization expense associated with intangible assets for the fiscal years ended January 31, 2017, 2016 and 2015 was $8.2 million, $4.3 million and $1.7 million, respectively. 94 Veeva Systems Inc. | Form 10-K The estimated amortization expense for intangible assets for the next five years and thereafter is as follows (in thousands): Period Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal 2021 Fiscal 2022 Thereafter Total Estimated Amortization Expense $ 7,798 6,964 6,062 3,629 3,182 11,648 $39,283 Note 6. Accrued Expenses Accrued expenses consisted of the following as of the dates shown (in thousands): Accrued commissions Accrued bonus Deferred compensation associated with Zinc Ahead Accrued vacation Accrued other compensation and benefits Total accrued compensation and benefits Accrued fees payable to salesforce.com Accrued third-party professional services subcontractors’ fees Sales taxes payable Other accrued expenses Total accrued expenses and other current liabilities January 31, 2017 2016 $ 3,754 $ 2,798 2,333 333 1,866 3,721 2,957 1,120 1,457 4,119 $12,007 $12,451 4,520 953 2,018 4,819 4,222 1,152 1,597 4,088 $12,310 $11,059 Note 7. Fair Value Measurements We apply the provisions of FASB Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the consolidated financial statements. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements. The carrying amounts of accounts receivable and other current assets, accounts payable and accrued liabilities approximate fair value due to their short-term nature. F o r m 1 0 - K Financial assets and financial fair value in the 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: liabilities recorded at Level 1 — Observable inputs, such as quoted prices in active markets for identical assets or liabilities. Veeva Systems Inc. | Form 10-K 95 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 financial 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 in its entirety requires management to make judgments and considers factors specific to the asset or liability. The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of January 31, 2017 (in thousands): Cash equivalents: Money market funds Commercial paper Corporate notes and bonds U.S. agency obligations Short-term investments Asset-backed securities Commercial paper Corporate notes and bonds U.S. agency obligations U.S. treasury securities Total Level 1 Level 2 Level 3 Total $20,174 $ — — — — — — — — — — — 5,450 20,718 20,570 92,756 87,052 80,170 $ — $ 20,174 — — — — — — — — — — 5,450 20,718 20,570 92,756 87,052 80,170 $20,174 $306,716 $ — $326,890 The following table presents the fair value hierarchy for financial assets measured at fair value on a recurring basis as of January 31, 2016 (in thousands): Cash equivalents: Money market funds Corporate notes and bonds U.S. agency obligations Short-term investments Asset-backed securities Commercial paper Corporate notes and bonds U.S. agency obligations U.S. treasury securities Total Level 1 Level 2 Level 3 Total $28,087 — — $ — 11,396 3,002 — — — — — 5,454 5,970 38,327 124,586 39,687 $ — — — — — — — — $ 28,087 11,396 3,002 5,454 5,970 38,327 124,586 39,687 $28,087 $228,422 $ — $256,509 We determine the fair value of our security holdings based on pricing from our service provider 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). We perform procedures to ensure that appropriate fair values are recorded such as comparing prices obtained from other sources. 96 Veeva Systems Inc. | Form 10-K Note 8. Other Income (Expense), Net Other income (expense), net consisted of the following (in thousands): Foreign currency loss Amortization of investment premiums Interest income Other income (expense), net Note 9. Income Taxes Fiscal Year Ended January 31, 2017 2016 2015 $(1,009) $(1,785) $(3,893) (1,801) 4,477 (2,804) 4,617 (2,424) 3,537 $ 1,667 $ 28 $(2,780) The components of income before income taxes by U.S. and foreign jurisdictions were as follows for the periods shown (in thousands): United States Foreign Total Fiscal Year Ended January 31, 2017 2016 2015 $ 97,981 $82,331 $64,178 11,654 (3,714) 3,008 $109,635 $78,617 $67,186 The majority of our revenues from international sales are invoiced from and collected by our U.S. entity and recognized as a component of income before taxes in the United States as opposed to a foreign jurisdiction. Provision for income taxes consisted of the following for the periods shown (in thousands): Current provision: Federal State Foreign Total Deferred provision: Federal State Foreign Total Provision for income taxes Fiscal Year Ended January 31, 2017 2016 2015 $36,004 $26,919 $26,039 4,924 4,976 2,897 826 3,022 2,093 $45,904 $30,642 $31,154 (2,395) (338) (2,340) (4,573) (209) (1,703) (3,421) (197) (733) $ (5,073) $ (6,485) $ (4,351) $40,831 $24,157 $26,803 Veeva Systems Inc. | Form 10-K 97 F o r m 1 0 - K Provision for income taxes differed from the amount computed by applying the federal statutory income tax rate of 35%, to income before income taxes as a result of the following for the periods shown (in thousands): Federal tax statutory tax rate State taxes Nondeductible expenses Research and development credit Domestic manufacturing deduction Stock-based compensation Foreign rate differential Valuation allowance Tax election benefit Others Provision for income taxes Fiscal Year Ended January 31, 2017 2016 2015 $38,371 $27,489 $23,470 3,883 (367) (6,739) (1,678) 4,338 1,042 1,630 — 351 2,034 794 (4,353) (1,712) 3,331 (5,104) 5,655 (2,865) (1,112) 1,429 140 (2,028) (431) 2,506 1,101 1,589 — (973) $40,831 $24,157 $26,803 The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and liabilities related to the following (in thousands): Deferred Tax Assets: Accruals and reserves Net operating loss carryforward State income taxes Tax credit carryforward Other Gross Deferred Tax Assets Valuation Allowance Total Deferred Tax Assets Deferred Tax Liabilities: Property and equipment Intangible assets Expensed internal-use software Other Total Deferred Tax Liabilities Net Deferred Tax Assets January 31, 2017 2016 $ 11,296 $ 8,181 1,753 1,612 1,834 1,097 11,479 10,346 264 — $ 26,404 $ 21,458 (9,620) (7,990) $ 16,784 $ 13,468 $ (906) $ (1,265) (11,678) (12,854) (390) — (371) (241) $(12,974) $(14,731) $ 3,810 $ (1,263) In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As a result, a valuation allowance was assessed as it is not more likely than not that we will recognize the future benefits on the net California deferred tax asset balances. We expect to generate sufficient California research and development credits in the future to offset our future California state tax liability. For the fiscal year ended January 31, 2017, the valuation allowance increased by $1.6 million, of which $2.5 million relates to the inability to use California research and development tax credits. These amounts were partially offset by $0.8 million related to the limited use of Zinc’s foreign tax credits as governed by regulations. 98 Veeva Systems Inc. | Form 10-K As of January 31, 2017, the net operating loss carryforwards for federal and state income tax purposes were approximately $0.2 million and $4.1 million, respectively. The federal net operating losses and the state net operating losses begin to expire in 2033. As of January 31, 2017, we had $10.2 million of California research and development tax credits available to offset future taxes, which do not expire. We evaluate tax positions for recognition using a more-likely than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. We classify unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as “other non-current liabilities” in the consolidated balance sheets. As of January 31, 2017, the total amount of gross unrecognized tax benefits was $7.9 million, of which $4.2 million, if recognized, would favorably impact our effective tax rate. The aggregate changes in our total gross amount of unrecognized tax benefits are summarized as follows for the periods shown (in thousands): Beginning balance Increases related to tax positions taken during the prior period Increases related to tax positions taken during the current period Lapse of statute of limitations Ending balance Fiscal Year Ended January 31, 2017 2016 2015 $5,248 $3,247 $2,439 24 2,888 (292) 160 2,185 (344) 169 869 (230) $7,868 $5,248 $3,247 Our policy is to classify interest and penalties associated with unrecognized tax benefits as income tax expense. Interest and penalties were not significant during fiscal year ended January 31, 2017. We file tax returns in the United States for federal, California, and other states. The tax years from 2011 forward remain open to examination for federal, 2007 for California and 2012 for other states. We file tax returns in multiple foreign jurisdictions. The tax years from 2011 forward remain open to examination in these foreign jurisdictions. As of January 31, 2017, we had not made any tax provision for U.S. federal and state income taxes and foreign withholding taxes on an immaterial amount of undistributed cumulative earnings of foreign subsidiaries that would be potentially subject to U.S. income taxes upon repatriation, because those earnings are considered to be indefinitely reinvested in those operations. If we were to repatriate these earnings to the United States, we would be subject to an immaterial amount in U.S. income taxes, subject to an adjustment for foreign tax credits and foreign withholding taxes, based on the U.S. statutory tax rate of 35%. F o r m 1 0 - K Note 10. Stockholders’ Equity Common Stock In connection with our initial public offering in October 2013 (IPO), we amended our certificate of incorporation to provide for Class A common stock, Class B common stock and preferred stock. Immediately prior to the consummation of the IPO, all outstanding shares of convertible preferred stock and common stock were converted into shares of Class B common stock. As a result, following the IPO, we have two classes of authorized common stock: Class A common stock and Class B common stock. Veeva Systems Inc. | Form 10-K 99 As of January 31, 2017, we had 103,789,544 shares of Class A common stock and 34,097,075 shares of Class B common stock outstanding, of which 2,500 shares of Class B common stock were unvested, resulting from employees exercising stock options prior to vesting. As of January 31, 2016, we had 87,359,026 shares of Class A common stock and 46,186,159 shares of Class B common stock outstanding, of which 56,666 shares of Class B common stock were unvested, resulting from employees exercising stock options prior to vesting. Employee Equity Plans 2007 Stock Plan Our board of directors adopted our 2007 Stock Plan (2007 Plan) in February 2007, and our stockholders approved it in February 2007. No further awards have been made under our 2007 Plan since the adoption of the 2012 Equity Incentive Plan. However, awards outstanding under our 2007 Plan will continue to be governed by their existing terms. 2012 Equity Incentive Plan Our board of directors adopted our 2012 Equity Incentive Plan (2012 EIP) in November 2012, and our stockholders approved it in December 2012. An amendment and restatement of the 2012 EIP was approved by our board of directors in March 2013, and our stockholders approved it in March 2013. The 2012 EIP became effective on adoption and replaced our 2007 Plan. No further awards have been made under our 2012 EIP since the adoption of the 2013 Equity Incentive Plan. However, awards outstanding under the 2012 EIP will continue to be governed by their existing terms. 2013 Equity Incentive Plan Our board of directors adopted our 2013 Equity Incentive Plan (2013 EIP) in August 2013, and our stockholders approved it in September 2013. The 2013 EIP became effective immediately on adoption although no awards were made under it until the date of our IPO on October 15, 2013, at which time our 2013 EIP replaced our 2012 EIP. As of January 31, 2017, the number of shares of our Class A common stock available for issuance under the 2013 EIP was 16,115,652 plus any shares of our Class B common stock subject to awards under the 2012 EIP and the 2007 Plan that expire or lapse unexercised or, with respect to shares issued pursuant to such awards, are forfeited or repurchased by us after the date of our IPO on October 15, 2013. The number of shares available for issuance under the 2013 EIP automatically increases on the first business day of each of our fiscal years, commencing in 2014, by a number equal to the least of (a) 13.75 million shares, (b) 5% of the shares of all classes of our common stock outstanding on the last business day of the prior fiscal year, or (c) the number of shares determined by our board of directors. 2013 Employee Stock Purchase Plan Our ESPP was adopted by our board of directors in August 2013 and our stockholders approved it in September 2013. The ESPP became effective as of our IPO registration statement on Form S-1, on October 15, 2013. Our ESPP is intended to qualify under Section 423 of the Internal Revenue Code of 1986, as amended (Code). The ESPP was approved with a reserve of 4.0 million shares of Class A common stock for future issuance under various terms provided for in the ESPP. The number of shares available for issuance under the ESPP automatically increases on the first business day of each of our fiscal years, commencing in 2014, by a number equal to the least of (a) 2.2 million shares, (b) 1% of the shares of all classes of our common stock outstanding on the last business day of the prior fiscal year or (c) the number of shares determined by our board of directors. Prior to the beginning of our fiscal year ending January 31, 2017 our board of directors determined not to increase the number of shares available for issuance under the ESPP. 100 Veeva Systems Inc. | Form 10-K During active offering periods, our ESPP permits eligible employees to acquire shares of our common stock at 85% of the lower of the fair market value of our Class A common stock on the first day of the applicable offering period or the fair market value of our Class A common stock on the purchase date. Participants may purchase shares of common stock through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. Voting Rights The holders of our Class B common stock are entitled to ten votes per share, and holders of our Class A common stock are entitled to one vote per share. The holders of our Class A common stock and Class B common stock vote together as a single class, unless otherwise required by our restated certificate of incorporation or law. Delaware law could require either holders of our Class A common stock or our Class B common stock to vote separately as a single class in the following circumstances: • if we were to seek to amend our restated certificate of incorporation to increase the authorized number of shares of a class of stock, or to increase or decrease the par value of a class of stock, then that class would be required to vote separately to approve the proposed amendment; and • if we were to seek to amend our restated certificate of incorporation in a manner that alters or changes the powers, preferences or special rights of a class of stock in a manner that affected its holders adversely, then that class would be required to vote separately to approve the proposed amendment. Our restated certificate of incorporation requires the approval of a majority of our outstanding Class B common stock voting as a separate class for any transaction that would result in a change in control of our company. Stockholders do not have the ability to cumulate votes for the election of directors. Our restated certificate of incorporation and amended and restated bylaws that became effective upon the closing of our IPO provide for a classified board of directors consisting of three classes of approximately equal size, each serving staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Dividend Rights Holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and only then at the times and in the amounts that our board of directors may determine. To date, no dividends have been declared or paid by us. No Preemptive or Similar Rights Our common stock is not entitled to preemptive rights and is not subject to conversion, redemption or sinking fund provisions. Right to Receive Liquidation Distributions Upon our dissolution, liquidation or winding-up, the assets legally available for distribution to our to prior stockholders are distributable ratably among the holders of our common stock, subject satisfaction of all outstanding debt and liabilities and the preferential rights and payment of liquidation preferences, if any, on any outstanding shares of preferred stock. Veeva Systems Inc. | Form 10-K 101 F o r m 1 0 - K Conversion Rights Each outstanding share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon any transfer, whether or not for value, which occurs following the closing of our IPO, except for certain permitted transfers described in our restated certificate of incorporation, including transfers to any “permitted transferee” as defined in our restated certificate of incorporation, which includes, among others, transfers: • to trusts, corporations, limited liability companies, partnerships, foundations or similar entities established by a Class B stockholder, provided that: • such transfer is to entities established by a Class B stockholder where the Class B stockholder retains the exclusive right to vote and direct the disposition of the shares of Class B common stock; or • such transfer does not involve payment of cash, securities, property or other consideration to the Class B stockholder. Once converted into Class A common stock, a share of Class B common stock may not be reissued. All the outstanding shares of Class A and Class B common stock will convert automatically into shares of a single class of common stock upon the earliest to occur of the following: (i) upon the election of the holders of a majority of the then-outstanding shares of Class B common stock or (ii) October 15, 2023. Following such conversion, each share of common stock will have one vote per share and the rights of the holders of all outstanding common stock will be identical. Once converted into a single class of common stock, the Class A and Class B common stock may not be reissued. Early Exercise of Employee Options We historically have allowed for the early exercise of options granted under the 2007 Plan prior to vesting. The 2007 Plan allows for such exercises by means of cash payment, surrender of already outstanding common stock, a same day broker assisted sale or through any other form or method consistent with applicable laws, regulations and rules. Historically, all exercises have been through cash payment. The unvested shares are subject to our repurchase right at the original purchase price. The proceeds initially are recorded as an accrued liability from the early exercise of stock options, and reclassified to common stock as our repurchase right lapses. At January 31, 2017 and 2016, there were unvested shares in the amount of 2,500 and 56,666, respectively, which were subject to repurchase at an aggregate price of an immaterial amount. These repurchase terms are considered to be a forfeiture provision and do not result in variable accounting. The restricted shares issued upon early exercise of stock options are legally issued and outstanding. However, these restricted shares are only deemed outstanding for basic earnings per share computation purposes upon the respective repurchase rights lapsing. We treat cash received from employees for the exercise of unvested options as a refundable deposit included as a liability in our consolidated balance sheets. During fiscal years ended January 31, 2017 and 2016, we recorded an immaterial amount of cash received for early exercise of options in accrued expenses. Amounts from accrued expenses are reclassified to common stock and additional paid-in capital as the shares vest. 102 Veeva Systems Inc. | Form 10-K Stock Option Activity The 2007 Stock Plan and the 2012 EIP provided, and the 2013 EIP provides, for the issuance of incentive and nonstatutory options to employees, consultants and non-employee directors. Options issued under and outside of the 2007 Plan generally are exercisable for periods not to exceed 10 years and generally vest over four to five years. Options issued under the 2012 EIP and 2013 EIP generally are exercisable for periods not to exceed 10 years and generally vest over five to nine years. A summary of stock option activity for fiscal year ended January 31, 2017 is presented below: Weighted average exercise price Weighted average remaining contractual term (in years) Aggregate intrinsic value Number of shares Options outstanding at January 31, 2016 18,549,702 $ 5.01 6.8 $359,306,108 Options granted Options exercised Options forfeited/cancelled Options outstanding at January 31, 2017 1,569,000 (3,369,356) (467,003) 16,282,343 Options vested and exercisable at January 31, 2017 5,698,072 30.21 3.69 13.21 $ 7.48 $ 5.06 Options vested and exercisable at January 31, 2017 and expected to vest thereafter 15,758,819 $ 7.40 5.7 6.3 $212,390,624 $550,420,530 The weighted average grant-date fair value of options granted during fiscal years ended January 31, 2017, 2016 and 2015 was $14.12, $12.36, and $13.87, respectively, per share. As of January 31, 2017, there was $39.2 million in unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options granted under the 2007 Plan, 2012 EIP and 2013 EIP. This cost is expected to be recognized over a weighted average period of 3.4 years. As of January 31, 2017, we had authorized and unissued shares of common stock sufficient to satisfy exercises of stock options. Our closing stock price as reported on the New York Stock Exchange as of January 31, 2017, the intrinsic value of options exercised was last trading day of fiscal year 2017 was $42.33. The total $107.3 million for the fiscal year ended January 31, 2017. Restricted Stock Units The 2013 EIP provides for the issuance of RSUs to employees. RSUs issued under the 2013 EIP generally vest over four years. A summary of RSU activity for fiscal year ended January 31, 2017 is presented below: F o r m 1 0 - K Balance at January 31, 2016 RSUs granted RSUs vested RSUs forfeited/cancelled Balance at January 31, 2017 Unreleased Restricted Stock Units 2,219,425 2,519,058 (973,149) (402,684) Weighted average grant date fair value $26.80 30.31 27.11 26.88 3,362,650 $29.33 During the year ended January 31, 2017, we issued RSUs under the 2013 EIP with a weighted- average grant date fair value of $30.31. Veeva Systems Inc. | Form 10-K 103 As of January 31, 2017, there was a total of $93.7 million in unrecognized compensation cost, net of estimated forfeitures, related to unvested RSUs, which are expected to be recognized over a weighted-average period of approximately 2.9 years. The total intrinsic value of RSUs vested was $34.9 million for the fiscal year ended January 31, 2017. Stock-Based Compensation Compensation expense related to share-based transactions, including employee, consultant, and non-employee director stock option awards, is measured and recognized in the consolidated financial statements based on fair value. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model. The stock-based compensation expense, net of forfeitures, is recognized using a straight-line basis over the requisite service periods of the awards, which is generally four to nine years. For restricted stock awards, fair value is based on the closing price of our common stock on the grant date. Our option-pricing model requires the input of subjective assumptions, including the fair value of the underlying common stock, the expected term of the option, the expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield of our common stock. The assumptions used in our option-pricing model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. These assumptions are estimated as follows: • Risk-Free Interest Rate. We base the risk-free interest rate used in the Black-Scholes valuation model on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent expected term of the options for each option group. • Expected Term. The expected term represents the period that our stock-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the stock option awards granted, we have based our expected term on the simplified method available under GAAP. • Volatility. We determine the price volatility factor based on a blend of our historical volatility and the historical volatilities of our peer group. Industry peers consist of several public companies in the technology industry that are similar to us in size, stage of life cycle and financial leverage. We did not rely on implied volatilities of traded options in our common stock or of our industry peers’ common stock because the volume of stock option activity was relatively low. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock share price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. • Dividend Yield. We have not paid and do not expect to pay dividends. The following table presents the weighted-average assumptions used to estimate the grant date fair value of options granted during the periods presented: Volatility Expected term (in years) Risk-free interest rate Dividend yield 104 Veeva Systems Inc. | Form 10-K For the fiscal year ended 2017 45% — 46% 6.31 — 7.56 2016 45% — 46% 5.50 — 6.32 2015 48% — 50% 6.00 — 6.32 1.48% — 2.10% 1.69% — 1.84% 1.75% — 1.94% 0% 0% 0% For the years ended January 31, 2017, 2016 and 2015, we capitalized an immaterial amount of stock-based compensation as part of our internal-use software capitalization. Employee Stock Purchase Plan The initial offering period for our Employee Stock Purchase Plan (ESPP) commenced on the date of our initial public offering and ended on June 15, 2014. During our initial ESPP offering period 350,059 shares of Class A Common Stock were purchased. We have not had an open offering period subsequent to the initial offering period, and do not currently have an active, open offering period under our ESPP. During active offering periods, our ESPP permits eligible employees to acquire shares of our common stock at 85% of the lower of the fair market value of our Class A common stock on the first day of the applicable offering period or the fair market value of our Class A common stock on the purchase date. Participants may purchase shares of common stock through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The following table presents the weighted-average assumptions used to calculate our stock-based compensation for the stock purchases under the ESPP: Volatility Expected term (in years) Risk-free interest rate Dividend yield 44% 0.58 0.10% 0% Note 11. Net Income per Share Attributable to Common Stockholders We compute net income per share of Class A and Class B common stock using the two-class method required for participating securities. Prior to the date of our IPO in October 2013, we considered all series of our convertible preferred stock to be participating securities due to their non-cumulative dividend rights. Immediately prior to the completion of our IPO, all outstanding shares of convertible preferred stock converted to Class B common stock. Additionally, we consider unvested shares issued upon the early exercise of options to be participating securities as the holders of these shares have a non-forfeitable right to dividends in the event of our declaration of a dividend for common shares. Under the two-class method, net income attributable to common stockholders is determined by allocating undistributed earnings, calculated as net income, less earnings attributable to participating securities. The net income per share attributable to common stockholders is allocated based on the contractual participation rights of the Class A common stock and Class B common stock as if the income for the year has been distributed. As the liquidation and dividend rights are identical, the net loss attributable to common stockholders is allocated on a proportionate basis. Basic net income per share of common stock is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. All participating securities are excluded from the basic weighted-average shares of common stock outstanding. Unvested shares of common stock resulting from the early exercises of stock options are excluded from the calculation of the weighted-average shares of common stock until they vest as they are subject to repurchase until they are vested. The unvested shares of common stock resulting from early exercises of stock options accounted for all of our participating securities. Diluted net income per share attributable to common stockholders is computed by dividing net income attributable to common stockholders 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. Veeva Systems Inc. | Form 10-K 105 F o r m 1 0 - K Undistributed net income for a given period is apportioned to participating securities based on the weighted-average shares of each class of common stock outstanding during the applicable period as a percentage of the total weighted-average shares outstanding during the same period. For purposes of the diluted net income per share attributable to common stockholders calculation, unvested shares of common stock resulting from the early exercises of stock options and unvested options to purchase common stock are considered to be potentially dilutive shares of common stock. In addition, the computation of the 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. The numerators and denominators of the basic and diluted EPS computations for our common stock are calculated as follows (in thousands, except per share data): Basic Numerator Net income Undistributed earnings allocated to participating securities Net income attributable to common stockholders, basic Denominator Weighted average shares used in computing net income per share attributable to common stockholders, basic Net income per share attributable to common stockholders, basic Diluted Numerator Net income attributable to common stockholders, basic Reallocation as a result of conversion of Class B to Class A common stock: Net income attributable to common stockholders, basic Reallocation of net income to Class B common stock Net income attributable to common stockholders, diluted Denominator Number of shares used for basic EPS computation Conversion of Class B to Class A common stock Effect of potentially dilutive common shares Weighted average shares used in computing net income per share attributable to common stockholders, diluted Net income per share attributable to common stockholders, diluted For the fiscal year ended January 31, 2017 2016 2015 Class A Class B Class A Class B Class A Class B $ 49,799 $19,005 $ 31,453 $23,007 $ 14,540 $25,843 (2) (1) (27) (20) (88) (157) $ 49,797 $19,004 $ 31,426 $22,987 $ 14,452 $25,686 98,216 37,482 76,246 55,774 45,983 81,730 $ 0.51 $ 0.51 $ 0.41 $ 0.41 $ 0.31 $ 0.31 $ 49,797 $19,004 $ 31,426 $22,987 $ 14,452 $25,686 19,004 — 22,987 — 25,686 — — 4,009 — 2,808 — 1,653 $ 68,801 $23,013 $ 54,413 $25,795 $ 40,138 $27,339 98,216 37,482 76,246 55,774 45,983 81,730 37,482 — 55,774 — 81,730 — 11,880 11,880 12,957 12,957 16,491 16,491 147,578 49,362 144,977 68,731 144,204 98,221 $ 0.47 $ 0.47 $ 0.38 $ 0.38 $ 0.28 $ 0.28 106 Veeva Systems Inc. | Form 10-K Potential common share equivalents excluded where the inclusion would be anti-dilutive are as follows: Options and awards to purchase shares not included in the computation of diluted net income per share because their inclusion would be anti-dilutive 2,040,238 886,472 355,263 Fiscal Year Ended January 31, 2017 2016 2015 Note 12. Commitments and Contingencies Litigation IMS Litigation Matter IMS’s Complaint Alleging Theft of Trade Secrets. On January 10, 2017, Quintiles IMS Incorporated and IMS Software Services, Ltd. (collectively, “IMS”) filed a complaint against us in the U.S. District Court for the District of New Jersey (Quintiles IMS Inc. v. Veeva Systems Inc. (No. 2:17- cv-00177)). In the complaint, IMS alleges that we have used unauthorized access to proprietary IMS data to improve our software and data products, and that our software is designed to steal IMS trade secrets. IMS further alleges that we have intentionally gained unauthorized access to IMS proprietary information to gain an unfair advantage in marketing our products, and that we have made false statements concerning IMS’s conduct and our data security capabilities. IMS asserts claims under both federal and state theft 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. 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 IMS’s claims lack merit. We have retained outside counsel, and we have begun vigorously defending ourselves against IMS’s lawsuit. On March 13, 2017, we filed our Answer and Counterclaims to IMS’s complaint, a motion to dismiss all of IMS’s claims except for those asserted under the Lanham Act, and a motion to transfer the case to the U.S. District Court for the Northern District of California under 14 U.S.C. § 1404(a). The Court has not yet ruled on our motion to dismiss or motion to transfer. Discovery has not yet begun, no case management schedule has been set, and no trial date has been set. F o r m 1 0 - K Veeva’s Counterclaim Complaint Alleging Violations of Federal and State Antitrust Laws. On March 13, 2017, we filed counterclaims in the action instituted by IMS in the U.S. District Court for the District of New Jersey. Our counterclaims allege that IMS has abused monopoly power as the dominant provider of data products for life sciences companies to exclude Veeva OpenData and Veeva Network from their respective markets. The counterclaims allege that IMS has engaged in various tactics to prevent customers from using our applications and has deliberately raised costs and difficulty for customers attempting to switch from IMS to our data products. The 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 and intentional interference with prospective economic advantage. The counterclaims seek injunctive relief, monetary damages exceeding $200 million, and attorneys’ fees. IMS’s responsive pleading is due April 17, 2017. Veeva Systems Inc. | Form 10-K 107 Medidata Litigation 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 five 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. 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. We have retained outside counsel, and we have begun vigorously defending ourselves against Medidata’s lawsuit. On February 21, 2017, we notified Medidata by letter of our intent to compel arbitration and stay the action. On February 21, 2017, Medidata and its subsidiary MDSOL Europe Limited (collectively, “Medidata”) filed a First Amended Complaint asserting the same allegations and claims. On March 1, 2017, Medidata voluntarily dismissed the Individual Defendants without prejudice. On March 3, 2017, we filed a motion to compel the entire matter to private arbitration, which Medidata opposed. The motion is still pending before the Court. 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 favorable costs, diversion of resources and other factors, and there can be no assurances that outcomes will be obtained. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment or remediation can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Leases We have several non-cancelable operating leases, primarily for offices and servers. Rental payments include minimum rental fees. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease including any periods of free rent. Rent expense for operating leases were $4.5 million, $4.4 million and $2.9 million, for the fiscal years ended January 31, 2017, 2016 and 2015, respectively. 108 Veeva Systems Inc. | Form 10-K Future minimum lease payments under non-cancelable operating leases as of January 31, 2017 are as follows (in thousands): Period Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal 2021 Fiscal 2022 Thereafter Total Value-Added Reseller Agreement Operating leases $ 3,418 3,365 2,569 1,663 1,172 668 $12,855 We have a value-added reseller agreement with salesforce.com, the Salesforce1 Platform in combination with our developed technology to deliver certain of our multichannel customer relationship management 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. As of January 31, 2017, we remained obligated to pay fees of at least $351.4 million prior to September 1, 2025 in connection with this agreement. for our use of inc. OEM Agreement In May 2016, salesforce.com suffered a significant service outage with respect to a group of servers that hosts the Veeva CRM solution for 38 of our Veeva CRM customers. The outage resulted in unplanned system unavailability of up to 21 hours for the associated Veeva customers. Customers are allowed to claim service level credits under their contracts with us, and as of January 31, 2017, an immaterial amount has been claimed and issued. We do not expect any material claims to be made in the future period in relation to this outage. F o r m 1 0 - K Note 13. Related-Party Transactions In September 2016, we entered into an agreement with Zoom Video Communications, Inc. (“Zoom”) to embed two of their products into our multichannel customer relationship management applications. Pursuant to this agreement, we will pay Zoom a fixed annual fee that is not material to us. We have also entered into a contract with Zoom pursuant to which Zoom provides conference call, video conference and web conference capabilities for our internal use. Pursuant to this agreement, we pay Zoom a fee based on usage that has not been material in the past and that we do not expect to be material in the future. Our Chief Executive Officer is on the Board of Directors of Zoom. Also, another member of our Board of Directors is the founder and a general partner of Emergence Capital Partners, one of Zoom’s investors. Note 14. Information about Geographic Areas We track and allocate revenues by the principal geographic region of our customers’ end users rather than by individual country, which makes it impractical to disclose revenues for the United States or other specific foreign countries. Revenues by geographic area, which is primarily measured by the Veeva Systems Inc. | Form 10-K 109 estimated location of the end users for subscription services revenues and the estimated location of the resources performing the services for professional services, were as follows for the periods shown below (in thousands): Revenues by geography North America Europe and other Asia Pacific Total revenues Fiscal Year Ended January 31, 2017 2016 2015 $297,014 $225,483 $173,261 160,666 86,363 111,923 71,815 81,782 58,179 $544,043 $409,221 $313,222 Long-lived assets by geographic area are as follows as of the periods shown (in thousands): Long-lived assets by geography North America Europe and other Asia Pacific Total long-lived assets January 31, 2017 2016 2015 $47,096 $45,163 $27,213 1,762 1,049 1,827 479 538 452 $49,907 $47,469 $28,203 Substantially all of the long-lived assets included in the North America region are located in the United States. Note 15. 401(k) Plan We have a qualified defined contribution plan under Section 401(k) of the Code covering eligible employees. To date, we have not made any matching contributions to this plan. Note 16. Selected Quarterly Financial Data (Unaudited) Selected summarized quarterly financial information for fiscal years ended January 31, 2017 and 2016 is as follows (in thousands): Jan. 31, 2017 Oct. 31, 2016 Jul. 31, 2016 Three Months Ended Jan. 31, 2016 Apr. 30, 2016 (in thousands) Oct. 31, 2015 Jul. 31, 2015 Apr. 30, 2015 $150,153 $142,779 $131,347 $119,764 $114,270 $106,921 $98,107 $89,923 103,683 32,530 98,854 33,810 89,152 23,822 78,673 17,806 74,526 15,211 69,909 64,634 57,938 20,100 22,353 20,925 $ 21,707 $ 21,630 $ 12,958 $ 12,509 $ 17,590 $ 10,482 $13,406 $12,982 Consolidated Statements of Income Data: Total revenues Gross profit Operating income Net income Net income per share attributable to Class A and Class B common stockholders: Basic Diluted $ $ 0.16 $ 0.16 $ 0.10 $ 0.09 $ 0.13 $ 0.08 $ 0.10 $ 0.10 0.15 $ 0.15 $ 0.09 $ 0.09 $ 0.12 $ 0.07 $ 0.09 $ 0.09 110 Veeva Systems Inc. | Form 10-K ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. ITEM 9A. CONTROLS AND PROCEDURES (a) 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 January 31, 2017. 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 the evaluation of our disclosure controls and procedures as of January 31, 2017, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. (b) Management’s Annual Report on Internal Controls Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of January 31, 2017 based on the criteria set forth in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, our management has concluded that our internal control over financial reporting was effective as of January 31, 2017 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. Our independent registered public accounting firm, KPMG LLP, has issued an audit report with respect to our internal control over financial reporting, which appears in Part II, Item 8 of this annual report on Form 10-K. (c) 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 January 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. (d) 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 limitations in all control systems, no considered relative to their costs. Because of 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 the inherent Veeva Systems Inc. | Form 10-K 111 F o r m 1 0 - K 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. ITEM 9B. OTHER INFORMATION None. 112 Veeva Systems Inc. | Form 10-K PART III. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item will be contained in our definitive proxy statement to be filed with the Securities and Exchange Commission in connection with our 2017 annual meeting of stockholders (the “Proxy Statement”), which we expect to file not later than 120 days after the end of our fiscal year ended January 31, 2017, and is incorporated in this report by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this item will be set forth in the Proxy Statement, which we expect to file not later than 120 days after the end of our fiscal year ended January 31, 2017, and is incorporated in this report by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item will be set forth in the Proxy Statement, which we expect to file not later than 120 days after the end of our fiscal year ended January 31, 2017, and is incorporated in this report by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item will be set forth in the Proxy Statement, which we expect to file not later than 120 days after the end of our fiscal year ended January 31, 2017, and is incorporated in this report by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this item will be set forth in the Proxy Statement, which we expect to file not later than 120 days after the end of our fiscal year ended January 31, 2017, and is incorporated in this report by reference. F o r m 1 0 - K Veeva Systems Inc. | Form 10-K 113 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES PART IV. (a) The following documents are filed as part of, or incorporated by reference into, this annual report on Form 10-K: 1. Financial Statements. See Index to Consolidated Financial Statements under Item 8 of this annual report on Form 10-K. 2. Financial Statement Schedules. All schedules have been omitted because the information required to be presented in them is not applicable or is shown in the consolidated financial statements or related notes. 3. Exhibits. We have filed, or incorporated into this annual report on Form 10-K by reference, the exhibits listed on the accompanying Exhibit Index immediately following the signature page of this annual report on Form 10-K. (b) Exhibits. See Item 15(a)(3) above. (c) Financial Statement Schedules. See Item 15(a)(2) above. Item 16. FORM 10-K SUMMARY A Form 10-K summary is provided at the beginning of this document, with hyperlinked cross- references. This allows users to easily locate the corresponding items in this annual report on Form 10- K, where the disclosure is fully presented. The summary does not include certain Part III information that is incorporated by reference to the Proxy Statement. 114 Veeva Systems Inc. | Form 10-K SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pleasanton, State of California, on this 30th day of March, 2017. VEEVA SYSTEMS INC. /s/ TIMOTHY S. CABRAL Timothy S. Cabral Chief Financial Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Peter P. Gassner and Timothy S. Cabral, and each of them, as his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ PETER P. GASSNER Peter P. Gassner /s/ TIMOTHY S. CABRAL Timothy S. Cabral /s/ TIM BARABE Tim Barabe /s/ PAUL CHAMBERLAIN Paul Chamberlain /s/ RONALD E.F. CODD Ronald E.F. Codd /s/ GORDON RITTER Gordon Ritter /s/ PAUL SEKHRI Paul Sekhri Chief Executive Officer and Director (Principal Executive Officer) March 30, 2017 Chief Financial Officer (Principal Financial and Accounting Officer) March 30, 2017 Director March 30, 2017 F o r m 1 0 - K Director March 30, 2017 Director March 30, 2017 Chairman of the Board of Directors March 30, 2017 Director March 30, 2017 Veeva Systems Inc. | Form 10-K 115 Exhibit Number 2.1 2.2 3.1 3.2 4.1 4.2 10.1 10.2 10.3 10.4 EXHIBIT INDEX Incorporated by Reference Exhibit Description Form File No. Exhibit Filing Date Filed Herewith Share Purchase Agreement, dated September 29, 2015, among Veeva Systems Inc., Veeva U.K. Holdings Limited, Accel-KKR Structured Capital Partners, LP and the other sellers party thereto. Deed of Variation of Share Purchase Agreement, dated May 11, 2016, among Veeva Systems Inc., Veeva U.K. Holdings Limited, Accel-KKR Structured Capital Partners, LP and the other sellers party thereto. Restated Certificate of Incorporation of Registrant. Amended and Restated Bylaws of Veeva Systems Inc. Form of Registrant’s Class A common stock certificate. Amended and Restated Investors’ Rights Agreement, dated May 16, 2008, by and among the Registrant and the other parties thereto. Data Processing Addendum, dated April 4, 2014, to Value- Added Reseller Agreement, between Registrant and salesforce.com, inc., as amended. Purchase and Sale Agreement, dated June 11, 2014, between Registrant and The Duffield Family Foundation, as amended July 16, 2014. Description of Non-Employee Director Compensation. Form of Indemnification Agreement between the Registrant and each of its directors and executive officers. 8-K 001-36121 2.1 10/1/2015 10-Q 001-36121 2.2 6/8/2016 8-K 001-36121 3.1 10/22/2013 S-1/A 333-191085 3.4 10/3/2013 S-1/A 333-191085 4.1 10/3/2013 S-1 333-191085 4.2 9/11/2013 10-Q 001-36121 10.1 6/6/2014 10-Q 001-36121 10.1 9/11/2014 8-K 001-36121 Item 5.02 7/10/2014 S-1/A 333-191085 10.1 10/3/2013 10.5* 2007 Stock Plan and forms of agreements thereunder. S-1 333-191085 10.2 9/11/2013 116 Veeva Systems Inc. | Form 10-K Exhibit Description Form File No. Exhibit Filing Date Filed Herewith Incorporated by Reference 2012 Equity Incentive Plan and forms of agreements thereunder. 2013 Equity Incentive Plan and forms of agreements thereunder. S-1 333-191085 10.3 9/11/2013 S-1/A 333-191085 10.4 10/3/2013 2013 Employee Stock Purchase Plan. S-1/A 333-191085 S-1/A 333-191085 10.5 10.7 10/3/2013 9/20/2013 Exhibit Number 10.6* 10.7* 10.8* 10.9** 10.10** 10.11* 10.12* 10.13* 10.14* 10.15* 10.16* 10.17 10.18* Amended and Restated Value-Added Reseller Agreement, dated September 2, 2010, between Registrant and salesforce.com, inc., as amended December 3, 2010, December 13, 2010, April 15, 2011, August 23, 2011, September 29, 2011, April 3, 2012 and May 24, 2012. Eighth Amendment, dated March 3, 2014, to Amended and Restated Value-Added Reseller Agreement, dated September 2, 2010, between Registrant and salesforce.com, inc., as amended. Offer letter, dated June 20, 2013, between Peter P. Gassner and the Registrant. Offer letter, dated June 19, 2013, between Matthew J. Wallach and the Registrant. Offer letter, dated January 25, 2010, between Timothy S. Cabral and the Registrant. Offer letter, dated March 16, 2012, between Ronald E. F. Codd and the Registrant. Offer letter, dated August 14, 2012, between Jonathan W. Faddis and the Registrant. Description of Non-Employee Director Compensation. Data Processing Addendum, dated January 23, 2016, to Value-Added Reseller Agreement, between Registrant and salesforce.com, inc., as amended. Offer letter, dated February 20, 2015, between Alan V. Mateo and the Registrant. F o r m 1 0 - K 8-K 001-36121 10.1 3/4/2014 S-1 333-191085 10.8 9/11/2013 S-1 333-191085 10.9 9/11/2013 S-1 333-191085 10.10 9/11/2013 S-1 333-191085 10.11 9/11/2013 10-Q 001-36121 10.1 6/4/2015 8-K 001-36121 9/11/2015 Item 5.02 10-K 001-36121 10.17 3/31/2016 10-Q 001-36121 10.1 6/8/2016 Veeva Systems Inc. | Form 10-K 117 Exhibit Description Form File No. Exhibit Filing Date Filed Herewith Incorporated by Reference Exhibit Number 10.19* 10.20 21.1 23.1 24.1 31.1 31.2 32.1† 32.2† 10-Q 001-36121 10.2 6/8/2016 10-Q 001-36121 10.1 9/8/2016 Offer letter, dated January 23, 2013, between E. Nitsa Zuppas and the Registrant. Ninth Amendment, dated August 11, 2016, to Amended and Restated Value- Added Reseller Agreement, between salesforce.com, inc. and the Registrant, as amended. List of Subsidiaries of Registrant. Consent of KPMG LLP, Independent Registered Public Accounting Firm. Power of Attorney (see page 97 of this Annual Report on Form 10-K). Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. 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. 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.SCH XBRL Taxonomy Schema Linkbase Document. 101.CAL 101.DEF 101.LAB 101.PRE XBRL Taxonomy Calculation Linkbase Document. XBRL Taxonomy Definition Linkbase Document. XBRL Taxonomy Labels Linkbase Document. XBRL Taxonomy Presentation Linkbase Document. X X X X X X X X X X X X X * Indicates a management contract or compensatory plan. ** Portions of this exhibit (indicated by asterisks) have been omitted pursuant to an order granting confidential treatment. Omitted portions have been submitted separately to the Securities and Exchange Commission (SEC). 118 Veeva Systems Inc. | Form 10-K † The certifications attached as Exhibit 32.1 and 32.2 that accompany this Annual Report on Form 10-K are not deemed filed with the SEC and are not to be incorporated by reference into any filing of Veeva Systems Inc. under the Securities Act of 1933, as amended (Securities Act), or the Securities Exchange Act of 1934, as amended (Exchange Act), whether made before or after the incorporation language date of this Annual Report on Form 10-K, irrespective of any general contained in such filing. F o r m 1 0 - K Veeva Systems Inc. | Form 10-K 119 [THIS PAGE INTENTIONALLY LEFT BLANK] LEGAL COUNSEL Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP 1200 Seaport Boulevard Redwood City, CA 94063 USA TRANSFER AGENT American Stock Transfer & Trust Company, LLC 6201 15th Avenue Brooklyn, NY 11219 USA www.astfinancial.com INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP Mission Towers I 3975 Freedom Circle Drive Suite 100 Santa Clara, CA 95054 USA BOARD OF DIRECTORS Gordon Ritter Chairman of the Board Tim Barabe Paul Chamberlain Ron Codd Peter Gassner Paul Sekhri COMPANY EXECUTIVE OFFICERS Peter Gassner Chief Executive Officer Matt Wallach President Tim Cabral Chief Financial Officer Nitsa Zuppas Chief Marketing Officer Alan Mateo Executive Vice President, Global Sales Josh Faddis Senior Vice President, General Counsel and Corporate Secretary Federic Lequient Senior Vice President, Global Customer Services CORPORATE HEADQUARTERS Global Headquarters 4280 Hacienda Drive Pleasanton, CA 94588 USA Europe Headquarters Avenida Diagonal 420 2° 1 C.P. 08037 Barcelona Spain China Headquarters Room 1707, 17F United Plaza 1468 Nan Jing Rd West Jing An District Shanghai 200040 China Japan Headquarters Ebisu Business Tower 5F Ebisu 1-19-19, Shibuya Ku Tokyo 150-0013 Japan Asia Pacific Headquarters Level 6, Suite 601 275 Alfred Street North Sydney NSW 2060 Australia LATAM Headquarters Rua Funchal 411, Suite 33 Vila Olimpia São Paulo 04551-060 Brazil Notice of Annual Meeting To be held at Veeva Systems Inc., 4280 Hacienda Drive, Pleasanton, California 94588, USA, on June 21, 2017 at 12:00 p.m. Pacific Time. Investor Relations For more information, and to obtain copies of this annual report and proxy statement free of charge, write to us at Corporate Secretary, Veeva Systems Inc., 4280 Hacienda Drive, Pleasanton, California 94588, USA; phone us at +1-925-452-6500; or visit our website at www.veeva.com. VEEVA.COM 

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