VEEVA SYSTEMS INC

Operating Expenses

Operating expenses include research and development, sales and marketing, and general and administrative expenses. We expect operating expenses to increase in the fiscal year ending January 31, 2025, primarily due to employee compensation-related costs.

Research and Development

Research and development expenses for the fiscal year ended January 31, 2024 increased $109 million, primarily due to an increase of $102 million in employee compensation-related costs. The increase in employee compensation-related costs was primarily driven by the increase in headcount during the period. The expansion of our headcount in research and development was to support development work for the products that we offer or may offer in the future.

We expect research and development expenses to increase in the fiscal year ending January 31, 2025, primarily due to employee compensation-related costs as we continue to invest in our product offerings.

Sales and Marketing

Sales and marketing expenses for the fiscal year ended January 31, 2024 increased $33 million, primarily due to an increase of $22 million in employee compensation-related costs. The increase in employee compensation-related costs was primarily driven by the increase in headcount during the period to support our sales and marketing efforts associated with our product offerings.

We expect sales and marketing expenses to increase in the fiscal year ending January 31, 2025, primarily due to employee compensation-related costs and the increase in marketing program costs related to events.

General and Administrative

General and administrative expenses for the fiscal year ended January 31, 2024 increased $29 million, primarily due to an increase of $15 million in employee compensation-related costs. The increase in employee compensation-related costs was primarily driven by the increase in headcount during the period.

We expect general and administrative expenses to continue to increase in the fiscal year ending January 31, 2025, primarily due to employee compensation-related costs.

Other Income, Net

Other income, net, for the fiscal year ended January 31, 2024 increased $109 million, primarily due to an increase in interest income of $87 million and a decrease in accretion of discounts on investments of $22 million.

Foreign Currency

We continue to experience foreign currency fluctuations primarily due to 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, Japanese Yen, Canadian Dollar, Great British Pound Sterling, Chinese Yuan, and Hungarian Forint. We may continue to experience favorable or adverse foreign currency impacts due to volatility in these currencies.

Provision for Income Taxes

The provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate primarily due to state taxes, tax credits, equity compensation, and foreign income subject to taxation in the United States. Future tax rates could be affected by changes in tax laws and regulations or by rulings in tax related litigation, as may be applicable.

For the fiscal years ended January 31, 2024 and 2023, our effective tax rates were 10.6% and 4.2%, respectively. During the fiscal year ended January 31, 2024 as compared to the prior year period, our effective tax rate increased primarily due to a decrease in excess tax benefits, partially offset by the release of tax reserves for uncertain tax positions.

We recognized excess tax benefits of $74 million and $94 million in our provision for income taxes for the fiscal years ended January 31, 2024 and 2023, respectively. The decrease in excess tax benefits during the fiscal year ended January 31, 2024 was primarily due to our Chief Executive Officer exercising the remaining portion of stock options in connection with a previously announced plan, which was a smaller amount compared to the prior period.