VEEVA SYSTEMS INC

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 three months ended April 30, 2024 increased $16 million, primarily due to an increase in employee compensation-related costs. The increase in employee compensation-related costs was primarily driven by an 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 three months ended April 30, 2024 increased $9 million, primarily due to an increase of $7 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 three months ended April 30, 2024 remained relatively consistent due to lower payroll taxes offset by a litigation settlement accrual.

We expect general and administrative expenses to be relatively consistent in the fiscal year ending January 31, 2025 when compared to the fiscal year ended January 31, 2024.

Other Income, Net

Other income, net, for the three months ended April 30, 2024 increased $21 million, due to an increase in interest income from higher investment asset balances as well as increases in interest rates within our short-term investment portfolio.

Foreign Currency

We continue to experience fluctuations primarily resulting from the periodic re-measurement of the foreign currencies exposures on the balance sheet. The results of operations and cash flows are also subject to fluctuations in foreign currency exchange rates, particularly in the Euro, Japanese Yen, Canadian Dollar, Great British Pound Sterling, and Chinese Yuan.

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 three months ended April 30, 2024 and 2023, our effective tax rates were 21.9% and (43.3)%, respectively. During the three months ended April 30, 2024, as compared to the same period in the prior fiscal year, our effective tax rate increased primarily due to the reduced benefit from excess tax benefits related to equity compensation.