Q3 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to be this fiscal 2023rd quarter results Conference call.
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I would now like to hand, the conference call over to Reglan head of Investor Relations. Thank you. Please go ahead.
Good afternoon, and welcome to be but its fiscal 2023rd quarter earnings call for the quarter ended October 30, Onest 2019 with me on todays call, our Peter Gassner, or Chief Executive Officer, Paul shower SVP of commercial cloud and Tim Kabral, Our Chief Financial Officer. During the course of this conference call, we will make forward looking stay.
Well, it's regarding trends our strategies and the anticipated performance of the business. These forward looking statements will be based on management's current views and expectations and are subject to various risks and uncertainties.
Actual results may differ materially.
Please refer to the risks listed in our earnings release and the risk factors included in our most recent filing on Form 10-Q , which is available on the company's website at <unk> Dot com under the investors section and on the Fccs website at <unk> Dot Gov forward looking statements made during the call are being made as of today November 26.
2019.
This call is replayed or viewed after today the information presented during the call may not contained current for accurate information.
The but disclaims any obligation to update or revise any forward looking statements. We will provide guidance on todays call, but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.
On the call. We will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results a reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the form 8-K filed with the FCC just before this call.
As you May have also seen in our earnings press release, we intend to begin using our website as a channel a public disclosure consistent with regulation FD.
Going forward. Please monitor our Investor Relations website. In addition to following our press releases that SEC filings and public conference calls and webcast.
Finally, I'd like to remind everyone that we recently closed two acquisitions both of those transactions close at the beginning of the fourth quarter, and therefore did not impact our third quarter results.
However, the forward looking guidance that we provide today will include financial results for these acquired companies details for how we expect those acquisitions to impact the fourth quarter of this year can be found in today's earnings press release.
With that thank you for joining us and I will turn it over to Peter.
Good afternoon, and thanks, everyone for joining us today Q3 with another strong quarter results came in ahead of our guidance. Thanks to great execution by our teams across all areas of the business.
Total revenue was 281 million up 25% year over year subscription revenue grew 27% and our non-GAAP operating margin was 40%.
I'll share a few highlights starting with commercial cloud.
It was a very exciting quarter for our commercial business, we entered new areas with the acquisitions of Krasik and positions World. We continued our momentum with new customers and delivered success with existing customers.
We furthered our leadership in core CRM, winning a number of new enterprise and SMB customers. For example, a top 50 pharma selected us as their standard in Europe to replace that QB, a based upon their experience with Ikea and their success with Veeva CRM in the U.S. market.
Not only are we continuing to add more CRM customers, we consistently deliver on our commitment to their success.
14, small and midsized CRM customers went live in Q3 across U.S. in Europe .
In SMB Veeva CRM implementations typically take jets four to six weeks. These projects are fast and reliable because of the quality of our software and our services.
It was another great quarter for the rest of commercial cloud as well, we saw particular strength in events management and open data customers are continuing to make the switch to open data and I'm also pleased to see large customers expanding their use of open data across markets.
Example, a top 50 pharma selected Veeva opendata for the U.S. operation and two other top 50 farmers are each in the process of rolling out open data to 30 countries.
We focus on customer success openness and operating as a true partner to the industry. In contrast, I QB uses anti competitive tactics and its monopoly power and data to restrict customer choice.
This harmony industry and ultimately harms patients.
In the past quarter, we have seen acuvue anti competitive, Texas become more extreme, especially as it relates there one key data offering I'm pleased to report that customers are starting to stand up tech heavy on these issues and many are considering moving to open data.
We're also extending commercial cloud with two significant acquisitions.
The cross Ics acquisition closed at the beginning of this month and things are off to a strong start the team is a great cultural fit with exceptional leadership krasik bring depth and patient data and data science to Veeva.
The operational integration is going well and we're starting to refine and execute our plans for new products and tight integration between Krasik Veeva CRM and open data.
Our customers excited about the potential I look forward to the impact that this could have on the industry over the long term.
This month, we also acquired physicians world, a leading provider of Speaker Bureau services for the U.S. market, which complements our offense management software offerings.
Events is an area, where speaker services and events software go hand in hand, because of the complexity of logistics in compliance when organizing a physician led educational event.
Decisions World has been a strategic partner for many years, we have a long track record of success together now we joined forces to make it easy for our customers to get industry, leading cloud software and services from a single vendor.
I'm really happy to welcome that physicians world team to Veeva.
These acquisitions made for a very busy quarter I wanted to take our corporate development finance legal I T HR and product teams for putting it in the extra hours to make this happen with speed and quality.
Shifting gears to Veeva vault.
One of the major highlights of the quarter indoor year was FEIBA, R&D summit, which had record attendance growing more than 40% over 2000 people.
There's real transformation underway supported by Veeva development class.
For the first time the industry has a suite of applications that span the full drug development lifecycle all in the single cloud platform. It was great to see so many customers showcase their successes and to work with them as they look toward the future.
Bolt had another excellent quarter across enterprise and SMB.
Touch on just a few highlights in quality and clinical.
A top 20 pharma in Europe selected quality DOCSIS their enterprise standard to manage quality documentation.
There are a longstanding commercial customer and quality of boxes. There first veeva R&D application. They struggled with a host of legacy applications in R&D and Qualitydocs is now the first step in their digital transformation.
We see a similar dynamic and clinical where companies are turning to veeva vault as they modernize and unify their system landscapes.
For instance, a top 20 pharma customer also in Europe selected Veeva vault study started up enterprise wide in Q3, we now have six top 20 pharma standardized on study start up to streamline trial execution.
In Cdms, we had been awarded our first large scale phase three trial within existing top 20 pharma customer.
This is a very large study it will cover more than 12000 patients across roughly 700 sides in 32 countries.
Congratulations to the Cdms team getting such a large study is a testament to the innovation. The team is bringing to market ended their hard work, making early customer successful.
It's a great milestone and speaks to the maturity of our products and services.
He didn't mass is advancing faster than we initially expected thanks to great partnerships with our early customers I expect to be out of early adopter mode by the end of next year and continue our measured expansion and product innovation from there.
Also share a few updates on vault outside of life Sciences.
Overall, I'm pleased with the team's progress to ensure a customer success and product excellence.
They've got their focus and are executing a well against the opportunity in quality and regulatory for the chemicals cosmetics and CPG markets.
To put things in perspective that market. Our initial market outside of life Sciences is roughly the same sizes are cdms market.
In October we held our second annual customer event for CPG chemicals, and cosmetic hosting more than 50 companies in Chicago.
Also in the quarter the team progressed well in our newer areas.
We signed our fourth early adopter another CPG company.
For the new Veeva claims application you had a major milestone in regulatory with our first CPT customer go lives.
We are now in active discussions with seven of the top 20 CPG companies.
We're still in early adopters mode in this market and will be for another year or more but this level of activity, especially with large enterprises tells us that were on the right track for long term success.
And all we had a great quarter in are progressing well against our long term goals, our focus on innovation and customer success and our ability to execute across multiple large market positions us well it'd be the strategic technology partner to life Sciences and to reach our 3 billion dollar revenue run rate target in 2025.
And now I'll turn it over to Tim for a discussion of our financial performance.
Thanks, Peter Q3 was another quarter of strong financial results.
Total revenue was $281 million up from 225 million one year ago, a 25% increase.
We continue to see strength in both vault and commercial cloud.
For Q3 of this year well represented 52% of total revenue up from 48% in Q3 of last year.
Subscription revenue grew 27% to 227 million from 178 million last year.
Ball contributed 49% of subscription revenue up from 44% a year ago indicative of both expansion of boat usage within our existing customers and new customer additions.
Note that the recognition of Unbilled revenue from multiyear orders with ramping fees was 110 basis point tailwind to year over year growth in the quarter.
Services revenue was 54 million up 16% from 47 million one year ago.
As a reminder, Q4 has fewer billable days due to the holidays in our field kick off which will impact our services revenue and services gross margin.
Our non-GAAP operating income was roughly a 112 million.
40% operating margin exceeding the high end of our guidance.
Topline strength, mostly drove this outperformance.
We achieved another record hiring quarter with 185 net new employees, joining veeva in Q3, bringing our total head count to 3000 in 12 up from 2480 to one year ago.
Moving to the balance sheet deferred revenue was 251 million compared to 329 million at the end of Q2.
This resulted in calculated billings of 193 million in the quarter, which was ahead of our guidance of 185 million.
This outperformance was driven by strong bookings quarter and better than expected services revenue.
Please remember that there are numerous factors that make year over year comparisons of this metric highly variable on a quarterly basis.
Therefore, we do not believe it is a good indicator of the underlying momentum of our business and we do not managed to it internally.
Our subscription revenue guidance and calculated billings guidance for the full fiscal year are the best indicators of our momentum.
Looking ahead, we expect calculated billings between 500 to 505 million in Q4, and roughly 1.175 billion for the full year.
Elsewhere on the balance sheet, we exited Q3 with over one and a half billion in cash and short term investments up from over 1.4 billion at the end of Q2.
This increase was driven by our performance in cash from operations, which came in at about 62 million and included 9 million in excess tax benefit related to equity compensation.
For the full year, we now expect cash from operations to be roughly 360 million, excluding this excess tax benefit.
Please note. This full year number includes one quarter of estimated impact from Crosstex and physicians world, which tend to have net cash outflows in Q4.
Before going into our guidance I'd like to provide some details around our recent acquisitions of physicians World and Cross X.
We acquired physicians world for approximately 40 million in cash and granted retention equity awards valued at $15 million.
Physicians World has a revenue run rate in the low 20 millions and is growing in a single digits with operating margins in the mid single digits.
Nearly all of physicians World revenue will be reported under professional services.
In addition to the previously disclose details of the cross Ics acquisition. Please note that almost all of cross Ics revenue will be reported under subscription revenue with the remainder in professional services.
Revenue from these acquisitions will be adjusted for purchase accounting, which will impact on revenue over the next two to three quarters.
Lastly, these acquisitions have reduced our cash balance by about $470 million, which will be reflected in our Q4 balance sheet.
We're very excited to have both of these teams joint Viva and plan to invest in both businesses going forward.
Both deals close at the beginning of Q4 and our forward looking guidance incorporates the impact of both acquisitions.
In today's press release, we give detailed information about our expectations for how these acquisitions will impact our financial results for the fourth quarter, but.
Please note that we won't be breaking this out separately next year and beyond as we will be deeply integrating these new solutions into our commercial cloud business.
Now I'd like to share guidance for Q4 in fiscal 2020.
In Q4, we expect revenue between 296, and 299 million and non-GAAP operating income of 102 101 million.
We expect the acquisitions to have a headwind of roughly 400 basis points to non-GAAP operating margin in Q4.
non-GAAP net income per share is expected to be 51 to 52 cents based on a fully diluted share count of approximately 159 million.
For the year, we expect total revenue in the range of 1.088 billion to 1.091 billion.
We anticipate subscription revenue to be in the range of 888 to 889 million.
For the full year, we now anticipate organic commercial cloud subscription revenue growth of about 14% and volt subscription revenue growth of about 43%.
For fiscal 20, we expect non-GAAP operating income a foreigner nine to 410 million a margin of roughly 37%.
We expect the acquisitions have a headwind of roughly 120 basis points to non-GAAP operating margin for the full year.
We're now targeting non-GAAP net income per share for the year between $2 in 16 and $2 in 17 cents.
Based on a fully diluted share count of approximately 158 million.
Let me wrap up my sharing our initial outlook for fiscal 21.
Please note we are still on in the process of finalizing the plan and will provide our formal guidance on the Q4 earnings call.
Currently our initial outlook for total revenue is between the range of 1.380 billion and 1.390 billion for fiscal 21.
Within this guide we expect subscription revenue to be in the range of 1.140 billion to 1.145 billion.
Based on our early spending plans, we see non-GAAP operating margins of 35% to 36% for the full year with the impact of Crosstex and physicians world, resulting in roughly 250 basis points of headwind.
In summary, it was another great quarter the teams outstanding and consistent performance has set us on track to reach our target of 3 billion in total revenue my calendar 2025.
As always thank you for joining the call and I'll now turn it back to the operator for questions.
As a reminder, in order to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hatch Keith.
Please standby will be compiled acuity roster.
And our first question comes from Sterling Auty with JP Morgan Your line is open.
Yes, Thanks, Hi, guys you mentioned the Cuba in the prepared remarks, we've gotten a number of questions around the competitive displacements and in the CRM side could you just maybe go into a little bit more detail into those situations and just how you're seeing that competition shaping up.
Yes, Hey, Sterling Hi, this is Paul Thanks from question.
So I'll take that one.
They did announce.
Yeah, I think there number was 70 70 wins.
Historically, and then I think they announced a couple of.
Two small divisions of large enterprise customers.
Those kinds of things are going to happen we.
Based on our key visit kind of aggressive.
Discounting in pricing and their bundling a combined with account specific factors those sorts of things will happen.
I don't see that as a trend in fact, and he was gaining share I'm really pleased with the progress that we've had in core CRM.
For the last couple of quarters in this quarter in particular, we've we've actually grown market share and I think thats largely driven by.
The strength that we've had in the small and medium size business segment.
Pre commercial customers are are are going to veeva, they're betting there'll launch on a on a on a vendor and <unk> a partner that they can trust and then existing customers are expanding so and I think I'm really pleased with the progress and we continue our strategy really hasn't changed we continue to focus on customer success and.
Nation, and also executing which is over the long term, which is what I think customers continue to one.
That's great one follow up just along those lines for the investors that are newer to the story can you help them understand this idea of the one key data they look at and say well if you've got this data that seems to be almost must have by the customers and the bundle. It into the CRM is there are risks that.
You could can that you could lose market share before anything happens in the courts or something else in the marketplace.
So the.
The anti competitive behavior that we've seen from my two via has been focused on our primarily three of our products network is where it started.
Then nitro and then more recently Andy.
It has not been we haven't seen any impact on core CRM. So I think it's unlikely that that will impact the core CRM business or have any impact on share are really growth going forward.
Great. Thank you.
Your next question comes from Ken Wong with Guggenheim Securities. Your line is open.
Great. Thanks for taking my question guys.
Maybe the first one for Tim when we're looking at that fiscal of 21 revenue outlook I know the the expectation as you guys are going to really talk about the M&A too much there, but can you maybe help us and Pat how much of that contribution is M&A specific versus what organic.
Yes can we as we are as I said in my prepared remarks, we're deeply integrating these two solutions into our commercial cloud business. So it's not our intention to break out the inorganic piece specifically going forward. We wanted to do it this year to delay the.
Nation of.
The expectation of what those businesses will contribute especially after you take into account purchase accounting for the rest of the year, but that's not our plan going forward because we're integrating these businesses so deeply into the overall commercial cloud business.
Okay got it and then as far as that.
That said 250 basis point headwind to two op margin.
Yes, I guess any any sense for kind of how how that how that fades away. After after next year I, obviously don't want to kind of guide to the following year, but is that something that we should expect in terms of investments will still be something that weighs on the business or more of a one year one year impact.
Yes, I think there's two components to that Ken as you think about next year. One is as you said and you heard Peter and I talk about.
These are businesses or solutions that will continue to invest in I don't think thats, a one year phenomenon I think that is probably overtime and the other piece of it is obviously some of the purchase accounting spills into next year, which also impacts the the operating margin impacted they have so.
I think that obviously goes away after the first half of next year, but I think that these are businesses that were bullish about and we think with investment we have an opportunity for customer success and long term growth opportunities.
Got it and then maybe a quick question Peter you mentioned cdms advancing faster than expected and we'll be out of early adopter phase next year, how should we think about what that means from a customer adoption perspective is this typically when you might see the kind of the slow adopter fast followers kind of dynamic kick in or or.
Or is that.
I interpret that differently.
I don't think there'll be a rush so to speak because.
Customers have their natural time, when they adopt these things and we're not going to impact that that too much and there will always start small with the system like that so no I I don't think though I think it'll be steady progress.
But but start to be significant in revenue in the coming years, yes, if we step back that the main thing. The main news here is the the handling the most complex and the largest trial. That's really says the product has arrived in and that bodes very well for our future.
Great. Thanks, guys.
Your next question is from buff on surgery with William Blair. Your line is okay.
Thanks for taking my questions guys and a nice job there I wanted to follow up on steroids question, a little bit on the competitive front.
Obviously on the commercial side I love to see if you're seeing any more competitive changes on the clinical side.
And then as you look at sort of the CMS or specific BDC part of the clinical side any change credit environment given that obviously the big player. There I was acquired by not just so.
I'll pick that one in terms of the CD mastered the clinical side now we're seeing no change in the competitive environment that.
We're really focused on our own execution with our early adopters polishing out that product and service offering and getting ready for that to become a very big big business.
On the Cdms on the broader R&D side development quiet cloud also no changes in the competitive environment. There development clouds really accelerating when you think about 2000 people at that R&D customer summit that that's one of the biggest events through the year in life Sciences. So.
Really there the momentum is increasing I think customers are planning for veeva over the long term on the development cloud. These are.
Very crucial systems very sticky integrated systems. So customers are thinking 20 years down the road literally on these types of things.
Peter that's helpful. I guess I wanted to just follow up little bit on that we pick the first part of that I think first real vault product. If we go back to traditional nomenclature whiskey Tms and given so that's been the market longest a little color in sort of growth rates on penetration of that business given its the most tenured off from that space really helpful.
As each CTM asphalt kind of ties into the Tms space, but love to understand how each investment doing you touched on Ram and other pieces, but love Trust on how that core first product is doing in terms penetration in gross thank you.
Yes, it's still growing quite quite nicely actually I won't get into the exact penetration rates, but growth growth as measured by bookings that type thing very strong in the Tms This year and you might wonder Okay. We'll watch how can that be well, it's a big.
Industry with a lot of players. So yes order early adopters I would say we're into the middle getting into the late majority. If you look at the classic crossing the chasm, there's still plenty of customers that don't have already Tms yet and also in life Sciences industry overall is growing and the.
A number with the move to precision medicine. The number of biotechs is growing is up significantly from when Veeva started in 2007 so.
The market is actually for MF has.
Grown significantly since the time, we introduced in 2012 in it and it continues to grow.
Thank you guys I appreciate your time.
Your next question is from the stands blocky with Morgan Stanley . Your line is open.
Hi, guys. Good afternoon, and thank you for taking my question.
[noise] once you actually go back to the the Cdms the big win for face to face three drug trial.
That one was very impressive to us because.
We we didnt hear a whole lot of.
Big success with like a phase true to drug trials and now we have the Mega phase threed dropping in at a top 20 pharma no less maybe just walk us through like how this one came together and you are there similar type of engagements that you have in your <unk>.
On the horizon, I'm, not necessarily saying it up for Q4 or anything like that but just as we look forward rate is that is the product mature enough where it can very effectively a handle these massive phase three trials and then I've a quick follow for Tim.
Okay.
Yeah. This this large trial this was at a customer top 20 pharma that we have signed a long term enterprise license agreement with.
And then when they do that they were the first to sign long term enterprise license agreement with us in in the top 20, when they do that they will start with clinical trials that are smaller and less risk could be smaller phase threes face to face one and when they're doing that there are products is new and they're testing that.
But also their adjusting their processes. So now they have their processes as it relates to veeva figured out enough and our product has matured enough now they're taking on the these this very very large trial. So that's kind of unique we have no other customer doing that yet, but we have a number.
Customers, we're in discussion with discussions with that could result into these long term enterprise license agreements.
So that there's the level of activity as high when that's going to actually turn into a booking or sale. You know that's something we can't predict a yet at this time, but the level of activity is very high.
Okay perfect quick follow up for Tim on the on billings as we think about the Q3 in Q4.
Anything to call out from a onetime standpoint, either on coming in Q3, maybe effects or anything like that and just you know how we should think about Q4 billings if there's anything to be mindful of other than the 30 million of calculated.
Yes benefit you keep suite Q4 billings from acquisitions.
Yes, they had no FX impact obviously in I Shouldnt say, obviously know Q3 impact of FX in terms of Q4 and Q3. There was no one time and I think what you're hinting at is.
Is there a movement if someone's renewal date changes the dynamic of the annual billings in the quarterly billings no none of that.
We we saw in Q3 or we are projecting in Q4.
Perfect. Thank you so much.
Your next question is from Brian Peterson with Raymond James Your line is open.
Hi, Thanks for taking my question. So just wanted to follow up on Sterling's first question on the CRM side of things, but it sounds like you're continuing to gain share. There I'm curious, where we are in terms of market share or where do you think that number could get to aegis. Many maybe an update on the penetration rates of some of the add on products.
Yes, Hey, Brian This is Paul so, yes, we're north of 80% I think we talked about a wild.
Quarter or to back that we hit that north of 80% Mark.
You know, it's still growing I think we can see pretty fair to see line of sight.
True through to 90% after that it gets.
It gets a little harder to predict.
So that the share continues to increase and I think again, it's it's.
Hi to your ability to execute in the marketplace I think customers. Our customers are clearly looking for partner, who can deliver and make sure that that they're going to be successful. So we're going to focus on customer success in innovation.
So I think that's.
90% is probably.
Clear line of sight too.
Then after that it's maybe a little bit harder to predict beyond that.
It any perspective on the attach rates of some of their products like approve email I, if somebody add ons that you've got.
Yes, so approved email continues to be really high we've had.
It's north of 60% and that's really driven by Veeva, helping move the industry to become more digital enabling the fuel teams to be able to communicate with customers via via digital engagement. So we've really I would say we've been successful moving the industry there and our customers had a lot of success doing that.
Then if you look across some of the other add ons events is moving quite well and that's north of 20%.
And then some of the other add ons like.
A line.
We're closer to closer to 10% in terms of account penetration so there's still.
Fair amount of runway.
For the add on products and.
In terms of the overall opportunity.
Great and maybe just one more follow up all the you obviously, we've seen the two acquisitions in pretty short order here curious.
Appetite for additional M&A with the cash on the balance sheet. Thanks, guys.
Yes in terms of other M&A, where we're always looking right you look a lot you don't you don't purchase very many but but you look a lot and we happen to find to that really fit for us the lowest keep doing that what fits for US is yeah. I can just explain that a little bit. It's when we find a cultural fit in a synergistic fit.
With the business and we have the right leader to run that business and we can find where one plus one equals three so we're always looking and sometimes we will find those where we can add value for the customers. We can create new value and then we'll execute on that but you know whats.
Generally rare you look a lot and you find a little.
Thank you.
Your next question comes from Rishi Jaluria with D.A. Davidson Your line is open.
Hey, guys. Thanks, so much for taking my questions first just wanted US maybe start off with a comment Peter you made in the prepared remarks on I QB on how you're seeing customers pushing back against there.
Behavior and adopting open data is that something that if this trend kind of continues it can start to serve as a tailwind to refer adoption of products like night show that in the past had been hurt by the lack of access to data and about a follow up.
Yes, if we look at the set the stage for the overall concept here with Ikea acutely has some near monopoly positions in in two types of data. They have the sales data area and then they have the reference data that the open data and their preventing that data from going into some.
Veeva suffer products in that.
Arming the uptake of those suffer products, particularly.
Thats network that Nitro and that's Andy.
As it relates to.
One key there's competition there now we have opened data. So some customers are are moving to open data. Unfortunately in the case of.
Hi, Andy and nitrile, they would need the sales day to end the reference data. So I don't I don't see good progress for Nitro and Andy and tell we can resolve this issue completely with Ikea, which will have to probably be resolved by the court, where we are seeing pro.
Yes for four nitrile, particularly is in companies that use alternative data sources not in some markets. Some certain types of countries not all not all companies will need.
Give you a data for example in Japan, there's another data provided there called insights, it's making great progress in Japan, particularly with that Youve Japanese domestic so.
That's kind of the lay of the land there the extreme behavior by acute via on.
One key is actually helping our open data business a bit that's not going to be the magic.
That will unlock network or four and year Nitro will need a more fulsome solution for that.
Got it that's that's really helpful.
And then I just wanted to maybe go a little bit into a if you've seen any.
You have any updates for us and on the engage business. If there's didn't need any areas, where you're seeing particular attraction and maybe the how we should just be thinking about.
What the runway of engaged looks like from here since we've been talked a lot about commercial cloud today. Thanks.
Yes, Hi. This is this is Paul and engages and engage is doing well again as the industry is trying to become more digital this opens up a channel for field reps to interact with customers remotely via live meeting so it's really a way that's increasing.
Access for customers from customers that may be difficult to see face to face.
We're that want to interact with a pharmaceutical company online at the room convenience are using engage and it's starting to catch on there but its a.
Significant change management remember this is an industry, who is called face to face on customers on doctors for a long time for pretty much effort and this is a change management from a rep perspective, but also from a doctor perspective. So the early what we're seeing with our really customers are getting great results. They are getting a lot.
Of time with customers sales calls that May last between 15 20 minutes and then also getting access to doctors that they may not have gone access to face to face so really significant benefit, but it'll take time because of the change management. So I think as companies learn more overtime I think you'll start to see this market play out.
Over the next couple of years when it becomes more standard best standard way of doing business I think it's still in the early stages, but the results are proving out to plant will.
Alright, great. That's that's helpful. Thank you so much cash.
Your next question is from Scott Berg with Needham Your line is open.
Okay.
Hi, everyone. Thanks for taking my questions.
Just wanted to follow up I don't know who wants to take the first one but it's on the Crosstex acquisition.
Spent a lot of time at Dreamforce last week as you do what they're trying to understand what the product is and in Qingwei. What's a good understanding we could you help us understand maybe how you take some of that marketing data and actually integrate it with the rest of your commercial cloud and maybe have a mutual benefit so all those solutions more holistically.
Yes, so prospects if you look at the core what they bring to the table with.
Data science and its understanding of patient behavior.
Backing that is.
Hundreds of millions data on hundreds of millions of patients and millions of doctors in the U.S. and all types of data on that now what.
So it's a hundreds of terabytes of data and significant data science algorithms on that which krasik uses to measure.
The effectiveness.
Digital marketing.
Now, where we where we can take that in the future. That's you know we're refining our plans right now we have CRM.
Open data, we have krasik and we're making plans both to in improved that existing cross Ics products and to create brand new product not ready to announce those specific plans yet, but we'll we'll certainly let the lets you know when we're ready to for that but overall it's exciting.
It's veevas entry into data science.
And that and we bought a company that has 15 years experience in it.
Really the thought leader in that they were doing data science before there was the term term data science so.
I'm really excited about it can be a transformative acquisition for veeva.
Great helpful. Then from a follow up perspective, Tim you had a big jump in Unbilled receivables in the quarter I think we all understand and Sixtyl six world what causes that generically, but was there are certain type of contract or a certain set of products that made that jump so materially for one quarter to the next just trying to.
Maybe help understand that dynamic because it was a little bit unusual from your recent trends.
Yes got one thing to note is when you look at the Unbilled receivables number that you will see in our balance sheet.
That is a combination of subscription and services and we'll typically see that in Q3 because October .
Becomes a pretty big utilization month for whatever reason for us. So that was helped by services quite a bit there wasn't any specific new types of subscription deals that we closed in the quarter a that would have impacted that Scott. So I think it's similar what we've talked about in the past in terms of these.
Altay year ramping fee deals that.
Do not have the ability for renewal on an annual basis. So I think it's the same type of deal but in Q3 at the end of Q3, you'll see a little bit of a pop from services Unbilled.
Revenue there.
[noise] helpful. Thanks again.
Your next question is from David Hynes with Canaccord. Your line is open.
Hey, Thanks for taking my questions I wanted to ask about physicians world. So maybe for Paul.
You know a bit of a break from the norm acquiring a a largely services business. So I guess question is do you see a big opportunity to sell events management software into their base was that was that part of the rationale for the deal and then just Standalone is there's significant opportunity for for margin optimization on that business.
Yes, David Thanks.
No. The rationale was really driven by combining a great software we create services. So what physicians world does the majority of their business was focused around providing logistics services to their customers when it when a life Sciences company doesn't event. They invite a thought leader to talk to a number of a number.
Customers, they often have to get hotel they have to pay the speakers. There is a bunch of logistics that are associated with managing that event and that's exactly where physicians will equate now. These are really significant thought leaders there keep them. They are important people to the life Sciences companies you need to provide great White glove service and that's what that's.
Exactly what physician worlds provides to customers so.
The opportunity for Veeva was to provide both of those under one roof, because our customers were asking us. They wanted one vendor to make sure that it was really seamless and really fully integrated and at least to have that choice of having one company providing end to end solution. So that's the that was the rationale for for acquiring physicians world.
I'll, let him comment on the kind of the margin optimization part of that.
Yes, so DJ add to Paul's point. This is very important that'd be high quality in white glove service. So I don't know if there's I wouldn't say, there's no margin improvement potential.
Especially as that business scales out I think the combined events software business and services business that we now have on being delivered from Veeva, There's an opportunity there from a from a margin optimization both.
In terms of just normal margin and then at some level of economies of scale.
Yes, okay.
Makes sense and then.
Peter.
So you've taken a pretty prudent approach to scaling efforts outside of life Sciences and I know this is the playbook you ran early early days and kind of core life Sciences markets. So I'm wondering what is it that you're looking for and kind of your cornerstone Ll LLS cut clients that could serve as a signal that the times right to.
Step on the gas in terms of incremental investment there.
Yeah, I guess, what we look for as you know do we have product market fit do we have capacity are we able to.
Take on more customers and not not have issues. So in the in the core market that we're going after now we're getting close where we've got.
In the quality in the regulatory product areas in CPG chemicals and cosmetics.
We're having a lot of discussions in there and so we're getting pretty close but will stay in that market.
For good long time here, it's a big market, it's about as big as our Cdms and we'll be very prudent if we if and when we pick up another market outside of life Sciences, that's sort of the hallmark of either right you really get laser focused on the specific needs of the product in the industry work it out with the early adopters and then you know exactly who to sell.
Two and you have exactly what product you need and that takes time.
Got it very good thanks, guys.
Your next question is from James referred and with Stephens, Inc. Your line is open.
Hey, Thanks, Good afternoon, I've got a couple of questions on commercial if I may.
Paul you talked about winning back that top 50 European pharma for my Q.
Just curious given how the oftentimes discount these deals pretty heavily in they try to lock in customers in some cases three to five years I'm just curious what the situation was here and whether this customer was one that went live and wasn't pleased or was it a failed implementation that brought this customer back into the fold just any color you can provide there.
Hi, James Thanks, So just just to clarify not one this was a as top 50 company and they had to have Veeva CRM and they have veeva in the U.S. marketplace and they've been a long time, even customer in the U.S. and very very successful.
They also had a QB legacy acute in the European region.
So they were operating essentially separately regionally for a long period of time, which is common particularly in companies about sites, where they have different systems in different regions and what they wanted to do was to centralize and harmonize more globally.
So they hadn't decision to make and they had experienced keep experienced with both of these end Ikea and based on their experience and they're kind of there they have to choose a partner that they could trust can execute on a global program.
Survey based on that and kind of our track record of success that we've had with them in the innovation. They chose veeva. So wanted to be clear as to what was the context behind behind that they knew both Viva and acuvue are quite well.
Perfect I appreciate that clarification and a follow up on commercial.
How much longer term question. It seems like there's been a trend that physicians are having fewer and fewer in person interactions with sales rep.
But it's the reporting the I've seen has said that newer digital engagement formats like email or virtual meeting may not necessarily be filling that gap entirely with the implication being that physicians or perhaps.
Yes, pulling information they need directly from the farmers or something like that so I'm just curious given that you all see more data on these interactions than anybody else in the market.
Is that fair description and were generally what do you think the long term role is for the pharmaceutical sales rep in this industry.
Yes, good question and I would say that for.
The in person interactions.
It's actually not really decreasing over time, you know if you look at the number of reps globally that are in the industry. That's actually increased a bit over time, it shifts a little bit by country. Some countries tend to decrease on companies within countries tend to decrease and others tend to increase as their their portfolio changes over time.
Yes, I go off patent and then as new drugs, our launch they may reduce in one area and an increase in another area. So the number of reps has been relatively constant and.
As you as the market is launching more specialized drugs.
They tend to be more scientific in nature, and you need people you need human human beings and the relationship becomes really really important getting those drugs out into the marketplace and into the hands for the right customers in the right patient. So I don't see I, certainly don't see I Havent. The data does not show that its diminishing and actually shows it's pretty Thompson and.
I see digital increasing at the same time.
So when I look back at our.
Approved email utilization and even you know newer we've engaged he the utilization is increasing over time, so the industry by and large is doing were digital at the same time that they're doing roughly about the same roughly the same amount of face to face interaction and I think that's where it will trend for while particularly as as the.
Industry beat becomes more.
Scientific and as the industry approaches more precision type medicines, it's I think that mix will continue for a long time.
Got it very helpful. Thank you.
Your next question comes from Sandy Draper with Suntrust. Your line is open.
Hi, This is a stand Bernstein on for Sandy Thanks for taking my question.
A lot of my question I've been asked what maybe to put a finer point on it.
You mentioned I Q, it became more and take a competitive this quarter can you maybe elaborate on what exactly was escalated.
This quarter versus the past and then maybe as a follow up to what extent just cross like some of the capabilities to provide it did alternative to acute and Peter maybe you already touched on that but.
Is there is there any potential to provide some kind of a data offside date alternative talked to them. Thanks.
Yes, the first question about Ikea just more.
I guess more of the same from my from my Q, yet, but maybe more rhetoric from there from their field team I guess, that's some of the echoes we've even seen in some of our vault products where.
Customers wanted to put in some.
One key data and Nike, We've said, okay can't put it into vault product now the reality is that one key data is not so important to the vault products at all so the customers just said, okay. We're going to go forward anyway, and then one case that led them to using open data in one of those things. So that's the type of stuff they haven't done.
Before so I think they're getting a bit desperate or some type of thing and that is having a bit of a backlash.
In the customers so that's that one.
In terms of Krasik.
Do they have assets that we can leverage into other other data products.
Certainly there's a lot of health care data and assets on a that Krasik sad doesn't have all the things that we would need yet to do any kind of a sales data anything like that but it's certainly something that you know it's not impossible that we do that in the future we don't have any.
Specific.
Plans at this time.
But it's so it's always an option.
Got it thank you.
Your next question comes from a Chris Merwin with Goldman Sachs. Your line is open.
Okay. Thanks for taking my question.
The quality one you called out.
CPG customer going live with the regulatory product I know you mentioned multiple customers taking claims already as well can you maybe help us think about the magnitude of some of these deals or maybe how we should be thinking about milestones in general for quality. One as you continue to build up referenceable customers there.
Yes. These are.
The things I think about our when we have activity in the in the top twentys that that really can move the needle for us not the initial activity, but over the long term and as as we look to.
Have you know customers of.
$10 million, a year or more revenue 8 million. So those would be milestones that we would that we would look at.
And that just takes time to to build up and to do that you need to have multiple successful products into these large enterprises.
And it all starts with a product somewhere in a division and even beat and even before that even before that it starts with discussions building relationships and the customers really understanding their business. That's what I'm excited about over the last quarter or to the depth of relationships, we're building and the inquiries were high.
Having in the discussions we're having.
Okay, Great and then just coming back to Crosstex for minutes. It sounds like there's quite a bit of work being done online their products, but perhaps some new products as well and I know, it's early but is it fair to say that in the context of next year's guidance. It doesn't really include any benefit of those new products are cross sell.
You know with your existing Salesforce.
Yeah, new products, they boy any new products, we would make that takes a while to first you got to make the products you got to get a few early adopters. So.
Even if you look at products that we announced.
All three or more years ago things like safety or Cdms. Those are very very early so if you look at them, they're not very material to our financials now at all so that takes years 345 years to take to get material.
Okay. Thanks terms of you can see it in our financials in investment.
If you look at some of our investments going forward and the things I'm really excited about is that we continue to build for the future. So the level of investment I can call out three particular areas, where we will have heavy investment thats in our safety product, where we're getting a lot of customer interactions and where we have new modules to build and we're doing that.
So we have to build out the field team the product team in safety. There also cdms more to build out of the product on the product more to build out in the field team as we see that business starting to ramp and in the Krasik, Syria, That's where we'll look to our new product roadmap and what we need to build out there. So the three significant areas.
Of investing that's it makes me excited because that make that make sure our future is bright all the way through 2025 and beyond.
Okay. Thanks.
Your next questions from Tom Roderick with Stifel. Your line is that.
Hi, everybody. Thank you for taking my questions.
So I guess in the first one I wanted to kind of go back to the I think withstand that acis earlier, just a question on the Cdms win Tonight.
I think it's obviously a big deal to land a phase three trial can you just talk a little bit more about the dynamics of what is required with that product aside from just sort of scale and being able to scale up to 12000 patients along those lines.
What additional features a were required for you to kind of get into this when I would imagine it was a pretty long competitive process, perhaps you could talk about that and then lastly at the analyst day, you spoke about the clinical query language I know, it's very early and probably customers haven't seen much of that yet, but what does the response Ben to the idea of.
A new and perhaps more flexible aquari language on the back end of that thank you.
Yes.
As far as the CD messing up in the large trials.
Do there.
While there were lot of things in the product, but around the product. So for example.
We talk about 700 sites all the right around the World I think 30, plus countries have to get our our support infrastructure, we had to get our support infrastructure up to speed and very understanding about clinical because you're actually doing the end user support for clinical investigators in Japan in Russia et cetera.
So that's an example, one thing we had to get ready we had to our performance right. We had to have our performance tested ready architectural things, but buttoned up.
The test environments et cetera to handle that level of scale and complexity of data that going in there.
And then administration. Okay. How are you can administer all these clinical investigators that are coming in around the world you have to handle all the loose loose ends in the loose corners that only come with experience software as a.
Sometimes you know it can be like a person you gotta go through some bumps and bruises that ticket to maturity.
So it's just the maturity of the software and all the processes around the software, including the scale of our.
Professional services team and our partner network.
Nobody is they will has ever run up this large of a study on Eva Cdms before and and our our approach is different the technology is different it's more agile. So there is different.
Operating roles that need to be established inside of the pharma company in that that all needs to get.
Work through the system.
And in terms of the sequel.
I would say there is I wouldn't say a handful but certainly.
In the.
Tens of people inside the industry, who really get it what this cqs can be it sort of the early adopters, who are thinking forward because after member workbenches not available to any customers yet.
We're targeting towards the early part of next year for it be available to the first the early adopters. So.
We haven't seen the impact of of the TQL or the data workbench, yet so far the excitement is around the much better clinical data management system.
Outstanding Okay. That's great. Thank you Peter Tim simple one for you maybe we have to wait on this I Didnt hear if you gave the RPL number is that something we just need to wait for the Q on or do you have that handy that you can share that with us.
I don't have it handy.
Right in front of me right now Tom.
We'll have it in the queue for sure I reckon I can.
Well, we should wait for the Q.
I'll wait for the Q perfect. That's it from me. Thank you guys appreciate it.
Your next question is from Brad Sills with Bank of America Merrill Lynch. Your line is open.
Great. Thanks, guys.
Wanted to ask about.
This seven of 10 CPG firms that you mentioned that sounds like great progress in pipeline in discussion there.
For outside life Sciences.
If you look at where those customers are today and what they are using.
Quality one for versus say some of the earlier wins I guess, how are you seeing the use cases evolve.
Hi life Sciences, particularly within those.
CPG vertical with sounds very good.
Yeah.
We're having active discussions with seven out of the top 20, Cpgs and what we see there is a lot of cross pollination between the quality area and the regulatory area.
So that's.
That's a common theme when we talk with the customers, we see a lot of concern and interest in environmental stewardship, a lot of knowledge that day.
Consumer goods is always faster moving faster moving all the time in different parts of the world. So they want to get from from innovation out to the short short to the store shelf as fast as they can a lot of concern about the environment and what they need to do to be environmental friendly and good good stewards shifted environment.
So those are those are common themes.
And.
The other one is looking for a partner that can scale across quality and regulatory to.
These companies that have over 50000 people and they just have not had a partner that has been able to do that so far so they would implement departmental solutions, maybe the quality maybe if they have 20 manufacturing plants in light of 20 quality solutions now, they're seeing okays potential veeva to have a unified quality system or a unit.
Slide regulatory system rather than.
One.
Every different country or every different plant that those would be the common themes.
Got it thanks, Peter and then one more if I may please.
I didn't hear you mentioned outside life Sciences is one of the top areas of investment should we take that to mean that you are still kind of early on in your reference selling their such that maybe the investment cycle.
For for go to market sales personnel.
Might be longer term.
Yeah, I think in terms that were certainly investing appropriately outside of life Sciences, I think the delta in increasing spending will be actually larger in the krasik in the safety in the Cdms.
Because we see more product work there that we have to do over the long term, we're still investing in outside of life Sciences.
Just that it'll be a little bit heavier in those three other areas.
Got it thanks Peter.
And our last question is from Kirk the turn with Evercore ISI. Your line is open.
Hi, guys is actually Peter Berkeley on for Kirk. Thanks, So much for taking my question.
You mentioned, a couple times, you're kind of growing partner ecosystem I kind of what's fun to see if you could dive into the model, but little bit further provide some color.
On how you're continuing to leverage as partner ecosystem to drive sales and scale, both within and outside of life Sciences.
Yes, Hey, Hey, Peter This is this is Paul.
We when we think about providing solutions to our customers certainly veeva is a very significant strategic partner to the industry, whether it's inside of life Sciences were outside.
Not the only certainly not the only technology provider that at any company will have so.
Really big part of our model is to be partner friendly.
And to give customers choice, we have a very open partnership model even in areas, where we have we have existing solutions. So.
The physicians World acquisition is one. Good example, we made an acquisition in an area, where we saw services team really strategic and a key area for our customers. They were asking us to get into that area and help them. Yet we continue to partner in that same exact area. So we will we have other logistics service providers and.
We'll continue to support them for the industry. So our philosophy around partnering is to be very open to give our customers choice and then make it really really easy for customers to do business. Because we're you know we know that we're not going to be the only vendor in their landscape and our mission is to help make our customer successful and part of doing that is making.
You know integrations and services accessible and and really easy for customers.
Okay, great. Thanks, so much that's very helpful. Just maybe one quick follow ups by Ken I'm. Just curious if you have can provide any color on the continued search for a CFO to follow up with 10.
Yes, Hey, Peter this is Tim.
So we we continue to to build the pipeline on that particular role. It's very important as you can imagine to both Peter and myself.
We continue to build the pipeline, both identifying candidates and getting some interesting inbound.
Folks and.
And talking to our network of people, who who know this this role quite well one thing to remember and I think you do remember this Peter is I've committed to the board into Peter and the management team and the company here that I'm here until.
We bring that person on and get that person onboarded effectively so there's no real timetable for for my departure. So it gives us the opportunity to really be thoughtful here and that's what we're doing.
Okay, great. Thanks, very much appreciate it guys.
Thanks Peter.
Ladies and gentlemen, this does conclude the human experience on I'll turn it back over to Peter Gassner for any closing remarks.
Thank you operator, I would like to thank everyone for joining us today, we wish you all a wonderful holiday. Thank you.
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