Q4 2020 Earnings Call
This time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question during the second only to press star one on your telephone if you require any further assistance. Please press star Zero I would now like to hand, the conference over to your Speaker today Recon had Investor Relations. Please go ahead Sir.
Good afternoon, and welcome to be was fiscal 2024th quarter and full year earnings call for the quarter and year ended January 31st 2020.
With me on todays call, our Peter Gassner, our Chief Executive Officer.
Shower SVP of commercial cloud and Tim Kabral, our Chief Financial Officer. During the course of this conference call. We will make forward looking statements 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 web site at FCC Dot Gov.
Forward looking statements made during the call are being made as of today March 3rd 2020.
At this call is replayed or viewed after today the information presented during the call may not contain current for accurate information.
You bet 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 eight in the understanding of our financial results.
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 release, we intend to begin using our website as a channel public disclosure consistent with regulation FD.
Going forward. Please monitor our Investor Relations website. In addition to following our press releases at SEC filings and public conference calls and webcast.
Finally, I'd like to remind everybody that we closed two acquisitions in the fourth quarter.
On this call we will provide detailed around how these acquisitions impacted our Q4 and fiscal 20 results and how they contribute to our fiscal 21 guidance for total revenue and commercial cloud subscription revenue.
In addition, we will in some cases provide growth rates comparing periods that include the contribution from these acquisitions to periods that do not.
With that thank you for joining us and I will turn it over to Peter.
Thank you Rick and thanks to everyone for joining us today Q4 with another strong quarter with results ahead of our guidance.
Fourth quarter revenue was 312 million up 34% year over year subscription revenue grew 33% and our non-GAAP operating margin was 34%.
The past year with an exceptional one for Veeva, we retained or deep focus on customer success in product excellence.
Banded our leadership position in past $1 billion in revenue a year and a half ahead of plan.
We accelerated our pace of innovation and established a new markets.
We made a potentially transformative acquisition with the addition of crossing.
We've refined our operating model for driving innovation in existing markets, while also creating new agile startups within veeva.
This gives our startups like Cdms and safety the autonomy to be laser focused on new markets. While our core teams remain dedicated to transformation in their areas like in CRM. For example, where we are embedding AI in ways that will fundamentally a fancy industry.
Also key has been the growth of our leadership team, which has expanded thanks. The exceptional new people. We brought onboard this year and the very talented people that have developed within veeva.
And all we have set ourselves up well for a product operating modeling team perspective to execute on the major opportunities ahead and to achieve our 3 billion dollar revenue target in 2025.
Thank you and congratulations the entire Beaver team for their outstanding work this year.
Now I'd like to share some highlights for the quarter and year.
It was a record quarter endear for Veeva commercial cloud.
We further extended our leadership in core CRM.
Bookings increased over last year, and we also saw an increase pace of new customer wins, adding 53, new customers compared to 46 the year prior.
Our strength in core CRM is fueling growth in commercial cloud overall as companies look to be but as their commercial foundation for the future.
For example, in the quarter, a cutting edge specialty diagnostics tests right. It was anticipating hyper growth expanded their use of Veeva CRM and adopted five additional commercial cloud applications enterprise wide.
Seven figure deal with our largest ever in commercial SMB and shows the strategic importance of our solution for companies of all sizes.
Veeva Opendata also had a number of wins in the quarter as we continue to gain momentum in the data market.
One of our key wins with a top 20 pharma selected open data in the U.S., replacing their current solution.
Head to head they found or data was better and more expansive.
This is Keith they moved to new selling models that required greater depth of information agility and the vendor that operates as a true partner committed to their success.
Also in the commercial area I'm pleased to share that krasik close the year strong with revenue coming in right on plan.
The acquisition is going exceptionally well.
The cross 16 has brought new DNA around patience and data into Veeva coming together will go well beyond what either company could have accomplished independently we have an exceptionally strong joint vision and roadmap, which you'll hear more about this year.
Before moving to vault I'd like to extend the special thanks to the Veeva CRM team for their rapid response to help our customers navigate the challenges surrounding the Corona virus.
For Veeva CRM customers not currently using engage meeting we're providing free access through September for field users in impacted areas.
This allows reps to connect online with the doctors that depends on them for information about the latest research and treatment for their patients.
And Veeva vault, we had our best quarter ever capping off a great year that was driven by strength across product areas in geography.
We are winning more new vault customers and existing customers are expanding their use we close the year with 715 bought customers up 25% from a year ago.
An existing customers continue to buy more based upon their success with vault and because of the benefits of having all applications on the single modern cloud platform.
Our average <unk> customer now has two to three vault applications.
Well platform has proven to be a unique and powerful asset, allowing us to rapidly develop and scale application across a range of areas. We now have 18 vault applications in all.
Regulatory is a good example, the momentum we are seeing across the board.
In the quarter at top 20 pharma and a top 50 pharma selected veeva vault rim as their enterprise standard.
These customers were struggling with a patchwork of legacy in custom built solutions.
One will replace more than 80 systems with vault rim.
Over the past two years the size of the rim subscription business has doubled.
We now have more than 200 rim customers and great potential as we look ahead.
Clinical is another area of significant strengthen opportunity for us in Q4, we signed our 14th top 20 pharma for each team at.
Our established track record of customer success with faulty T map is providing opportunities for additional veeva clinical applications as customers see the benefit of a unified solution on a world class cloud platform.
For instance in Q4, an existing top 20, he came up customer standardized on fault studies startup.
They are the seven top 20 pharma to standardize on steady startup.
It's been less than four years since we started expanding our clinical sweet biondi, Tms and already a quarter of our eating that customers have at least one other clinical application.
I'm very excited about the growth we are seeing clinical and the significant runway ahead.
I'm also pleased with our progress in newer vault products.
Safety and Cdms are two of the biggest opportunity we have on the R&D side and both are showing good early momentum.
We have more than a dozen early adopters for safety and more than 60 studies have started on CMS.
These two areas are still small in terms of revenue.
But we feel very good about the potential for these products to be market leading overtime.
This year will be an important one as we build our track record of customer success and continue to innovate in both areas.
Outside life Sciences for CPG chemicals, and cosmetics, we had a number of expansions and added some big wins with new companies, including a top 10, CPG company, who will adopt quality, one and a top 10 cosmetics company the standardizing on regulatory wise.
Reflecting on the year for this business I'm looking ahead, we set the right course in the Veeva way, we kept our focus on customer success and doing the right things for our early adopters, which is helping established veeva as a trusted provider in these new industries.
It was a great informative year for Veeva, we grew in evolved in important new ways. We have a big opportunity ahead, and the right team operating model technology and focus on execution to fuel our growth well into the future.
With that I'd like to handed over to Tim.
Thanks, Peter Q4 was a strong finish to another outstanding year.
As a reminder, this is our first quarter with crossings and physicians world and we are providing an additional level of transparency. During this call to assist in your understanding of how these acquisitions impacted our results and will contribute to our fiscal 21 guidance.
Total revenue for the fourth quarter was $312 million up 34% from 232 million a year ago.
Cross extended physicians world contributed more than 19 million of total revenue in the quarter.
Vault was 49% of total revenue versus 52% in Q3.
For the year total revenue was 1.104 billion up from 862 million in fiscal 19.
Excluding crosstex and physicians World total revenue grew 26% year over year.
For the full year vol represented 51% of total revenue as compared to 47% in fiscal 19.
Subscription revenue in the quarter totaled 254 million up 33% from 191 million the prior year.
Crosstex contributed roughly 14 million of subscription revenue in Q4, which include the impact of a purchase accounting write down of nearly 3 million.
This contribution from cross eggs represent an incremental seven points of growth in the period.
Ball was 47% of subscription revenue versus 49% in Q3.
For the full year subscription revenue came in at 896 million up from 694 million in fiscal 19.
Commercial cloud subscription revenue grew 15%, excluding the impact from Crosstex and vault subscription revenue grew 43%.
In fiscal 20, our revenue retention rate was 121%.
This metric is defined in the earnings release and reflects annualized subscription revenue growth within existing customers net of revenue attrition and continues to illustrate the increasing value we are providing to our customers and the life Sciences industry.
Services revenue came in at 57 million up 38% from 42 million last year.
Excluding crosstex and physicians World service revenue grew 25% year over year.
For the full year service revenue totaled 208 million up from 168 million in fiscal 19.
Non-GAAP operating income was 103 million, which came in above the high end of our guidance.
This result was driven by revenue outperformance offset in part by a couple of million dollars of additional onetime commission expenses for both our core business and the acquired Crosstex business.
We added 489 net head count this quarter, including the 384, Crosstex and physicians world employees joining veeva.
Fiscal 20 ended with a total of 3501 employees up from 2553 a year ago.
Moving to the balance sheet deferred revenue was 469 million compared to 251 million at the end of the third quarter.
Calculated billings for the fourth quarter came in at about 528 million, which includes roughly 9 million of net acquired deferred revenue less the acquired Unbilled receivables.
After adjusting for this calculated billings in the quarter was 519 million ahead of the high end of our guidance.
Crosstex and physicians World contributed 35 million to calculated billings in the quarter.
Looking ahead, we expect calculated billings of approximately 330 million for Q1, and 1.500 billion for fiscal 21 with 40% to 41% if those billings coming in Q4.
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.
Elsewhere on the balance sheet, we exited Q4 with 1.087 billion in cash and short term investments down 408 million from the end of Q3.
This reduction was mainly driven by the Krasik and physicians world acquisitions.
In Q4 operating cash flow was 39 million, which includes 11 million an excess tax benefit.
For the year operating cash flow came in at 437 million, including a total of roughly 50 million in excess tax benefit.
Excluding the tax benefit operating cash flow for the year was 387 million above our full year guidance.
We had another strong collections quarter in Q4, including nearly 15 million we plan to collect in Q1 fiscal 21.
For fiscal 21, we expect operating cash flow to be at least 460 million, excluding the excess tax benefit.
Next I'd like to share our outlook for Q1 and for the full year of fiscal 21.
For the first quarter, we expect total revenue to be between 327, and 328 million with services revenue contributing roughly 63 million.
We anticipate non-GAAP operating income of 117 to 118 million and non-GAAP net income per share a 59 to 60 cents based on a fully diluted share count of approximately 159 million shares.
Please note, we will maintain our non-GAAP tax rate at 21% for fiscal 21.
As a reminder, this rate is not something that we adjust quarterly and we'll evaluate it again next year.
For the year, we expect total revenue to be in the range of 1 billion 400 to 1.405 billion, which is an increase from the initial outlook provided on our Q3 earnings call.
Within that number we expect the contribution from Crosstex and physicians world to be between a 105 and 110 million in fiscal 21.
We expect subscription revenue to be roughly 1.145 billion for the full year.
Commercial cloud subscription revenue is expected to be roughly 585 million.
Included in that number we expect cross six to contribute between 85 and 87 million of subscription revenue for the year.
This number includes the impact of roughly 2.4 million of purchase accounting write down, which we will see mostly impacting our Q1 results.
Vault subscription revenue is expected to be roughly 560 million, representing an increase of approximately 31% year over year.
Before moving on I'd like to provide some additional context for the volt subscription growth outlook.
As we near the end of the zinc maps migration to Promomats commercial ball to successfully become the market leader and with our strong market share, we expect commercial vault growth to slow.
Additionally, as we have disclosed throughout the year fiscal twentys subscription revenue benefited from both favorable bookings linearity and a tailwind resulting from the recognition of unbilled revenue from multi year contracts with ramping fees.
Moving on we expect to non-GAAP operating income of roughly 500 million for the full year non-GAAP operating margin of almost 36%.
Finally, we expect non-GAAP net income per share of about $2.50 for the year based on a fully diluted share count of approximately 160 million.
In summary, the team has done an excellent job delivering another record year.
Given our focus on innovation and execution, we continue to be confident in our ability to deliver 3 billion in revenue in calendar 2025.
Thanks for joining the call today and I'll now turn it over to the operator for questions.
Thank you as a reminder to ask the question. Please press star followed by the number one on your telephone keypad.
Your first first question comes from Ken Wong from Guggenheim Securities. Your line is open.
Great Great quarter, guys and thanks for taking my question.
The first thing I wanted to touch on them I'm sure everyone falling into the headlines, but but obviously the impact of krona virus and any any headwind you might be seeing in China I guess first.
And what are you make you guys maybe directly seeing are projecting and then second as it relates to your customer base, how should we think about the impact to their business. Obviously, there is probably maybe some tailwinds as well there and how that might flow through for you guys.
Well all right. All this is Peter I'll take that when you first our hearts go out to the people of the families that are seriously affected by this and we hope they have a speedy recovery as it goes to our customers.
There really working hard to try to develop things that will help the situation vaccines or or cures actually for this and and we're helping our customers where we can but we know they're working around the clock in terms of our business. We haven't seen projects slowdowns, yet we haven't seen any projects canceled we've seen a little bit of slowdown.
As customers adjust to working remotely in some regions nothing that would be material to our financials.
In terms of Eva where in countries that are heavily impacted where we have offices. We've instituted a work from home policy now for Veeva, that's very normal we handle video conferencing very well we grew up as a very virtual company. So I I believe we're well, we're well positioned to handle this.
One of the things that we're doing I mentioned on our script is helping the industry by providing free veeva CRM engage meeting licenses to our customers up until September that way. They can continue their interactions with the doctors that they need to and they can do that remotely so in summary.
Our customers are working hard to provide the medicines here theres no material impact to our business at this time.
Great and then maybe a quick follow up just on the competitive landscape, whether it was product or customer engagement that there's a perception that maybe a door. What's left open a crack that allowed competitors to maybe sneak a foot in.
Any efforts and maybe button up customer outreach retention efforts to make sure things like that don't don't happen down the line.
Yes, Hey, Ken This is Paul I'll take that one.
So let me comment at a high level on the competitive you ever more competitive landscape and then more specifically what we're doing.
The competitive landscape is pretty much similar to what it's been over the last year things haven't really changed all that much I, Cuba is our primary competitor as you know, there's certainly regional competitors that we have but they're the ones that are primary in terms of.
Global kind of scope there I can give you has continued to be aggressive in terms of how they approach the market in terms of pricing and bundling.
Some of their projects have been a bit more services oriented instead of standard product and I think over the short term that sort of thing could you could work out I think over the long term custom projects are not great I'm from Veevas perspective.
We had it really great success last year I'm really proud we have so what we've accomplished Peter highlighted that we had 53 net new new CRM customers compared with the year before where it was was 46 and we've grown and we've actually expanded our share last year and of those wins most of them Kane.
No some more head to head with with our cube and many of them. We're at QB replacements. So I'm really proud of what we've accomplished that's the that's the results. The results I think speak for themselves in terms of what we're doing where we think our strategy is the right one which is focus on product innovation and focus on customer success. So.
Innovating within core CRM in many different ways and Peter highlighted some of the AI that we're doing we're also expanding our the add ons and we're innovating and you add on areas and.
And we'll continue to add new products and they were relentlessly focused on the customer success side. So that's our strategy to make sure those sorts of things don't happen those we I expect.
At specific accounts third there could be factors that that lead to a specific decision.
But we're doing our best and we're going to continue to focus on innovation and customer success.
Your next question comes from Karl Keirstead from Deutsche Bank. Your line is open.
Oh, Thank you I've got to maybe maybe both for Ah for Tim So Tim on the on the Volte subscription revenue growth I think you closed out fiscal 20 with 43% growth fantastic results. It looks like your guidance is for a diesel to 31%. So just given that this.
Yes, you are obviously your growth engine do you mind elaborating on on the reasons for that volt slowdown it sounds like it might be a little bit more on the commercial side. So maybe the clinical trials side is a is stronger and there's a mix shifts going on but maybe just to start there just to describe what's happening. Thanks.
Sure Carl certainly.
Happy with the momentum as evolve business and happy with the guidance.
To your point in terms of comparing the fiscal 20 results and you're correct, 43% was the vault growth number there versus the 21 guide a couple of things to keep in mind 31, 31%, sorry, I said fiscal 21, and 21, 31% guide couple of things to keep in mind and you're right.
Vaults commercial is we're nearing the come the end of the zinc maps migration of Promomats.
Weve really become the market leader in both commercial and at this market share, we expect that commercial vaults business to slow a bit but there was also a couple of favorable dynamics in fiscal 20 that we don't expect to repeat this year.
One is the favorable linearity of bookings and we talked about that through the year fiscal 20, and the second was the Tailwinds we saw.
From the recognition of multiyear Allays again, we don't expect both those dynamics to necessarily happen on a consistent basis and we don't have that in our assumption of the fifth fiscal 21 guidance, but lastly, I would say this is.
Consistent with the way that we viewed the ball the vault business and this view definitely informed our early fiscal 21 guided we gave 90 days ago as well as our $3 billion revenue target in 25.
Got it Okay. That's helpful. Tim and then maybe my follow up is just on on the revenue performance in fourth quarter just closed.
312 million relative to your guide of to 99, that's a that's a 4% beat and that's quite a bit higher than I'm used to seeing would be the so I'm. Just wondering if you could elaborate on that it doesn't sound like the upside came from acquisitions.
Pete had mentioned that it was roughly in line. So was there some factor that might have driven sort of more in period revenue upside than you anticipated three months ago. Thanks a lot.
Sure I think it was in part acquisitions we.
When we gave the guidance last last when we gave guidance last quarter 90 days ago, We had talked about the contribution from acquisitions being.
Roughly 15 million in that came in a bit higher most of that was due to a smaller purchase accounting write off than we had anticipated as well as good performance from those businesses I would say the other part of the beat Karl was a more normal stronger execution.
And stronger bookings in the quarter and we also saw a little bit more services revenue than we had anticipated 90 days ago and as we've talked in the past its sort of the lumpy part of our business. So those.
That part of the business can move up and down even within a 90 day period.
Got it okay very helpful on both answers thank you Tim.
Thanks Carl.
Our next question comes from Saket Kalia from Barclays. Your line is open.
Hey, Peter Hey, Tim Thanks for taking my questions here.
Peter maybe just to start with you.
I think we said that there were about 140, new vault customers. This year that started with one volt solution looking back at sort of the history that product can you just talk about how the profile of that initial land has maybe changed with those hundred 40, net new customers versus what you would typically land with them.
In the past.
Good question in terms of the profile of where people start.
Or development cloud.
I really haven't seen that quite change much. They would generally started in one area, where they where they have the most need it will be in the regulatory area a quality area.
For a clinical area I'd say, if there's any if you look at a shift from maybe four years ago.
I think we see a little bit more people starting in the quality area now than we used to because our quality suite has gotten much broader we have our Q mess product our quality docs products with service was our original one and our training product so.
That's maybe a little bit higher but it hasn't materially changed they will start in the area, where they they have the most need.
The smallest companies.
Generally start in either the quality area or the clinical area.
Because those are those would be the first needs of the smallest companies.
Got it got it and then for my follow up for maybe you Tim maybe on Cdms can you just remind us how that's priced as you grow the number of trials here and the size of those trials does not directly impact revenue or billings are all those typically part of kind of broader easily type of agreements.
Hi, This is Peter I can I I can jump in on that one.
Theres no there's no particular pattern that would be.
Pluggable to all customers in general we're going to start small with a new customers, they're going to try us out in certain areas. A small trial by trial small revenue and that if can graduate to any allay overtime and that takes some time to work through so theres no no particular pattern there I would say it's actually.
Quite similar also to what we saw in the early days of clinical with Veeva five years ago.
Very helpful. Thanks, guys.
Your next question comes from stands Foskey from Morgan Stanley. Your line is open.
Perfect. Thank you get thank you so much and I apologize I apologize for any background noise.
During this call.
Couple of questions from my end.
Peter You mentioned the top 20 pharma win with you if we'd be data product.
Could you give us a little bit more detail on that when and maybe just at a higher level could you give us that some update on how your overall data efforts are going and then have a quick follow ups for Tim.
Okay.
Yeah. This was a pretty standard it was a top 20 pharma in the U.S. diversified from Oh, there in oncology many different areas therapeutic areas. So their needs for data are quite diverse because they have to navigate a lot of complex health systems health system might be the Mayo clinic or the or Mds.
Person and all the doctors that are related to that to there. So they need a robust set of data. They had a set of data provided from a legacy provider and the service just wasn't quite what they wanted and the quality and quantity and expansiveness of the data it wasn't quite what they wanted so we were able to show them a better slow.
You should in and they're migrating towards it and that's.
The project, that's long, but not that long, it's less than the year project. So it's a pretty down the middle.
Rip and replace in terms of our data offerings are open data that's.
It's a market where its country by country. So we're the market leader in China, we're doing a bit.
Quite well in the U.S. here and in Europe, It's earlier for us and we're making progress country by country by country. So I'd say steady steady as she goes on open data.
Okay perfect. Thank you and then for Tim.
Going back to Volte, 31% revenue guidance for fiscal 2001 could you, perhaps remind us how much would benefit did you see in fiscal 20 from those ramping contracts on the bold side, especially you know of on both clinical whether or not know bolt R&D and why.
When you look at fiscal 21 do you expect those benefits just simply not be there would you expect those benefits to perhaps turn into headwinds as a result of the ramping contract nature.
Thank you.
Sure. So in terms of the fiscal 21 results. It was about a 300 point tailwind.
For those particular types of deals stand in that dynamic and you are very astute. It goes from being a tailwind to a headwind now to be clear, we still see a lot of opportunity this year around new L.A. deals, but the way that L.A. deals came in.
In late in fiscal 19 and into 20 really created a growth rate over fiscal Nineteens results that was ahead was a tailwind in 20 that could turn into a slight headwind in 21, but that is included in the guidance that we gave Stan.
Got it thank you so much.
Your next question comes from Rishi Jaluria D.A. Davidson Your line is open.
Hey, guys. Thanks, so much for for taking my questions. Peter I wanted a follow up on on the earlier point you brought up about what you're doing with CRM engaged.
The regions that are.
Impacted by Corona.
Maybe just following up a little bit on that it seems like CRM engage is obviously really exciting product and it's obviously a big process change.
For the industry I I mean, just maybe thinking ahead is getting an industry like life Sciences, that's maybe a little bit more resistant to change to adopt some more more solutions like that's.
Even after being forced to is that something that in your mind could serve as.
That that trigger point of okay. They tried it maybe because there are forced to there used to it and now that helps maybe accelerate the adoption or is there a better way to think about that and then I've got a fall for Tim.
Obviously, I think I think you're right.
This is going to business process change like this that involves compliance sometimes customers can be measured on that.
And then maybe move might not adopt too fast now there they are being forced to do some things I think it will we will see a bit faster.
Option of engage as a result of this.
So that's.
You know the real straightforward answer there.
Got it Okay. That's helpful and then.
Just going back to the acquisitions really appreciate all the detail and transparency in terms of this quarter's numbers next year. The outlook just wanted to maybe dial into the gross margin implications from the acquisition. So is this world very services heavy weight on gross margin. How do you think about the gross margin implications from from cross.
Net of the accounting for.
Acquisition.
Yes. So if you look at our Q4 results reshaping and into fiscal 21.
I would think that theres, roughly or we're expecting to be roughly about at 280 basis point impact to gross margins from those acquisitions and as you realize you'll see some of that in our subscription gross margin where across six is the majority of subscription.
And a little bit of it in our services gross margin, where physicians world is all services revenue.
All right that's helpful. Thank you.
Your next question comes from the voluntary from William Blair. Your line is open.
Hey, guys, let me Echo my congrats thanks, taking my call I guess I, just wanted to touch a little bit on MDC or or Cdms now when you look to see the primary competitor in that space or more modern primary competitor I take it up I, just so and.
If I think about 2020 was a very big renewal year for them.
Think about the potential to caps on all that you'd love to get some color on sort of how you're thinking about that market. How you guys are evolving because obviously with a at least one top 20 pharma when in the phase three clinical trial spaced out your set up well. So just trying understand how that business is going to evolve this year and how you're thinking about the opportunity vis-a-vis sort of the competitor being required.
This being a big renewal year for them.
Right I guess sit back at a high level for development cloud, that's our vault and R&D area I think it's important to know that that's.
That's a very large area for us and it's very and can it very connected.
T M. A C tms connected to the E D C connected to the safety connected to the regulatory that's a big broad area for us and it's very early days, it's less than 10% penetrated.
So are you know our goal is to have applications and the products that we become the market leader in.
That's where we can be really that trusted partner of the industry over the long term some of them we have quite some progress on and some of them are quite new cdms, particularly.
That's where we're quite quite new so we're still early there 60 trials that that's not that many but what we're seeing is we're very position well positioned for leadership into the future. It's the product innovation and the customer success, we're having so we're actually being very measured on the projects that we that we take on right now.
We are laser focused on customer success of these projects.
Where we're about to start a very large trial for a customer.
Multiple multiple sites around the world hundreds of sites around the world multiple countries. We're just laser focused on the customer success.
And then I think the the market will take care of itself because what the customers are looking for is not just cdms only they're looking for the whole suite of development cloud in integrated in together on one common platform.
I think it's important remember that's division, we started out with back in 2011.
And you know takes a long time to build out with some serious engineering work. So that's really what what we're focused on where we have our eye on that price. That's the type of thing that that gives us confidence in our 2025 goals. So that's that's really where our focus is of the company is out to that 2025.
Got it that's helpful. Then.
I will jump on Opendata little bit we've talked about was in the past <unk> some challenges given sort of the competitive environment given sort of the one data actually it was owned by IMS health, obviously not part of acute.
But it feels like open data seems to be doing.
<unk>.
Doing better maybe or maybe it's exceeding maybe are limited expectations from outside.
How does anything change there have you added something that is there's you know you're talking about data in China, but is there something unique there that's sort of helping that business you know, maybe maybe a little more growth and it has in the past.
How should we think about going forward.
Both from network and from care, while the other pieces of all of that business.
I think the story of open data is just a superior data product and we just buckling down year after year end.
Moving that data product improving that surface service and having the open.
Data use policy that we have Imus are acutely has very restrictive policies that customers don't like so that's all to the to the pro and that's why you're we're seeing some new customers to the Con open data is also affected by the Acuvue anticompetitive policies, so when customers.
I want to match, our open data with other acute via products.
They're prevented from doing that therefore.
It impacts our open data sales make no mistake, our open data sales would be significantly better without these and it and it can cut competitive products and what's causing us to win is just the products superiority.
What's causing that the Tailwinds is this this antitrust issue, which.
We are progressing well we have about two more years until the trial and that's a jury trial, we feel confident in our outcome but.
There's no guarantee but at least two years.
It's pretty defined timeframe here, and where we're hoping to get the right verdict.
Also I would say Duncan customer yeah.
Yes, just call out the customers. Thanks to the customers Weve largely finished the depositions in the case and there were six customers that testified about the anti competitive tactics that by Q via harming the industry, so really grateful to those customers and their testimony.
Thanks, I was just a follow up with that I'll, just thinking about the customers, but thanks for taking my question I was reading your mind I think thats, okay [laughter] they stopped the situation that's okay.
Your next question comes from Sterling Auty from JP Morgan Your line is open.
Yes, Thanks, Hi, guys. So in looking at both the bulk growth in the quarter and the outlook can you help us understand how much of that ball growth is coming from adding additional products. Because I think you mentioned the average is now between two and three versus adding more vaults in cases, where it's not an E.
Hi versus new customers.
That.
HM Okay.
I don't have the exact math on that.
I think it's.
I would yes.
It's roughly even maybe skewed a little bit more to customers, adding new vault.
Why do I say that clinical is is a big big area regulatory is a big area and quality is a big area. So we have three big areas that are sort of in their prime now we have other very large areas that are not yet in their prime they're very early such as safety and CMS. So the three areas that are in their prime in that.
Belamant cloud.
And then within each development cloud, we have two or three major applications. So on average it's going to be a mix of adding new applications into a vault and new vaults and.
Maybe to simplify I guess Sterling I would say that's a 50 50 mix there, but we don't have that exact number for you at this time.
Gotcha and then one follow up just can you must where are you.
Tim We love having now these calls and would want to keep your forever, but where where are you in terms that process.
Yes, Tim and I are working on Sterling, Tim and I are working on the the search and that's going well I think it's important to remember that Tim is here until we can find the right successor and also through that transition. So there's no defined transition period, we're focused on finding the right person over the long term.
And we're seeing some good candidates.
Sounds good thank you.
Your next question comes from Sandy Draper from Suntrust. Your line is open.
Thanks, So much I guess, just a follow up certainly its question.
You can maybe talk a little bit of the two top 20 Ram customers.
Where are they coming from similar backgrounds does from 80 enough new defaults I'm, just sort of some context about the two top 20 just joined on ramp.
The actually <unk>, one was a faster sandy one was a top 20 and the other ones that top 50.
So to just to be accurate on that one.
Oh, the specifics of these.
Actually both of them our headquarters in Europe, now that I wouldn't read any particular pattern into that but they happened to be both European based.
Both of these actually I would say quite early on in there.
In their journey with with fault I.
I don't.
The early on but I believe the both of these have made an emotional commitment to.
The full development cloud suite now that is that emotional commitment is much different than purchasing type equipment.
Commitment meaning.
They are starting and regulatory I believe I don't have the exact specifics, but I think thats. The first application, but both of these customers evaluated the development cloud Holistically.
Evaluated the concept of having development cloud Holistically actually before they bought our first application.
Okay, Great now that that's really helpful.
That's really helpful and all the way okay, Sandy it doesn't always happen that way, sometimes they'll be a particular need into customer and they want to solve that need and that will solve it before evaluating the full picture development cloud and some other customers will be more measured and evaluate the full development cloud first.
Before solving a specific area.
Okay, Yeah that makes a lot of sense, then a follow up my ears perked up when you talked about Crosstex and talks about the transformative hadn't had chance to get back in search all transcripts to see if you use that word before with.
With that acquisition and I'm just thinking back in early days vault is certainly turns out turned out to be transformative for the business just some when when you use that word as it relative to the art opportunity for that business the opportunity to transform your existing products I just using that word just really would love to get some more thought behind.
What you see when you talk about being transformed thanks.
Yes, I, it's very astute to see that I use that word carefully because.
We've now worked with across 16 hand in hand, you know day in day, our an hour over the last 90 days and that is how I feel about it at is transformative the cultural synergy is there the products energy the innovation synergy their expertise around data and privacy and patient data.
Is unparalleled so I do think it's very similar about like fault now much earlier stage right I might have talked to you about transformative potential involved in 2013 that type of thing I might have talked about the potential to be transformed over 2014. So it's.
Early days of course, when things are earlier, it's not as guaranteed how everything's going to work out but it has the potential to be transformative.
Okay, Great transformer, Peter Communing, bringing us into new markets changing the DNA of Veeva changing what we look like by 2025.
Got it.
Your next question comes from David Hynes from Canaccord. Your line is open.
Hey, Thanks, very much congrats on the results.
Peter I want to ask one on the R&D suite I think we have a pretty good idea of how your cdms relationships can potentially scale the beep.
Pretty large overtime I have less of a feel for how material your customer relationships and safety might be so can you just trying to frame that for me and are those relationships, where you start small and and scale like CMS or do you typically land a little bit larger and safety.
In safety in general what we're seeing right now as we actually land smaller than we do and Cdms.
Because they're generally there the revenue goes with the amount of safety case incidence. The customer has so right now we're getting into two quite small companies that have a low volume.
Of safety cases.
And this is also an area I would say in the safety or where customers are very measured in their approach very very measured.
So I think we'll we'll go abroad and small isn't it.
It will be.
Probably not jumping in the way of E.L.A.'s things like that that CMS does.
But it's it's very similar in its market size like Cdms and it's very similar in that safety is needed by a very small company as soon as you're starting to do a clinical trial. Since you have a medicine that is given to a human you're going to need it Gary can they need a safety system so in that way.
Cdms and safety our parallel.
But cdms is revenue based startup based on the trial versus safety is based on the number of safety incidents that that happen. So it's a little bit different profile.
Okay.
That's helpful.
And then second.
The other similarity I would say two is.
It's just these are areas safety is an area, where there's been a really not much innovation over the last years I would say even less so than cdms in terms of innovation. So we feel quite confident in our approach.
Also safety has a tremendous amount of integrations to the rest of that development cloud so customers using our let's say, our CTM assist or our cdms system, there's a tremendous benefit of getting our safety system, and then not having to build and maintain the integrations. So I think that will give us an event.
Which over time as well, that's just going to take a while to play out.
Sure no that makes sense.
And then a bit of a hypothetical for a second question, but but obviously healthcare as a hot button political topic and since its Super Tuesday, I forgot to ask the question along those lines.
If there are attempts to rein in drug pricing right the narrative or actual policy an industry margins were to come under pressure. How do you think that impacts your customers engagement with veeva.
Yeah, Hey, this is Paul David Thanks for your question.
So clearly good timing as we're approaching the election season the U.S.
I think.
Our customers certainly think about this I don't think they over think when we talk to some of our customers about this exact issue.
You know there are customers are global Veeva is global.
You asked as one market theres regulatory changes that happened in.
Every market all the time.
And typically no one market really drives the overall business. So I think there's although there was concern and there is thinking about it I think.
The impact may end up being slightly muted and I think there's also a potential impact that where there's there's pressure on pricing I think the other elements inside of that is increased access. When you you may increased volume you may reduce overall unit pricing the impact maybe.
Slightly negative.
But I think there's just thinking about that started that as well. So I think our customers are being balanced and not being too overly.
Sorry.
When they when they think about that but this is all thank you said, it's hypothetical we're projecting as much as well.
No surely no that's helpful. Thanks, guys.
Your next question comes from Tom Roderick from Stifel. Your line is open.
Gentlemen, thank you for taking my questions congratulations on nice finish here.
I know, there's not a lot of president.
You bet here since the beginning if any of your team has been as well.
Think about.
Response from the Lifesize community to what we're facing with though with across the virus issues going on around the world I don't know what the right precedent is maybe you take yourself all the way back when each one and one was what's the topic.
In the community.
Do you think the life sciences companies in the World and your customers at a play the side as we go forward certainly some.
Well, we'll put more money towards R&D and search for a vaccine historically does this results in a bump to R&D spend and can that be a good thing.
And just kind of take us through the longer term the mid term impact of what we might be facing here.
I think it's still early days and krona virus, so any kind of a long term prediction.
Could be inaccurate because I don't think we nobody knows exactly what the situation is going to be six months from now.
My personal belief is this underscores the importance of core research and development in life Sciences, and how important the of and an industry. This is for for the world right. So I I think overall it will potentially attract people into the life sciences into history, and and potentially have a guy.
Greater appreciation of the of the life Sciences industry, especially as we're moving into precision medicine, which is the other revolution, that's happening in life sciences, the ability to specifically target for repair a very specific disease, a very specific gene. So.
It's a really a golden time for life Sciences, and maybe Corona virus and it's in its own way will will shine a us a spotlight I certainly hope one of our customers can develop a vaccine or a cure for corona virus and I think that'd be a shot in the arm for the industry and really underscore the importance of this industry.
Fair enough that's really helpful. I appreciate that and from my second question. Let me just kind of churn outside of life Sciences, you focused on three particular market segments are industry.
Then can you speak to what some of the customer feedback as bad as you look at CPG and cosmetics and chemical.
Howard Thanks, finding success with with relation to the products a year that you're putting into market there and do you.
Look at some additional.
Verticals, where you might find some additional success in 2020 or should we kind of continue to focus on these three specific verticals as we think go.
Outside life Sciences this year. Thanks.
Yeah proud side of life Sciences, refocusing on the CPG cosmetics, and chemicals and within that Weve, focusing on our quality products quality one in our regulatory products regulatory one customer feedback is consistent they like our platform they like our applications and a lot.
Our long term partnership approach you know, we we don't feel like a vendor to them we're focused on their.
Success, and we're always thinking long term and what we can do so they they like that they like the fact that we are a company that knows how to handle large global customers, where we were very adept at that and they feel that so that's a customer success.
Type of feeling that we're creating.
And we're happy with that business. The growth. There is is steady and the customer success is good in terms of new verticals.
That's not something we're looking to do at this time. This year. We know we were still early in those verticals that we targeted so we're gonna buckle down there and focus on the customer success.
Outstanding. Thank you help appreciate it.
Thanks.
Your next question comes from Brad cells from Bank of America Securities. Your line is open.
Oh, Hey, guys. Thanks for taking my question Don just wanted to ask about Cdms I think it was last quarter you had your first phase three trial when in a top 50 are there more deals like that in the pipeline do you need more deals like that when you refer to your kind of very measured reference selling approach there.
Is that the validation that you need to that market, where it could you could start to see that tipping point of a replacement cycle and clinical I. Just just remind just kind of where we are in terms of reference selling and maybe even road map, maybe there's something coming with on the road map that could be a catalyst for that business. Thank you.
Yes, Cdms remember its early.
It's quite early 60 trials.
We're starting a major phase three trial, we've done phase three trials before so we've done a number of them what we're referring to last quarter as we're starting a a major phase three trial with a large company.
One of the largest trials they've ever ever done.
First patient in here for those types of thing I think for that trial is gonna be.
In a matter of weeks, so that's really where our focus is.
There's a lot of momentum in the market, we're being very measured in how many customers we take on.
That type of thing.
And that's not to do actually with the product feature or anything that's going to unlock the market, but it's more as we get more of these large trials in.
Enrolled and as we scale up our services support team and round out all the product features.
That's one is really going to happen, it's a route reference selling model.
So at some point in the future I'm, hoping we have a customer summit.
And the customer says, yes, all our new trials, we put them on Viva and we've been running them for two years and we're Super happy and these are the benefits were seeing that's when it really that's when it really starts to flow. So it's a long term game.
We mentioned our conversion commercial vault.
We have to remember that was 2011, when we sold our first commercial vault application.
On that.
In roughly 10 years later, there were no real leadership position in terms of.
The market.
Cdms takes awhile, but I feel very confident in our position also interestingly enough. Since we started seed cdms since we announced it there has actually not been a new entrant to the market.
So I feel we.
We have a good advantage, we have a leading cloud platform and we have a good head start here I don't feel like we're competing with somebody I just feel like we really have to focus on the customer success.
And then things will turn out quite well for us.
Thanks, Peter then one more if I may just just in outside life Sciences, I guess, where are you in terms of building out the salesforce that go to market. Those are those are obviously different verticals with a different domain expertise and go to market.
You guys have been very kind of steady and building references ahead of building out a sales organization I guess, where are you in kind of your buildout of go to market in those three three other verticals. Thank you.
Outside of life Sciences, there were.
Oh, I would say the way to characterize that as we're going to it it's going to be a steady grower for us and you won't see any type of a burst in terms of.
Expenses right, we'll be measured in the growth of our field and that'll roughly aligned I actually I think the growth through our revenue will outpace the growth of our expenses in outside of life Sciences. So its steady as she goes.
We're finding our group inside see particularly actually inside CPG, and cosmetics regulatory and quality chemicals, a little bit of the three chemicals.
I would guess is not as far as ahead of the other two but so you're going to see nothing dramatic outside of life sciences from us to steady growth.
Thanks Peter.
Your next question comes from Chris Merwin from Goldman Sachs. Your line is open.
Hi, Thanks, very much for taking my question.
I just for a notice for commercial cloud it looks like customer growth accelerated really nicely. There in 2020, and I know I know you called out a big customer win an SMB. So I was wondering if you could just talk a bit more about the improving traction that you're seeing in that customer segment and have also we should think about the runway there. Thanks.
Yeah. This is this is Paul thanks, Chris.
SMB was one of the really significant drivers for US we had a really strong year.
Last year in commercial cloud overall in SMB was one of those big drivers in I think part of that is just the approvals that have been happening. If you look at the European market us market. The FDA at a number of approvals has has been quite high end.
We are winning the majority of those should we are driving Fortunately, we're in a position where those companies they want to innovate they want to do things differently. They need to have a very successful launch they want to launch in many many ways in digital away. So they look to veeva.
As their choice. So the number of approvals is driven some of that strength hopefully that will continue in life science space for many more years.
What we've also seen is to the breadth of what they would be five from Diva, you know some small and medium sized customers come to be the looking for a CRM system and what they end up with is something much larger in much more significant than that because they learn more about what what is possible with veeva.
More broadly and commercial cloud.
So that has driven some of the some of the strength that you've seen over the last really over the last couple of years, but in particular last year particular strength in the SMB segment.
Got it thanks very much.
[noise]. We're ahead of the time for questions today, I would now like to turn the call over to Veeva CEO, Peter Gassner for closing remarks.
Thanks again for your time today, and thanks again to the team for all the work for the customer success than for the industry Trust and partnership that you're developing.
I look forward to connecting with many of you all virtually at Morgan Stanley Conference Tomorrow. Thanks, everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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