Q3 2021 Veeva Systems Inc Earnings Call
And we're standing by and welcome to the Veeva systems fiscal 2021, the third quarter results Conference call.
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After the speaker presentations, there will be a question and answer session.
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I would now like to hand, the conference over to your speaker today other Garrett.
Peter.
Senior Director Investor Relations. Thank you and please go ahead.
Good afternoon, and welcome to be this fiscal 2021 third quarter earnings call for the quarter ended October 31st 2020 with me on today's call are Peter Gassner, Our Chief Executive Officer, Paul share, what EBITDA strategy, and Brenda Bowman, our Chief financial Officer during.
During the course of this conference call, we will make forward looking statements regarding trends our strategies and anticipated performance of the business. These forward looking statements will be based on managements current views and expectations and are subject to various risks and uncertainties, including those related to the impact of COVID-19, and our business the life Sciences industry and global economic.
Condition and 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 and the company's website at www Dot Veeva dotcom under the investors section and on the FCC website at Www Dot FCC Dot Gov.
Forward looking statements made during the call today are being made as of today. This and the first 2020 based on if that's available to us today.
This call is replayed or reviewed after today the information presented during the call may not content per vehicle accurate information.
<unk> disclaims any obligation to update or revise any forward looking statements we book.
<unk> guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter unless we do so and the public for.
The guidance, we will provide today is in part based on our current assumptions as to the macroeconomic environment in which we will be operating at a future, including the timing and pace of recovery from any negative effects caused by cobot night to such matters that are beyond our control and our assumptions and may not be correct and may change rapidly and.
On the call. We will also discuss certain non-GAAP metrics that we believe aid and understanding of our financial results.
Reconciliation to comparable GAAP metrics can be found in today's earnings release, and and the supplemental investor presentation, both of which are available on our website for reconciliation can also be found as an exhibit to the form 8-K filed with the FCC and just before the call.
With that thank you for joining us and I'll turn it over and Peter.
Thank you and huh.
Before we get started I'd like to extend our sympathies to everyone affected by the pandemic and our gratitude to all those working to help and so many ways, including our customers industry has produced effective vaccine candidate rapid diagnostics and approved treatments all in a matter of months.
We are proud to be working with these amazing companies and I'm proud of how the Veeva team it stepped up though.
Now turning to Q3, we had another quarter of consistent execution and results ahead of guidance total revenue was 378 and 934% year over year.
Subscription revenue also grew 34% year over year and non-GAAP operating margin was 41%.
We are pleased with our results and how we're expanding customer relationships during a major digital transformation, we've been able to help customers with immediate needs to open up digital channels and commercial and clinical.
And we're also helping them to find the right digital models for the long term.
For example on the commercial side, we recently announced a strategic partnership with an emerging biopharma to help them to find and execute and innovative digital crews commercial model.
And we'll utilize the full commercial cloud, including Veeva CRM data Cloud Stephens, Inc. My Veeva and business consulting.
GAAP level of trust and confidence in our ability to deliver came through strongly and our Q3, new wins and expansion.
Added 19, new CRM customers, our biggest quarterly increase yet.
We continue to grow market share and had multiple international expansions and CRM with existing customers.
We also progressed well and our newer areas, including data cloud my Peter for doctors and either link. We expect these products will set us up for a long runway of growth and commercial.
It's an exciting time and commercial and a time of change we think our customers can generate meaningful productivity gains over the coming years as they increasingly leveraged stay true.
We're excited to enable that transformation through our technology.
[noise] Veeva vault, and we've seen significant progress and development cloud adoption 'cause.
Tumors are increasingly purchasing multiple products at one including a recently announced top five pharma and selected Veeva vault products and clinical operations quality and regulatory this is a major transformation, which they will implement over the next two to three years.
We're also seeing more customers expand boat usage within each area development class.
And clinical operations Salt CTM and had a standout quarter, we now have more than 75 customers, including six of the top 20 that have chosen to standardize on balls teach and mess.
This is a remarkable piece from adoption given the product was launched just over three years ago.
This rapid uptake is based on the trust, we feel and clinical operations with fault you came out and the power of having a unified suite for clinical operations.
And the area of clinical I'm, particularly excited about and FEIBA clinical network, where we're bringing real innovation to the industry help advance and moved to paperless and patient centric clinical trials.
Clinical network index sponsors sites and patients and has the potential to fundamentally change how the industry conduct trials.
We announced our first clinical network application Veeva site connect to connect sites and sponsors and then Q3 closed our first top 20 customer force I connect.
And quality, we had 20 net new customers for like vault Qualitydocs and we now have well from the top 20 pharma and says quality box customers.
Safety also continues to progress well with our early adopters and we added four new customers.
He also started our first safety I project in the quarter.
Outside of life Science and has a pandemic continues to drive changes in consumer goods and cosmetics companies are looking cost for agile global solutions that can help them quickly adapt.
Dynamic drove a major win and Q3 with another large CPG customer.
We also brought together nearly 800 leaders from across consumer goods cosmetics and chemicals for an online quality and regulatory summit to share best practices and insights.
Overall, we're pleased with our growing reach and momentum and these industries.
No share some additional thoughts as we look ahead to next year.
On the commercial cloud side and the business.
From his will find new ways to be more efficient by adopting our digital solutions. We believe this will likely drive field force reduction from the neighborhood of 10% over the coming year assets.
At the same time, we expect to increase market share and CRM and see further adoption and CRM add on products such as engaged events and the line.
We also expect greater adoption for Veeva link.
And it will be an important early adopter year for data cloud and my Veeva.
We expect both to continue its strong growth, particularly development cloud with progress across the board and clinical quality and regulatory.
It's still early in terms of revenue for C. D M S and safety, but.
But we have very strong early adopter momentum and broad customer interest, which will serve us well and these large markets in the coming years.
We're also excited about the future clinical network.
And we expect another year of consistent growth outside of life Sciences, and CPG chemicals and cosmetics.
And finally I'd like to update you on our proposed conversion to a public benefit Corporation.
We have completed our communication process with customers and investors and the feedback has been largely positive.
We also completed the comment process with the FCC and our filing a revised proxy this week.
Hold a special shareholder meeting to vote on the proposed PBC conversion on January 13th.
In closing I'd like to say, how proud I am other veeva team for the exceptional teamwork flexibility innovation and execution throughout the year.
It's that combination of trust, great people and great products that has put us in a position to really help the industry. During this time of change.
Now I'll turn it over to Brent for a financial update.
Thanks Peter.
Q3 was a corner a very strong execution booking.
Bookings and services performed much for book better than expected with notable acceleration and development cloud applications like see T M Atvs and key on that and our early in the reference selling cycle.
This led to outperformance and both subscription and services revenue.
This strong demand and bookings and services also led to a calculated billings total GAAP was 26 million above our guidance for the quarter.
Billings also benefited from better than expected billings duration for the business closed in Q3.
Hiring performance and Q3 was also especially strong.
We ended the quarter with 4340 employees.
And net increase of 280 from Q2.
Much of that increase and head count was within our fault services team I mean, our product teams.
Especially those product teams working on newer applications like CDIM assets safety.
The other cloud and might either.
Q3 operating margin benefited from roughly 250 basis points, a pandemic related cost savings from.
And reduced travel and customer events and a move to virtual and.
And levels similar to the previous quarter.
We anticipate a comparable benefit to operating margins and Q4 and into the beginning of next year.
Turning to guidance from the fourth quarter.
Total revenue was expected to be 378 to 380 million with subscription revenue of Luckily, we got and 15 million and services revenue of 63 to 65 million.
Note that this implies a sequential drop and services revenue from about 10 to 12 million from the third quarter.
Well our services business always has a high degree of variability there were a couple of reasons the size and this change.
The biggest factor is our normal seasonal pattern, resulting from fewer billable days around the holidays and our field kick off.
Our digital events business also has a similar seasonal pattern with fewer events around the holiday.
Non-GAAP operating income for the fourth quarter and is expected to be 136 to 138 million.
Non-GAAP operating margin of about 36%.
No cash, while Q4, and typically seasonally lower margin quarter. This year, we expect incremental expenses related to additional data supplier contracts as we invest in our day to cloud products.
These expenses will appear in our cost and subscription services revenue line.
We will also continue to aggressively hire as we scale to meet near term demand and plant seeds for longer term growth.
Q4, non-GAAP EPS is projected to be 67 to 68 cents based on a day moving share count of approximately 162.5 million.
We anticipate calculated billings of roughly 640 million in Q4.
No not this includes a benefit of about 10 million related to one large customer we expect to switch from quarterly and annual billing terms.
Please remember.
But there are numerous factors that make new over your comparisons of this metric and be very bolt on a quarterly basis. Therefore.
Therefore, we do not from the quarterly billings growth is a good indicator of the underlying momentum of our business and we do not manage to look internally.
Our subscription revenue guidance and calculated billings guide for the full year, our the best indicators of our momentum.
All of these Q4 guidance metrics and apply the following numbers for the full year.
Total revenue of 1.446 billion to 1.448 billion.
Subscription revenue of about 1.172 billion.
Non-GAAP operating income of 566 to 568 million.
And calculated billings of about 1.550 billion.
We now project non-GAAP EPS for the full year of $2 83 to $2 and and four cents based on a fully diluted share count of approximately 161 million.
Note that we can subscription revenue and expect commercial cloud to finish the year and about 595 million and bolts come in and about 577 million.
We now expect prospects to contribute 78 to 80 million look and subscription revenue.
This is up 2 million from our previous estimate a day.
That business has benefited from the gradual rebound and advertising spend within life Sciences company.
Within the total revenue line and now expect to combine contribution from book crossing and.
Positions world to represent 97 to 100 million for the full year.
Finally, we are also raising our guidance from the call your cash flow from operations, excluding the excess tax benefit to 500 million up from 475 million previously based.
Based primarily on billings outperformance in Q3.
Before I close.
Let me give an initial outlook for fiscal 2022.
Please note that we are still in the process of finalizing the plan and will provide our formal guidance on the Q4 earnings call.
Currently our initial outlook for next year and for total revenue of 1.700 billion to 1.720 billion.
Within that guide.
Expect subscription revenue of roughly 1.390 billion to 1 billion 400 billion.
And we'll provide more specific guidance on the next earnings call income.
Including breakdowns for commercial cloud and ball.
Overall and life Science, and the Street remains healthy and continues to invest for the future.
Which gives us confidence and it's really guide for next year.
Based on our early spending plans, we expect non-GAAP operating margins of roughly 37% for the full year.
This would represent a compression of about 200 basis points from fiscal 21, which is driven primarily by three things first we plan to continue investing in our day to cloud products through additional day that supply relationship.
Second.
And assuming that travel and event related expenses and start to return at some point and next year.
Lastly, and plan to continue hiring aggressively the customer success.
And product innovation.
With that let me close by saying that I'm extremely pleased with results from the quarter and I'm very excited for the foundation, we have laid for next year.
The team's outstanding and consistent performance gives me confidence and our ability to achieve our target of 3 billion and total revenue and calendar 2025.
Thanks for joining us today, and now I will turn it over to the operator for questions.
Ladies and gentlemen, as a reminder, please press star and and one on your telephone Keypad took you free question.
Yes. Thank you please limit yourself to one question and one follow up.
Well pause for just a moment and Bobby.
Sure.
Our first question comes from above and with William Blair. Your line is open.
Hey, guys. Thanks for taking my question and a very nice job, there and Peter will start with you.
No weve not seen sort of a handful of vaccine candidates I'm from market and hopefully have the broadly to somebody over the next several months I guess I was that's happened I'd love to know if you are seeing how the appetite from existing with other customers might have shifted or has it shifted.
I'm, just sort of think about transforming the clinical technology as a platform. So from sort of the other we want to adopt all of the Veeva platform. You mentioned, one customer were chosen to do that but I'd like to just sort of understand sort of even within the existing base and new logos sort of hasn't been a shift and.
Now this sort of a sense of lightly and the total has it been sort of some sense and maybe we should start accelerating is and this is are you seeing any of that or is that too early because you you sort of said you're not a beneficiary of coated I'm not a lot of and for sure corporate book, but coming out of this and feels like Digitization cloud and the integrated platform would make sense and love to see if you're hearing or seeing anything any color from.
Existing and new customers around that.
And Oh by them and about the vaccine candidate could think that is overall largely progressing as the life Sciences industry would have expected I think there and now you're thinking for the major markets that they're in mostly people are going to be vaccinated sometime next year and I think if you will.
And it's gone back to sort of the Mi ish time zone or so that would have been broadly you know in line with what the life science industry overall, what do you expect it so there's no surprise.
Surprises there.
The major shift I think its happening is the realization that digital is very important on the commercial side and on the on the clinical side.
So that's probably the.
And major beneficiary not so much seeing the light at the end of the Cobi total I think that was anticipated but I.
I think the life sciences, and and see right now feels more comfortable with digital and one that's more and digital overall then they as opposed to the way they would be thinking maybe last March or April.
So that'll help a lot and and cheap you broadly speaking that'll help us, but it's not a and in particular quarter. It's not a short term thing I think it's a secular shift and you have more digitization and coming.
Yeah. So and then just a follow up and that used to be sort of talked about sort of the set up here, but but I think of my veeva for doctors love to non you only take was it might even from patients coming out you know when you offer its level of connectivity that really isn't available today and make the flow of information better I'd love to understand what you're hearing from your customers.
Talked about my.
<unk> patients sort of the excitement the interest levels any color there would be really helpful. Thank you.
Yes.
Yeah, and it's really helping our might be that book might be for doctors might be good for patients.
He is about helping our customers connect more efficiently with their customers. So there's a there's a lot of enthusiasm there.
But there was heavy change management as well because that's something that will take some time to work through so it's not it's a business process change.
Particularly on the clinical side lots of technology and on the commercial side. So I think you know slow and steady uptake there because that's a that's a major shift so too early day to give it any type of a ramp.
Fair enough and enough nice job guys. Thanks, taking my questions.
Nick.
Our next question is from Christopher Glynn with Goldman Sachs. Your line is open.
Hi, Thanks for taking my question I wanted to ask you about that and growth and I'm sure and customers. I think you had a record increase and 19, new customers that you know more commercial 'cause small commercial ones are just curious any other detail you can share about that nice step up there and customer accounts. Thanks.
Yeah. Christopher. Thanks. This is this is Paul so and yeah. We're really pleased that the 19 that Peter referenced was 19 net new CRM wins. So this isn't a core CRM space and we're seeing that I really great strength and are U.S. SMB market and show. These are you know many of them are pre commercial companies companies.
And are looking to launch a others are orders that are on M legacy CRM system, and they're choosing veeva and I think there's a couple of things and are driving this one is you know the industry is looking to become more digital and more efficient and they they trust veeva as the partner to get the Americas Weve delivered on that over the last several months and over several years really.
And and I think the other thing is and you know just said it and to trust and Veeva as a as a strategic partner show and they need to get to two to digital quicker and and you know in there and the relying on and even as a partner and get them there.
So great momentum and and CRM, we've had and disrupt specifically those are kind of net new CRM wins.
Got it and maybe just a quick follow up to that and have you seen better and better at on adoption with those lands and are those customers landing larger than they have before anything you'd call out there.
And we do in fact, so what what is typically happening you know today, which is different than let's say to one or two or even three years ago is that you know companies three or four years ago may have come and looking for a CRM system and they walked away with CRM and maybe one or two items what is more common today is they're looking for.
For you know and broader and more strategic partner and a in there they're buying more products upfront. So certainly veeva CRM and then maybe add ons at the same time typically all of the digital items like approved email and and and engaged or just and three were looking to go and more digital.
So much faster so we are seeing uptick and CRM, but also the related items as well.
Okay, great. Thank you.
Our next question is from Ken Wong with Guggenheim Securities. Your line is open.
Great. Thanks for taking my question guys. This is building a bit on Christmas day question, just now Peter or.
Okay and can you, perhaps talk about the competitive landscape and CRM commercial cloud area anything you're seeing from customers. During the pandemic that you think perhaps might help or hurt your competitive position here.
Yes, yes, it's going really well and you know and as evidenced by some of the numbers first and foremost we talked about the net new third and record a number of net new CRM wins I start I would say the overall dynamics are roughly the same meaning and we continue to to win most deals we're increasing market share and the one thing that has changed.
And in the competitive landscape is over the last quarter is we've had two replacements and by Q vs. New Oshie product. So that's the product that they built on shelf force I tell him it's been out in the marketplace for a couple of years now and that's a new dynamic for us that hasn't happened before and you know what we're seeing across the market is that companies are.
Trying it and you know day it hasn't met their expectations from a product we're from a services standpoint, and they're looking to get to digital book Oki too and you know a partner that can execute it and that they can trust.
So we have we had there was true replacement and I expect that those will you know those are hard they take time, but I'm expecting notional, you'll see more and more of those over time.
Great. Thanks, a lot Paul and.
One follow up for you Brian you touched on some gross margin headwinds and you guys start to build up the day to cloud product I'm. Just wondering if you might do to help quantify what that it might be to gross margins and as we think about our numbers going forward is that no other onetime head and that's something that we'll continue to try to build overtime and and.
Any color there would be helpful.
Yeah, as we look at gross margins going out and there's a number of investments. So you mentioned the data cloud that is something that we'll be building over time over a couple of years.
And we're not going to break out specifically, how much that will be but that's been factored in to our op margin projections for next year, Our guide as well that's factored into our 2025 guide. So I guess I'd leave you with that from that perspective.
Great. Thanks, a lot.
Our next question is from Brian Peterson with Raymond James Your line is open.
Hi, everyone. Thanks for taking the question. So I actually wanted to start with you ever it's outside of life Sciences, you referenced and other large CPG G win this quarter I'm not sure wants to take this but you know and it is a gradual kind of go to market build focus and early adopters book, but has the inbound interest from large customers been quicker than you would have expected.
He does that potentially accelerate that timeline on the go to market side.
Hi, Brian.
I would say no.
Not quicker than I expected. This is a relatively it's very sticky application area that were in their quality and manufacturing regulatory claims management. So it's.
Hard to get in and hard to get out so.
So it's not something that day will jump on so its its steady its its how we it's how we expected it and then make really has not affected us in there other than temporary thing here and the cosmetics market two cats and hard good thing.
Okay, and maybe just a follow up and Peter I think you made the comment on fiscal year 22 that you were expecting and field sales reps to maybe be down about 10% I want to make sure I heard that right and I'm curious is that broad based across the customer base or where is that in some instances are down more and get somewhere in line, just I guess and try to.
To think about that for fiscal year 22, and then how that's kind of factored into your longer term targets.
Yeah, Brent I'll actually have Paula take that one.
Yeah, I'll give some commentary on that you know first and the overall, 10% number show them. The way that we think about that and she is really based on multiple conversations with customers are always and very you know strategic discussions with customers and thinking about what the future of the sales force looks like but also based on Veeva estimate.
And as well that's what we believe as we look out at the market and we help the industry become more efficient and more digital just move to digital is really really good for veeva. So as we're you know as companies adopt more and more of their products and veeva commercial cloud, including products like approved from female and engage and become more efficient and we're trying to drive that were embrace.
And that shift and you also see that that shift you know in our and renovations. So as we and we're trying to accelerate it with new products like my Veeva for doctors, helping the industry get to digital faster and more efficient way, so and we have I guess, maybe the <unk>. The one bigger point to think about is we've.
We're super confident and the targets still for 2025, because weve always contemplated some level of reduction and <unk>.
We're just what we're seeing is that reduction is happening a little bit and an accelerated pace compared to where we thought it would be because of the industry's moving and digital faster.
Good color, thanks for that and Oh, sorry, Peter right and.
Sorry, if I just add on there Brian this specific one about some customers more than others not really so much I would say doesn't depend on therapeutic area. So much although the more broad based general medicines might have a little more reductions and especially areas might have a little less and then there will be it was kinda company.
And specific factors, but theres no macro trend there why it would affect one customer.
Thank you.
Our next question is from standard Blocky with Morgan Stanley. Your line is open.
[noise], hi, guys or good afternoon, and thank you so much for taking my questions and congratulations and varies from quarter.
Peter maybe a one one for you.
You mentioned in prepared remarks, and there's potential for.
Global sales hockey head count and pharma to decline about 10% next year, when you're talking to your existing customers and thinking about and you know there and how their spend with Veeva R&D was commercial cloud would would trend.
How are they thinking about any of the strategic positioning of your product and in order to frankly, just big enable them to sell.
[laughter] versus you know the potential headwind of less seats.
Yeah.
Stan.
I see and reduce seats, what's what's happening is the selling motion and it's becoming more digital and more technology and people.
So that's a good trend for Veeva, because you know they'll.
They'll be spending a bit more and technology and data to power that technology, and and a little bit less from on the people and so that's a good trend for us so the.
Overall, we are.
Happy about the commercial cloud you know growth for you know, we'll certainly growth commercial cloud and next year and you know on into 2025 because of that trend that's in our favor and actually this is as Paul mentioned. This is something we knew we new is going to come we thought it would come a little more gradually and macoupin has been kind of a little boost.
Got it.
Got it got it that makes sense and then.
On the on billings right duration I would guess is from Brian.
You mentioned that you saw a little bit and benefiting Q3, two buildings dude to isolate longer duration could you dig into that a little bit and anything to note on FX or anything else. One time that you saw in Q3 billings.
Yeah I'll answer your second question per so regarding attracts very minimal minimal tailwind on FX and nothing to really to note. There and then on the on the duration you know, it's it's really a fracture a function of the customer and the specific deal and and sometimes and Q3, you often see coterminous day.
Sales, we saw a few less coterminous and that created the duration and tailwind that did I spoke of.
Perfect. Thank you so much.
Net.
Our next question is from Rishi Jaluria with D.A. Davidson your line.
Hey, guys. Thanks for taking my questions and and a nice to see continued strong execution and I wanted to start maybe with talking about CRM and gauge I know at the a a virtual analyst day recently, you gave us and really impressed and numbers on a and gauge meetings growth. This.
This year.
I think you said, 891% growth and engage meeting started with when you gave that number just a you.
You know how should we be thinking about that are you know how should we think the attraction with engage business next year, especially as the day engaged meetings, you know free period, and Ah December 31st <unk> and kind of putting that in context as well with the commentary around that 10% reduction and field sales force that you expect next year and then I've got a follow up.
All right, let me take let me take that one first so and you know.
He engaged try and continues to go really well and you know companies are continuing to adopt they're continuing to learn how to use and right. This is and this is a change and a lot of change management involved and becoming more digital share where customers are getting better. We're how we're helping them, we're providing and when the software and the technology, but also the domain expertise and know that they do business.
Since around doing.
Doing engage and using it really efficient way we.
We are where our customers are seeing value, we're well into that and into the discussions around renewals things are happening as you know that the free period ends at the end of the year, we expect to be a the majority and companies that started with free and new you're going to continue in the next year because it's working.
This is the product is working in the marketplace and they trust us as a strategic partner.
So most companies will continue with that your question was also about next year and I do expect to that and you know most companies will continue but they wouldn't they won't get to full deployment. This year and they'll they'll reach you know a significant amount of new users, but I think most companies you will see also expansion.
Opportunity next year and even into the year to follow as well.
Okay got it that's that's helpful and then.
Just one on the preliminary outlook for next year, I, I guess, a little little surprised and I'm seeing the subscription revenue target because that's you know question, a 19% growth and I know historically, there has been kind of the discussion of sustaining and 20% plus subscription growth rate for the foreseeable future just want to.
Maybe get a sense for what assumptions are baked into the outlook on the subscription plan right I mean, especially talking about the fact that you're you're on target to do and 24% organic subscription growth this year ex crosstex and and positions World I'm talking about 19% growth next year, maybe help us understand that and and any moving pieces that might be better and better.
And I'm sure happy to so first and very pleased by the strong demand and their ability for us to to drive customer success. So this guide for next year lines up lines up very well for us to hit our 2025 targets.
I'm not going to get into any splits regarding what's under the hood on that that's you know that's typical that will come in our Q4 call. So I'm not going to give you any color around that but we are very positive and and I feel good about the growth, we're seeing and in bulk space as well as the continued growth and the commercial space.
Alright, great. Thank you guys.
You bet.
Our next question is from Sandy Draper with true Securities Your line.
Oh, thanks, so much a lot of my questions have been asked and answered. So maybe just one on the the data acquisition and and the cost there when you're looking at and finding new data sources and <unk>.
And connections are you trying to go to a true.
The customers are data sources that others aren't in a sense that you're going to try to get exclusive rights to data and just data sources and other people are also getting easy to add it or are you able to sort of get it through data connectivity or system connectivity and find it and why the I just can't I'm just trying to understand the approach to building that GAAP.
Dataset and and how they think about that I know, you're not going up specifically carve out costs and how to think about cost versus what you're paying versus what maybe a competitor might pay thanks.
Oh, Yeah, I'll take that one.
Oh keep book, that's a little bit close to the best or data acquisition data production strategy.
So you know that's a bit of proprietary or things that were doing that is very unique to day to cloud and that's one other reasons why we really think we found a jewel in cross ex and across six day to platform because the way it didn't jazz and the way it matches the patient data.
Is is quite unique so, but I will give you some broad brush.
We hope to come and due to cost less than our competitors.
And we hope to have more data sources to multiple triangulation.
Each different data transaction and then in the health care systems, because when you think about it when there's interaction between the patient and and Doctor and payer.
Multiple people have copies of that information because of our technology, we're able to piece that piece that together, so we get multiple views on it.
And at a lower cost because we're not dependent on any one particular view so very happy about that and then if we step back you know what is actually going on with day decline.
It's it's a real difference and how we're making this data the data products, it's a different as moving from client server to cloud software. So we're focusing on new longitudinal patient data real picture of the patient as they flow through health care events and the same longitudinal view from the prescribers point of view.
Too so.
I would say.
It's it's not going to be two valid to compare us veeva to the and trench way of doing things because we're we're going to do a fundamentally different thing.
Got it that's really helpful. I guess that maybe we'll leave me and my follow up Peter in terms of so it sounds like once you have to you have to build the dataset, but there may be an education process, because the interest way of doing things that by definition and trench and so you're going to have to get behavioral change and get piece.
Well the change things that they've been doing for years and years and years. So I guess the first step is build the dataset to a point and then it's really educating the market about why you think you could have something better is that a reasonable way to think about it.
Absolutely it and follow the classic early adopter cycles that you find when you're doing true innovation because.
And you'll have to find those people that they want to be early on the product maturity from lifecycle, but also opened two way of doing Peter fundamentally different.
Oftentimes that'll that'll happen with small biotechs were really really looking for that edge you find that the larger companies may be more conservative and maybe rightly. So they have a larger and boat just here so it'll be gradual.
I did want to connect the dots to between day to cloud and our CRM wins as Paul mentioned, you know customers looking for product and a customer they can trust, which is true, but also especially the small biotechs, they're now seeing that vision of day to crop well, maybe I can get that comes from we complete commercial package together data.
ER insights and analytics technology, all from Veeva. So I think the day to cloud isn't will have a positive effect on our CRM business overtime, and and it's really even showing today.
Great. That's really helpful commentary Peter I appreciate it.
Thank you.
Our next question is from Saket Kalia with Barclays. Your line is open.
Okay, Great Hey, Thanks for taking my questions here guys.
Maybe first for you Peter.
You know I think the uptake on C. P. M. S is great to see and full clinical I think it was something like 75 customers and just three years of availability.
And I'm curious how would you compare this ramp and C. P M S.
[laughter] Dms and perhaps how each ramp could be different in terms of adoption and and perhaps bookings contribution does that make sense.
Oh, yes, sorry, I was trying to get myself off mute.
Let's see they they are quite different applications one thing.
Thing is seeking mess and build built they were they were started roughly the same time CP and mess in terms of the applications themselves that veeva, Tms, maybe a year or little more be year. So before cdms Tms was built on the base of the clinical operations suite that we had from fall to each other.
So that gave it a head start and overall CMS is a and it gets harder or deeper applications and build so CMS gotten mature faster than CMS.
Also.
Customers.
When they go to see Tms. They go all and that's the nature of it you don't really run two you can't Miss it.
When you when you go for CMS, that's a little more dangerous I guess for the customer little more scary because it directly connects to the clinical research sites, so they'll be a little more hesitant there they have to build their studies those well start with a few trial studies, but it'll be a little more cautious so it's a more cash.
And just market and CMS also we had to build veeva its reputation in the clinical data management area. That's what we've done over the last few years and.
Clinical operations area, where CMS is we have been building our reputation there for about six or seven years. So it was well established so that's why he can't Miss goes faster than TV and mess, but make no mistake.
One of the best indicators of future Cdms success is the success of CP and that's because see Tms is the heart of clinical and that's what's going on and it's the heart of clinical where your master data is it's the connectivity so.
I feel every time, we win and C. P. M S eight that that increases our likelihood for winning and C D and.
That's very helpful.
Maybe maybe my follow up for you Paul you don't.
Maybe just to go back to a prior question just on engage I think the question was asked for next year I kind of want to think about it more longer term can you just give some broad brushes on how to size the subscription opportunity with engage you know open ended whether that's the total number of users or pricing or anything that you can.
And you can help us sort of size, how big of an opportunity and gauge could be once that that free trial and.
Yes, it's a good one and and and I think you know as I pointed out earlier and just with a little bit more contacts I expect and you know most of that that growth to happen or you know this year, but also next year and even you know a year or two after so and gauge will continue to drive you know or cost.
Im honored and help our customers get the digital from our business standpoint, maybe the way to think about it is we've always given the guidance that are at all and slight can gauge and like approved email or in the ballpark of 15% to 20% of CRM. So maybe that's one way to give you a really rough fashion and we don't really break it out.
Typically by users, particularly as a lot of our customers are also thinking about this as more of an enterprise capability as well. So the concept of even getting down to a user level is even less important because it's really it's like one of those capabilities. When you think about doing digital you go online and digital so.
You know that that's kind of a new as a you know 15, 15% to 20% in that range of overall, CRM and and again, we'll get there over time.
Very helpful guys. Thanks.
And next question is from Joe <unk> with Baird. Your line is open.
Great Hi, everyone I want to go back to the safety I project that kicked off this corridor and.
Hoping you can maybe speak to the broader opportunity to add to AI and work flow automation and across some of the other bolt suites and is it just the case that the pain points associated with case and take and so acute that safety is kind of the logical and day.
Opportunities for this type of of AI application or it just starts to take off are there. Some other adjacent services within vault, where it's also applicable ultimately.
And Oh pick that one show Peter.
Look at a high and general and how it relates to vault.
One of the ways you could think about that how we're doing that and our framework is sitting up and is it it's a series of <unk>.
That can handle a task that is well formed task so that human doesn't have to handle it and you mentioned and safety data that where that places the and take of a case. So some some words come in either through and email or some other form those words after you read and understand.
Well what is actually going on here, how what product is in this case about what what actual how do I code. The complaint that it's about have I seen and do quick duplicated before so that's a pretty high volume thing and that's where we can oh CLI safety data. They are high on it you'll see other areas and vault.
Another area, you'll see next year is classifying document and in that come in to and in box as it relates to a clinical trial. That's another relatively high volume area and that needs to be done and that's something where the buck and handle it you will see that in the quality suite over time as well in terms of.
Got it.
Complaint.
Which is different than a safety event that is high and I didn't enjoy this product this product at a bad color et cetera, that's a product packaging was off et cetera. That's a complaint. So it's things like that where you will see that automation overtime.
Okay, that's great and I wanted to make sure I'm just totally clear on the outlook for and gauge you know Paul when you talk about most of the growth kind of happening. This year is is that just insight on the potential new use.
There's that you already have the visibility on and kind of the contribution of those new users from a financial standpoint, well therefore flow when next fiscal year, you know fiscal 2022 and is that the right sequencing.
Yeah. So what I was referencing companies that have turned on free engage and we'll continue to renew and that will that will end up being you know the tone from larger contribution when you look at the overall seismic engage market.
Bump that we'll see this year will be larger than the bump that we see next year, [noise] and and even perhaps the year beyond that as well because many of our customers have turned on free engage and we expect the majority of them to continue with and renewable so we'll see a significant increase and this this year and then and you know and over.
Time, or you know more and more of our customers know same companies will expand their usage of and gauge but.
But also net new companies won't happen as well the companies that haven't turned on engage and for whatever reason.
Well, we'll start to turn it on over time.
And maybe Joe if I might be able to add that'll manifest itself as a bump and billings. This fiscal year and then you will see that revenue contribution and fiscal year 22, just to be clear.
Okay, great. Thank you.
Our next question is from a Ryan Macdonald with Needham Your line is open.
Hi, Ryan Macdonald on for Scott for and Thanks for taking my question at the Analyst Day, Brent I believe you had slide showing modules per customer trends by year with penetration increasing from 2.41 and fiscal 22 2.5 to I recently.
As the company looks that subscription revenue growth expectations moving forward, but.
But expanding aire expanding your penetration by less than you know a quarter of module and annually. How should we think about the view of the cross sell cadence to be over the near term to drive you know, 20% plus subscription growth is just not all penetration need to increase or decrease to to achieve these growth rates.
And I think you'll continue you should expect to see a consistent cadence of of additional upsells within our installed base west the balance of of new business as well. So I don't think the motion from that perspective, you should expect to change for us to be able to hit the.
[noise] targets that we've established.
Excellent and as a follow up you know it's great to see the Crosstex has started to come in above initial expectations for this year and and sort of recovering a bit but if we look and look at the expectations for physicians wrote it seems like those have remained I think relatively consistent as we are now starting to get you know visibility into a vaccine how.
Are you starting to think about a the recovery for that physicians world business and perhaps some assumptions that you're looking at going into calendar year 21. Thanks.
Oh I'll take that one in terms of physician world that'll.
[laughter].
<unk> and <unk>.
No that will recover sort of low with I think with the vaccine where people feel comfortable.
Broadly speaking in the face to face and then so we're looking towards.
You know sometime towards the end of next year, I think that would be a reasonable expectation for the physicians will begin now having said that we are starting to get really momentum and and starting to meet a bit and innovation, we're doing around digital day.
So you know there's a potential that.
In the long term as we look at maybe not next year, but the following year I I believe we're going to be gained market share, there and and adding more value with both digital and face to face event and other services around that so I'm pretty bullish on the on the.
And the physician school business.
And we'll have another nine months is and we will have an overly lagging effect right now.
Excellent. Thanks again.
Our next question is from Brett.
Think of America and Merrill Lynch. Your line is open.
Oh, Great Hey, guys and thanks for taking my question I wanted to ask about.
Clinical top 50, it's been a market segment that you've seen some real progress and recently can you remind us kind of where we are and the replacement cycle for that particular segment.
We are we are we.
And number of wins, there already and the top 20 category should we expect more of those types of wins or are we are you looking at the next tier down where you could see more progress you've been and it's very steady kind of reference selling approach. There seems like you've got the references now and and so perhaps we could see a tipping point of replacement. So any color you can provide.
Kind of where we are and that and that cycle. Thank you.
Oh yeah.
Yes, and important systems for the clinical operations and then the clinical Peter Ms <unk>, and we talked Clinicals, there's those two areas clinical operations clinical data management line.
Clinical data and Madison, we are very very early yes, you know.
I have a handful of customers very very early so it's you know basically you know more weekly Greenfield and legacy players out there that we have to replace and that'll happen over the next.
You know, we literally five and 10 years long road in clinical operations, we have our eat enough, which has pretty good market share that was our first applications, but how it goes top 50, I don't have the exact number of calm and use our 18, but there's still there's still a decent and not to go that we have to be good and there's more and seek in there.
And there's payments, which is a new modules or studies still relatively new module per study start up but the big thing and clinical the clinical network, that's a whole new whole new leg of.
That's the case and and that applies to the top 50 and also the all the other clinical cases so.
And your very early days and clinical and you don't really have one and the truly leslie materially penetrated and application and that emptiness and.
Well that has a way to go because the early days.
Got it thanks, Peter and then you mentioned.
<unk> expectation for kind of consistent growth and outside of life Sciences. It sounds like pretty balanced across CPG chemicals cosmetics is that just a function of kind of awareness needs to build and that category and other in order for you to see more acceleration. There is it just go to market resources and product.
Maybe we just don't need to expect that business to really ramp and and there's just because there's so much opportunity within life sciences, but I guess any color on kind of what's driving that more kind of balanced you know steady growth and that business.
Huh and her solar and happy with that growth and I'm. Just you gave it at the analyst day, so its its growth pretty nicely and when you look at it.
So to 100 million or so net net neighborhood by 2025.
Now what happens there and that's a that's a slow and steady growing industry. There is you know you've got a lot of capital costs. It's not one that promote from two to jump very quickly and it has a natural adoption life cycle companies have investments and previous technologies and he did he goes through write those off and it's been.
To be a very cautious and capital efficient industries. So.
And that's what's going on there and no. It's not nothing new to you know we need more feet on the street or something like that or product and true maturity systems.
You know it's at record selling cycle you only have so many early adopters middle majority and then you have you have late adopters.
Got it thanks, so much Peter.
Thank you.
Our next question is from Stephanie Davis with SPP Leerink. Your line is open.
And he take my question congrats on the quarter.
Just got a quick question given some of the started outsourcing and the space.
And there's a a growing number of drug development sales and I can start up what are your eye teeth, and M&A priorities and these adjacent markets with that in mind and you mean lower bounds for assets that you could or would acquire either on scale a product maturity as out and then either not relative we now.
Yeah. Thanks, Stephanie Hi in terms of M&A, that's something we always keep our eye on so we're always looking in general we would like to if we can find something that is in their markets and we would like to go into and you can find a speed of innovation and provides us with a booth.
A boost and either technology or and the fourth one.
And knowledge, we will do that or where we can find something that's applied to a certain area and we feel like Luke and we can acquire that average assets and those people that fit with our culture, and and give them and bigger and that's the play and so that they can accomplish more book.
As example, I have there is with the crossings.
Six new for marketing analytics and had tremendous data platform do you find and when we buy and Krasik with Veeva and we can take on the pool.
Life Sciences day to play which is.
And times larger and then marketing analytics and a market. There. So there's not a specific area that we're looking at or that I can talk about now, but we're always looking and keeping an eye on it.
Right and they said and then following up and send the earlier questions about your data product.
Oh wheel is the trend going from real world evidence and when could we see maybe sound and offerings that are a little bit more weighed out within your submission.
Yeah and come to real World evidence that that's a real thing right you have a.
No you're you're sort of non go we'll hold our traditional a day.
It is a Mike and use for sales compensation and I'm sorry.
Targeting and planning that type of thing and the other real world evidence, which can be used and the commercial side, but also non besides so that is real.
Our focus is not in the real world evidence for sits in a commercial data. So we got to get that right now that asset we have and the classic data platform, absolutely is that going to be rep sell of real world data and the future and and.
We wouldn't do it and area and that way to play, but first things first and that's a longitudinal patient data, we'll we'll get that go on and then will expand from there.
And with even more likely to sell off that data for an hour and keeping yourself and look at and innovation and development and later.
Oh, Yeah, we wouldn't know selling new raw data rights to you you know we have.
And a long time, Oh, I'm building, a classic leaving network and data platform will continue to build it and then build it we use that per our internal use and our consulting group and they do use that but then we'll use and to make products for customers, but it's not the type of thing moving with OEM or.
And I'm just them and yes. Thank.
Thank you.
Our last question is from Sterling Auty with JP Morgan Your line is open.
Yeah. Thanks, Hi, guys. So Super high level question to start you know with the outcome of the presidential election, and assuming it holds up as is and the potential for the run offs and Georgia is there anything that you're keeping an eye on from a regulatory or legislative action that you think would have direct and.
Packed one way or other either on the business or to your customers that could impact your business and the next year or two.
[noise], Yeah, Hey, Sterling and.
And my question. So I mean, we're certainly keeping an eye on you know whats happening with the election and also what happens around legislation and policy as our customers and.
But you know that the reality is oh and the industry is a big industry. It's a global industry. These kinds of things elections happen. All the time legislation changes policy changes all the time and it tends to be balanced out by you know a lot of innovation that that happens in the industry innovating and new medicines and really everybody focused on driving patient.
Toms and doing the right thing from patients. So that's a long way to say that you know some of these changes they tend to be a wash with the innovation, we haven't seen any impact yet on our customers and you know we don't really expect any impact from some of those changes and the political landscape over.
Over the near term either.
Excellent and then one follow up question, there's a couple of questions around see Tms and I'm just kind of curious has anything changed from the competitive landscape in terms of you had that one legacy you know strong coupled with Oracle's Siebel C. T. M. S. You know Youve I had you know Medidata had an operating but you kind of came in and I think we're doing.
A better job, winning and has anything changed in terms of any other vendors that you're seeing more active in that space or any change to kind of win rates are displacements.
Sterling no new entrants that we're aware of and no change to the competitive dynamics, we really.
Placing the client server there and.
I guess, the only changes or customers are seeing that Peter has success and suky mess and scale at the large enterprise. So that's sort of de risk it for people and I think many new customers are thinking hey, when would I go to be the CP and that's when does it make sense to that's.
Because it.
At this point and I think we have the best alternative to the market and the proven solution.
Got it thank you guys.
Thanks.
And this does conclude and couponing session.
The call back over to Peter for any closing remarks.
Thank you all for joining us today I'd also like to extend a special thanks to Rick line for all his years of service and contribution that Veeva. This is Rick last earnings call with us and we wish him well and his next role as CFO.
And I wish you all a happy holiday season, and we look forward to talking with you next year. Thank you.
This concludes today's conference call and you may now and it's going to.
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