Q4 2021 Veeva Systems Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the Veeva systems fourth quarter and full fiscal year 2021 results conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone keypad. If you require any further assistance. Please press star zero and I would like to hand, the conference over to your speaker today, Mr. Edo Garrett senior director of Investor Relations.
Please go ahead.
Good afternoon, and welcome to Veeva as fiscal 2021 fourth quarter and full year earnings call for the quarter and year ended January 31, 2021 with me on today's call are Peter Gassner, Our Chief Executive Officer, Paul Shower, UPC strategy, and Brent Spellman, 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, including those related to the impact of COVID-19 on our business life Sciences industry and global economic.
And our actual results may differ materially please.
Please refer to the risks and listed in our earnings release and the risk factors included on our most recent filing on form 10-Q, which is available on the company's website at www Dot Veeva dot com under the investors section and on the SEC's website at Www Dot S E C Dot Gov.
Forward looking statements made during the call are being made as of today March <unk> 2021 based on the facts available to us today.
This call is replayed or viewed after today the information presented during the call may not contain current or accurate information veeva disclaims any obligation to update or revise any forward looking statements. We will provide 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 at public Forum the.
The guidance, we will provide today is in part based on our current assumptions as to the macroeconomic environment, and which will be operating the future, including the timing and pace of recovery from any negative effects caused by COVID-19, such matters that are beyond our control and our assumptions may not be correct and they changed rapidly on the call. We will also discuss certain non-GAAP metrics that we believe.
And the understanding of our financial results a reconciliation to comparable GAAP metrics can be found in today's earnings release and in the supplemental investor presentation, both of which are available on our website. A reconciliation and can also be found as an exhibit to a form 8-K filed with the FCC adjusted for this call with that thank you for joining us and I'll turn it over to Peter.
Thank you and tell me.
First I'd like to thank our life sciences customers for their incredible efforts over the last year. The COVID-19 genome with only sequenced about a year ago, and we now already have safe and effective vaccines diagnostics and therapies.
That's just amazing speed Covid.
COVID-19 was also disruptive to the health care systems overall, and the industry really stepped up to support doctors and patients around the world.
2020 was a transformational year for life Sciences and for Veeva.
The scale and speed of innovation from the Veeva team enabled the industry to adapt quickly work and new ways. Thanks.
Thanks to the team for your outstanding execution against our important mission.
Turning to our result, EBIT delivered exceptional performance for the quarter and year total revenue was 397 million up 27% year over year subscription revenue also grew 27% year over year and non-GAAP operating margin was 39% on.
Full fiscal year revenue was 1.46 billion up 33% year over year and subscription revenue was one point and one 8 billion up 32% year over year.
And commercial we further extended our leadership position with commercial cloud customer growth and the development of important new products that will set us up for future growth over the long term.
And Q4, we had 17, new customer wins for of course here and and a number of international expansions with existing enterprise accounts.
It was also a standout quarter for Veeva CRM engage as customers moved to paid subscriptions at the end of the 2020 three period.
And we're pleased with the adoption of engage and expect high attach rates with new customers and they look to digital capabilities to drive field efficiency.
I'm also very pleased with the progress and Veeva data cloud and.
Q4, we released patient data for the U S and now have five early adopter customers.
We are also proving our data with other customers and the feedback is encouraging.
And multiple cases, we were able to identify patients and prescribers that were not available and their existing datasets.
Looking ahead, we expect to have prescriber and sales data available for the U S by the end of the year.
Offering through additional countries will come over time.
It's early days, but we're excited by the potential of Veeva data cloud to help the industry and the area that's been stagnant for too long.
Having great data software and business and smelting is allowing us to build deeper partnerships with the industry.
We're starting to see increasing interest among biotechs to go all in with Veeva partnering with us from the very start could define and operationalized digital first commercial strategy.
And Q4, we had a second biotech and the rights go all in with US and this way.
To put the breadth of our full offering and context course here and that's roughly 20% of the opportunity when a customer goes all in with commercial cloud and the U S.
There is a major long term potential for Veeva and commercial if we execute well on our vision.
This year, our focus is to continue to innovate and our products and optimize our delivery and support for this approach by partnering deeply with a handful of early adopters.
And we look back on the year I'd also like to share that the two acquisitions. We made about 18 months ago Cross <unk> and physicians world are integrated and operating well.
We further invested and cross like growing the team by more than 50% since acquisition.
The growth, it's mostly on the data science area as we expand across six data platform.
Our event services business that with physicians World made a quick pivot when the pandemic hit and has been helping lead the industry and digital events.
We expect these new businesses to continue to thrive growing roughly in line with Veeva overall in the year ahead.
On the R&D side, we had another great quarter across the board with wins and go lives and clinical quality regulatory and safety.
Industry is starting to really appreciate the power of bulk development cloud and streamline drug development and and.
We closed the year with more than 850 vault customers overall.
Quality and regulatory had a record number of wins and the year the vault rim and vault quality suites are adding significant value to the industry.
Only offerings that can truly unify these important functions.
It was also a big year for clinical.
One major milestone was involved TD and masks.
And 2016, we set out to build a better EDC first product and PD math and we believe we are now there.
Walt EDC allows customers to build and execute studies more quickly than before and get access to crucial trial data faster.
The impact on our customers' trial speed and agility has been significant and the industry is starting to take notice.
In fact, we just announced that six of the top seven Fierros who've joined the vault TD and mass partner program, which is further validation of the strength of vault <unk>.
Having a critical mass of zero partners will make it easier for smaller customers to use vault TD and mass because they often leverage the technology provided by their CRO partner.
We've also made excellent progress with Veeva clinical network to connect sites patients and sponsors. This is a bold vision for the industry that over time has the potential to make trials, 25% faster at 25% less cost.
It's still early days for clinical network, but we have the key building blocks and place.
We have seven customers signed up and the first few customers just went live with their first sites on site connect which is our first clinical network applications.
So I connect linked sponsors and the clinical research sites together to make steady startup and steady execution faster and more compliant.
My Veeva for patients is another important part of the clinical and network.
First application and my Veeva for patient with E consent.
And we're already working with a few early adopters in fact, we had our very first patient use my veeva to sign and electronic consent from last Friday.
The big milestone preclinical and network, we are really excited about having patients use veeva applications directly.
Overall, it's been great to see so much progress innovation and exceptional execution across the board in commercial and R&D.
Looking outside of life Sciences, we had another solid quarter with new customer wins, and expansions and consumer goods and chemicals and Q4, a top 20 and nutrition company selected regulatory one.
Despite COVID-19 related disruption and the significant downturn and the cosmetics industry. We had a good year overall outside of life sciences with revenue over $30 million as expected.
Before we close I wanted to share that and February Eva officially became a public benefit corporation or.
Our proposal passed by and overwhelming majority vote.
Thank you to our shareholders for your support and this important decision.
This move was about the future of Veeva over the decades to come and ensuring the company continues to operate and consideration of all stakeholders.
But we are also seeing a positive effect right now and attracting talent to veeva and and deepening our customer relationships.
I also posted and medium article with my personal perspective on the importance of public benefit Corporation and more broadly.
And all it was a year of exceptional innovation and execution across the board where and.
And a stronger position than ever with the right team customers products and vision to fuel our growth to 2025 and beyond.
I'll now turn it over to Brent to discuss the details of our financial performance.
Thanks, Peter and the fourth quarter was a great close to another year of outstanding execution for Veeva we.
We had record bookings and the quarter driven by our continued momentum across our development cloud product suites and Veeva CRM engage.
Development cloud performed extremely well with a record bookings quarter, including particular strength and see Tms and qos.
And commercial cloud core CRM and the add on products drove our bookings performance and the quarter and.
Engaged conversions were extremely strong and we believe captured roughly 60% of the total dollar opportunity.
This will be a tailwind to our fiscal year 'twenty two commercial cloud subscription revenue.
We expect engaged subscription revenue growth after fiscal year 'twenty, two will be similar to other CRM add ons.
Cross X had a strong bookings quarter and posted $79 million and subscription revenue for the year.
Total revenue per <unk>, and physicians World was 103 million with physicians world benefiting from growth and virtual events.
And half of the year.
These acquired businesses are fully integrated into our financial results and we will not break them out and the future.
Strong subscription bookings, including engage strength and services demand led to calculate billings of $688 million.
And was $48 million above guidance.
Total billings includes $15 million from changes in billing terms and a few large customers, which was $5 million above our previous expectation for Q4.
Our revenue retention rate for the year was 124%.
This metric is defined and the earnings release and reflects annualized subscription revenue growth within existing customers net of revenue attrition and continues to illustrate the increasing value, we're providing to our customers and the industries we serve.
We had another strong quarter of hiring we ended the quarter with 4506 employees and <unk>.
Net gain of 202 from the previous quarter for.
For the year, we added more than 1000, net new employees and the vast majority of which were on our field and product development teams.
Fourth quarter operating margin was 38, 6%, which exceeded guidance operating margin was driven by subscription revenue outperformance and a smaller than expected seasonal dip in our professional services business.
As a reminder, on operating margin includes roughly a 250 basis point benefit from cost savings related to lower travel and event expenses, which was in line with the previous quarter.
Operating cash flow for fiscal year 'twenty, one excluding the excess tax benefit was $471 million.
This was below our guidance.
Approximately $30 million of expected Q4, and collections pushed to Q1 and were collected in the quarter.
I will now provide guidance for the first quarter and fiscal year 'twenty two.
For Q1, we expect total revenue between 408, and 410 million subscription revenue of roughly $330 million.
Non-GAAP operating income for the first quarter between 157 and 159 million. This.
And this includes a benefit from reduced travel and events similar to the past few quarters.
Note that we have made some changes to our fiscal year 'twenty two sales compensation plan as we do from time to time Keith.
These changes will result in approximately $3 million and incremental expense from Q1, and approximately $11 million for the full year.
Q1, non-GAAP EPS is projected to be 77 to 78.
Based on a diluted share count of approximately $162 million. Please.
Please note that we are maintaining our non-GAAP tax rate at 21% for fiscal year 'twenty, two and we'll monitor this assumption from significant events, including a new relevant tax law changes.
We expect calculated billings of roughly $392 million, and Q1, which implies year over year growth of about 17%.
This reflects approximately $4 million of billings that moved into Q4 from Q1 related to the changes and billing terms, we mentioned earlier.
If we account for this dynamic on normalized Q1 billings growth would be closer to 19%.
Please remember that there are numerous factors that make year over year comparisons on this metric highly variable on a quarterly basis and therefore, we do not believe quarterly billings growth is a good indicator of the underlying momentum of our business and we do not manage to it internally.
Our subscription revenue guidance and calculated billings guidance for the full year are better indicators of our momentum.
Turning to our guidance for the full fiscal year 'twenty two.
We expect total revenue of $1 $755 million to 1.765 billion Inc.
$45 million increase to the high end of our prior guidance.
We expect subscription revenue of approximately 1 billion and $430 million.
Consisting of vault subscription revenue of roughly $750 million and commercial cloud of roughly $680 million.
We expect non-GAAP operating income of about $655 million.
Investing for growth is a priority for the year.
Our guidance reflects investments with new data suppliers for our data cloud products and additional hiring primarily and our field and product development teams.
We expect travel and event related expenses to start to increase and the back half of the year.
We expect calculated billings of approximately $1.870 billion, which reflects a 17% year over year growth rate.
And if we adjust for changes in customer billing terms and fiscal year, 'twenty, one, which total approximately $17 million or.
Our guidance would imply normalized billings growth of roughly 18%.
We expect about 42% of full year billings to grow from Q4.
We expect non-GAAP EPS for the full year of approximately $3 20.
Based on a fully diluted share count of approximately $163 million.
Finally, we expect full year cash flow from operations, excluding the excess tax benefit of about $635 million and.
In closing I am very happy with our strong momentum exiting the fourth quarter and the growth we expect in the coming year, we are well positioned to achieve our 2025 target of $3 billion and revenue.
Thanks for joining us today, and now I'll turn it over to the operator for questions.
Thank you and as a reminder to ask a question and you'll need to press star one on your telephone keypad. If you wish to withdraw your question press the pound key.
And we ask that you please limit yourselves to one question and one follow up.
Our first question will be from Ken Wong of Guggenheim. Please go ahead.
Great. Thanks for taking my question and fantastic quarter guys.
And one for you Peter.
So can you maybe give us a little bit of feedback from what youre hearing from customers on this transition to a PBC and then perhaps more importantly, you've been you've been pretty public with your call to arms for other industry leaders to follow your lead what kind of feedback are you getting from other executives within life Sciences, and perhaps even outside on this.
Potential change to a public benefit Corporation.
Ken Thanks for the excellent question.
For customers it is helping.
And it's a discussion starter and and also has a very concrete way to say what veeva is all about not just because we're saying it because we wrote it and our chartered that we're committed to the industry to society and to our employees not just to our shareholders. So they can depend on veeva long term and.
And it's absolutely, helping it's also helping and recruiting we have people.
A number of people seeking us out and they want and they want and B.
And part of that so and I would say there is unexpected also thing that that's happening I think it's helping us generate new ideas and it's exposing us to a different ecosystem of ideas.
It will be positive for Veeva and the long term in terms of other companies certainly have had a reach out from others and they're interested in it.
I think rightfully. So this is a board decision that PBC matter. So this is something that plays out over.
Over years really this is not a snap decision and it may be other right for other companies Skippy P. B season, and it may not be right for them. So I try to stay neutral on that and just provide whatever.
Advice and guidance I can about how it fits for veeva.
Got it fantastic thanks for the color there.
And if it makes you feel better we've been hearing it from investors that it's positive and also have had other companies that we follow actually reach out to get some color on kind of what you guys are doing and what that could potentially and tell from a benefit perspective.
And then excellent.
So the follow ups for Brian just wanted to touch on the commercial cloud growth.
Called out 680 million and it looks like that's kind of a mid teens growth rate I think a lot of us were expecting a bit of a DSL there with what you guys highlighting a potential cut and pharma sales reps last quarter.
Can you maybe walk us through what are some of the assumptions that are in there and is there any seasonality we should be aware of to the extent that there are going to be some reductions in sales reps and how.
That might feather into into outlook.
So wondering why don't I take the first part about the head count reductions on and I'll, Let Brent answer your question about about billings and impact on the financials. So from a from a head count perspective, we first talked about that last quarter.
So we know a little bit more and now we said we believed it was about a 10% reduction and that'll happen about over the next year or so we still think that's going to happen and we think it will happen likely over the next one to two years and.
But so far we haven't seen the reductions happen broadly across the industry and haven't been industry wide reductions that we've seen and are in Q4, there's always ups and downs, just a little bit up and a little bit down as company shift, but there havent has not yet been anything thats been unusual or out of the ordinary now having said that why do we still believe it's going to happen.
And the context is important here on the.
The industry has moved to digital we have we help the industry become more digital and you heard that and brands prepared remarks, where we have now about 60% of market share from and engage standpoint. The industry is using that that will make the industry more efficient and will make them more effective and productive day.
And now have the opportunity to apply those efficiency gains to either reach more customers or do have reductions in our field force and I think pharma is thinking about how do they optimize for that and that takes time. So we haven't seen the impact yet, but I do think that will play out and we have included.
And those reductions and that thinking within our within our guidance as well.
Yeah, and maybe I could add an and.
And the 13% growth that we guided to and we did see broad strength across the portfolio. So cross six core CRM and core CRM add ons and we did have a pop and engage so that's probably the one item debt.
It flow through our Q4 billings and Youll see that.
Total revenue through fiscal year 'twenty, two and then beyond that we expect engaged to grow more in line with other traditional add ons.
Great. Thanks for color guys.
Our next question will come from the line of Brian Peterson of Raymond James. Please go ahead.
Yes, Thanks for taking my question and I kind of wanted to follow up on that just to just to clarify. So we can gauge how do you think about the long term penetration potential, but I think I'd just from 60% market share is that of the total reps is that penetration I just want to make sure I understand the SaaS.
And we're giving it and maybe what is the longer term kind of penetration potential that you see of that offering.
Yes, so you're right. It's the 60% is the of the total engage opportunity. So as we think it is not as it was.
And <unk> the CRM seats that we average of the total market.
For for engage.
So that happened.
And relatively quickly over the course from last year, we were.
And were there from the industry with the right products and technology and expertise to move the industry quickly.
We will see that impact hit our revenue was Brent mentioned.
Largely this fiscal year, and then beyond that and you will see it grow more like a steady growing out and.
So most of the pop that we have seen has already hit and in this current year and then beyond that I think it will see steady growth and it may approach and assortment.
This cash rate too and so what we've talked about with close and marketing and with approved email, which are a bit higher than where we're at with 60%.
Okay. Thanks for the clarification and and I just wanted to hit on on the 17, new wins and the core CRM on.
Obviously, you guys had a pretty significant market share leadership position there and just be curious if you had to take a step back and think about the results from the core CRM. This year, how did that perform versus your expectations and any thoughts on competitive dynamics in that space. Thank you.
Yeah. Thanks, I can cover that also so yeah, you're right I mean last last quarter. We had 19 CRM wins that was a record this quarter, we had 17 share wins.
We look across those there and many of them on a pre commercial companies a lot of them and the U S market.
We are also seeing.
Wins in Europe, but then even and some of the domestic markets like in Brazil and in Japan.
So we're pleased with that we're winning most deals in terms of the overall competitive landscape.
We're gaining share and we've gained share quarter over quarter, we've gained share year over year and there's a reason for that the reason, we're gaining shares because potentially and really difficult times like we're operating in.
Companies are looking for a partner they can trust and they want a partner that can execute this is all about execution right you have field people that need to be productive and the field they need a partner and if they can trust. They also want a partner that can innovate with them and we've proven that and.
And they're also looking for somebody who has the domain expertise and the guidance to get them through the digital transformation and that's what we've been doing over the last year or so.
From a competitive standpoint, our position has actually improved over the last year, because it's really shine.
White on the difference between how Veeva is operating and how recipe and others are there alternatives from the market.
So really happy with with progress from a competitive standpoint.
Good to hear congrats on the strong quarter guys.
And your next question on come from Brad Sills of Bank of America. Please go ahead.
Oh, great. Thanks, guys. So much for taking the question.
And congratulations on a nice a nice finish to the year I wanted to ask about the comments made earlier Peter on <unk>.
Core CRM.
And only 20% penetrated and the overall commercial potential.
Are there certain products or offerings that perhaps are.
Further out when you think about getting to 100% overtime and near term. Obviously engaged is doing well there is still some wins that you are are you.
And youre executing on.
New customer wins, but when we look further out maybe two or three years from now maybe something that's on the roadmap that might not be thinking about that you think could be could have real upside.
Thanks, Brad Yeah in terms of my my commentary about the 20% is the opportunity really referring to when we sell our complete commercial products that we have today not talking about future products, but products that we have today in the U S market when we sell that to a small biotech when they.
And Paul in with US the core CRM is about 20% of the opportunity today, so that the other 80% of that opportunity comes from the breadth of our products. Some of it is from the commercial content.
There is a pretty good sized chunk from data cloud and net debt chunk or growth.
<unk> is a sizable area that will grow and then we have the CRM add ons and we also have nitro.
When we look for this complete commercial which we have today and certain markets like in the U S.
And it's very early days, but we haven't that's where they offer tune and he comes from so we've come a really long way from the days, where we just had CRM now we have a long tail with the data and analytics products being the largest areas.
That's great. Thanks, Peter and then one more if I may please just on the outside life Sciences opportunity.
30 million and revenue as a nice.
And nice milestone here.
Where are you today I know that you haven't really been investing aggressively kind of letting the products sell itself and at some point.
Perhaps.
Getting more.
More aggressively investing in that business to go after the opportunity I guess, where are you and that reference selling approach and some of these industries that you are going after and consumers consumer package goods chemicals et cetera.
Mhm.
Life Sciences, we're focused on the consumer packaged goods chemicals, and also cosmetics and I'll look cosmetics has had.
Tough year here with the pandemic and.
And that we're focused on the quality and the regulatory areas. So the market is a bit of a certain size to put it and references about similar to our CD EMS market size and and it's what I would consider relatively slow and steady mover, so where we are deepening our customer engagements.
Areas that don't move too fast.
So to give the guidance on that we have said before we would like to have about $100 million business. There in that segment of the market by 2025, and we're still on track for that so things are going.
According to plan there outside of life Sciences.
Great. Thanks, so much Peter.
Thank you.
Our next question will come from the line of Tom Roderick of Stifel. Please go ahead.
Great Hi, everyone. Thanks for taking my question Peter I wanted to go back to your comment on on CMS. I think you said six of the top seven and <unk> are now partnered with you on that front in.
Perhaps that ceding the market more at the lower and or the emerging startup side.
And which I'd love to hear a little bit more about but just talk a talk on beta if you don't mind about how the crows or kind of.
And you're building up your presence on the CD EMS side, and what that does mean for the other top twenty's, where I know that that would take a little bit more of a share shift over time against some of the entrenched competitors.
Would love to hear more about that thanks.
Yeah.
And I consider that very significant six of the top seven zeros supporting Veeva and our partnership program.
One of the top seven zero is except for Quintiles.
And.
That's significant because that means that's what customers are asking for crows are very efficient they focus on getting the work done and they don't want to lead into technology when customers aren't asking for it. So this means that customers are asking for this technology and it means this heroes feel that they can be very efficient with veeva and over.
And now that takes a year or two to really work its way into the mid market ecosystem, but we're very bullish on that.
And I expect us to be the leader in the clinical data.
Management market and by roughly and that 2025 timeframe. It's a market that life sciences is cautious on and conservative, but we have the better product and I'm very pleased with our early adopter success with our with our customers. So I couldn't be happier, we entered that market and 2016 wrote the first line of code.
And now we're set for leadership, so very enthused about that area.
Fantastic, that's great progress and Brent and not to put too fine a point on it but I appreciate some of the details on the engage.
And some customer conversion and the success, you're having on that when you guide.
For the commercial cloud for this year can you Directionally just give us some sense as to how much of that acceleration on the organic front is being driven by engaged and sort of the reason behind asking that is as we model out longer term I'm trying to think about what and more normalized commercial growth rate would be once we sort of lap the benefits.
Of monetizing does engage customers had been free from last year.
Yeah, and we don't we don't breakout specific products and in.
And guiding and providing results, but with that a little more texture. As we said in my prepared remarks, what we gave you a sense of what we thought the dollar opportunity was.
And that we had captured at 60%.
The other piece of the equation as you know we're trying to size that.
If you think about sizing that we talked about percentage of core CRM. So we see that orienting around about 15%.
If you think about <unk>.
Size and that that's something that to consider there.
And the rest of our portfolio had outside of engage how it would have a record commercial.
Growth quarter bookings quarter. So we did have strength broadly outside of engage.
Great really helpful. Thank you I'll jump back into queue.
Yep.
Your next question on come from Donald Hooker of Keybanc. Please go ahead.
Great. Good evening, Thank you for the questions here with.
Was curious if you had any kind of peak on the sort of some of the changes in the aerospace cycle, obviously, the big news and icon and PRA Health Sciences potentially merging your comment on you were excited about your progress partnering and working with Crows offer on lob.
Lob out there for you kind of any any thoughts on the CRO landscape from Europe is firm the veeva perspective, given that mergers out there.
Yeah, that's certainly a large merger and there's consolidation and that can happen and the CRO space. So I think that's actually going to be good news for us both purion icon are our customers. They have some of our products, but not all of our products I think as they get together and they look for more efficiency.
They'll probably look to veeva for for more of our products now.
That is a consolidation and the CRO industry, but there is also always specialized smaller CRO, starting up and certain areas. So it goes there is theres booth.
Ups and consolidation happening so I don't see a macro level change and this euro and the stream.
Interesting. Thank you and then maybe follow up question. Just was curious if you could update us on your Veeva business consulting fees and so I know, it's a little bit on small and it doesn't get a lot of focus but I just have a sense that a lot of these.
Biopharma sponsors out there and particularly on the clinical area are struggling with.
Wildly changing regulatory environment, the sort of the changing.
Types of therapies coming to market and and thinking about had had adult day on that with a lot of the new technologies and companies like Veeva are providing I would I would imagine that's a nice growth area for you can you maybe talk about that even though it's small are you and I.
I think the business consulting is more commercial now grant granted but is there opportunity to expand that and the regulatory and clinical.
Yeah. It is a relatively small now and it is and commercial we will bring that into the R&D area. This year.
And let me step back and talk about what the purpose of that its really business process consult and can we help customers optimize the business process a lot of time and thats related to our products, but it may not be always related to our products and that brings a whole bunch of efficiency because we as you have new techs.
And all of the available your processes need to change and customers need help with that in.
And the clinical side and and the R&D side, particularly what youre going to have is.
How do they optimize processes across the functional groups the boundaries between quality and regulatory and clinical operations and clinical data and safety, how do they optimize those boundaries given that.
And new technologies available, whereas in commercial what Youre doing is optimizing field execution within our region. How do you operate better and in France, How do you operate better in the U S. So it takes a really different flavor.
When we look at Veeva is starting out on the software and and now we've really grown to lots of different software, but also data and business consulting and that I think the complete package. So it's a very.
And for Veeva and overall.
Thank you. Thank you I appreciate it.
Thank you.
Next question will come from the line of Sakakawea of Barclays. Please go ahead.
Okay, Great Hey, guys. Thanks for taking my questions here.
Maybe first for you Peter.
Some interesting commentary around the data cloud.
And it sounds like it's not only another another option to customers, but actually potentially even better data.
Better quality data that is and so the question is can you just talk about what enables that potentially better quality of data and it's sort of broad brushes, how you envision envisioned the pricing on that on that offering down the road.
Okay.
I guess, how is the better first of all we set out with the approach to innovate.
<unk> approach to the life Sciences data does.
Is it really is really 20 years really and it really hasn't innovated and it hasn't had that competitive push to innovate.
So we are taking a different approach to data sourcing I won't get into the specifics of that but definitely a different approach to data sourcing and then we're focusing on longitudinal data longitudinal patient data longitudinal prescriber Dana.
And then our sales data so.
If you look at it historically in the past.
The industry has gotten used to the datasets they have.
But we're bringing them new new datasets with more complete coverage that can be used in and better ways. So.
It's a very detailed work, but what we find it's when data analysts get a hold of this day to day think Wow. This is the way data should be done and now it's new and so there is resistance to change so it's almost like moving from client server to cloud.
Resistance to change, but we're really excited about the innovation.
Got it got it and.
And Brent maybe the follow up for you.
And thank you mentioned this when you were talking about the guide, but you touched a little bit on on potential from potential tweaks to sales compensation didn't sound like huge dollars, but curious if you could dig into kind of what those tweaks are kind of high level and just a recap on how that sort of impacting the expense dollars.
Yes, certainly socket happy too so I'm not going to get into the nuances of the comp plan changes, but broadly.
Looking to align our goals and incentives as we do parity off periodically to ensure they're aligned to customer success and the.
The changes we've made enhances that alignment.
The change did result in any substantial changes to our sales otas.
And it did result in a higher amount of P&L expense in the fiscal year based on the accounting treatment.
And so all in all we think it's and moving the right direction to align for customer success.
Got it very helpful. Thanks, guys.
Your next question will come from Joe <unk> of Baird. Please go ahead.
Oh, Great Hey, everyone. Peter I wanted to go back to your comments you made at the beginning about my Veeva, but more broadly just the rise and patient centric clinical trials and.
And I understand that it's it's a development that is still on the early and eggs, but clinical practices do change and the virtual or hybrid becomes the new norm. How do you think bolt kind of develops or evolves over the next few years and is it different.
And or are there certain opportunities that maybe are greater.
We're truly embarking on and those kind of channel yeah just different.
A different way of clinical practices across the industry.
I don't know yet whether the trials are more decentralized.
Or not won't really affect our core ball or actually the clinical network.
I do think by the way that is the approach that's going to happen more decentralized clinical trials, but really where we can really help us more patient centric and more paperless clinical trial. So when you think about what we're trying to do.
When when the patient when the Doctor feels out some data after seeing the patient whether that's virtual or in their office, we want them to be able to type that data into and electronic form and that flow right back into the sponsor.
Actually now not how it's done today, there's usually paper and the middle.
What we're doing is with our site on product providing software to the clinical research institutions for free.
So that we can automate that whole process.
And.
We're really excited about it I guess its the biggest undertaking that veeva has ever accomplished or you have and accomplished yet biggest undertaking we've ever started because we're trying to automate processes across the patient the clinical research and the life Sciences industry on net that's quite an undertaking.
That's great and if I can ask one follow up.
Just more in regards to and our near term financial performance.
And specifically the change from kind of the initial outlook on fiscal 'twenty, two last corridor and today's communication other than the update around commercial cloud and and why Youre seeing specifically for engage are there any other factors that drove the uplift.
And and revenue expectations, because it is a bit larger of a change that and you typically you have given between and be initial and this quarter's update.
Well the good news and my answer is it's broad based so we've seen good strength.
And demand and customer adoption across our development cloud sweets and as I said before more broadly and commercial cloud outside of engage so it is really a broad swath of strength that we're seeing that drove the increase and our guide.
And I guess that's a.
It's a slight recognition that we're becoming a more strategic partner and as time goes on with our customers and net that we feel that flows through to our business. We we've proven ourselves more and we continue to prove ourselves more every quarter and our product footprint growth broader and we bring in more senior executives into the cash.
And you saw that all those things and lead to broad based.
And this improvement.
Thank you very much.
Our next question will come from Sterling Auty of JP Morgan. Please go ahead.
Yeah. Thanks, Hi, guys I'm kind of curious if you could give us maybe a bit of a descriptive update on the mix of the vault revenue and what I mean by that maybe how much of that total bulk revenue is coming from clinical and I know theres a number of products versus just in pure R&D versus.
And as commercial just all the different areas, how would you kind of split it up and describe the breakdown of vault revenue today.
Yeah, Hi, Sterling, it's Brent so we don't break down the.
The vault revenue in two major segments or at the product level I think we've talked about the market opportunities and regarding the Tam. So we've broken that $6 billion down and and we have a long runway across all of those segments and across the clinical suite.
<unk> safety and quality there is a lot of headroom and front of us and.
And we're really pleased with the traction we're getting.
Okay, and then not.
Sterling not to break it down into specific numbers, but the largest revenue contributors and the bulk families are and the commercial content and now that was the first place we got into <unk>.
Clinical operations.
And the quality those are the those are the three largest regulatory is good as well, but not quite as large it has a longer tail on it and then the newer ones are the clinical data management and especially the safety. Those are those are very very new so that's roughly how to think of it.
Great. That's very helpful. And then one follow up would be when you look at the business outside of life Sciences, and when do you think about you know your longer term aspirations there.
Is that all expected to be in that kind of safety and quality area or how much of the opportunity might come from other additional solutions that you might be contemplating.
At this time, when we talk about the 100 million thats really and the quality and regulatory area.
And that's what we have visibility into now and and we're executing on and of course, there's always potential that we would do it.
Things, but at this time, we have no plans, we're not executing on on anything other than quality and regulatory outside of life.
Life Sciences safety will be used outside of life sciences, but that's that's very early and that's not none of that is contemplated and $100 million.
Great. Thank you so much.
Thanks.
Question on income from von Suri of William Blair. Please go ahead.
Hey, guys. This is this is doing on from before and I. Appreciate you, taking our questions and and will echo.
Congrats on a solid quarter.
I guess the first first question from me and I mean, maybe more towards Peter.
And now we think there's a couple of quarters and from that initial CRM announcement, we added another kind of top CRM and CMS.
And how should we maybe be thinking of these partnerships not only drivers of the overall.
Cvs adoption I think you just kind of mentioned it on another earlier question as well, but the overall opportunity.
For these sponsors and <unk> to expand their and their adoption across the clinical suite and.
Maybe a broader kind of platform integration.
Comes more and more of a focal points on.
On the on the clinical side.
Yes, I think it's right to focus in on that the 6% to seven the Tubbs heroes.
It really indicates is veeva is becoming a.
A core part of the fabric and the clinical data management area for life Sciences and.
Integration with our service partners.
Growth is driven by interest from sponsors large and small.
Hum.
We couldnt be more excited about it.
I would tell you and I think we will innovate and also with these zeros right when they see our type of technology. It will end up causing them to change their processes to further optimize and that's something that's going to help the industry. Overall, you have to remember that the existing products existing clinical data management products. The foundation of the two.
Players those foundations were made and roughly 20 years ago.
And they're still for example, and not even those major players are not true cloud applications and how about <unk>.
They did that and mattikalli, they're not all on the same relief. There's a lot of inefficiencies built into the system that were kind of a.
<unk> is a breath of fresh air.
For the clinical data management area.
Right now that's fantastic and it makes a lot of sense, especially.
Within the rest of it's kind of a clinical suite being integrated as well there maybe one more if I may or maybe more from Paul but.
And just kind of maybe given the uptake and it sounds like you guys are kind of investing and maybe that the physicians world business with virtual Webinars online events things like that.
And to get a sense of maybe how youre positioning and.
This business to take or to capitalize on that opportunity because I think maybe it was more of a check box. Initially when you acquired them. It seems like there is a growing and sizable opportunity there.
Around kind of generating insights.
And that was maybe maybe greater than what you had initially expected when you acquired them and 12 or 18 months back. Thank you.
Yeah, that's exactly that's exactly what's happening as you know it was.
The smaller part of the business when we acquired them and.
And we've quickly.
Pivoted the business assets a lot of the physical events have been pretty much shut down and some markets are still happening and I haven't gone to zero, but they are.
Gone down pretty considerably and what is growing.
Very consistently across most markets are now digital events.
And they're growing for good reason and not only because of the pandemic, but also beyond that do you think about the reach that you can get with a digital event, where geography no longer as a as a barrier.
<unk> is a little bit easier than the overall cost and spend on the vantage less because its youre not bringing people together physically on let's say on a hotel or restaurant and so there are a lot of reasons that the industry has moved to more digital events and we pivoted the business to focus on that.
And that has we're already starting to see some of the impact from from doing that and I think that will continue over the next couple of years.
When I think about the prospects and the event space and it's actually broadened our portfolio. We can now handle companies back to physical virtual and what I think we'll see a mix of and the future is this concept of a hybrid event, where they do some sometimes from parts or some people are and a physical location and others are joining virtually.
So it's really it's shrink and their overall position on that space.
That's great. Thanks, guys I appreciate you taking the questions and congrats again.
Our next question on come from Rishi Julia of D. A Davidson. Please go ahead.
Hey, guys. Thanks, so much for taking my questions nice to see continued strong momentum and and the business wanted to maybe go back first to the impressed to see Dms traction that you're seeing well I was wondering if you could give us a little bit more color, especially on <unk>.
On the CRM and traction that Youre seeing.
Is this are these.
Mostly displacing other solutions as a greenfield and going after kind of a bunch of different different point solutions that are stitched together and any color you can give on where you are seeing that traction and what what those customers are using the first place would be helpful. And then I got a follow up.
Sorry, I was on mute and you Couldnt hear me.
We're always displacing something and now it's often not a it's not a wholesale displacement that will start with this study at a time and generally.
Be displacing one of the top two large players there.
They have most of the market there are smaller very regional players are localized players that's not where we play too much. So it would be replacing that the top two and as to why it's.
Better EDC. So this study builds are faster more agile development environment.
And.
That's that's a huge reason and then the review the basic of the data review process is a bit more.
Streamline and it's true cloud. So it's always who was upgraded and then we have a very good C D and C T EMS product and ETF products and especially many of those heroes have our ETF product and now increasingly some have our cts product. So they're looking at getting the whole suite from Veeva that way they don't.
Have to maintain these.
Troublesome integrations, they can have a smooth and smooth process flow because the <unk> are all about efficiency and and they.
You can get more efficient. It's the same reason why people get a suite of applications from that peak when things are pre integrated together, it's more efficient.
Got it and Thats really helpful. And then I wanted to get maybe a little bit more color on on the subscription net retention rate I mean really impressive to see it actually to pick up and it looks like it's at the highest level. Since FY 17, I was wondering if you'd give a little bit color on on what drove that improvement.
From last year and actually the prior couple of years and maybe how we should be thinking about that metric going forward. Thanks.
Yeah, Let me give you just a qualitative view on that.
Last year has been pretty remarkable from the standpoint of and our customers have been put under significant pressure on there both on the development side, but also on the commercial side of the business they've been.
Forced to change and think differently about how they are operating and we then and the good position, where we have established the foundation with most of these companies and we help them operate efficiently.
Maintain business continuity and operate more digitally operating where virtually win and doctors' offices were closing down win and clinical research sites, we're closing down and we were there so.
And that data.
I think that's showing up and the retention numbers that you are seeing we are viewed as that is even a more strategic partner and its created opportunity for us to shine even beyond.
The last the last couple of years.
And these challenging times.
Companies need a.
A partner that can.
Execute consistently and and I think that's part of what Youre seeing and that higher retention rate.
The one last thing I'll add is the broader vision that we talk about in each area and commercial cloud and development cloud about bringing all of these process areas together companies are buying broadly into a development cloud vision.
And then what the decisions they make after that become really easy it's really a matter of how do they get to that how do they grow into that development cloud overtime. So it becomes more of a road mapping exercise and a vendor selection exercise.
Great. That's very helpful. Thank you so much.
Your next question comes from Brent price line of Piper Sandler. Please go ahead.
I think you maybe we'll start with Brent and finished with Peter here Brent of vault subscription and our model is now actually larger than commercial for the first time and and not only is this now the largest product but also saw accelerating growth. So as you just think about the demand drivers that drove this.
Asian and bulk this quarter.
You talked about broad based but was there any other factors that drove strength vault and again, one quick follow up for Peter.
And we saw.
People.
And.
And products like Etfs, and they look more broadly across the clinical suite youre seeing that and that just further adoption so buying into the integrated.
Walt platform, so a lot of strength and it is truly broad based we saw strength and on <unk>.
<unk>, we saw strength and our quality suite and QM mass as well.
And so it's really an exciting time with broad adoption across our product set so customers are starting to go more all in.
And in the bulk space.
Got it and so it sounds like Theres, a little faster uptake of some of the add on there I know, there's I think 17 18 and vault products. So good to hear and just Peter for you.
I wanted to follow up on on the commentary you made on biotechs.
You talked about seeing some biotechs have increasing interest and kind of going all in on Veeva.
My question is whats the biggest benefit to the biotech and why are they coming to you, saying we want to go digital first is it just faster time to market is that the primary benefit that the biotechs want is it just a more efficient digital internal process helped me understand.
And why Youre seeing that at the biotech level and could this be a precursor to other firms wanted to go kind of all in and have a digital first focus as well. Thanks.
Why.
On Sept of the biotech so there's a biotech day would be developing their drugs for many years using many many millions of dollars to go through the clinical trials and then they have to commercialize and that's a very very critical time, its a make or break time for the company. So that's the context when they some of them coming to us and the commercial cloud and wanting to go broadly.
And with Veeva now why why do they want that.
And they need somebody they can trust.
No digital is really important and they need a partner they can really trust they've learned to trust veeva and many of them have been using us on the R&D side.
And they have to do it right digitally and.
And so if this is kind of the new right. It's not the same old way to do it so they're looking for a company that can put it all together for them.
And then I think on our business consulting is critical and this in fact, when they go all in with Us.
On a business consulting is basically a required part of that package because you can't do that just with technology you need the business process work to make the technology to make that technology work work for you. So it's.
It is critical for the biotech and they trust us and we have the complete package.
That's why they would come to us otherwise they have to be the general contractor.
By data from here and software from here and digital from there and content from here and.
And get consulting from another place.
That's more areas that could fall down if the company's himself has to be the general contractor. So he has he would do that for us.
Certainly helpful and explains why we are seeing a big.
Big uptick and number of job openings on the consulting side. Thank you so much.
Thank you.
Your next question will come from Kirk <unk> of Evercore ISI. Please go ahead.
Hi, Thanks, very much and Peter you're obviously spending a lot of time with your customers talking through their own digital journey from a sales perspective, I was kind of curious about how youre thinking about your own go to market operations not only in the coming year, but.
How are you thinking about making some changes and then hopefully when people can start getting on planes over the next few months or six months are there any products that you think will be helped out by the fact that you can have people on site talking to your customers and person again or have you gotten to the point, where you all can sell pretty much the whole portfolio.
Virtually at a pretty effective level I'm thinking about things like data, where these are big transformations that may be having those conversations in person might be helpful. So just walk through kind of anything you are changing this year and then than anything that might be helped out maybe.
Bye bye moving past Covid.
Okay.
No.
We're changing this year as our summer months, we have our customer summit. So those are always a key part of of Veeva, we get the customers together.
And we would always do those and person two day events last year, we had to pivot very quickly to do those online and they went well, but I think we can do better. So this year, we're looking at doing our virtual events, even better we're going to try out some new formats that we're really.
Excited about so that's that's one thing and have have the marketing and the customer engagement a little more continue on we were.
Remember last year, we had to pivot so hard on our product model, our product roadmap and the support of our customers and all their twists and turns so we were sort of hair on fire. This year. We're on a steady state I think with Covid and so we're going to optimize some of our marketing and sales processes now in terms of getting back together.
I don't think that will impact any one product more than any other product.
But I do think that in person interaction generally does help the speed of business I think overall business will be a little more effect ineffective overtime. If we if we don't get back together.
Now that won't just affect Veeva I, just think overall that personal connection as needed and it provides people with energy and ideas and travel has a way of shaking your out of your norm.
And I'm really looking forward to and how about that.
Moving to travel when we can we're going to get out there because you get used to just being.
Not having that interaction and something and Smith, so the whole veeva team is and and our customers and there we're looking to get back together again.
That sounds correct congrats on a nice year. Thank you. Thank you.
We have time for one final question from Stans Lusky of Morgan Stanley. Please go ahead.
Perfect. Thank you so much guys for taking my question and congratulations on very strong growth strong quarter I actually wanted to come back to net revenue retention for a second because I mean that was.
That was certainly a an impressive result.
Maybe help us unpack it a little bit.
And how much of the of the uptick and we saw and net revenue retention and 224% in fiscal 'twenty one was due to the.
Quite a quick quote unquote like inorganic or maybe one time contribution from.
Selling and the cross X product into the install base or maybe even the and they engage product obviously, that's completely organic made my you but.
It was obviously a disproportionate benefit there.
This year as well how much of that was a driver of the uptick versus whats really sustainable.
Going forward into fiscal 'twenty, two and beyond.
Hey standard sprint so.
Clearly engage what did contribute to that but what I would say is development cloud more broadly also was a big driver of that uptick as we continue to land and expand our offerings across our customer base. So it was more than just a one time pop.
Was some substantial.
Okay.
Attach and cross selling that happened and and the development cloud space and helped drive that number.
Got it that's helpful and just maybe taking a slightly.
Slightly reverse.
Wage asked the question about pharmaceutical head count reductions.
And as much as in Q3, you guys were talking to us about potential for a 10% ish type of decline and global head count in 2020, one what happens if that decline is not 10% right I mean, what's baked into your billings guidance for fiscal 'twenty.
Two what happens when and what kind of renewal base do you have baked in there and is it are you truly baking and 10% or is it something less and that 10% and reductions that we're talking about and Q3.
And <unk>.
Yes. So we in fact are baking those reductions in and we picked them and over time, because we don't we don't see this as an abrupt change we see it as a gradual change that will happen over time and it'll happen.
And we believe over the next one to two years and the impact on on our financials will be somewhat muted because that will happen over a period of time and even a change that happens this fiscal year may not hit us until the next fiscal year.
And I and I think a lot of that will be offset by strength that we're going to continue to have we're anticipating having and CRM and.
And in the add ons and a broader commercial cloud portfolio. So so we haven't tracked it baked those reductions and but again most of it most of what you see there is offset by and by some of the core commercial cloud strength.
Got it. Thank you. Thank you guys.
Okay.
And we have no further questions I'll turn the call back over to the presenters for any closing remarks.
Alright. Thank you everyone for your time and we are looking forward to talking with many of you at the Morgan Stanley Conference Tomorrow, and we're also looking forward to a great year ahead. Thank you.
And this concludes today's conference call. Thank you very much for joining you may now disconnect.
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